HC Deb 29 June 1943 vol 390 cc1547-56

Sub-section (2) of Section thirty-one of the Finance Act, 1933 (which repeals Sub-section (4) of Section thirty-nine of the Income Tax Act, 1918), shall cease to have effect in so far as the said Section thirty-nine applies to members of a voluntary superannuation fund registered as a society under the Industrial and Provident Societies Act, 1893, who had become members of such a fund before the first day of April, nineteen hundred and thirty-three, and the said Sub-section (4) of Section thirty-nine of the Income Tax Act, 1918, shall have effect accordingly.—[Mr McNeil.]

Brought up, and read the First time.

Mr. McNeil (Greenock)

I beg to move, "That the Clause be read a Second time."

The purpose of this new Clause is a limitation of an object which I defined on the Committee stage. I and my hon. Friends then asked the Chancellor to accept a Clause which meant that the superannuation fund of the National Union of Journalists should have the investment of its capital exempted from tax as it was previous to 1933. In this new Clause we ask the Chancellor to apply that only to those members of the fund who made contracts between the date of its initiation in 1925 and 1933 because we thought that this would make the Chancellor's position easier. I do not want to detain the House with the history of this unfortunate affair. When the fund was initiated it was exempt from taxation of this kind. In 1933 the Section of the Finance Act designed to deal with the undistributed profits of the Cooperative Societies also applied to the funds of this Union. I think it is beyond dispute—at any rate the Chancellor has made no attempt to refute the statement —that that Section of the Act was never meant to apply to any other profits than what are called the trading profit of such mutual concerns. I am like the hon. Member for Bilston (Mr. Hannah), and unlike other Members who have spoken to-day, full of hope that the Chancellor will accept this simple proposition. It is plainly a simple proposition, and one with which I am sure the Chancellor is not unacquainted, that we should tax justly and that if we tax by accident we cannot be taxing justly. Moreover, the Chancellor said earlier that he was always glad when the supporters of a proposal indicated the cost of it. I meet that point very simply by reminding him that the cost of this to the Treasury is not minus but plus. If he cannot accept this Clause, then, as he knows, the fund will have to be wound up, because it is insolvent, which means that people who were making provision for their retire- ment may be forced to come back to the public purse for supplementation in their retirement.

Without taking up too much time, I should like to deal with the only point which the Chancellor has made against this proposal in the rather elaborate correspondence we have had on the subject. In saying that I should, perhaps, express immediately my indebtedness to the Chancellor and the Financial Secretary for the facilities they have provided for a discussion of this matter with their officials, though my feeling is that we did all the discussing. In his first letter the Chancellor decided against what he called more favourable taxation treatment to this fund, because he considered it would be a discrimination against mutual insurance concerns not registered under the Industrial and Provident Societies Act. The reply is very short. None of these mutual concerns at any time expected exemption in this fashion. None of them, therefore, based their benefits upon tables permitting exemption. They do not in any way compare with the fund for which we are speaking. Again, the Chancellor in his letter of 13th May seems by inference to be against the exemption because the fund provides for the members accepting what is called a cash option. He has indicated that if this fund can see its way to waive the claim to a cash option and provide only an annuity he might see things in a different light. The arithmetic of the situation rather baffles me, and I must point out that the officials offer no light on this arithmetic, but I say freely that if the Chancellor feels that he can say here firmly that the fund will be restored to its pre-1933 position if the officials take that step, then I will cheerfully go out of my way to persuade them to do so. But I should like a firm assurance. While I have no doubt about the logic or the justice of the case, I have slight doubt about the firmness of the assurance.

The third argument which the Chancellor produced in his correspondence is the old one that since this is not a fund to which employers are joint contributors it cannot be rated for exemption. I quite appreciate the principle behind this, the principle that if a payment is a compulsory one to permit a man to practice or fill any job it should be so rated, but I have pointed out that it means great hardship to the people in this industry, where a joint contribution is impossible. In his latest letter the Chancellor says that it is 10 years since this enactment was made, and he is apparently driven by that fact to shut his mind against making this change. That, surely, is a most unhappy argument. It is true that after their rather formal protests the officials of the fund sought in 1933 to set their house in order by increasing contributions and by reducing benefits, but is my right hon. Friend going to say solemnly that because for 10 years these people rather foolishly but quite honestly tried to meet the Act by which they were accidentally caught up that should be a reason against his accepting our present proposal? The arithmetic is that at that time it was a solvent fund and that to-day there is a deficit of more than £22,000.

Finally, the Chancellor says that any Clause granting relief would have serious repercussions and would give rise to other substantial claims. We know nothing of those other substantial claims. We believe, according to an actuary whom we have consulted, that there may be one other fund in a similar position. When we met the chairman of the Commissioners he was equally vague. But even if there are other substantial claims I still cannot understand the Chancellor's argument. If there are other funds which have been dealt with unjustly, is the Chancellor seriously arguing that that is an argument for not making an Amend-ment—that because there are other in-justices this one must continue? I cannot see that that is normal procedure at all. I have kept carefully to the arithmetic, and, as I see it, to the logic of this situation, but I should say that we are not dealing merely with an arithmetical proposition but are dealing with the provisions which some 350 people have made for their retirement. It is harsh, I think, and it is unjust, and I hope that even at this stage the Chancellor may see his way to change his mind. My hon. Friend the Member for Keighley (Mr. I. Thomas) made a joke earlier about the Chancellor suffering from an occupational disease which overtakes Chancellors. He is suffering, too, from an organic disease that seems to be occupational, much worse than the hardening of the arteries. He seems to be suffering rather badly from a hardening of the heart.

Mr. Lipson

I beg to second the Motion.

The object of this new Clause is to give my right hon. Friend the Chancellor of the Exchequer the opportunity to right a wrong, a wrong which was not intended but which was the indirect result of legislation destined to accomplish something quite different. It is true that only some 300 persons are affected, but I am sure the House will agree that its attitude towards an injustice should not be governed by the numbers affected. It is to its credit that it will be prepared to remedy a wrong where only a few people are concerned just as readily as to deal with one that concerns the many. This wrong was created 10 years ago, and the present position is that those who are responsible for the management of the fund are at the end of their financial tether. In 1925 certain journalists formed this financial association for the purpose of providing for their retirement, and within the law as it stood then they were exempt from taxation. As long as the law remained as it was then their fund was solvent and they were able to honour their commitments. Now, 18 years afterwards, at a time when many of them may reasonably have anticipated that they would enjoy the benefits of their sacrifices, they find the fund is over £22,000 on the wrong side. Unless this grievance is redressed the fund will have to be liquidated.

It seems to me that the law with regard to superannuation taxation is somewhat anomalous. If there is a superannuation Lund to which both employers and employees contribute the employees get better benefits and there is exemption from taxation; but if it is a superannuation fund to which only the employees contribute they get reduced benefits, obviously, because the income is smaller, and are also penalised by having to pay a tax upon their investments. That seems to be an application of the principle that to him that bath shall be given more abundantly and from him that hath not shall be taken away even that he bath which I am sure will not commend itself to this House as either right or fair.

I also ask the Chancellor to consider this point. If he says that it is impossible for him to make this concession, who will benefit as a result of that decision? The Treasury will not, because the fund will have to be liquidated and there will be no income which he can tax. On the other hand, men who have made provision for their old age will find that all their financial arrangements have been upset. I submit that those men, in forming this fund, have done something of which the Chancellor ought to approve. They have tried, out of their own resources, to make provision for their old age, and surely that is a piece of social service that must commend itself to him. At a time when the State is being asked to do so much for people it ought to be a pleasure to him to be able to help those who have tried to help themselves. Therefore, I appeal to him to try to help this union out of its difficulty. When the members entered into their financial commitments in 1925 they did so in good faith and their commitments were based on the law as it stood. Through no fault of their own, but through action taken by a Chancellor of the Exchequer and approved by this House, they now find that they cannot honour those commitments. I submit that as it was the Finance Act, 1933, which put the fund in its present unfortunate position, and as its difficulties are not due to any fault of management and administration, there is therefore a responsibility on the Chancellor to try to help to remedy the present position of the fund.

Sir K. Wood

My hon. Friend who has moved this new Clause has certainly put forward the case with great clarity and persistence, and I think that every argument that could be adduced in favour of some action being taken by this House, and by the Chancellor, he has put. Therefore there can be no regret on anybody's part, or any reflection that all the arguments have not been advanced. On his part, my hon. Friend will, I think, agree that at the Treasury, and by both the Financial Secretary and myself, as much attention has been given to this matter as if it involved the interests of thousands of people and very large sums of money. I was very anxious so far as this particular case was concerned—because I know some of the persons concerned, and I have, as a matter of fact, had this matter mentioned to me from time to time—that there should be no lack of any proper consideration and attention. I think my hon. Friend will also agree that we have given him every attention, and several inter- views, in the matter. I have myself personally gone into the matter in the hopes that I might have been able to do something directly in the way that my hon. Friend would desire—although, as I shall tell the House, I do not think, if certain steps are taken, that this fund need necessarily be wound up or the worst consequences, which my hon. Friend feared, in fact happen.

My hon. Friend has put down a different Clause from the one he put down on the last occasion. I know how difficult it is to draft these Clauses, and anybody who has not Government assistance will understand that it is no reflection on them that a Clause does not, as this does not, carry out the intentions of its promoters. The Clause, as my hon. Friend has presented it to the House, has little or no meaning because Section 39 of the Income Tax Act of 1918, to which he refers, does not apply to members of a society but only to the society itself. I do not rest upon that fact, hut am only informing my hon. Friend, and it would be impossible for the House to insert such a Clause into the Finance Act at the present time.

Two reasons were referred to by my hon. Friend—and I have already indicated them to him—why I am in difficulties in this matter. I did refer to the fact, which has its bearing, that all this had happened some 10 years ago. The matter has been going on for those years, and my hon. Friends are coming to me to-clay to put things right. I do not say that the matter should not be put right because 10 years have gone by, but it is made somewhat more difficult after all that time has elapsed. I am sure that my hon. Friend will appreciate that point. Again, I would not for a moment hesitate to take steps in this matter whatever the repercussions may be—although I should have to weigh them properly—and I would strain the position, if I thought there was considerable injustice or anything of that kind. I want my hon. Friend and the members of this society to feel assured that it is not because they are a small body of people that I am refusing, as they would think, to do them justice. In fact, it would affect others. What I am bound to take into account is that if I do vary the law and make it retrospective, as I should have to do, so far as these 350 people are concerned, I should have no answer to thousands of other people who could come to me and say, "You have already done this for a small section, and must in fairness do the same for us." That is the difficulty of repercussions of this kind.

If I were to revive the particular exemption which is desired for one class of industrial and provident society, I am advised that there might very well be claims from many other societies and clubs who lost their exemption as a result of the decision in 1933. In the position which I occupy, one is bound to have that aspect of the matter in mind. Glad as I would be to do so, I could not do it without taking into account that I should have no answer to applications from large numbers of other people for whom I must candidly say—the matter was fully discussed at the time—in right and justice little or no case can be made. The only other matter to be mentioned in connection with this small body of people is the unfortunate position in which they now find themselves, and it is not a question of justice or injustice. It is very unfortunate that this small group of people find themselves in the position that has, I believe quite fairly and properly, been represented to the House.

I have suggested to my hon. Friend—and I can give no undertaking as to what the consequences will be—that a certain course might be followed. At the Treasury we have been looking, and the Financial Secretary to the Treasury and myself have been looking, to see whether the position could be alleviated in any way. We think it could, and that it is worth the consideration of this body. Perhaps my hon. Friend would make this suggestion to them. It is that they should change their practice in regard to benefits and pay pensions instead of lump sums. The real fact is that it is because lump sums are paid that the society feels the incidence of the tax so much. In that event, the tax borne on investment income would be deducted from the pensions and would be treated by the Revenue as tax borne by the pensioner, to whom repayment would be paid if he were not liable to the tax deducted. I am anxious to help them if I possibly can, and these people would be well advised to seek this way out of the difficulty. I promise them this, that I will see that full facilities are afforded them for the discussion which may be necessary in this matter, and my hon. Friend may be assured that we are very anxious to assist this small group of people. If it is possible to be done in the way I have indicated, I am sure the House would be only too glad to see it so dealt with.

Mr. Ivor Thomas

The National Union of Journalists will no doubt consider with great attention the suggestion made by the Chancellor of the Exchequer and will be grateful to him for making it. I cannot forecast what their answer will be or what my own attitude to it will be, without due consideration. While I recognise the courtesy of the Chancellor of the Exchequer in this matter, as all the House will have recognised from his speech, I cannot see why he has turned down the particular proposal put forward by the hon. Member for Cheltenham (Mr. Lipson). He told us he did it on two grounds; firstly, that it would bring in a lot of other societies as well. It has been made abundantly clear that the fund in question, and any other fund which may be involved, are being taxed by accident. I have refreshed my memory about the Debate in 1933, from which it is obvious that the only funds in mind were those of co-operative societies. The right hon. Gentleman the Member for Devonport (Mr. Hore-Belisha), then the Financial Secretary to the Treasury, made that clear in his speech on that occasion. If it is desired to bring funds of another character under taxation, it ought to be done directly and not as an accidental appendage to some other provision.

The other objection made by the Chancellor was that he would have to make the benefit retrospective. That was new to mc. I do not think the society is asking for a retrospective benefit. It is new to me, and I have had something to do with this subject. As I understand the matter, the society would accept benefit from the present time onwards. This is socially a most desirable fund. It is intended to benefit free lance journalists—not the normal staffs of newspapers—those who are pursuing a profession that is harder than any other that I know of, with the exception of the stage. If the proprietors could be brought to agree, it might be possible to frame a scheme exempt from taxation as office schemes are. That has not been possible. Therefore this taxation affects a class who are hard hit already. We are grateful to the suggestion made by the Chancellor of the Exchequer and it will be fully considered by those concerned.

Question, "That the Clause be read a Second time," put, and negatived.

Dr. Russell Thomas

Would it be convenient at this point to ask you, Mr. Speaker, whether it is your intention to call the Clause I sent in relating to the relief from taxation of members of a fund where the employees make a yearly guaranteed payment into the fund? I sent it in a couple of days ago.

Mr. Speaker

The hon. Member sent me a manuscript new Clause. I do not propose to select it. Although it is in Order now to accept manuscript new Clauses—it never used to be—I think the opportunity of putting down the Clause should have been taken. It is not fair to the Treasury or to any other Department that I should accept manuscript new Clauses at the last moment when there has been ample time to put them on the Order Paper.

Dr. Thomas

The post is at fault.

Mr. Speaker

I am not responsible for that.