HC Deb 17 September 1931 vol 256 cc1122-52


Postponed Proceeding on Consideration of Tenth Resolution, resumed.


The point which I was trying to make, in connection with the Amendment in my name to the Budget Resolution dealing with Income Tax allowances, is roughly this. The extraordinary efficacy of our British Income Tax depends upon the fact that its working and incidence have the confidence of the taxpayer, and that confidence in the justice of the Income Tax as a method of raising Government income depends upon the extraordinary nicety and delicacy in the way in which the burden may be placed upon the back that is capable of bearing it. This confidence in the equity of the Income Tax is, I maintain, its strongest and most effective buttress. The graduation in the incidence of tax as the income to be taxed grows larger, is, as the Chancellor of the Exchequer in his Budget speech remarked, achieved largely by the method of allowances, covering such things as personal allowance, earned income allowance, and similar allowances which I need not mention. This system of personal allowances is the basis of our graduation of Income Tax.

Under this Budget Resolution the system of allowances is to be altered very drastically, along the lines foreshadowed by the Chancellor in his Budget speech. By that variation of allowances he proposes to widen the net of Income Tax so as to bring in ranges of income which have hitherto remained untaxed, and to increase the burden which all Income Tax payers must bear. Let me say right off that as far as the aim is concerned, I have no criticism whatever to make. The right hon. Gentleman the Member for Central Edinburgh (Mr. W. Graham) in a forecast of what the Labour party would do to meet the deficit, specifically mentioned that he was prepared and that the Labour party were prepared to reduce the level at which Income Tax might be paid, and at the same time to vary the allowances and thereby vary the graduation. I move this Amendment to protest not at the object of raising more money but against the variation of the basic principle of our Income Tax, which is a nice appreciation of the amount that ought to be paid by any individual taxpayer.

The object of the Budget Resolution is to increase the burden upon the Income Tax payers and I hold that the proposal of the Chancellor in laying these fresh burdens does not fall into line with that basic principle of graduation and progressive incidence. I claim that, far from doing so, it violates the basic principle of our Income Tax namely, progressive graduation. I say that there is no relationship between the actual burden imposed by the variation of allowances and the principle of progressive incidence. As a matter of fact, beyond a certain point these new proposals are definitely regressive, and the whole scheme is shot through with the most fantastic and indefensible anomalies.

In so far as I deal with the incidence of the fresh taxation I am not going to deal with it in percentages. To contrast percentages is a very tricky matter, and one can prove pretty well anything one likes in that way. It is easy to show that an increase of 1s. taxation on one income, may be an increase of 100 per cent. whereas an increase of £1,000 on another income may be little more than 5 or 10 per cent. I propose therefore to eschew entirely the question of percentages, and to confine myself to the question of the absolute and definite burdens that are being imposed. I shall he able to show that even sticking to the absolute burdens the incidence of the fresh taxation is utterly indefensible. Let me take for example the case of the single man with an earned income. The new taxation is progressive until we reach a point somewhere in the neighbourhood of £600. At that point the increased burden of taxation, which is due solely to this re-arrangement of allowances, amounts to £22. That is not the total tax but that part of it which is solely due to the burden of the new allowances. Thereafter it is definitely regressive until we reach £1,500 and then the burden, due to this rearrangement, is £12 on incomes from £1,500 to £2,000 as compared with £22 on the income of £600.

These figures are worked out to the nearest pound; I do not suggest that they are carried to the nearest shilling. Surely the increased burden ought to be progressive and not regressive, but this system of regression runs right through the whole of these increased burdens. Take the case of a married man with two children. Up to somewhere about £700 income, the fresh burden of tax—again I am speaking purely of that part of it which is due to the rearrangement of the allowances—is progressive; from £700 onwards it is once again regressive, until we come to £1,500, where the burden is £27, as against £36 for the income of £700. That is entirely opposite to the whole principle and policy of British Income Tax.

It may be said, "That is perfectly true if you are merely isolating that particular part of the tax that is due to a rearrangement of the allowances, but it will be rectified by the fact that the higher incomes suffer an increased burden owing to the increase in the standard rate of tax from 4s. 6d. to 5s." But is that so? If we turn away from the part of the tax which is due solely to the rearrangement of allowances, and turn to the actual increase in the tax itself, we find exactly the same fantastic anomalies running through the increased burden that the Chancellor has placed upon the Income Tax payers. Let me take the actual increase in the tax on a single man. The increase on an income of £500 is £31 fresh tax, and upon £1,000 it is £27, or £4 lower, and when we come to £1,500 the increased burden is £33 10s.; between £500 and £1,500 there is an increase of £1,000 in the income, and that £1,000 bears an increased burden of £2 10s.


What class is that?


A single man.


With an earned income?


Yes. A man with an earned income of £1,000 pays an increased burden of £4 less than the man with half his income. Let us take the case of a married man with two children, again with an earned income. The increased burden on a married man with two children and with £700 is £33 5s., and on a married with two children and an income of £1,500 it is £43 10s., or a jump of £800 in the income and of £10 in the increased burden of the tax. When we come to an income of £2,000, which is just too low to pay Surtax, we find that the increased burden over the income of £700 is £13 for the fresh tax that is laid upon an income of £2,000 in this category is £56 only. Thus, taking as a basis the married man with two children and £700 a year, a similarly placed married man with an income of 21,300 more pays a beggarly £13 extra tax as his share of sacrifice in the national need.

Let me take one or two other of these extraordinary anomalies which run through the whole of these new proposals. Take a single man with £1,500 income. 11e pays an increased burden of £33 10s. Take a married man with two children and a similar income of 21,500; is his burden lighter? No, it is £10 heavier. The single man pays £33 10s., and the married man with two children pays £43 10s. Let me take another case to show how little relationship the new taxation has to the status of the taxpayer. Take again the married man with two children and £700 a year. He pays £33 5s. A single man with £1,500 a year pays £33 10s. Does anybody suggest for a moment that the burden of 233 5s. upon a married man with two children is in any way equivalent to the burden of £33 10s. on a single man?

These anomalies are simply staggering so far as laying the burden upon the hacks that can best bear it is concerned. Let me give one other instance. Take a single man with £2,000 a year. Under the present taxation he pays £332 tax, and it leaves him with an income of £1,668—a single man without family responsibilities. What is the burden that the Chancellor has put on his back? It is a burden of £46, on a net income of a single man of 21,668. The Prime Minister said that we were to all intents and purposes in a condition analogous to a state of war. I will give the Financial Secretary to the Treasury a slogan which he will probably remember: "Single men first." I think that is a slogan, in view of the that this single man with £2,000 a year pays, which may well take the place of the slogan that the Tory party have made their own in this crisis: "Unemployed men first."

I now want to revert to the question of the effect of the allowances, and I want to form an impression of the bulk incidence of the tax. The Chancellor of the Exchequer has told us, in reply to a question, that the yield of taxation due to the variation of allowances was £27,500,000 out of the £51,500,000 that he anticipated raising from Income Tax; that is, rather snore than half of the increased yield of the Income Tax is to come from the variation of personal allowances. It is a comparatively simple calculation to find out what proportion of that £27,500,000 is raised from the large incomes of over £2,000 a year and what proportion from incomes under £2,000 a year, and the staggering result of the calculation is that out of the £27,500,000, more than half the total Income Tax, only £2,500,000 comes from payers with incomes over £2,000 a year. From the whole of the Surtax payers the revision of allowances means nothing more than a matter of £2,500,000, roughly, upon the £500,000,000 of incomes that, according to the last figures, were liable to Surtax.

When we look at figures like this, the less we say about equality of sacrifice the better. I have no figures of the distribution of income below the £2,000 level, but certain deductions can be drawn from general knowledge. We know that the lower the income the larger the number. Thus there are far more incomes of £1,000 a year than of £2,000, and far more of £700 than of £1,000. When we examine the incidence of the £25,000,000 which will come from the incomes lower than £2,000, we must bear in mind two facts. The first is that the bulk of the income that is taxable is in the lower range of incomes because they are more numerous. The second is that the individual burden upon the lower income is higher than it is on the higher rate of incomes. If we take £700 as the mean, we shall not be far from the Income Tax range where, to use an electrical phrase, the peak load of this new impost falls; £700 is roughly the point at which the incidence of the tax is heaviest. The individual incomes of £700 downwards will form, undoubtedly, the bulk of the income to be taxed.

9.0 p.m.

So we come to this conclusion. The re-arrangement of the personal allowances has fallen with devastating weight upon the lower incomes, and the fresh imposts, whether they be Surtax or the increase in the standard rate, in no way compensate on the larger incomes for the increased burden that is put upon the lower incomes. I want to appeal to the Financial Secretary. We know perfectly well on this side that the Income Tax has to yield more than it was estimated to yield in the last Budget. We know that there must be an increase and some rearrangement of personal allowances. We know that you cannot make omelettes without breaking eggs, and we are not afraid of having eggs broken. There must be increased taxes if you require an increased yield, but surely it is not beyond the powers of the Inland Revenue or of the Treasury to devise some fresh Income Tax impost which is not riddled with the indefensible anomalies that the present proposals show on the slightest examination. Let the suggestions that the Chancellor made in his Budget speech be withdrawn before the Finance Bill is presented, and let us have a fresh scale which is more in consonance with the great spirit of the British Income Tax, and with the suggestion of equality of sacrifice; a scale which he and his leader can feel honestly that they can defend before this House.


I beg to second the Amendment.

I support the speech which was made by my hon. Friend with such admirable cogency and wealth of detail. We feel that some increased taxation is necessary and inevitable, and that whatever Government had been sitting on the Treasury bench would have had forced on them some increase in the rate of direct taxation. We contend, however, that any increase in direct taxation should be equitable in its incidence over the range of incomes that are affected. Like my hon. Friend, I have made a careful analysis of the increases which will fall upon the Income Tax payer as the result of the diminution of the reliefs and other allowances; and, like him, I have been forced to the conclusion that these proposed increases are extremely inequitable in their incidence. It would appear from a fairly careful analysis that the main burden of the increased incidence of the Income Tax will fall upon the range of incomes from £500 to £700 a year. My hon. Friend has given several instances of direct increases as a result of the diminution in the reliefs and allowances. I want to give a few examples based upon percentage reckoning, though I know that percentages are very often a trap for the unwary, but I have calculated these percentages on as fair a basis as possible.

Take a married man with two children with an income of £400 a year. Previous to the alteration in reliefs and allowances he paid no Income Tax. Now he will have to pay £10 per year. A married man with two children and an income of £500 previously paid £8 4s.; now he will have to pay £20. The increase in the payment of Income Tax for such a man amounts to 144 per cent. of the previous tax he had to pay. A married man with an income of £700 and two children has his Income Tax increased from £24 18s. to £58 2s. 6d., which is a percentage increase of 142. A married man with two children who is enjoying an income of £900 previously paid £62 2s. 6d., but under the new arrangement he will pay £98 2s. 6d., which is an increase of only 58 per cent. as compared with the increase of 144 per cent. in the case of a man earning £500, and 142 per cent. in the case of a man earning £700. I would like the House to observe that the increase in Income Tax on a married man with two children who is earning £700 a year will be £34 a year, and on a married man with two children in receipt of £900 a year the increase will be £36. A £200 increase in income brings an increase of £2 only in Income Tax. That is definitely a retrogressive form of taxation.

Next I would take the case of a secondary school teacher earning £600 a year. Before the alteration in the relief allowances such a teacher paid £16 10s. a year in tax. That left him with a net income of £583 10s. With the 15 per cent. cut which is proposed he will now suffer an immediate diminution of £90 in his income, which will bring it down to £510. In addition to that his Income Tax—I am assuming that he is married and with two children—will be increased to £38 25. 6d a year. That leaves him with a net income of £471 17s. 6d. The first of these imposts will come upon him on 1st October, and two-thirds of the additional impost will fall upon him in January. As a result of the cut and of the increase in income Tax he will lose out of his income of £600 the sum of £111 12s. 6d. On the other hand, take a single man receiving £4,000 a year. With the proposed increase in Income Tax his income will be reduced by £111 12s. 6d.—[Interruption]—I am including Income Tax and Surtax—precisely the same reduction as in the ease of the married teacher with two children who is earning £600 a year. Nobody can argue that that is putting into practice the principle of equality of sacrifice.

I would point out to hon. Members opposite that the class which is most heavily affected by this increase in direct taxation due to the diminution in reliefs and allowances is the class in receipt of incomes from £500 to £800 a year or thereabouts. That class is the middle class, of which hon. Members opposite have always been, in their own estimation at all events, the most inveterate champions. That is the class from which they have drawn the greatest and most constant volume of electoral support, and as a vote of thanks for that support I hope they will follow us into the Lobby to-night in support of this Amendment. [HON. MEMBERS: "Are the middle class complaining?"] I think they will complain, and complain very vociferously, and in all probability they will signal their complaints in a way which will not be pleasant to hon. Members opposite at the forthcoming General Election.

In addition to these very inequitable increases in the incidence of Income Tax so far as the salaries of the middle class are concerned, a whole new range of very small incomes will be brought within the scope of Income Tax. A single man earning £150 a year will now be called upon to pay £2 a year Income Tax. If these proposals are adopted, a single man with £150 a year will, from now onwards, pay as much as a single man with £200 a year paid formerly, or a married man with no children with £300 a year. It may be argued that a tax of £2 10s. a year on a single man with an income of £150 a year is no very onerous or unbearable impost, but at the same time that we are imposing this tax of £2 10s. a year on that income we are also increasing the tax upon beer and tobacco. Even if this supposititious single man with £150 a year is most moderate in his consumption of these two luxuries, the increased taxation he will pay will amount to about 6d. a week, or another 26s. a year. In addition to that a man earning £150 a year will almost certainly be in an insurable occupation, and will be called upon to pay an additional 3d. a week as a contribution towards unemployment insurance. Further, whenever he goes to a cinema or a theatre he will have to pay an additional tax upon the seat which he occupies. It may very well be argued that there is a good case for having one tax, the Income Tax, and of levying that progressively upon the lowest income up to the highest incomes, but I say it is unfair to impose an increase in direct taxation upon very low incomes and at the same time to impose a considerably increased contribution in the way of indirect taxation.

The reliefs formerly available to a single man in respect of assessment to income tax amounted to £135 a year, and to a married man to £225 a year. I do not know how those figures were arrived at, but I assume that the Treasury officials calculated that the net cost of keeping a wife was £90 a year. With the alteration in the standard of relief the single man is relieved of £100 a year and the married man of £150 a year. That is to say, apparently the net cost of keeping a wife has fallen from £90 a year to £50. I do not know that there is any evidence in support of that reduction. We are being told in the Press that women are entering upon an era of in- creasing femininity. So far as we have been able to judge in the past, the more feminine women become the more expensive they are, and I do not think any argument can be brought forward in support of this decrease in the difference in the relief between single men and married men. In conclusion, while I cannot appeal to the Financial Secretary to the Treasury or to the Chancellor of the Exchequer, who are not here, I appeal to hon. Members opposite to use their influence with their Front Bench to prevent unjust impositions of inequitable taxation, which will fall chiefly upon the very class which has supported them electorally in the past and to which they will look for their chief support in the forthcoming election.


I wish to associate myself with my two hon. Friends in their statement that we are not objecting to the increase of the Income Tax. I am quite sure that most of us on this side of the House would not object to the rates of Income Tax being placed higher than they are. What we do complain about is the disparity between the relief which this new Budget provides for a single person as against a married person. It would appear that the Government, for some reason, want to promote celibacy and discourage people from getting married. In other words, they say, "Do not get married or we will make it expensive for you." I hope the Financial Secretary may have something to say by way of explanation of what I think will be admitted is an inexplicable disparity between the so-called reliefs to married Income Tax payers and single ones. The facts are that under existing arrangements there is a relief of £225 a year for the married man, plus the first deduction which is made. On the first slice of his taxable income he pays only 2s. on the first £250. His personal allowance is now reduced from £225 to £150, and he will pay half rate on £175. In both cases he loses £75. The married man sustains a net loss of £150 in the way of relief under the new Budget. If he happens to have two children he loses £10 on each child, and that makes an additional loss of £20. Take the case of a single man who has not the responsibility of a family. He only loses £110 as against £180 loss in relief by the married man with three children. The married man now loses £110 in relief. That is what is called equality of sacrifice.

I ask on what grounds the Financial Secretary can defend that disparity, and I would like to point out that it works out in the lower stages in an equally extraordinary way. Take the case of a married man with an income of £750 and a single person with an earned income of £1,500. The single person under this Budget is asked to pay on £1,500 an extra tax of £33 10s., while the married man with two children and an income of £750 is asked to pay an extra tax of £34 10s. Therefore, the married man in this case, with £750 a year, pays more than the single man who has £1,500. One would have thought that these proposals would have had some regard to equity, but there is nothing in them but inequality.


The criticisms to which we have listened are not submitted against the Resolution which is before the House as far as relief is concerned, because it is agreed that there must be a regrading of the tax, and the amount to be raised by the Income Tax has already been fixed.


May I remind the hon. and gallant Gentleman that the Amendment which has been moved deals with these reliefs?


I was coming to the various points which have emerged in the discussion. I think there is general agreement as to the increase of the tax, and agreement that a larger number of taxpayers should be brought in. Therefore, some rearrangement of the reliefs is necessary. All this brings us back to the fundamental question of the raising of the money, and it is from the angle of raising the money that we have to examine this problem. The main accusation of the Opposition, and more particularly the accusation of the hon. Member for Chesterfield (Mr. Benson), who delivered a well-informed speech full of statistical information, is that the arrangement now proposed leaves differences in the incidence of the Income Tax which it is impossible to defend.

The very core of our defence is that this grading by means of allowances to which the hon. Member for Chesterfield and other hon. Members made reference, is not by any means such a hoary and antique part of the structure as has been made out. I think there is whole-hearted agreement that the strength of this tax lies in the confidence which the ordinary person has in the justice of the tax, and the way in which it is adjusted to the shoulders of the people who have to bear it. These proposals have been worked out, not by theoretical considerations, but by practical methods, and they cannot be rejected merely in the light of the difficulties and anomalies which have been put forward or by citing this or that hard case. These proposals cannot be examined as an abstract question; they have to be considered in relation to the burdens which have been piled upon the taxpayer in the past. Readjustments must be taken into account in conjunction with adjustments which in the past years, and particularly in the past two years, have been heaped upon the shoulders of the direct taxpayer. The increases of the tremendous burden have come to such a point for the higher range of incomes that the State takes two-thirds of a man's income while fie is living and one half of his estate at death. The hon. Member for Chesterfield said: "That is not enough. Heap greater burdens upon him; he can stand it."


I do not wish to interrupt the hon. Gentleman except to say that I was most careful not to suggest that a practicable method was the piling of still higher taxes upon the extreme ranges. I am perfectly well aware that you may get into all kinds of trouble such as diminishing returns. It was anomalies in the lower ranges of taxation that I dealt with specially.


"Lower ranges," of course, is a relative phrase.


Up to £2,000.


Some of the illustrations of hon. Members opposite were drawn from incomes such as, or higher than, £4,000 or £5,000. Leaving the matter simply as one of incomes up to £2,000, let us first of all examine them. We are agreed that on those arises the rearrangement of the allowances. Let us see where the allowances arise from. They arise mainly as the result of the Royal Commission on the Income Tax. They are the allowances which were fixed on the direct understanding that they were subject to a review at a later date. The extracts from the report are familiar to hon. Members in all parts of the House. They suggest that the limits should be maintained until there is a substantial change in the cost of living and that they should not fluctuate from year to year. Various Chancellors of the Exchequer came in after those years. The Chancellor of the Exchequer under whom I have at present the honour to serve introduced a Budget which was greeted with great applause by hon. and right hon. Gentlemen opposite a Budget which they supported then, and for many years afterwards. I am not talking of the Chancellor's position at the present moment, but of his position at that time and for years afterwards, when he was supported by the enthusiastic chorus of those who are now criticising most keenly the present arrangement which he is making. Compare the arrangements which he is making now with the arrangements which he was making then. Take a married taxpayer with three children, and with an income of £135 per year; in 1924–5 he paid no Income Tax and he will pay no Income Tax now. A man in a similar position with £200 per year paid no income Tax then and he pays no Income Tax now. One with £300 paid no Income Tax then, and he pays no Income Tax now. One of the hard cases given by the hon. Gentleman was that of a man with £400 income, the exiguous sum equal to the salary of an hon. Member of this House before the axe fell upon it. That man paid £5 1s. 3d. under the proposals of my right hon. Friend then: he pays less than that now, for under the new proposal he pays £5 net.

Under what defence can the hon. Member come forward and say that the proposals, which he so enthusiastically supported in those years, are so mean and crushing and anomalous in the present year? The emergency is greater, and owing to the exemptions being allowed the allowance was increased and the tax yield went down. The married man with three children was for years, owing to the easier circumstances of the country, allowed to get off with less. Income Tax. The hon. Gentleman sees that the same kind of impost was exacted in 1924–25 that it is proposed to ask him to take in this present year of grace, and in the presence of this emergency. Everyone must see that a sum recognised as reasonable in those days cannot be regarded as excessive or unreasonable to-day. When we come to incomes of £500 we get into the range of peak increases. In 1924–25, a married man with three children was asked to bear a tax burden of £15 3s. 9d. What is he asked to bear to-day? A tax burden of less than that—£15.

It seems to me that these examples alone knock the bottom out of the case presented by the hon. Member for Chesterfield and his friends. They expose what is the weakness of the case which they have skilfully argued and presented, namely, that the big increases to the married man are disproportionate to those which have been asked for from other classes of the community. Take a reductio ad absurdum. Bring in a man who last year was not paying any Income Tax, and ask him to pay even £1 of tax, this year, or one penny. The increase is not 1 per cent, or 2 per cent., or 100 per cent., or 1,000 per cent.; it is an increase of an infinity. On the lower ranges of the tax with people who were exempted, the difference is infinitely wide, because it is a gap between a tax and no tax. I submit to hon. Members that comparison between incomes as they were reviewed and as taxation was placed upon them in past years, and the taxes which are placed upon them in the present year, is a juster way of looking at it and more in consonance with the historical position of the Income Tax to which the hon. Member for Chesterfield appealed, than the statistical calculations with which he delighted the House.

He does not wish me to quote any of the higher ranges. Indeed, it would be only too easy to give examples of taxation which is positively crushing in the upper ranges of taxation. The arguments which have been brought forward do not take into account sufficiently that we are on our way every year towards a juster arrangement of the Income Tax. This year in an emergency we seek an emergency solution. "Withdraw these proposals "says the hon. Member for Chesterfield," and introduce a juster scale." Have we any security that the hon. Member and his friends will not again demonstrate to us that, in a range of cases, they can show just as many anomalies as they have been able to show in the scale which we are presenting to the House?

Time is running on. Time is a necessary part of this contract. Great administrative changes have to be put through, thousands of forms have to be sent out, assessments have to be made, appeals have to be heard and hard cases examined. We are asked to make an emergency case to deal with an emergency. I have shown that in general the burdens laid upon the taxpayers in this emergency are not greater than the burdens which have been laid upon the shoulders of the taxpayer in the past. We do not pretend that the burdens are perfect or are the ideal solution; after comparing any other scale with the one that we are bringing before the House, it will be agreed that this is as good, fair, and harmonious a scale as can possibly be found. The fault, dear Brutus, is not in our stars. the fault is in the burdens that you have to hear. Any of these burdens will be grievous and will be heavy upon the shoulders of the community. Let us not discuss the exact adjustments, but brace ourselves to go forward and shoulder these tremendous burdens and to resolve to get the country as soon as possible into a state in which we can again reduce these allowances and bring down the ranges of Income Tax, as has been done before. That is the task that we have before us. Discussion of trivialities will be sterile, and I suggest that the House might now pass the further stages of the Income Tax Resolution.


We have heard from the Front Government Bench an appeal to which we have become quite accustomed. On that bench, where they have the benefit of the very greatest mathematical skill, they have failed entirely to deal with the, anomalies presented by my two hon. Friends who have moved and seconded this Amendment, and they fall back upon the cry with which as I have said, we are already familiar, that this is an emergency; and when there is an emergency you can, presumably, commit as many arithmetical anomalies as you please, and they will all be excused you. The mere fact that it is an emergency means, surely, that an hon. Member representing a Govern- ment such as that with which we are faced should tread very warily, because, unless, in these matters of taking people's income away from them—which is what taxation means—you proceed very carefully, you will do more harm with your taxation than you can possibly do good by it. Because it is an emergency, I suggest that the cases which have been submitted have raised some very important discrepancies which ought seriously to be looked into.

We were taken back—and this is another of the old excuses with which we are getting very familiar—we were taken hack, though I am not quite sure that it was by the hon. and gallant Gentleman, to Pitt. When Pitt drew up his scale, he only thought of income. It is a recent development, and very much more scientific, that, when you want to fit the burden to the back, you also take account of the compulsory expenditure. That has been done. These allowances represent an adjustment in respect of those compulsory items of expenditure which every man, married or unmarried, has to meet, and an attempt to adjust them to the back that has to bear them. But we came down to even later history. We came down to 1924, and my hon. Friends are assumed to have overlooked the fact that many of the things that were done by the then Chancellor of the Exchequer, who happens to be the same Chancellor of the Exchequer that we have to-day, were opposed by the hon. and gallant Gentleman as vigorously as he supports them as a precedent to-day?

What are the facts that he adduces? They are that the same people who paid no Income Tax then are paying no Income Tax now. I admit that, when you come to compare people who were paying nothing with people who are paying nothing, you cannot make any point about it, but what my hon. Friend did was, not to go to people who paid nothing, but to go a little higher in the scale, where you come across the unfortunate people who have to pay something, and he proved that in many cases those people, when they are married and have the same income as unmarried people, frequently have to bear a, very much heavier burden in relation to the emergency calls upon them than does the man who is unmarried; and that is a point which I think is germane to the discussion. We are not dealing with Income Tax in general, but in relation to this emergency. I am very sorry to have to repeat that word. The hon. and gallant Gentleman must be very tired of it; he has used it so often to explain his own discrepancies and to cover up the tracks of his own mistaken Government. The emergency, we are told, is here, and this House is asked to do its best to meet it; and it is in meeting that emergency, and not in trying to arrive at some mathematical equality, that we think the injustice has been done.

Let me give one or two instances of my own to show how severely, not this tax, but this alteration of the allowances, operates in quite simple cases. Take the case of a teacher, because his salary can be got at. You know his salary, and that is probably one reason why he has had to suffer such severe cuts. You do not know the income of the man in the City. You have to guess at it, until the Income Tax man wants particulars, which have to be furnished in private. The teacher's salary is not a private matter, but a public matter. We all know the teachers' salaries, and for that reason I go to them for my examples. Take the case of a single man beginning in the profession, coming straight from college, perhaps at the age of 21 or 22, after spending three or four years at a training college. He begins, at the age of 22, at a salary which an ordinary bank clerk would despise, namely, £192. He deducts from that one-sixth—I am giving the figures as they stand to-day, until this reforming procedure. We have proceeded, according to the hon. and gallant Gentleman, to a juster process of taxation by a method of trial and error year by year, and I suppose that this is a new attempt along that road to purity in these matters. Taking the commencing salary of £192, and deducting one-sixth, as he is allowed to do if he pays before the end of this month, that leaves £160. His allowance is £130, so that he has to pay on £30 at the rate of 2s.—not at half the standard rate, but less than half—and his total contribution to the needs of his country is £3. But an emergency has happened. We are told so, and we have to believe it. We are constantly having it dinned into us, and we are beginning to believe that there is an emergency.

I will take the same man who is leaving college in the same way. He is now informed that, having begun four or five years ago confronted with a certain scale of salaries and certain expectations, he does not now begin at £192, that there has been an emergency in the interval, and that, as a result of the emergency, his commencing salary will be £153. Then the Chancellor has been gentle. He has said, "We will not allow you one-sixth upon earned income, but one-fifth." That is very kind; it looks very nice on the surface; but you have to beware of this Chancellor who is going in for this process of trial and error in order to arrive at an absolutely just system of taxation, and you have to look this gift horse in the mouth very much. At present it looks very well. One-fifth of £153 is, roughly speaking, £31, and that leaves this teacher, this man who has to fulfil the duties that his country calls upon him to fulfil after six or seven years' training, with £122 of assessable income. His allowance, owing to this kindly disposed Chancellor, is £100, and he thinks, perhaps, that that is a very nice sum, until he compares it with his predecessor, whose allowance was £130. That leaves £22, and £22 at 2s. 6d., which he has to pay now, amounts to £2 15s., as against the other man's £3. But, on the top of the £2 15s., he has suffered a cut of £29 in his salary, and altogether is contributing £31 15s. He has nothing to thank the Chancellor for, at any rate.

Let us now leave the case of the single men, who, until they get married, can look after themselves, and who, I think, will be less and less disposed, when they see the figures I put before them, to get married. Let us leave them, and come to the quite mature married man who has gone so far as to have two children, and from that point of view may be said to be truly a married man. It may be after 20 years in a school, which has enabled him to arrive at his maximum. His maximum was, until the new scale was applied, £408 a year. From that he is allowed one-sixth, that is £68. That comes to £340. The allowance is £130 for himself, £90 for his wife—I suppose that is the respective value of the two kinds of property—£50 for one child and £40 for the other. That makes a total allowance of £310 and he has £30 left on which he has to pay the half tax. That half tax is 2s.

in the £ at the moment and this family man, with two children and 20 years service, at the maximum of his scale, is only called upon to pay £3 Income Tax at the moment. Again his country appeals to him. It calls on him and says, "Make sacrifices equal to the sacrifices of other people." Let us see how that sacrifice works out. His salary now, owing to the sacrifice that he has not so much made but has had forced upon him—there is a very great difference between sacrificing and being sacrificed which, up to the present, the House has not recognised—is reduced from the proud figure of £408 to the rather contemptible sum of £347. From that you take a fifth of the earned income, which is £69, roughly speaking, leaving him with £278 taxable.

What are the allowances from that? For himself £100, for his wife £50 and for the two children £70. He gets £220 as against £310 if lie had been so fortunate as to live in this country before the emergency occurred. In other words, his allowances have fallen off 30 per cent., which is double the cut in his salary. They were £310. They are now £220. It is the same wife and the same children, but the allowance has gone down. For some reason they have deteriorated owing to the emergency. Now he gets £220, which leaves him with £58. What is his position net? After all, when you are dealing with Income Tax you have to consider what it comes to in pounds, shillings and pence. In his case it comes to £58 at 2s. 6d. in the pound—£7 5s. In other words, the man who has had no cut pays £3, but the man who has had a cut of £61 in his salary has to pay an Income Tax nearly three times the tax that his friend has to pay. That is to me a sure sign that these allowances have not been properly arranged. They are too low. But we are not without our alternatives. It is absurd for the Financial Secretary to ask us to believe that these alterations in the allowances are made for the purpose of improving the machinery of our Income Tax or the system under which it is fitted to the back that has to bear it. I do not believe that was the consideration. It was what was easiest. The right hon. Gentleman himself suggested that, because he said, "There is an emergency. We cannot go into all these nice little calculations. We have not had time." There was an easier and a juster method, which was to have raised by 3d. or 4d., or whatever is necessary, the Income Tax for the whole Income Tax bearing people rather than take the poorer people, give these reduced allowances and throw upon their backs, in addition to the sacrifices they have already made, these much

heavier sacrifices which they had to make before this Reform Bill was brought into play.

Question put, "That the words proposed to be left out, to the word 'and', in line 3, stand part of the Resolution."

The House divided: Ayes, 264; Noes, 190.

Division No. 478.] AYES. [9.52 p.m.
Acland-Troyte, Lieut. -Colonel Culverwell, C. T. (Bristol, West) Hutchison, Maj.-Gen. Sir R.
Ainsworth, Lieut.-Col. Charles Cunliffe-Lister, Rt. Hon. Sir Philip Inskip, Sir Thomas
Altchison, Rt. Hon. Craigle M. Dalkeith, Earl of Iveagh, Countess of
Albery, Irving James Dairymple-White, Lt.-Col. Sir Godfrey Jones, Llewellyn, F.
Alexander, Sir Wm. (Glasgow, Cent'l) Davidson, Rt. Hon. J. (Hertford) Jones, Henry Haydn (Merioneth)
Ashley, Lt.-Col. Rt. Hon. Wilfrid W. Davies, Dr. Vernon Jones, Rt. Hon, Leif (Camborne)
Aske, Sir Robert Davies, E. C. (Montgomery) Jowitt, Rt. Hon. Sir W. A. (Preston)
Astor, Maj. Hon. John J.(Kent, Dover) Davies, Maj. Geo. F.(Somerset, Yeovil) Kedward, R. M. (Kent, Ashford)
Atkinson, C. Dawson, Sir Philip Kindersley, Major G. M.
Baldwin, Rt. Hon. Stanley (Bewdley) Denman, Hon. R. D. Lamb, Sir J. Q
Balfour, Captain H. H. (I. of Thanet) Despencer-Robertson, Major J. A. F. Lambert, Rt. Hon. George (S. Molton)
Balniel, Lord Dixey, A. C. Lane Fox, Col. Rt. Hon. George R.
Beamish, Rear-Admiral T. P. H. Duckworth, G. A. V. Law, Sir Alfred (Derby, High Peak)
Beaumont, M. W. Dugdale, Capt. T. L. Leighton, Major B. E. P.
Bellairs, Commander Carlyon Eden, Captain Anthony Lewis, Oswald (Colchester)
Bennett, Sir E. N. (Cardiff, Central) Edmondson, Major A. J. Llewellin, Major J. J.
Berry, Sir George Elliot, Major Walter E. Locker-Lampson, Rt. Hon. Godfrey
Betterton, Sir Henry B. Elmley, Viscount Locker-Lampion, Com. O.(Handsw'th)
Bevan, S. J. (Holborn) Erskine, Lord (Somerset, Weston-s. M.) Lockwood, Captain J, H.
Birchall, Major Sir John Dearman Evans, Capt. Ernest (Welsh Univer.) Long, Major Hon. Eric
Birkett, W. Norman Everard, W. Lindsay Lovat-Fraser, J. A.
Blindell, James Falle, Sir Bertram G. Lymington, Viscount
Boothby, R. J. G. Ferguson, Sir John MacDonald, Rt. Hon. J. R. (Seaham)
Bowater, Col. Sir T. Vansittart Fison, F. G. Clavering MacDonald, Malcolm (Bassetlaw)
Bowyer, Captain Sir George E. W. Foot, Isaac Macdonald, Capt. P. D. (I. of W.)
Boyce, Leslie Ford, Sir P. J. Maclean, Sir Donald (Cornwall, N.)
Bracken, B. Forestier-Walker, Sir L. Macpherson, Rt. Hon. James I.
Braithwaite, Major A. N. Fremantle, Lieut.-Colonel Francis E. Macquisten, F. A.
Briscoe, Richard George Galbraith, J. F. W. Maitland, A. (Kent, Faversham)
Broadbent, Colonel J. Ganzoni, Sir John Makins, Brigadier-General E.
Brown, Ernest (Leith) Gault, Lieut.-Col. A. Hamilton Mander, Geoffrey le M.
Brown, Brig-Gen. H.C. (Berks, Newb'y) George, Major G. Lloyd (Pembroke) Margesson, Captain H. D.
Buchan, John George, Megan Lloyd (Anglesea) Marjoribanks, Edward
Buchan-Hepburn, P. G. T. Gillett, George M. Markham, S. F.
Bullock, Captain Malcolm Gilmour, Lt.-Col. Rt. Hon. Sir John Mason, Colonel Glyn K.
Burgin, Dr. E. L. Glassey, A. E. Meller, R. J.
Burton, Colonel H. W. Glyn, Major R. G. C. Merriman, Sir F. Boyd
Butler, R. A. Gower, Sir Robert Millar, J. D.
Cadogan, Major Hon. Edward Graham, Fergus (Cumberland, N.) Monsell, Eyres, Com. Rt. Hon. Sir B.
Campbell, E. T. Granville, E. Morris, Rhys Hopkins
Carver, Major W. H. Gray, Milner Morrison, W. S. (Glos., Cirencester)
Castle Stewart, Earl of Greaves-Lord, Sir Walter Muirhead, A. J.
Cautley, Sir Henry S. Greene, W. P. Crawford Nail-Cain, A. R. N.
Cayzer, Sir C. (Chester, City) Grenfell, Edward C. (City of London) Nathan, Major H. L.
Cayzer, Maj. Sir Herbt. R. (Prtsmth.S.) Gretton, Colonel Rt. Hon. John Newman, Sir R. H. S. D. L. (Exeter)
Cazalet, Captain Victor A. Griffith, F. Kingsley (Middlesbro' W.) Nicholson, O. (Westminster)
Cecil, Rt. Hon. Lord H. (Ox. Univ.) Gritten, W. G. Howard O'Connor, T. J,
Chadwick, Capt. Sir Robert Burton Gunston, Captain D. W. Oliver, P. M. (Man., Blackley)
Chamberlain, Rt. Hn. Sir J.A.(Birm., W.) Hacking, Rt. Hon. Douglas H. Oman, Sir Charles William C.
Chamberlain, Rt. Hon. N. (Edgbaston) Hail, Lieut.-Col. Sir F. (Dulwich) Ormsby-Gore, Rt. Hon. William
Chapman, Sir S. Hamilton, Sir George (Ilford) Owen, Major G. (Carnarvon)
Christie, J. A. Hamilton, Sir R. (Orkney & Zetland) Peake, Capt. Osbert
Church, Major A. G. Hanbury, C. Penny, Sir George
Churchill, Rt. Hon. Winston Spencer Hannon, Patrick Joseph Henry Percy, Lord Eustace (Hastings)
Clydesdale, Marquess of Harbord, A. Perkins, W. R. D.
Cobb, Sir Cyril Hartington, Marquess of Peters, Dr. Sidney John
Cockerill, Brig-General Sir George Harvey, Major S. E. (Devon, Totnes) Peto, Sir Basil E. (Devon, Barnstaple)
Colfox, Major William Philip Haslam, Henry C. Power, Sir John Cecil
Colman, N. C. D, Henderson, Capt. R. R.(Oxf'd, Henley) Pownail, Sir Assheton
Colville, Major D. J, Heneage, Lieut.-Colonel Arthur P. Purbrick, R.
Conway, Sir W. Martin Hennessy, Major Sir G. R. J. Pybus, Percy John
Cooper, A. Duff Hills, Major Rt. Hon. John Waller Ramsay, T. B. Wilton
Courtauld, Major J. S. Hope, Sir Harry (Forfar) Ramsbotham, H.
Cowan, D. M. Hore-Belisha, Leslie Rathbone, Eleanor
Cranborne, Viscount Home, Rt. Hon. Sir Robert S. Rawson, Sir Cooper
Crichton-Stuart, Lord C. Howard-Bury, Colonel C. K. Reid, David D. (County Down)
Croft, Brigadier-General Sir H. Hunter-Weston, Lt.-Gen. Sir Aylmer Remer, John R.
Crookshank, Capt. H. C. Hurd, Percy A. Rentoul, Sir Gervals S.
Rhys, Hon. C. A. U. Smith, Louis W. (Sheffield, Hallam) Turton, Robert Hugh
Richardson, Sir P. W. (Sur'y, Ch'te'y) Smith, R. W.(Aberd'n & Klnc'dlne, C.) Vaughan-Morgan, Sir Kenyon
Roberts, Sir Samuel (Ecclesall) Smith-Carington, Neville W. Walters, Rt. Hon. Sir J. Tudor
Rodd, Rt. Hon. Sir James Rennell Smithers, Waldron Ward, Lieut.-Col. Sir A. Lambert
Rosbotham, D. S. T. Snowden, Rt. Hon. Philip Warrender, Sir Victor
Ross, Ronald D. Somerville, A. A. (Windsor) Waterhouse, Captain Charles
Russell, Alexander West (Tynemouth) Southby, Commander A. R. J. Wayland, Sir William A.
Russell, Richard John (Eddlsbury) Spender-Clay, Colonel H. Wells, Sydney R.
Salmon, Major I. Stanley, Lord (Fylde) White, H. G.
Samuel, A. M. (Surrey, Farnham) Stanley, Hon. O. (Westmorland) Williams, Charles (Devon, Torquay)
Samuel, Rt. Hon. Sir H. (Darwen) Steel-Maitland, Rt. Hon. Sir Arthur Wilson, G. H. A. (Cambridge U.)
Samuel, Samuel (W'dsworth, Putney) Stewart, W. J. (Balfast South) Windsor-Clive, Lieut.-Colonel George
Sandeman, Sir N. Stewart Stuart, Hon. J. (Moray and Nairn) Withers, Sir John James
Sassoon, Rt. Hon. Sir Philip A. G. D. Sueter, Rear-Admiral M. F. Wolmer, Rt. Hon. Viscount
Savery, S. S. Taylor, Vice-Admiral E. A. Womersley, W. J.
Scott, James Thomas, Rt. Hon. J. H. (Derby) Wood, Rt. Hon. Sir Kingsley
Shakespeare, Geoffrey H. Thomson, Sir F. Wood, Major McKenzie (Banff)
Shepperson, Sir Ernest Whittome Titchfield, Major the Marquess of Young, Rt. Hon. Sir Hilton
Simon, Rt. Hon. Sir John Todd, Capt. A. J.
Sinclair, Rt. Hon. Sir A. (Caithness) Train, J. TELLERS FOR THE AYES.—
Sinclair, Col. T. (Queen's U., Belfast) Tryon, Rt. Hon. George Clement Captain Wallace and Captain Hudson.
Adamson, Rt. Hon. W. (File, West) Hall, G. H. (Merthyr Tydvil) Muggeridge, H. T.
Adamson, W. M. (Staff., Cannock) Hall, J. H. (Whitechapel) Murnin, Hugh
Addison, Rt. Hon. Dr. Christopher Hall, Capt. W. G. (Portsmouth, C.) Naylor, T. E.
Alexander, Rt. Hon. A. V. (Hillsbro') Hamilton, Mary Agnes (Blackburn) Noel Baker, P. J.
Amman, Charles George Hardle, David (Rutherglen) Noel-Buxton, Baroness (Norfolk, N.)
Arnott, John Hardie, G. D. (Springburn) Oliver, George Harold (Ilkeston)
Attlee, Clement Richard Hastings, Dr. Somerville Palin, John Henry
Ayles, Walter Haycock, A. W. Paling, Wilfrid
Baker, John (Wolverhampton, Bilston) Hayes, John Henry Parkinson, John Allen (Wigan)
Barnes, Alfred John Henderson, Joseph (Ardwick) Perry, S. F.
Barr, James Henderson, W. W. (Middx., Enfield) Pethick-Lawrence, F. W.
Batey, Joseph Herriotts, J. Phillips, Dr. Marion
Bennett, William (Battersea, South) Hicks, Ernest George Potts, John S.
Benson, G. Hirst, G. H. (York W. R. Wentworth) Price, M. P.
Bowen, J. W. Hirst, W. (Bradford, South) Quibell, D. J. K.
Bowerman, Rt. Hon. Charles W. Hoffman, P. C. Raynes, W. R.
Broad, Francis Alfred Horrabin, J. F. Richardson, R. (Houghton-le-Spring)
Bromley, J. Hudson, James H. (Huddersfield) Riley, Ben (Dewsbury)
Brothers, M. Isaacs, George Ritson, J.
Brown, Rt. Hon. J. (South Ayrshire) Jenkins, Sir William Romeril, H. G.
Buchanan, G. John, William (Rhondda, West) Salter, Dr. Alfred
Burgess, F. G. Jones, J. J. (West Ham, Silvertown) Samuel, H. Walter (Swansea, West)
Buxton, C. R. (Yorks, W. R. Elland) Jones, Morgan (Caerphilly) Sanders, W. S.
Cameron, A. G Kelly, W. T. Sandham, E.
Cape, Thomas Kennedy, Rt. Hon. Thomas Scrymgeour, E.
Carter, W. (St. Pancras, S.W.) Kenworthy, Lt.-Com. Hon. Joseph M. Sexton, Sir James
Charleton, H. C. Kinley, J. Shepherd, Arthur Lewis
Chater, Daniel Lansbury, Rt. Hon. George Sherwood, G. H.
Cluse, W. S. Lathan, G. (Sheffield, Park) Shiels, Dr. Drummond
Cocks, Frederick Seymour Law, A. (Rossendale) Shillaker, J. F.
Compton, Joseph Lawson, John James Shinwell, E.
Cove, William G. Lawther, W. (Barnard Castle) Short, Alfred (Wednesbury)
Cripps, Sir Stafford Leach, W. Simmons, C. J.
Daggar, George Lee, Frank (Derby, N.E.) Sinkinson, George
Dalton, Hugh Lee, Jennie (Lanark, Northern Sitch, Charles H.
Davies, D. L. (Pontypridd) Leonard, W. Smith, Ben (Bermondsey, Rotherhithe)
Davies, Rhys John (Westhoughton) Lewis, T. (Southampton) Smith, Frank (Nuneaton)
Day, Harry Lloyd, C. Ellis Smith, Tom (Pontefract)
Devlin, Joseph Logan, David Gilbert Smith, W. R. (Norwich)
Dukes, C. Longbottom, A. W. Sorensen, R.
Duncan, Charles Lunn, William Stephen, Campbell
Dunnico, H. Macdonald, Gordon (Ince) Strauss, G. R.
Ede, James Chuter McElwee, A. Sullivan, J.
Edmunds, J. E. McEntee, V. L. Taylor, R. A. (Lincoln)
Edwards, C. (Monmouth, Bedwellty) McKinlay, A. Tilled, Ben
Edwards, E. (Morpeth) MacLaren, Andrew Tout, W. J.
Egan, W. H. Maclean, Neil (Glasgow, Govan) Turner, Sir Ben
Evans, Major Herbert (Gateshead) McShane, John James Vaughan, David
Gardner, B. W. (West Ham, Upton) Malone, C. L'Estrange (N'thampton) Viant, S. P.
Gardner, J. P. (Hammersmith, N.) Manning, E. L. Walkden, A. G.
Gibson, H. M. (Lanes, Mossley) Marley, J. Walker, J.
Gill, T. H. Marshall, Fred Wallace, H. W.
Gossling, A. G. Mathers, George Watkins, F. C.
Gould, F. Maxton, James Watson, W. M. (Dunfermline)
Graham, D. M. (Lanark, Hamilton) Messer, Fred Watts-Morgan, Lt.-Col. D. (Rhondda)
Graham, Rt. Hon. Wm. (Edln., Cent.) Mills, J. E. Wallock, Wilfred
Grenfell, D. R. (Glamorgan) Milner, Major J. Welsh, James (Paisley)
Griffiths, T. (Monmouth, Pontypool) Montague, Frederick Whiteley, Wilfrid (Blrm., Ladywood)
Grundy, Thomas W. Morley, Ralph Whiteley, William (Blaydon)
Hail, F. (York, W.R., Normanton) Morrison, Rt. Hon. H. (Hackney, S.) Wilkinson, Ellen C.
Williams, David (Swansea, East) Wilson, C. H. (Sheffield, Attercliffe) Young, R. S. (Islington, North)
Williams, E. J. (Ogmore) Wilson, J. (Oldham) Young, Sir R. (Lancaster, Newton)
Williams, Dr. J. H. (Llanelly) Wilson, R. J. (Jarrow)
Williams, T. (York, Don Valley) Wise, E. F. TELLERS FOR THE NOES.—
Mr. T. Henderson and Mr. Thurtle.

Resolution agreed to.


I beg to move, in line 3, to leave out from "1927," to the word "shall," in line 5.

I am moving to exclude the phrase from the Resolution, and the reliefs in relation to life assurance and other matters provided by Section thirty-two of the Income Tax Act, 1918, as amended by any subsequent enactment. I do not think that the Chancellor of the Exchequer, if he had been present, would have complained that we should seek to get some more definite information on the variations he proposes to make in the reliefs from tax in respect of premiums for life assurance. Although the Chancellor of the Exchequer in his Budget statement gave a general indication as to what all the other reliefs would be, curiously enough in this matter, although it has created, in the past, very considerable trouble for him, no detailed information whatever has been vouchsafed to us. The Chancellor of the Exchequer would recall, if he were present, that in the 1930 Budget and in the discussions in connection with it when he increased the reliefs to the small Income Tax payers in order to secure, as he said, equality of sacrifice, he found it necessary—and there is no complaint about this on any side, I expect—to vary the tax upon the premiums of the same class in order to preserve a general uniformity in his scheme.

In his efforts to secure this uniformity, when he came to the question of exemptions in the matter of life assurance, he met with an astonishing opposition from the Tory party and from the Liberal party. As he is now working in conjunction with the people who inflicted that opposition upon him and caused a very considerable modification of the plans that he had made, there is very special reason why, in view of the association he now has with them, we should learn from him as early as possible exactly what is proposed in this matter. The opposition ran to such an extent that there are 30 columns of it in the OFFICIAL REPORT of the Committee stage of the Finance Bill of 5th June, 1930. Hon. Members opposite held up the Chancellor of the Exchequer in the proposals he made for exemptions. The Conservatives moved an Amendment, which was supported by leading Front Bench men on the Conservative side and by leading Liberals, such as the right hon. Member for St. Ives (Mr. Runciman) and the hon. Member for Leith (Mr. E. Brown). Their Amendment dealt with life insurance abatements in regard to one particular class of Income Tax payers, to meet the grievances of that class.

The grievance was shown to be during the Debate, and as the Chancellor of the Exchequer showed it to be, in reference to premiums of £475 a year and more. Those premiums referred to exemptions that were proposed in the Amendment referring to incomes of £2,850 and more. It was only in regard to such incomes that any possible grievances could exist, according to the Amendment. The right hon. Member for St. Ives reminded the Chancellor of the Exchequer that even Mr. McKenna's dictum ought to have little regard paid to it, because he had held that in regard to life insurance and its relation to Income Tax no sort of contract was made with the State. Mr. McKenna had pointed out that the State never granted to individual taxpayers exemptions in regard to life insurance. The exemption went on from year to year, and the State was quite free, said the Chancellor of the Exchequer, as Mr. McKenna had said, to vary whatever arrangements had been made. The right hon. Member for St. Ives and hon. and right hon. Members on the Conservative benches objected to that point of view. As a result of the pressure, and I marvelled at the time how little notice was taken of it in the general Press, and even among my own friends, the Chancellor of the Exchequer on the Report Stage, brought in another Amendment which cost him £400,000 in exemptions, and probably £500,000 if the full claims were made. Those exemptions went mainly to people whose incomes were reckoned in thousands rather than in hundreds.

I made no complaint at the time that the Chancellor of the Exchequer found it necessary to yield under Parliamentary pressure. It was pressure used by the Liberals and the Conservatives. They constantly used that pressure where large monetary interests were concerned, in order to make the Chancellor of the Exchequer do things that were opposed to the general line of policy for which he stood. Can it now be complained that I should ask, now that we find the Chancellor of the Exchequer bound and tied in his relationship with those gentlemen, exactly what it is that will be proposed when we come to the question of the exemptions from Income Tax in respect of life assurance. I am not complaining about general exemptions on life assurance. The principle goes back to the days of William Pitt, although it is true that for a good many years, in the last half of the 19th century, the method fell into disuse. It was revived again by Mr. Gladstone in 1853, in mitigation of the taxation of savings and in order to give benefits to those who derived their incomes from their own exertions.

The result of exempting incomes from tax in respect of life insurance has led to a tremendous development of life insurance as a general national process. Higher taxation in recent years has given an incentive to persons to avoid part of their Income Tax payments by taking out life insurance policies, in order to reap the advantage of the exemptions. Insurance companies have not been slow to develop this advantage and have advertised in their prospectuses that much can be gained by utilising this particular process. They have done that to such an extent that there has grown in recent years a certain amount of suspicion that in the matter of large incomes it is not the view of Mr. Gladstone that has prevailed, but rather the aim of the tax dodger that has been successfully carried out. Nevertheless it still remains important that for the small incomes proper exemptions should be allowed on life insurance policies. The Royal Commission on Income Tax in 1918 suggested that there was no other way except life insurance by which the small class of Income Tax payers could secure their dependants in case of their own death. We have seen the development of widows' pensions and orphans' pensions, and the man of small income feels it more than ever necessary to make some effective provision for his widow and orphans in case of his death.

I do not know whether the Financial Secretary to the Treasury will be able to make an announcement, but I should like to know that any exemptions that are allowed shall be such that in this matter of insurance against death no further burden whatever ought to be placed upon small Income Tax payers, not only for their own sake but for the sake of the nation, especially in view of the present financial situation in which we find ourselves. The Colwyn Committee suggested in its report that life assurance was a kind of thrift specially practised by the possessors of small and moderate incomes, that it was a sort of thrift which came first to the possessors of small incomes because they felt the need for it in the case of widows and orphans of their own class, and they said that: A contraction of this type of exemption would leave a less balance of savings free for general industrial investment. If the Financial Secretary should announce now—I do not know what he is going to say—that there is to be any stiffening of the charge that will fall upon the small Income Tax payer in regard to this matter, all that he will be doing will be to make a reduction in the general amount of wealth that is more and more needed, in view of the financial crisis, for the purposes of general industrial development.


I do not wish to interrupt the hon. Member, but this is relatively quite a small point, and I am willing to explain it now if the hon. Member so desires. It involves a concession to the taxpayer, and I am perfectly willing to explain it here and now.


Perhaps I had better accept the suggestion of the Financial Secretary and then finish my remarks afterwards if necessary.


Is the Amendment seconded?


Before you ask for a seconder for the Amendment may I ask whether the fact that I am giving way to the Financial Secretary will deprive me of any right to speak again? I was hoping that it was more of an interjection on his part, which would leave me quite free to continue my speech.


The hon. Member would have no right to speak again.


May I suggest that the hon. Member, if he so desires, would be able to speak on the Resolution if he is not satisfied with the explanation I propose to give on this Amendment. He will lose his right to speak again on the Amendment, but he would still have his right to speak on the main Resolution.


Perhaps I had better finish my speech, although the fact that the Financial Secretary is willing to rise so rapidly will have the effect of curtailing it. The point is that exemptions regarding the small Income Tax payer have a close relationship to investments of wealth for industrial purposes, but it is not the same thing when you come to the large Income Tax payer. If you give to the large Income Tax payer a special advantage in the matter of life assurance what he will do, especially in a time of financial crisis, will be to take advantage to an even greater extent of this process of investing wealth in order that he might reap advantages in the exemption of tax, and in the long run the wealth of that class of Income Tax payer available for general industrial investment will be decreased rather than increased. I hope on this occasion that the Chancellor of the Exchequer and the Treasury, in working out their schemes, have been far more successful than in the case of the last question we discussed on the Amendment moved by the hon. Member for Chesterfield (Mr. Benson).

I hope that whatever scheme is going to he suggested it will be perfectly clear that the small man will have, at any rate in this matter, no further burden added to those that he already bears, and that if there is to be any alteration in the general scale it will be made only in the matter of the large Income Tax payers. I am certain that the Chancellor of the Exchequer, knowing the sort of struggle that he went through in 1930, will have done his best in this matter. I know his difficulties will have been increased, even on those that existed in 1930. I am sure that the Financial Secretary will forgive me for feeling that upon this issue we want a very clear statement indeed before we can be thoroughly satisfied that a fair deal is being given to the various classes in the community.


I beg to second the Amendment.

I am in the same difficulty as my hon. Frnend who has just spoken. I do not wish to take up unnecessary time if the Financial Secretary proposes to make an explicit statement upon this Resolution. But we do require a definite statement as to whether that part of the Resolution which it is proposed to delete means that it is a definite proposition on the part of the Government that there shall be either variation or a deletion of the reliefs allowed on account of life assurance. When the hon. and gallant Gentleman is making his statement, which I understand will be to the effect that there is to be a definite relief and advantage to the smaller Income Tax payer, I would ask him to bear in mind two points that are of great importance. First of all I suggest that there is an illustration of the unfairness of variations in these reliefs which come home very closely to Members of this House. Members of Parliament are to have their allowance for expenses—it is not a salary—reduced by £40 a year. The majority of Members realise that the reduction is very serious indeed for some Members, because there are those who depend entirely upon that allowance in order to maintain themselves. If the variation is to be made with regard to relief for life assurance it will be a case of an additional burden which will press very severely indeed on hon. Members.

I use that as an illustration, and do not want to say more upon a delicate subject. The points in reference to it were dealt with by the hon. Member for St. Helens (Sir J. Sexton) a, day or two ago. But there is an illustration showing how these burdens are cumulative upon various sections of the community. With regard to most of the proposals to which we are objecting, the same argument is applicable with equal force. If each stood alone, and if this were an ordinary humdrum Budget there might not be the same objection. We would object, no doubt, to burdens upon the community, but in this case it is not a question of one isolated burden imposed either as a tax or as a variation in relief from taxation. It is a cumulative burden because of the other burdens which are imposed, and that is the gist of the opposition which we are putting up to many of the proposals in the Budget.

May I point out another case in which this burden will fall very harshly? In many cases life assurance policies Are taken out by small business men and people of small financial means for the purpose of getting backing either for bankers' overdrafts for business purposes or for the purchase of house property. If relief of taxation on account of life assurance is to be varied seriously, it will have a definitely harmful effect upon a large class of people of small means. Finally, I would point out that the other matters referred to in Section 40 of the Finance Act of 1927 include deferred annuities to widows, and also the special provision that may be made by means of life assurances for children—that is to say, assurances which provide specifically for the education of children should the death take place of the assured person. These are matters of considerable importance, and I suggest that the Government would do well to bear in mind, when reconsidering this matter, that a variation of this kind is not isolated in its effect, but is a very burdensome cumulative tax upon people of limited means who will feel it very seriously indeed.


I hope to be able to reassure the House on the matter which has been raised by the hon. Member for Huddersfield (Mr. J. Hudson) and the hon. Member for West Islington (Mr. Montague). As the hon. Member for Huddersfield truly said, there was a great deal of controversy on the previous Finance Bill about the question of insurance premiums, and the House, quite rightly, is most jealous of any alteration in the law with respect to these things, because they represent the gilt-edged investments of many people of small incomes. As the Resolution is drawn in these general terms the House naturally and rightly demands from the responsible Minister an explanation of what is intended. As I say, I hope to be able to assure the House on the point. It is really a very minor matter. It is of the order of a concession to the taxpayer.

The hon. Member for Huddersfield, who was deeply concerned in the previous Finance Bill, will appreciate the point that it is intended to provide for the alteration in the relief in respect of life assurance premiums, which has to be consequential on the proposed alteration in the amount of relief given in respect of the first slice of taxable income. He will remember that it was so arranged in the last Finance Bill that you were not to get relief at a higher rate than you paid Income Tax. As now the rate of Income Tax has been changed, that restriction is no longer necessary, and consequently it is repealed. It is merely a technical point, and it is not proposed in any way to invade the rights or privileges of insured persons in respect of insurance policies or premiums or anything of the sort, but is merely a technical sweeping away of a restriction which is no longer necessary. Of course, the matter will be set out in greater detail in the Clauses of the Bill, but I assure the hon. Members that that is all that is proposed. As will be remembered, a person paying tax at 2s. in the £ was not to receive life insurance relief at 2s. 6d. Well, as the tax on the first slice of the taxpayer's income is now charged at one-half of the standard rate, 2s. 6d., it is not necessary to say that he is not to receive any other relief.

Amendment, by leave, withdrawn.



Resolution reported, That—

  1. (a) the standard rate of Income Tax for the year 1931–32 shall be increased to five shillings in the pound; and
  2. (b) in connection with the said increase amendments shall be made in Section two hundred and eleven of the Income Tax Act, 1918, as amended by Section twelve of the Finance Act, 1930, and special provision made in relation to income chargeable under Schedule C, under Rule 6 or Rule 7 of the Miscellaneous Rule applicable to Schedule D, or under Rule 21 of the General Rules; and
  3. (c) such other amendments shall be made in the Income Tax Acts as are consequential on the said increase."