§ Mr. Holmes (Harwich)
I want the House to consider a domestic matter, the question of Ministers' salaries and their assessment to Income Tax. Perhaps I may be allowed just for the moment to remind the House that Income Tax is assessed under five headings; Schedule A is on land and buildings; Schedule B, in inspect of occupation of land; Schedule C, on interest and annuities; and Schedule D on the profits of all kinds of businesses, on the income of professional men, on interest from Dominion and foreign securities and in respect of annual profits not included in any other Schedule. Then we come to Schedule E, which is on the profits on all offices, employments and pensions. That applies to Members of Parliament or a Minister. Each receives a salary. Schedule E has a number of rules attached to it. One of the rules is that a reduction is allowed formoney wholly exclusively and necessarily expended in the performance of duties.The right to that deduction applies to everybody receiving salary, wages, fees, commission, or any other form of remuneration. It applies to Members of Parliament, who are entitled to ask that a deduction shall be made from their £600 a year in respect of money which is "wholly, exclusively and necessarily expended in performance of" their duties as Members of Parliament. The result is that Members of Parliament in some cases get the whole of their £600 a year allowed, or a large proportion of it, because they are allowed to charge against the £600 a year secretarial expenses, stationery, postages, telephones, and similar out-of-pocket expenses. Also, if they reside in London they can charge all hotel living expenses in their constituency, or if they live in their constituency and the constituency is not in London, they can 2550 charge the whole of their expenses of living in London while they are attending the House of Commons. That is a right which they have under this rule, a rule which applies to every salary and wage earner in the country.
This is the point I want to bring before the House. If a Member of Parliament becomes a Minister, he ceases to receive his salary of £600 a year, and it is then held by the Commissioners of Inland Revenue that the expenses with regard to his constituency or his expenses of living in London are not wholly, exclusively and necessarily incurred in performing his duties as a Minister. The result is that when he becomes a Minister he has to pay out of his taxed income all the expenses which he as a Member of Parliament was previously entitled to deduct from his £600 a year.
I will give a couple of examples of how this works. The Prime Minister has seen fit during this war to invite talented men who were not Members of the House of Commons to join his Ministry. He may do so again at any time. A seat has to be found for such a new Minister. Let us assume that the man had been a very successful business man, and had an income, from the money he had saved, of £20,000 a year. I want in the first place to point out the position of a man who has £20,000 a year now, as compared with the position of such a man in 1938–39. In 1938–39, after paying Income Tax and Surtax on his £20,000, he retained for himself—it depended, of course, on what allowance he got for dependants and so on—roughly £12,500. Under our present taxation, out of his £20,000 he retains £3,750. The Prime Minister invites a man in that position to become a Minister. He says to him, "You will have a salary of £5,000 a year, and we shall have to find you a seat in the House of Commons." Of the £5,000 a year Ministerial salary, the Chancellor of the Exchequer would take in Income Tax and Surtax £4,875, so that the man would receive 5,000 shillings —£125. He is found a seat in the House of Commons. He has an income of £3,750 from his own investments and £125 from his Ministerial salary of £5,000. That is a total of £3,875. But he will have to spend out of his own income the cost of his constituency, which is not likely to be less than £600 a year.[HON. 2551 MEMBERS: "Why?"] Well, I will say £400 if you like.
§ Mr. Holmes
You have also to include the cost of your residence in London. A good many Members on that side may not spend much money on their constituencies, but they are able to charge up the whole of their living expenses in London while attending Parliament against their £600 a year. I am going to take it that the man has to spend the whole £600 on his Parliamentary duties. Before he joined the Government he had left out of his income after taxation £3,750. He becomes a Cabinet Minister with £5,000 a year, and he finds that his net income is £3,275. It is a farcical situation.
§ Earl Winterton (Horsham and Worthing)
The hon. Member talks as if this were a new situation. It has been the position, so far as the Tory Party and the Liberal Party are concerned, ever since I came into the House that people on becoming Ministers had to give up part of their income—directorships and so on. There is nothing new about it.
§ Mr. Holmes
I am not dealing with people who have to give up directorships and so forth: it is a matter of taxation. It is no good the noble Lord talking about when he first came into the House, because there was then no Parliamentary salary. It is only since Parliamentary salaries were instituted that the matter has arisen, and it is of increasing importance, first, because the Parliamentary salary has been raised from £400 to £600, and, secondly, because taxation is very much higher. It is absolutely farcical that a man can be invited to become a Minister, can be offered £5,000 a year as a Minister, and can find himself, quite apart from giving up fees—I purposely said that I was dealing with income from investments—£400 or £500 a year worse off than he was before he accepted the position. It would be much better for him to say, "I will do the Ministerial job for nothing, and if I get into the House I will take my £600 a year."
Take the case of a junior Member. He used to have his Parliamentary salary of £600 a year, out of which, on constituency 2552 expenses and so on, he had to spend possibly £400; so he paid Income Tax on £200. In addition, perhaps, he had a small appointment or a trade union grant of, say, £500 a year, which brought him up to a taxable income of £700. When he becomes a Minister he is no longer able to charge up the expense of £400 a year which he incurs by living in London or for which in other ways he can claim. He is worse off by Imo or even more a year by accepting a Ministerial post of £1,000 a year.
§ Mr. Mathers
And almost certainly he loses his trade union grant, because normally trade unions do not pay grants to Ministers.
§ Mr. Holmes
That is what I am assuming. I was assuming that he had previously his £600 a year salary and £400 to £500 from the trade union.
§ Mr. Holmes
Well, that may be so. I am in agreement with my hon. Friend. This is a most unfair situation. So far as I know it has never been challenged by any Minister. I feel that there are two men who ought to challenge the ruling of the Commissioners of Inland Revenue that a Minister is not entitled to charge his expenses against his Ministerial salary. Those two are the Chancellor of the Exchequer and the Financial Secretary to the Treasury—for this reason, that they must be Members of the House of Commons. Any other Ministerial office, so far as I know, may be held by a Member of the House of Lords, but it is essential that the Chancellor of the Exchequer and the Financial Secretary to the Treasury shall be Members of this House. I hope that my hon. Friend the Financial Secretary might consider whether he might not give the Commissioners a run on this point; and if he would like someone to represent him professionally on that occasion I shall be only too happy to do so without any fee. This is a matter for the House of Commons. It cannot be raised by the Ministers themselves. I feel that we, as ordinary Members, should make a gesture on this matter, that we should say, "This is unfair and it should be put right."
The proposal that I want to put forward is that where a Minister is a Member of the House of Commons his salary 2553 should be reduced by £600 a year, and that he should continue to receive his Parliamentary salary of £600. Take a Minister with £1,500 a year. If he were a Member of the House of Lords he would receive his £1,500, and he would pay full tax on it. He could not charge any expenses. If the junior Minister were a Member of this House, his salary would be reduced to £900 a year, and he would get in addition £600 a year as a Member of this House. He would then have the right to charge against that £600 a year the expenses which he necessarily incurs in carrying out his duties as a Member of Parliament. I hope that there will be a gesture on the part of the House, on the grounds of fairness and justice, to indicate to the Chancellor of the Exchequer and to the Prime Minister that the other Members of the House, who are not concerned in this matter, would like this alteration to be made.
§ Earl Winterton (Horsham and Worthing)
I did not intend to speak in this Debate. I think that everyone will sympathise with the case that has been made by my hon. Friend, but I most sincerely hope that the Government will not make the concession which he asks for, in wartime. Nothing would be more unfortunate, however strong a case there was for it, than to make such a concession for Ministers or private Members in time of war. When my hon. Friend talks about people being worse off as a result of taking office at £5,000 a year, I do not want to be sentimental, but let him think of the hundreds and thousands of men who have given up salaries of £3,000, £4,000 and £5,000 a year and are now ordinary private soldiers or subalterns. I think we ought to have a Motion on the subject and a big debate after the war, but I hope that the Government will not make the concession now. This is not the time for Members of Parliament to make an accretion to their own salaries, while these questions of pensions and Service pay and other things are still unsolved. I hope that my hon. Friend, who has done a great service in bringing this matter forward, will be content with the assurance, which I am certain he will receive, that this is not a matter that can be dealt with at the present time.
§ The Financial Secretary to the Treasury (Mr. Assheton)
I am sure the House will be grateful to the hon. Mem- 2554 ber for Harwich (Mr. Holmes) for raising this matter, which is of considerable interest, no doubt. It is a somewhat delicate position for me to reply to a Debate on this subject, as I am one of those affected by the proposal: The hon. Member is quite right in saying that, as the law stands, there are Ministers, particularly junior Ministers—of whom I am one—who do in fact lose rather than gain by taking office. The other day a Question was put to my right hon. Friend the Prime Minister by my hon. Friend the Member for South Croydon (Sir H. Williams), and if I may refresh the memory of the House by quoting my hon. Friend's Question, it will perhaps help us. My hon. Friend asked the Prime Minister:whether, having regard to the fact that Ministers who are Members of the Commons House of Parliament are not in receipt of salaries as Members of Parliament and, accordingly, cannot claim for Income Tax purposes against their salaries as Ministers the expenses which are deductible against their salaries as Members of Parliament, he will move to appoint a Select Committee to consider the situation, more particularly as it affects junior Ministers?In reply to that my right hon. Friend the Prime Minister said:This matter was discussed by the House during the Debates on the Ministers of the Crown Bill, 1937. Undoubtedly, the position as stated by my hon. Friend discloses a case requiring consideration, in respect of junior Ministers. The Government have not, up to the present, felt themselves able to make any recommendation to the House."—[OFFICIAL, REPORT, 6th July, 1943; cols. 1929ǵ30, Vol. 390.]I have nothing further to add to what has already been said on that subject, but none the less I am sure that the House will understand the honourable motives of my hon. Friend who introduced it.