Section two hundred and five of the Income Tax Act, 1952 (which defines the expressions "small maintenance payments" and "small maintenance order"), shall be amended as follows:—
- (1) By inserting as a new subsection to replace the existing subsection (2), which is hereby repealed, the paragraph set out below, that is to say—
- "(2) The age referred to in paragraph (b) of subsection (1) of this section is twenty-one years of age".
(2) By inserting as a new subsection (3) to replace the existing subsection (3), which is hereby repealed, the paragraph set out below, that is to say— "(3) The amount referred to in paragraph (i) of subsection (1) of this section is—
- (a) in the case of payments to or for the benefit of a woman for her maintenance, five pounds; and
- (b) in the case of payments to any person for the benefit of, or for the maintenance or education of, a person under the age specified in subsection (2) of this section, thirty shillings".—[Mr. Simon.]
§ Brought up, and read the First time.
§ 3.32 p.m.
§ Mr. J. E. S. Simon (Middlesbrough, West)
I beg to move, That the Clause be read a Second time.
This Clause seeks to remove an anomaly in the law whereby a wife who has suffered a matrimonial wrong at the hands of her husband is able to get one type of order in a court of summary jurisdiction, but, when she goes to the High Court, can only get what, from the point of view of tax, is a less favourable type of order.
We are concerned here with a class of person with whom the House will have especial sympathy. These people are in all cases women of small means, because this type of order relates only to women of small means; in addition, they are women who have already suffered great hardship in their personal lives—whose lot, in any event, must be a bitter and a hard one.
404 It must be rare when this House not only can remedy an injustice to individuals but, at the same time, correct an anomaly in the law. When one adds to that that in this case we shall also be effecting an administrative saving, one can say that it must be a very rare event that such a concomitance of favourable circumstances is found before the House in considering a new Clause.
The matter arises in this way. Before 1944, a wife who had had a matrimonial wrong committed against her by her husband could either go for a separation or maintenance order in a court of summary jurisdiction, or she could sue for divorce or separation in the High Court. In either case the court had jurisdiction to make a maintenance order in her favour.
The way it operated for tax purposes was this. The husband, in all cases, whether the order was made in the High Court or in a court of summary jurisdiction, paid over the sum awarded in two parts. He paid over the tax on the, sum awarded by way of maintenance, and at the full rate—even though neither he nor his wife may have had sufficient income to attract tax at the full rate, he had, nevertheless, to pay the full standard rate of Income Tax—to the Inland Revenue; and he handed over only the balance to his wife. All she could do in order to get what the court thought was right for her was to get from her husband a certificate of deduction of Income Tax, present that to the Revenue authorities and claim a repayment of tax.
Obviously, that had very grave disadvantages. In the first place, there was the overriding administrative disadvantage in that the Inland Revenue was acting as a clearinghouse for these tax rebates; because in very many cases the wife was not liable to pay any tax at all on her small order and, therefore, gained the full amount of the rebate. As a result, some quite unnecessary work was being done by the Inland Revenue authorities, who had, of course, to be satisfied that everything was in order.
It also involved great personal hardships for wives in poor circumstances, because they were kept out of the money to which they were entitled, and these were all cases of women who had been abandoned in some way or another by their husbands. They were kept out of 405 their money, or a considerable part of it, when Income Tax at the full rate, amounting to nearly half of the amount was paid, until the matter was cleared with the Inland Revenue authorities. If the husband was recalcitrant, or ignorant, or feckless she could be kept out of her money a very long time, owing to his failure to render the proper certificate of deduction.
It was for those reasons, I apprehend, that by Section 25 of the Finance Act, 1944, a new type of order could be made. If the sum ordered by way of maintenance was within the amount stipulated in that Section, what the husband did was to pay over the whole sum to the wife; and only if she was liable herself for tax would she be responsible to the Revenue authorities for paying tax on that sum.
Of course, that meant that the evils which, I suggest, flowed from the previous system were ameliorated, both as to the administrative inconvenience and as to the wife suffering hardship. The amounts of the order that could be made under the Finance Act, 1944, were £2 in the case of an order in favour of the wife and £1 in favour of a child of the marriage. Those provisions applied to all courts, wherever the order was made, the High Court or the court of summary jurisdiction, or the county courts in the rare cases when they made such an order.
The matter remained on that footing until 1949, when by the Married Women's (Maintenance) Act the jurisdiction of the courts of summary jurisdiction to award maintenance to a wife in respect of herself and her child was extended. It was raised in the case of a wife from £2 to £5 and in the case of a child from 10s. to 30s.
The provisions of Section 25 of the Finance Act, 1944, to which I have referred, were made applicable to those increased amounts. In other words, the system which had been found satisfactory as far as the maintenance orders for the smaller amounts paid up to them had been concerned was made applicable to these larger sums. But that concession was limited to orders made under the 1949 Act. The High Court was still limited to its £2 in the case of a wife and its £1 in the case of a child. Even courts of summary jurisdiction had a different tax system for their orders, 406 according to whether they were made under the Married Women's code or under the Guardianship of Infants' code.
The Guardianship and Maintenance of Infants Act, 1951, raised the jurisdiction in respect of orders made under the Guardianship of Infants Act—because, as hon. Members will appreciate, married women when seeking maintenance for a child often go under the one code as much as the other. Jurisdiction to make orders under the Guardianship of Infants Acts was increased to 30s. in respect of the child, and the 1944 provisions were made applicable to that type of payment. These provisions were consolidated in the Income Tax Act, 1952, which the new Clause seeks to amend.
The purpose of the Clause is to correct the anomalies which are to be found in the present law, whereby there is a different tax code applicable to orders for the same amount according to the court in which they are made. I submit that such a differentiation has very little to recommend it. All the arguments which led to the reforms in 1949, and the extension of the concessions to sums of £5 for a wife and 30s. for a child, apply equally in the High Court as in a court of summary jurisdiction.
There are a number of further arguments. Over 50 per cent. of divorce cases now are legally aided and, therefore, a great number of women who are in the circumstances envisaged by the reform that was found in the Finance Act, 1944, come to the High Court for relief. They can go before the very experienced registrars of the High Court to have their maintenance assessed. But at the moment the registrars have no powers to make the sort of order, as far as tax is concerned, that courts of summary jurisdiction have; and, therefore, if she wishes to have that sort of order, the wife is forced into a court of summary jurisdiction and she receives no legal aid. That is an unnecessary anomaly and a hard ship on a class of the community who already, by definition, will have suffered severely.
I am told that if the new Clause is accepted the bulk of the orders will be in the region of £3 to £4 a week. The wife, if she goes to the High Court, has to wait for repayment of tax rebate, and if the husband is a doubtful payer he will not produce the certificate and she will be 407 without her money for at least a month, and it may well be longer. She is a class of woman who does not easily obtain credit.
There are anomalies, also, in respect of the child. Not only have we now an anomaly as to the amount payable to the child, but also as to the age of the child; because in a court of summary jurisdiction this type of small maintenance order can be made in respect of a child up to the age of 21 for a larger amount, whereas in the High Court it can only be made up to the age of 16 in respect of a smaller amount. In these days, when we are doing our best to encourage parents to keep their children at school beyond the age of 16, such a differentiation cannot be justified.
The extension of the jurisdiction to the High Court will result in a further saving in administrative costs to the Revenue, in that it will not have to carry out the monthly working of the rebate system. The cost of the concession, if anything, must be infinitesimal, because it can only relate to the balancing of the allowance as between husband and wife. In respect of the children it can be at most only £10 a year for each child. For all these reasons, I commend the Clause without hesitation to the House.
§ Mr. Geoffrey Stevens (Portsmouth, Langstone)
In view of the very clear and careful exposition of the new Clause by my hon. and learned Friend the Member for Middlesbrough, West (Mr. Simon) there is nothing more for me to do than formally to second the Motion and commend the Clause warmly to the House.
§ 3.45 p.m.
§ Mr. G. R. Mitchison (Kettering)
The hon. and learned Member for Middlesbrough, West (Mr. Simon) has an excellent and purely professional acquaintance with all the workings of the divorce courts. He put this somewhat complicated question so clearly that there is no need whatever to repeat the arguments which he adduced. This appears to be an anomaly which, for the reasons he gave, bears hardly on just the wrong people. It is something the remedy of which appeals to my hon. and right hon. Friends and myself just as much as I hope and trust it will appeal to the 408 Government. If, as I feel sure, the Government intend to accept the Clause, I believe that they will do so with the support of the whole House.
§ The Economic Secretary to the Treasury (Sir Edward Boyle)
I should like to join in the tributes paid to my hon. and learned Friend the Member for Middlesbrough, West (Mr. Simon) for the extremely clear and lucid manner in which he expounded the Clause to the House and the fairness with which he put his case. I hope, therefore, that the House will not misunderstand me when I say that he has an intimate knowledge of divorce and maintenance, about which he sometimes speaks.
The object of the Clause, as my hon. and learned Friend explained, is to increase the extent of the class of "small maintenance payments" as defined in Section 205 of the consolidating Income Tax Act, 1952 which, by virtue of Section 206, are payable without deduction of Income Tax and are assessable directly upon the recipients. Until 1944, periodical payments under court orders for the maintenance of women and children in divorce and separation cases were payable under deduction of tax in accordance with the normal Income Tax law, but Section 25 of the Finance Act, 1944, changed this law in relation to small maintenance payments by making them payable in full. The main purpose of the change was to relieve the difficulties which magistrates found when issuing warrants for payment of arrears.
The intention of the Clause is to abolish the distinction which the present definition of "small maintenance payments" draws between those payments which are made under High Court orders and those which are made under magistrates' orders. I can see the force of the argument that the present distinction seems to be anomalous. It originates in the fact that when the maxima of the amounts which magistrates could award were raised in 1949, under the Married Women (Maintenance) Act, the limits for non-deduction of tax in magistrates' cases were raised to correspond, but no corresponding alteration was made in the limits for non-deduction of tax in High Court cases, which would have required separate legislation.
I see that at first sight this seems to be an amomaly and I expected my hon. 409 and learned Friend to make the point that wives in whose favour small High Court orders had been made suffer inconvenience because of the need to claim and recover Income Tax which they are not strictly liable normally to bear. However, I think it might be a mistake for us to consider this matter absolutely on its own. We have no reason to think that the present state of the law is having any specially harsh effects. At the same time, however, my right hon. Friend is very ready for this matter to be fully considered along with the problem of the law of maintenance generally, and he will suggest that the Inland Revenue should discuss with the department of the Lord Chancellor and the Law Officers whether a change in the law may be desirable.
There are some drafting objections to the new Clause as it appears on the Notice Paper. They are rather technical points with which I need not weary the House. I put it to my hon. and learned Friend that the most satisfactory solution would be if the Inland Revenue discussed this question with the Law Officers and with the department of the Lord Chancellor, and that if it is thought that a change in the law is desirable, we will see to it that the change is made as soon as a suitable opportunity for legislation presents itself. My right hon. Friend thinks that in view of those technical defects in the proposed Clause it would be better to postpone legislation on this subject until those discussions have taken place.
With the asurance that we realise there is a point here which needs to be looked at carefully, I hope that my hon. and learned Friend may consider withdrawing his proposed Clause.
§ Mr. Simon
We have learned in this House that the word "never" means "perhaps". I hope that in this case, therefore, "perhaps" will mean "yes". I do not know how long my hon. Friend proposes for these discussions. I accept from him readily that there are technical objections to the Clause as drafted, and if he envisages those discussions being over before next year's Finance Bill, I would ask leave to withdraw the Motion.
§ Mr. Harold Wilson (Huyton)
Before the House considers whether the Motion and Clause should be withdrawn, I want 410 to put a point to the hon. Gentleman the Economic Secretary. On this side of the House we are impressed by the case made by the hon. and learned Gentleman the Member for Middlesbrough, West (Mr. Simon). To many of us it was a new point, but it was put so convincingly, and it was made so plain that hardship is caused, that we felt that if the Government did not accept the Clause there would be a strong case for dividing the House upon it.
Now the Economic Secretary has produced reasons why there should not be a Division. The hon. Gentleman has suggested that the matter is to be considered rather more broadly than in the context of the proposed Clause, and has pointed out that there are some drafting weaknesses in it. That surprises me, since it has come from so great an authority on the subject as the hon. and learned Gentleman.
We on this side of the Committee are in some difficulty in voting. We do not want to divide the House unnecessarily and we have a pledge from the Government that they will consider the matter, I am sure, sympathetically. I hope, however, that the Economic Secretary intends to treat this as a matter of some urgency, and will not just leave it to be looked at some time next year as in the case of many other things we heard about during earlier stages of the Bill. Can the hon. Gentleman say how quickly he thinks the examination can be carried out, and when he feels that it might be possible to produce the necessary legislation?
Of course, there would be obvious difficulties about having this Finance Bill amended in another place. We do not know whether any further Measures will he brought forward by the Chancellor of the Exchequer in the course of the next year which would enable him to do what is asked. Does it really mean waiting for a whole year, with all the hardship referred to, or can the hon. Gentleman hold out any hope that we shall get some legislation in the not too distant future?
For example, it occurs to me that when this matter has been looked at it could be the subject of a one-Clause Bill, which I can promise the Government we on this side of the House would give full co-operation in getting through quickly. Can we have some idea of the time-table which the Economic Secretary has in mind, and 411 the kind of legislative facilities he would propose for carrying into law the result of the examination?
§ Sir E. Boyle
With the leave of the House, Sir, may I say that I cannot give any pledge this afternoon about a time-table. There are quite a number of candidates for tidying up this part of the law, and I do not think that a one-Clause Bill on this subject would be an advantage. What my right hon. Friend is keen on is that the Inland Revenue and the department of the Lord Chancellor and the Law Officers should look at all this part of the law and consider the various candidates before legislation is proposed.
§ Mr. Wilson
By leave of the House, Sir, may I put this point to the hon. Gentleman? When he refers to this side of the law and the number of candidates, I am not clear whether he means the side of the law relating to maintenance and divorce——
§ Mr. Wilson
Again, one does not know, from what the hon. Gentleman has said, how big a job that will be.
At an earlier stage of the Bill my hon. Friend the Member for Sowerby (Mr. Houghton) put it to the Chancellor that there is the strongest case for legislation on the administration of taxes generally, in a non-revenue and non-taxing sense. For instance, there are the 15 or more recommendations of the Royal Commission. I take it that the hon. Gentleman is not referring to anything as broad as that. I hope that the Chancellor will consider the possibility of legislation in the near future to tidy up the administrative side of the tax system, of which this is one example.
From what the hon. and learned Gentleman has said this seems rather more urgent than would justify it waiting to be considered as part of the general consideration of the administration of taxes. We are not too happy about the assurance which has been given, and if we do not divide the House I hope the Government will not take that as any 412 excuse for not proceeding quickly and reporting to the House at the earliest opportunity.