§ The claimant, if he proves that he has made any payment in the year of assessment to any charitable trustee or charitable corporation upon trust for the application thereof exclusively to charitable purposes, shall be entitled to a deduction of the amount of such payment, but in no case shall such deduction exceed five per centum of the total income of the claimant, provided that any deduction allowed under this Section shall be allowed for purposes of Super-tax also.—[Lieutenant-Colonel Guinness.]
§ Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
This Clause provides for exemption from Income and Super-tax of income devoted to charitable purposes up to a maximum of 5 per cent. of the total income of the claimant, and as Corporations pay neither Super-tax nor make claims for exemption or abatement from Income Tax, it has been necessary to make this applicable to them by another new Clause which stands next on the Paper. I understand that on this Clause it will be in order to discuss various aspects of this matter. There are Amendments in the names of hon. Members representing English universities and others asking for this advantage in a rather more modest 2810 form. I hope that the Chancellor of the Exchequer will take it in the wide form which I am asking. Of course, the arguments for this exemption apply equally to the other Amendments, and if the right hon. Gentleman cannot give a full concession as to Income Tax I hope he will go some way to meet us by allowing an exemption from Excess Profits Duty and Corporation Tax or any other of the rival claims on the pockets of the charitably disposed who are now so much restricted in their responses to appeals on behalf of various organisations. I do not think it. is necessary to weary the House with figures about the position of charities.
§ Sir H. CRAIK
On a point of Order. Before we proceed further, may I ask whether we shall be permitted a general discussion on this Amendment, or will the Debate be confined to the Excess Profits Duty?
It is notorious that charitable associations are now finding great difficulty in raising necessary funds. I suppose no Member of this House opens his letters in the morning without finding evidence of that fact. Unfortunately, side by 2811 side with the stringency due to smaller income, hospital and other organisations find very great demands upon them owing to the increased cost of labour, of wages, of repairs, of provisions and of other matters connected with upkeep. I saw it stated in a leading article in a paper two days ago that the trouble with hospitals was largely due to the fact that the War profiteer had not yet developed the tradition of giving. I do not think that is the whole story. I am afraid the real trouble is due to the competing claims of the Chancellor of the Exchequer. Pre-War days, when the Income Tax and Super-tax took no more than 2s. 6d. in the £ on the larger incomes, could not possibly be compared with the present position, when the Income Tax, coupled with the Excess Profits Duty and the Corporation Tax, is claiming not less than five times as much. I believe if the Chancellor of the Exchequer would free a certain proportion of income, if devoted to charities, it would have a very strong moral effect. It is not only the working classes, but it is also the Income Tax payer who like to get 9d. for 4d., and that is about the proportion he would pay if the Chancellor of the Exchequer accepted my Amendment. No doubt the right hon. Gentleman will point out that this would be an indirect subsidy from the State towards charitable objects. I agree with him, but it is not only in the public interest in the widest sense, but also, in the more narrow sense, in the interest of our national finance to take steps to save the charities from their present difficulties, as, otherwise, there is a great danger that the whole of the cost of many of the services now performed by them will be thrown on the State. It is unthinkable, if no other solution is found, that the functions now performed by the hospitals should be neglected. The State would obviously have to take them over, and that would mean a great financial loss, not only owing to the shutting down of charity, but also to the great increase of cost, for the State never runs these things as economically or as efficiently as private people. It would further mean a great loss of efficiency in the work itself.
I hope the right hon. Gentleman will do something in this direction. I would draw his attention to the example set 2812 by the United States of America which has gone much further than I suggest here. I have only asked for 5 per cent., but in the United States a reduction of 15 per cent. of the taxpayer's net income is allowed for religious, charitable, scientific and educational purposes as well as for gifts for the prevention of cruelty to children and to animals. If the right hon. Gentleman thinks that my Amendment is drawn too widely, so far as the words "charitable purposes" are concerned, I would suggest that its operation be confined to hospitals, medical research, and educational as these objects are all quite apart, and would necessarily have to be taken over by the State if private organisation broke down. The only other point I will make is that there is already one precedent for this distinction being made because insurance premiums have long been exempted from assessment to Income Tax and Super-tax up to the extent of one-sixth of the total income. ["No, no."] At any rate they have been to a limited extent, and that shows that there is no administrative difficulty in my proposal. Surely, if it is right by exemption from Income Tax to encourage private thrift it is far more justifiable by the same means to encourage public charity in the particular channels which I have mentioned, and if, as I believe, there is no administrative obstacle then on the merits I venture to say it is in the public interest to accept this Amendment, which will do so much towards the amelioration of the financial position which now threatens so many charities that are doing work of vital importance to the nation.
As was indicated by the Chairman at the opening of to-day's proceedings, it will be for the convenience of the Committee that we should on this proposed new clause discuss the whole series of alternative proposals which in wider or narrower form raise the same question of whether any abatement is to be allowed as regards taxation in respect of contributions made to charitable or educational objects. I must say at once that I could not possibly accept the clause of my hon. and gallant Friend or make any concessions in this respect in regard either to Income-Tax or to Super-tax. The proposal has been made again and again to my predecessors, and one and all, whatever their political com- 2813 plexion, they have repulsed it with a unanimity which is truly wonderful. I find myself in the same position of unalterable opposition to it, and I think I can convince the Committee that it is not right or fair. Observe what happens. The richer the man the greater the proportion of his so-called subscription which is found by the State. The poorer the man the greater the proportion of his so-called subscription which is found by himself. That cannot be right. Let me take a very simple illustration. A, a married man, earning £250 per year, paying no Income-tax, gives £5 to a hospital, and, as he pays no Income-tax, he gets no relief. B, a married man, earning £500 a year, pays Income-tax on £225 at 3s. in the £1. Of the £5 which he nominally gives, 15s. 1s contributed by the State. A married man earning £750 per year pays Income-tax on £225 at 3s. and on £225 at 6s. Of his £5 £1 10s. is contributed by the State. Let us come to the really big incomes. Another man has an income of £35,000. On the highest £5,000 of his income he pays Income-tax and Super-tax combined at the rate of 12s. Accordingly, of the £5 which he nominally gives, £3 comes not from his pocket but from the State. I do not think that is tolerable. We cannot make that kind of distinction. We cannot allow an individual taxpayer to spend at his sweet will on particular charitable institutions which attract his sympathy money which is not his money but which as to the major portion he would otherwise have to pay in taxation. Therefore, without going further, I cannot make any exception to the rule laid down by my predecessors either in regard to Income Tax or Super-tax.
There remains the Excess Profits Duty. That is an abnormal and temporary tax arising out of temporary and abnormal circumstances. It may be argued that that heavy charge does come in direct competition with these charitable appeals and does adversely affect the response. The need of these institutions at the present time is as abnormal as the tax of which I have spoken. Specially temporary circumstances have gravely affected their situation, and finding that the temporary tax arising out of the same abnormal conditions does adversely affect these institutions at a moment of great need, I am willing, in spite of all the wisdom of my predecessors—not without hesitation, but still I am willing—to throw 2814 a sprat to catch a whale. My hon. and gallant Friend asks me to throw a whale to catch a sprat, and that is not a profitable transaction. I am prepared to throw a sprat to catch a whale and to abate something in the hope that it may encourage the great trading concerns to recognise their corporate liability to the communities in which they live, and among which their revenue is earned, and may enable directors to persuade their shareholders adequately to recognise what I think is a growing responsibility of these great bodies. In the old days, when limited liability companies had made much less progress, the great institutions of our different cities were habitually supported, and generously supported, by the firms or partners who traded in them. Then those firms and partnerships were turned into companies. The shareholders are spread over a much wider area. The directors are often slow to recognise, and the shareholders slow to admit, that they have a duty to the place in which their profits are earned. Having taken the place of the private individual who in his day discharged his duty, the shareholders as a whole ought to take the burden upon themselves and make a similar contribution. As my hon. and gallant Friend has foreseen, I cannot simply take charitable institutions without ally distinction. If the Committee will accept it in satisfaction or in lieu of the many new Clauses which have been put down, I will at the end of the proceedings—I understand that I can move it only at the end of our proceedings—move a new Clause. If hon. Members will withdraw their new Clauses and accept it as a reasonable compromise and as reasonably meeting the difficulties of the moment, I will move a new Clause in the following terms:Where out of the Profits of a trade or business any contribution has been made after the sixteenth day of July,—that is the present day—nineteen hundred and twenty, to any trust, society, or body of persons in the United Kingdom, established solely for the purpose of the relief of the poor or the sick or for the advancement of education or for scientific research, there shall, for the purposes of Excess Profits Duty, be allowed in the computation of the profits of the trade or business arising in the accounting period within which such contribution was made a deduction in respect of such contribution of an amount not exceeding 5 per cent. of those profits as calculated 2815 for the purposes of Excess Profits Duty (before adjustment for increased or decreased capital and before making any deduction under this Section) and not exceeding 20 per cent. of the amounts of such contribution.This Section shall not apply to any contribution which, apart from the provisions of this Section, would be admissible as a deduction from profits for the purposes of Excess Profits Duty.The Committee will see that it is proposed to give relief for the purposes of Excess Profits Duty only, which is an exceptional and temporary tax, levied, as I have said, upon abnormal profits to which the institutions in question might not unreasonably look for some contribution towards meeting their abnormal need. I beg the Committee to bear in mind that this is a concession for which, I believe, there is no precedent, and it is one which has been resisted in any form by all my predecessors. It is as far as I feel justified in going.
Is it absolutely necessary that those who were generous enough to make their contributions before they knew what we now know of the acknowledged generosity of the Chancellor, should be penalised as against those who subscribe later?
If I made it date back at all, it might equally well date back to the very beginning of the Excess Profits Duty. There is no sacredness about any particular date. I cannot make it retrospective. The object is to encourage donations which have not been made. All honour to those who have already made them; I hope they may be tempted to make further donations.
§ Sir H. CRAIK
As I have an Amendment later on the Paper which deals with the Excess Profits Duty, I rise to respond, as far as I can, to the proposal of the Chancellor of the Exchequer. It will not do, of course, for us to look a gift horse in the mouth, and, although I am disappointed at the very severe restrictions which the Chancellor of the Exchequer has put upon this concession, yet I am grateful, and I am sure the Committee will be grateful, that he has gone further than any previous Chancellor of the Exchequer has gone, and has met, to a certain extent, what I think is a national desire, and a desire put forward in the national interest. I would point out that the Chancellor of the Exchequer has 2816 already conceded a considerable point in this direction. I think he has allowed that, if any institution or system of research or scientific inquiry has been established in connection with a special business, the cost of it may be deducted from excess profits. Is it not a fair demand that, if this inquiry is not confined merely to the advantage of a special business, but extends further and is for the general advantage of the community, it should also be considered as a fair subject for deduction from the Excess Profits Duty? I am glad that the Chancellor of the Exchequer has made even this limited concession, because, as he recognised in the speech just now, it is evident that the Excess Profits Duty, in itself, has caused a severe curtailment of the contributions to universities, hospitals and other institutions of the kind. A man makes his contribution from the extra prosperity of the year, but if he finds that his extra profit is severely curtailed by the State, he feels justified in saying, "Very well, the first things that must be curtailed in correspondence to this must be my contributions towards public efforts and public objects." Therefore the Chancellor of the Exchequer is only recompensating to a certain degree a loss which, through this tax, has fallen indirectly upon the great hospitals and educational and scientific institutions. However, half a loaf is better than no bread, and I know that my best way of requiting this concession, limited as it is, will be to save the time of the right hon. Gentleman and the Committee, and I will, therefore, say no more than that I shall look forward hopefully to the Clause which he proposes to introduce.
§ Sir MARTIN CONWAY
After the concession which the right hon. Gentleman has made, it will not be necessary for me to say more than a very few words. I wish to say, first of all, that the universities which I represent are far from failing to recognise the great assistance which they have received in the past from the Chancellor of the Exchequer. The demand of the universities for remission of Excess Profits Duty upon donations made to their funds has come universally and unanimously from the universities which I represent. At a meeting of the graduates of the University of Birmingham, in which, I think, my right hon. Friend is likely to take a considerable interest, a unanimous resolution was 2817 passed asking for this concession. The Chancellor of the Exchequer has said that the difficulties in which the universities are placed Pare likely to be temporary, but my impression is that they are not temporary, but permanent and increasing. The reasons are very simple. If we go on spending, as we are spending, from £50,000,000 to £70,000,000 a year upon primary and secondary education in this country, we shall be producing the raw material of university students at a much greater rate than has been the case in the past. We are, as it were, enlisting in an army a very much larger number f recruits than we have the possibility of mobilising. It is useless to turn out educated young men and women up to the point where they are ready to be taken in hand by the universities, if the universities are utterly unable to take them in hand. It is, probably, not generally realised how desperate is the need of the universities at the present time. Their endowments have been halved in value, and the number of their students has suddenly been doubled. Their equipment is insufficient to cope with the difficulties of the situation. In one of the universities of which I speak, they have, for instance, to take eleven sessions of students to follow one another hour after hour within a single laboratory to do their work, and that is quite an impossible conditions of affairs. In a chemical laboratory it is impossible for students to follow one another hour after hour in that rapid succession. Lectures have to be repeated, once or twice to successive audiences, and the work of professors and lecturers is thereby not only rendered much greater than it was before, but it is much heavier than they can possibly perform. I should like to ask the Chancellor if he would kindly explain what is the exact scope of the concession he has made. I heard the words of it for the first time, and they are a little complicated. What is the meaning of this 5 per cent. and 10 per cent.?
I suggest that the Committee should terminate this discussion, and allow me to move the Clause. I will move it, and on consideration on Report hon. Members will be able to see the scope of it. I agree that we ought to have an opportunity of seeing its terms. I do not think I shall be able to convey more by way of explanation than they will learn by reading the Clause.
§ Mr. CLYNES
The first part of the right hon. Gentleman's speech was a great disappointment to me, but I think he has gone far to reassure us by his later statement and by the announcement of his intention to submit this new proposal. In case I should not have an opportunity at some later stage of associating myself with it, I should like to avail myself of this opportunity and give it such support as I can. I do that, not really from the educational side of the question in relation to universities and colleges, the development of which is of such great importance to the working classes as well as to other classes. I do it because a very large number of the working class population and of the lower middle classes are feeling severely the condition of handicap in which the different hospitals are finding themselves. From one cause or another they have struggled bravely in recent years, in face of the enormous increase in the cost of living, and they have had additional difficulties. One point I should like to impress on the right hon. Gentleman. Charity is not universal. I am afraid that, whilst it is expensive, there is a considerable number of people in the community who could afford to give but do not, and it would appear that many institutions dependent upon the support of the charitably disposed have to appeal to the same people, the same organisations, the same companies and the same trading concerns time after time, and all I ask is that as the State cannot undertake this work it should give at least such encouragement as it can to those who are disposed to give. I am glad it has fallen to the lot of the right hon. Gentleman to make what is a good start—hereafter we might be able to improve on it—and I trust the Committee will give its full support to him.
In view of the concession the right hon. Gentleman has made, I beg to withdraw the Clause.
§ Motion and Clause, by leave, withdrawn.