HC Deb 01 June 1961 vol 641 cc573-9

Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. Douglas Houghton (Sowerby)

I shall not detain the Committee for more than a few minutes, but there are one or two points which I should like cleared up about the form and purpose of this Clause, particularly as associated with Clause 10. Clause 9 does two things. It fixes the standard rate of Income Tax for the financial year 1961–62 and also the rates of Surtax for 1961–62. It says that the rates of Surtax for the year 1961–62 shall be the same as for the year 1960–61. Clause 10 then fixes the rates for the year 1960–61 by saying that they shall be the same as for the year 1959–60.

In a speech which I made on Second Reading of the Bill I said that it was both novel and unnecessary to fix the rates of Surtax for two years in the same Finance Bill. I have been doing some research to see what was the form of Sections of previous Finance Acts dealing with the standard rate of Income Tax and the rates of Surtax. I find that in Section 12 of the Finance Act, 1958, the standard rate of Income Tax was fixed but that the rates of Surtax for the year 1958–59 were to be as Parliament may hereafter determine. But the following Section—Section 13—settled the rates of Surtax for the year 1957–58, so that in that year the rates of Surtax for the previous financial year were settled but the rates of Surtax were left for settlement as Parliament may hereafter determine. I find that in 1959, Clauses in precisely similar form to those in the Bill now before us were introduced, and in the Finance Act, 1959, Surtax was fixed for two years at the same time whereas in 1958 it had been fixed only for one year. But in the Finance Act, 1960, it was unnecessary to fix the rates of Surtax at all because the rates of Surtax for the year 1959–60 had been dealt with in the Finance Act, 1959.

To sum all that up amounts to the fact that I was wrong in saying that Clauses 9 and 10 taken together were novel. Clauses in this form were, in fact, introduced for the first time in 1959. Curiously enough, there was no debate during the Committee stage of the 1959 Finance Bill on this novel form of two Clauses which, added together, fixed the rates of Surtax for two years running. I notice that it was rather late at night. The Clauses concerned were ordered to stand part of the Bill without any debate whatsoever.

Although, therefore, I must withdraw the suggestion that Clause 9 taken together with Clause 10 constitutes a novelty in our Finance Bills, I still maintain that there is no necessity to deal with the matter in this way. Why it was done in 1959, my researches have not revealed, but there is certainly no need to do it as far as I can tell, because for years prior to 1959 the previous custom was followed in Finance Bills.

Clause 9 of the Bill is therefore now a paving Clause to the reliefs which are to be given under Clause 11. Clause 9 deals with the rates of Surtax for the year 1961–62 and Clause 11 provides for reliefs from Surtax for that same year.

10.45 p.m.

I can understand, therefore, that in a Bill in which it is proposed to introduce reliefs from Surtax for the year 1961–62 it is obviously necessary to determine the rates of Surtax from which the reliefs are to be given. To that extent, therefore, the form of Clause 9, in association with Clause 11, is clearly logical, though I repeat that there is no need in this Bill to provide either for the rates or for the reliefs from Surtax for the year 1961–62. That could be done in the Finance Bill of 1962.

Perhaps the Financial Secretary, who has a phenomenal memory of these matters, will be able to explain to the Committee why the 1959 formula is being repeated in the 1961 Bill. As I have said, I can see that there is perhaps a more pressing reason for adopting the form and purpose of Clause 9 this year because of the additional provisions which Clause 11 is to make when Surtax comes to be levied for the year 1961–62.

We had it in mind to take offence at Clause 9 sufficiently to vote against it, but, having discovered that this form was used in 1959, without the same ulterior motive that is clearly in the mind of the Government in this Bill because they want to provide reliefs from Surtax for the year 1961–62 and are therefore concerned with more than fixing the rates, it seems to have provided a precedent for the form which is used in Clause 9.

That was the point I wish to raise. There have been occasions when the corresponding Clause in earlier Finance Bills has been the occasion for hours of debate, especially from the benches opposite, on the evils of the high rate of taxation. When I first came to the House in 1949, I came just in time for the Budget and Finance Bill of that year, a Labour Government being then in office. I was much more conscientious then than I am now, and I sat through the debates on the Finance Bill. I am much more selective now. I remember sitting here hour after hour, believing it to be my duty to listen to every word that was said on a Finance Bill. We had many hours of complaints about the evils of the high rates of taxation, the high level of Government expenditure, and the road to ruin generally.

Now, of course, although the rates of taxation are superficially lower, the total yield of taxation is enormously greater, public expenditure is correspondingly higher, and yet if there is to be any debate on Clause 9 this evening it is obviously left to these benches to make it.

Having had that backward look and nostalgic reference to occasions when the corresponding Clause in earlier Finance Bills was much more contentious that this one appears to be, I hope that the Financial Secretary will be able to throw light on the chopping and changing of form of this and its associated Clause in earlier Finance Bills and this one, which to me becomes curiouser and curiouser.

Sir E. Boyle

I think that I can answer the hon. Gentleman's question. It is true, as he says, that in past years we have sometimes had a lively debate on the Income Tax Clause. I remember the Finance Bill of 1951. Possibly part of the reason was that in 1950 the standard rate of Income Tax was 9s. in the £, and in 1951 it was 9s. 6d. in the £, whereas now it is only 7s. 9d. Having said that, I agree that to debate this Clause without the presence of my hon. Friend the Member for Kidderminster (Mr. Nabarro) seems to mark quite a change from last year.

The hon. Gentleman is right when he says that normally if we have no change in the standard rate the rates of Surtax for a particular year are not fixed until the Finance Bill for the following year. For instance, Surtax for 1960–61, payable on 1st January next year, will be charged at rates which are being fixed by Clause 10 of this year's Bill. I agree with the hon. Member that, in a way, this part of the Bill is drafted in a slightly peculiar way, because half of Clause 9 is, as it were, a paving Clause to Clause 11, with Clause 10 sandwiched in the middle. The point had not escaped me, but I do not quite see, assuming that we draft Clause 9 in this way, how that was to be avoided.

As the hon. Member has rightly said, however, there is some precedent for the Income Tax Clause being drafted in this form. When the standard rate was reduced in 1959 and also, I think it will be found, when it was reduced in 1955, Parliament was invited to approve the corresponding Surtax rates at the same time so as to make quite plain the total tax burden proposed for personal incomes under the new rates.

In the same way, my right hon. and learned Friend feels that, in view of the importance of the reliefs in Clause 11 in this year's Bill, it is right here and now to ask Parliament to fix the 1961–62 Surtax rates, so that the intended effect of the new reliefs can be clearly brought out. That means that taxpayers currently liable to Surtax, and those potentially liable to it, can have the whole picture before them, and the value of the reliefs in Clause 11 as an incentive will surely be greater if those affected know just what benefit they can expect to receive.

Next week, I have no doubt, we shall debate with considerable vigour the merits of Clause 11, but when a major change is being made in direct taxation, either through a large reduction in the standard rate or through, as in this case, a major reform of Surtax, in those conditions there is something to be said for the Income Tax Clause being drafted in this way, so that those who are, and those who may become, affected can know here and now just where they stand.

Mr. Jay

It would be quite possible, would it, for next summer's Finance Bill to reverse the Surtax reliefs announced by the Chancellor in this year's Budget, and they are in that sense purely contingent and hypothetical?

Sir E. Boyle

That phrase "Surtax reliefs" is a little imprecise. There are the Surtax rates which we are laying down now. In a sense, Clause 11 is something on its own. We are not debating it tonight, but it contains certain proposals which it is intended to apply to the Surtax rates. In a sense, therefore, it is something on its own. Therefore, I do not think that there is anything incorrect or contingent about the procedure which we propose to follow this year.

Mr. Mitchison

If that is so, why does the sidenote label Clause 11 "Surtax: reliefs for earned income"? If it does not mean relief, why put it in the side-note?

Sir E. Boyle

There is nothing wrong about the word "reliefs" in this context. Clause 11 begins by saying that For the purpose of charging surtax for the year 1961–62 or any subsequent year of assessment, certain particular considerations shall be taken into account. That is, in a sense, a Clause on its own, quite distinct from Clauses 9 and 10.

Mr. Mitchison

The hon. Gentleman might understand the difference between that and a relief, but I do not. I should have thought that what it meant was that for the purpose of charging Surtax, certain reliefs are to be allowed.

Sir E. Boyle

I was dealing with the point, made by the right hon. Member for Battersea, North (Mr. Jay), of whether to some extent our arrangements this year are contingent. We shall pass Clause 11 this year. I have no doubt that it will be possible notionally for the House to pass a quite new Clause on the same lines as Clause 11 next year if it is so minded, but that does not in any way make it incorrect for us to pass the present Clause in the form in which it is drafted in the Bill.

Mr. Jay

Would it be correct, therefore, to say that whether or not the Surtax changes announced by the Chancellor in the Budget this year take effect depends on next year's Finance Bill rather than on this one?

Sir E. Boyle

I do not, with respect, think that that is quite correct. The Surtax chargeable as proposed in the Finance Bill for 1961–62 will be reduced in many cases through the operation of the new reliefs for earnings under Clause 11. I was suggesting to the Committee only that there is an important distinction between the basic rates of Surtax chargeable and the new reliefs for earnings contained in Clause 11.

Mr. Diamond

To pursue that a moment, I think that my hon. and learned Friend, the Member for Kettering (Mr. Mitchison) may have been concerned with rates more than with reliefs, although he included both words in his question. To leave Clause 11 and the reliefs under it for the moment and to deal with Clause 9 and the rates there, is not my right hon. Friend the Member for Battersea, North (Mr. Jay) absolutely right, and am I not right, in saying that whether or not the rates proposed apply depends entirely on next year's Finance Bill? If that is so, whether it be a little abnormal or very abnormal, ought not one to bear it in mind and accept that the total result, the total liability to Surtax of an individual, cannot be finally ascertained until next year's Finance Bill is passed through the House?

Sir E. Boyle

I can give the unqualified assurance that the Clause in next year's Finance Bill corresponding to Clause 10 of this year's Finance Bill—I think this is the point the hon. Member for Gloucester (Mr. Diamond) has in mind—will be in no way at all inconsistent with Clause 9 of this year's Finance Bill.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 10 ordered to stand part of the Bill.

Mr. H. Wilson

I beg to move, That the Chairman do report Progress and ask leave to sit again. The Chancellor is not here at the moment, but I am sure that the Financial Secretary has authority to express enthusiastic support for the Motion I move. We have made remarkable progress with the Finance Bill today. We have got through all the vehicle duties, the Schedule, and two Clauses of, perhaps, lesser importance but on which time could have been spent, and we have dealt with the economic regulator in a matter of an hour or two in the quiet of the evening, handing to the Chancellor powers such as have never been handed to a Chancellor in time of peace before. If there is any criticism of today's proceedings, it ought to be directed at the Opposition for allowing such major power to go through so quickly.

We start again next Wednesday, I think. Since we have got through Clauses 9 and 10, I should tell the Chancellor, who is greatly experienced in many things but not, perhaps, in Finance Bills yet, that we got through Clauses 9 and 10 probably more quickly than at any time since the war, with the exception of 1959, which was the time my hon. Friend the Member for Sowerby (Mr. Houghton) had in mind, I think, a few minutes ago. I think that we ought to leave it there and go right into Surtax next Wednesday. I do not want to mislead the right hon. and learned Gentleman. I should regard it as very surprising if we had the same weight of productivity of Clauses per hour next Wednesday.

Mr. Selwyn Lloyd

One of the charms of the right hon. Member for Huyton (Mr. H. Wilson) is that, when he makes a speech, he opens up a great number of points capable of argument. I propose to resist the temptation to deal with some of his suggestions. I agree with the right hon. Gentleman. I do not think I can possibly complain of the progress we have made today. In the circumstances, I accept the Motion he has moved.

Question put and agreed to.

Committee report Progress; to sit again Tomorrow.