§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. G. Campbell.]
§ 4.2 p.m.
§ Mr. Graham Page (Crosby)I desire to draw the attention of the House to the unnecessary expense involved in the production of the P.A.Y.E. tax tables and to the waste of time involved in the use of those tables. I hope to be constructive in my criticism, because I wish to put before the House an alternative layout of these tax tables which would save a considerable amount of public money in their production and a considerable amount of time in operating them. I shall not occupy the time of the House in reciting the purpose and origin of the P.A.Y.E. system of the collection of Income Tax except to the extent that I should perhaps put myself in order by saying that these tax tables originate from time to time in regulations made by the Commissioners of Inland Revenue under Section 157 of the Income Tax Act, 1952. My proposals could be carried out in such a regulation and therefore do not entail the amendment of any Statute.
The collection of tax under the system of P.A.Y.E. is made, as the House knows, by the employer deducting the tax from the employee's wage or salary and accounting to the Inland Revenue authorities for the amount that he has so collected. The amount to be deducted is ascertained by a code number given to the employee by the Inland Revenue authorities and by the application by the employer of that code number to the weekly tax tables.
The tables are printed in as many as six books for the year and are divided into Table A and Table B, which are printed in each of the six books. It is to Table A that the employer applies the code number of the employee and by that means discovers against that code number the employee's "free pay", the amount up to date in the financial year on which the employee is not called upon to pay tax. He then has to deduct that "free pay" figure from the wage actually paid to the employee up to date in the current financial year and to carry the resultant figure to Table B. Tables A 1811 and B are printed for each week of the year. The pages for any one week start with one page of Table A. In the later weeks of the year, there are as many as six pages of Table B for each week.
There would be an advantage to a person operating these tables if they were printed in separate volumes so that Table A might be kept open beside one while one is referring to Table B. There would also be considerable printing advantage in having the tables printed separately, because tax changes sometimes affect one table and sometimes affect the other. New editions of Table A, for example, could be produced without the elaborate re-printing of the Table B books.
To continue with the process of operating the existing tables, having deducted the "free pay" figure found in Table A from the actual wage paid to the employee, one thus arrives at the total taxable pay to date. One has then to turn to Table B to root out that figure from the total taxable pay columns of Table B. Alongside it, when one has found that figure, one finds the total tax due to date.
When I speak of "rooting out" the figure from Table B, I mean a process which is correctly described as rooting out, because it is completely devoid of any systematic search. Each column of Table B, with items of 5s. intervals, covers a range of £15. The tops of the columns commence respectively, therefore, with a figure of £15, £30, £45, £60, and so on. Multiples, therefore, are not easy to spot within the columns. For example, £22 is not on the same line horizontally as £32 or £42. It is on the same line as £37, £52, £67, and so on, which is extremely confusing.
That is not the end of the difficulties in spotting the figures. Half the taxable pay in any one week is divided in Table B into intervals of 5s. Another quarter is divided into intervals of 10s. and the final quarter into intervals of £1. Because the columns are in ranges of £15, later of £30 and, later still, of £60, it is necessary for every week to print Table B in two columns, setting the tax payable against every interval of total taxable pay.
A constituent of mine, Mr. Edmund Jacob, has pointed out to me how the 1812 whole process can be immensely simplified by making each column hold figures for a range of £20 instead of £15. One could then dispense with the printing of the whole series of total taxable pay figures with the tax payable against each, and Table B could be arranged as follows.
The first column on the left-hand side would be the figure for total taxable pay from nil to £20 15s. For practical purposes, one would start at 15s. instead of nil. That, however, gives a column on the left-hand side of the sheet of total taxable pay from nil to £20 15s. The second column would be the total tax figure for each of the 5s. intervals of the £20 of the first column. The remaining columns would be the total tax figures for the total taxable pay ranging from £21 to £40 15s., from £41 to £60 15s., from £61 to £80 15s., and so on. Each column would be so headed.
If, for example, one wanted to discover the total tax figures for a total taxable pay of £45 15s., one would run one's finger down the column on the extreme left to find £5 15s., and then run the finger horizontally across and pause at the column headed £41 to £60 15s., and that would give one the answer. Again, if one wanted to discover the total tax figure for a total taxable pay of £73 10s., one would run one's finger down the extreme left-hand column to the figure £13 10s., and then horizontally across and pause in the column headed £61 to £81 15s., and there would be the answer. This could be done without turning any pages of the book at all. In the later weeks of the year, it might be necessary to have two pages printed opposite one another, when the discovery of the figures would be quite simple.
There are refinements to this layout, but the basis of the scheme is that the columns should be in multiples of £20. One finds, for example, for the weeks 17 to 28, that the tax payable on taxable pay from £1 to £20 is the same, and therefore reprinting each week could be avoided. Again, for weeks 28 to 52, the tax payable on taxable pay up to £40 is also the same, and again reprinting for each could be avoided.
At the point where the 5s. intervals in the present Table A change to 10s. 1813 intervals, the proposed new Table B would have columns to hold a range of £40, instead of £20 taxable pay, split in the centre horizontally so as to give half a column at £20 instead of a long column at £40. The method of operating would be just as simple as that which I have explained for the £20 columns. So, when the intervals change to £1, the range would be £80, and again the columns could be split for convenience.
The present tax tables are printed in six books and cover 320 pages. By the system which I have described, the pages would be reduced to 50 for Table B and 26 for Table A, a total of 76 pages, in place of the present 320 pages. Because of the advantages of the tables being hound separately, there would be two books, one for Table A and one for Table B instead of six books as at present. If it were thought better, for the purpose of facilitating tax changes, Table B could be in two books, hiving off the first nine weeks from Table B, which would be only a six-page book, which would give the opportunity for the printing of tax changes.
The pages of the new Table B book would be of progressively increasing size, that is, horizontally. Vertically, they would be 11¼ in., and horizontally they would start with a small page 6 in. across and go up to a page of 20 in. across. The advantage of that would be that on the right-hand page there would be a thumb index. The binding would be on the left-hand edge, instead of in the centre of the sheet, as in the present book. Comparing the present size of the books with the figures I have given, the present books are 8½ in. by 10 in.. and the net result of this proposed layout in square inches of paper would be a reduction from the present 14,824 sq. in. to 4,292. That is to say, in Table A it would be 512 sq in. and in Table B 3,780 sq. in. The actual figures to be printed on that paper would be less than one-third of the figures used at present.
I have given these figures in some detail, because I want now to use round figures and show that the pages of the new tables I propose would be less than one-quarter of the existing books. They would be bound twice or possibly thrice and not sex times. The amount of paper 1814 would be about two-sevenths of the existing books and the printing less than one-third.
Each time the present tax tables are printed as many as 1½ million copies have to be made. That costs the Exchequer in print and paper £168,750, which is 2s. 3d. a copy. To distribute these tax tables through the post, as my hon. Friend told me in answer to a Question, the estimated cost is £88,000. If posted by an individual at the ordinary rate it is calculated that £250,000 would be spent on postage, but taking the estimated £88,000 it costs just over £250,000 in print, paper and postage every time one set of these tax tables is sent out. I believe that on the figures I have given we could produce and distribute the simplified tables at one-fifth of the £250,000 or so which it now costs, and that is a saving of £200,000 to the taxpayers. There would be a reduction in cost of each book from 2s. 3d. to 8d.
The saving of £200,000 to the taxpayers is not to be scoffed at, but the saving of the time of those in offices who have to operate this would he very substantial indeed. A very conservative estimate is that it would be a 25 per cent. saving in time, and if things like plastic and transparent scales were used the saving could be at least 50 per cent. of time.
I believe that my constituent, Mr. Edmund Jacob, has devised something for which he should earn not only the thanks of the taxpayers for what can be saved to the Exchequer but the very warm gratitude of those who labour in offices with tax tables every week. He can earn this praise if the Government are prepared to adopt his scheme.
§ 4.18 p.m.
§ The Economic Secretary to the Treasury (Mr. Anthony Barber)Before I come to the substance of the proposals of my hon. Friend the Member for Crosby (Mr. Graham Page), there are two preliminary observations I should like to make. First of all, I should like to thank him for his courtesy in giving me notice of the particular scheme he was going to draw to the attention of the House this afternoon. Secondly, I should like to congratulate him on the remarkably lucid way in which he has explained the revision of the tax tables which he 1815 favours. I say "remarkably lucid" because I am sure it will be appreciated that it is really no mean feat to explain, without some form of visual aid, either the operation of the existing tables or the operation of the tables with which he would wish to replace them.
As for my hon. Friend's constituent, Mr. Jacob, who has devised these new tables, he deserves praise not only for his public spirit but also for the skill and application with which he has pursued his ideas about these complicated and technical matters. If I mention in a few moments some of the difficulties which I believe are involved in Mr. Jacob's scheme, I want to make it clear to my hon. Friend at the outset that in the course of a review of the tax tables which is at present being undertaken by the Inland Revenue it is proposed to consider Mr. Jacob's scheme further.
Perhaps I should say a word about the existing tax tables. They are, as my hon. Friend will know, of several varieties. There are, first, the weekly cumulative tables with which my hon. Friend and Mr. Jacob, his constituent, are, I think, primarily concerned.
These are used by very many employers and have been in operation for a considerable time. When the P.A.Y.E. system was first introduced, the tables were very substantial volumes. They contained a separate set of figures for each week of the year for each code number—and there were 100 code numbers—with pay scales running up to £2,000 a year. In 1947 a revised form of tables was introduced involving the use each week of two tables—the Free-Pay Table A and the Taxable Pay Table B. One first consults Table A to see what the free pay is for any particular code number; one then deducts the free pay from the gross pay to arrive at the taxable pay, and then consults Table B to find the tax actually payable.
This change in 1947 was a valuable one, as I think everyone would agree. It enabled the tables to be considerably reduced in size, and the tables have been substantially on this basis ever since. The number of codes has increased since the early days of P.A.Y.E. There are now over 220 of these codes and the 1816 tables have been able to accommodate this considerable extension to the range of taxpayers' personal circumstances which can now be reflected in a code number.
I am sure that the hon. Member will agree that there are certain qualities which any tax table must have. Perhaps I can consider first Mr. Jacob's Table B in the light of these requirements. The tables must be, above all else, immediately clear and simple for any person to use. Not all employers have large and competent office staffs. Sometimes in a small firm the employer himself has to act as his own wages clerk and he is far too busy to be able to devote more than the minimum amount of time to office work. When he has looked up the free-pay figure in Table A and deducted it from the total gross pay to date and discovers, for instance, that the resultant figure is, say £134 10s. or £445 10s., I am convinced that what he wants to be able to see is this figure itself reproduced in Table B so that he can read off the amount of tax immediately alongside.
In Mr. Jacob's tables he would first have to find out which figure on Table B represented £134 10s. or £445 10s., to use my examples. Then he would have to run his finger from that point horizontally along the line to the appropriate vertical column and try, at a remove of perhaps 16 or 17 columns in the proposed Table B, to read off a smaller figure in a box which may contain not one £ figure but in some cases two £ figures. This seems to me a practical disadvantage.
A further important requirement in tax tables is that they must not present occasions for increasing the element of human error. The existing tax tables, with their individual and distinct pay and tax figures, seem to have an advantage over the Table B involved in Mr. Jacob's scheme. They do not require a clerk to undertake the mental calculation which is necessary in Mr. Jacob's scheme to arrive at the figure which should be taken at a starting point from which he has to run his finger along the horizontal set of figures. In the existing tax tables he simply looks at the figure itself and reads off the tax. The reading-off of the correct figures at 1817 the junction of the appropriate horizontal and vertical columns in Mr. Jacob's table would, I think, increase the risk of error.
I should now like to turn to Mr. Jacob's proposal, to which my hon. Friend referred, of having separate books for Table A and Table B. I should perhaps say that this proposal is not a new one, and the balance of arguments between the alternatives is, perhaps, not all that clear.
The fact is that some employers find particularly useful the immediate juxtaposition of Tables A and B which exists in the present system for most ranges of income in the early weeks of the tax year, and for the lower ranges of income later on in the year. The free pay and taxable pay figures can then be read off the open pages of the Table without any need to turn to another page.
It is perfectly true, as my hon. Friend said, that in the later weeks of the year when the taxable pay figure is rather larger the wages clerk may have to turn over one or two pages from the Free Pay Table before coming to the taxable pay figure. But it is difficult. I think, to say with any degree of certainty that this operation will be found more inconvenient to him than turning from a separate Table A book to the Table B book and finding the appropriate taxable pay figure in it.
I might say, in passing, that this is a matter on which consultation with employers' representatives particularly would be necessary before any change, if it were thought desirable, could be brought about.
My hon. Friend produced some detailed figures of savings which he thought would result from the adoption of Mr. Jacob's table. He made the calculations partly on the basis of certain figures which I had given him previously in answer to a Parliamentary Question. Of course, if we can cut out any unnecessary expenditure, we should do so. But there are two points that I should like to make in this connection.
The first point is that I think my hon. Friend may perhaps have been a little over-optimistic in his calculations of the 1818 saving, because I think that he might well agree on reflection that the size which he gave—and about which he kindly notified me before the debate—of 11¼ ins. by 12¾ ins. which he allows for Table B would lead to the entries being rather compressed.
Secondly, I am not sure how real a saving this would be in terms of the economy as a whole if, as I feel to be the case at present, Mr. Jacob's tables led to a greater percentage of errors and to more time being spent overall in using the tables than is spent at the present time.
In connection with the saving which my hon. Friend expects to make from the introduction of the new tables, I should point out that it is a mistake to suppose that alterations to Table A necessarily require the reprinting of both Table A and Table B. It is sometimes found possible to provide amended pages which can be gummed over the existing tables, and so obviate the need to reprint the whole set of tables. There would, therefore, not necessarily be a saving each year anywhere near the amount suggested by my hon. Friend.
Perhaps as an indication of the economy which is possible, and is, in fact, practised by the Inland Revenue with the existing tables, I might mention that employers are, in fact, using for the current year, 1961–62, tables which were first provided in the years 1959–60 and 1960–61.
I have given quite frankly my reactions, after seeking advice from the Inland Revenue, to these proposals which Mr. Jacob and my hon. Friend think would be to the benefit of the community at large. But I repeat what I have said earlier. The Inland Revenue is giving thought to the existing tax tables and the use made of them. In the course of their review they will certainly give careful consideration to Mr. Jacob's proposals. Perhaps I might mention one other consequence of this debate. I have at last learnt how to check my own P.A.Y.E. deductions.
§ Question put and agreed to.
§ Adjourned accordingly at twenty-nine minutes to Five o'clock.