§ (I) In paragraph (a) of subsection (1) of section two hundred and twelve of the Act of 1952 (amounts of relief in respect of children) for the reference to one hundred pounds there shall be substituted a reference to one hundred and ten pounds.
§ (2) This section shall not be deemed to have required any change in the amounts deducted or repaid under section one hundred and fifty-seven (Pay as you earn) of the Act of 1952 before the twenty-second day of June, nineteen hundred and sixty.—[Mr. Houghton.]
§ Brought up, and read the First time.
§ Mr. HoughtonI beg to move, That the Clause be read a Second time.
§ Mr. Deputy-Speaker (Sir Gordon Touche)It would be convenient to discuss with this new Clause the new Clause—Increase of personal reliefs—and the new Clause—Increase of a personal relief.
§ Mr. HoughtonYes. That will be convenient to me and to the House, I am sure.
For the first time today we come to a matter concerning the ordinary taxpayer in the street. For hours past we have been dealing with dividend strippers, hobby farmers, golden handshakers, and all sorts of people who have been 400 raiding the Chancellor's hen-roost. Only now at this late hour are we able to spare a little time for the general taxpayer—the married man, the single person, and the family man.
I wish to draw the attention of the House to the need for some relief in personal allowances. Last year the Chancellor of the Exchequer reduced the standard rate by 9d. in the £. We criticised the concentration of tax reliefs on the standard rate. We pointed out that in 1955 his predecessor, when reducing the standard rate of Income Tax by 6d., accompanied it by widespread improvements in personal reliefs. But last year the right hon. Gentleman felt it to be a good thing from the point of view of the economy and desirable from the point of view of taxpayers generally, especially industry, that he should concentrate the reliefs he could give in the Income Tax field on the standard rate. He said last year that it was the turn of the standard rate. We all assumed that this year it would be the turn of personal reliefs, if indeed anybody gets a turn in matters of Income Tax reliefs year by year.
It is significant that in the Bill the only reliefs which the right hon. Gentleman has been able to give to taxpayers generally are these. He has increased the personal relief for those who have dependent relatives from £60 to £75 a year. He has increased the relief for the taxpayer who has a housekeeper from £60 to £75. He has introduced a modest but welcome new relief for widowers and widows with young children who do not qualify for housekeeper relief but whose claim to some special tax allowance was generally acknowledged by the House. There is nothing in the Bill to improve child relief or personal reliefs for married and single persons.
The Clause proposes one special relief in respect of children. It is a proposal to increase the lowest tier of child allowance from £100 to £110, leaving alone the £125 for the over elevens and the £150 for the over sixteens still at school.
This admittedly asks the right hon. Gentleman for considerable reliefs in total tax, though the proposal we are making in regard to child relief is much more modest than the one we made in 1958 and again in 1959 to increase the child allowance by £25. In framing the present proposal we have had regard to the right 401 hon. Gentleman's natural restraint on tax relief this year.
We are bound to admit that in the recent history of the child relief there have been very favourable improvements. Since 1951 the child allowance for a child under 11 has been increased by 40 per cent., from £70 to £100. For a child between 12 and 16 the increase has been 80 per cent., from £70 to £125. For the over 16 and still at school the increase has been over 100 per cent., from £70 to £150. 11.15 p.m.
These are spectacular increases, but even so they have to be put into the general picture of the tax burden on the family man today. If the pre-war personal allowance were translated into current money values, the 1950 child allowance of £40 would be £140 today.
Our proposal in respect of child relief is based on nothing more than this: first, that it should have been the turn of personal reliefs for some improvement this year; and, secondly, only modest improvements are possible and not all-round changes. But we certainly believe that the child allowance commands attention at all times because of the family man's position in society. We think that the lower tier of child relief is entitled to special attention this time because it was left out of the Chancellor's bounty in 1957. In 1952 all child allowances were increased from £70 to £85; in 1955 all child allowances were increased from £85 to £100; but in 1957 the allowance for the older children was increased while the standard allowance of £100 for the younger children was left alone. While the older children have had their reliefs increased by £25 and £50 respectively, therefore, the younger child has continued to impoverish his parents unheeded by the Chancellor.
On all these matters at this stage the question of cost to the Exchequer will arise. It is a great pity that such a minor improvement should cost relatively so much, although it would be a maximum benefit to the taxpayer of £3 15s. 3d. a year, plus in some cases some additional relief for Surtax payers. Yet, while the total cost may be as much as £8 million, we should bear in mind that the increase in the dependent relative relief will cost over £6 million in a full year, and we 402 think that the Chancellor should be able to spare reliefs of equal amounts for children as for dependent relatives.
In mentioning cost, it is interesting for the House to note that the cost of such a small concession as this shows how wide is the net cast by Income Tax. After all we hear about the family man paying little or no tax, we find that to give an extra £10 in relief to children under the age of eleven may cost between £8 million and £10 million.
I may in passing just refer to our other two new Clauses. The first—Increase of personal reliefs—is much more ambitious than the second—Increase of a personal relief—and proposes to increase the married relief rom £240 to £250 and the single relief from £140 to £150. The second is confined to an increase for the married man only, from £240 to £250. I know that the Chancellor will say that the double relief, for single and married persons of £10 each, may cost £40 million to £50 million and that the £10 increase for the married man alone might cost £20 million, despite, as I have said, the smallness of the reduction in actual tax, amounting to £3 15s. for the married man, plus certain additional benefits in the case of Surtax payers.
The Chancellor may say, "I cannot afford it this year. It is not in keeping with my general budgetary and financial policy to grant reliefs on this scale at this time." That, I am sure, is what he will tell us.
To that, we say that if the Chancellor is in search of additional revenue to cover this type of deserving relief, we can tell him where to go for it. There is no doubt that since the Bill was introduced into the House, there has been a greater public awareness of the speculation in land value that is going on and the enormous untaxed capital gains that are being made by many people—those who started small and are now big, those who started poor and now boast, or others do on their behalf, that they are millionaires.
There is no doubt that in present circumstances the most crying scandal of our fiscal system is our failure to tax these substantial capital gains. Had the Chancellor constructed his Budget on more ambitious and equitable lines, there is little question that he would 403 have been able to grant substantial reliefs to personal taxpayers this year, as it was their expectation that they would benefit from concessions after the concentration of reliefs last year on the standard rate.
We impress upon the Chancellor that he has in the three new Clauses a choice of reliefs to personal taxpayers. The one that we would especially commend to him, because it is more modest in cost and makes, perhaps, the strongest appeal to the House, would be the additional relief for the younger children.
Mr. AmoryThe hon. Member for Sowerby (Mr. Houghton), as is his custom, has made his case with great moderation and I do not quarrel in any way with the new Clauses that have been put forward. My hon. Friends and I on this side are conscious that, in spite of the reductions which we have made in the rates over recent years, the level of direct taxation is still very high. We for our part have been a good deal more ready to reduce those rates when opportunity has permitted than right hon. and hon. Members opposite were in their time in office.
The hon. Member for Sowerby has mentioned that these personal allowances have not gone up in proportion to the changes in the value of money since pre-war. That may well be so, but it is not an accepted principle of taxation that either these allowances or the rates of taxation should vary in proportion necessarily to changes in the value of money. These allowances are merely part of our overall scheme of graduation.
If one looks into that more closely, however, one finds that hon. Members opposite, during their period of office, did little to follow that principle, because there were no spectacular increases in these allowances during their time. Between pre-war and 1945, the price level went up about 60 per cent., but by 1948 the Labour Government had only just about got back, or little better than got back, the pre-war money value of these allowances. Between 1948 and 1951, they increased these allowances much less than the increase in the price level.
During our time in office, the price level has gone up about 25 per cent. But 404 the increases in these allowances has been greater than that. I will not go through them all, because the hon. Member for Sowerby accurately stated the percentages by which the children's allowances had been raised over recent years—42 per cent. in the case of the younger children, 80 per cent. in the case of the over-elevens and over 100 per cent. in the case of the older children. I have always thought that that considerable increase in the allowance for the older children, introduced by my right hon. Friend the Member for Monmouth (Mr. Thorneycroft) in 1957. was a very good provision.
In the case of the single person, we have increased the rates by 27 per cent., which is more than the price level has changed, and the same in the case of the married allowances. In the 1957 Budget there was the big increase, to which I have referred, in the graduated allowance for children and a special relief for the elderly.
In 1958 I introduced reliefs again for the elderly, and in 1959, as the hon. Gentleman has just very fairly stated, I said I considered that it was the turn of the standard rate; and this year I have proposed the increases of £15 in the housekeeper's and dependent relative's allowances. There are also the new allowances for widows and for widowers with children.
Let us now turn to the cost of these Clauses. According to our estimates, the hon. Gentleman has under-estimated the cost. Our forecast is that the proposal which he and his hon. Friends have put forward for the children's allowance would cost £13 millions in a full year, while the proposal for the married man would cost £29 millions. It would cost £57 millions in a full year if we conceded the single as well as the married allowance, and, taken together, I am afraid that it is quite impossible to contemplate increases of that order this year.
I would remind the House that the object of this Budget was to make a contribution towards keeping the economy in balance and ensuring price stability; and I think that price stability is the greatest service which one can render to those who have family responsibilities or, indeed, to all who find the burden of direct taxation rather heavy.
405 If I had proposed a net reduction in taxation it would have resulted in increased spending power and that would have been in clear conflict with the needs of the economy this year.
I cannot recommend the House to accept these new Clauses because they really are in conflict with the needs of the economy. Another reason is that this proposal is impossible because I cannot afford reliefs of the scale involved.
§ Mr. JayThe Chancellor's reply was very disappointing and his complete refusal to make any concession on these personal allowances is in strange contrast with his gentleness towards the dividend strippers and the hobby farmers. The fact is that over these last three years, very considerable concessions have been given in direct taxation, but they have almost all gone to the benefit of business profit rather than to personal incomes.
We have, in fact, had no concession on the major personal allowances since 1957. In the whole of the three years of the right hon. Gentleman's Chancellorship, the personal allowances have got very little indeed; and since this is the Chancellor's last chance—or so we are led to believe—would he not consider again his hardness of heart towards these personal allowances? He cannot deny that we had last year a major reduction in the standard rate of tax, but most of the benefit goes to business profits and not to personal incomes; and in so far as it does go to personal incomes, it goes more to the higher than to the lower range. We have also had a considerable reduction of Profits Tax; so again, most of the benefit goes to businesses.
I should have thought that whether one argues on the basis of incentive, or on the basis of need—and they are the most usual arguments for reductions of Income Tax—by far the strongest argument is for some concession on these personal allowances. 11.30 p.m.
On grounds of incentive I would have thought the Chancellor would not have denied that there is a far stronger case for Income Tax reliefs on personal earned incomes than on any other type 406 of incomes which bear tax. If, on the other hand, one argues on grounds of need, I do not think there can be any doubt whatever that there is a much stronger case for a reduction in the personal allowance rather than for a straight reduction in the standard rate. Yet last year the Chancellor was willing to concede something like £300 million in reliefs in tax very largely in the reduction of the standard rate of Income Tax, and this year he is not prepared to find even the £13 million which, he said, was the sum which would be conceded if our proposal in the case of the child allowance were met.
I think that of all the proposals my hon. Friend put forward there is the strongest case of all for further relief for the younger children. I have never been as sure as the Chancellor is that the discrimination between children of different age, introduced three years ago, is really justifiable, but even if it is justifiable I think that there is an extremely strong case for increasing the relief in the case of those children who have got the smallest.
The Chancellor argued that in the last few years he had increased the reliefs to a greater extent to countervail any fall in the value of money than the Labour Government had in previous years. What he did not tell us was that, as The Times showed in an article just before the Budget, if we examine Income Tax over the last five or six years the remarkable fact we find is that the proportion of personal incomes taken in Income Tax has actually risen in the five years before this Budget, and since the biggest reliefs by way of the standard rate have been given to the biggest incomes bearing Income Tax, if the average proportion has risen, it follows inevitably that the lower incomes paying Income Tax must be paying a higher proportion now than they were four or five years ago. So I think there is very little in the Chancellor's argument that he has given sufficient relief by way of personal allowance to allow for the fall in the value of money during those years. The fact is that he has given the great part of relief over his three years' term to business profits and the highest personal incomes. He has done extremely little for personal allowances, where clearly the need is greatest.
407 I say again that this is his last chance. If he is not a little more forthcoming before we have finished, my hon. Friends will, I hope, carry this matter to a Division, to register our opinion tonight, and, if the Chancellor does not give way, to be a strong incentive to his successor,
§ whoever he may be, to give any reliefs next year in this form, rather than by any reduction in the standard rate.
§ Question put, That the Clause be read a Second time:—
§ The House divided: Ayes 90, Noes 172.
409| Division No. 131.] | AYES | [11.33 pm. |
| Ainsley, William | Hayman, F. H. | Randall, Harry |
| Allaun, Frank (Salford, E.) | Herbison, Miss Margaret | Redhead, E. C. |
| Awbery, Stan | Hilton, A. V. | Reynolds, G. W. |
| Bacon, Miss Alice | Holman, Percy | Roberts, Goronwy (Caernarvon) |
| Baxter, William (Stirlingshire, W.) | Houghton, Douglas | Ross, William |
| Bowden, Herbert W. (Leics, S.W.) | Hughes, Cledwyn (Anglesey) | Slater, Mrs. Harriet (Stoke, N.) |
| Braddock, Mrs. E. M. | Hughes, Hector (Aberdeen, N.) | Slater, Joseph (Sedgefield) |
| Brown, Thomas (Ince) | Hunter, A. E. | Small, William |
| Cliffe, Michael | Hynd, John (Attercllffe) | Smith, Ellis (Stoke, S.) |
| Craddock, George (Bradford, S.) | Jay, Rt. Hon. Douglas | Snow, Julian |
| Crosland, Anthony | Jenkins, Roy (Stechford) | Soskice, Rt. Hon. Sir Frank |
| Cullen, Mrs. Alice | Jones, Jack (Rotherham) | Spriggs, Leslie |
| Davies, G. Elfed (Rhondda, E.) | Jones, J. Idwal (Wrexham) | Stewart, Michael (Fulham) |
| Davies, Ifor (Gower) | Kelley, Richard | Strachey, Rt. Hon. John |
| Dempsey, James | Kenyon, Clifford | Sylvester, George |
| Diamond, John | King, Dr. Horace | Taylor, Bernard (Mansfield) |
| Dodds, Norman | Mabon, Dr. J. Dickson | Thomas, Iorwerth (Rhondda, W.) |
| Donnelly, Desmond | MacColl, James | Thompson, Dr. Alan (Dunfermline) |
| Fitch, Alan | McInnes, James | Timmons, John |
| Foot, Dingle | Mahon, Simon | Ungoed-Thomas, Sir Lynn |
| Forman, J. C. | Manuel, A. C. | Wainwright, Edwin |
| Fraser, Thomas (Hamilton) | Mapp, Charles | Wheeldon, W. E. |
| Galpern, Sir Meyer | Mason, Roy | Whitlock, William |
| Gordon walker, Rt. Hon. P. C. | Millan, Bruce | Williams, W. R. (Openshaw) |
| Gourlay, Harry | Mitchison, G. R. | Willis, E. G. (Edinburgh, E.) |
| Grey, Charles | Monslow, Walter | Winterbottom, R. E. |
| Griffiths, W. (Exchange) | Morris, John | Woof, Robert |
| Grimond, J. | Oram, A. E. | Yates, Victor (Ladywood) |
| Hall, Rt. Hon. Glenvil (Colne Valley) | Pentland, Norman | |
| Hannan, William | Price, J. T. (Westhoughton) | TELLERS FOR THE AYES: |
| Hart, Mrs. Judith | Probert, Arthur | Mr. Sydney Irving and Mr. Lawson. |
| NOES | ||
| Aitken, W. T. | Dalkeith, Earl of | Jackson, John |
| Allason, James | d'Avigdor-Goldsmid, Sir Henry | James, David |
| Amory,Rt.Hn.D.Heathcoat(Tiv'tn) | de Ferranti, Basil | Jenkins, Robert (Dulwich) |
| Arbuthnot, John | Donaldson, Cmdr. C. E. M. | Johnson, Dr. Donald (Carlisle) |
| Atkins, Humphrey | Drayson, G. B. | Johnson, Eric (Blackley) |
| Barber, Anthony | Elliott, R. W. | Jones, Rt. Hn. Aubrey (Hall Green) |
| Barlow, Sir John | Emery, Peter | Kerans, Cdr. J. S. |
| Barter, John | Farr, John | Kerby, Capt. Henry |
| Batsford, Brian | Fell, Anthony | Kerr, Sir Hamilton |
| Berkeley, Humphry | Finlay, Graeme | Kershaw, Anthony |
| Biggs-Davison, John | Fisher, Nigel | Kirk, Peter |
| Bingham, R. M. | Fraser, Ian (Plymouth, Sutton) | Kitson, Timothy |
| Birch, Rt. Hon. Nigel | Gammans, Lady | Leavey, J. A. |
| Bishop, F. P. | George, J. C. (Pollok) | Lewis, Kenneth (Rutland) |
| Bossom, Clive | Gibson-Watt, David | Lilley, F. J. P. |
| Bourne-Arton, A. | Glover, Sir Douglas | Litchfield, Capt. John |
| Box, Donald | Glyn, Sir Richard (Dorset, N.) | Longbottom, Charles |
| Boyle, Sir Edward | Goodhew, Victor | Loveys, Walter H. |
| Brewis, John | Gower, Raymond | Low, Rt. Hon. Sir Toby |
| Bromley-Davenport, Lt.-Col, W. H. | Green, Alan | Lucas-Tooth, Sir Hugh |
| Brooman-White, R. | Grimston, Sir Robert | MacArthur, Ian |
| Browne, Percy (Torrington) | Hall, John (Wycombe) | McLaren, Martin |
| Bryan, Paul | Hamilton, Michael (Wellingborough) | McLaughlin, Mrs. Patricia |
| Bullard, Denys | Harris, Frederic (Croydon, N.W.) | Maclean,SirFitzroy(Bute&N.Ayrs.) |
| Carr, Compton (Barons Court) | Harvey, John (Walthamstow, E.) | MacLeod, John (Ross & Cromarty) |
| Chataway. Christopher | Heald, Rt. Hon. Sir Lionel | McMaster, Stanley R. |
| Chichester-Clark, R. | Hendry, Forbes | Maddan, Martin |
| Clarke, Brig. Terence (Portsmih, W.) | Hirst, Geoffrey | Maginnis, John E. |
| Collard, Richard | Hocking, Philip N. | Markham, Major Sir Frank |
| Cordeaux, Lt.-Col. J. K. | Holland, Philip | Marten, Neil |
| Cordle, John | Hopkins, Alan | Mathew, Robert (Honiton) |
| Corfield, F. V. | Hornsby-Smith, Rt. Hon. Patricia | Matthews, Gordon (Merlden) |
| Craddock, Sir Beresford | Howard, Gerald (Cambridgeshire) | Mawby, Ray |
| Critchley, Julian | Hughes-Young, Michael | Mills, Stratton |
| Crosthwaite-Eyre, Col. O. E. | Hutchison, Michael Clark | Montgomery, Fergus |
| Curran, Charles | Iremonger, T. L. | Nabarro, Gerald |
| Currie, G. B. H. | Irvine, Bryant Godman (Rye) | Nugent, Sir Richard |
| Osborn, John (Hallam) | Roberts, Sir Peter (Heeley) | van Strautaenzee, W. R. |
| Pannell, Norman (Kirkdale) | Roots, William | Vickers, Miss Joan |
| Partridge, E. | Ropner, Col. Sir Leonard | Wakefield, Edward (Derbyshire, W.) |
| Pearson, FranK (Clitheroe) | Scott-Hopkins, James | Wakefield, Sir Wavell (St. M'lebone) |
| Peel, John | Sharples, Richard | Wall, Patrick |
| Percival, Ian | Shaw, M. | Ward, Dame Irene (Tynemouth) |
| Pickthorn, Sir Kenneth | Simon, Sir Jocelyn | Watts, James |
| Pike, Miss Mervyn | Skeet, T. H. H. | Wells, John (Maidstone) |
| Pilkington, Capt. Richard | Smith, Dudley (Br'ntf'rd & Chiswiek) | Whitelaw, William |
| Pitman, I. J. | Smithers, Peter | Williams, Dudley (Exeter) |
| Pitt, Miss Edith | Stevens, Geoffrey | Williams, Paul (Sunderland, S.) |
| Powell, J. Enoch | Steward, Harold (Stockport, S.) | Wise, A. R. |
| Price, David (Eastleigh) | Storey, Sir Samuel | Wolrige-Gordon, Patrick |
| Prior, J. M. L. | Summers, Sir Spencer (Aylesbury) | Woodhouse, C. M. |
| Prior-Palmer, Brig. Sir Otho | Tapsell, Peter | Woodnutt, Mark |
| Proudfoot, Wilfred | Taylor. W. J. (Bradford, N.) | Worsley, Marcus |
| Ramsden, James | Temple, John M. | Yates, William (The Wrekin) |
| Redmayne, Rt. Hon. Martin | Thomas, Peter (Conway) | |
| Rees, Hugh | Thornton-Kemsley, Sir Colin | TELLERS FOR THE NOES: |
| Rees-Davies, W. R. | Tiley, Arthur (Bradford, W.) | Colonel J. H. Harrison and |
| Ridley Hon. Nicholas | Tilney, John (Wavertree) | Mr. J. E. B. Hill. |
| Ridsdale, Julian | Turner, Colin |
Mr. AmoryI beg to move, That further consideration of the Bill, as amended, be adjourned.
We have completed a lot of work today and made a great deal of useful progress. Though our work tomorrow looks quite formidable on paper, and is formidable, I think that we shall be able to give full consideration to all the Amendments and new Clauses which have been tabled and still complete the Bill at a reasonable hour. It is in that hope that I move the Motion.
§ Question put and agreed to.
410§ Bill, as amended (in Committee and on Recommittal), to be further considered Tomorrow.