NEW CLAUSE.—(Relief for lower grades of unearned incomes.) (Hansard, 15 June 1944)

Dr. Russell Thomas
I beg to move, "That the Clause be read a Second time."
2246 This Clause is directed to giving relief to persons who have only a small unearned income. I will explain it a little more clearly than it appears on the Order Paper as I go along, but I want to make this point before I begin. The Chancellor said early to-day that the arguments which have been brought up on a certain matter were the same this year as last year and that a particular case before the Committee was neither stronger nor weaker than it was in the past. Personally, I think with deep respect, that is a very weak thing to say, because the suggestion is that the Committee should not proceed to rectify a matter because the case is no stronger this year. If an injustice exists over a long period of years and the Treasury cannot see its way clear to rectify the injustice, then it is the duty of this Committee. to press the matter until the injustice is removed.
The lot of the particular class of people for whom I am speaking to-day becomes harder every year and more difficult as the war goes on. I am bound to quote a few figures wearisome as I know them to be in order to make my case. Single persons with an unearned income of £200 in 1941–42 and since pay £39 tax. In 1939 they only paid £8 6s. 8d. That is a large sum for a person with £200 a year. A married couple without children who had an income between them of £300 a year in 1939–40 paid £10 in taxation; in 1941–42 and since they have to pay £52 a year in taxation. I do not want to dwell on this side of the question very much because I have been making my points now in regard to these matters for the last two or three years regularly, and it would be foolish indeed to go on repeating them. However, their position is getting worse and worse. They have had no help of any kind since the war began and no one has given them encouragement while all sort of burdens have been added to them. I have said before, and I am going to make these points again, they often have war damage payments to make in addition to their taxation and they are not helped by the Rent Restrictions Acts, the cost of living is still rising, and it may go up still further this year. Their commitments remain constant. Many of them have small mortgages to pay and other have small life assurances which they are trying to keep alive.
2247 All these people, with the low taxation of 1939, could have gone along quite happily to the end of their days but the war has altered all that. Letters have been sent to me—I do not want to capitalise sentiment at all—telling me that they have had to leave the old homes where they had brought up their families and have gone to live in rooms. They have had to sell their furniture to meet certain unavoidable expenses, and they have had even to dig into their capital. I will not go into the matter more than that. The relief given to these people at present is, in the case of a single person, a personal allowance of £80 a year; in the case of a married couple it is £140. In this Clause I suggest that the personal allowance be raised by£15 in both cases—to £95 in the case of single people and to £155 in the case of a married couple. The personal allowance, as hon. Members will remember, was £100 for 1939 in the case of single people; £180 in the case of a married couple.
It will occur to Members at once to ask, Why have I not sought to raise the personal allowance for married couples to a rather higher level? They might ask why a single person is scoring over married couples. All the time I was trying to frame this Clause—and it was a difficult thing to do because it involved trial and error methods, and arithmetical calculations—I tried not to impinge on the general principles of taxation. That limited me greatly in what I set out to do. Anyway I have given married couples a longer range of income for relief. I had to keep in mind the difficulties of administration, and the difficulties of the inspectors. I had to be equitable to others. Therefore, I could not, in my Clause, say simply, that a single person should be relieved up to £245 and married couples up to £305. I had to make it a little more complicated.
Although I have, in the case of the single person, given a personal allowance up to £245, in order not to be inequitable, I had to scale that off as it were to £260, because if I did not do that it would mean that a person with an income of £246 would be worse off than a person with an income of £245, that is if the extra personal allowance I suggest was from the top figure suddenly dropped off altogether. If 2248 the full allowance as suggested by me was given to a single person up to £245 at £246 it would drop by £1, at £247 it would drop by another £1 until at £260 it would disappear altogether. That means that the full £15 allowance to be granted on the first £245 of income and after will decrease up to £260 when it will disappear. I have chosen the figure of £245, because hon. Members will see that if the £80 personal allowance now allowed is taken from £245, it will leave £165. I did not want to impinge on the 10s. rate so I had to keep it at that level. There is another point in regard to single persons. A single person pays tax on everything over £110. I have chosen, in the case of a single person, the lower level of £140 below which he will not get benefits, and I had to do that otherwise unearned income below that would be less than earned income.
All this is, no doubt, very trying to the Committee but it is my duty to put these points to the Chancellor, whether or not they are wearisome. The considerations I have mentioned in regard to a single person will apply in the case of married people without children. There is no lower limit in their case as reduction of taxation by an extra allowance does not put them in a better position than those with earned income at the lowest levels, so there is no necessity to have a lower limit. They will always pay more at every point, right up to £305, but the Committee will see that I have scaled it off to £320 so that the person with £306 per annum will drop£1 with £307 per annum will drop another £1 and so on until at £320 it will disappear. The full benefit of this to these parties will mean that they will benefit in hard cash by £4 17s. 6d. per annum. This is not a great amount but it is, nevertheless, a very valuable sum if the income of a person is, say, only £200 a year. Many of these people have never been able to buy clothes to replace old clothing and the like and this extra sum will make their lives very much easier. Pro rata it is something which, to them, must be very valuable indeed. I am not asking the Chancellor for much, it will not make a great deal of difference and at no point in the scheme I suggest has unearned income any benefits over earned income. All the way through these people will still pay more than those who are earning their living tax.
2249 Of course, I cannot, with my own resources, say whether there are not certain snags which I as an individual, standing on my own feet, as it were, have overlooked. The Treasury are far better able to judge than I am, but if they admit the principle they must come to my rescue later, perhaps on the Report stage, if they are not prepared to accept the Clause as it stands, and be prepared to make such adjustments as are necessary that will meet, more or less, what I am asking for now.
I expect that one argument which will be put forward against me is an argument we have heard before—that we are going through a difficult time and we must be careful about inflation. It will be remembered that other claims have been put forward recently for increases of pay. It was announced at first by the Secretary of State for War, in response to a request for increased Service pay, that the cost would possibly introduce an inflationary condition. I do not believe that that statement was right. Claims have been made by pensioners of various kinds, ex-civil servants and so on, and the Chancellor has to a great extent given way. Although we hear that this year prices will probably go up owing to the present state of our internal financial structure, nevertheless, the Chancellor has slowly given way and in some respects has met the demands. But in this particular case I do not think the inflationary argument can be used, because many of these people have been so poor since the war began that they have not been able to take up their full rations. Many of them have not always had their full food points ration. A large proportion of them have not had anything like the full amount of the clothes ration and so on, so there is a long way for them to go to absorb the goods they are really entitled to and which are available before the inflationary argument comes in. There is also the question of the Purchase Tax.

§ The Deputy-Chairman
I think I must ask the hon. Member to leave out the Purchase Tax.

Dr. Thomas
I am only trying to meet the argument which might be put against me by the Chancellor of the Exchequer.

§ The Deputy-Chairman
That is entirely hypothetical.

Dr. Thomas
Surely it is for me to consider the effect of my proposal on the general financial structure, and that is all that I intended, but I leave it at that. I trust that the Chancellor will see his way clear to make some concession to these people. I believe I can safely say I have the support of my colleagues on this bench and many other hon. Members.

§ Sir J. Anderson
I should like to put the hon. Member out of his misery at once, by assuring him that it would never have occurred to me to employ the argument of possible inflation against the proposal that he has put forward. In talking of inflation, I have always chosen my words carefully. The hon. Member referred to a remark of the Secretary of State for War, but my right hon. Friend did not say that a particular addition to Service allowances would cause inflation. What he said was that the proposal that was put forward was inflationary in character—I think he said "wildly inflationary." It was the argument that was relied on to justify the proposal that was inflationary in character, rather than the amount involved in the proposal itself. However, that is probably out of Order. Let me get speedily into Order by saying that on the Report stage of the Budget Resolutions, when the hon. Member made a plea on behalf of the persons whom he seeks to relieve by this Clause, I said I had a great deal of sympathy with them, and I have. I have a great deal of sympathy with the position of people with small incomes, especially fixed incomes, who have to bear the very heavy burden of Income Tax under present arrangements. But that does not mean that I go all the way with him, in regarding the burden that rests upon these people, as an injustice. There is hardship if you like, but I do not call it an injustice, because all classes of the community have to share in the grievous burdens of the war, and there is a great deal of hardship that we should all like to remove, if possible. But it is not a question of injustice. We have to look at the various classes of taxpayers, and see whether the burden laid upon them is, in all the circumstances, equitable, and see that there is a reasonable proportion of what is admittedly a very heavy and grievous burden.
The hon. Member first draws a very sharp distinction between people with 2251 small incomes, entirely investment incomes, and all other people with small incomes. I think that is a distinction which cannot possibly be sustained. The effect of the Clause—though perhaps the hon. Member does not realise it—would be that a taxpayer with an investment income within the limits with which the Clause deals who had the smallest supplementary income which he earned would be ruled out completely. The Clause is strictly limited to persons wholly dependent on investment incomes. If one is looking at hardship, there are many people with small incomes which are earned. Pensions, for example, are necessarily treated as earned income, and their hardship would be just as great as that of those whose case has moved the hon. Member to such eloquence. Apart from that distinction, what he has in fact done is to go back on the decision taken by Parliament in 1941, when the allowances, which had been £100 for an unmarried and £170 for a married person, were reduced to their present level of £80 and £140 respectively. Three years after it was come to, the hon. Member would give back to that restricted class the allowances that were taken from them in 1941. When those allowances were taken away, they were replaced by the post-war credit—I think completely replaced. I think the effect of what was done then was to give to each taxpayer, in the form of post-war credit, the equivalent of the extra tax that was being levied by reason of the reduction in the level of allowances. There has been no such change in circumstances since 1941—the hon. Member called that a weak argument but it is one to which I adhere very strongly—as to justify us in making the change for which he pleads. I therefore must ask the Committee not to accept his proposal.

§ Sir Henry Fildes (Dumfries)
I would make a plea to the right hon. Gentleman to open his mind. I am not concerned with earned or unearned income. I am concerned with pensioners, and people with small fixed incomes. He has been asked to exercise his generosity and his ingenuity to give relief in these very hard cases, to the extent of less than L5 per head. This is the fifth year of war, and we have all suffered, but the people with small fixed incomes should have 2252 some recognition. I would ask the right hon. Gentleman to look into the matter again and see if it is necessary that this strangulatory taxation upon the poorest of our people should be continued.
If he could loosen that stranglehold a little, so that pensioners and others could breathe a little more freely, financially, it would be a help. I know that right through the Committee there is a feeling that if the Chancellor could see his way to help in this direction it would cause great satisfaction. We are not asking for a great financial contribution. We know that we are hard up as a nation, but we are not so hard up that we cannot help some of these people who, owing to sickness and other causes, are suffering a disastrous experience. If the Chancellor could help he would go down to posterity as the man who, when he had the power, helped the poor, and it would make more easy his entry into the higher sphere.