§ Mr. Thornton
I beg to move, Amendment No. 49, Clause 25, in page 19, line 10, to leave out from "Acts" to the second "to".
This is a small, technical Amendment. The general purpose of the Clause is to apply the rules and procedures established in the National Insurance Acts for the collection of National Insurance contributions and the collection of Redundancy Fund contributions by treating the two contributions as one combined contribution.
Subsection (5), to which the Amendment relates, ensures that references in any other Act to National Insurance contributions shall also apply to Redundancy Fund contributions. There are, however, two exceptions: the National Insurance Acts, which have been dealt with earlier in the Clause, and the enactments relating to Income Tax. There is only one such enactment relating to Income Tax—Section 377(2) of the Income Tax Act, 1952. That is being repealed by the current Finance Bill and we therefore no longer need the words we propose to delete.
§ Mr. Ronald Bell
I understand that the necessary provision is being made in the present Finance Bill, and that the redundancy payments will be free of Income Tax in the hands of the recipients.
§ Mr. Bell
Does the hon. Gentleman mean that it is not provided for in the current Finance Bill but that the intention is to provide for it in the 1966 Finance Bill, and that, therefore, when this Measure becames an Act and comes into operation, as I understand is envisaged, at the end of the year, the initial payments will be subject to Income Tax until the 1966 Finance Bill is enacted? Surely, that cannot be the position.
§ Mr. Thornton
I am sorry that I cannot find the document, but I believe that this point was dealt with by my right hon. Friend the Chancellor of the Exchequer in reply to a Parliamentary Question about a week ago. That was in relation to the provisions of the Finance Bill covering the question of Income Tax relief in respect of redundancy payments.
§ Mr. Bell
Let us just be clear that this provision is in the current Finance Bill, and that, as a result, payments made when this Measure comes into operation will be exempt from Income Tax. The effect of the Government's Amendment is to strike out reference in this Clause to the Income Tax Acts. We have no objection to that, of course, provided that the matter is covered by the present Finance Bill, and is not being left to the Finance Bill of 1966.
§ Mr. Thornton
It is not covered by the present Finance Bill. In the Parliamentary Answer to which I have referred, my right hon. Friend said that it would be in the next Finance Bill, and would apply retrospectively, and that, in the meantime, Income Tax would not be payable on redundancy payments.
§ Mr. Godber
This rather disturbs us. We had not realised the position. I believed that we had received an assurance in Committee about this matter. It is extraordinary incompetence on the part of the Government if the point has not been covered. They had warning in Committee, and there was time for the Treasury to deal with it. I do not blame the Parliamentary Secretary, but it certainly was for the Government to see that it was dealt with. It is extraordinary that it should be left in this muddled way; that recipients will be liable for 1744 this tax payment but that in some underhand way they will not be asked to pay it, and there will be retrospective legislation. That is not the way to treat this House. It is entirely wrong. I protest against the way in which it has been done. It is a most unsatisfactory state of affairs.
§ Mr. Thornton
I have now found the document. On 14th July, my right hon. Friend the Chancellor of the Exchequer, in answer to a Written Question, said:In my Budget Speech I made it clear that my proposal to legislate on this point in the Finance Bill was dependent on the progress of the Redundancy Payments Bill. I have now decided that exempting legislation should be introduced next year. When the Redundancy Payments Bill becomes law I will make a further statement about the proposed exemption, so that employers can take account of it when making payments to which it will apply; it will be framed so as to cover all qualifying payments made after the provisions of the Redundancy Payments Bill come into force."—[OFFICIAL REPORT, 14th July, 1965; Vol. 716, c. 81.]
§ 11.30 p.m.
§ Mr. Godber
I am grateful to the Parliamentary Secretary for having explained the point, but that does not excuse the way in which the Government have handled this matter. They have had plenty of time to deal with it. I do not understand why it should have been dealt with in this way and I make my protest about the way in which it has been done.
§ Sir Harmar Nicholls
The whole House should support the protest. Although the Parliamentary Secretary says that the payment will not have to be made, the demand will have to go out. The Inland Revenue officers will have to do their duty. There is the stupid position that demands will have to be issued for payments which they will never see. Collection of taxes is a hard enough business in any case and this is bringing it into contempt. The terms of this Bill were known long before we had the present Finance Bill before us. I support the protest and hope that heed will be paid to it.
§ Mr. Ronald Bell
By leave of the House I speak again and I apologise for speaking so often. The Amendment seeks to leave out reference to Income Tax Acts. If the hon. Gentleman withdrew the Amendment, would the effect be to leave the exemption from the 1745 Income Tax Acts and thereby cover the payments for the current year? If so, this would be a sensible way of meeting the point and under the Finance Bill in 1966 the Chancellor of the day could deal with the matter by including a provision exactly to the same effect as the Amendment we are considering.
It is a little difficult to see why deliberately at this point a gap should be left to be covered by an administrative assurance. Why not leave the reference to Income Tax Acts in the Bill? What is the nature of the operation we are being asked to take part in at the moment?
§ Sir Edward Brown (Bath)
I want to take the argument a little further. I thought that the Parliamentary Secretary said that the employer would not deduct tax and the man concerned would receive the whole sum. Surely that is incorrect. The Income Tax collector must do his job. He must send in the demand and get the money. Surely a misstatement has been made. I hope that the Parliamentary Secretary will clear the matter up, because otherwise it will cause confusion.
§ Mr. David Mitchell (Basingstoke)
Am I right in thinking that no Chancellor of the Exchequer is in a position to commit his successor?
§ Mr. Thornton
I have full confidence in the Chancellor of the Exchequer being able to cope adequately with the situation. This Amendment does not relate to tax relief for redundancy payments. Section 377 of the Income Tax Act, 1952, allowed tax relief on the National Insurance element but not on the National Health or industrial injuries element of contributions paid by employers. We are advised that it is in order to anticipate the repeal of this provision in the Bill in this way.
§ Mr. Hale
My hon. Friend is perfectly right in saying that he has every confidence in the Chancellor of the Exchequer. So have I, but this is the High Court of Parliament and the Chancellor of the Exchequer is not the High Court of Parliament and he has no right to promise legislation. The most that he can do is to promise to present certain proposals to this House for consideration.
1746 I have at this moment on my desk a demand for £300 Income Tax. Her Majesty's Government have not thanked me for services rendered to a Royal Commission, but Her Majesty's agent has suggested that I had been spending too much of my time away from my office and the income earned while I was away from the office should be regarded as unearned income. I have not paid that 300 quid. I fancy that I am under a moral obligation to pay it, but at the moment the spirit has not moved me and I have not even taken the advice of my psychiatrist about this. The matter rests there.
I have suggested that if the tax authorities would be kind enough to try to enforce payment by means of committal, it would give me an opportunity to make a personal investigation of the problems of penal reform, as I have wanted to do for a considerable time, leaving the responsibility for any diminution in the Government's present majority to be dealt with by those persons on whose shoulders that burden has been very properly imposed.
I do not think that we can dismiss this question of future Income Tax liability as lightly as that. I will vote for the hon. Gentleman if the Amendment is pressed to a Division, but I do not think that it will be. This may have been a problem which had gone so far that it could not be dealt with, but we should not just be told we can rely on the Chancellor of the Exchequer to do this, that and the other.
We must face the fact that although the Budget was carried through by the Chancellor with very great ability, the Finance Bill was subjected to a few minor alterations in the course of its passage, which indicated that not even the Chancellor could anticipate its final form. While I was begging for time to discuss the urgent problems of byssinosis which affect my constituents, the Chancellor was chucking £5 million or £6 million over the table every five minutes while the Finance Bill was going through its concluding stages, perhaps very properly and perhaps very desirably, but it meant that certain alterations were made in his proposals and that that is a possibility which should be envisaged when we are trying to deal with any 1747 statement by any Chancellor of the Exchequer, however able and however honourable.
§ Mr. Peter Bessell (Bodmin)
I have great sympathy with the Parliamentary Secretary who is obviously in great difficulty over a muddle which has been created for him, and I certainly do not want to add to his burdens tonight. However, I am still not clear about what is to happen.
Does the statement by the Chancellor of the Exchequer which the hon. Gentleman read a few moments ago mean that anyone in receipt of redundancy payment will not have Income Tax deducted and that the employer will not be liable to remit tax to the collector of taxes and that the collector of taxes will not make a demand for it?
If that is the case, I cannot see how that is to be done within the terms of the Income Tax Acts. On the other hand, if it is to be a question simply of holding the payments in abeyance in order that the Chancellor of the Exchequer may fulfil the undertaking in his statement, surely that, too, will provide problems in as much as the employee who will have received the full payment, or the employer who has paid it, will in law be required to meet the demand if a demand is made against him, if the Chancellor is unable to fulfil his pledge for any reason beyond his control. This matter should be made clear even if the Parliamentary Secretary cannot now help the House further than he has.
§ Mr. Howe
The situation into which the Government have got themselves is a regrettable example of lack of foresight and co-ordination, but I wonder whether it is not possible that, with that higher degree of foresight which one comes to expect from Chancellors of the Exchequer drawn from the party now on this side of the House, the matter has already been dealt with, albeit inadvertently.
I think that it was in the Finance Act, 1958, that it was provided that there should be exempt from Income Tax the first £5,000 of what were known as "golden handshake" payments. This means that the first £5,000 of payments by way of compensation for loss of office, 1748 or damages in lieu of compensation, are in any event exempted, so that it may well be that the prescience of my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) has saved the Government, at least for the time being, although that does not excuse them for having failed to solve the problem for themselves.
§ Mr. Godber
With the leave of the House, may I add a few words? What my hon. and learned Friend the Member for Bebington (Mr. Howe) has just said is most interesting, and I hope very much that he is right. It would help to solve the problem for us. But it is clear that this is not the Government's view at present. They think that they have not provided for it. They have had opportunity to do so, and they should have provided for it. We on this side feel very strongly about what has suddenly emerged during the last few minutes, and we should have wished to divide the House on it. But I gathered from one of the last remarks of the Parliamentary Secretary that, in fact, this particular Amendment has nothing whatever to do with the point we are discussing, so that, presumably, the whole of this discussion is out of order, and we cannot press the matter.
§ Amendment agreed to.