§ In the course of the Finance Bill Debates last year, a number of my hon. and right hon. Friends, in all parts of the House, pressed for an extension of the housekeeper and dependent relative allowances, and urged that at the present high level of taxation considerable hardship arose from the conditions attached to these allowances. The Committee will remember that, while I had to point out the difficulty of making in war-time concessions which had been refused in peace-time, I promised that these representations should receive my consideration before this year's Budget. I have decided, in the light of this consideration, to propose certain reliefs, which are directed to meeting certain broad and clearly defined types of cases in which substantial hardship may exist and where it has certainly been accentuated by our present heavy taxation.
§ My first proposal is to widen the scope of the housekeeper allowance. The existing law gives a deduction of £50 from income in respect of a housekeeper maintained by a taxpayer who is a widower or a widow, or in respect of a widowed mother or other female relative maintained to look after young brothers and sisters. The allowance for a widower or a widow was originally given only where there were young children to be cared for, but in 1924 this condition was dropped, with the result that the widower or the widow obtains the allowance merely on the ground of the maintenance of a resident housekeeper. Although I do not propose to disturb it, I am not sure that this extension of 1924 was a wise one. It was a great source of complaint on behalf of other taxpayers that they had not the same allowance as the childless widow or widower if they employed a 957 housekeeper. My proposal for widening the sphere of the housekeeper allowance is founded primarily on the presence in the home of young children and the absence of a wife who can perform the normal maternal duty of looking after the home and the children. I propose, accordingly, to extend the scope of the housekeeper allowance so as to grant it to any taxpayer who is entitled to the Income Tax reliefs in respect of a child or adopted child and employs or maintains a resident housekeeper. There must be the proviso that the taxpayer is either entitled to a single personal allowance or, if entitled to the married personal allowance, can show that the wife is permanently incapacitated, and that he must, therefore, have a resident housekeeper.
§ This will extend the relief to the following types of cases not covered by the existing law: First, the single taxpayer who has to maintain young brothers and sisters is at present entitled to the housekeeper allowance only for his widowed mother or a female relative, but under my proposal he will get the allowance for a resident housekeeper, even though she is not a relative. Secondly, where, owing to separation or divorce, the family does not include husband and wife and the married allowance is therefore not due, the spouse maintaining the children and entitled to the Income Tax allowance for the children will be able to claim the housekeeper allowance for a resident housekeeper employed to look after the home and the children. Thirdly, where the wife is permanently incapacitated and there are young children qualifying for the Income Tax allowance, the housekeeper allowance will be given to the husband who employs a housekeeper to look after the home and the children. The type of incapacity which has been particularly pressed is that of the wife who is permanently incapacitated and, by reason of physical or mental illness, is no longer in the home, but I do not propose to limit the new relief to such a type of case. It will extend also to cases where the wife is still at home, provided it is established that she is totally incapacitated throughout the year of assessment. This is a condition that I must emphasise. I do not think, however strong the human appeal may be, that I could propose an allowance for 958 the cost of a housekeeper where the incapacity of the wife may have existed for only part of the Income Tax year. I ask the Committee to accept what I propose as meeting the general case as well as anyone can expect it to be met, at any rate in war-time. The proposed extension of the housekeeper allowance will cost £2,000,000 in a full year, and I am advised that this extension of the relief will benefit about 100,000 householders.
§ I now come to the dependent relative allowance. This allowance is a deduction of £25 from income in respect of a dependent relative who is incapacitated by old age or infirmity, and whose income from all sources does not exceed £50. I propose to increase the allowance from £25 to £50, which will bring it more into accord with the allowance for a wife and the allowances for children. I also propose, in order that the full value of the concession may be obtained, to replace the existing income limit of a flat maximum of £50 by a marginal arrangement based on the existing personal allowance of £80. At present the grant of the allowance is limited to the case of a dependent relative whose income does not exceed £50. If his income is just below that figure, the full rate of the allowance is granted. If it is just above, no allowance is given. I propose that, where the dependent relative has an income of £30 or more, the allowance shall be adjusted in such a way that the total of income and allowance together will amount to £80. The effect of this will be that nearly 500,000 dependent relatives with incomes of between £50 and £80, who are at present excluded from the allowance, will be brought within the scope of the concession.
§ Many of those who will now be included for the first time will be old age pensioners who, as a result of the extension of supplementary pensions, have an income of just over £50 and have hitherto been outside the present arrangement. At the other end of the scale, the cases in which the income is below £30 will qualify for the whole benefit of the increase of £25 in the allowance, while those cases where the income is between £30 and £50 will qualify for increased benefits in varying proportion. A further benefit which will flow from the increased allowance proposed is that it will remove the anomaly of the case of the invalid child who has reached 16 years of age. The 959 Committee will remember that at this point the case becomes one of the dependent relative allowance, instead of the child allowance, and accordingly the amount of the allowance has hitherto fallen from £50 to £25. This will no longer be so, and the full allowance of £50 will continue to be granted. The increase of the allowance to dependent relatives will cost about £7,000,000 in a full year. I commend these proposals to the Committee for their acceptance, and I hope the Committee will recognise that, in the present financial circumstances, they represent a sincere endeavour to meet the wishes of the House in regard to the tempering of the Income Tax charge so as to bring relief to cases of hardship, particularly at the present difficult time.