HC Deb 10 June 1947 vol 438 cc936-56
Sir Peter Bennett (Birmingham, Edgbaston)

I beg to move, in page 8, line 1, to leave out from "pounds," to the end of line 5.

This Amendment deals with a deserving class of persons who are not numerous or powerful, but whose difficulties come to the notice of many of us from time to time. I am referring to that body of elderly people, mainly widows and spinsters, who have been provided for under trusts in which they hold a life interest. Incomes in these cases are not large, and we feel that these people have been badly hit during the last few years. They have suffered from the cheap money policy, and as has been shown by letters to the Press, and many of them have been very adversely affected by the transfers which have taken place, or which will take place in connection with the nationalisation schemes. With a reduced income they have to face the very heavy increase in the cost of living which we know is likely to occur. They cannot touch their capital, and some cases of acute hardship have come to the notice of Members of Parliament.

In this Budget they are to be further hit by the Legacy Duties. Of course, if the legacy is from a husband or a parent, this is not serious, but a great many of these persons have been provided for by brothers and other relatives. The kind of case I have in mind is that of the elderly sister who has looked after her father and mother and brought up the family, and is then left a small income at the end of her life. If their income is less than £500 a year when they reach an advanced age, such people benefit by being granted an earned income allowance. To that extent they receive further income. This Amendment, coupled with a later one with which it is allied, seeks to give them a little increased income by fixing the old age relief at one-quarter instead of one-sixth. That is only a small amount, but it will increase the income for a class which is really deserving of consideration. I hope the Chancellor will be able to make this small concession. It will not cost much, but it will relieve much hardship.

Mr. Dalton

I always listen with great attention to the hon. Member for Edgbaston (Sir P. Bennett) because he always states the case with clarity, moderation and persuasiveness, but in this case he is asking for something which would not be reasonable at this stage in the life of this Parliament. To accept what he is asking for would be to put the fraction for age relief in advance of the fraction for the general earned income relief. Hitherto in the history of this age relief, which was first introduced in 1925, it has always moved exactly in accordance with the earned income relief. The earned income relief moved down during the war, and it has moved up again since. It was increased to one-fifth in the period immediately before the war and during the war it was lowered to one-tenth. In each case the age relief followed it. In my last two Budgets, when I have been able to propose improvements in the earned income relief, I have always made a corresponding proposal with regard to age relief to keep the two the same. I think that is the right way to do it.

Here, again, I must not let hope run into prophecy, but I would like very much, not this year but, if things go well, another year, to do something more about the earned income relief. We are now proposing to go back to one-sixth. We are also proposing that the age relief should go back to one-sixth. It now stands at one-eighth. Before last year it stood at one-tenth. In the age relief we are deeming investment income to be earned income for this purpose within a ceiling of £500 a year. The purpose is clear. It is to assist elderly people who have saved money and are living on their savings to have the same alleviation as if they were still earning. It means that, up to £500 a year, an old person is entitled to treat income from investment as it would be treated for tax purposes if it were income from earning. That is right and proper.

I do not think we should get these two fractions out of line with one another. Although I am sympathetic to the case, I do not believe we should give elderly persons living on investments such preferential treatment as this Amendment envisages. I hope the hon. Gentleman will not press the Amendment on this occasion. I am entirely sympathetic to the idea of gradually raising the earned income relief. I have given an earnest in doing it twice in my last two Budgets, and I hope we are not at the end of the story. I would like to go further as financial circumstances permit in the future. We cannot, however, broadly speaking, give a preference in the age relief in respect of investments as is sought by the Amendment.

Mr. Marlowe

If the Chancellor of the Exchequer will permit me to say so, that was a really departmental answer. What he is ally saying is that there is an ancient custom that the age relief and the earned income relief should march in step.

Mr. Dalton

It is more than that.

Mr. Marlowe

When that system was initiated, there was a sound principle for it. The situation has now changed because the people who are earning are able to earn more in many cases than they did before. The object of this Amendment is to meet the case of the unfortunate person who is not only unable to earn more by reason of age, but has also had his or her income reduced because of the heavier taxation. Various Bills, such as the Transport Bill, are going through the House. Such Bills are having a serious effect on the income of many people who are living on income from investments and are beyond the age of earning, or have no hope of earning. This Amendment would meet just those cases. I hope the Chancellor of the Exchequer will not think he is bound by that old precedent of the age relief and earned income relief marching together, and will realise that the time has come for an alteration.

Mr. Heathcoat Amory (Tiverton)

I support the Amendment. The Chancellor of the Exchequer, in his reply, has not done justice to the needs of this section of the community. If any section of the community is having a very difficult time at present, it is the old people. They are hit hard by the rising level of prices and they cannot do much about it. Other people can perhaps adjust their mode of living to the higher prices, but even if these old people are able to work, there is little place in the labour market for the over 65's. It is rather tragic that people who have made every effort to provide for their old age and to make sure that they do not become a burden to their relatives or the State should find themselves robbed of the results of their thrift. I hope the Chancellor of the Exchequer will reconsider this and see whether he cannot do something to afford a really deserved relief to a hard-pressed section of the community.

Mr. Baldwin

I rise to support the Amendment. There is no doubt that, in view of the decrease in value of the pound, a great deal of hardship has beep caused to people with a limited income They cannot earn extra money and have to live on a fixed income. Such people are being hard hit by the Transport Bill, which is reducing their income. This Amendment would give some assistance to them.

Amendment negatived.

Mr. I. J. Pitman (Bath)

I beg to move, in page 8, line 6, after "words," to insert: 'seven hundred and fifty pound were substituted for the words 'five hundred pounds,' the words. This Amendment does not go contrary to the point which the Chancellor of the Exchequer made in relation to the last Amendment, because in this the rate of the fraction remains the same. It is just that the ceiling after which the relief shall cease to operate shall he raised from £500 to £750. In this connection I think the Committee would like to understand a little more about the old age relief, and I will try to explain it, because the wording is apt to cause confusion.

Mr. Wadsworth

On a point of Order, Major Milner. Is not the sentence in which the words "five hundred pounds" appear an explanatory one? Is it in Order to discuss it?

The Chairman

Yes, I think it is in Order to discuss it.

Mr. Pitman

The point in question is that the relief which is given is to treat the income of old people as if it was earned income whether it is a pension income or an investment income. The ceiling for that is at present £500. The ceiling for earned income is £1,500. The figures are rather confusing, because we are not comparing like with like. For earned income the relief is one-sixth up to £250, which gives one £1,500 For old age relief it is one-sixth up to £83 6s. 8d., giving a total of £500. The basis for comparison is either £250 with £83 6s. 8d. or £1,500 with £500. Whereas these old people get the same fraction—I would like the Chancellor to bear that in mind—those who get their income from investments get only one-third of the relief, but if their income is from pensions they get the whole £1,500. That is one of the things which is particularly unfair about the present old age relief and about which I ask the Chancellor to make an amende for what I regard as past deficiencies in that respect.

7.0 p.m.

The right hon. Gentleman has told me in answer to a question that this would cost £3 million. I think there is some error and that that is more than he would find it to be, because we are only talking about one-sixth of what is probably a low rate of Income Tax—three shillings in the pound. We are only talking about 6d. in the pound. The relief is up to £500. After that, you go on taking that off your income. You begin to pay at first 3s., and then 6s., and finally 9s. in the pound. If I am wrong about that, I still think it would be a relief to people who have saved their money and put it away as a pension for their retirement. These people should be treated on the same footing as those who have come into some compulsory or voluntary contributory scheme and who get the money in regular pension form. There is this added anomaly which I would like the Committee to realise. If the money is taken in pension, the limit is £1,500. If it is taken as income from accumulated, personal investments, then it is only £500. We are asking, not that the Chancellor should go up to the whole £1,500, but only up to £750, which is half way to the £1,500.

Hon. Members may say that it is all very well to benefit people who have put their money away in their working life for their retirement, but that the Amendment would also benefit people who had inherited wealth of some kind, people between the £500 and £750 limits, and who could probably take care of themselves. On that point I would say this: do not let us assume that all money that is handed down is unearned. Take the case of a daughter who has looked after her father and mother for years, probably at a very great sacrifice to herself. She reaches old age with a legacy which her father and mother have left to her on their death. If anybody in the world has earned that money, it is that woman. There will be innumerable cases in this class in which the money has been earned and well earned, and is as much deserved as in the case of men who have put aside year by year sums of money which they have invested to serve as pension.

Finally, there is the double point which my hon. Friend the Member for Edgbaston (Sir P. Bennett) has made. First of all, the investments on which many of these people have relied for their future livelihood have had their income value reduced by nationalisation schemes and by the cheap money policy, which has hit that type of person particularly badly. Secondly, there is the undoubted fact that although this relief of £500 was worth something when it started—I think the Chancellor said the date was 1924—it is certainly not worth that amount now. For all those reasons, I ask the Chancellor to consider giving way on this point of benefiting a very worthy class of the British community.

Mr. Dalton

This, again, is not a proposal which one would wish in principle to repel. When particular improvements can be made is largely a question of priorities. This year it is not appropriate to make this concession. We have worked out the cost of it very carefully. I have had it carefully checked. It would cost £3 million in a full year and it would benefit a group of 70,000 people—rather a small number. I was surprised, when the figure was given to me, that the numbers were so small. That is on the average. This is a small group of people over a certain age between £500 and £750. It is a clearly but narrowly defined group between those income limits.

I do not think, now that I am being asked to give money away in various directions—I have already made two concessions this afternoon, and no doubt other demands will be coming—that this matter can stand very high. As I suggested on the last Amendment, it is not as though nothing was being done for these people. On the contrary; both last year and this year we have assisted them by the improvement in the earned income relief. They are not left without any assistance. The earned income relief was at first only one-tenth. We brought it up to one-eighth last year, and I am now bringing it up to one-sixth, without raising the ceiling of £500, it is true, for the age relief. Subject to that, we are certainly lifting it. In those circumstances it would be well to postpone this proposition until next year. When next year comes, we do not know what the conditions may be. I repeat that I do not refuse this as a matter of principle. I merely think that the particular moment is not expedient for making a further alleviation of £3 million a year to this group, in view of the many other claims that we have upon us at the present moment. I hope the hon. Gentleman will not press his Amendment and will let us think about it at a later date.

Mr. Assheton (City of London)

I was very glad to hear the Chancellor of the Exchequer say that he did not in any way suggest that this Amendment should not be accepted as a matter of principle, and that it is something which he is prepared to look at upon another occasion. It would clearly meet a need which is felt. My hon. Friends have already pointed out to the Committee the hardships from which the smaller income groups are now suffering. They include people who derive their income from investments. They are suffering from a pincer movement of cheaper money and nationalisation on the one hand, which reduces their income, and of higher taxation and higher prices, which make their burden much more severe, on the other The Amendment puts forward a suggestion to reduce the taxation. The Chancellor has told us that he has already done something to relieve the burden on this section of the community. There are 70,000 people in it. The Chancellor of the Exchequer said that that is not a great number, but I suggest that they are 70,000 of the worthiest citizens of the country. They are people who have, by saving in past years, managed to build up a small capital on which they are able to live in their later years, without in any way becoming a burden on the community. I am, therefore, glad to support the Amendment which my hon. Friend moved, and I am glad to hear that the Chancellor is not unfavourably disposed towards it in principle.

Sir P. Bennett

The Chancellor has twice suggested that he has made concessions, with the inference that the particular classes to which we have been referring are better off. I think that all these concessions mean is that they are less worse off than they would have been. What has happened to them? We all know about the Measures that have gone through, the change in values, and the increased cost of living. They are worse off year by year, in spite of the Chancellor's concessions, and I would not like it to go forth that the Chancellor, by these concessions, is doing something to make their lives easy, when all he has done has been to make their lives a little less hard. Their lives become harder as each year goes by, in the net result, and it is the net result that counts.

Amendment negatived.

7.15 p.m.

Mr. Osborne (Louth)

I beg to move, in page 8, line 6, to leave out "one-sixth," and to insert "one-half."

The Chancellor has just refused an appeal for £3 million. I am not asking for chickenfeed from him, but for a concession that will cost hundreds of millions of pounds. The Chancellor has claimed more than once, while I have been listening to him, that he is doing a bit each year—from one-tenth to one-eighth, and then to one-sixth. My complaint is that he does too little and does it too late. I suggest to the Committee that the earned income allowance should be increased to one-half, and the maximum relief should be increased from £250 to £500.

The problem before this country at the present time is one of getting more production. Almost every weekend, senior Members of the Government are making appeals to the working men of the country to increase production. They have large posters on the walls saying "We work or want." The Leader of the House said the other day that we must either export or die, and he made an appeal, saying that in the next six weeks output was vital. I feel that taxation is the greatest hindrance to production which there is in this country, and I ask the Chancellor to consider doing something bold and to take away this hindrance. The Chancellor is like Old Mother Hubbard, who was so careful to keep her accounts squared that her cupboard was bare. I would rather see the Chancellor's account unsquared and his cupboard full, and the only way to do that, in my opinion, is to give a greater incentive to the men who really do the work.

I can illustrate the effect of the Amendment by the case of a single man who, at the present time, is earning £300 a year. Under the Chancellor's proposals, he will be paying £36 15s. in tax. The one thing which the Chancellor and the Leader of the House want more and more is extra production. Supposing that man works harder, as we want him to do, and that he earns £500 a year. Under the Chancellor's proposals, he must pay £111 18s., so that, out of an extra earning of £200 a year, he has to pay £75 in extra tax. There are plenty of representatives of the trade unions on the Benches opposite. I challenge them to deny the fact that the average trade unionist will not put in extra work to earn an extra £200 a y ear if he has to pay £75 of it away in taxation. I wait for that to be denied. I say to the Chancellor that his old-fashioned, Victorian desire to balance his Budget is reacting upon production, and I would much rather see the whole of our accounts for two years unbalanced and production increased rather than go on in this miserable, half-starved way as we are doing at the present time.

Our present position is no advertisement for Socialism. I have just come back from America. Over there, taxation does not start at the same level as in this country; it is smaller in extent, and there is an incentive for men who will work. I put it to the Chancellor that he himself is the greatest hindrance to the achievement of the policy for which his colleagues are appealing. If he were to accept the Amendment, the man who is today earning £300 a year would pay little or no tax. If he worked harder and earned £500 a year, he would then pay £36 15s.; that is, he would pay £30 15s. more in tax out of his extra earnings of £200 a year. We are much more likely to get the output we need under that system than we are under the Chancellor's old-fashioned, Gladstonian taxation ideas. Somehow the economic pump has got to be primed. Men will not work because taxation takes so much of their earnings—

Mr. George Thomas (Cardiff, Central)

They are working. Does the hon. Member suggest that the working people are not pulling their weight at the present time?

Mr. Osborne

I do not suggest it; I know it. [HON. MEMBERS: "Oh."] If the hon. Member likes to go to the Minister of Labour and ask him whether the 35-hour working week asked for by the Railway Clerks' Union is a fair one or not, I will stand by the reply of the Minister. Socialist Members on the other side honestly believe that men would work harder for the State than for private enterprise. That is the very basis of Socialist philosophy, but experience has shown that they will not do so, and that we have to give them extra monetary rewards. We have to put the profit motive back into the working man's mind. We ought not to tax overtime, but encourage men to work overtime. Therefore, I plead very hard with the Chancellor to consider this case. I know he will not give way, but I do not think that even he would deny that the suggestions made about this Amendment are sound. May I make this last point? With this reduction in taxation, the right hon. Gentleman should appeal to his colleague the.President of the Board of Trade to stop the export drive in consumer goods at the present time, and leave the goods in the shops for men and women to buy. Unless we do so, we shall not get the production we need. At the present time, under the Chancellor's scheme of taxation, all that the working men and women are doing—and I invite hon. Members to deny this—is buying the only thing they can buy, and that is time off—half-a-day for this, and a day for that. The absenteeism figures—

Mr. G. Thomas

Look at the miners.

Mr. Osborne

We will look at them.

The Chairman

I hope the hon. Member will keep to the Amendment.

Mr. Osborne

I would like to repeat to the Chancellor that if he would reconsider his decision and increase the earned income allowance from one-sixth to one-half, and increase the maximum from £250 to £500, he would get an immense increase in output, which in my opinion would compensate for the adjustment in two years

Mr. Dalton

This is a completely wild and fantastic proposal. I cannot believe that any serious person on the Front Opposition Bench would give it support, nor even the most Bolshevik-minded members in any section. It would cost £350 million, and would, therefore, completely unbalance this year's Budget. The hon. Member for Louth (Mr. Osborne) said that he wanted the Budget unbalanced, but that was not the general judgment of the House. The criticism to which I was subjected when I budgeted for a prospective surplus of £270 million was that I ought to have made it a much higher figure, because some hon. and right hon. Gentlemen opposite said that a lot of this surplus was not genuine. I do not accept that, but I do not intend to go over the arguments now. This proposal would be the most inflationary folly that could be conceived—putting into circulation £350 million. I know the hon. Member has a very dim thought about how to get production, but the proposal is totally irresponsible finance, and is not the kind of thing to which the Government could give consideration for a moment. Never in the history of our national finance, from Gladstone—since he has been mentioned—down to myself, have we ever had an earned income relief of more than one-fifth. In the palmy prewar days it was one-fifth, with a ceiling of £300. I hope, despite the present position, to do rather better than that before we are through Today we have an earned income allowance of one-sixth, with a ceiling of £250. To suggest an allowance of one-half is completely mad and completely out of scale in the eyes of any prudent or reasonable person, and is based on the idea that nobody is producing very much now, which has already been repelled from this side of the Committee. Years later, when we have got over our difficulties, something of this sort might be looked at—

Mr. Osborne

The Chancellor says that my proposal is fantastic and that it is mad; yet his own Party, at their Conference, have advocated that the Budget should be unbalanced—

Mr. Dalton

No.

Mr. Osborne

—when necessary. Therefore, if I am mad I am in jolly bad company for once.

Mr. Dalton

I am sure the hon. Gentleman is in bad company, but he really must not misrepresent, I am sure quite innocently, what all thoughtful students on these Benches and in the Labour Party outside say, that we should aim at balancing the Budget, over a period of years. All sorts of other people who are not particularly political—economists, students of finance—accept that we should aim at balancing the Budget over a term of years, having a deficit in some years and a surplus in others, according to whether financial conditions justify one or the other; that we should budget for a deficit if there is a tendency towards deflation, and for a surplus if there is a tendency towards inflation. At the present time there is a tendency towards inflation. The point is often made from the benches opposite. That means that this is a good year for a good surplus, as I said in my Budget speech. There is an inflationary tendency at present, but we may well face a time when there will be a deflationary phase. Then we shall be looking about for all sorts of excellent reasons for putting more purchasing power into circulation. In such a time, although a jump from one-sixth to one-half would be too quick in relation to other sorts of tax adjustments, it would be a time when it would be quite proper to put more money into circulation by making reliefs in Income Tax, etc. This is not the time. I have gone some distance towards assisting Income Tax payers—particularly those who are hard pressed—in the way of earned income relief, child allowances, and dependent relatives' allowances. These are three points on which I thought that something could and should be done urgently. I have had to balance this with other tax adjustments which have been designed to hold the inflationary pressure in check by obtaining revenue from other sources. I say that this proposal is not only widely out of scale, but is quite lunatic in scope and erroneous in direction. I hope the hon. Member will wait until a better day.

Mr. Osborne

May I make this point again to the Chancellor? If he says that it is wise, over a period of years, to balance the Budget, to have a deficit in some years and a surplus in others, why, because it happens to be this year, is it proposed that we should have a surplus?

The Chairman

That really does not arise directly out of the Amendment.

Mr. Osborne

There is one other point I should like to make. The Chancellor, in reply to my suggestion, has made certain arguments which I think I am entitled to refute. He said that this proposal would release extra money for spending, and would be inflationary. The fallacy behind the Chancellor's argument is that he cannot conceive that we can get out of an inflationary spiral by increasing the goods and services available. All he thinks about is the monetary question. There is the other side, and I appeal to him to get rid of his old fashioned ideas and to look more at the production aspect.

Mr. Spence (Aberdeen and Kincardine, Central)

I ask the Chancellor what the Government intend to do, other than move along the lines indicated in this Amendment, to get out of the vicious circle in which we are at the moment. The problem is one of getting the economy of the country balanced. The first step required is to get consumer goods into the shops to stimulate production We cannot get that additional production without some stimulus. I suggest that in a reduction in P.A.Y.E. and an increase in the earned income allowance lies the first step to the required upward stride in the output per man and woman. We are faced with the great manpower crisis in industry. We want more men and women in industry. This Amendment would have the effect of encouraging married women to go back to work, whereas the Clause as it stands works in a contrary way. Take the case of a man earning £6 a week, whose wife thinks she will go back to work, and who earns £4. She finds that 30s. of the £4 goes in tax.

Mr. Dalton

The hon. Member will remember that in the Finance Act last year we provided, apart from all the other reliefs, a relief of £110 for married women engaged in industry? That was a relief over and above all the reliefs to which she was entitled by reason of her being a married woman, and having a joint assessment with her husband, earned income relief, etc.

Mr. Spence

Although that relief is £110, it does not relieve the whole weight. If this suggestion were accepted, it would help to get back into industry many people who will not return under present conditions. The Amendment would mean a cut in revenue, but it would also mean a cutting of the knot which is strangling production.

7.30 p.m.

Mr. Gerald Williams (Tonbridge)

I wish to express my amazement at the Chancellor's extravagant language about the lunacy of this Amendment. That must be some reflection on the Chair. This Amendment was put down in the ordinary way and it was selected by the Chair. I was also surprised that the Chancellor seemed to think that it is bad business to lose £350 million this year with a chance of making £500 million next year. He did not tell us whether he would make £500 million, but there is a very good chance. However, I would be satisfied if he met us half way and gave us a quarter instead of a half. Private enterprise will not work without an incentive and unless the Chancellor gives us the incentive, he will not get the production.

Mr. Assheton

Most hon. Members, and certainly all those on this side, are bound to have some sympathy with this Amendment. The Chancellor condemned it in very harsh terms. He used the phrase, "totally irresponsible, lunatic finance," which I shall find very convenient when we come to Clause 49. I think the Chancellor was unduly harsh. My hon. Friend the Member for Louth (Mr. Osborne) was expressing the yearning of all workers to pay less tax on what they earn. That is a very reasonable sentiment. We have all felt this extraordinarily oppressive taxation during the war years, and we hoped that when the war was over we would get much more substantial reliefs from taxation than we have been allowed so far. The Chancellor told us that this proposal would cost £350 million. In view of that, I must confess, that I do not feel myself in a position to support the Amendment in the Division Lobby. Nor would this be exactly the way in which I would distribute £350 million amongst the various classes of taxpayers, if there was £350 million to distribute. I hope the Committee will appreciate the very deep feeling of the people in the country about the high rate of taxation. I am sure that the Chancellor understands it. He was certainly going rather too far in trouncing the hon. Member for Louth in such harsh terms. I hope that next time the Chancellor makes reference to an Amendment proposed from this side, he will use rather more moderate language.

Amendment negatived.

Mr. Wadsworth

I beg to move, in page 8, line 20, to leave out "sixty," and to insert "seventy-five."

I hope that the Chancellor will deal more favourably with this Amendment, which will not cost the large amount of money mentioned on the last Amendment. I am appealing on behalf of a section of the community which we should encourage. No doubt the Chancellor has carefully watched the advance of the birth rate figures during the last two years. We should give encouragement in the form of taxation relief to young parents. I do not think it will be doubted that the cost of bringing up children makes life a little difficult for young parents Hon. Members who have children will know the price of shoes, clothes and the other things which are necessary for their welfare. Before the war, the relief for the first child was £60. Under this Bill a similar relief is proposed. I suggest that that is not sufficient in view of the cost of living. I do not know what amount of money is involved, but I am certain that we cannot do too much, on the one hand, to encourage the birth rate to increase and, on the other, to alleviate the problems and difficulties of young parents

Mr. Glenvil Hall

I am sorry, but I must ask the Committee to resist this Amendment. The £60 to which my right hon. Friend has now increased this allowance is the highest figure which has ever been granted. It makes the allowance equivalent to what it was before the war. That does not mean that in happier times some Chancellor of the Exchequer might not think it well worth while to increase the figure above £60 I only say that what my right hon Friend is doing in more difficult times than 1938–39 is to make the allowance equivalent to that which was given in the last prewar year. Also, we must remember that since that time family allowances have been instituted. It is our view that the increase of £10 this year, plus the fact that family allowances are now being paid, is not unreasonable.

Mr. Wadsworth

I hope it is realised that the family allowance is taken into consideration when taxing a man's income. Many people believe that the whole of the family allowance is tax free. That allowance is taxed.

Mr. Glenvil Hall

That is true It is also true that, although family allowances are subject to tax, in most working class households where there are a large number of children the man has to earn a fairly considerable sum before he begins to pay Income Tax at all. Therefore, in most working class households—and it is the working class household which I am sure my hon. Friend desires to help by this Amendment—the man gets the benefit of the family allowances and he does not, as some others do, pay tax upon them. The hon. Member asked what the cost would be. In a full year the cost would he approximately £15 million. That may not seem large, but it is a fairly considerable sum which my right hon. Friend at this juncture cannot afford to lose.

Amendment negatived.

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

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

I had an Amendment down to this Clause which presumably was not selected, and I therefore want to say a few words on the question of the earned income relief in support of the case for extending the range of the relief rather than for increasing the rate. An Amendment was discussed on the Budget Resolutions in exactly similar terms to the one which has not been selected, and I think it met with a great deal of support from all quarters of the House. It is particularly because of the manner in which the Chancellor dealt with that Amendment that I wish to remind the Financial Secretary of what was said on that occasion. The Chancellor said: 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."—[OFFICIAL REPORT, 23rd April, 1947; Vol. 436, c. 1094.] That was a definite indication that if the Chancellor felt it reasonable, presumably dealing with the earned income allowance, he would bring forward a suggestion. I am therefore rather disappointed that the Chancellor has not so far brought forward any an suggestion for improving the provisions he has made in the Finance Bill by giving up a very small proportion of taxation.

The argument in favour of extending the range of the earned income allowance rather than the rate is in two parts. The first one, which will of course appeal to the Chancellor in his capacity of collector of revenue, is that it is much less expensive. He himself said on a previous occasion that this small increase in the range would cost but £4 million, while the slight variation in the rate which he himself indicated he thought was preferable would cost £40 million. I was rather surprised when I heard the Chancellor of the Exchequer saying that he thought that a relief of taxation which would cost £40 million was preferable to one which would only cost £4 million, but he did say so, and the only point of difference on principle between us was whether it was better to deal with the rate or the range. I want to argue that there is a very strong case for extending the range, particularly in view of the fact that the Chancellor did not find it possible to make any alteration in the standard rate of tax this year.

7.45 p.m.

I do not think that either he or the Financial Secretary would disagree with the view that probably there could have been no finer incentive in the whole of the Budget than a reduction in the standard rate of tax. It would have had a psychological effect over the whole country which would have been far in excess of that of any one, two or three individually selected reliefs. He stated, however, that he found it impossible to afford the revenue which would have been required to make any substantial reduction in the standard rate of tax, and he also reminded the House at that time that there was a moral obligation on any Chancellor to increase the earned income allowance at the earliest possible moment, having regard to the circumstances in which the alterations were made by one of his predecessors. Everyone would agree that, having regard to what was said when the adverse alterations in this particular relief were brought into effect, there is no doubt that returning this relief must be a prior charge on any revenue which the Chancellor can forego.

The fact that he was not able to make any reduction in the rate does, I submit, make it even more important that he should make some gesture as to the desirability of extending the range over which taxation reliefs are given rather than the rates for particular classes. The particular range which I have in mind, the upper range of the carried income relief class, is a particularly important one for two reasons. The persons affected are persons who can probably bring forth a greater hardship claim than almost any other section of the community, and from the far more important point of view of the good of the community as a whole, they probably embrace a larger number of individuals who can indirectly affect the productive capacity of this country than any other range of taxation. Within the higher earned income relief groups are included the key men of our production drive. Their actual production with their own hands at a particular machine may not be directly noticeable, because in some cases they will not be working on machines, but their indirect effect through the leadership which they can give if they are encouraged will, in relation to the economic stability of this country, be second only to the lead which the Government can give. They are, I believe the most important group to whom we have to look today.

On a previous occasion I mentioned particular groups which covered not merely the managerial class in industry, but professors in universities; and just as the managerial class in productive industry are the people to whom we must look for immediate results, the professors, whether engaged in training the young or in research work, are the people to whom we must look for results in the years to come. This group would also embrace the higher range of civil servants, probably the most overworked class in this country today, and those particular ranges outside industry, in the educational field and in the civil service field, have probably felt the increased cost of living and of taxation more than any other group, because their remuneration has not been improved, as the cost of living has increased, to anything like the same extent. I do not think the Financial Secretary would disagree with that. They have increased costs to bear, but they have had nothing like the increases in income which have been received—and rightly received—by many other classes of the community. In fact, as a result of taxation, they have had definitely less. However, they have not only as great personal responsibility hut, from the point of view of the future of the country, they have possibly the greatest responsibility of anyone in the country outside the Government. I hope, in view of what the Chancellor said in dealing with this matter, both in the Bill and on the Budget Resolutions, that the Financial Secretary will be able to give some suggestion that at a later stage he will be able to introduce some relief.

This plea is not brought forward at the request of any pressure groups. It is brought forward because I honestly believe relief in this direction can have a finer effect in helping to get us through our economic crisis than relief in any other direction. In so far as my constituents are concerned, there is only one individual I know of who would be directly affected by this. I have not asked his advice about it, but I cannot believe that he would be prepared to come down to this Committee and say that it would make his work of less value to the country if he received rather better earned income relief. The only member of my constituency whom I happen to know personally who comes within this range is the Financial Secretary to the Treasury, and I think he would feel great diffidence in supporting my point of view because he might feel that he had to declare a personal interest in it. However, with his responsibility for looking after the whole of the Civil Service, of deputising on many occasions for the Chancellor, can he really say that he would not work 25 hours a day instead of 24, as he does now, if he had this extra little incentive added?

Mr. Glenvil Hall

The Committee has listened with great interest to the speech of the hon. Member for St. George's Division of Westminster (Mr. Howard). It is a theme which I know is very dear to his heart. On several occasions he has discussed the point which he has just put before us with such lucidity, and I am afraid he has given me a difficult task in replying, because it is a question of opinion as to whether one should widen the range or raise the percentage. Those in the lower ranges of income, of course, would much prefer to have the percentage as high as possible because it means greater relief for them. Those whose salaries run into the £1,500 to £2,000 ranges would, of course, prefer that the maximum allowance should be higher than it is sometimes, because it means that they do not get the full benefit of the higher percentage as some of them would like to do.

The highest that the percentage has ever been is one-fifth, I think, in 1931 when tax stood at 5s. in the £ and the maximum of the earned income relief was £300. My right hon. Friend is getting very near to what has been an "all-time high" to use an Americanism; that is; he is fixing it this year at £250 and the percentage at one-sixth. So as far as this year is concerned, he has gone some way to meeting the point of view put forward by the hon. Gentleman. When this relief began in 1920, it was one-tenth with a maximum of £200, and we have moved a long way from that—

Mr. Howard

The standard rate was not quite so high.

Mr. Glenvil Hall

The standard rate was not anything like as high, and one-tenth at that time with a maximum of £200 would mean relief on salaries up to £2,000. I admit straight away that the standard rate makes a difference, and when one bandies about these percentages and figures, one has to remember what the standard rate was in any year. All I will lo now is to content myself with reminding the Committee that my right hon. Friend has gone some way towards meeting the point of view put up by the hon. Gentleman and I, with him, live in hope that, as thy financial situation improves and other Budgets come along, my right hon. Friend may find himself able to do even better than he has done this year.

Clause ordered to stand part of the Bill.