HC Deb 01 August 1956 vol 557 cc1551-60

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Wills.]

11.2 p.m.

Mr. William Teeling (Brighton, Pavilion)

The origin of this short Adjournment debate is that a constituent of mine, some months ago, wrote to me complaining about the attitude of Income Tax collectors with regard to a debt of his which amounted to about £15. They were threatening to seize his furniture and sell it, whereas he maintained that he had £45 in post-war credits. He asked, as the Government were not honouring their pledge to pay those credits after the war. why he should be forced to sell his furniture in view of the fact that he had more money in post-war credits than he actually owed the Government.

A Question by me on this subject caused quite a number of letters to reach me from all over the country and I was rather alarmed about the general attitude of Income Tax collectors to small people. I must say, in passing, that, although I know my right hon. Friend the Financial Secretary to the Treasury has already replied to me in private, when he answered my Question he pointed out that this man had not paid his debt for six years. That gave me and, I think, everyone in the House, the impression that the man had had quite long enough to pay. As hon. Members will know, we get letters from constituents which sometimes do not tell the whole truth and the full story. I felt that perhaps this man had rather let me down and I did not go further with the matter at the moment.

Since then, however, I have seen him and found that, far from the case being that he had not paid for over six years, he had been in Canada and only came back at the end of December. After that, for the first time, to his knowledge, he was informed by the Income Tax people that he owed them this sum from nearly six years before. That, of course, was quite a different story. Because, for what were good reasons, he did not turn up on a day when they asked him to come to see them, they sent him a particularly strong letter.

Others have since written to me on this subject and I was so much impressed by their letters that I have spoken to two or three very prominent chartered accountants who deal with Income Tax matters. They told me that there is no doubt that especially among younger Income Tax collectors a much more highhanded attitude is taken than used to be taken. These accountants have been very clear in stating that that is not at all the case with the older collectors. There seems to be a better tradition among the older generation.

I ask my right hon. Friend to tell us a little of what is done from Whitehall to control Income Tax collectors in different parts of the country, and how far, and in what way, they are trained. I have in my hand several cases, and though I do not want to bother the House with them all I would, if I may, just mention one or two.

There is an official of this House who tells me that he has had some extremely rude letters from the Income Tax people. On one occasion, when he was away ill, he was not able to answer a letter from them. When he came back he found another letter which asked for the information, and added: Will you please add why you did not reply to our last letter, giving the full reasons? Another man writes to say: This year I was unable to pay the £11 odd demanded but paid £3 on final demand and then later on sent a further cheque for £3, saying that I would pay the balance of £5 at my earliest convenience, and stating, in my ignorance, that I was quite prepared to go to court to request leniency. To that letter he got the following reply: Your cheque for £3 is returned herewith. Please amend it to the full balance of £8. I must request that it is returned duly amended within the next seven days or distraint proceedings will be taken. Your reference to going to court is not understood, as the distraint proceedings are taken by a certificated bailiff without reference to any court whatsoever. That seems to bear out a little of what these chartered accountants have been telling me; that some of the younger people say, "We are the judges," whereas most people have always thought that they were just administrators—certainly not the judges of whether or not people are capable of paying. One occasionally hears of cases in which they really seem to be wasting their time. Here is one, in particular: As one of your constituents, 73 years of age, a Boer War and First War veteran, and an old-age pensioner … I wish to bring to your notice an injustice which I have received from the Revenue Department. On my retirement, in 1948, we went to Canada, came back, and went back there in 1952, returning to this country in 1956. Wishing to settle in Brighton, I purchased the house my brother was living in, as he had had a stroke and was no longer able to maintain it himself. Eventually, the Income Tax people were informed, and started a very ruthless campaign against me and wanted to know where I got the money from, etc. They wanted to know all my history from before I retired. I informed them that I did not think, as my assets were so small and my income so low, that I was taxable. However, after all the hunting and hounding that I endured, it was stated that I was taxable for 11d. per week, which would be stopped from my Army pension and which was starting from 1st April. On 12th May I received from the Army Pension Paymaster a memorandum and a postal draft for 6s., stating that the figure of 11d. per week was a mistake and that the tax was, in fact, 2d. per week. I was not given any opportunity of paying this tax in a lump sum but was given a coding number and the sum spread over 12 months the same as one would be if in work. If this is the result of the training given to the staff of the Income Tax people to catch the dodgers who evade tax would it not be more profitable to try to catch those … who get away with thousands of pounds instead of wasting their time for the sake of 2d. a week from an old-age pensioner? Two pension draft books and a mass of correspondence and several interviews were incurred for this 2d. per week tax payable over 12 months. Since then I have had a letter from my right hon. Friend the Financial Secretary, which says: For the current year, it was at first thought that … income exceeded his Income Tax allowances, and small tax deductions were therefore being made from his pension. It has now been found that he is entitled to further allowances, and provided there are no changes in his circumstances he will not be liable to pay tax this year. The Army authorities will repay to him the tax which has already been deducted. One is inclined to think that these officials were possibly wasting their time, and I should like my right hon. Friend the Financial Secretary to give us some reassurance on these matters. I should like him also to say—I cannot find the information anywhere—whether, when the post-war credits were introduced, or subsequently, they were intended to be applied also in the Colonies and whether the Dominions have adopted the principle. It would be interesting to know this.

As most people know, post-war credits were started in 1941, when the late Sir Kingsley Wood, in his Budget speech, said that by providing the small saver with the promise of a substantial nest-egg, we may well increase rather than diminish his desire for adding to it, so that he may have a sum sufficient to enable him to face with further confidence the difficulties of the post-war world."—[OFFICIAL. REPORT, 7th April, 1941; Vol. 370, c. 1331.] He then promised that after the war, as from the date when payment began to be made, interest would be paid on the postwar credits. The nest egg is hardly being used as a nest egg and it is difficult to use it as such when one cannot get it. The suggestion was made that people might be encouraged to go in for War Savings Certificates, which, of course, bear interest. It might be suggested that if people cannot be repaid their post-war credits, they could at least be given interest on them.

Governments that followed allowed post-war credits to be used in bits and pieces. Payment was made to men aged 65 and women aged 60, first, in respect of the first three years of the war and then for the following two years. We have had many discussions on the subject and no less than two Adjournment debates, from one of which it is interesting to quote from what was said by Sir Gurney Braithwaite: When the post-war credit system was introduced, it so happened that I was one of the Members of the House who were somewhat sceptical about what would be likely to happen after the war. I remember asking whether we should have the credits set off against Income Tax arrears. I said I thought that in many cases we would never succeed in touching the cash. That was repudiated by the Financial Secretary to the Treasury. We were assured that none of these nefarious practices would happen. But they are happening now under the present Administration. Already, officers who have claims made upon them of debts arising out of their war service are being told that they can be set off against post-war credits. That is already beginning to arise in the Departmental Claims Branch … I am a great believer in getting back to first principles. The whole conception of post-war credits was that they were a nest-egg for use in the very period through which we are now passing "— that was in 1947— the period of post-war reconstruction, but a nest-egg is not much good if you cannot take advantage of it when you are most hardly pressed financially. The right hon. Gentleman will be in the same difficulty as we are in discussing legislation, but it would be in order for him to say that he will examine the machinery which is open to him, that is Statutory Rules and Orders."—[OFFICIAL REPORT, 19th December, 1947; Vol. 445, c. 2085–6.] He thought that the matter might be dealt with in that way and asked whether it was possible to set off post-war credits against Income Tax.

I am only suggesting that use of the credits could be allowed in cases where people are really unable for one reason or another to pay their Income Tax—and this can usually be verified by methods such as are used in National Assistance offices; but we could be much more flexible than at present in setting off post-war credits against claims by the Government. I have only just discovered something which happened when the right hon. Member for Bishop Auckland (Mr. Dalton) was Chancellor of the Exchequer. On reading a debate raised by Mr. Ralph Morley in September, 1951, I see that my right hon. Friend the Minister of Pensions and National Insurance, then Financial Secretary to the Treasury, told the House that no less than £20 million was paid by setting it off against Income Tax arrears under the scheme of the right hon. Member for Bishop Auckland. If that could be done then, it surely could be done today.

My right hon. Friend was rather horrified when I suggested that the other day at Question time, and asked whether I realised what a colossal amount it would involve, but I do not think it would involve a colossal amount for the purpose I am suggesting. The latest figures, given on 17th May, show that there are 9½ million holders of post-war credits and that the total of the credits is about £523 million. Of course, the £ is not worth anything like what it was worth in the days when that money was put aside. To divide that £523 million among 9½ million people would mean paying about £60 a head.

To repay the credits would be no more than to honour the debt long after the war. I should not be at all surprised if the majority of the people would put the money back into savings. It has been suggested they might put it into Premium Bonds. They most probably would not blow the payments, as my right hon. Friend no doubts fears. Even if they did. £60 a head is not a colossal amount. Paying of credits as I suggest, for Income Tax, would probably involve no more than a repayment of £4 million or £5 million a year. I hope my right hon. Friend, even if he cannot do anything about the matter now, will bear it in mind for the next Budget.

11.16 p.m.

The Financial Secretary to the Treasury (Mr. Henry Brooke)

My hon. Friend the Member for Brighton, Pavilion (Mr. Teeling) has covered a good deal of ground. I shall do my best to reply to him in the time available. He asked me about post-war credit schemes in the Commonwealth. There was certainly a scheme in Canada. In New Zealand there was a war loan subscription scheme under which taxpayers were required to subscribe for a Government war loan. South Africa had an unusual scheme of its own, a system of special types of savings certificate. Northern Rhodesia had war compulsory savings. Nyasaland had a scheme of post-war credits, and the three Protectorates, Basu-toland, Bechuanaland and Swaziland had each a personal savings fund levy. I should not like to claim that that information is complete, but that is what I have been able to gather in the time available since my hon. Friend was good enough to let me know that he was to raise that question.

At present there are some £517 million of post-war credits outstanding, and the not inconsiderable sum of £283 million in post-war credits has already been repaid. My hon. Friend suggested that perhaps it was time to start paying interest on the unpaid credits. I should think that if the Chancellor of the Exchequer were to find himself in a position to allocate more money for post-war credits it really would be better to use that to speed up the rate of repayment than to pay interest on those still unpaid.

My hon. Friend has put forward the proposition that in certain circumstances post-war credits might be tendered in payment of tax. I am sure he will realise that to give a general right of that kind would mean that very quickly the greater part of the £500 million or so outstanding would be tendered, and in fact the Exchequer would find itself with £500 million less of revenue coming in, and the general public would have £500 million more of purchasing power in its pockets. I am not going to guess how all that would be used. It would, of course, go in many different ways. Some of it, no doubt, would go into savings. However, in the present inflationary condition of our economy it really would be quite impossible to take the risk of releasing a sum of that magnitude.

I am not sure whether my hon. Friend has in mind that perhaps it could be done more narrowly, that credits could be released just in cases of hardship. As I have had to explain to the House on many occasions, it seems quite impossible to arrive at any definition of hardship which would effectively draw the line between one holder and another. One cannot possibly leave this to the administrative discretion of the Income Tax staff, some of whom my hon. Friend has himself been criticising. In a moment I will rebut that criticism.

With between 9 million and 10 million individuals involved, it really would be quite impracticable to leave it to the officers of the Inland Revenue to use their own judgment. They could only repay on some principles laid down, and so far it has defied all our efforts to find any form of words that would make sure that those who were suffering hardship were on one side of the line and those who were not were on the other.

My hon. Friend also threw out the suggestion that in certain cases where a man is finding it hard to pay his taxes, or where enforcement action is going to be taken against him, he might be allowed to tender his post-war credits. It would certainly not be equitable to allow that simply in cases where enforcement action is being taken because such action is often taken in cases where people have a lot of resources of their own. If one is thinking of the other type of case where the resources are relatively small, then, again, one is simply raising in another form the question whether payment could be made in cases of hardship.

The main case which my hon. Friend has been concerned to put before the House tonight is that there are a good many people in the employment of the Inland Revenue who are doing their job harshly and are not properly trained for it. I am bound to say that I must rebut absolutely the charge that Income Tax collectors act harshly to taxpayers of small means. Whether individual taxpayers have large or small means, complaints are made from time to time that harshness is being shown towards them. I do not think it would be right to judge any of those individual cases unless one knew the full facts from both sides.

What interests me is the following fact, and I think this is substantial evidence. It was two years ago last week that I was appointed Financial Secretary to the Treasury, and in that time I have received from right hon. and hon. Members complaints by their constituents on almost every conceivable subject relating to the work of the Treasury, the Customs and the Inland Revenue. I could count almost on the fingers of one hand the number of complaints that I have received through Members of Parliament about alleged harsh behaviour of tax collectors in the case of the small taxpayer of the type whom my hon. Friend has in mind.

I can tell my hon. Friend in all truthfulness that remarkably few complaints of this kind ever come to the head office of the Inland Revenue. If any complaints are sent in, either to head office or elsewhere, they are very thoroughly investigated by senior officers, and any complaint of a serious nature would certainly be investigated at regional level, or possibly at head office as indeed all complaints coming through hon. Members are investigated.

My hon. Friend asked me to explain whether there was any system of training for Income Tax collectors. I am very glad to reply to him on that because I think the information should be known. The Inland Revenue Department has set up a systematic scheme which ensures not only that every new entrant receives a course of training when he joins the tax collection service, but also that as he is promoted he receives instruction in the work which he will be expected to perform in his new grade. A feature of all these courses is the stress laid on the importance of preserving good relations with the taxpayer, and the evidence which I adduced earlier of the few complaints which reach the Board of Inland Revenue does suggest that this training has good effect. It would be quite wrong for me to stand here and say that no one in the Inland Revenue Department ever makes a mistake; but, if mistakes are made, I am the responsible person, and I will apologise.

I believe, however, that a high standard is maintained, and I will certainly see that any well authenticated complaint is investigated. My hon. Friend referred to one or two individual cases and, as he knows, neither he nor I must mention names; but I am aware of the cases to which he refers. In the first case, £13 10s. was owing, and the taxpayer tendered post-war credits—which in that instance were worth £45. I have explained the reasons why this method is not permissible.

I want to apologise to my hon Friend, and the taxpayer concerned, if any inadvertent words of mine were read in such a way as to suggest that this taxpayer refused payment for six years. That is not true. The amount was ascertained only at the end of 1955, and the taxpayer then offered payment at the rate of £1 a week; but the payment of the instalments was broken off and it was at that stage, after two further letters had been sent to the taxpayer, that the inspector took the step of sending a printed final notice which contained a reference to distraint as a possible means of enforcement.

I should say here that it is Parliament itself which has made available methods of enforcement of payment, such as leave to distrain without a warrant from the magistrates, so that the responsibility is on this House rather than on the collectors. But I hope that the taxpayer concerned will be able to reach a reasonable and amicable arrangement with the collector. Had he replied to the letters no difficulties would have arisen.

Then my hon. Friend referred to another case where an individual said that he had been "hunted and hounded ". What, in fact, happened, was that the collector was trying to ascertain whether that person was liable for tax or not. The collector had to get particulars of that taxpayer's newly acquired property and certain bank interest which he received. As a result, his liability was worked out at twopence a week. This position is liable to occur in any case where the income of an individual just exceeds the tax-free allowance.

My hon. Friend has suggested that the taxpayer offered to pay a lump sum, but we have no record anywhere of such an offer. I am sure that my hon. Friend appreciates that we cannot write to millions of P.A.Y.E. taxpayers and ask whether they would like to pay in lump sums. The P.A.Y.E. machinery works smoothly. We did not know of any offer to pay until we saw a letter from the taxpayer to my hon. Friend. I must emphasise that the collector was simply doing his duty under the law.

It may be that sometimes people go too far and sometimes do not go far enough, but we in Parliament put on these collectors a statutory duty of collecting Income Tax at the date when it is due, and if tax is left unpaid for a long period after that date and the taxpayer does not seem to be making reasonable efforts to pay, there is a duty on the collector to make a serious effort to get that tax in. It is a duty which he owes to the other taxpayers of the country. If tax is not collected from those who are liable, that is unfair to all the rest of the taxpayers, the vast majority of whom are both honest and punctual in their payments.

I am glad that we have had this short debate. I am always anxious to look into any further cases of this or a similar character brought to my notice, and I hope that my hon. Friend will accept from me that the standard attained by the tax collectors is high and that we are jealous to preserve it.

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty-nine minutes to Twelve o'clock.