HC Deb 19 June 1951 vol 489 cc270-84

In Rule 10 of the Rules applicable to Schedule E to the Income Tax Act, 1918, there shall be inserted at the end thereof the following words:—

"Provided also that the Treasury shall for the purposes of this Rule fix sums in respect of the maintenance of uniform of Officers of His Majesty's Forces not being less than the following:—

Royal Navy
£
Captains (or female officers of equivalent rank) and below 50
Flag Officers (or female officers of equivalent rank) 55

Brought up, and read the First time.

Mr. Profumo (Stratford)

I beg to move, "That the Clause be read a Second time."

This Clause seeks to increase that part of the pay of officers of His Majesty's Forces which is free from tax as an allowance in respect of the upkeep and maintenance of their uniforms. For the benefit of the Committee I would point out that the present allowance, in all cases, is £15 less than the figures which appear in the Clause. These figures have remained steady and constant for the last 33 years—ever since the date in 1918 when this concession was initiated.

I base my case on two main factors. The first is that the basic cost of clothing has risen since the war out of all comparison with the present allowances. The second is that Purchase Tax is now levied on all the articles concerned. They are two distinct factors and I should like to speak on both issues. It seems clear to me that the system is not at present operating as it was originally intended. Without wearying the Committee too much, I think it is germane—in fact it is essential that I should read Rule 10 of Schedule E to the Income Tax Act of 1918 on which the whole of this concession is based.

That Rule says: Where the Treasury are satisfied with respect to any class of persons in respect of any salary, fees or emoluments payable out of the public revenue that such persons are obliged to lay out and expend money wholly, exclusively, and necessarily in the performance of their duties in respect of which such salary, fees or emoluments are payable … And this is the point: … the Treasury may fix such sum, as in their opinion represents a fair equivalent of the average annual amount laid out and expended as aforesaid by persons in that class, and in charging the tax on the said salary, fees, or emoluments, there shall be deducted from the amount thereof the sums so fixed by the Treasury. It is quite clear that the intention was that no part of an officer's pay necessarily spent on uniform should be taxed in any way.

My first contention is that the present allowances fail adequately to cover the annual average amounts expended on uniform today. At first sight it may appear to hon. Members in all parts of the Committee that officers have to provide themselves with less uniform today than they used to have to provide when this concession was introduced or indeed at any time before the war. I would point out, against that, that one must remember the cogent factor that the quality of cloth and material today is in no manner similar to what it was before the war. Therefore, the wear and tear is of a more speedy nature that it used to be.

Over and above that, the real point I wish to make is that the basic prices, without taking into consideration Purchase Tax, have risen since the war by two or even three times. May I give just two examples? and then I will leave the technicalities of the case to my hon. and gallant Friends who know more about the details. The first example is that before the war the cost of a naval officer's greatcoat was £11 15s. 6d. Today, it is £29 17s. 6d. before Purchase Tax is added. Prices of Army and Royal Air Force uniforms are more or less equivalent. The cost of a Service jacket and trousers before the war was £9 16s. 6d. It seems scarcely credible, but that was the price. Today, the cost is £28 6s. without Purchase Tax.

Now what is the other side of the picture? Perhaps we had better go back to our 1918 principle, which was that no officer should be taxed on the maintenance or upkeep of his uniform. It seems to me entirely contrary to that principle that officers should now have to bear the pernicious imposition of Purchase Tax on their uniforms. In fact, I go further. I challenge the Financial Secretary to deny that this is an infringement of the law. I am sure there is no intention to break the law, but those are the facts. The Purchase Tax on a naval greatcoat is £7 10s. and on a Royal Air Force or Army Service jacket and trousers it is £6 12s. When we take into consideration that further factor, it means that the cost of uniform of all types has, since the war, gone up to four times what it was before, whereas the allowance has remained stable at what it was originally in 1918.

Can justice be said to have been done when other ranks in the Armed Forces are, quite rightly, issued free with battle-dress to replace that which they wear out. If they burn their uniform or spill acid on it, they may have to pay for replacements, but otherwise, after fair wear and tear, they are issued free with new battledress. But, for exactly the same article, officers have to pay the full price, plus Purchase Tax. I think that hon. Members will appreciate the force of that argument.

The attitude of the Government on the question of officers' uniform was announced by the predecessor of the present Minister of Defence in this House on 3rd November, 1948. He said: It has been agreed in principle that the State should in future meet the reasonable cost, including Purchase Tax, of officers' uniforms on commissioning"—[OFFICIAL REPORT, 3rd November, 1948; Vol. 457, c. 855.] It is surely a sine qua non, therefore, that the Government should take into consideration Purchase Tax when assessing allowances for the maintenance and upkeep of these uniforms.

I was a little surprised at Question time this afternoon when the Secretary of State for War, in reply to a Question from one of my hon. Friends, said that in assessing the allowances for the upkeep of officers' uniforms Purchase Tax was taken into consideration. I cannot believe that he had considered that statement very carefully. He made it in reply to a supplementary question, and I assume that if he had been advised he would not have made the statement, because it is contrary to the facts. Purchase Tax cannot possibly be included in the present allowance.

I should like to take the case a little further. As a result of the statement by the former Minister of Defence, the initial allowance to officers on commissioning was doubled in the case of the Royal Navy and the Army, and the allowance was increased to nearly double what it was previously in the case of the Royal Air Force, in spite of the fact that less uniform is now needed by officers in His Majesty's Forces. I submit that this is direct proof that the cost of providing and maintaining uniform on the present scale has risen so steeply since the war that the Government should alter the allowance.

5.0 p.m.

Either they must relieve officers of what I call the unlawful burden of Purchase Tax or, if that is impossible—and it may well be impossible, because I believe if we were to say that officers' uniforms should not attract Purchase Tax they might run into difficulties because some parts of the uniform could be used in other ways, and that might lead to a sort of "brown market"; but, if that is impossible, then as an alternative it is incumbent upon the Government to make a fair allowance to cover Purchase Tax.

I think I should mention the cost involved—I see that the hon. Gentleman opposite is turning over the pages to see whether I have the right figures. If we raise allowances by £15, which is the minimum that we suggest, the cost would not be very great. May I digress for a moment to explain to the Committee why we have put a minimum figure in the Clause? It is to maintain the existing bargaining power which the Service Ministries have year by year with the Treasury, so that if Purchase Tax is raised higher—which Heaven forbid, although one does not quite know what is in the minds of hon. Gentlemen opposite—or if prices rise the Service Ministries can bargain for an increase in the allowance without having to come to the House to have the law changed.

If we make the increase of £15, then at 9s. 6d. in the £ that would amount to £7 2s. 6d. per officer per year, which I calculate to be a sum of £550,000. I suggest that this should and could be regarded as a legitimate expense in connection with our re-armament programme. Viewed against the background of a Budget of £4,700 million, the majority of which we have been told time and again is in respect of our defence Forces, this sum of £550,000 is a meagre and puny figure indeed.

May I make a point which will impress itself upon hon. Members opposite? It is one about which I feel very strongly myself. Since the war hon. Members opposite have time and again advanced the argument that our Armed Forces must be democratic and that it must be possible for people who go into the Armed Forces to rise through the ranks to obtain their commission—to find a field marshal's baton somewhere in the barracks. They say it should be a citizen Army; and that is quite right. But as the law operates at the moment, that is not possible. A man is precluded from the right to a commission.

When other ranks consider whether they wish to become officers and to accept the responsibilities of an officer, one of the first things they ask themselves is, "What is it going to cost?" If they have to pay too much for their uniforms we shall find many cases in which men will refuse point blank to take on the responsibilities of an officer. I think that is a significant fact which the Committee ought to bear in mind.

I hope the Financial Secretary will see the force of the argument behind this Clause. In fact, I hope he will be able to accept the Clause but if, by any chance, I have raised issues which he has not appreciated before, then I hope he will regard them as sufficiently important to review the matter and to give to the Committee an undertaking that he will consider it before the Report stage.

Mr. John Tilney (Liverpool, Wavertree)

I shall detain the Committee for only a few minutes, but I want to speak very strongly in support of the Clause which has been moved by my hon. Friend the Member for Stratford (Mr. Profumo). He has told the Committee about Rule 10 of Schedule E of the Income Tax Act of 1918 and has backed it with the argument of what was said by a former Minister of Defence in the House in November. 1948. It is surely wrong that, in carrying out his job, any officer should be penalised through having to pay a tax on the uniform which he needs to perform his duties.

What happens in practice? An other rank now receives a clothing allowance of 1s. 3d. a week, which I calculate is £3 5s. a year, tax free, out of which he has to maintain his underclothing, his socks, his towels, and so on; but his battledress, his greatcoat, his boots—except in the case of repairs—are all maintained for him free of charge. If he loses any article, such as a battledress, he is able to replace it by purchase without any Purchase Tax being levied and to do so at the vocabulary rate, less 25 per cent.

How different is the case of the officer. The Financial Secretary may say that the officer gets a rebate on taxation. For instance, a captain of the Army gets up to £25 a year rebate, but in calculating the effect of that we have first of all to deduct one-fifth for earned income allowance. At 9s. 6d. in the £ the sum is then reduced to £9 10s., by comparison with £3 5s. for an other rank. An officer up to the rank of captain is only £6 5s. better off than an other rank, and with that extra money he has to buy many things. After his initial allowance he gets nothing free at all—and one must remember that many officers of a certain age in the Army have never had that substantial initial allowance.

Out of that £9 10s. the officer has to maintain all his equipment and clothing—much more than an other rank; and he has to do that at the vocabulary rate, plus 10 per cent. for Departmental expenses. Moreover, we have to add 33⅓ per cent. for Purchase Tax on most of those figures. I have here a list of various items which can be bought from the quartermaster's stores, with the price which an officer has to pay. These figures may interest the Committee: anklets, web (category CG0081)—3s. 11d. for an other rank against 7s. for an officer; berets, blue—4s. 6d. against 8s. 9d.; blouses, battledress—£1 9s. 3d. against £2 12s.; trousers, battledress—£1 8s. 7½d. against £2 11s. 4d.; drawers, woollen, long—10s. 10d. against 19s. 5d.; greatcoats, £3 3s. 2d. against £5 12s. 2d. In each case the article is identical.

I could go down the list so as to show that in each case the officer has to pay a much greater price for identically the same article—even down to towels, where the figures are 5s. against 8s. 4d. for the officer, at which figure I believe it is a thoroughly bad buy. Not only has the officer to buy all that equipment but in many units he is expected to have a Service dress, as my hon. Friend has already said. The Financial Secretary may argue that a Service dress is no longer essential, but at any rate a No. 1 dress is essential according to an A.C.I of two years ago.

I have here a letter from a young captain friend of mine who says he has had to buy his No. 1 dress. He had to go to his regimental tailor and he found that the best quality material cost £35 10s., plus £8 17s. 6d. Purchase Tax, and the second best quality material cost £33, plus £8 5s. Purchase Tax. He points out that had he been sent to a unit in Germany he could have taken advantage of the Board of Trade concession and need not have paid any Purchase Tax at all.

He says: My point is that because I have been posted to a unit stationed in the United Kingdom I am obliged to pay an £8 5s. fine. I should like very strongly to support by hon. Friend, and I hope that the Committee and the Financial Secretary will accept this new Clause.

Commander Noble (Chelsea)

My hon. Friends the Members for Stratford (Mr. Profumo) and Wavertree (Mr. Tilney) have covered the ground very fully, and I shall not detain the Committee for more than a minute or two; but there are one or two points I should like to make. I think my hon. Friend the Member for Stratford made quite clear what are the reasons why we propose this Clause—first, rising prices, and, second rising Purchase Tax.

Hon. Members in all parts of the Committee are fully aware of rising prices when they try to buy a new suit these days. Of course at the same time as the price of clothes goes up so does the Purchase Tax go up as a percentage of that price. I think it was my right hon. Friend the Member for Aldershot (Mr. Lyttelton) who said the other day that when Purchase Tax was first brought in it was to cut down consumption of articles in short supply but that now it had become a very profitable source of revenue for the Treasury. I am sure that there never was an occasion—there certainly is not now—when we wanted to cut down the consumption of uniforms because they were in short supply; and I am sure we should never want to raise more revenue out of Service uniforms.

There is another point that was raised by my hon. Friend the Member for Stratford, and it was mentioned at Questions today, and that is utility cloth. As far as I know there is not in any of the three Services a utility uniform, and, therefore, there is no type of uniform the purchasers of which have the benefit of buying free from Purchase Tax. I shall come back to that in a moment.

There is no doubt that these prices of uniforms bear very hardly on all three Services; and do not let us forget that officers have, at the same time as they pay high prices for uniforms, also to pay high prices for civilian clothes. Some examples of high prices have been quoted, and I should like to add one or two more examples from the Navy. Officers of the Royal Navy and the Reserves do not have to buy the same amount of uniform that they did before the war. As hon. Members know, the full dress and the frock coat are gone, and I must say I am a little sorry at that. However, naval officers have to wear what one may describe as their Service dress, that is, the monkey-jacket, on more occasions than the officers of the other Services.

My hon. Friend quoted the price of a naval officer's greatcoat. Let me quote also the prices of a monkey-jacket and trousers. I take the case of a lieutenant though, of course, the price of the article goes up with gold lace of rank. The cost used to be, before the war, £10 12s. 6d. and it is now £38 7s., including £7 10s. Purchase Tax. An evening mess jacket, waistcoat and trousers which is compulsory and, which used, before the war, to cost £11 12s. 6d. now cost £43 1s., including £8 9s. Purchase Tax. A little mental arithmetic by hon. Members will enable them to realise very soon that the tax free allowance goes in Purchase Tax alone.

There are three ways of helping these officers. First, by freeing uniforms and accessories from Purchase Tax. Second—which would not help them quite so much—to produce, not a utility uniform, but a utility price range, by which an assessment would be made of what utility uniforms would cost, and then to put Purchase Tax only on the amount costing above that price; and this would cut down Purchase Tax to be paid on uniforms. Third, of course, because I know that the Treasury are always rather reluctant to create privileged classes through exemption from tax, there is the very much better way, that of accepting this Clause, and, therefore, increasing tax free allowances.

5.15 p.m.

Mr. Bellenger (Bassetlaw)

It is rather difficult to ask the Treasury to accept Amendments or new Clauses which involve them in extra expenditure, but I do think that this Clause is worthy of my hon. Friend's consideration. The Officer, unlike the other rank, has to provide his uniform. It is true that he gets an initial allowance, but it is questionable, in my opinion, whether it is sufficient to fit him out properly for his duties.

The uniform allowance on which an officer gets tax rebate should really be considered, and I would suggest to my hon. Friend that, if he cannot accept this Clause in its present form, he should consult the Service Ministers to see what they think about it. I have reason to believe that they will urge strongly on him and on the Chancellor of the Exchequer that sympathetic consideration should be given to making additional allowances to officers. I hope that my hon. Friend will not reject the idea entirely.

Mr. Jay

My right hon. Friend the Member for Bassetlaw (Mr. Bellenger) and the other hon. Gentlemen who have spoken have argued the case on the ground that uniforms, including Purchase Tax, now cost a great deal more than they did when these allowances under Rule 10 were first fixed. I am not quite sure that hon. Members fully appreciate the relation between the working of Rule 9 and Rule 10 in this matter.

Rule 9, Schedule E, provides that any Income Tax payer may claim a deduction for any expense "wholly, exclusively and necessarily" incurred in the performance of his duties. What Rule 10 does is to enable the Treasury, where they are satisfied that members of any class of persons paid from public funds are obliged to spend money in that same way, according to that same definition—"wholly, exclusively and necessarily" in the performance of their duties—to fix a special sum which persons in that class are then entitled to claim as of right without making a specific claim, as the rest of us do when we have expended a particular figure, whatever it is.

The existence of these conventional scales under Rule 10 do not debar an officer, any more than any other taxpayer, from claiming under Rule 9 the actual figure he has spent, whatever it may be. It is possible for an officer, if he has spent a sum on uniform necessary in the performance of his duties, to make that claim; and, presumably, a great many of them do, in fact, do that, if they have a good claim. Therefore, I think the hardship is not, perhaps, as great as it appears.

Nevertheless, having listened to the debate, it does seem to me that there is a case against continuing these rather out of date or, at least, rather long-standing scales, if we are to have any scales at all, and I therefore propose to follow my right hon. Friend's suggestion, and consult with the Service Ministries on this subject to see whether any revision is necessary.

Surgeon Lieut.-Commander Bennett (Gosport and Fareham)

Could the hon. Gentleman say whether it is generally known in the Services that officers are allowed to claim on any higher scale than that laid down? I do not think it is known in the Navy.

Mr. Jay

I have no reason to believe that it is not, but if we consult Income Tax experts we find out these useful pieces of information.

Lieut.-Commander Gurney Braithwaite (Bristol, North-West)

I am sure that the Committee is gratified by the terms of the Financial Secretary's reply and by his revealing remarks on the subject of Rule 9, which escaped most of us during the time when we were wearing uniform. I rise only to ask the hon. Gentleman whether such concessions can be made retrospective.

There is one point in particular upon which the hon. Gentleman may be able to help. It concerns that section of the Clause which applies to uniforms of the Royal Navy. I do not know whether the hon. Gentleman is aware that at the end of this year the gold braid worn by Royal Navy Volunteer Reserves is to be altered, much to the regret of many of us. The "Wavy Navy" is to disappear, and officers on reserve will wear the straight stripes of the Royal Navy, and the alteration is bound to cause considerable expense.

The Parliamentary Secretary to the Admiralty said, in reply to a suppplementary question which I put to him, that as from 1st January, 1951, the new rig would have to worn by officers called up to do their drill. I am wondering whether that change, which will be an expensive one, can be brought within the ambit of Rule 9, which has just been revealed to us. If so, I think that would clarify the position of those officers who are contemplating the alteration of their uniforms. I am glad that he is going to examine the matter between now and the Report stage, and that we have been fortified by the intervention of the late Secretary of State for War. I hope that the whole matter may be cleared up by some further remarks from the Financial Secretary which will appear in HANSARD tomorrow morning.

Mr. Paget

When my hon. Friend is discussing this matter with the Service Departments, would he also discuss the question of the initial allowances for uniforms. That also has become obsolete, and when we have so many men getting commissions from the ranks, the fact that they have often to make an expenditure which they cannot afford is a very great hardship and liable to get a man into debt as soon as he becomes an officer. I hope that matter will be considered at the same time.

Brigadier Clarke (Portsmouth, West)

I am pleased that the Financial Secretary has agreed to look into this matter, because I raised it at Question time today and received no such assurance from the Secretary of State for War. I should have thought that the Secretary of State for War would have been the first person to assist Members on this side of the Committee to fight for the rights of the Services, instead of trying to obstruct them.

The fact that the Financial Secretary is on our side in this matter may help in the case which I raised with the Secretary of State for War a few years ago, when I was still a soldier. He was urged to give way and say that it was quite absurd that officers should be charged Purchase Tax on their battle dress. On that occasion, the Parliamentary Secretary chipped in to say that miners had to pay Purchase Tax on the clothes they wore when they go down the mines, and when the Secretary of State for War heard that he said that perhaps the officer should also be called upon to pay Purchase Tax. I would point out, however, that the miner does not wear his best suit when he goes down the mine.

Mr. Paget

On a point of order. Has Purchase Tax anything to do with this matter, Sir Charles?

The Deputy-Chairman

This Clause is concerned with officers' uniforms, but I think that literally it does include Purchase Tax.

Brigadier Clarke

The officer has to go on parade in a smart battle dress, and when he is fighting in Korea he may well have to go out on patrol and crawl on his stomach over land which has been fired and become black. He then has to spend something like £2 on renewing his battle dress the next morning at the quartermasters' store. I am sure that this country would never expect an officer on patrol to be charged £2 for the privilege of fighting for his country, because that is what it amounts to on the present scale of Purchase Tax.

The same applies to naval officers who wear their monkey-jackets a great deal more than Army officers wear their best uniforms. When a naval officer goes down in the engine room his uniform, which is very expensive, is liable to be spoiled. He has only to make one slip or to lean against some greasy article to ruin a perfectly good uniform. His uniform then has to be washed out, as he cannot afford to buy a new one, and he should not be expected to pay to serve his country when his country should be paying him a great deal more.

Lieut. - Commander Baldock (Harborough)

I am sure that the Committee will be gratified that the Financial Secretary is to look into these out-of-date allowances because "out-of-date" is exactly the expression that applies to them. These allowances seem to be based on an understanding that officers are still people with private means with which they can eke out their pay. The point which I particularly want to make is in relation to the reserve Forces because it is not only the question of the change of uniform in the case of the R.N.V.R. but also that the annual maintenance grant is very much scaled down in comparison with the maintenance grant for Regular officers.

I hope that when the Financial Secretary is looking into the matter of the Regular Forces he will also consider the Volunteer Forces who presumably have an equally important role to play in the defence of their country. The appearance of their uniform is just as vital to the morale of the men, who take their cue from the appearance of their officers, and as the volunteer officers have to put their hands in their pockets to a greater or less extent in order to carry out their job and prepare themselves for hostilities, they should be given a reasonable grant for the maintenance of their uniform. I hope that point will be borne in mind.

Surgeon Lieut.-Commander Bennett

There is only one matter to which I should like to draw the attention of the Financial Secretary since he has been so good as to undertake to consult with the heads of the Service Departments about this matter. Would he consider with the Admiralty introducing some scheme to help naval officers who have to spend all their time "dripping with gold lace?" Could not they arrange for some kind of utility range of gold lace or some other way of exempting this gold lace from Purchase Tax? Gold lace worn in almost every other instance is quite rightly regarded as a luxury, but in the Navy it is an essential part of an officer's uniform. Without the gold lace an officer is not an officer. I ask him to try to overcome this anomaly whereby something which is normally regarded as a luxury has in this single instance become a necessity.

Wing Commander Hulbert (Stockport, North)

While the Committee is grateful to the Financial Secretary—and I assure him that all officers and women officers of the Auxiliary Services will be even more grateful—would he, before he considers what he is going to do on the Report stage—

Mr. Jay

Perhaps I should make it clear that I did not say that this was a matter which would be dealt with on the Report stage. This is a matter which does not have to be included in the Finance Bill. The Treasury can lay down these figures whenever it reaches an agreement.

Wing Commander Hulbert

Then before the Financial Secretary considers it, will he ask his colleagues, the Service Ministers, to announce in orders the provisions of Rule 9?

5.30 p.m.

Mr. D. Marshall

There is only one point I wish to put to the Financial Secretary. While warmly welcoming the attitude he has adopted, I am rather surprised that after six years of power and following a good deal of discussion in other years on this question of Purchase Tax and tax allowance the Treasury now say that Rule 9 does apply as well as Rule 10. If on reflection the hon. Members refers to the arguments put to different Chancellors of the Exchequer, perhaps he will take into consideration the point which he has now made and see whether the question of being able to go back over and above six years could be made possible.

Mr. Profumo

I should like to say "Thank you" to the Financial Secretary for the careful way he has listened to us and the conclusion which he has come to, namely, that this is worth looking into. When he is discussing this with the people concerned could he make it perfectly clear to all people serving in the Armed Forces that they are entitled to ask for a larger amount in respect of uniform, because I am sure that they do not know it. In view of the fact that he has promised to look into the matter, and in the hope that he will do so before the Report stage, I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.