Clause 2.—;(ALTERATIONS IN PERSONAL RELIEFS.)

HC Deb 27 April 1955 vol 540 cc984-1035

Mr. Roy Jenkins

I beg to move, in page 2, line 31, at the end to insert: Provided that this subsection shall not apply to a claimant who is chargeable in the year of assessment to income tax at any rate higher than the standard rate. The effect of the Amendment would be to exclude from the benefits of the increased single or married allowances those who are within the Surtax rate. They would continue to enjoy the increased child allowance, but a single man would not get the increase from£110 to£140 under the single person's allowance, and a married man without children would not get the increase from£190 to£240 in the married man's allowance.

I have no doubt that this Amendment will be described, in the words of the Chancellor's famous interjection of last Thursday, as the "most blatant class-war stuff." It is not that, and perhaps I may begin by explaining why, for two reasons, it is not that. We had another Amendment down on the Order Paper which, under the very restrictive terms of the Budget Resolution, was not in order, but which will, no doubt, have attracted the attention of some hon. Members of the Committee. That Amendment proposed increasing the child allowance, not to the£100 at which the Chancellor puts it, but to£120, and the Amendment would have applied to Surtax payers as well as to the whole range of other Income Tax payers.

The result was two Amendments, this Amendment which I am now moving and the one which was on the Order Paper, but which we are not able to discuss today. Had the two Amendments been taken together, their result would have been that anyone who had more than two children would have been better off under our suggested arrangement than under the Chancellor's Budget proposals. To that extent, our proposals were in line with the broad recommendations of the Royal Commission on Taxation.

We wish to improve the position of the man with family responsibilities, whether he be in the Surtax range or not. We also take the view that, if one says that the Surtax man with a substantial number of children should get an improvement in his allowance, that improvement should be given, not at the expense of people much less well off than himself, but at the expense of single or married Surtax payers without children.

In other words, there should be a sort of redistribution within the same range of income, but any improvement in the position of the Surtax payer with a number of children should not be brought about at the expense of people, either with or without children, who are a great deal worse off than he.

Had that been done, the position of Surtax payers would, as I say, have been somewhat improved. It is our view that that should be done by a redistribution within an income group and not at the expense of people very much worse off who will be paying 1s. a week extra in National Insurance contributions as part of the genera] financial arrangements of this Finance Bill.

There is a second reason—there is no class-war stuff about this Amendment—which is that, if it were accepted, the Surtax payer, particularly the very big one, would still be very much better off under this Budget than he was before. It would merely, to some smaller extent, moderate the rate of improvement which he would receive as a result of the cut in the standard rate of Income Tax which, of course, will go on independently of this Amendment, and which by its nature benefits far more those in the upper ranges than those in the lower ranges.

Therefore, the effect of the Amendment is not to penalise the Surtax payer as compared with other groups of taxpayers, but somewhat to moderate the extent of the advantage which he will get. I will illustrate this point by giving a few examples. Let us take, first, the case of a single man with an earned income of£2,500 a year. As far as I can see from the tables with which we have been provided, under the Finance Bill as it stands at present such an individual would be about£39 a year better off. If our Amendment were carried, he would still be about£24 a year better off, and would still get twelve times as much out of the Budget as would the average single wage earner. I am giving the illustration on the basis of single individuals earning the average wage over the whole country.

As another example, let us take a married man with no children with an earned income of£4,000 a year. Under the present arrangement, he would be£77 better off and under our arrangement he would be£45 better off—still 10 times better off than the comparable married average wage earner. Again, take the example of a married man with no children earning£10,000 a year. I am taking the example of a man with no children because if there were children he would, under the provisions of our other Amendment to which I have referred, gain a compensating benefit. Such a man would be£229 better off under the Finance Bill as it stands, whereas, under our Amendment, he would be£89 better off, still getting 40 times as much benefit out of the Budget as the average wage earner.

My last example is that of a married man with no children, with an income of£50,000 a year, and here, instead of taking it as earned income, I have taken it as unearned. That may strike some hon. Members as unreasonable, but, of course, it is a fact that the tables in the Report of the Commissioners of Inland Revenue make it clear that the higher up the income scale one goes, the greater the chance that income will be unearned, the reason being that when one gets into the really high figures the unearned proportion becomes very large indeed.

Perhaps I might also say in parenthesis that when we on this side of the Committee talk about examples of people receiving incomes of£50,000 a year or whatever may be a high income, hon. Members opposite always take the view that these are very unrealistic examples which one should not talk about at all. But when hon. Members opposite wish to talk about the crippling, disincentive effects of direct taxation they always talk about the combined rate of Income Tax and Surtax at 18s. 6d. in the£as though this were the sum that everyone paid on an income of over£2,000 a year. Therefore, it is not unreasonable for us, in one out of four examples, to refer to the people who actually pay the rate of tax about which hon. Members opposite are always talking.

To revert to the details of the examples of a married man without any children having an unearned income of£50,000 a year, as the Bill stands he gets an advantage of£1,240, whereas under our Amendment he would get an advantage of£1,190. In other words, he would still be getting 240 times more than the average wage earner is getting out of the Budget. So I say that this Amendment of ours, although moderating the extension of the advantages which Surtax payers who are single or who are married without any children will get, is not a vindictive Amendment, because it still leaves them very substantial remissions of taxation.

We are frequently asked to consider the plight of the really big Surtax payer. As I hear remarks of that sort, I always think that there is one worse fate than being a really big Surtax payer and that is not being a really big Surtax payer. The Committee should bear that in mind in considering the economic burdens which these people, with whom we are all extremely sympathetic, have to pay. I think it should be recollected—and I very much doubt whether the Treasury Bench would seriously deny this—when talking of people with big unearned incomes necessarily flowing from the possession of large sums of capital, that there are opportunities to those people which are not available either to those with big incomes and no capital or to those with small incomes and very limited capital, to make capital gains which do not attract tax at all. From that point of view they are better off than the generality of individuals, and that should be borne in mind in discussing the remissions to which they are entitled and which they will get out of this Finance Bill.

This is not, I repeat, a vindictive Amendment, but it is designed to express our sense of the excessive nature of the concessions which have been given to a limited number of individuals under this Finance Bill, not because we do not wish the concessions to be made, but because we believe that there is a whole range of claims affecting individuals through indirect taxation which should have been met to as great an extent as possible before the Chancellor went out of his way to give these very large remissions of taxation to a very limited number of people who are by no means in the greatest need of such remissions.

5.45 p.m.

Mr. H. Brooke

This Amendment is a shortened version of one that was on the Order Paper up till yesterday, and it certainly is an improvement because the longer version contains some additional words which, as I understand them, would have excluded the Surtax payer from the benefit even of the existing personal allowances. That would have been out of order, and I understand that that is not what the hon. Member for Stechford (Mr. Roy Jenkins) is desirous of incorporating in the Bill.

The hon. Member has most skilfully combined the Amendment which he is now moving with certain other Amendments on the Order Paper which he was not able to move, and he will appreciate that all I can do is to point out the effects of the Amendment as it stands. It is hard for me to give any calculations to the Committee to show what this Amendment might do if certain other Amendments, which we are debarred from discussing, were to be incorporated in the Bill. I must admit that I have found it hard to follow some of the figures which he gave, and I was not quite sure to what extent they were founded on this Amendment alone or this Amendment in conjunction with other Amendments which are out of order.

Mr. Roy Jenkins

It may not make the figures any easier to follow, but I must say they were founded solely on this Amendment. I applied them only to single persons and married persons with no children because I had the other Amendment in mind, but it made no difference to the figures as such, which were solely founded on this Amendment.

Mr. Brooke

The hon. Member and I are in agreement that in this matter it is better to talk in terms of a single person or a childless couple. We shall only complicate the discussion if we bring in the children, because of the rates of child allowance.

What I must put to the Committee once again is that the proposal in subsection (3) has always been linked in the mind of my right hon. Friend with the proposal in the Bill to reduce the lowest band from£100 to£60. I think I can only make clear the case which my right hon. Friend is desirous that the Committee should grasp by stressing that he has been working to find a means of fulfilling the recommendation of the Royal Commission on Taxation that large numbers of people paying small amounts of tax with quite small incomes should, if possible, be relieved from tax altogether and should be relieved in such a way that the relief extended to them should not spread up through all the higher levels of income.

The Royal Commission made one suggestion that would have involved certain administrative difficulties, and my right hon. Friend has presented to the House another device. That device is to bring into force these increased personal allowances of£20 for the single man and£30 for the married couple, but to stop the benefit of that from going right through the higher incomes by reducing the band chargeable at the lowest rate.

I want to show to the Committee how, in effect, he has combined those two in such a way—I am not at all sure that the hon. Member has appreciated this—as to ensure that anybody who is paying tax at the standard rate on part of his income—and that, of course, includes all Surtax payers—will derive no perceptible benefit from these two changes taken in conjunction.

Subsection (3) will give the following advantages to Surtax payers. To the single man it will give an advantage of tax at the rate of 8s. 6d. in the£on£20, that is to say, a total of£8 10s.; to the married couple it will give an advantage of£12 15s., that is to say, 8s. 6d. in the£on£30. That is the whole amount that any Surtax payer will gain. But we now have to look—I have stressed that the two are linked together—at the effect on the higher income levels of the provision whereby the lowest of the reduced rate bands is cut down from£100 to£60, because that, in effect, claws back from the Surtax payer any addition which he would gain from subsection (3).

If the Committee will study it, they will find that the contraction of the smallest of the reduced rate bands by£40 means that, under this Budget, the Surtax payer will on£40 be paying tax at 8s. 6d. in the£instead of at 2s. 3d. in the£. That is to say, he will be paying additional tax on£40 at the rate of 6s. 3d. That will work out at£12 10s.

Now we go back to the figures I have just mentioned. The married couple will have received a total benefit of£12 15s. from the increased personal allowances, and£12 10s. of that—all except 5s.—is clawed back by the provision on page 3. The single man is less fortunate. He will have gained£8 10s. from the increased personal allowance, but he will have no less than£12 10s. clawed back, so that he will be£4 worse off as the combined result of this operation.

Mr. Hale

I may be wrong, and I apologise if I am, but the hon. Gentleman is talking as if all this applies to the Surtax payer only. The Amendment of my hon. Friend the Member for Stechford (Mr. Roy Jenkins) applies to the Surtax payer only. Surely the clawing back applies to everybody earning£1,000 or less?

Mr. Brooke

Yes. I am sorry if I confused things for the hon. Member for Oldham, West (Mr. Hale), but I was addressing myself to the Amendment which is confined to the Surtax payer. I thought I had indicated in passing in the earlier part of my speech that this would apply to anybody who was paying tax on a sufficient slice of his income at the standard rate.

Mr. Jay

I congratulate the Financial Secretary on remembering all the figures, but can he tell us what is the point of having this most ingenious device to prevent the Surtax payer gaining from part of the change, and then superimposing on the whole thing a reduction in the standard rate which gives it back to him again?

Mr. Brooke

We have discussed the reduction in the standard rate on Clause 1, which we have now passed. Here, we are examining personal allowances. What we are studying is the particular method that has been chosen by my right hon. Friend, which I submit is a wiser method than the Royal Commission recommended, to carry out a recommendation which, I should have thought, would have commended itself to both sides of the Committee.

It really is not reasonable to split up Clause 2 in such a way as to say that one can take subsection (3) separately from subsection (7), and so forth, when, in fact, they have been specifically designed to go together. I hope, therefore, that I have convinced the Committee that subsection (3) is not here to give something extra away to the Surtax payer, but is really part of a skilfully designed piece of machinery to ensure that those people who have the benefit of higher incomes do not derive any gain from the advantage given in subsection (3) to the small taxpayers.

Mr. Gaitskell

I must say that I did not think the Financial Secretary met my hon. Friend's arguments at all adequately. What we are trying to do in this Amendment is to modify what we regard as a very unfair distribution of tax remissions in this Budget, and we are proposing therefore, within the very narrow limits set by the rules of order, to take away from the Surtax payers the gain that they otherwise would have from the increased personal allowances.

Frankly, I do not think it is an adequate answer to my hon. Friend to refer to this very intricate affair of the narrowing of the band from£100 to£60 and the reason that was done. It does not meet our point at all. The fact remains that out of this Budget as it now stands, the Surtax payers do extraordinarily well.

I would ask hon. Members to look at the table on column 740 of yesterday's OFFICIAL REPORT. I do not apologise for quoting these figures because they are very remarkable. It will be seen that as a result of these Income Tax changes, 8,350,000 people get£19 million in tax remission—somewhat less than 1s. a week—whereas 325,000 Surtax payers, with incomes of£2,000 and over, get£25 million—about 30s. a week. In other words, they each of them get thirty times as much as the vastly greater number of taxpayers on incomes of£10 a week or rather less.

Indeed, if one has any doubts about this general argument, I suggest one turns to the table set out in the written answers to Questions on columns 41 and 42 of yesterday's OFFICIAL REPORT, which shows in the clearest possible way the enormously greater advantages which,

under the three Budgets in which the Income Tax was changed, have gone once again to the wealthier people. The maximum amounts which persons at different levels of incomes have obtained in these three Budgets are as follows: The married couple with two children on£500 a year have an advantage of£130 in total. That is the gain they have from these three Budgets. The£5,000 a year man has a gain of£285; the£10,000 a year man has a gain of£535; and the£20,000 a year man has a gain of£1,350.

The Financial Secretary the other day produced some interesting percentage figures. I suggest that the percentage effect on the net income of the taxpayer is something which is extremely important because that indicates just how much better off he is in percentage terms as a result of these Budgets. It will be seen that the wealthiest person in this table—the£20,000 a year man—as a result of these three Budgets had an increase of about 25 per cent. in his net income; the£10,000 a year man a gain of about 15 per cent. of his net income; the£5,000 a year man a gain of about 11 per cent.; and the£500 a year man only 2½per cent.

All these are only alternative ways of showing the same essential, which is that as a result of the right hon. Gentleman's policies the wealthier section of the population have come off overwhelmingly best. This Amendment is a modest attempt to do something at this late stage to modify the latest of the right hon. Gentleman's proposals. I am extremely sorry that the Financial Secretary is unable to make us any kind of concession to help us or to give any adequate reply. In the circumstances, I suggest to my hon. Friends that we should divide the Committee.

Question put, That those words be there inserted:—

The Committee divided: Ayes, 208, Noes, 236.

Division No. 61.]	AYES	[5.59 p.m.
Albu, A. H.	Blenkinsop, A.	Callaghan, L. J.
Allen, Arthur (Bosworth)	Blyton, W. R.	Champion, A. J.
Anderson, Frank (Whitehaven)	Boardman, H.	Chapman, W. D.
Attlee, Rt. Hon. C. R.	Bottomley, Rt. Hon. A. G.	Chetwynd, G. R.
Awbery, S. S.	Bowden, H. W.	Clunie, J
Bacon, Miss Alice	Braddook, Mrs, Elizabeth	Coldrick, W.
Barnes, Rt. Hon. A. J.	Brockway, A. F.	Collick, P. H.
Bartley, P.	Brook, Dryden (Halifax)	Collins, V. J.
Bellenger, Rt. Hon. F. J.	Broughton, Dr. A. D. D.	Corbet, Mrs. Freda
Benn, Hon. Wedgwood	Brown, Rt. Hon. George (Belper)	Cove, W. G.
Benson, G.	Brown, Thomas (Ince)	Craddock, George (Bradford, S.)
Bevan, Rt. Hon. A. (Ebbw Vale)	Burke, W. A.	Crosland, C. A. R.
Blackburn, F.	Butler, Herbert (Hackney, S.)	Cullen, Mrs. A.
Dalton, Rt. Hon. H.	Jones, Jack (Rotherham)	Robinson, Kenneth (St. Pancras, N.)
Davies, Ernest (Enfield, E.)	Jones, James (Wrexham)	Rogers, George (Kensington, N.)
Delargy, H. J.	Jones, T. W. (Merioneth)	Ross, William
Dodds, N. N.	Kenyon, C.	Shackleton, E. A. A.
Driberg, T. E. N.	Key, Rt. Hon. C. W.	Shinwell, Rt. Hon. E.
Ede, Rt. Hon. J. C.	King, Dr. H. M.	Short, E. W.
Edwards, Rt. Hon. John (Brighouse)	Kinley, J.	Silverman, Julius (Erdington)
Edwards, Rt. Hon. Ness (Caerphilly)	Lee, Frederick (Newton)	Silverman, Sydney (Nelson)
Edwards, W. J. (Stepney)	Lee, Miss Jennie (Cannock)	Simmons, C. J. (Brierley Hill)
Evans, Albert (Islington, S. W.)	Lewis, Arthur	Skeffington, A. M.
Evans, Edward (Lowestoft)	MacColl, J. E.	Slater, Mrs. H. (Stoke-on-Trent)
Fernyhough, E.	McGhee, H. G.	Slater, J. (Durham, Sedgefield)
Fienburgh, W.	McInnes, J.	Smith, Ellis (Stoke, S.)
Finch, H. J.	McKay, John (Wallsend)	Smith, Norman (Nottingham, S.)
Fletcher, Eric (Islington, E.)	McLeavy, F.	Snow, J. W.
Follick, M.	MacPherson, Malcolm (Stirling)	Sorensen, R. W.
Foot, M. M.	Mallalieu, J. P. W. (Huddersfd, E.)	Soskice, Rt. Hon. Sir Frank
Forman, J. C.	Mann, Mrs. Jean	Steele, T.
Fraser, Thomas (Hamilton)	Manuel, A. C.	Stewart, Michael (Fulham, E.)
Freeman, Peter (Newport)	Marquand, Rt. Hon. H. A.	Stokes, Rt. Hon. R. R.
Gaitskell, Rt. Hon. H. T. N.	Mellish, R. J.	Strachey, Rt. Hon. J.
Gibson, C. W.	Mitchison, G. R.	Stross, Dr. Barnett
Glanville, James	Monslow, W.	Summerskill, Rt. Hon. E.
Gooch, E. G.	Moody, A. S.	Swingler, S. T.
Gordon Walker, Rt. Hon. P. C.	Morgan, Dr. H. B. W.	Sylvester, G. O.
Grenfell, Rt. Hon. D. R.	Morris, Percy (Swansea, W.)	Taylor, John (West Lothian)
Grey, C. F.	Morrison, Rt.Hn.Herbert (Lewis'm,S.)	Thomas, Ivor Owen (Wrekin)
Griffiths, David (Rother Valley)	Mort, D. L.	Turner-Samuels, M.
Griffiths, Rt. Hon. James (Llanelly)	Moyle, A.	Ungoed-Thomas, Sir Lynn
Hale, Leslie	Mulley, F. W.	Usborne, H. C.
Hall, John T. (Gateshead, W.)	Murray, J. D.	Viant, S. P.
Hamilton, W. W.	Oliver, G. H.	Warbey, W. N.
Hardy, E. A.	Orbach, M.	Watkins, T. E.
Hargreaves, A.	Oswald, T.	Webb, Rt. Hon. M. (Bradford, C.)
Harrison, J. (Nottingham, E.)	Owen, W. J.	Weitzman, D.
Hastings, S.	Paling, Rt. Hon. W. (Dearne Valley)	Wells, Percy (Faversham)
Hayman, F. H.	Paling, Will T. (Dewsbury)	Wells, William (Walsall)
Healey, Denis (Leeds, S.E.)	Palmer, A. M. F.	West, D. G.
Henderson, Rt. Hn. A. (Rwly Regis)	Pannell, Charles	Wheeldon, W. E.
Herbison, Miss M.	Pargiter, G. A.	White, Henry (Derbyshire, N.E.)
Hobson, C. R.	Parker, J.	Whiteley, Rt. Hon. W.
Holman, P.	Parkin, B. T.	Wigg, George
Holmes, Horace	Paton, J.	Williams, Rev. Llywelyn (Ab'tillery)
Houghton, Douglas	Pearson, A.	Williams, Ronald (Wigan)
Hudson, James (Ealing N.)	Peart, T. F.	Williams, Rt. Hon. T. (Don Valley)
Hughes, Emrys (S. Ayrshire)	Plummer, Sir Leslie	Williams, W. R. (Droylsden)
Hughes, Hector (Aberdeen, N.)	Popplewell, E.	Willis, E. G.
Hynd, H. (Accrington)	Price, J. T. (Westhoughton)	Wilson, Rt. Hon. Harold (Huyton)
Hynd, J. B. (Attercliffe)	Price, Philips (Gloucestershire, W.)	Winterbottom, Ian (Nottingham, C.)
Irving, W. J. (Wood Green)	Probert, A. R.	Winterbottom, Richard (Brightside)
Isaacs, Rt. Hon. G. A.	Proctor, W. T.	Woodburn, Rt. Hon. A.
Janner, B.	Pryde, D. J.	Yates, V. F.
Jay, Rt. Hon. D. P. T.	Rankin, John	Younger, Rt. Hon. K.
Jeger, George (Goole)	Reeves, J.
Jenkins, Roy (Stechford)	Reid, Thomas (Swindon)	TELLERS FOR THE AYES:
Johnson, James (Rugby)	Reid, William (Camlachie)	Mr. Wallace and
Jones, Rt. Hon. A. Creech	Rhodes, H.	Mr. Wilkins.
Jones, David (Hartlepool)	Roberts, Goronwy (Caernarvon)
NOES
Aitken, W. T.	Black, C. W.	Cooper, Sqn. Ldr. Albert
Alport, C. J. M.	Boothby, Sir Robert	Cooper-Key, E. M.
Amery, Julian (Preston, N.)	Bowen, E. R.	Craddock, Beresford (Spelthorne)
Amory, Rt. Hon. Heathcoat (Tiverton)	Boyle, Sir Edward	Crookshank, Capt. Rt. Hn. H. F. C.
Arbuthnot, John	Braine, B. R.	Crosthwaite-Eyre, Col. O. E.
Armstrong, C. W.	Braithwaite, Sir Albert (Harrow, W.)	Crouch, R. F.
Ashton, H. (Chelmsford)	Braithwaite, Sir Gurney	Darling, Sir William (Edinburgh, S.)
Assheton, Rt. Hn. R. (Blackburn,W.)	Bromley-Davenport, Lt.-Col. W. H.	Davidson, Viscountess
Baldock, Lt.-Cmdr. J. M.	Brooke, Henry (Hampstead)	Deedes, W. F.
Baldwin, A. E.	Browne, Jack (Govan)	Dodds-Parker A. D.
Banks, Col. C.	Buchan-Hepburn, Rt. Hon. P. G. T.	Donaldson, Cmdr. C. E. McA.
Barber, Anthony	Bullard, D. G.	Donner, Sir P. W.
Barlow, Sir John	Bullus, Wing Commander E. E.	Drayson, G. B.
Baxter, Sir Beverley	Burden, F. F. A.	Duncan, Capt. J. A. L.
Beach, Maj. Hicks	Butcher, Sir Herbert	Duthie, W. S.
Bell, Philip (Bolton, E.)	Butler, Rt. Hn. R. A. (Saffron Walden)	Eden, J. B. (Bournemouth, West)
Bell, Ronald (Bucks, S.)	Carr, Robert	Elliott, Rt. Hon. W. E.
Bennett, F. M. (Reading, N.)	Cary, Sir Robert	Errington, Sir Eric
Bennett, Sir William (Woodside)	Channon, H.	Fell A.
Bevins, J. R. (Toxteth)	Clarke, Col. Sir Ralph (E. Grinstead)	Finlay, Graeme
Birch, Rt. Hon. Nigel	Cole, Norman	Fisher, Nigel
Bishop, F. P.	Colegate, Sir Arthur	Fletcher-Cooke, C.

Fort, R.	Linstead, Sir H. N.	Remnant, Hon. P.
Foster, John	Llewellyn, D. T.	Renton, D. L. M.
Fraser, Hon. Hugh (Stone)	Lloyd, Maj. Sir Guy (Renfrew, E.)	Roberts, Peter (Heeley)
Fraser, Sir Ian (M'cmbe & Lonsdale)	Lloyd-George, Maj. Rt. Hon. G.	Robertson, Sir David
Galbraith, T. C. D. (Hillhead)	Lockwood, Lt.-Col. J. C.	Robinson, Sir Roland (Blackpool, S.)
Garner-Evans, E, H.	Longden, Gilbert	Robson-Brown, W.
Glover, D.	Low, Rt. Hon. A. R. W.	Rodgers, John (Sevenoaks)
Gomme-Duncan, Col. A.	Lucas, Sir Jooelyn (Portsmouth, S.)	Roper, Sir Harold
Gough, C. F. H.	Lucas, P. B. (Brentford)	Ropner, Col. Sir Leonard
Gower, H. R.	Lucas-Tooth, Sir Hugh	Russell, R. S.
Graham, Sir Fergus	McCorquodale, Rt. Hon. M. S.	Ryder, Capt. R. E. D.
Gresham Cooke, R.	McKibbin, A. J.	Savory, Prof. Sir Douglas
Grimston, Hon. John (St. Albans)	Mackie, J. H. (Galloway)	Schofield, Lt.-Col. W.
Grimston, Sir Robert (Westbury)	Maclay, Rt. Hon. John	Scott-Miller, Cmdr. R.
Hall, John (Wycombe)	McLean, Neil (Inverness)	Sharples, Maj. R. C.
Harris, Reader (Heston)	Macpherson, Niall (Dumfries)	Shepherd, William
Harrison, Col. J. H. (Eye)	Maitland, Cdr. J. F. W. (Horncastle)	Smithers, Peter (Winchester)
Harvey, Air Cdre. A. V. (Macclesfd)	Maitland, Patrick (Lanark)	Smyth, Brig, J. C. (Norwood)
Heald, Rt. Hon. Sir Lionel	Manningham-Buller, Rt. Hn. Sir R.	Snadden, W. McN.
Heath, Edward	Marlowe, A. A. H.	Spearman, A. C. M.
Higgs, J. M. C.	Marples, A. E.	Spens, Rt. Hn. Sir p. (K'ns'gt'n, S.)
Hill, Mrs. E. (Wythenshawe)	Marshall, Douglas (Bodmin)	Stevens, Geoffrey
Hill, John (S. Norfolk)	Maude, Angus	Steward, Harold (Stockport, S.)
Hinchingbrooke, Viscount	Maydon, Lt.-Comdr. S. L. C.	Steward, William (Woolwich, W.)
Hirst, Geoffrey	Medlicott, Sir Frank	Stewart, Henderson (Fife, E.)
Holland-Martin, c. J.	Mellor, Sir John	Stoddart-Scott, Col. M.
Hollis, M. C.	Milligan, Rt. Hon. W. R.	Storey, S.
Holt, A. F.	Molson, A. H. E.	Studholme, H. G.
Hope, Lord John	Moore, Sir Thomas	Summers, G. S. (Aylesbury)
Hopkinson, Rt. Hon. Henry	Mott-Radclyffe, C. E.	Sumner, W. D. M. (Orpington)
Hornsby-Smith, Miss M. P.	Nabarro, G. D. N.	Sutcliffe, Sir Harold
Horobin, Sir Ian	Neave, Airey	Teeling, W.
Horsbrugh, Rt. Hon. Florence	Nicholson, Godfrey (Farnham)	Thompson, Lt.-Cdr.R. (Croydon, W.)
Howard, Hon. Greville (St. Ives)	Nicolson, Nigel (Bournemouth, E.)	Thorneycroft, Rt. Hn. P. (M'nm'th)
Hudson, W. R. A. (Hull, N.)	Nield, Basil (Chester)	Thornton-Kemsley, C. N.
Hughes Hallett, Vice-Admiral J.	Noble, Comdr. A. H. P.	Touche, Sir Gordon
Hulbert, Wing Cmdr. N. J.	Nugent, G. R. H.	Turton, R. H.
Hurd, A. R.	Oakshott, H. D.	Vane, W. M. F.
Hutchison, Sir Ian Clark (E'b'gh,W.)	O'Neill, Hon. Phelim (Co. Antrim,N.)	Vaughan-Morgan, J. K.
Hutchison, James (Scotstoun)	Ormsby-Gore, Hon. W. D.	Wade, D. W.
Hyde, Lt.-Col. H. M.	Orr-Ewing, Charles Ian (Hendon, N.)	Wakefield, Edward (Derbyshire, W.)
Hylton-Foster, Sir H. B. H.	Osborne, C.	Wakefield, Sir Wavell (St. M'le'bne)
Jenkins, Robert (Dulwich)	Page, R. G.	Wall, Major Patrick
Jennings, Sir Roland	Peake, Rt. Hon. O.	Waterhouse, Capt. Rt. Hon. C.
Johnson, Eric (Blackley)	Perkins, Sir Robert	Webbe, Sir H. (L'nd'n & Westm'r)
Jones, A. (Hall Green)	Peto, Brig. C. H. M.	Wellwood, W.
Joynson-Hicks, Hon. L. W.	Peyton, J. W. W.	Williams, Rt. Hn. Charles (Torquay)
Kaberry, D.	Pickthorn, K. W. M.	Williams, Gerald (Tonbridge)
Kerby, Capt. H. B.	Pilkington, Capt. R. A.	Williams, Paul (Sunderland, S.)
Kerr, H. W.	Pitman, l. J.	Williams, R. Dudley (Exeter)
Lambert, Hon. G.	Powell, J. Enoch
Lambton, Viscount	Price, Henry (Lewisham, W.)	Wills, G.
Lancaster, Col. C. G.	Prior-Palmer, Brig. O. L.	Wilson, Geoffrey (Truro)
Langford-Holt, J. A.	Raikes, Sir Victor	Wood, Hon. R.
Leather, E. H. C.	Ramsden, J. E.	Woollam, John Victor
Legge-Bourke, Maj. E. A. H.	Rayner, Brig. R.
Legh, Hon. Peter (Petersfield)	Redmayne, M.	TELLERS FOR THE NOES:
Lindsay, Martin	Rees-Davies, W. R.	Sir Cedric Drewe and
		Mr. Robert Allan.

The Chairman

The next Amendment which I shall call is that in the name of the right hon. Member for Leeds, South (Mr. Gaitskell) at the top of page 462 of the Order Paper, namely, in page 3, line 13, leave out "£60" and insert "£100."

Mr. Hugh Dalton (Bishop Auckland)

May I at this stage, Sir Charles, ask you which of the Amendments to Clause 2 it is intended to call? They cover a number of points which are connected and they all relate to Income Tax rates. It might be convenient to the Committee if you would tell us.

The Chairman

The nine Amendments which go with the Amendment I have selected are as follow:

In page 3, line 15, leave out "£60" and insert "£100"; in line 16, leave out "£60" and insert "£100"; in line 17, leave out "£210" and insert "£250"; in line 19, leave out "£210" and insert "£250"; in line 20, leave out "£210" and insert "£250"; in line 21, leave out "£360" and insert "£400"; in line 22, leave out "£210" and insert "£250"; in line 23, leave out "£360" and insert "£400"; and in line 24, leave out "£360" and insert "£400".

Mr. Dalton

That means that a large number of our Amendments will not be called, although we are having a very abbreviated Committee stage. Is it because you as Chairman are not selecting them, Sir Charles, or because they are out of order?

The Chairman

Those of which I gave a list just now are all consequential on the Amendment which has been called. If this Amendment is carried by the Committee the others will be called, but, if it is negatived, the others will fall.

Mr. Dalton

There are several groups of Amendments which, I understand, will not be called.

The Chairman

The Amendment in page 3, line 13, to leave out "£60" and to insert "£250," is outside the scope of the Bill. It is not a question of reducing charges, but of being outside the scope of the Bill.

Mr. Dalton

I want to know where we are. I am sure the Chancellor will agree that that is desirable. We are having a very abbreviated discussion on the Bill and all these Amendments relate to the proposed changes in the charges for Income Tax. All we are seeking to do by the whole of this group of Amendments is, not to increase the charges, but to give further tax remissions to certain groups of taxpayers and, in particular, by some of the Amendments, to put back the state of affairs as it was prior to the introduction of the Bill—to restore the status quo, for example, with regard to the first band in reduced Income Tax relief, and so on.

We are rather surprised that on the ground of order we are not to have an opportunity to debate some of these Amendments. They seem to fall into a broad group of improvements in the Income Tax arrangements by making certain relatively small, but none the less important, changes in the scheme for tax.

The Chairman

The scope of the Finance Bill is limited by the Resolutions on which it is founded.

Mr. Mitchison

As a rule, in a discussion on the Finance Bill one is allowed to put down and have discussed Amendments to increase reliefs. There are three Amendments on the first page of the Order Paper, none of which has been selected, but which are simply of that character.

The Chairman

Perhaps I should answer that point now. Generally speaking, the last Resolution is a general alteration of the law, which makes that in order. We did not have that this year. That is why those Amendments are out of order and, for the same reason, the proposed new Clause, "Disability relief" is out of order.

Mr. Mitchison

Does that mean that even though Clause 2 deals with specific reliefs, we are not allowed to say that those reliefs are not enough? The Chancellor has passed on only 3d. of the reduced rate relief instead of the usual 6d. We have put down Amendments to do what has been done in previous cases—to pass on the 6d.

On that subject I found some observations made by the Chancellor, which I thought might be of assistance to the Committee. This was an occasion when there was a similar restricted Resolution on the Purchase Tax and the right hon. Gentleman objected to debating the matter in chunks. He said it was a very big constitutional question remaining unsolved and unanswered by the Government. The representatives of the people and the Committee were unable to discuss the tax. He went on to say—these are the words upon which I rely—that It was an aggravation of this spirit which lost us the American Colonies.… "—[OFFICIAL REPORT, 19th April, 1950; Vol. 474, c. 157.] I know that we have lost those Colonies, but we do not want to lose any more. It is an aggravation of that spirit that will lose the Government their position. We would not mind that, Sir Charles, but the other part of the question has serious implications.

The Chairman

I think that the hon. and learned Member for Kettering (Mr. Mitchison) is confusing two things. Generally speaking, hon. Members can move Amendments to reduce the charge, but on this occasion it is a question of scope. If hon. Members look at the Budget Resolutions which the Committee passed, and the House agreed to, they will see that they are very much restricted and that is why we are in this position. It is a question of scope, and not of increasing the charge. In reference to the Purchase Tax, I imagine the hon. and learned Member was referring to the 1952 Budget—

Mr. Mitchison

Yes, Sir Charles.

The Chairman

That was under the Resolutio n dealing with that particular point.

Mr. Mitchison

With respect, I understand that what happened in 1952 was that there was a restrictive Resolution. There is an even more restrictive step being taken now to meet the almost invariable Resolution amending the law. The result is that the Chancellor is out-Heroding Herod. This is far worse than what he was protesting about on the former occasion, when he mentioned the American Colonies.

6.15 p.m.

Sir Frank Soskice (Sheffield, Neepsend)

As I understood the Ruling you gave a few moments ago, Sir Charles, you proposed to allow a discussion, and have ruled that it is in order to allow a discussion, on what is described as the band—the band within the terms of which the reduced rate of Income Tax is charged. But as I understood your Ruling—perhaps I misunderstood it—

The Chairman

I never used the word "band."

Sir F. Soskice

I used the word "band" as an epithet to describe the group of Amendments which deals with the problem as to the limits within which the reduced rate of Income Tax is chargeable. That band is a limit above which one pays a higher rate and below which one pays a still lower rate. If we were not able to raise it on the Financial Resolution which has been passed we should like to be told, because that seems unfortunate. I understand that we are allowed to argue that the limit for the reduced rate should be what it was before this Bill was introduced—in other words, that it should be£100 and not£60. We want also to be able to argue that by way of further relief to Income Tax payers in the lower income groups, the limit for reduced rate should be increased to£250.

Surely I am right—I speak with great deference and subject to your Ruling, Sir Charles, of course—that this is immediately germane and bound up in the question of what I have described as a band, that is, another limit which we seek to substitute for the limit at present in the Bill within which the reduced rate is to be charged. If we are entitled to argue that the limit should be£100 as before, we would not be infringing the rules of order if we said that it should not be£100 but£250. We would not be imposing an additional burden on the subject; on the contrary, we would be trying, in a very small, moderate measure, to relieve still more the burden on the lower income groups by seeking to extend the band within which the reduced rates shall be charged.

The Chairman

What I tried to make clear a moment ago is that the rates in the charge have nothing to do with it; it is a matter of scope. When these matters were laid down under the Budget Resolutions I did not invent the rules, but I have to carry them out. It is no good saying that an Amendment will reduce the charge if it is drawn in such a way that it will go beyond the scope and is out of order. I have called an Amendment; I do not know why there should be much complaint.

Sir F. Soskice

I want to make it perfectly clear, Sir Charles, that I was not in any sense questioning any Ruling you have given. That is the last thing I would desire to do. The only point is that you having pointed out that the Financial Resolution keeps us within very narrow limits, should we not be strictly within those limits if we limited our argument simply to the range within which the reduced rate is to be charged and do what we are anxious to do because we think this is an imperative measure of justice to the lower income groups of taxpayers? What we want to do is to say that the lower income rate should be chargeable up to£250 limit instead of up to only£100 limit.

We should be grateful if you would tell us whether the Resolution is so very tightly drawn that we cannot even go as far as that in trying to secure some measure of relief for the lower Income Tax payers.

The Chairman

I did not draw up the Resolution. I am here to carry it out to the best of my ability. The Amendments which I have detailed are in order, but the others in the name of the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) are out of order because they are outside the scope of the Resolution. That is really all I can say about it.

Mr. Jay

You say, Sir Charles, that it is the Resolution which is the cause of the trouble. Do we understand, therefore, that the whole responsibility for this unprecedented restriction of debate rests not with you but with the Government?

The Chairman

I did not say that there was any trouble. I am not in the least troubled.

Mr. Jay

But the responsibility for the restriction which is causing trouble to us, at any rate, rests with the Government who drew the Resolution.

The Chairman

I do not know who causes trouble. I am here to carry out the rules.

Mr. Dalton

I hope, Sir Charles, that you do not think that we have pursued the point unduly. We were anxious to ascertain the position as interpreted by you. Having now heard that it is the fault of the Government's Resolution, which you have to carry out, which has brought us to the pass that at least half the Amendments designed to benefit the poorer sections of Income Tax payers are out of order—

The Chairman

The first Amendment which I have called is in order. If it is negatived, the second will be out of order.

Mr. Dalton

None the less, you have told us that a large number of the Amendments which we have put down as a group of proposals which hang together and which are designed cumulatively to be of benefit to those whom the Chancellor has neglected to a great extent are out of order. If they are now to be ruled out of order—and we accept your Ruling, of course—then a situation has been reached in which the Committee should express an opinion. The opinion which I hope the Committee will express is that this is a most outrageous example of Parliamentary dictatorship.

The Bill is short and trivial enough in all conscience. There is little enough in it. Whereas, in other years, we have had a long period of debate, and sometimes all-night sittings on considerable proposals, we find that we are deprived even of the opportunity of moving these Amendments which we have put on the Order Paper.

In view of the constitutional outrage that has been committed, and so that people may understand what is being done on the eve of the appeal for their votes, I beg to move, "That the Chairman do report Progress and ask leave to sit again."

The Chairman

I cannot accept that Motion. [HON. MEMBERS: "Why not?"] I will tell you in a moment. The complaint is that the Finance Bill is drawn in accordance with the Budget Resolutions. The Budget Resolutions were passed in Committee and agreed to by the House, and it was quite obvious that anybody reading them would see that there would be a short Finance Bill. I was not in the least surprised; in fact, I was surprised that I was able to find so many Amendments in order.

Mr. Hale

I am in rather a difficulty. The right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) is the only person I have heard with complete clarity in the last half an hour. I am not sure, therefore, what the Ruling is. I listened to my right hon. and learned Friend the Member for Sheffield, Neeps-end (Sir F. Soskice) and I appreciate the points which he put which come within the Short Title of the Bill. I understood you to say, Sir Charles, that this was not a question of limitation of figure by the Resolution; it was a question of limitation of scope.

The Short Title of the Bill makes it clear that this is a Bill …to alter the law as to certain of the personal reliefs. If that were the only matter concerned, then clearly, subject to the normal law about increasing the charge beyond the limit of the Resolution, this was within the scope of the Bill and, therefore, a matter properly to be discussed.

I understand from what you have said to my right hon. Friend the Member for Bishop Auckland that, although the Government have introduced a Bill to alter personal reliefs, they have so devised the Resolution, and done so deliberately, as to deprive the Committee of the opportunity to discuss the whole question of personal reliefs in the sense of giving any relief. In fact, the Resolution is so devised that personal reliefs shall give no relief, and the only thing we can discuss is whether to accept the fantastic mechanism of give-and-take, or put-and-take, which the Financial Secretary described to the Committee so eloquently and not very accurately about an hour ago.

In these circumstances, it seems to me that my right hon. Friend took a course which is extremely important, in view of the fact that it is suggested that the opinion of the country shall be taken on this matter within a few days—that the opinion of the country shall be taken on a matter about which they cannot be fully informed and about which a debate has not been allowed here because of the use of the rules of the House by the Chancellor deliberately to stultify and stop discussion. My right hon. Friend suggested that the time had come when a Motion to report Progress should be accepted by the Chair.

The Chairman

I made it clear that I would not accept such a Motion. If the hon. Gentleman was speaking on that, he was out of order because I cannot accept it.

Mr. Jay

You said, Sir Charles, that your reason for not accepting the Motion was that the Resolution was debated by the House during the Budget debates and that it was quite obvious that that Resolution would invariably lead to this restriction later on. In fact, I myself repeatedly asked the Chancellor, during the Budget debate, for an assurance then, before we passed the Resolution, that this difficulty would not arise at a later stage.

I asked him that question several times and he said that it was impossible to deal with it at that stage, because, in effect, he did not understand his own Resolution, and that it could all be satisfactorily discussed when we came to this stage. With all respect, surely it cannot be correct that we should now be told that we cannot even discuss this matter on a Motion to report Progress when we were given those assurances earlier.

The Chairman

I never gave any assurances. I am simply carrying out the rules of order. Whatever the Chancellor may or may not have said, I am responsible for the calling of the Amendments.

I have taken the best advice I can get. I have come to the conclusion that what I have done is correct and I stand by it.

Sir R. Boothby

Is not it a fact that the Opposition concurred in the Resolution which is now limiting the scope of our debate? They are not being dictated to; they concurred in the circumstances.

The Chairman

As far as I remember, there was no Division, but I should not like to pledge myself on that. That has nothing to do with me.

Mr. Eric Fletcher (Islington, East)

One reason why the House concurred in the Budget Resolutions was because of certain assurances given by the Chancellor of the Exchequer during the discussion. This point was raised during the discussion, and the most extraordinary feature of the debate during the last half an hour is that the Chancellor has sat silent. We have not had a word from him.

You have given a Ruling, Sir Charles, and we sympathise with you in that; but there is one point about which I should like to ask. There is on the Notice Paper an Amendment to Clause 2, page 2, line 37, in the name of my right hon. Friend the Member for Bishop Auckland (Mr. Dalton), the effect of which would be to increase the child allowance. That is quite clearly within the scope of the Bill, because one of the Budget proposals is to raise that allowance from£85 to£100.

The Chairman

No Amendment to increase an allowance above the upper limit given in the Resolution may be moved, and that Amendment goes beyond that figure.

6.30 p.m.

Mr. Fletcher

I entirely appreciate that, Sir Charles, I am saying that none of the Amendments with which we are concerned relates to the general discussion. It is significant that the Chancellor of the Exchequer quite definitely said that it was not his wish that the Opposition should be deprived of an opportunity to put down Amendments; and this, surely, is one of the important factors on which the Election will be fought—whether these allowances are adequate or not. We wish to make an alteration and to suggest that the child allowance should be increased, whatever consequential change is made.

It has always been the custom, in debates on the Finance Bill, that the Opposition should have the right—indeed, it is a constitutional right—to put forward alternative suggestions. It is quite obvious that on this occasion the Budget Resolutions have been so drawn that we should not be in order in putting down new Clauses, because there is no Budget Resolution dealing with the general law. But, in view of what the Chancellor said, we fully understood that we should be able to debate matters that would relate closely to changes in the Income Tax law.

The Chairman

The hon. Gentleman must not blame the Chancellor. He has no responsibility for selecting the Amendments or for ruling that Amendments are out of order.

Mr. Fletcher

But surely—

Hon. Members

Order.

The Chairman

I am here to carry out the rules of order to the best of my ability. It may be thought sometimes that I do not do so very adequately. Obviously, at the moment my Ruling does not meet with the pleasure of many hon. Members. But that has nothing to do with the Chancellor. He may think that an Amendment is in order when I think differently—the extraordinary thing is that I am the one who wins.

Mr. Fletcher

I hope, Sir Charles, that you will not think for a moment that any hon. Member on this side of the Committee is attempting to blame you in any way—

The Chairman

But that is what hon. Members are doing.

Mr. Fletcher

If I may explain, I was attempting to say—no one was suggesting that—that the Chancellor—

The Chairman

I have just said that the Chancellor has nothing to do with it. I am responsible, and not the Chancellor. I do not ask the right hon. Gentleman for advice about which Amendments are in order.

Mr. Frank Bowles (Nuneaton)

I have no doubt. Sir Charles, that you do not think that the Chancellor is responsible, but I am, in a sense, prepared to blame the Chancellor; because at the end of his Budget speech he said that the last Reso- lution was not the usual one, making general changes in the law, and that he hoped you would allow the discussion to go a good deal more widely than would be usual if the Resolution which we usually discuss had been before the House.

In view of that suggestion from the Chancellor, to which you agreed—in other words, to let the debate go much wider because of the peculiar circumstances of the Finance Bill this year—may I respectfully suggest that you might also agree to the Opposition going a bit wide and relax the rules to some extent regarding the Amendments which my hon.. Friends have put down?

Mr. Mitchison

May I speak once more?

The Chairman

May I answer one hon. Member at a time?

We generally debate a Resolution relating to an amendment of the law, but we did not do so in 1929, nor in 1945, and we have not such a Resolution now. Those are the precedents by which we are bound. I am having them looked up at the moment. I let the debate go wide during the Committee stage of the Money Resolution because there was a precedent which I will have looked up. But we cannot always operate in that way, and I am now ruling out Amendments which are not in order.

Mr. Mitchison

The point I wish to put is this. You observed just now, Sir Charles, that it was obvious that the Money Resolution tied the debate very closely. In general, I would respectfully agree. But it was not at all obvious what effect that would have and I should like to call in aid the right hon. and learned Member for Chertsey (Sir L. Heald) who was, until recently, the Attorney-General. On 20th April—it is reported in column 297 of the OFFICIAL REPORT—the right hon. and learned Gentleman took the view, so far as I can see, that it would be possible to make Amendments with regard to the rate within this Income Tax band.

The normal procedure in previous debates, where there was a reduction of 6d. in the rate, was to pass on the whole of the 6d. In this case, only 3d. has been passed on. With respect, I would say that I feel that little about the Income Tax is obvious and that nothing whatever was obvious about the reduced rate reliefs; and that that part is exceedingly complicated.

Surely the spirit of the thing, at any rate—and all that any of us could gather at the time—was that the question of whether the whole or only half of this 6d. should be passed on would be debatable, and capable of Amendment. Accordingly, in good faith, we have put down Amendments substituting the passing on of 6d. for the 3d., and now I understand that those Amendments are out of order. All that we can do is to pass on 1½d.—for reasons relating more to mathematics than good sense—in one part of the band.

The Chairman

The hon. and learned Gentleman is encouraged to call on one of his own profession to help me. I do not need that help. I know perfectly well what we are doing and that what I have said is correct. I hope that we may now proceed with the business.

Mr. Fletcher

On a point of order. I understand from this discussion that the only reason we are being prevented from discussing Amendments which we desperately wish to discuss, and which we think it our duty to discuss in the interests of the country, is the way in which the Budget Resolutions are drawn.

The position is that the Government have set aside the whole of today and Friday for the discussion on Committee and Report stages of the Bill. I gathered from what the Chancellor said last week—although the right hon. Gentleman has been notably silent this afternoon—that he is as anxious as we are that we should not be deprived of our rights. Would it not be possible to have the Budget Resolutions amended in such a way that on Friday we should be able to raise the points we wish to raise?

I urge you, Sir Charles, to appreciate that we believe—in accordance with tradition and what has always occurred throughout the centuries—that it is the duty and the right of the Opposition to put forward these points for the consideration of the country, particularly on the eve of a General Election.

The Chairman

That is not a point of order. There is nothing that I can do about it.

Mr. Fletcher

The point of order I am raising—

The Chairman

I am saying that it is not a point of order.

Mr. Fletcher

The point of order I was trying to submit to you, Sir Charles, was to ask whether, were this debate adjourned and the Budget Resolutions suitably amended, it would be possible for us, on Friday, to debate the Amendments which the Opposition feel they are entitled to debate and so prevent our being gagged and silenced from putting forward views on which the country will be asked to form an opinion on 26th May?

The Chairman

I find it difficult enough to deal with direct points of order. Hypothetical points of order are beyond me.

Mr. Dalton

May I try to help to elucidate the difficulty into which we have been led by the Chancellor's, no doubt quite innocent. ambiguity at an earlier stage, Sir Charles?

The Chancellor told us—and this, I think, is within the recollection of the Committee—when this matter was raised on the Budget Resolutions, that he could not then say exactly how the Budget Resolutions would operate, and in particular, the absence of the Resolution which we normally debate on the general amending of the law. The right hon. Gentleman did say—and it has already been quoted—that this matter could be discussed later.

It now appears, following your Ruling, Sir Charles, which I repeat that we at once accept, that certain unintended results have followed, which have taken the form of a very sharp and severe abbreviation of our debate on these proposed improvements—as we think—in the Income Tax arrangements. The Chancellor said the other day that everything he did was intentional. I think I have here found an exception to that dictum—

The Chairman

Is this a point of order?

Mr. Dalton

Yes.

The Chairman

I am not responsible for what the Chancellor says—so long as he behaves himself in this Chamber.

Mr. Dalton

I do not wish to burden you unduly with responsibilities which, as you rightly say, should fall on the right hon. Gentleman's conscience rather than on your judgment of the rules of order. But would not the Chancellor now help us by himself proposing that we should report Progress, so as to allow time for the Budget Resolutions to be brought in again simply with the view—

Lieut-Colonel W. H. Bromley-Davenport (Knutsford)

Order.

Mr. Dalton

If I am out of order I shall not be told of it by the hon. and gallant Member.

Will not the Chancellor assist us by himself proposing the Motion which I moved but which you, Sir Charles, were not disposed to accept? We could then review the very restricted conditions which you have so clearly explained to us and be enabled, on the eve of this fateful General Election, to have the opportunity for a real democratic debate instead of the farce to which this debate is being reduced by the Government.

The Chairman

I do not have to give a reason for my Ruling, but I thought it was more courteous to the Committee to do so. I think that we ought to get on with the Amendment now.

Hon. Members

A Government diktat.

Mr. Dalton

Set the Reichstag on fire.

Sir F. Soskice

I beg to move, in page 3, line 13, to leave out "£60" and to insert "£100."

After the Reichstag has been set on fire, I should like to address myself, Mr. Thomas, to the extremely limited point which remains open to discussion. Possibly it would be convenient to the Committee to discuss the other Amendments which, as your predecessor has ruled, stand or fall by this Amendment.

The Amendment seeks to restore to what it is under the existing law the limit up to which the lowest reduced rate is charged. The limit under the existing law is£100. I should like to have the attention of the occupants of the Treasury Bench. I do not know which Minister is going to reply but, whoever he is, he will be in a better position to answer if he knows the argument.

Mr. R. A. Butler

I was wondering about the scope of what the right hon. and learned Member was talking about, and I was mentioning it to my hon. Friend the Economic Secretary.

Sir F. Soskice

Perhaps I can repeat the purpose of the Amendment so that the right hon. Gentleman can reply. The Amendment seeks to restore to what it is under the existing law the limit up to which the lowest reduced rate is chargeable in respect of Income Tax. As the Committee knows, under the existing law the limit is£100. The Chancellor seeks in the Finance Bill to reduce that limit to£60, with the result that in respect of any income over£60 the higher rate which is appropriate to the next band of income is chargeable.

We seek in the Amendment to restore the£100 limit in place of the£60 limit. Later Amendments which, Mr. Thomas, your predecessor proposed to call and which are in order, would also seek to restore the 3d. which the Chancellor has not passed on from the 6d. reduction in the standard Income Tax rate, but at the moment we are merely concerned with the limit of£60 as against the limit of£100.

Prima facie, to reduce the limit from£100 to£60 seems an unnecessary piece of what one can only describe as stinginess in treating the lower income groups. By common consent, and as has been pointed out over and over again, the higher income groups are going to derive a very substantial advantage. Those whose gross incomes run to many thousand of pounds will derive an advantage in having, in respect of each of those pounds of their large incomes, a reduction of 6d. in the tax.

As has been pointed out and urged upon the Chancellor, the Economic Secretary and the Financial Secretary, it would seem appropriate that, if that is to be done in respect of large incomes, the Government should at least try to give the same corresponding advantage, as far as practicable within the limits of the financial possibilities of the year, to those enjoying smaller incomes. The Amendment is one effort to give them some redress in that direction.

Looking at the structure of the whole proposals, it seems extraordinary that, when the higher income groups are given a substantial advantage, this very moderate advantage which is enjoyed within the existing law is withdrawn from other Income Tax payers, including the lower groups. This matter, of course, has been raised before. It was raised in the Second Reading debate on the Finance Bill. The Financial Secretary then gave an answer on which I should like to press the Government because, quite frankly, it seems unintelligible, at any rate as it is put.

6.45 p.m.

After saying that it was necessary to consider this change in the lowest Income Tax rate limit in connection with the increases in the tax-free allowances which had been given to single men and married men—an extra£20 for the single man and£30 for the married couple—the Financial Secretary went on to say: …if one simply made those increases in the personal allowances and made no difference at all in the bands, the benefit which the Chancellor was desiring to concentrate on the people now paying quite small amounts of tax would have gone right up through all the taxpayers at the higher levels."—[OFFICIAL REPORT, 25th April, 1955; Vol. 540, c. 631.] If that is the reason which has actuated the Chancellor, it is a reason which I urge upon him will not stand examination for one moment.

After all, the effect of charging tax at the lower rate is that those who have small incomes derive a substantial advantage in respect of the lower rate of tax chargeable. The rate of tax chargeable is not 8s. 6d. but smaller amounts. Under the Chancellor's present proposal, the smaller rates are 2s. 3d., 4s. 9d. and 6s. 9d., in accordance with the band which is appropriate to the particular income level. If the intention of the Government really is that the result of imposing the reduced rate limit should not be passed on so as to produce an inordinate advantage to rich taxpayers, the remedy is in their own hands. If they really want to make sure that large incomes do not derive inordinate advantage, they could, as we sought to ensure today in an earlier Amendment, perfectly easily say that the reduced rate limit applicable to the lower incomes should not be enjoyed by the large Income Tax payers. In an earlier Amendment which the Committee discussed, we made precisely that proposal in connection with some of the other reliefs which the Chancellor has given. If that is the anxiety of the Financial Secretary and the Economic Secretary, the remedy is in their own hands. They could have assented to that proposed Amendment or could have made some such change in the tax structure without our prompting. Therefore, it seems to me that that was not their motive. I call attention again to the words which the Financial Secretary used in the Second Reading debate. He said that the Chancellor was anxious to see to it that the advantage of paying less tax in respect of the lower portion of one's income is not passed up to what he calls the higher levels of taxpayers. If that is his anxiety he can easily so enact, but the fact that he has not done so surely should not redound to the disadvantage of people to whom payment at the lower rate will matter a great deal.

If the Amendment I have moved is accepted, payment at the lower rate would mean that persons who just come into the full scale of Income Tax liability would have to pay about£12 less than they would have to pay if the law was as the Government seek to have it. I cannot understand what is the point of depriving them of that. I do not know whether the Financial Secretary really understood the reason which he was trying to give the other day during the Second Reading debate. When he was pressed about it he went on to some other aspect of the Bill.

I cannot help thinking that he either did not have an easily comprehensible brief upon the matter or, if he did have such a brief, he did not devote to it the necessary amount of study to absorb the reasoning behind it and make that reasoning clear to the House. If there is a real reason why the moderate relief which we suggest should not be available to small Income Tax payers, let us be given it, so that we can examine it, but let it not be obscured in the phraseology used by the Financial Secretary, which conveyed very little to my hon. Friends.

The Chancellor has said, "I am proposing to reduce the limits from£100 to£60." In other words, in respect of any£of one's taxable income over£60, a higher rate will be paid under his present proposal. Previously one had to have above£100 before the higher rate was paid. We press the Government to leave the£100 limit as it is. Do not let us disadvantage the small taxpayers, as they will be disadvantaged if this change is made. That is all we ask the Government to do, and, having regard to the very narrow limits within which the Resolution has been drawn, that is all we can do. We ask for this very moderate scale of relief in order to try to help people who get extremely little out of the Budget.

Those are the arguments which I should like to be answered. They were put during the course of the Second Reading debate, but the Financial Secretary did not answer them. I do not know whether he has now had time to go into those arguments rather more fully. Perhaps he was taken unaware when the matter was discussed during the Second Reading debate. Perhaps he is in honour bound to reply, in view of his performance during that debate. At any rate, I hope we shall be given the reason which motivated the Government in taking this course, so that we can make up our minds whether or not to ask the Committee to divide.

Mr. Hale

I do not want to say more than a few words, because I am so entirely in agreement with what has been said by my right hon. and learned Friend the Member for Neepsend (Sir F. Soskice), but it is important that we should have it on record quite clearly that the only reason this Amendment is being debated is that any Amendment increasing the benefits is out of order. We are, therefore, not able to explain our full policy as we should wish to do.

My right hon. and learned Friend always speaks with exceptional courtesy, and he did so in this case. It seems to me that there is only one reason for the introduction of this provision, and that reason is abundantly clear. The Chancellor of the Exchequer, in referring indirectly to this matter during the discussion upon Clause 1, said that he had tried to carry out the recommendations of the Royal Commission which had recommended the removal from taxation of a large number of people who were paying very small sums. There is no doubt about the reason for that recommendation. It was that it is not economical to collect those small sums.

There are many people who, fortuitously—almost accidentally—find themselves, by a slight increase in their salaries, suddenly coming just within the Income Tax range; having to have P.A.Y.E. certificates arranged for them and the whole paraphernalia of collection, assessment, and possibly appeal, related to them. They are paying an average of 2s. 9d. a week, and they number about 2,400,000. It is not worth collecting the money. It costs a lot of money to collect it, and causes much exasperation. It is a good thing, even from a Tory point of view, to write those people off.

That is what the Chancellor did, and then he said, "But this is still costing us rather a lot of money, and will give these people rather more than I intended. There is a very ingenious way of getting it back, namely, by reducing the amount of allowances at the lower rate of tax." There is no argument about that. No hon. Member opposite dare controvert what I have said. The Chancellor said, "I am giving them 9d., and that is too much. I am going to take 6d. back."

The real effect of a tax concession is the percentage increase in spending power which it gives to a man. I quite agree with the Chancellor of the Exchequer that a concession of£10 to a man earning£20 a year is a good deal more than is a similar concession to a man earning£2,000 a year. It is quite clear that it raises the spending power of the first man by 50 per cent. whereas, to the other man, it is of very little importance.

If we look at the figures which are affected by this Clause—which is directed principally against the lower-paid workers—we must do so in terms of those percentages, and we then find that whereas the increase in spending power to the man earning£500 a year is about 2½per cent., the increase to the man at the top rate is 25 per cent. or 30 per cent. It is quite disgraceful and shocking that this increase of taxation—because it is an increase—is deliberately, destructively and decisively applied primarily to the lower-paid workers. It obviously makes no difference to the higher income groups. It is directed to the lower-paid groups precisely because the Chancellor is afraid that his reduction of 6d. in the£all round would give too much benefit to the lower-paid workers. I challenge anyone to deny it. There is no other possible explanation. That is why this Budget is peculiarly contemptible.

I wish the Chancellor no harm; I have considerable admiration for him. A week or two ago I thought that after a short and nominal regime he might take over the leadership of the Tory Party, and become the only able leader it has produced from its own ranks since the Younger Pitt. I do not know whether that can happen now, when people have studied the Budget.

The Chancellor has been throwing up a smoke-screen in the debates which we have had. Apart from the fact that in drafting the Budget Resolution he has chosen deliberately to prevent us from moving Amendments that we, as a Labour Party, would wish to move, he talks about a reduction in taxation when, in fact, the Budget increases taxation. The question whether or not taxation is increased is a matter of expenditure. If one is raising more money from the public as a whole, one is increasing taxation, whatever the rates may be.

If the Chancellor had an enormous surplus at his disposal, he had it for one of two reasons. It was either because he deliberately misled the House last year, in framing his Budget—which I do not believe for a moment—or because he made one of the most extraordinary miscalculations ever made by a Chancellor in estimating his Revenue. Having to deal with that surplus as best he could, and having some money to distribute upon the eve of the Election, he asserts that he has given 6d. to everybody, but he has taken back 3d. off the lower-paid worker by this ingenious and rather dishonest limitation upon the concession given to him. 7.0 p.m.

In an earlier discussion the Chancellor said that he had made an all-round reduction of 6d. in the Income Tax. It was made all round, to everybody, millionaires and all, as a matter of financial rectitude—one could not make fish of one and fowl of another; one could not differentiate between classes of people; one had to give it to everybody in the same way. That is the old argument which we have heard before about equality. Everyone can go into the Ritz Hotel. Everyone can have an Income Tax concession, an expenses allowance, buy a car, and so on. It is rather a question of what your salary is, what your allowances are, and what you have available to spend.

The Chancellor, having talked about financial rectitude and having indicated that it sprang not so much from the rectitude of his own conscience but from the sight of Gladstone's eyes, which were looking down at him from his painting, and which had petrified him into a rather temporary attitude of rectitude, now comes forward with this proposal about the liability on the lower band of Income Tax. We are to have class distinction applied to the lower-paid workers. We now see that the tax concession does not apply right through but that its most damaging, savage, and particular effects fall upon the lower-paid worker.

Since I have sat here this afternoon I have been wondering whether I made some frightful error when I was reading the account of the Budget speech. I have wondered whether we were discussing something else. I listened to the suggestions from the Government benches that taxation was being reduced when it is, in fact, being increased. I listened to the suggestion of benefits being given when, in point of fact, the Chancellor is filching by false pretences hundreds of thousands of pounds from people and is proposing to give only a little of it back. I listened to our being told that we cannot discuss, on any of these Clauses, any alternative means of allocating this money.

It has become plain to me beyond any possibility of doubt that the Government have framed a fraudulent Budget in an effort to deceive the electors, and that they framed a Budget Resolution to prevent any discussion which would enable light to be given to the electors to show what the real proposals and the real facts about the Budget are. We are presented with proposals which, from start to finish, are designed to mislead.

I have admired the Chancellor of the Exchequer in many ways. I admired his struggle to save the£, which is worth less now than it was in October and is considerably lower than it was in 1951. We have heard about his financial rectitude, his careful computations and his careful estimates, every one of which has been wrong, yet Government supporters can still get up and say that this Budget is the result of his stupendous ability, diffident character, and irresistible charm. I recognise his charm. There is no question about his charm. In my former days, when I was a practising solicitor, I encountered many confidence tricksters of one sort or another. Charm and ability were always there, coupled with a capacity to present financial matters in a most impressive, instructive, and moving way.

With every desire to use words that are in no way controversial—[Laughter.]—well, over-controversial—I suggest that this Income Tax proposal is a mean and contemptible way of filching back a few pennies from people on the lowest band of Income Tax liability, from the very people who work for those who are in control of the private sector of business, who produce things, and without whom no private business could exist. This is coupled with a contemptible way of presenting it, so as to try to conceal from the public that a confidence trick has been played upon them, and that when they get their P.A.Y.E. demands they will find that something has been taken from them which offsets any benefits which may have been given to them.

The Economic Secretary to the Treasury (Sir Edward Boyle)

I am glad to have this opportunity of explaining to the Committee the reasons for the cut, proposed in the Bill, of£40 in the first band of income chargeable at the lowest reduced rate of tax. I apologise to the right hon. and learned Member for Neepsend (Sir F. Soskice) for any discourtesy I may have offered him at the start of his speech. He was always extremely courteous to us when we were in opposition. The very last thing I want to do is to be discourteous to him.

This cut of£40 cannot be considered in isolation, but must be considered along with my right hon. Friend's proposal that the single person's allowance should be increased by£20 from£120 to£140, and the allowance given to a married man increased by£30 from£210 to£240. This is a unified scheme, which proposes an increase in the basic personal allowances coupled with a reduction in the first band of Income Tax chargeable at the lowest reduced rate. It will have the effect of exempting from Income Tax about two million people.

The object of this scheme is precisely to meet the point put forward by the Royal Commission on the Taxation of Profits and Income, in its Second Report, that the present starting point of liability to tax of individuals was too low and should be raised, but in a way that did not benefit people with higher incomes. It recommended that this object should be achieved by introducing a minimum amount of earned-income relief.

I recall that during the Report stage debates on the Finance Bill last year a new Clause was moved by the hon. and learned Member for Kettering (Mr. Mitchison) and was seconded by the hon. Member for Islington, East (Mr. E. Fletcher), to give effect to the scheme of the Royal Commission. This scheme involved serious administrative difficulties, particularly with regard to P.A.Y.E. My right hon. Friend has put forward the present proposals which, by increasing the basic personal allowances and cutting back the lowest reduced rate, attains the Commission's objective in a very much simpler way. It is worth pointing out that, taken as a whole, the scheme of my right hon. Friend will be more favourable in most cases to taxpayers with the lowest amounts of taxable income than the suggestions which the Royal Commission put forward. I would like to give just two or three examples. I will be as quick about them as I can, because I know that it is tedious to listen to too many figures.

The present starting point of liability to tax on the earned income of a single person is£155. Under the Royal Commission's scheme, the starting point would be£183. Under the proposals of my right hon. Friend, the starting point will be£180. The single person does a little bit less well than under the Royal Commission's proposal. The position is very different for the married man with two children. His present starting point of liability on earned income is£489. Under the Royal Commission's scheme, which the hon. and learned Member for Kettering talked about last year, the starting point would be£518. Under the present proposal, the starting point will be£566.

When we remember that the married man with two children starts to be liable for tax on earned income only when he is earning£566 a year, it really becomes very difficult to share the view of the hon. Member for Oldham, West (Mr. Hale) that it is the lowest-paid worker who will suffer most from this cut in the first band of liability.

Mr. Hale

Not all married men have children.

Mr. Mitchison

I should like to get my mind clear on two points. My recollection is that two schemes were put forward in that Report. I do not know to which of them the Economic Secretary is referring. Perhaps he will tell us. The second point is that the Royal Commission's proposal was for a minimum amount of earned-income relief. Surely the Chancellor's proposal is entirely different. It has nothing to do with earned income.

Sir E. Boyle

On the first point, I confess I cannot give an answer off-hand. I am having inquiry made, and will communicate with the hon. and learned Gentleman afterwards. The only reason why I quoted the Royal Commission's scheme was to show that my right hon. Friend's proposals were an attempt to implement the recommendations of the Royal Commission in as simple and practical a way as possible, without involving administrative difficulties.

Mr. Mitchison

It depends on which recommendations are referred to.

Sir E, Boyle

I am referring to the recommendations which the hon. and learned Gentleman and other hon. Gentlemen discussed on the Report stage of the Finance Bill last year.

I quite agree with the hon. Member for Oldham, West that not all married men have two children. But if one takes the married man with one child, his present starting point of liability on earned income is£380; under the Royal Commission's scheme it would be£408, and under the Budget proposals the starting point of his liability on earned income is£437.

The right hon. and learned Gentleman talked of stinginess to the lower income groups, and said that it was the higher income groups which would derive most advantage from my right hon. Friend's proposals. It is fair to say that it is those who pay the standard rate who, so to speak, suffer most from the cut of£40 in the first band. It means that they reach the point in their income where they have to pay the standard rate£40 earlier than they otherwise would.

I hope that, now that I have explained why the scheme was introduced, hon. Members may feel able to withdraw the Amendment. I have tried to explain how the scheme came to be put forward. I hope that I have convinced the Committee that the lower-paid workers will not suffer as a result of the proposals. In fact, no one will altogether pay more tax as a result of the joint proposal to increase the personal reliefs and, at the same time, to cut£40 from the first band of the taxable income of individuals.

Amendment negatived.

Sir F. Soskice

I beg to move, in page 3, line 20, to leave out "1s. 9d." and insert "1s. 10½d."

This Amendment is really complementary to the last one which was moved and seeks to restore the 3d. reduction in the existing rate of relief. I cannot say that I move it with any great optimism, having regard to the answer given to my previous Amendment. If the Government are not prepared to concede that the£60 should go to£100 as it was before, but insist on reducing the relief, I suppose that it is likely that they will persist in their intention of reducing the relief by 3d. below last year's figure.

What the Bill does is perfectly clear. Last year, relief was given by deductions of 2s. 6d., 5s. and 7s. in respect of the lower ranges of income. Those reliefs have been respectively reduced by 3d., and are now 2s. 3d., 4s. 9d. and 6s. 9d. That, again, to us on this side seems to be a wholly unnecessary piece of stinginess. When I say "wholly unnecessary piece of stinginess" I mean that it is particularly unnecessary and particularly noticeable for its quality of stinginess when one considers the reliefs that have been made, as has been pointed out over and over again—and it is not supererogatory to point it out once more—to those who have very large incomes.

7.15 p.m.

If one has a large income one gets relief in the sum of 6d. in respect of every£of that large income. In those circumstances, it seems very extraordinary, when one looks at people who seek to derive their advantage from the reduced rate reliefs, to find that the Chancellor is taking off 3d. from the amount to which they would have been entitled last year. In the first place, therefore, he has made them pay the full rate£40 earlier—if I might use that expression—and then goes on to add the further disadvantage of getting by way of reduced-rate relief 3d. less in each band than they would have got last year.

In his Second Reading speech, the Financial Secretary did not even venture to vouchsafe a reason except that I understood that he thought it was necessary to adopt the reduced rates at 3d. to make, as he said, "roughly proportionate reductions." I can only interpret that as meaning that when dealing with rich Income Tax and Surtax payers he thinks it appropriate to give them a reduction of 6d.; when dealing with moderate incomes he says "their relief must be much less; I will give them only 3d." To us on this side that seems to be monstrously unjust and unnecessary.

What does the Financial Secretary think it would cost the Chancellor to restore this small, measly 3d.? Has he any estimate of the cost of that? I presume that the Chancellor has considered what it would cost to leave the law as it was last year and to leave the rate of reduction as it was last year. Can the Financial Secretary tell us that this will really make a great deal of difference to the balance of the Budget? If he cannot, and if the sum involved is comparatively small, I press upon the Government that at least they should give this very slight, moderate relief to those to whom it would mean so much.

I do not think I can elaborate the reasons for the Amendment—they are self-evident. It simply asks the Chancellor to say that the rate should stay as it was last year and should not be dropped by 3d. When a man has a small income which is only sufficient to bring him into the full standard rate the 3d. means a great deal. It might not mean much to a person with a large income, but to a person who just comes into the standard rate it is very important. For those reasons, I ask the Government to say that the amount should be restored to at least last year's figure.

Mr. Mitchison

I find it very difficult to understand why the full 6d. has not been passed on, it having been the practice for several years now to pass on any reduction of tax to those lower-band taxpayers. For some reason or other that practice has been abandoned this year.

I want to say at once that one thing that I feel sure all of us will welcome in this Clause is that the peculiarly involved piece of choctaw—which was the original reduced-rate provisions—is going to disappear. It was a quite incredibly involved piece of business. It started with the Income Tax Acts, and the Finance Act, 1952, in a great hurry, put further complications into it. The result was an extraordinary sum which meant nineteenths of the amount of tax payable. When the nineteenths were in force they meant, in plain English, 6d.—because the standard rate was 9s. 6d. Accordingly, when the standard rate was reduced to 9s. the nineteenths became eighteenths and we went on with the choctaw in full force, with that momentous change in it.

This time we expected that the eighteenths would become seventeenths, or, in plain English, we expected 6d. off. Indeed, we were justified in that because when the 9s. 6d. was reduced to 9s.—and I notice by the way that the Chancellor justified it in very much the same terms as he used today—he called it: …a very potent augmentation of the company reserves available for maintenance, innovation and development … He went on: I have not forgotten the smaller incomes, and with this proposed reduction of 6d. in the standard rate of Income Tax I link proposals … and the proposals were to reduce each of the rates by 6d. Then, with that financial rectitude which he has so clearly shown to us today, the right hon. Gentleman added: Thus the benefit of the reduction in the standard rate will be carried down, without restriction, to the lowest incomes that are liable to Income Tax."—[OFFICIAL REPORT, 14th April, 1953; Vol. 514, c. 60.] I notice that the concession costs quite a bit, and the reason for that is obvious. It is that the number of people who will be affected because they are on these low incomes is considerable. What we are complaining about is that they are so little affected. One is entitled to ask today what has happened this time. Has the right hon. Gentleman forgotten the smaller incomes? I think not, because he deliberately explained that he could not pass down the benefit in this instance. One looks to see the reason for this curious change.

We had a tradition quoted. The party opposite is strong on principles and traditions, but I find its reliance on them somewhat intermittant and obscure. That applies in this case, because what the Chancellor said he was doing was as follows: I return to the tradition that reductions in the general rates of Income Tax should be broadly proportionate to the rates already borne."—[OFFICIAL REPORT, 19th April, 1955; Vol. 540, c. 59.] That sounds magnificent until one begins to look into it.

The Treasury has been working out these incredibly involved sums for years past—and I spare the Committee the detail of them because the language is staggeringly complicated, being about nineteenths, eighteenths and all the rest of it—and I should have thought it would not have escaped the attention of the Treasury that if the higher range of taxpayers is relieved of 6d. and the lower range of 3d., a reduction in the general range of Income Tax is not being made "broadly proportionate to the rates already borne."

I really do not know what those words mean. I respectfully suggest that they are complete nonsense, and that there is no reason for not doing what was done last time, and passing on the full amount of the reduction to the people at the bottom of the scale, who need it most. If there is some principle that determines this matter, why is it different, when the reduction is from 9s. 6d. to 9s., from what it is when the reduction is from 9s. to 8s. 6d.? Are the mathematics of the Treasury so remarkable that it really thinks that the difference between those two reductions amounts to the difference between 3d. and 6d.?

It does not seem to me to be anything of the kind. I should have thought the principle was a moral principle and not a bogus mathematical fallacy. I should have thought the moral principle was that when a reduction was being made in favour of companies, in favour of Surtax payers, in favour of all those who pay the full rate, the last people to whom it should be denied are those on the reduced relief bands. Yet that is what is happening in this case. I find it incomprehensible, and so I hope we shall have an explanation which goes beyond a mere statement.

I understand, Sir Rhys, that the Amendment we are discussing is the one to increase 1s. 9d. to 1s. 10½d. Am I correct?

The Deputy-Chairman (Sir Rhys Hopkin Morris) indicated assent.

Mr. Mitchison

No doubt that is what we have to discuss, because every other Amendment is out of order and it is a fantastic state of affairs.

The previous Attorney-General, the right hon. and learned Member for Chertsey (Sir L. Heald)—no mean authority on these matters—stated in the House that there would be no difficulty, because in the case of Clause 2 (7)"— which is what we are talking about— relating to the rate not exceeding£210 and the rate between£210 and not exceeding£360, it would be possible, within appropriate limits, to make Amendments."—[OFFICIAL REPORT, 20th April, 1955; Vol. 540, c. 297.] I understand, Sir Rhys, that this is impossible as regards, at any rate, the rate not exceeding£210.

I say that if Resolutions are put forward by the Government, and passed by the House, and we are not told clearly what they mean, it is natural that so competent and so expert an authority as the previous Attorney-General should misapprehend their meaning. Also it is ridiculous and fundamentally undemocratic to use those Resolutions as a means of stifling proper Amendments on a matter which affects the small taxpayers. It is dead wrong, it is indefensible, and I adopt the protests made with regard to a similar restrictive Clause on the Purchase Tax.

I shall not develop the point which was made earlier in the day, but it is fantastic that the only Amendment which we should be able to put forward on a matter affecting large numbers of small taxpayers—the people whom we should look after particularly—is one in relation to the highest of the three bands to do half of what we want to do. If that is the way in which Resolutions are to be used by the Government, they will richly deserve the fate which no doubt they will receive shortly at the hands of the electors of this country.

Both on that account, and because it is cynically unjustifiable to deny to the small taxpayer the full relief given both to the large taxpayer and to the limited company, I urge the Government at this last moment to accept all that we can move, an Amendment for half of one-third of what we want. Whatever the full relief would cost, I should have thought that even a Tory Government might go that far in favour of the wage earner and the man with the smaller income, who are the people who pay at these reduced rates.

Mr. H. Brooke

This Amendment is skilfully drafted to keep within the Rules of Order. All it would do would be to fix the highest of the reduced rates at 6s. 7½d. instead of 6s. 9d., as proposed in the Bill, and 7s. as it has been up to the present. I appreciate from the speech of the right hon. and learned Gentleman that it is not unreasonable for him to seek to enlarge the scope of the discussion so that one can touch on the broader issue which he mentioned, namely, the issue of whether all the reduced rates and not only the standard rate should have been reduced by 6d.

I want to show the right hon. and learned Gentleman the utmost courtesy and give him all the information I can. This Amendment to make a change of 1½d. in the highest of the reduced rates would cost£3¼ million. The larger change of structure, which I think is really in his mind, to bring the 6d. reduction right through the reduced rates as well as the standard rates, would cost£34 million.

As was explained at an earlier stage of the Bill, what my right hon. Friend has done is to revert to the practice which was almost universal in the years before the war, namely, to make changes in the reduced rates proportionate to changes in the standard rate. That is founded on a sensible principle. We all wish to devise a tax structure which will cause the burden of the tax to rise in a steady progression as income increases, and not to go by jumps. If it goes by jumps, that is the kind of gradation which would be unfair to people whose incomes happen to fall at unlucky places. I think the Committee will quickly appreciate that the natural way of ensuring a steady gradation, and maintaining a steady gradation when we have one, is to make changes whether upwards or downwards in the reduced rates proportionate to, but not equal to, the changes in the standard rate.

7.30 p.m.

It is interesting to look back at the facts. With the exception of, I think, only one year, it is true that from 1920–21 to 1934–35 the reduced rate—there was only one reduced rate then—was at half the standard rate and varied accordingly. From 1935–36 to 1939–40, the reduced rate was usually one-third the standard rate, and in the Budgets of those years there was no question of every change in the standard rate being compelled to be accompanied, as I think the Opposition would now wish, by an exactly equal change in the reduced rate.

It is quite true that in the year 1951 the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell), rather harshly as I think, increased not only the standard rate by 6d. but also both of the reduced rates which then existed by 6d., and it was that action which my right hon. Friend specially corrected in his Budget of 1953, when he had the opportunity precisely to undo what the right hon. Gentleman had done.

Mr. Mitchison

I hope that the hon. Gentleman will remind the Committee that that was made at the time expressly in connection with two other increases, one of which was the child allowance. I forget what was the other; but there were two£10 increases. That was the reason for it.

Mr. Brooke

It will not have escaped the hon. and learned Gentleman that in this Budget both the personal allowance and the child allowance are being increased. My right hon. Friend is acting perfectly reasonably.

The right hon. and learned Gentleman who moved this Amendment used his words skilfully to suggest that people were having something taken away from them. In fact, everybody now paying tax is under this Bill having something given back to him. No one is paying more tax than hitherto. All these reduced rates are, in fact, going down by 3d.

The right hon. and learned Gentleman further stated that the taxpayers would have to pay on these new rates at an income£40 earlier than at present. There too, of course, he was wrong because he had overlooked the change in the personal allowance. Every married man will get an increased personal allowance of£30 and, therefore, he will not have to pay at a higher rate of tax£40 earlier than at present, but at only£10 earlier than at present. I grant that on that tiny slice of his income, he has to pay at the higher rate, but he nevertheless gets the benefit of having the additional£30 entirely free of tax, whereas, hitherto, he has been paying tax on it.

The purpose of the Amendment is, I think, to make sure that everybody gets a fair crack of the whip under this Budget. The right hon. and learned Gentleman used a different phrase, but he was concerned to argue that both those paying at the lower rate and those paying at the higher rate should be equally fairly treated. Let us consider for a moment what would happen if one made precisely proportionate reductions in the reduced rates.

The Chancellor is cutting down the standard rate by one-eighteenth, and if he were applying the same proportion to the highest of the reduced rates—7s.—he would be fixing it at 6s. 7⅓ d., which is almost exactly what the Amendment suggests. If he applied the one-eighteenth reduction to the middle rate—now 5s.—he would arrive at the figure of 4s. 8⅔ d., which is very near the 4s. 9d. proposed. If he applied the one-eighteenth cut to the lowest rate—now 2s. 6d.—he would get to a figure of 2s. 4⅓ d.

I am sure that all of us, on both sides of the Committee, would agree that we should be putting an impossible burden on Somerset House and the tax inspectors and collectors if we were to introduce thirds of a penny into our rates. The Committee will notice that what the Chancellor has done is to reduce the lowest of these rates—the 2s. 6d. rate—by substantially more proportionately than the one-eighteenth which he would maintain if he were keeping the proportion the same throughout. He is treating most generously those who are small taxpayers with incomes of limited size, who do not pay at anything higher than the lowest of the three rates.

The middle rate is kept almost exactly to the correct proportion. The highest of the three rates is, I grant, not cut down by quite so much, but all the people who are paying at that rate will have the benefit of the lower rates and also of the increased personal allowance, so that, in fact, justice is done to everybody.

It would, as I have said, not only cost the sum I have mentioned had the 6d. reduction been carried throughout, but it also would be a contravention of the general principle, which has been accepted in many previous Budgets, that changes in the reduced rates should be proportionate to the changes in the standard rate. We cannot play about with these figures except at the risk of getting the line of gradation for different taxpayers out of proportion. These proposals were very carefully considered and I commend them to the Committee.

Mr. Mitchison

The hon. Gentleman has not answered one simple question. He appears to have been so obsessed by proportions and grossly improper fractions that he has not answered a very simple point. Last time the "tanner" was passed on to these people; why cannot he pass the "tanner" on this time?

Mr. Brooke

In 1951, the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell), somewhat cruelly, as we think on this side of the Committee, put a "tanner" on everybody, the weaker as well as the stronger taxpayers. My right hon. Friend was determined to correct that as soon as he could, and he took the "tanner" off everybody, thereby bringing things back to the point at which they were before. Having then got the gradation right he considered that, at any rate in this Budget, the right thing to do was to adhere to the general principle accepted year after year by Committees in this House in pre-war Budgets.

Amendment negatived.

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

Mr. E. Fletcher

One of the great difficulties facing the Committee this year in examining the Budget is the speed at which we are having to pass from one stage of the Bill to another. Never before has it happened that, when changes of such proportions in the Income Tax structure have been introduced by a Budget, we have had to proceed from discussing the Budget Resolutions one week to discussing details of the Finance Bill the following week.

That has to be added to the special disadvantage which confronts the Opposition this year in finding the Budget Resolutions so tightly drawn that it has been virtually impossible to put down any Amendments which are in order, with the result that in under five hours we have disposed of all the Amendments on the Order Paper which have been accepted by the Chair and have reached the stage of considering the Question, That this Clause stand part of the Bill. That Question alone gives us the opportunity of trying to clear up some of the astoundingly complex figures which we heard on Monday and today from the Chancellor and the Financial Secretary.

Earlier today the Financial Secretary tried to explain to the Committee the merits of what he called the band proposal, whereby the band, which used to be£100, which attracted the lowest rate of Income Tax, was reduced to£60. I want to give the Chancellor full credit here, because I had occasion earlier in our Budget deliberations to criticise the proposal on the ground that it did not give adequate remission of taxes to the family man with three children.

The Chancellor will recall that he took credit in his Budget statement for having accepted in spirit the Royal Commission recommendations about married couples with children. He took credit for having devised a better method of securing the desired results than that preferred by the Royal Commission. I want to examine that claim, and I want to say to the Chancellor in all fairness that his method is certainly, qua method, a simpler and more satisfactory way of carrying out the findings of the Royal Commission. I refer to the recommendation that the disparity which has grown up over the years, as a result of inflation, by which the married man with children is now paying far more in tax when compared with the single man or with the married couple without children, should be corrected.

There still remains on this subject a very important question which should be cleared up. Nothing we have yet heard indicates that the Chancellor's proposals go to the full extent of the recommendations put forward by the Royal Commission. He claims to have invented a better method, and I am prepared to grant that. My criticism is that in this Budget proposal he has not carried out to the full extent the recommendations made by the Royal Commission. I do not think enough weight has been given to that criticism in the debate.

The principle on which the Royal Commission proceeded was that at the very least the same proportion should be maintained in our tax system between, on the one hand, the burden imposed on the single man and, on the other hand, the burden imposed on the married man with a family. That was the principle, and I understood that the Chancellor did not dissent from it. He claimed to have assisted the family, but has he assisted them to the full extent? We have not yet had figures to show that he has, and it does not seem that he has gone far enough.

I doubt very much whether, even before the war, in the days before inflation distorted the comparison, it was true to say that the married man with a family was fairly treated compared with the single man. Such disparity as existed was considerably increased and exaggerated by the inflation.

7.45 p.m.

What is the position today? If we turn to the Financial Statement we can see the result of the Chancellor's Budget proposals. I have taken examples at random because I think this proposal ought to be tested. On pages 20 and 21, for example, we find that a married couple without children, earning£700 a year, pay£74 5s. in Income Tax, whereas a married couple with one child pay£41 1s. In other words, the married man has a cash benefit of£33 because he has one child. The figures increases very slightly as we go up the scale. For example, a married man earning£800 a year has a benefit, as a result of having one child, of£35, and a married man earning£1,000 has a cash benefit, in similar circumstances, of£42.

Is that considered adequate in terms of our present money value? The Chancellor of the Exchequer, quite rightly I think, attaches importance to the incentive motive behind his Budget. Nothing is more important to our national economy in these days, when full employment is so important and when we want all the employable hands we can get, than to give a full incentive to married people who want to have children but who are in difficult financial circumstances.

You know as well as I, Sir Rhys, the cost of bringing up children these days. The cost has risen. The cost of educating and maintaining children, as the Chancellor knows, is an even greater burden on those earning incomes between£1,000 and£1,500 or between£1,000 and£2,000 than it is on those in the lower range of incomes. But whatever point in the range we consider, we find, in my view, that there are still inadequate differentials for the family man compared with the single person or the married couple without children.

When I find that a married man earning£800 a year, with one child, is only£35 better off than a married man without children, and the proportion is the same for a single person, then I think the question which the Committee should ask itself is whether that is adequate. It would not cost the Chancellor very much to increase the child allowance. One of the Amendments which we put down and which we hoped would be called, but which was not called, was a proposal to increase the child allowance. We wanted to argue that it should be increased not merely from£85 to£100 but to£120 a year, which would give effect to the Royal Commission's recommendation. I think Clause 2 is defective in this and many other respects.

It is particularly unfortunate that when, as the Financial Secretary was claiming just now, the Government try to take credit for having evened out the progressive scale of taxation and to have produced relative justice at all stages, we on this side of the Committee should be deprived of the full opportunities usually afforded the Opposition of examining with care and attention the detailed Amendments which we believe necessary to give effect to our beliefs and policies.

We have made our protest and I have no doubt that the country will observe that protest. We are entitled, in considering Clause 2, to ask the Chancellor for some further figures than we have yet had. What, in his mind, is the principle governing the point at which a child allowance is given? Why has he increased it from£85 to£100, but not to£120? Does he consider that£33 a year in the case of a married couple with an income of£700 a year is the cost of a child, that £66 is the cost of maintaining and educating two children, and that£99 is the cost of educating and maintaining three children? If so, those figures only need stating to enable one to point out that the reverse must be the case.

In fact, as the family increases, so does the burden on the father of the family. He not only has the direct cost of maintaining, clothing and educating the children, but has to live in a larger flat, or house, with a higher rent to pay, and higher rates. Frequently the mother of a large family is unable to contribute to the family resources in the same way as a married woman with only one child can, and certainly in the way in which a married woman with no children is able to contribute. The fact that married women without children are able to obtain employment is, in present conditions, of very considerable assistance to our national economy and national production efforts, but that trend can be pushed too far. It is equally necessary to secure the well-being of the generation of the future.

We had some statements made by the Minister of Education yesterday—conceived, I thought, in the right spirit—but there is still a long way to go if the Government are to use the very flexible weapon of the Income Tax structure to give a full and adequate measure of equality and social justice, about which the Chancellor was speaking just now in such glowing terms, to the married man with a large family in comparison with the single man.

My criticism is that the Chancellor has not carried out the recommendations of the Royal Commission to anything like their full extent in this matter. He is not entitled to claim credit for having given special relief to the family man. His proposals will leave a great deal to be desired if full justice is to be done to people with large families in comparison with single persons. That is the burden of my criticism on Clause 2.

Mr. Mitchison

This is a matter of reliefs. When the Budget appeared, my local paper asked me to comment. When the General Election date was announced I was also asked to comment. My first comment was that we would get a half-baked Budget. We did. It was said to be of a "classical purity and simplicity": I think it was better described as half-baked.

We then came to the Finance Bill. I doubt whether the Finance Bill was half-baked. I think it was burnt to bits. When the hon. Gentleman defends an inexcusable injustice to the lower range of taxpayers by some exceedingly bad arithmetic and all he and his right hon. Friend can rely on is a reversion to a tradition which does not exist, I would simply tell him that the tradition to which he is reverting goes back much further. It was King Alfred who burnt the scones. This time the Tory Party has been burning the country's finances. If ever a Finance Bill was calculated to promote injustice, if ever a Finance Bill was calculated to give all to those who have something already and hardly anything to those who have not, this is that Finance Bill.

To add to that, on this Clause, which deals with reliefs—the things that matter to the ordinary man and do not apply to limited companies—we have been restricted by the Resolutions of the Government to practically no discussion at all. That is the way to deprive this Parliament of any effectiveness at all. If at this hour of the day, in the first Committee on the Finance Bill, our main object is to try to wake up the Treasury Bench, what a pretty pass we have come to. What about democracy? What about our control over finances? What about certain protests over cheap money, which finally resulted in a few heads rolling from the scaffold? If the Government want their heads cut off—governmentally of course, Sir Rhys—this is the way to do it.

It is a farce continuing to discuss this Clause, or indeed, this Finance Bill, under the iniquitous restrictions that have been put upon us. It is grossly unfair to the country that we should be asked to accept the burnt proposals which have been put before us by the Government, which themselves represent an injustice to the people who are to vote on 26th May and who will, I hope, kick the Government out, hard.

Mr. Brooke

The hon. and learned Member for Kettering (Mr. Mitchison) has used inflammatory language, but I have not noticed that the atmosphere in this Chamber has been getting anywhere near explosion point in our recent debates on the Budget. Maybe he will have greater success in the market places of Kettering in collecting crowds and arousing them than it is perhaps possible to do on these rather sparsely occupied benches.

I want to take very seriously the speech made by the hon. Member for Islington, East (Mr. E. Fletcher). I feel sure my right hon. Friend would take no exception to anything he said, apart from one or two party jabs which he introduced. I can give a few party jabs back, if need be. The hon. Member said that the child allowance ought now to be£120. I remember that in 1953, and again in 1954, the Opposition was urging that it should be£100. Now that my right hon. Friend has made it£100, somebody is bidding higher.

Mr. E. Fletcher

The point is that it ought to rise to keep pace with inflation. If£100 was the right figure last year, this year the figure should be more than£100.

Mr. Brooke

I congratulate the hon. Member on his attempt at a get out. It is interesting to see what the trends have been. The hon. Member may remember that back in the 1920s, when the married person's allowance was£225—a figure which we are only just now reaching and surpassing in this year's Budget—the child allowance was£36 for the first child and£27 for other children.

8.0 p.m.

It seems to me wholly right that the House of Commons, year by year, has been setting a higher value on the importance of bringing up children and educating them. Indeed, it is a source of pride to me that, in the course of these four Budgets which my right hon. Friend has introduced, whereas the personal allowances for single people and for married people have been increased by 26 or 27 per cent., the child allowance has been increased by no less than 43 per cent.

The hon. Gentleman said that it would not cost very much to put it up higher. In fact, the increase embodied in this Finance Bill costs£18 million in a full year, and I am advised that, to meet the suggestion in the Amendment which would raise the allowance by a further£20 to£120, would cost another£20 million, so that one is not here dealing with small figures. One has to bear in mind that they are substantial.

Nevertheless, I am sure that all hon. and right hon. Members have a great deal of sympathy with the cogent case which the Royal Commission has made in favour of treating the family man not quite so severely in relation to the Income Tax and Surtax that he has to pay. The hon. Gentleman will I trust grant me that a further valuable step forward has been taken in this Budget. None of us can forecast the future, but I am quite sure that if my right hon. Friend finds himself, as no doubt he will, a year hence in the same position, he will give very sympathetic consideration to the family man.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 3 ordered to stand part of the Bill.

Schedule agreed to.

Bill reported, without Amendment; to be read the Third time Tomorrow.