HC Deb 05 June 1934 vol 290 cc820-8

7.4 p.m.

Sir ARTHUR MICHAEL SAMUEL

I beg to move, in page 11, line 39, to leave out "1932–33," and to insert "1928–29."

An hon. Member appealed to the Financial Secretary to the Treasury on the last Amendment to say something. I am going to take the same line. I hope he will offer an apology and express regret when he replies to me and will show sympathy for the Surtax payer. The Amendment I am moving deals with Surtax. I do not expect it will be accepted, there is no money available. Probably Members opposite may deride me for championing the cause of the Surtax payer. Neither in the Budget statement nor during the discussions on this Bill has there been any reference to the Surtax or to the savage rate of taxation now endured by the Surtax payer. This is a matter for regret. We ought not to let the Bill go through without a word, in justice to the Surtax payer. After all, he is very dumb and helpless. There are very few of him among the 30,000,000 electors; only 100,000 are Surtax payers, and of those—I think 90,000 is more correct—70,000 have an income under £5,000 a year, and only 20,000 an annual income of over £5,000. He has very little electoral power. I shall take the over-£5,000 a year man as the text for my remarks. These Surtax payers are not all despised rentiers, living on inherited wealth; for if one looks through the report of the Inland Revenue Commissioners it will be found that £4 out of every £5 assessable for Income Tax and Surtax are derived from Schedule D, profits on trade and professions, and Schedule E, income from salaries, and from wages. Therefore the greater portion of these taxes comes from the personal efforts of persons. The taxation on. the £5,000 a year man is about £1,500; that sum comes back to the revenue and is not available for voyages of economic and industrial discovery. True, a poor man with £4 or £5 a week looks on £4,000 or £5,000 as a lot of money. But, after all, it is from the great incomes, if money can be saved, that adventurous capital is available for new trades and new industries desired by the hon. Member for Spennymoor (Mr. Batey).

I want to find out a little more of what the hon. Member meant by the expression "new industries." It is no use going down to the coalfields to spend more on more collieries. Or into Lancashire to put up more factories for cotton, or to Northampton for boots and shoes: they have already productive power enough to supply the community from existing factories. What is wanted is new kinds of trades and new kinds of industries. In my lifetime what has helped to increase the prosperity of England has been new kinds of trades, such as those created by the introduction of the internal combustion engine, the discovery and uses of coal-tar products, of the soya bean, and oil seeds for food, and rubber, and, quite recently, artificial silk or rayon. These were new kinds of industries, not extensions of old industries. What we are seeking now is not more factories but new industries, fresh in ideas and in newly-invented materials. I look for one, such as an artificial fibre which might take the place of cotton. That is the class of new industry that brought so much new business to this country. Vast sums were lost by those who first speculated in developing these new industries. The men who found the money for inventions and industrial speculations took a sportsman's view and said, "Well, we might lose money, but we might also make large profits to balance."

What happens now with this vindictive taxation running up to 12s. in the £, with Income and Surtax? The game of industrial adventure is not worth the candle. It does not pay to take risks of loss. The £5,000 a year man to-day pays even £1,500; his income was cut by 10 per cent. in 1931 as a result of Mr. Snowden's theories of restricting wealth by the weapon of penal taxation, and the collapse under him of the Socialist principles of national finance. Since then there has been no amelioration of the Surtax payer's position, nothing said about it, nothing done about restoring some of this cut.

The Surtax payer can get nothing tonight: the Exchequer has no money. A £5,000 a year man paying Surtax under the present Clause 18 has had his income injured by tax by a 45 per cent. increase since 1928–29. If there is to be any hope for the rehabilitation of industries, you must allow this Surtax man to have something with which he can speculate in fresh ventures and discoveries, so that later we can have new kinds of industries. Who is going to venture money now, when he has to pay so much of his gains in tax? Suppose a man is asked to venture a large sum on a new industrial discovery such as a new fibre to take the place of cotton and of a more useful nature, he will say: "No, it will need a lot of money to try out the discovery and I may lose it all. If I make money in another venture, the State will come along and penalise me. The State will not help with my earlier losses, but will take away most of what I may make." You will not get men to venture on those lines. Neither will the State be able to take the place of the private venturer.

The hon. Member for North Hammersmith (Mr. West), who was formerly on the Public Accounts Committee with us, will agree with me that, following the views of the hon. and learned Member for Bristol (Sir S. Cripps), if you hand, over the control of industry to the State, you will not create new trades. Do you think that civil servants would venture to take risks of the loss of public money in venturous, untried industry? Those who have sat on the Public Accounts Committee and know what happens if £200 is lost, know that no civil servant would be justified in risking public money in new industrial discoveries and experimental speculations such as always attract the sporting capitalist. The civil servant would rightly say, "If this risk goes wrong I shall be blamed by the Public Accounts Committee for losing public money; but if it comes right it is only part of my duty and I shall hear nothing further of it. I shall get all the blame and little praise for my official courage." You must allow the private man to keep something to recompense him for losses in trade ventures in new industries when he makes a success. He must be tempted by profits to risk his own money. And that is what this vindictive, savage Surtax is not doing. Hon. Members talk of money piled up at banks. That is quite true. Why is money idle there? I submit that a man who succeeds in saving £500 or £1,000 concludes that it is no good venturing it in any fresh industry. He would rather get a gilt-edged 3 per cent. Government stock, or leave it in the bank on deposit because he is not treated fairly. He says, "If I lose by my speculation in developing a new idea or material the Government do nothing for me. If I win by my pluck the Government take everything away from me. It is not good enough, thank you."

In consequence I have put down this Amendment. We are in dire want of men to try new ideas with their own savings. Hon. Members have referred to me as a financier. I am not. I am a retired manufacturer and have never been interested in financial business. I have had nothing to do with finance, my standpoint is always that of productive industry, and I want to see new industries. We shall never get full trade recovery and full employment until we induce men to develop discoveries and set up fresh trades by giving them the rewards of their venturesomeness to invest their skill and money and courage in untried industries. It is folly to discourage them by taxation. I want to hear the representative of the Treasury say that he is very sympathetic, not promising anything, but that when he comes next year with money in hand to the question of taxation he will try to restore some of the cut to those who are liable for Surtax.

7.15 p.m.

Mr. TINKER

I want to come to the help of the Government in this matter. The hon. Baronet says that he knows nothing about finance. I want to be as modest as he is. I know nothing about it either, but I can see one or two things that are happening, and this plea of not knowing anything is all an attempt to better one's position. One would think from the way he spoke that he knows something about the Surtax payers. He seemed to be well primed in regard to their position. He may not be a £5,000 a year man. I would not go so far as to say that about him. I am waiting to see if that is denied. It is evident that, if he does not know much about finance, he is very closely connected with it. I wonder how many of the 100,000 Surtax payers have left the country because of the pressure of taxation. I do not think there are very many who went away in fear and trembling to other places. I do not think there is any better place in the world for the rich man than this country. Four or five years ago, when this taxation was being increased, the hon. Baronet said that, if we went on with this pressure, we should have all the rich men running away and there would be none to tax. Has anyone run away since that time? Have any of them gone to Russia, to Italy or to Germany? I have not heard of them, but I see from the Press that, when there are any loans floated, as in the ease of the Canadian loan the other week, the lists are no sooner opened than they are closed. Where did that money come from? The Surtax payers? I should imagine so. They were quite willing to allow their money to be invested overseas some where.

The hon. Baronet talked about building up new industries. How many of these Surtax payers have invested their money in other parts of the world and then pleaded with the Government to recover some of it for them? That is what they have done in the past, and, if their plea now is for some reduction in the next Budget, I hope the Government will give them no pledge at all. We protest against the reduction of Income Tax, but, if it comes to any question of the Surtax payer having a reduction, there will be a storm on these benches. At a time like this a plea of help for the £5,000 a year man appears ridiculous, and I am surprised that the hon. Baronet should come forward with it. It would be far better for these men to remain quiet for the time being, because when it becomes known that we have so many rich men, I do not think the people will stand for that kind of thing. When there is so much poverty on the one hand and so much wealth on the other, they will demand a levelling down of the wealth. The Government have been asked for an understanding. It would be as well if they did not give it. I do not think there will be any understanding, but I am giving a hint as to what our position will be if there be any attempt in that direction. There must be no attempt at assisting Surtax payers until there is some equalisation in the other direction, that is, helping the very poor. When that has been done, hon. Members can come forward with theif plea for the Surtax payer. I know this is merely an attempt to get something done in the next Budget, but I hope the Government will pay no attention to it.

7.22 p.m.

Captain ARCHIBALD RAMSAY

As one of those who put their names down to a Resolution to restore the cuts to the unemployed, I am sure the hon. Gentleman who has just sat down and other hon. Gentlemen on that side will realise that the last thing I should desire would to be unfair when I say that it is time some one associated himself with the remarks of my hon. Friend the Member for Farnham (Sir A. M. Samuel). Even in these days when taxation and representation seem to be very remotely connected, there should be some poor enough to do ' the Surtax payer reverence. In all fairness it must be borne in mind that one of the cuts at the time of crisis was the 10 per cent. extra on the Surtax; and while being among the foremost of those who advocated that the unemployed should get just consideration, yet I think it is equally just that, when all cuts can be restored, this class—one that performs many valuable functions—should not be neglected, even though they are a small class and have few to speak for them.

Then, again, I think hon. Gentleman opposite seem to forget that these cuts indirectly affect a considerable number of persons normally employed by Surtax payers, who in the event of such a cut are compelled to reduce their establishments in one way or another. And let it be remembered, the persons so affected are not provided for by the Unemployment Insurance Acts. So, for the above reasons, I am happy to associate myself with the Amendment standing in the name of my hon. Friend.

7.24 p.m.

Mr. HORE-BELISHA

It is quite right, a protest against the reduction of the Income Tax having come from opposite, that a protest should come from this side of the House against the failure to make any restoration to the Surtax payer, for it. is true that, whereas the other sections of the community have received some restoration, the unemployed in whole and Income Tax payers and others in part, the additional burden of 10 per cent. placed upon Surtax payers in the second Budget of 1931 has not up to the present been relieved. In those circumstances, I think no one will complain of my hon. Friend's action in moving this Amendment. He, with his economic knowledge, knows the repercussions of heavy direct taxation upon industry, and therefore upon employment. His Amendment aims at reducing the scale governing the payment of Surtax during the current year to the scale charged for the year 1928–9, which determined the tax payable in 1929–30. There have been since that date two increases in Surtax, and no restitution of course has been made. The cost of meeting this Amendment would be £14,000,000, of which about £4,500,000 represents the removal of the 10 per cent. increase and the balance represents the adoption of the lower scale previously in force. It would clearly be quite out of the question for the Government to concede the Amendment, particularly as it not only proposes the restitution of the 10 per cent. 'additional tax imposed in 1931 but claims a further restitution going back to 1928. But it was not my hon. Friend's object to achieve the insertion of this Amendment in the Bill. It was merely his object to make a protest.

It is interesting to observe that the total income of Surtax payers has fallen by about 30 per cent. since 1929. In that year there were over 100,000 Surtax payers with aggregate incomes of £590,000,000, and the number has now fallen to 85,000 with a total income of £420,000,000. Thus their incomes have fallen by 30 per cent. during the present depression. I appreciate that the jealousy, the envy or the hatred of poorer people may be aroused against the rich, but I would remind the hon. Member for Leigh (Mr. Tinker) that the State depends very largely for its income upon the Surtax payers. I should say they contribute about 40 per cent of the total inland revenue of the State, and the direct taxpayers as a whole, of course, make a contribution without which the social services could not be carried on. Therefore, even if the hon. Member does not like this class of persons, he might at any rate appreciate their utility. He cannot have it both ways. He cannot at the same time rely upon them to provide this contribution and desire to destroy them. He must decide on which side of the fence he is coming down. The present course of taxation shows that they are a diminishing number of persons and, should they diminish still further—happily, as the result of our policy, there is a hope of even further revival—many of the glittering schemes which the hon. Member advocates with such eloquence would have to be abandoned. I do not think I need make any further comment upon the Debate, except to thank my hon. Friend the Member for Farnham for drawing attention to this subject and thus putting into the balance the protest that was made in the opposite direction from the other side of the House.

7.30 p.m.

Sir A. M. SAMUEL

Before asking leave to withdraw my Amendment, I would like to say something to the hon. Member for Leigh (Mr. Tinker), who is always a fair debater and a student, which I think may perhaps enlighten him. It is no good his girding at the Surtax payer. If you took every farthing of income which is assessed to the Surtax payer away from him, and spread it out evenly among the 45,000,000 people of this country, the amount that you would give to each of them would be something like 7d. a day. But when you had done that you would have lost your £50,000,000 a year of taxation which those Surtax people provide. And would seven-pence a day extra income all round compensate the loss of that tax contribution of £50,000,000 a year? It is easily collected from 90,000 people, and they have no electoral power to speak of. They make honey for others to collect. I would ask the hon. Member for Leigh to read page 83 of Cmd. Paper No. 4456, called the 76th Report of the Commissioners of Inland Revenue, where I am sure he will find figures which will cause him to vary his views about the Surtax payer and be grateful to him. I now beg to ask leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clauses 19 to 22 ordered to stand part of the Bill.