HC Deb 30 June 1927 vol 208 cc728-36

Motion made, and Question proposed, "That the Clause stand part of the Bill."


This Clause, to which I wish to refer briefly, may not be one of the most important Clauses in the Bill, but it is one of the most characteristic, and it is one which, in my opinion, ought not to be added to the Bill without some words of explanation. I say it is one of the most characteristic Clauses of the Bill, and if I had to characterise this Bill in a sentence, I should describe it as a Bill for papering over the cracks. No one can question the existence of the cracks, they are large and gaping, in the potential revenue of the year. I imagine the Chancellor must have arrived at his decision to insert this Clause by some such argument as this. He said to himself, I imagine, "I cannot and I must not appear to increase taxation; I must not frighten the consumer of the necessaries of life by adding to indirect taxation; I must not alarm the income tux payer; but additional taxation, by hook or by crook, I must have. I will get it honestly if I can, and otherwise if I cannot."

He approached this problem with all his accustomed ingenuity. He designs, by camouflage, I take it, to conceal from the taxpayer the very deadly instrument of warfare by which he and his colleagues are going to be assailed. In this case we have one of the most ingenious of the many camouflages with which the Bill is adorned. This Clause proposes that Subsection (2) of Section 157 of the Income Tax Act, 1918, a Section which provides that in the cases to which that Sub-section applies Income Tax shall be payable in in two instalments, shall cease to have effect so far as it relataes to tax chargeable under Schedule A: other than any tax so chargeable in respect of income which is, or is to be treated as, earned income. Most members of the Committee will recollect that under that Section 157 it was for the first time enacted that instead of Income Tax being payable in one instalment on or before the 1st January it should be payable in two equal instalments, the first on or before 1st January and the second on or before 1st July. This concession, for it was a concession, made by the Chancellor of the Exchequer of the day applied not only to tax payable under Schedule A but to several other categories of Income and Property Tax. It applied to tax payable under Schedule B where it was charged in respect of lands occupied for husbandry only; and it was applicable to payments under Schedule D and Schedule E. But to this general concession made in the Act of 1918 there were two notable exceptions. The first was in the case of weekly wage-earners, whose tax was assessed as a rule half-yearly, and the other was in the case of railway companies, who paid under Schedule D by four quarterly instalments. The point that I want the Committee to observe is this: The concession, when it was made in 1918, was a concession granted practically to all payers of Income Tax, and was not then limited to payers under Schedule A alone. In this present Finance Bill, in order to make up the deficit to which I have alluded, the Chancellor of the Exchequer proposes to take away the concession made under the Act of 1918 in regard to paying Income Tax in two half-yearly instalments, but to take it away from one class of taxpayers only, that is to say, those who are owners of land and owners of house property, whereas other taxpayers, who may be in an equally good or in many cases a far more favourable, position, are still left with the concession which was granted in 1918.

I can easily believe that, in extenuation of the proposal made by the Chancellor of the Exchequer, it may be urged, and I believe it has been urged, that the concession in regard to payment under Schedule A in two equal half-yearly instalments was only introduced—and I imagine that this will be the argument of the Chancellor of Exchequer—at a moment when the standard rate of Income Tax stood at 5s. in the £, and when, therefore, it was not practicable to leave it to be paid in one sum, owing to the fact that many tenants would not be able to deduct the tax, as they are entitled to do, from the rent payable to the landlord. If, however, that had been the case, the concession I have named would have been made in 1918 only to payers of Income Tax under Schedule A, but, as I have already pointed out, it was a general concession made to all categories of Income Tax payers. Whatever the motive may have been when the concession was originally made in 1918, that concession is now to be withdrawn, and I suggest that the Clause as it stands is one which ought to be resisted on two grounds—firstly, on the ground that it is a manifest injustice to discriminate between one class of Income Tax payers and another, especially if you discriminate against those who are less able to pay; and, secondly, on the ground that it involves a very grave hardship to the particular class of taxpayers whom it will affect. It will involve hardship to them whether they are owners of agricultural property—and everyone knows their position to-day—or whether they are owners, particularly if they happen to be small owners, of small urban property.

As regards agricultural property, the position under the Bill of this year will be this: The landowner will have to find the whole of his tax under Schedule A for the year on 1st June. He will already have discharged the second half of his tax for the current year, that is to say, in July, 1927. In most cases agricultural rents are payable half yearly, at Michaelmas and Ladyday. Practically the whole of the rent payable at Michaelmas, 1927, will have gone in discharging the July instalment of this year and consequently the unfortunate landowner will have no funds at all out of which to pay his full year's Income Tax in January next. He will have either to borrow from his banker or run into debt in order to discharge his obligations to the Exchequer.

So much for the position of the agricultural landowner. I am going to add a word on behalf, not of the large landowner, not the great bloated capitalist, whom we are supposed particularly to represent, but the very large number of small owners of small property. Let us see the position in which they will be placed by this Bill. I will not go into particular illustrations. I would rather put the matter on this broad ground, that these owners of urban property are called upon to pay as Income Tax during the next twelve months, which is 50 per. cent. in excess of the Income Tax they had to pay last year and 50 per cent. in excess of the Income Tax payable by any other class of Income Tax payers. I know the Chancellor of the Exchequer will do all he can—and he can do a great deal—by his ingenuity to camouflage this proposal, but no argument on his part can disguise the disagreeable fact that these unfortunate people, the landowner and the owner of urban property, will be called upon during the next twelve months—as a matter of fact during the next seven months—to pay 50 per cent. more Income Tax than they expected before the Budget was introduced. It is futile to attempt to comfort them with the assurance that this matter will be straightened out six months after the end of the world. I suggest that it should be straightened out before that time, and that is because they refuse that cold comfort the Chancellor suggested that I oppose the Clause.


As far as I understand this Clause, it amounts to this, that those who in the opinion of hon. Members opposite are guilty of the gross offence of owning heritable property are to be made to pay 18 months' taxation in 12 months. They are going to pay 50 per cent. more. They are to lend money to the Chancellor of the Exchequer by paying it six months ahead. How they are to borrow it from the banks, I do not know. Apparently, they will have to do it. I do think it is a very great hardship, and therefore I think the Chancellor of the Exchequer ought to give us a better excuse for what he is doing than he gave to us in his Second Reading speech.


I desire very briefly, although I cannot do so with the same degree of eloquence, to support the case against this Clause, and I sincerely hope the hon. Member for York (Sir J. Marriott) and the hon. and learned Member for Argyll (Mr. Macquisten) mean to press it. We shall know within a few moments whether they actually mean what they say, or whether they have only made speeches for the sake of speaking. If they are prepared to go into the Division Lobby, I am prepared to be one of the tellers. I say this in all seriousness, because it is a very serious matter. I suggest to the Chancellor of the Exchequer that although there is no considerable amount of interest in this question at the present time, there will be a tremendous outcry about it next January and February, and it will lose thousands of votes to the Conservative party. I will tell the Committee how I think this is going to happen. [Interruption.] I do not usually indulge in political prophecy, but this is how it is going to occur. In most constituencies thousands of working-people have purchased their houses through the Small Dwellings Acquisition Act and through other schemes. They were called upon, as everybody knows, to put down from £50 upwards, and they have to pay the balance by instalments. The figures relating to persons who are buying their houses have been given in this House repeatedly by the Minister of Health, and they run into many thousands. The people who are doing this are respectable working people, most of whom have families, and it is because they have families that they experienced greater difficulties than other people in finding houses to rent. They have been compelled to buy their houses. Many of them have had to borrow money in order to enable them to make the necessary deposit, and the local authority or some enterprising builder has advanced the rest. The repayments these people, who are mostly of the artisan or working class, have to make, inclusive of rates, amount to from 24s. to 30s. per week. That money has to come from homes where the weekly income is £3, £3 10s., or £4 at the most. That is the instalment they have to pay under the Small Dwellings Acquisition Act. I should say that in my constituency there are 400 or 500 of these people, and I know that a great many people in the constituencies of other hon. Members are in a like position.


What is the scale of income of the class about which the hon. Member speaks?


The scale of income would be round about £200.


That is beneath the Income Tax limit.


I would point out to the right hon. Gentleman that up to now, at any rate, though I have made endeavours on their behalf to get exemption from Schedule A, they have been compelled to pay it—even working men. I would sit down directly if the right hon. Gentleman would make a statement that the people who do not come under the ordinary Schedule for earned income are exempt from Schedule A. If he could do so this discussion would have been very useful. While the right hon. Gentleman is finding that information, I would only add that in having to pay the whole of the amount, which will amount to between and £2 and £4 per annum, in one lump sum, it is going to cause a very great amount of distress to a number of people. It is going to cause them to fall into the hands of moneylenders or to fall behind with the instalments payable to the local authority. For all these reasons, I hope the hon. Gentleman who so eloquently presented the case against the Clause and the hon. Member who supported it will press it to a Division. I am sure every Member on this side of the House will gladly support them.


The hon. Member (Mr. Morrison) will be relieved to hear that no one who is below the Income Tax limit will be called upon to pay Schedule A, and the class of people he has described will be below the Income Tax limit. A married man with two children earning an income of —300 a year will be below the Income Tax limit, and can quite easily recover his Schedule A payment if it has been made. Therefore, the grievance of which the hon. Gentleman has been speaking has really been removed, so that any objection he has to voting for this Clause will fall with the grievance which he has expressed. I do not intend to go into the general question raised by my hon. Friend the Member for York (Sir J. Marriott) in a speech which, at one time, I was really afraid might not end until six months after the end of the world. I should like to say, however, that he made an excellent speech, and I was almost ready to wait so long. This is a very important Clause, for without this particular method of dealing with the difficulty we should undoubtedly have to face a substantial rise in the standard rate of the Income Tax. It is certain that next year we shall be in a better position, and therefore a method of this kind, the beneficial effects of which are only experienced for one year, is appropriate, and more appropriate to the present financial problem than the provision of a permanent tax. Although my hon. Friend has made a powerful speech, I have not, through the many channels open to me, been able to receive any serious body of complaint from any part of the country to this provision.


Several of my colleagues agree with the statement I made that there are scores of artisans whose income is not sufficient for them to pay ordinary Income Tax, who are paying year by year Income Tax under Schedule A. Can I take it that if they are asked to pay any more they can get complete exemption?


Certainly. If, however, there be any doubt, the hon. Gentleman had better put me a question to which full publicity can be given.


What my hon. Friend refers to is the Income Tax upon the mortgage interest which must be paid by the person who receives the mortgage, and which can be deducted from the next payment of his interest. It is following the general practice of deduction, and so on.


You mean the tenant's deduction from the rent?


Not from the rent, but from the mortgage interest. The person who has bought his house, but has mortgage on it will have to pay—


But would recover?


And would recover, of course.


May I ask whether the Chancellor of the Exchequer will issue instructions to the inspectors that claims should not be made from people whom they know quite well are not liable to pay. It is not so much that publicity on this matter is necessary among the rank and file of the people who are purchasing houses as that instructions should be given to the inspectors that they have no right to make these claims. I am not referring to the point made by the right hon. Gentleman the Member for Colne Valley (Mr. Snowden), who was referring to the mortgage interest. That is deducted or allowed for, and very rightly so. I am referring to the claims made by inspectors for what would be the rent if they were not paying the mortgage, and I am quite sure, if the Chancellor of the Exchequer were to notify the inspectors, they would carry out his instructions.


I should like to put one point to the Chancellor in regard to Schedule A and in respect to those people who are under the Income Tax exemption limit. It is perfectly true, of course, that if they are made to pay they can recover, but the question surely is whether they can be made to pay in the first instance, because if they can, and they can only recover after a time, that gives rise to difficulties which have been referred to, even though they have the right of subsequent recovery.


I desire to call the Chancellor's attention to one small point. In trying to check the figures in the White Paper as to the £14,500,000 of extra revenue, in order to see how the total amount was made up, I found to my surprise that up to and including the year 1919–20 the yield of each Schedule A, B, C, D, and E was given separately in the abstract, but, for some reason that I have been unable to fathom, for each year since 1921 all of it is lumped together in one sum and only two divisions are given, namely, Super-tax and Income Tax. I call the Chancellor's attention to this, because it is a very great convenience to hon. Members who are trying to check the figures to have the amounts separately, as they were given before 1919.