INCOME TAX.

HC Deb 23 April 1941 vol 371 cc185-208

Second Resolution read a Second time.

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

Mr. Woodburn (Stirling and Clackmannan, Eastern)

The Resolution to increase the Income Tax of this country has met with satisfaction by people generally as being an indication of the Government's resolve to carry the war through by the complete organisation of the country. It is true that in many instances. Income Tax is reaching the point where it raises considerable difficulties. I think it is right that the Government and the House should realise, with the incidence of Income Tax as it is to-day, that it is rapidly reaching the stage where, from the point of view of the normal incentive provided for people to carry on their duties, it will eventually be a handicap in this and other directions in achieving progress in the war effort. I came across an instance the other day of a civil servant being offered promotion. He accepted it, but the curious thing was that in accepting that promotion the man suffered a reduction in his income. That was partly due to the incidence of Income Tax and to other circumstances arising out of the war.

There are many circumstances arising to-day where the effects of the incidence of Income Tax are a deterrent on people accepting more responsibility, and therefore the normal inducement of additional income is being removed as a method of securing additional effort. That throws on the Government the responsibility of providing some other incentive, and I think we ought to register our appreciation of the fact that throughout the country to-day the overwhelming majority of the people are willingly rendering service, on the ground of patriotism and from the desire to see the country victorious, in spite of the fact that they themselves may be personally handicapped in the action that they take. It is therefore desirable that this House should also register, in the case of firms and individuals who are putting personal motives first and handicapping the progress of the war, their contempt for such action. Some firms are showing an entirely selfish outlook and are prepared, even at the risk of the defeat of the country, to handicap the war effort, but we are glad to say, in contrast to that, that the overwhelming mass' of the people are making voluntary sacrifices.

Taxation by money is not the only taxation that is being levied. When the Chancellor of the Exchequer takes 10s. in the £ in taxation he takes away half the right to consume goods or employ labour, and the State takes the means of spending that money, instead of the person taxed. The State is doing that in other ways as well, because, as it calls people up for service in the Army or for the Civil Defence Forces, as it enrols people for service in the nation's effort, it automatically removes from the sphere of employment large numbers of people and therefore even though a person might have thousands of pounds of income, they become relatively useless to him if there are no people to employ, and no goods to purchase. Therefore taxation is not only imposed by means of the Chancellor's efforts, but a very large amount of real taxation is being carried through by the reorganisation of the man-power of the country in a planned and constructive fashion. If we take that to its logical conclusion and imagine that the Government are organising the activities of the whole man-power of the nation—it is immaterial whether you register it by money means or not—you are effectively depriving everyone of spending money except in the case where the State gives permission to do so.

Take the case where ever so many people are competing for building-trade labour to repair houses and shops which have been damaged. You get a kind of option market for building-trade labour. I am informed that public houses are the first in the market by offering the highest prices to have their establishments repaired, and in every "blitzed" area the public house is the first place to be repaired. That is obviously a matter of competition for building-trade labour. If the Government take steps to decide what repairs are to be done first, and plan those repairs in the order of their necessity and of public service, they may decide that public houses come last, in which case it would not matter how much money the publican was willing to spend; his money would be useless because the Government would be achieving the purpose of controlling the labour by other means than taxing the publican and removing his ability to purchase the labour. Therefore, in contemplation of the Budget, and of this particular Resolution, we must realise that the conception of simply taxing people and removing their power to spend is only one part, and is becoming a less fundamental part, of the Government's power to decide what is to be done by the labour of the country; and I am sure I express the feelings of the country as a whole that all these measures of taxation, of organising the man-power of the country or of taking the cash from the people in order to divert that man-power to a public purpose, are giving evidence that the Government are going to spare no effort to organise the country to achieve its maximum effort for victory.

Major Sir George Davies (Yeovil)

In attending the Budget Debates this year, what has struck me is that the level of interest of all the speeches in connection with it has been a great deal higher than on many occasions in the past. The reason is that we have tended to get away from those small details, such as so much on tea, etc., to really big issues. The last speaker has confined himself very largely to some of those broader issues that are raised by the Budget proposals, and, while it is true that the nation as a whole, and certainly we who listened to the Budget being unfolded, have cheerfully and gladly welcomed its savage taxing provisions, it would not perhaps be out of place to recall some of those implications which are inevitable in connection with this rate of taxation.

Nothing can be more certain than that the standard of life of practically everyone in the country will be completely upset. You have only to think of the extreme of the 19s. 6d. in the £ person who lives in a realm of fairyland compared with the rest of us. Everyone of us, even if he has not been living extravagantly, has to recast entirely his standard of life. It is inevitable that in any Budget provisions this ratio must bear more heavily on some than on others. The very wealthy have very heavy commitments and responsibilities of various sorts which are not comprised in the ordinary spending of money on themselves, and they will find it very difficult to reconstruct, even if they are left with a substantial income. I cannot hide from my mind the effect that this is going to have on those great charitable institutions which have so largely been supported by those with considerable wealth. The voluntary hospitals, Dr. Barnado's work, the Waifs and Strays, the Argnes Weston Homes, and hundreds of thousands of charitable organisations have been kept going largely by contributions from the better-to-do. They will suffer very severely and will have to recast their standard of life.

Then we come down to those of whom I very often think, those with incomes ranging between £500 and £1,000. The man with an earned income of £500, who spends £490 and is £10 to the good, has no cushion to fall back upon. He has commitments of rent, insurance and education, and I think he will find he will have great difficulty. With regard to those who have a cushion to fall back on, these provisions will be tantamount to an elastically applied capital levy, so that two of the great cries that we have often heard from hon. Members opposite, one about the conscription of wealth and the other about the capital levy, are taking place before our eyes. I mention these considerations, because it seems well to bear in mind the position in which we are finding ourselves.

In this connection I wish to make an appeal or suggestion to the Chancellor of the Exchequer which I have made in the past, and which is, indeed, I may say an annual event. At present, our relations with the United States of America are growing, as we hope, ever closer. The United States are taking an ever-greater part in this world convulsion and we now read that, following in the footsteps of our own Chancellor of the Exchequer, they are about to increase their taxation enormously. Certain people in this country—it is true they are fewer to-day because of the Treasury's policy of impounding, as it were, the investments of British citizens in the United States, but there is still a considerable number of them—have sources of income on both sides of the Atlantic. These people find that not only are they paying American tax on the source of their American income, but that the same source of income is being taxed at the highest rates over here. Thus they find themselves contributing, not only to the upkeep of an ever-increasing British Navy but also to the upkeep of two United States navies, one for the Atlantic and the other for the Pacific—all coming out of the same income.

I know that there have been great difficulties because it is a question of cooperation with a foreign country, unlike the arrangements which we have been able to achieve with our own Dominions on this matter of double taxation. But at a time like this, when we have had the passing of the Lease and Lend Act in the United States, when proposals for the actual application of the money has passed Congress and when the speeches that we read and the general atmosphere show a closer outlook on the part that our two countries are playing in this war, I suggest that this is a consideration which might, at least, be put forward. I suggest that a person with interests in the United States should properly have those interests taxed for the defence purposes of the United States but that when it comes to a question of applying the taxation of this country, that the double taxation should be, if not entirely avoided, at least to some extent reduced, because it falls with tremendous additional force on top of the already heavy blows which we are bearing here.

We, one and all, know that whether this is a 10 per cent, or a 100 per cent, capital levy is immaterial. We have to win this war and everything that any of us has got must be put into the winning of it. At the same time, it is not out of place to bring forward some of these considerations, and 1 hope that the Chancellor may be encouraged by what I have said to take up this question again with the proper authorities and to see whether what seems to be a very heavy unfairness cannot somehow be alleviated. We can with courage say that we are prepared to bear this heavy taxation, but to do so twice over, for two Allies or near-Allies, is, I submit, putting it a little strongly. I hope the Chancellor of the Exchequer, therefore, will see his way at any rate to ventilate this question with our opposite numbers on the other side of the Atlantic.

Mr. Rhys Davies (Westhoughton)

I would ask the Chancellor of the Exchequer to look into a small problem which has been brought to my notice. I do not propose to dwell on the larger issues of taxation mentioned by the hon. and gallant Member for Yeovil (Sir G. Davies) but I trust that nobody will refrain from making grants to hospitals because of this increased taxation. The point, however, which I desire to raise has come to my notice in this fashion. Deductions are now made by employers from wages, and it has been said several times in favour of this method that what we do not get we do not seem to miss. In the case of a coal miner working at the coal face his wages are paid from the office of the colliery and the tax is deducted in the ordinary way. I do not know whether the practice applies all over the country but in certain districts it is customary for the coal miner to employ a young man as his assistant. This assistant is known in colliery language in some areas as his "butty." The miner pays this young man's wages himself and a case has been brought to my notice showing that while deductions in respect of Income Tax are made from the wages of certain colliery workers, young men of the type I have described are not taxed at the source. In one case a young man recently received from the Income Tax authorities an account for £8 15s. He was, of course, staggered to find that he had to pay Income Tax to that amount in one lump sum; if deductions had been made from his wages he would probably not have felt it at all. I understand from inquiry that this system applies not only to colliery workers but in some other industries as well where work is on a contract basis; and I would ask the right hon. Gentleman whether some method could not be devised to make regular deductions from., wages to prevent these young people receiving accounts for large amounts of Income Tax dues.

Mr. Hammersley (Willesden East)

This Resolution imposes a level of Income Tax which is higher than any ever contemplated in the history of this country, either in peace or war, and I am glad that it is not going through without some comment being made upon it. It is true that, on the whole, the proposal to raise the general level of Income Tax to 10s. in the £ has been well received in the country. The reason is obvious. With the growing expenditure on the war effort, it is necessary that there should be a growing yield of taxation, and the country is in the mood for sacrifices. It realises that unless we get a greater yield from taxation, our national finance is in danger of being swamped by the whirlwind of inflation. Therefore, the community, as a whole, is willing to bear sacrifices and burdens, but it seems to me that when we get to this abnormal level of taxation, we should bear in mind the whole resources of the community, and have some regard, not only to the income of the individual but also to his capital resources.

My hon. and gallant Friend the Member for Yeovil (Sir G. Davies) said that taxation at this level, constituted a kind of capital levy. It is true that the individual may have to realise some of his capital in order to meet. his Income Tax demands but the point is that that kind of. capital levy is inequitable. It is a capital levy put on to individuals entirely through their incomes. If you contemplate a capital levy, such levy should have regard to the volume of capital possessed by the person taxed. Take the cases of two individuals each of whom has an income of £2,000. One of these may be in charge, say, of one of Lord Nuffield's factories making war material. Such a person might be regarded, for the purposes of the war, as belonging to the salt of the earth. He may have grown up in his business or profession and while having achieved an income of £2,000 a year, he may have no capital resources. On the other hand, the other person's income of £2,000 may be derived from capital resources which have passed down to him and which may amount to as much as £100,000. Those two people pay precisely the same contribution to our war taxation. We should have regard to the question of the capital resources of the individual when we get a level of Income Tax as high as that of the present time.

The hon. Member for East Stirling (Mr. Woodburn) mentioned the same point and put the fact that when we get beyond a certain level of Income Tax it tends to interfere with the productive ability of the country. While everybody agrees that sacrifices must be made, we cannot pass this Resolution without making the comment that if a level of Income Tax at 10s. in the £ is to be part of our system, we may be causing severe injury to our productive processes and interfering with the growth of that virile section of the community which is coming along, which demands higher wages for increased skill and ability, and whose position is being materially sacrificed in these circumstances. I make these comments to the Chancellor because I am sure that in the commercial and industrial world they have great weight.

Mr. Benson (Chesterfield)

I would like to say a word in reply to the hon. Member for East Willesden (Mr. Hammersley), who, we all know, is an advo- cate of a capital levy or capital tax. What is the use of discussing it in war-time when our prime concern is revenue which comes out of the spending capacity of the population? A capital tax may or may not be equitable, but it cannot be imposed until the capital of the country has been valued.

Mr. Speaker

We cannot go into the question of the capital levy on this Resolution.

Mr. Benson

Having said that it cannot take place without a capital valuation, I think that I have disposed of it. Both my hon. Friend the Member for East Stirling (Mr. Woodburn) and the hon. Member for East Willesden pointed out the appalling height which taxation has reached. It is now so high that we have to view taxation from a rather more realistic point of view than many of the speeches in the House have tended to do. The acceptance of this high taxation by the House of Commons has been very creditable. I remember a predecessor of the right hon. Gentleman putting 3d. on the Income Tax, and he sat down in absolute silence—an unusual thing after a Budget speech. Hon. Gentlemen apposite were horrified. When the right hon. Gentleman raised Income Tax to 10s. in the £ he was greeted with laughter. We accept this taxation, but it is no use accepting it unless we are prepared to realise how far these proposals are taking us. We are possibly reaching a limit where on certain ranges of income we may get a diminishing return.

We cannot discuss the effect of this rise to 10s. without some reference to the other part of Income Tax, namely. Surtax, because the two go together. When we get Income Tax and Surtax up to 19s. 6d. maximum, and 19s. practically through the whole range of income, we get to a level where we must consider what the effect will be. It is true, as my hon. Friend has said, that it is bound to have some effect upon initiative and incentive. We have been told often enough in this House and in every Debate in the last 30 years on the subject of Socialism and Capitalism, that the only motive that will drive industry is the motive of private incentive. I do not accept that for a moment, but if we have an industry organised on a basis of private incentive, it is a serious matter to interfere with what is the very mainspring of the industrial system. I do not say that this is the only motive that can be used in human society, but with our present economic system it is the main motive, and a tax of 19s. in the £ is cutting into the root of it. I am not certain that, if this war continues long, we shall not have to extend largely the idea an industry which is not run primarily for profit and not owned by private individuals. That is rather by the way, however, for I want to talk about the question of taxation as such.

This country, probably for a century, has been the most highly taxed country in the world. Our Income Tax has been so effective because it has always been accepted. The main reason why we can tax and have taxed, and why our taxes are paid, is that in our democracy we impose our own taxation, and it has been accepted voluntarily by the taxpayer. When, however, taxation gets to the present height, or even lower, there is a certain number of people, who do not accept it voluntarily. We all know the vast amount of complicated legislation to prevent avoidance and evasion which we have been compelled to pass in the last 10 or 15 years. That has been due to the fact that a certain element have not voluntarily accepted the taxation that has been imposed and have taken steps to avoid it. This refusal to accept taxation was very noticeable after the stiff increases that were put on by the late Lord Snowden in 1929–31 The total increase of tax in the higher ranges of Income Tax and Surtax was then 3s. 3d. The result was that incomes subject to Surtax dropped catastrophically. It may be said that part of the drop was due to the slump. That is so, but not all of it was due to that cause. If we examine the subsequent growth of incomes subject to ordinary taxation and compare it with the growth of that small section of incomes which also pays Surtax, we find that the growth of the total taxable income of the country has been much greater in proportion than the growth of Surtax incomes. Unquestionably steps were taken to avoid the payment of Surtax even when the total Income Tax and Surtax was only 13s. 3d. With the total at 19s. 6d. I do not believe that we shall get Surtax fully paid unless we take further steps along the lines we have been continually compelled to take in the past to make it more and more difficult to avoid the payment of taxation.

The present 19s. 6d. is not the only impost which is placed by the Government on income. There is the War Damage Act levy, and on some forms of income 2s. is imposed 'for Mineral Rights Duty and mineral welfare levy. Imposts by the Government on certain ranges of income are now more than 20s. in the £, and every increase in a man's income makes him poorer. That is, I will not say a ridiculous situation, but an anomalous situation, and a situation in which we cannot rely upon steady patriotism to carry us through. I am not objecting to this exceptionally high taxation. I am merely querying whether our machinery as it is now constituted is likely to be effective, in collecting it. The man with £150,000 a year from bricks and mortar can give away £110,000 and be better off from the net income point of view with £40,000 a year than with £150,000 a year. He has to give away £110,000 and leave himself with £40,000 before he reduces his Income Tax, Surtax and war damage contribution to less than 20s. in the £. If the income arises from minerals the same thing applies, though not quite so hardly. Here you have income which is a definite detriment, and one has to be extremely patriotic to go on year after year receiving income, which burns a hole in your pocket.

I am not suggesting that taxation should be reduced, but I feel that we ought to realise where taxation has got us to, and I think we shall have to introduce certain safeguards. If we realise that the war is going to last, say, three years, why not let us adapt to Income Tax legislation a clause on lines somewhat similar to one that applies to Death Duties. Hon. Members know that gifts inter vivos are taxable if they have been made within three years of death. Our present taxation is a tremendous incentive to a wealthy man to make settlements upon his children—I do not mean minors, but adult children. If he makes a seven years settlement, he need not dispose of his capital. If he makes a seven years settlement, the income under the settlement passes out of the higher range of taxation. It is a tremendous saving, particularly where a man is supporting his son or daughter out of his income. I am not saying whether his action is right or wrong, but I am pointing out the motive. Every settlement of that kind will impose a severe loss upon the Exchequer. Moreover, there must be a tendency not merely to make settlements but to dispose of property to children in order to avoid what might be termed negative income which arises from the property, and that would also help in avoiding death duties later.

Is it not possible to introduce some such Clause as this—that during the period of the emergency any transfer of property without valid consideration, or any trust for seven years, shall bear taxation at the rate of income not necessarily of the disponsor but at the higher rate of either the recipient or the disponsor? I make that suggestion became of the possibility of using a seven years' trust to avoid tax if the tax is payable at the rate of the settlor. If it is taxed at whichever is the higher rate, the recipient's or the dis-ponsor's, that difficulty should begot over. I am not blaming people who get rid of negative income, which is a different thing from getting rid of positive income, however small, but I think we shall have to take some step in face of the tremendous incentive, which will tend to grow, to people to get rid of income which makes them poorer.

Mr. Mainwaring (Rhondda, East)

I should like to draw attention to another class of taxpayers who will find it more than difficult to meet the obligations they will be called upon to face under the new Income Tax proposals. I refer to working men who earn by wages £200 a year. The Chancellor has taken steps to impose compulsory saving upon them. The only advantage which the Chancellor will gain is that he will have the use of that money for a given period of years free of interest, for thereafter he is going to return it to them. But what about the capacity to pay of all the individuals in this category? However difficult things may be for the man who is called upon to pay taxation up to 19s. 6d. in the £ at any rate he has a sufficient number of sixpences left to support him. Things are different with the individuals with £200 a year. Many of them have heavy travelling expenses to meet. I am mindful of the difficulties involved, and I do not blind myself to the fact that a large proportion of the population are by choice residing elsewhere than where they work, but to-day, with the creation of so many new points of production, there is a big redistribution of large masses of working men and women. One cannot go into any county without coming across a large army of men and women who daily have to be transported considerable distances to their work. That involves them in tremendous expenditure. An outlay of 10s. a week is a normal occurrence in the case of tens of thousands of men and women.

Now the Chancellor states that we must compel a person with an income of £200 a year to save some of it, which is a very desirable thing if it is possible and practicable. But take the case of a married man with an income of £4 a week. Of that £4, £1 may go in rent and 10s. in travelling expenses. That accounts for 30s. In addition, the cost of living is mounting week by week, and as a result trade unions feel compelled periodically to make applications for increases of wages. To a man in that position this tax, let it be £5, £10, £15 or £20 a year, is an increase in the cost of living. The Chancellor of the Exchequer is imposing a tax which one wav or other is very unequal in its incidence. One man with £200 a year may live near the place where he works, and another man with a similar wage has to travel 20 or 25 miles to work and pay 10s. a week or more in travelling expenses. The problem cannot be disposed of by saying that many people choose to live where they do not work. I am not concerned about those who choose to live away' from their work, but with the case of the man who is compelled to travel to work, because there is no possibility of his living near his work. With all the new points of production which are being set up in the country, one cannot assume that a man will always find accommodation near his work, because it is not available for him. Transport is therefore unavoidable at every step.

I wish the Chancellor of the Exchequer would most seriously reconsider the factor to which I have referred, because it will affect not only the individuals who have to bear this increased imposition but there will be other effects. I warn the Chancellor now that it will involve trade union practice and negotiations for wages. Speaking as a miner, this must arise. I would regard an increase of Income Tax of £10 or £20 a year as a definite increase in the cost of living. The Chancellor certainly takes only a loan from my wages until after the war, but what do I get during the period of the war? The Chancellor will take a greater slice of my income than I can afford. Trade unions will therefore be compelled to enter into negotiation for increases of wages because of the increased cost of living represented by this increase of tax. It is therefore reasonable to ask the right hon. Gentleman to consider this matter, with a view to modifying the incidence of the increase of taxation on the lower levels of earned income.

Mr. Hannah (Bilston)

Nobody grudges higher taxation made necessary by the war. It has one advantage, on the basis of realism. The difference between our formerly opposed parties seems to be rapidly disappearing. Nobody could tell from the speeches which we have heard the supposed political allegiance of those who have spoken. I am sorry that my right hon. Friend was not impressed by my efforts to obtain a bachelor tax. Perhaps I was rather keen on the matter, because I imagine that my Division, being almost entirely working-class, has fewer bachelors than almost any other Division in the country. I complain that a considerable number of people with quite large incomes live in flats or hotels and are in such a position that they can pay the extra Income Tax demanded, by drinking water instead of champagne, or something of that kind. It will be easy for them. On the other hand, there are people who can pay the increased Income Tax only by dismissing men whom they employ. It mayor may not be right that great country estates should still be kept up, but it is far more beneficial to the community that gardeners, foresters and people like that should be employed than that money should be spent in towns merely upon living in flats and in other ways that merely concern a single individual.

Very much on the lines of the speech which was made from the other side a minute ago, I would urge my right hon. Friend to consider, as far as possible, the obligations that fall upon the taxpayer. What has to be investigated is how many people are being supported on particular incomes. A difference in treatment should be accorded between a person who has no dependants and whose income is spent entirely on himself, and another person who may be supporting 20 or 30 individuals, including the children of those who are working for him. I hope that something will be done on these lines. We must take note of the way in which a man has to spend his income, whether he be in the working class or in any other class of the community. Undoubtedly various schemes will be evolved with the object of dodging taxation which is felt to be unfair. In a foreign country some years ago I was speaking about the English Income Tax, and a comment I received was that the English people must be extraordinarily honest folk not to try to evade taxation on such a scale. It was pointed out. that in very few other countries would it be possible. I urge my right hon. Friend to give consideration to the obligations which have to be met by the incomes on which this taxation is imposed.

Mr. A. Edwards (Middlesbrough, East)

Previous speakers have drawn attention to the double taxation from which some people suffer, and I hope that the Chancellor of the Exchequer will look into that matter. I wish to draw his attention to another danger, in the case of people who are making money in America. When the 100 per cent. Excess Profits Tax was imposed, the best brains in the country were brought to bear upon the problem to see how something could be saved. People who were doing very large business with America put their heads together to see how they could accumulate something of the profits they made, and many ways were considered. I have no doubt that some scheme for accumulating profits there and avoiding taxation here was evolved. There are people in this country who have very large interests in America and who would rather let their capital position increase there than have profits coming to this country on which they would have to pay high taxation. I hope that the Chancellor of the Exchequer will, through his Department, and particularly through the Purchasing Commission in America, carry out a thorough investigation of this position.

I want to put a question to those who are doing business in America and to ask whether there are any delaying commissions. I am certain that, although there may not be agreements, there are many understandings on the matter. I have in mind people with very large interests in America who are importing and selling in this country. I am certain that they are allowing to accumulatae in America vast sums of money. With very little excuse, some people are sending representatives over there into all kinds of well-paid jobs, taking offices and employing people. I am aware of one instance, although I do not think it will do much harm in this case. The people in question are building up an organisation there at the expense of the British Government which will be very useful to them. Inspectors of taxes have the right to go behind all kinds of arrangements and to refuse to allow certain expenses; I hope that the Chancellor will see that his Department look into this matter from the point of view I suggest. I am sure he will find that in many cases people have agreed to delaying commissions and that staffs are there, receiving some kind of consideration from the higher profit being accumulated in America. The Purchasing Commission should be authorised or instructed to look very closely into this matter. I would ask the Chancellor to consider some methods of taxing capital appreciation in this country. I know the argument against it, that you must set off the costs against it.

Mr. Speaker

This matter cannot be discussed upon this Resolution.

Mr. Edwards

I naturally accept your Ruling, Mr. Speaker, but 1 do not propose that all capital property should be treated as income for the duration of the war. Is that not in Order?

Mr. Speaker

I do not think that would be a straight enough way to get round the fact that the subject is out of Order.

Mr. Edwards

Do I understand from your Ruling that I may not discuss the matter?

Mr. Speaker

That was my intention.

Mr. Edwards

I hope that the Chancellor of the Exchequer has noted that I have been ruled out of Order. Otherwise I should have made a statement. I would emphasise the other point about the American accumulations, and I hope that he will pay attention to it.

Mr. Pethick-Lawrence (Edinburgh, East)

I think that not only the House as a whole but the Chancellor of the Exchequer will agree that we have had a very interesting Debate. As has been said, it has been a Debate that has cut very largely across the ordinary party lines. The only reason for my intervention is that I would like to sum up what has been said. In all the speeches the main agreement has been that with this exceptionally high level of taxation entirely new considerations arise. In the first place it means that certain classes of Income Tax payers will not, and, in fact, cannot, pay their Income Tax out of income, and are forced to pay it out of capital. I will not go further than that, because, if I may say so, Mr. Speaker, you have very properly ruled any further discussions on that matter out of Order. I do feel entitled to say, however, that there must inevitably be a payment of Income Tax out of capital in many cases.

In the second place, my hon. Friend the Member for Chesterfield (Mr. Benson) has wisely pointed out that with this high level of taxation the incentives to evasion are very much greater than they were before, and the Treasury will have to look into this matter and do everything possible to stop evasion. Thirdly, the point raised by my hon. Friend the Member for East Rhondda (Mr. Mainwaring) is a very important one. Whereas people have not bothered about small and necessary expenditure when the rate of tax has been low, they will be forced to deal with that matter now that the rate of tax is high. This question of travelling is certainly one which will have to be very carefully considered, because there may be two people, one of whom has a certain income which is really net income, and the other with an income subject to travelling expenses; it may be possible for a man to get a job near by at one figure and to get a job further off at a higher figure on which he has to pay a certain amount of travelling, and it must be clear that that becomes a serious consideration when the rate of tax is as high as it is. I do not expect the Chancellor of the Exchequer now to say what he is going to do, but I put it to him that the higher the rate of tax, clearly the more essential it is that the administration of the tax should be fair. Therefore, although I do not want him to whittle away the proceeds of taxation, I think he will have to consider being a little more friendly towards Amendments and concessions for obvious hard cases than he would be if the rate of tax was low. I hope that he will not shut his mind to making concessions which, I hope, will not cut to a large extent into the actual volume of the yield of the tax, but which will relieve it in the cases where it ought to be relieved. I hope that, without committing himself, the Chancellor, with his usual fairness, will say that he will keep an open mind when the time comes when individual concessions may be asked from him during the discussion of the Finance Bill.

The Chancellor of the Exchequer (Sir Kingsley Wood)

I am very much indebted to the House for the observations that have been made. As my right hon. Friend has said, it has been a brief, but a well-informed Debate, and I think that what has been said by all my hon. Friends in all parts of the House really reflects the opinion generally of the country on the Budget. One of the observations which I have drawn from what has been said is that no one has said to me as Chancellor of the Exchequer, "You should not have introduced this Budget." No one has said, "You have gone too far ''. What have been addressed to me, quite rightly, have been words of warning that in many respects the limit has been reached, and that when taxation is as high as it is it is important that the administration should be fair and equitable. I also note what has been said about the danger in relation to evasion. I must say that I recognise that the burdens are pressing so heavily upon everyone that it is a matter which the Exchequer must carefully consider if evidence arises, and they must deal with any atttempts at evasion of this kind. In fact, I myself think that at this time evasion is almost doubly an offence, and I hope it will not arise.

I would like to make one or two observations in answer to some of the questions which have been put to me. I hope that my hon. Friend the Member for East Stirling (Mr. Woodburn) will communicate to me the case of the Civil servant who apparently had some increase in his remuneration and was then worse off, but I notice that my hon. Friend slipped in the words" and other circumstances arising out of the war "

Mr. Woodburn

He moved to another town.

Sir K. Wood

No doubt, it will be rather an exceptional case which the hon. Member sends to me.

Mr. Woodburn

The point is that he had to move to another town, and obviously an increase of £50 which was reduced to £25 involves a loss which counteracts any increase.

Sir K. Wood

We can always think of those cases, but I would not like to see it in flaring headlines in the papers tomorrow that the hon. Member for East Stirling put forward a case of a man who was actually worse off on account of the rise in Income Tax despite an increase in his salary.

My hon. and gallant Friend the Member for Yeovil (Sir G. Davies) mentioned how people will undoubtedly have to face very considerable difficulties and hardships arising from the tax. It is also to be noted—and it should be noted in fairness to the Budget—that instances have been given concerning all sections of the community. Complaints in that respect have not been confined to any particular section. I think the counterpart of those considerations is that in imposing the burdens that have arisen from this Budget I have endeavoured to deal fairly with all sections of the community. The fact, of course, is reflected in one way by the fact that many of my hon. Friends have pointed out how various sections of the community will suffer. My hon. and gallant Friend the Member for Yeovil said that voluntary hospitals and other charities will suffer or be inconvenienced in that respect. I comfort myself so far as voluntary hospitals are concerned, because a great proportion of the assistance that they are now receiving, and, in fact, the assistance which has saved so many of them, does not come from subscriptions of large sums of money but from regular contributions which are made week by week by large sections of the community all over the country. Therefore, much as I would regret the withdrawal of subscriptions, I am not so apprehensive in that respect as otherwise I would be. I will take note of the suggestions about the question of double taxation. This, of course, is a matter for mutual arrangement.

My hon. Friend the Member for Westhoughton (Mr. Rhys Davies) raised the case of people employed in collieries; apparently, from what he said, there are other people engaged with them, rather on a sub-contracting basis. He asked what was. their position. I will look into that and see if anything further can be done, but the view we have taken up to the moment is that in the case of colliery workers who are employed on a sub-contracting basis, tax is not deducted at the source. It is not because we do not believe in it or think it necessary, but because we feel that it might be held unreasonable or impracticable to expect the sub-contractor to assume the burden of keeping the necessary records, which are, of course, essential for the collection of tax. It is really a matter of balance as to whether we ought to impose upon someone in that position the keeping of a lot of books. I made inquiries while my hon. Friend was speaking, and I have been informed that in a good many of these cases Income Tax stamps are bought, which rather eases the position as far as such people are concerned.

Mr. Woodburn

May I offer a suggestion to the right hon. Gentleman? In the case of collieries, it might be possible for the Treasury to make arrangements for some employé of the colliery, say a clerk, to act as adviser to these people, and actually arrange, in an individual capacity, to keep the records and act as agent of the Treasury.

Sir K. Wood

I will certainly explore that suggestion and see if it is practicable. On the one hand one wants to avoid keeping a lot of records, and on the other hand one is confronted with the difficulty occasioned when men receive demands for tax which they might find it difficult to pay all at once.

I am indebted for what my hon. Friend the Member for Chesterfield (Mr. Benson) said. I listened with care and attention, because I heard what he said to me on the last occasion when I introduced a Budget, and if the hon. Members will refer to what he said then, they will see that in many respects I have adopted the suggestions which he made. People often say that I do not take much notice of suggestions, but occasionally I do. He advised me not to hesitate to impose burdens, and he was fair enough to say that they should be imposed all along the line. He did not, as some hon. Members do on occasions, suggest that one section of the community ought to bear the whole burden while the other is let off. He was quite definite and quite courageous and said that this was the sort of Budget which he himself would introduce, spreading the burden right from top to bottom, except, of course, for the very small incomes. We will study what he has said about the question of tax evasion. As a matter of fact, I am already considering that in connection with the Excess Profits Tax, but there is a difference in that case, because the Excess Profits Tax is one which we regard as being of a temporary nature, arising from the war, and in regard to which we have not always been able to bring in provisions to deal with attempts at evasion. It is only fair to say that, while so far as Income Tax evasion is concerned, people do sometimes have a run, the Inland Revenue, the Finance Act and the House of Commons generally overtake them, and in this connection it may also be observed that in many cases where provision has been brought in to deal with evasion it has been made retrospective. People who wish to evade taxation will therefore have to bear in mind the growing tendency to make such provisions retrospective, "and they will do that sort of thing at their peril.

I will also look into the question of travelling expenses raised by my hon. Friend the Member for East Rhondda (Mr. Mainwaring). It is exceedingly difficult, as my hon. Friends will appreciate, to endeavour to apply the law to particular cases of this character. At the moment, travelling expenses incurred wholly, exclusively and necessarily in connection with employment are allowed —that covers, for instance, the case of the commercial traveler—but not travelling expenses to and from a place of business. I will also note what my hon. Friend the Member for East Middlesbrough (Mr. A. Edwards) said on the question of America and tax evasion there.

Mr. Woodburn

Before the Chancellor leaves the question of travelling expenses, I would like to point out that there are cases in which the Ministry of Labour actually sends a man to special work some long distance away, and it may be almost conditional that he travels backwards and forwards. If it is a condition of employment that he must pay travelling expenses out of his wages, or if he is allowed travelling expenses by his employer, does not that absolve him from paying Income Tax on the expenses allowed for travelling? If a man's wage is £3 a week, and he gets a job somewhere else which involves the payment of £1 a week travelling expenses, which are paid by the employer, has the man to pay Income Tax on that £ 1 a week travelling allowance, in addition to the Income Tax on his own income?

Sir K. Wood

I am informed that the answer is in the negative.

Mr. Kirkwood (Dumbarton Burghs)

Why is it that a commercial traveller is to be in this unique position of being allowed this concession? In my own constituency there are thousands of people who are going to be placed in the position of paying from 9s. to 15s. a week in travelling expenses because of the "blitz." Is any allowance" to be made for that? It is not, by any stretch of imagination, of their own freewill: they have been "blitzed"—bombed out of their homes—and some of them have had to go 45 miles away. Surely the Chancellor of the Exchequer will give some sympathetic consideration to men placed in such a situation.

Mr. Tinker (Leigh)

May I ask the Chancellor of the Exchequer to give us a fuller explanation as to why there is this distinction? I am informed by my right hon. Friend that there is a difference between travelling while at work and travelling to and from work. Would it not be advantageous to make the position clearer?

Sir K. Wood

The present position is as I have stated. I take it that the reason is this: when travelling expenses are so intimately associated with the work upon which a man is engaged, as in the case of a commercial traveller, the law at present is that those expenses are allowed, but, as I have said, the expenses of travelling to and from a place of employment have not up to the present been allowed. The distinction has been made purely because in the case of the commercial traveller these expenses are so wrapped up with the course of his business and employment.

My right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) summed up very fairly a good many of the considerations that have arisen in connection with the Debate. It is obvious that when heavy impositions of this kind are imposed there must be hardship. I think this hardship will be borne cheerfully, because it is essential to victory. One can only hope that it is of a limited and temporary character. I was faced, and every Member of the House has been faced, with the fact that the alternative would be much worse for the great mass of the community, and particularly for—for lack of a better description—the lower sections. If these steps had not been taken, we might have been in for a very serious period of rapid inflation, in which a great deal more suffering would have been inflicted. That is what we have to take into consideration in connection with the Budget Resolutions. I have no doubt that the general opinion of the House will be that the course we have taken, although a very hard one, is the best.

Mr. R. J. Taylor (Morpeth)

What commission, if any, is charged for the deduction of miners' Income Tax at the source?

Sir K. Wood

I do not think that any commission is charged in respect of miners or of anyone else. The employers have been doing this work quite voluntarily, and in my Budget speech I expressed our indebtedness to them.

Mr. Woodburn

Are we to take it that the Chancellor will give consideration to the point put by my hon. Friend the Member for Dumbarton Burghs (Mr. Kirkwood) about people who are "blitzed" out and involved in undue travelling expenses? Also, where people are transferred by Employment Exchanges or by other means to places far from their homes, will some consideration be given to the question of an Income Tax allowance for their travelling expenses, which are quite separate from their wages?

Mr. James Griffiths (Llanelly)

This question of men living some distance from their work is becoming a very serious one. Thousands of people, not only miners, now live a long distance from their work. I think it is a desirable social improvement; people should not be living on top of pitheaps. I add my plea to that of my hon. Friend the Member for Dumbarton Burghs (Mr. Kirkwood) to the Chancellor, to consider the whole matter. With Income Tax operating on very low wages, these payments of 8s. to 12s. a. week in travelling expenses are a very serious consideration.

Sir K. Wood

I will consider the matter. Whether any provision of the kind suggested is practicable is another question. If concessions are made, someone has to pay for them. That is often forgotten. If we are to follow out the principle of the Budget, any concessions made will have to be borne by the country generally. One has to weigh in one's mind whether it is wise to put still further burdens upon the community as a whole.

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

Third and Fourth Resolutions agreed to.