HC Deb 10 July 1956 vol 556 cc288-99

4. Subject to the following paragraph, in the case of an individual born at a time specified in the first column of the Table set out below, the proviso to subsection (1) of section twenty-one of this Act and Part I of this Schedule shall have effect with the substitution for the references to seven hundred and fifty pounds and to the fraction one-tenth of references respectively to such sum and to such percentage as are specified for his case in the second and third columns of the Table.

TABLE
Year of Birth Sum Percentage
£
1914 or 1915 825 11
1912 or 1913 900 12
1910 or 1911 975 13
1908 or 1909 1,050 14
1907 or any earlier year 1,125 15

5.—(1) This Part of this Schedule shall not apply in relation to any year of assessment in which the individual, in respect of his past services in any office or employment formerly held by him (not being one in which he served part-time only), either—

  1. (a) receives any income in respect of a pension payable under or in pursuance of a sponsored superannuation scheme or otherwise purchased or provided for him by another person; or
  2. (b) has a right under a sponsored superannuation scheme to a pension which is not presently payable, whether because it is suspended or because it is to become payable only at a future time or on the happening of some contingency (but not including a right dependent also on service in an office or employment for the time being held by him).
(2) In this paragraph, "pension" includes any superannuation or other allowance or deferred pay.—[Mr. H. Brooke.]

Brought up and read the First time.

Mr. H. Brooke

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

We had a sort of preliminary run on this matter when we were discussing Clause 21, but at that time we were really addressing ourselves only to one particular point and I think that the Committee would probably wish me very briefly to describe the two Parts of this Schedule, after which, if there are any questions about them, an endeavour will be made to answer them.

Part 1 makes the necessary adjustment to the upper limit of £750 for those whose earnings consist partly but not wholly of pensionable salary. This is linked with the matter with which we were dealing a few moments ago, the matter which was originally brought to the attention of the Committee by my hon. Friend the Member for Carlton (Mr. Pickthorn). The effect of Part 1 is that a man with both a pensionable post and non-pensionable earnings will be allowed self-employed relief up to 10 per cent. of the pensionable earings, but the limit of£750 a year on the amount eligible for relief will be reduced by 10 per cent. of the pensionable emoluments.

Perhaps it would be better if I were to give this explanation by a practical example. Taking purely hypothetical figures, let us consider a case of a man with non-pensionable earnings of £5,000 a year and a pensionable salary of £4,000 a year. He could get this self-employed tax relief on an amount of£350 a year, that is to say the full £750 a year minus 10 per cent. of his pensionable salary of £4,000. He could in that way add on top of the existing pension in respect of his £4,000 salary the pension which would be appropriate to further earnings of £3,500 to bring his total pension up to the maximum appropriate earnings of £7,500. That is the effect of Part 1.

Paragraph 2 deals with complicated cases where a pensionable employment is held for one part of a year and non-pensionable earnings arise in the other part; in certain circumstances there may be an overlap between them. I hope that we have provided for all those rather special cases. Paragraph 3 defines what is meant by "pensionable emoluments".

Part II of the Schedule gives effect to the promise which I was authorised by my right hon. Friend to make during the earlier stage of our debates, that we would introduce later a scheme which would increase both the percentage and the permitted upper limit for people born before 1916. It has throughout been the general view of the Committee on both sides that it would be welcomed if the Government could introduce into their Budget proposals a provision of this sort for older self-employed people who have not hitherto been able to make provision for their pensions except out of taxed income.

This is all based on the figure of £750 which has been the subject of controversy, but I do not think it is that that we are discussing now so much as the special arrangement which is to be made. This special arrangement would operate whatever the basic figure was for the older people. Part II increases the normal limits for this self-employed tax relief on a sliding scale according to age. The reason why there is no increase for those who reach the age of 40 this year or later is simply this, that they still have time to build up an adequate pension before they reach retiring age. The trouble was, as was pointed out earlier, that premiums limited to 10 per cent. of earnings would often not build up a pension having a reasonable relation to earnings in the remaining years available for the older people.

It is proposed that the percentage shall be increased by 1 for each 2 years of age over 40, up to a maximum of 15 per cent. for those who will be 49 or more this year, and the overall limit of £750 is correspondingly increased. I ought to point out that these increases apply to the two-job man who is dealt with in Part I of the Schedule as well as to the ordinary self-employed person.

The broad object of these arrangements is to compensate the older men for the fact that self-employed relief was not available to them in the earlier years up to now. Therefore, it seems to the Government that there is no ground for allowing these increases, that is to say the higher limits, to operate for those who, though they are self-employed now, were in pensionable employment in the past and are now either receiving a pension or have what is called a frozen pension which will become payable when they reach retiring age; though even there one has to make a further refinement, because we want to be as fair as we possibly can to everybody. There may be a case where the past pensionable employment was only a small part-time one, and in such a case it seems that it would really be unfair to exclude a person from these advantages. Consequently, Part II is drafted so as to exclude those who have pension rights from past whole-time jobs, but not the others.

Those who are excluded because of their past pension rights, will still be able to qualify for relief up to the normal 10 per cent, or £750 from their present self-employment; it is only the increase which they will not get.

The Committee would, no doubt, wish me at this stage to give an estimate of the cost. Questions were asked when we discussed the matter before as to what this extension for the benefit of the late entrants would cost, and I said that at that stage it was really impossible to make any sufficiently reliable estimate. We have been examining this matter further and, though, of course, everything depends on the proportion of people who take advantage of the new opportunity—and everything I say must be subject to that safeguard—we estimate that the cost will be increased by this provision for the late entrants by something of the order of one-quarter. In other words, if the scheme as it stood before was going to cost £30 million, we think the cost will now be £37½ million, or, if it was going to be £40 million, we think it will be increased to£50 million. I think the Committee has appreciated throughout that it is not through any lack of arithmetical aptitude but solely through the sheer impossibility of prophecy that it is not possible to give firm figures. So far as we can see, bearing in mind that probably a good many of these late entrants will wish to take advantage of this arrangement, since they are the people who have been suffering most up to now, we are inclined to think that it will increase the cost of the scheme by about 25 per cent.

Mr. Mitchison

Before the right hon. Gentleman leaves that topic, would he just deal with one point? He has been talking about people of a certain age. This is calculated by reference to the year of a person's birth, and therefore the ages will differ. I should have thought that the cost of the scheme, or the proportion it bears to the cost of the whole scheme, is going to differ in succeeding years. Can the right hon Gentleman give any estimate of that?

Mr. Brooke

I think we must speak in very general terms. I was not thinking so much of the first year, this particu- lar short year which we are now in. I was rather forecasting that, when the scheme gets going, the cost may be increased by something like one-quarter. I would not like to carry my figures beyond that, because it will be possible when the scheme has run for a year or two to see how we are going. At present, all we can do is to indicate that, in the first full year when the new plan is operating, we think that if the Committee accepts the proposals for late entrants in the new Schedule, the cost will be increased by about one-quarter.

8.0 p.m.

Mr. Mitchison

I am grateful to the right hon. Gentleman for giving a fairly full explanation of what, I am sure he will agree, is a very complicated provision. I should like to ask him one or two questions. First, am I right in thinking that Part I of the new Schedule departs substantially from the recommendations which the Millard Tucker Committee made on the same point?

I am not going back to discuss the question as between £500 and £750, but I think the right hon. Gentleman will agree that the existence of the provision in Part I of the new Schedule meets at least some of the points which were put forward in support of the increase from £500 to £750. Without going back into the merits of that matter, it appears to that extent to make that increase less necessary.

Part II of the proposed Schedule is intended to deal with the persons whom the right hon. Gentleman described as the late entrants. He referred to them persistently by their ages. I think—I speak subject to correction—that the Millard Tucker Report, when considering similar questions, also referred to them by their ages. What the Government have done, however, is to define those ages by reference to the year of birth. Consequently, it seems—I am not objecting to it; I want to know the position—that the advantage that is given to this type of entrant will diminish as the years go on. On balance, fewer and fewer of each group will be coming in.

While I take all of the reservations made by the right hon. Gentleman about the difficulty of estimating what proportion of the total amount this will represent, it does seem to be a tapering proportion. If that is the case, so much the better. If we had had to consider this type of provision in the light of the £500 figure, we should not have taken the same objection to it that we now take.

I shall not discuss that now because, later, we shall come to some Amendments of our own which will involve references, if we are allowed to introduce them, to a number of Amendments to the new Schedule which appear in pages 3998 and 3999 of the Notice Paper.

The Temporary Chairman

The hon. and learned Member will be aware that those Amendments have not been selected.

Mr. Mitchison

I am well aware of that as regards the Amendments in pages 3998 and 3999 of the Notice Paper, Mr. Hynd, but I would point out that the Amendments on Report, to Clause 21, in pages 4008 and 4009 of the Notice Paper, seem to me to raise questions which involve consideration of the figures mentioned in those Amendments. I am not attempting to discuss those Amendments now——

The Temporary Chairman

I am trying to help the hon. and learned Member. The position is that those Amendments could possibly be discussed on the Report stage when we come to those pages of the Notice Paper. If those Amendments are selected by the Chair, they could be moved then as manuscript Amendments.

Mr. Mitchison

I am obliged, Mr. Hynd; I hoped that that was the position. All I was doing was partly to safeguard the position as regards the future Amendments and partly to point out to the Financial Secretary, who must be weary with obstruse mathematics, that if he wanted to avoid a little simple arithmetic he would find the figures corresponding to £500 on the next two pages of the Notice Paper, although, of course, as Amendments I could not refer to them.

Those figures—I can, if necessary read them out as a matter of mathematics, but they are there on the Notice Paper—represent somewhat more reasonable sums. It is perhaps about as good an illustration as one can have of the difficulties into which the £750 limit gets us that when one comes to apply it on quite reasonable lines to the late entrants, one gets up to figures as high as those which appear at the bottom of the table at the end of Part II of the new Schedule.

When, in a year of financial crisis, notwithstanding the Premium Bonds, we are compelled to allow people to have special concessions in respect of tax up to amounts on either side of £ 1,000, we wonder whether we have not set the whole business rather too high. I make that comment accepting provisionally the fact that this appears to be an annually tapering provision. I should like to know whether I am right on this latter point.

There is one other question I want to ask, similar to the one I wanted to ask about Part I. Here again, this seems to me to differ from recommendations made on exactly the same point by the Millard Tucker Committee. They appear, I believe, in paragraph 400, in page 111, of the Millard Tucker Report. As the right hon.Gentleman has been good enough to say that he would answer questions, perhaps he will answer one rather general question.

It apparently required the assiduous efforts of the hon. Member for Carlton (Mr. Pickthorn) to induce the Government to take account of these cases, but I feel certain that the Government did not stop reading the Millard Tucker Report at any point. It is not very long and they must have read it all through. Why did they leave the hon. Member for Carlton to remind them about these types of case, and why did they not follow up the Millard Tucker Committee when they came to deal with them? I hope that the right hon. Gentleman will answer these matters while the opportunity is still ready and ripe for him. He is to get more of them presently.

Mr. Stevens

All I want to do, on behalf of my hon. Friends, is once more to thank my right hon. Friend the Chancellor of the Exchequer for accepting the persuasive arguments which some of us used at an earlier stage of the Bill, partly for the two-job people and partly for the old boys like myself.

I heard the how and learned Member for Kettering (Mr. Mitchison) express surprise that in a crisis year these large figures, up to £1,125, should be contemplated; but the hon. and learned Member has clearly forgotten what my right hon. Friend the Chancellor of the Exchequer was so careful to point out— that this is not consumer spending, but, on the contrary, is a form of saving, because the premiums are paid to insurance companies and go to swell the gross total of the national savings. I should have thought that that was a good thing for the nation as well as being a reasonable thing for the individual concerned.

Welcome as I find these proposals, I do rather regret the limitations which have been imposed. I think that my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens) was so right when he pointed out that the vast majority of self-employed persons, whether they be professional, or garage proprietors or shopkeepers, do not belong to the category of wealthy friends of hon. Members opposite who start with £7,500 a year when they are 21. We do not mix with that type of person who has been referred to in our debates today.

Very few self-employed people reach £7,500 a year at all, and of the very few who do, I think that they earn it and deserve it, and they reach it only in the last three or five years of their working lives. The consequence is that these stories of people who have been working for years for £7,500 a year, or have worked for 10 or 15 years at £1,125, are so exaggerated they can be dismissed as untrue.

No, far from feeling these figures are excessive, I look forward to a future Budget and Finance Bill in which my courageous and right hon. Friend the Chancellor will give full expression to what I think most of us feel in our hearts as being just to senior civil servants, just to the chairmen of nationalised boards, just to retired officers of the three Services, just also to self-employed persons, and put in figures substantially higher than those which we are considering at the present.

Mr. Mitchison

May I ask the hon. Gentleman whether I could summarise his speech in this way, by reference to another accountant, the turf accountant in the well-known book called "Love on the Dole," whose cry was, if I remember aright, "The sky's the limit"?

Mr. Stevens

The hon. and learned Gentleman's choice of reading matter, of course, I must leave to him. I have not read that book. [HON. MEMBERS: "Shame."] I would refer the hon. and learned Gentleman to a speech made by his right hon. and learned Friend the Member for St. Helens (Sir H. Shawcross) at a meeting yesterday, and widely reported in the Press today. I am sure that he is of one opinion with his brother lawyer.

As I say, I think my right hon. Friend is much to be thanked by hon. Members in all parts of the Committee for doing something for the self-employed even though at present he has not brought them up to the level of senior civil servants, retired officers of the three fighting Services, and the chairmen and members of the nationalised boards. The hon. and learned Member for Kettering suggested that Part 1 of the Schedule goes beyond Tucker. What he evidently has forgotten for the moment is that Part II does not go as far as Tucker. I once again express my thanks to my right hon. Friend.

Mr. H. Brooke

I am very much obliged to my hon. Friend the Member for Langstone (Mr. Stevens) for what he has said. I shall try in a minute or two to answer the questions of the hon. and learned Member for Kettering (Mr. Mitchison). I think he was slightly confused about my hon. Friend the Member for Carlton (Mr. Pickthorn). It was not due to him that we discovered that there were potential late entrants. We certainly knew that all along. What I said was that my hon. Friend was the first person to draw the attention of the Committee to the problem of the two-job man.

The hon. and learned Member asked whether, under Part I, we were departing from the Millard Tucker Committee's recommendations for the two-job man. I am not quite sure what the answer is, because the Millard Tucker Committee made no recommendations on that type of person. We have devised this scheme which we hope will do justice. All of us, on both sides, recognise the debt we owe to the members of the Millard Tucker Committee. I think that the hon. and learned Member, although he correctly spotted another item of the Report, will have to search long before he finds the two-job man there.

Mr. Mitchison

Is not this really a case of the partially provided for employees?

8.15 p.m.

Mr. Brooke

No. The partially provided for employee is a different case where the man is in a pension scheme, but it is a scheme of a character which will produce a pension that is quite out of line with the type of pension for which a man in an ordinary, full pension scheme would expect to qualify.

With regard to Part II the hon. and learned Member was entirely right in saying that we have departed substantially from paragraph 400 of the Millard Tucker Report, and that is primarily because, having examined with care and sympathy the Millard Tucker Committee's recommendations for potential late entrants, we found the recommendations impracticable. We could not have worked them. It would have involved, among other things, looking back over a period of 17 years and seeking definite evidence whether a person was self-employed for the whole of a tax year 15, 16, 17 years ago, with a good deal of money dependent upon the result. That seemed to us to be getting well beyond the range of practicability.

We have devised this, as we think, much better and much simpler scheme, where there will be no dubiety, and where people will know exactly where they are. I hope that this improvement which has been made by my right hon. Friend will bring legitimate satisfaction to many people who can take advantage of it.

The hon. and learned Member asked about the cost of Part II. If the hon. and learned Member addresses his mind to it he will see that any extra cost loaded on by Part II is bound to dwindle to nothing in 30 years' time because the only people who can take advantage of Part II are those who are over the age of 40. He criticised me for a moment for speaking in terms of ages rather than years. I was doing that for simplicity's sake. I thought I made it clear in my speech that all this was by calendar years and not by age, but 30 years hence all those people will be over 70 and will no longer be within the range of this scheme which allows tax relief.

Therefore, there will be a tapering of the extra cost over those 30 years. I still stick to my statement that as soon as we have got the scheme running on a normal basis, in the first year of that character, the cost is likely to be 25 per cent. higher than it would otherwise be by reason of the provision for the late entrants.

Schedule read a Second time and added to the Bill.

Bill reported, with Amendments; as amended (in Committee and on recommittal), considered.