HC Deb 20 June 1961 vol 642 cc1180-201

(1) In section two hundred and ten of the Act of 1952 (Personal relief) for the reference to two hundred and forty pounds there shall be substituted a reference to two hundred and fifty pounds.

(2) This section shall not be deemed to have required any change in the amounts deducted or repaid under section one hundred and fifty-seven (Pay as you earn) of the Act of 1952 before the twenty-second day of June, nineteen hundred and sixty-one.—[Mr. Houghton.]

Brought up, and read the First time.

3.40 p.m.

Mr. Houghton

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

The Chairman

I think that it would be for the convenience of the Committee to discuss with this new Clause the two new Clauses—(Increase of personal reliefs)—and—(Additional personal relief for unmarried householders).

Mr. Houghton

As you have said, Sit Gordon, it would be convenient to consider those two new Clauses with the one I am moving.

The Chairman

Order. Will hon. Members be a little more quiet, please?

Mr. Houghton

This new Clause contains a simple proposal to increase the personal allowance for a married man from £240 to £250. It makes no provision for a corresponding increase in the personal allowance of a single person or in the wife's earned income relief.

In the second new Clause we are discussing—(Increase of personal reliefs)—we go further than proposing a relief for a married man. It includes a corresponding increase for the single person and, since the wife's earned income relief is dealt with in Section 210 of the Income Tax Act, 1952, it also covers the corresponding increase in the wife's earned income relief, the allowance of which is now £140 and which would, under this proposal, become £150.

The last increase in these personal allowances was in 1955, when the personal allowance for a married man was increased from £210 to the present figure of £240, and that of a single person from £120 to £140. It should, however, be pointed out that when these improvements in personal allowances were made the Chancellor of the day modified the reduced rate bands and, by readjustment of reduced rates, took back quite a lot of what he was giving away in increased personal allowances.

The Committee will probably remember that when the Chancellor increased the personal allowances in 1955 he reduced the lower band of taxable income from £100 at the lowest rate to £60 at the lowest rate, and the result was that many people, especially single people, actually paid more tax and not less, even when their personal allowance was increased from £120 to £140.

It is true that these personal allowances have been increased over the last ten years from £180 to £240 in the case of a married man and from £110 to £140 in the case of a single person. Notwithstanding this, the tax liability comes low down the pay scale even today. A single person pays £1 in tax on a wage of £10 a week. A married couple with no children pay 10s. a week tax on a wage of £10 a week, and £1 a week tax on a wage of £12. Wages of £10 a week, or even £12 a week, are below the average wage of industrial workers today, so that the Committee will see that, despite the improvements which have been made in personal allowances and in the reduction of the rates of tax in recent years, Income Tax attacks the pay packet low down.

Indeed, Income Tax becomes payable, in the case of a single person, on pay beyond £180 a year—which is very low—and, in the case of a married couple, on pay beyond £309 a year—which is also very low in the scale of earnings today. If we were to look at these personal allowances in relation to the fall in the value of money, we should discover that these personal reliefs should be very much higher than they are. In terms of pre-war money values, a single person's allowance would be as high as £280, and a married man's personal allowance would be as high as £506 instead of £140 and £240 respectively as at present.

Of course, there is no principle of taxation which says that personal reliefs shall rise as the value of money falls. All I am doing is to suggest that, despite much that has been said about tax reductions in recent years, the level of taxation is still fairly high in relation to pre-war days. The cost of this proposal is surprisingly high, which shows the large number of people who would be affected by this very modest improvement.

After all, a lift of £10 in personal allowance means that the maximum relief for Income Tax would be £3 17s. 6d. a year. That is a very small amount. It is neither here nor there in terms of the tax paid by a great many people. It would additionally benefit a number of Surtax payers because, as the Committee knows, personal reliefs over and above the single person's allowance are set off against Surtax. Thus, there would be a small additional relief for Surtax payers—which is scarcely the direct intention of our proposal. However, before the Bill finally leaves the House, it may be possible for us to moderate the reliefs which are included already for the Surtax payers.

The large number of people concerned sends up the total cost to the Exchequer considerably. From Answers given to Questions which I asked a few months ago, I judge that the cost of the first new Clause would be £22 million in tax in a full year, while the cost of the second new Clause would be £57 million in a full year, which would bring the total cost of the reliefs proposed to approximately the same amount that the Chancellor is proposing to give to Surtax payers for the years 1961–62 onwards.

Having explained to the Committee what these proposals do and what they would cost, I wish to say a little more about the general background to them. We have three groups of proposed improvements in tax reliefs and personal allowances in connection with this Finance Bill. The first we dealt with very late last Thursday night. Those were the changes which we really hoped the Chancellor would feel able to make, because they dealt with age exemption, small incomes relief and age relief at a total cost of probably not more than £4 million, which we thought could be met within the general strategy which the Chancellor is deploying in the Bill. However, the Chancellor remained quite firm that he could not make any of the concessions which we sought last Thursday.

How much less able will he be today, therefore, to meet the proposals which we are now making and which will cost not £4 million, but nearly £84 million? That would be about the total cost, reckoning wife's earned income relief as well as married and single personal allowances, as proposed in the Clauses. Later, we shall come to our third batch of proposals, which will deal with a section of secondary reliefs much less costly, but, nevertheless, quite formidable from the Chancellor's point of view.

I am bound to say that this batch of new Clauses is a demonstration against the wholly excessive Surtax reliefs granted in the Bill for operation in 1963, because we still believe that they are excessive if considered on grounds of equity, and misconceived if intended to give a dynamic boost to the economy.

I want to be as conciliatory as possible and to offer to the Chancellor the same operative date for these proposals, if that will help him, as he is giving to the Surtax reliefs. Only a few moments ago I heard the right hon. and learned Gentleman protesting that he had not made any reliefs from Surtax yet and that they would not become operative until Surtax for the year became payable on 1st January, 1963. But the Chancellor is overlooking the fact that Surtax payers can begin to spend more of their incomes in the year 1961–62, because they will have less Surtax to pay on 1st January, 1963.

Mr. Gerald Nabarro (Kidderminster) indicated dissent.

Mr. Houghton

The hon. Member for Kidderminster (Mr. Nabarro) is shaking his head so violently that it will fall off in a moment.

Mr. Nabarro rose

Mr. Houghton

No. The hon. Member will have to continue to shake for a moment or two longer.

What I am saying is that the prudent Surtax payer saves up to pay Surtax when it becomes due, because he receives the money before the tax becomes payable. If he is a prudent man, as most Surtax payers are—I know that many go to the bank for an overdraft to pay their Surtax, but many save against the day—he will not have to save up so much as before and he will, therefore, have more for spending or investing, more free income.

I offer to the Chancellor that any change in the new Clauses should become operative on a date to coincide with the date of operation of the Surtax reliefs. I know that this would be an enormous promissory note on the Chancellor's budgetary provision in a couple of years, and that it would be a hazardous thing to do, having regard to the general state of the economy, but if the Chancellor can make promissory notes for the Surtax payer, without any assurance that that will be rewarding to the economy, he has no excuse for not making a similar promissory note to people much lower down.

What the Chancellor hopes to get out of his proposals is some tangible additional benefit to the economy. He is putting the admittedly influential and, for the most part, capable and often brilliant people in the Surtax range under a very heavy obligation to the nation. If the Surtax concessions fail in that respect, they will prove to be unjustified, but I draw the Committee's attention to the fact that in making the distinction between those in the Surtax range and those below it the Chancellor is putting forward a proposal carrying disturbing implications.

By concentrating more relief on 400,000 Surtax payers than he will be willing to give to 12 million or 15 million ordinary taxpayers under the new Clauses, he is leaving the great mass of workers who pay tax, but not Surtax, with the feeling that they do not matter, or, at least, that they do not matter as much as their managers, their supervisors, their technicians, their bosses. Perhaps individually, man for man, being a modest chap the ordinary worker would not claim to be the equal of many of the brilliant people in the Surtax range, but collectively the ordinary workers matter as much, and, I would say, matter a great deal more. We see evidence every day that if industrial relations fail and break down, all the skill and all the genius of managers and executives cannot save the country from grievous damage.

The Chancellor has matched his concessions to Surtax payers by imposing additional tax on the profits of industry. Presumably, the theory behind that is that the Chancellor has given the top man a substantial pay increase and is calling upon the shareholders to pay the money.

Viscount Hinchingbrooke (Dorset, South)

On a point of order. Is it in order for an hon. Member to put down Clauses and get them called, but then to argue not on the basis of their merits, but to use them as a blind or cover for a discussion of an issue already decided by the Committee?

The Chairman

I did not think that the hon. Member for Sowerby (Mr. Houghton) was doing that.

Mr. Houghton

Thank you, Sir Gordon. Hon. Members opposite must be rather duller than usual this afternoon.

I am arguing the relative merits al these proposals against those made by the Chancellor. I am about to argue that if the Chancellor can impose an additional 2½ per cent. Profits Tax on industry to pay Surtax reliefs, he can impose a further 2½ per cent. Profits Tax on industry for more general reliefs. If the 2½ per cent. additional Profits Tax to pay for Surtax reliefs, taken with the reliefs themselves, is to be of benefit to the economy, I am trying to show that there is every bit as much evidence behind my theory that another 2½ per cent. with wider-spread reliefs would be a greater boost to the economy.

4.0 p.m.

I hope that I have succeeded in bringing myself back into order, if I was ever out of order. I know that the noble Lord is always willing to help me in these difficult matters, and I can see that he is listening attentively to my arguments.

The Chancellor may say, "This is all very well, but to give tax reliefs to the many will stimulate consumer demand just at a time when I do not want it, whereas tax reliefs to the few, although equal in amount and just as heavy a charge on the Exchequer, will be likely to lead to more saving and not to more spending". I do not think that there is any evidence to support that view either. It is difficult to say who is saving what at the moment. There is evidence to suggest that the great mass of the people are saving more, and with additional tax reliefs they would probably be stimulated to put aside still more.

The Chancellor may say that he could not, in any case, permit himself to such substantial reliefs in advance, but he has done it for Surtax payers. Why can he not do it for the rest? What makes him so sure about the results that he will get from the Surtax payers, and less sure about what he will get from everyone else? What is this magic which has lured him into this enormous cut in Surtax reliefs, but which, at the same time, has made him as stubborn as ever against providing reliefs lower down?

If the Chancellor can compel industry to underwrite his confidence in managers to the tune of another £84 million a year, why can he not call on them to underwrite equal confidence in the workers? This is the simple, relative point which I am putting to the Chancellor. I will not repeat the comment which my right hon. Friend the Member for Battersea, North (Mr. Jay) made during Question Time a few minutes ago, but there is no doubt that the reliefs which the Chancellor is giving to Surtax payers is disturbing to those who are conscious of the welfare of those much lower down.

Had the Chancellor's Budget statement ended just before he proposed the drastic Surtax cuts, we on this side of the Committee would have felt that his budgetary strategy made a coherent policy at this juncture in our economic affairs, and it would have been much more difficult for us to propose some of these improvements which we have felt impelled to put forward.

We have to deal with the Chancellor's proposals as they are but, even taking the necessity, from his point of view, of giving Surtax reliefs, what a call to arms he would have had had he declared that our economy was socially and industrially indivisible, and that alongside reliefs to Surtax payers there would be reliefs to all other wage and salary earners. He could have put the whole nation on its toes instead of dividing it as he has done by these proposals. He could have called for a big, national heave to get the country out of the economic trough into which it is now gradually sinking.

The Chancellor is enterprising and imaginative, but his imagination and enterprise have played him false. I still have hopes, but he could have said, "This time, we will have tax reliefs by results". That would have been a new and magical appeal to the country. He could have put all his tax reliefs forward and said, "According to the justification that you give me for my confidence in the recuperative powers of the nation you shall have these reliefs, but if you fail me I shall have to withdraw them when the time comes". That would have put the country on its toes. The Chancellor is giving this relief willy-nilly to Surtax payers. He hopes that they will give him some economic reward. He has given everyone else a disappointing slap in the face.

That is our case in favour of the new Clauses. I do not know what is passing through the Chancellor's mind, but I suppose that in the middle of June all Chancellors of the Exchequer wonder whether they made the right sort of Budget statement in the middle of April. This afternoon, the Chancellor seems to be more than usually confident that what he said in April still holds good, but I do not know whether his hands are itching to grasp the economic regulators which he has put into the Bill. Is he having second thoughts on what he has promised to the Surtax payers?

The Chairman

Order. The hon. Member is going rather far from the new Clauses.

Mr. Houghton

Thank you, Sir Gordon, for arresting me on a crescendo of eloquence.

I accept that I was straying a little beyond the new Clauses, but the merits of them go far beyond the financial detail within them. As I said before, they are a demonstration, and it is impossible to have a demonstration without carrying one's case far beyond the narrow confines of the new Clauses.

The Economic Secretary to the Treasury (Mr. Anthony Barber)

The three new Clauses which have been explained by the hon. Member for Sowerby (Mr. Houghton) are all concerned with increases in personal reliefs.

The first new Clause would increase a married man's personal allowance from £240 to £250 while leaving the other allowances unaltered.

The second new Clause would do the same thing, but, in addition, would increase a single person's allowance from £140 to £150, and would also increase the maximum figure for the wife's earned income allowance by the same amount, from £140 to £150.

I do not think that the Committee would wish me to deal in detail with the third new Clause in the name of the hon. Lady the Member for Leeds, South-East (Miss Bacon), as she is not here.

On a number of occasions during the last few weeks my right hon. and learned Friend has explained the reasoning behind his Budget proposals. I do not propose now to go over the same ground again. Nobody in his right senses would deny that at the time of the Budget there was excessive pressure on home demand, and nothing that has happened since throws doubt on the wisdom of my right hon. and learned Friend's appreciation of the situation at that time.

Mr. Nabarro

My hon. Friend referred to the pressure on home demand. Was not a survey published by the Federation of British Industries, 48 hours ago, showing that a number of firms were not working to capacity at present? How does my hon. Friend reconcile that survey with his statement about pressure on home demand? Is he not mistaking the symptoms? Is not the correct symptom the pressure of wage demands on costs and prices, which is an entirely different proposition?

Mr. Barber

No, Sir. I cannot accept what my hon. Friend says. I would have to go into considerable detail to convince him that the appreciation made by my right hon. and learned Friend was correct at the time of the Budget, and still is correct. I must not go into details about the economic situation, or I shall get into trouble with you, Sir Gordon.

The point is that that was the appreciation of my right hon. and learned Friend at the time of the Budget, and it was in order to deal with that situation that he provided for an above-the-line surplus of £506 million. To achieve that it was necessary for him to propose to the Committee a net increase of £68 million in taxation this year.

The second Clause, also in the name of the right hon. Member for Huyton (Mr. H. Wilson), incorporates the proposal contained in the first one. If the second were to be accepted it would wipe out the greater part of the net increase in taxation which was proposed by my right hon. and learned Friend. It must be apparent to the Committee that, quite apart from the merits of the proposals, there are overwhelming economic reasons for rejecting them this year. It is fair to add that, if we were to provide taxation relief of about £60 million in a full year, even the hon. Member for Sowerby would probably not seriously contend that these proposals should necessarily have first priority.

I was surprised that the hon. Member referred at such length to the Surtax reliefs which figured in my right hon. and learned Friend's Budget proposals. On the assumption that the hon. Member's arguments were not meant deliberately to deceive the Committee—and I would never accuse the hon. Member for Sowerby of doing that—I can only assume that they are the consequence of muddled thinking. When all the somewhat devious reasoning which he put forward has been considered, the fact remains that these Clauses would involve a substantial cost to the Exchequer this year.

The second new Clause would involve a loss of £48 million to the Exchequer this year, whereas the Surtax reliefs will not cost the Exchequer a penny. Furthermore, as the hon. Member pointed out, by far the greater part of the Surtax relief is covered by the increase in Profits Tax. If I heard him aright he was proposing yet a further increase in Profits Tax of 2½ per cent. to cover his proposals, and I found that a little surprising.

Mr. Douglas Jay (Battersea, North)

Do we understand that the Chancellor is now getting cold feet about his Surtax reliefs, and may be proposing to withdraw them before next year?

Mr. Barber

I do not see the point of that intervention. Nothing that I have said casts the slightest doubt on the proposals which my right hon. and learned Friend has made. The point is that in any consideration of personal reliefs which would result in a loss to the Exchequer this year the Surtax reliefs which will result in no loss this year have no relevance.

Mr. Houghton

I said that to assist the Chancellor we would be ready to post-date these additional reliefs to coincide with those he has given to the Surtax payers, in which case there would be no charge to the Exchequer this year from these new Clauses. I made that suggestion quite plainly.

Mr. Barber

That is not the purport of the Clauses. If the hon. Member wishes to achieve that purpose he can take the obvious way out and put down similar Clauses next year, when they can be considered again.

But it is relevant to consider the way in which these allowances have increased over the years. The married allowance, which was £180 from 1946 to 1950, was increased to £190 in 1951, to £210 in 1952–53, and to £240 in 1955. There was a similar increase of £30 in respect of the single person's allowance between 1951 and 1955. The hon. Member was critical of the fact that in 1955 there was a narrowing of the first reduced rate "band", because the effect—disregarding the relief provided through the reduction in the rates of tax in the same Budget—was to take back, except from those who paid very small amounts of tax, part or, in some cases, the whole of the benefits derived from the increase in personal allowances.

4.15 p.m.

I do not want to waste time in going into this matter in detail, but two points are highly relevant. First, as the hon. Member knows, the purpose of the changes made in 1955 in this way was to carry out the suggestion of the Royal Commission on the Taxation of Profits and Income that the starting point of liability for individuals was too low and ought to be raised—but in such a way as not to benefit people with higher incomes. Secondly, taking the whole 1955 Budget into account, every taxpayer paid less Income Tax than he would have if that Budget had made no change at all in tax rates and allowances.

Any further relief from taxation is attractive, but a great deal has already been done. I have some figures here, but I shall not weary the Committee with them; I ask hon. Members who are interested in the matter to read an Answer given to the right hon. Member for Huyton on 20th March this year. The right hon. Gentleman asked for figures which would show what percentage of income was taken in tax, on a basis which would enable a given gross income in 1951 to be compared with the income at the present day having the same purchasing power.

The Answer is very illuminating, and I am not sure that it was the Answer which the right hon. Gentleman expected. It showed that in every case the tax liability, as a percentage of income—allowing for the rise in the cost of living—was reduced. These lower percentages which come out in the Answer are partly the consequence of the increased personal allowances made over the years.

The cost of the new Clause in the name of the hon. Member for Leeds, South-East alone would, according to the interpretation of the word "householder", be anything from £20 million to £50 million in the present year. Whether or not the other two Clauses are desirable in themselves; whether or not, in any year when there could be some substantial remission of taxation, they should have priority, the fact remains that to provide for reliefs this year on the scale suggested would run counter to the basic purpose of my right hon. and learned Friend's Budget. Indeed, in fairness to the hon. Member, he virtually admitted at one point that he thought he had little chance of success with these Clauses. He said that they were little more than a demonstration. Because of their high cost, if for no other reason, I must ask the Committee to reject them.

Mr. Anthony Crosland (Grimsby)

The reply of the Economic Secretary demands some comment. The hon. Gentleman has based the whole of his case on the assumption that when the Chancellor framed his Budget we were in a period of such excess demand that concessions costing £84 million—as the hon. Gentleman has admitted that the proposals in these Clauses would cost—cannot be envisaged by the Chancellor. I ask the Economic Secretary to consider the implications of this statement, that we have such a condition of excess demand in this country that no further concessions of any character can be made.

Two comments ought to be made. The first is that which was made in an intervention by the hon. Member for Kidderminster (Mr. Nabarro), that this statement is inconsistent with the findings of the recent F.B.I. survey, which showed a high degree of non-utilisation of capacity in a large proportion of British industry. The second and, I suggest, the very much more serious implication in saying that we have such an excess demand is that for twelve months there has been no increase in production in the British economy, no natural growth of any kind.

If, after twelve months of no increase in production, we have excess demand, I should like to know whether this means that all the new investment undertaken during those twelve months yielded no return of any kind. Has there been no increase of productivity and industrial efficiency? That is the implication of saying that after twelve months of stagnant production we have an excess demand.

The Economic Secretary must face this if he proposes to use that argument as the main reason for not accepting these new Clauses, and no doubt later for refusing other concessions which hon. Members on this side of the Committee will be urging on him. He must face the fact that the argument that after 12 months of stagnant production we have excess demand implies that all our investment during that period has been wasted, that there is no natural increase in efficiency and productivity in the system.

The implications are such that they could not possibly be accepted by any Chancellor of the Exchequer. So I wish to insist that the major reason for rejecting this and other concessions is one of excess demand in April when the Chancellor framed his Budget is not consistent with the facts about the British economy, and I hope that if the hon. Gentleman is proposing to resist further new Clauses and proposals he will use a rather more plausible and ingenious argument.

Mr. Nabarro

Before we part with this new Clause I wish to put one or two questions to my hon. Friend the Economic Secretary which, I hope, he will answer now or possibly, as it is equally in order, in the debate on the next new Clause to be called.

The Income Tax allowance for a wife is £100 per annum. The Income Tax allowance for a child up to and including 11 years is £100 per annum. The Income Tax allowance for a child between 12 and 15 years inclusive is £120 per annum. The Income Tax allowance for children wholly engaged in educational pursuits and over the age of 16 years is £150 per annum. So the children are graduated for Income Tax allowances at £100, £120 and £150 per annum. The wife allowance is £100 per annum, only. That is nonsense. A wife is much more valuable than any child, and much more expensive. That ought to be recognised by the Treasury which has permitted allowances for Income Tax purposes, as between children of varying ages, and the allowance for a wife for Income Tax purposes, to become badly out of relation to one another.

In the figure of £250 mentioned in the first of the proposed new Clauses, it is, of course, implicit that there is still an allowance of only £100 for the wife. I hope that the Economic Secretary will give us some hope, in his remarks on this or the ensuing new Clause, that some measure of reform may be expected in the future regarding the disparity which the figures I have just quoted obviously reveal.

Mr. Barber

First, may I take up the point made by the hon. Member for Grimsby (Mr. Crosland). It is extremely difficult, without going into the matter in great detail, at a time when one in dealing with proposals to increase personal allowances, to convince those hon. Members who do not accept the fact that there is considerable overstrain in the economy at present. Of course, it is perfectly true, as the hon. Gentleman said, and as was indicated earlier by my hon. Friend the Member for Kidderminster (Mr. Nabarro) that some industries are working below capacity. But, taking the country as a whole and looking at the various economic indicators, I should have thought that there is no doubt at all that the view taken by my right hon. and learned Friend at the time of the Budget was amply justified and has been vindicated by subsequent events, and by the figures which we now have available.

The hon. Member for Grimsby asked how it was that in these circumstances our economy did not seem to be growing, or had not grown significantly over the past twelve months. Again, I cannot, on this occasion, go into the matter in detail. But, as the hon. Gentleman knows full well from his great experience of economic matters, there are many reasons which might account for this. I will mention only one, and I do not for a moment suggest that it is the most important. With all the new machinery at our disposal, as the result of a considerable increase in investment by productive industry, it is a fact that recently there have been cuts in the number of hours worked. In itself, this is bound to affect the total productive output. There are other reasons, some of them may be more important and others less. But I am sure that. I should not be in order were I to go into those aspects at any great length.

To my hon. Friend the Member for Kidderminster, who made a particular point about the relativity between various personal allowances, I can only say on this occasion that one of the primary considerations which my right hon. and learned Friend and his predecessors have always had to bear in mind in considering what ought to be done about personal allowances is the way in which an increase in one personal allowance has, as it were, a consequence regarding other personal allowances.

As I understand, my hon. Friend is saying that he thinks that the allowances are out of line and that this fact ought to be borne in mind on any occasion when my right hon. and learned Friend did feel able to make some concessions in respect of personal allowances. I will certainly bear that in mind and I know that my right hon. and learned Friend will take note of what has been said by my hon. Friend the Member for Kidderminster.

Mr. Nabarro

May I get this straight? All I am asking my hon. Friend to do is to convey to the Chancellor of the Exchequer, who was not present when I was speaking, the importance—in a fiscal sense—of holy matrimony, and to divorce it for the moment—in a fiscal sense—from the allowances for children.

Since 1951, the Conservative Party has applied itself, conscientiously and rightly, to a progressive increase of children's allowances for Income Tax purposes. Speaking from memory, I think that the child allowance was £70 when the Conservative Party came to office in 1951. Now the allowances amount to the three figures which I have given. But nothing has been done about the wife allowance. As a wife is such an expensive asset, surely the wife should rank first. I said that the wife was an expensive asset and the word "asset" is perfectly right. The wife should rank first, and so should any improvement of the allowance given to her spouse in respect of his wife for Income Tax purposes.

Mr. Barber

I am not sure whether my hon. Friend is now proposing that there should be some form of capital allowance for a wife. But I know, from my private conversations with my hon. Friend, that he and I take much the same sort of view about women, and I will convey his observations to my right hon. and learned Friend.

4.30 p.m.

Mr. G. R. Mitchison (Kettering)

It is not for me to investigate the fiscal divorce of holy matrimony—an operation no doubt carefully considered in Conservative circles, but one which I could not hope even to describe. I was a trifle amused by the Economic Secretary warning us solemnly against muddled thinking. Perhaps he did not realise some of the things which were to follow.

I suppose that if we are to push this business about the wife and the child a little further we shall have to consider how expensive an asset one is oneself. What we are describing deals, it is true, with personal allowances, but the real question put before us is: at what point do we begin taxing single persons and married people? These are only allowances made by some bit of muddled thinking no doubt by those who originally prepared the Income Tax Acts. The question we have to consider is very simple. Are we justified, in present cir cumstances—and those we must consider in comparison with the rest of this Finance Bill—in refusing to increase the amount of income of the comparatively poor man which escapes taxation?

I agree that it applies over the whole belt of incomes, but the real importance of this and the number of people principally concerned are matters which have to do with the bottom of the belt of Income Taxpayers. They are the vast majority of people. The reason why this would be an expensive change, even to the very limited and modest extent which my hon. Friend proposed, is simply the numbers of people who would be affected. What is so violently wrong, not merely in the refusal of this proposal, but with the complete failure of the Chancellor to do anything about this until nearer the next General Election, is that, at the same time, he is proposing to make very considerable concessions to the directly opposite class of people—the small, not large, number of people who pay, and are in a position to pay, a considerably larger, not smaller, amount of tax.

It is an almost classic case of Tory philosophy. It is Tory philosophy, apparently, to make this concession to the Surtax payer and to refuse, at the same time, to make any concession to the bottom dog in the Income Tax world. That is what the refusal of this proposal means. It is muddled thinking to try to confuse this, as the Economic Secretary did, with the question of timing. If he had chosen to look at the merits of the case he could even have avoided all those difficulties by considering what had been put to him verbally. He would not do that. He preferred to try to work up a defence on questions of timing, knowing perfectly well that on any view of social justice no defence whatever was possible for a refusal to accept this new Clause or the omission to move anything of the sort in the Finance Bill.

It is monstrous that at a time when we are still supposed to be moderately prosperous—although that appears to be getting more and more doubtful every day, so we are told—this concession should be made, whatever the dating of it, to Surtax payers, the best friends, no doubt, of the Tory Party, and the Tory Party should refuse to support a proposal in favour of a far larger group of people who, quite clearly, if there is anything going, ought to have a much better claim and a much earlier claim than that of Surtax payers.

It is monstrous to try to get out of this on minor matters of timing. The right way of looking at this was to suppose that people put aside money for paying Surtax when they knew that the Surtax would be due to be paid later. That is ordinary prudence and a course to be encouraged, but that is all that could be said and that was all it was when it was a matter of defending the proposals in the Budget. This is not a question of being able to afford it, or of upsetting the balance of the Budget or anything of that sort. It is merely a question of deliberately preferring to make a concession to the fairly rich to making a concession to the far larger number of people who, I repeat, are at the bottom of the scale.

Think about those people. They get £3 a week for a single person and £5 a week for a married couple. What is the social justice or sense in taxing people like that? What is the social justice or sense in refusing to help them when the Government are doing the other things in this field?

This, of course, is a question of principle, but it is not a try-on, as was suggested by one hon. Member after another. It is an attempt—I agree, obviously a hopeless attempt—to make the party opposite understand that there is some social content even in a Finance Bill.

Mr. Percy Holman (Bethnal Green)

I add my appeal to the Treasury Bench on this matter. I speak for an area which is traditionally poorer than most of the rest of London. The effect of not increasing the personal allowances at this time will be detrimental to the poorer elements in our community.

By its refusal to accept these proposals, the Treasury is, in effect, increasing the number of taxpayers among the poorest in the country. An old-age pensioner

now receiving a pension somewhat increased since the beginning of April, and going out to earn, finds that the maximum allowed for a man under 70 or a woman under 65 is now brought within the tax range. Our proposal is ultra-modest. It would increase personal allowance only from £240 to £250 for a married couple and would not obviate all this increased group of pensioners and others on very low incomes from once again coming within the range of those who pay Income Tax, but it would at any rate mitigate the hardship.

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

Are not the people of wham the hon. Member is speaking exempt under the provisions for relief in respect of small incomes?

Mr. Holman

They are not exempt, for only their pension is treated as earned income. There are manufacturers who are finding that part-timers whom they are employing, among them these pensioners, are now becoming liable to pay Income Tax although they were not liable to do so last year. That sort of thing alone should justify the Government in making a concession along the lines of personal reliefs.

There is another reason why personal relief should be increased this year. In only twelve months the cost of living index has risen by four points. It is not far off 4 per cent., and 4 per cent. on £240 is, as near as possible £10. Every forecast indicates that the cost of living will go up another two or three points during the next twelve months. The Government should meet the position which is arising. I plead with the Treasury Bench to give this matter second thoughts and to come down on the side of same relief in personal allowances in order to avoid increasing hardship for the elderly and other low-income groups.

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

The Committee divided: Ayes 180, Noes 226.

Division No. 208.] AYES [4.39 p.m.
Ainsley, William Boardman, H. Butler, Mrs. Joyce (Wood Green)
Allaun, Frank (Salford, E.) Bowden, Herbert W. (Leics, S.W.) Callaghan, James
Allen, Scholefield (Crewe) Boyden, James Castle, Mrs. Barbara
Bacon, Miss Alice Braddock, Mrs. E. M. Chapman, Donald
Baxter, William (Stirlingshire, W.) Brockway, A. Fenner Chetwynd, George
Bence, Cyril Broughton, Dr. A. D. D. Craddock, George (Bradford, S.)
Benson, Sir George Brown, Rt. Hon. George (Belper) Cronin, John
Blyton, William Butler, Herbert (Hackney, C.) Crosland, Anthony
Cullen, Mrs. Alice Johnson, Carol (Lewisham, S.) Reid, William
Darling, George Jones, Dan (Burnley) Reynolds, G. W.
Deer, George Kelley, Richard Roberts, Albert (Normanton)
de Freitas, Geoffrey Kenyon, Clifford Roberts, Goronwy (Caernarvon)
Diamond, John Key, Rt. Hon. C. W. Robertson, John (Paisley)
Dodds, Norman King, Dr. Horace Robinson, Kenneth (St. Pancras, N.)
Donnelly, Desmond Ledger, Ron Ross, William
Driberg, Tom Lee, Frederick (Newton) Shinwell, Rt. Hon. E.
Dugdale, Rt. Hon. John Lever, L. M. (Ardwick) Short, Edward
Ede, Rt. Hon. C. Lewis, Arthur (West Ham, N.) Silverman, Julius (Aston)
Edelman, Maurice Logan, David Silverman, Sydney (Nelson)
Edwards, Robert (Bilston) Mabon, Dr. J. Dickson Skeffington, Arthur
Edwards, Walter (Stepney) McCann, John Slater, Mrs. Harriet (Stoke, N.)
Evans, Albert MacColl, James Slater, Joseph (Sedgefield)
Fernyhough, E. McInnes, James Small, William
Fitch, Alan McKay, John (Wallsend) Smith, Ellis (Stoke, S.)
Fletcher, Eric Mackie, John (Enfield, East) Sorensen, R. W.
Foot, Michael (Ebbw Vale) McLeavy, Frank Soskice, Rt. Hon. Sir Frank
Fraser, Thomas (Hamilton) MacPherson, Malcolm (Stirling) Spriggs, Leslie
Gaitskell, Rt. Hon. Hugh Manuel, A. C. Steele, Thomas
Ginsburg, David Mapp, Charles Stewart, Michael (Fulham)
Gooch, E. G. Marquand, Rt. Hon. H. A. Stonehouse, John
Gordon Walker, Rt. Hon. P. C. Marsh, Richard Stones, William
Gourlay, Harry Mason, Roy Strachey, Rt. Hon. John
Greenwood, Anthony Mayhew, Christopher Stross, Dr. Barnett (Stoke-on-Trent, C.)
Grey, Charles Millan, Bruce Swingler, Stephen
Griffiths, David (Rother Valley) Milne, Edward J. Sylvester, George
Griffiths, Rt. Hon. James (Llanelly) Mitchison, G. R. Symonds, J. B.
Grimond, J. Monslow, Walter Taylor, Bernard (Mansfield)
Hale, Leslie (Oldham, W.) Moody, A. S. Taylor, John (West Lothian)
Hall, Rt. Hn. Glenvil (Colne Valley) Mort, D. L. Thompson, Dr. Alan (Dunfermline)
Hamilton, William (West Fife) Moyle, Arthur Thomson, G. M. (Dundee, E.)
Hannan, William Mulley, Frederick Thornton, Ernest
Hart, Mrs. Judith Neal, Harold Timmons, John
Hayman, F. H. Noel-Baker, Francis (Swindon) Tomney, Frank
Henderson, Rt. Hn. Arthur (Rwly Regis) Noel-Baker, Rt. Hn. Philip (Derby, S.) Ungoed-Thomas, Sir Lynn
Herbison, Miss Margaret Oliver, G. H. Wainwright, Edwin
Hill, J. (Midlothian) Oram, A. E. Warbey, William
Hilton, A. V. Owen, Will Wells, Percy (Faversham)
Holman, Percy Paget, R. T. Whitlock, William
Holt, Arthur Pannell, Charles (Leeds, W.) Wilkins, W. A.
Houghton, Douglas Parker, John Willey, Frederick
Howell, Charles A. (Perry Barr) Parkin, B. T. Willis, E. G. (Edinburgh, E.)
Hoy, James H. Pavitt, Laurence Wilson, Rt. Hon. Harold (Huyton)
Hughes, Emrys (S. Ayrshire) Pearson, Arthur (Pontypridd) Winterbottom, R. E.
Hughes, Hector (Aberdeen, N.) Peart, Frederick Woodburn, Rt. Hon. A.
Hunter, A. E. Pentland, Norman Woof, Robert
Hynd, H. (Accrington) Popplewell, Ernest Yates, Victor (Ladywood)
Irvine, A. J. (Edge Hill) Prentice, R. E. Zilliacus, K.
Janner, Sir Barnett Price, J. T. (Westhoughton)
Jay, Rt. Hon. Douglas Probert, Arthur TELLERS FOR THE AYES:
Jager, George Proctor, W. T. Mr. G. H. R. Rogers and
Jenkins, Roy (Stechford) Rankin, John Mr. Lawson.
Redhead, E. C.
Agnew, Sir Peter Carr, Compton (Barons Court) Errington, Sir Eric
Allan, Robert (Paddington, S.) Carr, Robert (Mitcham) Farey-Jones, F. W.
Arbuthnot, John Cary, Sir Robert Finlay, Graeme
Balniel, Lord Channon, H. P. G. Fisher, Nigel
Barber, Anthony Chichester-Clark, R. Fraser, Ian (Plymouth, Sutton)
Barter, John Clark, William (Nottingham, S.) Freeth, Denzil
Batsford, Brian Clarke, Brig, Terence (Portsmth, W.) Gammans, Lady
Baxter, Sir Beverley (Southgate) Cleaver, Leonard Glover, Sir Douglas
Beamish, Col. Sir Tufton Cooke, Robert Glyn, Dr. Alan (Clapham)
Bell, Ronald Cooper-Key, Sir Neill Glyn, Sir Richard (Dorset, N.)
Bennett, Dr. Reginald (Gos & Fhm) Cordeaux, Lt.-Col. J. K. Goodhew, Victor
Berkeley, Humphry Contain, A. P. Grant, Rt. Hon. William
Bidgood, John C. Coulson, J. M. Grant-Ferris, Wg Cdr. R.
Birch, Rt. Hon. Nigel Courtney, Cdr. Anthony Green, Alan
Bishop, F. P. Craddock, Sir Beresford Grosvenor, Lt.-Col. R. G.
Black, Sir Cyril Crosthwaite-Eyre, Col. O. E. Hall, John (Wycombe)
Bossom, Clive Cunningham, Knox Hamilton, Michael (Wellingborough)
Bourne Arton, A. Currie, G. B. H. Harris, Frederic (Croydon, N.W.)
Boyle, Sir Edward Dalkeith, Earl of Harrison, Brian (Maldon)
Braine, Bernard d'Avigdor-Goldsmid, Sir Henry Harvey, Sir Arthur Vere (Macclesf'd)
Brewis, John Digby, Simon Wingfield Harvie Anderson, Miss
Brooman White, R. Donaldson, Cmdr. C. E. M. Hastings, Stephen
Browne, Percy (Torrington) Duncan, Sir James Hay, John
Bryan, Paul Eccles, Rt. Hon. Sir David Heald, Rt. Hon. Sir Lionel
Buck, Antony Eden, John Henderson, John (Cathcart)
Burden, F. A. Elliot, Capt. Walter (Carshalton) Hendry, Forbes
Butcher, Sir Herbert Elliott, R.W. (Nwcstle upon-Tyne, N.) Hiley, Joseph
Campbell, Sir David (Belfast, S.) Emmet, Hon. Mrs. Evelyn Hill, J. E. B. (S. Norfolk)
Campbell, Gordon (Moray & Nairn)
Hirst, Geoffrey Marshall, Douglas Sharples, Richard
Holland, Philip Marten, Neil Shaw, M.
Hollingworth, John Mathew, Robert (Honiton) Skeet, T. H. H.
Hornsby-Smith, Rt. Hon. Patricia Matthews, Gordon (Meriden) Smith, Dudley (Br'ntf'rd & Chiswick)
Howard, Hon. G. R. (St. Ives) Mawby, Ray Smithers, Peter
Howard, John (Southampton, Test) Maxwell-Hyslop, R. J. Spearman, Sir Alexander
Hughes-Young, Michael Mills, Stratton Speir, Rupert
Hulbert, Sir Norman Montgomery, Fergus Stanley, Hon. Richard
Hurd, Sir Anthony More, Jasper (Ludlow) Stevens, Geoffrey
Iremonger, T. L. Morrison, John Steward, Harold (Stockport, S.)
Irvine, Bryant Godman (Rye) Nabarro, Gerald Stodart, J. A.
James, David Nicholson, Sir Godfrey Stoddart-Scott, Col, Sir Malcolm
Jenkins, Robert (Dulwich) Noble, Michael Studholme, Sir Henry
Johnson, Eric (Blackley) Nugent, Sir Richard Summers, Sir Spencer (Aylesbury)
Johnson Smith, Geoffrey Oakshott, Sir Hendrie Tapsell, Peter
Kerby, Capt. Henry Orr, Capt. L. P. S. Taylor, Sir Charles (Eastbourne)
Kerr, Sir Hamilton Osborn, John (Hallam) Taylor, Edwin (Bolton, E.)
Kirk, Peter Osborne, Cyril (Louth) Teeling, William
Kitson, Timothy Page, John (Harrow, West) Temple, John M.
Lagden, Godfrey Page, Graham (Crosby) Thomas, Leslie (Canterbury)
Langford-Holt, J. Partridge, E. Thompson, Kenneth (Walton)
Leather, E. H. C. Pearson, Frank (Clitheroe) Thornton-Kemsley, Sir Colin
Leavey, J. A. Peel, John Tiley, Arthur (Bradford, W.)
Leburn, Gilmour Percival, Ian Turner, Colin
Legge-Bourke, Sir Harry Peyton, John van Straubenzee, W. R.
Lewis, Kenneth (Rutland) Pickthorn, Sir Kenneth Vaughan-Morgan, Sir John
Lindsay, Martin Pike, Miss Mervyn Vickers, Miss Joan
Linstead, Sir Hugh Pilkington, Sir Richard Vosper, Rt. Hon. Dennis
Litchfield, Capt. John Pitt, Miss Edith Wakefield, Edward (Derbyshire, W.)
Lloyd, Rt. Hon. Selwyn (Wirral) Pott, Percivall Walder, David
Longden, Gilbert Powell, Rt. Hon. J. Enoch Walker, Peter
Loveys, Walter H. Price, David (Eastleigh) Wall, Patrick
Lucas, Sir Jocelyn Prior-Palmer, Brig. Sir Otho Ward, Dame Irene
Lucas-Tooth, Sir Hugh Proudfoot, Wilfred Watkinson, Rt. Hon. Harold
McAdden, Stephen Pym, Francis Webster, David
MacArthur, Ian Quennell, Miss J. M. Whitelaw, William
McLaren, Martin Ramsden, James Williams, Paul (Sunderland, S.)
Maclay, Rt. Hon. John Rawlinson, Peter Wills, Sir Gerald (Bridgwater)
Maclean, Sir Fitzroy (Bute & N. Ayrs.) Redmayne, Rt. Hon. Martin Wilson, Geoffrey (Truro)
MacLeod, John (Ross & Cromarty) Rees, Hugh Wise, A. R.
McMaster, Stanley R. Rees-Davies, W. R. Woodhouse, C. M.
Macmillan, Rt. Hn. Harold (Bromley) Renton, David Woodnutt, Mark
Macmillan, Maurice (Halifax) Ridsdale, Julian Woollam, John
Macpherson, Niall (Dumfries) Robertson, Sir D. (C'thn's & S'th'ld) Worsley, Marcus
Maddan, Martin Robinson, Sir Roland (Blackpool, S.) Yates, William (The Wrekin)
Maginnis, John E. Ropner, Col. Sir Leonard
Markham, Major Sir Frank Russell, Ronald TELLERS FOR THE NOES:
Marlowe, Anthony Seymour, Leslie Colonel Sir H. Harrison and
Mr. Gibson-Watt.