INCOME Tax.

HC Deb 31 July 1940 vol 363 cc1272-91

Ninth Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

4.13 p.m.

Mr. Pethick-Lawrence

When we were discussing the Budget Resolutions generally I put forward certain suggestions with regard to Income Tax. I did not press the right hon. Gentleman on that occasion to look into the matter and I do not press him to-day, because I know he has not had time to do so, but I wish to emphasise the points which I made lest they should escape attention. I pointed out that certain classes of people escaped paying Income Tax because it never occurred to anybody that they were likely to be liable to it. For instance, there may be people in receipt of quite substantial incomes, living in very small houses who, thereby, escape the notice of the Income Tax collector. I suggested that something might be done to look after people in that class.

The other class of people to which I referred were those who already paid Income Tax, but who, through their own inadvertence—I will not put it higher than that—failed to pay Income Tax on certain small amounts which they received. The most striking illustration is probably that of the person who has a few hundred pounds in the bank and who forgets to include the bank interest received on the deposit, in the amount on which tax has to be paid. I suggested there were two methods of getting this taxation. One was to put in all declarations of income the specific question, "Have you, during the period under review, received any money from your bank in the way of interest on deposits?" Instruction should be given that the question must be answered either "yes" or "no." If the taxpayer, therefore, had been inadvertent in the matter, he would be prepared to answer that question. The other way, which applies to a number of other things, is to insist on the disclosure on the part of the person who pays the money. That proposal has been made before and turned down. It may be that in ordinary times people who pay small sums do not want to be compelled to make a return. There is no reason why banks should not disclose the amount of money paid to customers on their deposits. They would only be put in the position of a large number of people like mortgagors, and I do not see any great difficulty in it. I shall be glad to know whether the right hon. Gentleman has considered either of these suggestions.

4.16 p.m.

Sir Frank Sanderson (Ealing)

While I have no intention of raising my voice against the very high rate of Income Tax and Surtax, I feel that not only the House but the country should appreciate the magnitude of the direct taxation which my right hon. Friend, quite rightly, has found it necessary to impose upon the country. I would like to give an example of the magnitude of this taxation. Less than two years ago the House passed a Vote in favour of raising the salary of the Prime Minister to £10,000 a year. It was raised to that amount because it was generally accepted that the Prime Minister could not carry out the financial responsibilities which devolved upon his office for a less figure. I wonder how many hon. Members appreciate that taxation on £10,000 of earned income leaves the Prime Minister with only £3,951. That is a very small amount for one who holds such a high office and has to maintain the dignity and financial responsibilities of that office. There is another figure which is significant. In my right hon. Friend's speech on the Budget he referred to the fact that he will take no less than 18s. in the pound on incomes in excess of £20,000 per annum. I do not think it is fully appreciated that when a person with an income of £20,000 has paid Income Tax and Surtax, he is left with only £5,389; so that, in point of fact, one pays 18s, in the pound after reaching a net income of £5,389. That puts a very different complexion on the figure of £20,000 mentioned by the Chancellor of the Exchequer.

I raise these points because I am one of those who profoundly believe that if we have not already arrived at, we are nearing the point of diminishing returns. It is not necessary for me to remind hon. Members that to-day we see, as we shall continue to see, the closing-down of houses and estates throughout the country. We see, too, the closing down of houses in London. Owners of property in London are finding it necessary to take the furniture out of their houses so that they shall not have to pay rates upon the property. That means that the Chancellor will lose a considerable income which he would normally receive and that local authorities will find it increasingly difficult to raise the revenue that they require to meet their obligations. I feel it is necessary that someone should point out to the country what the weight of direct taxation is.

On more than one occasion I have asked the Chancellor to make a small concession. As the Budgets pass—and we have had four in 14 months—the concession becomes of increasing interest to a greater number of taxpayers. The process of arriving at the figure upon which one has to pay tax, be it great or small, is so involved and complex that it is necessary to appoint an accountant or solicitor in order to arrive at the amount which is due to the Chancellor. That may appear to be a small item. but accountancy charges do not grow less as the years go on. I would ask my right hon. Friend whether he can see his way to meet an increasing demand that such charges should be allowed to be offset against income. May I prevail upon my right hon. Friend to give this matter his consideration?

4.24 p.m.

Sir G. Davies

This is not an inappropriate moment to mention a point which has been before my right hon. Friend but has not been alluded to in the Debates. The right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) referred to the position of the lesser Income Tax payers and my hon. Friend the Member for Ealing {Sir F. Sanderson) spoke of those on the higher scale, but the point I have to bring forward touches the whole scale of Income Tax payers. There are patriotic people who have invested part of their estates in foreign countries and have thus assisted the expansion of foreign trade. At a time like this they are hit by double taxation. Unlike the quality of mercy, they are twice cursed, once, as in the case of those who have invested in the United States, by the increasing war effort in that country, and then by the taxation which they have to face at home. I am not making a plea that the enormous taxation, especially on the higher rates of income, should be reduced. We all have to face the present effort, but it comes very hard on a considerable number of people that they should have to pay twice over, at constantly increasing rates of tax, on their incomes.

An arrangement has been made with the Dominions whereby substantial reductions can be made, but when it comes to foreign countries it is a matter for diplomatic channels and of getting mutual agreement. The nationals of other countries with incomes in this country may have to pay double taxation in the same way. The fact remains that there are certain people who are faced with a much heavier burden on their incomes than anything envisaged by the great burdens imposed in the Budget. I would ask my right hon. Friend whether he has that matter in the forefront of his mind and is taking definite steps to see whether some agreement, particularly with the United States, cannot be reached whereby the burden can be equitably reduced or spread so that some people are not financing huge armaments in two quarters of the globe simultaneously. If that could be done, we should arrive at a position which is much fairer in principle than the present situation.

4.27 p.m.

Sir Robert Tasker (Holborn)

I wish again to plead for a simplification of the Income Tax and to suggest that it should be levied upon all revenue. At the present moment a distinction is made between one class of investment and another. In one form taxation is not deducted at source. If you happen to have your investment in land and property, it is deducted at source, If an individual enjoys a small income from ground rent, therefore, he has to claim back from the Treasury. If all Income Tax were deducted at the source it would lighten the burden of the officials of the Inland Revenue. With regard to the point of the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) there is a space on the Income Tax form in which the taxpayer has to declare any interest which he receives from a bank on money on deposit.

With reference to the question of the charge for accountancy which was raised by the hon. Member for Ealing (Sir F. Sanderson), most of us have to go to chartered accountants to try and unravel mysteries which have been created by this House and have been brought about by alterations and amendments to the original form of Income Tax when proposed. The concessions which have been given by various Chancellors have brought about a confused state of affairs. I am bold enough to say that I do not believe any member of the public, any individual in the Treasury, or any official in the Inland Revenue really knows what is, exactly, the law relating to Income Tax. That can be proved by anybody who goes to chartered accountants. They ask you this, that and the other; you have to confess that you do not know. It resolves itself into this, that the chartered accountants and the officials of the Inland Revenue make the best of a bad job and come to an agreement and the taxpayer pays. That is the position to-day, and it is one of the reasons why some attempt should be made to simplify methods of calculation and collection of Income Tax.

4.31 p.m.

Sir K. Wood

I am very much indebted to my hon. Friends for the suggestions which they have made to me. So far as the points which my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) mentioned to-day were made by him in his comments upon the Budget speech, we have already made a note of his suggestions. They will be examined in the Department, and I am very much indebted to him for putting them forward. I think one of his suggestions has already been met, because there is a space on the Income Tax assessment form asking for a statement of interest received, including any interest from bank deposits. My right hon. Friend suggested that there should be a specific question regarding interest upon bank deposits, and that we will examine. I am only too happy to consider any suggestions which will be helpful to me at the present time. They will be examined in that spirit. I also sympathise with the observations made by my hon. Friend the Member for Ealing (Sir F. Sanderson) upon the magnitude of our present taxation. I share many of the observations which he made concerning it, and he will remember that in my Budget speech I did make reference to the fact that we were approaching in certain respects the limit of taxation, although I added that I could not say that it has yet been reached.

I do appreciate that in very many quarters—not only among the rich: chiefly among people of smaller means and of the middle classes—taxation bears very hardly at the present time, and that is one of the reasons why I came to the opinion that whatever may be contemplated in the future it was necessary at the present time to give people time to look round and to adjust their affairs to the present scale of taxation, and I have had increasing evidence of the desirability of that course in the communications which I have received in the last few days. My hon. Friend asked me to make a small concession—another of those small concessions—as regards the charges which people have to pay to accountants and solicitors who are employed, perhaps of necessity to-day, to prepare accounts for Income Tax purposes, but I am afraid that I am not in a position to do anything in that direction at the present time, although I appreciate the arguments which were put forward by my hon. Friend.

Mr. Ellis Smith (Stoke)

Before the Chancellor leaves the speech of the hon. Member for Ealing (Sir F. Sanderson), may I ask whether he was stating a fact when he said that the result of the new taxation is that the Prime Minister's salary is reduced from £10,000 to £3,000?

Sir K. Wood

If my hon. Friend will look at the Supplementary Financial Statement, Appendix D, on page 13, he will find that on an income of £10,000 which is all earned income the deductions for Income Tax and Surtax amount to more than £6,000, so that I think my hon. Friend was pretty accurate in the figures he gave.

Sir F. Sanderson

Is my right hon. Friend aware that if the Prime Minister is in fact to have a salary of £10,000 a year this House will have to vote him a sum of no less than £66,110? It would need £66,110 to leave him with £10,000 a year.

Sir K. Wood

That is an interesting sidelight on the situation. In answer to what my hon. and gallant Friend the Member for Yeovil (Sir G. Davies) said upon the subject of double taxation, I have examined quite recently certain cases affected by taxation here and taxation in other countries, and undoubtedly considerable hardship does flow from the effects of double taxation, but I do not see any effective remedy short of a mutual arrangement between the countries concerned. In the one case which I examined it appeared to me that there was really no appropriate way of dealing with the situation at the present time.

Sir G. Davies

Is there any prospect of the investigation being pursued?

Sir K. Wood

It is a difficult time to do it now. I also appreciate what my hon. Friend the Member for Holborn (Sir R. Tasker) said. He cast some doubt on whether members of the Inland Revenue staff really understood the law dealing with Income Tax, but what they may not know and understand is, of course, made up for by the knowledge of the Law Officers of the Crown, and so we are amply fortified in that respect. I also appreciate his suggestion that there should be a simplification of the law and the practice of Income Tax, but I do not feel that that is a task which I can undertake at this moment. It may be necessary to do it as time goes on, but I am afraid he cannot expect me to recast the system just now. It would he very difficult to do that in the middle of a war.

Sir F. Sanderson

Will my right hon. Friend give me a promise that he will look into the question which I have raised? After all, it is to the interest of my right hon. Friend that all returns should be strictly accurate, and that can be better secured in most cases by employing an accountant. A company is able to charge the expenses of the accountants among their other expenses; it is only the individual taxpayer who employs an accountant who is not allowed to set off that charge. This is of particular importance in the case of the small man. The man who has an income of £150 to £500 a year will find it essential to take advice in computing the amount upon which he has to pay tax, and I think his expenses in that respect ought to be a charge against the net income. In many cases to-day my right hon. Friend is taking not half but 75 per cent. of the income of—

Mr. Speaker

The hon. Member cannot speak again. I thought he was only asking a question.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Tenth Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

4.39 p.m.

Mr. Benson

On an earlier Resolution I said that I thought the Chancellor was playing with direct taxation, and I feel that his proposals in this Resolution and the next one dealing with allowances show it clearly. I am fully aware that there is not a great deal more in bulk to be got out of Surtax payers. After Income Tax and Surtax have been paid, the amount of bulk income left in the hands of the Surtax payers of this country is in the neighbourhood of £270,000,000. Obviously we cannot get more than £270,000,000 out of them, but we can still take a good deal more of that £270,000,000 than we are doing. Upon an earlier Resolution the hon. Member for Ealing (Sir F. Sanderson) mentioned that a number of Surtax payers were having to give up their country houses and their large town houses. Quite frankly, I do not see that that is any evil from a social standpoint. I see no particular reason why a small group of individuals should be allowed to live nowadays in almost feudal pomp in the country. I am much more concerned about people who cannot get houses at all than those who are having to give up their large country mansions.

Taxation, and the inflation that is being imposed, will bear very much more hardly upon those individuals who cannot get houses at all, the working class and the lower middle class, than any taxation which the Chancellor is imposing upon the Surtax payer. The Surtax is not yet up to an adequate amount, and that observation applies also to every other range of Income Tax. We are spending on our war effort more than half the total national income, but it is not until a man has an income of £6,000 that direct taxation takes more than half his total income. On page 16 of the Supplementary Financial Statement I find that in the case of a married man with two children who has an earned income of £6,000 the total taxation imposed is £3,031. If we are to meet the cost of this war out of taxation even to a reasonable extent, if we are to adopt sound finance and not inflationary finance, obviously taxation will have to reach the figure of 10s. in the £ of a man's income at a great deal lower income than £6,000. I know very well that the Chancellor cannot do very much this year with Surtax, cannot make a tremendous jump at the £2,000 level and that we shall have to wait until next year, when the incomes of £1,500 are brought in. But I want him to realise that if we are spending half the national income upon war effort people with far smaller incomes than £6,000 will have to contribute at least half of their incomes in direct taxation. On the next Resolution I shall have something to say about the lower ranges of tax. It is no use fiddling with taxation, no use meeting a third or a quarter only of our expenditure out of taxation, as is the case at the present time. If we are to come through this war with an industrial and a social system which will stand the post-war strain we must have sound orthodox finance. Such finance involves imposing high taxation and we are not imposing it yet. The Surtax proposed this year is entirely inadequate to meet the situation.

4.44 p.m.

Sir K. Wood

I do not think I need make any long answer to the hon. Member for Chesterfield (Mr. Benson). I regard his speech as rather a means of relieving his mind on the situation as he sees it, and I have a note of what he has said.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Eleventh Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

4.45 p.m.

Mr. Benson

Now we come to the lower ranges of taxation. I am well aware that the Chancellor cannot increase his standard rate of Income Tax beyond a certain limit, because the standard rate is only part and parcel of direct taxation and is limited by the maximum incidence of the Surtax. If we are to bring adequate taxation on to the lower-scale incomes it can be done only by one method, and that is slashing the personal allowances, for these are the basis on which our graduation is built. just as there is inadequate taxation in the higher ranges so there is, I feel, grossly inadequate taxation in the lower ranges. This observation applies to practically all the ranges. We have to pay for this year's war this year. Whoever the Chancellor may be, he cannot make posterity pay. What we spend this year we must pay for this year. We cannot fight this year's war by next year's income; and when the Chancellor fails to impose sufficient taxation it does not mean that any less burden is imposed upon the community.

The only proposal which the Chancellor of the Exchequer has made for imposing direct taxation in the lower ranges, apart from the increase of 1s., is a very fiddling modification in the personal allowance. He gave an example in his Budget speech of the effect of the new taxation upon a married person with two children, a normal family, with an income of £400 a year. He said that he was increasing the taxation by some £5 to £15 16s. 8d. I say very definitely that a direct Income Tax of £15 16s. 8d. on that range of income is entirely inadequate to the present financial situation. It is not that the Chancellor is helping the £400 a year man to escape his burden, because if the Chancellor does not impose it, increased prices and inflation will. The Chancellor suggested that he had imposed all that was reasonably necessary; let us compare what he is doing with what was done during the last war. No one will complain that we were overtaxed during the last war. Every financial authority that I have ever read admits that we played with taxation for the first two years of that war.

Mr. Pickthorn (Cambridge University)

Fiddled with it, to coin a phrase.

Mr. Benson

That is my own phrase. Financial authorities do not use language like that. What did the poor man, earning £400 a year, pay in 1915? £25 4s., as against £15 16s. 8d. In 1916, the £400-a-year man paid £31 10s.; in other words, twice as much as the Chancellor proposes to take from him this year, notwithstanding that the war burden then was not a fraction of the burden that we have to bear. We know what happened as a result of the entirely inadequate financial steps which were taken during the last war.

Mr. Stokes (Ipswich)

. Would my hon. Friend say whether the relative value of money was the same?

Mr. Benson

I am afraid that I cannot say off-hand what was the relative increase in prices in 1916 compared with what it is now, but there had been a very sharp increase. The point is that we have a far greater financial burden to meet, and that we are not meeting it. The interruption of my hon. Friend suggests that he thinks what a very large number of people think, that if you do not impose taxation you lighten the burden of the taxpayer, but that is not true.

Mr. Stokes

I never said any such thing.

Mr. Benson

I did not say that my hon. Friend did say it, but that his interruption suggested that he thought it.

Mr. Stokes

I do not think it.

Mr. Benson

You do not lighten the burden by holding your hand as a Chancellor, because the burden has to be met. I am urging that the burden shall be met in a rational and reasonable way and not by inflation. Therefore, comparing the direct taxation which was imposed in 1915 and in 1916, I say that the taxation that is imposed now does not meet the burden in a reasonable way. The claim of the Chancellor of the Exchequer that it does so is, therefore, entirely unfounded.

4.50 p.m.

Sir K. Wood

I have taken note of what the hon. Gentleman has said. He has made a valuable contribution to the Debate. The only observation I would add is in regard to the £400-a-year income to which he referred. The hon. Member will find that the charge, on the pre-war basis, was only £1 135. 4d. Under the proposed charge, in this Budget which I have introduced, that taxpayer's liability has now risen to £15 16s. 8d. You must give people time to look round.

Mr. Benson

Can the right hon. Gentleman guarantee that the inflationary rise in prices will give people time to look round?

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Twelfth Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

4.52 p.m.

Mr. Pethick-Lawrence

If I may judge by my post bag and by comments which have been made to me by several of my colleagues in this House, I have no need to depart from the view which I expressed when this matter was before us last, which is that the innovation of the Chancellor of the Exchequer in this respect is genuinely welcomed by the great mass of the people concerned. I am very glad that the Chancellor has been able in this way to achieve a considerable reform which is not only not objected to by employers and employed but is welcomed in the main by them as having an advantage over the present method.

There are three small points about which I should like to ask questions and the first is one to which I made reference last week when the matter was before us. I am informed that, under the present voluntary scheme of collection of Income Tax by employers, there is a practice of charging a small commission, which is deducted from the amount which the inland Revenue are otherwise entitled to receive. I should like to know whether that statement is correct and, if it is, what the Chancellor's decision is in regard to the new situation, in which the collection of Income Tax will be compulsory in future instead of voluntary. Perhaps the right hon. Gentleman will be able to reply to the point on this occasion.

The second question on which I should like an assurance—although I think know the answer myself, but it is just as well that the right hon. Gentleman should make a statement for the purpose of informing the public—relates to the possibility that the new method of collection will allow certain employers to pry into the affairs of their employés. I do not think many large employers have anything to gain by such a course, but if the new proposals have the effect of enabling small employers to pry into the family circumstances of their employés, there would be disadvantages. I have had letters from several people who fear that that might be the result, and I hope that the Chancellor will be able to allay any fears in that direction.

The third matter is one upon which I believe the Chancellor has already received a letter. If he has not himself received it, it has, I understand, reached his Department. It is in regard to the situation which arises when an employer goes bankrupt. I believe that this matter was raised last week, and that the Chancellor of the Exchequer pointed out that it would not result in loss to the employé, who would not be called upon, in any case, to make his contribution a second time. I do not know whether there is any possibility of dispute between employer and employé in any form, in which the employé would be unable to prove that his contribution had been deducted. I do not ask for an answer from the right hon. Gentleman on this point to-day, but perhaps he will make certain that there is no risk of an employé being placed in that position.

A question on which I hope the right hon. Gentleman will be able to answer to-day is the suggestion that was contained in the letter, which I understand has been sent. The suggestion is that an employer, instead of waiting for specific dates on which to pay to the Inland Revenue the whole of the money collected from his employés—on the last occasion the Chancellor said, I think, that the payments would be once a month—should, say, on Friday morning, or whenever his pay-day is, when he draws his money from the bank in order to pay the employés, automatically credit at the bank the part which is being withheld from the employés as collection of the taxation. It is suggested that this money should be transferred to a separate account in the bank.

I do not know whether that would be a complicated or troublesome thing to arrange; if so, no doubt it cannot be done. Offhand, it strikes me as a very simple matter, and I hope that the right hon. Gentleman will consider it and decide whether it is a feasible way of doing things. I believe that the person who wrote to the Chancellor of the Exchequer had the idea that the local branch of X Bank should have a definite "omnibus account," which would be a Treasury account, into which those sums would be paid regularly each week. I hope that the suggestion will be considered. If the Chancellor of the Exchequer is in a position to give an answer, I hope he will do so, and will say whether he considers there is anything in that proposal.

4.58 p.m.

Sir K. Wood

The right hon. Gentleman has raised interesting points, as he always does, and I think they will be very helpful to us. At the present moment, I am very concerned about one of them in particular. Like him, I have received a very large number of communications about the new method of collection, and I think that the proposal has been generally welcomed. It is in the interests of employés and will have considerable advantages. In regard to the commission, it is true that commission was paid under the voluntary scheme, but none will be paid under any compulsory scheme. It is not suggested that there should be any form of commission paid under our present proposal.

I welcome the opportunity to say a word as to the risk of employers prying into the private affairs of their employés. I do not think that there is any possibility of that happening, for reasons which I have given. We have to remember that collection is confined, in the first place, simply to payments arising under Schedule E, and those are payments made in the course of the man's employment in respect of that particular work. If individuals have been thrifty enough to acquire income from any other source, that income would not be the subject of deduction by their employers under this scheme. Payments in respect of any other income would be made direct through the ordinary channels, to the Income Tax collector. Therefore, it does not seem to me that there can be any possibility of prying into the affairs of employés. We are confining the scheme to matters which arise under Schedule E. I will examine the other point which the right hon. Gentleman put forward. So far as the possibility of the Revenue losing money is concerned, under the proposals which we have in mind the payments received by the employers will be sent to the Revenue on the 15th of the following month and, if there are any arrears pending, not later than two months. That, of course, would not lessen the risk of loss to the Chancellor of the Exchequer through a bankrupt, but there would be no loss to the employé, because if a loss arises in such a case, it will not be borne by him but by the State.

Another suggestion which was made was that when the employer receives the money he should pay it into some special account. It is obvious that that would not help the situation if it was a sort of No. 2 or No. 3 account of the employer, because that would be equally subject to the trustee in bankruptcy as if the money had been paid into No. I account. If anything were to be done with the suggestion, it would mean a direct payment to the Exchequer, so that it would be divorced from any of the assets and payments of the employer himself. Of course, I should need to consider the position of employers in this matter. I am grateful to the right hon. Gentleman for putting forward those points and for giving me the opportunity of making them clear.

5.2 p.m.

Mr. Benson

There is one point that I should like to raise. Perhaps it is because of my clumsiness that I did not quite understand the Chancellor with regard to what he said about the question of the rate of deduction. In his Budget speech he said that employers would be notified as to the rate at which they should make these deductions from wages and salaries.

Sir K. Wood

No, not the rate—the amount.

Mr. Benson

I understand that certain amounts would be taken from a man receiving £5 a week and from a man receiving £10 a week. Are those deductions to be made at the appropriate rate of income as if the income under Schedule E were the man's total income, or will the actual rate of Income Tax which the man pays be the amount which the employer deducts? If the deduction is based upon the wage or the income that the man receives, then the employer does not need to be advised. He can calculate how much that is. But if it is at the total income rate, it is not a difficult calculation for the employer to find out whether one man has a private income or not. I do not see how you can keep secrecy unless the deduction is at the rate appropriate to the Schedule E income only.

5.4 p.m.

Sir K. Wood

I shall be glad to go into this matter further, but I would like to put it as I understand it. The Income Tax collector notifies the employé of the amount of tax which he has to pay. That is a matter which is dealt with by the employé and the tax collector together. The employer is notified of the amount that is to be deducted, and it is spread over a period. The question of rate does not come into it. So far as compulsory deduction is concerned, that is simply confined to Schedule E. Any further adjustment of sums received by way of private income is a matter between the collector and the employé.

5.5 p.m.

Mr. W. H. Green (Deptford)

Does the right hon. Gentleman propose to include retired servants of local authorities and even pensioned people from Government offices in the deduction at source? Here is a case in point: a town clerk with £2,000 a year retires on a pension of £800 or £900. He has had, or would have had, a deduction while he was getting £2,000 a year. Will that deduction carry on while he is a superannuated servant of the local authority? If that was not in the Chancellor's mind—and I have not heard any reference to it—will he consider it, because I believe that a great many superannuated Government servants and civil servants would like the principle carried through on the pension as it was on the salary.

Sir K. Wood

Yes, I am glad that point was raised. That is our intention.

5.6 p.m.

Sir R. Tasker

The Chancellor did not make it clear how often the collection is to be made. A point was raised about the case of bankruptcy. If the employer is compelled to deduct it week by week, then as a large number of businesses are conducted on overdrafts, it seems to me that in such circumstances there is insufficient provision to safeguard the Treasury. The other point that I was not clear about was this: Is any commission to be paid? I cannot think that there is any justification—[HON. MEMBERS: "No"] I am very glad to know that there is not. I would be glad if the Chancellor would clear up the point as to how often the collection is made and paid to the Inland Revenue.

Sir K. Wood

It is deducted from each pay day.

Sir R. Tasker

Yes, but when do the Treasury get it?

Sir K. Wood

As at present advised, it is paid over on the 15th of the month following. The suggestion was made by me to the right hon. Gentleman opposite that we may be able to improve on that.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Thirteenth Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

5.10 p.m.

Mr. Pickthorn (Cambridge University)

It is with some hesitation that I rise to put a question. I hesitate partly because I am not sure that I understand the question myself and partly because I have put it privately in a letter to the Financial Secretary to the Treasury. It has been suggested to me—I am not sure whether fairly or not—that there will be some hardship if the limit of 3s. 6d. on allowance for life insurance premiums applies to people who are compulsorily members of insurance schemes. The suggestion is that they are distinguishable from other people, partly because of the fact that they spend the money in that way under compulsion and not of their own free choice, and also because, when they receive the fruits of their premium, when they reach the age of 65, or whatever the age is, they do not receive the money to do with it as they please. They have to buy annuities, and it will, therefore, come within the scope of taxation again, in a way which would not affect people who do as they please with the fruits of their insurance policies. I do not ask for an answer to the question now, but I would like it to be borne in mind, because if the Treasury recognise that there may be some such hardship, it may be possible for some slight amendment to be made.

Sir K. Wood

Yes, Sir, I will certainly examine that.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Fourteenth Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

5.12 p.m.

Mr. Benson

I am not sure whether I am fully seized of what this Resolution means. I understand that a man is not to be allowed to put his air-raid insurance against his trading profits. I should like to ask the Chancellor why. It is a customary allowance to put the fire insurance of commercial premises against one's commercial profits and in making a quinquennial return for Schedule A, one is allowed to include a return for fire insurance. I do not see why a levy which is made upon certain forms of property—a levy which is by no means regarded with equanimity by those who have to pay it—should be put into a different category from fire insurance.

5.13 p.m.

Sir K. Wood

I am glad to inform the House of the reason for this and why it is very necessary and desirable. The Resolution before the House authorises legislation which would prohibit an allowance for any purpose of Income Tax for this year—we will deal with Excess Profits Tax in another Resolution—in 1940–41 and subsequent years on payments made in connection with certain war damage indemnity schemes. In Resolutions 17 and 18 we are taking a similar course in relation to Excess Profits Tax and National Defence Contribution. We had an examination of one of these cases some time ago and it was found that, in law, a company which had inaugurated a scheme of this character would be entitled, as far as payments were concerned, to deductions in compiling profits for Income Tax purposes. Automatically an allowance on deductions would be permissible on Excess Profits Tax. It is perfectly true, as the hon. Gentleman says, that unless we have legislation disallowing the contributions to these schemes as expenses for the purposes of taxation, the result would be that they would in fact be met very largely at the expense of the State. In the case of Excess Profits Tax of 100 per cent., there is nothing to prevent half a dozen people joining together and paying contributions as they wish and getting an allowance.

I am coming to the point which the hon. Gentleman made about fire insurance. No one could pretend that this kind of war indemnity insurance is an insurable risk at all of the character of fire insurance. The cost to the State of allowing such payments would be one which the Exchequer could not afford. An ordinary risk, like fire insurance, could be assessed, but a risk of this character, which the State itself could not undertake, beyond giving the undertaking this has been given, is obviously not a matter which could be put into the same category. In the case of Excess Profits Tax, the allowance of these payments would reduce the yield. It is, clearly, wrong that in the case of subscribers to these war-time schemes the State should not only provide a measure of compensation to all property owners, but should enable these particular persons to obtain additional compensation.

Mr. Benson

Am I to understand that this does not apply in any way to the Government scheme?

Sir K. Wood

No, Sir. It does not.

Mr. Benson

In my innocence, I did not realise the "wangle" which was possible.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.