§ Mr. Quintin Hogg (Oxford)
On a point of Order. There are on the Order Paper two Amendments concerning different parts of the Measure which deal with subjects which overlap. There is the Amendment which has just been called, standing in the name of the hon. Member for Rugby (Mr. W. J. Brown), and there is an Amendment in the name of myself and some of my hon. Friends which takes the form of a new Clause. The difference between the two Amendments, as I understand it, is, in effect, that one deals with Crown servants, including permanent civil servants, and the other with temporary civil servants only. As the Committee will recollect, the arguments directed to the two cases by the Government have been different, and it has been open to hon. Members to take different views about them. The view of my hon. Friends and myself is likely to be—subject to the opinion of the Committee and the views expressed—that we agree with the Government about the permanent civil servants but not the temporary. We are therefore anxious to divide the Committee, if need be, on the question of temporary civil servants only. I ask for your guidance, Mr. Williams, as to the correct procedure to follow. I believe that the right plan would be for those who are interested in the temporaries as distinct from the permanents to await Clause 6, and I shoud be grateful if there could be some guidance given to us on the point.
Does the hon. Member for Rugby (Mr. W. J. Brown) wish to put any point of Order on that?
§ Mr. W. J. Brown (Rugby)
If I may make a submission, the hon. Member for Oxford (Mr. Hogg) is not quite correct in saying that the distinction between the two Amendments is that one covers both permanent and temporary civil servants and the other only the temporary. My Amendment is concerned not only with temporary and permanent civil servants but also with men serving in His Majesty's Forces. It comprehends all Crown servants. It is true that hon. Members may take a different point of view as regards any one of those three categories. It may be so, but if the Committee do not want their view to embrace all three categories, they would presumably reject my Amendment, and then deal with Amendments dealing with the separate categories. I may say that the Income Tax authorities tell me that it is under Clause 4 that we must deal with this matter.
I have had the best advice available, but the Committee will realise that it is not a particularly easy problem for me. I suggest that it would be in the interests of the Committee as a whole if we took the Amendment of the hon. Member for Rugby (Mr. W. J. Brown), and if we dealt with the matter of permanent civil servants, though I think he is right in saying that it does cover a rather wider area, but that it would be better possibly to defer a decision on temporary civil servants until the new Clause of the hon. Member for Oxford (Mr. Hogg) is reached. Meanwhile, we could deal with the wider issue and more particularly with the permanent civil servants. If the Committee are agreed upon that point I think we could carry on the discussion on that understanding.
§ Mr. W. J. Brown
I beg to move, in page 2, line 34, after "are", to insert:persons in Crown employment whose tax is ordinarily deducted within the financial year and.I am very happy indeed, Mr. Williams, to comply with your suggestion, if that suits the convenience of the Committee, though my doing so ruins a very good speech which I had prepared. I will confine myself at this stage to the case of permanent civil servants, and then, if I catch your eye later, deal with the 366 temporaries. There is in Parliament a very great deal of sympathy with the position of temporary civil servants, and I have no doubt that that sympathy will find expression at a later stage of this Debate. I am bound to concede that there is not the same degree of sympathy with the case of the permanent civil servant. The attitude of hon. Members, in private conversations with me, has been something like this: "The temporary civil servant's case we can understand. Here is a man who comes into the Civil Service in, say, 1939, and pays double tax on the basis that later on he will have a tax holiday, and that tax holiday is withdrawn under this Bill. But how does that apply to the permanent civil servant? Is his case at all the same in principle as the case of the temporary man? If it is not, exactly what is the case of the permanent civil servant?"
I fear the Committee are under the impression that the case of the permanent civil servant is a case of the past, that what happened to the permanent civil servant was that when he came into the Civil Service, it may be many years ago, he was translated from the ordinary system of paying Income Tax this year on last year's income to a Pay-as-you-go system on which he has been ever since. Hon. Members represent to me that to try to reopen that case now is to go back into the dim and distant past, and that we ought not to go back as far as that. I want to make it clear that what permanent civil servants are concerned about is not a past grievance at all, but a grievance arising on their tax for the year 1943–44. In 1942 every Schedule E taxpayer in Britain, civil servant or non-civil servant, expected that in 1943–44 he would pay a certain amount of tax. The civil servant has been compelled to pay that full tax, but the outside tax-payer is being excused seven-twelfths of his tax under the terms of this Bill. For some reason or another the civil servant in 1943–44 is compelled to pay the full year's tax while the members of the outside public are required to pay only a portion of it. The grievance of the permanent civil servant is not an abstract thing of the remote past, but a grievance over what he has to pay in 1943–44.
§ Commander Galbraith (Glasgow, Pollok)
Can the hon. Member say 367 whether his argument is addressed not only to permanent civil servants but also to all permanent servants of the Crown?
§ Mr. Brown
It was my intention to have said in my first sentence, if the massive architecture of it had not been disturbed by the arrangement we have just come to, that this did cover serving soldiers as well as civil servants, but that I was proposing to leave it to other hon. Members, who are better informed on that aspect of the matter than I am, to develop the arguments concerning them, and that I would confine myself to permanent civil servants.
§ Mr. Palmer (Winchester)
The hon. Member's Amendment is dealing with permanent and regular servants of the Crown?
§ Mr. Brown
I am not qualifying or limiting it in any way. When the Financial Secretary to the Treasury spoke at the end of the Debate on the Second Reading what was his justification for the arrangement in the Bill? It was that while the position might be a bit rough upon civil servants, we had to look at these things by and large, and that when the civil servant came to the end of his life he would not have paid in tax any more than he ought to have paid and would not have paid tax upon income that he had not received. At the end of his life he will have paid only the tax which was properly due on the moneys he had received. I noticed that the House responded sympathetically to what the Financial Secretary said, because the House evidently deduced from it that, whatever the incidence of the matter might be, in the long run rough justice was done. It may be true that at the end of his life the civil servant has paid no more tax than the tax which was due upon his income, but the whole point and pith of the matter is that his colleague in trade and industry outside will not have paid the full tax, but the full tax less seven-twelfths of this one year's tax.
In other words, there is an anomaly as between the position of the outside taxpayer and the position of the permanent civil servant to the disadvantage of the permanent civil servant. In a single sentence, we must do justice between one man and another. The Chancellor says 368 that the civil servant has no more reason to complain of his treatment under Schedule E than other taxpayers under other schedules of Income Tax such B, C and D. There again, the Chancellor, if I may say so, misses the point. It is perfectly true that people coming under Schedules B, C and D will not come under Pay-as-you-earn, because the Chancellor has not put them there. The Chancellor has decided that he only wants Pay - as - you - earn applied to Schedule E taxpayers, wage and salary earners, but he is not entitled to quote that fact as a justification for distinguishing between a Schedule E taxpayer and another. That is exactly what he tried to do in the course of his remarks on the Second Reading.
I want to say to the Committee that the civil servants are feeling very aggrieved about this matter. It is not merely that they lose money by it—that they are denied the seven-twelfths remission which everybody else gets—it is that they resent this as a raw deal. They say, and they say it in language which my vocabulary would not allow to traverse, and which I should not be allowed to utter even if it would, "Here are we, 350,000 of us, and among us are those Inland Revenue officers who will have to administer this Bill when it becomes an Act of Parliament. We permanent civil servants will have to distribute to millions of Schedule E taxpayers a seven-twelfths rebate on tax for 1943–44, but we civil servants, who are much better than the outside taxpayer in various ways, are denied that remission. Why are we better than the outside folks? First of all, all our lives—
I am only suggesting that if we have this discussion it would be better not to say that civil servants are better than outside people.
§ Mr. Brown
Let me put it this way. It so happens that the civil servant throughout his lifetime has never been in arrear with his Schedule E tax, because 369 he has always been under a Pay-as-you-earn scheme. He feels that he has always been the model taxpayer in that sense, and he regards it as a double injustice that he is now denied the seven-twelfths relief which the ordinary taxpayer gets. He is very sore about it. I hope that the Chancellor is not going to be sticky at this last hurdle. He is going to get a lot out of this Bill. He is going to get a situation in which there will never again be any Schedule E lag in tax, for anybody. From one end of the country to the other, all will be paying up to date as they earn. Next, he gets out of it tax on the civil servant's current revenue instead of on last year's and, and in very many cases, the current revenue is higher than last year's because the man and the woman are making their way up the incremental scale, so that he will get more tax than he would have done under the old arrangement.
When the taxpayer dies and shuffles off this earth and goes to the realm of light where there is no taxing or giving in tax, the Chancellor will be under no obligation to distrain on the estate which the taxpayer leaves behind, because he will have been paid up to date—a very effective system of tax collection. I hope the Chancellor is not going to spoil a thoroughly good Bill by being just mean about the very people who have got to apply it in practice. I submit that I have established the contention that the civil servant is badly done-by, but I want to repeat it in a formula which I think the Chancellor will not have to re-shape or overturn. The point is that before the introduction of Pay-as-you-earn, everyone inside and outside the Civil Service accepted his liability for tax payable from March, 1943, to April, 1944. Under the Bill however, everyone except Civil servants receives a discharge equal to seven-twelfths of the tax payable during that year. I know that railway clerks are somewhat similarly treated, and I shall be happy to support the claim on their behalf. Can the Committee, therefore, wonder that the civil servant feels very sore about it.
I do not think it is worth the right hon. Gentleman's while to avoid the discharge of tax in the case of this comparatively small section of the community—350,000 out of 45,000,000 is the figure involved. It is not worth his while to 370 mar this good Bill for such a small matter, and I beg him, therefore, not to be obdurate, and not to harden his heart. I beg him to be as big in this matter as he has shown himself capable of being in others, and to lay down the rule that the civil servant, as well as the outside taxpayer, shall have that seven-twelfths remission. The rest that I would like to say I will reserve for the discussion at a later stage. That is my case for including the permanent civil servant, and there is no just answer to it except to include them.
§ The Chancellor of the Exchequer (Sir John Anderson)
I am sorry to have to disappoint my hon. Friend, but his Amendment is one which I could not possibly accept, and I will explain in a very few words why. My hon. Friend made, I feel sure, the very best of a not too easy case. What he said, in effect, was that as the law stands there has been inequality between the treatment of civil servants and the treatment of other Schedule E taxpayers. That is true. He said there had been, and is, an anomaly. With that, also, I am not disposed to quarrel. It depends on how you define anomaly. But when he goes on to imply that there has been injustice, I absolutely reject it. We must try to do justice, but we cannot, in Revenue administration, ensure equality as between one taxpayer and another, or between one class of taxpayer and another, or as between the taxpayer of to-day and the taxpayer of some years ago. There has been from the very beginning an entirely different treatment for the civil servant and the railway servant from that for other people paying tax under Schedule E.
I do not think that the difference in treatment for the civil servant has been entirely to his disadvantage. I do not take the view that it is a bad thing to pay your liabilities on the nail, to keep your payments absolutely up to date and to be clear of the anxiety as to what may happen to your dependants if you suddenly die and there is an overhanging liability—which has applied to all other classes of Schedule E taxpayers—a liability which has to met out of a possibly very meagre estate. It is not, in fact, possible to do away with tax anomalies and inequalities of the kind which my hon. Friend has referred to unless every time 371 an Amendment of Revenue law is made you try to apply it retrospectively, a course which would be quite impossible, inimical to all reforms and quite inconsistent with sound principles of Revenue administration.
Having said so much and having dealt with this question really very fully on two previous occasions, I will just turn for one moment to the Amendment on the Paper and see what the effect of it would be. The Amendment applies to civil servants, to men and women in the Government service, to all classes of Crown servants, judges, Ministers of the Crown, and so on. It applies to Members of Parliament too, and I do not know whether they could be included in the category of temporary civil servants which we are about to deal with separately. Just for a moment, despite the understanding on which we are proceeding, I would like to look at the thing comprehensively. The effect would be simply this. Alone in the community those people to whom the Amendment applies would, during a year of war, be paying tax less by seven-twelfths on a year's income than all the other members of the community. Surely that would be a wholly impossible position, and it would be a disservice to the people in whom my hon. Friend and I are equally interested to try to put them in that position. They have no real grievance inasmuch as they have not suffered hardship.
When we come to the temporary civil servants, my task will be different. I shall have to recognise, as I have recognised in the past, that there is there an element of hardship. In the case of the permanent civil servants there may be inequality, but I do absolutely deny that there is an element of hardship in allowing these people to go on as they have always done. It is true that under the new plan they will be paying on their current remuneration and not on their remuneration for the previous year as in the past. They asked for that change and it has been conceded to them. This is an entirely separate proposition and one which, for the reasons I have given, I could not possibly accept.
§ Mr. W. J. Brown
I am in a quandary. If I cannot get all I want out of the Chancellor, I want to get all I can, and, since I do not see my way to muster a majority in the Lobby against him on this point, I must now concentrate upon success upon the second issue. With very great doubts in my mind—I have no doubt I shall get into a row about it—I beg to ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Mr. Lipson (Cheltenham)
I beg to move, in page 2, line 34, after "are," to insert:British subjects employed by Allied Governments in this country and paid by them and.I trust that this Amendment will commend itself to the Chancellor of the Exchequer. At the present moment there are many British subjects—I am told they are many thousands—who are employed by Allied Governments in this country and paid by them. It was assumed that they would benefit under the Pay-as-you-earn scheme, but apparently that is not to be so. Therefore I have put down the Amendment so that either the Chancellor can give an adequate reason to the Committee why these people should not be included or, if he is unable to do that, he should express his willingness that they should be included. The arguments which have been advanced against the previous Amendment do not apply to this class of taxpayer. It is important, in introducing legislation of any kind, and also when we are dealing with matters of finance, that people who are in comparable positions should, as far as possible, be treated alike, as otherwise a feeling of injustice is created. It is most important that such a grievance should be removed, or that it should be made clear that there are convincing reasons why that cannot be done.
I think it is true to say that the very large majority of these people are employed by the Americans, and I cannot imagine that the Americans would have any difficulty in working a scheme of this kind because they are familiar in their own country with the Pay-as-you-earn scheme. I hope that the Chancellor will see his way clear to removing this discrimination. These people have entered this service in very good faith and I believe that the terms of their employment and remuneration have been decided in consultation with the Ministry 373 of Labour. Otherwise, the Americans would have been inclined to pay them on a higher scale. As their earnings are therefore considerably less than they would have been, because of the action taken by one Department of His Majesty's Government, and they are treated as if they were employed by a British Ministry, the same rule should be applied to their taxation. I put forward this Amendment with the confidence that either the Chancellor will give us a convincing reason why he cannot accept it, or that he will consider it favourably.
§ Mr. Assheton
My hon. Friend has made clear to the Committee what he seeks to achieve, but I have to tell him that he is under a misapprehension and that there is no necessity for him to move his Amendment. The taxpayers whom he has in mind are already entitled to a full discharge of taxation under the Act of 1943. Under Section 3 of that Act, the discharge does not rest upon deduction of tax by the employer, and applies to all emoluments to which Pay-as-you-earn applies, with certain exceptions, which include civil servants. These are not a class to whom my hon. Friend intended his Amendment to apply. I hope that he will see his way to withdraw the Amendment.
§ Mr. Lipson
I am glad to have the Minister's assurance. Information had reached me that the Inland Revenue had told these people that they were not to benefit. Now that I have had the Minister's authoritative statement, I beg to ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Clause ordered to stand part of the Bill.