HC Deb 07 July 1930 vol 241 cc59-70

If either husband or wife who are living together claims to be separately assessed for the purpose of Income Tax (which expression includes Surtax) neither of them shall be liable to pay a larger sum in respect of Income Tax than they would be liable to pay if they were each unmarried.—[Mr. G. Locker-Lampson.]

Brought up, and read the First time.


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

This new Clause has been proposed for the last 12 or 13 years, but when moved in the past has been moved without avail. I venture once more to move the Second Reading of the Clause in the hope of persuading the Chancellor of the Exchequer to remove what, after all, seems to me to be a great injustice and a really ridiculous anomaly. As the Committee know, under the present law a man and woman may be living together unmarried, and in that case they are treated separately for the purpose of Income Tax; they do not pay according to the joint rate, but each of them pays an individual rate and each of them is assessed separately. As soon as they marry they pay on their joint incomes at a higher sate. In fact, to put it quite shortly, a very heavy tax is placed upon the legal marriage bond. No one else is treated in this way. If two sisters are keeping house together, or two brothers, or a father and son, or a mother and daughter, each of them is treated separately for the purpose of Income Tax and each pays his or her own rate. Why should the marriage bond be treated differently from any other kind of union in this respect? I do not believe that there is any valid argument in favour of it. Indeed it is much more serious now than it was a few years ago, because the tax is becoming heavier and heavier. In the days before the War, although the principle was exactly the same, the result was comparatively slight, owing to taxation being much less; but now it is very serious indeed and may become much more serious.

I will give the Committee two instances to show what it means. I will take quite low incomes, not the incomes of rich people. I have here the instance of a man and woman living together, not married. The man earns an income of £280 a year and the woman has an unearned income of £280 a year. Between them they pay a tax of £24 8s. But directly they marry, with exactly the same income, they pay a tax of £32 8s. 6d. Here is another instance of a man and woman living together unmarried. The man earns an income of £200 a year and the woman has an income of £200 unearned. They pay a tax of £10 4s. But directly they marry, with the same income, they will pay a tax of £14 4s. The majority report of the Royal Commission on the Income Tax in 1920—the present President of the Board of Trade was a distinguished member—used this argument in paragraph 259 in support of the existing practice: The incomes are aggregated because the law of taxable capacity is the supreme law in matters of taxation, and taxable capacity is, in fact, found to depend upon the amount of the income that accrues to the married pair, and not upon the way in which that income happens fortuitously to be owned by members of the union. That may be a perfectly sound argument, but if it is a sound argument it applies equally to any other kind of income; it applies equally to the man and woman who are living together unmarried, to the joint household of a couple of sisters or of a couple of brothers, or of a father and son, or of a mother and daughter. If the argument is sound in one case, it is equally sound in the others. The present practice is against the whole of the recent history of women's enfranchisement. The Married Women's Property Act, passed in 1882, has always been considered to be the married women's charter. Before that Act was passed the property of a wife became the chattel of her husband. What does the women's charter say? Every woman who marries after the commencement of this Act shall be entitled to have and hold as her separate property all the real and personal property which shall belong to her at the time of marriage, or shall be acquired by her after marriage. 4.0 p.m.

No one ever dreamed that this principle would be called into question again. Unfortunately in 1918 a general rule was put forward in connection with the Finance Act of that year which violated this principle. The rule in 1918 laid it down that the profits of a married woman living with her husband should be deemed to be the profits of the husband, and should be assessed and charged in his name, and not in her name or in the name of her trustees. It is perfectly true that if the wife chooses to go out of her way to make a separate claim, she can get a separate assessment, but she has got to make the claim first. Many people are quite unaware of that, and, whether she makes a separate claim or not, the assessment is a joint assessment, in the sense that they have to pay on the joint amount, and this, of course, holds good except in very rare cases where both the incomes are earned and those incomes are very low. It does seem to me very curious that in the very year that the great Reform Bill was passed giving women the vote and enabling them to sit in this House, the other Act was passed which was a distinct violation of the Married Women's Property Act and took away what was given nearly 40 years previously.

I should like, if I may, to anticipate some of the objections which, I presume, the Chancellor of the Exchequer is going to make. I think that he will find three arguments against this new Clause. The first argument will be based on the report of the Royal Commission of 1920; the second, possibly, on the argument that if he agrees to this Clause, it will lead to a great deal of evasion; and the third argument, probably, will be that the cost will be too great. I do not feel that the report of the Royal Commission ought to carry any weight to-day. On that Commission there were 26 Commissioners, and only one was a woman; 186 persons gave evidence, and only five of those were women. Only 11 gave evidence in regard to this marriage tax at all, and eight out of the 11 were in favour of its abolition. Three only were in favour of the marriage tax, and all those three were officials connected with the Inland Revenue Department. Out of five women who gave evidence, one was not asked any question about the marriage tax at all, but every one of the four women who were questioned were in favour of the abolition of the tax. One of those ladies represented the National Council of Women of Great Britain and Ireland, another represented the National Union of Societies of Equal Citizenship, the third represented the Women's Freedom League, and the fourth member was the hon. Lady the Member for Sunderland (Dr. Phillips), who represented the Standing Joint Committee of Industrial Women's Organisations. The hon. Member for Sunderland in her evidence used these words: We are of opinion that a husband and wife should not be placed with regard to the payment of Income Tax at a disadvantage in comparison with any other two persons living together. Later on in her evidence she said: It puts two married people at a disadvantage compared with the rest of the community. I only hope that the hon. Lady the Member for Sunderland is still of that opinion, and that she will go into the Lobby in support of this Clause. More than this, Mrs. Knowles, who was the only woman member of the Commission who signed the Minority Report, strongly condemned the tax, and disagreed with the recommendations of the Majority Report of which the distinguished President of the Board of Trade was a member. Therefore, I do hope that the Chancellor of the Exchequer, if he is going to reply, will not adduce this report as a reason against this Clause. I do not think that it will strengthen his case. Women in those days were much less organised than they are to-day. They are far more powerful now, and no such Commission could possibly be set up to-day. To-day, women would have been far more strongly represented on the Commission, and their voices would have been heard in evidence far more fully.

The next argument which, I think, possibly the Chancellor of the Exchequer will use is the argument of evasion, but exactly the same argument could be used in regard to people in other relationships of life living together and running a joint household. Does it lead to evasion when two sisters are living together, or two brothers, or a mother and a daughter or a father and a son? More important still, does it lead to evasion when two people are living together, a man and a woman, who are unmarried? If it does lead to evasion, why does not the right hon. Gentleman now treat their incomes as joint and get the full tax; and if it does not lead to evasion, and there is no evasion, why is he afraid there is going to be evasion in the case of husband and wife? May I suggest to the Chancellor of the Exchequer that he could meet this case of evasion by the same means that he meets the case of evasion under the Death Duties? In the case of Death Duties, if property is handed over within a certain period of time, Death Duties have to be paid, and in the case of income of husband and wife, if property is handed over to escape the tax, that proportion of the property could, after a certain period, be considered as part of the income of the giver. I would like to know whether the Chancellor of the Exchequer has considered that.

The last argument that the right hon. Gentleman may use is the argument of cost. I would like to point out that the heavier the cost, the heavier is the present burden and the heavier the injustice. The right hon. Gentleman may be going to tell us that if he accepts this Clause it will cost many millions of pounds. If he does, it is a very serious confession to make, for, in that event, marriage in this country is penalised to such a vast extent that it must necessarily have some effect in discouraging the legal bond. The cost of the removal of this injustice is the exact burden of the tax upon marriage at the present moment. Women to-day, as everyone knows, are more than half the electorate. Therefore, they wield, if they choose to exercise it, a greater political power in this country than the other sex. They can sit in this House on equal terms with men. They can vote on Finance Bills and tax their fellow-subjects. Numerous Acts have been passed during the last few years gradually placing them on practically a complete equality with the other sex in every department of life. Is it not ridiculous that directly they are married, the whole of their property is treated as the property of the husband for Income Tax purposes? Directly the legal bond becomes effective, the tax authorities treat the property of the wife as the property of the husband, and no longer consider it as her separate property, unless she makes a special claim to be assessed separately, and then she has to pay increased tax. Would it not be far more in accordance with the spirit of the times to sweep away what, after all, is a gross anachronism, a relic of the inequality of women as citizens of this country?

The PRESIDENT of the BOARD of TRADE (Mr. William Graham)

My right hon. Friend who moved this Clause has pointed out that the subject is one which has been before this House in, I think, all the discussions on the Finance Bill in Committee in recent years, and he is also, of course, perfectly correct in directing attention to the conclusions of the Royal Commission on Income Tax, although I am not, quite sure that he has accurately represented the views of, at all events, a section of its membership. The reply to this proposal can be put in brief and simple terms. No doubt there are certain features in the case which has been presented by my right hon. Friend which are attractive, and it seems to be a logical development of the principle of the Married Women's Property Acts and kindred legislation that there should be a separation of the incomes of husband and wife if they so elect, and it is an option which is provided under this new Clause that the tax should be separately imposed. But when we come to make inquiries into what is meant in practice by this Clause, then the anomalies and injustices, not to mention the loss to the revenue, are of the most startling character, and the proposal altogether ignores one fundamental consideration which the Royal Commission had clearly in view. At the present time, we give an allowance in the assessment of husband and wife; there is a reduction in respect of their marriage. That is the way in which we recognise marriage under the law as it stands, but if it were proposed to segregate or separate the incomes, and carry that to its extreme conclusion in taxation, then, of course, that must be clearly an alternative to the existing marriage rates. My right hon. Friend seeks to get over that difficulty by making it an option under this Clause, but there is not the least doubt that while for a certain section of families in this country the option would be very valuable, it would be very damaging to the great majority.

Let us see what would happen. There is not the least doubt that very soon after this change had been introduced and the option exercised, income would be redistributed between husband and wife for the express purpose of reducing the aggregate amount of taxation now paid in that household, and the cost to the Exchequer, to begin with, would be at least £8,000,000, but as the taxpayers, who for this purpose include Surtax payers, redistributed the income, over the years—and it would be accomplished probably, in a very short time—the cost would mount up until, I am advised, it might amount to as much as £35,000,000. So that on revenue grounds alone, whatever point it might be between £8,000,000 and £35,000,000, the proposal is impossible. But what would be the effect upon the taxpayers themselves? After all, the real test in any system of taxation, more particularly if we regard the marriage bond as the normal thing in life, is the fair allocation of the burden of taxation over a community with reference to ability to pay.

I am advised that the number of cases of joint incomes up to £1,000 in which that income really belongs to the husband or flows to the husband, and in which the wife has little or no income, is probably 2,000,000. That is to say, there are 2,000,000 cases of taxpayers or households in that condition in this country. If this change were introduced then, it follows clearly, that an additional burden would be placed upon that great body of taxpayers in order to give a reduction of tax to taxpayers over that amount who, again, would be more readily able than the others to redistribute their income for the purpose of taking advantage of this option. Therefore, the net result would be to inflict a grave hardship upon large numbers of taxpayers who have been held entitled to our consideration and have received our consideration in the past. I need not stress the point which the right hon. Gentleman himself remembered in moving the Clause, namely, that it would lead to widespread legal evasion. It would be quite legal to do that and though, no doubt at a very early date, correction would be introduced in legislation to deal with the matter, that evasion would be inevitable and it would be practised over a very large field or at all events over a field which would make it very costly to the Exchequer.

The final point is this. It is suggested that the present position is not compatible with the Married Women's Property Act and kindred legislation, but I would remind the Committee that at the present time partly under that legislation and in this case certainly under Income Tax practice, there can be separate assessments and separate charge and collection, subject always to the condition that that separation is not allowed to diminish the aggregate amount of tax payable. I have already tried to indicate that at present we recognise marriage in the allowance which is made in assessment for Income Tax. As the law stands, it is £225 allowance for the married couple as against £135 for the single individual, which is a difference of £90. On the tax chargeable for the financial year on which we have now entered that difference represents a cost to the Exchequer of £17,000,000 which, I think, is a very fair recognition of marriage obligations. For all these reasons, although on the surface there is something attractive about the proposition in the proposed new Clause, the Chancellor of the Exchequer could not possibly accept it, and perhaps the strongest reason of all against it is the manifest injustice which would be inflicted upon the great majority of taxpayers who are entitled to our consideration.


The Committee must have been impressed by the revenue argument of the President of the Board of Trade but nevertheless I, as a, backbencher and a bachelor, wish to support, to some extent, the contention of my right hon. Friend the Member for Wood Green (Mr. G. Locker-Lampson). I agree with him that the whole basis of this method of assessment is antiquated. At the same time I admit that it conforms with the idea flat a married woman is regarded by the law, in some degree, as an incapacitated person and that the husband and wife are regarded by the law as one person. Of course those are mere legal fictions but they recognise the facts of life that ordinarily the husband and wife do lead a common life and that their wealth is, to some extent, common wealth. There is one great injustice however to which I would call the attention of the Chancellor of the Exchequer and the President of the Board of Trade. Although it is comparatively small in scope it is in fact a very serious injustice. Owing, I believe, to representations from a famous playwright whose wife had a very large fortune, a condition was brought in making it possible to have separate assessments as between husband and the wife for purposes of Income Tax. But supposing that I, through love, were induced to marry a lady of the dramatic profession who earned a very large income per year and that she, lothing and despising anything so mean as Income Tax, were to go away to America or somewhere else. The Revenue officials could in that case come down upon me and my small goods and chattels in order to satisfy their claim. It seems an absolutely monstrous injustice on a husband who marries a lady with a much greater fortune than his own, that his small house and personal possessions should be liable to seizure by the Revenue officials because of the neglect or the whim of his wife. I ask the right hon. Gentleman to give his attention to this matter and to see if this serious injustice cannot be remedied.


This proposed new Clause is a very "hardy annual." It comes up every year in the debates on the Finance Bill and no new argument has been adduced either for it or against it. It all depends upon whether a party is in Opposition or in office, as to whether they champion this proposal or oppose it. The party which is in Opposition always champions it; the party which is in office always opposes it, and the very arguments which have been used to-day by hon. Members above the Gangway were used on previous occasions by hon. Members now sitting on the Government side and vice versa. One of the main reasons which has deterred every Chancellor of the Exchequer from considering this proposal favourably is that of its effect on the revenue. The right hon. Gentleman the President of the Board of Trade has told us that it involves a matter of £35,000,000 and, of course, the Chancellor cannot forgo that sum. But I think if this proposal were put to the House of Commons, apart from any consideration of supporting the Government of the day, the House of Commons as a whole would be in favour of it because I think nearly every Member has at one time or another expressed views in favour of such a proposal.

The one consideration which has operated against the adoption of the proposal clearly is the consideration of revenue. But that argument in itself only goes to show that the amount of the present toll upon marriage is £35,000,000. There is no logical argument in favour of the line of demarcation chosen by the right hon. Gentleman the President of the Board of Trade in his reply. The right hon. Gentleman has chosen, as he always does, the best argument that can be found, namely, the argument as to the effect of this proposal upon people receiving incomes below £1,000, but I think that some means might be devised to meet what is obviously an injustice in this matter. I do not know if it would be possible to put a tax upon bachelors like the hon. Member for Eastbourne (Mr. Marjoribanks). That might be a method of remedying this obvious injustice and of meeting what, I believe, is the sense of all Members of the House of Commona—when they are in Opposition.


I am not sure that the argument that this new Clause is a "hardy annual" tells against it. It tells very much in favour of this proposal that in spite of the eloquent and sometimes convincing arguments which the President of the Board of Trade addressed to the Committee, that every year, while this age-long injustice remains unremedied, Members are to be found willing to voice the claims of married people in this matter. The hon. Member for Eastbourne (Mr. Marjoribanks) spoke from the point of view of the bachelor. I speak from the point of view of a married man, and I am not in the least impressed by the concession to which the President of the Board of Trade referred as having been made to matrimony, in the form of the allowance of £225 to the married couple. I would point out that if a couple fail to regularise their union each gets a personal allowance of £135. Thus they would make £45 on the transaction, and thus I fail to see the force of the right hon. Gentleman's argument as to the concession which has been made in favour of regular unions.

I have taken out certain figures in order to show how married people are penalised at the present time. It may interest the Committee to know that a married pair each earning £500 a year, at the present time, after all allowances including that of which the right hon. Gentleman boasted, pay £95 10s. in taxation, whereas were they living together but not married the taxation payable by them would be £64 5s. Therefore, the married couple are penalised to the extent of £31 5s., and every time the husband looks across the coffee pot at his wife he realises what a lot marriage is costing him. The right hon. Gentleman used what may have seemed to some hon. Members a very convincing argument about the revenue, but the fact that the revenue is making so much money out of this injustice is surely an additional argument in favour of the new Clause.


I think the discussion has shown us conclusively that the majority of Members of the Committee, if they were free to act, would alter the present method of taxation in reference to married people but the manner in which the Finance Bill is discussed renders it quite impossible now, or I suppose in the future, to alter this matter by means of one step. Unless some Chancellor of ale Exchequer has the courage to make a start with some kind of alteration, even if it is only a minor alteration to begin with, nothing will ever be done, because it is obviously impossible at this stage or at any subsequent stage in the proceedings on the Finance Bill to make an alteration which would involve some £35,000,000 in the Budget of the country. If some Chancellor had the courage to bring in a new Clause which would deal with one part of this matter first then, gradually, we might have this injustice rectified.


We have heard that the Opposition are always in favour of this proposal and that the Government are never in favour of it but our hope was that, on this occasion, the Government would favour the proposal for the very simple reason that one of the great theories of this Government is that of the redistribution of wealth and the President of the Board of Trade, only a little while ago, declared that the immediate effect of this new Clause would be that a spouse Who was wealthy would hand over to the other party a considerable amount of wealth. Thus we have a case here in which the Government could help to carry out their idea about the redistribution of wealth to that extent at any rate, and I thought it was a proposal which would commend itself to the President of the Board of Trade.

Question, "That the Clause be read a Second time," put, and negatived.