§ 'In section 15(1) of the Finance Act 1974 (maintenance payments up to£1,000 not to be investment income) for "£1,000" there shall be substituted "£1,500"2—[Mr. Pardoe.]
§ Brought up, and read the First time.
§ Mr. PardoeI beg to move, That the clause be read a Second time.
§ No. 17, in Clause 22, page 14, line 33, at end insert—
§ '(4) In Section 15 of the Finance Act 1974, subsection (1) shall have effect for the year 1977–78 and subsequent years with the omission of the words "the first£1,000 of".'
§ No. 18, in Clause 22, page 14, line 33, at end insert—
§ '(4) In Section 15 of the Finance Act 1974, subsection (1) shall have effect for the year 1977–78 and subsequent years with the substitution of "£2,000" for "£1,000".'
§ Mr. PardoeThis, again, goes back to arguments that we had in Committee about how maintenance payments should be treated. It is, in fact, a question of whether the maintenance payment is investment income or earned income. There is, of course, already an allowance of£1,000. Maintenance payments up to£1,000 are counted as earned income rather than investment income. I believe that many hon. Members felt that maintenance payments should not be counted as investment income at all, and certainly it seems that we ought to raise the limit. The clause seeks to raise the limit from£1,000 to£1,500.
§ Mrs. Lynda Chalker (Wallasey)It came somewhat as a surprise to see New Clause 74 on the Order Paper, for no such clause had been tabled during the Report stage. This matter did not just start in the Committee stage of this Finance Bill. It started way back in 1960 and has had a continuing history. In fact, we have just managed to have an anniversary tonight of our debate on the Report stage of the Finance Bill last year on the subject of the investment income surcharge on maintenance income.
While I welcome the clause moved by the hon. Member for Cornwall, North 963 (Mr. Pardoe), I am sorry that we are not hearing of Liberal support for our Amendment No. 17, which is being discussed with it, because hon. Members on both sides of the House—although maybe not those on the Government Front Bench—have said that they do not believe it right that maintenance income awarded through the courts should be regarded as investment income.
The time is late and I do not wish to detain the House, but I think we should put on record whal. the values are and why we feel so strengly that this housekeeping allowance, awarded through the courts to separated and divorced women, should not be subject to the investment income surcharge.
In answer to a parliamentary Question of mine on 7th April this year, the Financial Secretary told us that the value of the effective exemption of£2,500—the figure at which it now stands, without the clause—would be only£1,460 at April 1974 prices. When we look, therefore, at what the Government are giving this year in the Finance Bill, it does not stand comparison with the value of£2,000 at which it stood in April 1974.
We are worried that the Government have so far seemed thoroughly unwilling to realise what a travesty this is for women who have had a very difficult time. In answer to a Written Question on 19th May this year the Government told us that the total level of exemption—that is, the£1,500 plus the additional£1,500 which would be effected by the clause—would need to be£315 more to retain its real value. We shall obviously not succeed with that.
The words which are passed between the parties indicate to me that the Government have some sympathy with the clause moved by the hon. Member for Cornwall, North. We are glad to not this chink of light in the hitherto rather hard face of the Government against separated and divorced women, for the Government last year refused totally to see the wisdom of exempting this small number of persons from the investment income surcharge on their maintenance income.
I draw attention to the fact that it is only those settlements made through the courts which are so levied, not those which are made in easier circumstances by agreement between the parties outside the 964 courts. We are dealing with the worst possible situation.
In saying that we welcome the new clause, I give notice, certainly for all the women Members in the House who have spoken to me about this, that we do not intend to give up with the Treasury, and that we intend to see that maintenance income is relieved of the investment income surcharge as soon as possible.
We hope very much that the Government will accept the clause. We shall be presenting amendments such as No. 17, which is in my name and that of my hon. Friend the Member for Braintree (Mr. Newton), on the next possible occasion, to make sure that we do not have to go through this rigmarole on anniversary occasions.
§ Mr. John Moore (Croydon, Central)I hope that my hon. Friend will not exclude male colleagues from her statement.
§ Mrs. ChalkerI should in no way wish to exclude my hon. Friend the Member for Croydon, Central (Mr. Moore), who last year loyally supported an attempt to remove maintenance payments from investment income surcharge. We missed last year by only 21 votes. I know that there is more understanding on this matter by some of the hon. Ladies on the Government side of the House than there seems to have been in the past by hon. Gentlemen on the Government side.
It was in that light that I made that remark. All hon. Members should be able to see the sense of these arguments and want to get rid of this strange anomaly. It is discrimination, but, unfortunately, it does not fall within the scope of the Sex Discrimination Act, otherwise it would not be on the statute book.
§ Mrs. Helene Hayman (Welwyn and Hatfield)The hon. Member for Wallasey (Mrs. Chalker) is right in what she says about the classification of maintenance payments as investment income. But what she says is not new. My right hon. Friend the Member for Blackburn (Mrs. Castle), who wished to be here this evening, has been fighting this battle for some time.
It has been a cause of constant irritation to many thousands of divorced and separated women that maintenance payments—which they regard as earned, 965 since the money is earned by their husbands or ex-husbands—should suddenly become translated by some magical Treasury pen into investment income. It is also a source of financial hardship because of the level of investment income surcharge.
All hon. Members should welcome New Clause 74, which at least increases the exemption limits. However, the clause does not deal with the principle involved, which is dealt with in Amendment No. 17. The principle is one on which we all feel strongly; namely, that there is a lunacy of accounting here that brings in this classification.
Mr right hon. and hon. Friends on the Treasury Bench have much to think about in terms of the classification of various incomes and various dependencies, and perhaps when they take this matter on board they will also take on board the married man's allowance.
The money involved in maintenance payments is not investment income, and it is very foolish to call it that. A divorced woman who came to me with a problem about the surcharge said, "If this is investment income, I would like to know where the capital is, because I would like to realise it." The money comes out of earned income. In view of the figures involved, we are not dealing with the poorest of one-parent families, but when we talk of figures of£2,000 or£2,500 a year, for a divorced or separated woman with a large family and heavy commitments, we are not talking about vast sums of money.
The least that can be done is to accept New Clause 74. I hope that my right hon. and hon. Friends will look at the principle with more sympathy than they have done in the past.
§ Mr. NewtonAs the mover of related amendments which resulted in a tied vote in Committee, I, too, support every word spoken by my hon. Friend the Member for Wallasey (Mrs. Chalker) and the hon. Member for Welwyn and Hatfield (Mrs. Hayman). There is no logic, principle, or justice in regarding maintenance payments as investment income.
It should be placed on record that no Minister, either last year or this year has 966 attempted to present any argument that such payments should be regarded as investment income. All that we were told in Committee by the Financial Secretary was that the matter had been treated in the same way by the last Conservative Government and by Governments before that, as if that in itself was a justification. That is not an argument. No one has attempted to state why maintenance payments should be treated as investment income.
I think that many hon. Members on both sides of the House want the situation to be changed. I hope that the Government will look at the whole issue again before next year; otherwise it is clear that there is a majority in the House to defeat the Government on this issue. I hope that the clause will be treated sympathetically tonight.
§ 12 midnight
§ Mr. David HowellI begin by saying "What amazes me is that maintenance payments were ever considered as investment income." If those words sound familiar to the hon. Member for Cornwall, North (Mr. Pardoe)—
§ Mr. PardoeI thought they were familiar.
§ Mr. Howell—it is because they were the words that he used in Committee. He also said that he was amazed that maintenance payments should ever be considered as investment income. Therefore, it is surprising that he and his hon. Friends have lowered their sights. I do not oppose the clause, it is plainly better than the present situation. It is wrong that maintenance income and investment income—two completely different concepts—should have become tangled up.
We must continue to press the matter until we are able to disentangle these two completely different concepts which should have different applications of tax treatment. They are not even in the same world. On the one hand, we are dealing with divorced women awarded maintenance payments through the courts. They are often extremely modest payments and great difficulty is experienced in getting them updated in line with inflation. On the other hand, we are dealing with investment income and the separate issue whether investment income should carry the surcharge over and above income from earned sources.
967 We are puzzled why maintenance income should be regarded as investment income. The hon. Member for Cornwall, North is also puzzled. However, I hear through various vibrations that it is possible that the Government will accept the clause. That is a slight advance on the previous position. Treasury Ministers must face the reality put to them by my hon. Friend the Member for Wallasey (Mrs. Chalker) again and again, that maintenance payments should not be treated as investment income. I hope that gradually we shall reach a better understanding on the matter. The clause is a small step on the way.
§ Mr. Denzil DaviesHon Members on both sides of the House have argued strongly on the point of principle that income from maintenance payments is not investment income; they want it to be taxed as earned income. The trouble is that it is not earned income either. Whatever hon. Members may say, in the tax legislation since the time of Lloyd George a distinction has been drawn between earned and unearned income, or between earned income and investment income. Income falls into one or the other category. The difficulty is that it does not fall very well into either. The hon. Member for Wallasey (Mrs. Chalker) looks puzzled. There is nothing puzzling about it. She should study the tax books and find out about these matters. Mrs. Chalker: I was looking slightly surprised because to tell a housewife, whether she is still with her husband or separated from him, who is still doing the household chores that she has not earned the housekeeping money is a travesty of the truth. I do not think that the hon. Gentleman will go on and say that we should decide whether the housekeeping should be taxed. The maintenance allowance is a payment to maintain the family and household which the husband has left. Therefore, it cannot be regarded as investment income. It is truly earned, but it is the husband who should be pay-the tax. Tax is already paid on it as earned income. The investment income surcharge should not be put on top.
Mr. DaviesThe hon. Lady is getting closer to the point. never said that it was not earned. I said that it was not earned income for tax purposes. It is 968 income in the hands of whoever receives it, whether man or woman; this is not a sex discrimination point. The income is not income from a trade, employment or profession. The trouble is that it tends to fall in between. That is the difficulty which Governments have faced. We have had strong representations from my right hon. Friend the Member for Blackburn (Mrs. Castle), my hon. Friend the Member for Welwyn and Hatfield (Mrs. Hayman) and others of my hon. Friends. In the light of those representations and in the light of the obvious anomaly which exists, we are happy to accept the clause, which increases the limit to£1,500. It means, in effect, that the first£3,000—up to£60 a week—will now be exempt from the investment income surcharge.
§ Question put and agreed to.
§ Clause read a Second time, and added to the Bill.