CLAUSE 3.—(Transitional provisions.) (Hansard, 20 October 1943)

§ Mr. Brooke
I would like to invite the attention of the Committee to Sub-section (4) of Clause 3, which deals with the transitional provisions and the discharge of tax. It is so complex that I am not going to attempt to explain the Subsection, nor ask for any immediate answer from the Chancellor of the Exchequer upon it. But I hope he will be able to remove from my mind the fear that this Sub-section is going to give rise to some rather serious anomalies. As I understand it, if a person dies towards the end of April, 1944, he will have paid tax for either two or five months during the year 1943-44 on his total earnings in that year, and it is provided by that Subsection that the tax in respect of the remaining 10 or seven months shall be discharged. Compare his lot with that of the man who dies on 31st March, 1944. He also will have had 12 months' earnings during the year 1943–44, and will have paid by deduction in respect perhaps of two months' earnings and there will be 1475 10 months' outstanding. The widow will be required to pay the whole of that outstanding tax from his estate on his death; or, in other cases, where the deduction in respect of 1943–44 started at the beginning of November, 1943, the Revenue will be entitled to claim seven months' outstandings arrears of tax. It is clear that the amount of taxation that two taxpayers have to pay in respect of the year 1943–44 should be based on what they actually earn in that year, and should not vary tremendously according to the chance dates on which each of them dies or is compelled to retire. If I am wrong and no such anomaly arises nobody will be happier than I; but if in fact there is substance in what I am saying, and I believe there is, I hope that the Chancellor of the Exchequer or the Financial Secretary to the Treasury will afford me an opportunity to discuss this point with him between now and the Report stage of the Bill.

§ Mr. William Brown
I rise to ask an assurance from the Chancellor of the Exchequer in respect of the treatment of public servants, who, as a result of the deliberations of this House, are being brought within the scope of the Bill. Clause 3, Sub-sections (3) and (4) of the Bill provide for the discharge of tax for 1943–44. In the case of manual wage-earners it provides that 10/12ths of the tax on earnings for 1943 are to be discharged. A man has to be forgiven that amount of tax. For the non-manual earners the figure is seven-twelfths. Unless this Committee makes some specific provision in the case of public servants, there will be no discharge at all. The explanation of that is that the Chancellor takes our tax away from us month by months, and by the time that this Bill comes into operation the whole of the civil servant's tax will have been paid up to date. Unless we now give him a rebate of 7/12ths or 10/12ths as the case may be, the civil servant, merely because he is a civil servant, will for the year 1943–44, have paid very much more tax than he would have done had he been outside the public service and come under Sub-sections {3) and (4) of the Clause. I do not pretend that this is the gravest injustice of all time but it is a substantial hardship which can only be put right if the Chancellor agrees that civil servants brought under the Bill should, in the 1476 case of weekly wage earners, pay no more tax in the next ten months, and in the case of salaried earners pay no more tax for the next seven months. That would have the effect of putting the public servant on precisely the same footing as a member of the outside public, and anything less than that would obviously be repugnant to the sense of justice of the public servant.

§ Sir John Mellor (Tamworth)
I want to say something about the discharge provided for in Clause 3. The Chancellor in the Debate on the Amendment to Clause I made it clear that he was unable to extend the scope of the Bill as far as many hon. Members would have liked on the ground that the further he extended the scope of the Bill the greater would be the amount of the tax discharge, and so the more would the interests of those taxpayers who are outside the scope of the Bill be prejudiced. I want to ask the Financial Secretary what attempt there has been made to find a way in which, while extending the scope of the Bill to the maximum, the effect of the consequential discharge should be reduced to a minimum. Under Sub-section (5) of Clause 3 there is a set-off of postwar credit for the current year against the amount discharged. I want to ask the Financial Secretary why the matter has not been carried still further so that the amount of post-war credit which may ultimately accrue would be cancelled out against the amount of tax discharged.
I raised this point on the Second Reading, but for circumstances of which I make no complaint my hon. Friend the Financial Secretary was unable to reply on that occasion. I want to ask him if he will give an explanation why the total ultimate post-war credit should not be brought into account. I have searched in the Debates on the Finance Bill for 1941 to see whether any undertakings were given which would make it unfair or dishonourable for the Government to take the course I am suggesting. I have not been able to find anything which would make it unfair, in my opinion. I found this reference in the speech of the late Chancellor of the Exchequer in moving the Second Reading of the Finance Bill, 1941. He said with regard to postwar credit: Any assignment or charge on the amount to be credited, or any agreement for such an 1477 assignment, is to be void. This, I hope, will close the door—I think it will—to speculation in these credits, which I am sure the House will agree, would be most undesirable and detrimental to all concerned. [OFFICIAL REPORT, 22nd May, 1941; col. 1611, vol. 371] I do not think that that passage has given any special sanctity to post-war credit beyond providing that it shall not be a negotiable instrument. The whole purpose of precluding the assignment of post-war credits was to prevent their being dealt with in an ordinary commercial manner. I do not think there is anything in the passage I have referred to which would preclude the Government from taking them into account in settlement of debt between the Government and the taxpayer. I do not know whether there is any practical objection, but if so I would be grateful if the Financial Secretary would explain it. I have no doubt that if my suggestion were adopted, it would involve perhaps a further crop of anomalies and certain elements of hardship. Whatever we do in this Bill, that is inevitable, but I think that on balance of rough justice, or rough injustice, if my suggestion were adopted it would be fairer to the general body of taxpayers than what would happen if the Bill was passed in its present form.

§ Mr. Assheton
My hon. Friend the Member for West Lewisham (Mr. Brooke) raised a point which I should be very happy, as he suggested, to discuss with him later. I am, however, inclined to think that his point is not a very good one, because he will bear in mind that the object of this discharge is to prevent any overlapping in deduction. Although it may not be as satisfactory from a financial point of view to die on one day as on another, I am not sure that it is reasonable to expect us to make provision for the sort of case he put forward. My hon. Friend the Member for Rugby (Mr. W. Brawn) made the appeal which I half expected he might. I am fully aware of the circumstances of civil servants in this matter but I think the reply which I have given to my hon. Friend the Member for West Lewisham will to some extent suffice as a reply to my hon. Friend the Member for Rugby. There will be no overlapping deduction, and there will therefore be no occasion in the case of civil servants to provide for any discharge of tax.

§ Mr. W. Brown
Does the Financial Secretary defend a situation in which two subjects of His Majesty are treated differently in respect of tax of last year? Why should Crown servants be the only people in England who are denied any discharge of tax?

§ Mr. Assheton
A number of His Majesty's subjects are not going to gain advantage from this particular discharge. I am one of them, and many other hon: Members may find themselves in the same position

§ Mr. Brown
But virtue is only commendable when it is voluntary.

§ Mr. Assheton
I am not claiming any virtue; I am only drawing attention to the fact. There is no doubt that the object of this discharge is to prevent overlapping. In the case of civil servants there will be no overlapping, so there will be no discharge. My hon. Friend the Member for Tamworth (Sir J. Mellor) raised two points. One was whether there was any objection to setting off amounts to be discharged under the Bill against post-war credits against other than the current year's post-war credit. My hon. Friend referred to a statement made by the late Chancellor in 1941. If he will be good enough to look at the late Chancellor's Budget speech on 14th April, 1942, column 124, of Hansard, he will see there the pledge which was given and which led to the late Chancellor coming to the conclusion that in any event, whether he desired to do so or not, there will be no possibility of adopting the proposal which my hon. Friend has made.
My hon. Friend also asked me in the Second Reading Debate what was the possibility of two standard rates of Income Tax. He suggested there might be a standard rate for the pay-as-you-earn people and another rate for other people, and he wrote to me on this matter. I promised him that I would give him an answer. The difficulty, clearly, is that everyone who comes on to pay-as-you-go has not an immediate advantage. My hon. Friend the Member for Rugby, thinking of his Civil Service colleagues, knows that some of them who have been fortunate to receive increments in their salary will pay more tax next year than they would if this new system had not 1479 been introduced. They would not welcome the idea of being taxed at a higher rate than people who were placed otherwise. It is quite clear that a double rate of Income Tax would be a quite impracticable proposition and would not achieve the objects which my hon. Friend had in mind.