HC Deb 21 June 1960 vol 625 cc233-87

(1) Where the total income of an individual includes, or would but for this section, include any sum chargeable to tax under Schedule A in respect of a house of which the individual is both owner and occupier, that sum shall be disregarded for all the purposes of the Income Tax Acts other than surtax or the furnishing of information if or in so far as the sum does not exceed fifteen pounds:

Provided that this subsection shall not apply to any individual in respect of more than one house in any year of assessment.

(2) For the purposes of this section "house" includes any residence or dwelling and a house owned by a married woman living with her husband and occupied by them shall be deemed to be owned and occupied by the husband.

(3) The enactments relating to income tax, and in particular Part III of the Act of 1952, shall have effect as if subsections (1) and (2) of this section were contained in the said Part III between sections ninety-two and ninety-three.

(4) 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 passing of this Act.—[Mr. Cronin.]

Brought up, and read the First time.

Mr. John Cronin (Loughborough)

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

The Chairman

It would be convenient to discuss with this new Clause the new Clause in the name of the hon. Member for Kidderminster (Mr. Nabarro)—Exemption from Schedule A for owner-occupiers—that in the name of the hon. Member for the Isle of Thanet (Mr. Rees-Davies)—Owner-occupier to be exempt from tax under Schedule A—and that in the name of the hon. Member for Orkney and Shetland (Mr. Grimond)—Abolition of Schedule A Income Tax.

Mr. Nabarro

On a point of order. You will have recognised, Sir Gordon, that though the new Clause which the hon. Member for Loughborough (Mr. Cronin) has just moved and that in the names of some of my hon. Friends and myself deal with the same general issue of Schedule A, they are very different in their content, because the new Clause which has been moved prescribes a limit of £15 for exemption from Schedule A whereas the new Clause in the names of my hon. Friends and myself deals with the total abolition of Schedule A on owner-occupied houses.

Having regard to that important difference between them, though you have ruled that they may be discussed together, is it possible for the Question to be put separately on these two new Clauses, for I find myself in the invidious position of having to vote against the new Clause now under discussion, but, of course, having to vote for my own?

Mr. H. Wilson

Further to that point of order. I should very much like to support the point made by the hon. Member for Kidderminster (Mr. Nabarro).

Mr. Nabarro

Jolly good.

Mr. Wilson

I am sure that it is for the general convenience of the Committee and in the interests of the time we get to bed tonight that we should take all these new Clauses together. I fully agree with the hon. Gentleman, as I am sure the Chancellor does, that what is proposed in the various new Clauses is very different in its ultimate conclusion. I do not object to the hon. Gentleman's account of it. That being so, it might be helpful to the Committee to give all hon. Members a chance of voting for their own proposals. We shall have the chance, presumably, of voting for ours, and it is only fair that on such an important issue the hon. Member for Kidderminster and his hon. Friends should have an equal right to vote for their proposals.

Mr. Donald Wade (Huddersfield, West)

May I also support that suggestion? You will have noticed, Sir Gordon, that the new Clause in the name of my hon. Friend the Member for Orkney and Shetland (Mr. Grimond) and myself goes considerably further than that in the name of the hon. Member for Kidderminster (Mr. Nabarro), which is also being discussed with the new Clause moved by the hon. Member for Loughborough (Mr. Cronin). It would be helpful if there could be a separate vote on these Clauses.

Mr. John Barter (Ealing, North)

On a point of order. May I draw your attention, Sir Gordon, to the fact that there is also on the Notice Paper a new Clause in the names of my hon. Friend the Member for Crosby (Mr. Graham Page) and several of my hon. Friends—

Mr. Nabarro

And mine.

Mr. Barter

—and that of my hon. Friend the Member for Kidderminster (Mr. Nabarro)—Allowance under Schedule A for owner-occupiers—on the same subject, but which, again, approaches this very delicate problem in a slightly different way. While I shall find myself in considerable difficulty in supporting the Opposition in their new Clause, I should be very glad if we could have a separate vote on my new Clause as well.

The Chairman

I shall call the new Clauses for a Division separately, but they can be discussed with the new Clause in the name of the right hon. Member for Huyton (Mr. H. Wilson), which has been moved by the hon. Member for Loughborough (Mr. Cronin). In view of the feeling of the Committee, I suggest that we have Divisions on all three.

Mr. Cronin

The purpose of the new Clause is quite clear. It is to give complete relief from Schedule A Income Tax up to a maximum of £15. In that respect it is completely different from the new Clauses being discussed with it. The purpose of limiting the concession to £15 is to confine it to owner-occupiers of the ordinary small house and small garden with which we are all familiar, and not to include large houses or extensive properties.

We on this side feel that Schedule A Income Tax is, to a large number of people, the most vexatious and oppressive tax, particularly to owner-occupiers of comparatively small dwellings and gardens. Such owner-occupiers are particularly deserving of sympathy. The man who saves to purchase a house with a garden to shelter his wife and children, and possibly his aged and ailing relatives, is particularly deserving of some support from the Committee as regards his fiscal obligations.

The owner-occupier of a small house and garden has many burdens. He has mortgage payments. Because of the prevailing high rates of interest he has to pay rather more in mortgage payments than is necessary. He has to cope, also, with the very high cost of post-war housing.

The number of people having to pay Schedule A Income Tax is steadily increasing. It increases with the number of people who have to pay Income Tax. As the Chancellor of the Exchequer pointed out in the House of Commons last year, since 1951 there has been an increase of 2¾ million taxpayers and during the same period there has been an increase of £494 million in the total amount of Income Tax paid. The right hon. Gentleman's original words are to be found in the OFFICIAL REPORT, vol. 607, c. 1015. Schedule A Income Tax increases in its incidence pari passu with the increase in Income Tax.

There are various arguments for and against this concession. I shall draw the Committee's attention, first, to the arguments in favour of the concession contained in the new Clause from the point of view of equity. First, Schedule A is not a tax on income. It is a tax on a notional income. It would appear from the elementary principles of justice that Income Tax should be charged on income and not on a purely hypothetical income existing to a large extent in the minds of the Commissioners of Inland Revenue.

It also seems rather inequitable that a man should be taxed on his beneficial enjoyment of occupation of real property when people who have a beneficial enjoyment of other forms of property are not taxed. To put it in simpler language, it seems unreasonable that a man is taxed because he possesses and occupies a house with a garden, when others having a caravan, a houseboat, a yacht, a painting by an old master, or a washing machine, do not pay tax on that property. It is fair to point out that a washing machine is already subject to Purchase Tax. It seems unfair that houses and gardens should be the subject of Schedule A, which is essentially a tax on houses. There is no reason why houses should be subject to tax rather than other forms of property.

There is another aspect of this subject which indicates that it is rather unfair from the point of view of fiscal legislation. The first £15 of interest on money invested in the Savings Bank has been free of tax since the Finance Bill, 1956.

4.15 p.m.

Mr. Nabarro

The hon. Gentleman's phraseology is a little loose. It is not free of tax. It is free of Income Tax, but not of Surtax.

Mr. Cronin

I am very grateful for the correction. It is free of Income Tax. It seems rather unfair that interest on savings of that nature should be free of Income Tax when savings put in the form of bricks and mortar and small pieces of land are subject to Income Tax.

A further aspect of this is that Schedule A Income Tax falls rather unfairly in its incidence on the different people who pay it. There is, as hon. Members on both sides know, relief in the form of maintenance claims. However, maintenance claims require a certain amount of expertise.

Mr. Nabarro

Hear, hear.

Mr. Cronin

I am glad that the hon. Member agrees with me. They require a certain amount of expertise in order to be successfully urged on Her Majesty's Inspectors of Taxes. I cannot do better than quote what the late Lord Jowitt said When Solicitor-General, namely, that Schedule A was the most complicated branch of an exceedingly complicated subject …"—[OFFICIAL REPORT, 6th June, 1940; Vol. 361, c. 1037.] It seems rather unfair to expect the average owner-occupier of a small house and garden to be familiar with the rather complicated technical, legal and fiscal matters involved in preparing a claim for maintenance repayments.

The result is that a person who is wealthy and can afford to employ an accountant is able to put in substantial maintenance claims. A person possessing special knowledge can do so. The ordinary person who cannot afford an accountant does not know how to obtain relief for maintenance payments.

This argument is borne out by the fact, which will no doubt have the Chancellor of the Exchequer's agreement, that maintenance claims are made in only one case in ten where Schedule A Income Tax is paid. There is obviously considerable unfairness in the incidence of this tax. It falls most heavily on those people who cannot afford accountants or do not understand the complexities of the law.

There is also a very strong economic argument in favour of some abatement of Schedule A. It is the elementary one of encouraging savings as much as possible Saving in the form of mortgage repayments is obviously a form of saving as desirable as, if not more desirable than, any other.

I appreciate that there are some substantial arguments against this concession. One which is frequently used is that a man who pays rent receives no tax reduction for his payments of rent. I do not think that that argument is as valid as it sounds, because the majority of owner-occupiers have to make mortgage repayments, which are very analogous to rent, throughout most of the period during which they are in beneficial enjoyment of their homes. Even those who pay for their homes by an outright sum by paying that sum pay rent for an indefinite period in the form of a lump sum. It is rather like the situation when a person instead of paying maintenance for his wife or family regularly and indefinitely makes one large lump sum payment. I therefore suggest that the actual capital expenditure on a house is almost exactly analogous to rent paid, but it is paid in one lump sum instead of periodically—

The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory)

Surely that is not right, is it? At the end of the period, the owner of the house is left with the house.

Mr. Cronin

I agree that that point should be made, but this is rather a complicated matter. Is it not rather similar, in reverse, to buying undated Government stock? A lump sum is paid and, as a result, one is free of further payments but receives a beneficial effect periodically, indefinitely.

I think that the Chancellor must accept that for all economic purposes a lump sum is the equivalent of a payment made regularly, even though it is not paid for more than a definite time. It is probable that the Chancellor will not agree with that—he does not look convinced—but I do not wish to take up the time of the Committee by expanding that much more fully.

Perhaps the next argument against this new Clause is that the Royal Commission on the Taxation of Profits and Income rejected the idea of modifying the scope of Schedule A Income Tax. It did that in 1955, and probably collected the evidence in 1954 and 1953. A lot of water has passed under the bridges since then. In any case, I do not think that we should regard the Royal Commission as being necessarily the ark and the scrolls and the covenant of fiscal legislation indefinitely, although I would be the last to deprecate the very excellent work of Lord Radcliffe and his colleagues.

It seems to me that the Commission's arguments against modification of Schedule A Income Tax were, perhaps, rather less substantial than most of the weighty matter referred to in its Report. First, in paragraph 824 of its final Report the Royal Commission said: … one of the fundamental assumptions of the tax code is that land is inherently a proper subject for taxation in a general income tax.… I feel that that assumption—and it is no more—requires considerable qualification. When land is divided into very small parcels it is no longer a particularly appropriate source of taxation.

The Commission gave as its second basis for rejecting a decrease in Schedule A Income Tax that a man who owned a house had a greater taxable capacity. At first sight, it would seem that that argument has some substance—a man who is the owner of a house does not have to pay rent, so he has more ability to pay tax. In actual practice, however, the vast majority of those owning houses are making mortgage payments, and even those who are not making mortgage payments are losing interest on the capital sum with which they had purchased their dwelling houses. The Commission's argument does not take into account the high cost of the maintenance of a house, the high cost of housing and the high cost of the very high interest rates involved. I therefore submit that a man who owns a house is not in a better position to pay Income Tax than is a person who pays rent.

The Royal Commission's views are not supported by An Coimisiún um Chánachas Ioncaim—the Commission on Income Tax of the Government of Ireland—which recently issued a report recommending that Schedule A Income Tax should be dispensed with completely up to the first £30. This very weighty work is available in the Library for hon. Members to study and, unlike its title, its contents are entirely in English. A very lucid and helpful mass of argument is there available in support of a substantial reduction in the scope of Schedule A Income Tax.

Another argument against the new Clause is that a taxpayer who does not own a house would not benefit. The same argument applies to a person who is prevented from taking part in other forms of savings. Some people, because of health or age, are unable to take out life insurance. Others cannot buy Savings Certificates. Others cannot obtain superannuation benefits, because those are not available in the job. The circumstance that a taxpayer who does not own a home cannot benefit cannot be used as an argument for not encouraging this particular form of saving.

I have no doubt that the Chancellor will refer to the cost of implementing the provisions of the new Clause. He said last year that it would cost £40 million in a whole year, but he should bear in mind—

Mr. H. Wilson

That was to abolish it altogether.

Mr. Cronin

Yes, I am glad that my right hon. Friend points that out. The Chancellor said that to abolish Schedule A Income Tax would cost the Treasury about £40 million—

Mr. Nabarro

With respect, the hon. Member must get this right. My right hon. Friend said last year that total abolition of Schedule A Income Tax on owner-occupied houses might cost £40 million—not the total abolition of all Schedule A. They are different matters.

Mr. Cronin

That interjection was a little superfluous, as it must be clear to both sides that this new Clause deals exclusively with owner-occupied houses. I sometimes feel that the interjections by the hon. Member for Kidderminster (Mr. Nabarro) are superfluous. We heard earlier complaint from him about the loudness of hon. Member's voices. Judging by his constant interruption of my speech, he is rather like a man in a crystal palace who throws boulders.

The other aspect of the matter that is rather against the new Clause is that it gives no relief to the family man who does not pay Income Tax. Again, I do not think that that can be put forward as a serious reason for rejecting the Clause. There is no logic in saying that we must not help one person because we cannot help someone else.

I have summarised—with comparative brevity, in view of the nature of the subject—some of the arguments for the new Clause and, to some extent, those against it, but I feel that it is a Clause that would be of the greatest value. It would relieve so many members of the population of a burdensome and irksome series of payments, it would simplify the fiscal system, and would be a substantial advance in the whole financial and social structure of the country.

Mr. John M. Temple (City of Chester)

Before the hon. Gentleman sits down, can he say what would be the cost of the new Clause to the Exchequer?

Mr. Cronin

I had sat down but, if I can rise again, I would say that the hon. Member's question is best directed to his right hon. Friend the Chancellor, who has extensive facilities for getting such information.

4.30 p.m.

Mr. Nabarro

I am deeply grateful to you, Sir Gordon, for your Ruling that, notwithstanding our debate on this very important aspect of direct taxation being an amalgamation of considerations arising from four new Clauses on the Notice Paper, they might be dealt with, if there were a vote, quite separately, because there are important contradistinctions between the four proposals. The new Clause standing in the name of the right hon. Member for Huyton (Mr. H. Wilson)—and I pause again to express my appreciation to him for supporting the view that we should have a separate vote, if necessary—and moved by the hon. Member for Loughborough (Mr. Cronin) restricts the relief proposed to only the very small or relatively small type of house.

I think it would be wholly wrong to indulge in discrimination again in this field, and I give, as an example of where discrimination in fiscal matters is leading us, a reference to the very matter that the hon. Member for Loughborough brought into his speech earlier—the fact that the first £15 of interest on the deposits in the savings banks is free of Income Tax assessment but not free of Surtax assessment. That has always seemed to me from the moment that it was introduced a ridiculous discrimination which nobody has ever been able to justify, because there are surely a lot of Surtax payers in this country who put money into savings bank accounts for convenience and for other reasons, and to penalise or single them out seems to me to be an intolerable situation.

If we brought that kind of discrimination into the field of Schedule A, it would lead to a large number of additional difficulties. Schedule A is referred to as Income Tax. Income Tax should, in my opinion, be directed to taxation of income. The form of taxation enshrined at present in what we are pleased to call Schedule A is not a tax on income. It is a notional consideration based on all the complex matters which are related in the final Report of the Royal Commission.

Although I do not wish to weary the Committee with any part of the Commission's arguments for or against abolition of Schedule A, it is instructive to observe that a large part of the Royal Commission's Report is devoted to this important topic. I cannot give the exact number of pages, but starting at page 245, there is an entire chapter, Chapter 28, relating to all the considerations for and against a continuance of Schedule A tax. A majority of the Commission evidently favoured a continuation of Schedule A tax, and a minority considered that it should be abolished. What is important is the short and succinct statement on page 249 of the Report, paragraph 826, of the reasons advanced by those who pleaded, as I am pleading in the new Clause entitled "Exemption from Schedule A for owner-occupiers", for total abolition of Schedule A tax on owner-occupied houses.

The words employed in paragraph 826 were: The witnesses who objected to the charging of tax on the owner-occupiers of dwelling-houses did so on the grounds—

  1. (1) that notional income is not a fit subject for taxation; and
  2. (2) that it is inequitable to tax the beneficial enjoyment of a right of occupation of real property when the income which could, by parity of reasoning, be attributed to the owners of other forms of property (e.g., motor cars) goes untaxed."
Then the Commission proceeds with a lengthy dissertation on the merit or otherwise of those two proposals.

My reasons for pleading for total abolition of Schedule A tax are relatively simply expressed. It is, in my opinion, an illicit tax—illicit because if all the owner-occupiers of dwelling houses in this country knew their statutory rights and privileges the Chancellor would collect practically nothing from Schedule A tax at all.

Mr. Amory

indicated dissent.

Mr. Nabarro

I am sorry that the Chancellor is immediately expressing his dissent. He disagrees with me. But let me proceed with my argument. There are 6 million dwelling-houses in this country assessed to Schedule A tax. Every one of those taxpayers may make a maintenance relief claim, providing that they spend money on repairs and maintenance. The overwhelming majority of them do spend money on repairs and maintenance. No owner of a house deliberately causes by negligence his hereditament, which is his own personal property, to fall into a state of desuetude or decrepitude through lack of attention.

Mr. E. Fernyhough (Jarrow)

Some landlords do.

Mr. Nabarro

The overwhelming majority do not. There is, of course, a tiny minority involved in every argument, and a minority may do so, but the overwhelming majority do not. Out of 6 million owners of dwelling-houses, only 600,000 last year made a maintenance relief claim—one in ten. Nine out of ten did not make that claim.

Mr. John Diamond (Gloucester)


Mr. Nabarro

For a variety of reasons—in many instances because of ignorance of their statutory rights and privileges. [HON. MEMBERS: "Hear, hear."] I am glad to carry my hon. Friends with me as well as Opposition Members. Many of them fail to make their claims through ignorance, and many through fear. A lot of simple people in this country are genuinely afraid of a tax collector. They think that he is some "god almighty" who can raise an assessment for them and collect from them larger sums of money than he should be able to do. Many more do not make these maintenance claims through sheer idleness.

Mr. Douglas Houghton (Sowerby)

Hear, hear.

Mr. Nabarro

I am glad that the hon. Member for Sowerby (Mr. Houghton) agrees with me. But I say in defence of those people that it is an awful lot of trouble to convince these tax inspectors that repairs and maintenance are genuinely involved and that there is no element in respect of improvement. That is one of the troubles.

I am sorry the Chancellor indicated dissent when I made a statement on this matter of maintenance a few moments ago. Possibly, with due modesty, I have more personal experience of these matters than he has.

Mr. Amory

My dissent was to my hon. Friend's statement that a tax which brought in nothing would be an illicit tax. I do not agree that it would bring in nothing, even in present circumstances, if everyone applied for and obtained maintenance relief, and in any case I do not think that a tax which brings in a small sum or nothing is necessarily illicit.

Mr. Nabarro

May I explain to my right hon. Friend that I think it is an illicit tax if one does not bring very clearly to the attention of the persons who are liable to pay the tax the reliefs that they may obtain by going through certain procedures? That is a very valid matter and has often been adversely criticised. Nobody can deny that the overwhelming majority of people who do not make these claims do not know that they can make the claims. That is why it is illicit.

Mr. Amory

I cannot agree at all. On every relevant form we call the attention of the taxpayer to the existence of maintenance claims; in fact, he is urged if in doubt to seek advice from his Income Tax inspector. I have always said that I am willing to consider any practical suggestions that are made for making those rights even clearer than they are at present.

Mr. Nabarro

My right hon. Friend is coming along nicely, and I congratulate him. I shall be dealing with his point in close detail in a moment—it is in my notes—as to the advice which my right hon. Friend gives to owner-occupiers. But I say it is not enough.

For example, why does he not study the habits of the Midlands Electricity Board which puts inside every account that it sends out to consumers an advertising leaflet for the sale of electrical appliances on hire purchase from one of its showrooms? Why does not the Chancellor put inside every Schedule A Income Tax assessment a nice brightly-coloured leaflet, which I will willingly design for him—I am used to advertising matters—which would say to the Schedule A owner-occupier, "Have you claimed your maintenance relief for the repairs you have executed? If you have not claimed it, why have you not done so? This is how you claim it." I would bring it luridly to his attention.

Mr. Amory

I bet you would.

Mr. Nabarro

I hear my right hon. Friend say, "I bet you would". I quite agree. I would bring the matter luridly to the attention of the taxpayer.

Mr. Barter

Will my hon. Friend accept that it might tax even his considerable ability to explain in simple terms the procedure which from then on has to be followed?

Mr. Nabarro

I am grateful to my hon. Friend for what he has said. I am addressing you, Mr. Arbuthnot, facing the Chair, in view of your earlier rebuke, but I am replying to my hon. Friend who made that useful intervention. I shall have to wave over my shoulder at him. It is true that the method of claiming the relief is extremely complex. It covers every item of household expenditure in maintaining a property, from putting a new washer on the kitchen tap to regravelling the garden path or drive or putting—

Mr. Graham Page (Crosby)

My hon. Friend would not get that one in. He would not get an allowance for gravelling his front path.

Mr. Nabarro

I wish that everyone would not contradict me in the Committee. My hon. Friend says that I am wrong. If he will kindly look at a set of papers which I am prepared to send him relating to my personal Income Tax Schedule A assessment for 1959–60 he will find admitted there the cost of regravelling my garden paths at home. [An HON. MEMBER: "My hon. Friend bullied the inspector."] I have not bullied the inspector. I never bully anyone.

Mr. H. Wilson

No one will ever accuse the hon. Member for Kidderminster (Mr. Nabarro) of bullying anyone. Is there not a mishearing here which is causing misunderstanding? I think that the hon. Gentleman said that he got an allowance for regravelling his garden path. Is not the hon. Member for Crosby (Mr. Graham Page) questioning whether he would get anything for gravelling his garden path?

Mr. Nabarro

Gravelling, regravelling, scarifying or rescarifying—they are all terms covering much the same thing. The point I am trying to make to my hon. Friend the Member for Crosby, perfectly sensibly, I think, is that one has to maintain the path to one's house and the inspector will allow that expenditure. The great majority of taxpayers, however, do not know that he will allow it. The making of these claims is a very complicated business and it requires a great deal of work. It calls for more work on the part of the tax inspector, in my view, than on the part of the house occupier because so much argument and correspondence is inevitably involved.

I say again to my right hon. Friend the Chancellor that only one house owner in ten at present makes a maintenance claim. If all ten in every ten house owners made maintenance claims, the Inland Revenue would be submerged and could not possibly deal with them. That is a further reason why I maintain that this is an illicit tax.

Mr. Ellis Smith (Stoke-on-Trent, South)

How did the hon. Member vote last time?

Mr. Nabarro

I will gladly deal with that now. On 15th June, 1959, the hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) voted for the new Clause moved by the hon. Member for Huddersfield, West (Mr. Wade) on behalf of the Liberal Party. I spoke in that debate. I said that I would not vote with the hon. Member for Huddersfield, West because the Chancellor had already given away the £34 million which I wanted to give effect to the abolition of Schedule A tax on owner-occupied houses, in the form of his relief of 2d. off a pint of beer. Subsequently, of course, the hon. Member for Huddersfield, West, notwithstanding a written explanation from me on the point, saw fit to publish throughout his Liberal Party propaganda sheets attacks on me for not voting for his new Clause. Today, as the new Clause to which I am speaking is exactly the same as the Liberal new Clause last year, I invite him or the hon. Member for Stoke-on-Trent, South to act as a teller for me in support of it.

4.45 p.m.

Mr. Wade

I have read the OFFICIAL REPORT of the debate to which the hon. Member refers, but I cannot find any reference to the hon. Member saying anything during the course of it. That may be unusual. He did, however, make some comment later in another debate the same evening. I think that he should be accurate in what he says. I cannot find a reference to any statement at all made by him during the course of the debate on the new Clause which I moved.

Mr. Nabarro

I am grateful to the hon. Gentleman. I explained the circumstances very fully to him at a later stage of that Finance Bill and explained why I did not support him. I was not in the Chamber when the hon. Gentleman moved his new Clause because I was making a speech elsewhere—the sort of thing that happens to most of us from time to time. The hon. Gentleman sneers at me now. I have stolen his clothes. I say so quite unashamedly. He can come into the Lobby with me this afternoon and demonstrate his consistency.

The Chancellor of the Exchequer has published exact figures showing the cost of making the concession asked for in new Clause No. 19, Exemption from Schedule A for owner-occupiers. He has said that it would cost the Exchequer £45 million in a full year if the Schedule A tax were abolished on all owner-occupied houses, and that £45 million is arrived at after taking into account £10 million given back to the taxpayers, as he expresses it, through maintenance relief claims. That would not, of course, be a charge this year. It would fall as a charge next year. On grounds of logic, on grounds of equity and on grounds of practical common sense, I believe that owner-occupiers of houses should not be made the subject of this impost.

I come now to my right hon. Friend's intervention about how good the Revenue is in telling Schedule A taxpayers what their maintenance claims may be. On 5th May this year, there was published in The Times a letter contributed by the Chairman of the Board of Inland Revenue. Dealing with this very point only seven weeks ago, he said: (1) The Schedule A maintenance relief is brought to the taxpayer's notice in Schedule A notices of assessment, Schedule A demand notes, all receipts issued by Collectors of Taxes, the notes sent with the return forms and the notes sent with P.A.Y.E. notices of coding. (2) The relief under Section 313 is mentioned, admittedly in a footnote, in the principal form for claiming maintenance relief. (3) Age relief is listed, in the same size of type as the other personal allowances, in all return forms and other forms on which personal allowances can be claimed. Of course, the Chairman of the Board of Inland Revenue is absolutely accurate in what he says. I do not deny any of that, but does any hon. Member really suggest that an ordinary factory worker assessed to tax and paying his Income Tax through P.A.Y.E. should know what are the contents of Section 313 of the Income Tax Act, 1952? I doubt whether the majority of hon. Members of the Committee know, let alone the ordinary factory worker paying under P.A.Y.E. If the Chancellor resists the new Clause to which I am speaking today and insists on keeping the Schedule A tax on owner-occupied houses, he ought at least to employ a competent advertising agent to tell him how to put the necessarily lurid slips into the envelopes addressed to all Schedule A taxpayers reminding them of how they can obviate payment of Schedule A tax by making the appropriate maintenance claims.

In the Daily Telegraph of 7th April, 1960, appeared certain comments which I commend to the Committee. The heading was "Dodgers". The paragraph said: The hunt is up against the naughty tax-dodger. Just as naughty in their way are the Commissioners of Inland Revenue. When is the hunt going, to be up against them? As Mr. Nabarro pointed out in his excellent article, Schedule A is 'an illicit collection by the Inland Revenue'. It is a tax levied not really upon those who own houses but upon those who, owning houses, are too naïve or too busy or too careless to wriggle out of it". The Daily Telegraph went on to say: For every successful tax dodger there must be hundreds of thousands of poor dopes who, from sheer fright, ignorance, confusion or form-blindness, are paying far more tax than they ought. This should be remembered". The Chancellor is very harsh on tax dodgers. I consider that he should now exhibit a little benevolence towards taxpayers, not all of whom are as intelligent as he is, and, having regard to the complexities of Income Tax, notably Schedule A tax, should remind them how they may avoid and obviate paying any part of this iniquitous levy. I hope that the whole Committee will support my new Clause.

Mr. Diamond

Is not the hon. Member totally inaccurate in constantly referring to the making of a maintenance claim as a method for a person to ensure that he obviates, to use the hon. Member's word, payment of Schedule A tax? The making of a maintenance claim may reduce Schedule A tax, in exceptional circumstances, to nil. The hon. Member has been quite unfair to the Committee. He has not referred to the millions of cases where a maintenance claim is not made because the Inland Revenue already allows the house owner more by way of repairs than he incurs.

Mr. Nabarro

The hon. Member referred to exceptional circumstances. As he well knows, there is nothing exceptional about me. I have never paid a penny in Schedule A tax in my life. [Interruption.] The hon. Member says that he did not think I would. Of course I would not. I organise my affairs and the cost of maintaining and repairing my property in such a way as to make certain that I never pay a penny in Schedule A tax.

Mr. John Rankin (Glasgow, Govan)

The hon. Member is a tax dodger.

Mr. Nabarro

That is not being a tax dodger. That is my right. That is what the law says. As I have endeavoured to tell my right hon. Friend the Chancellor, the trouble is that many Schedule A tax payers do not know their rights in this matter. That is the answer to the hon. Member for Gloucester (Mr. Diamond).

Mr. Wade

It is important that we should distinguish between the four new Clauses under discussion, although it is for the convenience of the Committee that they should be debated together. I notice—and I think the hon. Member for Kidderminster (Mr. Nabarro) expected me to say this—that the hon. Member has tabled and spoken in favour of a new Clause which is in precisely the same terms as one against which he voted last year.

Mr. Nabarro

One repentant sinner is worth the whole of the Liberal Party.

Mr. Wade

Before I leave the hon. Member for Kidderminster, I should like to raise a point of detail of some importance. The hon. Gentleman should read the new Clauses which he tables. He has referred several times to the total abolition of Schedule A tax for owner-occupiers, but he will perhaps be aware, or he will be aware if he reads his own Clause, that it is limited to one house per person. There is much to be said for that, but I think that we should be accurate. The hon. Member is not advocating the total abolition of Schedule A tax for owner-occupiers. If he wishes to steal other clothes, he should examine the clothes which he has stolen.

Mr. Nabarro

That is a trifling point. A man does not live in half a dozen houses all at once. My new Clause would apply only to one house per person, as is proper. It was a Liberal new Clause last year. I do not mind being associated with the hon. Member. He is not unclean.

Mr. Wade

I am glad to hear that. I always listen with some doubt and hesitation to the observations of the hon. Member, but I do not want to delay the House. He should, however, be accurate.

The Chancellor has a variety of proposals before him, and we shall be interested to find out which of the four new Clauses he chooses. I think it only right that I should explain why my hon. Friends and I favour total abolition this year. Last year we were hoping to ease the path of the Chancellor by suggesting that Schedule A tax paid by owner-occupiers should be abolished but that there should be a limit of one house. We felt that that was a reasonable step towards total abolition. Unfortunately, we failed to persuade the Chancellor and our proposal was defeated by 231 votes to eight. I will not rub it in too much, but the hon. Member for Kidderminster was one of the 231.

It is only right that I should give some reasons for the abolition of Schedule A tax. I do not want to go over all the ground. This subject has been debated many times in the House. First, there is not as great a difference as is sometimes thought between owner-occupied houses and tenanted houses in the abolition of Schedule A tax. When I use the word "houses", I of course include flats. In the case of rented houses, the landlord will in any case pay tax on the rent. There would, therefore, not be a great difference in the revenue if Schedule A tax on rented houses were abolished. Schedule A primarily affects owner-occupiers. There is not a great difference between limiting abolition to owner-occupied houses and total abolition which I am advocating.

Mr. A. R. Wise (Rugby)

I should like to ask the hon. Member a question arising out of his statement about tenanted houses. What would be the position of a person who has purchased a long lease and only pays ground rent?

Mr. Wade

I should like to consider that point. Abolition probably would apply. I think that there is a case for a clean sweep.

Secondly, there are anomalies which keep coming to light. They are inevitable when it is attempted to tax on a notional income. Last year we had an interesting discussion on the subject of notional income, ranging from caravans to the Chancellor's trousers. It was clear that Schedule A tax was not payable on caravans, houseboats or even the Chancellor's trousers, but it is difficult to draw a line. It is difficult to make any logical case for the kind of notional enjoyment which is taxable or for that which is not taxable. I think that that is inevitable so long as there is this imposition on what is called a notional benefit as opposed to an actual income.

Thirdly, it is very much out of date. Times have greatly changed since property tax, as it is commonly known, was introduced, when a comparatively small percentage of the population owned property. Now many people own houses, which I welcome, and the circumstances are different. For that reason, there is a strong case for the abolition of Schedule A tax. There is no doubt that it is unfair in its incidence. It is true that the Chancellor sends out printed explanations, but there are many owner occupiers, particularly of small houses, who just do not understand it and fail to make their maintenance claims. There is no doubt that many people fail to take advantage of the benefits of the claims which they could make. It is all very unfair.

5.0 p.m.

The Chancellor himself in the debate last year recognised that there was at least a strong argument in favour of abolition. He said: … it is not my wish or intention to reject the proposal out of hand or for all time. It is widely held to be unfair that tax should be paid on a possession which does not produce a cash income, … It is only right I should add that he continued … but this view is by no means universally held. He then proceeded to refer to the Royal Commission.

I am somewhat disturbed by some of the arguments he used in that debate. For example, he referred to freedom from rent. He said later in the same debate: An owner-occupied house may not produce cash income, but it produces the equivalent in the form of freedom from rent."—[OFFICIAL REPORT, 15th June, 1959; Vol. 607, c. 64.] I should not like to see the principle adopted that a taxpayer should have to pay a tax because he enjoys freedom from rent. What about the tramp who enjoys freedom from rent? I have never heard it suggested that we should impose a tax on the tramp based on the value of the freedom from rent which he enjoys.

Mr. Barter

Would the hon. Gentleman accept also as freedom from rent the permanent resident of a caravan or houseboat?

Mr. Wade

I did in fact last year raise the case of an occupier of a caravan and houseboat, who, I understand, does not pay Schedule A tax.

Later, in the same debate, the Chancellor referred to the fact that Schedule A assessments are based on valuations made in 1935. It is, of course, quite true that many assessments are low. Many are still based on valuations made in 1935, but that is not so of all properties. Some properties have been assessed much much more recently. That is another example of the anomalies and injustices that arise from this kind of tax. This state of affairs will not continue indefinitely.

I do not know exactly in which year the new assessments will come into effect, and I do not know whether the Chancellor will be able to tell us whether, when they come into effect, Schedule A assessments will be automatically raised to the same extent at the same time. If that is so, there is a very nasty shock coming to owner-occupiers when they find that their rates go up and also their Schedule A assessments. Before that happens, it would be advisable to abolish this tax altogether.

I appreciate that such a course involves some loss to the revenue. As I said on a previous occasion in debating a similar new Clause, it would be out of order to suggest other ways whereby the revenue might be raised. I should perhaps refer in passing to the fact that very large profits are being made from some land which is free for development. Very high prices are being paid—in fact, prices have rocketed—but it would obviously be out of order to discuss that now. I merely mention it to show that there are other ways of raising revenue.

As to the Clause proposed from the Labour benches, I think that it would require a considerable amount of expertise and a good deal of understanding to know exactly what would be the rights of a taxpayer. I appreciate the good intentions behind it, but it would not get over the difficulty that Schedule A tax would still be very complicated. For that reason, I do not feel inclined to support the first of the new Clauses suggested this afternoon. I prefer the Clause on which the hon. Member for Kidderminster has spoken. Whatever I may have said about him, I prefer his Clause; but I think that the best course would be to make a clean sweep of this tax and abolish it altogether.

Mr. W. R. Rees-Davies (Isle of Thanet)

It seems to be rather popular to have a Clause on this subject on the Notice Paper. At the time my hon. Friend the Member for Kidderminster (Mr. Nabarro) was tabling his, I was tabling the new Clause which stands in my name and that of my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach), the hon. Member for Dulwich (Mr. Robert Jenkins), my hon. and gallant Friend the Member for Portsmouth, West (Brigadier Clarke) and my hon. Friend the Member for North Fylde (Mr. Stanley).

I share to a great extent the argument put up by my hon. Friend the Member for Kidderminster but, if I may say so, not in so robust or boisterous a sense. I think this is the first time I have spoken on this Finance Bill, save on Clause 29, and I have reserved myself to make a special appeal to the Chancellor on this subject. I do so very briefly, but with a slight difference of argument, and quite unabashed, from this side of the House. I ask him to do this, if not this year then next year, for the sake of our own party. I regard this as being within the very heart of Tory philosophy. Those of my hon. Friends who are associated with me on this matter want this done, for very good party political reasons.

The Labour Party have, I think, been unabashed about doing certain things for party reasons when they were in power. [An HON. MEMBER: "And the Tories."] Yes, and the Tories. It is at the very heart of Tory philosophy to be able to give a person an opportunity to buy his own home and not to have to pay a tax on his home. Therefore, I come straight out with this. Some of the nice old ladies of Broadstairs—all very good Conservatives, because it is the most Conservative town in England—own their houses and are very proud to own them.

I observe that the great Labour trade union leaders have changed their views very much over the last few years about this fact of home ownership. If we want to know the way in which the other parties have reacted, we have only to look at the way in which the Liberal Party is making a great platform today of owner-ownership as part of its wider policy of co-ownership. The Labour Party used to talk a good deal about council houses and council subsidies, but it is not half as strong for it as it was. [HON. MEMBERS: "No."] The temperature has changed. At any rate, one thing is clear—it is taking great steps to try to encourage home ownership.

Under our present Prime Minister, we had a remarkable record for building houses—houses for sale and houses to let. Notional or otherwise, the first basic argument is that everybody should be entitled to one home—no more—without having to pay tax on the right to have that home. I believe that to be a fundamental argument. I would regret it if we on this side of the Committee found ourselves divided and requiring the support of hon. Members opposite to bring pressure on the Chancellor in this matter. I hope that if the Chancellor cannot meet us this year, he will give us a firm pledge that this is something to which he will give the highest priority in the future.

Secondly, although far less important, it would save him a great deal of administrative time now used by his inspectors in dealing with claims. The new rich, the £12 to £15 a week artisans—[HON. MEMBERS: "Oh."] Yes, they are the new rich of today, the motor fitters, the men from Coventry, and a jolly good thing it is. They are earning £15 to £20 a week and many of them earn £30 a week, men who drive fish lorries, for instance. They are beginning to recognise, as the miners did many years ago, that Income Tax is fairly important to them. At last they are beginning to take advice about it and are not being as stupid as was the ordinary man in the factory ten years ago. They are waking up and looking for advice.

It will be unfortunate if the Inland Revenue has to have more and more inspectors to deal with the maintenance payments and returns which this year's debate is likely to encourage. I would be interested to know whether more returns now come in than did last year. Is it not time to see whether some of the administrative expenditure could be saved by cutting out these claims?

I am therefore against the Liberal argument, because I do not want Schedule A tax to be abolished. I want a rather more restricting influence on some property developers. Those who own a number of houses, property companies least of all, require no reduction in taxation within Schedule A and I do not support the Liberal argument.

Mr. Wade

The hon. Member has referred to property companies. If he means companies which let property, then, of course, such companies will pay tax and may pay even more tax after the abolition of Schedule A, because they will not get the benefit of the statutory allowances in respect of that kind of property. Such companies will not gain by the abolition of Schedule A.

Mr. Rees-Davies

That is true in certain cases, but there are others who are engaged in the development of new properties, selling them and passing them on, who are often in the position of having to pay Schedule A. In certain respects they might find that if Schedule A were abolished they would pay the tax as Income Tax or in other ways, but substantial Schedule A claims are made against such property companies and I do not want to see it abolished. There is a clear distinction between the abolition of Schedule A for the owner-occupier in respect of one home only, to which he is entitled, and those who are in the property business. For a business concern, this is a fair and legitimate matter of tax.

Thirdly, the Chancellor has put many of us in great difficulty these days by the changeable policy of interest rates—and I am not necessarily criticising the policy. The men and women who suffer from that are not the big speculators on the Stock Exchange. They are not the big insurance companies who see when the fall is coming. A ludicrous situation has arisen on the Stock Exchange in the last few weeks—

Mr. Nabarro

Very painful.

Mr. Rees-Davies

Very painful for those who do not understand the weird aberrations of the Stock Exchange. At the moment the Bank Rate is 5 per cent. and an increase to 6 per cent. is being considered. The building societies and insurance companies are uncertain at any given moment what interest rate it is proper for them to demand from a borrower. I hope that in the months which lie ahead we shall be able to get some sanity into the Stock Exchange.

The Temporary Chairman (Mr. John Arbuthnot)

I must ask the hon. Gentleman to relate what he is saying to Schedule A taxation.

Mr. Rees-Davies

It is intimately related because if a man has to pay Schedule A as a notional tax on income in respect of his house, he has to compute the amount which he is to spend on that house and the most important element with which he has to deal first is his mortgage. The average house, costing £2,500, will carry a mortgage of about £1,700 at 6 per cent. When he has estimated the cost of repaying the mortgage, he knows what he has to spend on maintenance and repairs. He then sees what his Schedule A tax is.

5.15 p.m.

The argument I am addressing to the Committee is that if we are to have a difficult period of high interest rates, as I think we are, then one should consider carefully whether this is the proper time to make a reduction in Schedule A tax. I hope that the argument is clear, whether one agrees with it or not.

I agree with the broad purposes of the Budget and with the steps which the Chancellor has taken to restrict credit. I see the difficulties which face him all the time and the razor's edge on which he is balanced in trying to prevent inflation. I see the difficulties which he has in playing this extraordinary game of poker with the Stock Exchange in which everyone engages in a daily gamble on whether he will raise interest rates and the Bank Rate and whether the Stock Exchange will go up or down. I see that he is trying to keep the index of the Exchange at between 300 and 320 points and that in six months profits will be so big that he will try to keep it between 330 and 340 points That is why we have this jack-in-the-box on the Stock Exhange.

But the person who suffers—and this is the trouble—is the good old Tory house owner, and now the Liberal house owner and the Labour house owner, the small people with a few hundred £s invested on the Stock Exchange, the same people who have a large mortgage on their homes. [HON. MEMBERS: "No."] Surely hon. Members opposite do not believe that the average Labour supporter today does not have a go on the Stock Exchange.

The Temporary Chairman

That is a little far from Schedule A.

Mr. Rees-Davies

I entirely agree. The obvious example is the unit trust holder.

I conclude by saying that I hope that the Chancellor will seriously consider the new Clause which I and my hon. Friends have drafted. I hope that he will consider it, first, on a basis of doing everything possible to encourage home ownership and as a basis of Tory philosophy. Secondly, this year and next year will be a good time because interest rates are so difficult and the house owner needs to be assisted. Thirdly, I believe that part of the money will be saved by removing some of the difficulties which his inspectors have and will continue to have in dealing with maintenance claims. Fourthly, there is a good deal in the argument about a notional tax.

I have a small and attractive Tudor house. I enjoy owning the house and I am able to enjoy, without notional taxation, the antiques in it, the pictures in it and the silver in it. If one's wife has jewellery, there is no notional tax on that. There is no difference between the treasures, the antiques and the other things which one may be able to buy and one's home. I see no reason why the home should be treated notionally for tax when the others are not.

Above all, I believe this to be one of the best things which can be done for the Tory Party and, as far as I am concerned, that is the best possible reason for supporting my proposal.

Mr. F. J. Bellenger (Bassetlaw)

The hon. Member for the Isle of Thanet (Mr. Rees-Davies) has rather spoiled a good case. We are not interested in the jewellery of his wife, or of anyone else's wife, or in the antiques. Most people do not have these things, and I should imagine that the assessable value of the hon. Gentleman's house is probably over £100.

Mr. Rees-Davies

As a matter of fact, it being an old house, the assessable value is £65, very largely because the maintenance is so great.

Mr. Bellenger

At any rate, I think that the Chancellor would be right in saying that in the case of that class of house, the house with the higher assessable value, it would not, even if the first Clause were accepted, destroy all of the income to which he is at present entitled.

We ought to try to keep the argument as simple as possible. My hon. Friend the Member for Loughborough (Mr. Cronin) moved a Clause which sought to make the first £15 of the assessable value exempt for the purpose of Schedule A tax. I shall support that, but I should be equally inclined to support the hon. Member for Kidderminster (Mr. Nabarro), who wants the Schedule A tax removed from all owner-occupied houses.

In introducing the question of the property companies the hon. Member for the Isle of Thanet went wide of the mark. I should think that most property companies, in relation to their investments in house properties, are assessed on an entirely different Schedule, namely, Schedule D, and not Schedule A.

All that hon. Members on both sides of the Committee are concerned with, I hope, is to exclude the owner-occupier, or the house in which he lives, from the incidence of Schedule A tax. I think it right and fair that the Chancellor should concede the point which has been put from both sides of the Committee. I very much regret that my hon. Friend the Member for Loughborough moved a Clause which sought to limit the amount to £15.

In my own constituency, 95 per cent. of the houses, at any rate in one very populous borough, have a rateable value, and, therefore, I presume, an assessable value under Schedule A, of £30. They are within the Rent Act of 1957. Only 5 per cent. of the houses in the constituency are outside the Rent Act as far as the rateable value, and, therefore, I presume, the assessable value, is concerned. Most of them are owner-occupied. I suppose that their assessable value would not be more than £50, although one or two of the houses might come into the £65 class like that of the hon. Member for the Isle of Thanet.

When we consider that the statutory allowance for repairs to a property assessed at £100 is only £20, and that for a house assessed at over £100 the allowance is only 16 per cent. more, we see that the owner of that house can escape Schedule A tax by doing the repairs that he must necessarily carry out. With the knowledge that he has, such an owner need not always employ an accountant to put in his maintenance claim. I never go to an accountant. I do my own accounts, and I have found, in contradistinction to the hon. Member for Kidderminster, no difficulty in convincing my inspector of taxes what is maintenance and what is improvement or capital expenditure. I would not say that the regravelling of my garden path would be permissible expenditure for a maintenance claim, but I would say that the repair of the path would be and that it would be easy to convince the inspector of that.

Be that as it may, I fear that the hon. Member for Kidderminster, by his ebullience, has hardened the Chancellor's heart. I am sure that the Chancellor knows that eventually Schedule A tax will have to go for the majority of owner-occupiers, and for a reason which I now propose to advance. In London, for example, quite a large proportion of the property is leasehold. In Kensington, where I live, a large proportion of the property is leasehold. No allowance whatever is granted by the Chancellor or by the Inland Revenue for the depreciation of the leasehold value of that property, whereas in the case of industrial dwellings some allowance is granted for depreciation. That is one additional reason that I would advance to the Chancellor for allowing what, in equity, I consider is a fair relief from Schedule A tax to the owner-occupier.

Of course, Schedule A tax is merely a part of property tax. Indeed, it was originally called a property tax and in most leases, I believe, it is called a landlord's property tax. It is no longer that in the case of the owner-occupier, although I agree that where an owner leases or lets his property at a rent he should pay tax on that rent. But that is a different matter altogether from the case of the man who is trying to provide a home for himself. I would not put it on the same basis as did the hon. Member for the Isle of Thanet, that it is a sound Tory principle. It is nothing of the kind, as one can see from the new Clauses which have been mentioned today.

As I have already said, my hon. Friend the Member for Loughborough moved a Clause seeking to limit the amount to £15, which is the sum that the small saver can escape being taxed on the interest which he receives from his savings. I submit that most of the owner-occupied houses in the country are of a modest net assessable value and it is those people that I want to protect in the same way as we have all agreed to protect the owners of small capital who invest in the Post Office Savings Bank or elsewhere and thus receive a relief of up to £15 per annum by way of untaxed interest.

The hon. Member for Kidderminster mentioned demand notes. I agree with the hon. Gentleman to this extent, and I would put it as strongly as I can to the Chancellor, who seems to be receptive to ideas for improving demand notices sent out by the collector of taxes for Schedule A tax. It is a very complicated notice, and difficult for the ordinary man to understand. The Chancellor could improve upon it in so far as the maintenance claim is concerned. Whether he would go the whole distance with his hon. Friend the Member for Kidderminster, I do not know.

Anyone who has had to deal with demand notes for tax under any Schedule whatsoever will know how complicated and how un-understandable they are to the ordinary man. The whole point of the case today is that there is an increasing number of people who are being encouraged by building societies and other organisations, not to mention the Tory Party, to become owner-occupiers. Why should we not encourage them? If they are entitled to relief, as so many of them are owing to the amount of money they expend each year on the maintenance of their properties, why not make it quite plain to them that they can escape Schedule A tax altogether, or, at any rate, receive a substantial relief from it, if they put in a claim?

At present, the maintenance claim has to be based on a five-year average. One has to produce figures for five years to show that over those five years the average entitles one to a claim. It is true that on a change of ownership a person can get the inspector of taxes to agree to the first year's expenditure, but then he has to build up a five-year average before he can maintain his maintenance claim.

The Chancellor could simplify his rules and regulations regarding the de mand for Schedule A tax, whatever attitude he may take towards the proposals advanced by both sides of the Committee today to ameliorate or to entirely disregard Schedule A tax for the owner-occupier. Not only shall I support my own Clause, but I shall also support that in the name of the hon. Member for Kidderminster if he takes the matter into the Division Lobby tonight.

5.30 p.m.

Mr. Amory

I do not want to bring this debate to a conclusion if other hon. Members wish to speak, but I thought that it might be as well, perhaps, if I did make a comment or two at this stage. There are on the Notice Paper five new Clauses, originating from both sides of the Committee, relating to Schedule A. The new Clause under discussion, moved by the hon. Member for Loughborough (Mr. Cronin), would relieve owner-occupiers from Income Tax, but not Surtax, on the first £15 of annual value of their houses. The hon. Member is not, I think, in his place at the moment, otherwise I should have like him to have made it clear, as I hoped he would, whether that is as far as he wishes to go, or whether he proposes that as a step on the road to complete removal. I have no idea what the policy of the party opposite is on that.

Mr. H. Wilson

We will make it clear in the debate.

Mr. Fernyhough

Will the Chancellor repeat his words about my hon. Friend the Member for Loughborough (Mr. Cronin) now that my hon. Friend is here?

Mr. Amory

The hon. Member for Loughborough did not make it clear whether his proposal was as far as he wished to go, in giving relief of Income Tax on the first £15, or whether he was proposing that as a first step on the road to the removal of Schedule A tax altogether.

Mr. Cronin

Rather than that I should make a long intervention it will be more convenient if my right hon. Friend the Member for Huyton (Mr. H. Wilson) deals with it in his speech.

Mr. Amory

I take it that the hon. Gentleman has given his right hon. Friend complete power of attorney in this matter.

Mr. Wilson

The new Clause stands on the Notice Paper in my name as well as that of my hon. Friend. I will inform the right hon. Gentleman that on this matter we are not divided as is the Conservative Party.

Mr. Amory

The new Clause put down by the Liberal Party would, as I understand it, abolish Schedule A tax altogether, and I gather from the speech of the hon. Gentleman the Member for Huddersfield, West (Mr. Wade) that the underlying assumption is that all rents would then be taxed under Schedule D. It is at least doubtful whether that new Clause as drafted would achieve that object, and it would not, I would have thought, be in accordance with the historic principles of the Liberal Party to exempt landlords from tax.

Then the Clauses put down by my hon. Friends on this side of the Committee, in slightly varying terms, would exempt owner-occupied houses from all tax, the relief being limited to one house for each owner-occupier.

The principal object, as I understand it, of all these proposals is to encourage home ownership, an object which we on this side of the Committee most strongly believe in and to which we have already made a number of practical contributions, notably by relief from Stamp Duty in recent Finance Acts and by the House Purchase and Housing Act of last year.

The decision whether to encourage home ownership by this particular form of tax relief is not an easy one. Some people talk as if the removal of liability to Schedule A tax would remove a discrimination against house ownership and, therefore, would be only common justice, but I think that the facts are against as simple a view as that. It is really not as simple a matter as that. The Royal Commission on the Taxation of Profits and Income unanimously decided that the imposition of Schedule A on house ownership was not unfair as between a house owner and someone who rents his home, and it argued that its removal would be inequitable as between them. It considered, therefore, that the tax should remain.

The simplest way of explaining that view, which, I think, is, strictly speaking, the right one, is to imagine a person with £5,000 invested who sells his investment and with it buys a house and lives In that house. He has lost the income on his investment on which he would be liable to pay tax and instead he has acquired the house on which he is liable to pay Schedule A tax. Someone else has £5,000 invested and decides to keep the investment and to use the income to rent a house, and if he does that, then he pays tax on the income on his investment. With Schedule A charged on the owner these two are in substantially the same position. Therefore, if Schedule A is taken away from the owner-occupier, then, to that extent, it is discrimination in favour of the owner-occupier. [HON. MEMBERS: "But the social grounds."] I am coming to that point. Even though—and this is the point—it does amount to discrimination in favour of the home owner, there may well be a social argument because of precisely that.

I recognise that, but before reaching a final view on the matter I think that it is right for us to remember that there are very many people Who would dearly like to own their own houses, and may well have the means to do so, but, for employment or other reasons, find it impossible to do other than live in rented accommodation. We have got to consider the arguments both ways.

Mr. John Hall (Wycombe)

Would my right hon. Friend address his mind to this matter? It is true to say, I think, that a home is no use unless there is furniture in it. Just to have a home without furniture is useless. One can sell one's investment on which one pays tax on the dividends and buy furniture with it, and there is no notional value for tax on the furniture without which one's home is useless.

Mr. Amory

That is just the kind of point Which makes this a complicated issue. The Royal Commission dealt with it and came to the conclusion that the fact that it was not practicably feasible to extend assessments to other forms of property which are also essential did not invalidate the argument that that should be done in cases where assessment could practicably be made—on such things as houses. The Royal Commission did deal with the point.

As I said last year, if the Schedule A tax on owner-occupiers were abolished or varied, then I think that there would be a pretty strong case for a tax allowance to be claimed on rent paid by tenants. If the owner-occupier were to live tax-free there would be strong grounds for saying that somewhat similar treatment should be given to those who have to pay rent. I think that if that were done it would be a still more expensive course from the point of view of the Revenue; that would amount to something like £60 million a year.

Mr. Hector Hughes (Aberdeen, North)

It does not seem to me that what the right hon. Gentleman said that the Royal Commission said is exactly what it did say. The Royal Commission said, in paragraph 826: The witnesses who objected to the charging of tax on the owner-occupiers of dwelling-houses did so on the grounds—(1) that notional income is not a fit subject for taxation; and (2) that it is inequitable to tax the beneficial enjoyment of a right of occupation of real property when the income which could, by parity of reasoning, he attributed to the owners of other farms of property (e.g., motor cars) goes untaxed. Those are the ipsissima verba.

Mr. Amory

The Royal Commission said that and a good deal more as well.

I know that a good many of my hon. Friends are disturbed not so much by the tax in its present shape as by what would happen if it were charged on the current rental values of owner-occupied houses, and the immediate answer there is that there can be no revision of present Schedule A assessments without legislation, and, once again, it is too early to decide what is to be the future basis of the tax if it is retained. At present, the basis of assessment, as several hon. Members have said, is the 1935 values. Of course, against that, maintenance claims are allowed at the current level of costs. Although there are variations, in general the assessment of the newer house has also approximated as far as can be to 1935 values, certainly since the Inland Revenue took over responsibility.

Mr. William Ross (Kilmarnock)

That is only in England.

Mr. Amory

I am not familiar in detail with the position in Scotland.

Mr. E. G. Willis (Edinburgh, East)

What is the use of producing an argument that does not apply to Scotland?

Mr. Amory

I realise that that is a very serious limitation.

Some people talk as if Schedule A tax was a recent imposition, but Schedule A, like the other Schedules which we use today for Income Tax purposes, dates from Addington's reorganisation of the Income Tax in 1803. The notional benefit which an owner-occupier obtains by occupying his house rent-free has from the first been treated under the Income Tax Acts as taxable, as being equivalent to a monetary income.

The owner-occupier is, therefore, liable to bear tax on the annual value of his house, that is, on the figure which is intended to represent the return which he might have received by way of rent if he had chosen to let it instead of occupying it himself, subject to deduction of the statutory repairs allowance. There was no criticism of that principle, which has been all the time in the law, until after the last war. The Royal Commission on Income Tax, in 1920, restricted itself to some minor recommendations and obviously regarded the principle of the tax as unassailable.

Mr. Barter

In saying that there has been no attack on this taxation since it was reorganised in 1803, is not my right hon. Friend overlooking the fact that in 1803 there were only 2 million houses in the country and very few owner-occupiers, whereas today there are 16 million houses and 6 million owner-occupiers?

Mr. Amory

I agree that the circumstances are entirely different, and we are fully justified in taking a fresh decision today, if we wish to do so, in the light of changed circumstances. The point to which I was referring is that many people talk of this as if it were in some way a recent intrusion by the Revenue authorities in a field not previously covered. It is far from being the case.

Mr. John McKay (Wallsend)

Can the Chancellor say what would be the average benefit to these owners of houses, taking, for example, a three-bedroom house with its amenities?

Mr. Ellis Smith

Like mine.

Mr. Amory

Does the hon. Member for Wallsend (Mr. McKay) mean benefit by the abolition of the tax?

Mr. McKay


Mr. Amory

I have not the figure in my head, but the hon. Member, from his knowledge, can work out a few cases.

Mr. Barter

According to various figures which my right hon. Friend gave last year, the benefit would be £7 10s. per head per annum.

Mr. Amory

I accept what my hon. Friend has said, but the Royal Commission took the view very definitely that the principle of taxing this particular notional income was a right one and a fair one.

But, having said that, I want to add that I do not consider that in a field like this the recommendations of the Royal Commission need necessarily be conclusive. There are many other arguments. While the arguments of the Royal Commission are pretty conclusive on the propriety of taxing notional income of this kind, and on the relative equity as between a person who owns his own home as against one who rents his, I find the arguments in favour of special discrimination as an incentive to house-ownership an appealing one. But whatever the cogency of the arguments either way I am quite sure that it is not possible to give relief, partial or complete, in the circumstances of this year.

I made it clear in my Budget statement that in the present conditions of brimful demand it would be irresponsible to add to purchasing power by an net decrease in taxation, and that such a conclusion—which has not been really seriously disputed—puts out of court this year acceptance of any of these new Clauses. Complete exemption for owner-occupiers would cost as much as £45 million in a full year at current rates of tax, and even the more modest proposal advanced by the hon. Member for Loughborough would cost £22 million in a full year. Relief on this scale this year is absolutely impossible.

5.45 p.m.

I would sum up by saying that I think that there are strong arguments both for and against relief from Schedule A for owner-occupiers. I have owned to a personal inclination to regard the arguments for some relief at a practicable time as meriting very serious consideration. I agree with what my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) said about that, but it must be absolutely clear that it is not possible to consider relief in the circumstances of this year. We ought all to think over very carefully and weigh up all the arguments for and against, so that we shall avoid the risk of oversimplifying what is a much more complicated and difficult issue than appears at first sight, and so be in a position to form a considered view at an appropriate time.

Mr. H. Wilson

The Chancellor's speech is obviously a very profound disappointment to hon. Members opposite. They may or may not be encouraged by the right hon. Gentleman's suggestion that he may be prepared to think about this in a future year because we read in the Press that he will not be here in a future year, and so far we have not been told who will replace him. It may be the hon. Member for Kidderminster (Mr. Nabarro).

Mr. Nabarro

I have already realised that possibility.

Mr. Wilson

I was aware that the hon. Member had already realised that possibility, but few others have.

Mr. Austen Albu (Edmonton)

My right hon. Friend has not seen Peterborough's "London Day By Day" in today's Daily Telegraph. According to Peterborough, there is a leaflet going round the country which says, "Nabarro for Premier".

Mr. Nabarro

One thing is perfectly certain about my right hon. Friend the Chancellor's successor. It will not be the right hon. Member for Huyton (Mr. H. Wilson).

Mr. Wilson

It is true that I was basing my argument on the Press assumption that the Chancellor, to our personal regret, would be moving to other spheres in the near future. As to the suggestion of having the hon. Member for Kidderminster for premier, I am one of those who hold the view that it would be an improvement.

Obviously, we have no dissent with the Chancellor's historical account going back quite correctly, to Addington. We do not dissent either from some of the arguments which the right hon. Gentleman used. He is perfectly right in saying that this is a much more difficult problem than would appear from the way in which it has been presented in some recent oversimplifications. Where I take issue with the Chancellor is with the bit at the beginning of his speech when he went into an imaginative stratosphere and claimed to be a member of a party which had done a great deal for the owner-occupier and for a property-owning democracy and the rest.

The hon. Member for Ealing, North (Mr. Barter), who intervened, said that the relief, on average, for the owner-occupier of a three-bedroomed house would be about £7 10s. a year, but the hon. Member will admit that the recent decision of the building societies to raise interest rates—a direct result of the Chancellor's financial policy, which I do not think even the Chancellor would deny—would place a much heavier burden on the same householder than the whole of the relief that he would obtain if Amendments for the total abolition of Schedule A tax had been accepted by the Chancellor. Let us, therefore, have no more cant about this.

Mr. Amory

Will the right hon. Gentleman agree that offset against any consideration of that kind is the practical fact that the standard rate of Income Tax was reduced last year by 9d. in the £, which brought a definite measure of relief to those on Schedule A?

Mr. Wilson

If we go into that kind of degree, there are a lot of arguments that could be used, including the one that many people pay Income Tax because of the inflation which has occurred under the Conservative Government since 1951 and which has taken them up to a much higher rate of taxation. That, however, raises wide issues. The right hon. Gentleman cannot get away from the fact that his financial policies have imposed a heavy burden on those who are buying their houses by means of mortgage, just as other Government policies have imposed heavy burdens on those living in council houses and those who live in privately-owned rented houses.

Let us recognise that for the average family buying its house on a mortgage basis, the whole of the saving that it would get from the Clause is less than the recently announced increase in building society interest rate as a result of the Chancellor's policies. Perhaps we have not seen the end of his policies in this direction yet, because we are all well aware of the worsening economic situation. We keep reading in the Press suggestions of various things that the Chancellor may feel compelled to do before long.

As for the Chancellor's suggestions about the wider field of the property-owning democracy and investment, it so happens that we are debating this matter on a day when War Loan is at a lower price than it has ever been in all its 28 years. That is not much encouragement to the gilt-edge investor or to anyone else. By all means let the Chancellor stick to the Schedule A arguments, but do not let him lard them about with all this stuff about a property-owning democracy and the rest.

As for the general arguments, the debate has covered some well-traversed ground, as one would expect, but it has brought out the simple arguments very clearly again. There is the argument, on the one hand, of the difficulty about taxing notional income and that a man is not taxed on the notional enjoyment he gets from his car or his refrigerator, not to mention the successful constituency intervention by the hon. Member for Wycombe (Mr. John Hall) when he referred to furniture, another industry which is suffering as a result of the Chancellor's recent economic measures.

Mr. Nabarro

Jolly good advertising.

Mr. Wilson

That is what I thought, but the hon. Member does his advertising with rather more finesse than certain other hon. Members on the bench behind him.

On the other hand, there is the equally important theoretical argument—I was glad the Chancellor put it forward; it is only fair that it should be taken into account—of the comparison of the two men, one of whom saves throughout his lifetime and accumulates capital. He finds it very much diminished, however, as a result of the Chancellor's policies. He cannot sell his investments—who would want to sell investments which have lost so much? Out of the interest which he gets on them he pays rent. Before he pays rent on the flat or the house in which he lives, he is paying tax on the interest he receives. The Chancellor fairly drew attention to such a man, setting beside him for the purpose of argument another man who had saved that amount of money, disposed of his investments—or perhaps he had always kept it in liquid form—and put it into a house. It is then suggested that he would live rent free in the house and be free of Schedule A on it. That is an important argument. Whatever our desires in the matter of helping owner occupiers, none of us can dismiss this argument that the Chancellor has put forward.

It is true, as hon. Members have said, that this whole question was considered by the Royal Commission. The hon. Member for Kidderminster and others have quoted those well-worn words in which witnesses before the Commission gave their reasons for feeling that Schedule A should be abolished. Since the hon. Member for Kidderminster quoted them in so audible a fashion, I do not feel it necessary for me to repeat them.

I should, however, refer to the argument with which the Royal Commission countered that. Referring to the first argument quoted by the hon. Member for Kidderminster that notional income is not a fit subject for taxation, the Royal Commission said: We think that the first argument ignores the principle that taxation should be adjusted to the relative capacity to pay of different taxpayers. There can be taxable income which is not received in cash. Living accommodation is a necessity of life and a taxpayer who does not own it is obliged to rent it: consequently an owner-occupier with a given income, paying no rent, has a larger taxable capacity than a tenant with the same income out of which he must meet liability for rent. That is a fair argument. I am only trying to suggest that the arguments on this matter, as the Chancellor said, cut both ways.

Referring to the second argument quoted from the Royal Commission by the hon. Member, that it is inequitable to tax the beneficial enjoyment of a right of occupation of real property when the income which could, by parity of reasoning, be attributed to the owners of other forms of property (e.g., motor cars) goes untaxed", the Royal Commission said that that was a logical argument and that Theoretically an income can be attributed to the possessors of many forms of chattels. It went on to say, however, that it would be quite impracticable to extend to every form of chattel the notional income associated with it and then to impose a tax upon it.

I am agreeing with the Chancellor that Royal Commission Reports are not necessarily sacrosanct. In recent years—I have already drawn the Committee's attention to this—a number of important judicial reports have been treated as the opposite of sacrosanct by the Chancellor of the Exchequer and his colleagues, whether one thinks of the Devlin Report or, indeed, the, not judicial but highly authoritative Report on Monetary Policy by Lord Radcliffe and his colleagues, which the Chancellor has almost completely dismissed and rejected. I agree, however, that not in every case must we say that because a Royal Commission has reported that settles the issue for all time. The House of Commons has the final responsibility in these matters.

It is relevant to consider another report, not in any way binding on this country, which was referred to by the hon. Member for Loughborough (Mr. Cronin), the report of a Commission in Ireland. I am sure that hon. Members will bear with me when I say that my pronunciation of the language in question is a little less than perfect. My knowledge of the language is not very great. Reading it phonetically, however, this body is called An Coimisiún Um Chanachas Ioncaim. Some hon. Members will be able to pronounce it better. Translated, it means Commission on Income Taxation.

In its second report, that Commission recommended, as we have been told this afternoon, the virtual abolition of Schedule A, despite the strong plea to the contrary of the Irish Board of Revenue. I quote this Irish Commission because it represents a rather more up-to-date study of the problem than our own Royal Commission, which reported in 1955. The Irish Commission said: Although, other things being equal, the owner-occupier might be regarded as having a greater taxable capacity than the person who has to rent a residence, income in the popularly accepted sense does not accrue from owner-occupation. It will be agreed that if a notional income is attributed to a person's interest in an owner-occupied residence it is logical to treat similarly other durable assets such as furniture. As a source of income there is no fundamental difference between them and a residence. The fact that a dwelling is a necessity for all families is regarded as strengthening the argument against taxing owner-occupation. Ownership of a necessity would appear to be, if anything, a less proper subject for taxation than ownership of amenities such as yachts or jewellery. I know that the Chancellor will, perhaps, feel a little divided in the argument about yachts.

Mr. Amory

Not in the latter, about jewellery.

Mr. Wilson

No. The right hon. Gentleman is the last person I should associate with that.

The Irish Commission referred to the Irish experience in tax exemption on the interest on certain State securities. In Eire, as the Committee will know, such interest is exempt from Income Tax up to the tune of £25 a year. It is, of course, £15 a year in this country as far as Income Tax is concerned. The Irish Income Tax Commission proposed exempting property from Schedule A tax up to the first £30 and that any houses up to £30 rateable value should be totally exempted, while houses above that value should be exempted on the first £30 of taxable value. It went on to say that only one house per owner should qualify for this relief.

These are only recommendations of the Commission and the Irish Government have still to pronounce upon them, but I felt it right to quote these arguments in order that the Committee could be in full possession of the arguments both ways. It is clear that the theoretical arguments are very finely balanced. We have this question of whether notional income should be taxed. It is right to point out that it is taxed in other directions. For example, the company director who enjoys a flat in Central London or the occupation of an hotel suite in Park Lane is, in theory at any rate, taxed on the notional income resulting from that. I say in theory because I do not think that the Inland Revenue is tough enough in dealing with these cases.

6.0 p.m.

That is one example and there are others in which notional income or notional value of something not easily measured in monetary terms can be taxed. We on this side of the Commit tee considered what new Clauses we should put down. Complete abolition features in one or two new Clauses proposed by hon. Members opposite. That would, on balance, help the higher taxpayer rather than the lower taxpayer. Between £30 million and £40 million is involved. If we have that sum to dispose of in tax reliefs, is this the most appropriate way of giving them at this time and in these conditions? It is for every Member to form his own conclusion about that.

There are certainly more urgent and deserving cases than this, quite apart from those involving State expenditure, such as old-age pensioners—cases of taxpayers who perhaps ought to be helped by tax remissions rather than by total exemption from Schedule A tax, for such exemption would include many people who may or may not be deserving but who are certainly not very needy. Some of the higher taxpayers would gain considerably from what is proposed. That is why we on this side have not felt able to go so far as to recommend total abolition of Schedule A tax.

However, we feel that there is a case for some relief and that that case logically follows from the argument used by the Chancellor of the Exchequer when he drew the parallel between the man who had saved his money, invested it in some form of security, was taxed on the interest and had to pay rent, and the man who had invested in a house. In 1956, for the first time, this Committee gave remission of tax on £15 of Post Office Savings Bank interest. It is not the fault of this side of the Committee that that £15 was not extended to cover other forms of savings. We have pressed successive Chancellors to extend it, for example, to co-operative savings, and have gone into the Division Lobby in support of our proposals and will do so again. Since we have to that extent discriminated in favour of the saver who invests in the Post Office Savings Bank we think it not unreasonable to propose, by the same argument, a tax remission on Schedule A for the same figure, £15.

Mr. Nabarro

The principle is not the same. It might well be that a Surtax-payer is an owner-occupier of one of these houses up to £15. The Post Office Savings Bank concession to which the right hon. Gentleman is referring only applies to interest being exempt from Income Tax up to £15, not to Surtax. If we accept the right hon. Gentleman's new Clause it would apply equally to Income Tax and to Surtax.

Mr. Wilson

We are not unaware of that. I can remember the present Prime Minister pointing out in 1956 not only that the £15 was Income Tax free but that it was grossed up for Surtax purposes. We were aware of it before the hon. Member for Kidderminster made his point earlier this afternoon. Whether our Clause is sufficiently well drafted or not, we make it clear that it refers to Income Tax only and not to Surtax. The phrase we use is "other than Surtax". I hope that we are right. We meant Income Tax only. It is entirely on a parity with the arrangements for taxing the interest from the Post Office Savings Bank, and our Clause would mean some equity as between the two types of saver.

It is very arguable, but it is fair vis-à-vis the man who saves his money and pays rent out of accumulated savings or interest received on it. I say frankly, however, that if our Clause were accepted it would still not be fair to the man who pays rent, for there is still no provision for rent rebate in taxation. We feel it right, therefore, to put forward our Clause against the background of our general policy on housing. It would be wrong if the Chancellor accepted our Clause and did nothing about those paying rent. Our Clause is defensible only if something is done to improve the position of the tenant who is paying rent. We are all aware that as a result of the Chancellor's policy—the abolition of the housing subsidies and the high interest rates that local authorities have to pay, a rate which apparently is to rise higher soon—new council houses involve a very much higher rent.

In my area—which is one of rather low average income—the rents for new houses have recently had to be raised to £2 7s. 6d. a week, entirely because of the Conservative Government's housing policy. If subsidies were restored and interest rates under the Public Works Loan Board were anything like the lower figures of a few years ago, those rents would be £1 a week lower. Only on the assumption that something was to be done to help council house tenants would I recommend the Committee to accept our Clause. Yet if we dealt in this way with owner-occupiers and council house tenants, those paying rent to private landlords would, of course, be relatively unfairly treated unless we were to put forward at the same time, as we do—though it would be out of order to discuss them at present—proposals to ease, the difficult conditions being suffered under the Rent Act at present.

Mr. Fernyhough

They are already being unfairly treated. The tenant of a house who carries out repairs cannot claim a penny piece in Income Tax rebate nor get the money back from the landlord, but the owner-occupier is still given a maintenance allowance.

Mr. Wilson

That is a fair point, but I would be out of order if I pursued the subject of the unfairness of conditions under the Rent Act.

Mr. William Clark (Nottingham, South)

Is the right hon. Gentleman saying that he would municipalise all rented property?

Mr. Wilson

The hon. Member is rather tedious. He knows that I should be out of order if I went into the whole question of what should be done for those in privately-owned rented houses. We have stated clearly upon a number of occasions what our proposals are in that direction. I am trying to keep in order, Sir William, with your tolerant acquiescence. We should not feel free to put forward a new Clause designed to give relief only to owner-occupiers unless we felt, at the same time, that we could sincerely commend to the Committee action to help bath council house tenants and those living in privately-owned rented properties.

On a number of occasions we have said that the repeal of the Government's Rent Act is the first step in the matter of bringing justice to these tenants. To go beyond that would be out of order. Our Clause does not go the whole way, and I know that it will disappoint some hon. Members opposite, but I believe that it is right and equitable, and brings justice not only as between the owner-occupier and the man who has saved and invested money, but also, on our assumptions as to housing policy, as between the owner-occupier and the tenant, whether of privately-owned rented property or of council property.

Mr. A. R. Wise (Rugby) rose

Hon. Members


Mr. Wise

Predecessors of mine in this House used to go on for 20 minutes longer than they otherwise would have done whenever they received an interruption, however orderly. I therefore announce that if there is a further interruption I shall go on for 20 minutes longer than I otherwise would.

The speech of the right hon. Member for Huyton (Mr. H. Wilson) was of a curiously mixed character. He seemed to be sympathising a great deal with my right hon. Friend's statement that he could do nothing this year; in fact, he started his speech by saying that. But when he finished I was not quite certain whether he proposed to advise his supporters not to press their new Clause, so that they should not force some action this year. If he is proposing to press it I should like to reflect upon it very briefly.

Mr. H. Wilson

We certainly intend to press our new Clause in the Division Lobby. We also intend to provide helpful facilities to the hon. Member for Kidderminister (Mr. Nabarro) and other hon. Members who want to press their new Clauses—but we shall not be joining them in the Lobby. I thought that I should say that. As soon as the hon. Member finishes his speech he will find us ready to go through the Lobby.

Mr. Wise

I am grateful to the right hon. Gentleman for that information.

I want to make it clear why I cannot support his new Clause. As the hon. Member for Loughborough (Mr. Cronin) said, Schedule A tax is a curious eccentricity. It is based upon a notional and hypothetical income, not on actual income. What I cannot understand is why the hypothesis should end at the sum of £15 a year. Is it any the less notional or hypothetical if it is £30, £50 or £100 a year?

Mr. Wilson

Will the hon. Member tell us why the Prime Minister and the hon. Member's party put a limitation of £15 on the relief given in respect of the interest on Post Office Savings Bank deposits? If that was right, this is.

Mr. Wise

That is a totally different matter. The limitation of £15 a year in that case was a limitation on actual income. If exception is taken to a tax on hypothetical values—as the hon. Member for Loughborough took exception to it—I merely ask why values should cease to be hypothetical when they pass a total of £15 a year. I am still at a loss to know why that should be.

6.15 p.m.

I am deeply sorry that the Chancellor was not a great deal more forthcoming. Nobody wanted too much to be done this year; I am sure that a slightly firmer undertaking to consider the matter carefully would have satisfied most of my hon. Friends—but we did not get it. In fact, we are getting a little tired of the curious theory that whenever purchasing power is released it is automatically inflationary. If new purchasing power is not created I cannot see that there can be any inflation. Whether £45 million is left with the payers of Schedule A tax, or is taken from them and spent by the Government, I cannot see that anything has been added to the inflationary or deflationary state of the country.

Indeed, it can be argued that some Schedule A taxpayers might have invested money and might have increased savings, thus producing a slight measure of deflation, whereas we can rest assured that any money which the Government get will not be used in any deflationary way but will be spent as fast as it is received.

Mr. T. L. Iremonger (Ilford, North)

Would it not be true to say that if my right hon. Friend did abolish a tax it would be increasing the purchasing power of the economy through the Budget but increasing the overall Budget deficit?

Mr. Wise

That has a bearing upon a point that I was going to make later. My right hon. Friend the Chancellor underestimated last year's surplus by over £300 million, which went towards reducing the under-the-line deficit. It is more than probable that exactly the same underestimate has been made this year, and that there is a margin with which my right hon. Friend can play. In any case, the Budget deficit is best met not by taking more money from the taxpayers, but by slightly reducing Government expenditure. I do not regard it as beyond the bounds of possibility that if £45 million were devoted to the abolition of Schedule A tax that comparatively small sum, considered in relation in the £5,000 million or £6,000 million that we are spending a year, could be saved.

Therefore, I cannot accept the theory that any release of purchasing power must automatically be inflationary. Inflation can take place only if new money is created. If it is not there can be no inflation. I aim gravely disappointed at the Chancellor's attitude in this case. I agree largely with my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) that this is a basic part of my party's philosophy. Whether or not it is strictly logical, or strictly in accordance with the highest principles of theoretical economics, the fact remains that if we want to create a property-owning democracy we must stop penalising people who own property. If we wish to encourage people to buy houses we must do rather more for them than we do for people who do not buy houses.

That means that we must have discrimination in favour of a particular class of taxpayer. That is not unknown; there are many classes of taxpayer in whose favour discrimination is made. The principle is not new. Nor, for that matter, is taxation itself an equitable matter. Any taxation must be full of anomalies if it is levied not for the purpose merely of carrying on Government business, but apparently as a means of regulating markets, distributing property and running the entire economy of the country.

Once we step out of the proper function of taxation, which is merely to provide the Government with enough money to govern and, instead, use it for other and, in my view, quite improper purposes, we are bound to create anomalies. Therefore, there is no reason why we should hold back from taking this action merely because it happens to be slightly anomalous.

The time has come when the abolition of Schedule A tax is becoming a national demand. After all, although we in this Committee, are not delegates of the people, we are accustomed to pay some attention to their views and, despite what was said by my hon. Friend the Member for the Isle of Thanet, it is not only Conservative house-owners who are demanding the remission of Schedule A tax. There are house-owners who vote for the other two political parties, although I cannot understand why, because one of them seems to be pledged to bring about the abolition of house-owners and the other can do little to help them. But, in fact, this demand is becoming greater.

There is another thing. This tax is really one which is levied without any idea of how it should properly be assessed. Some time ago I took the trouble to write to the Treasury to ask if there was a basis for the assessment of the Schedule A tax. It was a very long time before I received an answer, which did not surprise me. But when I did get an answer it was, to all intents and purposes, an admission that there was no basis—it was done "by guess and by God" by various people all round the country. In my view, in itself that is a condemnation of this tax. Clearly, it is illogically assessed and, therefore, it should be done away with.

In this Committee there has been not one defender of this tax, save the Chancellor—who was rather a doubtful champion. I do not know whether any hon. Member opposite would like to maintain the Schedule A tax exactly as it stands today. From some of the interjections made during the various speeches I gathered that there is a section of hon. Members opposite which is firmly and solidly in favour of Schedule A, but it is not prepared to accept the party's decision in the matter. There is a section in favour of Schedule A, but unquestionably it is a very small section. In the Liberal Party, apparently, there is no one in favour of the tax. I have heard little support for it from hon. Members on this side of the Committee, even by way of interjection.

Therefore, I ask my hon. Friend the Financial Secretary to take careful thought, before he winds up this debate, and consider whether he cannot give us a little more encouragement. None of us enjoys voting against our own side, but there is the principle in the House of Commons that the vote follows the voice, and one cannot help oneself, unless a mild excuse is given which would enable us to refrain from pressing this matter to a Division.

Mr. Iremonger

I do not propose to impose on the patience of the Committee for more than a few minutes. On the last occasion on which the Committee considered this question I abstained from voting against my right hon. Friend because, if I may quote from the OFFICIAL REPORT of 15th June last year, my right hon. Friend did not, in my words, stand firm by the tax, root and branch and on principle."—[OFFICIAL REPORT, 15th June, 1959; Vol. 607, c. 60.] On this occasion I intend to support my right hon. Friend in the Lobby because I supported him in his Budget and in his analysis of the economic situation. Having done that, I do not think that it would be fair to turn round on this particular tax point and oppose him. At the same time, I am glad to hear that my right hon. Friend is still of an open mind, and I am just a little disappointed that he did not give us quite as clear an assurance as we should like to have that, in due course and in the proper circumstances, this tax is earmarked to be the first to go.

I do not think that this is properly argued on a question of tax theory. When it comes to theoretical considerations, if anything, the balance of argument is, in my opinion, in favour of the Schedule A tax. Therefore, I do not oppose it on theory. I oppose the Schedule A tax because I think that it should be abolished as a straightforward act of avowed social policy. I think it right that the Government should distort the pure theoretical interpretation of tax principles, if necessary, in favour of desired social ends, and the social end I want to see promoted by the abolition of the Schedule A tax is the ownership of private property by owner-occupiers.

I hope, therefore, that my right hon. Friend will not only keep his mind open, but will be a little less open to theoretical argument and realise that I and my hon. Friends are firmly convinced that it is right that the tax should be abolished. I am not prepared—I do not think it would be fair—to press that on my right hon. Friend now. But it is a tax against which many of us feel very bitterly and we consider it high time that it was put quite avowedly at the top of my right hon. Friend's list for abolition.

Mr. J. Grimond (Orkney and Shetland)

I share the views of the hon. Member for Ilford, North (Mr. Iremonger) about this tax, but last year the Chancellor of the Exchequer made almost exactly the same speech as he has made this year. The reason he gave last year for wanting further time to consider the matter was that he was giving away so much in his Budget. The reason he wants time for further consideration this year is that he has put on extra taxation. It would be interesting to hear from the right hon. Gentleman what sort of Budget it will be in which he can eventually remove this tax.

Mr. Iremonger

I agree with the hon. Member that the Chancellor will not be able to get away with this indefinitely. [HON. MEMBERS: "He will not be there."] Hon. Members opposite know perfectly well that when one speaks of the Chancellor one is referring to the right hon. Gentleman who is responsible for Government policy at any given moment.

Mrs. Harriet Slater (Stoke-on-Trent, North)

Policy changes with the Minister.

Mr. Iremonger

No doubt the policy would be changed minute by minute had we a Chancellor from the party opposite in office. But there is a theme and a thread running through Conservative policy which means that we can rely on the fact that a promise given by one right hon. Gentleman will be honoured by the right hon. Gentleman who follows him.

Mr. Sydney Silverman (Nelson and Colne)

Would the hon. Gentleman care to explain in what way he establishes a continuity of policy between the present Chancellor of the Exchequer and his immediate predecessor?

Mr. Iremonger

If my memory serves me right, my right hon. Friend's immediate predecessor resigned because he did not approve of the policy of the Cabinet, which was that of the present Chancellor of the Exchequer. So, in fact, the policy of the Government has been entirely continuous, and on this occasion—he does not often do it—I think the hon. Member for Nelson and Colne (Mr. S. Silverman) has shot himself down in flames.

I do not wish to detain the Committee further—[HON. MEMBERS: "Hear, hear."]—unless, of course, I am unduly provoked. Provided that I am not actually asked to sit down, I am about to do so—

Mr. John Paton (Norwich, North)

Sit down.

Mr. Iremonger

I feel obliged to stand my ground, if only merely to repeat that I propose to support by right hon. Friend.

Mr. Nabarro

On a point of order, Sir William. Can you give the Committee some guidance at this stage? Presumably the new Clause of the right hon. Member for Huyton (Mr. H. Wilson) is to be voted on now. That is the Question to be put. The second new Clause which we discussed with it, the new Clause in the name of my hon. Friends and myself, which is No. 19 on the Notice Paper—

Mr. Ellis Smith

There will be two Divisions.

Mr. Nabarro

Yes, but the point I am trying to make is that although there will be two Divisions—and I shall tell in the second Division—the second Division will not take place—as I understand it—until new Clause No. 19 on the Notice Paper is reached, which may well be in two hours' time. Is that correct?

The Deputy-Chairman (Major Sir William Anstruther-Gray)

Yes, I appreciate the point which the hon. Gentleman makes. I had intended, as is the usual practice, to call the Clauses in the order in which they stand on the Notice Paper. Therefore, the second Division to which he refers will not take place until we reach new Clause No. 19.

Mr. Nabarro

That may be in several hours' time.

The Deputy-Chairman

As the hon. Gentleman says, it may be in several hours' time.

Mr. Nabarro

I am very much obliged.

6.30 p.m.

Mr. Bellenger

On a point of order. We had it from the Chair that the three new Clauses would be debated together and then voted on individually, but if they were debated together why should the Divisions not follow each other?

The Deputy-Chairman

The Committee will recollect that it is not infrequent to have debates on more than one Amendment or new Clause at the same time, but for the votes to be taken separately on each as it is come to and not out of turn. In Erskine May it is laid down quite clearly that procedure on new Clauses is that they are considered in the order in which they stand on the Notice Paper. Although discussion has been allowed to range over all these three new Clauses, we shall, in fact, consider each Clause separately when it is put from the Chair. In that way we must wait until we reach the new Clause—Exemption from Schedule A for owner-occupiers—vote on that and afterwards wait until we reach the new Clause—Abolition of Schedule A income tax—before we have Division on that new Clause.

Mr. H. Wilson

Further to that point of order, Sir William. What you are saying is always the principle followed in any Finance Bill. Surely there cannot be any argument about it. That is laid down, but, if this is inconvenient to hon. Members opposite, I suggest through you that they could have avoided it by being a little slippier in putting down new Clauses.

If they had been as quick as we were in putting down a new Clause, it would have followed ours. Then we could have voted on them in succession, but, having failed to do that, I suggest that if they are afraid they might not be present later when the Clause in the name of the hon. Member for Kidderminster (Mr. Nabarro) is called it would be in order for them to join us in the Lobby and vote for the new Clause under discussion.

The Deputy-Chairman

Order. I think that goes beyond what concerns the Chair.

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 195, Noes 259.

Division No. 107. AYES [6.33 p.m.
Abse, Leo Hayman, F. H. Peart, Frederick
Ainsley, William Henderson, Rt. Hn. Arthur (Rwly Regis) Pentland, Norman
Albu, Austen Herbison, Miss Margaret Popplewell, Ernest
Allaun, Frank (Salford, E.) Hill, J. (Midlothian) Prentice, R. E.
Allen, Scholefield (Crewe) Hilton, A. V. Price, J. T. (Westhoughton)
Awbery, Stan Holman, Percy Probert, Arthur
Bacon, Miss Alice Holt, Arthur Proctor, W. T.
Baxter, William (Stirlingshire, W.) Houghton, Douglas Pursey, Cmdr. Harry
Beaney, Alan Howell, Charles A. Randall, Harry
Bellenger, Rt. Hon. F. J. Hoy, James H Rankin, John
Benn, Hn. A. Wedgwood(Brist'l, S. E.) Hughes, Cledwyn (Anglesey) Reid, William
Benson, Sir George Hughes, Hector (Aberdeen, N.) Roberts, Albert (Normanton)
Blackburn, F. Hunter, A. E. Roberts, Goronwy (Caernarvon)
Blyton, William Hynd, H. (Accrington) Robinson, Kenneth (Sir Pancras, N.)
Bowden, Herbert W. (Leics, S.W.) Hynd, John (Attercliffe) Rogers, G. H. R. (Kensington, N.)
Bowles, Frank Irvine, A. J. (Edge Hill) Ross, William
Boyden, James Irving, Sydney (Dartford) Royle, Charles (Salford, West)
Braddock, Mrs. E. M. Jay, Rt. Hon. Douglas Shinwell, Rt. Hon. E.
Brockway, A. Fenner Jeger, George Silverman, Julius (Aston)
Brown, Alan (Tottenham) Jenkins, Roy (Stechford) Silverman, Sydney (Nelson)
Brown, Rt. Hon. George (Belper) Johnson, Carol (Lewisham, S.) Skeffington, Arthur
Brown, Thomas (Ince) Jones, Dan (Burnley) Slater, Mrs. Harriet (Stoke, N.)
Butler, Herbert (Hackney, C.) Jones, Jack (Rotherham) Slater, Joseph (Sedgefield)
Butler, Mrs. Joyce (Wood Green) Jones, J. Idwal (Wrexham) Small, William
Callaghan, James Jones, T W. (Merioneth) Smith, Ellis (Stoke, S.)
Castle, Mrs. Barbara Kelley, Richard Sorensen, R. W.
Chapman, Donald Kenyon, Clifford Soskice, Rt. Hon. Sir Frank
Chetwynd, George Key, Rt. Hon. C. W. Spriggs, Leslie
Cliffe, Michael King, Dr. Horace Steele, Thomas
Craddock, George (Bradford, S.) Lawson, George Stewart, Michael (Fulham)
Cronin, John Lee, Frederick (Newton) Stonehouse, John
Crossman, R. H. S. Lee, Miss Jennie (Cannock) Stones, William
Cullen, Mrs. Alice Lewis, Arthur (West Ham, N) Strachey, Rt. Hon. John
Darling, George Logan, David Summerskill, Dr. Rt. Hon. Edith
Davies, Rt. Hn. Clement(Montgomery) Loughlin, Charles Swain, Thomas
Davies, Ifor (Gower) Mabon, Dr. J. Dickson Swingier, Stephen
Deer, George McCann, John Sylvester, George
de Freitas, Geoffrey MacColl, James Symonds, J. B.
Delargy, Hugh McInnes, James Taylor, Bernard (Mansfield)
Dempsey, James McKay, John (Wallsend) Taylor, John (West Lothian)
Diamond, John Mackie, John Thomson, G. M. (Dundee, E.)
Dodds, Norman Mahon, Simon Thornton, Ernest
Dugdale, Rt. Hon. John Manuel, A. C. Thorpe, Jeremy
Ede, Rt. Hon. Chuter Marsh, Richard Timmons, John
Edwards, Rt. Hon. Ness (Caerphilly) Mason, Roy Tomney, Frank
Edwards, Robert (Bilston) Mayhew, Christopher Wade, Donald
Edwards, Walter (Stepney) Mellish, R. J. Wainwright, Edwin
Evans, Albert Mendelson, J. J. Warbey, William
Fernyhough, E. Millan, Bruce Watkins, Tudor
Foot, Dingle Mitchison, G. R. Weitzman, David
Forman, J. C. Monslow, Walter Wells, Percy (Faversham)
Fraser, Thomas (Hamilton) Moody, A. S. Wheeldon, W. E.
Gaitskell, Rt. Hon. Hugh Morris, John Willey, Frederick
George, Lady Megan Lloyd Mort, D. L. Williams, D. J. (Neath)
Ginsburg, David Moyle, Arthur Williams, Rev. LI. (Abertillery)
Gooch, E. G. Mulley, Frederick Williams, W. R. (Openshaw)
Gordon Walker, Rt. Hon. P. C. Noel-Baker, Francis (Swindon) Willis, E. G. (Edinburgh, E.)
Greenwood, Anthony Oliver, G. H. Wilson, Rt. Hon. Harold (Huyton)
Grey, Charles Oswald, Thomas Winterbottom, R. E.
Griffiths, David (Rother Valley) Owen, Will Woodburn, Rt. Hon. A.
Griffiths, Rt. Hon. James (Llanelly) Padley, W. E. Woof, Robert
Grimond, J. Pannell, Charles (Leeds, W.) Yates, Victor (Ladywood)
Gunter, Ray Pargiter, G. A.
Hale, Leslie (Oldham, W.) Paton, John TELLERS FOR THE AYES:
Hamilton, William (West Fife) Pavitt, Laurence Dr. Broughton and Mr. Redhead.
Hannan, William Pearson, Arthur (Pontypridd)
Hart, Miss Judith
Agnew, Sir Peter Beamish, Col. Tufton Boyle, Sir Edward
Aitken, W. T. Bell, Ronald (S. Bucks.) Braine, Bernard
Allason, James Bennett, F. M. (Torquay) Brewis, John
Alport, Rt. Hon. C. J. M. Bennett, Dr. Reginald(Gos. & Fhm) Brooman-White, R.
Amory, Rt. Hn. D. Heathcoat (Tiv'tn) Bevins, Rt. Hon. Reginald (Toxteth) Browne, Percy (Torrington)
Ashton, Sir Hubert Bidgood, John C. Bryan, Paul
Atkins, Humphrey Biggs-Davison, John Bullard, Denys
Balniel, Lord Bingham, R. M. Butler, Rt. Hn. R. A. (Saffron Walden)
Barber, Anthony Birch, Rt. Hon. Nigel Campbell, Sir David (Belfast, S.)
Barlow, Sir John Bishop, F. P. Campbell, Gordon (Moray & Nairn)
Barter, John Bossom, Clive Carr, Compton (Barons Court)
Batsford, Brian Box, Donald Cary, Sir Robert
Baxter, Sir Beverley (Southgate) Boyd-Carpenter, Rt. Hon. John Clark, Henry (Antrim, N.)