§ Notwithstanding anything contained in the Income Tax Act, 1918, as amended by subsequent enactments, the same allowance of Income Tax shall be made in respect of voluntary contributions under the Widows', Orphans' and Old Age Contributory Pensions Acts as in the case of compulsory contributions under those Acts.—[Mr. D. G. Somerville.]
§ Brought up and read the First time.
§ 3.47 p.m.
§ Mr. D. G. SOMERVILLE
I beg to move, "That the Clause be read a Second time."
I am moving this new Clause because I have received a strong letter from one of my constituents, a man who has made compulsory contributions under these Acts ever since they have been in being. His salary has now been raised from £245 to £255. Therefore, he will drop out of benefit unless he keeps up the contributions voluntarily. He writes that it is hard that, having contributed all this time under these Acts, he should now, at an advanced year, because he has received an increase of £10 a year in his salary, lose the whole of the benefits which would have accrued had he remained a compulsory contributor. It would cost very little to the State to grant Income Tax allowances in respect of these contributions when they are made voluntarily, and I think that they should be granted in order to encourage this form of saving. It seems unreasonable that when a man no longer has to pay these contributions because he has a small increase of salary, or because he throws up a job and starts a small business, and still wants to keep up the payments voluntarily, he should be deprived of Income Tax relief in respect of them.
§ 3.50 p.m.
§ The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)
My hon. Friend put forward as the ground for asking for this concession that his constituent had contributed all his life compulsorily to the pension scheme, but that is no 826 grievance that he has lost the right to obtain an allowance under Income Tax because he is no longer contributing. So long as he was bound to contribute he had this allowance, and he has lost nothing in the past by what happens now. In view of the fact that his income has been increased he has ceased to be liable to contribute compulsorily, but it is open to him, if he likes, to become a voluntary contributor. The reason he got that allowance was not due to anything in the Pensions Act, but to the general provisions of the Income Tax Acts. Those general provisions give an allowance where a man is obliged compulsorily by statute to contribute towards the securing of a pension for himself or his dependants or by reason of the terms of the employment. In the case of a voluntary contributor neither of those conditions is fulfilled, and it would therefore be contrary to the general principle to admit an exception in that case.
Considered on its merits what is there to be said for this case? My hon. Friend said it was a very small matter. I wonder whether he realises how small it really is. The amount which is taken as being the equivalent of the contribution is £1 a year, and therefore the amount of allowance that the man would receive, if his taxable income were under £135, would be 1s. 6d. a year. Really one ought not to be asked to legislate for such a trifling relief as that. There are something like 500,000 voluntary contributors to-day and the number of them is increasing at the rate of 30,000 or 40,000 a year, and when my hon. Friend considers the extra amount of labour there would be in dealing with all those cases for the sake of 1s. 6d. a year, I hardly think he will feel that it is worth while to press his new Clause.
§ 3.53 p.m.
§ Mr. RHYS DAVIES
I do not think the Chancellor of the Exchequer has really done justice to the hon. Member's new Clause. It is true that there are half a million voluntary contributors under the national health insurance and contributory pensions scheme, but many of them will be in receipt of very much less than £250 a year; a considerable number will have become voluntary contributors because of unemployment, though they will be removed from that category by the passing of the present Health Insurance Bill now before Parliament. 827 The voluntary contributor, indeed, is becoming subject to many disadvantages consequent upon his small increased income as soon as he goes beyond the limit of the rate of £250 per annum. If his income rises to £252 per annum and he becomes a voluntary contributor the position is not quite so simple as the Chancellor put it. When a man is receiving up to £250 per annum as wages or salary the employer pays, roughly, one-half of the contribution, because he is compulsorily insured, but once his income goes beyond £250 he has to pay both the employer's contribution as well as his own, and more than that, he loses the free medical attention that was formerly provided for him. I have pointed out previously that this type of person is, in equity, dealt with unfairly by the present law. I have always understood that the Treasury could, for the purposes of taxation, over-ride all other legal enactments that are passed by Parliament. I have never heard it argued that because a certain Act of Parliament had been passed the Treasury could not include in a Finance Bill anything that would violate its provisions.
§ Mr. CHAMBERLAIN indicated dissent.
§ Mr. DAVIES
I thought that was the interpretation to be placed on the right hon. Gentleman's speech, but whether I was right in assuming that or not I do hope that some day the Treasury will again look into this matter. Although it may appear a very small point, I am very much afraid that Members of Parliament are getting into the habit of thinking that 2s. 6d. or 10s. 6d. or £1 is nothing to some of these poor people. Even 3d. a week is a lot to some men in my own constituency, and other divisions as well. I have spoken on behalf of these people under another Measure before Parliament, and I do not think the statement of the right hon. Gentleman will be the last word said in connection with the position of voluntary contributors.
§ 3.56 p.m.
§ Mr. AMERY
This may, as the Chancellor has pointed out, be a very small matter so far as the amount of money concerned, but it does raise a rather important issue of principle, and that is the position in which all our social legislation leaves the small man who is his own employer, the small independent worker. 828 For many years past all our legislation has tended to provide for the employé. Everything is done for the employé, and the small man working on his own who, from the national point of view, is as desirable as the employé, comes off much worse. This is only another instance, a very small one, it may be, of the general differentiation against the small independent worker. I only got up to emphasise that point—not to press the Chancellor so much on this particular Clause as to ask him to keep the position of the small self-employed worker in mind in his future legislation.
§ Question, "That the Clause be read a Second time," put, and negatived.