PERSONAL RELIEFS

HC Deb 23 April 1947 vol 436 cc1084-101

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

Lieut.-Commander Gurney Braithwaite (Holderness)

When, yesterday, we were discussing the question of tobacco, the Chancellor referred to the psychological changes which some times come upon hon. Members when their arguments rebound from those benches to these, and the right hon. Gentleman told us how our attitude to some of these matters changes when we are in opposition rather than supporting the Government. This Resolution will not introduce any such difficulties. We welcomed the other day the acceptance by the Chancellor of the suggestion put forward to him by some of those who sit on these benches during our long discussions of a year ago.

Mr. Speaker

I am very sorry, but I made a mistake. It was entirely my fault. I should have called upon the hon. Member for St. George's (Mr. Howard) to move his Amendment.

Mr. Howard (Westminster, St. George's)

I beg to move, in line 10, to leave out "two," and to insert "three."

The effect of this Amendment, put quite simply, would be to raise from £1,500 to £2,100 the upper limits of earned income on which this personal relief may be claimed and automatically granted as of right. I think that direct taxation at its present level is becoming a matter of increasing concern to all hon. Members. It has been called penal taxation in all quarters of the House, and it is having a really damaging effect on our whole national economy.

Not the least damaging effect is the difficulty of providing the greatest possible incentive, together with a fair reward—judged solely on merit—to persons who have exceptional intellectual abilities, experience, or technical or professional qualifications, and who, by reason of those exceptional capabilities, are, in fact, making an outstanding contribution to the national effort. There is probably a higher percentage of these people in the range of income with which this Amendment is concerned than in any other range. This difficulty is by no means confined to the commercial and industrial field. As everybody must know who is interested in higher educational establishments, the salaries of many professors and of some of the headmasters of leading secondary schools just about come into this range. It also applies to a very large number of other men about whom, if I were to describe them as keymen, I do not think there would be any great controversy. They are the keymen in the essential production drive on which our whole short-term future depends, and the keymen in the research and educational fields, who are equally important for our long-term future. The income range about which I am speaking also covers men who, under the present Government's dispensation, can certainly be regarded as keymen—the higher range of civil servants—the men who are probably more overworked today than any other men in the country.

The effect of this high taxation on that class of man is clearly shown in Command Paper No. 7099, Table No. 10. Unfortunately, the line at which the incomes are divided in that Paper is not very convenient for my purpose, and for giving comparisons. There the line is divided between the £1,000 and the £2,000 level, whereas this Amendment seeks to make an alteration at the £1,500 level. I will not deal with the lowest range of all. But if hon. Members care to look at the Table set out in the Command Paper, they will see that in the range of incomes from £250 to £500, there remained at the disposal of the taxpayer before the war, after paying his taxes, 96 per cent. Just prior to this Budget that 96 per cent. had been reduced to 85 per cent., a reduction of ix per cent. But if they look at the range of incomes from £1,000 to £2,000—it is the upper portion of this range which would be effected by my Amendment—and at the range from £2,000 to £10,000—it is the lower portion of this range which would equally be effected by my Amendment—they will see a very different picture.

On the £1,000 to £2,000 range, the proportion of income which remained after paying taxation before the war, was 82 per cent. At the present rate of taxation, that figure has been reduced to 63 per cent. Taking the £2,000 to £10,000 range, whereas before the war 72 per cent. remained, it is now only 47 per cent. It will, therefore, be seen that in these particular ranges which I am seeking to amend, whereas in the £1,000 £2,000 range, before the war people retained four-fifths of their income, that has now been reduced to less than two-thirds, and, in the slightly higher range, where prior to the war they retained three-quarters of their income, today they actually retain less than one-half.

I maintain that in this income range we find a very large number of men and women who are performing exceptional services for the country. I think it is also true that these people have to meet exactly the same additional cost of living as the rest of us. They also suffer from the effects of the lower purchasing power of money. I believe that increases, if any, in remuneration over this field, whether by salary or otherwise, have, as a whole, been at a very much lower proportionate rate than the increases which have been gained, and properly gained, over very wide areas of the lower ranges of earned income workers. Whereas this particular group have been more harshly hit by the effect of higher direct taxation, it has been less benefited by getting a higher gross income.

I am attempting to state a general case as fairly as I can, on the basis on which the Chancellor himself proposed this Resolution. I accept that, in this Budget, he has a difficult decision to make in deciding how any relief which he is able to give shall be most usefully distributed. Having regard to the circumstances under which earned income allowances were reduced in 1940, there is no doubt that there was a moral obligation on any succeeding Chancellor of the Exchequer to restore the allowances at the earliest possible moment. Therefore, on grounds of equity, I do not think that anyone can dispute the wisdom of restoring the allowances set out in this Resolution.

But there are many of us who had hoped that it would also have been possible to reduce the standard rate of Income Tax. The Chancellor has told us that that is impossible. But the mere fact that, in his view, it is impossible to reduce the standard rate, makes it, to my mind, additionally important that we should seek to extend the range over which relief is given to the widest possible extent. The Chancellor has claimed a certain amount of credit for restoring the relief in respect of children. I do not know to what extent he will claim that that is a non-inflationary relief, or to what extent he will claim that it is an incentive. I frankly admit my personal interest in this matter. As the father of four children, I am bound to feel flattered that the Chancellor should regard the married man with children as being likely to use any slight additional income which he may receive rather more wisely than would a wild bachelor.

6.30 p.m.

I hope he is right. I also hope he is right in believing that this slight change in the children's allowance will lead to a greater productive effort in the country. Whether the particular productive effort to which it leads will automatically be followed by an improvement in our balance of payments, I rather doubt, but the Chancellor will perhaps wish to consult the President of the Board of Trade before dealing with that point. I do not wish to delay the House, because in the discussions on the previous Resolution we covered to a large extent the principle which this Amendment seeks to establish. The Chancellor told the Committee in his Budget statement that we must be modest this year. Nothing could be more modest than to seek to alter the figure "two" to "three", which is all that my Amendment seeks to do. But I would like the Chancellor to tell the House that he is prepared to accept this Amendment because he is wise enough to see that in the alteration of one little figure would lie an immense amount of benefit to the whole of the national effort.

Mr. I. J. Pitman (Bath)

I beg to second the Amendment.

I would first like to take this opportunity, which I may not get again, of congratulating the Chancellor on giving the earned income relief which he has given. He will remember that, with a considerable number of graphs, I pointed out to him that the married working man who was earning only £3 18s. a week was paying more tax under the right hon. Gentleman's Budget than under the late Sir Kingsley Wood's Budget. That he has put right. Those graphs also pointed out that the more children that man had, the worse off he was. I congratulate the right hon. Gentleman on having now seen the wisdom of those graphical figures which I presented to him, and I know the country is delighted with what he has done.

The purpose of this Amendment is to ask him to go a little further. I have not on this occasion drawn a graph, but this is a principle which is applicable and is clearly demonstrable by graphic methods. Let the right hon. Gentleman think in terms not of himself but of one of his colleagues on the Front Bench earning £5,000 a year, or one of His Majesty's judges earning the same amount. Let him compare the situation in 1913, when the salaries were the same, With the situation now. Roughly speaking, such a man in those days would have paid about £500 tax, and would have been getting £4,500 bearing their 1913 value, which we will assume, for the purposes of comparison, to be 20s. to the £. Now that man is getting two reductions in his net income; first of all, there is the enormous taxation to which he is subject, and, secondly, there is the valuation of the pound at about 8s. 4d. Taking these two together, the net effect is that those who were drawing £4,500 net—including those of his own colleagues, and His Majesty's judges—are now drawing about £1,200. We are having a lot of trouble about expenses. That subject has been mentioned in connection with the Coal Board and other fields. I am in favour of the Prime Minister living in dignity, and that applies also to his other colleagues on the Front Bench and to the members of the Coal Board. I think they should live in a dignified and proper way befitting the office they hold. This Amendment proposes a simple device for making good what is a basic problem; because, whereas in 1913 we paid our Ministers sufficient to enable them to live in reasonable dignity, now, owing to the high taxation, we are making it impossible for them to do so.

The remedy is a very simple one, to put right what is wrong and to make the taxation less onerous. This proposal would not cost much because, as I read the Chancellor's tables, the big share of income lies in the amount up to £1,500 a year. The over £1,500 income, roughly speaking, is the assistant secretary level in the Civil Service; it is also the large factory manager level—the man who is doing the really highly skilled work of this country. As the right hon. Gentleman is aware, this proposal refers only to earned income. How much would this proposal cost? I suggest it would help enormously to solve the difficulties in connection with the expenses field, and it is in the expenses field that the right hon. Gentleman is trying to right what is a fundamental error of taxation. The right hon. Gentleman will not solve the problem by round-sum expense allowances because the principle will have to be applied right down the line. The judges will require it, the heads of the Civil Service will require it and so will everybody else. I think everybody would agree that that would be an unsatisfactory way of solving what is a human and important problem

Mr. Dalton

Many suggestions have been made in this borderland which fringes on the allowances, which in themselves are not unsustainable—far from it—and for all of which a good case can be made relative to the times and the circumstances. It has already been observed by some hon. Members that some of the proposals which I am making this year, and which I hope will be accepted in a later part of this Resolution, were proposed last year, but then I was not able to accept them because the financial conditions did not permit. I feel we have now advanced to a point where a number of those suggestions can be accepted. So it may be in future with the proposal to lift the ceiling of the earned income relief. But I do not think I can accept this Amendment now. I have no objection to it in principle. I merely say that, in the priorities as we must make them out, I do not think the case for this Amendment has been made now, and I will cite a few figures in reply to the questions which have been raised.

Mr. Oliver Stanley (Bristol, West)

I hope the Chancellor will tell us how much the proposal would cost.

Mr. Dalton

I will. What are we doing with the earned income reliefs this year by way of modification? We are lifting the proportion. There are two factors in the earned income relief. There is the proportion of the relief, and there is the ceiling—the total amount which can be deducted from the assessable income in order to arrive at the taxable income. In this year I am proposing to change these elements, and to improve both from the point of view of the receiver of earned income. In the first place, I am proposing to increase the proportion that may be claimed from one-eighth to one-sixth; and I am also proposing to lift the ceiling from £150 to £250. This proposal is to leave the first element as I have proposed, namely, one-sixth, and to lift the ceiling still further from £250 to £350. I have been asked for the cost of this proposal. It would cost £4 million. Of course, of every scheme it may be said—as was said in another context—"It is but a little one." None the less I do not think that at this stage it would be reasonable to accept this Amendment.

There may be a few million pounds to give away by the time we reach the Committee stage of the Finance Bill, and, if I feel it reasonable, I may be able to bring forward a suggestion. But I do not think this can claim a very high priority here, because relatively to the old position before the war we are already back a little. I will give the figures. I think the hon. Member for the St. George's Division (Mr. Howard) and the hon. Member for Bath (Mr. Pitman) know them very well. Before the war the position was that the earned income relief was one-fifth. That is a higher fraction than I have yet been able to get back to. But even then the ceiling was only £300. That was the prewar arrangement. A ceiling as high as £350 has never been the law in this country. There is no reason why it should not be some day, but we cannot do it at the moment. We are not yet back to the prewar fraction of one-fifth. The point which we are now reaching, if my proposals are accepted, is to put the position back as it was, not prewar but in 1940, before postwar credits were introduced. At that time, the fraction was as I am now proposing it should be, namely, one-sixth, and the ceiling was as I am now proposing it should be, £250. If we merely retrace our steps—which in this sort of field is not a bad thing to do; there is a prima facie case here for retracing our steps—we should get not to one-sixth and £350, as is proposed here, but to one-fifth and £300. I think, myself, that would be the better mode of progress on another occasion, but on this occasion I would not go beyond what I have already proposed.

Mr. Assheton

What is the cost of that?

Mr. Dalton

I forget it. I have not got that particular cost. I have taken care to obtain the cost involved in the Amendment on the Order Paper, but the cost for which the right hon. Member asks I have not got. It would cost more, undoubtedly. I would emphasise that the gain in the change of the earned income relief is felt by all, for what it is worth. This lift from £150 to £250 applies to all persons with earned income, whatever the size of the earned income above the taxable lower limit may be. As the hon. Member for the St. George's Division truly said, incomes running from £1,500 to £2,100 would be particularly advantaged, in so far as this is a range of income where, although they get a lift of £100 under my proposal, they would get further lifts amounting up to another £100 under his. That is quite true. On the other hand, it ought not to be omitted to be observed that this group of people does gain to the extent of £100 under the proposal I have put forward, and so do those in the higher groups.

Of course, the figures have had to be got together quickly, but I understand that putting it up to one-fifth with a £300 limit would cost an additional £40 million. It would cost ten times as much. None the less it is probably in that direction that we ought to move. Balancing one thing against another—although I do not in any way repel this proposition; it is one of the things which should be noted and considered before the next Finance Bill, to see, along with all the other proposals, which should come first—I do not think that at this stage this is an Amendment which can be accepted. I hope the hon. Member will not think it necessary to press the Amendment to a Division, in view of what I have said. Of course, if he does, I must ask the House to reject it.

Mr. Pitman

Will the right hon. Gentleman bear this point in mind? His advice comes to him from people of very great integrity, who are the people who will benefit under this rule. I should like him to consider the possibility of overruling their integrity in this matter, since he himself has said it is such a small payment.

6.45 p.m.

Mr. Quintin Hogg (Oxford)

I do not want to detain the House for long, but this is a matter on which I have long felt deeply, and I hope the House will forgive me if I add a few words. I should like to thank the Chancellor for the reasonable tone of his reply. If I venture to put be- fore him certain considerations, it is not because I do not appreciate that tone. When he comes to consider this matter again, I hope he will not think he is giving money away when he allows people to retain a larger proportion of the income which they have earned. I hope his further researches into the matter will convince him that the conception of a donation, which seems to have entered his calculations, ought to be removed. He is really allowing people to keep what they have earned; he is not giving to them money which does not belong to them.

Secondly, I hope he will consider a little more generously the question of priority. It is all very well to talk, as he did, about the many claims upon the Treasury. What we ought to consider, among other things, and perhaps first of all, in relation to these tax reliefs at the present time, is, what effect the tax relief is likely to have upon the all-important question of production. I do not think it can be denied that the earned income relief is one of the matters to which a Chancellor of the Exchequer ought properly to look in order to gear up production at all levels of society. Therefore, I should submit to him that when he is considering this matter of priority, and when he has finally cleared his mind of this false conception that he is giving money away, he will ultimately come to see that the benefit to society which would result from giving a priority of this kind is quite sufficient to entitle him to do it.

Lastly, I trust that he will try to rid his mind of too pedantic an adherence to what he called "the prewar ceiling," for this reason. I think it is not sufficiently emphasised in our Debates how very hardly the high rate of taxation has fallen in recent years upon a particular, and not the least deserving, class of the community. I mean the professional and salary-earning middle class, which looks to its savings during its earning life to provide the wherewithal to educate children, and to provide something upon which to retire. Those are things which are, I think, generally recognised as legitimate aspirations for ordinary people to entertain. It does strike me, and has struck me for some time since I have been in this House, that some of us are rather anxious to decry the rich, and to include within that term all the professional and salary earning people; and others are rather anxious perhaps to complain when additions are put on to Surtax, without making corresponding complaints when the burden, which is very much more hard to be borne, is placed upon the salary earning professional middle class.

Let me just say this by way of illustration. It is quite obvious that when the people of our generation were young, ordinary salary-earning people, earning perhaps £500 a year, up to £2,000 or £2,500, were able to retain quite a large proportion of that income for the purpose of saving—a thing which we are all encouraged to do, even now. They considered they were entitled to do this for the benefit of both themselves and their families. Now the effect of the very much higher rate of taxation, with the relatively small earned income relief, is to deprive a man whose working years happen to be in what is a particularly difficult period, of any opportunity to save on the same scale. It may be that his successors, who live in calmer times, may be able to save; his predecessors certainly were able to do so. Therefore, there is a case, whatever may be the merits of earned as compared with unearned income, for allowing more highly differentiated earned income reliefs at this period than at any other. So we should not be bound to the prewar ceiling.

I suggest that the Chancellor of the Exchequer, who is fond of researches, might do what I did the other day, and read the entire Budget speech of Mr. Gladstone in 1853. It is a very interesting and valuable document. One of the curious things that emerges from that study is this. Mr. Gladstone, who was, after all, only re-enacting, substantially, the legislation of Pitt, quite clearly saw and predicted the evils which would necessarily come from Income Tax, and which are now universally admitted to be the evils which do attach to this particular form of taxation. He came to the rather remarkable conclusion—or the conclusion which, to us, seems rather remarkable—that Income Tax ought to be treated as "a sleeping giant"—which were his own words—to be aroused out of his slumbers only when a war takes place. The reason he did so was that the evils were so serious. What he overlooked was not that the evils existed: he was not wrong about that belief. Where he was wrong was in his overlooking the fact that the relatively low rate of taxation at that stage did not, in fact, cause the evils which he rightly saw were inherent in the tax.

One of the most serious evils he saw was that a man who depended for his savings on a relatively high earned income as distinct from a man who has been able to develop a business with a capital goodwill or who inherited a fortune from which he obtained an investment income, would have a burden placed upon him which would unduly depress his position in the community. I submit that that has happened now, owing to the high rate of tax on earned income; and I would, therefore, suggest for the Chancellor's consideration that it is an important piece of social justice to remedy that situation by increasing the earned income reliefs, that it would be an entirely wrong view of the whole case to try to tie oneself to the pre-war ceiling, and that, quite apart from the question of priorities, this relief would be justifiable in future years.

Mr. James Callaghan (Cardiff, South)

I desire the House to bear with me for a few minutes only. I want to enter a slight variation to the agreement which is emerging about the degree of priority which should be afforded to the earned income relief, and to make it clear that I was one of those who urged last year that the present reliefs should be given.

An Hon. Member

Not in the Lobby.

Mr. Callaghan

No, not in the Lobby, because I had a full sense of responsibility. I am glad that the Chancellor has given way this year. But what I want to put to him is that whilst this is very desirable—and I do not disagree with what the hon. Member for Oxford (Mr. Hogg) said—there may be a case for giving a higher degree of priority next year to other reliefs, notably the personal allowance. I wonder if the House would follow me in a little mental arithmetic. Take the case of a man getting £1,500 a year and the case of a man getting £3,300 a year. Under the present proposal of one-sixth the man with £1,500 a year gets an allowance of £250. On one-fifth he would get £300 allowance. So that if the proposition for one-fifth were to be brought into force next year, the net gain to him would be £50. The man on the level of £3,300 a year would be in a different position. The difference between one-fifth and one-sixth to him would be the difference between £50 and £60—£10 more. So the man at £1,500 a year would be getting £50 relief, and the man with £3,300 would be getting £60 relief. Why should be not? That is a perfectly fair observation. But we are dealing with the question of priorities, and all I want to put to the Chancellor is this. If he has next year an amount of money to spend, will he consider, as an alternative, whether it would not be better to increase the personal allowance all round as the first priority? Then, if he had some amount to distribute he could give £20 a year higher personal allowance to the man with £3,300 a year, and £20 higher personal allowance, say, to the man getting £1,500 a year.

Mr. Hogg

The hon. Member will agree, will he not, that if the right hon. Gentleman did that, he would be giving relief to a person whether the income was earned or not?

Mr. Callaghan

The hon. Member has anticipated me. That is, of course, the difficulty. That is why I say the Chancellor has to balance the advantages in a matter of this sort. There are so many millions of taxpayers. I think, however, the benefits to the community might be greater by doing it that way. I enter that reservation now, only so that when the Chancellor comes to read, the Debates next year—as, presumably, he will, before making up his Budget statement—he will not think he is going too far now in what he said about giving earned income relief. There is a good case for a Chancellor of the Exchequer, particularly a Socialist Chancellor of the Exchequer, distributing what he may have to distribute, a little more evenly between the men at the top and those at the bottom of the scale.

Mr. Orr-Ewing (Weston-super-Mare)

Comparing the position today with that which existed before the war, I cannot help feeling that, in painting that picture, the Chancellor of the Exchequer rather overlooked the difference between the size of the weapon he is now wielding and the size of the weapon wielded by prewar Chancellors. It seems to me it would be wise to reconsider allowances for personal reliefs the higher the standard of taxation, and now is the moment, when it reaches the present serious level. It is at that moment that one is likely, inadvertently, to do the greatest harm to the most valuable elements in the community. Therefore, as a general proposition, I do not think in comparing pre-and postwar you can make a fair analogy, in regard to personal relief or allowance, by comparing the position now with the prewar position unless it is made perfectly clear that additional allowances must be made in view of the incidence of the higher standard tax.

The hon. Member for Oxford (Mr. Hogg) has mentioned the professional classes. There may at one time have been too many doctors—I mean the health sort—and possibly too many lawyers. In fact, I think today a good many lawyers are beginning to think there are too many of themselves now. But there is one group of which we have always been short or of which we certainly were short up to the war. We have always been short of those in the higher and most responsible grades of management in industry, the progressive forms of management in industry, and I think we have suffered from that for a very long time. We are now beginning to realise where the gap has occurred, and there is a good deal of work being done, possibly for the first time for 150 years, to build up a really progressive and modern approach to the problem. It is that group to which I would specially refer and I would ask the Chancellor not to go on hitting them longer than he need. If he does, he will be discouraging at the very point where we should be encouraging, namely, in the efficient management of the industries of this country.

7.0 p.m.

Mr. John McKay (Wallsend)

This Amendment raises a matter about which I have felt strongly for a long time. As I understand it, the argument on behalf of this Amendment is that we ought to do something for the men of ability, and particularly those who have £30 or £40 per week. It is suggested that we should go out of our way to help these individuals. I have been in the unfortunate position of having a much lower income than that, but of course I have not the ability, and therefore, I suppose, I was not justified in receiving that amount. During my lifetime, my position has been similar to that of the vast majority of the people of this country. When I hear this talk about ability, how these people have applied their potential powers with such great benefit to society, and that therefore they should be recognised, I have tried to weigh up the position. I have tried to analyse humanity, and to find out whether it is correct that these people really have all this ability. I have asked myself whether these people are receiving incomes relative to their ability. Unfortunately, I have come to the conclusion that the so-called ability of these people is not relative to the amount they receive or in relation to their qualities as between one man and another.

It is questionable whether the incomes which these people receive are justifiable from the social point of view. If that is questionable, it is also questionable whether it is advisable to give a special relief to this class. I object to the general proposition that these people have any extra ability. They receive these incomes largely as a result of their social opportunities, which have raised them far above other sections of the community. In their present positions, they may have certain abilities as compared with others, but these abilities arise largely out of the opportunities they have been given. Any number of our people, who have not had similar opportunities, are being taxed pretty heavily. The House will understand, therefore, why I oppose the suggestion of giving relief to this class of the community.

Captain Crookshank (Gainsborough)

The speech of the hon. Member for Wallsend (Mr. McKay) is very interesting, but up to now we have not been discussing ability at all. I do not know where his argument would lead us. If the argument is that you are not necessarily an able person because you happen to have an income of £2,000 a year or more, I would go no farther than the Government Front Bench. I know from my experience of the Government Front Bench that there is quite a lot in what he says, but perhaps we had better leave aside our views, and his views, and other people's views, about ability in discussing this Amendment.

Dr. Morgan

Has not the right hon. and and gallant Gentleman got a few City directors on his Front Bench?

Captain Crookshank

I beg the hon. Member's pardon. I ought to have made an exception in his case, after the speech we heard earlier, which showed his ability and agility in a way I have not seen exhibited before. We do not complain of the tone of the right hon. Gentleman's reply on this question. He certainly did not turn the proposal down flat; he did not even turn it down for this year. He made the astonishing admission, which we did not have before, that there may be some money to come. We have discovered that this Amendment will only cost about £4 million, and we are, therefore, very glad that this matter has been raised so early in the proceedings, because at any rate it has chronological priority, if nothing else. We are pleased with the way in which the Chancellor met the argument. I am not at all surprised that he did not accept this proposal offhand, in view of the fact that the concessions already contained in this Resolution, will cost some £55 million this year. I think a case has been made out, and I hope that if he is not going to do it this year he will carefully consider the matter when he reviews the problem next year.

I hope that the Chancellor will review the speech of my hon. Friend the Member for Oxford (Mr. Hogg). The right hon. Gentleman thought that the real objective, before we started changes, was to get back to what happened before the war. In a great number of fields of activity, we should all be very happy if only that could be done. But let him not make it absolutely vital that that position should be reached in this case. If he finds that there is something in the considerations put forward by my hon. Friend the Member for Oxford, that there should be something other than the one fifth and the £300 maximum, which he said, would cost £40 million, let him not be so bemused by the idea of getting back to prewar as not even to consider the alternative. The right hon. Gentleman has promised to keep this subject prominently in mind, and has gone so far as to bring us back to the situation of what might be called the pre-postwar credit standard. In doing that, he has done a good deal. If there is any money still available, I hope the right hon. Gentleman will consider that this is a proper point to consider, because we are satisfied that something of this kind would be an incentive to a certain section of taxpayers, to whom the money would be useful.

Mr. Howard

In view of what the Chancellor has said, I can do nothing but ask leave to withdraw the Amendment, and hope for the best.

Amendment, by leave, withdrawn.

Question again proposed, "That this House doth agree with the Committee in the said Resolution."

Lieut.-Commander Braithwaite

In rising to make a few observations on this Resolution, I find it almost impossible to recapture the "first fine careless rapture" in which I found myself some time ago. There will be no controversy over the acceptance of this Resolution as a whole, because we have to be thankful for this small mercy which the Chancellor was able to announce when he introduced his Budget.

I want to impress upon the right hon. Gentleman a point connected with relief on earned income. In Mr. Gladstone's time—and I would like to congratulate my hon. Friend the Member for Oxford (Mr. Hogg) on reading the speech made by Mr. Gladstone, which lasted four and three-quarter hours—his Budget of 1853 was well received by the House, because there was a proposal to abolish Income Tax entirely for seven years. Naturally, if the right hon. Gentleman himself proposed that, we would gladly listen to him for four and three-quarter hours. I want to refer to the manner in which earned income is defined, This is not a matter which will affect the great business executives, whom the right hon. Gentleman described as "Tom and Dick"—a description which, I believe will cover the identity of the hon. Member for Romford (Mr. T. Macpherson) and the hon. Member for Ipswich (Mr. Stokes). It is with reference to those who are lower down the managerial scale that we want this matter considered.

The Chancellor stressed, as he always does, when he addresses us, the tremendous importance of savings. He looks with approval on the thrifty man. He does not believe, as I once suggested, during one of our wartime Debates, that one of the good friends of the Treasury in these days is the beer-drinker and the smoker, the man who, every time he indulges in drinking or smoking, makes a present of something to the Government, as against the man which creates the necessity for interest and sinking funds, and so on. I would stress that there should be a sharp distinction in that sphere. Many Members opposite, and the whole of our machinery hitherto, have regarded all investment as unearned income. I suggest that in many cases such income has been very hard earned indeed. It has been earned by those who have done the very thing which the Chancellor encourages, by those who have not spent the whole of their weekly wage on the cinema, the dog track, in a public house, or in smoking cigarettes. They have accumulated a nest egg for their old age, and they have invested it, perhaps in some tax-free security, or other form of investment in a great industry. I believe that the time has come to draw a sharp definition between inherited wealth, which falls from one generation to another, and the savings of a lifetime, carefully and wisely accumulated, and invested against old age.

7.15 p.m.

Dr. Morgan

Hear, hear.

Lieut.-Commander Braithwaite

I am glad that I have carried the hon. Member for Rochdale (Dr. Morgan) with me. Anyone who can do that, has achieved something. I also thought I detected on the countenances of one or two of his comrades slight signs of approval. In these times, the man who, as a result of a life of toil, has been thrifty and wise should not be treated as if his income was derived from investment, as if it were something which should carry a penal form of taxation. I would like to see the sharp distinction between earned and unearned income applied to the whole scale of taxation, including Surtax, and I hope that as we move to smoother financial waters, that may be possible. I agree that the right hon. Gentleman is not in a position to make a concession of that sort this year, but we are always looking forward. One Budget leads to another. This is a matter for his skilled officials; I admit that it bristles with administrative difficulties, but when we come to define earned income we should bring within its scope the savings of those who have worked hard during their lives, and leave unearned income to cover inherited wealth which descends from one generation to another.

Lieut.-Colonel Lipton (Brixton)

I would like the Chancellor to give his favourable and, I hope, sympathetic consideration, during the next week or two, to a point I wish to put to him. I am the more emboldened to put forward the suggestion in view of the fact that my right hon. Friend the Minister of Defence is on the Government Front Bench. I hope I shall get his backing for the proposal I want to make, which is that the annual bounty of £8, the maximum efficency grant for other ranks serving in the Territorial Army, should be exempt from the tax on earned income. This matter has been raised on previous occasions, and the Chancellor, on 25th February, showed that he was not completely unsympathetic to the idea of considering some kind of concession. Such a concession would serve two useful purposes. It would encourage the recruiting campaign for the Territorial Army, which is now about to commence, and it would have the additional merit, if, indeed, it be a merit; that it could only be extended to other ranks in the Territorial Army because, rightly or wrongly, T.A. officers are not entitled to this bounty for maximum efficiency. There is one other aspect of the matter to which I invite his favourable consideration, and that is the training allowance of 1s. 6d. for a two hour drill. I hoped that it may be possible to consider that as income so earned as to be exempt from tax.

Mr. Pitman

On the point raised by the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite), in regard to paragraph (a) of the Resolution—

Mr. Speaker

The hon. Member seconded the Amendment. He was then talking to the original Question and, therefore, he cannot speak again. By seconding, he exhausted his right to speak on this Resolution.