NEW CLAUSE.— (Income tax relief in re spect of Territorial Army pay, allow ances, and grants.) (Hansard, 17 June 1936)

§ Major STOURTON
I beg to move, "That the Clause be read a Second time." 1063 The object of this Clause is to exempt from taxation the pay of all officers and other ranks of the Territorial Army received for training periods, except, of course, the pay of the permanent staff. The Committee are well aware that the Territorials are, in fact, civilians who carry out patriotic, essential and voluntary duties in defence of their country. It always strikes me, as being a case of base ingratitude on the part of the State to tax what, at any rate in the case of officers, is really a contribution towards expenses incurred upon national service. We already have a precedent in the case of Members of this House who receive £100 a year of their salary tax free, and this concession can be extended to the full £400 where Members can prove that they have, in fact, spent up to that amount in the discharge of their duties. Therefore, I am only asking on behalf of the Territorials what is already conceded to Members of Parliament
Anyone who has had any connection with the Territorial Army knows that at any rate in the case of officers of the higher ranks—captain and above—their essential expenses are considerably in excess of what they receive by way of pay. Perhaps I may cite one or two instances to show how the money is spent. Principally it is spent on travelling about the areas in which the units are situated. Then there is the cost of contributing to prizes for sports and shooting, as well as towards the cost of "socials," recruiting marches and so on. As things stand at present officers receive £7 10s. a year free of tax as a contribution towards the upkeep of their uniform. Other ranks receive no tax remission whatever, and as I understand it will have to pay Income Tax on the new marriage allowance which is to be conceded to them.
So far as I can make out the cost of granting the concession for which I ask would be a trifling matter from the Treasury point of view. There are at the present time 7,452 officers of the Territorial Army, and as the average period of training is only 14 days it requires no expert mathematician to work out that the sum involved would be a very small one. Exactly what it would be it is impossible to compute, because of the variations in assessment to tax in individual cases, but I think I am reason- 1064 ably correct in asserting that the cost of such a concession would not be in excess of £10,000, and probably less. The Committee will recollect that on Wednesday of last week the Chancellor declared that he was of a yielding nature. He is not in his place at the moment, but I hope that the Financial Secretary, acting on his behalf, will be able to prove that that statement was correct.

§ Brigadier-General Sir HENRY CROFT
I would urge my hon. and learned Friend to give sympathetic consideration to this proposal. I think the case has been very fairly stated by my hon. and gallant Friend, and I feel that the public would wish this Committee to do everything in their power to encourage what I claim to be one of the most deserving sections of the population of this country. I remember that after the War, when I was asked to reconstruct the battalion in my county, I had experiences such as the hon. and gallant Member has mentioned. As a commanding officer in a big county with detachments all over the place, I found at the end of the year that my pay was far more than eaten up in the endeavour to keep touch with those detachments, and by the various little expenses involved. That is the general case throughout the country. The Committee ought to realise that officers of the Territorial Army are not, as a rule, men of great means.
This would be a small concession, but it would be an indication that Parliament does appreciate the sacrifice and service given by this small number of persons, and I feel that it would be immensely appreciated throughout the whole of the Army. We read the other day a congratulatory speech from the Secretary of State for War—it was an alarming speech in some ways—in which he mentioned that 6,000 additional recruits had been found for the Territorial Army in the last month, but I read in to-day's papers the statement that 588,000 additional Italians had joined the Fascist Militia since May. It is because our forces are so small and that it is so essential to have trained men willing to give their services to the country in this way that I urge my hon. and learned Friend to consider this most reasonable proposal.

§ Mr. W. S. MORRISON
I have the utmost sympathy with the object sought by the two hon. and gallant Members who have addressed the Committee, and both my right hon. Friend and I would gladly take any step that was practicable in order to encourage the Territorial Force and those serving in it, but I doubt whether this proposal is the right way to do it. The present position of officers serving in the Force is that certain allowances are paid which are not taxed. The Secretary of State for War has recently announced increases in those allowances which will help the position of young men who, as has been said, have no great means. I think that is the way to encourage the object of the supporters of the proposed new Clause, and not by giving a relief from Income Tax which is granted to no other section of the community.

§ Major STOURTON
Members of Parliament.

§ Mr. MORRISON
No, Members of Parliament are on no different basis. They receive their salaries and they are allowed an amount to pay expenses. That is the general rule. It is true that, for the purposes of convenience in some cases, allowances are made in the way that hon. Gentlemen have said prevails, but that is not a breach in the ordinary Income Tax rule. The pay of a Territorial officer is pay; whether it is enough pay is another matter. If hon. Members wish to increase the pay that would be an entirely different question, but, being pay, it would be subject to Income Tax, which applies to all pay. I do not see that I am justified in accepting the proposed new Clause.
Apart from increased allowances, a flat rate deduction of £7 10s. for the upkeep of uniform is always made in assessing Territorial officers' pay. The general condition which I have pointed out applies equally to the pay of Territorial officers and to the pay of Members of Parliament, that is to say, if an officer can prove that he has incurred extra expenses within the meaning of the Income Tax rule, in order to do service and earn the pay, he is entitled, like any other subject, to have the excess allowed in his assessment. I do not think this particular matter can be considered a deterrent to recruiting. The amount of 1066 tax involved is very small, and I cannot perceive that any young man who had come to the conclusion that it was his duty to serve his country in this very necessary fashion would be deterred by the fact that the very small sums he received for pay would be assessed for Income Tax. For those reasons I feel that I cannot accept the proposed new Clause.

§ Mr. RADFORD
I was very disappointed when I heard the reply of the Financial Secretary to the Treasury. The Mover and Seconder of the proposed new Clause spoke as Territorial officers of experience, and testified that the pay and other allowances which they received had not been sufficient to pay their expenses, and that they have often been out-of-pocket in carrying out their duties as Territorial officers. I am also quite unable to see where the differentiation lies between the remuneration of Members of Parliament and the pay of Territorial officers.

§ Mr. W. S. MORRISON
There is none.

§ Mr. RADFORD
Then that gives additional support to our request on behalf of Territorial officers. Would the Financial Secretary consult with his right hon. Friend the Chancellor of the Exchequer with a view to allowing these officers the same right as is possessed by Members of Parliament? A certain allowance is given to us above our salary, calculated as the expenses we have incurred. We have to satisfy the Income Tax authorities that our out-of-pocket expenses exceeded the figure which is allowed. If the Territorial officers had the same right, when their expenses had wiped out all their pay and allowances the concession asked for by my hon. Friend would make everything satisfactory.