New Clause. — (Repeal of s. 36 of 8 and 9 Geo. V, c. 15.)

Orders of the Day — Finance Bill. – in the House of Commons on 8th July 1924.

Alert me about debates like this

Section thirty-six of the Finance Act, 1918, is hereby repeated.—[Mr. Freeman Dunn.]

Photo of Mr John Dunn Mr John Dunn , Hemel Hempstead

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

The effect of this Clause would be to reduce the Stamp Duty from 2d. to 1d. This is a reform long overdue, the desirability of which is frequently lost sight of owing to our familiarity with the stamp as it exists to-day. The revenue from the Stamp Duty on cheques is £3,050,000. In reply to a question which I addressed to the Chancellor of the Exchequer, he informed me that if the Stamp Duty were reduced to 1d. the revenue would suffer to the extent of £1,500,000. I think he is unduly pessimistic, and leaves out of account the largely increased number of cheques that would be drawn if the duty were reduced. In 1902, when Sir Michael Hicks-Beach proposed to increase the Stamp Duty from 1d. to 2d., he was met by the urgent representations of the bankers that this should not be done, and he yielded to those representations. The arguments then, in the main, were based upon the fact, as the bankers showed, that the duty would militate against the keeping of small bank accounts.

Those arguments which were used in 1902 are as cogent to-day as they were then, indeed more so. The reduction of the duty would not only promote the keeping of small banking accounts among that section of the community which has not yet contracted the habit, but there is the further point in these days when we are striving to encourage trade in every possible way as to the real need of our banking resources being marshalled and utilised to the fullest possible extent. I have been at some trouble to get statistics in regard to the Stamp Duty, and I find that of the total number of cheques drawn no fewer than 55 per cent. were cheques under £10. If that fact be taken in conjunction with the total of the cheque clearances, it will be found that the drawer of small cheques has to pay a tax of 2s. 6d. per cent. as against one half pence per cent. paid by the drawer of large cheques. Therefore, this Stamp Duty presses too hardly upon the drawer of small cheques and is a discouragement to the keeping of small banking accounts. That argument in itself ought to be sufficient to justify the Chancellor of the Exchequer in accepting the new Clause.

I will mention another matter and that is the currency economy that would result from an extended use of cheques consequent upon the reduction of the Stamp Duty from 2d. to 1d. I am sure the Chancellor of the Exchequer will agree with me that in the cheque we have an instrument so valuable that it is the finest piece of mechanism in exchange that the ingenuity of man has ever devised. We in this country have brought it to a fine art. In America they have gone still further. They have realised how unwise it is in any way to hamper the development of the cheque, by sweeping away the tax on the cheque altogether. In all movements for industrial progress in the past, the development of banking and the economy of our legal tender have been inseparable features from our industrial progress. For that reason, especially at this juncture, it is desirable that we should encourage an extended use of cheques by reducing the Duty.

The restricted use of cheques due to this extra Stamp Duty is having the reverse result from that which our monetary policy should have as its aim. It is making for the demobilisation of currency and credit in this country in so far as it makes for the retention in the tills of our traders and in the pockets of our people of currency notes that ought to be in the coffers of the banks. If we remove or reduce this tax we shall drive this superfluous currency from the tills and pockets of the people into the coffers of the banks, where it can be used for the purpose of fructifying trade. In pre-War days, currency stood at £2 per head, while to-day it stands at from £6 to £7 per head, so that even if we allow for the cost of living having doubled we still have a surplus currency of £2 to£3 which is idle and unproductive in the tills and the pockets of our people. Therefore, I contend that, roughly, the estimate that has been made by that well-known authority Sir Drummond Fraser is the correct one, that there is at the present time something like £100,000,000 of currency notes in this country idle and unproductive in the tills and pockets of our people.

That has the further effect that the bank balances are being unduly depleted. If these notes were forced back into the banks they would be able to increase their loans from the fact that their balances would be increased. It would have the further desirable financial effect which the hon. Member for Farnham (Mr. A. M. Samuel) has at heart, in that it would make for the centralisation of our currency note issue into the hands of the Bank of England as against the Government. In so far as economy is effected we shall be strengthening the value of the £1 sterling, and that tendency would help towards a further desirable thing, namely, the return to the gold standard. I appeal to the Chancellor of the Exchequer to give us this concession which not only the bankers would welcome, but big business wholesale business, the retailers, the small trader and the private individual also desire. The London Chamber of Commerce have advocated it.

It would have the effect of encouraging the unknown many who up to the present time have not had banking accounts to open banking accounts if the Chancellor can see his way to make this concession. I ask him not to resist a suggestion which would have such widespread consequences to the community. The effect of the concession as far as he is concerned and as far as the revenue is concerned will be very small, but the importance to the trading community and to our currency will be great.

Photo of Mr Arthur Samuel Mr Arthur Samuel , Farnham

On a point of Order. I have a new Clause on Page 815 which goes rather wider than the Clause now moved. Will that Clause be called, or had I better speak on this Clause?

Photo of Sir Cyril Entwistle Sir Cyril Entwistle , Kingston upon Hull South West

The hon. Member's Clause later on the Paper has not been selected. Therefore, he had better speak on this Clause.

Photo of Mr Robert Barclay Mr Robert Barclay , Manchester Exchange

I wish to support this new Clause. One feels some diffidence in making any suggestion that might trench upon the resources of the Chancellor of the Exchequer in any way, but he indicated the other night that he might be willing to make some small concessions, although he pointed out that if he granted all the small concessions which were being asked it would undermine the whole basis of his Budget. I hope that this is one of the small concessions which he can see his way to make. When this matter was discussed in 1918, the proposal to increase the Duty from ld. to 2d. was made under the stress and emergency of war conditions at a time when the Chancellor of Exchequer was compelled to look around and to seek all possible means for increasing his revenue. It was recognised at that time that the effect of that increase would considerably retard the expansion of the use of cheques. Some hon. Members went so far as to say that if it had that effect it would be a good thing at that time, in as much as it would reduce the pressure on banking staffs which were so much depleted.

It is difficult to estimate what has been the effect of the increased duty as regards retarding the expansion of the use of cheques, but it is interesting to note the value per cheque in the various years since the tax was increased. I have the figures for the years 1917–18 up to the years 1923–24 of the number of cheques used in this country and the total clearinghouse returns for the corresponding years. In the year 1917–18, 306,000,000 cheques were used, and the total amount of the bankers' clearances for that year was £19,335,000,000, which gives an average per cheque of approximately£63. The corresponding figures for the succeeding years were £72 in 1918–19;£95, 1919–20 and 1920–21;£110, 1921–22;£108 in 1922–23, and£101 for last year. It may be argued that the increase in the value per cheque may be accounted for to a large extent by the increase in prices of commodities, but I think that the increase which is shown in these figures is in itself very significant.

What we have to try to gauge is what has been the effect in checking the increase in the use of cheques. My hon. Friend has referred to the value per cheque, and the percentage of the cheques drawn for amounts under £10. If you come to think of the fact that enormous numbers of these cheques are issued for amounts of £1 and under, and the percentage tax on the cheque of£1 is something like three-quarters per cent., one realises how onerous the tax is on small cheques. Anyone who makes inquiries will discover that there has been a growing tendency to pay small accounts by currency and notes, with the result that people carry an enormous amount of currency in their pockets My hon. Friend has referred to the fact that there is no stamp duty on cheques in the United States, and those who have lived in that country, I believe, all confirm the opinion that the use of the cheque is enormously more popular there than it is in this country. It would be too much to ask the Chancellor of the Exchequer to concede complete exemption, but I do think that he might seriously consider this concession. One hears a great deal in these days about the assistance which the Government might render to trade and industry. To my mind a great many people look for far too much in that respect from the Government. There are decided limitations to what the Government can do in this regard, but they can do a great deal in the way of clearing the channels of trade. I think that this is one of the small reforms which might be made, and which would be of considerable value in helping to clear the channels of trade, especially at a time like the present, when we want to do everything which we can to stimulate trade.

Photo of Mr Arthur Samuel Mr Arthur Samuel , Farnham

I have put down an Amendment which goes further than this Clause, and I must therefore support my hon. Friend opposite. I go so far as to ask that the Stamp Duty which is chargeable under the Stamp Act, 1891, should be extinguished. I do not ask for that because I want the 2d. to be saved to the taxpayer. I want it for a far wider purpose than that. I want to help us to get back to a free export market for gold. One of the steps towards that end, and I think I have explained it on many occasions, is the increased use of the cheque. The cheque was invented originally as a substitute for the wasteful bank-note. Cheque currency is one of the most wonderfully useful instruments of finance that have ever been invented, and the clog of a duty of ld. or 2d. on cheques operates towards preventing the extension of the use of cheque currency.

We have got in this country a great and popular use of cheque currency. France is trying to get it, and the United States and Germany are trying to get it. I do not agree with my hon. Friends opposite in saying that there is a greater cheque currency in the United States. They do not know how to handle a cheque currency in the United States in any way comparable to the way in which we handle it, and Germany, France and the United States would do anything they could to get their system of finance on a similar basis of cheque currency. While we have this splendid system, what we are now doing is, for this trumpery £3,000,000 a year, putting a clog on the use of cheques. People are disinclined, I do not know why, to draw small cheques now and spend the two pennies per cheque. They prefer to draw large cheques and to have a large number of notes immobile in a drawer or in their pockets. It is a stupid thing to have much money in hand liquid in this way. I avoid carrying much money about me. If I have it I spend it. It burns a hole in my pocket, and the man who draws more notes than he wants, just to save the 2d. on the cheque, will fritter it away or spend more than he requires.

The Chancellor of the Exchequer gets£3,000,000, and, because people will not use cheques on account of the 2d., he may get a few pounds for postal orders. But that is all the advantage which he gets. The disadvantage is that people carry too many notes in their pockets while, if they left some of them in the bank, and drew out their payments by cheque, as they were wanted, those same notes would be available to be lent, and if they were left in larger volume in the banks there would be a larger amount of money to lend, and money would be cheaper. There are in issue now £290,000,000 sterling currency notes, and, if you add the Bank of England notes, you have an issue of something like £407,000,000. If you could induce people to take out fewer notes and, instead, use cheques, by taking the 2d. stamps off, you would probably leave a hundred millions more in the coffers of the various banks, and, in the result, you would lose £2,000,000 or £3,000,000 stamp duty, but you would probably, owing to the banks having more money to lend, bring down the price of money and be able to borrow on your Treasury Bills more cheaply, and very likely you might get back your£3,000,000 quite easily by the smaller interest you would have to pay for the Treasury Bills.

But I would go a little further. The more currency notes that you have in existence, because people draw a larger volume of currency notes to avoid paying the 2d. on cheques, the larger amount of gold cover you have got to have. That is a block on our road towards a free export market in gold. If you have not to keep so much gold to cover these notes, because you are using cheques, you have gone a step towards that very desirable goal. If you do not use notes but cheques, the cheques will be drawn by a man on his own credit account, and they provide their own fiduciary cover. I am not pleading that this duty of 2d. should be taken off cheques because I want to save the taxpayers' pockets. It is because I want to take away what is a stumbling block on our road towards a free export market in gold, that I think that the Chancellor of the Exchequer ought to look at the matter from the wider point of view, rather than from the point of view of revenue.

Photo of Mr Philip Snowden Mr Philip Snowden , Colne Valley

I never dreamt, until I heard the speech of the hon. Gentleman who moved this Amendment, that in the difference between 2d. and ld. on cheques we had the solution of all our economic financial and trade difficulties, and that the reduction which is proposed in this Amendment from 2d. to 1d. was going to increase bank deposits, going to increase the lending power of the banks, and going to rectify the exchange between this country and the United States of America.

Photo of Mr Philip Snowden Mr Philip Snowden , Colne Valley

I do not think that I misrepresent the hon. Gentleman. I am sure that every Member of the Committee who heard the speeches will agree that I am not doing so. [HON. MEMBERS: "No!"] The hon. Member referred to the effect which it would have on foreign exchange. I was in the House of Commons when the duty was raised from ld. to 2d. and I remember speaking against it, but there is all the difference in the world between opposing a proposition and dealing with a matter which is already an established fact. It cannot be denied that the gloomy anticipations, which were suggested in 1918 when the duty was raised, as to a falling off in the use of cheques, have not been realised. The figures show that the increase in the use of cheques, since the duty was increased, has been in no way affected. Since that date there has been an annual increase in the number of cheques. It is true that in one year, 1920, the figure rose very high, and that in the slump which followed there has been a decline on the figure for that year, but, still, in the last three years there has been an increase each year in the number of cheques issued, and the number for 1923–24 was 367,000,000 in the 12 months. In the year before the duty was raised the number was 298,000,000. There was, therefore, an increase in the number of cheques used, notwithstanding the increase in the duty, of 68,000,000.

7.0 P.M.

I do not think that those figures tend to support the argument that has been advanced in support of the reduction of the present duty of 2d. I was reminded of the Debates which took place six years ago, when the proposed increase was submitted 0to the House of Commons, by the arguments used by the hon. Member for Farnham (Mr. A. M. Samuel) that there was a tendency to draw cheques for larger sums on account of the increase in the duty and to keep the money in people's pockets, but I think that the experience is that, after a falling off in the use of cheques on the part of some people, those people soon returned to the old practice, and they continue to draw cheques with a 2d. stamp just as they have drawn them with the ld. stamp. The hon. Member argued that it would not cost very much, as the amount lost by the reduction would be met by the enormous increase in the number of cheques used, and, therefore, we should get on the penny practically the same revenue as we now get on the twopence. There are not in our experience any facts to justify such an optimistic anticipation. There is not the shadow of doubt that the revenue would suffer by the reduction of duty in proportion to the amount by which the duty would be reduced. The yield last year of cheques was just under £3,000,000. I estimated in my Budget this year that the yield this year would be£3,050,000. If I accepted this Amendment it would not operate in the whole year, but I have no doubt that in a full year I would have to sacrifice—and I am making some allowance for a possible increase in the number of cheques—revenues of not less than£1,250,000 and possibly£1,500,000. For those reasons I regret that I cannot accept the Amendment.

Photo of Commander Charles Burney Commander Charles Burney , Uxbridge

I do not think that I quite follow the Chancellor of the Exchequer, because the hon. Member who brought this matter forward put it on the basis that it would increase the number of cheques in use, and reduce the amount of money which people would keep in their own houses, and that, as a result of this, we should get an increase in the amount of money available for lending. Following that point to its natural conclusion, the first thing that would happen would be that we should get increased currency in circulation. That would put up the velocity of the circulation by increasing the purchasing power of persons, due to the disbursement of that money on enterprises. The further result of that would be that the price level of this country would be somewhat put up because of the increased velocity of circulation. But by putting up the price level in this country we shall damage, in a sense, our exchange with New York.

That would further mean that we should have to pay more sterling to New York for dollars owing to the fact that the price level of the country had been raised relatively to New York, and consequently our payments of debt to America would be increased upon a sterling basis. So far as the burden of this extra amount of sterling to be gathered in taxes is concerned, the result would be immaterial, as the revenue upon a given basis of taxation would increase, due to the increase of price level in the country; and if I follow the Mover of this Amendment in his remarks, the point which he is endeavouring to make is not that the Chancellor of the Exchequer would actually lose on this tax. Of course, he would lose money on this tax if he removes the duty altogether, but the argument is that by removing the duty altogether he would benefit trade to a still greater extent and thereby increase the revenue which he would obtain from this better basis of taxation. It is for that reason that I think that it would be worth while to make the experiment, because I do not think that the country would lose. I think it probable that it would make a profit of £6,000,000 or more, and it is because I think that that is a speculation which the Chancellor of the Exchequer would be fully entitled to make that I support the Amendment.

Photo of Mr Fredric Wise Mr Fredric Wise , Ilford

I rise to ask the Chancellor of the Exchequer as to one matter. I cannot help thinking that, if there were any alteration made, it would affect the fiduciary issue more than any of the other issues. In regard to the Bank of England the fiduciary issue is now about £246,000,000, which is very near the maximum figure fixed by the Cunliffe Committee. If you had more money in the banks I think that you would not be so near the limit which was fixed by the Cunliffe Committee. I only put that technical point before the Committee in this way, that it might possibly assist in bringing more depositors to the bank, and in that way with a cheaper cheque and more deposits we should not be so near the limit of the fiduciary issue which was suggested by the Cunliffe Committee.

Photo of Mr Philip Snowden Mr Philip Snowden , Colne Valley

I think that I have indirectly answered that question by saying that I do not agree that the reduction of the duty would increase the amount in the bank in the manner described.

Photo of Mr Arthur Samuel Mr Arthur Samuel , Farnham

Does the right hon. Gentleman lay it down that it is good for a country, or bad for a country, to have a less amount of currency notes or a greater amount of currency notes?

Photo of Mr Philip Snowden Mr Philip Snowden , Colne Valley

I am not going to be involved in a discussion on that matter on this Amendment.

Photo of Mr John Dunn Mr John Dunn , Hemel Hempstead

After the statement of the Chancellor of the Exchequer I beg to ask leave to withdraw the Amendment.

HON. MEMBERS:

No!

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 101; Noes, 298.

Division No. 134.]AYES.[6.7 p.m.
Alstead, R.Gardner, J. P. (Hammersmith, North)Pease, William Edwin
Apsley, LordGaunt, Rear-Admiral Sir Guy R.Penny, Frederick George
Atholl Duchess ofGavan-Duffy, ThomasPercy, Lord Eustace (Hastings)
Balfour, George (Hampstead)Gibbs, Col. Rt. Hon. George AbrahamPerkins, Colonel E. K.
Banner, Sir John S. Harmood-Greene, W. P. CrawfordPlelou, D. P.
Barnston, Major Sir HarryGrenfell, Edward C. (City of London)Pliditch, Sir Philip
Beckett, Sir GervaseGretton, Colonel JohnPownall, Lieut.-Colonel Assheton
Benn, Sir A. S. (Plymouth, Drake)Guinness, Lieut.-Col. Rt. Hon. W. E.Pringle, W. M. R.
Berry, Sir GeorgeHacking, Captain Douglas H.Raine, W.
Blades, Sir George RowlandHarland, A.Rankin, James S.
Blundell, F. N.Harney, E. A.Rawlinson, Rt. Hon. John Fredk. Peel
Bourne, Robert CroftHartington, Marquess ofRemnant, Sir James
Bowater, Sir T. VansittartHayday, ArthurRhys, Hon. C. A. U.
Bowerman, Rt. Hon, Charles W.Hennessy, Major J. R. G.Richardson, Lt.-Col, Sir P.(Chertsey)
Bowyer, Capt. G. E. W.Herbert, Dennis (Hertford, Watford)Ropner, Major L.
Bridgeman, Rt. Hon. William CliveHerbert, Capt. Sidney (Scarborough)Roundell, Colonel R. F.
Buckingham, Sir H.Hoffman, P. C.Samuel, A. M. (Surrey, Farnham)
Bull, Rt. Hon. Sir William JamesHogg, Rt. Hon. Sir D. (St. Marylebone)Sandeman, A. Stewart
Bullock, Captain M.Hohler, Sir Gerald FitzroySassoon, Sir Philip Albert Gustave D.
Burman, J. B.Hood, Sir JosephSavery, S. S
Burney, Lieut.-Com. Charles D.Hope, Rt. Hon. J. F. (Sheffield, C.)Sheffield, Sir Berkeley
Butler, Sir GeoffreyHore-Belisha, Major LeslieShepperson, E. W.
Butt, Sir AlfredHoward, Hn. D. (Cumberland, North)Somerville, Daniel (Barrow-in-Furness)
Caine, Gordon HallHume-Williams, Sir W. EllisSpencer, H. H. (Bradford, South)
Cautley, Sir Henry S.Huntingfield, LordSpender-Clay, Lieut.-Colonel H. H.
Cayzer, Sir C. (Chester, City)Inskip, Sir Thomas Walker H.Stanley, Lord
Cayzer, Maj. Sir Herbt.R. (Prtsmth.S.)Jackson, Lieut.-Colonel Hon. F. S.Steel, Samuel Strang
Cecil. Rt. Hon. Lord H. (Ox. Univ.)James, Lieut.-Colonel Hon. CuthbertStuart, Hon. J. (Moray and Nairn)
Chamberlain, Rt. Hn. J. A. (Birm. W.)Jenkins, W. A. (Brecon and Radnor)Sueter, Rear-Admiral Murray Fraser
Chilcott, Sir WardenJowitt, W. A. (The Hartlepools)Sutcliffe, T.
Clarry, Reginald GeorgeKindersley, Major G. M.Thornton, Maxwell R.
Clayton, G. C.King. Captain Henry DouglasTitchfield. Major the Marquess of
Cohen, Major J. BrunelLamb, J. Q.Turner, Ben
Colfox, Major Wm. PhillipsLane-Fox, George R.Turton, Edmund Russborough
Cope, Major WilliamLumley, L. R.Vaughan-Morgan, Col. K. P.
Crooke, J. Smedley (Deritend)Macdonald, Sir Murdoch (Inverness)Waddington, R.
Cunliffe, Joseph HerbertMacDonald, R.Ward, Lt.-Col. A.L.(Kingston-on-Hull)
Dalkeith, Earl ofMacnamara, Rt. Hon. Dr. T. J.Warrender, Sir Victor
Davidson, Major-General Sir J. H.McNeill, Rt. Hon. Ronald JohnWatson, Sir F. (Pudsey and Otley)
Davies, Alfred Thomas (Lincoln)Macpherson. Rt. Hon. James I.Weston, John Wakefield
Davies, Sir Thomas (Cirencester)Maltland, Sir Arthur D. Steel-Wilson, Sir C. H. (Leeds, Central)
Davison, Sir W. H. (Kensington, S.)Makins, Brigadier-General E.Windsor-Clive, Lieut.-Colonel George
Dawson, Sir PhilipMartin, F. (Aberd'n & Kincardine, E.)Winterton, Rt. Hon. Earl
Dixey, A. C.Mason, Lieut.-Col. Glyn K.Wise, Sir Fredric
Dunnico, H.Meller, R. J.Wood, Major Rt. Hon. Edward F. L.
Eden, Captain AnthonyMills, J. E.Worthington-Evans, Rt. Hon. Sir L.
Eiveden, ViscountMilne, J. S. WardlawWragg, Herbert
Emlyn-Jones, J. E. (Dorset, N.)Mitchell, Sir W. Lane (Streatham)Yate, Colonel Sir Charles Edward
Erskine, James Malcolm MonteithMorden, Col. W. GrantYerburgh, Major Robert D. T.
Eyres-Monsell, Com. Rt. Hon. B. M.Morrison-Bell, Major A. C. (Honiton)
Falls, Major Sir Bertram GodfrayNall, Lieut.-Colonel Sir JosephTELLERS FOR THE AYES.—
Ferguson, H.Newton, Sir D. G. C. (Cambridge)Mr. Hannon and Mr. Samuel
FitzRoy, Capt. Rt. Hon. Edward A.Ormsby-Gore, Hon. WilliamRoberts.
Forestler-Walker, L.Pattinson, S. (Horncastle)
NOES.
Ackroyd, T. R.Bondfield, MargaretCollins, Sir Godfrey (Greenock)
Adamson, Rt. Hon, WilliamBonwick, A.Compton, Joseph
Adamson, W. M. (Staff., Cannock)Bramsdon, Sir ThomasConway, Sir W. Martin
Alexander, A. V. (Sheffield, Hillsbro')Bromfield, WilliamCove, W. G.
Allen, R. Wilberforce (Leicester, S.)Brown, A. E. (Warwick, Rugby)Cowan, D. M. (Scottish Universities)
Ammon, Charles GeorgeBrown, James (Ayr and Bute)Crittall, V. G.
Aske, Sir Robert WilliamBuchanan, G.Croft, Brigadier-General Sir H.
Attlee, Major Clement R.Buckle, J.Darbishire, C. W.
Ayles, W. H.Burnie, Major J. (Bootle)Davies, David (Montgomery)
Baker, WalterChapple, Dr. William A.Davies, Ellis (Denbigh, Denbigh)
Banton, G.Charleton, H. C.Davies, Rhys John (Westhoughton)
Barclay, R. NotonChurch, Major A. G.Dickle, Captain J. P.
Barnes, A.Clarke, A.Dickson, T.
Barrie, Sir Charles Coupar (Banff)Climle, R.Dodds, S. R.
Batey, JosephCluse, W. S.Duckworth, John
Benn, Captain Wedgwood (Leith)Clynes, Rt. Hon. John R.Dukes, C.
Duncan, C.Lawson, John JamesRomeril, H. G.
Dunn, J. FreemanLeach, W.Rose, Frank H.
Edwards, John H. (Accrington)Lee, F.Royle, C.
Egan, W. H.Lessing, E.Scurr, John
England, Colonel A.Linfield, F. C.Seely, H. M. (Norfolk, Eastern)
Falconer, J.Livingstone, A. M.Sexton, James
Fletcher, Lieut.-Com. R. T. H.Loverseed, J. F.Shaw, Rt. Hon. Thomas (Preston)
Foot, IsaacLowth, T.Sherwood, George Henry
Franklin, L. B.Lunn, WilliamShort, Alfred (Wednesbury)
Gardner, B. W. (West Ham, Upton)McCrae, Sir GeorgeSimms, Dr. John M. (Co. Down)
Gates, PercyMcEntee, V. L.Simon, E. D. (Manchester, Withington)
George, Major G. L. (Pembroke)Macfadyen, E.Simpson, J. Hope
Gillett, George M.Mackinder, W.Sinclair, Major Sir A. (Caithness)
Gosling, HarryMaclean, Nell (Glasgow, Govan)Smith, Ben (Bermondsey, Rotherhithe)
Gould, Frederick (Somerset, Frome)Mansel, Sir CourtenaySmith, W. R (Norwich)
Graham, W. (Edinburgh, Central)March, S.Snell, Harry
Greenwood, A. (Nelson and Colne)Marks, Sir George CroydonSnowden, Rt. Hon. Philip
Grenfell, D. R. (Glamorgan)Marley, JamesSpears, Brigadier-General E. L.
Griffiths, T. (Monmouth, Pontypool)Martin, W. H. (Dumbarton)Spence, R.
Groves, T.Maxton, JamesSpero, Dr. G. E.
Grundy, T. W.Middleton, G.Spoor, B. G.
Guest, J. (York, W. R., Hemsworth)Millar, J. D.Stamford, T. W.
Hall, G. H. (Merthyr Tydvil)Mond, H.Stephen, Campbell
Hamilton, Sir R. (Orkney & Shetland)Montague, FrederickStewart, J. (St. Rollox)
Hardie, George D.Morel, E. D.Sturrock, J. Leng
Harvey, T. E. (Dewsbury)Morris, R. H.Thomas, Rt. Hon. James H. (Derby)
Hastings, Sir PatrickMorrison, Herbert (Hackney, South)Thomas, Sir Robert John (Anglesey)
Hastings, Somerville (Reading)Morse, W. E.Thompson, Luke (Sunderland)
Haycock, A. W.Mosley, OswaldThompson, Piers G. (Torquay)
Healy, CahirMoulton, Major FletcherThomson, Trevelyan (Middlesbro. W.)
Hemmerde, E. GMuir, John W.Thorne, W. (West Ham, Pialstow)
Henderson, Rt. Hon. A. (Burnley)Muir, Ramsay (Rochdale)Thurtle, E.
Henderson, T. (Glasgow)Murray, RobertTout, W. J.
Henderson, W. W. (Middlesex, Enfld.)Murrell, FrankTrevelyan, Rt. Hon. C. P.
Hillary, A. E.Naylor, T. E.Viant, S. P.
Hindle, F.Newman, Sir R. H. S. D. L. (Exeter)Vivian, H.
Hirst, G. H.Nichol, RobertWallhead, Richard C.
Hobhouse, A. L.Nixon, H.Watson, W. M. (Duntermline)
Howard, Hon. G. (Bedford, Luton)Owen, Major G.Watts-Morgan, Lt.-Col. D. (Rhondda)
Hudson, J. H.Paling, W.Webb, Rt. Hon. Sidney
Isaacs, G. A.Parkinson, John Allen (Wigan)Westwood, J.
Jackson, R. F. (Ioswich)Perry, S. F.Wheatley, Rt. Hon. J.
Jenkins, W. (Glamorgan, Neath)Pethick-Lawrence, F. W.Whiteley, W.
Jewson, DorotheaPhillipps, VivianWignall, James
John, William (Rhondda, West)Pilkington, R. R.Williams, David (Swansea, E.)
Johnston, Thomas (Stirling)Ponsonby, ArthurWilliams, Col. P. (Middlesbrough, E.)
Jones, Henry Haydn (Merioneth)Potts, John S.Williams, Lt.-Col. T.S.B. (Kennington)
Jones, Rt. Hon. Leif (Camborne)Purcell, A. A.Williams, Maj. A.S. (Kent, Sevenoaks)
Jones, Morgan (Caerphilly)Raffety, F. W.Williams, T. (York, Don Valley)
Jones, T. I. Mardy (Pontypridd)Ramage, Captain Cecl BeresfordWillison, H.
Jowett, Rt. Hon. F. W. (Bradford, E.)Raynes, W. R.Wilson, C. H (Shefield, Attercliffe)
Kay, Sir R. NewbaldRea, W. RussellWilson, R. J. (Jarrow)
Keens, T.Rees, Sir BeddoeWindsor, Walter
Kennedy, T.Rees, Capt. J. T. (Devon, Barnstaple)Wintringham, Margaret
Kenyon, BarnetRichards, R.Wood, Major M. M. (Aberdeen, C.)
Lansbury, GeorgeRichardson, R. (Houghton-le-Spring)Wright, W.
Laverack, F. J.Ritson, J.Young, Andrew (Glasgow, Partick)
Law, A.Robertson, J. (Lanark, Bothwell)
Lawernce, Susan (East Ham, North)Robinson, S. W. (Essex, Chelmsford)TELLERS FOR THE NOES.—
Mr. Frederick Hall and Mr. Warne.
Division No. 135.]AYES.[7.10 p.m.
Agg-Gardner, Rt. Hon. Sir James T.England, Colonel A.Nicholson, William G. (Petersfield)
Apsley, LordErskine, James Malcolm MonteithOrmsby-Gore, Hon. William
Balfour, George (Hampstead)Falle, Major Sir Bertam Godtray,Penny, Frederick George
Banner, Sir John S. Harmood-Ferguson, H.Perkins, Colonel E. K.
Barclay, R. NotonFranklin, L. B.Peering, William George
Barnston, Major Sir HarryGaunt, Rear-Admiral Sir Guy R.Pielou, D. P.
Becker, HarryHacking, Captain Douglas H.Raine, W.
Beckett, Sir GervaseHannon, Patrick Joseph HenryReid, D. D. (County Down)
Berry, Sir GeorgeHarland, A.Remnant, Sir James
Bird, Sir R. B. (Wolverhampton, W.)Harmsworth, Hon. E. C. (Kent)Richardson, Lt.-Col. Sr P. (Chertsey)
Blades, Sir George RowlandHartington, Marquess ofRoberts, Samuel (Hereford, Hereford)
Bourne, Robert CroftHarvey, C.M.B. (Aberd'n & Kincardne)Sandeman, A. Stewart
Bowyer, Capt. G. E. W.Henn, Sir Sydney H.Savery, S. S.
Buckingham, Sir H.Herbert, Dennis (Hertford, Watford)Scott, Sir Leslie (Liverp'l, Exchange)
Bull, Rt. Hon. Sir William JamesHillary, A. E.Sheffield, Sir Berkeley
Bullock, Captain M.Hood, Sir JosephSomerville, A. A. (Windsor)
Burman, J. B.Howard, Hn. D. (Cumberland, Northn.)Somerville, Daniel (Barrow-in-Furness)
Butt, Sir AlfredHoward-Bury, Lieut.-Col. C. K.Spender-Clay, Lieut.-Colonel H. H.
Caine, Gordon HallHuntingfield, LordStuart, Hon. J. (Moray and Nairn)
Cautley, Sir Henry S.Jackson, Lieut.-Colonel Hon. F. S.Sutcliffe, T.
Cayzer, Maj. Sir Herbt.R.(Prtsmth. S.)James, Lieut.-Colonel Hon. CuthbertTurton, Edmund Russborough
Chilcott, Sir WardenJenkins, W. A. (Brecon and Radnor)Waddington, R.
Clarry, Reginald GeorgeKedward, R. M.Ward, Lt.-Col. A. L. (Kingston-on-Hull)
Cohen, Major J. BrunelLumley, L. R.Warrender, Sir Victor
Craik, Rt. Hon. Sir HenryMacDonald, R.Watson, Sir F. (Pudsey and Otley)
Crooke, J. Smedley (Deritend)Marriott, Sir J. A. R.Weston, John Wakefield
Cunliffe, Joseph HerbertMason, Lieut.-Col. Glyn K.Wilson, Sir C. H. (Leeds, Central)
Curzon, Captain ViscountMeller, R. J.Wood, Sir H. K. (Woolwich, West)
Davies, Alfred Thomas (Lincoln)Milne, J. S. WardlawWragg, Herbert
Davies, Sir Thomas (Cirencester)Mitchell, W. F. (Saffron Walden)Yate, Colonel Sir Charles Edward
Dawson, Sir PhilipMitchell, Sir W. Lane (Streatham)Yelburgh, Major Robert D. T.
Dixey, A. C.Moore-Brabazon, Lieut.-Col. J. T. C.
Duckworth. JohnMorden, Colonel Walter GrantTELLERS FOR THE AYES.—
Dunn, J. FreemanNall, Lieut.-Colonel Sir JosephMr. A. M. Samuel and Commander
Elveden, ViscountNicholson, O. (Westminister)Burney.
NOES.
Ackroyd, T. R.Climie, R.Gosling, Harry
Adamson, Rt. Hon. WilliamCluse, W. S.Gould, Frederick (Somerset, Frome)
Adamson, W. M. (Staff., Cannock)Cobb, Sir CyrilGraham, W. (Edinburgh, Central)
Alden, PercyColfox, Major Wm. PhillipsGreene, W. P. Crawford
Alexander. A. V. (Sheffield, Hillsbro')Collins, Sir Godfrey (Greenock)Greenwood, A. (Nelson and Colne)
Allen, R. Wilberforce (Leicester, S.)Collins, Patrick (Walsall)Grenfell, D. R. (Glamorgan)
Alstead, R.Compton, JosephGrenfell, Edward C. (City of London)
Ammon, Charles GeorgeComyns-Carr, A. S.Griffiths, T. (Monmouth, Pontypool)
Aske, Sir Robert WilliamCope, Major WilliamGroves, T.
Atholl, Duchess ofCove, W. G.Grundy, T. W.
Attlee, Major Clement R.Cowan, D. M. (Scottish Universities)Guest, J. (York, Hemsworth)
Ayles, W. H.Crittall, V. G.Gulnness, Lieut.-Col. Hon. W. E.
Baker, WalterDalkeith, Earl ofHall, G. H. (Merthyr Tydvil)
Banton, G.Darbishire, C. W.Harbord, Arthur
Barnes, A.Davidson, Major-General Sir J. H.Hardie, George D.
Barrie, Sir Charles Coupar (Banff)Davies, David (Montgomery)Harney, E. A.
Batey, JosephDavies, Rhys John (Westhoughton)Harvey, T. E. (Dewsbury)
Benn, Captain Wedgwood (Leith)Davison, J. E. (Smethwick)Hastings, Sir Patrick
Bentinck, Lord Henry Cavendish-Deans, Richard StorryHastings, Somerville (Reading)
Birchall, Major J. DearmanDickie, Captain J. P.Haycock, A. W.
Blundell, F. N.Dickson, T.Hayday, Arthur
Bondfield, MargaretDodds, S. R.Hemmerde, E. G.
Bonwick, A.Dukes, C.Henderson, Rt. Hon. A. (Burnley)
Bowerman, Rt. Hon. Charles W.Duncan, C.Henderson, A. (Cardiff, South)
Bramsdon, Sir ThomasDunnico, H.Henderson, T. (Glasgow)
Briant, FrankEden, Captain AnthonyHenderson, W. W. (Middlesex, Enfld.)
Broad, F. A.Edmondson, Major A. J.Hennessy, Major J. R. G.
Bromfield, WilliamEdwards, G. (Norfolk, Southern)Hindle, F.
Brown, A. E. (Warwick, Rugby)Egan, W. H.Hirst, G. H.
Brown, James (Ayr and Bute)Emlyn-Jones, J. E. (Dorset, N.)Hobhouse, A. L.
Buchanan, G.Eyres-Monsell, Com. Rt. Hon. B. M.Hodge, Lieut.-Col. J. P. (Preston)
Buckle, J.Falconer, J.Hoffman, P. C.
Burnie, Major J. (Bootle)Fisher, Rt. Hon. Herbert A. L.Hogg, Rt. Hon. Sir D. (St. Marylebone)
Butler, Sir GeoffreyFitzRoy, Capt. Rt. Hon. Edward A.Hohler, Sir Gerald Fitzroy
Cayzer, Sir C. (Chester, City)Fletcher, Lieut.-Com. R. T. H.Hope, rt. Hon. J. F. (Sheffield, C.)
Cecil, Rt. Hon. Sir Evelyn (Aston)Foot, IsaacHoward, Hon. G. (Bedford, Luton)
Cecil, Rt. Hon. Lord H. (Ox. Univ.)Gardner, B. W. (West Ham, Upton)Hudson, J. H.
Chamberlain, Rt. Hn. J. A. (Birm. W.)Gardner, J. P. (Hammersmith, North)Hughes Collingwood
Chamberlain, Rt. Hon. N. (Ladywood)Gates, PercyIsaacs, G. A.
Chapman, Sir S.Gavan-Duffy, ThomasJackson, R. F. (Ipswich)
Chapple, Dr. William A.George, Major G. L. (Pembroke)Jenkins, W. (Glamorgan, Neath)
Charleton, H. C.Gibbins, JosephJewson, Dorothea
Clarke, A.Gilbert, James DanielJohn, William (Rhondda, West)
Clayton, G. C.Gillett, George M.Johnston, Thomas (Stirling)
Jones, Henry Haydn (Merioneth)Murrell, FrankStanley, Lord
Jones, Rt. Hon. Leif (Camborne)Naylor, T. E.Starmer, Sir Charles
Jones, Morgan (Caerphilly)Newman, Sir R. H. S. D. L. (Exeter)Steel, Samuel Strang
Jones, T. I. Mardy (Pontypridd)Nichol, RobertStephen, Campbell
Jowett, Rt. Hon. F. W. (Bradford,E.)Nield, Rt. Hon. Sir HerbertStewart, J. (St. Rollox)
Jowitt, W. A. (The Hartlepools)Nixon, H.Sunlight, J.
Kay, Sir R. NewbaldO'Grady, Captain JamesTattersall, J. L.
Keens, T.Owen, Major G.Terrington, Lady
Kennedy, T.Paling, W.Thomas, Rt. Hon. James H. (Derby)
Kenyon, BarnetPalmer, E. T.Thomas, Sir Robert John (Anglesey)
King, Capt. Henry DouglasPattinson, S. (Horncastle)Thompson, Piers G. (Torquay)
Lansbury, GeorgePerry, S. F.Thomson, F. C. (Aberdeen, South)
Laverack, F. J.Pethick-Lawrence, F. W.Thomson, Trevelyan (Middlesbro, W.)
Law, A.Philipson, MabelThomson, Sir W.Mitchell-(Croydon,S.)
Lawrence, Susan (East Ham, North)Phillipps, VivianThorne, G. R. (Wolverhampton, E.)
Lawson, John JamesPilkington, R. R.Thorne, W. (West Ham, Plaistow)
Leach, W.Potts, John S.Thornton, Maxwell R.
Lee, F.Pownall, Lieut.-Colonel AsshetonThurtle, E.
Lessing, E.Purcell, A. A.Titchfield, Major the Marquess of.
Lindley, F. W.Raffety, F. W.Tout, W. J.
Linfield, F. C.Ramage, Captain Cecil BeresfordTrevelyan, Rt. Hon. C. P.
Livingstone, A. M.Raynes, W. R.Turner, Ben
Loverseed, J. F.Rea, W. RussellVaughan-Morgan, Col K. P.
Lowth, T.Rees, Sir BeddoeViant, S. P.
Lunn, WilliamRees, Capt. J. T. (Devon, Barnstaple)Vivian, H.
McCrae, Sir GeorgeRhys, Hon. C. A. U.Wallhead, Richard C.
McEntee, V. L.Richards, R.Ward, Col. J. (Stoke-upon-Trent)
Macfadyen, E.Richardson, R. (Houghton-le-Spring)Warne, G. H.
Mackinder, W.Ritson, J.Watson, W. M. (Dunfermline)
Maclean, Neil (Glasgow, Govan)Robertson, J. (Lanark, Bothwell)Watts-Morgan, Lt.-Col. D. (Rhondda)
Macnaghten, Hon. Sir MalcolmRobertson, T. A.Webb, Rt. Hon. Sidney
Macnamara, Rt. Hon. Dr. T. J.Robinson, S. W. (Essex, Chelmsford)Wells, S. R.
Maltland, Sir Arthur D. Steel-Robinson, Sir T. (Lancs, Stretford)Westwood, J.
Makins, Brigadier-General E.Romeril, H. G.Wheatley, Rt. Hon. J.
Mansel, Sir CourtenayRopner, Major L.Whiteley, W.
March, S.Rose, Frank H.Wignall, James
Marks, Sir George CroydonRoundell, Colonel R. F.Williams, A. (York, W. R., Sowerby)
Marley, JamesRoyle, C.Williams, David (Swansea, E.)
Martin, F. (Aberd'n & Kinc'dine, E.)Samuel, Samuel (W'dsworth, Putney)Williams, Col. P. (Middlesbrough, E.)
Martin, W. H. (Dumbarton)Scrymgeour, E.Williams, Lt.-Col. T.S.B. (Kennington)
Masterman, Rt. Hon. C. F. G.Scurr, JohnWilliams, Maj. A.S.(Kent,Sevenoaks)
Maxton, JamesSeely, H. M. (Norfolk, Eastern)Willison, H.
Middleton, G.Sexton, JamesWilson, C. H. (Sheffield, Attercliffe)
Millar, J. D.Shepperson, E. W.Wilson, R. J. (Jarrow)
Mills, J. E.Sherwood, George HenryWindsor, Walter
Mitchell,R. M.(Perth & Kinross, Perth)Short, Alfred (Wednesbury)Windsor-Clive, Lieut.-Colonel George
Mond, H.Simon, E. D. (Manchester, Withington)Wintringham, Margaret
Montague, FrederickSimpson, J. HopeWise, Sir Fredric
Morel, E. D.Sinclair, Major Sir A. (Caithness)Wood, Major Rt Hon. Edward F. L.
Morris, R. H.Smith, Ben (Bermondsey, Rotherhithe)Wood, Major M. M. (Aberdeen, C.)
Morrison, Herbert (Hackney, South)Snell, HarryWoodwark, Lieut.-Colonel G. G.
Morrison, R. C. (Tottenham, N.)Snowden, Rt. Hon. PhilipWright, W.
Morrison-Bell, Major A. C. (Honiton)Spence, R.Young, Andrew (Glasgow, Patrick)
Morse, W. E.Spencer, H. H. (Bradford, South)
Mosley, OswaldSpero, Dr. G. E.TELLERS FOR THE NOES.—
Moulton, Major FletcherSpoor, B. G.Mr. Frederick Hall and Mr. Allen
Muir, John W.Stamford, T. W.Parkinson.
Murray, Robert

In estimating the income of the previous year for an assessment of Super-tax, there shall be deducted the amount of Income Tax for each previous year which the individual shall have paid or be liable to pay.—[Mr. Hannon.]

Brought up, and read the First time.

Photo of Sir Patrick Hannon Sir Patrick Hannon , Birmingham Moseley

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

This Clause brings before the Committee and the Chancellor of the Exchequer what I think is a very old grievance in relation to Income Tax administration. The Clause simply seeks to re-arrange the present methods of collecting Income Tax so as to give the Super-tax payer some credit for the Income Tax which he has previously paid, and which, in point of fact, never came into his possession at all. One would imagine that, in strict equity, if a man has paid, or is liable to pay, Income Tax he should be allowed that measure of abatement in the calculation of his Super-tax.

The Chancellor may say that Super-tax is graded according to income, and that in the fixing of the gradation of Supertax, account was taken of the fact that no concession had been made on Income Tax previously paid or due to be paid, but even the gradation of Super-tax is not a justification for making the Income Taxpayer pay upon income which never goes into his pocket at all. We have had this question before the House several times. It affects a very considerable number of people who are largely concerned with industrial enterprises, and is a burden imposed upon those whose incomes are mainly contributing to the enlargement of the available working capital for industry. I would ask the right hon. Gentleman, notwithstanding the differences which are so apparent between us from time to time, to consider this Clause from the point of view of equity and of common sense. He knows better than anyone that one of the canons of taxation is that it must be just to the individual. Here you are actually taxing a man upon income which never goes into his pocket at all and from which he will derive no sort of benefit except contributing to the maintenance of the State. It is only fair to ask that some sort of consideration should be given to the Income Taxpayer from that point of view.

Photo of Mr Philip Snowden Mr Philip Snowden , Colne Valley

The point of the Clause, which I can dispose of in a very few sentences, is to relieve Super-taxpayers of a very considerable part of the Income Tax and Super-tax which they pay under the existing method of assessment If the suggestion were adopted it would add to the injustice which may be felt by certain grades of Super-taxpayers. It would destroy the fairly regular grading which prevails at present in the assessment of Super-tax. The operation of this Clause would be to give far greater relief to Super-taxpayers with large incomes than to Super-taxpayers who have smaller incomes. For instance, the tax relief which would be given under the Clause to a. Super-taxpayer who was just above the exemption limit for Super-tax, say with an income of£2,100 a year, would be 1.86 per cent., but in the case of an income of£4,000 the effect would be a reduction of 10 per cent., and when we get to an income of£50,000 a year there would be a reduction of 14 per cent. The hon. Member would have no reason for saying that if this concession were made it would be a relief to the Income Taxpayer. It would not. I do not know if he knows what his proposal would cost. It would cost£20,000,000 a year. If I made that remission I should have to find the revenue from some other source, and there is only one source from which I could find it. I should have to impose increased taxation upon the same class that I have relieved by accepting this Clause. In the last two years Income Taxpayers have had remissions of taxation amount to£80,000,000 a year, and an enormous part of that has gone to the very people for whom the hon. Member is now pleading, and for whom he is asking a further remission of£20,000,000.

Photo of Sir Patrick Hannon Sir Patrick Hannon , Birmingham Moseley

And whose capital is invested in the industries of the country.

Photo of Mr Philip Snowden Mr Philip Snowden , Colne Valley

Not necessarily. At any rate there have been remissions of£80,000,000 in the last two years and the hon. Member is now suggesting another£20,000,000. I think the demand is perfectly preposterous and I am sure the Committee will not entertain it.

Photo of Sir Patrick Hannon Sir Patrick Hannon , Birmingham Moseley

Does the right hon. Gentleman really think the present proportion between direct and indirect taxation is fair?

Photo of Mr Philip Snowden Mr Philip Snowden , Colne Valley

That does not arise at all. We have had that question debated almost ad nauseam.

Photo of Mr Arthur Samuel Mr Arthur Samuel , Farnham

I do not take the same line as my hon. Friend below me, but the Chancellor of the Exchequer has gone off very adroitly at a tangent, and I should like to put my own point of view about the Clause. I support it but I do not ask for any remission of taxation. I do not ask for a single penny to be taken off so far as I am a Super-tax payer. All I ask is that I should pay Super-tax on what I have received. If you need to put the tax up do so and, if the small Income Tax payer who becomes a Super-tax payer receives by the new arrangement a less benefit than the big Super-tax payer, adjust the tax rate so that the taxpayer, whether big or small, pays to the State exactly the same amount that he contributes now. Suppose, for example, that I have£3,000 a year. The Income Tax at 4s. 6d. on that would be roughly£700. But I am assessed to Super-tax on£3,000, which I have not received. I have only received£2,300. I may be assessed for Super-tax at X shillings in the£. Let us call it 3s. I would rather pay the rough equivalent, say, 4s. in the£and be assessed on£2,300 than pay 3s. in the£and be assessed on£3,000. Let it be seen by the public that those who pay Super-tax are paying a higher rate on their incomes than the present rate of figures show. If I pay 4s. 6d. in the£Income Tax and 3s. more for Super-tax, people say I am paying 4s. 6d. and 3s. on my income. I am not. I am paying more likely 4s. 6d. and 4s. I am willing to pay the State what I am paying now but I ask to be assessed so that the truth shall come out as to what I am receiving and what I am really paying.

Sir BEDDOE REES:

It is probably my fault, but I cannot possibly follow the hon. Gentleman who has just sat down. I think there is a certain amount of confusion. Whether we pay Income Tax or Super-tax, it comes to the same thing. I think if we look upon it from the point of view that Super-tax is merely an additional Income Tax, we get the right point of view. At present we pay Income Tax up to£2,000 a year at 4s. 6d. in the £ and from that point we have a graduated Income Tax which we call Super-tax. I wish the word were abolished. If we had instead a graduated Income Tax, I think the Exchequer would not suffer and the general public would certainly understand it. Income Tax payers are paying a bigger sum than appears in many returns. I have every sympathy with those who have endeavoured to reduce the Income Tax. I moved to reduce it by 6d. on the Budget Resolution, but the Chancellor could not see his way to accept it. I wish he had. But I have very little sympathy when we come to deal with Super-tax. Those who have to pay Income Tax should not be unduly assessed, but I fail to see that there is any advantage to be gained from the Clause. So far as I understand it, what is proposed is that the sum that is paid in Income Tax shall be deducted from the total amount when it comes to assessment for Super-tax. Surely you are going to give a certain section of the taxpayers an advantage to which they are not entitled. I fail to see why we should be called upon to support this Clause. There are many others on the Paper which appeal to me very much more than this. There are two or three that I shall move myself. I hope the Chancellor may be persuaded to give us something. I am amazed when he tells us this would cast the colossal sum of£20,000,000. That in itself is sufficient to destroy any hope of its being accepted, and I hope that it will be withdrawn.

Photo of Commander Charles Burney Commander Charles Burney , Uxbridge

I agree with the hon. Member who has just spoken in regard to the difference between Income Tax and Super-tax, but it makes very little difference because Income Tax and Super-tax are graded from 4s. 6d. in the£right up to 11s in the £ There is one point the right hon. Gentleman did not deal with at all. Super-tax is paid not in the year in which the income is received, but in the year following. It should be deducted in the year in which it is due, because the fact that it is paid a year later presupposes that there is a stable price level. During the slump in 1920 many individuals and firms earned very large incomes and were assessed to Super-tax a year later, and they had to pay on an altogether different price level from that at which they received their money. In some cases they paid perhaps not 6s. in the£Super-tax, but probably 12s., because between 1920 and 1922 the price level varied from about 330 to 180. That seems to me to raise the whole question of the Budget. We have had no statement whatever as to what is the monetary policy of the Government, and whether they are going to maintain the price level at any given figure. Therefore the Clause has to be viewed not only from the technical point of view, to which the Chancellor very cleverly tried to turn the Committee's attention, but one has to consider it in regard to the whole monetary policy of the Government. It is impossible for any person to deal with any of these Amendments unless they know what is the fundamental basis of the Chancellor of the Exchequer's Budget, and what is the condition precedent to an estimate of any revenue. The whole question of an estimate of revenue must necessarily be based upon the price level in the country. That brings into question what is the attitude of the Government in regard to its monetary policy.

Photo of Mr John Whitley Mr John Whitley , Halifax

I have been patient with the hon. Member. He seems to have gone wide of the Amendment.

Photo of Commander Charles Burney Commander Charles Burney , Uxbridge

I am sorry if I have gone wide of the Amendment. The point I am trying to make is that so long as taxes are paid in a different year from that in which they are received, and so long as the monetary policy of the Government is unstable, it is impossible to get a fair measure of taxation with any acceptable incidence of any certain tax. It is for that reason that I hope the Chancellor of the Exchequer will arrange, if he is in office next year when the next Budget is introduced, that there shall be some regard paid to that point.

Section twenty-one, Sub-section (1), of the Finance Act. 1922, shall be amended so that the words "The said reasonable part of such income" shall be substituted for the words "The said income." in line fourteen of the Sub-section.—[Mr. A. M. Samuel.]

Brought up, and read the First time.

Mr. SAMUEL:

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

This is merely a drafting Amendment of the Act as it now stands. We wish to insert the words "reasonable part of such." We propose this new Clause in order to bring the first part of the first Sub-section of Section 21 of the Act of 1922 into complete harmony with the concluding words of the same Sub-section. We are trying to make the first part of the first part of the Sub-section harmonise with the words of the last part of the Sub-section, which read: Provided that in determining whether any company has or has not distributed a reasonable part of its income as aforesaid the Commissioners shall have regard not only to the current requirements of the company's business, but also to such other requirements as may be necessary or advisable for the maintenance and development of that business. Under Section 21 of the Act of 1922 the Company to which this Section applies must distribute a, reasonable part of its profits so that the recipients will include that proportionate amount in their Super-tax returns. If the company does not distribute a reasonable part of its profits the Commissioners may direct that, for the purposes of assessment of its members for Super-tax, the said income of the company from all sources shall for the year or other period be deemed to be the income of the members. What is the "said" income? Why not "reasonable part"? I took a considerable part in getting this Clause substituted and put into the Act of 1922, and after remarks I made in the Debate upon the original Clause the late Chancellor of the Exchequer got up and said he would withdraw his original Clause. We had a consultation with him behind the Chair, and he then undertook to draw up this present Clause which we now seek to amend. We had no idea when we agreed to the Clause that it would be interpreted in the way it has been. We had no idea of the ambiguities that would arise out of it. May I give an instance to illustrate what I mean? If a company has made £20,000 in the year and it has decided to distribute £12,000 to its members and to hold back £8,000 for the development of the company, that may be thought to be a reasonable amount to hold back, and the Commissioners may consider it reasonable and accept £12,000 for Super-tax purposes; but if, by chance, the company has distributed only £11,000 and has reserved £9,000 the Commissioners may come along and say, "You have not distributed a reasonable amount," and then they have power under this Act to fix the assessment, not at the admittedly reasonable£12,000, but at£20,000, the whole amount of the profits for the year; and not the reasonable part of the profits. That is, I submit, a great hardship for the company, and it really defeats the intention of the Act, which provides for regard to be had for the maintenance and development of the concern. I suggest we ought to give the Commissioners discretion, and we can do that by importing into the Clause the words "reasonable part of the income," thereby making the earlier part of the Clause harmonise with the closing words of the Sub-section. For that reason, I beg to move that this new Clause be read a second time.

Photo of Mr William Graham Mr William Graham , Edinburgh Central

I am going to ask the hon. Member not to press this new Clause, because its effect will go very far beyond what he himself thinks. The Amendment in the Act of 1922 to which he has referred was designed to impose a check upon attempts to evade the payment of Super-tax. Where the amount distributed was regarded as a reasonable part of the income the Special Commissioners were given power to assess the income accordingly. I believe the difficulty suggested by the hon. Member has been more than met by the proviso which was inserted in the Act of 1922 to the effect that the Commissioners, in fixing the amount of the income, should have regard not only to the current requirements of the company but also to the needs of the business from the point of view of future development. I am advised that the effect of the hon. Member's new Clause would be to weaken the protective value of this Clause from the point of view of the evasion of Super-tax, and it would tend to put these people in a position to evade that Super-tax. If there is any doubt or ambiguity about the effect of the proviso in the Act of 1922 the Government would agree with the hon. Member in trying to remove it, provided also that we do not in any way weaken the safeguard which the Clause is intended to provide. If therefore the hon. Member will withdraw the Clause I am quite willing to look into the matter to see if there is any ambiguity as he has stated, and to try and remedy it between now and the Report stage. But we cannot possibly do anything which would weaken the Clause as regards the protection it affords against the evasion of the payment of Super-tax.

Mr. SAMUEL:

I am obliged to the hon. Gentleman, and I think if he will look at this matter from our point of view he will agree with our argument Let me say here and now we do not desire for a moment to weaken the safeguards of the Clause against Super-tax evasion. We will assist the hon. Gentleman in every possible way to get his proper and fair Super-tax, but I want to point out again that if a company has earned £20,000, and it can be deemed reasonable that it should distribute only £12,000 and reserve £8,000 for future requirements, we desire to have it made clear that the Commissioners have the power, if they think£12,000 is the right amount to distribute, and that they should assess the distributable income at £12,000, and not at £20,000, as they do now. They must be free to make allowance for the maintenance and development of the business. If the hon. Gentleman will meet us on these lines we will withdraw the Clause, as we have no wish to do anything to defeat the original intentions of the Clause as to Super-tax. I am certain that the way in which the Treasury or Revenue has interpreted the Clause is very penalising and unfair. If the hon. Gentleman is willing to come to some arrangement with us as to an amending Clause, I will withdraw my Clause on the understanding that he will not allow the Clause in the Act in future to be interpreted without discretion allowed to the Commissioners, as it is at the present moment.

Photo of Mr Dennis Herbert Mr Dennis Herbert , Watford

May I just remind the hon. Gentleman of an Amendment which stands in my name further down on the Paper to the effect that The amount of income of any company which under Section 21 of the Finance Act, 1922, the Special Commissioners may direct shall for the purpose of assessment to Super-tax in any year or other period, be deemed to be the income of the Members, shall notwithstanding anything in that Section contained not exceed such part of the income of the company as for the purpose of that Section shall be a reasonable part thereof for the company to distribute. This Amendment is intended to meet the case quoted by my hon. Friend, and it does so in somewhat different words. I suggest there should be no difficulty in the Government accepting my Amendment. I would remind the Financial Secretary that I sent him a draft of that Amendment two or three weeks ago when the question had been raised in the City of London, and it had been assumed by some financial papers and authorities that there was an error in the drafting of the Finance Bill. For my part I have not the slightest doubt whatever that that is so. The hon. Member for Farnham (Mr. Samuel) will remember that it was due to an Amendment moved by me that the first draft of the Clause was withdrawn altogether, and the right hon. Member for Hillhead (Sir R. Horne) subsequently put in the present Clause. Never for one moment was it suggested that the person who honestly made a mistake or had a difference of opinion with the Income Tax Commissioners as to what was a reasonable amount to be distributed should be penalised simply because of an error of judgment. That seems to me to be grossly unfair. In view of the fact that the Government, until this afternoon, have given us no hope whatever of what they intend to do—on the contrary, the Financial Secretary wrote definitely to me that he feared there was no chance of the Government accepting my Amendment—and after what has passed now, I ask to have something a little more definite than the statement of the Financial Secretary, before this Amendment is withdrawn. I hope my hon. Friends will press with me for an assurance that, in any case, we shall receive the support of the Government in some Amendment which shall rectify the particular unfair penalty in the Clause as it now stands.

Photo of Mr Herbert Spencer Mr Herbert Spencer , Bradford South

This Amendment was put down on behalf of the Association of Chambers of Commerce. I appreciate the assurance that the Financial Secretary has given the Committee, but I think we might ask for some rather more definite assurance. I feel certainly that the Financial Secretary will agree with me in this. It is not an attempt in any way to enable the one-man company to dodge its Super-tax. I think the whole House agrees that the formation of a small company for the express purpose of not dividing the profits to dodge Super-tax is a thing we want to stop. But there are many companies which, for various purposes, do not wish to divide a great proportion of their profits. It may be that a company is in a bad financial position. There are hundreds of companies to-day, after the 1920 slump, who are only carrying on because their banks are allowing them to do so on the proviso that the profits shall go to reduce the assistance that the banks have given to them. If the members of that company do better, we do not ask for a moment that they shall be relieved from paying their Super-tax, but we do ask that if, for one reason or another, they decide not to distribute their profits, a reasonable arrangement shall be made between the Inland Revenue and the members of that company as to what a reasonable distribution is. At the present time the Commissioners of Income Tax have no power to make a reasonable arrangement. If they disagree as to the amount that should be divided, they are compelled to charge Super-tax on 100 per cent. of the profits. If the Financial Secretary will say that he will put in words which will meet that great hardship—and we do not want to assist anybody to dodge their fair Super-tax—I shall be only too glad, as my name is on the Amendment and as I am speaking as the secretary of the Associated Chambers of Commerce, to join my hon. Friend in withdrawing this Amendment. The Financial Secretary should bring in words to give a reasonable relief to the people who are unable, very often because of the financial pressure from their banks, to distribute their profits.

Photo of Mr Neville Chamberlain Mr Neville Chamberlain , Birmingham, Ladywood

I think we have now a pretty clear idea of what it is we want to do, and what it is we do not want to do, in making any alteration in the law as it at present stands. I examined the Amendment with some care, and whilst I agree with the object of my hon. Friend the Member for Farnham, I do not think the Amendment is drafted in a way which the Financial Secretary could accept as it stands. In the Act itself the Special Commissioners are not directed to say what is a reasonable amount to be distributed by the company; they are only directed to say what is not a reasonable amount. I do not think the words, therefore, could stand as they are, because there is no reasonable amount mentioned in the Act. That objection, as the hon. Member for Watford (Mr. D. Herbert) has pointed out, does not appply to the Amendment which stands in his name. This Clause says that the amount to be charged is not to exceed such part of the income of the company as, for the purpose of that Section, shall be a reasonable part thereof for the company to distribute. That does not seem clearly to indicate who is to decide what is a reasonable part, but I want to suggest to the Financial Secretary that, if he amended the last line, so as to make it clear by whose authority the reasonable part ought to be decided, he might then quite well give an undertaking that he will accept the Clause of my hon. Friend in the words in which it is put down.

Photo of Mr Dennis Herbert Mr Dennis Herbert , Watford

My Amendment was particularly drawn in such a way as to meet the point raised. It is not to exceed such part of the income of the company as, for the purpose of that Section, shall be a reasonable part, and what is to be a reasonable part for the purpose of that Section is the very point which, under the Section as it at present stands, the Commissioners have to decide.

Photo of Mr Neville Chamberlain Mr Neville Chamberlain , Birmingham, Ladywood

I do not quite agree. If the hon. Member will read the Section he will see that the Commissioners are not directed to say what is a reasonable part, but only what is not a reasonable part.

Photo of Mr Thomas Keens Mr Thomas Keens , Aylesbury

There is one point in Section 21 of the Act of 1922 in which there is a refund of Corporations Profits Tax in respect of the amount that is charged for Super-tax, and it therefore follows that Section 21 is entirely disturbed, and it is necessary that the whole matter should be taken into consideration. In dealing with this matter it is desirable to have regard to the actual position as we find it. In the case of a company that has not distributed a reasonable part of its income, it is the practice to treat that limited company as though it were a partnership, and the assessment therefore made upon the company for Income Tax—which forms the basis of the assessment for Super-tax, which is levied upon the person in the name of the company, as mentioned in Section 21—is not the amount of the distributable profits, but the amount of statutory income, calculated according to the Income Tax Act. As the Corporation Profits Tax ceases to be levied for any accounting period after the 30th June, the whole balance of the, treatment under this Section is lost, and I suggest to the Financial Secretary that he should agree, if this Clause is withdrawn, that the parties interested should be called into consultation, so that a new Clause should be inserted which restores the balance under the Act of 1922. No one who has had experience in the working of this Section will agree that the decision of the Special Commissioners as to the way in which this operates is what was intended when the Finance Act, 1922, was passed. It, was clearly intended then that a reasonable amount should be distributed, and that the reasonable amount should be brought into charge, but now we have the view of the Special Commissioners, who have held that they have no discretion in the matter if they have the slightest difference as to what they find is a reasonable amount, and they have no alternative but to bring in the whole assessment and to make that liable for Super-tax. That was not intended by the Finance Act, 1922. What is a reasonable amount must always be a matter of opinion, as it frequently happens that this is a matter of keen controversy between the directors. It is especially unfair that on a decision of the Special Commissioners as to what is a reasonable amount, and that amount differs from the view of the directors, the whole amount must be brought into charge for Super-tax. It must be remembered that the Special Commissioners are adjudicating at a later date, when it may be experience has falsified the perfectly justifiable expectations of the directors. I appeal to the Financial Secretary to the Treasury to come to the arrangement suggested by the hon. Member for Farnham (Mr. A. M. Samuel), so that the parties interested may find what is the real position contemplated by the Act of 1922, affected by the position as we find it to-day.

Photo of Mr William Graham Mr William Graham , Edinburgh Central

From the practical experience of Members of the Committee, there is a difference of opinion, not confined to one part of the House, as to the way in which this Section in the Act of 1922 works out. My own impression of the distribution has always been that there is adequate safeguard in the proviso to the main part of the Act of 1922, that part which I quoted earlier in the Debate, which indicates that regard must be had not only to the current needs of the company's business, but also to such other requirements as may be necessary or advisable for the maintenance and development of that business. As I said earlier, if hon. Members will agree to withdraw their Clause, I will undertake to consult with them between now and the Deport stage, subject to the condition that there must be no weakening of this Section from the point of view of the safeguards against the one-man companies. On that basis, it is a matter which we might clearly discuss. Perhaps my hon. Friend will withdraw the Clause.

Photo of Mr Dennis Herbert Mr Dennis Herbert , Watford

Might I be allowed to put one further question? The proviso which an hon. Member put in at the end of his words just now, I am sorry to say does not altogether please me, because I have had it indicated to me pretty strongly in this letter, to which I have referred, that there was, a short time ago, a definite difference of opinion between the Government and ourselves, and, therefore, with all respect, and I hope the hon. Member will not think I am saying it offensively, I do not think that I quite like the proviso. I would rather like the Financial Secretary, if he prefers my Amendment to my hon. Friend's, to accept my Amendment. Let that go in now and then we shall have an earnest that this matter will be dealt with on the Report stage.

Photo of Mr Arthur Samuel Mr Arthur Samuel , Farnham

Let us be clear on this, as it is of so much importance to us, and the revenue does not get very much out of it one way or the other. Will the Financial Secretary meet us and see if we can draw up an Amendment to be put in on the Report stage? We shall be perfectly satisfied if he will merely adopt the words already in the Act.

Question, "That the Clause be read a Second time," put, and negatived.