HC Deb 20 October 1943 vol 392 cc1402-74
The Chairman

Mr. Summers.

Mr. Pethick-Lawrence (Edinburgh, East)

On a point of Order. I think it must be clear to the Committee that the discussion on the Amendment that you have now called is very closely associated with the Amendment in the name of the Chancellor of the Exchequer, to insert a new Schedule, and that it will be practically impossible not to discuss those two Amendments together, and I suggest that, with the approval of the Committee, it would be desirable if we might discuss them at one and the same time, which will shorten the discussion and be much more helpful to the Committee as a whole, and I suggest that you therefore allow that course to be taken.

The Chairman

I am obliged to the right hon. Gentleman for giving me an opportunity of saying a word or two on the form that the discussion might take. If the Committee is agreeable, I propose that the discussion on the whole question of the extension of the pay-as-you-earn system might perhaps take place on this Amendment and that reference be permitted to the Schedule to be moved by the Chancellor of the Exchequer as the two matters appear to hang together. If the Committee agrees, the discussion might perhaps take that form. May I take it that the Committee agrees?

Mr. Mander (Wolverhampton, East)

On a point of Order. Do I understand that the discussion which is to take place will cover my Amendment, in Clause 1, page 1, line 16, at the end, to insert: all emoluments assessed under Schedule E of the Income Tax Act, 1918, as amended by subsequent enactments, which comes before that of my hon. Friend and covers the same ground?

The Chairman

I had not selected the hon. Member's Amendment. I thought that if there was to be a general discussion, it could take place more usefully upon the Amendment in the name of the hon. Member for Northampton.

Mr. Hutchinson (Ilford)

There is upon the Order Paper an Amendment in my name and in the names of some of my hon. Friends, and also an Amendment to the Schedule which is to be moved by the Chancellor of the Exchequer in my name and the name of the hon. Member for West Lewisham (Mr. Brooke). The question raised by all those Amendments, both those to the Bill and those to the Schedule, is substantially identical with the question raised by the Amendment in the name of the hon. Member for Northampton (Mr. Summers) and the question raised upon the Schedule moved by the Chancellor. In those circumstances would it not be for the convenience of the Committee that the Amendments in my name both to the Bill and to the Schedule should be discussed at the same time?

The Chairman

If the Committee agree, I have no objection. It will be understood that all the proposals with regard to the extension of the pay-as-you-earn system will be discussed on the Amendment in the name of the hon. Member for Northampton.

Major Sir George Davies (Yeovil)

Is it to be understood that when we reach the Schedule the Debate upon it will be completely curtailed because of the Debate now and that it will merely come before us formally?

The Chairman

That is so.

Mr. Summers (Northampton)

I beg to move, in page 1, line 18, to leave out "by way of manual labour," and to insert: chargeable under Schedule E of the Income Tax Act, 1918, as amended by subsequent enactments. I hope it will be clear that this Amendment is not promoted by a desire to force the Chancellor of the Exchequer to go further than he indicated in his Second Reading speech that he was then prepared to go. As evidence of that, I would point out that this Amendment dealing with the scope of the wage-earners' scheme was, in fact, on the Order Paper before the Chancellor made his Second Reading speech, so there can be no suggestion that, having obtained a little, one was induced to ask for still more. I hope the Amendment will be judged solely upon its merits, and in that connection I would like to draw attention to two passages in the Chancellor's speech on Second Reading which have a direct bearing on the extent to which the scheme should go. He said: 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. In another passage he said: 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." [OFFICIAL REPORT, [14th October, 1943, cols. 1101-2,Vol. 392] I do not think it needs any detailed explanation to show that the purport of this Amendment is to extend the benefits and the principles of this new scheme to all who are enjoying income from employment. Arguments have already been used on the technical side which I will touch on lightly, but to go into detail would be merely to repeat what has already been said. It is worth noting that in so much as the principle appears to have been conceded that once a person is under the pay-as-you-earn scheme he will remain under it, regardless of his future income, it will inevitably follow that a person below the datum line —if there is one, and that is the position contemplated by the Chancellor's Amendment—at the outset of the scheme, who in subsequent years rises to a substantially higher income, will continue under the scheme and will have his tax discharged for the current period, whereas a person immediately above the datum line may, when the time comes have an income substantially smaller than the man who has risen, and will be in a very anomalous position. There is also the position of two people who are doing virtually the same work, one of whom may be paid, say, £700 a year and the other, in another firm or in another position, paid £500 a year. The work is the same, the standard of living is the same, the obligations are the same, yet the one, owing to the arbitrary dividing line between them, has the benefit of discharging and evening out his obligations now, while the other, merely because his firm has found it possible to pay him the larger salary, will, in fact, be denied the benefits of his opposite number.

One of the points which has been mentioned is the difficulty which would arise if this scheme were extended above £600 a year and confined to Schedule E taxpayers because of the discrimination in their favour against those coming under Schedule D, shopkeepers and other people, who might claim that their need for such discharge of tax was no less great than in the case of those under Schedule E. But if we are to give the benefit of this scheme to people enjoying earned income up to £600 a year, below that datum line there will be many anomalous cases of just that kind, and it seems to me that it would not increase the anomalies under that heading to go above £600 a year. The position is there, it has to be faced, and if it can be resolved so much the better; but there is no escape from it by confining this scheme to £600 a year.

There is another point, and here one is at some disadvantage through having difficulty in understanding the Amendment in the name of the Chancellor. It is very involved. Whether it could have been shorter, only those who are more expert than I could say, but it does give the impression that whether a person comes under the scheme or not will be judged by whether in the year 1943–44 he is above or below the £600 a year figure. But that year is not yet finished, with the result that there must be a marked incentive to individuals for the remainder of that period to ensure that by their labours they do not bring themselves just above the datum line before the scheme is introduced. That is a thoroughly unfortunate incentive to introduce at the present juncture of the war. The Chancellor indicated that on broad principles he was sympathetic with the idea, and I have quoted passages from his speech to illustrate that fact. But in the Second Reading Debate he told us that he must have regard to the cost of this proposed extension. He said it would cost an additional £7,000,000 to extend the scope of the scheme to those earning up to £600 a year, and that to go to the limit of Schedule E Income Tax payers, would mean a further £53,000,000. Those estimates will be affected by what happens in the future and by the income which the beneficiary will have at the time he retires or when he dies. [An HON. MEMBER: "No."] My hon. Friend opposite appears to take a different view. I do not know that it is possible on this occasion to argue a technical point of that kind, but it seems clear that what happens in the future will have a marked bearing on the cost of a scheme of this kind.

It is said that those whom it was originally intended to include would be unable to meet their obligations when normal times came and their incomes fell substantially, and that a loss to the Treasury—which incidentally is merely all the taxpayers—would be inevitable and that, therefore, to discharge tax was merely anticipating to a certain extent what would inevitably follow in due time. I suggest that it is a thoroughly unsatisfactory point of view to take on this question, to say that those whose position enables them to discharge their debts shall not have those debts forgiven, but those whose position makes it doubtful that they will be able to discharge their debts are to have some concession granted to them. That seems to be a distinction which ought not to be allowed to enter into the justification for the extension of this scheme. If it is right and proper that a remission of tax should be given, it ought not to be affected by whether, in fact, people will pay these taxes in the end or not.

The Chancellor says that in times like these he must have regard to the cost. That would have a more convincing appearance if the cost, such as it is, had to be borne now, but the cost which this scheme entails will not be borne now. It will be borne in the years to come—25 or 30 or 35 or even 40 years hence—because it falls solely when the individual retires from work or dies. That process goes on year after year. If we take the Chancellor's figure of £53,000,000, without discounting a substantial amount for the reasons which I have mentioned, it can scarcely be more than £2,000,000 a year over the years that are to come, and I suggest that a gross figure of £2,000,000, which may be substantially less, is not, on grounds of cost alone, a good reason to deprive certain types of paid employment of the advantage offered to those in lower categories.

Mr. Bowles (Nuneaton)

May I ask my hon. Friend one question? He keeps referring to the benefit which people are going to obtain under this scheme, but surely anybody with a rising salary would lose under the scheme. To take an extreme example, suppose the case of the man who had an income of £1,000 last year, who has £2,000 this year and who will have £3,000 next year. Leaving out the question of reliefs, suppose that he pays £500 this year on the previous year's income. If this scheme is applied to a man such as I visualise, he will be paying £1,000 tax this year. It will cost him £500 more, if the scheme is applied to him.

Mr. Summers

I am obliged to my hon. Friend for that point, because that is merely a further inducement to the Chancellor to extend the scope of this scheme. In fact, all those with rising incomes will, as my hon. Friend says, have rather more to pay than they would have had to pay if the scheme had not been introduced, and that is another item to be taken into account in discounting the ultimate cost of extending the scheme. It was urged with considerable force by my hon. Friend the Member for East Birkenhead (Mr. Graham White) during the Second Reading Debate that it was of great importance to introduce this scheme with the least friction, the greatest amount of understanding and the minimum of additional work to the already harassed staffs of the employers. Simplicity, therefore, is an extremely important point in considering the merits of the scheme, and the submit that to have a dividing line at all is only detracting from the simplicity of the scheme and the opportunities of making it work. I was horrified at one passage in the Amendment which stands in the name of the Chancellor of the Exchequer. It is to the effect that in assessing the income, to determine whether it is above or below the datum line, overtime is to be ignored. I do not know whether those who drafted the Amendment are familiar with the method of calculating wages in industry, but I am satisfied that to attempt to take out overtime from the weekly wages of those in employment will be a fantastic and indeed impossible task.

The Chancellor of the Exchequer (Sir John Anderson)

May I interrupt my hon. Friend on a point of fact? That does not apply to weekly wages.

Mr. Summers

I am obliged to my right hon. Friend for that correction. In so far as it does not apply to weekly wages, the apprehension which one felt will be correspondingly reduced, but I am not sure, even now, that the introduction of the point of overtime at all will not lead to endless trouble, because wherever it comes—and if it is not the weekly wage-earner it must be somebody else, or it would not be introduced—it will, inevitably, lead to intense additional difficulty for people operating this scheme.

There is one last point which I would ask the Committee to consider in judging the merits of the plea that this scheme should be extended to all Schedule E Income Tax payers. In the last speech which the Prime Minister made in this House he said: This island is a model to the world in its unity and perseverance towards the goal."— [OFFICIAL REPORT, 13th October, 1943, col. 933, Vol. 392.] I believe one of the great features of our national life at the present time is its unity, Here we are seeking, by having a dividing line in this scheme between those up to £600 and those above it, to divide the unity of treatment of people who are similarly situated. I do suggest that not only are there no good technical grounds for such a distinction but that we ought to do nothing to impair in this way similarity of treatment for people who are in similar circumstances. We are all in this war together; the people who are employed in the same way should be treated in the same way. I urge the Chancellor not to be dismayed by the cost but to take the broadest possible view and to recognise that there is a desire for the extension of this scheme, not only in all quarters of the House, but throughout the country as well. The Prime Minister once said to America: Send us the tools, and we will finish the job. I ask the Chancellor to remember that he has the tools, and I ask him to finish this job.

Mr. Mander

I beg to support the Amendment. The Chancellor said the other day that his mind was not closed and that he was prepared to extend the system at the proper time in the way now proposed. I hope that as a result of the Debate he will come to the conclusion that the proper time is now and that he will feel that, as a result of representations that will be widely made to him in the Debate, the country as a whole desire this Amendment. Hon. Members have had many representations and received many deputations, and there is no doubt of the very strong feeling in the country that this proposal should be extended the whole way now. The Chancellor is a good House of Commons man, and I am sure that he desires to act in accordance with the views expressed here. If he finds there is strong pressure from all sides to go the whole hog, I hope he will feel it right to advise the Government that the proper time is now. The most difficult side of the matter has already been dealt with. I can understand the Government saying that the scheme has so many complications and was so difficult that they could not consider putting it into operation in war-time, but that part has been got over, and to put it fully into operation is not so difficult. It is an easier task to apply it to persons above £600. I do not think the Chancellor would be likely to lose money over adopting the Amendment, on the whole, owing to the circumstances now existing, but even if he did it would not seem to be a good reason for not accepting the Amendment.

A further point is that the proposal as it now stands is definitely anti-social. We are anxious to encourage longer terms of engagement for our workers, not simply by the hour, day, or week, but tending to the month or more. In its present form the proposal definitely encourages engagement for no longer than one week, and ought therefore to be looked at very closely indeed. There is the complication that some persons are paid not only a weekly wage but also an annual bonus. It is desirable that every section of the Committee should express its views to the Chancellor, and I shall be glad to see an extension made in the terms of the Bill.

Mr. Burden (Sheffield, Park)

I support the Amendment, moved in such admirable terms by the hon. Member for Northampton (Mr. Summers). The Chancellor has received many well-merited congratulations, and it may seem somewhat Ungracious to ask him for further concessions, but by inference he has admitted the justice of the claim embodied in the Amendment, that his proposal should apply equally to all. He seemed to reject the claim merely on grounds of expediency. His proposal received very careful consideration by the organisations representing non-manual workers. While those organisations fully appreciate the value of his proposals, so far as they go—and that remark applies particularly to the Railway Clerks' Association—they are unanimous in asking the Chancellor to widen the scope of the proposals to bring in everybody who is assessed under Schedule E. The Railway Clerks' Association, the National Union of Teachers, the National Federation of Professional Workers, and the National Association of Local Government Officers, fully representative and able to speak with authority for their members, are unanimous in asking the Chancellor to wipe out the £600 per year limit.

The case for this extension is simple. The present proposals are unjust in their incidence and will create endless anomalies. To-day, for example, owing to extended hours, war increases and extraneous duties, many officers in the local government service are above the £ limit. Sooner or later—and I expect we all wish it may be sooner—those amounts of additional remuneration will cease, and the officers will be compelled to pay, out of their decreased salaries, Income Tax at the higher rates. The Chancellor's proposals are intended to put right that very point for other sections of the community. I would point out another anomaly which is bound to arise. When the officers revert to their normal pre-war salaries, many of them will be below the £600 limit, and there will be cases in an office or Department where some who have been above the £600 and have reverted to a lower figure will be working with people on the same rates of pay, and one of them will be paying Income Tax on the new system and one on the old. For tidiness and good administration that state of affairs should not obtain.

There is one further point. In the local government service to-day are men above the £600 limit who are willingly and cheerfully carrying out many additional responsibilities imposed upon local authorities by the Government—Civil Defence, Fire Guard organisation, billeting and rehousing of homeless, fuel control, and so on—and doing so with sadly depleted staffs. They are working longer hours and giving up their holidays. I submit that they are making a really vital contribution to the country's war effort, and I would beg the Chancellor not to leave these men with a sense of injustice and of unfair treatment. The right hon. Gentleman has started on his journey with the good wishes of us all; perhaps I may recall to him Shakespeare's words: A merry heart goes all the day, Your sad tires in a mile-a.

Mr. Hutchinson (Ilford)

I desire to support the Amendment moved by my hon. Friend the Member for Northampton (Mr. Summers). The hon. Member reminded the Committee of the general sense of disappointment to which the limitation placed by the Chancellor upon this scheme has given rise, because it seems that one class is being given an advantage which is not to be extended to another. The feeling has been aroused that the scheme represents a departure from the generally accepted basis of equality of sacrifice and burden for all classes of the community, in so far as is practicable. In his speech in the Second Reading Debate the Chancellor seemed inclined at first to use the argument that salary earners did not experience the same fluctuations and instability of income as weekly wage-earning classes. Then he departed from that argument. His objection to extending the pay-as-you-earn system above £600 finally rested upon the loss which would be involved to the Exchequer. I propose, therefore, to address myself to that question and to consider how far such loss is real and how far it is of a notional character. The Chancellor estimated the loss involved in extending this system to all classes of Schedule E taxpayers at £60,000,000. I am not quite sure whether that takes into account repayment of postwar credits, but I assume that it is the net loss, I understand that the loss involved by extending the system up to the £600 income limit will be £7,000,000, and therefore the further loss in extending it to all Schedule E taxpayers would be £53,000,000, after taking into account the repayment of post-war credits. The sum which is involved is thus a net estimated sum of £53,000,000. That loss is not of course a loss which will be incurred by the Exchequer at once. I think that the easiest way to look at it is this: If this country were to go into liquidation and its assets were to be realised, there would be, of course, a loss of £53,000,000. But there is some hope that that state of affairs will not arise. Therefore the loss is not one which will fall upon the Exchequer at any particular moment but will be extended over a very long period. That is to say that this loss, as I understand it, will arise bit by bit as those persons who were assessed for Income Tax in the tax year 1943–44 die or retire on retired pay or superannuation. Then, bit by bit, by reason of the fact that certain arrears of tax payable in the change-over to pay as you earn will be discharged, there will be a loss to the Exchequer of the arrears of tax from those taxpayers who were assessed to tax in the year 1943–44 when they cease work. Many persons who were assessed to Income Tax in the tax year 1943–44 are likely to live for quite a long time. Therefore this is a loss which will be spread out over a very long period.

The Exchequer will, like other people, have to discount the extent of the loss by reason of the fact that it will be postponed for a very long time. As against that, the Treasury will get this advantage: It will collect certain Income Tax at an earlier period than if the present system of assessment was to be maintained. The Treasury would get this advantage in the case of salary-earners whose salaries exceed £600 a year. It is not an unsubstantial amount. They will, too, avoid those arrears of uncollectable tax which at the present time are quite a formidable proportion of the bad debts made by the Inland Revenue. Thus they will not only get the tax earlier but will avoid having to get it from widows or from small estates or even insolvent estates. There is a much greater certainty of the collection of tax which is paid under the principle of pay-as-you-earn rather than under the present method of collection.

The hon. Member for Northampton pointed out that it is, of course, a fact that extending the pay-as-you-earn system to all classes of salaried earners will not remove altogether anomalies between different categories of taxpayers. You have still got the Schedule D taxpayers who will not be brought within the scope of pay-as-you-earn. That is perfectly true. I hope that at some future time it will be possible to devise a method of tax collection which will make it possible to apply the principle of pay-as-you-earn to Schedule D taxpayers as well as to Schedule E. But one thing is quite plain —that the system which is embodied in this Bill cannot under any circumstances be applied to Schedule D taxpayers. Therefore we have to leave that class of taxpayers out of account for the moment and hope that they may be brought within pay-as-you-earn later on. It is plain that the Schedule D Income Tax payers cannot be brought into this scheme. But because that anomaly persists there is no reason why other anomalies which will be involved by the dividing line proposed by the Chancellor should be perpetuated too. Indeed the anomalies which will arise from this pay-as-you-earn scheme very largely have their origin in the fact that it is being applied to different classes of taxpayers in different ways. The more you continue to do that, the more likely you are to find that the system will give rise to anomalies. If this system of pay-as you-earn had been applied to the wage-earning class, as some hoped that it would be, at the time when they were first brought within the scope of the Income Tax, this question of the discharge of a proportion of their uncollected tax would never have arisen at all, and that anomaly would have been avoided. I think the House is determined that at some time all classes of Schedule E taxpayers will have to be brought into this scheme. If we postpone the time when they are to be brought in until some later date the result will he that we shall be faced with still further anomalies. The only way you can effectively avoid anomalies in a change of this sort is to bring the greatest number of taxpayers within the same. category into the scheme at the same time.. That is what this amendment invites the Chancellor to do.

The hon. Member for Northampton also referred to the Amendment to be moved by the Chancellor of the Exchequer and pointed out that overtime earnings were not to be included in respect of those assessed under the pay-as-you-earn system. I understand that that does not include the overtime earnings of weekly wage-earners. But I would like to ask my right hon. Friend whether that involves a separate assessment to be made for the overtime earnings of salaried workers. I am not quite clear. Perhaps my right hon. Friend will be able to deal with this at a later stage. I am not at present able to see how, if overtime earnings are not to be included in the earnings to be assessed under the pay-as-you-earn system and are not to be the subject of a separate assessment, the Income Tax on those earnings is to be collected.

I hope my right hon. Friend will see his way to accept this Amendment or at any rate to give us some assurance that perhaps next year or at a later stage he will take the necessary steps to extend this system to every class of salary-earners. The feeling in the House and outside the House is really unanimous that we ought not to make this differentiation between one class of taxpayer and another. I hope the Chancellor will see his way to meet the wishes of the House and the country.

Mr. Willkun Brown (Rugby)

I shall occupy the time of the Committee for less than five minutes. I should first like to say that it would be ungracious on my part not to acknowledge the response which the Chancellor has made to the speech which I made on the subject on Second Reading, not only for the admission of salary earners but specifically for the admission of servants of the Crown. The Chancellor of the Exchequer has made good that deficiency. I wish to express my gratitude to him in that regard. The case for the Amendment now before the Committee was, in my view, so completely stated by the Mover that there is very little left to be said. But there is one thing to be said, and this is all I shall say. When the Chancellor moved the Second Reading of the Bill he explained that he would not include the salaried workers because their position was fundamentally different from that of the wage-earners. He argued that in the case of the wage-earners they were confronted with a possibility of sharp contractions and expansions of income and that therefore the pay-as-you-earn principle should be applied. With the salaried worker, he argued, the liability to fluctuation was very much less, and therefore the need for a pay-as-you-earn basis was not so pressing. So far as that second argument was concerned, I think it is disposed of by the circumstance that the Chancellor is including the salaried earner up to £600 a year, so that that argument goes by the board.

Having jumped that hedge, we come to this position. If the Chancellor was right in saying, when I raised the question of Crown servants, that from some points of view it would be a disadvantage to them to come in because those getting increments year by year would pay on this year's salary and thus would pay more than under the present system of paying this year on the basis of last year's salary, if that is true—and I do not dispute it—then the more salaried earners he brings into the Bill the less the loss to the Exchequer. That seems to me to be a logical argument. It is an argument of mine that there should be some relation between logic and fact. Also on top of that he gets his tax earlier. That is an argument which would not apply to the Crown servant, because he has always been in the position of paying throughout the year from the beginning of the tax year. I shall ask the Chancellor later for a rebate of seven months for the Crown servants, in order to put them in exactly the same position as those in other employment. The more we extend the scope of this Bill now, the more tax will he collect in the first, second, third, fourth, fifth and six months of the year instead of getting it in arrears, and, moreover, the assessment will be on a higher basis than it would be if the salary-earners are left out. On all these grounds I wish to say to the Chancellor that here, if ever, there is a case in which the old words are true: Now is the accepted time, now is the day of salvation.

Major Sir George Davies (Yeovil)

I wish to put one consideration. Arising out of the Chancellor's speech on the Second Reading and the Amendment he has himself put on the Order Paper, it is clear that the principle has been admitted. The situation therefore arises, Where is a datum or dividing line to be drawn? That always gives rise to difficulties in regard to questions of those just above and below. You get an old age pensioner of 65, but the person of 64 years six months is probably in just as great need. If you landed in France in the last war after a certain minute of the clock, you did not get the 1914 Star. That sort of difficulty must always be the case. It seems to me that the real point of consideration is this question of the datum line. In dealing with this matter, I think we must bear in mind two considerations. Our people as a whole have suffered very severe burdens in connection with, first, rationing and, secondly, taxation, in the course of this war. Complaints have been few. The burdens have been willingly borne, for two reasons—because there has been general agreement that they have been inevitable and the feeling that as far as possible they have been fairly distributed.

Lots of us have had our post bags full of representations of various sorts in connection with the matter which we are discussing to-day. I confess it leaves me cold when people suggest that they have been discriminated against, because they would be just as well off, as things are to-day, without or with this extension. But what cuts some ice is the idea that justice should not only be done but should appear to be done. We want to carry on for the rest of the war with the same united will as hitherto, based on the feeling that, however disagreeable, things are fair. I do not believe that the dividing line at £600 year will appear to do justice. The only objection I have to the speech of the Chancellor on Second Reading and to the Debate so far is that I doubt whether we can afford it. Sir William Beveridge speaks of whether we can afford not to afford things. That carries no conviction with me. The bogy of £53,000,000 has been waggled at us—and I think it is a bogy. It is obvious that if we went into immediate bankruptcy and had to dig up money we should have to find £53,000,000, but I do not believe that that is going to worry anybody.

Mr. Hutchinson

It would not be necessary to find the sum, but the Exchequer would not be entitled to collect it.

Sir G. Davies

That is true, but I should say that it is as broad as it is long. We have to face the provision of an additional £53,000,000 or the loss of £53,000,000. It would be spread over an x number of years, and the actual amount that the nation would be out of pocket would be quite within our means. The principle has been admitted. The fixing of the datum line is the only thing to be considered, and if we want to have a united nation, satisfied that we are playing fair and spreading the burden equally, the Chancellor should accept this Amendment or something equivalent.

Mr. Pethick-Lawrence (Edinburgh, East)

I rise to put two points to the Chancellor of the Exchequer. The first is that there is no division on this matter between different sections in this House. The people behind me are just as desirous of seeing this Amendment agreed to as is the hon. Member for Northampton (Mr. Summers) himself. The second point is that I think every Member is anxious to give the Chancellor his warmest thanks for the concessions he has given, and not to embarrass a man who has come forward in his new position with a great desire to do the work thoroughly. But, with all that, there is in the House a firm determination that now is the time for going the whole way in this matter. I beg the Chancellor of the Exchequer, unless he can give much stronger reasons than we have had hitherto, not to decide to-day to refuse. It may be that he will want a little more time to think it over. If he is prepared to take the matter back and think about it, I am sure the Committee will be quite willing. But I hope that he will not mistake the feeling of the Committee, owing to our desire to be courteous to him and not to embarrass him, and think that Members are not exceedingly anxious on all sides for this to be done.

I think it would be a legitimate case to make against this proposal if it could be shown that there were great administrative difficulties in carrying it the whole way. I have endeavoured to conceive administrative difficulties on those lines, and I cannot conceive any. My own view is that the administrative difficulty of drawing this datum line will be very much greater than that of including the whole of Schedule E.I think the Committee ought to give way if the Chancellor showed that the Treasury would be a substantial loser by this proposal, particularly during the continuance of the war. The Chancellor, quite properly, said the other day that he could not face a loss to the Exchequer of something like £60,000,000, but the fact, certainly so far as war-time is concerned, and probably for all the years we can visualize in front of us, is that the Exchequer, instead of losing, will gain by the proposal. When I spoke on the Second Reading, I myself was taken in by this idea of a loss of £60,000,000, and I suggested therefore that the Chancellor should make some demand on people above the datum line, on the lines of what has been done in the United States, and that those people should pay 50 per cent. But it was brought to my notice by my hon. Friend the Member for Chesterfield (Mr. Benson) that, so far from losing anything, the Exchequer would most likely gain. I think the fact is that so long as the total wage and salary bill of this country remains the same, and so long as the rate of taxation remains the same, the Exchequer will not suffer any diminution in any year that we can foresee. If the total wage bill, including salaries, falls, there will be for the first year when the fall comes about a slight reduction in the yield of the tax. If the rate of taxation falls, there will be a slight reduction. We are accustomed to hear any Chancellor of the Exchequer introducing a Budget say that the result of his proposals will be so much in a full year, but that, as they do not affect the beginning of the year, the alteration will be slightly less in the particular year of the introduction of that Budget. That will be so in the case of this alteration. If the alteration be made, it will modify the difference between a full year and the first year in which the change of taxation is imposed. But, apart from that, there will be no loss of revenue whatever as a result of the change, even when a full remission is effected.

As I pointed out, and as my hon. Friend behind me brought out in the course of the speech by the hon. Member for Northampton—and I think the Chancellor of the Exchequer himself brought it out in his original speech last Thursday —in many ways the Chancellor of the Exchequer will actually gain. He will certainly gain during the continuance of the war, because salaries and wages are still rising. If the Chancellor of the Exchequer wants an excuse for giving way on this matter, it is obvious that the financial position during the year will improve, and that the real loss will be postponed until the Day of Judgment. I hope that the Chancellor will think again. He was very quick to see that some concession was needed, and in making that concession he met the wish of this House. Now he has been confronted with a very strong body of opinion. I am sure that if the late Chancellor of the Exchequer were here, he would recognise that that strength of opinion could not possibly be resisted. The Chancellor of the Exchequer knows—he said it in his speech —that sooner or later this change will have to come about. I cannot see any advantage in postponing the second half of it until a later year. It will be much more trouble administratively. In the meantime a great many anomalies will have arisen, and he will produce a feeling that the obvious wish of this House and of the country is not being met. I hope the Chancellor of the Exchequer, in inaugurating his new reign, will use his wide knowledge, his experience of this House, and his natural kindly feeling to meet a desire which I beg him to believe is not confined to any one section but is shared, as I understand, by every Member of the Committee.

The Chancellor of the Exchequer (Sir John Anderson)

It might be for the convenience of the Committee if I intervened at this stage, not, of course, with any idea of curtailing the Debate, but in order that before more Members have made speeches, inevitably covering more or less the same ground, the Committee may be put in possession of the views I have formed on this matter. The Committee have listened to a large number of persuasive speeches, putting forward cogent arguments, and I think the Committee know that in substance I am in sympathy with the case that is put forward. I do not like drawing an arbitrary line. I said on Second Reading that I thought the system of pay-as-you-earn had a great deal to commend it and that if we were starting afresh I felt sure that we would start on that basis. I said that I was in favour of extending it at the proper time and in the proper way and that I intended to work to that end. The Committee, I confess, want me to work to that end rather more speedily than I had contemplated last Thursday. I am sure that the Committee will listen to what I have to say with the attention with which I have certainly listened to all that the previous speakers have had to say. If I appear to be not quite as yielding at this moment as they would wish, I hope that they will not put it down, after they have heard my arguments, to mere obstinacy or to a pig-headed desire to stick to the position I have taken up. I have not had very long in which to consider this complicated matter, and I naturally do not want to act without due deliberation.

Would the Committee allow me first to deal with the question to which my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) devoted a considerable part of his speech, that is, the precise financial effect of what is involved in this matter of controversy? My hon. Friend the Member for Northampton (Mr. Summers) and my hon. and learned Friend the Member for Ilford (Mr. Hutchinson) both described to the Committee in their own words what they thought the process would be. They will forgive me if I put it more definitely and, as I think, rather more accurately. It is not altogether a simple matter to grasp, and, in thinking about it during the last few days, I have found myself in a little intellectual difficulty from time to time. But I think it is like this: We are talking about the question of a discharge of tax liability, and beyond all doubt it is the discharge of tax liability which is involved in these proposals and which constitutes their main attraction. Do not let us make any mistake about that. It is true that there are other considerations, but that is the main attraction. The tax involved is a liability which in the ordinary course would have to be met in the seven months beginning next April. We are not talking about manual wage-earners now; we are talking about salaried people. The amount of that discharge, as I stated on Thursday, is of the order of £60,000,000 in all, of which we have already disposed of part, which, I think, I understated. I said that the discharge involved in going up to £600 was of the order of £7,000,000. It would have been more correct if I had said that it was about £10,000,000. I just say that in passing.

The effect of that discharge is certainly not immediately felt by the Exchequer, because the place of those who would have been paying that tax is taken by a body of taxpayers, including in very large measure the same people, who will in that period of seven months be paying tax, not on the previous year's assessment, but on current assessment. So that to a very large extent the same people will be paying in that period, and the Exchequer will not on that account suffer any immediate loss. The Exchequer may conceivably gain a little. But let me just say on this point—the point as to whether the Income Tax on pay-as-you-earn apart from any questions of discharge is going to mean gain or loss to the Exchequer—that if we manage our affairs well, I think it will turn out that the total volume of salaries and wages is at present higher than that at which it will stand after the conclusion of hostilities. The effect of this change must be that the Exchequer will lose and the taxpayer will gain, quite apart from any question of discharge. As I have said, the payments will make up the immediate loss due to the discharge.

Mr. Pethick-Lawrence

Will my right hon. Friend take into account the fact that when soldiers come out of the Forces and go into private employment—they are outside this proposal at the present time—they will come into it and will help to swell the wage bill of the country?

Sir J. Anderson

I know.

Mr. Woodburn (Stirling and Clackmannan Eastern)

There are a great number of people to-day earning salaries of £700 because of the war conditions who had never earned it in their lives before, and presumably after the war there will probably be a slump, and is it not the case that the Treasury is likely to lose a lot of that tax because of their inability to pay?

Sir J. Anderson

That is another question. I was not considering how far it was recoverable; I was referring to the amount of discharge. As I was saying, the amount of loss by discharge will be made good next year as far as the Exchequer is concerned by a body of taxpayers very largely the same as those who benefit by the discharge. In the next following year a similar process will take place. In the first seven months tax will be paid on a current basis of assessment instead of on the basis of a previous year, not because there has been any discharge in respect of that year, but because the previous year's assessment will have been discharged by payment; and so it will go on like that. I should be sorry to misrepresent my hon. Friend the Member for Northampton, but I understood him to say that no loss would arise until the taxpayers die or go out of employment. My hon. and learned Friend the Member for Ilford said very much the same thing in different words. He said that the loss would arise bit by bit as the persons assessed die or retire. Actually, when, as my right hon. Friend opposite said, the rate of tax is reduced or when the volume of employment as measured by the aggregate amount of salaries and wages goes down, then a loss will be suffered by the Exchequer. The extent of the loss will depend upon the reduction of tax on one hand and on the reduction of what I call the general salaries bill of the country on the other.

Mr. Hutchinson

Surely that is a loss which the Exchequer must inevitably suffer.

Sir J. Anderson

Perhaps my hon. and learned Friend will wait a moment. I have not completed my argument. My hon. Friend the Member for Northampton, speaking of the Exchequer, said, and said rightly, that the Treasury is just the same as the general body of taxpayers. So if the factors are as I have stated—and it is important that we should see this thing clearly—what will happen will be that there will be a loss to the Exchequer, which will affect the general body of taxpayers, since the point at which relief from taxation can be given to them must be affected; there is no escape from it. That was the great difficulty that I felt. I do not feel quite comfortable, without the very fullest consideration, about a proposal which involves giving a discharge of tax to a large body of people whose circumstances differ widely, including people on all sorts of salaries and including people getting part-time payment by way of remuneration, unless I am clear that I am not doing something unfair to somebody else. We have all sorts of professional and business men assessed under Schedule D and persons, to use the current phraseology "gainfully occupied," that is, dependent on their own exertions for their earnings. I want to feel sure that I am not doing anything unfair to them.

One hon. Member—I have forgotten for the moment who it was, but I think it was my hon. and learned Friend the Member for Ilford—talked about Schedule D and about the desirability of extending this principle to Schedule D. You certainly cannot extend the same machinery to Schedule D; that is quite clear. But the principle of keeping your payments up to date, paying on your current earnings and not having a hang-over to carry forward is just as valid, as I readily admit, for the engineer, the doctor, or the lawyer as it is for the manager of a great company or a company director or a civil servant, or whoever it may be. That is the thing that sticks in my mind. It is not a question of loss to the Exchequer. I was very glad to hear the right hon. Gentleman say that if it had been a question of asking the Chancellor of the Exchequer to submit to some loss, it would not be right to put that pressure upon me. I remember that sentiment, which I think will be supported, but that is not what troubled me. I am troubled by the simple question of trying to do justice all round. The Committee may say that I have already queered the pitch by what I have done. My answer to that is that there was compelling urgency. It had to be done as a matter of necessity for the wage-earner, who had to be put on pay-as-you-earn. Then my predecessor thought that the non-manual wage-earner should be put on the same footing as the manual wage-earner. I in my turn felt that it was perhaps hard to draw a distinction between a man on a weekly wage, which might be a very high weekly wage, and the salary of a person who might be no better off. Therefore I agreed last Thursday to include the lower ranges of salary. Of course, by doing that I create anomalies, which I regret. They are not always as great as some hon. Members suppose, because if a person who has been above £600 reverts and goes below £600, he will have to be put on pay-as-you-earn.

I have indicated thus the sort of consideration that weighed with me. I felt that it could not fairly be said that it was of great urgent importance to do the whole thing now. We are not completing the job even in this Bill. We shall have to deal in the next Finance Bill with all sorts of different transitional questions. The thing is not being tidied up and cannot be completely tidied up in this Bill, and therefore I think it is perhaps not unreasonable for me to say to the Committee that I am in sympathy, as indeed I am, with the representations put forward. But I do propose to ask for a little more time to consider the matter in all its bearings and see what is best to be done. That is all that I think I can say at this moment, and either I or my hon. Friend the Financial Secretary will be speaking at a later stage perhaps on this topic and certainly on many of the other points which have been raised.

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

The Committee has listened with care and attention to the statement made by the right hon Gentleman the Chancellor of the Exchequer, and the admirable impression which he created in introducing the Bill and in making the original concession has been, I am sure, repeated in the minds of his hearers to-day when they realised the way in which he has approached this very difficult subject. I am one of the signatories to the Amendment, and I, along with my hon. Friend the Member for Northampton (Mr. Summers) and all others who have spoken on this subject, desire to see it brought into effect. But it will be only right, as I was fortunate enough to catch your eye, Mr. Williams, immediately after the Chancellor sat down, if I addressed a few words to the considerations which the Chancellor of the Exchequer has brought forward. I do not quite know what he means by the further consideration he is prepared to give to this matter, but from something he said immediately previous to that I got the impression that his mind is now on expansion bent and that he is prepared to go further in this direction, possibly even to other Schedules, as time passes. I did get the impression that in a Finance.Bill in the relatively near future we might have the hope of seeing further action taken.

If the Financial Secretary could confirm that opinion or hold out any more hopes on that subject, I do not suppose the Committee would want to press the Chancellor any further on the matter to-day. But I would hope to be re-assured when the Financial Secretary replies that there is a very genuine prospect of further extensions being made. I very much appreciate what the Chancellor has said, but at the same time I fear that he has been rather obsessed by these thoughts of unfairness to other persons and classes. When all is said and done, we are only dealing with legislation which, by its very nature, can only affect Schedule E taxpayers, and nobody, except by way of illustration, has had much to say for Schedule D taxpayers or any other Schedules of taxpayers. The person who corresponds to the Schedule D taxpayer in America has been covered by legislation there on the subject, but I understand that it is a very complicated form of legislation and one which will offer great difficulties to the taxpayer. Whether that is so or not, the fact is that we are only concerned with the Schedule E taxpayer, and that shopkeepers, lawyers, doctors and members of other classes who have been mentioned to-day and last week have not had their hopes raised in any way whatsoever, because they knew they were not being considered in this matter. On the other hand, the Schedule E taxpayers, owing to the united voice with which the House has spoken and united opinion in the country, have had ample reason during the last few days to expect that their case would be placed on an equal basis with every other member of the Schedule E taxpaying class.

That is the reason why I implore the Chancellor not to worry too much about doctors, lawyers and the rest of them but to deal with the Schedule E taxpayers first. Having got that settled, perhaps he can go on and think of the other Schedules, but at present let us deal with one matter at a time and try to get this business extended to all classes of Schedule E payers. The Chancellor was right in saying that a lesser volume of employment and a lower rate of tax would in all probability be factors that would lead to a smaller intake to the Exchequer, but he also admitted that this was a matter which was inescapable and was likely to happen in any case. So far as a reduction of tax is concerned, which he can control more directly than he can the volume of employment, if by the extension to the whole of Schedule E he suffers a loss of income he can always postpone the reduction of the tax for one year in order to put his accounts into proper shape. So I hope that he will not let that fear act as a deter- rent in introducing this Amendment. I am aware that the Treasury at all times are reluctant to give up any income which they can collect with relative facility, and although I do not know why the figure of £600 a year was decided upon, I rather suspect that one of the arguments advanced may have been that persons earning more than that are those from whom on death or retirement there is no great difficulty in collecting Income Tax. But I very much question the morality of that sort of argument. If you are willing to give concessions to certain persons, you should not limit it at a point where you think the odds are a little more on your side. Therefore, I very much hope that not too long a period will pass before the Chancellor sees the merits of this argument.

Mr. Woodburn (Stirling and Clackmannan, Eastern)

I would first like raise a point with the Chancellor in regard to this matter of the transition period, because I have no particular sympathy with people receiving over £600 a year, and I have not been much impressed by any arguments in favour of relieving them at the expense of other people. I still feel that after the war it will be almost impossible to carry out the financial activities of this country if income is allowed to fall, because the general income of the Chancellor will not be able to meet the claims upon him. I am proceeding upon the assumption that the Government must organise full employment and endeavour to maintain the national income at approximately the level of the existing income. I, therefore, assume that when we pass over to peace there will not be a sudden slump in the general income. If there is, it will be a serious matter, not only from the point of view of this back money, but from the point of view of the general policy of the country.

The Chancellor may be right if he objects that the purpose of this claim is to obtain remission of this taxation and not genuinely the desire to be put on the new system. If the purpose of this claim for those over £600 a year is merely to get remission of tax it is a different argument, and I have no sympathy with it. But from the point of view of the tidiness of tile financial system all incomes should be brought under a pay-as-you-earn scheme at the earliest moment. So far as I can see, that will come about in any case by gradual changes. Even if all the people now receiving over £600 a year are left out of the scheme, these will gradually fade away even if we do not accept the change to-day. Those under £600 a year will gradually pass into the over £600 class, and if the Chancellor's pledge is maintained they will remain in the pay-as you-earn scheme. So there will be a gradual transition in which those outside the scheme will be wiped out. Therefore, I think the purely sympathetic side does not really amount to much. We ought to discuss the matter from the point of view of the tax system and its general administration. I agree with the Chancellor that the benefits of having one scheme instead of two would be a great improvement, but in supporting this view it does not imply for a moment that if there are some changes, which will take time, that we must make them to-day. I accept the Chancellor's good will in this matter as a pledge that in a short time these anomalies will be wiped out and a comprehensive scheme brought in.

A great deal of this discussion, I might say, would never have arisen had the Treasury not presented a document which purported to say that the working classes of this country were to have a gift of £250,000,000. That is quite fantastic, and the Treasury in the same document later points out that the Exchequer will suffer no loss at all and that they will gain on the swings what they will lose on the roundabouts. If the Treasury offered to pay my salary a year in advance to the end of my life and not do any reclaiming when the end came, I would be quite prepared to do without this year's salary. This change-over is a meaningless thing. It is simply juggling with figures. The Chancellor will not lose any income, because there will always be new people coming in as the old go out. But in one place his argument falls, and this is a point he has not dealt with. It is the question of how far how many of the taxes he fears to lose will be recoverable for many people over £600 a year when the war comes to an end. I know people who are earning £700 to-day in some administrative posts which have been created by the war and which must automatically go out of existence when the war ends. These people will go back to an income on which they will find it difficult to meet the back-pay demands of the Exchequer. If industry collapses, they may be unemployed, in which case the taxes will not be obtainable at all. In any case a great many will not be able to pay their tax and that is one other reason why the matter should be looked into again.

In regard to the collection of back-tax, when a person dies I think it is a hard thing that at a time when a widow or children are suffering their greatest loss the Treasury should dun them for money and take more off them. They have to pay Death Duties even on small sums and then comes in addition an account for Income Tax. Sometimes it tends to break their hearts, and there is no doubt of the case—which the Chancellor accepts—for having the money collected from all classes as time goes on. My plea is that the time between now and the bringing-in of these excluded people should be reduced to a minimum. I also think the Chancellor should re-consider the question of whether any real loss will occur to the Treasury, whether it will really cause hardship to the Treasury if this money is remitted, and whether, if so, it could not be done in some other way. As a last resort, if people wanted to come in, there is no reason why they should not pay double taxation next year. I have a recollection that the Treasury at one time advanced the payment of taxation by some months and balanced the Budget by making the figures appear in an earlier balance-sheet. I see no reason why they should not work a similar financial trick and square up their books this time to put everyone on the same basis.

The Treasury under-estimate their own ability to accomplish things; they thought this whole pay-as-you-earn-proposal was impossible but they have achieved the impossible. I suggest that they look at this matter from the point of view of their own great record in introducing this great scheme and see whether they cannot make it complete and embrace everyone. From the point of view of the workers, I think the Treasury are to be congratulated on their ingenuity in providing a scheme which, so far as I can see, is the fairest scheme ever devised for the collection of Income Tax. It has received a general welcome from the workers and will do much to relieve irritation in the workshops. I hope the fact that from now to April the workers will get off without Income Tax on greater production will stimulate their efforts in that field and that this will go far to improving relationships in industry. The tax as at present administered has created a great deal of friction, but I am glad to say that has shown signs of disappearing.

Mr. Lewis (Colchester)

We are in rather a curious position. The Chancellor has shown beyond all doubt that he is extremely sympathetic to the purpose underlying this Amendment, yet he cannot bring himself to take the financial plunge because of the financial bogy which he sees in front of him, a bogy so insubstantial that even Members like my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence), who always speaks with knowledge on these questions, declares there is no bogy at all. It seems a lamentable thing that the wish of the Committee should be set aside by the Minister for a reason so unsubstantial as that. I think possibly my right hon. Friend is making one mistake. I notice that he said something like this. "Make no mistake about it, it is the discharge of tax which is attractive in this proposition." I think he is entirely wrong. Certainly, speaking for myself, if anyone came to this Committee and said a particular class of taxpayers who are already under a liability for tax should be excused that liability, I should resist such a proposition. That is not the attraction of this Amendment at all, at any rate to Members of the Committee. I submit that the attraction is that in future the taxpayers referred to shall have their demand for taxation made to them at a time when they can discharge it. That is the point. The attraction is not some illusory discharge of tax which will not affect the individual for a great number of years. That is not what we are asking the Chancellor to support here. We are asking him to bring about a state of affairs whereby the taxpayer when he gets his demand for taxation can most conveniently meet it.

I hope the Chancellor will not persist in the idea that all that those who support the Amendment want is that this particular class of taxpayers should be favoured by some discharge of tax. I am sure that that does not express our view. It is not really necessary that the right hon. Gentleman should say "Aye" or "No" to-day. The Bill has other stages to go through. I suggest that it would be seriously worth his while, without in any way committing himself, to say that he will not give a final decision on the subject until the Report stage. I really do not think that is unreasonable. He has filled his office for a very short time and has had this complicated Measure thrown at him with very little time to study it. I really think it is not unreasonable to suggest that he should not come to a final decision one way or another to-day but should take further time to consider it and give his answer on the Report stage.

Mr. Pritt (Hammersmith, North)

I think it is very reasonable that the Chancellor should ask for time to consider this, but I do not think it is reasonable that he should ask for some months to consider it. A very strong opinion is being expressed in the Committee and in the country, and I do not think anyone could suggest that it was in any way a manufactured agitation. It is not the interest of any big interest but that of the whole community trying to play fair by itself. I do not think the right hon. Gentleman ought to ask for more time than the Report stage. I agree with what has been said about people not looking to the discharge of tax liability as the main attraction. Certainly not the people for whom this was originally designed, the manual wage-earners, and I do not think many people with salaries up to £600 or £1,000. I do not think for a moment that they were saying, "We will get out of some tax if we can get this done." They were saying, "We will get out of the awkward situation of paying high Income Tax when our income is low," and it is little compensation to tell them that they may be paying lower tax when their income is higher. I can sympathise with this opinion, because there was a period not long ago when my income was reduced to 10 per cent, of my earnings for the previous year, and the only relief I got was reasonable treatment by the tax collectors, who were prepared to wait till I paid the money.

I do not want to say much about the discussion as to whether the Treasury will be losing money here and there. It will lose money here and there, and it will gain here and there, and I do not think the right hon. Gentleman put it at all wrongly or unfairly when he said, "If you look to the end of the war, the odds are that the total volume of wages and salaries counted in money may well be lower." The Exchequer would then lose in a sense. That would mean that the Exchequer would not, I think, raise the actual rate of taxation but would reduce it more slowly. If the only price you have to pay for saving a great many people from really acute hardship and a certain measure of resentment, a certain measure perhaps even of is to realise that at some stage in 1945 or 1946 the people who might have hoped to come down from 10s. to 8s. 6d. will only come down from 10s. to 9s. or some figure like that, that is so remote and speculative that it must be very strongly outweighed.

The right hon. Gentleman said he did not want to be unfair to the general body of taxpayers. This is a question as between the general body of taxpayers and any particular section of them which may be a very large section which is being roughly handled by the circumstances of what they are earning and the way the money is being collected. Every relief that is given must fall back on the general body of taxpayers, and it is really no argument at all to say that you are worrying about the general body of taxpayers. The people you have to consider most are those who are really suffering some really great hardship. One of the weakest parts of the right hon. Gentleman's speech, not because it was a weak speech, but because it was dealing with a case which in some respects is a weak case, was when he described how step by step his predecessor and he had given way, for he was unable to show any logical halting point short of that demanded by the various Amendments that are being discussed. The only argument he produced was that the matter is very much less urgent for these further classes, but what is being said here and the things that are being said and thought and argued in the country show that the urgency is much greater than he seems to think.

Now I am going to venture into something a little more difficult, because it goes down to details and technicalities, but it is important to be put to show the very acute hardship that is going to happen to many people earning over £600 a year as things stand at present. My attention has been drawn to it by the National Association of Local Govern- ment Officers, who after all understand these things as they affect them, and it seems clear that they affect people in a similar position in commercial occupations, too. To give one illustration, the position that arises where a man retires. After all, we must not think of retirement as something that happens in the remote future. We may all feel young and bright and have no intention of retiring, but some people are older and retire or fall ill and retire, and the sort of position that arises when a local government officer or a commercial employee retires is that his income drops to perhaps 60 per cent. of what it was because it takes the form of a pension or living on savings. Sixty per cent. of a large income is not at all bad, but 60 per cent. of an income between £600 and £1,000, probably when family obligations do not vary very much, is a very substantial drop, during the first period, when he has not been able to adjust himself to his new standard of living in practical methods, like getting into a smaller house; and as things stand at present he has to pay the ordinary full rate of tax on what he is actually getting by way of pension and also to pay tax during a part of the first year on his previous larger earnings, just because he is not on pay-as-you-earn. So that he will be paying double Income Tax or rather more for a period.

It is that sort of difficulty which is sought to be eliminated—and of course a good many others; this is only one illustration—by the Amendments, and these are matters of real urgency. Whenever anyone takes an illustration, even if it has been provided by thoughtful people who know the details of what they are talking about, it is often said, "You have taken rather an exceptional illustration." Therefore I have this bit of information which shows that this sort of thing must be rather widespread. It looks at first sight like a tiny, narrow section, but I am told that for the next 12 months among persons employed by the Metropolitan borough councils alone the number of persons falling into this class will be 500. If you spread that over the whole country and over commerce as well as local government you get a good many thousands of people, and if that is only one illustration, and I think a fair one, it shows that even that much is a very substantial loss. Other Members have pointed out others, and no doubt others too will be pointed out, but I think it shows that the country is justified in asking the right hon. Gentleman to treat this as a matter of real urgency and hardship, in which, if there is any loss now or next year or the year after, it is one that should be borne by the general body of taxpayers.

Mr Hely-Hutchinson (Hastings)

I wish to endorse the suggestion of my hon. Friend the Member for Colchester (Mr. Lewis) that the Chancellor of the Exchequer, without committing himself in any way, should tell us that he will not definitely make up his mind against what we are asking for before the Report stage. We are asking that the provisions of the Bill shall be extended as soon as administratively possible to the whole range of Schedule E taxpayers. Some of us do not like the argument that he must not give way on the whole range of Schedule E taxpayers because that will make it look as if he was being unfair to the Schedule D taxpayers. I suggest that that argument does not arise. Unless the Chancellor makes some such statement as that which the hon. Member for Colchester suggested, I personally am not satisfied with what he has said to-day. My hon. Friend the Member for Colchester (Mr. Lewis) spoke of a "bogy." The word that was in my mind was "ghost." I thought we had killed that £60,000,000 argument on Second Reading, and if there was anything still left of it to-day it was killed by the speeches made earlier in this Debate. But the Chancellor did seem to show signs of trying to revive the corpse, and I should like to put it back into its coffin and drive in a couple more nails. I am certain that this £60,000,000 is largely a notional loss and has been accurately so described, but even the figure of £60,000,000 is only arrived at by taking the present rate of tax. I suggest to my hon. Friend the Financial Secretary that he take counsel with those very close and accurate thinkers in the Treasury, and I believe they will agree that the real loss, if and when it ultimately comes, some time between now and the Day of Judgment, will be determined not by the present rate of tax but by the rate of tax which is in force as each instalment of that remission comes to be remitted. I would add another argument which would tend to extinguish any remaining sense of life in the corpse. In the case of people with large estates, to the extent that they finally had to pay the tax which would now be remitted, the Government would lose a considerable portion of the amount in Death Duty. That is another argument which has not been put forward.

I did feel there was great force in the suggestion of my right hon. Friend the Member for East Edinburgh (Mr. Petnick-Lawrence) that the proper argument to bring up against extension to the whole range of Schedule E is not the money argument. That cock will not fight. The argument to bring up is that of the administrative difficulties. If the Chancellor of the Exchequer can show us that the administrative difficulties are, at any rate for the moment, insuperable, we would gladly accept that view. I should like also to support what was said by my hon. Friend the Member for Clackmannan (Mr. Woodburn). He said that if we take the Bill as it is, with the Amendment proposed to extend its provisions to the £600 salary earners, then gradually, over a long period, say 30 or 40 years, we shall all come to be on the pay-as-you-earn basis. I think that is probably true. Let us picture the transition stage over those 30 or 40 years, taking ourselves along about 20 years. When people meet friends in exactly the same circumstances of life, the question they will ask each other will be "Are you a go-as-you-pleaser or a pay-as-you-earner?" It will be a ridiculous and impossible situation, and we had much better clean it up now.

There is one more reason, and I put it forward with a good deal of diffidence, against making this distinction between weekly wage earners and monthly wage earners. There are some of us, certainly on this side of the Committee, who look forward to the time when a far greater range of workers will be on a monthly rather than a weekly basis. We believe that will add greatly to labour's sense of the dignity of their occupations and their sense of security, and if that should ever come about it will make the distinction made by this Bill even more ridiculous than it is at present.

Mr. McEntee (Walthamstow, West)

Most of the points I had intended to refer to have already been covered, and I do not propose to deal with them at any length. My hon. Friend the Member for the Park Division of Sheffield (Mr. Burden) concluded with a quotation and I should like to open with one. He knew the source of his quotation, but I am not in his happy position. He quoted from Shakespeare. I would quote from someone whom I do not know. It is a quotation that I saw many years ago and one that has inspired me a good deal, and I recommend it particularly to the Chancellor now. It is: Go as far as you can, and then see how much farther you can go. On Second Reading the Chancellor said he would go as far as he could and fixed on £600. I ask him, as every speaker today has asked him, to go farther than he thought it was possible for him to go. The Chancellor has said "I would like to go very much farther but there are certain administrative difficulties. I think they can be got over but there is one difficulty that I am not satisfied I can get over, and it is a difficulty that may also be an injustice." He said that if he were to grant the concession which very Member who has spoken has asked for it might lead to the imposition of a burden on other people, as well as those who would be affected by the change, at some time in the future. I think we all sympathise with him in that point. Probably I am as little able to bear additional burdens as any hon. Member, but unless this burden were very considerable I should still say to the Chancellor "We will bear that burden if and when it comes." In the meantime there are people who, as a consequence of the £600 limit, may have to bear a very much more considerable burden.

I did intend to stress a point already made by the hon. and learned Member for North Hammersmith (Mr. Pritt) concerning men and women when they retire from the public service or local government service or the service of bodies like the Metropolitan Water Board, the Port of London Authority, and the railways. A man may have an income of 700 or £800, or even £1,000, and if he is paying his Income Tax on the income of a year ago he will find himself on his retirement in a difficult position, because he will be presented with a heavy bill for taxation on the past year's earnings. The burden may be so heavy that it imposes hard- ship not only on him but on his family and others. I hope the Chancellor will give every consideration to that point.

Then there is the position of those who are in the public service to-day. On my own local authority we have just been presented with a list of people in our service stating their salaries and whether they are permanent or temporary employees. A great number of them are temporary employees who came into the service because of some special qualifications they possessed and of the difficulty of getting staff at the present time. They are in comparatively good jobs, for them, earning, perhaps, something over £600 a year. After the war they may find themselves in the same position in which I was not very long after I first came to this House. I had left a permanent job in the municipal service for a not so permanent position in political life, and after three elections in two years I found myself out of work, unable to go back to my previous employment, unable to find work elsewhere and still called upon to pay my Income Tax. After the war there will be a great number of people in a similar position and I hope that the Chancellor, even if he does have to impose some burden on the remainder of the taxpayers, will, if the burden is not so heavy—and I do not think it will be—give consideration to the large numbers of people who will find themselves in the position I have described.

On the question of anomalies, the Chancellor said that once a man came into this scheme he must remain in it. What will that lead to in a few years' time? A great number of people who are now receiving under £600 a year will have got increases and will be receiving more than £600—some may, by promotions and otherwise, be getting £1,000 or £1,200—and they will still be under the pay-as you-earn system in regard to Income Tax, whereas others who may have come into the service later, because they get over £600 a year, will not be in the scheme at all. That will create a set of anomalies that some future Parliament will have to deal with, and I am afraid they will say we were not very wise in our generation to allow the possibility of such anomalies. I hope, therefore, the Chancellor will do as I said at the beginning: Go as far as you can and then see how much farther you can go.

Mr. Butcher (Holland with Boston)

I think the Committee owe a considerable debt to the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) for his intervention, because I feel the Chancellor's reply made it clear that sooner or later this question will have to be cleared up in order to have a tidy and workable scheme. I do not propose to stress the very large number of arguments to-day, except to urge upon the Financial Secretary that the tidying up of this plan should not be delayed beyond the Report stage of the Bill. We shall be in a difficult position if we draw a line at £600 across Schedule E in October-November of this year for the privilege of removing it in April next year, or moving it a little nearer to the top. This matter must be dealt with as a whole at the present time, because otherwise we shall have three groups: we have two groups at present, those who discharge their tax prior to the time and those after; but should we make two bites at the cherry during the intervening period many cases will arise to worry hon. Members through their post-bags, leading to approaches to the Treasury. While we are conscious of the very generous manner in which the Chancellor has approached this matter—a problem which he has had to take over under such tragic circumstances—I do not think we are unreasonable in saying that the Report stage is quite the latest stage at which he ought to make up his mind.

Mr. Brooke (Lewisham, West)

I find myself in great sympathy with almost everything that was said by the hon. Member for Hastings (Mr. Hely-Hutchinson), except when he suggested that the Chancellor might have to explain to us that the administrative difficulties in doing what the Committee unanimously wants were so great as to make it impossible. Far greater administrative difficulties have already been overcome by the Chancellor of the Exchequer, the previous Chancellor, the Financial Secretary and their brilliant assistants in the Board of Inland Revenue, in giving us the Bill at all. I do not think it would be right for the Committee to accept a reply on those lines from the Chancellor of the Exchequer. With his truly statesmanlike speech I have no quarrel except on the point already referred to by the hon. Member for Colchester (Mr. Lewis). I have here the actual words used by the Chancellor. He said: Discharge of tax liability constitutes their main attraction. That is to say, the main attraction of this Amendment. My hon. Friend pointed out that that is not the case. It is not that the Committee want to relieve some section of the population from tax.

I go beyond what my hon. Friend said in replying. It is not merely that this is a better system that we want to see universally introduced, but that the Committee is insistent that justice shall be done to all taxpayers at the same time. The Chancellor moved to very strong ground when he explained to us, and I think convinced the majority of us, that what is really in his mind is the desire to be sure that he is being fair to everyone, but a great deal of harm has been done by allowing the suggestion to get abroad that other and less sound arguments were weighing with him. In his speech on the Second Reading referring to this discharge of £60,000,000, he said that unquestionably that was money which would in the main be recoverable. The Committee is not going to accept that argument. For hundreds of years we have agreed in this country that capacity to pay is the proper principle of taxation and it will be a sad day when we introduce, as a subsidiary principle, capacity to fail to pay. If we can be sure that any such argument has been removed right away from the mind of the Chancellor, I feel sure that the Committee will be found much more agreeable to whatever might ultimately be proposed.

I have only one further point to make. In his Second Reading speech the Chancellor said that he regarded the principle of pay-as-you-earn as suitable for general application in the proper time and in the proper way. That gave me and others the impression that we might find the principle extended to new classes of taxpayers in one Finance Bill after another. We might find the majority of people in in 1944, perhaps another set in 1945 and another in 1946. I do not think that would be the right way to do it. We cannot avoid unfairness in that way. We shall not only be perpetuating unfairness but shall be increasing anomalies. I am most willing to give the Chancellor the extra time he asks for to consider the complexities of this subject, provided that we have an assurance from him or from the Financial Secretary that any extension to new classes of taxpayer comes into force as nearly as possible at the same moment as the provisions of the Bill lay down for the classes coming under it as it now stands. I am afraid that if we wait until the next Finance Bill, the Chancellor will say that that is impossible and that the matter must be postponed for a year. That is my main reason for appealing to him to reach a decision between now and the Report stage, so that, although we may have to wait for two or three weeks in uncertainty, the uncertainty will then vanish completely and the new system will be applied as broadly as possible simultaneously.

Mr. Bowles (Nuneaton)

We ought to be perfectly fair in what we are doing and to tell the taxpayers under Schedule E exactly what is to happen. I have the impression that a large number of people, such as those who are writing and petitioning us or seeing us on deputations, think that they are all going to benefit by being included in the extension of the scheme above the £600 limit. It is obvious that everybody who is on an increasing salary will suffer immediately by being included in this scheme. The only people who are particularly concerned about being included are those who are presumably going to drop from a higher salary to a lower pension, or to nothing at all. It is important that the great mass of bank clerks and other black-coated workers who possibly earn more than £600 a year should know that although we are all in favour of this extension it is not necessarily going to be to their immediate benefit.

I believe in doing things tidily. In talking about the datum line of £600, I would like to inform the Chancellor about two personal friends of mine. One is the managing director of a well-known firm in London. He gets £5,000 a year but he is paid by weekly salary and he is already in the scheme. The other person whose salary is £620 a year, not paid week by week. Both those gentlemen are to retire on 1st April next year. The man getting £5,000 a year is already in the scheme and will therefore be excused all his Income Tax on this year's earnings, whereas the man who will drop from £620 to a pension of £300 or £400 a year will nevertheless find that his taxation for 1943–44 has not been discharged at all. Obviously it is wrong to choose a datum line of so much a year. I am prepared to give the right hon. Gentleman the names of those people, because I am certain that there are many other people similarly affected. Some have been regularly employed for something like 50 years. Others, like actors and actresses, are paid so much per week although their earnings may be quite substantial in the course of the year, and will bear comparison even with the salary of the right hon. Gentleman. The whole thing is completely anomalous and cannot be justified on any basis of uniformity whatsoever.

When men come to retire, then they are glad or sorry about being in this scheme and about having a reduction in their Income Tax. They are very concerned then whether the Chancellor of the Exchequer has done justice by them. He is very anxious to do justice all round, and we all welcome that expression of his determination but, by bringing people up to £600 a year into his scheme he has already introduced many more anomalies than he is at present aware. Let no Member of Parliament be responsible when he supports the Amendment, for deceiving the great mass of the people who are on increasing salary schemes. Secondly, try to get away from all anomalies and injustices and to secure uniformity. The only way to do that is to accept the Amendment so ably moved by the hon. Member for Northampton (Mr. Summers).

Mr. Spearman (Scarborough and Whitby)

I think that my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) expressed the view of many Members of the Committee when he said that he would not be satisfied if all those in receipt of a salary were not included unless the Chancellor gave a more substantial reason than he had done last week. If I understood the Chancellor of the Exchequer aright, his principal reason for not extending the pay-as-you-earn scheme to all Schedule E taxpayers was that he expected a fall in wages and in the national income generally in postwar years. At present we are putting up as cheerfully as we can with very heavy taxation because we realise that it is a very effective weapon in cutting down the demand for things to the supply avail- able at a time when, if the supply were increased, it would interfere with, the war effort. After the war there will be a huge demand for goods, and millions of now serving men will be only too anxious to get to work to earn wages in fulfilling that demand. It therefore seems a defeatist view to take that there will necessarily be a huge fall in the national income; later when there will be an adequate supply of goods for the demand it surely will not be quite so urgently necessary to raise all that is possible for taxation in any one particular year. I suggest that the possibility of a fall in national income after the war is not so certain as to afford a satisfactory reason for missing an improvement in the machinery of administration that is so generally desired by the Committee.

Mr. Benson (Chesterfield)

This discussion has clarified quite a number of points on which we were rather muddled when we first approached the matter. In the very lucid speech which he made, the Chancellor of the Exchequer has done away with the fear which was in the minds of some Members of the Committee that the Amendment would throw serious burdens upon the Exchequer. He himself has admitted that that burden will be entirely negligible. What then was the basis of the Chancellor's argument against the Amendment? It was that he was afraid that in certain circumstances it might be possible that in the distant future our Amendment might be unfair to the other Schedules. He said in substance that he was in agreement, but may I suggest to him with the very greatest respect that if he is in agreement with us in substance, his objections were of an extraordinarily nebulous character, and if we come to examine them and see what they really do mean, we shall find that the unfairness to the other Schedules is almost as notional as the loss to the Exchequer. If the Amendment throws a burden upon the other Schedules, admittedly there is an element of unfairness. Under what circumstances could it be that if pay-as-you-earn is applied to all Schedule E an additional burden will be thrown on Schedule A, B, C or D. Theoretically there are three circumstances, a fall in wages, a fall in salaries or a reduction in the rate of tax.

Let us take the question of a fall in wages. Whether the total wage bill of the country will fall or not after the war I do not know, but one thing is quite certain, that the very large wages being earned at the present time will come to an end, and the Chancellor himself has said that he was forgiving in that respect something like £250,000,000. I would point out that that loss and that burden if it ever be a burden to be thrown on the other Schedules, is due to the Bill itself and not to the Amendment. The major possibility of unfairness has already been committed by the Chancellor. He has swallowed the camel to the extent of £250,000,000 and is now straining at a gnat of a maximum amount of £50,000,000 in theory but which in practice may be negligible.

Now let us take the other instances, a fall in salaries or a fall in the rate of tax. Again here there is a theoretical loss, and very largely a theoretical burden to be placed upon the other Schedules. But what probability is there of a fall in salaries? The Chancellor suggested that we were at a peak point in salaries. That is perfectly true. Never have salaries been higher in the past than now, but that applies to any year in the last 50 years. The secular tendency of salaries is continuously upward. Take the amount of salaries paid in 1938. It was considerably higher than salaries in 1928, and salaries in 1928 were very considerably higher than salaries in 1918, and the probability is that the tendency for salaries to increase which has been steady for the last century will continue, and that increasing salaries by virtue of the fact that they are taxed one year in advance, so far from throwing a burden on the other Schedules, will theoretically lighten them, so that on that score there is no danger whatever of inequity. The one real possibility of inequity arising is the fall in the rate of tax. The Chancellor has now amended his estimate of the amount of forgiveness to £50,000,000. Our tax at the present standard rate is 10s. It is quite true that the Exchequer will lose £5,000,000 in any one year where the rate of tax is reduced by 1s.; that is inescapable and is the only loss which the Exchequer will really suffer. I suggest that for every 1s. reduction in tax the spreading of a burden of £5,000,000 over the whole of the rest of the taxpayers is a burden so small that no taxpayer could possibly calculate his share of it. To suggest that that is an unfairness and an inequity to which this Committee should have serious regard is, I think, merely splitting hairs and making a logical case out of pure imagination.

Sir A. Beit

Could the hon. Gentleman explain where he gets the figure of £5,000,000?

Mr. Benson

The total loss at the 10s. rate is £50,000,000; therefore it is £5,000,000 to the Is. The very maximum reduction the Committee can hope to look forward to for many years is a reduction to 7s. 6d. Nobody will be optimistic enough to suggest that we are going rapidly to reach less than that. The very maximum burden that this could throw on the whole body of taxpayers is £12,500,000, and against that there are two things to set, first the secular tendency for salaries to increase, and the fact that every individual salary tends to increase and thereby benefits the Exchequer. The real danger is that Schedules which are left out will complain not so much about the burden which is thrown upon them, but that they are left out and that they are not getting the advantage of the pay-as-you-go scheme. If it is possible to bring the other Schedules in, there is no reason why sooner or later it should not be done. Frankly, I cannot conceive any circumstances under which you could bring the vast mass of Schedule D in, but I was very sceptical that you could bring Schedule E in last year. However, it has been done by a very brilliant scheme indeed, a scheme for which we owe the Board of Inland Revenue very great thanks. Let us not forget that the Board of Inland Revenue have done something which the American Exchequer have failed to do, and they have done something which I think the majority of people did not realise could be done so wonderfully effectively. In view of what they have done, I do not feel too sure in saying that we cannot bring Schedule D in, but it will be much more difficult than in the case of Schedule E.

The real grumble, if there is any, will be that Schedule D and other taxpayers have not been brought in, Not any question of any theoretical burdens cast upon them. Anybody who takes up the argument that we must not extend this to the small residue of Schedule E because we cannot give it to Schedules A, B, C and D is taking up a line which when I was a small boy and I took up a similar line resulted in my being told, "Don't be a dog in the manger." If this extension does not prejudice the other Schedules, if it costs nothing but a mere theoretical burden upon them, they cannot grumble about its being extended unless they take up the line of the dog in the manger. The Chancellor of the Exchequer has frequently been called the watchdog of our finance. It will be horrible for him to be called the watchdog in the manger of our finance. To suggest that because some people are not getting a concession which cannot be applied to them therefore it should not be applied to people to whom it could be applied, is not a question of fairness, but of envy. When one analyses the Chancellor's case into actual figures and facts, it really disappears into mist. I hope that he will realise the strong feeling there is in the Committee. I am not asking him to commit himself to-day, for he said he could not do it without further thought. There is time for further thought between now and the Report stage. If necessary, we do not need to pass this Bill for a considerable time. Let him delay the Report stage until he has made up his mind. If he wants to take a month, let him do so. I ask him not to commit himself. Let him realise the strong feeling there is in the Committee, and let him take time to see how he can meet the demand.

Mr. Graham White (Birkenhead, East)

Unless I very much mistake the situation in this discussion, the Committee is in a very fortunate position which very seldom arises, namely, that on the question of equity and justice there is complete agreement in every quarter. The hon. Member for Northampton (Mr. Summers) in his opening speech quoted words of the Chancellor which showed exactly where he stood, so that when the whole House is agreed, under the leadership of the Chancellor, on the equity of the proposal and the desirability of it, there must be very strong reasons advanced why it should not be done at the very earliest possible moment. We can therefore assume, if that is so, that it is the intention of the Chancellor, in view of the equity, to bring it into operation in the appropriate way at the appropriate time. I am bound to say that I am not terribly impressed by the arguments adduced so far as a case for immediate action. I am a little surprised that the Chancellor to-day did not dwell more on the difficulties of introducing this new scheme smoothly and without friction, because I am impressed by the importance of that and also by some of the difficulties.

It may be I am unduly impressed through having read at the time and having re-read the White Paper which had as one of its objects to explain how difficult it was, if not impossible, to carry out the scheme we are now engaged in putting forward. I would have been very much impressed if the Chancellor had said, "You know my views as to the equity of this proposal and as to the desirability of it, but I must ask for time in order that we may carry through the actual machinery for the administration and for the inquiry and testing, through the courts it may be, as to the liability and the place of the taxpayer in this scheme." I should have had nothing more to say, but that argument has not been brought to us to-day. It may be that the Financial Secretary when he speaks may develop an argument of that kind which would receive very careful attention from me at all events.

I do not intend to raise any special point by way of emphasising the difficulties which will arise when it comes to administering this scheme, but I will indicate this kind of case. What is to be the definition, for example, of full employment? I have had before me the case of a woman who had worked for five hours a day for five days in the week. She has been ruled by the courts to be only part-time employed, but if she had been employed for six days a week for six months, she would have been full-time employed. When you see matters of that kind open to doubt and different interpretation just on that one particular point, one realises that the question of classification may involve an even greater task and difficulty in the administrative application of the scheme than we now know of. That is an aspect to which I attach very great importance. I have listened with care to the speeches which have been made about the advantage to the Exchequer arising from this proposal and possible extensions of it, and I am not very much impressed by those arguments, because at all stages the Government will be in control of the situation, whatever it is, and can make such adjust ments as are necessary. I hope that the Chancellor of the Exchequer, in agreement with all quarters of the House, and I believe with the sentiment in the country, will tell us exactly what is in his mind as to the difficulties of administration. We do not want in war-time any additional difficulties in regand to the shifting of pay-days or anything else. Will the Chancellor tell us what is in his mind also as to the steps by which this proposal is to be brought about?

Mr. Collindridge (Barnsley)

Representing a heavy industrial area, I do not think there are many people in my division who will be affected by this Amendment. I have made contributions in this House, however, in favour of the general principle of this Bill, and I have found at recent meetings in my division that nothing has given greater satisfaction than the proposal that taxation should be paid as the money is earned. Indeed, several constituents and the Press recently have paid tribute to the decent manner in which the Government are dealing with the situation so far as ordinary working people are concerned. This prompts me to support those who suggest that this scheme should be applied to others as well. In Yorkshire we have a saying: "Get hold while they have it," that is why I want as many people as possible brought within the scheme of pay-as-you earn. If the scheme is desirable for the manual workers it is desirable for those who, although salaried, might not be much better off than other people who are not salaried. We should look at this matter in a big way.

There are two stages of life at which people feel that the payment of taxation is wrong. I know that the payment of taxation is not strikingly popular with anybody, but it seems particularly harsh when a person has a deferred tax payment to meet at retirement. You may say that, because he has missed paying that taxation earlier, he should pay it then; but having mentioned one Yorkshire expression, I will mention another: "Eaten bread is soon forgot." At the retirement stage of life the payment of taxation ought not to be a burden. Also, when a man dies, leaving a widow and children, the payment of taxation ought not to be a heavy imposition, as often it is. There is a class of people in my division to whom I pay tribute for the work they have done —local government officials, civil servants and others. Their standards have not improved much, and they have had many additional duties put upon them. They should derive some benefit from this scheme; this is why I support their being in. Some of my hon. Friends have made use of quotations on this subject, and I will conclude with one. The right hon. Gentleman has said that he will consider this proposal. I am sure that at no distant date he, or someone on his behalf, will come here and say that the proposal has been agreed to. I would then say to him: If it were done when 'tis done, then 'twere well It were done quickly.

Mr. E. P. Smith (Ashford)

I want to put a question about the payment of Income Tax by weekly wage-earners under Schedule D. I have particularly in mind the entertainment industry. The hon. Member for Nuneaton (Mr. Bowles) mentioned that industry, but unfortunately he did not pursue it as much as I thought he might have done; and that has led me to intervene. Ninety-five per cent. of the members of the entertainment industry, whether they are artists or technicians, whether they are in receipt of £6 a week or £600 a week, are weekly wage earners under this Bill. That is made abundantly clear by the phraseology in Clause r, Sub-section (2) (b), and also I have been assured by the Financial Secretary to the Treasury, to whom I put a question on the point, that they are weekly wage earners under the Bill. Nevertheless, generally speaking, they pay tax under Schedule D. I would be grateful if the right hon. Gentleman would define the position of such weekly wage-earners in regard to this Bill. The entertainment industry affords an illustration of a bridge which might be built between the taxpayers under Schedule D and those under Schedule E, so that one day all Income Tax might be collected on the pay-as-you-earn basis.

Mr. Tinker (Leigh)

I feel sure that the Chancellor of the Exchequer desires to satisfy the public generally on this matter. I heard him last Thursday, and I thought he made a very good speech. This weekend I met several deputations who wanted to know why this Bill should not apply to everybody, and I had no effective answer to give them. If this is a good system for the weekly wage-earners it ought to be a good system for everybody else. My hon. Friend the Member for Nuneaton (Mr. Bowles) and the hon. Member for Ashford (Mr. E. P. Smith) have just spoken about highly-paid people who are weekly wage earners. The hon. Member for Nuneaton spoke of a £5,000 a year man being on a weekly wage basis and getting all the benefits of this proposal, and the hon. Member for Ashford said that the star artists in the entertainment industry are on a weekly wage basis. How can we argue, then, against everybody coming on the same basis? I never like swinging with the crowd, especially when the crowd is on the other side of the House, as Members on that side are usually against our ideas on taxation. I have sat here a long time, almost afraid to speak in case I was supporting the wrong policy, but it is clear that the principle is right. I look forward to seeing my demands for the old age pensioner being supported in the same way from the other side. I believe in the case which has been put to-day, and I hope that the Chancellor will agree with us.

Mr. Levy (Elland)

I rise because this is said to be a Legislative Assembly, and legislation is supposed to reflect the will of the House of Commons as a whole. I do not remember such unanimity on any other point of substance during the years in which I have had the honour to be a Member of the House of Commons. Since the present discrimination creates a large number of anomalies which ought not to be created, I think that the Chancellor, if I may say so with great respect and humility, should bow to the unanimous desire of the House of Commons in respect of this proposal. Although there may be some difficulties about machinery —and I appreciate the Exchequer will lose considerably in the turnover—we still say, with unanimity, that in equity this ought to be conceded.

Mr. Arthur Jenkins (Pontypool)

I would like to put one or two questions to the Chancellor. I am not sure what is going to be the final effect in loss or gain to the Treasury of such a proposal as this, and I would like to get the Chancellor's view about that. We ought to look further than one year ahead on such a question of taxation. It seems to me that, in the final analysis, there must be a great disparity in the benefit that will be derived by the citizens of the State. Assume that one person has an average income of £5,000 a year throughout his adult life, and another has an average income of a week throughout his adult life. Both have been subject to taxation on the present system. Now we change to the pay-as-you-go system. What is the final effect of that on each of those men or on his dependants if he should retire? It seems to me that the advantage derived by the £5,000 a year man will be substantially greater than that derived by the £5 a week man. The amount of gain that will be effected by the £5,000 a year family will be considerable—more than £2,000. To the £5 a week man, less than £50. We ought in changing to a system of taxation to have some regard to the advantages that the taxpayers will enjoy. It looks to me—I may be wrong, and I would like the Chancellor's view—that if you treat this as a gift to each family arising out of the proposed system of taxation, the highly paid people will get an enormous advantage compared with the lower-paid people.

Originally we intended that this system should be introduced for the purpose of meeting the difficulties of lower-paid men. There is a case for salaried people and people up to £600 a year and perhaps somewhat higher. The Chancellor made some substantial advance in that respect and we are obliged to him for it. But I think he might have gone up to £750 or £800 which would have met most cases and particularly families with liabilities of children at school and so on. There is no need to worry about people above that total. They are able to meet their liabilities on behalf of their families. To be fair we should look at it from the beginning of a life to the end of that life and see what the advantages would be. If you look at it in that way, I think it must be seen that the saving to highly paid people will be very high indeed. If the contention that the State would lose nothing at all is incorrect, then more taxation will have to be collected from the taxpayers, and people on the lower level might have to contribute something towards making up that which has been lost, but even though there would be no loss to the State, there is no justification for making the benefits from the new system so unequal in their incidence.

Sir J. Anderson

I think that the Committee is, by all the ordinary signs, now in a position in which this matter can be disposed of at any rate for to-day. We have had a very full and interesting Debate, and, speaking personally, I am not at all sorry to find in all sections of the House the feeling very generally shared against drawing arbitrary lines and making distinctions according to whether a person is a little richer or a little poorer. There is at the same time no doubt at all that taxpayers are inclined to look very closely at the treatment meted out to other taxpayers, and a feeling of injustice, which is bad from every point of view, can very easily be engendered if hasty action is taken without carefully considering all the possible implications. I have no doubt at all that as a result of having gone so far as I have gone already in the extension of this scheme, with the accompaniment of a discharge of tax, I am going to provide arguments which can be used against the Treasury by people who feel they have been harshly dealt with in the past. I have no doubt about that. I have no doubt that it would be necessary for good and sufficient reasons to resist such pleas. These transactions have to remain closed, but one ought not too readily to do something which is going to create an unnecessary or an increased sense of injustice.

However that may be, I cannot possibly refuse to consider the plea that has been put in very moderate language by various speakers that I should at any rate reserve a final judgment on this matter. When I say "on this matter" I mean on this narrow question of whether something more should be done now in this Bill, because I have made my position clear with regard to the general problem. A lot of the points made in the Debate about anomalies and difficulties really do not concern what we are doing now immediately in this Bill, but they concern the long-term problem. I cannot resist the plea that I should not at this stage finally commit myself, and I gladly undertake, if the Amendments which are concerned with the question of the scope of this Bill are for the moment dropped, to return to the matter without commitment on either side—certainly without commitment on my side; that must be understood— on the Report stage, and I hope that with that assurance my hon. Friends in various parts of the Committee—they are friends, not only in the technical but also in the natural sense of the term—will be content not to press their Amendment. That is really all I need say on this matter at the present time, and I hope that we can dispose of it.

Mr. Gallacher (Fife, West)

There have been references made to people who support this system, and I think it is necessary to say that the hon. Member for Dumbarton Burghs (Mr. Kirkwood), who has pioneered this campaign, and the shop stewards and workers in the factories, who have supported him from the beginning in putting forward the proposition that led to this Bill, are in favour of its being extended to these other sections. That much should be said, because it has not been brought out. Everybody knows of the traditional generosity of the Scot, and I ask the Chancellor not to let his country down.

Mr. Summers

I think it will be a very long day before any Amendment which I may have the privilege of moving in the future is found to carry such support in so many quarters as has been the case today. It was unexpected, to say the least of it. I am sure that the Chancellor will agree that in considering this question there has been no feeling to organise in all quarters of the House an attack on the Government as such. It has been purely one on the merits of a particular aspect of a particular scheme. If I understood the Chancellor aright in his last remarks—and I refer to them purely for the sake of clarity—he said that he was prepared to defer his final opinion on this question of scope until the Report stage and to make it clear that that was so, he would be willing for the Amendments dealing with the scope of the scheme to be dropped for the time being. That, of course, applies to all the Amendments concerned, and I am sure that I shall be voicing the opinion of all Members who have spoken in saying that we appreciate the way in which the Chancellor has recognised the universal demand. He must, I feel sure, realise that it is from all quarters and carries great conviction and force, and I hope he will not lose sight of that when he comes to apply his mind to these questions.

Mr. Pethick-Lawrence

Before the hon. Gentleman asks for leave to withdraw the Amendment, after which no speech can be made, I would like to ask the Chancellor of the Exchequer a question. I take it for granted, if it should prove necessary in order to re-raise the question, that when the Bill comes to the Report stage the Bill will be recommitted and that the Chancellor will certainly take no exception to that course?

Sir J. Anderson

I shall certainly not take any exception to that course. I think it will be necessary to move that the Bill be recommitted, because we intend to alter the Title anyhow.

Mr. Summers

In view of the undertaking given by my right hon. Friend, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. Douglas (Battersea, North)

There is a small point which I would like the Chancellor of Exchequer to look at with a view to clarification. It arises in Subsection (2, b), where it says: emoluments … calculated by reference to the hour, day, week or any period less than a month (at whatever intervals the wages or other emoluments are paid). That phraseology is not at all clear, as it does not make it definite whether the calculation referred to is for the determination of the rate at which the person is paid or the determination of the instalment by which the person is paid. The amount might be on the basis of yearly remuneration paid by weekly, monthly or other instalments, and it is possible for a person to have his remuneration calculated by reference to weekly rates and to be paid by instalments at longer intervals. What is here stated in the Bill seems to be ambiguous and I ask the hon. Gentleman the Financial Secretary to the Treasury to look at it, and if necessary, clarify it on the Report stage.

Question put, and agreed to.

CLAUSE 2.—(Regulations of Commissioners of Inland Revenue.)

Mr. Douglas

I beg to move, in page 2, line 44, after "tables" to insert" or rules."

There appears to run through the White Paper and through the Bill a touching faith in the efficacy of tables.

The tables which are proposed show an extraordinary degree of complication, and I want the opportunity to be given for the Chancellor of the Exchequer, in bringing in his scheme and the regulations which will be needed to give effect to it, to do it by the alternative method of rules instead of by tables, and by rules which people will be able to understand. I will take a simple illustration from these tables to show the anomalies that arise from them. In the example A the workman in the third week of the period earns £4 18s. and suffers a deduction of 17s. in tax, and in the 38th week of the period he earns precisely the same amount and suffers a deduction of 21s.

There are other illustrations of a similar nature, but I would like to draw attention to something which the average workman will find the greatest difficulty in understanding. If Members will look at the sequence of weeks in example A, beginning No. 35, they will note that a workman who receives £4 19s. in wages suffers a deduction of £1 in that week. The next week his wages are £5 3s. 6d. but the tax goes down to 18s. The following week his wages go down to £5 13s. 6d. but the tax, curiously enough, goes back to £1. The week after his wages go down still further to £4 18s., the tax takes another step upwards, to £1 1s. In the week afterwards his wages go up to £5 13s., but the tax takes a step downwards to £1. I do not want to elaborate the argument as I want to have a chance later of saying something about the basis of the scheme in general. I merely want by this Amendment to leave the way open for the Chancellor to deal with the matter in another way by means of rules which people can understand instead of by means of tables which appear to be so contradictory.

Mr. Bowles

I would like to raise two points on this Amendment, about which I gave the Financial Secretary notice earlier to-day. In the tables referred to by my hon. Friend a few moments ago we always visualised 52 weeks to the year. In the first financial year, when this Measure is enforced and assuming that the pay day is Thursday, there are 53 pay days, and I was wondering what explanation could be given of that because obviously it makes the tables seem much more difficult than they ordinarily would have been if every year had exactly 52 pay days. Of course, in a leap year there will be two pay days in the week which will be repeated 53 times in the year. I would like to ask whether copies of the tax tables referred to in Paragraph 14, page 5, of the White Paper will be made accessible to wage-earners? Can we be told in what way this will be done? For instance, is it proposed that copies shall be made available at Inland Revenue offices, post offices, public libraries, etc.? What happens in the case of a man who lives in remote parts and who wishes to check his deductions week by week? No doubt the Financial Secretary will be able to give us some explanation, because these are practical questions which actually touch the working of this scheme.

The Financial Secretary to the Treasury (Mr. Assheton

My hon. Friend the Member for North Battersea (Mr. Douglas) raised a point which has been noticed by more than one Member of the Committee, and I am not sure whether he heard my reply which I gave when the Second Reading of the Bill took place last week. I said then that the matter was under consideration by the Board of Inland Revenue and that the Board were confident that the range of deviations could be reduced to small proportions by modifications of these tables. It has not been possible up to now to provide the modifications which it is proposed to make, but I hope that my hon. Friend will feel satisfied with that assurance.

On the points which were raised by my hon. Friend the Member for Nuneaton (Mr. Bowles), I would like to tell him that I am grateful to him for having given me notice of them earlier in the day. Although I am not able at the moment to give him a complete answer, it is not because there is no satisfactory answer but because the matter is very complicated. I shall try to explain his first point at a later date. On the question of tax tables, they will be made available to members of the public in various places. We are anxious that they should be made available in public libraries for instance; they will, I hope, be available in the offices of employers where a considerable number of people are employed and also in the offices of Inspectors of Taxes. Any further suggestions which my hon. Friend has to make in that particular connection will be carefully attended to, because we want the public to have every oppor- tunity of referring to these tables should occasion arise for them to do so. I think I can assure my hon. Friend that that, in fact, will be done.

Amendment, by leave, withdrawn.

Mr. Douglas

I beg to move, in page 3, line 13, at the end, to insert: () for the repayment of the whole or of any specified part of tax previously deducted. It is clearly contemplated in the scheme, and examples given in the White Paper show it, that automatic repayments may be made by an employer in certain cases when wages fall or when they temporarily cease, but I am not clear whether actual provision is made in the text of the Bill to give effect to this, and for that reason I have put down this Amendment.

The Attorney-General (Sir Donald Somervell)

It is the Chancellor's intention that sums should be repaid if as a result of what has happened in previous weeks you reach a state of affairs in which a man is entitled, as he may be, to repayment. If there are very high payments in the first part of the year, you may get that result if there are lower payments in the later part of the year. I do not think it is appropriate or necessary to put these express words in the Bill. Although I had not myself quite appreciated what was in my hon. Friend's mind in putting down this Amendment, I will undertake to have the point looked into, because, as I have just said, it is my right hon. Friend's intention that this should be done. Indeed, there is administrative machinery for doing it.

Mr. Bowles

May I ask two questions? First, will the Inland Revenue Board be supplying tables showing the net tax being deducted? Secondly, in Paragraph 2, Page 7, of the White Paper the procedure is outlined for new employees. It states that the employer will be required to deduct provisionally on the basis of an employee being a single person entitled only to the single person allowance of £80. Will the employer be expected to find the appropriate code number to cover the single man's allowance each year? The position is this: It is true that certain people are able to deduct £80 or make that allowance, but, on the other hand, a great number of people who will operate the scheme will be people who are in the habit of referring to code numbers and not to £80 per annum. Would not the Government consider the suggestion that instead of paying £80 per annum as a personal allowance the man may be given a code number—I think it is No. 11 which goes from £76 to£80—so that it will be much more easy for people who are relatively unskilled in this matter to work out what allowance should be made when deducting tax? Under the present weekly wage Income Tax law the late Chancellor of the Exchequer laid down minima below which either a single or a married man with children should not be allowed to fall. I am not quite sure whether these minima are proposed to be retained, but it seems to me that in a case of this kind where a new employee comes in he will no doubt suffer the maximum tax deduction possible. Although the Inland Revenue Board will get on with the job of finding which code he should come in under, nevertheless, a man with a wife and, say, half a dozen children may find that in the first few weeks, while the local inspector is working out what particular allowance and code number he should come in under, almost all of his weekly wage deducted in the form of Income Tax.

Mr. MacLaren (Burslem)

His wife may have another baby in the meantime.

Mr. Bowles

I am not so worried about that as my hon. Friend. The old principle was to give minima below which persons' weekly incomes should not fall, and that should obtain now unless there is a good argument against it.

Mr. Assheton

I fully appreciate my hon. Friend's point, which I will look into further, but I have been assured by the Board that this matter, among others, will be covered by the Regulations which are to be made. It is clear that a good many of these points are detailed matters which can only be properly understood by the House when the Regulations are available. Nevertheless, I am much obliged to my hon. Friend for having raised them.

Mr. Woodburn

I would like to raise a point on this. Would it be possible, on the tax cards for the convenience of pay clerks to have two columns—refunds in one and payments in another? That would be a convenience in checking and would be much better than having to use different inks.

Mr. Assheton

I will certainly consider that.

Amendment, by leave, withdrawn.

The Chairman

The remaining Amendments to this Clause in the name of the hon. Member for North Battersea (Mr. Douglas) are, I think, consequential.

Mr. Douglas

With all respect, Major Milner, my Amendment with regard to paragraph B, Sub-section 2, is on an entirely different matter. It goes to the whole structure of the scheme of deduction which will be determined by this paragraph, and I would like to have an opportunity of discussing it.

The Chairman

Very well.

Mr. Douglas

I beg to move, in page 3, line 29, to leave out paragraph (b), and to insert: (b) the amount deducted or repaid at each period of payment of emoluments shall be related to the amount of such payment and to a proportional part of a provisional adjustment for allowances and reliefs. This paragraph determines the whole form of the scheme of collection as outlined in the White Paper, and, if it remains, the framework of the Regulations will have to be determined by it, and it does not appear to me that there will be an opportunity to do what the Financial Secretary promised a few moments ago, that he would undertake to consider whether the system of tables should be simplified so as to remove the anomalies that exist in them. I am not concerned as to whether anything is substituted for the paragraph or not, although I have suggested a form of words which might be inserted in place of it. What I am concerned about is to remove the paragraph as it stands in order to leave open the precise form of the Regulations and the mechanism by which this system, on which we are all agreed in general principle, is to be carried out. I suggest that the White Paper plan is based upon a misconception of what is the real issue. The demand for the pay-as-you-go system of assessment and collection is not a deman for precision to the extent that the White Paper plan contemplates. It is a demand to save people from being subjected to the payment of taxation based upon higher earnings during a period when their earnings have fallen. There has been no complaint about paying a little more than the amount ultimately found to be due if that payment is made during the period when the wages are relatively high, because the adjustment, which is made by way of a refund afterwards, comes into a period of lower wages and is a positive advantage to the workmen.

The White Paper appears to be based upon the view that it is wholly objectionable to pay a little more when wages are high, and therefore it aims at a standard of theoretical perfection in adjusting the payment of tax week by week according to the cumulative amount of earnings up to the end of that week. That is the basis of the scheme contained in the White Paper, and paragraph (b) is a direction to put it into operation. I want to point out some of the practical consequences which will arise. In my constituency there is a firm which employs 4,000 work-people, which is very well organised and which has a highly efficient system of dealing with its pay and other problems, and they estimate that, in order to deal with these calculations and deductions, the labour of 20 clerks for one day will be required. If you multiply that to the extent of 16,000,000 workpeople, it means the labour of 80,000 clerks for one day. I do not know how the Financial Secretary is going to persuade the Minister of Labour to provide that labour, or where the Minister is going to find it. More than that, as things are, it means that that labour cannot be spread over the whole week, because all these operations and calculations have to be done in a very short space of time after all the other calculations with regard to rates of remuneration, overtime and so on have been performed. So the defect of the White Paper scheme arises out of the attempt to get too close to perfection at one blow. I pointed out earlier that it does not convey to the average person a feeling of justice and equity which it is really intended to achieve, for the simple reason that the contribution of tax in many cases goes up in a week in which wages are actually reduced, so the workman is left with a larger deduction from his lower rate of wages. Therefore I suggest that another method should be adopted which will avoid those anomalies and difficulties.

May I also point out that the scheme has to be worked by means of a system of tax deduction cards upon which the employers have to make every week, in respect of every worker, a series of five entries? One of those is the date, and it does not matter if someone makes a mistake about that, but the others are entries of sums of money. From the employer's own books and records he has to transfer to the card, first the amount of the week's wages. Then there has to be added the previous total of wages to get the cumulative total. Then there has to be a reference to the table of the particular code and week in order to ascertain the cumulative amount of cash to date. In that reference to the tables particularly there is abundant possibility of error, because the tables are constructed in such a complicated fashion. I understand that there are about 5,000 pages of them. More than that, they are arranged upon a system that is calculated to lead to error. It is as if a mathematician was provided with a table of anti-logarithms in order to ascertain the logarithms. They are arranged so that he can run his finger down the side and see the amount of tax payable, which makes it easy to refer back from the tax to find what the wages are but not so easy to find from the wages what the tax is. Although the tables are absolutely correct, they are not adapted for quick use and quick reference.

After the cumulative tax has been ascertained from the figures, the cumulative amount for the previous week has to be deducted from it in order to find the amount for the week in question. Then that has to be transferred back to the employer's books and deducted from the amount of wages due to the employee in order to ascertain the net amount due. The whole of these processes are outside the book-keeping system. Everyone is liable to an error. Some are liable to cumulative errors, which will add up during the whole of the 52 weeks. It involves a great deal of labour and waste of time and paper. More than that, it is extremely difficult for the workman to check the proper amount of deduction from his pay unless he is very familiar with the use of these papers. He has to know what the cumulative total of his wages up to date is. He has to know what the cumulative total for the previous week was in order that he can extract the amount of the cumulative totals of tax and subtract one from the other in order to check whether he has had a proper deduction from his wages or not.

May I say a word about an alternative which I have suggested to the Chancellor of the Exchequer, which has been devised by my constituents, who have brought to my attention difficulties of a practical character which would arise in operating the White Paper system? The alternative requires that the employer shall be notified, not of a code number but of a weekly figure of deduction on account of reliefs and allowances, and the employer will make that deduction from the wages each week. It is a uniform figure which is fixed once for all until there is a change in reliefs and allowances. It is as fixed as the code, as it arises from precisely the same group of facts, but is expressed in a different fashion. The employer can put this figure at the top of his wages book or card, or the record by which he carries out the ordinary operations of accountancy. The wages clerk has simply to deduct it from the week's wage, and the difference represents the taxable sum of money, and, in order to ascertain the amount of tax payable far the week, the wages clerk has to look at the calculating table or ready reckoner, which can be comprised on a single sheet of paper, to cover every range of income that is likely to be of any importance, and from that the amount of the tax deducted can be ascertained and placed directly upon whatever record or sheet is used in the normal operation of business and the whole computation of facts has been achieved. It is true that it is not so theoretically precise, but will require some slight adjustment, but, even if it is adjusted every quarter, the employer can have a tax table comprised upon a single sheet of paper from which to calculate the quarterly adjustment in a few moments, and save the enormous amount of labour involved in the White Paper scheme. The time of the Inspectors of Taxes and Inland Revenue officials can be saved because all that they will require is a notification from the employer of what the total wage is for six months or a year and what the total of the tax deducted has been. They will not have to be bothered with this tax deduction card, with its 52 entries, or any attempt to check the entries or see whether they can be reconciled or not.

The only objection to the scheme, if it is an objection, is that in a few cases where the wage varies over the borderline between no tax and the lowest rate of tax, or between the 6s. 6d. and the vas. rate, there will be a little over-deduction in weeks in which the wages are highest, but that is a form of deduction which the workman will not mind because he will get his money back at the time when he will need it most and the over-deduction will be very small. It is a great advantage to the workman, because he has to be notified in any case of what the relief and allowances are and what the code is under the White Paper scheme. He can be notified that the weekly amount of deduction is so and so and he can be given the details—the employer need not know how it is arrived at—and he can be presented with a copy of the calculation table so that he can tell at a glance how much the deduction ought to be. I commend this in all seriousness to the careful consideration of the Chancellor of the Exchequer and the Financial Secretary because of its simplicity and the saving of labour, which is vitally essential at the moment and indeed is desirable at any time because either in peace or war it is shocking to think of labour being wasted. I believe also it would create more general satisfaction and contentment. Those are the grounds upon which I move the Amendment.

Major Woolley (Spen Valley)

It may be that the Financial Secretary will resist this Amendment, but if he does I trust he will give an undertaking that the matter shall be discussed before there is any finality. In the Debate on Second Reading he was good enough to say that he would discuss an alternative scheme which I mentioned in my speech on that occasion, and I hope he will undertake that there shall be no finality reached on the question of these tables before certain other discussions have taken place. The hon. Member for North Battersea (Mr. Douglas) has spoken of simplicity, and in my opinion simplicity is the first thing we require. We want the matter so simple that it shall be understood by the wage-earners. On page 16 of the White Paper we see the possibility of considerable confusion arising in the minds of wage-earners. In that table we see that for three weeks the wage-earners has earned the same wage each week. In the second week in the table he earns £9 10s. and pays £1 9s. In tax. In the tenth week he earns £9 10s. and pays £2 2s. in tax. In the 13th week he earns £9 10s. and pays £1 14s. in tax. There are three different tax payments for the same amount of wages. That is bound to leave the wage earner wondering how on earth the tables were drawn up.

Mr. Woodburn

Will he not wonder equally in the week when he earns £3 18s. and gets £2 12s. back?

Major Woolley

I am obliged to my hon. Friend for pointing that out. The whole thing will cause confusion in the mind of the wage-earner.

Mr. Woodburn

Do not believe it.

Major Woolley

If the wage-earner wants to check the tax deductions, what has he to do? The hon. Member for North Battersea gave some explanation, but did not go far enough, because it is more complicated than he suggested. Let us say that in the tenth week the man wants to check the amount of tax deduction. First he has to add together the wages for the ten weeks and divide the total by ten in order to get the average weekly wage, then multiply that figure by 52 in order to arrive at the annual wage. He then deducts from that figure the allowances—

Mr. MacLaren

And commits suicide.

Major Woolley

He deducts the allowances, he looks at his table, he calculates his tax, he divides that tax by 52 in order to get the average weekly tax, multiplies it by ten and deducts from that figure the amount already paid in tax, and then he has the answer how much has to be deducted for tax that week. I suggest seriously that simplicity is not one of the virtues of this scheme. From the employers' point of view there arises the question of the availability of clerical labour to do this work. I have calculated that it will need between 7,000 and 10,000 additional pay clerks to work the Treasury scheme, and again I ask the Financial Secretary where are those men to come from?

Mr. MacLaren

Use the German prisoners.

Major Woolley

The hon. Member for North Battersea suggested that the work would occupy 80,000 clerk-hours, and that is not very much different from the figure I have arrived at. For these reasons I hope the Financial Secretary will give an undertaking that the tables set out in the White Paper will be subjected to careful reconsideration, and that he will not close his mind to the possibility of having alternative tables. As to the paper that will be required, I estimate that the Treasury tables will require a code or calculator of approximately 1,000 pages, which will have to be referred to, and extracts from it must be available both for employers and employees. The whole scheme is complicated and if it can be simplified I submit that it should be.

Mr. John Wilmot (Kennington)

I hope that in considering the details of how the scheme is to be applied the Committee will not overlook the fact that the pay-as-you-earn system will be a very great boon to manual workers, and if there are complications they are the price which we have to pay for this excellent reform in our Income Tax system. If it is possible to devise a more simple form, even at the expense of the loss of some mathematical accuracy from week to week, every consideration ought to be given to any such alternative. I have myself examined the scheme referred to by my lion. Friend the Member for North Battersea (Mr. Douglas), which I understand has been passed on to the Financial Secretary, and I should like to add a word in favour of that particular method receiving earnest consideration. It is essential if the scheme is to work properly that the workman, who is the taxpayer, shall be satisfied from week to week that the amount which his employer has deducted is the amount which he is properly called upon to pay.

Mr. Bowles

May I refer to a case in which the employer does not deduct the tax at all, the employee deducting his own tax? A large number of people are employed in collecting various sums of money. For doing this they get a commission, and they deduct from the amount collected the commission to which they are entitled and pay the balance into the local bank. Now this employee or commercial traveller or whatever he is called will have a further duty placed upon him. After he has collected the money he will have to say to himself, "On this my commission amounts to so much," and then he will have to add to the amount he pays into the bank the amount of his Income Tax. I ask the Financial Secretary to give some consideration to the large number of men and women who will be in that position, because they will from time to time make mistakes. Some of them are working in very remote parts of the country, including the Scottish Isles, and they may only be able to communicate with their employers by post. Not being very expert in these matters they will probably make mistakes in their Income Tax deduction. The postal service may profit by this, because there will be a considerable amount of correspondence between the employers and the employees. For example the employee will be told, "You should have deducted 14s. 7d. and not 14s. 6d., and therefore there is a penny due from you to be paid next week." The amounts these people collect vary from week to week and their earnings vary accordingly, and the Income Tax will vary from week to week. I ask the Financial Secretary, who has so far shown such open-mindedness, to consider these proposals as friendly criticisms, and, though not necessarily replying now, to give an undertaking to look into the matters raised and if possible see that they are covered by the same body of Regulations to which he has referred.

Mr. Butcher

The proposal of the hon. Member for North Battersea (Mr. Douglas) is that we should exclude paragraph (b). I am bound to say that I think the Chancellor has been rather like the juggler whom we used to admire in the variety halls, who, having climbed to a great height with great effort, then impresses us further by his ability to do juggling feats at that height, because it seems to me this particular sub-section rather imposes upon the Chancellor an undue handicap in the construction of tables. My hon. Friend the Member for Kennington (Mr. Wilmot) spoke of the importance of making sure that the wage-earner had every opportunity of understanding how his wage packet was made up. It is a point to which, quite properly, all workers attach the greatest importance, and, equally, all intelligent employers take pains to ensure that gross earnings, deductions, and so on are made perfectly clear to their employees. As my hon. and gallant Friend the Member for Spen Valley (Major Woolley) has pointed out, we shall have men earning the same sums in three different weeks and having different tax deductions. We may have three men working on the same job for the same number of hours, at the same rate of pay and receiving the same gross wages, but finding different spendable sums of their wages envelope. That will make for confusion and misunderstanding. What really matters to the worker, and above all to the worker's wife, is what I may call the free spending income, the amount available to be spent when health insurance payments, Income Tax, and trade union dues have all been accounted for. Taking examples 4 and 5 on page 14 of the White Paper, we see that in the fourth week the man earned £5 4s. and the tax deduction was £1 4s., leaving him with £4 to take home to his wife. Next week he earns 11s. more, but the tax deduction is only £1, and he therefore takes home 15s. more. Having earned only 11s. more he takes home 15s. more in his wages envelope.

I am bound to say that a system such as that will create confusion in the minds of the ordinary wage earner. On the other hand, the scheme is so good that I hope the Chancellor, in constructing his tables, will not worry very much about securing a meticulous measure of justice and making things balance to within 1s. at the end of the year. Let it work on a basis of rough justice: he can get it right during the year, even though that may mean an adjustment of £2 or £3 one way or the other at the end of the year. Above all, let us have it nice and simple; if the man earns the same money each week he should suffer the same tax deduction; and if a number of men are earning the same wage at the same job then, subject to their family conditions being the same, their deductions should be in line with one another.

Mr. Woodburn

We are all in sympathy with the desire to have more simplicity. If some scheme can be devised which gives absolute simplicity, I am sure that the right hon. Gentleman will accept it. I can speak on these matters from my own experience. I spent a day in an engineering works, and in the foundry, where they had a most complicated system of making up the wages. I discussed this scheme with the directors and with the pay clerks, the men who are going to do the job. They said that, after going carefully into the matter, they saw no difficulty at all in working it.

Mr. Bowles

In Scotland?

Mr. Woodburn

Yes, in Scotland. En a case where you pay £4 a week all toe time an addition to the work is relatively of great importance. In an engineering works where the clerk has to calculate straight time, 47 hours at is. 17 11/16d. and then he has to calculate 39 17/24 hours at time-and-a-half, then percentages, then has to deduct insurances and infirmary dues, then about 10 per cent. for other things and then make up the man's wages, we can understand that looking up a table and making two separate calculations is relatively simplicity itself.

Mr. Bowles

It may be the last straw.

Mr. Woodburn

Yes, it might be the last straw that breaks the camel's back. It may be also that Scotsmen like making calculations. I do not know but so far as I can see the benefits of the scheme outweigh any disadvantages that come from particular tables.

Major Woolley

The hon. Member suggests that the benefits outweigh the disadvantages, and no one would disagree with that, but I would ask him whether, if a simpler scheme of tables can be evolved he would object to the simplicity being incorporated?

Mr. Woodburn

I am all in favour of it. The only point is that I do not want to create the impression in the country that the present scheme is unworkable. I am willing to press the Chancellor to consider any simpler scheme, but I do not want this scheme delayed on account of somebody making calculations that do not require to be made by the worker at all. It has been suggested that the worker requires to calculate whether his Income Tax is exact. That is very interesting, because I have never been able to check my own Income Tax for a good many years. I am very interested to hear that any hon. Member knows when his Income Tax is correct. To tell the truth I have much more confidence in the Inland Revenue than I have in myself in this matter. At one time I was the only person in an office who understood some of the rebates made in regard to deductions at source. It was extremely complicated, until the voucher was issued to indicate to every taxpayer what had been deducted from taxation at source. All these things have come from experience. While I desire some simplicity and say if there is a better scheme let us have it, let us not delay the present scheme because of imaginary obstacles. Many of those that have been mentioned do not exist in fact.

Mr. McEntee (Walthamstow, West)

Everybody is agreed that if a simpler scheme can be evolved it will be an advantage, and it has on the other hand been stated that if accuracy is to be obtained week by week such a scheme cannot be evolved. Like many other hon. Members who move among workers and know their views, I am certain that if anything like a reasonable calculation can be made, they would rather pay something over the amount due week by week and have a bit to come at the end of the year than pay something under the amount and be left with something to pay at the end of the year. I have never been able to calculate my Income Tax, which is based almost entirely on the income which I get here. I have always left it to the Inland Revenue Department to make the calculations, and I pay what they ask me to pay. On more than one occasion when I was satisfied that I had been justly treated they have sent me a bit back. It ought to be possible to evolve a reasonable average that in most cases might charge the workers a little bit more week by week than they ought to pay so that at the end of the year they can have a little bit back.

Mr. McLean Watson (Dunfermline)

I agree with my hon. Friend that the people responsible for making the deductions will be able to undertake these tasks but I am not sure that they will find it a simpler system than that which they have had in the past. I am glad that the representative of the Ministry of Labour is on the Front Bench, because I am not sure whether what I have to say does not concern that Department more than it does the Financial Secretary to the Treasury. With a wage that is constant it is a simple matter to deal with the Income Tax, but it is most complicated to calculate the deductions to be made upon a collier's pay ticket. It would not have been so bad if there had been left as they were in the offices of the undertakings staffs capable of making the calculations week by week. First of all the offices were staffed by young men who were being brought on to be cashiers, but since the war, the young men have had to go somewhere else and young girls have had to come in to assist in making the calculations. Just when the girls are able to do the work the Ministry of Labour has taken them away and new ones have had to be brought in.

The result is that we have received protests from collieries all over the country where these elaborate calculations have to be made week by week. They are seriously concerned about having to deal with these complicated questions affecting wages. I hope that there will be some understanding between the Treasury and the Ministry of Labour with regard to the proper equipment of these offices for dealing with these calculations, and that as a result of a discussion we shall have on this matter they will see whether a simpler system can be provided or whether there can be put in, or allowed to remain in, the offices, staffs capable of dealing with these matters.

The Attorney-General

It is, of course, always a good aim and a great aim to try to make everything as simple as possible. On the other hand, as the Committee know, the history of this topic is broadly as follows; that schemes were put up and considered and dealt with in the White Paper of last year which pointed out the objections to such schemes as were then envisaged, and which I think were then felt to be insuperable, the broad objection being that under any scheme which is not on a cumulative principle you are liable to have over-deductions or under-deductions and adjustments at the end of the year, which is not a satisfactory system. I quite agree that if you are to have adjustments there is something to be said for preferring to get a bit back than having to pay a bit more. That was the view of the hon. Member for West Waltham-stow (Mr. McEntee). On the other hand, I can imagine quite a formidable body of objection from people if in fact they were told that a scheme was being introduced on the basis that a very large number of them would have larger sums taken off for Income Tax than they were liable to pay.

This Amendment proposes to leave out the Sub-section which embodies the principle upon which this whole scheme is based. [Interruption.] Yes, the Subsection. The Sub-section says that these tables are to be constructed with a view to securing that so far as possible: the tax deductible or repayable on the occasion of any payment of, or on account of, emoluments is such that the total net tax deducted since the beginning of the year of assessment bears to the total tax payable for the year the same proportion that the part of the year which ends with the date of the payment bears to the whole year.

Mr. Douglas

That is paragraph (b), not the Sub-section.

The Attorney-General

I beg the hon. Member's pardon; that is the paragraph which the Amendment proposes to leave out. I think we all realise what these words mean, that at any given pay day you take the total amount of wages—say that in two-thirds of the year £200 total wages had been paid—and deduct so much. You will estimate that £200 for two-thirds of the year means £300 for the year, and you find what is the proportion of the tax payable on that basis up to that time. The great virtue of that scheme —and surely it is the reason why it has commended itself particularly to the wage-earners of this country and has received encomiums from all parts of the House—is, first, that at the end of the year, you have finished, and, secondly, if in the course of the year you have paid more tax than it looks as though you will ultimately have to pay you get a repayment.

This Amendment proposes to leave out that paragraph, and my hon. Friend's motive in moving it, as he told the Committee, was in order that there might be scope for consideration of a scheme, the outlines of which or the full details of which he sent to my right hon. Friend. It is not on the cumulative system, and he agrees that it is less exact. That inaccuracy was not very important, but there really is in this matter no half-way house.

I believe the Committee will accept this: You have either got to have the cumulative system, which does undoubtedly mean a fairly elaborate set of tables—and within the principle laid down by the scheme my right hon. Friend is ready to consider whether there can be any simplification—or you have to have one of these other systems which will lead either to under-deductions or over-deductions and will lead to quarterly or annual adjustments which are bound to be one way or the other. Obviously if you are to have a scheme which is to make a shot at the tax due, sometimes it will be below the mark and sometimes above it. We believe it is the scheme as embodied in these tables which has commended itself to the persons affected and which this Bill has been introduced in order to carry out. Therefore to omit a paragraph which really confines the tables within the principles of the scheme would be something we could not possibly contemplate.

Reference has been made to the amount of extra work that this may put on the pay clerks. My hon. Friend the Member for East Stirling (Mr. Woodburn) and the hon. Member for Dumfermline (Mr. Watson) pointed out what complicated work pay clerks in many industries already have to do. I agree that that is not in itself a reason for giving them some further complicated task to perform, but over a very wide range of industry the weekly calculation of wages does involve a number of rather complicated factors. One or two hon. Members asked whether the Minister of Labour had been approached and his attention drawn to the fact that this would put extra work on a section of the community which like other sections has been depleted through people being called up. Again I inform the Committee, on behalf of my right hon. Friend, that the Minister of Labour and National Service has been asked to review the instructions to district man-power boards to ensure that special consideration is given to any additional work which may be thrown on to wages clerks as a result of these proposals.

Undoubtedly there will be extra work, how great I think it is probably a little too early to say. Obviously when you first begin a thing it takes a longer time than when you once get into it. It may be that some of the estimates that have been made are on the pessimistic side, but my right hon. Friend appreciates, as he made clear in his Second Reading speech, the extra work it throws on those who do this work in the many industries of this country. He hopes that this burden will not be an undue one, and he certainly appreciates the general willingness which has been shown by employers and those who have to do with this work to do their best to see that this scheme is made to work, because it is a scheme which is so generally acclaimed in all parts of the Committee and the country. I am afraid that we cannot accept this Amendment, which would really introduce some principle other than that principle, the cumulative principle, on which this Bill is based, and which we believe was the principle on which it was accepted when this House gave this Bill a Second Reading.

Mr. Bowles

Could the Attorney-General on behalf of the Financial Secretary give an undertaking that points I raised will be considered?

The Attorney-General

Yes, certainly.

Mr. Douglas

I am extremely disappointed with the Attorney-General's reply, because it seems to indicate that his mind is not open to any fresh consideration of the matter. I hope that that does not reflect the view of the Chancellor of the Exchequer. We have been told that we must have a scheme based entirely on the cumulative principle, and that no alternative can be considered. Surely that is not the way an entirely new proposal of this kind should be approached. The Attorney-General has buttressed himself upon the fact that there has been a general welcome in the country for this proposal. There has not been a general welcome in the country for its details. Very few people are familiar with the details. It was only a year ago that the Treasury told us that this job could not be done at all. Now they have come forward with a way of doing it. In view of that record, I beg them to realise that it may be possible to devise a simpler means of doing it than that which they have proposed. The Attorney-General says that any alternative scheme must inevitably involve both under-deductions and over-deductions. That indicates that he knows nothing about the scheme which I have put forward. That scheme does not involve any under-deductions at all, though it does involve some over-deductions.

My constituents who worked out this scheme—I take no credit for it myself—worked out what would happen to the examples given in the White Paper. Their proposal is that there should be a quarterly adjustment of the over-payments. Take Example A. All the adjustment required at the end of the first quarter is a refund of 2s. 1d., at the end of the second quarter a refund of 3s. 11d., at the end of the third quarter a refund of 6s. 8d., at the end of the fourth quarter a refund of 1s. 1d. There does not appear to be any great injustice in that. Take Example B, in which there is a considerable fluctuation in wages. At the end of the first quarter the refund is 6d., at the end of the second quarter it is £1 6s. 5d., at the end of the third quarter it is £5 4s. 1d., and at the end of the fourth quarter 12s. 9d. There has been an extreme fluctuation of wages between £8 and £10 a week in the first quarter, and between £3 and £4 a week in the third quarter. Even then the refund is not very great. I asked my constituents to work out a case from their experience. They employ a large number of people. I asked them to take a case exhibiting a great variation of wages. They found in the case they took that in the first quarter the maximum refund was £1 8s., in the second quarter 12s. 2d., in the third quarter £1 19s. 9d., and in the fourth quarter 12s. 9d. Can anybody complain about that?

Look at the alternative. This firm are enlightened employers, and they are anxious to introduce the pay-as-you-earn scheme. They calculate that to operate the White Paper scheme they would want 20 clerks on one day—and the work cannot be spread out, otherwise it would delay the pay-day. Under their proposals they would want two clerks for one day and one for a week, a total of eight days' work, compared with 20. If a saving of 60 per cent. can be achieved in this way, and if the workman understands how it is done and is able to check the amount of the deduction, and if it does not inflict any hardship upon him, as it would not, I ask the Chancellor of the Exchequer not to close his mind to the possibility that there is a practical way of achieving the result we all desire, with substantial accuracy, and at the end of a limited period—a quarter, let us say—achieving it with precise accuracy and justice. Therefore, I am not satisfied with the reply of the Attorney-General, which does not indicate a detailed knowledge of the scheme I have put forward.

Amendment negatived.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. Butcher

I feel that the reply we have received from the learned Attorney-General was hardly as full or as satisfactory as it should be. My right hon. and learned Friend did not explain to any extent how the ordinary wage-earner would be shown the balance between the deductions of tax from different persons under the same personal circumstances, engaged upon the same work. The only explanation so far that the employer is able to give to his workers is, "I really do not understand it very much, but the Attorney-General has told me that it is constructed on the cumulative principle." Another point relates to the size of these code tables. An hon. Member suggested that they would run to 5,000 pages, at which the Financial Secretary shook his head. A figure of 1,000 pages was then suggested, at which I do not think there was any head-shaking. Perhaps my hon. Friend will tell us how many pages there will be? We can at least ask him whether they will look like a pocket time-table or like three Bradshaws stuck together.

Mr. Assheton

I cannot say how many pages there will be, but it will be nearer 1,000 than 5,000. I would remind the Committee that I said the other day, when replying to the Second Reading Debate, that it was the intention of the Inland Revenue to make what modification of the tables they could, to obviate the undue fluctuations suggested by hon. Members. We cannot alter the cumulative principle on which the tables are made out, but we will do all we can to modify the tables to reduce the amount of variation.

Sir A. Beit

May I make another comment about the tax tables, arising out of something which I said on the Second Reading? I then advocated a husband and wife being separately assessed. I am not surprised that I did not get a reply from the Financial Secretary on that occasion, as a great and controversial reform could not be expected on such a limited Bill as this. The reason I brought it up was because a husband and wife who are both in employment—and that during the war must apply to hundreds of thousands of people—are both subjected to these taxation tables which take into account the reduced rate of relief, that is to say, the first £165 on which less than the full rate is paid, with the result, as stated in the White Paper, that at the end of the first year the husband and wife will in all probability, indeed it is more than a probability, have paid less than they should have paid. They will have to pay the balance in the following year and it will once again be doing what we are trying to get away from doing, namely, paying the previous year's tax. I can only see two solutions of the problem unless it is considered satisfactory and should be left as it is. The one is that a second series of tables should be prepared which do not take account of reduced rate relief, and where a husband and wife are both in employment, not necessarily at the same place, it should be arranged that in tae case of one, presumably the husband, a different tax table should apply. I imagine that this would cause a great deal of additional labour, and we know how short that is. I am forced upon the only other alternative and that is that the simplest matter, certainly in respect of assessment, will be to allow the reduced rate relief to apply to both husband and wife, who would be assessed at his or her particular work, and there would not, at the end of the year, be a large amount of tax to carry forward.

Question "That the Clause stand part of the Bill," put, and agreed to.