§ Mr. Geoffrey Stevens (Portsmouth, Langstone)
I beg to move, in page 10, line 33, at the end to insert:Provided that in the case of an individual (or in the case of a married couple either spouse) who was aged 65 or over at the commencement of the year of assessment such higher rates shall be charged where the total income exceeded £2,500.A month ago I was very fortunate in that the Chair selected an Amendment which I moved, the effect of which was to raise the starting point of Surtax from £2,000 to £3,000. In the week or ten days that followed the debate, I had letters from all over the country supporting my action. My hon. Friend the Economic Secretary, however, despite the tribute which he paid to
§ the manner in which I posed this suggestion, made some very crushing remarks in reply. I do not intend to deal with those remarks this evening.
§ The hon and learned Member for Kettering (Mr. Mitchison) was even more crushing in his remarks and I should like to reply to those, but I will not be tempted. I will refer to only one of my hon. Friend's points and that was that the cost of the proposal I made would be in excess of £75 million in a full year, which seemed a shade on the high side for an Amendment moved by a back bencher, and for that reason I readily asked leave to withdraw the Amendment.
§ I come back now with an Amendment more modest in two respects. Instead of proposing an increase in the starting point of Surtax from £2,000 to £3,000, the Amendment cuts that advance in half, from £2,000 to £2,500, and it limits that higher starting figure of £2,500 to a taxpayer who is 65 years of age or over at the beginning of the year of assessment, or in the case of a married couple where either spouse is 65 years of age at the beginning of the year of assessment.
§ Having taken some little time on the previous occasion to advance the reasons which I thought were good and sufficient for raising the starting point of Surtax, I shall not weary the House by repeating those arguments. I intend to make only two points in support of my Amendment. Six weeks ago I suggested that the figure of £2,000 is the only starting point figure in the Income Tax Code 1443 which has remained unchanged since it was introduced over 40 years ago. I was not and have not since been challenged on that suggestion, and I therefore believe that I am right.
§ It is true that when that special tax, Surtax, was introduced in 1922 it was intended as a tax on wealth. Surely that must mean "wealth" in real terms and not necessarily wealth in money terms, because there is a variation in the amount of wealth which money can buy. If £2,000 was the yardstick for a wealthy person in 1922, it certainly is not a proper yardstick over 40 years later. For that reason, if for no other, I suggest that the time has come to consider investment income as well as earned income.
§ I have included the age qualification of 65 in my Amendment. That seems a reasonable age. It is the normal retiring age of a man. It is the age at which the retirement pension is normally paid, so long as the person does retire. It is the age at which many men hope to retire and at which many private pension schemes begin to operate.
§ My hon. Friend the Economic Secretary rejected my previous suggestion on the ground of the tremendous cost involved. I should have thought that with these two qualifications—the reduction to £2,500 and the age qualification—the cost would obviously be very much less and perhaps even within the proper sphere of a back-bench Member to move.
§ I recall that so many of these incomes which are deemed to be unearned in fact have come from interest, dividends, and rents on sums put aside year by year from earned income during a working life by people who are not covered by pension schemes, and I see no reason why those forms of income should be deemed to be unearned and should not attract the earned income allowance which pensions do. They should have similar treatment. All such incomes should be deemed to be earned incomes for Surtax purposes. I therefore commend the Amendment to the House.
§ Mr. A. P. Costain (Folkestone and Hythe)
I wish to add my supplications to those of my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens). This is a matter which I have 1444 had very much in mind in my constituency which contains a lot of people who are in this income group. They are all people who have retired on their own savings.
Before my hon. Friend the Economic Secretary works out the mathematics, I want to put one point to him. A number of people in this age group, because of the tax position in this country, are leaving to live in the Isle of Man and the Channel Islands. It is a great shame that these people, who have made their living in this country, should have to go abroad or to adjacent islands in order to avoid paying Surtax. I hope that my hon. Friend the Economic Secretary will, in his calculations, bear this other factor in mind and give to these people some hope that they can remain in this country as they would wish to do.
§ Mr. du Cann
As usual, my hon. Friends the Members for Portsmouth, Langstone (Mr. Stevens) and for Folkestone and Hythe (Mr. Costain) have made powerful, persuasive and cogent speeches, but I am sorry to have to say that I cannot accept the Amendment. Clause 11 lays down the rate of Surtax for the year 1962–63, and the Amendment proposes that, if a taxpayer, or, as my hon. Friend explained, in the case of a married couple, his wife, was 65 or over at the commencement of the year of assessment, the higher rate should be charged when the total income exceeds £2,500.
First, I must tell my hon. Friends that there is some doubt about the interpretation of the Amendment. It might be interpreted in one of two ways. First, it might be said to let all elderly Surtax payers off Surtax on the slice of Surtax-able income between £2,000 and £2,500 however big their income might be, leaving slices above £2,500liable to Surtax at the rates proposed in the Bill. Second, it might be said to exempt from Surtax elderly taxpayers whose total income for Surtax purposes is less than £2,500, leaving those with incomes above £2,500 to pay Surtax at the rates proposed in the Bill. In other words, someone with an income of £2,499 would pay no Surtax, but, if he had, by accident, an income of £2,501 or anything above that, he would pay Surtax at the full rate. There are those difficulties of interpretation.
1445 My hon. Friend the Member for Langstone referred to the Amendment which he proposed in Committee. Perhaps I misjudged him, but he seemed to cast doubt on my estimate of the cost of that Amendment.
§ Mr. du Cann
My hon. Friend corrects me. He did not doubt at all my estimate of the cost of that Amendment. However, he said that he hoped that this Amendment would cost a good deal less. So it would. He will recall that there was with that Amendment, too, some difficulty regarding the drafting. It would have made the Surtax rates start at £6,000 because of the way the allowances would work. Hence the high cost. This Amendment, if accepted, would cost a great deal less, only £1 million.
I absolutely understand—I say this as seriously as I can—the anxiety which my hon. Friend feels on this subject. He has great experience in Income Tax matters, occupying a very responsible position in a society concerned with the problems of Income Tax payers, and I can well believe that he has had a volume of correspondence on this question.
§ Mr. du Cann
I think that it would be appropriate for my hon. Friend to give the name himself if he wishes to do so. In any case, I think that it is very well known.
§ Mr. Stevens
The name of the society, which escapes the hon. Member for Stokeon-Trent, South for the moment, is the Income Tax Payers' Society. Subscription 1 guinea. Members opposite welcome.
§ Mr. du Cann
I am glad to remind the House of the splendid work which my hon. Friend does in that connection. It is part of the devoted work he does in many spheres and for which he does not always obtain the proper credit.
I was about to say that cost is not the principal ground of objection. It does not provide the principal reason why we are unable to accept the Amendment. My hon. Friend said something on the subject 40 years on. He is quite right to draw attention to the fact that this particular matter 1446 has not been dealt with for about 40 years. On the other hand, it would be quite wrong to leave the House with the impression that the Government are so unsympathetic to the plight of the elderly and the retired that nothing whatever is done.
In this very Bill, we propose by Clause 12 to raise the income limit for age relief for Income Tax purposes from £800 to £900, and by subsection (7) the age exemption provisions are again improved from £300 to £325 for a single person and from £480 to £520 for a married couple.
If my hon. Friend is suggesting that it would be appropriate to introduce an equation into the Surtax field, I am obliged to say this to him. First, perhaps he feels that there is a new anomaly in the Surtax field because of the measures taken by this House which were introduced by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) in 1961. But I should make it clear that any blurring of the distinction between earned and investment income would certainly be contrary to the basis deliberately adopted by my right hon. and learned Friend when framing his Budget at that time.
Secondly—and this is perhaps a more important objection, for, like many hon. Members, I am impatient of precedent—although my hon. Friend's proposal provides relief for income from savings, the Amendment is not in any way limited to the income from investments which represent the accumulation from savings of past earnings, and any such limitation would certainly seem to be a practical impossibility. My hon. Friend will know my feelings about savings and the feeling and attitude of the Government about savings. It must be right to encourage people to make provision for their old age, if possible, during their lifetime. Whether they do this to a large or small extent, good luck to them. It is a splendid thing to do. But there is a difficulty in distinguishing between income of that sort, which is genuine income, and investments provided from savings and income of other kinds. That is one of the complications.
The third and probably the most important point of all is that it seems to 1447 create new anomalies to retain the kind of Income Tax age relief which I have described, raised to £900 by the Bill, and at the same time to recognise a new hardship category consisting of elderly people with incomes of £2,000 and upwards. Such a state of affairs would certainly be regarded as unfair by all those elderly taxpayers with incomes below £2,000 which would, nevertheless, be too large to qualify for the Income Tax age relief.
These are very real difficulties. I hope that my hon. Friend will not feel that there is any reason of prejudice which obliges us to take an attitude of this sort. On the contrary, we leave prejudice to other people. We are most anxious to find ways of helping these people if possible. But, with regret, we are convinced that the method proposed by my hon. Friend is not one which we are in a position to accept in the interests of taxpayers as a whole and, more particularly, in the interests of other elderly people who do not precisely fit into the pattern set in the Amendment. For those reasons, I hope that my hon. Friend will not press the Amendment.
§ Mr. Houghton
The Economic Secretary is a kind of Parliamentary tranquilliser. He turns down the proposals of his hon. Friends and of my hon. Friends in the gentlest possible manner. I think that he must have a tin of soft soap there.
The hon. Member for Portsmouth, Langstone (Mr. Stevens) will not be surprised to hear that we shall not be able to follow him into the Division Lobby if he presses this Amendment. What he is asking for is Surtax age exemption. That raises many questions of equity in taxation and of comparison with the burdens of taxation resting on people in groups lower down. Moreover, as far as I can see, the relief which would be given would be on investment income only, because to the extent that these older people are on pension, for example, they will get the benefit of earned income relief and the special earned income relief under the Surtax concessions given in the Finance Act, 1961. Therefore, they would have to be getting fairly large incomes—up to £5,000 a year—if their incomes were wholly earned or pensions before they 1448 would pay Surtax at all. The special earned income relief and the earned income relief combined would bring them down to £2,000, at which level no Surtax is payable except to the extent that they have investment income.
§ Mr. Houghton
I see the hon. Gentleman nodding his head. It is therefore true that this Amendment really means that it would give exemption from Surtax on that amount of the income over £2,000 which is investment income. He may intend that, and, indeed, he referred to the savings of people of this level of income. But the hon. Gentleman, although he has not been in our debates just recently, must know that we have, unfortunately, been rejected in our request for some relief of Purchase Tax on clothing, boots and shoes and mattresses.
§ Mr. Stevens
I think that the hon. Gentleman should change his oculist because clearly his eyesight is failing. I have heard every word of the debate on Purchase Tax this afternoon.
§ Mr. Houghton
The hon. Gentleman will not expect us in the same day that we have our own proposals to relieve people in the lowest income groups of Purchase Tax to agree to his proposal to give age exemption on this point. I shall not delay the House any longer. I think that I heard sufficient of the sentiments of my hon. Friends behind me, while the Economic Secretary was speaking, to chance my arm in declaring that we cannot support the hon. Gentleman's Amendment.
§ Amendment, by leave, withdrawn.