§ In section thirteen of the Finance Act, 1957 (Relief for persons over sixty-five with small incomes) as amended by section fourteen of the Finance Act, 1958, for the references to two hundred and seventy-five pounds and four hundred and forty pounds (which refer to the income limits for exemption under those sections) there shall be substituted references to three hundred pounds and four hundred and eighty pounds respectively.—[Mr. Houghton.]
§ Brought up, and read the First time.
§ Mr. HoughtonI beg to move, That the Clause be read a Second time.
§ The Deputy-Chairman (Major Sir William Anstruther-Gray)I think it will be convenient to discuss with this new Clause the two new Clauses "Relief for small incomes," and the following new Clauses, "Old age relief," "Relief for persons over 65 with small incomes," "Income limit for relief for small incomes," and "Income limit for old age relief."
§ Mr. HoughtonYes, Sir William. I very much regret that this important group of new Clauses falls to be discussed at this late hour, but I must ask the Committee to soldier on a little longer. Hon. Members on these benches attach great importance to these new Clauses.
Of the first three new Clauses in this group, the first deals with relief for persons over 65 with small incomes, the second with relief for small incomes, and the third with old-age relief. The cost of conceding the reliefs proposed would be £3¼ million in a full year. I say that at the outset because I want to express my belief that the granting by the Chancellor of these concessions would still be within the general strategy of his Budget. The cost is small enough to leave intact the Chancellor's estimate of a surplus above the line of over £500 million for the present financial year. Because we believe that the concessions can be made without damage to the Chancellor's general budgetary strategy, and because we are convinced of the merits of these proposals, we shall certainly press them upon the Government in the event of an unsatisfactory reply.
I think that it would be for the convenience of the Committee if I were to argue in detail on the first of these new Clauses and to make briefer references 570 to the other two, because if the Chancellor feels unable to concede the relief proposed in the first one it is very unlikely that he will feel able to concede the other two proposed reliefs.
The first new Clause proposes to raise the limits for age exemption under Section 13 of the Finance Act, 1957. In its present form, the relief means that a single person aged 65 or over is exempt from Income Tax if his total income from all sources does not exceed £275 a year. If one of a married couple is over 65, both are exempt from Income Tax if their joint total income from all sources is not more than £440 a year. We propose that these limits should be increased, in the case of a single person, by £25 to £300 and, in the case of a married couple, by £40 to £480.
Before going further, I want to explain that the new Clause makes no reference to marginal relief. The omission is intentional; it is merely to avoid complicating the drafting. It must not be taken as an oversight, or as an implied intention to leave the marginal relief as it is. Quite clearly, if the Chancellor accepted the Clause it would be necessary for the marginal relief to be adjusted to match.
The case of lifting the amounts for age exemption is that a few weeks ago retirement pensions were increased by 7s. 6d. for a single person and by 12s. 6d. for a married couple. If the present age exemption limits are left as they are many people will have tax to pay, or more tax to pay, which will he a high proportion of the extra income they receive.
Hon. Members on both sides of the Committee may have received letters from their constituents painting out what the pensions increase means to them in extra tax because the additional retirement pension will push them aver the age-exemption limit. I freely admit that the proposed increase of £25 in the case off the single person is somewhat above the increase in the retirement pension of £19 10s.; and that the proposed increase of £40 in the limit of income for a married couple is somewhat more than the retirement pensions increase of £32 10s. The figures proposed are convenient, round figures, but if the Chancellor would like to pare them down to 571 equate them with the pensions increase exactly, I do not think that we should complain.
10.30 p.m.
The age exemption was first introduced in 1957 when the limit for a single person was £250 and for a married couple £400. Then in 1958 there was a 10s. a week rise in the pension for a single person and a 15s. a week rise in the pension for a married couple, and it was then that the Chancellor of the Exchequer raised the age exemption limits to their present levels of £275 and £440 respectively. I mention that particularly because the pensions increase this year seems to us to give rise to a similar adjustment in the exemption limits.
The next thing I want to make clear is that age exemption gives to old people an advantage over younger people on the same incomes. There can be no doubt about that. That has always been the case right from the beginning. The improvements that are proposed would make no difference to that principle. The change would be a matter of degree.
To illustrate what the difference amounts to, a single person who is working begins to pay Income Tax after receiving £180 in the tax year, whereas a single person over 65 years of age pays no tax until his income is more than £275 a year. So the Committee will see what a substantial difference there is between the exemption limit far the younger person and the older person respectively. A married person who is working begins paying after £309, whereas a married couple one of whom is over 65 are exempt up to £440. There again the difference is quite apparent.
But I do not think there is anything to be said against the extension of the reliefs that we propose, having regard to the fact that two things have happened since the present reliefs came into operation in 1958. First, in 1959 there was a reduction of 9d. in the standard rate of Income Tax and a corresponding reduction in the reduced rate of tax. These persons, being exempt from tax, got no benefit from reliefs given to other taxpayers. The second point is that, the pensions having been increased in 1961, there is need for this adjustment in order to avoid what I believe would be a degree of hardship. What we want 572 to do surely is to give these old people a higher living standard and we wish to alleviate any hardship which may be caused by too heavy a rate of tax on the marginal increase in income.
There is what is known as marginal relief. This is to obviate the jump in tax which would otherwise occur, the moment a person went over the limit of £275 or £440, whether single or married. This marginal relief provides that the tax on incomes just over £275 and £440 respectively shall not exceed nine-twentieths of the amount of income over the limit. Marginal relief in this case does not take care of the hardship which is inevitable, and that is why we are proposing that the exemption limits should be lifted in order to put at least the amounts of pension increase beyond the reach of this increase in tax.
I can give the Committee an example if it is still able to follow figures a little further. A man on £440 income exactly now, who is at present exempt, receives a pension increase of £32 10s. which gives him a total income of £472 10s. The tax on that which he will now have to pay will be £14 10s. Thus, instead of receiving £32 10s. extra income, he will receive after tax only £18 of the pension increase of £32 10s. That means that he will have only 7s. net benefit from a pension increase of 12s. 6d. a week.
§ Mr. Dudley Williams (Exeter)rose—
§ Mr. HoughtonI hope that the hon. Gentleman will allow me to continue my examples and then, if he wishes to, make his intervention. He is usually so mischievous that I am reluctant to give way at this stage.
§ Mr. Dudley WilliamsI do not want to be mischievous at all. Is not the argument on which the hon. Gentleman is concentrating the same as that used by the Scotsman who complained that, when the fares in Glasgow were reduced, he did not save so much money when he walked?
§ Mr. HoughtonThis confirms what I said a moment ago. I know that it can be argued that, if income goes up, then the person concerned can expect tax to go up with it. But I am dealing here with the specific question of the effect of the retirement pension increase on people with small incomes who are 573 bumping against the ceiling of age exemption. I ask the Committee to answer quite frankly this question: do hon. and right hon. Members wish people on this range of income to be deprived of such a substantial proportion of the pension increase which the House of Commons voted to them a few months ago?
To put the example I have just given in another way, out of the increase in pension of 12s. 6d. a week, that person will pay 5s. 6d. a week in tax, and 5s. 6d. a week tax out of an increase in income of 12s. 6d. is a very high marginal rate. The comparable example in respect of a single person is that the net increase after tax will be 4s. out of the pension increase of 7s. 6d.
I have a bundle of cases here of complaints from taxpayers who have written to their local tax officers to find out how they stood and who are appalled at the difference which Income Tax will make to the increase which they were longing for and toping to have the benefit of now that the pensions increase is payable.
Do we want the old-age pensioners with these relatively small incomes to have the maximum benefit from pensions increases? That is the question. If we do, then we must lift the exemption limits to which I have referred. I think that the Committee will want old-age pensioners on small incomes to be in no worse position, relatively, than before. The extra pension in this range of total income was, or should have been, intended as a net gain in their not-too-high living standards, not to be made a kind of sitting duck for the tax collector.
I stress that the age exemption of 1957 was designed as some protection against the full force of taxation for those who were too old to share in the benefits of higher earnings and rising standards. We should not take that shield away now. We should not allow it to be lowered, relatively, in face of the pensions increases which we have granted. I hope that the Financial Secretary will have something reassuring to say about this. As far as we are concerned, this is the key new Clause. It is here that we think the Committee should give some attention after having spent so long on reliefs in other directions, upon which I will say nothing more at the moment.
574 To conclude, I wish to refer briefly to the other two new Clauses, the first of which proposes and is entitled "Relief for small incomes". This, though not a relief for persons over 65, is a relief for persons, mostly widows and single women, living on small fixed incomes whose total income at the moment does not exceed £300 a year. They are allowed to treat investment income as earned income and to receive the two-ninths earned income relief on investment income. It is a very small concession and does not exempt them completely from tax. It gives them a slight benefit on their investment income.
The third of this group of new Clauses proposes "Old age relief" which is usually an accompaniment of age exemption, though not necessarily so. This again relates to people over 65 years of age, and if their total income from all sources does not exceed £800 a year they are allowed to reckon investment income as earned income for the purpose of the two-ninths relief.
That is the case for this group of new Clauses. I am sorry that the Chancellor is not present. It is always a bad sign when one is asking for anything if the Chancellor is not here. I believe it is traditional that if the Chancellor has anything to give away he does it himself. He leaves his assistants to turn everything down. However, I will not anticipate trouble in case there is not going to be any.
I want to impress upon the Committee how strongly we feel about this group of new Clauses, especially the one on age exemption and the one on small incomes relief because they both relate to persons on the lowest of incomes. Those who get the benefits of age relief are able to have a somewhat better standard of living and still get earned income relief on investment income. I sincerely hope that the Committee will view these three new Clauses favourably.
§ Dame Irene Ward (Tynemouth)I am very glad indeed that the hon. Member for Sowerby (Mr. Houghton) started by talking about the very difficult position of those who have had the benefit of the retirement pension. I was very grateful for the concise and careful way in which he put his argument.
575 About a fortnight ago I addressed a Parliamentary Question to the Chancellor which, of course, was replied to by the Financial Secretary. I quite agree that perhaps my Question was not as accurately framed as it ought to have been because, of course, I have not the experience of the hon. Member for Sowerby. But I must say that I was stunned to receive a reply from the Financial Secretary, couched in the most extraordinary terms, saying that he did not understand what my Question meant at all. Therefore, I am waiting with extremely great interest for the answer that my hon. Friend is to give to the hon. Member for Sowerby.
There is one other point, and I am sorry to have to say this to the Financial Secretary because I find him a very charming young man. I also received some letters and I sent them on to my hon. Friend. In my personal letter to him I particularly underlined that I wanted a quick reply because I wanted to use it as an example and read it out in the debate on these new Clauses. Needless to say, the Treasury takes such a long time about doing anything that I have had no reply. I have not even got my personal letters back. Therefore, I cannot make use of those very suitable letters in support of the argument advanced by the hon. Member for Sowerby. I think that I have been let down by the Treasury, so instead of going on my usual crusade about the charm of the Treasury I shall deliver my attack in quite a different tone.
§ 10.45 p.m.
§ Sir E. BoyleWe have these love-hate situations practically every year on these occasions. But may I say to my hon. Friend that if she wants personal letters back and if she asks me for them, I will see that she gets them. That I promise.
§ Dame Irene WardThat is very kind, but the point is that my hon. Friend must have had the letters for at least a week and I think that I have a legitimate grievance. He knows perfectly well how deeply I feel on these matters. There are very good letters. My hon. Friend might have written to me to say that he was studying them so carefully that he had not had time to read them. [Interruption.]—or he could have let me have them back again.
576 I, too, regret the absence of the Chancellor of the Exchequer. I feel strongly on this matter, and I have taken a lot of trouble over the Chancellor. I try to be as quick on the uptake as possible, but I notice that when I go to the Treasury the Chancellor very charmingly asks whether I mind having my hon. Friend the Financial Secretary in the room when we are discussing the problems of these people on small fixed incomes and—
§ The Temporary Chairman (Sir N. Hulbert)Order. I hope that the hon. Lady will now devote herself to the new Clause.
§ Dame Irene WardI am going to direct myself to the new Clause. I have said a great deal about it and I have a lot of new Clauses to which to direct my attention. But surely I am entitled to repeat a conversation that I had with my right hon. and learned Friend. I think that I have every right to complain because the Chancellor is not present. The hon. Member for Sowerby was allowed to complain about that and I think it a great pity if someone from this side of the Committee cannot complain at the absence of the Chancellor. I feel it much more acutely than most hon. Members.
When I went to discuss these questions with the Chancellor he always referred them to the Financial Secretary and he gave me the impression regarding the last Finance Bill—I presume that the same applies to this Bill—that all the recommendations to miss out the things I wanted to put in came from the Financial Secretary. The Chancellor has taken no part whatever even in looking at the problem. His absence tonight reveals that he has not looked at the problem. He is not interested in it. His absence also reveals to me that, after having given away all that wonderful amount to Surtax payers, he is not looking at this problem at all.
I find myself more in agreement with the new Clauses relating to people living on small fixed incomes than with the proposals relating to people who pay Surtax. But that is the way the pattern goes, and it is the same when a Labour Government are in office.
I want to make this point about the various Clauses with which I am associated, though the main argument, of 577 course, is on the Clause moved by the hon. Gentleman the Member for Sowerby and the related ones. I hope that the Financial Secretary will not refuse them in the usual kind of way, that is to say, get up and give us in great detail all the things which have been done—neither by the present Chancellor nor by himself, but by that Chancellor of the Exchequer who is now Minister of Aviation.
He was the one who initiated this sort of Clause, this type of exemption, and I am never going to forget that he was the only Chancellor within my recollection to alter the taxation pattern in favour of those living on small fixed incomes. He did it directly. I went to see him. He listened to what I had to say. It was, of course, very exciting for me that the sort of position we are discussing tonight directly flowed from the representations which I and some friends of mine who were interested in this matter made.
I want to spike the guns of the Financial Secretary by saying that Surtax payers have already had the pleasure of a reduced standard rate of Income Tax, and, therefore, there is no reason why my hon. Friend the Financial Secretary should get up and read out—as generally happens—all the things which have been done to help that section of the community. That has been his attitude and the atttiude of his Minister and the whole of the Treasury through the chief civil servant and everybody else down. They all say the same thing.
Perhaps my hon. Friend will remember that we are faced with an entirely new situation with the Clauses put down—and at that I am delighted—I think for the first time, certainly almost for the first time, since I began these battles, by the chairman of the Conservative Party's finance committee. He and that committee are supporting me, or I am supporting them. I do not mind which it is. Those Clauses are a great step forward, and I cannot say how proud and glad I feel. That makes all the more reason why the Financial Secretary should accept some of the new Clauses—I do not mind which ones he chooses, but some of them—which will help the people in whom I have a very great interest.
578 That perhaps gets that out of the way and I want now to discuss what happened in the past and why I am concerned with the Clauses which have been put down by the chairman of the Conservative Party's finance committee who is now sitting beside me. I want to put this proposal.
In the last General Election the Prime Minister made it perfectly plain that in his opinion the whole of the country—the whole of the country: we cannot eliminate the people living on small fixed incomes—was entitled to share in the general prosperity of the country. In other words, that wonderful phrase, "You have never had it so good," was an umbrella for everybody and not just for those who had got on, leaving outside in the wet those on small fixed incomes. I must say, devoted as I am to the Prime Minister, that I have been very disappointed that, any time we have raised the kind of suggestions which are embodied in the various new Clauses we are discussing tonight, the Prime Minister has tried to make out that his election pledge did not cover that section of the community.
I find that very difficult to take indeed, because, whatever his pledge was with regard to retirement pensions mentioned by the hon. Gentleman the Member for Sowerby, candidates in the General Election certainly referred to the fact that all those living on small fixed incomes, not just those drawing retirement pensions, were to benefit under this all-embracing phrase that everybody was entitled to share in the general prosperity of the country. All I am saying—and I am not going to take any longer than absolutely necessary—is that a pledge is a pledge. Even if the Chancellor is not present I hope that he might think it a rather nice idea to allow his charming Financial Secretary, who is so soon to leave his present post, to give something away on possibly the last time that he will appear at the Dispatch Box as Financial Secretary.
I am grateful to the hon. Member for Sowerby for quoting what he assumes would be the cost to the Exchequer of his new Clause, but the new Clauses tabled by my hon. Friends and myself are slightly better in their terms than the terms offered by the hon. Member. He seems in his new Clause to be more 579 concerned to maintain the status quo whereas our new Clauses are designed to improve the standards of those living on small fixed incomes and to give a "bump up" as well as to protect the position which so badly needs protecting. I hope, therefore, that my hon. Friend the Financial Secretary will bow to the blandishments on this side of the Committee and so do better than would be the case under the new Clause moved by the hon. Member for Sowerby.
In any event, I hope that we shall have something. I cannot believe that the expenditure involved could possibly upset the structure of the Budget. I entirely agree with my right hon. and learned Friend's Budget in its main basis and theme. Nobody wants to upset the financial structure of the Budget and the Finance Bill but it is not fair, honourable or decent to leave in their present situation those people with whom I am concerned, many of whom may not live very long. Most of the Surtax payers will live until they receive their remission of tax. At lease I hope for their sakes that they will, but many of those who live on small incomes are not quite in that satisfactory position. Therefore it is all the more important that something should be done for them immediately.
I wish I had greater words, greater powers of appeal and greater ability to argue the case which I feel so deeply and strongly. I hope that when the Financial Secretary replies he will not come back with those ancient arguments which I am so sick of hearing. If he does, then if I can think of any way of moving my hon. Friend from the Front Bench to this back bench I will do so with great pleasure. I hope that we shall have something on these Clauses. I will not say what I shall do but I feel so strongly about this matter that I cannot believe that the party which I have always supported with such pride and pleasure can be so mean and so frightfully uncharitable to these people who stood by the country in its great need.
§ 11.0 p.m.
§ Miss Margaret Herbison (Lanarkshire, North)I am sure that the speech of the hon. Lady the Member for Tyne-mouth (Dame Irene Ward) has delighted all my hon. and right hon. Friends and 580 also quite a number of hon. Members opposite. The hon. Lady said that she will not tell the Committee what she will do, but I know her very well and if the Chancellor does not give way I shall be very surprised if I do not find her in the Lobby with us on the new Clause. I hope also that those who have added their names to the new Clauses on which she has been speaking will accompany us into the Lobby if the Chancellor does not give way.
In 1957 we had the first action taken by a Chancellor of the Exchequer to help the people on small fixed incomes. That Chancellor, after resigning, is now an important Minister again in the Government. In April, 1957, he said:
But I am sufficiently impressed by the case of the old to feel that I should take some action this year."—[OFFICIAL REPORT, 9th April, 1957; Vol. 568, c. 996.]He took the action of allowing a single person with an income of £275 and a couple with an income of £400 to be completely free from Income Tax.My hon. Friend the Member for Sowerby (Mr. Houghton) showed how in 1958, because of an increase in the retirement pension, the then Chancellor further increased the limit for old people before they became liable for Income Tax. The then Chancellor, who is now in another place, said very clearly that the first two measures in the Income Tax field
will affect some older members of the community, who, I think we would all agree, are, in general, having the most difficult time today."—[OFFICIAL REPORT, 15th April, 1958; Vol. 586, c. 63.]I do not think that there is a single hon. Member who could say that our old people are having any easier a time today than they were having in 1958, and if at that time the Tory Chancellor felt that they needed the kind of assistance that he proposed to give in respect of Income Tax, it seems strange to me that the present Chancellor does not realise that also.The hon. Lady made a very great complaint against the Minister for not letting her have back letters which constituents had sent her and she had sent on to the Chancellor. As far back as November one of my constituents wrote to me about this matter. He wrote when the first announcement was made that the Government were going to give an increase in retirement pensions. It may be that 581 that Scots constituent of mine was very clearly ahead of what might happen when the Chancellor made his Budget statement. I sent the letter to the Chancellor in November, and I got back a most sympathetic reply. In spite of what I might think about this Tory Government, I did not feel that even they would have such a great disregard for these old people on very small fixed incomes as it is evident from the Budget and the Finance Bill that they have had.
In November I also put a Question to the Chancellor urging him to take into account the rise in the pension when he came to frame this Budget so that the limit could be increased for the old people. To that I got the answer which I expected—that, of course, that would be considered with other matters when the Chancellor came to frame his Budget.
We are not asking for a great deal in these new Clauses. It is true that my hon. Friend the Member for Sowerby showed, as he usually does so carefully with his facts and figures, that the amount for which we are asking is perhaps greater than we need to ask for. But, like the hon. Lady opposite, we on this side want to see the standard of living of the old people raised if we can possibly raise it. I hope that the Chancellor will not say that he is willing to give further consideration to the matter but will meet only that part that the rise in pension would warrant.
When I compare this miserable treatment of these old people with that given to the very wealthy, it makes me very angry, and its makes all decent thinking people in the country very angry that the Government can find £83 million for those earning over £2,000 a year and particularly for those with over £5,000 a year and yet cannot find £3¼ million to meet the needs of these old people. I do not believe that any Financial Secretary could possibly tell us tonight that the Chancellor is going to be adamant and do nothing further for these old people.
These old people cannot contribute millions of pounds to the election fund coffers of the Tory Party as the big Surtax payers can. They expect to have on both sides of the House of Commons men and women who look on these matters in the way a Christian, civilised community should, believing that no one 582 should suffer as our old people are suffering today.
I ask the Financial Secretary to realise that it is his duty to safeguard the interests of the old people and that £3¼ million is very little to ask for to bring some cheer and help to all of them.
§ Mr. William Clark (Nottingham, South)I do not intend to repeat the arguments put forward on the new Clauses in respect of those over 65 and on small incomes or old-age relief. They have all been put in a very moderate speech by the hon. Member for Sowerby (Mr. Houghton). Also, I do not want to get into party politics or indulge in invidious comparisons in relation to this Budget or any other Budget.
However, I hope that my hon. Friend will not put these older people in a position that their pension increase of £32 10s. will be partially taxed. If he cannot accept the various figures put forward in the new Clauses, it would at least be fair if he would accept an increase on the minimums of, say, £33. I hope that the additional increase in the old-age pension will not result in the old people being penalised by an addition to their taxation.
Mr. Bruce Milan (Glasgow, Craigton)I absolutely agree with what the hon. Member for Nottingham, South (Mr. W. Clark) has just said. It is rather a pity that this debate is taking place at this time of night, because this is an extremely important matter and I know that there is a good deal of feeling about it on both sides of the Committee.
The whole question of the tax position of people with small fixed incomes requires consideration by the Government. It is absurd that, for example, the ordinary single man with an earned income should start to pay Income Tax on a wage of about £4 a week and the ordinary married man should start to pay Income Tax on a wage of about £6 a week. Those figures are absolutely absurd in present-day conditions and with present-day costs of living. When, as in this Budget, considerable sums of money are given away to very well-off people, as in the Surtax concessions, it is all the more appropriate that we should spend some time on this question of the people with small fixed incomes.
The Financial Secretary may well argue that the reason why we have this 583 arrangement is that the personal allowance is fixed at a certain level and that everything else is fixed in relation to the personal allowance. That is true, of course. It is also true that any adjustments of the personal allowance, the ordinary single man's allowance, or the marriage allowance, or the allowances for children, cost considerable slims of money. When we have put down new Clauses or Amendments to increase the personal allowance, the invariable answer from the Government has been that it is an extremely costly operation and that that does not happen to be the year in which it is appropriate, or when the money is available. We have sometimes had to accept that, for these are expensive things to do and we cannot expect to get increases in the personal allowance one year after another.
But if it is true that it is always difficult to make adjustments in the personal allowance because of the cost, it is none the less more true that that is an extra reason why we should pay attention to the people with small fixed incomes and should not allow their standard of taxation to be determined exclusively by reference to the personal allowance.
That is what happens with the ordinary wage earner at present and that is why as a single man he starts to pay Income Tax at about £4 a week and as a married man at about £6 a week. It is because he is tied to the personal allowance level, which is absurd. We should look at this matter again and do something far better for the small wage earner.
There is a considerable case this year for increasing the maximum age exemption limit, because of the increase in old-age pensions. I imagine that the Financial Secretary's argument may be that if one introduces the principle of giving age exemption, which makes an exception for elderly people from the general taxation arrangements, one must expect that in certain circumstances anomalies will arise.
For example, there is the marginal rate of tax which is needed for the transitional income between the exemption limit and the income at which the ordinary rates of tax have to apply. Because of those transitional arrangements, there has to be a marginal rate, which in the case of age exemption is 584 nine-twentieths, or 9s. in the pound. It does not matter at which point the age exemption limit is fixed, for anybody who gets just above that level will have to pay tax at 9s. in the pound—[HON. MEMBERS: "7s. 9d."] No, it is not 7s. 9d., but 9s. in the pound, which is the marginal rate for age exemption. If hon. Members study page 33 of Cmnd. 1258 they will find the details given there. It is 9s. in the pound for the marginal rates for age exemption and that is a great disadvantage to the age exemption provisions.
With this high marginal rate—it is not essential to have it high and there could be a much smaller transitional rate—the moment one gets over the limit one starts to pay 9s. in the pound until one gets on to the ordinary taxation arrangements. That is undoubtedly a disadvantage and will always be so while we have this age exemption limit. Surely, when millions of elderly people are involved, we can use the increase in old-age pensions as an argument for putting up the age exemption limit. If we are to have these marginal arrangements, and this large marginal rate of 9s. in the pound, surely that is a considerable argument in favour of the new Clauses that we are debating, and in particular the new Clause which deals with raising the age exemption limit.
11.15 p.m.
My hon. Friend the Member for Sowerby (Mr. Houghton), in a comprehensive treatment of this, mentioned the example of a married couple with an income of £440 who were paying no tax, but after an increase of 12s. 6d. in the old age pension, had to pay 5s. 6d. a week in Income Tax on that 12s. 6d. Amongst the letters of complaint which I received there was one exactly similar case. It was a text book case of someone who had an income of £440 from the old-age pension and from a superannuation pension. He received 12s. 6d. a week increase in the old-age pension, and then had to pay an extra 5s. 6d. in Income Tax.
These people do not understand why they should be penalised in this way. If we are to have this age exemption—and I think that it is an excellent thing—we ought to accept the principle that every time old-age pensions go up there should be a corresponding adjustment in the age limit. That is what we are 585 asking for. That is what the hon. Member for Nottingham, South (Mr. W. Clark) asked for. I shall be disappointed if the Government do not accept this proposal.
§ Sir E. BoyleI share the regret of hon. Members on both sides of the Committee that we should have to discuss these important new Clauses and the important principle involved in them so late at night. I should also like to express the apology of my right hon. and learned Friend the Chancellor for the fact that he cannot be present for this debate. As I mentioned earlier this evening, he is not present because tonight is the occasion of the centenary dinner of the Public Accounts Committee, and both he and the right hon. Member for Huyton (Mr. H. Wilson) are attending the function. I was invited, but I have been kept here with other duties most of the evening.
§ Mr. HoughtonDoes the hon. Gentleman know whether the dinner is still going on?
§ Sir E. BoyleI am told by my hon. Friend the Economic Secretary that speeches are still in progress.
I should also like to say how much I agree with one point made by the hon. Member for Glasgow, Craigton (Mr. Millan), that when we are considering the incidence and nature of our tax system we ought to pay attention not merely to the rate of taxation, but to the whole system of allowances. Much of what I have to say this evening will not be very acceptable to the Committee, but I assure the hon. Gentleman that if the Chancellor were present he would very much agree with the hon. Gentleman in the importance which he attaches to the whole system of tax allowances as a feature of our tax system.
Before I consider the three proposed new Clauses in detail, I should like to make two general points. First, and I make this point despite what my hon. Friend the Member for Tynemouth (Dame Irene Ward) said, whatever criticisms can be made of the social service and fiscal policies of the Government, it simply is not true to say that they have neglected the special problems of elderly people living on small fixed incomes. It is worth remembering that the income limit for the age relief which we are discussing was £500 in 1951, and 586 it is £800 today. When we are considering age exemption, and whether or not the limit for age exemption should be raised, let us remember that there was no provision for age exemption at all in our tax system before my right hon. Friend the Minister of Aviation introduced it in 1957.
As we are considering the tax needs of the elderly, I hope that I shall not be ruled out of order if I remind the Committee that we are today spending about 90 per cent. more on the social services than we were ten years ago. Many, though admittedly not all, the developments in our social services—and especially the developments in the hospital services—must have proved of direct benefit to elderly people with limited means,
My second general point—and here I answer the hon. Member for Glasgow, Craigton and my hon. Friend the Member for Nottingham, South (Mr. W. Clark)—is that I cannot accept the argument that the personal reliefs which we are considering, age exemption, age relief, and small income relief, should automatically be revised because otherwise some people will pay more in direct taxation as a result of the recent increase in National Insurance retirement pensions.
The whole concept of a progressive Income Tax is founded on using the size of a man's income as an indication of his relative ability to contribute to the needs of the Exchequer and the economy. I cannot see anything anomalous about a situation in which an increase of income leads to an increased tax liability, no matter whether the extra income comes from a pension increase or from some other source.
The main justification for giving old people special tax reliefs is surely that, as a class, they are less able than other people to get a share in rising standards of living resulting from economic growth. The recent increase in National Insurance retirement pensions, in accordance with the pledge which the Conservative Party gave at the last General Election, was explicitly designed to give old people a share in rising standards. When my right hon. Friend the Minister of Pensions first announced the raising of the pension, he made it clear that practically the whole of that increase constituted 587 an increase in standards. So it is not unjust that those who are at the margin for tax reliefs should benefit less from special tax treatment as a result of the increase in their pensions.
I now turn to consider in rather more detail the new Clauses, the first and most important of which—as I was glad to hear the hon. Member for Sowerby (Mr. Houghton) agree—would lift to £300 the exemption limit, which is now £275, for a single taxpayer aged 65 or over, and similarly lift to £480 the corresponding exemption limit, which is now £440, for a married couple at 65 or over. The new Clause in the names of my hon. Friends the Members for Preston, South (Mr. Green) and Eastleigh (Mr. D. Price)—(Relief for persons over 65 with small incomes)—is slightly more generous. Instead of £275 for a single taxpayer and £480 for a married couple, the figures would be £310 and £500 respectively.
As the hon. Member for Sowerby admitted in his very moderate speech, the raising of the limit and the adoption of the new Clauses would cost about £3¼ million in a full year. According to my figures the cost of the first of the new Clauses alone would be £3¼ million in a full year—but I agree that that is the most costly of the three. Therefore, I do not want to argue about the details of the cost.
On the ground of cost alone, my right hon. and learned Friend would have felt unable to accept the proposal. But I do not want to base my advice to the Committee on the merits of the Clause purely on grounds of cost; nor do I want to direct my arguments purely to technical considerations. The hon. Member for Sowerby made the quite correct point that the first of the new Clauses does not make provision for marginal relief, and therefore would be unsatisfactory as it stands. I was interested to hear the hon. Member instance the case of a married man who had been exempt on an income of exactly £440 before the pensions increase. During the Second Reading debate he said that when that income rose by £32 the man would have to pay 7s. a week tax. This afternoon he corrected that figure to 5s. 6d. According to my information the correct figure is 5s. 7½d. I make the point, as he raised it before.
§ Mr. HoughtonI think that the hon. Member will agree that we can leave the 1½d. out. I am glad that he drew my attention to the other matter. I did intend to refer to the figures I gave in my Second Reading speech; I confused the amount of tax with the amount the man would have left after deduction of tax in respect of the retirement pensions increase. I apologise for that, but I have my figures right this time.
§ Sir E. BoyleThe hon. Gentleman so rarely makes a technical error of any kind in his speeches, if I may say so, that I am sure that the Committee will accept that explanation in the spirit in which it was offered.
Just as I would not wish tonight to take refuge purely on grounds of cost, neither would I wish to take refuge on purely technical grounds. I may tell the Committee that when my right hon. and learned Friend was framing his Budget he considered very seriously the possibility of increasing the age exemption limit but, for two reasons, came to the conclusion that the case was not sufficiently compelling to cause him to take action in a year when, as I have explained, economic considerations rule out any widespread remission of direct taxation—
§ Mr. DiamondHow can the hon. Gentleman justify what he has just said when the Chancellor has given £83 million in relief to the Surtax payers?
§ Sir E. BoyleThe hon. Gentleman knows perfectly well—and we cannot go over this again—that that does not apply to the current financial year.
As I have already pointed out, the purpose of age exemption was to ease the position of old people living on quite small incomes which, because of their age, they could not increase by extra earnings. My right hon. and learned Friend thought that it would not in any way be inconsistent with this purpose if an increase of income carried with it a small increased tax liability.
Secondly—and this is the point I want chiefly to commend to the Committee tonight; it bears very closely on what the hon. Member for Craigton said—we have always to remember that this special relief for old people does treat them more favourably than young 589 people with equal incomes who, nevertheless, may have just as many calls on their resources as the old.
For instance, the present starting point of liability for an elderly married couple, £440, is actually higher than the point, £438, above which the younger married couple with a child under 11 begin to pay tax. Again, the starting point of a single person of 65 years or over—£275—is just about the same as that of the younger single person who maintains a dependent relative.
Indeed, I noticed that among other hon. Gentlemen opposite, the hon. Member for Wallsend (Mr. McKay)—whose speeches are not always too easy to follow precisely—made the point, as I understood him, that similar exemptions should be given to those under 65. I would agree with the hon. Member for Wallsend to this extent, that I think that there is a strong case for not discriminating further in favour of old people in a year when my right hon. and learned Friend has found it impossible, for economic reasons, to give any general remissions of direct taxation or to make any changes otherwise in our system of tax allowances.
I will be more brief in dealing with the two other new Clauses that we are now discussing. I confess that the case for raising from £300 to £325 the income limit for the small income person does not, frankly, seem to me particularly strong. I agree that the cost would not be great—about £½ million in a full year—and I recognise that this proposal would help some people who are badly off—for instance, single persons and widows under 65 who suffer ill health and have to live on a small investment income. But I must point out that it would only help those with incomes within the very narrow zone of £300–£325 and, to a lesser degree, those above £325 who have gained from the provision for marginal relief. People with incomes of £300 or below would get nothing out of it and, of course, married couples with incomes not exceeding £300 are already exempt.
Secondly, we should remember that many of those whom it would help would not be old people, but young people in the early stages of their earning career who have, in addition to their earnings, a small amount of investment income. 590 I cannot see that they have any special claim to tax relief.
One must also remember that the increase in the retirement pension, which clearly played an important part in inspiring hon. and right hon. Gentlemen opposite to put down the first new Clause, has really very little relevance to the present proposal. After all, the retirement pension ranks as earned income for tax purposes. At the age of 65 a taxpayer on a total income not exceeding £800 can claim the age relief, which gives the equivalent of the two-ninths earned income relief on any investment income included in that total.
At the age of 65 small income relief ceases, in effect, to be relevant. The truth is that in the case of this relief it is its relationship to the basic personal allowances which is of primary importance. My right hon. Friend the present Home Secretary raised the income limit for the small income relief from £250 to £300 in 1955 because the married personal allowance was raised that year from £210 to £240. If the income limit had not gone up, it would only have been £10 above the basic married allowance.
11.30 p.m.
I suggest strongly, with regard to the second new Clause, that we should defer consideration of any further improvement of this particular relief until a future year when economic circumstances permit my right hon. and learned Friend to make some improvement in the basic personal allowances. Indeed, I will plead with right hon. and hon. Gentlemen opposite, and even with my hon. Friend the Member for Tynemouth—
§ Dame Irene WardIt is no good.
§ Sir E. Boyle—that they should not press this new Clause to a Division, whatever may be their decision on the first new Clause.
Finally, I come to the third Opposition proposal, namely, that we should raise the income limit for age relief from £800 to £900. This proposal would cost about £1¾ million in a full year. I must say that I do not think that the case for raising this particular income limit is at all strong. In the first place, the income limit for age relief 591 has already been increased handsomely since the present Government took office in 1951.
The limit had stood at £500 ever since it was first introduced in 1925, but in 1953 it was raised to £600, in 1957 to £700 and in 1958 to the present figure of £800. That is proportionately a considerably bigger increase than that made in any of the basic personal allowances since 1951. Against this background it would surely be hard to justify raising this income limit in a year when my right hon. and learned Friend has found himself unable to give any general tax reliefs.
When one looks at the general effects of raising this income limit, the case that I have put seems to be strengthened. The maximum benefit would go to those with investment income only. The proposal would only help those with incomes in the £800 to £900 zone which include some elements of investment income, and to a lesser degree those above £900 who were able to benefit from the provisions for marginal relief. Old people with incomes of £800 and below would get nothing out of this third proposal at all.
Of course, it is true that though the retirement pension ranks as earned income for tax purposes an increase in the rate of retirement pension may bring the pensioner with investment income in addition to his pension over the £800 limit for age relief, and so deprive him of the two-ninths relief on investment income which he previously enjoyed. But I must say that the argument which I advanced earlier—namely, that there is nothing in principle unreasonable about a situation in which an increase of income due to a pension increase leads to an increased tax liability—seems to apply with special force when we are considering not, as we were in the first new Clause, age exemption, but age relief.
It is surely also worth remembering in this connection that the age relief was originally introduced by my right hon. Friend the Member for Woodford (Sir W. Churchill) in 1925 primarily to help elderly taxpayers who had been unable to qualify for a pension and were living in retirement with income from investments—investments built up over their whole working life, perhaps, as a provision 592 for old age. We can all take pleasure and pride in the fact that a far greater proportion of our population enjoy reasonable pension provisions today than was the case thirty-five years ago. But I do not believe we should be justified in reversing the ideas of 1925 almost diametrically in arguing that a pension increase was itself sufficient ground for raising the age relief income limit.
I have replied to the debate at some length because these are, obviously, matters, especially the first new Clause—(Relief for persons over 65 with small incomes)—on which right hon. and hon. Members on both sides of the Committee will have strong feelings. As I said earlier, my right hon. and learned Friend considered carefully the point raised by the first new Clause, but he came to the conclusion that he would not be justified in accepting the principle of it, partly because of the general shape of this year's Budget and partly because of the importance of not putting one allowance out of line with other personal allowances.
As to the other two new Clauses—(Relief for small incomes)—and—(Old age relief)—I am bound to say that the case there seems to me far weaker. I regret that I cannot recommend the Committee to accept any of these proposals.
§ Mr. MitchisonWe shall, of course, divide the Committee on the first new Clause—(Relief for persons over 65 with small incomes)—as a token that, if time had permitted, we would have divided on each of the new Clauses we have discussed.
A more callous, complacent collection of mandarins I have never seen than the Government opposite in their attitude to this matter. They are the people who say that economic circumstances do not permit them to make a concession of £3¼ million to the very people who will pay far more than that by way of increased charges for the Health Service. The old and the sick will be the ones who will pay.
Just a short time ago, the Government gave away £1½ million to a collection of financial tycoons who could not find the right stamps to put on bills of exchange. 593 Now, we are told, economic circumstances, unfortunately, forbid them from giving this small amount of £3¼ million to those to whom they are giving with one hand and taking with the other. It cannot be done this year. It will be done
§ next year, a bit nearer an election. We propose to divide the Committee.
§ Question put, That the Clause be read a Second time:—
§ The Committee divided: Ayes 92, Noes 154.
595| Division No. 203.] | AYES | [11.37 p.m. |
| Ainsley, William | Hamilton, William (West Fife) | Parkin, B. T. |
| Albu, Austen | Hannan, William | Prentice, R. E. |
| Allaun, Frank (Salford, E.) | Hayman, F. H. | Probert, Arthur |
| Allen, Scholefield (Crewe) | Henderson, Rt. Hn. Arthur (Rwly Regis) | Rhodes, H. |
| Bacon, Miss Alice | Herbison, Miss Margaret | Robertson, John (Paisley) |
| Blyton, William | Houghton, Douglas | Ross, William |
| Bowden, Herbert W. (Leics, S. W.) | Howell, Denis (Small Heath) | Small, William |
| Bowen, Roderic (Cardigan) | Hughes, Cledwyn (Anglesey) | Spriggs, Leslie |
| Boyden, James | Hughes, Emrys (S. Ayrshire) | Stewart, Michael (Fulham) |
| Castle, Mrs. Barbara | Hynd, John (Attercliffe) | Stonehouse, John |
| Cliffe, Michael | Jay, Rt. Hon. Douglas | Stones, William |
| Craddock, George (Bradford, S.) | Johnson, Carol (Lewisham, S.) | Sylvester, George |
| Crosland, Anthony | Jones, Elwyn (West Ham, S.) | Symonds, J. B. |
| Davies, G. Elfed (Rhondda, E.) | Kelley, Richard | Taylor, Bernard (Mansfield) |
| Davies, Harold (Leek) | King, Dr. Horace | Thompson, Dr. Alan (Dunfermline) |
| Davies, Ifor (Gower) | Lawson, George | Thornton, Ernest |
| Diamond, John | Lewis, Arthur (West Ham, N.) | Ungoed-Thomas, Sir Lynn |
| Edelman, Maurice | Loughlin, Charles | Wairrwright, Edwin |
| Evans, Albert | Mabon, Dr. J. Dickson | Ward, Dame Irene |
| Fernyhough, E. | McInnes, James | Whitlock, William |
| Finch, Harold | McKay, John (Wallsend) | Wigg, George |
| Fitch, Alan | MacMillan, Malcom (Western Isles) | Wilcook, Group Capt. C. A. B. |
| Foot, Dingle (Ipswich) | Manuel, A. C. | Wilkins, W. A. |
| Fraser, Thomas (Hamilton) | Mapp, Charles | Williams, Ll. (Abertillery) |
| Gaitskell, Rt. Hon. Hugh | Marsh, Richard | Williams, W. R. (Openshaw) |
| Galpern, Sir Myer | Mendelson, J. J. | Willis, E. G. (Edinburgh, E.) |
| George, Lady Megan Lloyd (Crmrthn) | Millan, Bruce | Wilson, Rt. Hon. Harold (Huyton) |
| Ginsburg, David | Milne, Edward J. | Winterbottom, R. E. |
| Gourlay, Harry | Mitchison, G. R. | |
| Greenwood, Anthony | Noel-Baker, Francis (Swindon) | TELLERS FOR THE AYES: |
| Grey, Charles | Oswald, Thomas | Mr. Charles A. Howell and |
| Hall, Rt. Hn. Glenvil (Colne Valley) | Owen, Will | Dr. Broughton. |
| NOES | ||
| Agnew, Sir Peter | du Cann, Edward | Legge-Bourke, Sir Harry |
| Aitken, W. T. | Elliot, Capt. Walter (Carshalton) | Lewis, Kenneth (Rutland) |
| Allason, James | Elliott, R. W. (Nwcstle-upon-Tyne, N.) | Litchfield, Capt. John |
| Atkins, Humphrey | Emery, Peter | Lloyd, Rt. Hon. Selwyn (Wirral) |
| Barber, Anthony | Fisher, Nigel | Longbottom, Charles |
| Barter, John | Fraser, Ian (Plymouth, Sutton) | Longden, Gilbert |
| Batsford, Brian | Freeth, Denzil | Lucas-Tooth, Sir Hugh |
| Berkeley, Humphry | Gardner, Edward | MacArthur, Ian |
| Biggs-Davison, John | Gibson-Watt, David | McLaren, Martin |
| Bingham, R. M. | Glover, Sir Douglas | McLaughlin, Mrs. Patricia |
| Birch, Rt. Hon. Nigel | Godber, J. B. | Macmillan, Rt. Hn. Harold (Bromley) |
| Bishop, F. P. | Gower, Raymond | Maddan, Martin |
| Bossom, Clive | Grant, Rt. Hon. William | Markham, Major Sir Frank |
| Boyle, Sir Edward | Grant-Ferris, Wg Cdr. R. | Marten, Neil |
| Brown, Alan (Tottenham) | Green, Alan | Mathew, Robert (Honiton) |
| Browne, Percy (Torrington) | Gresham Cooke, R. | Mawby, Ray |
| Bryan, Paul | Grosvenor, Lt.-Col R. G. | Maxwell-Hyslop, R. J. |
| Buck, Antony | Gurden, Harold | Mills, Stratton |
| Bullard, Denys | Hall, John (Wycombe) | Montgomery, Fergus |
| Campbell, Gordon (Moray & Nairn) | Hamilton, Michael (Wellingborough) | More, Jasper (Ludlow) |
| Carr, Compton (Barons Court) | Harris, Reader (Heston) | Morgan, William |
| Carr, Robert (Mitcham) | Hastings, Stephen | Nabarro, Gerald |
| Channon, H. P. G. | Heald, Rt. Hon. Sir Lionel | Noble, Michael |
| Chataway, Christopher | Healey, Denis | Nugent, Sir Richard |
| Chichester-Clark, R. | Hill, Mrs. Eveline (Wythenshawe) | Oakshott, Sir Hendrie |
| Clark, Henry (Antrim, N.) | Hirst, Geoffrey | Osborn, John (Hallam) |
| Clark, William (Nottingham, S.) | Hocking, Philip N. | Page, John (Harrow, West) |
| Cleaver, Leonard | Hollingworth, John | Page, Graham (Crosby) |
| Cordeaux, Lt.-Col. J. K. | Hopkins, Alan | Pannell, Norman (Kirkdale) |
| Corfield, F. V. | Hornby, R. P. | Pearson, Frank (Clitheroe) |
| Coulson, J. M. | Howard, Hon. G. R. (St. Ives) | Peel, John |
| Courtney, Cdr. Anthony | Hughes-Young, Michael | Percival, Ian |
| Critchley, Julian | Irvine, Bryant Godman (Rye) | Pitt, Miss Edith |
| Curran, Charles | Johnson, Dr. Donald (Carlisle) | Pott, Percivall |
| Dalkeith, Earl of | Johnson, Erie (Blackley) | Price, David (Eastleigh) |
| Deedes, W. F. | Kershaw, Anthony | Prior, J. M. L. |
| Leavey, J. A. | Proudfoot, Wilfred | |
| Pym, Francis | Smithers, Peter | Walder, David |
| Quennell, Miss J. M. | Storey, Sir Samuel | Walker, Peter |
| Ramsden, James | Sumner, Donald (Orpington) | Wall, Patrick |
| Rawlinson, Peter | Talbot, John E. | Webster, David |
| Redmayne, Rt. Hon. Martin | Taylor, Edwin (Bolton, E.) | Wilson, Geoffrey (Truro) |
| Rees, Hugh | Thornton-Kemsley, Sir Colin | Wise, A. R. |
| Ridley, Hon. Nicholas | Tiley, Arthur (Bradford, W.) | Wolrige-Gordon, Patrick |
| Roberts, Sir Peter (Heeley) | Turner, Colin | Wood, Rt. Hon. Richard |
| Roots, William | Turton, Rt. Hon. R. H. | Woodhouse, C. M. |
| Ropner, Col. Sir Leonard | Tweedsmuir, Lady | Woodnutt, Mark |
| Shaw, M. | van Straubenzee, W. R. | Woollam, John |
| Shepherd, William | Vane, W. M. F. | Worsley, Marcus |
| Simon, Rt. Hon. Sir Jocelyn | Vaughan-Morgan, Sir John | Yates, William (The Wrekin) |
| Skeet, T. H. H. | Vickers, Miss Joan | |
| Smith, Dudley (Br'ntf'rd & Chiswick) | Wakefield, Edward (Derbyshire, W.) | TELLERS FOR THE NOES: |
| Wakefield, Sir Wavell (St. M'lebone) | Mr. Finlay and Mr. Whitelaw. |
§ 11.45 p.m.
§ Mr. Selwyn LloydI beg to move,
That the Chairman do report Progress and ask leave to sit again.I will not pretend to you, Sir Gordon, that I am exactly satisfied with the progress that we have made either yesterday or today. Nevertheless, one has to bear in mind the feeling of the Committee, which I have been ascertaining. I think that it would be the wish of hon. Members that you should report Progress and ask leave to sit again. I hope that when we resume consideration of the Bill we may make rather more speedy progress than we have made tonight. I therefore move the Motion on that understanding.
§ Mr. MitchisonI support the Motion, but I can assure the right hon. and learned Gentleman that most of the time of the Committee, during his absence, has been taken up by his hon. Friends.
§ Mr. LloydMay I inform the hon. and learned Member for Kettering (Mr. Mitchison) that during my absence most of my time has been taken up by his right hon. Friend the Member for Huyton (Mr. H. Wilson).
§ Question put and agreed to.
§ Committee report Progress; to sit again Tomorrow.