CLAUSE 10.—(Amendment as to relief in respect of life insurance premiums.) (Hansard, 5 June 1930)

§ Sir ARTHUR STEEL-MAITLAND
Before we proceed with the first Amendment, I would like to raise a point of Order with regard to the Clause as a whole. The point of Order is that paragraph (c) imposes a charge upon the taxpayer by way of diminishing relief that he gets in the matter of Income Tax on his insurance premium, and that this charge has not been covered by the Financial Resolution. If any hon. Member will refer to the Sixth Financial Resolution on 14th April, he will find that the Resolution covers paragraphs (a) and (b), but not (c). I will explain, if I may, as briefly as I can, the way in which the charge is made. It arises becausee relief of Income Tax was divided into three grades, that is to say, incomes up to and including £1,000 a year received relief from Income Tax on premiums up to one-half of the standard rate, or, supposing the Income Tax be 4s. in the £, during this last year up to 2s. Incomes exceeding £1,000 and up to £2,000 received relief at three-quarters of the standard rate, and incomes of over £2,000 received it at the full rate of Income Tax.
That led to a queer and anomalous situation with regard to incomes just below as compared with incomes just above one of those limits of £1,000 or £2,000, as the case may be, for it created the very topsy-turvy result that but for the Sub-section referred to here, the person with the lower income might, in the aggregate, pay a larger Income Tax than the person with the higher income. The way in which it worked was this: Supposing you take two men, one of them with an income of £990, and the other with an income of £1,010, that is a difference of £20 between them. But there is this very vital difference, that one of them is just over the margin of £1,000, and the other is just under. The 2416 person with the £20 lower income pays in Income Tax directly, of course, less in tax. With Income Tax at 4s. in the £, having £20 less income than the other, he pays £4 less, or one-fifth of £20. On the other hand, supposing he has effected substantial insurance on his life, the advantage he has got in paying less Income Tax is more than taken from him by the fact that his relief is at a lower rate. Suppose that he pays £120 a year, which is within the limit, by way of insurance premium. The man with an income of £990 in that case gets 2s. in the £ relief when the standard rate is 4s., or one-tenth. That means to say, he gets one-tenth of the £120, or £12 of relief. The man with an income of £1,010 gets relief at the rate of 3s., or half as much again. Therefore, on the same premium of £120, he gets not £12 of relief, but £18 of relief. In other words, the man with the lower income is better off by £4 of direct payment to Income Tax, but he is worse off by £6, owing to the fact that the relief he gets is on a lower scale, that is to say, in the net total result, apart from the special provision of Sub-section (9), he pays actually £2 more in taxation than his richer brother.
That is a sufficiently topsy-turvy result, and, naturally, some provision was necessary to set it right. Therefore, the Act of 1918 was amended by the Act of 1920, which inserted Sub-section (9) referred to. Perhaps the Committee might like to hear the words of that Sub-section. It is one of those Clauses which must have been present in the mind of the Attorney-General when he said that he hoped legislation for the future would be easily intelligible. The only thing I can say to him is that if he consents to this Finance Bill passing as it stands, he will be committing, perhaps, the greatest sin of all, because he does so with his eyes open, and the Sub-section will be made more difficult in the future by these additional words, which will add to its complexity. For crystal clearness to any ordinary reader, let me read the Sub-section which puts right the anomaly to which I have referred. Where the tax ultimately payable by any person after deducting the allowance under this section is greater than the amount of tax which would be payable if the total income of that person exceeded one thousand pounds or two thousand pounds, as the case may be, the allowance 2417 under this section shall be increased by a sum representing the amount by which tax at one-fourth of the standard rate on the amount of the premiums or payment in respect of which the allowance is made exceeds the amount of the tax at the standard rate on the amount by which the total income falls short of one thousand pounds or two thousand pounds, as the case may be. In passing, I submit this to the Attorney-General, who is in favour of real intelligibility of Acts in general and particularly of Acts which impose charges on the unfortunate taxpayer, who, at least, might be able to see at one glance the sentence that is passed upon him, because if he refers to the Section he will realise that, incomprehensible as it is at the moment, when reading the new words placed in it, it will be still more incomprehensible.

The DEPUTY-CHAIRMAN
The right hon. Gentleman is raising a rather long point of Order.

§ Sir A. STEEL-MAITLAND
The point is, that this means that the allowance under this section shall be increased by a sum representing the amount by which one shilling in the pound on the amount of the premiums.… exceeds the amount of the tax at the standard rate on the amount by which the total income falls short of one thousand pounds. That means that he gets one-fourth of the standard rate which, when it was at 4s. was 1s. He gets an additional relief to the amount of a 1s. on the amount of his premium. In the case in question that is £120; therefore he gets £6. From that there is deducted Income Tax on the difference between his income and £1,000. That is £2, so that it gives him an extra £4 in all in order to cover the disadvantage that he was at and a little more. The point is this. But for this Clause, he would have been getting relief at a fourth of the new standard rate which is 1s. 1½d. per £ on the amount on the premium. That is going to be reduced to 1s. and, therefore, when you deduct from the proceeds of that the difference of the amount of the Income Tax between the income and the standard rate it leaves him sensibly worse off than he was before. That case has not been covered by Resolution No. 6 and, therefore, I submit that the Clause is out of order.

The DEPUTY-CHAIRMAN
The point of Order raised, if I understand the right 2418 hon. Gentleman aright, is, that paragraph (c) of Clause 10 is not covered by the Ways and Means Resolution. I do not share that view for the following reasons. I have the Resolution before me. The effect of the Resolution is to substitute throughout Section 32 of the Income Tax Act of 1918, as amended, a rate of four shillings for the standard rate, with one exception, namely, "the last such reference in Sub-section (9) of the said Section." Sub-section (9) of Section 32 was not in the Section as originally enacted, but was inserted by Section 26 of the Finance Act, 1929. Subsection (9) reads as follows: Where the tax ultimately payable by any person after deducting the allowance under this section is greater than the amount of tax which would be payable if the total income of that person exceeded one thousand pounds or two thousand pounds, as the case may be, the allowance under this section shall be increased by a sum representing the amount by which tax at one-fourth of the standard rate on the amount of the premiums or payment in respect of which the allowance is made exceeds the amount of the tax at the standard rate on the amount by which the total income falls short of one thousand pounds or two thousand pounds, as the case may be. This Sub-section contains two references to the standard rate. Paragraph (c) touches the first of these two references and not the second. It appears to me that the paragraph is covered by the Resolution in as much as under the Resolution the words at one-fourth of the standard rate are to be read as "at one-fourth of a rate of 4s.," Which is the same as 1s. in the £. I have taken such advice as I could obtain. That is my Ruling, and I am afraid that I must adhere to it. If the right hon. Gentleman disputes it, there may be other stages of the Bill where it can be raised, but so far as this stage is concerned, my Ruling is quite definite.

§ Sir A. STEEL-MAITLAND
At what stage can we raise it? I should like to see your reasons in detail. We have taken very careful advice about this.

The DEPUTY-CHAIRMAN
The right hon. Gentleman approached me on this matter less than an hour ago. He will understand that this is a very difficult and complicated matter to grasp. During that period I have taken such advice as 2419 I could obtain. I have given due consideration to all the points raised by the right hon. Gentleman, and I must stand by the Ruling given.

§ Sir LAMING WORTHINGTON-EVANS
I beg to move, in page 7, line 13, after the word "from," to insert the word "Income."
I should like to ask whether you, Sir, will not think it would be for the interest of the debate and for the convenience of the Committee if a general discussion took place upon the first Amendment, so that the separate Amendments to be put to a Division will be moved with short speeches only in order that the debate may be concentrated in a form which will be easily understood. The Clause is an extremely important one. It raises matters of first-class importance which interest a very large number of people, and it would be quite impossible, if each Amendment were taken saparately, to open the case that we think we have against the Government.

The DEPUTY-CHAIRMAN
I always take the view that, as far as the Chair can, it must meet the convenience of the Committee. If the Committee desires a general debate, on the clear understanding that there shall be no general debate on the Question, "That the Clause stand part," and only short speeches will be delivered on the Amendments selected, I am quite willing to allow it.

§ The CHANCELLOR of the EXCHEQUER (Mr. Philip Snowden)
I think the course that has been suggested would probably be most in the interest of the Committee, and I am quite prepared to fall in with it, on the understanding that the conditions that you, Sir, have mentioned are observed.

§ Sir AUSTEN CHAMBERLAIN
I am anxious that the discussion should take the form which is most for the convenience of the Committee and leads to the clearest exposition of the subjects that are to be discussed, but I feel some difficulty about the arrangement that there should be no debate on the Question, "That the Clause stand part." I quite understand that, if the whole matter is opened in the form of a general discussion on the first Amendment, discussion 2420 on other Amendments raising individual points which have been covered by the general discussion should be brief, but a Clause in passing through Committee is sometimes altered. At any rate, it is a great convenience to be able to review it as a whole with a knowledge of the shape in which it issues, and I hope you will feel, Sir, that our right to some reasonable discussion on the Question, "That the Clause stand part," may be reserved, even if we are allowed a general discussion on the first Amendment.

§ Mr. CHURCHILL
Even apart from a discussion on the Question, "That the Clause stand part," which naturally would be abridged in consequence of the full discussion on the first Amendment, there are certain specific Amendments which could not be disposed of simply by their being put to the Committee. There will have to be some discussion, however accelerated, on the various important Amendments in detail.

§ Mr. SNOWDEN
The right hon. Gentleman is under a misapprehension. It is not suggested that any Amendments shall be put without discussion. The Chairman has said that, after the general discussion, the speeches on the Amendments might be very brief.

The DEPUTY-CHAIRMAN
I hope I made myself quite clear. I am quite prepared to allow a general discussion on the first Amendment which will cover the entire Clause. I hope we shall have shorter discussions on the subsequent Amendments selected, and I do not want a discussion on the Question, "That the Clause stand part," which will be mere repetition of the first one.

§ Sir L. WORTHINGTON-EVANS
I think my Amendment is of real importance to the community. When we were discussing the financial resolution it was explained to us that it was intended to cover relatively small alterations in the law. It was really intended to provide that the tax-payer, who had hitherto been deducting 2s. 3d. in the £ from his insurance premiums, should in future only deduct 2s. in order that he might not get twice over a benefit which he would have got already from a former Clause. First it was represented that this was really a very small matter and, by a process of interrogation, the Opposi- 2421 tion secured a further explanation, after the Financial Secretary had explained it, from the Chancellor of the Exchequer. That seemed to widen the scope of the Resolution somewhat but it was not until the President of the Board of Trade explained what he thought the Resolution was intended to cover that we really discovered what wide alterations were intended by the Chancellor of the Exchequer. It took three Minister to explain the Government's intentions and, when they were explained, our worst suspicions were confirmed that the Clause that was represented as so harmless and so necessary to prevent double benefits in fact disturbed the whole basis upon which the great thrift movement, as expressed in insurance, has been founded.
I propose to give part of the history of the practice that has grown up of allowing rebates from Income Tax in respect of insurance premiums. It started in 1799. I will not ask the Committee to follow it in detail from that time but I propose to tell them what Mr. Gladstone said about it. What did Mr. Gladstone say in 1853? He spoke for many hours and I will not, therefore, read the whole of his speech. He explained the principles which determined the Government in asking the Committee to approve of various alterations in the Income Tax Act. Some of it is very interesting. It sounds almost a fairy tale. Besides fixing on the tax a temporary character, we are most anxious to do what can be done in order to meet the public feeling as to the inequality of the tax. For that public feeling we have not only respect but sympathy, while we do not admit that it is our duty, as persons charged with the conduct of public affairs, to shape our measures according to any feeling or sentiment whatever until we have examined the practical form which they are to take and tried it by the light of our understanding. We propose to introduce certain mitigations into the operation of the Income Tax. We propose to extend the principle of commutations. A more important mitigation which we propose to make is this. There is a general feeling that a man ought to have, at any rate, the opportunity of investing the savings he may make from his income without being liable to the Income Tax upon them. We do not think it possible to make provisions of that kind applicable to savings simply as such. All we can do is to say, 'If you choose to invest your savings in the form of a deferred annuity or a life assurance, the premium which you may pay upon that deferred annuity or life assurance up to one-seventh of your income, shall not be chargeable to 2422 your Income Tax, but may be deducted from your Income Tax before it is charged.' I will give some of the reasons which induced that statement. He continued: I am not at all prepared to say that we would stop at that point if it were possible to do more. At the same time, this plan has considerable recommendations. I do not say that it will completely meet the case of persons who, being afflicted with sickness, cannot, except under peculiar circumstances, insure their lives.… But what I do say is this—that it is a relief which will admit of very extensive application.… It establishes, however no invidious distinctions between one class and another. It is open to all those who choose to avail themselves of it; but while it is open to them all, we know that practically the classes who are in the habit of insuring their lives are just those very classes whom it is your main object to relieve by the reconstruction of the tax—namely, classes of professional men and of persons who are dependent upon their own exertions. It would be seen that Mr. Gladstone justified the principle of rebate of Income Tax premiums as an encouragement to thrift, and he justified the selection of this particular form of thrift because it was open to all and was helpful to those who had earned incomes and created some differentiation in favour of earned incomes as against unearned incomes. That remained the unaltered and continuous history of the Income Tax until the War. During the War years, money had to be found and the Income Tax, as hon. Members know, rose to five shillings and ultimately to six shillings, and the amount of the rebate which was given to those who were paying insurance premiums increased very largely in value. An alteration was made in 1916–17 under War conditions. It was thought then that it was unsatisfactory, and the Colwyn Committee was appointed to consider the whole incidence of Income Tax and the incidence of the rebates, including the rebates for insurance premiums. I propose to remind the Committee of what that Royal Commission reported. They first of all, in paragraph 290, summarised the position at that date. They said that: The principle of allowing Life Insurance ance premiums as a deduction from income for Income Tax purposes was restored, after a long interval of disuse, in 1853. Mr. Gladstone, when opening his Budget for that year, defended the allowance as a mitigation of the taxation on savings. He stated that it was impossible to exempt savings from Income Tax altogether, but that to make an allowance for Life Insurance premiums 2423 would go some way in that direction, and would especially benefit those who derived their income from their own exertions. They go on to say: The advantage given to insurers by this allowance has probably been a factor in the great increase and development of Life Insurance that has taken place since 1853, but whether this be so or not these developments both in volume and in variety of character were so great, that their influence on Income Tax was so important that it became necessary to review the position in 1915 and 1916. The high rates of tax that then obtained had made Life Insurance more attractive than ever, and it had become a common practice to affect policies which, though nominally Life Insurance policies, were in reality wholly or mainly a form of investment rendered exceptionally attractive by the Income Tax allowance. No doubt there was, in these days, as no doubt there is now, some abuses of the abatement which is allowed in respect of Income Tax. Consequently some of the witnesses who appeared before the Royal Commission proposed that the allowance for insurance premiums should be abolished altogether. The Commission reported against abolition. There were others who argued that it was unfair to pick out life insurance premiums as the only form of saving which should have this particular benefit from the State and these particular allowances in respect of their annual payments. Having first said that they did not agree with the witnesses who advocated the abolition, they found sound reasons, they said, for singling out this one form of thrift for preferential treatment. They pointed out that in the Dominions and in foreign countries a similar allowance was made, and they said: Viewing the matter in a broad and rational way we consider that this reason is sufficient to justify the State in looking with favourable aspect upon Life Insurance and in treating income that is saved and applied in this matter with special indulgence. Finally, the committee reported that certain changes only were to be made and these changes were, in fact, embodied in the Finance Act, 1920, and, briefly, they were these, that as regards the pre-1916 policies—those are the old policies—there was no alteration at all. They were allowed to deduct the standard rate of Income Tax from their premiums. It is true that this was only in respect of incomes of over £2,000. As regards incomes of £1,000 and £2,000 they were 2424 allowed to deduct three-quarters of the standard rate, and in the case of samller incomes not exceeding £1,000 they were entitled to deduct half of the standard rate of Income Tax. As regards the policies later than 1916, that is, those policies taken out with the knowledge that there was to be an alteration in their treatment, there was an allowance of one-half of the standard rate. The Committee will observe—and this is important—that in every case the allowance was based upon the standard rate of Income Tax. The basing of it upon the standard rate of Income Tax has always been the principle which has been adopted. You really had a continuous history for 140 years of the standard rate of Income Tax being taken as the basis upon which the deduction was to be calculated, and you have had for that period some deduction allowed. It is now reserved for the present Chancellor of the Exchequer to break the bargain which has been kept over all that period. On what ground does the Chancellor of the Exchequer allege that this alteration should be made? I suppose he does not say that it is no encouragement to thrift to allow the abatement in respect of insurance premiums? At the same time, the practical result from the point of view of the State is of extreme importance.
In answer to a question in the House the other day, the Financial Secretary replied to the effect that £18,000,000 was added to the valuation of estates arising from the policies included in the estates year by year. On the average it showed that £18,000,000 was added to the values of the estates in respect of policies included in those estates, and the amount of duty received represented only £1,600,000 as applicable to the capital of the insurance policies. The Chancellor of the Exchequer said the other day in the discussion on the Financial Resolution that he did not see how thrift could be discouraged, because in regard to the pre-1916 policies they were already taken out, and the insured, having committed themselves to taking out a policy before 1916, could not be affected one way or the other by anything which was now done by the Chancellor of the Exchequer. This was on the principle that he had got them already for purposes of taxation, and that whatever he did now they could not get out of his clutches.
2425 There is no question that the future has also to be taken into account. What about those who are contemplating insurance? Hitherto they have known that they would get one-half of the standard rate of Income Tax as an abatement. Now we are to cut adrift from that standard rate, and in this year, instead of being half the standard rate, it is to be half an assumed standard rate of 4s. In other words, some people in future are to be cheated of 3d., and in order to gain that 3d., a relatively small sum, the Chancellor of the Exchequer is going to reverse the process of 140 years, abandon the relief on the basis of the standard rate and substitute for it this year a relief on the standard rate, less 3d., and next year some other relief, perhaps, and the following year again, a reduced rate. Once he starts on this sort of thing, where is he going to stop? Hitherto we have had the principle by which there was an abatement of half the standard rate, and the standard rate is not fixed arbitrarily for this purpose but fixed, for the purposes of taxation upon the Income Tax payers of the country. The assured people know that they are going to get, not a fancy allowance, but an allowance fixed, not in respect of what they have to pay, but in respect of what the whole of the people of this country have to pay. I have no doubt that this will really come as a great shock to thrift and to those who would otherwise rely upon the practice which has hitherto been in force.
There is another point which makes this an especially bad step on the part of the Chancellor of the Exchequer. When the Colwyn Commission determined what allowances should be made and when the Government of the day adopted that report and put it into the Finance Act, 1920, the Colwyn Committee also considered that many of these insurance societies are mutual societies and are paying, after some allowances for expenses, Income Tax upon the income which they receive and retain, and put to reserve as security for policy holders. These moneys upon which tax has been paid do not belong to the company but to the insured people. Very large numbers of insured people are only liable to pay Income Tax at reduced rates, because most of them are people of relatively small means. Although these people are only liable to pay Income Tax at the reduced rate, on these moneys which 2426 belong to them but are retained by the societies tax is paid at the full rate, and there is no abatement. It was consideration of that fact which influenced the Colwyn Committee to come to the conclusion that there should be these allowances. The Chancellor of the Exchequer is not merely casting adrift the anchorage of the insured persons to the standard rate of Income Tax but he is also increasing the total taxation upon those who really are relatively poor people. On this point, as I understand it, the gain for the Treasury is £500,000, of which I gather that between one-fourth and one-third is to be exacted from those who took out their policies before 1916.
Where is the money to come from? It is not coming from the luxury spenders of this country and not from those whom the Chancellor of the Exchequer calls the idle rich, but from the savers of the country, the saving poor of the country whose earned incomes in future are to pay a larger taxation because of the reduction of the rebate hitherto allowed. We raise very large sums of money to give pensions to the widows of insured wage earners, but there is another class of people who have been endeavouring to provide for their own widows by weekly, monthly or yearly savings. They have put these sums on one side by insuring their lives for a relatively small sum in order that their widows might have a small annuity or a small capital which would enable them perhaps to earn their own living or to obtain an annuity from the insurance money. While on the one hand we are raising large sums of money to give widows' pensions, the Chancellor of the Exchequer is taxing the very people who are trying to exercise thrift. This is not a rich man's question. I have had communications from the Association of Industrial Assurance Companies and Collecting Friendly Societies upon the subject. They are very much alarmed. They say that this proposal affects them as it affects other people.
If the Chancellor of the Exchequer gets this money, it will be dirty money, obtained by a breach of legislative practice of 140 years' standing. It may not be perhaps a contract that he is breaking or a bargain that he is breaking—those words might not be literally and legally applicable—but there is a moral 2427 contract or bargain which he is breaking ruthlessly. I have not the slightest doubt that he is taking from those who are endeavouring to help themselves and seeking by their thrift and self-sacrifice to protect their widows. I hope that the Clause will be rejected. I do not believe that there is any Amendment that can be moved that will go to the root of the question, but there are same Amendments which I hope will be moved because they do offer some mitigation. There is only one proper method of dealing with the matter, and that is for the Chancellor of the Exchequer to withdraw the Clause.

§ Mr. P. SNOWDEN
Anyone ignorant of what is in this Clause would, after listening to the right hon. Gentleman, come to the conclusion that I have committed a crime unparalleled in the criminal annals of this country. The right hon. Gentleman indulged in a great many general statements and rhetorical statements, but he refrained from giving one figure, one instance, one case, in support of the accusations that he has made. He spent a good portion of the later part of his speech in saying that this proposal is going to inflict a grievous burden upon people of small means, and that it was in the interests of these people of small means that he was making his vigorous appeal. He knows quite well that there is not an atom of foundation for that statement. He knows that all people of small means and most people with higher incomes are not affected by the proposals of this Clause.

§ Sir L. WORTHINGTON-EVANS
They are.

§ Mr. SNOWDEN
The right hon. Gentleman went back to the early history of these abatements on life assurance and said that they originated in the eighteenth century. I believe that some attempt was made in that century to deal with that matter, but it fell into abeyance and was not revived until Mr. Gladstone made the speech which the right hon. Gentleman has quoted so copiously. The right hon. Gentleman said that he would give part of the history of the life assurance abatement, and he confined himself to giving a part only. I am not going to spend the time of the Committee 2428 by going at length into the history of the matter, but there are one or two matters of recent history to which I would call the attention of the right hon. Gentleman and of the Committee. The right hon. Gentleman said that on the Report stage of the Budget Resolution it took three Ministers to explain what was meant by this proposal. I would say that it took three Ministers to make the party opposite understand what was embodied in the provisions of this Clause.
This Clause provides rates of relief for life assurance. Last year the rate of relief was half the standard Income Tax rate, and on an Income Tax of 4s. in the pound the allowance for life assurance premiums was 2s. The pre-1916 policies had a different rate, which varied according to the amount of the income from 2s. and 3s. to 4s. It is true that these reliefs were related to the standard rate, but the new graduation that we have so far carried in Clause 9 has upset those reliefs. The Royal Commission on the Income Tax, to which the right hon. Gentleman referred, pointed out that if some new graduation of the Income Tax should be adopted in the future it would be necessary to review the insurance abatements, to harmonise them with the new system of graduation which might be adopted.

§ Sir HENRY BETTERTON
Has the right hon. Gentleman the report before him?

§ Mr. SNOWDEN
No. The new graduation upsets these reliefs and therefore some adjustment has been made necessary.

§ Sir L. WORTHINGTON-EVANS
I would ask the right hon. Gentleman whether the Clause which alters the figure from £225 to £250 does not apply to everybody, whether insured or not.

§ Mr. SNOWDEN
Yes.

§ Sir L. WORTHINGTON-EVANS
Then how can the right hon. Gentleman relate it to insurance?

§ Mr. SNOWDEN
I will deal with that point in a moment.

§ Sir A. STEEL-MAITLAND
rose—

§ Mr. SNOWDEN
I would prefer to continue. I could have interrupted the 2429 right hon. Member for St. Georges (Sir L. Worthington-Evans) on every sentence, but I refrained from doing so.

§ Mr. CHURCHILL
We are in Committee. We are in conversational Committee.

§ Mr. SNOWDEN
In paragraph 300 the Royal Commission says that if the graduation scheme should in future be varied the question of life assurance relief would need to be reconsidered. This relief for life insurance is given from the taxable income, and the taxable income is something different from the gross income of the Income Tax payer. The taxable income is arrived at after the various allowances have been made, such as the allowance for the wife, the children or dependents. A taxable income—I am giving the figures very roughly—of about £250 might, in the case of a married man with two children, represent a gross income of about £700 a year. Last year the first £225 of taxable income paid 2s. in the pound. We have altered that to £250. If I had followed the ordinary course, the amount payable would be 2s. 3d. in the pound instead of 2s. but on the first £250 only 2s. in the pound will be paid. With regard to life insurance allowances there is a limit. The relief cannot exceed one-sixth of the person's income and it cannot exceed 7 per cent. of the capital value of the sum assured. The right hon. Gentleman has been opposing this proposal because of its effect upon the poor, thrifty people. The fact is that any grounds of complaint that there may be can only apply to something like 1 per cent. of the taxpayers. The right hon. Gentleman admitted during the Report stage of the Resolution that if a person were allowed to deduct half the Income Tax of 4s. 6d., namely, 2s. 3d., he would be getting back more than he had paid.

§ Sir L. WORTHINGTON-EVANS
Yes, but I also gave the remedy.

§ Mr. SNOWDEN
The right hon. Gentleman has not incorporated it in the Amendment. The proposal that is now submitted to the Committee would leave these people as they were before. I believe it is mentioned in the White Paper that has been circulated that it is only where premiums exceed £475 a year that there could be any possible 2430 grievance, and that is a very exceptional premium for a life insurance policy. The people for whom the right hon. Gentleman expressed so much concern, the poor people, certainly do not pay insurance premiums of £475 a year; £475 represents one-sixth of an income of £2,850 a year, and it is only there that any possible grievance can exist. Of course, any observations I am making now apply only to policies taken out since 1916.
The right hon. Gentleman repeated several times in his speech a charge that be made on the Report stage, that we were breaking a bargain. I might answer that by saying that there can be no such thing as a bargain made between the Government of the day and the individual.

§ Sir L. WORTHINGTON-EVANS
I did not suggest it.

§ Mr. SNOWDEN
The right hon. Gentleman said it was a bargain, and the language with which he concluded his speech was of the most violent kind. He said that it was not a bargain signed and sealed, but that it was a moral obligation. I will deal with that. There can be no such thing even as a moral obligation to maintain a rate of Income Tax or of any form of taxation, or to maintain any allowances which may be in existence at the present time. I remember that Mr. McKenna, as Chancellor of the Exchequer, reduced the figure for the abatement of Income Tax from £160 to £120, or something like that, and justified it on that very ground. He said that there was no bargain that it should be kept at £160, and when it became necessary to make a change, the Government were perfectly justified in doing it. It might have been thought, from what the right hon. Gentleman said, that there have never been any changes in regard to life insurance which were inimical to the policy-holders, but what was done in 1916?

§ Sir L. WORTHINGTON - EVANS
During the War!

§ Mr. SNOWDEN
Things were justifiable then which are not justifiable now, apparently, but the right hon. Gentleman is not aware, seemingly, of the fact that financially the War is not over, and that we are still in a period of war 2431 finance and, I am afraid, likely to remain so for a very considerable time. The very suggestion made by the right hon. Gentleman was made when Mr. McKenna in 1916 proposed to limit this relief. Mr. McKenna resisted very strongly the argument that there had been any contractual rights, and eventually he carried his contention. He said—the quotation is not long, but it is very important: It is perfectly open to the House at any time, without inflicting any injury, to cease to give the allowance which has been allowed to be given in the past, provided, in ceasing to give the allowance, the House does not take back something which has already been allowed. I am not proposing to do that. He went on: The House is absolutely at liberty, without any question of breach of contract, or retrospective taxation, to refuse to continue allowances which have been made in the past. If there was anything in this doctrine it would be equally true to say that it was retrospective taxation when the abatement in respect of Income Tax was reduced from £160 to £120 by this House, which, with enthusiasm, cut down the abatement."—[OFFICIAL REPORT, 13th July, 1916; col. 602, Vol. 84.] Allowances for life insurance are part of the Income Tax system, and in any year there may be a change in the incidence of the Income Tax allowances, abatements, and the like. Mr. McKenna was perfectly right—and I am amazed that anybody should try to maintain the contrary—when he said that this question of allowances on Income Tax was a matter which the House of Commons have a legitimate right to reconsider. He said on that same occasion: It is not retrospective taxation.… to discontinue an allowance which has been made in the past. He took away what you might call rights, if you want to apply such a word on certain policies which existed at that time. When the Super-tax was introduced, the Super-taxpayer got the deduction on both Income Tax and Super-tax just as the ordinary Income Taxpayer got his Income Tax deductions, and he got his relief for life insurance allowance from his Super-tax at the top slice, the highest rate of his Super-tax. Mr. McKenna took that away.

§ Sir L. WORTHINGTON-EVANS
That was very wrong.

§ Mr. SNOWDEN
Very wrong, but it was taken away, and therefore, having been done and Parliament having accepted it, the whole case about bargains, attempted to be made by the right hon. Gentleman opposite, falls completely to the ground.

§ Sir L. WORTHINGTON-EVANS
The right hon. Gentleman ought not to follow a bad example.

§ Mr. SNOWDEN
I think I have dealt with all the points raised by the right hon. Gentleman. As I pointed out, 99 per cent. of the people are not affected injuriously by this proposal. There is, I admit, a very small minority, but it would be quite impossible to make the change which is necessary on account of the change in the graduation without doing perhaps some slight injury to one person here and there. The right hon. Gentleman mentioned a sum of £500,000 as the cost, but—

§ Sir L. WORTHINGTON-EVANS
I got that figure from the right hon. Gentleman himself. I do not know anything about it. I asked him what was involved, and he replied that it was £500,000 and a quarter or a third of that sum on the pre-1916 premiums.

§ Mr. SNOWDEN
The amount that is involved is about £150,000 in the pre-1916 premiums.

§ Sir L. WORTHINGTON-EVANS
And £500,000 in the others.

§ Mr. SNOWDEN
£500,000 in all, but the amount that would be taken from each individual would be very small. If the right hon. Gentleman would refer to the White Paper, he would find that the figures are given on page 5.

§ Sir L. WORTHINGTON-EVANS
It is a very large number of people.

§ Mr. SNOWDEN
In the case of a taxpayer with an income greater than £2,000 a year who pays a premium greater than £237, he would only lose upon the excess over the £237 and the amount he would lose would be generally a fraction of a penny in the £ spread over the whole of the premium.

§ Mr. ARTHUR MICHAEL SAMUEL
We sympathise with that point of view and try to protect the Exchequer by the 2433 first Amendment on the Paper, so that the Exchequer can have no right to do what we think is an injustice.

§ Mr. SNOWDEN
We have carefully examined all the Amendments which hon. Members have put forward, and there is hardly one of them—and this particularly applies to an Amendment standing in the name of the right hon. Gentleman—which, while it might give relief in some cases, will not leave a similar hardship, if you call it so, upon a small number of others. The right hon. Gentleman said that this would give a blow to thrift, and that people would say, "What is the use of saving? We have been saving under the expectation that we should get this relief, and it has been taken from us.' As a matter of fact, it has not been taken from them. This change has become necessary, as I say, because of the change in the graduation, and we have dealt with this question in a way which inflicts the smallest possible amount of hardship upon any individual. There is no intention at all of dealing with the question of life insurance abatements. I am not making an attack upon them. The right hon. Gentleman asked if I advocated or supported any such proposal. Most certainly not, and if I thought the proposals in this Finance Bill were going to strike even the mildest blow at the thrifty habits of the people I should be quite prepared to sacrifice the comparatively small revenue which the Exchequer receives—

§ Mr. CHURCHILL
Will the right hon. Gentleman allow me—

§ Mr. SNOWDEN
We might just as well conduct a conversation.

§ Mr. CHURCHILL
Will the Chancellor of the Exchequer tell us what that comparatively small revenue will amount to?

§ Mr. SNOWDEN
I have just told the Committee the amount. If I thought this proposal was going to strike a blow and involve any real hardship upon any individual, I would willingly sacrifice the relatively small amount of revenue which is involved. Even if I was willing to do this we should find administrative difficulties such as I have mentioned in the way, and we should be giving more to some people than they are entitled to and little relief to a much smaller number of people.

§ Sir L. WORTHINGTON-EVANS
Will you think again before the Report stage?

§ Mr. SNOWDEN
I am willing to do that, but I doubt very much whether we shall be able to devise any better plan than that which we are now submitting to the Committee.

§ Mr. ERNEST BROWN
I regret that the Chancellor of the Exchequer has not seen fit to deal with this point. It is the Treasury officials who have discovered this little point, but they must really think it a little mean. While the sum of money at stake is not large there is a definite point of principle involved. I can assure the Chancellor of the Exchequer that we are getting many representations from people throughout the country, not supporters of the party above the Gangway upon this matter. While the House of Commons is free to change the basis of taxation yet the State does have regard to an understanding arrived at, especially in relation to an undertaking which from its very nature must cover a long period of years. The White Paper of the right hon. Gentleman himself makes that quite clear, because it says: There is a distinction drawn between pre-1916 policies, and post-1916 policies. Successive Chancellors of the Exchequer have taken the view that there is a distinction between a contract made before 1916 and a contract entered into after 1916. That being so, the Committee should have regard to the point of principle which is involved. What is the point of principle? I do not want to go back to 1799 when this allowance was first introduced, let me go back to 1920, when the arrangement which it is now proposed to disturb was entered into after the Report of the Royal Commission. The principle is this, that in regard to these allowances there should be a definite relation between the rebate given by way of allowances and the standard rate of Income Tax. There has been more than one regraduation of the Income Tax since 1920, and I cannot imagine that it is necessary for the purposes of the right hon. Gentleman's new scheme that he should take this point into consideration now. The evidence given to the Royal Commission makes it clear that before they assented to this definite relation between the rate of Income Tax and the rebate for allowances 2435 they had considered the question of graduation. Under the heading, "Problem created by graduation," they say: If Income Tax were as formerly at a uniform rate save for the distinction between earned and unearned income, this question woud not arise. The rate would without doubt be the rate charged on what is known as unearned income. The system of graduation introduced into the tax in recent times, however, creates a problem which in this case cannot receive the same solution as in the case, for example, of a body of shareholders. An ordinary trading or investment company is charged by deduction or otherwise at the maximum rate of pay, but the charge upon the company is only a convenient though indirect way of reaching the individual. When the profits of such a company are divided each member received his share under deduction of tax at that rate, and if he as an individual is not liable to the maximum rate of tax he recovers the difference between that and the rate, if any, to which he is properly liable by applying to the Inland Revenue Department far a refund. In the case of insured persons the opportunity for such an adjustment does not arise. The interest earnings go at once into the common fund, and ultimately come out in the form of capital as part of the sums assured by the policies. There being no separate allocation or payment on interest to individuals no one can say that he has received so much, and that this having borne tax at the maximum rate he is entitled to a return of the difference between such tax and the amount with which he was properly chargeable. Equality of treatment, however, as between one set of persons and another, requires that the constituents of a life office shall in some ways have a corresponding relief afforded to them. They came to three conclusions: The offices submit that their basis of taxation once determined shall be adhered to, and there should be no option to the Inland Revenue to change from time to time to another basis; That they should not have to bear the maximum rate of tax, seeing their constituents are not, as a whole, liable to such rate; That the form of relief best suited to their case is to charge a modified rate of tax corresponding as nearly as may be to the average liability of their constituents: It has been the practice since 1920 to fix the rebate on these policies in a definite relation to the standard rate of Income Tax. That, I understand, is what is causing uneasiness throughout the country.

§ Mr. P. SNOWDEN
Are you suggesting that we should put back the half rate upon these post-1916 policies?

§ Mr. BROWN
The answer is that I am proposing that the present arrangement with regard to the relation of the rate of rebate to the standard rate of Income Tax should not be disturbed. I can see no reason for disturbing it.

§ Mr. SNOWDEN
I have been asked to consider this matter between now and Report and, therefore, I want to be quite clear what it is the Committee is asking me to consider. I want to know quite definitely whether the hon. Member is suggesting that people who hold post-1916 policies, which under the new graduation only pay 2s. in the £ should get the half rate of 2s. 3d. allowed to them.

§ Mr. BROWN
The answer is that if they are liable to 2s., they should pay 2s., and if they are liable for 2s. 3d. they should be liable for 2s. 3d. There is a great feeling about this matter. It is a small financial point, but the principle is being disturbed, and it is this disturbance which is causing much anxiety throughout the country. There is no doubt that the whole arrangements of life insurance societies since 1920 have been based on the assumption that this relation between the rate of allowances and the standard rate of allowances would be maintained. That is what we want to safeguard. This may be but a disturbance, but if it is granted now there can be no assurance in the minds of those who have to carry on this important business, which concerns rich and poor people alike, that in the future we may not have far greater distortions. I hope the Chancellor of the Exchequer will give us a little more sympathetic answer than he has, for I can assure him that he is causing a world of uneasiness amongst the people who have to conduct this great branch of our national business.

§ Major HILLS
The Chancellor of the Exchequer reminded us that we are still in the period of War finance. No reminder of that is necessary, we are all very well aware of it. I want to be quite clear about one point, and that is that nobody will be affected unless they pay £475 per year in premiums. Is that so?

§ Sir L. WORTHINGTON-EVANS
No, post-1916.

§ Major HILLS
It means that until a man's income rises to £2,800 per year he does not suffer anything by these calculations. I had not appreciated that 2437 fact. I want to be quite clear that this Clause affects nobody until his income is nearly £3,000 a year. It is a point of great importance, because it affects the arguments which have been used and it must affect our approach to this Clause if we know that it only applies after a man's income reaches £3,000.

§ Mr. CHURCHILL
It does not matter how unjust it is.

§ Major HILLS
I am not dealing with that point.

§ Sir L. WORTHINGTON-EVANS
Will my right hon. and gallant Friend allow me. The statement of the Chancellor of the Exchequer is only true if you take into account the benefit which some people get because the £235 has been raised to £280. That is given to everybody, whether they are insured or not, and the Chancellor of the Exchequer has no right to allot that to the insured person.

§ Major HILLS
I thought there was a catch somewhere. I am a simpleminded person and I was taking the statement at its face value. The next point of the Chancellor of the Exchequer was this, that no taxpayer should get a greater abatement on the one-sixth of his income in insurance premiums than he pays in taxes, and it is not fair that on that one-sixth that he should get an abatement of 2s. 3d. in the £ whereas he pays only 2s. in the £ Income Tax. Nobody on this side of the Committee wants that. Let me read the words of the Amendment: Provided that relief shall not be granted at a greater rate than the maximum rate of Income Tax payable by the taxpayer. Surely that is quite plain. All we ask is that the right hon. Gentleman shall not divorce the relief from the standard rate of Income Tax. That is an obvious advantage; otherwise, the only relief we get is what the Chancellor of the Exchequer may choose to give. The Chancellor of the Exchequer said that he did not make an attack on life assurance abatement. I assure him that very serious alarm has been caused. I quite agree that it is an infringement of the general principle of Income Tax that he should deal with the expenditure of the income and not only with the receipt of income. Speaking generally, however beneficially a man may spend his 2438 income he pays the same tax, and what you tax is what goes into a man's pocket and is not affected by the way it is paid out.
But surely there is a very special case for life assurance? It is a very admirable means of thrift. That brings me back to the point of the statement that this affects only the rich. As to that I have two things to say. First of all I think it is rather unfair in small things to impose a special burden, even though it does fall upon a class of taxpayer for whom the Chancellor of the Exchequer has very little sympathy. Secondly, is he not in the end doing more harm than good to the revenue? Do not let the Chancellor of the Exchequer forget the figures that were given the other day. £18,000,000 of life assurance comes every year within the purview of Inland Revenue. He is dealing with a state of mind which may be moved by financial or by psychological considerations. If people think that there is less advantage in taking out a life policy than there was before, is it not highly probable that in the end the revenue will suffer? Take the case of the mutual societies, which was dealt with by my right hon. Friend who moved the Amendment.
Does the Committee appreciate what is happening in the case of mutual insurance societies? In those societies certain people come together, pay money into a common pool, expenses are paid out of that pool, and the policies that members of the society take out are paid out of the pool. After those payments are made the revenue is treated as profit and is taxed by the Chancellor of the Exchequer. I believe that is a correct statement. I can never see that the Chancellor has any more right to tax this profit than to tax the co-operative societies. The principle is exactly the same. But still the tax has been and is being levied. Do not let the Chancellor of the Exchequer forget that already a burden of an excessive character is laid upon the body of insured persons, and especially of persons insured in mutual societies. Some special consideration should be given to them. I do not think that all tax arrangements are irrevocable. But you should do things with good cause and for some sort of necessity. There is no sort of justice at all in this case. I do not think that from the Chancellor of the 2439 Exchequer's own point of view, for the very small return on this tax it is worth while upsetting an arrangement which has existed for 10 years and has been thought to be a permanent arrangement. For these reasons I hope that the right hon. Gentleman will reconsider his decision. As far as the revenue is concerned it is a very small matter. Surely the balance of advantage and justice lies very heavily on the side of deleting this Clause altogether?

§ Mr. RUNCIMAN
As far as I can see the point made by the Chancellor of the Exchequer and the only thing at which he is aiming is to prevent a man getting 2s. 3d. back for a 2s. payment. Very roughly that is what it means. I have no doubt that if the law were in such a state, or if he left it in such a state as to provide for a man getting 2s. 3d. back for 2s., there would be something to be said for amending the law, and, if necessary, inserting a Clause like this in the Finance Bill. But the Amendment covers the point, as I understand it. If that really is the point, I beg the Chancellor of the Exchequer between now and Report to reconsider his decision. My reason for pressing that on him is not the small sum of money at stake, but the whole relation of the Exchequer and the State to insurance societies.
It is true that there are numbers of these insurance institutions which are proprietary concerns, some of them very prosperous. But the great mass of them, while proprietary, deal with a great deal of profit by way of bonuses. They have that mutual element in them. Apart from them, there is a very large number of mutual companies which do not divide any profit amongst any proprietors, but the whole of whose profits are divided amongst the policy holders. I do not want to enter into the rival merits of offices, but they are societies which ought to be especially encouraged by the Chancellor of the Exchequer. I know that he has sympathetic feelings towards co-operative societies. So have I and a great many other Members. These are of the nature of co-operative societies. The case that occurs to my mind is not that this is going to be a deterrent, on financial grounds, to an increase of new business in these institutions, 2440 but that it does alter the atmosphere in which they conduct their operations.
My right hon. Friend quoted Mr. McKenna as to the right of this House to vary allowances. I quite agree that that is sound doctrine. But you can carry it too far. There ought to be some limitation to that doctrine of the House doing what it likes in matters of taxation and allowances to suit the finances of the year. No Chancellor of the Exchequer has ever been bound rigidly not to make such changes as the necessities of the year demand. I know what the right hon. Gentleman has in mind, but at the same time every Chancellor of the Exchequer has respect for what may be called long-term contracts. I should be very much mistaken in the right hon. Gentleman if I thought that he could in any circumstances come and calmly propose that the 5 per cent. War Loan should suddenly become 4 per cent. His reason for refusing to do that is that he regards it as a long-term contract. Similarly, in insurance institutions, the policies are long-term contracts, taken out in the circumstances of the day and in anticipation of the fact that the Chancellor of the Exchequer would apply the same principles of continuity with regard to these contracts as with regard to his own financial obligations.
I admit that the parallel is not quite accurate. But the way in which these things are done justifies me in saying that if the Chancellor of the Exchequer departs from something that has been in the nature of an understanding he will disturb the whole atmosphere in which life insurance is conducted. I suggest that it is a good plan, from the right hon. Gentleman's own point of view, to keep on good terms with the insurance institutions. He knows that if he has any conversion operations to carry through, any further loans to float in the market, there are no more useful offices to co-operate with him than the insurance institutions. They have shown their patriotism in the past by taking out very large blocks of national stock when they could have made much greater rates of interest by other investments. They have done that in the past and they are prepared to do it in the future. That fact ought to be kept in mind.
2441 My second point on that general consideration is that the insurance institutions provide the Chancellor of the Exchequer with a very large amount of revenue which he would not otherwise be able to collect. The connection between insurance and Death Duties is becoming daily greater. If the right hon. Gentleman puts an obstacle in the way and creates any apprehension which would prevent life insurance spreading, especially for dealing with tax obligations in the future, he will be doing injury to the Exchequer. On these general grounds, which really carry weight in the minds of people who wish to take out policies, I hope that he will between now and Report stage reconsider his decision. I think he will find that the amount of revenue that he will collect is not worth while, and that he can safeguard himself by an Amendment which, if not in the exact words of that moved, may be on the same lines. He would thus relieve the minds of many people who are now disturbed.

Mr. PALMER
I would not have intervened but for the fact that I feel sure that the Committee does not fully appreciate all that is involved in this question. There is a real sense in which insurance follows the action of a Chancellor of the Exchequer. The more the Chancellor of the Exchequer taxes people on their incomes and by means of Death Duties, the more a certain class of people insure. If Death Duties go up people increase their insurance to make cover for that purpose. It is so also with Income Tax. The 6d. rise in Income Tax will cause a good many people to cover their risk with more insurance. These are people who have the insurance mind. It is a definite calculation that a person who has got into the insurance habit will take full cover on his life. I wish that everyone, rich and poor, would take that full cover of their lives by insurance. It would be a good thing for the nation and the Exchequer, and many costs which now fall on the public purse could be obviated, if people covered risks as they ought to do, scientifically and properly, by insurance.
I am not going to argue about the abuses of insurance. I know perhaps better than other hon. Members that there have been abuses but I also know 2442 that this country, in the matter of insurance, has travelled very rapidly during the past few years and my only desire in intervening in this debate is to ask the Chancellor not to do anything which would prejudice the inherent British attitude of utilising insurance to cover risks and even taking advantage of insurance to make provision in the matter of imposts for Income Tax, Surtax or Death Duties. I assure the right hon. Gentleman that, with the best will in the world to support him in the proposals which he is making in the Finance Bill, I should at the same time be much obliged if something could be done on the Report stage to meet this small point. I ask the right hon. Gentleman to do so, largely on the ground that this proposal will be regarded by many thousands of policy holders as a gesture on the part of the Government not to encourage but to deter insurance.

§ Sir DENNIS HERBERT
I wish to put to the Chancellor of the Exchequer one or two reasons, by way of an appeal to him to meet our views, and, therefore, I hope I shall not allow myself to say anything which might justify the right hon. Gentleman in again accusing me of having grown rather warm on this subject. One of the right hon. Gentleman's defences to the arguments adduced from this side is the precedent of what Mr. McKenna did in 1916. When we say that that precedent ought not to be followed because it was during the War period, the Chancellor's answer is that we are still in the War period as regards finance. But, financially, this is a very different sort of War period from that which ended in November, 1918. Up to November, 1918, we were faced with the necessity of raising enormous sums for the prosecuting of the War. That necessity is now at an end, and, therefore, there is less excuse now for doing the things which had to be done in order to raise the tremendous sums required every year for the prosecution of the War.
We argue that, in this matter, the Chancellor of the Exchequer will be upsetting confidence, and dealing a blow at the extension of life insurance and at thrift, if he attempts to alter the system under which in the past this relief in respect of insurance premiums has been definitely related to the standard rate 2443 of tax. The Chancellor of the Exchequer has spoken a great deal about the graduation of the Income Tax. We quite understand the way in which Income Tax is described as a graduated tax and we have the graduations set out in the White Paper but the ordinary taxpayer in the less wealthy classes does not regard Income Tax—leaving out Surtax,—as a graduated tax. He regards it as a tax at a standard rate, fixed every year, and I think he is correct. I say so more confidently because the law has been altered in recent years in such a way that the relief given on the first £130 or whatever it may be and the further relief at half the rate, are given in the form of repayment of tax. Therefore, strictly speaking, Income Tax, as distinct from Surtax, is not a graduated tax but a tax at a standard rate. The ordinary small life insurer has certainly got that idea into his mind. He has got from the report of the Income Tax Commission the idea that this question of rebate in respect of insurance has been definitely settled once and for all on the basis that the rebate is related to the standard rate of tax.
The hon. Member for Greenwich (Mr. Palmer) spoke just now of the increase in life insurance in recent years. There has been some, but nothing like the increase that ought to have taken place. The amount of insurance per head in this country is much lower than it is in other countries, and is certainly immensely lower than it ought to be. The harm which the Chancellor will do by insisting on this Clause will not be merely the levy which he is making, or the penalty which he is inflicting, or whatever you may choose to call it, upon policy-holders of a certain kind. The harm will be much greater than that. It will be the first occasion since the end of the War on which the relation of rebates in respect of insurance policies to the standard rate of tax has been altered. Consequently, there will not be the feeling of security which has existed in the past that that relief, as related to the standard rate of tax, will remain unaltered. The policy-holder will feel that whereas that relief, related to the standard rate of tax, is being altered only by a comparatively small amount this year, this change will be used as a 2444 precedent for altering it to a much greater extent in future years. That is the reason why I fear that this Clause, if insisted upon, will militate against the efforts which are being made by life insurance companies, by social workers and by many others to increase the amount of life insurance among people with incomes even up to £3,000 a year.
The Chancellor will agree that people with a gross income of £3,000 a year, if they are of a certain position, are not to be regarded as wealthy people. If a man who has an income of £3,000 a year gross, mainly an earned income is likely to leave behind him a widow and several children he ought to insure very heavily. The figure of £3,000 a year may seem to be a high figure to fix as not meaning wealth, but I put it as high as that. My argument, however, is just as good if I put it at £2,000 a year. These are the people who, for the sake of the future revenue of this country, should be encouraged to take out cover on their lives. It is a form of automatic saving, of course, and it will result in increasing the taxable wealth of the country. If the right hon. Gentleman insists upon this change it will go very much further than the proposal in his own Clause. It will mean the creation of a precedent and the upsetting of what policy-holders thought was definitely settled, namely, the fixing of this relief in relation to the actual standard rate of tax for the time being, whatever it may be.

§ Mr. P. SNOWDEN
I cannot, of course, resist the appeals which have been made to me from both parties opposite. It is my business in the conduct of this Bill through the Committee stage to hear criticisms and objections and suggestions and I am quite ready to do so. It is quite true that there is not a great deal of money involved in this proposal, and it is not for the sake of the paltry £150,000 concerned that these provisions have been made. We thought that they were necessary as a corollary to the proposals which we were making in reference to the change in the graduation. I frankly say that I am not, perhaps, prepared to speak quite so definitely on this matter now as I was in the conclusion of my previous remarks, but if the Committee would care now to give a formal and non-committal passage to this Clause, I should not accept that as committing the party 2445 opposite at all to it in this form, and I should be willing to take the matter into full consideration between now and the Report stage. I hope that with the ingenuity of the able officials of the Revenue Department we may be able to devise some Amendment which will meet the criticisms and the suggestions of hon. Members opposite.

§ Sir L. WORTHINGTON-EVANS
I am grateful for the obvious intention of the right hon. Gentleman to meet the Opposition in this matter, but I think it would be convenient if he could make his meaning a little more clear. I do not ask him to indicate the exact methods in which he proposes finally to carry out his suggestion, but I would ask if it is his idea to try to find some means, for example, of not altering the pre-1916 policies and of not altering subsequent policies, provided they do not receive back in abatement more than they pay to the Exchequer?

§ Mr. P. SNOWDEN
Of course, I do not like to be committed in detail. I do not say that to the minutest detail we shall be able to meet all these points, but we will make every effort possible to meet what is I think intended in the Amendment of the right hon. Gentleman the Member for Farnham (Mr. A. M. Samuel), which proposes to insert: provided that relief shall not be granted at a greater rate than the maximum rate of Income Tax payable by the taxpayer.

§ Mr. CHURCHILL
I congratulate the Chancellor of the Exchequer on having deferred to what was the general wish expressed from all quarters of the Committee. The right hon. Gentleman is wise to adopt at the outset a mood of seeking to invite the Committee to share to some extent in the actual shaping of legislative proposals. It is very difficult to do that if the possibility of debate affecting legislative proposals is excluded, and we are reduced to what is little more than a trial of physical strength and imaginative volubility. Once the Government show that they are willing to learn by the debates—for, after all, almost every prolonged debate in Committee throws light on the subject—and to make their legislation harmonise with the general opinion of the House, we may make more rapid progress than it would be reasonable 2446 to expect in the face of an adamantine and inflexible opposition.
We on this side have never sought to leave the right hon. Gentleman in the anomalous position of having to allow a rebate of 2s. 3d. on an Income Tax which is chargeable only at 2s. We wish to meet him on that. We recognise that, with the new graduation, that point has to be met, and my right hon. Friend has suggested one method by which it might be met, but we have not the facilities of the draftsmen and the trained legal advisers which are at the disposal of the right hon. Gentleman and it may well be that that purpose can be expressed in some other way. It might not, but the right hon. Gentleman can see perfectly well what we wish, and I gather that if that were conceded, and his difficulty met by another form of words, he would be willing to leave the rest of the Clause out and make it inoperative, and to have no more in the Clause than will maintain the standard rate and the proportion of the rebate to the standard rate for all other cases.

§ Mr. P. SNOWDEN
I gather that the Opposition do not want to take out paragraph (c), which was the subject of a long point of Order just now, because that is really removing an anomaly which, I think, the Opposition are quite as anxious to remove as we are.

§ Mr. CHURCHILL
I am only on the specific point and the part of the Clause which relates to this point. I gather that the right hon. Gentleman will study how he can meet the point put forward by the hon. Member for Farnham (Mr. A. M. Samuel). In that case, our general debate upon this aspect might well be abridged.

§ Sir ASSHETON POWNALL
Will the Chancellor of the Exchequer consider consulting the insurance interests? I have been in touch with them on this matter and they wish to help in every way.

§ Mr. SMITHERS
I want to reinforce what my hon. Friend has asked. I have a friend who is high up in the insurance world; he has no political bias, and he assures me that Clause 10 will do a real harm to the industry. The office to which he belongs has refused to do business of a tax-dodging character, as far as it was possible in the face of competition with other companies. I 2447 beg the Chancellor to ask somebody of that kind, who is unbiased politically and is out for clean insurance business, to consult with him and to point out the way in which it can be done.

§ Sir L. WORTHINGTON-EVANS
I beg to ask leave to withdraw the Amendment.