HC Deb 11 June 1934 vol 290 cc1499-506

Where for any year of assessment rights to work minerals in the United Kingdom are let a deduction shall be allowed in the computation of the lessor's income for the purposes of Sur-tax equal to the amount which shall be proved to have been disbursed by him in payment of mineral rights duty in respect of that year.—[Mr. Amery.]

Brought up, and read the First time.

11.28 p.m.


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

This Clause and the next in my name—"Surtax deduction in respect of payments in respect of miners' welfare levy"—raise in substance precisely the same point, and the same argument will be sufficient to cover both. The point is that as the law stands at present a mineral royalty owner has to pay in taxation first of all Income Tax on the gross royalties received by him, subject only to certain allowances. He then has to pay Mineral Rights Duty and miners' welfare levy at the rate, each, of 1s. in the pound, on the gross royalties, less Income Tax, and finally he has to pay Sur-tax on the gross total of the royalties. The result is that the royalty owner is taxed on the income he actually receives on a higher scale than any other receiver of income in the country. To take a concrete illustration, a royalty owner paying Sur-tax on the highest scale would, on £1,000 received as royalties, pay £225 in Income Tax, £77 10s. in Mineral Rights Duty and miners' welfare levy and £412 10s. in Surtax, making £715 in all, which is a tax of 14s. 2d. in the pound and £32 more than any other person in the same financial position would pay. That seems to me to amount to a case of real unfairness.

I could argue, and there would be a good deal to be said for the argument, that royalties should not be subject either to full Income Tax or Surtax on their nominal amount, because they are not merely income but are in a large measure a payment by instalments of capital values, because when a mine is exhausted the source of the income disappears entirely. However, I do not wish to stress that point, but only to show that at present the royalty owner has to pay Surtax on income which never comes within his purview. The mineral rights duty is the only one of the Land Taxes of 1909 which is left on—the others were abolished in 1920—and the miners' welfare levy was imposed in 1926 at a time when the industry was in great financial difficulties and could, therefore, be imposed only on the royalty owners. Both these substantial imposts levied on the royalty owners alone, are in themselves a sufficient additional burden of taxation without constituting a justification for further taxation on income which the royalty owner never receives.

I suggest that the least that should be done to remedy the unfairness is that the royalty owner should not pay Surtax on the money which he has to pay out for Mineral Rights Duty or the Miners' Welfare Levy; to that small extent, at any rate, he might be relieved. An alternative proposition might be to do what is already done in respect of Income Tax, and not to levy for the miners' welfare fund or the Mineral Rights Duty until Surtax as well as Income Tax has been deducted from the gross royalty income. Anyhow here is a real injustice which needs remedying in one way or another. This is not a request for a large sacrifice of revenue on the part of the Treasury. Taking the total amount of royalty income at some £5,000,000, and it is considerably less than that at the present time—about £500,000 less, it used to average some £6,000,000—and taking the average rate of Surtax at 7s. in the pound, which is again a high figure, and having regard to the fact that neither the Ecclesiastical Commissioners nor the Commissioners of Crown Lands pay Surtax, though both are large owners of royalties—taking all those figures the total loss of revenue would work out at £75,000. I agree that one is not entitled lightly to ask the Chancellor of the Exchequer to forego even that amount of revenue in the present difficult situation, but it is fair to suggest that even that amount of revenue ought not to be levied, when it involves an unfair discrimination against one sec-ton of the community, by levying taxation on them at a rate at which it is not levied upon anyone else.

11.36 p.m.


I support the Clause moved by the right hon. Gentleman the Member for Sparkbrook (Mr. Amery). There must have been an oversight of the Treasury, because these taxes were not intended to bear upon these people to the extent that they do. That they should pay Income Tax and Surtax on their gross amount, without allowing for Mineral Rights Duty and miners' welfare levy to be deducted, is hardly an equitable form of taxation. Hon. Members of the Opposition will admit that all taxation is based on consent and that all consent is based on equity. If you do not have equity, consent becomes correspondingly diminished and takes expression either in evasion, with a corresponding war carried on by the Treasury to prevent the increase of the invasion, or in some remote and possibly quite obscure issue, such as "ship-money," which was merely the last straw that broke the camel's back, and the culmination of a long and iniquitous series of forced loans, benevolences and other forms of extracting money from the taxpayer, which had been initiated by that famous Socialist Stafford—[Interruption]—I should have said Strafford. No hon. Member will wish that to occur. It can occur, as it has in many other countries, and even in our Dominions, as an inevitable result of this matter of equity. I am sure the right hon. Gentleman will receive this plea with that sympathy with which, as a good-natured, fair and generous-minded man, he must naturally receive it.

The question of whether mineral royalties are right or wrong is not in order. If Opposition hon. Members wish to discuss it, that is a matter for the Chair to decide upon. I will give them a trial fling, if they wish it. The reason for private owners possessing mineral royalties, and the question whether the royalties should be Government-owned, is a far wider subject. I wonder whether some hon. Members will cite the instance of oil, and the recent legislation, as an example of the State-ownership on which the ultimate aims of the Labour party are based. If that be the case, my answer——


The Noble Lord is now going far too wide.


I bow to your Ruling. I understand that the broad question as to whether mineral royalties and rights are to be owned by the private individual is not in order in this Debate. If there were no privately-owned mineral royalties, their could be no Royalty Duty; if their were no Royalty Duty there could be no exemptions from Surtax to the royalty owner. I base my plea entirely on the question of equity, on which I am sure the right hon. Gentleman will be sympathetic.

11.40 p.m.


My Noble Friend suggests that it was owing to some oversight on the part of the Treasury that exemption from Surtax in this case had not been granted long ago, but there is no question of any oversight on the part of the Treasury. Indeed, the intention of the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) was that there should be no deduction for Income Tax in charging Mineral Eights Duty, but there was some flaw in the Statute, and in 1913 a case was decided in the courts with the result that since then Income Tax has been allowed. The same, judgment laid it down that a deduction for Surtax was not allowable. However much I sympathise with those unfortunate fellow-subjects of ours who are not only royalty owners but are also subject to Surtax, I am afraid I must not listen to the mellifluous accents of my Noble Friend, because to deal with this matter would be contrary to the principle which I have laid down, and which continues to guide me on matters connected with the Budget, that the sacrifices and burdens imposed in 1931 must have the first consideration. Therefore, I am obliged to say that the royalty owners must possess their souls in patience until those matters are disposed of, when it may be possible to consider their, no doubt, well founded claims.

11.42 p.m.

Marquess of HARTINGTON

I wondered, after hearing the Chancellor's remarks, whether he fully appreciated what has happened in connection with the collection of Surtax on incomes derived from minerals. When the Mineral Rights Duty was first imposed, Surtax was relatively small; I think they were both introduced in the same year, and, as my right hon. Friend the Member for Sparkbrook (Mr. Amery) has said, the Mineral Rights Duty is the last survivor of the "People's Budget" of the right hon. Gentleman the Member for Carnarvon Boronghs (Mr. Lloyd George), which was designed to bring about all kinds of results which it failed to achieve. It was then a tax levied on the mineral income received. We had subsequently another survivor of all kinds of recommendations—the Miners' Welfare Duty, which is the sole survivor of the recommendations of the right hon. Gentleman the Member for Darwen (Sir H. Samuel) in his Report on the Coal Industry. Both of these taxes have worked well, and neither could well be described as unfair, but the mineral owner receives from his lessee, not the 20s. with which he is credited, but 18s. He can never get more; 2s. is deducted at the source. But he has to pay Surtax on 20s., and I think my right hon. Friend must agree that that is rather less than fair.

Many mineral owners are mulct in other ways. For instance, machinery has been introduced in the pits to a very large extent, with the result that particular districts are being intensively developed, while others are not. I know of cases where an owner who may have paid Death Duties on colliery royalties based on the old system of working is now getting no income, but is still having to pay the full rate of interest on money borrowed to pay his Death Duties. There is a hardship, and there is something of a hardship in being credited with income enormously larger than you are actually receiving. A mineral owner is credited in the district in which he lives with his gross income. The ordinary miner knows very little about Income Tax or Surtax, or Mineral Rights Duty, or the Miners' Welfare Levy. He believes the royalty owner is getting 20s. in the pound. He believes he is a man of limitless wealth. He knows nothing at all of the fact that his actual income is not 20s. in the pound, but that what he draws from the pits is something more nearly approaching 5s. 6d. in the pound.

The Mineral Rights Duty is a fair tax, and the Miners Welfare Duty has done so much good in the industry that, speaking as one who pays it, I should not be prepared, until things improve very much indeed, to move for a reduction of that tax, but, even so, I believe that taxation ought to be on a fair basis, and it is wrong to tax a man on 20s. in the pound when he is actually receiving not more than 18s. I hope the right hon. Gentleman will consider the matter and, if he cannot make a concession this year, will bear it in mind for a remission of taxation next year. It will cost him very little, but I believe it is wrong to tax people on an income which they can never hope to receive.

11.47 p.m.


I rise to ask if this new Clause is exactly in order. Is not the proper place for this to be dealt with under Part II of the Unemployment Insurance Act? It is evident that a number of these people are likely to come on the fund and will have to receive consideration from those administering Part II of that Act.

11.48 p.m.


I believe this is the only anomalous double taxation in connection with the Surtax that exists. I appreciate that this year nothing can be done to relieve the injustice. At the same time, while of course we appreciate that Surtax is leviable on the amount to which one was assessed to Income Tax in the year before, and although one has to pay Surtax on that part of one's income which has to go to public purposes, such as rates and so forth, as far as I know, there is no other case where one has to pay Surtax on money that is directly due to the Exchequer under another direct tax. I believe it is an anomaly. The position is that, whereas you are assessed to Income Tax on your gross royalties, out of which you have to pay directly the Mineral Rights Duty to the Exchequer, none the less the following year you have to pay Surtax on the full amount, including that which you have had to pay directly to the Exchequer as Mineral Rights Duty. Of course, in one sense one has to pay Surtax on that part of one's income which one does not receive because of the Income Tax deducted at the source, but Surtax is an additional Income Tax and one cannot complain about that. It is an additional Income Tax on your gross income. The point I am trying to make is that where you come to deal with Surtax on Mineral Rights Duty you do in fact include in your gross income this direct taxation to the Exchequer under this old piece of legislation of 1909, which I agree was intended to be even more severe than it is at the present moment, but I submit that this is an anomaly which ought to be reconsidered at the earliest possible moment.

11.52 p.m.


I am not concerned so much with whether payment is made on 20s. or 18s., but when the Noble Lord says that the ordinary miner knows nothing about Income Tax, I must reply respectfully that he does not understand the miners as well as some of us do. Before the Chancellor of the Exchequer removes any anomalies as far as mineral royalties are concerned, I hope that he will remove anomalies which concern the ordinary mine worker. I was in a colliery office some days ago, and the wages on the colliery books showed that the men had taken home that day 16s. 3d. and that for ordinary Income Tax purposes 16s. 3d. would be sent in to the Inspector. Actually the men had taken 13s. 9d. home, and they had left at the pit in stoppages of various kinds between 2s. 6d. and 2s. 9d. per shift upon which they were assessed for Income Tax. When we have had dealings with the local Inspector on matters of this kind, we have been told that the gross earnings of the men—the wages in the colliery book—are the wages which have to be taken into account for Income Tax purposes. Even though there may be anomalies from the mining royalty owners' point of view, there are also a great many anomalies from the point of view of the miners. Before the right hon. Gentleman removes the anomalies that my Noble Friend is pleading with him to remove, I hope that he will remove those which affect the ordinary worker.

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