Section twenty-three of the Finance Act, 1920 (which provides for a reduced rate of Income Tax on the first £225 of taxable income), shall have effect as if there were added the following—
The rate on which the next £200 of the taxable income of an individual shall he charged to Income tax shall be two-thirds of the standard rate of tax, and the rate on which the next following £200 of the taxable income of an individual shall be charged to Income Tax shall be five-sixths of the standard rate of tax."—[Mr. Hartshorn.]
§ Brought up, and read the First time.1237
§ Mr. HARTSHORN
I beg to move "That the Clause be read a second time."
The object of this Clause is that a graduated scale may apply and that instead of the 6s. in the pound coming into operation after the first £225, the 3s. operating up to that average, four shillings should apply to the next £200, five shillings to the next £200, and six shillings on higher figures. Before the War all incomes below £160 were exempt from Income Tax. If to-day we assume the cost of living to be 100 per cent, above pre-War, or the purchasing power of money to be half what it was in pre-War days, it would require at least £320 income to enable a married couple to live the same standard of living as was regarded as a model-ate standard of living on which they were free from Income Tax in pre-War days. Instead of being relieved to the extent of £320, the abatement to-day is only £225, which, in effect, means that the Income Tax operates at a much lower figure than it did in pre-War days. During the War Amendments were made which gave additional relief to married people by making an allowance on behalf of the wife. Before the War the £160 applied to the single man as well as to the married man, but as part of the scheme to which the Chancellor of the Exchequer referred this evening, which was propounded by the Royal Commission, a differentiation was made between the single and the married man. With that principle we are in entire agreement. We are offering no criticism of it. We are finding no fault with it or with the general scheme, but we say that the operation of the Income Tax begins at too low a figure. In any case, if it is to continue to operate as from £225, which is very little more than £100 at pre-War value, the 6s. tax certainly ought not to come into operation after the £225 taxable income. It is because we desire that with a graduated Income Tax the burden should fall gently and steadily upon incomes as they assume great dimensions that we propose the Amendment in the form placed on the Paper.
It is not at all necessary to labour this point. It must be patent to everybody that a 6s. tax, operating on taxable incomes above £225, especially having regard to the fact that Income Tax is now operating at so low a figure, is a very irksome and burdensome imposition upon 1238 a large section of the population. I do not think that in future this charge will affect many manual workers. Judging from the general tendency that has set in of reducing wages all round the probabilities are that very few manual workers will come in for Income Tax payments, even under existing schemes. Certainly, however, a considerale section of what is known as the lower middle class, and anyone who has an income that brings him on to the 6s. tax directly after the £225 of taxable income, must be feeling the pinch of this, and undergoing a very severe strain indeed. I, and those associated with me, think that ours is a perfectly just, equitable and reasonable proposition to make, and we hope the Chancellor of the Exchequer will see his way to its adoption.
§ Mr. WATERSON
I regret that the Chancellor of the Exchequer has allowed this Clause to pass by without giving to the Committee some intimation of his attitude upon it. I shall be perfectly willing to give way in order to hear what he has to say, but I did not feel justified in allowing the Clause to be put before the right hon. Gentleman had had an opportunity of replying.
§ Sir R. HORNE
I did not desire to show any discourtesy to the Committee in this matter. I was not aware that my hon. Friend (Mr. Hartshorn) had sat down, because I was discussing another point at the moment when his speech ended. The question is really a very simple one. I have only to remind the Committee of what I said earlier in the day, that the scheme of Income Tax in operation at the present time is one that was very carefully considered by the Royal Commission which reported recently, and that practically the whole of its recommendations were put into legislative effect by the Finance Act of last year. If you alter one part of it you have to proceed to make alterations in every other part, because the system represents a complete scheme. It may be possible to produce instances in which you think you can justify some new arrangement, but if you do that you have to begin to apply the new theory to the whole. It is too soon to do that. You will make a great mistake if you start with the idea that without a general plan you can make differences in any particular item. The Mover of the Amendment says it is wrong 1239 that people with an income little above £225 should be assessed at 6s. in the pound. But that is to present a complete misapprehension of the scheme. Nobody pays 6s. in the pound on his whole income unless the income reaches £3,000 a year. One of the effects of the graduated scheme is that while you may at a comparatively early stage in your income be paying 6s upon a portion of it, the effect of the whole graduation, taking allowances into account, is that nobody is paying 6s. on the whole of his income until he is a man of comparatively large emoluments. If you take, for example, what is being paid on the whole of an income of £300, even if it is unearned income, you will get only 1s. 8d. on the whole of it. At £400 you pay 2s. 3½d. per pound; at £500 you pay 3s. per pound; at £600 you pay 3s. 6½d. per pound; and so on.
§ Mr. HARTSHORN
Is it not a fact that on all income over £225 a charge is made of 6s. in the pound?
§ Sir R. HORNE
No. That is where there is a great deal of misunderstanding. There has been issued to everybody a scale which shows how the Income Tax works. The scale cannot be regarded as bearing too harshly even upon the small incomes. That is the reply upon the merits of what has been said. I am sure everybody understands that to-day we cannot sacrifice any source of revenue. The Amendment would reduce revenue by £8,000,000 a year. That is a loss which, frankly, I cannot afford to face now, and I am sure the Committee will not ask me to do so.
§ 11.0 P.M.
§ Mr. HARTSHORN
I am not a man with a big income, but I am paying 6s. in the pound on part of my income. I made my return to the Paymaster-General and I got a note from the local Surveyor of Taxes telling me that he had been informed by the Paymaster-General that he should charge me on £225 at 3s. in the pound and on the remainder at 6s. in the pound. That is the way in which my own Income Tax is made out and that is the assessment upon which I have paid.
§ Apparently the view of the Chancellor of the Exchequer is that it is not correct. I want to understand exactly what is the present position. It is certainly very irksome if, on limited incomes, people are to be asked to pay 6s. in the pound.
§ Mr. WATERSON
I wish to point out that my hon. Friends on this side of the Committee are not anxious to limit in the slightest degree those avenues whereby the Chancellor of the Exchequer may get the necessary revenue for the country. The main purpose which we have in view is to show that the people in the country are not being taxed according to their ability to pay and that the rate of Income Tax as it affects those who are in receipt of the smaller incomes is vastly greater in proportion than the rate imposed on those who have the larger incomes. I desire to submit to the Committee one or two figures which have been brought to my notice. I notice that those people who have incomes of £14,000 only pay a tax of 9s. in the £ and that a tax of 10s. in the £ is levied on incomes of £40,000. The jump from 9s. to 10s. which is the difference between the rate on the £14,000 and the £40,000 incomes is, in our humble judgment, not satisfactory as compared with the rate of tax on the lower incomes.
§ Sir R. HORNE
My hon. Friend is entirely ignoring the Super-tax.
§ Mr. WATERSON
I will admit there is something in the right hon. Gentleman's argument, but even putting the Super-tax in conjunction with the Income Tax, I venture to say that on the income which the individual derives, the lower paid persons are in proportion liable to a greater Income Tax. It is upon that basis we contend an injustice is being perpetrated particularly upon the middle classes of the country, and on that ground we ask the Committee to give favourable consideration to this Amendment.
§ Question put, "That the Clause be read a Second time."
§ The Committee divided: Ayes, 44: Noes, 188.1241
|Division No. 185.]||AYES.||[11.5 p.m.|
|Barker, G. (Monmouth, Abertillery)||Cairns, John||Davies, Alfred Thomas (Lincoln)|
|Barnes, Major H. (Newcastle, E.)||Cape, Thomas||Davison, J. E. (Smethwick)|
|Bowerman, Rt. Hon. Charles W.||Carter, W. (Nottingham, Mansfield)||Entwistle, Major C. F.|
|Bromfield, William||Cowan, D. M. (Scottish Universities)||Graham, R. (Nelson and Colne)|
|Brown, James (Ayr and Bute)||Davies, A. (Lancaster, Clitheroe)||Grundy, T. W.|
|Guest, J. (York, W. R., Hemsworth)||MacVeagh, Jeremiah||Swan, J. E.|
|Hayday, Arthur||Morgan, Major D. Watts||Thomson, T. (Middlesbrough, West)|
|Hayward, Evan||Newbould, Alfred Ernest||Thorne, G. R. (Wolverhampton, E.)|
|Hogge, James Myles||O'Grady, James||Waterson, A. E.|
|Holmes, J. Stanley||Raffan, Peter Wilson||White, Charles F. (Derby, Western)|
|Irving, Dan||Richardson, R. (Houghton-le-Spring)||Williams, Col. P. (Middlesbrough, E.)|
|Johnstone, Joseph||Robertson, John||Wood, Major M. M. (Aberdeen, C.)|
|Kenworthy, Lieut.-Commander J. M.||Rose, Frank H.|
|Kenyon, Barnet||Royce, William Stapleton||TELLERS FOR THE AYES.—|
|Kiley, James Daniel||Shaw, Hon. Alex. (Kilmarnock)||Mr. Hartshorn and Mr. Frederick|
|Lawson, John James||Spencer, George A.||Hall.|
|Addison, Rt. Hon. Dr. Christopher||Ganzoni, Sir John||Newman, Sir R. H. S. D. L. (Exeter)|
|Agg-Gardner, Sir James Tynte||Gee, Captain Robert||Nicholson, Reginald (Doncaster)|
|Amery, Leopold C. M. S.||Gibbs, Colonel George Abraham||Nicholson, William G. (Petersfield)|
|Armitage, Robert||Gilmour, Lieut.-Colonel Sir John||Nield, Sir Herbert|
|Atkey, A. R.||Glanville, Harold James||Ormsby-Gore, Hon. William|
|Bagley, Captain E. Ashton||Goff, Sir R. Park||Parker, James|
|Baird, Sir John Lawrence||Gould, James C.||Perkins, Walter Frank|
|Baldwin, Rt. Hon. Stanley||Goulding, Rt. Hon. Sir Edward A.||Perring, William George|
|Balfour, George (Hampstead)||Green, Joseph F. (Leicester, W)||Pollock, Sir Ernest Murray|
|Barlow, Sir Montague||Greig, Colonel Sir James William||Pownall, Lieut.-Colonel Assheton|
|Barnett, Major Richard W.||Gretton, Colonel John||Pratt, John William|
|Barnston, Major Harry||Gritten, W. G. Howard||Pretyman, Rt. Hon. Ernest G.|
|Barton, Sir William (Oldham)||Hacking, Captain Douglas H.||Purchase, H. G.|
|Bell, Lieut.-Col. W. C. H. (Devizes)||Hailwood, Augustine||Rae, H. Norman|
|Bellairs, Commander Carlyon W.||Hall, Lieut.-Col. Sir F. (Dulwich)||Rankin, Captain James Stuart|
|Benn, Capt. Sir I. H., Bart. (Gr'nw'h)||Hamilton, Major C. G. C||Remer, J. R.|
|Betterton, Henry B.||Harmsworth, C. B. (Bedford, Luton)||Remnant, Sir James|
|Birchall, Major J. Dearman||Henderson, Major V. L. (Tradeston)||Richardson, Alexander (Gravesend)|
|Bird, Sir A. (Wolverhampton, West)||Hennessy, Major J. R. G.||Roberts, Samuel (Hereford, Hereford)|
|Bird, Sir William B. M. (Chichester)||Henry, Denis S. (Londonderry, S.)||Robinson, S. (Brecon and Radnor)|
|Boscawen, Rt. Hon. Sir A. Griffith-||Hewart, Rt. Hon. Sir Gordon||Rodger, A. K.|
|Boyd-Carpenter, Major A.||Hickman, Brig.-General Thomas E.||Sanders, Colonel Sir Robert Arthur|
|Bramsdon, Sir Thomas||Hope, Lt.-Col. Sir J. A. (Midlothian)||Sassoon, Sir Philip Albert Gustave D.|
|Breese, Major Charles E.||Hope, J. D. (Berwick & Haddington)||Scott, Leslie (Liverpool, Exchange)|
|Bridgeman, Rt. Hon. William Clive||Hopkins, John W. W.||Seager, Sir William|
|Briggs, Harold||Hopkinson, A. (Lancaster, Mossley)||Seddon, J. A.|
|Brittain, Sir Harry||Horne, Edgar (Surrey, Guildford)||Seely, Major-General Rt. Hon. John|
|Broad, Thomas Tucker||Horne, Sir R. S. (Glasgow, Hillhead)||Shaw, Capt. William T. (Forfar)|
|Brown, Major D. C.||Hotchkin, Captain Stafford Vere||Smith, Sir Allan M. (Croydon, South)|
|Bruton, Sir James||Hunter, General Sir A (Lancaster)||Smith, Sir Harold (Warrington)|
|Buckley, Lieut.-Colonel A.||Hunter-Weston, Lieut.-Gen. Sir A. G.||Smith, Sir Malcolm (Orkney)|
|Burn, Col. C. R. (Devon, Torquay)||James, Lieut.-Colonel Hon. Cuthbert||Sprot, Colonel Sir Alexander|
|Butcher, Sir John George||Jameson, John Gordon||Stanier, Captain Sir Seville|
|Carr, W. Theodore||Jephcott, A. R.||Stanley, Major Hon. G. (Preston)|
|Cautley, Henry Strother||Jones, Henry Haydn (Merioneth)||Starkey, Captain John Ralph|
|Chadwick, Sir Robert Burton||Joynson-Hicks, Sir William||Steel, Major S. Strang|
|Chamberlain, Rt. Hn. J. A. (Birm. W.)||Kellaway, Rt. Hon. Fredk. George||Stephenson, Lieut.-Colonel H. K.|
|Chamberlain, N. (Birm., Ladywood)||Kidd, James||Sturrock, J. Leng|
|Clough, Robert||King, Captain Henry Douglas||Sugden, W. H.|
|Colvin, Brig.-General Richard Beale||Lane-Fox, G. R.||Sutherland, Sir William|
|Conway, Sir W. Martin||Law, Alfred J. (Rochdale)||Taylor, J.|
|Coote, Colin Reith (Isle of Ely)||Lewis, Rt. Hon. J. H. (Univ., Wales)||Thomson, F. C. (Aberdeen, South)|
|Cope, Major William||Lindsay, William Arthur||Thomson, Sir W. Mitchell- (Maryhill)|
|Cory, Sir J. H. (Cardiff, South)||Lloyd, George Butler||Tryon, Major George Clement|
|Cowan, Sir H. (Aberdeen and Kinc.)||Lloyd-Greame, Sir P.||Turton, Edmund Russborough|
|Davidson, Major-General Sir J. H.||Locker-Lampson, G. (Wood Green)||Wallace, J.|
|Davies, Thomas (Cirencester)||Locker-Lampson, Com. O. (H'tingd'n)||Ward-Jackson, Major C. L.|
|Davies, Sir William H. (Bristol, S.)||Lorden, John William||Watson, Captain John Bertrand|
|Davison, Sir W. H. (Kensington, S.)||Loseby, Captain C. E.||Weston, Colonel John Wakefield|
|Dewhurst, Lieut.-Commander Harry||Lyle, C. E. Leonard||Wheler, Col. Granville C. H.|
|Doyle, N Grattan||M'Curdy, Rt. Hon. Charles A.||White, Col. G. D. (Southport)|
|Edwards, Major J. (Aberavon)||Mackinder, Sir H. J. (Camlachie)||Wild, Sir Ernest Edward|
|Elliot, Capt. Walter E. (Lanark)||M'Lean, Lieut.-Col. Charles W. W.||Willey, Lieut.-Colonel F. V.|
|Eyres-Monsell, Com. Bolton M.||McNeill, Ronald (Kent, Canterbury)||Williams, C. (Tavistock)|
|Evans, Ernest||Mallalieu, Frederick William||Wood, Hon. Edward F. L. (Ripon)|
|Falcon, Captain Michael||Manville, Edward||Worsfold, T. Cato|
|Falle, Major Sir Bertram Godfray||Mitchell, William Lane||Worthington-Evans, Rt. Hon. Sir L.|
|FitzRoy, Captain Hon. Edward A.||Molson, Major John Elsdale||Young, E. H. (Norwich)|
|Ford, Patrick Johnston||Moore, Major-General Sir Newton J.||Young, Sir Frederick W. (Swindon)|
|Forestier-Walker, L.||Moore-Brabazon, Lieut.-Col. J. T. C.||Younger, Sir George|
|Foxcroft, Captain Charles Talbot||Morden, Col. W. Grant|
|Fraser, Major Sir Keith||Morrison, Hugh||TELLERS FOR THE NOES.—|
|Fremantle, Lieut.-Colonel Francis E.||Neal, Arthur||Colonel Leslie Wilson and Mr.|
|Gange, E. Stanley||Newman, Colonel J. R. P. (Finchley)||Dudley Ward.|
§ Mr. R. McNEILL
I beg to move "That the Chairman do report Progress, and ask leave to sit again."
I do this for the purpose of asking the Chancellor of the Exchequer how far he 1242 proposes to go to-night, and if he will indicate how late he proposes to keep the House?
§ Lieut.-Commander KENWORTHY
May I also appeal to the Chancellor of the 1243 Exchequer not to keep the House sitting too late in discussing these somewhat complicated Clauses, especially the one to be moved by my hon. Friend sitting below me (Mr. Holmes), which occupies three pages of the Paper. It is not the fault of the Opposition that the Debate was interrupted at 8.15. That was the fault of his own supporters, who, I notice, are not in their places now. I do not think it is treating us altogether fairly to take these Clauses late to-night. We have made very good progress.
§ Sir R. HORNE
I should be glad to respond to that appeal, but, unfortunately, Parliamentary time is restricted. I anticipate that the House wants to rise at a reasonable period, and accordingly we have got to arrange the business so as to ensure that the House will get up before we are all so absolutely exhausted as to be incapable of doing effective business.
§ Lieut.-Commander KENWORTHY
Do you mean to-night?
§ Sir R. HORNE
No, I mean in August. There is only a limited time between now and then, and having regard to the time which has been allotted to previous discussions on the Finance Bill, I do not think I am asking too much of the Committee in asking that we should get through the Committee stage of the Bill within this sitting and another, the second being on Friday. That is the limit of time that can be devoted to the discussion. It is unfortunate that we have been interrupted in the course of the debate this evening by a motion for the adjournment, and I must ask the indulgence of the Committee to sit to-night till we have accomplished the discussion of the whole of the new clauses, leaving for Friday the discussion on the schedules. Though I cannot say to my hon. Friend what hour of the night we shall be able to adjourn, I do give him quite definitely the statement that I think it is necessary that we should have all the Clauses disposed of before we rise to-night.
§ Question, "That the Chairman do report Progress, and ask leave to sit upon," put and negatived.
§ The CHAIRMAN
The proposed new Clause (Application of Corporation Profits Tax), standing on the Order 1244 Paper in the name of the hon. Member for Kettering (Mr. Waterson) and other hon. Members, is out of place. A similar proposal was discussed on Clause 40, and negatived.