CLAUSE 2.—(Repayment of contributions in certain, cases.) (Hansard, 19 July 1922)

§ Major GRAY
I beg to move, in Subsection (1), after the word "Act" ["that Act or"], to insert the words or if he has satisfied the Board that by reason of illness or physical defect consequent on War service he has been disqualified for a death gratuity under the principal Act. I hope to have better fortune with this Amendment than with the last, as it -will appeal to a wider circle. Under Clause 2 if a teacher satisfies the Board that he will be unable to obtain a pension by reason of the fact that he will not be able to serve the required number of years, as from the date when he so satisfies the Board, he will not be required to make contributions under this Bill. I ask that that provision shall be extended to a small number of ex-service teachers who, having contracted illness during the War and as a consequence of the War, are unable to qualify for the death gratuity which is payable in the case of healthy members of the teaching profession, such a man, if he can manage to survive to the age of 65, can draw a superannuation allowance, but owing to the fact that on the 1st of April a couple of years ago he was in such a state of health, due to War service, that he could not obtain a clean medical certificate, he is now and for all time disqualified from the receipt of a death gratuity. The death gratuity payable under the main Act is a year's salary, that goes to the widow and children in the event of a man's death. The unfortunate ex-service man—and I have a bigger sympathy for him than for any single teacher in the whole profession-—went up the moment that there was a call to the Colours, a 2167 strong, vigorous young man, and he came out broken in health, and rejoined the teaching profession, and he lives on year after year with the certainty that in the event of death there is no year's salary for his widow and children, whereas the shirker, the coward who remained away from the Colours and avoided disease and disability may have the full benefit of the Superannuation Act. The very least we can do in fulfilment of the very many professions of sympathy with the ex-service man, which we have all made, is to give this slight benefit. It is not much in money, but it would be regarded as an earnest of sincere sympathy. I hope that the House will support me in appealing to the Government to grant this very small concession. I have not provided myself with a seconder because I feel that the whole House will second it.

§ Mr. WATERSON
I beg to second the Amendment.

§ Mr. FISHER
I need hardly say that in common with every other Member of the House I have the fullest sympathy with the case contemplated in my hon. and gallant Friend's Amendment, but I think that that Amendment is not conceived in the interests of the man whom he desires to help. The case of the man who cannot get death gratuity owing to illness or effects consequent on War service is already entirely covered by the Bill. If such a man lives to the age of 60 he can obtain a superannuation allowance, if he is disabled he gets disablement allowance, or, if he dies, under Subsection (4) there is repayment of his contribution. It is difficult to imagine what further concessions could be given to him. But nevertheless there is real hardship, as my hon. and gallant Friend suggests. The real hardship is that he cannot get any death gratuity because he was in impaired health at the commencement of the Act, but that is a hardship which was created by the Act of 1918, and not by this Bill, and it cannot be removed by this Bill. The Amendment will accentuate that hardship in any case where such a disabled man refused to contribute, since he would shut himself out from the possibility of getting disablement allowance which he can otherwise get. The 2168 Amendment, in other words, is not conceived in the interests of the case which my hon. and gallant Friend has in view. Sub-section (1) of Clause 2 enables a teacher who cannot qualify for a superannuation allowance at 65 to cease his contributions, and to have those contributions returned. He thereupon ceases to be entitled to any benefit under the principal Act. Now it is proposed, under this Amendment, to put within this category any man who owing to illness consequent upon War service cannot get the death gratuity. The result would be that such a man might claim repayment of his contributions under Sub-section (1). He might then live to 65 or be disabled, and he would then be entitled neither to superannuation allowance nor disablement allowance. It is very difficult to imagine an Amendment which could be less in the interests of those persons whom the Amendment is designed to serve. In those circumstances I hope that my hon. and gallant Friend will withdraw his Amendment which has not the effect which he desires.

§ Major GRAY
I beg to move, at the end of Sub-section (4), to insert the words All contributions returned under this Section shall be treated as a capital payment for the purposes of Income Tax. The point which I am raising here is of more immediate interess to the local authorities who have to collect the contributions and the Income Tax than to the teachers. The Inland Revenue authorities treat the payments received by the teachers under the Superannuation Act as capital, and do not require Income Tax to be paid on the amount so received. If, therefore, the man reaches the age of 65, and draws a superannuation allowance lump sum of one and a-half year's salary the Inland Revenue authorities treat that lump sum as a capital, and no Income Tax is payable thereon. Now it has been already provided in the Finance Bill of this year that the contributions made under this Bill shall be deducted from the assessable income for Income Tax purposes. In 2169 other words, Income Tax will not be payable upon it, but it is provided in a very few cases that the contribution shall be returned. In the case which we have just had under consideration, that of the teacher who does not become eligible for superannuation allowance, the contribution may be returned. I am asking that those returned contributions shall be treated exactly as we treat the superannuation allowance. That is that it shall be free from Income Tax.
May I point out the difficulty which the local authority will have in ascertaining what the man's income was from all sources, this year and next year, during the two years in which the Act is running, and then deducting from his salary the third year the amount which would be paid as Income Tax on the contributions during each of these two years. If the Income Tax were a fixed amount, and did not vary from year to year, the task, though somewhat difficult, would not be insuperable, but you have a varying tax and an income derivable from salary and other sources, and the local authority financial experts tell me that they will have the greatest difficulty in ascertaining what amount the man ought to have paid in 1922, 3923, and 1924, so that the amount may be aggregated and repaid to the Treasury in the form of Income Tax. If, therefore, the returned contributions were treated in precisely the same way as the lump sum payable on death this difficulty would not arise. I am anxious to lay down here a principle.
If the principle should be incorporated in an amended scheme, and it became a question of returning 20 or 30 years' contributions, then I do not envy the financial expert of any local authority who has to go back over the contributions made by any individual during a period of 30 years, and ascertain what was the amount of Income Tax which he ought to have paid during each of those years. Nay, more, there is the man who goes from one local authority to another. He is one year with one and another with another. The local authority with which he is serving at the end of the time will become responsible for the deduction for Income Tax purposes. My right hon. Friend might accept this as a declaration of principle. He can do it without loss to the Chancellor of the 2170 Exchequer because assuming that the two years' contributions are held by the Chancellor of the Exchequer, then when he returns them he will have had the use of the money with the interest thereon, while the teacher will be deprived of the use of the money and the interest thereon, and he, having paid over the contributions which it is ultimately found have not been legally taken from him, should not be required to pay Income Tax on the aggregate amount when it is returned.

§ Mr. SPEAKER
The speech of the hon. and gallant Member has made me a little doubtful about the propriety of this Amendment. I thought that it was only a declaratory paragraph, repeating what is the practice now by Statute or Regulation. After the speech of the hon. and gallant Member it seems to me that the Amendment ought to have been introduced a week ago into the Finance Hill. I will hear further arguments before I come to a decision.

§ Mr. FISHER
I confess that I had expected you to rule this Amendment out of order. It appears to me to override the decision which was arrived at by the House when the Finance Bill was discussed. I submit that the Amendment would impose a new charge. It is true that that charge would not be borne by the State in the current financial year, but the Amendment would relieve teachers from Income Tax on their contributions two years hence. I thought, therefore, it was out of order. It appears to me to be an Amendment which does not properly belong to this Bill. It overrides the decision of Parliament as to the proper treatment of returned contributions, both under the teachers scheme and under other schemes set up by public Acts. Not only that, but in doing so it discriminates in favour of teachers only, and it would set up a differentiation between teachers and all other classes of employés which would be indefensible on logical grounds. For those reasons I ask my hon. and gallant Friend to withdraw his Amendment.

§ Mr. RAFFAN
I raised this matter on the Finance Bill, and I understood that I received an assurance from the learned Solicitor-General that no Income Tax would be imposed upon the returned con- 2171 tributions. I have not a copy of the OFFICIAL REPORT here, but when I read the Report the day after the Debate, I was confirmed in the belief that I had received that assurance. I regret extremely to hear the view expressed by the Minister of Education. I would ask him whether he has consulted the representatives of the Exchequer before making his statement to-day.

§ Mr. SPEAKER
My impression was the same as that of the hon. Member. In any case the Finance Bill of next year clearly will be the proper place to set this right, if there be a grievance in this respect. It will hardly do to have an odd Income Tax provision in a Bill of this kind, instead of having it in its proper place, which is in the Finance Bill. I dare say the hon. and gallant Member will see the force of that argument.

§ Major GRAY
I accept your ruling at once, and ask leave to withdraw the Amendment.