NEW CLAUSE.—(Amendment of 10 and 11 Geo. V., c. 32, s. 32.) (Hansard, 21 June 1926)

§ Sir C. KINLOCH-COOKE

I beg to move, "That the Clause he read a Second time."

This Clause was brought to the notice of the Chancellor of the Exchequer last year, and he made a very sympathetic reply and told us that between then and the present time he would give consideration to it. I hope that he will now be in a position to grant the concession. I think the right hon. Gentleman and the Committee will agree that the organisation of widows' and orphans' funds, in principle, is similar to that of a superannuation fund. The Royal Commission on Income Tax, when considering the position of superannuation funds, recommended that, income arising from the investment of these funds shall be exempted from tax.

That recommendation was adopted, and on the motion of my hon. and learned Friend the Member for the Exchange Division of Liverpool (Sir L. Scott) was incorporated in the Finance Act of 1921. What we are asking is that similar treatment be given to widows' and orphans' funds. To a certain extent recognition has already been given to these funds. For instance, an employer's payments to widows' funds are reckoned as an expense in assessment for Income Tax. What we want to see is that that position should be legalised, and we also want to obtain relief from tax on the interest on the investments of widows' and orphans' funds. In the memorandum of the Royal Commission which was submitted on the part of the Inland Revenue, a superannuation fund is described as a mere channel, and for these reasons; a superannuation fund exists for the sole purpose of paying pensions and not for making profits or accumulating unnecessary funds; secondly, pensioners 185 are for the most part exempt from tax, but where they are not exempt, pensioners arc taxable on their pensions when they receive them. These considerations apply with equal force to pensions funds for orphans and widows.

Two objections were raised last year by the Chancellor of the Exchequer against the grant of this concession. The first point he made was that similar requests would be received from other institutions, and that there would be difficulty in limiting the concession to widows' and orphans' funds. Let us see whether this contention is sound. The Clause I am moving practically limits exemption from Income Tax to one kind of fund—namely, funds for widows and orphans, and the safeguards provided by the Finance Act, 1921, remain intact. The safeguards are, first, that the funds must be properly established littler trust; second, that the sole purpose of the fund must be the relief of widows and orphans; third, that the employer has to contribute to the fund, and that the fund has to be recognised by the employés as well as employers. So long as the funds are surrounded by these safeguards, there cannot be any danger of any evasion.

The second objection is the cost of the concession. In this matter we have gone a little further in our inquiries since last year. While we find that the number of widows' and orphans' funds is somewhat in excess of what we estimated, there is no indication that the cost of the concession will exceed £31,500. Assuming there are 60 widows' and orphans' funds, the loss to the Exchequer would be £50,000 per annum, but in view of the fact that widows' funds are of more recent date than superannuation funds, and probably of smaller dimensions, I venture to say that £31,500 would be ample to meet the,case. I would, therefore, urge upon the Financial Secretary, that upon the ground of expenditure, there can be no serious objection to placing these funds in the same position as the superannuation funds under the Finance Act, 1921. I have not gone into the Annuity Funds of Life Insurance Offices, which, almost without exception, enjoy the privilege we are now seeking to secure for Widows' and Orphans' funds, but, I think, I have said enough to justify my plea that 186 these funds should receive the relief we ask, and that the new Clause for which my friends and myself are responsible should be included in the Finance Bill now before the House.

§ Mr. McNEILL

The Motion which my hon. Friend has moved is one of a great many examples of proposals made in the course of this Bill where the reasons put forward in favour of the concessions asked for have really no stronger ground than that one's natural sympathies go out to the particular object in view. It is not really enough to say that a certain institution or a certain organisation is in every possible way deserving of encouragement. That is not enough as a ground for relieving them from taxation. It must surely rest upon some different principle altogether than mere sentimental agreement with the objects that the institution has in view. It is quite true in cases of this sort that it is impossible to draw a clear dividing line between one set of funds entitled to exemption and another set of funds closely allied and not separable by any great dividing principle, and say that one should be left on one side of the line and the other on the other side. This is just an example of what follows very often from making a concession which is net fairly and logically inseparable from some other. We are constantly being told, in connection with a proposal on these grounds that this is not a real bona fide ground of rejection and that you should not, when it is a fair one on its merits, refuse it because you might consider logically that you are compelled to go further. That is really what the, hon. Member for East Cardiff (Sir C. Kinloch-Cooke) is suggesting. Some time ago, for no particular principle, exemption was given to these superannuation funds. If that step had never been taken, the hon. Member would never have had any ground for his argument at all. The only strength of his position is that, having got off the jumping-off ground of 1921, he says, "how are you going to distinguish from what you gave then and what I am asking for now?" I agree that it cannot be done on any real ground of principle. It only shows how dangerous it is, from the point of view of the Revenue, to take these steps one after another. If we were to accept this proposal—which I am not in a position 187 to do—it would, in its turn, become something more.

The hon. Member referred to various thrift societies. I understood him to say that he differentiates between the widows' and orphans' funds and the thrift funds. There may be some distinction between the funds, but I do not think anyone can doubt that the moment concessions were made to the widows' and orphans' funds demands would very quickly follow from the others. There is one clear, firm ground on which we can take our stand, although I do not think it is logical. It is the recommendation of the Royal Commission. They were a body of experts with great experience and knowledge of these subjects who were able to take an amount of evidence on all these points utterly impossible, of course, for this House to go through, and whose opinion on matters of this sort is entitled to the utmost possible respect. The Royal Commission, in dealing with this subject, did recommend that exemption for taxation should be given to superannuation funds, but they expressly refused to make the same recommendation as regards provident funds. Although I freely admit that there is no logical distinction or difference in principle, I think we are entitled to say that we cannot go from one jumping-off ground to another, but that we are on safe ground when we take our stand on the particular point on which the Royal Commission decided, which is the safest ground, and for that reason, as well as for others with which I will not weary the Committee, I cannot accept the Amendment.