HC Deb 14 October 1943 vol 392 cc1059-180

Order for Second Reading read.

The Chancellor of the Exchequer (Sir John Anderson)

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

I feel myself to be to-day in a very special sense the successor of the late Sir Kingsley Wood. The plan which I have to present to the House was his; the White Paper explaining it had been completed for presentation at the time of his death. I know how much thought he had given to this question, and I ought to make it quite clear to the House that the Bill as it has been introduced embodies in every detail the plan which he drew up. In whatever form it may emerge, the plan, beneficent in purpose and in effect, will remain essentially the last achievement of Kingsley Wood, and his name will always be honourably associated with it.

Before turning to the plan itself, I think it will be convenient if I make a few remarks on the nature of our Income Tax system—a matter of some little complexity—for it is important that modifications in the system such as we are concerned with to-day should be examined in the light of the general structure and principles upon which the structure is founded. The aim of our Income Tax system, which I have heard described, like our Civil Service, as "the best in the world," is to collect from every taxpayer throughout his life, year by year, by a process of annual assessment, a sum payable according to his financial circumstances in the particular year and to the rates and conditions of Income Tax for the time being in force. The practice and procedure of the Revenue Department have had to be adjusted from time to time to meet the varying circumstances of the different classes of taxpayers. But such practice and procedure must always, in the course of critical examination, be subject to this test: How far do they achieve the aim which I have just stated? I referred a moment ago to variations of procedure. There are two such variations as between the different classes of taxpayers which are of special importance Lin the present connection. One relates to the period on which calculations are based in determining tax liability for any particular year. The other variation concerns the time in which the taxpayer is required to discharge his tax liability for any particular year. These variations are both of importance, because they affect the question of the carry-forward of tax liability beyond the end of the year of charge.

Now as to the period on which calculations are based. Normally the practice is to take a past period, and that has the obvious advantage that calculations can be made on the basis of ascertained fact. Such a system involves this, that under it adjustments have to be made at the beginning and end of the taxpayer's Income Tax life. That also is of importance. As regards time of payment also, there are variations between classes. Taking the two together the variation in the basis of calculation and in time of payment, the result we have at the present moment is that in the case of the manual wage earner the basis of calculation, the basis of assessment, is the earnings of the current year and the payment of tax begins from the 11th month of the year of charge. That is to say, that the tax for the Income Tax year beginning in April, calculated on the income of that year, begins to be collected in the following February and it runs on month by month for one year. In the case of salaried employees in general and of non-manual wage earners the basis of assessment is the preceding year. Payment in this case runs from the 8th month. That is to say, from November for a period of 12 months. In the case of Crown employees and certain salaried railway employees the basis is the preceding year but payment begins from the first month and is, therefore, completed within the course of the year of charge. Those are the three variations with which we are concerned to-day. It is important to remember that, in considering the changes we are now proposing to introduce. Pay-as-you-earn will be a new practice. It means paying out of current earnings, on the basis of current earnings.

I do not think it will be necessary for me to describe in detail what is already in the White Paper. The central feature of the scheme, as hon. Members will have observed, is that deduction of tax keeps in step, not only with weekly earnings but with the accruing liability up to date. Thus, the nature of Income Tax as an annual tax, is preserved, since at the end of the year the deductions would be equal, with insignificant variations one way or the other, to the true liability and at any intermediate time during the year the amount deducted is related to the amount so far earned. This removes the great objection to which all other schemes have been found to be subject, that they have regard only to the income of the particular week. Such systems mean that in millions of cases too much must, inevitably, be deducted over the year, and repayments then have to be made at the end of the year. We avoid all that by this plan.

The new system keeps in step, as I have said, with the growth of earnings, and where earnings fall, it gives relief even to the extent of prompt repayment, where circumstances alter so that too much has been paid. Adjustments are automatic, whether they are caused by variations in income or by changes in the taxpayer's domestic circumstances during the tax year. Repayments, when due, will be made automatically by the employer in normal cases. Where the wage-earner, however, becomes unemployed for any appreciable time, the Revenue Department will make the repayments; and where unpaid sickness lasts for any length of time, arrangements will be made for repayment of tax, if due, during sickness, without waiting for a return to work. The House will no doubt agree that such a system provides an admirable solution for the problem of the wage-earner and removes all the difficulties with which we have been familiar and which arise under the present system, where the earnings fluctuate, and the tax on high earnings has to be recovered from low earnings. There is also the difficult problem of seasonal industries, and there will be the much greater problem of adjustment after the war to peace-time conditions, with changes in working hours and individual employment which must inevitably result in some instability in earnings. By the introduction of this new system the wage-earner will be placed on a footing which ensures that the weekly tax liability automatically adjusts itself to any of these changes.

I come now to the scope of the plan. The remarks which I made at the beginning about the general features of our Income Tax system were intended to lead to what I now have to say about scope, and I recognise that this may well be the main point to which the House may wish to direct criticism. It is important to realise that the main justification for this plan is to be found in the element of fluctuation and instability of earnings. Until the combination of the present high rates of tax with the wide incidence of tax arose in this war, as a result of the inclusion of many millions of wage-earners, the existing system gave rise, I think one may fairly claim, to no serious difficulty. But the weekly wage-earner often lives of necessity on a weekly budget, and it is especially desirable in his case, not only that the tax should be assessed on current earnings, but that it should be collected from current earnings. I would not seek to contend that the salary-earner never suffers from fluctuations or instability, but these are nothing like so common as in the case of weekly wages. For the most part, the man on an annual salary has a regular income, to the continuance of which he can look forward, and, indeed, taken over the years, the salaried worker, normally, is on an ascending scale of income in the course of his career. Where there was pressing need for action, therefore, was in regard to weekly wages, and it is, in fact, in relation to that case that the great demand in the House and outside has been over the last few years, for some reform of the system. The new plan might, therefore, have been limited to the manual wage-earner. Incidentally, may I say that ever since the last war the manual worker has been recognised as in a different category from other employees and his taxation system has, in fact, differed accordingly? Since 1915 he has been assessed on the earnings of the year, either by quarterly or by half-yearly assessments, while others as I have explained, have been in the main on the basis of the earnings of a past period. There would, thus, have been good precedent for applying the new scheme to manual wage-earners only. The late Chancellor of the Exchequer, however, thought well to include others whose earnings are similarly computed and whose circumstances are generally similar, by bringing in all weekly wage-earners and not merely manual wage-earners as previously.

I indicated earlier in my speech that large changes in the Income Tax system must have regard not only to the basic principles of the system but to the actual structure of the system as we find it. The case for change in regard to the weekly wage-earner was, in my opinion, overwhelming. The case for other classes is, I think, by no means so clear. So far as salary-earners receive increasing incomes over the course of their career, the present system of assessment on the preceding year's income actually operates somewhat to their advantage. A change to a current basis would obviously bring any increases of income into assessment one year earlier in every case. Moreover—and this is an important point which is often overlooked—the salary-earner is safeguarded against hardship caused by a serious drop in income, by the provision of the present law which allows a reduction of assessment from the preceding year basis to the current year basis, where the fall in income exceeds 20 per cent. That was a change introduced by legislation in 1940, I think in the second Finance Act of that year.

Mr. Benson (Chesterfield)

That applies only to war-time conditions.

Sir J. Anderson

It is perfectly true that that change was introduced in 1940 to meet war-time conditions. Anyhow, it is a provision of the law at present in force, and I think I am right in saying that it is frequently overlooked. Letters which I have received show that.

Now I come to the question of remission of tax. The desire which may be felt in this House, in some quarters—and it may be general—for an extension of the scope of the scheme of pay-as-you-earn is, I expect, influenced to some extent at any rate by the provision which we have made in this Bill for discharge of tax and by a perfectly natural wish to see that any concession of that kind should be extended. But it is my duty to point out quite plainly that the discharge of tax is not given in this scheme for its own sake, or as a concession justifiable in itself. It should rather be regarded as the essential price which has to be paid for the benefits of the new system because of the extreme difficulty of imposing a double charge in a single year. Viewed in that way, it is fair to ask whether the price should be paid for those classes of taxpayers where the need for the change is not so imperative as it is for the weekly wage earner.

If Income Tax were being started afresh as a new tax, I have no doubt that the new system would be applied universally to employment. It has many undoubted advantages. But we have to consider the existing position and the strength of the case for large changes as well as their cost. As Chancellor of the Exchequer I must examine most carefully the debts which I am asked to wipe out in order to meet the plea that the time-lag in collection should be removed for everyone. I must point out that the time-lag is, in essence, time granted by the Exchequer to the taxpayer and is not an imposition but an easement and as such is not, in itself, a very obvious ground for further concessions.

The tax to be discharged in the case of the weekly wage-earner means, in essence, giving up claims which would have been made on the taxpayer later on, when, as we hope, the burden of war taxation may in some measure be relieved. The experience of the last war shows however that arrears of war taxes are specially difficult to collect in the case of weekly wage-earners when conditions of employment change after the war. The remission therefore of the outstanding tax balance affects in their case something which would to a certain extent—to an incalculable extent—be a doubtful debt in the future. Any wholesale extension of the plan, however, would raise different considerations. In the case of large incomes the arrear of tax outstanding represents money a very high proportion of which undoubtedly will ultimately reach the Exchequer. I could not, in the crisis of a great war, when so much uncertainty enshrouds our financial future, lightly forgo a claim to many millions of pounds—a claim which is in every respect legitimate and reasonable.

The discharge proposed in the plan before the House amounts, after the deduction of post-war credit, to £125,000,000. No one can say how much of this amount would in practice have had to be written off in any case, but it certainly would be a considerable proportion. If all employments were included in this scheme a further discharge of £60,000,000 would be involved, and that unquestionably is money which would be in the main recoverable. It is true that in other countries some forgiveness has been given for tax arrears, on the adoption of a pay-as-you-earn system, for all levels of salaries, but I believe those countries had no system of payment by deduction such as exists in this country, a system which has enabled existing arrangements to work comparatively smoothly for classes other than wage-earners.

My mind is not closed, however, to the possibility of reconsidering the scope of the scheme. While I could not agree to wholesale extension accompanied inevitably by a very large remission—though I regard the principle of pay-as-you-earn as valid and suitable for general application at the proper time and in the proper way, and should like to work up to that—I have been giving very serious consideration to the case of salaried workers in the lower salary ranges. I recognise that a strong case may be made for early action in this matter, for these lower salaries, and if the opinion of the House as expressed in debate should be in favour of such a concession, limited to that class, I shall be quite ready to come forward with suitable proposals on the Committee stage. In view of the reasons that I have indicated an Amendment for this purpose would have to be by way of the inclusion of all salaries, however paid, below a certain annual limit. Such a system of income limitation is not free from difficulty, and I believe the late Chancellor was deterred from making any such proposal as I am now hinting at by the prospect of serious anomalies arising owing to fluctations of earnings on either side of the dividing line. If such an extension as I have suggested is made, what I may call the "in and out" difficulty will have to be met by the adoption of this simple principle for every individual taxpayer—"Once on pay-as-you-earn, always on pay-as-you-earn." I do not think the House will expect me to say more on that point at this moment. [Interruption.] It would apply to personal emoluments; it would not apply to anyone who is not in Schedule E.

I turn now to the operation of the scheme embodied in the Bill. The employer's part in its working is going to be of the greatest importance. The scheme will involve an increase of work for employers as a vital contribution which is needed in order to realise the benefits of the plan. This is unquestionably an unfortunate addition to have to make in wartime, when staffs have been cut down, but I feel no doubt that in the interests of the workpeople the employers will be ready to shoulder this burden.

Sir Granville Gibson (Pudsey and Otley)

Will the Minister of Labour be encouraged to return some of the employees to assist in that work?

Sir J. Anderson

My predecessor was at great pains to make certain of the feasibility of the plan, and he consulted with representatives on both sides of industry, from whom the scheme had a most favourable reception. I recognise that the new system involves additional pressure of work on pay day, since under the old system the tax to be deducted could be entered in pay sheets in advance. If as a result it should be found in some cases that a slight adjustment of the existing arrangements for payment of wages is desirable, I feel sure that employers will have the fullest co-operation of their employees, who stand to gain so much from this scheme.

It is the initial stage that will be the most difficult. It is important that all should understand the working of the scheme well in advance. The Inland Revenue—and here I should like to pay a tribute to the work that has been done by the Inland Revenue in preparing details of the scheme—will do everything possible in this direction by explanatory literature and broadcasts; and a specially trained staff will be available to help employers and representatives of labour locally, to expound the scheme to them and as far as possible officials will be available to visit individual employers who require assistance. The first step in publicity has been the issue of a cheap edition of the White Paper, of which half a million copies have already been sold.

I will not weary the House with a long exposition of the Bill itself, particularly in view of the full explanation contained in the White Paper and the Explanatory Memorandum attached to the Bill, but there are a few points to which I ought perhaps to call attention. Clause 1 of the Bill deals with the persons affected. The scheme includes, as that Clause shows, first of all everyone employed by way of manual labour. It adds to these all weekly wage-earners, with certain exceptions, to which I will refer in a moment. The definition of weekly wage-earner follows that embodied in the existing law, since the Income Tax Act, 1918, defines weekly wage-earners as persons who receive wages calculated by reference to the hour, day, week or any period less than a month. The exceptions which I mentioned are Crown servants and certain railway officials who are already taxed under special arrangements and have deduction schemes which run throughout the tax year. These classes do not have in fact any time-lag in the collection of their tax, and there is not therefore the same need of a change in the basis as in the case of the classes affected by the Bill. Clause 1 (3) provides that the incidence of the plan shall depend on the conditions obtaining before it was announced. This is necessary in order to fix the population to be given code numbers under the scheme and to prevent deliberate changes in methods of payment in order to alter the incidence of taxation.

Mr. Bowles (Nuneaton)

In Clause (2, b) is it not possible for a man to be in and out of the scheme every week? He may have a basic salary of £150 a year, with commission. He may be a commercial traveller, and his earnings may be greater in one week and less in the next.

Sir J. Anderson

I do not think that would be quite the result, but I have indicated that so far as the suggested salary limit is concerned I favoured the principle of "Once on pay-as-you-earn always on pay-as-you-earn."

Clause 3 provides for transition from the existing to the new system and for the discharge of tax. It would be impracticable while the change is taking place to make the half-yearly assessments for manual wage-earners under which tax would be deducted next February and March. As explained in the White Paper, provisional deduction will be made in those months subject to adjustment later if those deductions prove incorrect. Subsection (7) gives power to make these provisional deductions, and as this provision relates to the charge of tax for the current year a Resolution will be necessary. A Resolution is on the Order Paper and will be moved at the end of the Second Reading. The provisions for discharge are, as I have explained, intended to avoid anyone having to pay two lots of tax out of one income. Discharge is therefore given only while the taxpayer is subject to deduction under the new system, except that this limitation does not operate if the taxpayer dies, becomes unemployed or ceases his occupation. Sub-section (5) deals with post-war credit. This credit—it is a somewhat elusive point—is the amount of extra tax paid in any year by reason of the cut that was made in the allowances in 1941. The taxpayer does not therefore become entitled to the post-war credit for the year—this being a matter which, like assessment, goes by complete years and not shorter periods—until he has paid the amount of tax for that year which would have been chargeable on the basis of the higher allowances. The cancellation of tax for the current year will therefore reduce the amount by which the tax payable exceeds the tax bill for the year on the pre-1941 basis and will therefore operate to reduce or even to wipe out the post-war credit for that year. This means that the taxpayer's post-war credit for 1943–4 will he limited to any amount by which the two-twelfths in the case of the manual wage-earner or five-twelfths in the case of others which he actually pays exceeds his liability far the year on the old basis. In the case of those who would not have been liable for tax but for the cut in allowances the whole of these two-twelfths or five-twelfths which they pay will still rank as post-war credit. No-one's post-war credit for any other year of charge will be affected, and in the case of those coming under the new system it should be remembered that the tax payable by them from April next will immediately begin to rank for post-war credit for 1944–45.

Sir Adam Maitland (Faversham)

Would it be convenient to say how much is the total sum which will not be credited by the Treasury in respect of the charge he has just outlined in respect of post-war credits?

Sir J. Anderson

The proportion varies according to the income and the allowances to which the taxpayer is entitled, but I could give the thing roughly at once in this way. Taking the whole body of weekly wage-earners, the gross amount of outstanding tax, that is the ten-twelfths or seven-twelfths to be discharged, is £250,000,000, and against that there is £125,000,000 post-war credit to be set. That leaves a balance of £125,000,000.

Mr. Woodburn (Stirling and Clackmannan, Eastern)

Would the right hon. Gentleman arrange that whoever is winding up the Debate might give a concrete example of how this really works, because it is impossible to disentangle it?

Sir J. Anderson

I said it was a somewhat elusive point, but I am sure my hon. Friend will be glad to accede to the hon. Member's request.

It will be obvious that provision must be made to meet the cases of persons whose circumstances change in the future so that they move from the pay-as-you-earn system to the old system, or vice versa. That is not affected by what I said about the principle of "Once on pay-as-you-earn always on pay-as-you-earn," because I was dealing then with the question of a salary limit; there will still be some transfers as for instance when a man moves from Schedule E to Schedule D and the other way about. This question of transfer from one system to another is not entirely new. Within the field of employment there are already three systems in operation: the manual wage-earner assessed half yearly, the employee assessed under Schedule E and Crown employees who have a system of current deductions. The present Bill covers all the provisions that are urgently necessary in order to bring the new system into operation next April, but other questions, such as this matter of transfer from one system to another, will have to be carefully considered over the course of the next few months, and proposals made to cover them in next year's Finance Bill.

This war has laid many burdens, not all of them financial, upon our people, and I think we all agree that the spirit in which those burdens have been accepted, and particularly the manner in which the terrific burden of direct taxation has been borne by all sections of the community, and certainly not least by that section which was brought for the first time during the war within the range of Income Tax, is a tribute to the quality of the nation and a fine example to the world. I recall that in 1915 a predecessor of mine found it necessary, in view of the unprecedented height to which the Income Tax had been raised, to introduce a special measure of easement. The tax was then a graduated one, rising to 3s. 6d. in the £ as a maximum on earned income. Times have indeed changed. I am glad that it should have fallen to me, as my first public act as Chancellor of the Exchequer, to present in this House a Measure which, without impeding the volume and even flow of revenue into the Exchequer, will, I believe, substantially ease the burden upon that section of the community least able to bear it. I hope the House will accord its approval to these proposals by unanimously agreeing to the Second Reading of the Bill.

Mr. Lewis (Colchester)

Before the Chancellor of the Exchequer finishes will he answer one question? He told us that if this pay-as-you-earn system were extended to all classes of salaried workers, it would involve the Exchequer in a loss of approximately £60,000,000. He then told us that he was considering the possibility of extending pay-as-you-earn to the lower-paid grades of salaried workers only. Could he give us some idea of what that would cost the Exchequer?

Sir J. Anderson

I had not intended to be very specific on this point, but perhaps I should say a little more than I did. If the House will not hold me to every detail, I may say that what I have in mind is this, that the line should be drawn at a salary, or equivalent emoluments on a whole-time basis, excluding such incidental items as overtime, of £600. On that basis the loss of revenue, after taking into account post-war credit but not taking any account of possible bad debts, would be of the order of £7,000,000

Mr. Pethick-Lawrence (Edinburgh, East)

I should like at the outset to associate myself with the remarks which fell from the Chancellor of the Exchequer in appreciation of his predecessor. We all recognise that the late Sir Kingsley Wood devoted a great deal of his time and thought to the proposal which is embodied in this Bill, and that in spite of the very great difficulties in putting forward any such scheme he persisted until the scheme embodied in the Bill was actually evolved. It was a sign of the flexibility of his mind that he was not bound by any preconceived notions and was willing to examine, and ultimately to embody in a specific scheme, proposals which are of very great advantage to the manual workers of this country. I should also like to associate with that appreciation one word regarding the Financial Secretary to the Treasury. He has devoted a very great deal of thought to this matter, and I think we owe him a great debt of gratitude for his part in producing this particular scheme. Having said that about the late Chancellor of the Exchequer and the Financial Secretary, I think that we must extend very grateful thanks to the present Chancellor of the Exchequer, because in this very early stage of his new office he has shown that he too is prepared to keep an open mind and to meet the wishes which have reached him, no doubt, from all parts of the country and from Members of this House; and in preparing the scheme I am sure his experience in what I may call the chrysalis stage of his political career cannot fail to have been of great service to him. I shall have a word to say with regard to the actual suggestions he has put before us for amending the Bill, but in this preliminary observation I would point out that he showed a Chancellor of the Exchequer's art in keeping the pea under the thimble up to the very last moment. From the earlier part of his speech few people would have imagined that he was going to indicate the concession which in the last few sentences he actually foreshadowed.

There are certain things which I think need to be said about this Bill. The principle of the Bill, as the Chancellor has pointed out, is not concerned with the transitional question at all. The principle of the Bill is whether we want to make such a change in our Income Tax administration that we tax on current income instead of income a little further back. I feel certain that with Income Tax so high as it is to-day it is of great importance that as much of the Income Tax field as is possible should be on the current rather than on the post-dated basis. I think it has not been fully appreciated by large numbers of people that, apart from the transitional period, this change is not necessarily by any means to the pecuniary advantage of the taxpayer. The Chancellor has given one illustration. Let me put it into concrete terms. Where a man is on a salary, and it is a gradually increasing salary, under the old system, by paying always in arrears, he was paying Income Tax on a smaller salary than he was currently receiving. Under the new scheme a man with a rising scale of salary will in each year be paying on the higher rate rather than the lower; therefore, under the permanent provisions of the Bill, it does not work out to the advantage of anyone to be on the current-payment basis where his salary is increasing.

On the other hand, there are great advantages to everybody from paying on current income. I remember when I was a Minister of the Crown that in the first few months of holding office I received a greatly increased income and paid no Income Tax on it, with the result that I had a considerable surplus to invest. When my period of office terminated I had to pay Income Tax on nearly a year's salary without the advantage of additional salary, and the investments I had made had to he resold to pay the tax. There is really something rather foolish about that system, and I am sure the Chancellor and the House generally will agree that there is a great advantage in paying tax currently on any sums of money which come to us as salary.

Having said that, I wish to point out that the transitional effects are merely incidental to the main principle. This discharge, or remission, or forgiveness of Income Tax is only an incident which arises owing to the practical impossibility of expecting any taxpayer to pay two years' tax in a single year. Certain rather curious results arise. In the first place, a taxpayer, under the change-over from the old system to the new, incidentally gets a remission which does not affect him until his wages ultimately disappear or, in the case of his death, affects the estate of the person who is the inheritor of what is left of his fortune. Another curious incidental effect is that wage earners pay no Income Tax on the particular wages they are earning at the present moment. It might have been mentioned in the coal debate yesterday, as an additional reason why the coal miner should exert himself during the next few months, that, in fact, any increase of wages which he earns at present does not involve him in any additional payment of tax. I think I am night in that; if I am wrong the point will be brought out. It is a curious little side-pocket result of the change.

So much for the principle and the incidental consequences of this change in the law. I now come to the method. Most of us, I imagine, have received proposals for several different methods of carrying out the principle, and even if I were able fully to explain the difference between those proposals and the one of the Chancellor of the Exchequer, obviously it would not be possible to do so in this Debate. The one essential difference between many of them, not all of them, and the Chancellor's plan is the cumulative system by which the tax, instead of being computed on the weekly wage, is, under the Bill, computed on the aggregate amount of wages paid up to date in any particular year, a proposal which seems admirable for the person concerned. I cannot conceive any plan which would more adequately meet this case. Undoubtedly this cumulative system does add to the troubles of the bookkeeper for the employer who is making out the wage payments and arriving at the deductions, but I do not think there is anything complicated about the sums which he will have to do. They are elaborate, because for each payment to the wage-earner he has to do about six little sums, but all are exceedingly simple sums of addition and subtraction, except for looking out certain things in the tables. I do not think that -the House can possibly decide between one scheme and another, so far as method is concerned. No doubt the Chancellor of the Exchequer himself has gone carefully into the facts, with, as I have said, his previous great knowledge of Inland Revenue matters. He and the Board as a whole have underwritten this scheme, and we as a House will accept it with thankfulness. We must however recognise that it will throw on the employer a good deal of additional labour and that there will be for some time difficulty in the matter, to which the Chancellor of the Exchequer has already referred.

Now I come to the concession which the Chancellor of the Exchequer has announced his willingness to bring into effect, if it is the wish of the House. I feel certain that the wish of the House will be that this amendment should be made, but I should like to re-emphasise what I said at the beginning, that, apart from the remission, the persons who will come into the scheme will not necessarily gain from the alteration of the principle of collection. Many of them will suffer. The immediate effect upon most of them will be a loss. I hope that Members of the House recognise that fact and that those who have written to them recognise it also. At the same time, I think that what the Chancellor of the Exchequer has promised will be accepted with very great satisfaction by Members of this House and people outside. I have been written to myself. Letters have been reaching me from a number of different sources asking that persons who would have been outside the Bill should be brought into it. I should like to mention three of them. I was not quite clear upon what the Chancellor of the Exchequer said about the Civil Service. I understood him to say that all civil servants pay on their current wages at present, but I do not think that is quite a true statement of the position.

Sir J. Anderson

I said out of their current wages. They pay on the basis of an assessment related to the previous year, but they pay as they go, month by month, and there is no outstanding charge of tax for the particular year.

Mr. Pethick-Lawrence

Of course, these matters are rather complicated, and I do not quite understand what the Chancellor of the Exchequer is now saying. He does say that they pay on the previous year's basis, and that is the point. I was approached by a number of postal workers who said they were speaking on behalf of the manipulative grades. They pointed out that their wages vary very considerably week by week and that under the Bill as it stood they were excluded from the change. They point out to me that, just as the ordinary manual wage-earner had a great disadvantage when his wages varied so, on that principle, they would gain by being included in the scheme. I am not quite clear how far the new proposals of the Chancellor to-day will bring them in. I think they will, and in that case the difficulties that they raised will be met. I have had a communication from the Association of Local Government Officers. There I think the answer is quite clear, that they will come into this scheme, provided their wages are below the level to which the Chancellor of the Exchequer said he was prepared to go. Finally, I have had an application from the National Union of Journalists along those lines. There I think the same remarks will apply.

I want now to look at this thing from a little larger point of view. The Chancellor has explained to us that we are dealing here with Schedule E. Personally, I do not believe, whatever may be the point at which he may stop to-day, that he can stop short in the end of including the whole of Schedule E in the new scheme. I am not quite sure that the argument which he puts up against it is sound. What he says in effect is this: We are dealing with Schedule E. Of the taxes that are in arrears in Schedule E, certain classes would probably never be recovered, or at any rate only a very small proportion of them would be. So far as those are concerned, the late Chancellor of the Exchequer took one compartment, and the right hon. Gentleman is now taking a second compartment, and the Inland Revenue are prepared to accord the principle; but with regard to the remainder, which he says could be recovered, he is not prepared to take that step. Of course, that is very intelligible from the Revenue point of view, but in the first place the new line which the Chancellor of the Exchequer has described himself as willing to make, raises a good many complications, one of which he mentioned himself.

He mentioned the question of where people are in and out. The rule will have to be adopted that once a man is in the scheme he will have to stay in, however large his salary becomes. That would obviously mean that 10 years hence you might have two men, one in the scheme, earning a large salary because he came in when he was earning a small salary, and the other earning a smaller salary all through which put him over the limit to qualify him for the scheme. The latter would still be paying on the old plan. I think the right hon. Gentleman will agree that even though he may stand on that line to-day, the line will obviously have to go in the years to come. I should have thought, now that he is making the change, that it would have been simpler if he had made it altogether at the same time. Whenever this change is made, the same question of transition periods will arise. The moment a man is turned over from one scheme to the other there will be the question of what is to be done with the year that is left out. I confess that I see a little more difficulty in the making of this line than the right hon. Gentleman apparently does. If he says, with regard to the high salary people, "Why should I forgo a large part of the tax that these people are quite competent to pay, would pay and are entitled to pay? he could be answered in this way. If that be so, and if he feels—and I quite understand his position—that he cannot remit all that taxation, there is a precedent, not in this country but in the United States, of how to handle this question. What they have done there is to say, "We will remit"—this is how I understand it, but it is very complicated, and I would not like to be too sure, hut I am assuming that I am correct in my reading of the matter—" upon incomes below a certain figure. We will remit the whole of the period in that case, covered by this transition. Between one figure and the next, we will remit a percentage and then, above a certain figure we shall not remit at all." I should have thought it possible for the Chancellor of the Exchequer, even if he fixed some figure—I think he mentioned £600 to-day—that above that figure he would still adopt the new system but would not remit the whole of the year or whatever it is, but only, say, 50 per cent. of it.

Sir Alfred Beit (St. Pancras, South-East)

Does the right hon. Gentleman recognise that the proposal would mean that in one year such persons would have to pay more than a full year's Income Tax?

Mr. Pethick-Lawrence

I do recognise that fact quite clearly,,but, after all, you are giving them a remission of their burden, and in the circumstances they might not be unwilling to pay a certain amount. I am merely quoting what has happened in America and suggesting that some scheme might possibly be found of a similar character for this country. Most of the people who are on the larger basis do not look at the thing from the weekly or the monthly point of view. If they feel that they are getting a considerable concession, as they would be, in the course of a year or two, although they might have to pay more in one year, it would not necessarily be to their disadvantage, and they might be quite willing to do so. It would be a form of life assurance, like paying a premium for a life assurance. I throw this out merely as a suggestion. It would have been easier and more complete for the Chancellor of the Exchequer to have opened this matter over the whole of Schedule E instead of shutting it down at this figure. If necessary he could make some provision for getting part of the year's hypothetical taxation brought in, in addition. I believe that in the end, whether it be this year or in some future year, the Chancellor of the Exchequer will be forced by the logic of events to come to something of that kind.

However, I do not want to press my right hon. Friend too hard on this matter. After all, we have got a very great change—we may call it a concession or a move—in the Bill as it stands, and on the top of that my right hon. Friend has made a very handsome proposal. If he feels that he cannot go above it this year, we ought not to be too hard on him. I think he would be wiser to go what I might call the whole hog on this thing and give us the whole of Schedule E on the same basis.

There is only one small point remaining on which I would like to say a word or two, and that is post-war credits. I confess that I read Clause 3 (5, a and b) a a great many times before I discovered exactly what it meant, and I collated it with the information contained in the Explanatory Memorandum to the Bill and in the White Paper. One of my hon. Friends tried to work it out for me in two or three practical examples, and I think I understand now what it proposes. Having understood it, I am not quite sure whether it is fair. I should have thought the simplest thing to say, taking the case of the two-twelfths of the year's taxation, was that everything ought to be taken on the two-twelfths basis. If a taxpayer would have got a certain post-war credit he has to pay for the two-twelfths of the tax and on the same basis he should get two-twelfths of the post-war credit. As I understand it, that is not the proposal of the Government in the Bill. Apparently, they do not provide him with as much, and even though he may pay for this two-twelfths tax at the increased rate, in certain cases they do not give him any post-war credit at all. If the sum works out negatively, they do not take away from him anything beyond the post-war credit, but if it works out positively, they only pay him as the result of this formula under Sub-section (5), and he is a little worse off. The proposal I have made, would, I suggest, appear to the ordinary man the reasonable thing to do. I would ask the Chancellor to look at that again. It cannot be a matter of more than a very few pounds.

That is all I wish to say about this Bill. I would like to repeat the debt of gratitude which this House and the country as a whole owe first of all to Sir Kingsley Wood and to his Financial Secretary and also to the present Chancellor, who has brought his great knowledge to bear and added to it the human understanding, the appreciation of what is being felt by the country as a whole.

Sir Adam Maitland (Faversham)

I would like to join with what I am sure will be the general chorus of congratulations to my right hon. Friend on his appointment as Chancellor of the Exchequer and in wishing him every success. It seemed to me that as the late Sir Kingsley Wood—whose death we deplore—increased the number of taxes and the volume of taxation, so his parliamentary stature was enhanced. I hope that the converse will operate in the case of my right hon. Friend and that his reputation may thrive on fewer taxes. May I tell him of an enthusiastic—and as I hope—a friendly constituent of mine who said that he was interested to notice that I am supporting the pay-as-you-go Income Tax plan, but that he thinks many workers would be much happier and proceed much more eagerly to their work if Income Tax was abolished entirely. I pass on that suggestion to my right hon. Friend but I would add that I have not found myself able to support the suggestion.

The great interest which has been caused by this scheme is not by any means confined to the particular class of taxpayer directly affected. [Interruption.] Some hon. Friends have occasionally brought before the late Chancellor of the Exchequer the necesity and the desirability of this particular scheme, and I am glad to have my own attitude about it confirmed and approved by the hon. Member for Dumbarton Burghs (Mr. Kirkwood). My view is that when this direct taxation was imposed on the manual worker it was a mistake to try and maintain the existing system of an annual basis. I am not quite certain that that mistake is not being perpetrated again. I am not convinced in my own mind of the necessity of which the Chancellor spoke for fixing up a weekly system of taxation based on the annual amount earned. I think we have to look for some considerable time to fairly high rates of taxation, and I think that we should frame our future system of taxation on the basis that the rate of tax will be very high. The existing system of allowances and rebates has been built up in our usual illogical way. It is a system that was fixed very largely when Income Tax varied from 6d. and 9d. to 1s. in the and we have since accepted the same general principle. Conditions and rates of taxation have considerably changed. However sound particular methods were when the tax was comparatively low, I think that the operation of the allowances and rebates is to-day operating most harshly in their incidence on the taxpayer in whatever category he may be. I am particularly glad to observe that the Chancellor recognises the urgent need for this alteration and that the new basis of our taxation will not be confined to those specifically included in this Bill.

My own view—and I hope the Chancellor of the Exchequer will be courageous enough to share it—is that taking as an assumption that there will be very many more years of the existing rate of taxation, a complete review should be undertaken of the existing basis of taxation, having in mind also the system of allowances and rebates. It is my conviction that while heavy rates of tax can be imposed for a limited number of years, it will from an administrative point of view be quite impossible to secure the Revenue on those high rates beyond a certain definite period. I am not impressed at all by the idea that this scheme has been put forward as a gesture or a concession to the taxpayer. I do not believe it. I do not believe that that motive actuated the late Chancellor in putting forward this scheme. I believe that the arguments which did convince him arose from the fact that we had many troubles arising from the position under the scheme for manual workers; secondly, that these troubles were continuing; and, thirdly, I am quite sure that the right hon. Gentleman had in mind that the cessation of the war would inevitably raise new difficulties which would accentuate the trouble which had been caused. I would say to my right hon. Friend that these circumstances had become hardships upon individual workers.

I wanted to make this appeal. The same argument with regard to the personal difficulties of the manual worker in regard to Income Tax apply with equal force to the salaried man. It is not how a man is paid but what he has to do with his pay that matters; it is not whether he is paid weekly or monthly but the amount he received that counts. I see no justice whatever for a system of taxation differentiating between taxpayer and taxpayer, beyond the differences which experience proves fair and right. We must pay the penalty—as a House of Commons—of our mistakes, and I am glad to hear that the Chancellor is ready to extend the range of his proposal. I had a letter from a large employer of labour, and I think that a breath of air from somebody who has no responsibility to constituents would be helpful to the House. It certainly corroborates the idea which the Chancellor has announced today. The letter says: Referring to the pay-as-you-go legislation which is at present being introduced, I feel that the suggestion that only weekly wage earners should receive a remission is most unjust and unfair. I would here wish to place on record that as far as I am personally concerned, as I am a payer of Surtax I am not worrying in regard to the matter of any remission, but I am very strongly of the opinion that if legislation goes through upon the lines that one reads in the Press, the greatest error will have been committed. The men and women in factories working overtime are undoubtedly earning very high wages and have for a number of years earned more than the average clerical worker, and it would seem that the clerical staff are definitely going to be penalised. The writer makes the same kind of suggestion which the Chancellor announced to-day. He says: The matter will no doubt be debated thoroughly, and I would suggest that if distinction is to be made, monthly wage earners should receive a remission in tax upon the first,£500 earned, and beyond that they should be made to pay the tax according to the existing Income Tax Regulations. I would not like the remission of tax to any Surtax payers at all. The last sentence is an expression with which I do not quite agree. I think if concessions are to be made the claims of every taxpayer should be considered, The whole position of Income Tax payers should be reviewed, and there should be some kind of equity between taxpayer and taxpayer. Taxes should not only be fair between the State and the individual but should be fair between individual and individual. I have taken the liberty of referring to that proposal because it is somewhat in line with what the Chancellor outlined. I put it in as further evidence if he needs further evidence. If he says he intends to alter the basis and now proposes to extend it to a larger number of taxpayers it will be generally welcomed.

There are one or two points of detail I wish to make. The first is with regard to the form in which the new tax is to be put into operation, and this is a practical point. Having in mind some of the troubles which arose when the tax was first imposed on the manual workers, I attach great importance to the necessity that as soon as possible there should be deducted the true rate of tax. There was a letter in "The Times," I think on 9th October, in which some friends of mine drew attention to the weekly operation of the tax which this scheme involved and pointed out as an illustration this kind of example: Week No. 1, amount earned £9 10s., actual tax deducted £1 16s.; week No. 2, £9 9s., actual tax deducted £1 2s.; week No. 3, £9 8s., actual tax deducted £2 3s. The correspondents in "The Times" went on to say that these were by no means extravagant cases and that in some instances there was a weekly variation of 18s. I emphasise that point to my right hon. Friend because it will be very difficult to convey to the ordinary working man why he should have these variations of tax taken from his weekly wages. Further, it will put an imposition on the employers which if it is possible to avoid should be avoided, because there are still people in this country who do not completely trust their employers and they do not believe that some of the amount deducted is not in fact being retained by the employers. I believe that to be utterly false, but it is held in certain quarters.

I suggest it would be better to make concrete suggestions which have some bearing on the administration of the new proposals. I am firmly of the opinion that it is of importance that the working man should understand exactly the basis on which he is asked to contribute to taxation. That is not going to be easy, because the salaried worker with longer experience of Income Tax payment does not always understand the anomalies of taxation. Even when a taxpayer does understand there are times when he feels that he has a grievance. Because of that I venture to re-assert my previous statement and to hope that the Chancellor between now and the Committee stage will have full regard to the basis of existing taxation and the stringent financial claims upon the taxpayer. I would say to him that it would be better to come to this House and say that because of the fact that we have such high taxation for a long period and because of the fact that this high rate of taxation must be continued we need to make vital alterations in the basis of our assessment. If he does that and submits proposals accordingly the House will support him. Although the Chancellor has spoken about the cost of the scheme being about £125,000,000, that is not strictly correct in terms of present cash payment. The £125,000,000 will be spread over a number of years. I hope that my hon. Friend the Financial Secretary, if he is going to reply, will tell us how that sum is spread over. As to the scheme generally, I am quite sure it will be cordially accepted, and that, Oliver-Twist-like, we shall look for more.

Mr. Graham White (Birkenhead, East)

The words in which the Chancellor of the Exchequer referred to his predecessor in office raised a very sympathetic echo in the hearts of all of us; and not least in mine. I had the greatest affection for the late Chancellor ever since I had the privilege of working with hire some years ago. It was not only the qualities of the man himself that gained our affection, but also those qualities which he possessed of getting the best possible work out of those associated with him. It is of interest that the present Chancellor seems to be following on the same lines as his predecessor, realising that progress is often made more rapid and satisfactory by seeking to develop agreement, rather than by accentuating differences. I had intended to say that I supported this Bill, on behalf of my hon. Friends, with reservations; but, having heard the speech of the Chancellor, I shall say little or nothing about the reservations.

I have always regarded the Income Tax and everything connected with it with feelings bordering upon hatred, not because I believe it to be in any sense an unjust tax or badly administered—very much the reverse—but because it is a tax which no ordinary man can understand. I think few people who have read the White Paper, and even fewer who have read only the Bill, will be able to grasp the scheme, as it will work out in administrative detail. I do not blame the Treasury or the Income Tax authorities for the difficulty. They are bound by an Act which is venerable and antique, fortified by a great mass of case law and rules, which, narrowing down from precedent to precedent, has produced an administrative complex that no one can understand unless he has made it a life study or has been specially trained as an accountant. Therefore I think it good that the Chancellor's first Measure should be one designed to make Income Tax easier to understand. If he wishes to endear himself to the people of this country he will make arrangements, as soon as opportunities serve, to review the whole scope of the Income Tax. There is no section of our fiscal machinery which it is more necessary to make simple and more easily understood. The taxation system started in conditions very different from those obtaining to-day and however perfect the system may be for obtaining revenue, it is very largely obsolete. The House may recollect a discussion we had earlier this year on an Amendment to the Finance Bill, as a result of which a Committee was set up to go into the effects of the present rates of tax and the present methods of collection on the industries of this country. The Income Tax is much more than a machine: it may be an instrument of social and industrial policy. For that reason, the whole of our Income Tax machinery should be reconsidered. Particularly we should be on the lookout to see whether it cannot be used as an instrument, when we are engaged in remobilising for peace after the war to even out fluctuations of trade and to ensure better employment.

As a result of inquiries in different parts of the country among all sorts of taxpayers, dockyard workers, shopkeepers, professional people and business people, I have found that there is a general welcome for the Bill. That welcome will be much more cordial to-morrow morning, as a result of the suggestions that the Chancellor has put forward, because, although there was a very general welcome from different classes of taxpayers, there was in every case, whether they were concerned or not, a feeling of resentment at what they considered discrimination. As complaints came in, by deputation or through the post, it was borne in upon me that the proposed discrimination was indefensible. For example, in one of our large cities, when the Boards of Guardians were abolished some of the staffs were transferred to the public assistance service, and, for reasons best known to themselves, they staked a claim, and succeeded in it, for payment on a weekly basis. Those people, although some of them are paid considerably more than others who are paid on a monthly basis, will have a quite indefensible differentiation made in their favour. That kind of thing, which is fairly widespread, made it clear that there was something indefensible about the differentiation. It is very important that there should be no question of unfairness about this tax.

The Chancellor of the Exchequer referred to the necessity for an explanation of the tax. He also referred, with, I thought, insufficient emphasis, to the difficulties of bringing this scheme into operation at all. The difficulties are very, very great. The task of overcoming these difficulties by all concerned, by the Inland Revenue authorities and by the employers, should be regarded as a war task of the very first importance, because the Income Tax is now pressing hard into the affairs of every house in the land, and is not a matter to be looked at in any superficial way. Take the case of the employers. How hard it will be for them is quite evident from the fact that if we go back only to Cmd. 6348 of April, 1942, we find it stated there that it was impossible to work the very scheme which is here proposed. The Paper said: Under a current earnings basis (of assessment) a computation would have to be done by the employer 52 times in the year and the burden thus placed on employers' clerical staff would be heavy, even if the employer could find the staff. … There would be the problem of getting all the work done in the interval between the end of the pay week and the time at which payment is made. It would create an almost insuperable difficulty in cases where wages are paid at the end of the week in which they are earned. We are 18 months further on. There is no more staff to do the work than there was then. We are now in the fifth year of the war, which makes it terribly important that every possible effort should be made to bring this scheme in smoothly. From somewhere some people will have to be found to do additional work, and a great deal of overtime will have to be worked by certain people. Where the wage week ends on Wednesday and wages are not paid until Friday, it may be possible to do the work without extra staff, but where the week ends on the Friday it will not.

Mr. George Griffiths (Hemsworth)

The majority of the mining companies keep a week in hand, from Saturday to the following Saturday.

Mr. White

I am not suggesting that in order to make the scheme work it will be necessary for everybody to have a week in hand.

Mr. Griffiths

I am not saying that, either.

Mr. Kirkwood (Dumbarton Burghs)

We will not stand that.

Mr. White

I had no intention of raising this point at all. In one case which has been brought to my attention the actual cost to the employer of administering this scheme will be many thousands of pounds—in fact, it will be of the order of £20,000. This employer has a very large number of branches, each employing 100 to 150 people. That is a special case, but I am going to mention it as an example of the kind of thing which has to be taken into account. The additional cost to the employers of doing work which used to be done by the tax collector should not be expected, at any rate, to rank for tax. I am inclined to think that this kind of operation could be carried out more on the lines of that between the Ministry of Health and approved societies in connection with a National Health Insurance by which a per capita grant is made for the work done. I am not putting that forward as an alternative, because I have not thought it out, but I think it is not an unreasonable suggestion. There is a heavy burden put upon people who do this work, and at a time of extreme difficulty it would be a reasonable proposition.

I have been trying to argue that this is important work, and it is very important that it should be brought in soon. Misunderstandings with regard to Income Tax have had an effect upon savings groups and at times upon production, though it may be having less effect on production than it had. I remember a gentleman I met in a Midland town. He was a very highly skilled man, and it was well within his capacity to earn £20 a week, and at the establishment where he was employed £20 or even more might have been paid to him with the greatest satisfaction. But he refused to do a hand's turn of work more. He said, "I have no family. There are only my wife and myself. Ten pounds is enough for me, and why should I work for Kingsley Wood?" That may be a rare case.

Mr. Kirkwood

A very rare case.

Mr. White

But it is an example of the kind of thing which should be removed by explanation. I entirely support what the Chancellor of the Exchequer said with regard to a continuous campaign of explanation concerning the Income Tax, which is far from being understood. The White Paper adds to the confusion. For instance, in paragraph 30, it will be observed: The deductions are lower in the weeks in which the wages are lower and higher in the weeks in which the wages are higher. That is a statement which, if you carried the transaction through to the end of the year, is no doubt correct, but if you turn to Example A in page 14, the figure set out indicates to the ordinary observer precisely the opposite of what has been said earlier. The wage for the first week given in the example is £5 6s. 6d. and the tax deducted is £1; for the fourth week the wages paid is £5 4s. and the tax deducted is 24s., and for the fifth week the wages paid is £5 15s. and the tax deducted is £1. Anybody would be entirely excused if he gave up trying to guess what this really does mean. I hope that this matter will be followed up and that we shall have these things dealt with in the simplest possible way, and as soon as possible, avoiding all these obscurities and apparent inconsistencies which are set out in the White Paper. The Prime Minister, I understand, is taking an interest in the subject of basic English and I certainly hope that we may have some attention given to that in the compilation of these White Papers. I am hoping the day may not be far distant when we shall see a Bill issuing from the Treasury in basic English.

Sir Percy Harris (Bethnal Green, South-West)

No, for goodness' sake.

Mr. White

The right hon. Baronet hopes for goodness' sake we may not have such a Bill. I think that reference to that Committee might by no means be unhelpful. In the Explanatory Memorandum to this Bill the word "emoluments" appears once, but if you turn to the Bill the word "emoluments" appears twice in most lines and at least once in almost every other line. This is a Bill dealing with Income Tax. I know that there is a technical meaning of "emoluments," but no working man ever went on strike in order that his emoluments should be increased. Emoluments appertain to the Prime Minister and the Archbishop of Canterbury, but no working man talks about emoluments. I looked up the word yesterday in Johnson's Dictionary. I did not know what an emolument was myself, although I had an idea of the technical meaning of it. An emolument, according to Johnson's Dictionary, is "profit arising from grist," whatever that may mean. It was described in 1625 as being an uncouth word. The standards of 1625 are not those of 1943, but here is this word, and no one ever went on strike about emoluments and no sinner was ever deterred from wrongdoing by hearing that "the emoluments of sin is death." The Bill would be easier to understand if some other word were substituted for "emoluments," which is not the only word in the English language. It is a curious thing that when we are dealing with matters of gain and loss the words that describe them are nearly always monosyllabic—tips, bets, gain, loss and the like. If "income" were substituted for "emoluments," in most cases it would probably meet the bill. I am not sure that a little ingenuity might bring the Bill into a more intelligible form. An intelligent and simple form of propa- ganda and education in regard to the aim and purpose of the Income Tax and the part it plays in the national life should be undertaken.

With regard to the concession which the Chancellor has promised in respect to certain classes of wage-earners, it may be said with some certainty that it will facilitate and help the administration of the scheme. There will be a tremendous job of work in finding out who is to be included in the scheme and who is not. There will be tens of thousands of cases which will have to be considered. There are other things which are looming in the future which may well lead to a great simplification of the scheme. The Government were understood during the time that the proposals of the Committee presided over by Sir William Beveridge were before the House to be in favour of family allowances, and I presume that they are still in favour of family allowances, and that at some not too distant date a system of family allowances will he introduced. It will be evident to anybody who thinks for a moment that it would abolish at once a very considerable number of these codes. I shall be glad to hear from the Financial Secretary, when he replies, to what extent they have considered the implications of family allowances in connection with this scheme and whether he does not think it might lead to a very great simplification in the method of working. I confess complete ignorance of Income Tax, and have all my life avoided having anything to do with it. All I expect is to be told at the end of the year how little I have to spend. That in itself is a wrong thing. It is wrong from the point of view of the taxpayer and also from the point of view of the Inland Revenue authorities. They have to spend a great deal of time on this, and accountants have to be employed on one side or the other to ascertain the taxable liability. I hope that there will be some liaison between the Treasury and the Committee which is examining into Company Law, so that forms of accounts may be so organised and arranged that these studies, researches and investigations which absorb so much time on the part of the authorities and employers will be got rid of.

There is almost an unlimited number of points in connection with this Bill and its proposals which will lead to discussion, and which, I hope, will receive consideration. I would like to congratulate whoever was responsible for this principle. It seems to indicate that after all it will be possible to work the pay-as-you-earn scheme in spite of the conclusive document written by the same people in April. 1942, to say that it could not possibly he worked. If this can be made to work smoothly—and it is very important indeed that it should—I hope that everyone concerned will do everything possible to make it work. I think that the inventor of this new scheme will rank with the genius who invented the points system of rationing. It is something of the same order and very little less important. It is a matter in which whoever had it in mind can well take pride. We on these benches support this Bill with reservations. The reservations for the time being we withdraw, and if any remain, we will discuss them later on the Committee stage.

Mr. R. Morgan (Stourbridge)

I only intervene for a short time in this Debate. I want to congratulate the Chancellor of the Exchequer on his excellent statement to-day and also for his announcement at the end of his speech, because whatever we may say about the merits of this Bill, we must admit that the scheme itself has caught the public imagination. Indeed, the feeling was so strong that I doubt whether the Bill would have passed through the. House without the extension which was foreshadowed in my right hon. Friend's speech. I do not intend to quarrel with the hon. Member for East Birkenhead (Mr. Graham White) in his rather pernickety references to the wording of the Bill or about the difficulties that will confront employers. I think it is true that they will find difficulties, like all changes bring at the beginning, but they will right themselves. I would like to congratulate the authors of the Bill on their excellent work and their "ready-reckoner" scheme which they have formulated for employers. Like other hon. Members, I have been inundated with requests from different associations and employers who pressed for an extension of this scheme. I am not speaking particularly for any one class, but local government officials have been very strenuous in pressing their case, and I must say that I could see no argument against extension. When we come to the Committee stage later there will be Amendments to Schedule E, and I think they will find general favour. I would like to put on record the feeling of gratification that there will be among members of the National Association of Local Government Officers and teachers at what has been done. It was difficult to see how a teacher earning £15o per annum should be excluded while another class of worker, being paid monthly and receiving a lot more money, was included.

Recently we had a Question in the House referring to people who come to this country, receive large sums in their pay packets, and send them off to Ireland without paying their whack of Income Tax. This scheme will bring in all these people. For that reason and the reasons I have mentioned I would like to express my gratitude to the Chancellor of the Exchequer, because I came here, like the hon. Member for East Birkenhead, to espouse the cause of those who have been left out. Now that these people have been brought in I am sure that they will all be very grateful.

Mr. Kirkwood (Dumbarton Burghs)

I would like to begin by thanking the late Chancellor of the Exchequer. It is over two years since I took a deputation to him, and I am quite sure that nothing would have given him greater pleasure than to have brought in this Bill. Eighteen months ago, in answer to Questions I put to the late Chancellor about this scheme, I was told that it was impracticable, that it could not be done. Eight months ago, when there appeared in the Press of this country stories about a pay-as-you-earn scheme in Canada, I again questioned the late Chancellor. May I say that I have the greatest regard for his work? I had known him intimately for a quarter of a century during which I obtained many concessions from him for the workers. In his replies to me about the Canadian scheme the late Chancellor said that he did not think the workers of this country would stand the strict inquiry into personal matters such as had been necessary to carry out that scheme in Canada. The reason why some of us were interested in this scheme, as hon. Members know, is because the scheme under which we are now operating at present adversely affected workers, particularly those in shipyards. At this time of the year, because of inclement weather, the hours of these workers are cut down, there is no overtime, and Sunday work is reduced to a minimum. Thus these shipyard workers and engineers whom I represent here have had to pay heavy Income Tax demands on big summer-time earnings out of small wages. When foremen went to these workers and asked them to do extra work when it was necessary—as it was time and time again when there was a heavy call for repairs—the men refused. They said that if they worked overtime the money they earned would be taken off in Income Tax.

Seven months ago I introduced to the Financial Secretary to the Treasury a deputation of shipbuilders. The deputation came from Aberdeen, Dundee and the Firth of Forth. Four came from the Firth of Forth, eight from the Clyde, some from the Ayrshire shipyard, three from Newcastle-on-Tyne, four from Birkenhead and some from Barrow-in-Furness. This deputation was organised by the much maligned shop steward movement in this country; the Financial Secretary received it like the gentleman he is and both he and the representative of the Treasury who was with him have been highly praised by the convener of shop stewards on the Clyde, who led the deputation, for their attitude that day. We were given a great concession, as I was able to show some 7,000 workers about a fortnight ago. Months ago, when I asked people here to assist me, there was nothing doing, but the shipbuilders and engineers who have fought for us are very anxious that there should be no division among the working class. They feel that the Bill ought to include the black-coated workers as well as the hardy sons of toil. I want it to be understood, and I want it to go out from here, that this is a proof of what I have always held—that we are able to get concessions here in the House of Commons for the workers and are able to modify conditions, as we have been able to do right through the ages, without blood and tears. We got this concession without any strike, and because of that I am delighted that this Bill has been introduced to-day.

It is almost a year ago since the Chancellor of the Exchequer challenged me and my friends to produce a scheme after we had said that it could be done. Their Chief Tax Assessor of the West of Scotland, two chartered accountants, who were employed by the Government during the last war, and one of the ablest lawyers in the West of Scotland, all of them my friends, produced a scheme, and I handed it to the late Chancellor of the Exchequer. Now the principle of this scheme has been accepted. I am a member of the working class; I know nothing about finance, because I have never had any finance, like many others in Great Britain. That is the explanation. But I have friends who know about finance, and I am backed up by some of the biggest employers in shipbuilding and engineering, as well as my own union, the Amalgamated Society of Engineers, which has a membership of 800,000. I presented them with a copy of the scheme that I submitted to the Chancellor of the Exchequer, and they all informed me that it is vastly superior to the scheme that has come from the right hon. Gentleman. The largest employer of labour, who employs over 20,000, says the Bill is far too complicated. There are 51 codes to deal with reliefs up to £310, and they say they could be reduced by 75 per cent. In fact, they say they will have to be reduced in order that the scheme may work. The employers were not in favour of tax being deducted by them at the beginning, but I was able to get them to see that the office work of their staff was a bagatelle compared with the discontent throughout the shipbuilding and engineering industry, and they are now in favour of it.

The next item that I am asked to draw attention to is this: We have among us people who do not pay Income Tax because they do not earn enough, but some of them make a tremendous effort, at great sacrifice, to take out an insurance. I am informed that, because they do not pay Income Tax, they get no rebate. Surely it is worth while making them some concession. [HON. MEMBERS: "The rebate is off the Income Tax."] It is difficult to get hon. Members opposite to understand our point of view, because their conditions are as different from ours as night is from day. I have been up against that all my life, and I have been up against it for 20 years in the House of Commons. But I know perfectly well that, if we can get those in power to see that what we are advocating is going to be for the good of the community at large, we get a concession. We were told yesterday by the highest authority in the land that nationalisation of the mines was im- possible. That is what they said to me 18 months ago about paying Income Tax as you go, but we got them to change their minds. My advice to my colleagues is to keep hammering away at the Government, and I am quite satisfied that success will attend their efforts.

Colonel Greenwell (The Hartlepools)

This House is justly renowned for the indulgence which it invariably extends to one addressing it for the first time. I trust, therefore, that I may look for this indulgence to-day, particularly as I wish to address a few remarks on the subject of Income Tax, which is probably one of the most complicated that the tortuous mind of man has ever evolved. I, therefore, hope the House will overlook those errors into which I must, by reason of lack of experience and nervousness, inevitably fall. I think this Bill must remind us all of those film plays which from time to time appear in which the principal actor has passed from among us. It is indeed, I think, a Caesarean Bill in that it is born after the death of the one who conceived it, and we shall all hope that it will prove to be a memorial to the many meritorious acts of a man who deserved well of the State.

There are two points which seem to me to stand out very prominently in these proposals. The first is that some measure of this nature has obviously become inevitable. The Government are faced, in regard to the deduction of the appropriate tax from the weekly wage-earner, with a very serious problem. Doubtless there are companies which carry the matter of post-war credits in their balance-sheets, but if there are such companies I, personally, do not know of them. Having regard to the nebulous terms in which the Exchequer has delineated these proposals for after the war, it would be a pretty bold firm or body of business men who would care to carry in their balance-sheets these guarantees for the future in the way of a tangible asset. Therefore it is not surprising to me that the British working man or woman, with his or her usual fund of common sense, refuses to regard post-war credit as other than something very ephemeral indeed. The problem with which the Government is faced is that, when the period of re-adjustment ultimately arrives, it must inevitably carry with it some period, however transitory, of unemploy- ment for a great number of people, and there would at the same moment, under the existing system of taxation, be large numbers who are at one and the same moment debtors to the State by arrears of Income Tax and creditors of the State under the post-war credit scheme. I think a very large number of weekly wage-earners merely regard the post-war credit scheme as an insurance against their ability to pay arrears of Income Tax dependent on their condition of employment at the time. This obviously lays the Government open to a straight charge of bad faith, in that under these conditions the post-war credit scheme is not worth the paper it is written on. From this point of view I hope the House will agree that the present proposals were absolutely inevitable in some form or another sooner or later, and I think the Government will be commended from all sides on the proposals they have now put forward.

The second obvious point which seems to arise is the complete unfairness of giving a magnanimous present of £250,000,000 to one section of the community only. This could not be made more obvious than by citing the case of two brothers both, let us say, employed in the same job in the same industry when war broke out. One may have been married and had children and so was temporarily reserved while the other brother joined the Forces and, let us say, is now a commissioned officer. As a commissioned officer he is a monthly wage earner while his brother, who has remained in industry, is a weekly wage earner. The officer is earning probably half what his brother in industry earns, but because he is a monthly and not a weekly wage-earner he does not get this Io months' remission of tax, though risking his life in the service of his King and Country. That seems to be grossly unfair.

I would also ask the Chancellor whether he thinks it fair to give no remission, of the nature proposed in the Bill, to such worthy public servants as school masters and school mistresses, who are faced, when their period of pension begins, with the payment of taxes incurred during the last year of service. I think it was gratifying to the House to know that the Chancellor has intimated that he will be prepared to consider such cases as those. Also, there are to be considered the cases of local government officers and many others who, although they do not have the advantage of being paid on a weekly or even a monthly scale, are yet subject to wide fluctuations in actual income. I would suggest that the Bill ought to be amended so as to treat everyone alike, even though it should cost a far greater sum than the £250,000,000 at present envisaged. It has to be remembered that whatever the amount involved it would be spread over a very long period of years. The only obvious and reasonable way in which this can be done is to provide by legislation that, in the case of death, the last year's Income Tax should be assessed on the actual income up to the time of death where that would be lower than the estimate of the previous year's income.

There is one third and final point to which I would draw the Chancellor's particular attention. I do not think those who drafted these proposals are sufficiently aware of the conditions at present obtaining throughout all those branches of British industry engaged in the war effort. I venture to think there is no industry so employed which does not suffer in almost every one of its constituent firms from a grave shortage of clerical staff. The right hon. Gentleman the Minister of Labour has so diluted and attenuated office staffs of most firms engaged in the war effort that the compilation of weekly pay rolls presents an ever-increasing problem. How those attenuated staffs will compete with the enormous extra burden placed upon them by the present Income Tax proposals and the calculations that will be involved I, for one, cannot see.

Although these arrangements will in time become largely automatic this is the process that will have to be gone through week by week. The obligation to deduct tax and to pay it over to the country is, under the scheme, imposed on the employer, and the steps he has to take in calculating the amount of Income Tax payable week by week are as follow: First, he must ascertain the gross earnings of the individual workman for the week. Secondly, he must add up, on the card provided by the Income Tax authorities for the individual man, that man's gross earnings for the taxation period up to that particular week. In other words, when we come to the i3th week of the taxation period, he must add the gross earnings of the r3th week to the accumulated earnings in the first 12 weeks. Thirdly, he must base his calculations on the code number of the workman given on the card supplied by the taxation authorities, since it is in accordance with the code number that the workman gets the benefit of all the allowances to which he is entitled. Fourthly, he must refer to the book of tables supplied by the taxation authorities, and from them ascertain in respect of (i) the particular week, (ii) the particular code number, and (iii) the gross earnings of the workman up to that week, the gross amount of tax due by the workman from the beginning of the taxation period to the particular week. Fifthly, and I think the House will be gratified to know, lastly, he must then deduct the amount of tax already paid in previous weeks as shown on the workman's taxation card. I hope the House will agree that that process, although it may become mechanical, does involve a very large amount of extra work for pay bill staffs as we know them in industry.

I would also ask the Chancellor whether he has ever heard of the squad system of piecework? Under this system, which covers many thousands of men in the shipbuilding industry, one man in the squad draws the money earned by all the members of the squad, and that money is subsequently divided among them under their own mutual arrangements. The amounts individually received are supposed to be reported to the wages staff of the firm concerned by the leader of the squad, and it is within my experience that these reports may be received in anything from two to ten days after the actual payment. The Income Tax computations that will be necessary in connection with payment to piecework members under the squad system will involve an enormous number of people in an enormous amount of extra work. But that is not the most difficult situation that may arise under the squad system. Some firms in the shipbuilding industry pay their squads individually, that is, the firm works out the amount of money due to each individual, and it quite frequently happens in these days, when sickness is more rife than we should like to see it, that one man may work in as many as five different squads. A hand-rivetting squad normally consists of three men and a heater, and there may be a catcher boy. If one man

falls sick, the squad is made up by a man from a number of odd men who are at hand. When the sick man returns the odd man goes back to the men kept in reserve and will make up another squad. Under that system, and the calculations which I have outlined, it is not to-day possible under the present Income Tax system to calculate the amount due to each man in the squad till perhaps lunch time or dinner time on the day of pay. How it is to be done under the new system of taxation I do not see. I rather fear the draftsmen of this Bill have failed to take that into account.

Considering the number of platers and riveters in the British shipbuilding industry at present, this is a very serious point indeed. Unless there are safeguards, I think conditions in the shipbuilding industry will become impossible and before very long lead to complete breakdown and chaos. The first of those safeguards is that it will be eminently desirable for many firms in such industries as shipbuilding—and probably coalmining, although here I speak without authority—to alter what is known as the "Total-time" day, that is the day up to which wages are computed. In the industry with which I am associated that day varies between Monday night, Tuesday night and, in one or two isolated instances, Wednesday night. Calculations are made up to one of those nights for the payment of the wages on the following Friday night. It will be essential that that date be put back, and it cannot be done, I would like the Chancellor to notice, on the responsibility of the industry involved, of its own authority.

Last year, in one district, it was deemed essential to alter the "Total-time" day. The leaders of the trade unions were approached, the matter was discussed, and they quite saw that, with the existing wages staffs, the proposals were not only reasonable but absolutely necessary. Without difficulty, an agreement was reached between the trade unions and the employers and notices were posted to give effect to the alteration in the "Total-time" day, but the workmen simply refused to have anything to do with it, and a strike lasting some weeks and involving large numbers of men took place and was stopped ultimately only after prolonged and difficult negotiations. In view of that no body of employers will take on themselves the responsibility of trying another experiment on those lines. I suggest that the Chancellor should ask his colleague the Minister of Labour to see that this alteration, which will undoubtedly be essential, is made by order—that industry should be ordered to alter its "Total-time" day to a suitable day for the calculations to be easily made.

The second safeguard which I think is essential is that the Minister of Labour should release from the Forces, if necessary, or from other places a sufficient number of competent—I emphasise the word "competent"—people to augment existing wages staffs. If that is done, I think the Chancellor's proposals can be implemented without difficulty, but if it is not done certain branches of British industry will be in for a very difficult time, and we may conceivably be faced with widespread stoppages. The whole object of this Bill is to make war-time industry run more smoothly by removing sources of difficulty and irritation. I therefore earnestly hope that before the Bill becomes law the Chancellor will give serious consideration to some of these points which have apparently been overlooked and which, unless they are rectified, will probably make the last state of war-time industry worse than the first.

Mr. William Brown (Rugby)

I think the first thing I have to do is to compliment the hon. and gallant Member for The Hartlepools (Colonel Greenwell) on his exceedingly clear and competent maiden speech. We are always nervous when we make speeches in this House. [Laughter.] Hon. Members may laugh, but, believe me, my knees are positively knocking together. And we are most nervous when we address this House for the first time. The hon. and gallant Member should be felicitated on his very powerful and cogent contribution in his first speech to us. I am in a good temper to-day, so I will now go on to felicitate the Chancellor of the Exchequer. Normally, the function of the Chancellor of the Exchequer in Britain is to find out what the House of Commons want, and then to tell them that they cannot have it, but here is a Chancellor of the Exchequer, in his first address to the House in that capacity, giving us what we want before we ask him. Before the demand for the extension of the provisions of the Bill from the manual worker to the salaried workers has been articulated in this House, it has been given to us, at any rate in principle, and we shall see the working out of it later.

Mr. Gallacher (Fife, West)

But it is something that has been asked for for many months.

Mr. Brown

It is certainly true that there has been a popular and a Press demand for the extension of the provisions of the Bill from manual workers to salaried workers for months, but the most remarkable thing is that it has been taken some notice of before the Debate has started. In the Chancellor's opening speech we were assured that the provisions of the Bill would be extended to salaried workers up to the level of £600. I hope that this singularly auspicious beginning to the Chancellor's career will be maintained. That he should do straight away what we want done is a most abrupt, remarkable, and welcome change from the past; and I hope that the Chancellor of the Exchequer will continue along the path on which he has started.

Now I wish to represent the claim of a section of the community which, even after the Chancellor's speech, is still left out of the Bill. The Bill, even with the proposed additions, still excludes from its scope all servants of the Crown. There is a very large number of them. They are in the Army, the Navy, the Air Force, the Civil Service, the Prison Service and the Judiciary—a vast number of people who come under the heading of Crown servants—and who are completely excluded from the scope of the Bill. My job to-day is the single one of attempting to urge the Chancellor to bring them inside the scope of the Bill, and not to leave them outside as the last solitary orphans of the storm.

I would like to explain to the House how this thing works out in practice. The manual workers in Government employment, in dockyards, factories and elsewhere, are covered by the Bill, and therefore I need not spend any time upon them. The second category of civil servants is the hundreds of thousands who have come into the service during the war. Their number is approximately 300,000. They are employed as temporary civil servants, either on a weekly paid basis, or on a salaried basis. So far as they are on a weekly paid basis, I fail to see the slightest reason for distinguishing between them and the ordinary weekly paid worker outside. A temporary clerk in a Government office, no less than a clerk in industry, has to balance his budget weekly, and every single argument that the Chancellor of the Exchequer used to-day to justify the introduction of this scheme, must apply with equal force to the weekly paid temporary civil servant recruited during the war.

The case of the salaried temporary civil servant is even worse. Before he came into the Government service as a temporary employee he was due to pay Income Tax in the usual way on his earnings for the previous year. When he came in, he came also under the Government scheme which already compelled the civil servants to pay as they went. So, for the first year of his Civil Service life, the salaried temporary officer paid double Income Tax, on two years' earnings. From all the categories to whom the Chancellor of the Exchequer has distributed his benevolence these are excluded, but if there is a case for giving anybody a rebate of Income Tax of five, eight or Io months, as the case may be, surely the people with the first claim are those who paid two years' Income Tax during one year. So I ask for a formal assurance that back pay will be given forthwith to that category. We ought to compensate those people. They ought not to be excluded from the benefits which the Bill proposes to confer.

Now I turn to the permanent, established civil servant. Here again the category is also made up of weekly paid wage-earners and salaried workers. We heard from the Chancellor of the Exchequer that, in his view, nothing need be done about them because, said he, they already have a pay-as-you-go system. That is perfectly true. Instead of having two demands a year, discharged at the latest possible moment, as is the case with the normal taxpayer, these people suffer regular deductions from pay at the source. As the Chancellor himself said, they start to pay in the first month of the tax year. But the point is that, although we have a pay-as-you-go system, what we pay is assessed, not on the current year's earnings, but on the last year's earnings, so that although we may have a pay-as-you go system, it is not the pay-as-you-go system which this Bill proposes to apply to the wage and salary earners of Britain. The Chancellor of the Exchequer did not disguise this, but he implied that since the ups and downs of income were less in the salaried area, it was less necessary to apply to it the principle of the Bill.

There are two answers to that implication. The first is that it is not true, and the second is that the Chancellor of the Exchequer has already vitiated his own argument by deciding to bring salaried workers in. In normal times it is true that the salaries of permanent civil servants will go up increment by increment, year by year, but we are not living in normal times. During the war, all promotions in the Civil Service have been made on what is called an acting basis. Instead of definitely promoting a man from, say, the clerical to the executive grade, what happens is that you give a man an "acting promotion." There are many men now in the Forces whose claims to promotion will have to be considered at the end of the war, and those claims can be considered only if present promotions are on an acting bans. Therefore, at the end of the war we shall have thousands of reversions, from the grade to which the holders have been promoted, to lower grades, and unless something is done those people will have to pay, during their year of reduced earnings, Income Tax based upon the highest point reached of the salary paid to them in their acting capacity.

The second point is that a very great deal of overtime is being worked in the Departments. It would be true to say that overtime is general throughout the public service. At the end of the war, that overtime will presumably drop off. Not only will there be a very heavy loss in income, due to reversion, but a further loss due to the cessation of large-scale overtime, such as prevails to-day. The Civil Service recognises that, under ordinary conditions, the balance of advantage lies, with steady incremental progression, in keeping to the old system, but the Civil Service unions, in consultation, have come to the conclusion that, in present circumstances, they want this scheme applied to them. They have had discussions with the Inland Revenue. The Inland Revenue are invariably helpful, understanding and courteous, in everything except in dealing with my personal Income Tax affairs. The Inland Revenue have explained their difficulties, and we have taken full account of them; but at the end of it all, the unions of the Services, which represent about 450,000 workers in the public service, asked me to express in this House their desire that this scheme shall be applied to them.

The last thing I have to do is to refer to our Army, Navy and Air Force officers. They too, are Crown servants. At the end of the war, thousands upon thousands of them will be demobilised and come back to civil life. I hope that they find jobs not less remunerative than the Army, Navy, or Air Force jobs in which they now are. Are they to be left in the position of having to pay Income Tax in civil life on their last year's earnings in the Army, Navy, or Air Force? If so, that strikes me as a monstrous injustice. It is monstrous that they should be excluded from the proposals of the Bill, and I ask the Financial Secretary to the Treasury to tell us that their position will be taken into account. I ask him to say also that he will take account of the views of the Civil Service unions in this matter, and that he will introduce, at the Committee stage, such Amendments of the Bill as may be necessary to bring Crown servants within the scope of the Bill, to the same extent as is proposed for the community generally.

Mr. Summers (Northampton)

I should like to add a word of tribute to those that have already been said for the part that the late Chancellor of the Exchequer played in this scheme, and also to the ingenious minds which have found a way round those innumerable obstacles which they themselves told us existed, when they published the White Paper some I8 months ago. There can be no doubt that, broadly speaking, and as far as the Bill goes, the proposals have met with a very cordial reception throughout the country, which has been echoed in the speeches to which we have listened today. Before coming to the essential point, namely, the scope of the Bill, I would like to refer to a less important matter with which the Chancellor dealt to-day, but which I found it somewhat difficult to follow. I refer to the point which arises when a person under the scheme falls out of employment through sickness or some other cause.

We were told, in language which appeared perfectly clear, that provision would be made for the prompt repayment of any excess tax which had been deducted as a consequence of his falling out of employment. The Chancellor of the Exchequer no doubt knows the Bill infinitely better than I do, but I have failed to see in my first study of the Bill any provision for prompt repayment, unless the man in question was reemployed. If the Chancellor's remarks meant anything, they must include other circumstances than re-employment. I hope that the Financial Secretary to the Treasury will take the opportunity of explaining how, under the Bill as it now stands, repayment of excess tax deduction is to be effected if the man in question is out of work for any appreciable period of time. There will undoubtedly be many hard cases if that is not done, and there will be the absurd position that people out of work may need to have recourse to public assistance for loss of their normal income when, all the time, tax which has been wrongly deducted in the light of subsequent events is still in the possession of the State. That anomaly is one which should be dealt with, I suggest, on the Committee stage of the Bill. In regard to the scope of the Bill, anyone who came here prepared with a set speech will, I am happy to feel, find it necessary to revise very many points which he would otherwise have made in view of the attitude and the final remarks of the Chancellor to-day. It was clear that he recognised that there were certain anomalies under the Bill as it was drafted, and he indicated that on the grounds of anomaly and on the grounds of equity he was prepared to extend it to people earning up to £600. Presumably, though was not quite clear whether in fact their emoluments—the hon. Member for East Birkenhead (Mr. Graham White) will forgive the word—are calculated in terms of a week or some longer period. I assume that that distinction will be eliminated, but there would still remain very substantial anomalies. Without wishing to detract from the welcome we accord to the attitude which the Chancellor has adopted, I do not believe that satisfactory arrangements will prevail until there is no dividing line at all. In my own business we had before the war and still have substantial numbers of people earning £1,000 a year on piecework. Their wages are calculated in terms of a week. But there will be others earning £650 a year whose wages are calculated in terms of a month who if this dividing line is made will be excluded, while the worker earning £1,000 a year will receive the benefits of this scheme. Any dividing line must entail most invidious distinctions.

We are told, and it is self-evident, that people cannot just go in and out of the scheme owing to changes in their circumstances. It will have to be settled that once a man starts on the pay-as-you-earn system he will have to continue doing so hereafter. But as the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) pointed out, the effect of that would inevitably be that a person who starts below the datum line when the scheme is introduced and rises perhaps to £3,000 or £4,000 or £5,000 a year, continues to have the benefit of the scheme, while a person who was drawing £750 in earnings at the beginning of the scheme is still assessed on past periods. That will inevitably lead to the most glaring and absurd anomalies, which in fact would be quite indefensible.

There is also a question which no doubt will apply whether or not a datum line is introduced. There will surely be anomalies between what I might for simplicity call the weekly husband or the monthly wife or alternatively the monthly husband and the weekly wife. How on earth their joint incomes for the purpose of Income Tax are to be calculated I find it very difficult to understand. This is one of the numerous anomalies which are in fact bound to arise with this datum line. The Chancellor indicated that he would very much have liked to go the whole hog and to have had no distinction, but that he felt that under to-day's conditions it was a question of cost, which deterred him from treating everyone alike. He indicated that it would cost some £7,000,000 to go as far as he thought he was justified in going at the present time. I fail to see how, in fact, the cost of forgiveness or discharge of taxation can be accurately assessed at all. Not only is it a question of the numbers involved, but the actual amount of tax which the Treasurer goes without is that amount which a person affected by the scheme is relieved from paying either on retirement or death. Surely the measure of the cost to the Treasury in the long run would depend not only on the amount the individual is in fact forgiven at that time but on the rate of taxation at that time. When we say that £250,000,000 less post-war credits is the measure of the existing plan and that an additional £7,000,000 is incurred by including people up to £600. I venture to think that that is a very general statement which ought to be taken with the utmost reserve, in view of the inevitable errors which the future may bring to that calculation.

It may be felt that in considering the merits of extending the scheme to still higher and, I hope, indefinite limits, the benefits conferred on people of such incomes are really not justified, but it might easily be overlooked that a person earning, say, £2,000 a year does not in fact have twice as much spending power as a person with £1,000 a year. There are after all four categories into which people fall from the Income Tax point of view: those who escape entirely owing to the allowances, those who come on the reduced rate—6s. 6d. at the present time—those who come within the next slice of taxable income at the 10s. rate, and finally those who incur Surtax, so that as you go higher in the income ranges so the spending power is less, and when fluctuations in a person's circumstances arise he is that much less able to deal with the changes forced upon him. Therefore the differences between gross and net income do to my mind affect this question.

There is this point. It is not as it were the rich man who is going to be forgiven by an addition to this scheme for the remission of tax. The actual remission arises when he either retires or dies. If in fact he retires, it is almost certain that he will at that time be in the worst possible position to pay the tax for he will be called upon to pay on the basis of his previous income. If he dies, it is not that person at all but his heirs you are relieving, if you extend the scheme. To my mind, it is entirely false—and it has not been suggested to-day—to argue that to extend the scheme to higher ranges is really giving privileges and concessions where in fact they are not required at all.

I would like to add one word on the work which will fall on employers. That work is virtually inescapable. There is widespread recognition of the satisfaction to employees generally which a scheme of this kind will bring. I have no doubt whatever that additional work will be required. It will readily be provided, and the scheme will not be looked upon askance as a consequence of it, but it will be a mistake to imagine that it is purely additional work at the outset of the scheme and that once the thing has become familiar to those operating it many of the teething troubles will in fact be eliminated. Clearly it will become easier to operate, but the essential difference between a new scheme and the old is that under the old scheme it was possible to insert the amount of tax which each employee was to have deducted before his actual wages for that week were known, but under the new system the amount cannot be inserted until the employee's wages for that week are calculated. This means that the tax calculation will follow the wage calculation instead of preceding it, and that is a distinction which no familiarity with the system can alter. It is an additional difficulty with which employers will be permanently faced.

I hope that the Ministry of Labour, particularly under present conditions, will recognise that the smooth working of this scheme is essential if it is to have the initial start which we hope it will have. If the difficulties are made more difficult than is inevitable, the start of the scheme will be made very much worse. I hope the Ministry of Labour will look sympathetically on employers who are at present in danger of losing clerical staff under the call-up for this, that or the other. It will help very much if the Ministry will look sympathetically on the matter, and I hope that when we come to the Committee stage the Chancellor will increase the scope of this scheme as widely as he can possibly justify, and I hope the House will support no dividing line as regards earned income of any kind.

Mr. Hewlett (Manchester, Exchange)

May I express my congratulations to the hon. and gallant Member for the Hartlepools (Colonel Greenwell) on his maiden speech and the hope that we may hear him on many occasions? I have listened to what the Chancellor had to say in presenting the Bill. I agree with him that in so far as Schedule E tax is concerned there is some little complexity regarding the assessment and collection of the tax. The country generally is grateful to the Government for bringing this Bill before the House. I say quite definitely that the consensus of opinion throughout the country is that the Bill should have gone much further than is indicated in the White Paper. Why should this legislation apply to wage-earners who are paid weekly and not to wage-earners who are paid monthly, quarterly or annually? The consensus of opinion in the Manchester area is quite definite that this legislation should apply to all workers. I have had a vast amount of correspondence from various constituents. I shall read portions of two letters. One is from the Manchester Chamber of Commerce, who at their board meeting on Monday night unanimously passed the following resolution: In the opinion of the board of directors of the Manchester Chamber of Commerce, the pay-as-you-earn method of taxation should be applied to all earned income, whether the earnings are calculated by reference to a period of less than a month or a longer period. The other communication is from the Manchester Municipal Officers' Guild, which has a membership of approximately 4,000. They submit that there is no justification for discrimination between taxpayers receiving wages and those receiving monthly salaries, that many salaried workers are not better off, but worse off, financially than a great number of wage earners, and that the burden of tax arrears bears just as heavily on them. They maintain that the test of eligibility to share in the benefits of the scheme is not the size of the income, but whether the taxpayer's earnings are paid weekly or monthly. Broadly speaking, the discrimination is between manual and black-coated workers. A manual worker earning £5 a week will get the benefit of the scheme, but a clerk or other black-coated worker with £260 a year will not. A manual worker earning £15 a week will come within the scheme, but a salaried worker earning £20 or £25 a month will be excluded. Why should there be two classes of Schedule E Income Tax payers? We are fighting for democracy; why should we not be democratic in our domestic legislation? Is there any logical reason why a person employed at an annual salary of £416 should be taxed on a different basis from one employed at a salary of £8 a week?

The present proposals for separate treatment will appreciably increase the amount of work involved both in the offices of employers of labour and in the offices of His Majesty's inspectors of taxes, by reason of the classification of the two types of Schedule E taxpayers, and I wonder whether the Members of the Government, the majority of Members of this House, and the public generally fully appreciate the tremendous amount of additional work which has been already placed on employers of labour through recent legislation, whereby such employers are made unpaid collectors of Income Tax. This has involved an immense amount of official work for which, as far as I can gather, there has been hardly a "thank you." I would like to mention a case that has come to my personal knowledge. At the beginning of the war a certain firm, with a view to saving labour, appealed to their salaried people to agree to their emoluments being paid monthy, it being indicated that if any member of the staff preferred to continue on the weekly basis he or she could do so. Speaking generally, that monthly system was brought into operation. Therefore, the anomaly arises that a man drawing £376 per annum and paid on a monthly basis will not come within the scheme, while a man paid £425 per annum and paid weekly will. Do not make the difficulties of the employers and the inspectors of taxes still greater. Let us have one clear-cut scheme, so that the new enactment shall apply to all Schedule E taxpayers; and cease differentiation as between weekly and monthly drawers of wages or salaries. We were all delighted to hear the Chancellor indicate that he might extend the Bill to include people drawing salaries up to £600 a year, whether such salaries are paid monthly, quarterly or annually. I plead with the Chancellor to go further, and to allow all Schedule E taxpayers to benefit from the Bill.

Mr. Benson (Chesterfield)

I think everybody feels very grateful to the Chancellor for indicating that he proposes to take away a very large part of our grievances by extending the proposal to salaried workers. But he will find that there is a very strong feeling indeed against the imposition of a bar at £600. I am well aware that if he granted this extension without any limitation there might be a number of people who would feel aggrieved and that if you grant a forgiveness to a man drawing £500 a year the small shopkeepers and business men might feel that they are getting a bad deal. But that is a political rather than a fiscal argument against the abolition of the bar and as the small shopkeepers and business men invariably grumble all the time about everything I do not think that it matters very much. I think that the advantage of tidying up as we go outweighs any disadvantage. Our Income Tax law is complicated enough. There are enough anomalies in it already. I think there will have to be very powerful reasons indeed to make this House willingly accept a bar at £500, £600, £1,000 or any other figure. A bar in itself is objectionable.

My right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) suggested that it might be possible to get rid of the inequity by charging a certain amount in the present year against the forgiveness at the end of the taxpayer's life. That is quite reasonable and I commend it to the Chancellor as a method of getting revenue now when we need it at the sacrifice of revenue when we shall need it less. The amount that would have to be charged to the taxpayer would be on an average very small because although you may be forgiving £1,000 at the end of the taxpayer's life the present value of £1,000 say, 20 years hence is very small. So if we wish to do this business on an actuarial basis, it can be done without throwing any great burden on the taxpayer. But the effect of forgiveness on Exchequer receipts is really nil. The Chancellor has talked about it costing £60,000,000, but he will never feel the loss of that sum. It is purely a theoretical calculation. In fact, this scheme seems to work a miracle, because it gives very considerable concessions to the taxpayer without any cost to the Chancellor. If he can only find other methods of doing this trick, he will become the most popular Chancellor in history. This £60,000,000 loss will never fall upon the Chancellor except in the unlikely event of our Income Tax system being wound up. It is true that if the rate drops the Chancellor will lose some small amount—not very much. But, as we apprehend, the rate is not going to drop very much, and it is not going to drop at any rate until after the war; so the advantages of getting rid of the bar and making a clean sweep are very great. The real cost to the Chancellor will only be a very small fraction of £60,000,000 if and when the rate of Income Tax drops. We shall, therefore, require very much stronger arguments to make us accept the very untidy method of putting on a bar, at any figure. Having a tidy mind, I am very much in favour of extending this scheme to every level of Schedule E income.

Mr. Hely-Hutchinson (Hastings)

I think my right hon. Friend the Chancellor is to be congratulated upon facing his baptism of fire as Chancellor and at the same time receiving so handsome a christening mug as this Bill. He will be known as the Chancellor who turned us over from go-as-you-please to pay-as-you-earn. I am very sorry that he has limited the scheme to the weekly wage-earner. I think that the case has been admirably put, and put in an uncontroversial way, by the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) and the hon. Member for Chesterfield (Mr. Benson). It seems to me that in the years ahead this situation, with some people having their tax deducted as they earn it and others having it deducted on the present basis, is going to be anomalous. As I listened to the Chancellor giving as his main and indeed as his only reason for not going the whole hog the fact that the Revenue would lose £60,000,000, I felt inclined to question, most respectfully, the accuracy of the calculation, for reasons which were hinted at by the hon. Member for Chesterfield. In the second place, I think that in a series of Budgets so unbalanced as the present ones when one is trying to effect a great reform it is really straining at a gnat after having swallowed a whole regiment of camels to accept an item of £125,000,000 and to object to one of £60,000,000. It takes some considerable time to build a case, whether it be the case for the Empire or for the public schools, which may take several hundred years to develop, or, to descend from the sublime to the ridiculous, the case for an amendment to Income Tax procedure. Hon. Friends of mine on both sides of the House have been trying to get this done for 2½ years. We have at times had some impression that somewhere along the chain there was that particular type, fortunately not universal, of official who had made up his mind that he did not want to do something. That was certainly borne out by the form of the arguments used in the White Paper issued in 1942. I have my original copy, and I find I scribbled on it: This is a piece of special pleading by somebody who does not want to do something. I believe that my right hon. Friend the late Sir Kingsley Wood always wanted to get this done. He had great difficulties to overcome. They were not all difficulties in negotiating with outside bodies; some of them, I believe, were internal difficulties. Some of us who were supporting him are pleased to feel that by the use of dynamite and several hundred Parliamentary Questions we helped to shift whatever obstructions there were in his way. I would like, as part of the tribute to my right hon. Friend, to mention some of the arguments which hon. Friends of mine and I put forward to him and which we embodied in a letter which I wrote to him on 4th March, 1942. I will not weary the House by quoting all the letter, but I will just give the beginning and end of it. It read: May I add my voice to those which are recommending that in respect of Schedule E, the taxable year, the year of assessment, and the period of deduction should be made to coincide. Towards the end it said: Without going into detail, I suggest that once the plunge in respect of Schedule E has been taken, a whole vista of simplifications and modifications, both of taxes and of tax machinery, would be opened up, tending not only to make the income-tax itself a more flexible instrument, but also to make taxation and financial problems generally less of an inhibiting factor in changes of occupation and rates of pay, throughout the whole range of tax-payers. The final thing I put into the letter which I would like to emphasise, because nobody appreciated more fully than I do what a tremendous change there was in our Income Tax procedure, when Sir Kingsley Wood started in 1941 to deduct Schedule E at the source, was as follows: From the political viewpoint, I think the Schedule E change would be acceptable to both sides of the House. It would be a question of building on the corner stone you laid last year—deduction of Schedule E at the source. That letter, which I have read, while I happened to be the writer of it, represents naturally enough the views of many hon. Members with whom I had collaborated in trying to bring about something which we all thought ought to be done.

I would like briefly to comment upon one or two observations of hon. Members who have spoken, particularly upon the maiden speech of the hon. and gallant Member for The Hartlepools (Colonel Greenwell), who has now left the House. He spoke of the complications of this Bill. It is a complicated Bill; and its application is complicated. I do not see how it could be anything else. It is a great deal less complicated than anything I expected to see on this subject. He spoke of the cost to employers. I do not myself think that the cost of carrying out the provisions of this Bill is going to be very much greater to employers than that of carrying out the deduction at source which was started in 1941, but I do not think that the cost of either should necessarily be imposed upon employers without compensation. I would like to draw my right hon. Friend's attention to the old system of poundage, allowed to those who operate on behalf of the Government in the collection of taxation.

My hon. and gallant Friend in his maiden speech, which delighted all of us, also referred to shortage of labour as being one of the difficulties with which employers are confronted. We have to be fair about this. That shortage of labour is a difficulty which affects all of us, and the Inland Revenue are a bit short of labour themselves. The hon. Member for Rugby (Mr. W. Brown), who I am sorry to say has left the House, started his speech by attempting to appear before us as a modest violet. I propose to do something more unusual still, and to say something in support of what he said. I wish to read a short letter which I received from a constituent which I think would please the hon. Member for Rugby if he were here. It says: I feel I must write to you to express the hope that you will support the demand being made to the Chancellor of the Exchequer that his pay-as-you-go proposals shall be applied for the benefit of all concerned. The present proposals are grossly unfair to monthly wage earners and are quite contrary to the accepted taxation principle of equal sacrifice for all. In my own case I became a temporary civil servant at the request of the Government. As such I am paid a salary monthly. This salary is considerably less than is earned by many munition workers and yet they are to receive a present of so months' tax while I am to pay as usual. The writer of that letter probably does not realise that he is already on a pay-as-you-earn system, being a civil servant, and the only effect of going from that system to the new pay-as-you-earn system, is that he may have to pay more tax this year than otherwise. My hon. Friend the Member for Northampton (Mr. Summers) joined in with a very able argument on the question of the expense to the Treasury and also on the cost to employers. I hope that these suggestions coming to my right hon. Friend from every quarter of the House will bear fruit in due season. It is obvious that all quarters of the House are determined that sooner or later this principle of pay-as-you-earn shall be extended to all Income 'fax payers. One can readily appreciate that the strain on the machinery of the Inland Revenue may make it difficult to disturb existing arrangements about salaries and larger taxpayers at present. It may be something for which we can afford to wait while gratefully accepting for the moment the very good provisions which are in this Bill. But if by any chance there is in the way of this extension the same kind of obstruction which I strongly suspect was in the way of the present Bill, then I would like to say that quite a lot of us have several more tons of dynamite and several hundreds more Parliamentary Questions up our sleeves which we are prepared to ask. We all know that Socrates was given hemlock for asking inconvenient questions in the market place. Nowadays we do things somewhat differently—we kick inconvenient persons upstairs.

I would like to say a word more about the Bill itself. It strikes me as a good Bill, absolutely first-rate as far as it goes, and in particular those who worked it out deserve congratulations on the coding system. That was a stroke of brilliance which goes as far as possible in the direction of securing privacy. With these remarks I commend the Bill and hope that it will be passed as soon as possible.

Mr. Leslie (Sedgefield)

The pay-as-you-earn Income Tax scheme is welcomed and undoubtedly will be appreciated by wage-earners, to whom Income Tax has been a source of bewilderment and worry in the past. It undoubtedly came as a shock when men were suddenly con- fronted with a tax demand asking for a sum beyond their comprehension. This not only applied to the weekly wage-earner but with equal force to salaried workers paid monthly. I was very glad that the Chancellor of the Exchequer told us that he had an open mind- and that he was prepared to consider the case of the salaried workers. It must be borne in mind that many salaried workers have very heavy insurance policies and mortgages to meet. Hitherto many of them have had expenses almost equal to their income and, with the increase in Income Tax, some of them are now in a very difficult position. Income Tax notices come to many of them as a staggering blow. In many cases they do not know how to meet their obligations. Some have contributed to superannuation schemes and when the time comes to go on to superannuation they are faced with arrears of Income Tax and have a depleted income with which to meet them. If it is right to make concessions to manual workers in this respect, it is only right to make a concession to the salaried workers in the same way. Having considered all the implications concerned in bringing into operation the pay-as-you-earn scheme, is there any good and sufficient reason why all wage-earners should not participate? Surely, it would be easier to operate in the case of monthly wage earners than in the case of weekly wage-earners in view of the fact that the Chancellor of the Exchequer has told us that he has an open mind. I hope he will have an open mind on the class of workers for whom I have appealed on several occasions and that he will free the pensions of Servicemen's widows from Income Tax. It is very unfair that their pensions should be saddled with Income Tax when they are doing work of national importance.

Sir Alfred Beit (St. Pancras, South East)

The Chancellor of the Exchequer must be very gratified by the assent which this Bill has gained in all quarters of the House, and, although I have a few comments to offer, my fundamental reaction is one of gratitude and praise. The outstanding feature of the proposal is the principle described in the White Paper as a cumulative tax which has solved what formerly seemed an intractable problem. Any system which deducts Income Tax from weekly wages when those wages may in one week be double or half of what they were in the previous week is bound to break down. The principle merit of a cumulative tax means a higher tax on higher wages and vice versa. After a week of no earnings there will in all probability be a refund, which, added to the insurance payments, will bring the total Income Tax to something nearer normal and not subject the householder to the usual violent and unpleasant fluctuations. Similarly the birth of a child will bring to the wage-earner a most acceptable present in the form of a refund at the time when most required, as a result of his being transfered to a different code, a code which allows additional relief of £50 to the new child. Much will depend upon the promptness with which the birth is reported by the employer to the tax inspector and the speed with which the inspector amends the code. I noticed an example in the White Paper where a child is born on 23rd January and the wage-earner has the code amended and has his refund paid to him on 3oth January. I think that if that is an example it is a trifle optimistic and not entirely in accordance with the experience of most of us in dealing with tax inspectors. I desire to refer to certain points of detail before returning to some general considerations. I notice that the scheme starts on the first pay day after 5th April, 1944. If that does not represent a full week, what happens in the case of fixed weekly wage-earners? Can the employer calculate the wages to coincide with the actual number of days? As the normal pay day after 5th April next year will be Friday, 7th April, that means that only two days will fall into the tax year 1944–45.

Another point I would like to raise, which was referred to by my hon. Friend the Member for Northampton (Mr. Summers), is that a difference seems to arise according to whether, on leaving his job, a man goes into other employment or becomes unemployed. In the first case, just as in the case of sickness interrupting regular employment, the first payment made in the new job, or the payment made on return after sickness, will take account of any changed circumstances and adjustments will be made. But if a man becomes unemployed, I presume he will hand his tax deduction certificate from his last employer to the employment exchange. Suppose he remains unemployed for the rest of the fiscal year. As he receives no wages, he will presumably receive no tax adjustment, yet it may well be as things turn out that he will not be liable for Income Tax at all, although he will have paid his cumulative tax for the period when he was in work at a rate based on last year's wages and which presupposes full employment. That may be a reasonable assumption now, but the time may come when we shall be faced with a volume of unemployment. It appears that the employment exchange should be authorised to make appropriate refunds when paying a man his benefit. Other difficulties may arise from the fact that the White Paper and the Bill are based principally, as is quite natural, on the case of wage-earners without other resources, but this is not entirely true today, when every sort of person has taken up work to further the war effort. A woman, for instance, may earn wages but at the same time enjoy a respectable income or may be married to a man who is a rentier or a wage-earner or both. The usual method of setting off other income against personal allowances may be quite insufficient, and I therefore once again put forward the plea—which is very well known in this House—for the separate assessment of husband and wife. In that connection I notice that in the White Paper the Treasury repeats the warning which was given during the Debates on the Finance Bill this year that the separate assessment of husband and wife would actually lead to higher tax in the case of small incomes. This is perfectly true under the present law, but those who have pressed so long for this reform have, I hope, every intention that at the same time the reduced rate relief should become applicable to both parties exactly as it was before marriage. If that change—

Mr. Speaker

The hon. Member must discuss the Bill and not the problem of separate assessment, which seems rather beyond the scope of the Measure.

Sir A. Beit

I was raising the point, Mr. Speaker, as a whole paragraph in the White Paper is devoted to the subject of married women in employment, and it does have a very strong bearing upon what I am saying, especially when one considers the fact that on £165 each individual has to pay only 6s. 6d. instead of the 10s. allowed to one party of the marriage. With respect, I suggest that my point has some bearing on the subject. My point is that where that reduced rate relief is allowed to both husband and wife, there would be absolutely no truth in the contention we have heard previously from the Treasury that separate assessments would, in fact, in the case of smaller incomes, lead to a higher tax.

There is another very important consideration. When husband and wife are both in employment and they are both subject to the pay-as-you-go assessment, their respective employers will apply to each one of them the reduced rate relief which is incorporated in the tax tables. At the end of the year, therefore, they will have paid in all probability—and it is made quite clear in paragraph 23 of the White Paper—less tax than they really owe. In the following year they will have to be re-coded, with the result that they will have to pay back tax, which is one of the things this whole scheme was designed to avoid. If we could have separate assessment of husband and wife, these difficulties would not arise.

I would like to associate myself with every Member who to-day has asked for the extension of the scheme. I would like to express my gratitude, before I make a few further observations on the subject, to my right hon. Friend the Chancellor, who has given a very fair review of the whole position and who has made it clear that he is prepared to offer certain concessions. If I say that these concessions do not seem to go quite far enough, I hope he will not think I am guilty of any lack of gratitude.

We do, I suppose, realise that the monthly wage-earner in nine cases out of ten is the same as the yearly wage-earner, because nearly all monthly salaries are fixed salaries and are based upon a yearly payment. A monthly salary which is not so related is a rarity. There are at the same time certain yearly payments, such as those of company directors, which are not paid monthly, but in fairness to the Schedule E taxpayer the managing director of a concern who is paid at the rate of 10,000 per annum, monthly, should be entitled to exactly the same consideration as any other salary-earner. As a matter of fact, I do not see why we should stop it at monthly payments. It has been well maintained by a number of speakers to-day that all Schedule E salary-earners should be included in the provisions. In any case, it seems to be unfair to start drawing a line, whether or not it covers a Member of Parliament's salary, which was the figure, I understand, which would be accepted by the Chancellor.

There is a further point which has also been mentioned to-day, namely, that a managing director might be a person who, because he is outside this scheme, is not included and could not be included. At the same time it often happens that wage-earners in the course of promotion, reach a high position in their concerns, and in view of the principle "once pay-as-you-go always pay-as-you-go," you could get the position of a managing director earning a certain salary not being included in the new scheme, whereas another in a neighbouring factory, who started as a wage-earner at the introduction of this Bill, would be included under the pay-as-you-go assessment.

If this concession were made, there seems to be some doubt as to what it would mean in the way of loss to the Treasury. The Chancellor of the Exchequer has told us that it would mean a loss of £60,000,000. Well, the hon. Member for Chesterfield (Mr. Benson) has, I think, shown cogently that that loss is notional. In any case, whatever the truth, it would be spread over 3o to 40 years, and, therefore, in asking what would be the loss to the Treasury, which I might amend to what would be the additional income they would forgo, the answer is, seven months' Income Tax at the death of each person in this new category, a great number of whom do not die insolvent and from whose estates the Treasury can, as a rule, recover back tax. That is the fundamental difference between the two classes of people. It is of little use to the Treasury to have a claim for back tax on the weekly wage-earner when the prospect is that such a claim will become a bad debt, not only at the death of the wage-earner but also if and when he loses his job or suffers a reduction in wages. For the vast number of people who earn fluctuating wages the scheme is ideal, and although it is less urgent for other classes, there is a perfectly good case to be made out for all Schedule E payers, if for no better reason than that a great many on the monthly basis to-day are earning a good deal less money than the manual wage-earner who will be benefited. The Treasury, there- fore, must, in my opinion, discharge the seven months' tax otherwise recoverable at death and console themselves with the thought that post-war credit for 1943–44 will not be due to the great majority of monthly wage and salary-earners. That new and to me unexpected little twist is defined in Clause 3, Sub-section (5), of the Bill. The Treasury will naturally recover any other tax due to it, for the discharge is strictly limited to the pay-as-you-go assessment.

I am bound to say that I had hoped that the introduction of this Bill would have marked the occasion for a reform of some of the anomalies and cumbersome processes which are a millstone round the neck of the Income Tax payer. Efforts have been made, it is true, to reduce the number of payments which an individual may be called upon to make in different parts of the country, and one small example may be seen in the Appendix to the White Paper, where the Schedule A assessment on a man's house is set against the reliefs to which he is entitled and is not demanded separately, thus bringing him into a slightly lower code. I understand that the Inland Revenue are always prepared to act along these lines, but only if the other assessments do not exceed the reliefs. In all but the smaller income brackets, reliefs are proportionately so small that they are very quickly absorbed by other assessments, so that a man who lives in one place, has a business in another, owns property in a third and is a company director in a fourth can never Get his assessments consolidated and settle his Income Tax in one payment. People commonly suppose that the tax inspector assesses the taxpayer because in practice this appears to happen. If that were so, of course, the various regional tax collectors could get together and agree a single assessment. But they cannot do this, because the Income Tax administration is still based on Peel's Income Tax Act of 1842, which was consolidated but not very much altered in 1918 and which set up additional Commissioners—

Mr. Speaker

I must again interrupt the hon. Member to remind him that this is not a Bill in which he can discuss the general principles of Income Tax. He must confine himself to what is in the Bill.

Sir A. Beit

I realise that I am going a little wide, but the reason I mention it is because the new assessment that we are discussing is an additional assessment, and I thought you, Sir, would probably not object if I made a certain reference to existing assessments, especially in cases such as the one that I quoted of a man who may have interests in different parts of the country and, owing to the war, his wife is a factory worker earning money in that way. It seemed to me that in this relatively small number of cases, which are entirely due to the war, you would get further complications rather than simplification.

Mr. Speaker

If one admits one case of that sort, any number of others might be thought of, ranging over a wide field.

Sir A. Beit

I will not pursue the matter further, beyond saying that I hoped there would be some simplification or rationalalisation, and I am a little disappointed that the opportunity has not been taken, but I shall be very happy to know if there is any prospect at all of some investigation taking place into this hundred-year-old system, with a view to bringing it a little more up-to-date, of the taxpayer being allowed to settle in which of the many areas in which his income may arise he desires to make a consolidated payment.

When one reviews this proposal it is interesting to consider the distance we have travelled since the time when Income Tax was looked upon as merely a contribution to the State from a very limited, almost diminutive, section of the population—the landowner, the rentier and the higher salaried professional classes. Had it not been for two wars in one generation it might be that the contribution of these classes would still suffice, with certain additions, but the cumulative effect of these wars has brought about a remarkable change. The resources of the landowner and the rentier to-day are not what they were. The resources of the wageearner—I do not wish to imply that this is cause and effect—are very much greater than ever before. All but the poorest classes in the land now make their contribution, not only for the waging of the war but also for making possible the better social services of the future, for the old, the sick and the unemployed will depend as they never did in the past upon the wage-earners' contributions, both in weekly premiums and in Income Tax. It is right, therefore, in view of this funda- mental change of circumstances, that the system which governs their tax payments should be made as simple and as fair as possible, and it is for that reason that I am supporting the Bill.

Major Woolley (Spen Valley)

I should like to associate myself with the tributes that have been paid to the late Sir Kingsley Wood, and I think it is rather a pleasant thought to realise that one of the last things he did was to cause this scheme to be brought up which would have such beneficial effects upon the masses of working men and women. I should also like to associate myself with the comments that have been made regarding the statement of the Chancellor of the Exchequer. The concessions which he contemplated he would consider are a great gratification to all of us. The scheme envisaged in this Bill is one which will bring a great deal of relief to people and will eradicate a lot of hardship, but I should like in my comments, which I hope will not be interpreted as being critical but helpful, to follow the line of the hon. Member for East Birkenhead (Mr. Graham White), who expressed his appreciation of the great difficulties attendant upon the adoption of this scheme. Of that there is no question, but, as far as I have heard, no actual figures have been quoted as to what sort of additional burden is likely to be imposed upon industry. I should like to quote two simple figures which will emphasise the additional burden that will be imposed. To take 25 typical wages and to calculate on the Treasury scheme the amount of tax that must be deducted has taken an expert 62 minutes. On another scheme to which I am going to refer the same calculation has taken 25 minutes. This is the additional burden which I suggest is going to be placed on industry, and not only on the employer, because it is an additional burden which the employee will be called upon to bear perhaps in a greater proportion than the employer. In the coal Debate yesterday the Prime Minister said: When three months ago we had a series of War Cabinets and inter-Departmental discussions on man-power, a most difficult and painful process began. Departments, all keen on their plans of war and for the greatest effort, required 500,000 more men than existed, and there is no means of repairing such a deficiency in time for them to be of any use in the coming campaign. There was a struggle, and everyone had to face the cutting of dearly loved plans, and wisely conceived plans, for increasing our war effort. Man-power—and when I say that I include of course womanpower—is at a pitch of intensity at the present time in this country which was never reached before."—[OFFICIAL REPORT, 13th October, 1943; col. 929, Vol. 392.] That is the difficulty that one is facing with regard to the implementation of this scheme, and, if it is a fact that for every 25 wages which have to be worked out the additional time factor involved is approximately 40 minutes, I cannot realise how we are going to pay extra labour to do it. We are short of labour at the moment, but if there is any one kind of industry shorter than another it is the clerical staffs, and there are few branches of clerical staff more complicated than those which have to do with the calculation of wages. Therefore this is a very important matter which I am sure the Chancellor will carefully take into account, because he said his mind is not closed, and I therefore hope he will bear it in mind.

The Treasury scheme is not an accurate scheme. It has a considerable degree of accuracy, but it is not accurate in its weekly deductions, as my hon. Friend the Member for East Birkenhead quite rightly mentioned. Under example A in the White Paper on a weekly wage of £4 4s. a deduction of £1 4s. is made for Income Tax, yet in the next week, when the wage goes up by 11s. to £5 15s., there is 4s. less deducted for tax. Therefore there is no absolute accuracy in this scheme. Nor if we go to the end of the year is there accuracy. I appreciate that there is a cumulative effect, and that it is said that reconciliation will be effected, but there is no absolute accuracy in the scheme as presented by the Treasury.

I want to bring to the mind of hon. Members a communication addressed to them by Mr. Avison, who happens to be one of my constituents. I have had the opportunity of discussing the matter with him and he has put forward suggestions which in my opinion would be of very great benefit in the matter of the time factor. Under the Avison scheme 25 wages which took 62 minutes to work out under the Treasury scheme took only 25 minutes with very little less degree of accuracy. I admit the Treasury scheme is more accurate than the Avison scheme, but I think the difference between them is not great enough to justify the addi- tional burden thrown on industry. To give an example, taking 25 typical wages, of those 25 at the end of 12 months, 10 are calculated under the Avison scheme to within l0s. There is not much reconciliation to have effect at the end of the year in those cases, when we remember that it has taken 52 weeks to accumulate that inaccuracy. The greatest reconciliation figure at the end of the year is only £4 2s. 1d. I am not suggesting that it is impossible to find cases which would leave a greater reconciliation figure than that, but these cases I have referred to are 25 typical cases, not specially chosen, and if that is the result and if it is true that there is such a difference in the labour involved, I ask the Chancellor of the Exchequer not to close his mind to the possibility of introducing or at any rate of considering further this Avison scheme. I believe that if we were to adopt it, it would lessen the burden on industry and give pretty well the same result at the end of the year.

Another point I wish to touch on has been already mentioned by several hon. Members. It is that the Treasury scheme is one which the average employee really cannot understand. It is complicated. I think it is only fair when we are introducing a new scheme to do everything we can to introduce a scheme which has the virtue of simplicity, simplicity in operation and simplicity in being capable of being understood by the employer. After examining these two schemes, I am in no doubt whatever that the Avison scheme is very much more simple to understand and considerably more easy to put into effect. Therefore I hope that the Chancellor of the Exchequer between now and the Committee stage of this Bill will look into this Avison scheme and see if there is not something in it. I would not take up the time of the House if I were not quite convinced that there is virtue in the Avison scheme. I do ask the right hon. Gentleman to consider very carefully what is perhaps the most important point, and that is the great amount of time and employment which will be involved by the Treasury scheme. If he does that, I am quite certain he will serve a very useful purpose.

Sir John Mellor (Tamworth)

In expressing my admiration for the way in which the Chancellor of the Exchequer moved the Second Reading of this Bill, making the general propositions so very clear, I must also express my sympathy with him for the dilemma which he showed himself to be in. The further he extends the scope of this Bill, as I am sure he would like to do, the greater the burden he must cause to be transferred on to the shoulders of those taxpayers who remain outside the scope of the Bill. On that point my hon. Friend the Member for Chesterfield (Mr. Benson) was in sharp conflict with the view of the Chancellor of the Exchequer. I believe the view expressed by the hon. Member for Chesterfield was a very attractive but speculative one, and I think we should be much safer if we assumed that the view of the Chancellor of the Exchequer was well founded. He said, "Discharge is not justified in itself." I think everybody will agree with that proposition, The Chancellor of the Exchequer cannot lightheartedly wipe out obligations to the State. I think myself, however, that my right hon. Friend rather over-estimated the difficulty in the post-war period of clearing arrears of taxation. He had in mind events after the last war, but then there were no post-war credits, which we have now before us in enormous figures. The provisions of this Bill do not affect postwar credits in any other year of charge than the current year, the financial year 1943–44. The proposed discharge amounts to the figure of £250,000,000 gross, or after allowance for a set-off of this year's post-war credits we have been told the figure will be approximately £125,000,000 less.

One question rather puzzles me, and I hope the Financial Secretary when he replies to the Debate will explain whether there is any objection in honour to the Government setting off the amounts which they propose to discharge against the postwar credits, not only for the current year, but for past and future years also; and if there is no objection in honour whether there is an objection in practice. I know that this suggestion is likely to be regarded as controversial, and in many quarters as unpopular, but if there is no objection in honour or in practice, I think that the amount which my right hon. Friend proposes to discharge should not be discharged but should be carried forward as a liability, and that these debts should be debited against the ultimate figure of post-war credit credited to the taxpayer concerned.

I was very glad, in company, I think, with almost everyone in the House, to hear my right hon. Friend say that he contemplated extending the scope of the Bill to include at least some salaried taxpayers. I should like to see him include all salaried taxpayers. I feel that anything short of that would be very anomalous, and to stress the anomaly I should like to read one paragraph from a letter which I have received from a chartered accountant in my constituency. He wrote: The anomaly is underlined in so far as it operates towards pensioners. The pensioner whose income is derived from an appointment in which he was paid weekly will have discharged the portion of the 1943–44 assessment outstanding at 31st March, 1944, whereas the pensioner whose income is derived from on appointment in which he was paid monthly will be held liable to discharge the outstanding balance of the 1943–44 assessment. While there will be a considerable element of anomaly unless the scope of the Bill is extended to cover all salaried taxpayers, it must at the same time be recognised, as I have endeavoured to stress, that the more the scope of the Bill is widened the greater will be the burden to be transferred to the shoulders of those who still remain outside it

Having regard to that difficulty and to the dilemma in which the Chancellor of the Exchequer is inevitably placed, I suggest that some solution should be found which would make for greater equality between all taxpayers. I put forward one suggestion with great diffidence, because It is a very far-reaching one and will be highly controversial. I suggest there should be some adjustment of the standard rate of Income Tax in a compensating way; that there should be a differential standard rate for the period of one year, with a higher standard rate for those persons who come within the scope of this Bill and a lower standard rate for those who have the misfortune to remain outside it. I put that forward with diffidence, but if some way can be found to make this Bill operate more justly and more equally throughout the community, so that it does not involve the transfer of a burden of taxation from the shoulders of one set of taxpayers to the shoulders of another set, I think this Bill will be a very great contribution to the fiscal system of this country.

Lieut.-Colonel Sir William Allen (Armagh)

There has been a widespread expression of opinion with regard to the personality of the late Chancellor of the Exchequer, in which I should like to join. It has been said that they do not die who live in the hearts and minds of those they leave behind. If that be true, I feel, almost, that the personality of the late Chancellor of the Exchequer is with us to-day, and no one should feel that more than the present Chancellor in undertaking his work for the future. Naturally we congratulate him and wish him all success in the high office to which he has attained. I would like to add, in regard to the late Chancellor of the Exchequer, that those of us who came into contact with him recently in connection with readjustments in the finances of Northern Ireland have reason to be more than grateful for his action. A manifest injustice was adjusted by the late Chancellor.

I should like to congratulate the present Chancellor on the way in which he introduced this Bill. It augurs well for his future in his new office. I congratulate him more particularly upon the clever way in which he was able to take the sting out of all the prepared speeches that were ready for delivery. I was particularly struck with the speech of the hon. Member for East Birkenhead (Mr. Graham White) and the hon. Member who spoke from the front bench here, and I am sure the Chancellor will look carefully into the points which they put forward relating to the part to be taken by employers in carrying out the details of the Bill. The tables which have been referred to are certainly very peculiar; no doubt the Financial Secretary to the Treasury will be able to inform us how he got the figures which are in the White Paper.

The complaints of the workmen will be met by this Bill. The workers found it very difficult to pay large amounts of Income Tax at the end of six months, wondering where they would find the money, and this Bill is the result. Reference has been made to the fact that those who were responsible for the finances of the country declared not long ago that it was impossible to introduce such a plan, but now we have this Bill. It has been found possible because the Treasury was losing so much money—the first thing that would touch the heart of the Chancellor of the Exchequer. I have no doubt that the miners will take advantage of this Bill, which relieves them from the discharge of their liabilities, that there will be a great increase in coal production in the next eight months. That will be one result of the introduction of this Bill, particularly when, if they double their wages, they will be given ten-twelfths. There always has been and always will be some line of the incidence of taxation which is unfair. Up till to-day we thought there certainly would be a very sharp line of demarcation between the weekly and the monthly wage-earners. However, the decision come to has taken this demarcation away, and I have no doubt that the result will be very satisfactory to those concerned.

I should like to ask the Chancellor of the Exchequer one question, which is, Will this tax be deducted from the gross earnings or the net receipts of the workers? That is a very important question. The gross earnings are made up by the clerks of the employer and put down as a certain sum, but compulsory deductions from those wages will be made, more particularly if the scheme of Sir William Beveridge comes into operation. That will mean compulsory deductions from the gross earnings of workers, and we have the opportunity of looking forward to see how this can be carried out. I should be glad if the Financial Secretary will give me an answer to this question. I am very grateful for the opportunity that has been given to a Member from my part of the country to take part in this Debate.

Mr. Jewson (Great Yarmouth)

I can well believe that the Chancellor of the Exchequer regrets more than anyone else that the Bill was not introduced by his predecessor but, setting that thought aside, I think he could hardly have desired to make his début as Chancellor of the Exchequer under more favourable auspices. If we criticise to some extent the form, and to a very large extent the scope, of the Bill, at least we welcome it for what it is, for it does meet a very real demand of the country. This is a case in which the demand has produced the supply, which always seems to me the correct sequence of events. I welcome the Bill because it will smooth the path of taxpayers who are unused to long distance budgeting. I do not blame them for that. The circumstances of their lives have produced that state of mind, and I hope that we shall be able in future to reduce, or at any rate to lessen, the causes which have brought about that state of mind.

From the revenue point of view, I can see no objection to what I may call the forgiveness Clauses, partly because it seems to me that no real loss is incurred. The Chancellor mentioned the regular volume and flow of the revenue, and that will continue. The Chancellor of the Exchequer will budget every year for the amount that he needs, and the taxpayer will pay it every year. I therefore cannot see that the revenue will be the loser at all by the forgiveness Clauses; but, as between taxpayer and taxpayer, it is essential that justice should be done. It is essential also, as another hon. Member has said, that it should seem to be done. There is no doubt of the very strong sense of grievance among black-coated workers in many parts of the country. "Black-coated" is perhaps an inaccurate description, now that so many women are included in their ranks, but the phrase is one which we all understand.

I was rather surprised to learn from the owner of a large store that he engaged all his staff on an annual basis. Certainly one cannot justify making a concession to people who are earning £6, £8 or £10 a week, or even more, and refusing it to a shop assistant who has £150 a year. The wage-earners have deserved well of the country. We do not forget that fact, and it has been mentioned time and again, but surely the black-coated workers also deserve well of the country. They have been carrying on in very difficult circumstances, as I personally am well aware. The black-coated worker has had to face a constant reduction in staff, has continually had the strain of training recruits to take the place of workers called up, only to see the recruits in turn swept into the net of the Minister of Labour. He has had to begin his work over and over again, and all the time he has been facing the insistent demands of Government Departments for forms and returns which are sent out, without any estimate of the work they entail in the offices of the people to whom they are sent. On top of that, as I think it will be agreed, the black-coated worker has had considerably less increase in his income than the wage-earners have received. The black-coated worker does deserve every consideration, and I am sure that we were all glad to hear from the Chancellor of the Exchequer that this demand is to be met. It is a demand which must be met.

I am bound to say that I view with some concern the burdens which this new system will place on industry. We are going to appoint a large number. thousands in fact, of tax collectors, unpaid. I am not sure that that is really a satisfactory thing to do, but there is no outcry from the people who are going to do the work at their own expense. I do not think we shall have any outcry, but I am not sure that we are wise in introducing this principle on so wide a scale. We know that if we appoint anyone to collect our dues, we pay them either by salary or commission. Otherwise we cannot expect our work to be well done. I have had personal experience of this, as trustee of property-owning charities. We certainly should not think of asking those who are to benefit under the Bill to work half-an-hour for nothing. I hope it is being carefully considered whether the principle which we are now introducing of appointing so many unpaid tax collectors is really a good one. It seems a little hard that in the Bill we find threats as to what is to happen to them if they do not carry out at their own expense our work in the way we think it should be done. They are not complaining, and possibly they will gain through what it will mean to their own employees more than they lose in the expense of carrying out this scheme. I am sure it will be carried out to the best of their ability, but there is the very important and difficult question of man-power.

I should like to ask specifically whether the Minister of Labour has agreed to provide the necessary man-power or at any rate to cease to withdraw from offices the clerks who are essential if this heavy extra work is to be carried out. It has already been pointed out that this work in connection with wages has to be done against time. In my own small way I know very well that anyone who interrupts the clerk in my own office who has to prepare the wages on a Friday afternoon becomes extremely unpopular. It is always a job to get them ready in time, and I am still puzzled to know how it will be possible in future. In the case of a large employer who has all his employees under one roof the work can be done by providing a skilled accountant with sufficient assistance, and they can get through it. But in a company with which I am connected, which employs possibly 600 or 700 employees scattered among six different branches of various sizes, it is of course impossible to appoint a skilled accountant to each branch to do that job. It will have to be done by the ordinary office staff. It is a very heavy task, and I hope it will be made clear that the matter has been carefully gone into with the Minister of Labour and that he has agreed to see that the necessary provision is made.

One further point. It is provided that all the necessary documents must be produced to an inspector on demand and so forth. That means another heavy burden on offices. We all know only too well these days what the arrival of an inspector from a Government Department wanting information really means. Someone has to be given up to him to go into matters, to find everything he wants, and of course people are disturbed throughout the day. This is really a very heavy burden on the office staffs, and, as I say, I hope it will be carefully prepared for. I think that is all I want to say except that once again I welcome this Bill, and all I hope is to see it extended to include all the people it ought to include.

Mrs. Tate (Frome)

I should like to add my thanks to the Chancellor for the extraordinarily interesting and explicit way in which he introduced the new provisions here to-day. I think that not the least valuable part of this new arrangement will be that it will lead to far greater understanding on the question of Income Tax in the country as a whole, which I believe will be of very great advantage to enormous numbers of workers. I believe it would be a very good thing if we took this opportunity of having very clear and explicit talks on the wireless and articles in the Press really explaining to the worker exactly how the incidence of Income Tax will fall. There is absolutely no question, as anyone representing, for instance, a mining constituency must know, that among miners as a whole there is not a complete understanding of Income Tax, which has often led to very unfortunate circumstances. Had it been better explained to them, it would have been a very valuable thing.

But we all welcome this Bill. I am sure the Chancellor will agree with me that especially when the incidence of taxation is so high it is very vital that all those whose wages come within the Income Tax level should be making their contribution, and I do not think that this is the case to-day. I think one class of workers who sometimes should be paying Income Tax and in fact do not pay are domestic workers. Before the war very few of them received wages sufficiently high to bring them within the Income Tax level, but one has only to read the advertisement pages of any newspaper to-day to realise that a very large number of domestic workers are receiving wages which bring them into the Income Tax level. Very many of them are foreigners, and I think it is exceedingly desirable that some steps should be taken to bring to their notice the fact that they should be paying Income Tax, and some steps should be taken to impose an obligation on their employers to inform the authorities as to what wages domestic workers in their employment are actually receiving when they are above the Income Tax level.

I very much welcomed the hint which the Chancellor gave that he would take into consideration giving these advantages to the monthly salary-earners up to an annual income level of £600 a year, but I would very much have preferred to have seen all salaried workers brought into the same class. I think it is a very unfortunate thing to make unnecessary numbers of differentiations in the classes of payee, and I also think that the anomalies which will arise in years to come as a result of the decision "Once a pay-as-you-earn worker always a pay-as-you-earn worker" will be appalling. Members of Parliament who deal with anomalies and hard cases every day will quickly appreciate the appalling situations and the hard cases which will inevitably arise from this provision. The only argument the Chancellor used for having included in the beginning only the weekly wage-earner was that his salary was liable to greater fluctuations than were the salaries of the monthly or annually paid worker. That entirely ignores the fact that the final application for Income Tax on the annual worker—for instance, teachers, a body of people whom no one can contend are overpaid—the final demand on them is generally made when they go on super- annuation or is made on their dependants when they have died. It does indeed seem hard that weekly wage-earners who perhaps were earning £15 or £20 a week—the hon. Member may express dissent, but that is the sum being earned by some weekly wage-earners in the country to-day; it may be only a small number, but some are earning £15 a week or more—it does indeed seem anomalous that they should be having this concession but that the teacher, who has never earned as much as that in a month perhaps should have a tremendous burden when he goes on to superannuation pay, or that his dependants should have the burden placed upon them when he dies, and that he should not benefit from this concession. I very much welcome the Bill, and I hope indeed that the level will be raised to include those who earn £600 a year, although I would prefer to see it extended to all salaried workers. I very much hope that my suggestion that this opportunity should be taken to give very clear explanations on Income Tax on the wireless or in any other way to the whole country will not be lost.

Lieut.-Commander Hutchison (Edinburgh, West)

I welcome this Bill very heartily, and I believe it will give great satisfaction throughout the country. I also welcome the declaration, or, rather, the broad hint, of the Chancellor of the Exchequer that he will consider widening the scope of the Bill to include a good many categories of people who are not now included. I hope that it will be possible ultimately, as he hinted, to revise the Income Tax system to bring everybody into the pay-as-you-earn scheme. I agree that it is a matter of some difficulty, which will take time, but I think that it is an objective worth striving to reach. The hon. Member for East Birkenhead (Mr. Graham White) complained about the drafting of the Bill. I am no expert on Income Tax, or on finance generally, but I think that this is a well-drafted Bill, much easier for the layman to follow than many Bills I have seen while I have been in this House. I want to comment on two points which have been brought forcibly to my notice by my constituents, and on which I have no doubt many other Members have received representations.

There is among such people as the small shopkeepers and business people whose undertakings have been hurt by the exigencies of war conditions some soreness about one section of the community having their Income Tax remitted to a large extent, whereas they cannot come into the scheme. I agree that it would be extremely difficult, if not impossible, to bring certain categories of business people and shopkeepers into such a scheme, but I would ask the Chancellor of the Exchequer to get the Treasury officials to consider whether anything can be done. Perhaps my hon. Friend the Financial Secretary, when he replies, will point out some of the reasons for not bringing them in. A great many people think that one section of the community is to be freed from a very heavy burden, which will be borne by others, and publicity should be given to the fact that that is not entirely correct. My other point was, I think, covered by the Chancellor of the Exchequer in his speech, but I would like to have the matter made clear. It concerns the eligibility of pensioners who have their pensions paid monthly, to come under the scheme. I understood the Chancellor to say that they will be brought into the scheme if the pension is not too great. I have in mind the case of a retired post office official with a pension of about if £120 a year, who is paid monthly. It seems to me that he ought to come into the scheme. Might I ask the Financial Secretary what would happen to such a person if his tax had been under-collected and he was at present in debt to the State? Would that tax be discharged under the Bill? The Financial Secretary shakes his head, but I should have thought that such a person would be covered in that way. Perhaps the Financial Secretary can deal with the point when he replies.

Mr. Murray (Spennymoor)

I rise to say a few words, as the miners have been mentioned to-day. The men in the mining industry are very much interested in this matter. Wages in that industry are largely regulated by a method of piece-rate payments. On many occasions men have been called upon to pay large sums of Income Tax when their wages have been at the minimum rate, because of what is known as the cavilling system. A man may be in a splendid place one quarter, earning a reasonable amount, and in the next quarter he may be in a very hard place, earning the minimum wage; so that he is called upon to pay Income Tax on the high wages when he is receiv- ing very low wages. The manager of one colliery put this position to me—it is what I always advocated when I was at the colliery. This manager said that the most difficult persons he had to deal with were the putters. They are the young men who put in the tubs and draw them out. I always considered that the heaviest work, the horse work, of the pit. I always thought that if you could keep the putter all right you had no fear of a stoppage in a pit. These lads are very sensitive about the possibility of a big deduction for Income Tax when they are earning the lowest wages. I hope that the concession which has been made to-day by the Chancellor of the Exchequer will smooth out some of the difficulties in the mining industry. If that happens, this will be one of the best pieces of work that this House has done for a considerable time. I do not want to say any more on that point, because I want to hear the Financial Secretary's reply.

The other point to which I wish to refer concerns teachers. The County of Durham, like all other counties, I suppose, has a teachers' association. That association decided to approach the Members of Parliament for the county, with a view to getting this concession applied to the teaching profession. I think the teachers have been very honourable in coming forward and asking for it. Not many people ask to pay Income Tax, but the teachers have asked to be allowed to pay it in the same way as the weekly wage-earners do. They realise that the war has to be paid for. If the teachers can be given the same opportunities as are given to all the manual workers, we shall have met that application, which has been so generously made.

The Financial Secretary to the Treasury (Mr. Assheton)

I am very glad indeed to notice the way in which the House has welcomed the Chancellor's speech and the Bill which he introduced. As my hon. Friend the Member for Faversham (Sir A. Maitland) said earlier in the Debate, everybody is very satisfied with the Bill, but, like Oliver Twist, they are asking for more. That is a very high compliment to the system which we have been able to introduce to the House of Commons to-day in this Bill. I am certain that my late chief, Sir Kingsley Wood, would have been very gratified indeed if he could have heard much that has been said during the course of the Debate to-day. He had this matter very much at heart, and it was a great satisfaction to him to know that it had been satisfactorily settled. I would like to thank my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) for the kind things he said with regard both to the Chancellor and myself.

I will do my best to answer the very numerous questions and problems that have been put to me in the course of the Debate, but I am sure the House will appreciate that it is not a very easy matter to handle and that it is full of technicalities. They will also appreciate that I am replying on the spur of the moment, not having had the opportunity of the considerable amount of consultation and thought which one is able to have if one is making a carefully prepared speech. The main issue which faced the House was, to some extent, dealt with by my right hon. Friend the Chancellor of the Exchequer in the last few words of his speech. It is clear that what my right hon. Friend said gave a great deal of satisfaction to the House. None the less I recognise that there has been a very considerable demand for the extension of this system to all classes of Schedule E taxpayers. My right hon. Friend said in his opening speech that he agreed in principle that to pay as you earned was a good thing, and he also said that he hoped to work up to it, but I do not think that I would be right to give the House any reason to hope that he will be able to go further in this Bill than he went in the closing remarks which he made in his speech to-day.

I would like to put one or two difficulties to the House which perhaps may not have occurred to hon. Members. One has to consider other classes of taxpayers besides those in Schedule E. Let us take, for example, the case of a director of a company who is assessed under Schedule E and a partner in a firm doing just the same sort of business who is assessed under Schedule D. It might well be asked: Why should there be a discharge in the case of the company director and not in the case of the partner? Again, my hon. and gallant Friend the Member for West Edinburgh (Lieut.-Commander Hutchison) referred to the difficulties in the case of the small shopkeeper, which is a good illustration, as also is the case of the farmer. My hon. and gallant Friend asked why it was we could not apply the same system to this class of taxpayer. The difficulty is that with this class of taxpayer we at the Board of Inland Revenue do not know nor does the taxpayer as he goes along, what his income is. If you take the case of the farmer, which is a very good illustration, he does not know what his income is until the end of the year, when he comes to take stock and can see how many more cows or how many fewer cows he has than he had on the same date in the previous year, and can assess the profit or loss he has made. Therefore, it is difficult to apply a system of this kind to farming or shopkeeping, or indeed to the professions. Comparisons will be made between these various classes of taxpayer, and my right hon. Friend the Chancellor of the Exchequer has given the House an indication in his speech of how far he proposes to go. He has told us he agrees in principle that to pay as you earn is a good thing, and that he hopes to work up to it, but he does not feel able to go any further than he has indicated to-day, as far as the Bill is concerned.

A very large number of other questions have been raised. There was one of great interest which was raised by my hon. Friend the Member for Faversham. It refers to an interesting letter written to "The Times" some days ago by two gentlemen who are actuaries. They made a considerable point of the swing which one can detect if one looks at the tables in the White Paper, and my hon. Friend the Member for Faversham and another hon. Member referred to this point. Attention has been drawn to this already by others and the Board of Inland Revenue have already in mind a recasting of the tables so as to try to eliminate some of this trouble as far as possible. I do not know whether all hon. Members have studied this Paper as closely as I have been obliged to do. It may be that they have not found some of the practical difficulties which presented themselves to those who prepared this scheme. One of the practical difficulties, and it is an interesting one, is that there comes a time when you are a taxpayer, when your income passes from the range at which you are paying tax at the rate of 6s. 6d. in the £ to the range where you are paying 10s. in the £. The sum of £165 is allowed to a taxpayer at the reduced rate of tax of 6s. 6d. The moment you pass from that area, a rate of tax of 6s. 6d. in the £, into the 10s. area you are taxed at a different rate and your weekly deduction is inevitably at a different rate from what it was when you were in the 6s. 6d. area. The taxpayer may find that although he receives practically the same wages he will have a different deduction. That is the inevitable result of our system of taxation but it will be something which will be useful for employers and workers to understand, so that they will not be alarmed when they find that there is that difference in the amount of tax that is deducted.

Major Woolley

Is the Financial Secretary now suggesting that the example in Table A, where for the first week £1 10s. is deducted on £5 6s. 6d. income and for the fourth week £1 4S. on £5 4s. od. income, is a result of the incidence to which he now refers?

Mr. Assheton

I should not think that that particular case is. I refer to it as being one of the reasons which causes these differences. In that particular case, without pledging myself to it, I should think that that is due to the variations which arise from the method of rounding off figures in tables. That is another cause of difficulty. It is to that in particular that the Board of Inland Revenue are paying attention and it is hoped that by the recasting of these tables to some extent a greater degree of exactness will be obtained.

Sir W. Allen

Shall we have that before the Committee Stage?

Mr. Assheton

I should think that that is rather doubtful but work is going on on these tables and any alteration which can be proposed will of course be an amelioration and improvement of the present position. I wanted to refer to that interesting letter which these two gentlemen wrote to "The Times," because it raised an important point. My hon. Friend the Member for East Birkenhead (Mr. Graham White) said that our whole Income Tax law urgently needed review, a point which has been made before to-day. I am in agreement with him that there is a great deal that can be done, but there is a great deal that cannot be done during the war, for various reasons which my hon. Friend will know. None the less my hon. Friend welcomed the Bill and was one of those who also asked for more. He complained a little that we had used the word "emoluments" in the Bill rather often. I have been looking at Income Tax Acts rather frequently lately, and I have become used to the word, but I think there is merit in its use in this Bill because it has the advantage of already having been defined in previous Income Tax Acts, either 1925 or 1927, which give a definition of the word. I would direct my hon. Friend's attention to that. If he thinks the definition is not a good one, I am sure he will be good enough to tell me.

My hon. Friend the Member for Stourbridge (Mr. R. Morgan) took the view that this was a simply drafted Bill, and I think that on the whole it is. Many Bills which have been drafted have been more difficult to understand than this one, and the ordinary reader who understands Income Tax can, I think, get a clear idea of what it is intended to do from this Bill. I would like to thank my hon. Friend the Member for Dumbarton Burghs (Mr. Kirkwood) for his kind remarks. I know the great interest he has taken in these matters in the past. He asked me to reply on the question of insurance premiums. I quite understand his point, but, of course, the insurance rebate to which he referred is a reduction in the amount of tax which the taxpayer pays if he has certain life insurance policies. What my hon. Friend was wondering was whether a man who insured his life and was not a taxpayer could obtain a similar rebate. That would not be so, because this rebate is a rebate which reduces the amount of tax which has to be paid. It is not connected in any way with the premium which the man who is insured has to pay on his life policy. The rebate is a deduction from Income Tax, and, therefore, if no tax is due there can be nothing deducted from it.

Mr. Kirkwood

Will not the Financial Secretary consider the point further, because it will affect the class without income with which to pay Income Tax, who are anxious to make sacrifices and provision for their children?

Mr. Assheton

I do not think it is possible for it to be done, but I shall be happy to discuss the matter with the. hon. Member afterwards. My hon. and gallant Friend the Member for The Hartlepools (Colonel Greenwell) made an interesting maiden speech to-day, on which I would like to congratulate him. He referred to the difficulty which would arise under the squad system. That difficulty will arise in other forms of business, certainly in several industries that I know, and it is intended that as far as possible this system should apply to these cases. There will be a number of difficulties which will have to be worked out, but I do not think it is impossible to overcome them. My hon. Friend opposite, the Member for Rugby (Mr. W. Brown), who made an interesting speech about servants of the Crown, asked whether it was possible for civil servants to come into this scheme. I understand that a formal application has been received to that end, and I should like to say that my right hon. Friend the Chancellor will be very happy indeed to consider it and that it is his hope, provided no unforeseen difficulties arise, that he will be able to accede to that request. There was a further request which my hon. Friend made about men in the Services. He drew attention to the difficulty which might arise in the case of men leaving the Services and who might have some Income Tax obligation unpaid. I do not know whether the House is fully aware of it, but so far as Service men are concerned tax is deducted as you go along. It may be that there are certain arrears due to people being in remote places. The assessment is based on the last year's income, and they are, in fact, paying as they go. My hon. Friend called attention to the fact that an officer might have been promoted in the last year and that there might be an additional assessment, but I understand from the Inland Revenue authorities that even in those cases every effort is made to deduct tax during the course of the year when the emoluments are actually received. So I hope this will not cause us so much difficulty as anticipated. Normally, there should be no tax outstanding. I should have said a few moments ago that in the case of civil servants even if they come into this method of taxation, there will be no question of discharge arising, because in their case they have for some time been paying as they go.

My hon. Friend the Member for Northampton (Mr. Summers) asked what happened when a man fell out of employment. My hon. Friend told me that he could not be in his place at the moment. He wondered whether repayment would be prompt. The Inland Revenue have every hope that repayment will be prompt, and they intend to make arrangements to that end. So far as employers are concerned, that will work automatically. If a man is sick, he will be able to receive a refund when he goes back to work or if a refund arises before that he will be able to obtain it from his employer.

Sir A. Beit

In the case of an unemployed man, does it mean that he will get his refund from the employment exchange?

Mr. Assheton

Not at all. If he is unemployed, if he has left his work, he will obtain it from the Board of Inland Revenue, from the local tax inspector.

Mr. Woodburn

Supposing a man retires, is due for refund and immediately goes on to supplementary pension, would it count as means or income in connection with his supplementary pension?

Mr. Assheton

He would get his refund, and it would have no effect, so far as I am aware, on his supplementary pension. I have given that answer without consultation with my officials so it may possibly be wrong.

Mr. McEntee (Walthamstow, West)

If it is wrong, will it be put right?

Mr. Assheton

If it is found to be wrong, I will see that a Question is put down in the House and a correct answer is given.

I was asked to give some examples of the post-war credit business. The hon. Member who raised it said he did not think it was easy to understand without figures of actual examples. I will give an example. Take the case of a married man with no children who has an income of £4 a week. Before 1941, which was the date when this post-war credit business started, his tax was 15s.; but for the reduction of the allowances his tax at present rates would now be £1. Now his full tax is £15 5s. That is to say, the post-war credit which he will receive is the difference between these two figures, the additional amount he has to pay on account of these allowances having been reduced in 1941. So the post-war credit of that man will be £14 5s. In the case of the Schedule E non-manual worker, he will be discharged from 7/12ths of the tax which, I am advised, amounts to £8 18s. There will thus be left for him a post-war credit of £5 7s. I do not know whether that illustration serves the purpose which my hon. Friend wanted me to give, but if not I should be happy to give him further illustrations of the matter at some later date. My hon. and gallant Friend the Member for West Edinburgh asked a question about pensioners. I am not sure that he was not asking about Civil Service pensioners.

Lieut.-Commander Hutchison

It was the case of a retired Post Office official.

Mr. Assheton

A Civil Service pensioner would not be in the scheme. It is no advantage to him to be brought into it. He would get no tax discharge, as he is up to date with his payments when his employment ceases.

Mr. W. Brown

That is not so. A civil servant pays this year on his income for last year, and when he stops drawing salary and starts taking his pension, for the first year he has to pay Income Tax for the previous year.

Mr. Assheton

That is not so.

Mr. Brown

It is. I know.

Mr. Assheton

This is one of the occasions when I have taken the precaution of providing myself with some information from the Board of Inland Revenue. However, I will go into the matter carefully and write to my hon. and gallant Friend if I am wrong, and I shall be happy to discuss the matter further with him.

Mr. Pethick-Lawrence

Perhaps we may have the information in the House, because it is a very important point.

Lieut.-Commander Hutchison

The particular person whom I have in view has not been paying tax until quite recently—only in the last couple of years. He is wondering now whether he will come into the scheme or not. His pension is about £120 a year.

Mr. Assheton

If his pension is under £600, he will come in. He will not be given an option.

Lieut.-Commander Hutchison

How about arrears?

Mr. Assheton

Perhaps I may discuss the matter further with my hon. and gallant Friend later on.

Major Woolley

Will my hon. Friend deal with the very important point of where he is to find all the thousands of employees who will be required to work the Treasury scheme?

Mr. Assheton

My hon. and gallant Friend and others have made the important point that the scheme will give a great deal of work and will certainly make the employers' task in some ways harder than it is now. In some ways it will not, but in some ways it will. There will undoubtedly be great pressure of work at certain parts of the week. We must see how we go along, but it is clear that the Ministry of Labour, which is always reasonable and ready to listen to particular difficulties which have to be overcome, will undoubtedly give ear to the plea which my hon. Friends have made.

I was out of the Chamber when my hon. and gallant Friend the Member for Spen Valley (Major Woolley) referred to an alternative scheme. I should like an opportunity of going into it with him in some detail. It is much too long for me to be able to give a full reply now. The main difficulty in it is the question of overpayments. I should like to say to the House what a very great debt of gratitude they owe to the Board of Inland Revenue, of which my right hon. Friend was at one time the Chairman. The Board has given an immense amount of careful study to the production of this scheme. It is not yet perfect, and I daresay it can be improved upon, and I hope it will be, but they have done so much hard work and put so much effort into it that it is only right that we should take this opportunity of expressing our gratitude. One of the canons of taxation laid down by Adam Smith was that every tax ought to be levied at the time and in the manner which is most likely to be convenient to the payer. I believe that, as far as possible, this scheme follows out that very important principle.

Mr. Woodburn

The next six months may be among the most important from the point of view of production. Could the hon. Gentleman make it clear that, as an incidental result of this scheme, workers will be relieved from Income Tax on any increase they make on their production between now and April next? [An HON. MEMBER:" And their wives."] If he would make that clear, it might be a stimulus to production, which might even continue after April if once inculcated. I am not sure, as I have not been able to be here continuously, whether the point has been made that this is better than Beveridge in some ways in producing a bonus for babies. I think the illustration given is a very interesting one and might even meet the point raised by my hon. Friend of being an inducement to wives as well as husbands.

Mr. Assheton

There is certainly something in what the hon. Member has said. [An HON. MEMBER: "Is it true?"] It is partly true. There is something in it. It is also true that it gives a bonus for babies, and it is very interesting to realise that you get a bigger bonus for babies, if they are born at a certain time rather than at another.

Mr. Mack (Newcastle-under-Lyme)

Would the right hon. Gentleman consider giving a classification of those weekly wage-earners who are entitled to benefit under the scheme? For example, would insurance agents be included in so far as they are paid generally on a weekly basis?

Mr. Assheton


Question, "That the Bill be now read a Second time," put, and agreed to.

Bill read the Second time.

Bill committed to a Committee of the Whole House for the next Sitting Day.—[Major Sir James Edmondson.]