SURTAX RELIEF (Hansard, 28 February 1961)

§ Mr. Woodrow Wyatt (Bosworth)
I beg to move, That leave be given to bring in a Bill to provide for the raising of the levels at which Surtax becomes payable. I have been asked why my proposed Bill provides only for Surtax relief and not for a capital gains tax, also. The answer is simply that the rules of the House permit Ten Minutes Rule Bills to lower taxation, but not to create new taxes. I say at the outset that I do not wish the Government to find time for the Bill to complete its stages, supposing that leave is given to introduce it, unless they are willing, at the same time, to introduce a capital gains tax which would raise the equivalent sum, or more, that would be lost to the Revenue by any relief in Surtax.
I should also like to say that, misunderstanding a speech made by my right hon. Friend the Leader of the Opposition, in Derby, I said on television that I thought that he was in favour of Surtax relief and a capital gains tax. I apologise to him for any embarrassment I may have caused him. It is always my aim to minimise as much as possible the embarrassment that I cause my right hon. Friend.
I am not trying to make the rich richer. I am attacking a series of social evils caused by the levels at which the present rates of Surtax begin. [HON. MEMBERS: 'Oh."] If my hon. Friends will wait to hear the arguments, they might then decide whether they wish to complain. The starting level of £2,000 for Surtax was fixed forty years ago and has remained the same ever since. But we have no need to go back forty years. A man who, in 1938, was earning £2,000 a year might then have bean considered a rich man, but today, £2,000 a year is the equivalent of only £600 or £700 before the war. [An HON. MEMBER: "What about the workers?"] No one, even before the war, would have dreamed of starting the Surtax level as low as £600 or £700.
Keeping the old Surtax level while the value of money has declined has led to many harmful consequences. Because so much of the increased salary given to responsible executives is lost in Surtax, 1391 firms have increasingly tended to give their employees tax-free gifts instead of increased salary. That was the beginning of the expense account racket, which did not operate before the war. A rich shipowner told me recently that he would never have given his employees the right to run up accounts at restaurants before the war. He does it now because it is the only way of giving a man an increase without his incurring a heavy Surtax liability. That attitude is multiplied many times throughout industry.
The twenty most expensive restaurants in London have three-quarters of their bills—[HON. MEMBERS: "Which are they?"] In asking leave to present the Bill, it is not part of my intention to provide a tourist guide of London. If my hon. Friends want to know the names of these restaurants, I will supply them afterwards.

§ Mr. A. C. Manuel (Central Ayrshire)
Take us on a grand tour.

§ Mr. Wyatt
I do not wish to take up too much of the time of the House. If I am to be continually interrupted, it might take a little longer than I would otherwise need to develop my theme.
In at least twenty of the most expensive restaurants in London three-quarters of the bills are paid not by the individuals who order the meals, but by the firms for whom they work. Some of this so-called entertainment may be justified, but every accountant in the country knows that a great deal of it is not. If the number of foreign buyers alleged to have been entertained in Britain every year had really been entertained, we would have no export problem.

§ Mr. E. H. C. Leather (Somerset, North)
rose—

§ Mr. Speaker
Order. It is not our practice to allow interruptions on a Ten Minutes Rule Bill.

§ Mr. Wyatt
It does not stop at meals in restaurants, jollifications at night clubs, or unnecessary stays in luxury hotels. It covers, among other things, the provision of motor cars to executives which they can use as their own, which are bought by their firms, who pay the running expenses. The vast 1392 majority of Bentleys, Rolls Royces and a large number even of Jaguars, appear to be owned by the private individuals who drive them, but are really lent to them by their companies because an equivalent increase in salary would carry so much weight in Surtax.
Again, it is a growing practice to provide employees with flats in London and other towns, ostensibly to entertain foreign buyers or customers or because their place of residence is somewhere else. In both cases, the intention is to provide rent-free, tax-free accommodation by way of salary increase. Most of the flats in Grosvenor Square, with premiums of £20,000 and £30,000, have not been paid for by the individuals who live in them, but by the companies who employ them.
The giving of tax-free amenities instead of salaries is an unhealthy trend which did not happen before the war. It can only start to be reversed when the Surtax levels are raised and employees feel that it is worth while accepting increases in salary. This is not a purely economic matter. The moral climate that it breeds must be damaging to the sense of integrity of the nation as a whole.
Let me turn to another aspect. Many people are worried about the undesirable nature of some take-over bids. One of their complaints is the low level at which Surtax starts. Surtax payers, as a class, particularly those in the £5,000 to £6,000 a year group, who may, perhaps, pay as much as £800 in Surtax above their Income Tax, desperately try to make good their Surtax payments by speculation on the Stock Exchange. Before the war, most investments were intended as a long-term, serious investment in the company concerned. Now, they are aimed at quick capital gains, which are unsettling for steady economic growth.
When Fords, of America, offered 147s. apiece for the shares in the British Ford concern, which were then standing at 95s., the shareholders did not for one moment hesitate to accept. They did not put to themselves the proposition that if the shares were worth 147s. to Fords of America, they must be worth the same to them to hold—not a bit of it. The Surtax element in the shareholders at once seized upon the quick capital gain. 1393 They did not want their income to appreciate over the years because they thought that it would be no good to them.
The whole pattern of our economy is being distorted by the rates at which Surtax begins. Mr. Clore has made £10 million in the last six years without paying any tax, because it has all been in capital gains. Others have made similar fortunes. It is quite customary for many thousands of pounds to be made tax-free in a few hours. It is not surprising, therefore, that the ordinary Surtax payer at around the £4,000–£5,000 a year mark devotes much of his ingenuity to finding out how to make money without paying tax. He is only trying to emulate the lords of property and take-overs, who are mightily praised in the Press for making so much money with so little effort. Every accountant knows how hard his clients work at devising ways for turning money which otherwise would be called income into capital. They employ ingenuity on this which might well be employed in devising new motor cars and other new goods for export.
When Surtax was introduced in 1920, only 90,000 people then paid it. Today, nearly half a million people pay it, and the number is rising every year. This is largely because of the social revolution brought about by the Labour Government in 1945. [Interruption.] My hon. Friends should not decry the work done between 1945 and 1951 in raising the general living standards of the vast mass of the people. Nearly half a million people are now paying Surtax. Soon, the number will be higher. If we do not get many of their votes and their influence, the Labour Party will not return to power at the next General Election. [Laughter.] Yes, many of those people are very well disposed to the Labour Party. They are professional men, civil servants, technicians, managers—

§ Mr. Emrys Hughes (South Ayrshire)
Miners?

§ Mr. Wyatt
Yes. The miner who earns £20 a week at the coal face, and whose wife is a qualified teacher, may well find himself in the Surtax class.

§ Mrs. Harriet Slater (Stoke-on-Trent, North)
How many of them are there?

§ Mr. Wyatt
It is not only people whom we used to think of as rich who are coming into the Surtax class. The other 1394 day, I was talking in my constituency to the 20-year-old son of a miner. [Laughter.] I hope that that is not a cause for laughter. He is going to the local university to get a degree in mine management. By the time he is 25 he expects to be earning £25 to £30 a week in mine management. Very soon, he will be coming into the Surtax class. He may well decide not to increase his efforts to get on and so be of more value to the country.
It is said that there is no evidence that the present Surtax levels have any effect on productivity, output or exports. I believe that there is a mass of evidence to the contrary. Many firms, for example, have the utmost difficulty in persuading the middle-range executive earning from £3,000 to £4,000 a year to accept posts with more salary, because the greater responsibility is not compensated for by the increase in income. We all know of the reluctance of many people to work overtime because of the effects of tax. Why do we think that the same thing does not apply to Surtax payers?
In England, if a man's salary is raised from £2,000 to £3,000 a year, he keeps only £598 of the increase. In Germany, a similar increase would give him £693 and in France, £775. This may well have something to do with our failure to increase our productivity and exports while those countries have been doing much better than we have done.
The position rapidly worsens after the £3,000-a-year level. Young men refuse jobs which involve moving, say, to London or elsewhere in the country, because the rise in salary would not sufficiently offset the cost of the move, which is not allowable against tax. [HON. MEMBERS: "Divide."] I am going on longer than I would otherwise have done because I am being interrupted and I refuse to be browbeaten into silence.
It is common knowledge that many scientists and graduates, valuable to the country, have gone abroad to America and Canada. This trend has got so bad that the Civil Service Commission and the Atomic Energy Authority have recently been advertising for them to come hack from America and they are holding selection boards at the end of March in America to try to persuade 1395 our young scientists and graduates to return home, which they left because of our low Surtax level. These bodies would have much better luck if the Surtax levels were raised beforehand.
The Minister of Education has appealed for qualified married women to return as teachers. In view of the present shortage, this is an important matter. As, however, my hon. Friend the Member for Flint, East (Mrs. White) pointed out in the debate on the Queen's Speech, the incidence of Surtax when a qualified married woman goes back to teaching prevents many of them from doing so, because their income is combined with that of their husbands and they have to employ, perhaps, help in the home to do the housework that they would otherwise be doing. Many find that they are making a loss on the whole deal and they will not return to work. These are serious matters. [HON. MEMBERS: "Oh."] I wish that my hon. Friends would take them seriously, because they are fundamental to the government of this country.

§ Mrs. Slater
We have a lot more to take seriously.

§ Mr. Wyatt
The Surtax at its present level hits savagely thousands of the best elements in the community. Doctors, scientists, research workers, civil servants and professional men are all being hit because they cannot have expense accounts, tax-free flats and all the rest. We have reached the absurd position where, if a man wins a football pool, he is congratulated because he has got his money without working, but if a man works hard in his business or profession, and benefits not only himself but his country, he is regarded as so wicked that he must be punished—unless, of course, he can, like Mr. Cotton, Mr. Clore or Mr. Wolfson, find some way of making tax-free capital gains. That is another matter.
Under our present system, anyone who can make a fortune without paying tax is much to be congratulated. He will probably be given a commercial television station to run as a reward. I do not propose, in my Bill, that there should be any raising of the level at which Surtax is payable on unearned income. I propose that the starting level should be raised to 1396 £6,000 or a lesser figure, for earned income. That would be the equitable figure compared with 1938, although I do not make a shibboleth of that level. According to the Chancellor of the Exchequer, this would cost the Revenue about £60 million in a year. This amount could easily be recovered, and more than recovered, by a capital gains tax. I have already said that I do not wish the Bill to be introduced unless the Government are prepared to introduce a capital gains tax.
The effect would be to shift the emphasis to rewards for work and not for speculation. If anyone says that it would not have a stimulating effect among important sections of the community, he must be blind to all the known facts of human nature. It would have a tremendously stimulating effect in large sections of our economy. Anyone who denies that must be blind also to the example of Russia, where there is no Surtax and even the old flat-rate of 13 per cent. income tax is being fast reduced.
My Bill, and its corollary, a capital gains tax, would help also to curb the dangerous tendencies of tax-free gifts in our society. One would think that an effort to shift the emphasis from tax-free gifts, "perks" and capital gains to money earned in honest toil for the benefit of the country would be regarded as obvious common sense. But nowadays we seem to be so weighed down by complacency, inertia and old attitudes that we find the utmost difficulty in changing anything. If Dr. Johnson were alive today, I think that he would say of Britain, "If a thing is obvious common sense, one can depend upon it, Sir, that it will not be done".

§ Mr. Gerald Nabarro (Kidderminster)
I rise to oppose the Motion.

§ Mr. John Diamond (Gloucester)
On a point of order, Mr. Speaker. My point of order relates to the manner in which a Member catches your eye to oppose a Bill which is proposed as my hon. Friend the Member for Bosworth (Mr. Wyatt) has done. I take it that I am right in the assumption that it would be your desire that this matter should be fairly debated at this stage. I take it, also, that you are as aware as I am—

§ Mr. Speaker
I am sure that the hon. Member knows all about this. My precise powers in the matter are described in the Standing Order.

§ Mr. Frank Allaun (Salford, East)
Further to that point of order—

§ Mr. Emrys Hughes
Speak for Britain.

§ Mr. Allaun
I think that it will be apparent to you, Mr. Speaker, and to the whole House, that support for my hon. Fiend's speech came from the benches opposite and opposition to it came from this side of the House. Would it not be fairer and more representative, Sir, if the speech in opposition came from this side of the House?

§ Mr. Speaker
I know that the hon. Member means the utmost courtesy, but this is simply a matter of selection for the Chair conferred upon me as a responsibility. I do not want to lay down any general rules, but the ordinary process seems to be, if several people are opposed, to choose one from the other side of the House after the first speech.

§ Mr. E. Shinwell (Easington)
I do not know whether you are aware, Mr. Speaker, that, when I came to the House a little after one o'clock today, I was informed that the hon. Member for Kidderminster (Mr. Nabarro) would oppose this Motion.

§ Mr. Speaker
An hon. Member had communicated privately with me saying that he wished to do so. I do not know what reached him, but the answer I gave was, "Yes; as far as I am concerned, that will be all right, unless someone on the opposite side of the House to the hon. Member moving the Motion applies". That was quite early after breakfast time, if I may put it in that way. Since then, I have had a variety of applications from other hon. Members in different parts of the House. I have, in fact, selected the hon. Member for Kidderminster (Mr. Nabarro).

§ Mr. Charles Pannell (Leeds, West)
But is there not a proviso in your selection, Mr. Speaker, under the Ten Minutes Rule when leave is asked to bring in a Bill, that you only call a Member who is prepared ultimately to divide the House on the issue? I remember a previous occasion when Mr. Speaker Morrison admonished an hon. Member 1398 who, after having spoken, did not then divide the House. I submit that that is the issue. We ought to be sure that at the end of these deliberations the hon. Member for Kidderminster will be prepared to divide the House, and we ought to have his word that he will do that.

§ Mr. Speaker
With respect to the hon. Member, who so often tries to help me—and I am grateful—all that has happened now is that I have selected the hon. Member for Kidderminster.

§ Mr. John Hynd (Sheffield, Attercliffe)
On a point of order, Mr. Speaker. May we have your guidance? This is obviously an important matter, on which there is very deep feeling in the House. Since we are restricted to one speaker in opposition, what would be the position if it should prove that the speaker rising in opposition put forward a frivolous opposition? If such happened, what would be the protection for those who genuinely wished to oppose?

§ Mr. Speaker
I may have committed many indiscretions, but I never give a Ruling on a hypothetical situation. I respectfully suggest that the House may think that we ought to get on, because I cannot help knowing that there are many hon. Members wishing to speak on our further business.

§ Mr. Nabarro
I repeat, Sir, that I rise to oppose the Motion. I hope that what I say will not be judged by the House to be frivolous in any way. I begin by giving the hon. Member for Leeds, West (Mr. C. Pannell) my assurance that I hope to act myself, in a Division to follow this Motion, as the first Teller against the Motion, and I invite the hon. Member for Leeds, West to join me as the second.
Having disposed of those essential prerequisites, I now pass to the rather quixotic situation in which we find ourselves this afternoon, when a Socialist Member—[HON. MEMBERS: "What?"]—a Socialist Member, the hon. Member for Bosworth (Mr. Wyatt), widely known as the leader of the Leicestershire coal miners—

§ Mr. Thomas Swain (Derbyshire, North-East)
rose—

§ Mr. Speaker
Does the hon. Member rise to a point of procedure?

§ Mr. Swain
Yes, Mr. Speaker. I should like you to call upon the hon. Member for Kidderminster (Mr. Nabarro) to withdraw that remark. My hon. Friend the Member for Bosworth (Mr. Wyatt) is not connected with the mining industry either as a workman or as an employer—least of all as a workman.

§ Mr. Speaker
I understand that there is some suggestion of factual inaccuracy, but I do not think that so to describe an hon. Member as unparliamentary.

§ Mr. Nabarro
The hon. Member for Bosworth is equally notorious as a newspaper magnate, the chairman of the Banbury Guardian. In the course of his speech he ought to have declared an interest as a Surtax payer. I readily declare that interest myself, and I have no objection in principle to anything that the hon. Member says as to the desirability of reducing the present penal levels of direct taxation.
I take the view, and I think that the majority of my hon. Friends accept the view, that there is a very definite connection between the inadequacy of British exports during the last twelve months and the penal level of direct taxation. My objection to what the hon. Member for Bosworth has done and said this afternoon is that it is surely grossly improper for a Member of the House to seek to presage the Budget which my right hon. and learned Friend the Chancellor will introduce on 11th April next, six weeks from now, by endeavouring to precipitate a major change in fiscal policy and a major reduction in taxation.
The hon. Member for Bosworth said that there were half a million Surtax payers in this country today and that the Socialist Party would require to capture their support at the next General Election if the Socialists were to win.

§ Mr. G. W. Reynolds (Islington, North)
There are 50 million Purchase Tax payers.

§ Mr. Nabarro
Yes, there are, but the point I am trying to make, however inadequately, is that half a million Surtax payers and their adult dependants might total about 800,000 or 900,000 voters.

§ Mr. Emrys Hughes
All Tories.

§ Mr. Nabarro
I hear someone say that they are all Tories, but even supposing 1400 that the policies of the right hon. Member the Leader of the Opposition, as distinct from those of the hon. Member for Bosworth, as distinct from those of the hon. Member for Coventry, East (Mr. Crossman), and as distinct from all the conflicting policies within the Labour Party, commended themselves to the electorate, even then, from Surtax payers, the Socialists could not muster more than tiny support.
In any event, the cost of the changes which the hon. Member for Bosworth proposes would be fairly formidable. He has given us no reliable estimate of what they are.

§ Mr. Wyatt
Sixty million pounds.

§ Mr. Nabarro
The hon. Member is badly informed as usual.

§ Mr. Wyatt
rose

§ Mr. Nabarro
No. I did not interrupt the hon. Member.
The hon. Member, who quoted so fluently from several of my Parliamentary Questions and the Answers thereto, should go away and look up the Chancellor's Answers again. He will find these facts. If the present commencing level of Surtax were raised from £2,000 a year to £3,000 a year, the cost to the Revenue in the present year would be £56 million.

§ Mr. Wyatt
That is unearned income as well.

§ Mr. Nabarro
The hon. Member might be a coalminer, the way he is carrying on.

§ Mr. Swain
On a point of order, Mr. Speaker. May I again ask you to call upon the hon. Member—I am almost ashamed of myself for calling him that—for Kidderminster not to insult the miners' group in this House of Commons by making any reference to them with or without relation to my hon. Friend the Member for Bosworth?

§ Mr. Speaker
I can find no point of order in that.

§ Mr. Swain
It is insulting, Sir.

§ Mr. Nabarro
If the present commencing level of Surtax were raised from £2,000 to £4,000 a year, the cost to the Revenue in the current year would be no less than £89 million. If the commencing 1401 level of Surtax were raised from £2,000 to £5,000, the cost to the Revenue in the current year would be £110 million. If it were raised from £2,000 to £6,000. as the hon. Member suggests—

§ Mr. Wyatt
rose

§ Mr. Nabarro
I will not give way. If it were raised to £6,000—

§ Mr. Wyatt
On a point of order. It will be within the recollection of the House that I was referring to raising the Surtax level only on earned incomes, not on unearned incomes. The hon. Gentleman's figures are totally irrelevant to the question of earned incomes.

§ Mr. Speaker
I do not appreciate the point of procedure about which the hon. Gentleman addresses me.

§ Mr. Nabarro
If the commencing level of Surtax were raised to £6,000, the cost to the Exchequer in a full year would be even greater than £110 million.
Having regard to these formidable figures, I suggest that it would be wholly wrong to endeavour to anticipate what my right hon. and learned Friend will do in his Budget on 11th April, and that we would he well advised to bring all possible pressure to bear on my right hon. and learned Friend, in the general sense of the speech of the hon. Member for Bosworth, for a substantial reduction of Surtax, but not—

§ Mrs. Slater
On a point of order. When the question whether the hon. Member for Kidderminster (Mr. Nabarro) should be selected to speak was raised, it was said that he had given you, Mr. Speaker, notice that he wanted to oppose the fundamentals of the proposed Bill. He is not fundamentally opposing the Bill, but merely safeguarding the Exchequer. Therefore, is he a right and proper Member to oppose the Motion?

§ Mr. Speaker
There is no point of order at all in that.

§ Mr. Nabarro
Clearly, what I was endeavouring to do was to damn the proposal with faint praise. We should not anticipate what the Chancellor will do on 11th April. What we should do is bring the maximum pressure to bear on him by every Parliamentary means, the whole of the Socialist Party getting 1402 "fell-in" behind me, to insist that the Chancellor recognises what is a grave deterrent to export performance, namely, the present penal levels of direct taxation.
I believe that this Motion is a kite being flown by the hon. Member for Bosworth on the instructions of the Leader of the Opposition.

§ Mr. Hugh Gaitskell (Leeds, South)
rose—

§ Mr. Speaker
I shall be in grave difficulty—does the right hon. Gentleman wish to raise a point of order?

§ Mr. Gaitskell
Yes, Mr. Speaker. You have ruled that it is not possible to interrupt during the proceedings on a Bill under the Ten Minutes Rule, but when slanderous statements are made what opportunity have we to correct them? The hon. Gentleman knows perfectly well that what he has said is utterly untrue.

Hon. Members
Withdraw.

§ Mr. Speaker
I am sure that the right hon. Gentleman understands that the suggestion that he had inspired something does not necessarily strike me as unparliamentary.

§ Miss Margaret Herbison (Lanarkshire, North)
May I raise a point of procedure, Mr. Speaker? We have been listening carefully to the hon. Member for Kidderminster (Mr. Nabarro). I understand that he was chosen by you to speak because he said that he wanted to oppose the Motion. What right have we on this side and Members on the other side of the House, or, indeed, what chance have you, Mr. Speaker, of rectifying the mistake which has been made? I take it that the hon. Member for Kidderminser gave you the assurance that he proposed to oppose the Motion asking for leave to bring in the Bill. What he has done, in fact, is to make a mockery of the Ten Minutes Rule procedure.

§ Mr. Speaker
I do not take any responsibility for the arguments which an hon. Member uses to support, or rather to counter, some proposition. The hon. Member for Kidderminster has declared publicly to the House that he proposes to divide the House, and, indeed, if possible, to tell in a Division against the Bill.

§ Mr. George Chetwynd (Stockton-on-Tees)
rose

§ Mr. Nabarro
My ton minutes is running out.

§ Mr. Chetwynd
Some of us wish to oppose the proposed Bill, Mr. Speaker, but the conduct of the hon. Member for Kidderminster is making it impossible for us to do so. It is placing us—

§ Mr. Speaker
Order. What the hon. Gentleman says may well be so, but what hon. Members do is not a matter for me. I hope that the House will get on with this matter, because of our other business.

§ Mr. Edward Short (Newcastle upon Tyne, Central)
rose

§ Mr. Nabarro
This is not fair. My ten minutes is running out.

§ Mr. Short
You said a minute ago, Mr. Speaker, that you were not concerned with arguments. May I suggest to you that in this one case you are probably concerned with arguments, for this reason? It is the custom of the House, under the Ten Minutes Rule, to listen to one speech in favour of the Bill and one speech against the Bill. The hon. Member for Kidderminster has said over and over again that he is in favour of raising the level of Surtax. I suggest to you, Mr. Speaker, that the hon. Member is simply playing the fool. This is clear abuse of the procedure.

§ Mr. Speaker
That is not a point of order.

§ Mr. Nabarro
The Leader of the Opposition said that a statement of mine was slanderous. I hope that he is not trying to qualify for £1,500! The right hon. Gentleman the Leader of the Opposition is flying two kites—the kite on finance, represented by the hon. Member for Bosworth, and the kite on defence, represented by the hon. Member for Coventry, East. For my part, I want Surtax reductions in the Budget, which is the proper time, not now.
1404 I believe that the whole House should oppose the Motion, and I invite the hon. Member for Leeds, West to act, as he said he desired, as a Teller with me in opposing the Motion.

§ Mr. Charles Royle (Salford, West)
On a point of order. The penultimate sentence of the hon. Member proves conclusively what we on this side have said in our points of order. He deliberately said that he is in favour of the Surtax level being altered, which is in exact agreement with what my hon. Friend the Member for Bosworth (Mr. Wyatt) wants. Therefore, does not that indicate that the hon. Gentleman is not opposing the Motion?

§ Mr. Speaker
I am unable to take that view or to believe it to be right. The fact that the hon. Member says, "I desire the bottom level of Surtax to be raised" does not mean that he is in favour of the Bill. He declares himself to be opposed to it.

§ Mr. Nabarro
I am deeply grateful, as always, for your protection, Mr. Speaker.

§ Mr. Speaker
The Question is, That the hon. Member for Bosworth have leave—

§ Mr. J. Hynd
rose

§ Mr. Speaker
I must ask the hon. Gentleman to resume his seat. I am putting the Question.

§ Mr. Hynd
I wish to raise a point of order, Sir.

§ Mr. Speaker
I must put the Question.