§ For the purposes of assessment of Income Tax and Surtax, the first six hundred pounds of the salary of a Minister of the Crown who is also a Member of the House of Commons, shall be deemed to be salary on account of services rendered as a Member of Parliament. —[Sir I. Albery.]
§ Brought up, and read the First time.
§ 9.7 P.m.
§ Sir I. Albery
I beg to move, "That the Clause be read a Second time."
This is, in a way, a rather interesting Clause. During the discussion of this Bill we have considered questions of evasion of taxation, and there has been agreement on all sides of the Committee that we should do what we can to prevent people avoiding their just dues as taxpayers by quibbling or trying to get round the letter and the spirit of the law. This Clause presents another side of the picture. I 1826 have put my name to it, not merely because I desire the Chancellor of the Exchequer and his colleagues to be dealt with fairly, but more because when the right hon. Gentleman comes to reply he will very likely say that one of his reasons for not accepting the proposed new Clause is that there are many other cases that are unjustly dealt with, and that he would like to deal with them all at the same time. My view is that nothing would give the other people more encouragement than his acceptance of this Clause. If he puts right the wrong from which he and his colleagues are suffering, we can claim that the other people who are suffering from injustices have every prospect of theirs being put right in the near future. Let me now explain in a little more detail what the injustice is.
It appears that when a Member of Parliament is promoted to be a Minister of the Crown, perhaps as a junior Minister or a junior Whip, he becomes entitled, from a salary of £600 a year, to a salary 1827 of, say, £1,000 a year, but from that moment he no longer has the right to claim any relief on account of his expenses as a Member of Parliament. I understand that the argument under Income Tax law is that you cannot claim relief upon any remuneration which you receive on account of a different service. When that Member becomes a Minister he receives his salary as a Minister but nothing as a Member of Parliament, and he is therefore no longer entitled to claim on account of his expenses as a Member of Parliament. I do not think that that result could have been the intention of whoever framed those provisions. It seems clear that a junior Minister will have, in the main, exactly the same expenses as he had before he was made a junior Minister, and the effect under the present arrangement is that after he becomes a junior Minister he gets no increase of salary at all, in addition to which he may have to give up his employment, if he has private employment, and to devote the whole of his time in the office of the Minister. Financially, he finds himself no better off, and possibly worse off, than he was as a Member of Parliament.
The Treasury or the Income Tax officials have taken that view for some time past. I am bound to say that it is their duty to exact from the taxpayer as much taxation as the law will enable them to exact, but that does not seem very different from the position of the taxpayer who avoids as much taxation as he can as long as he remains within the law. For that reason I consider the present moment an opportune one to raise this point. The Chancellor of the Exchequer will say, of course—he has already said it—that the present is not a good moment to make any tax concession, but this is a very small concession. On the other hand, it is a good moment to raise it. The letter of the law is that when a Member of Parliament gets to ministerial rank he should be deprived of his just relief. Legally, that is entirely in order, but, in my view, it is entirely against all views of justice and equity, and is against the spirit of the law.
§ .9.14 p.m.
§ Sir J. Simon
My hon. Friend has raised an interesting point, which arouses, on the face of it, a sympathetic feeling in certain breasts. I think his account of the situation is accurate. J admit, as 1828 one who has been a Minister of the Crown in various offices, that it bears harshly in certain cases. Income Tax law is perfectly clear. It is that the holder of any public office who is paid a salary because he holds that office is entitled, for the purposes of Income Tax, to deduct only those expenses which he incurs wholly, exclusively and necessarily in the performance of the duties of that office. That is the ordinary law which applies to every one, what-ever his office is. It follows that a Member of Parliament who receives k£600 a year is entitled to deduct from that i£600, for purposes of Income Tax, expenses that he wholly, exclusively and necessarily incurs in the performance of his duties as a Member of Parliament. As many hon. Members know, £100 is allowed as a matter of course, and, if any Member of Parliament can prove, as many can, that the expenses which are wholly, exclusively and necessarily incurred by him in the performance of his duties as a Member of Parliament amount to more than that, he can make a further deduction.
Supposing, however, that a Member of the House becomes a Minister of the Crown, he becomes the holder of an office for which he receives a salary, and it might be supposed that thereupon he. would be entitled to deduct from his salary the same expenses which he had deducted when he was a Member of Parliament. But the law answers, "Ah, but those expenses which you want to deduct are really expenses which you incur in the performance of your duties as a Member of Parliament. The expenses which you incur in discharging your duties as a Minister will be at any rate almost entirely met out of public funds as part of the expenses of the office, and, therefore, you are no longer entitled to deduct anything at all; you must suffer Income Tax on your salary as a Minister without any diminution or deduction whatever." And that is what happens.
It is not disputed, of course, that a junior Minister receiving perhaps £1,000 a year has to pay Income Tax on that £1,000 without any deduction at all, as a result of an accurate and perhaps rather refined application of the Income Tax law; but although he may incur expenses, as, for instance, for a private secretary to deal with his constituency correspondence and so on. he can no longer say that he is 1829 incurring those expenses in the discharge of his duties when holding the office of Minister, because they are really expenses incurred as a Member of Parliament, and he has become an unpaid Member of Parliament. That is how the matter stands. It is due, first, to the fact that that is the law; and, secondly, to decisions which were reached as long ago as 1911, when the position was expressed to be that there should be a payment to each Member of Parliament of, at that time, £400 a year, excluding any Member who was for the time being in receipt of the salary of an office under the Crown. What I have said will probably cause a number of hon. Members to feel that this is rather an artificial distinction and a hard rule, and it is true that some Ministers feel that they have some ground of complaint about it. But unquestionably it is the right application of Income Tax law.
I am now asked whether I am prepared to accept this agreeable proposal to change the rule for the benefit of Ministers present and to come. I cannot do that, and I cannot do it for, among other things, this definite reason. The Committee may remember that last year a Bill was carried through Parliament called the Ministers of the Crown Bill. Indeed, I was myself responsible for piloting it through the House of Commons. We then rearranged the salaries of Ministers, putting them on a more orderly level, and in some cases raising the salaries; and one of the reasons given at that time on behalf of the Government—I gave it myself—was that it was thought that a certain readjustment of salaries, involving raising them in some cases, was justified, among other grounds, on the ground that, when a man became a Minister, he had to pay Income Tax on the whole of his Ministerial salary, and was not permitted to make any deduction on account of expenses incurred. I could not offer that argument to the House of Commons on 28th April, 1937, and now, at the present date, say that, the salaries having been altered, I think it is time to allow this deduction for expenses.
§ Sir J. Simon
The hon. Gentleman is very encouraging, but in my view this is the thing that we cannot do. Whether some day, when we are dealing with the whole subject of a general revision of 1830 the Income Tax law, this is a case which might be reconsidered, I do not know, though frankly I think it operates a little harshly. When a man becomes a Minister, his correspondence with his constituents and so on does not cease, nor does he in practice, as far as my experience goes, do all that work at the expense of the State; and I imagine that a good many Ministers find that the expenses connected with such work are not in fact met out of the salary or out of the provision which is very properly made in the Departments for official purposes. However, I am quite clear that I could riot accept this proposed new Clause, and, therefore, more in sorrow than in gladness, I must tender the Committee my respectful advice that they should reject my hon. Friend's proposal.
§ 9.22 p.m.
§ Mr. Pethick-Lawrence
This matter has been brought before me on more than one occasion and in varying circumstances, and I think that, at the first blush, I should have been inclined to agree with the hon. Member for Gravesend (Sir I. Albery), because, as the Chancellor has explained, this matter really turns on a technicality. If Parliament, when it gave salaries to Members of the House of Commons, had said that a Member of the House of Commons should receive a salary, and that the salaries of Ministers of the Crown should be diminished, if they were Members of the House of Commons, by the amount of their House of Commons salary, then, I think, they would have been entitled to make the same deduction as a Member of the House of Commons does. But that, of course, was not the case. It was decided at that time that persons who at the same time were Members of the House of Commons and Members of the Government should not receive their House of Commons salary, and therefore, they are not in the position of having any salary from which they can correctly deduct expenses. That, as the Chancellor has explained, is the technical position.
At that time some Members of the Government were only in receipt of £700 a year, and, when a man was appointed to such an office and only held it for a certain number of months, it was quite true that, in view of certain expenses which attached to that office, he might in fact be really worse off through holding 1831 the office for some six or seven months than he was as a Member of Parliament in receipt of £400 a year from which he could deduct expenses. Had that been the position to-day, there would have been a great deal to be said for supporting the hon. Gentleman's proposal, but, in view of the fact that salaries have been very appreciably increased, in the case of the lowest-paid offices particularly, I do not think that equity any more than technical legality would support the hon. Gentleman's claim, and for these reasons I agree with the Chancellor of the Exchequer.
§ 9.25 p.m.
§ Mr. Maitland
I can well understand that it is rather embarrassing for an occupant of the Front Bench to deal with a matter which has some regard to his personal position, but I am tempted to support my hon. Friend on the ground that this is the kind of case which is very often advanced by the Inland Revenue authorities in other matters and, whilst the right hon. Gentleman described this as an accurate but refined interpretation of the law as it stood, I think the House should be very careful that accurate but refined interpretations should not be responsible for the infliction of hardships upon people who are genuinely desirous of paying their proper proportion of the contributions due from them to the State. I support the Clause because it is a definite and concrete example of the kind of case which often results in a taxpayer in another capacity having to pay a certain amount of taxation which on all equitable grounds he should not be called upon to pay. I hope, although the Chancellor of the Exchequer cannot see his way to accept the Clause on this occasion, that he will be assured that there are others besides the hon. Member for Gravesend (Sir I. Albery) who recognise that here is a definite case where the Treasury is receiving in taxes more than it is equitably entitled to receive. I should be very glad if this might be taken as an example of the kind of case where relief may be given in a way which may not be accurate or refined but may be more equitable.
§ 9.28 p.m.
§ Mr. R. C. Morrison
I should like to draw attention to a small point which seems to me to be a flaw in the technical argument which the Chancellor of the Ex 1832 chequer developed, and which he was careful to say was not his argument but that of the Department. It was that when a Member of Parliament becomes a Minister of the Crown he becomes automatically an unpaid Member of Parliament and the whole of his salary is liable to tax. It seems to me that not enough attention was paid to the fact that a Member of Parliament cannot become a Minister of the Crown without being a Member of Parliament and cannot remain a Minister of the Crown without remaining a Member of Parliament.
§ 9.29 p.m.
§ Sir J. Simon
I think the answer to that difficulty is this. You are permitted to deduct expenses wholly, exclusively and necessarily incurred in the performance of the office for which you are receiving a salary. If you are not receiving a salary, there is nothing from which to make deductions. The moment a Member of Parliament becomes a Minister it is true that he remains a Member of Parliament but he ceases to be a Member of Parliament in receipt of a salary and, unless he can show that the expenses that he wants to deduct are expenses due to discharging his office for example as Chancellor of the Exchequer, it is nothing to the point to say, "They are expenses that I have to pay because I am discharging my duty as a Member of Parliament." It is fine-spun but it is a well understood distinction which is sometimes quite important. Incidentally, if the Clause were accepted, if a Minister happened to be in the House of Lords he would be in quite a different position from a Minister in this House.
§ 9.3o p.m.
Mr. J. J. Davidson
I think we can all understand the difficult position in which the Chancellor of the Exchequer is placed. I think he is developing a habit of dealign more with only one side of a particular question and neglecting the other side. True argument cannot really be pressed unless both sides are thoroughly examined. He said that undoubtedly, from a business point of view, it placed a hardship upon Under-Secretaries. It would be much more interesting if we could get one of the Under-Secretaries who have obtained the plums of office to explain some of the general benefits that accrue. There are many things apart from the actual salary. I understand, merely from listening to Debates in the House, that 1833 hostesses seek their company. I understand that week-end parties are given to meet prominent Members of the Government who may be suffering this pecuniary hardship. We have heard of the weekend parties at Cliveden to budding young men who have attained a particular position. I think the right hon. Gentleman could have given some very interesting information. He is an experienced campaigner in that respect, and, if it was possible, I am sure that some of the Under-Secretaries would have given perhaps a more modern version of those benefits.
Then we should keep in mind the difficulties of those who have to work out Income Tax returns. It would be placing a great burden on them to have to deal with the ever-changing Front Bench. Generally speaking, with the benefits to which I have referred and with the extra work that it would place upon the shoulders of an already overworked community, the whole thing would not be worth the candle, as we say in Scotland. I think I can make this offer with safety. I could assure the right hon. Gentleman of a quid pro quo. If he is prepared to withdraw the tax from the Co-operative movement, I am sure the Opposition will support this Clause.
§ 9.35 p.m.
§ Mr. Garro Jones
No Under-Secretary who is suffering such hardship in existing circumstances has ventured to raise his voice in support of this proposal. That is a circumstance which reveals either considerable poverty of spirit or, at this hour, fulness of appetite. However, I hope to be able to say something in their place. I propose to address a few consolatory remarks to the hon. Member for Gravesend (Sir I. Albery) in view of the fact that his proposal has been turned down. The Chancellor attempted to dismiss it with that air of finality which is one of his forensic methods, but I think we should be able to make out a case that a greater part of the expenses which fall on a Member of Parliament in that capacity ought to be deductible from his Income Tax assessment in his capacity as a Minister.
The first expense of a Member of Parliament is the private office which he keeps for his constituency correspondence and other duties; the second is the secretary, or part-time secretary; the third is 1834 postages and stationery; and the fourth is the extra domicile. It appears to me that Ministers fall into two classes: those whose duties are so important that they are provided with offices and secretarial assistance by the State, and those whose duties are not so important. I cannot say into which class the Minister for the Co-ordination of Defence falls. I am told that he has one typist. However hard it may be on the Under-Secretaries who are not here to-night in not being provided with these amenities, there can be no hardship on the Ministers who are. I have had the honour of serving in various Government. Departments in days gone by, and I never recollect that any Minister with whom I came into contact ever went to the elaborate trouble of separating his postages for constituency correspondence and those required for his official duties. It was never expected that they should, and in fact it wouid not be worth while. The same thing applies in regard to stationery. I am told that it is the rule that Members cannot use official stationery in their private offices without buying it. In the House they can get it free, but if they walk round to Abingdon Street to do their correspondence, they have to pay for it. I think that no Minister who is provided with an office ever pays for his stationery, and it would be foolish to expect that he should.
The largest expense incurred is that of maintaining two domiciles. If the Under-Secretaries showed a little less of that poverty of spirit they would be able to make out a case with the Inland Revenue that maintenance of two domiciles is just as important for a Minister of the Crown as a private Member. I have yet to learn that the tenure of office of a Member of the present Government is so secure that he would be justified in giving up his ordinary residence. Therefore, I put it forward as the suggestion to the Under-Secretaries that they should return to the charge against the Board of Inland Revenue.
§ 9.39 P.m.
§ Sir I. Albery
I regret that I cannot withdraw the Clause. I was disappointed that the Chancellor and the right hon. Gentleman on the Opposition Front Bench said they could not support this Clause because certain events had somewhat improved the emoluments of Ministers. That 1835 was not the spirit in which the Clause was moved. It was mainly intended to show one of the injustices and inequalities which are occasionally inflicted on the taxpayer. Neither the Chancellor nor the right hon. Gentleman on the Opposition Front Bench has said anything to assure me that I was wrong in assuming that these injustices do exist.
§ 9.40 p.m.
§ Mr. Benson
I am very glad we have had the second explanation from the hon. Member as to what was behind this Clause. When it was put down I think we on this side all assumed that the hon. Member felt deeply the grievances of Ministers of the Crown. We find, however, from his second explanation, that, so far from that being the object, it is merely one more step in the continuous battle that hon. Gentlemen opposite are fighting against the Board of Inland Revenue, and part of the attempt to establish that the interpretation of Income Tax law by the board is harsh and unconscionable. In view of the motives behind this Clause, I, personally, am much more inclined to oppose it than I was before I knew what the motives were.
§ Question, "That the Clause be read a Second time," put, and negatived.