New Clause — (Enactments relating to income tax reliefs.)

Orders of the Day — Finance Bill. – in the House of Commons on 11th June 1934.

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Section eight of the Finance (No. 2) Act, 1931 and the Fourth Schedule to that Act are hereby repealed and the enactments relating to Income Tax relief described and specified in the Schedule (Enactments relating to reliefs from Income Tax) to this Act which were amended by the said Section and Schedule shall have effect as if the said Section and Schedule had not been enacted.—[Mr. Wilmot.]

Brought up, and read the First time.

4.19 p.m.

Photo of Mr John Wilmot Mr John Wilmot , Fulham East

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

The proposed Clause which stands in my name and that of my hon. Friend the Member for Mansfield (Mr. C. Brown) and my hon. Friend the Member for Spennymoor (Mr. Batey) repeals Section 8 of the Finance (No. 2) Act, 1931, and consequently the Fourth Schedule to that Act and substitutes for it a new Schedule which appears on page 1380 of the Order Paper:

SCHEDULE.
Enactments relating to Beliefs from Income Tax.
Subject matter.Enactment.
Personal allowanceThe Finance Act, 1920, s. 18.
Deductions in respect of relative or other person taking charge of widower's or widow's children, or acting as housekeeper, or in respect of widowed mother, &C.The Finance Act. 1920, ss. 19 and 20, and the Finance. Act. 1924. ss. 21 and 22.
Deduction in respect of children.The Finance Act, 1920, s. 21

I must ask the indulgence of the Committee in moving this new Clause not because it is not important—in my view, it is an extremely important Clause—but because it is a little difficult, without paper and pencil, to make clear all the arguments which support it. I therefore hope that the Committee will bear with me while I endeavour to explain as briefly as possible, what in fact the new Clause does and what alterations it makes. The various Income Tax reliefs and allowances are not embodied in any one Act, but are in the Income Tax Act and the various Finance Acts. It may be helpful if I give a brief indication of the effect of the change in these allowances brought about by the Finance (No. 2) Act, 1931, in respect of each of the headings of allowances. Prior to the Emergency Budget of 1931 the personal allowance for a single man was £135, and it was reduced to £100, and for a married man the allowance of £225 was reduced to £150. Then there were the deductions in respect of relatives or other persons taking charge of children or acting as housekeeper or a widowed mother. That deduction was; reduced from £60 to £50. There were the allowances in respect of children, and the allowance in respect of the first child was reduced from £60 to £50, and for other children from £50 to £40.

The earned income allowance was altered from one-sixth, with a maximum of £250, to one-fifth, with a maximum of £300. The Committee will observe that in this case there was actually an apparent improvement in the allowance, but I will refer to its effects a little later, because I want to rebut the suggestion made by the Minister that the improvement in this particular allowance went a long distance to offset the disadvantages of the other changes. Then there is the relief in respect of the taxable income thus arrived at after deduction of those allowances. The Committee will remember that the alteration had the effect of giving, instead of the first £250 of taxable income at 2s., the first £175 at 2s. 6d. The relief in respect of life insurance premiums was a very small alteration.

In considering the effect of these changes, which are somewhat difficult to follow without paper before one, it is necessary to refer to the effect on specimen incomes. I will not trouble the Committee with the recital of all the figures which I mentioned on the Budget Resolution, but some of those figures are so remarkable and the results so inequitable in their effect as to bear reference again. The single man with £200—we are right down now in the £4 a week class of Income Tax payer—had his Income Tax increased in 1931 from £3 4s. to £7 10s. That was a very large increase, being more than double, and, as my hon. Friend beside me points out, his tax amounted very nearly to a fortnight's wages. That enormous increase in tax, one of more than 100 per cent., was due not to the alteration of the standard rate of taxation, but in the main to the withdrawal of those allowances. That man is only affected to the extent of 15s. by the reduction in the standard rate of tax. So that here we have a man, of the poorest class of taxpayer, whose tax is increased from £3 4s. to £7 10s., and the only remission of taxation he receives as a result of the present Budget is a reduction of 15s. He is still paying £3 11s. more than he was paying before the emergency Budget. If we look at the £2,000 a year man earning ten times as much, that man gets back £37 16s. 3d. out of his total increase and is left with increased taxation of only £8.

It is obvious that the effect, whatever may have been the intention, of a simple reduction in the standard rate without any restoration of the allowances is definitely to penalise the poor and to enrich the well-to-do. That is true of the income of all single men, and it is even more true of the married man, and the larger the family the greater the injustice. The Committee will see how this arises. By reducing the allowances the increase of tax fell heaviest upon those who had the largest families. Take the case of a married man with no children earning £250 a year. We are still among the comparatively poor people. Prior to the emergency Budget he paid no Income Tax at all. The income was held to be so small as to allow of no margin. The emergency Budget put a tax on that family of £6 5s. a year. All the relief they get by the present proposal's is a relief of 12s. 6d., and they are left to bear increased taxation of £5 12s. 6d. The well-to-do couple with £2,000 a year and no children get back £36 11s. 3d. in remission due to the alteration in the standard rate, and are left with only £17 3s. 9d. of increased taxation. Take the married man with £500 a year and three children. The tax was increased in 1931 from £3 4s. to £15. That family had the tax increased by nearly five times; yet their total share of our boasted prosperity of to-day is a remission of 30s. That family is struggling against very heavy expenditure and under very great difficulties and facing the constant fear of unemployment which is the lot of so many. They are left with an increased tax burden of £10 6s. a year while the well-to-do family, the £2,000 a year family, with three children, whose tax went up from £275 in 1930 to £333 in 1931 has had £33 6s. 3d. of that increase restored and only £23 18s. 9d. of the increase is left. Well over half is restored in that case but only one-tenth is restored in the case of a man with an income of £500 a year. I do not think it needs any further figures to demonstrate that the effect of the change of standard rate without altering the allowance has been entirely inequitable. It has reduced the taxation of those who were the least urgently in need of a reduction, and I hope that even at this stage the Minister will consider whether this now Clause cannot be accepted, in order to reduce these obvious inequalities.

I should like to say something about the real effect of the change in the allowances for earned income. The old allowance was one-sixth with a maximum of £250 and that was altered to one-fifth with a maximum of £300. Upon examination of this apparent concession to the small Income Tax payer—a concession made at a time when the other allowances were being reduced—one finds that here again the concession favours the taxpayer with the higher income, and the concession increases in volume as the income increases. While the smaller people are mulcted in taxation out of all proportion to their taxable capacity, a concession was made which had this effect: the larger the income, up to a certain point when the concession ceased, namely, up to £1,500, the larger the amount accruing from the concession.

Let me give an example. A taxpayer with an income of £300 a year had an increase of £10 in his earned income allowance. On an income of £500 a year the increase was £17 in the earned income allowance. The figures I am giving are not figures of tax payable, but of income released from tax. There was a reduction in personal allowance of £35 for single men and £75 for married men and £10 for each child irrespective of income. The relief goes on up to £1,500 a year income. In that case there was an increase of £50 in earned income allowance but otherwise the same reductions. A married man earning £300 a year paid tax on £65 more after the change in the allowance, while the married man earning £1,500 only paid on £25 more. The single man earning £300 a year paid tax on £25 more while the single man earning £1,500 a year paid tax actually on £15 less. Thus if we take the effect of this to the end of the scale, that is, up to £1,500, where it ceases to apply, we get the remarkable anomaly that while the £300 a year single man is paying tax on £25 a year more of his income, the £1,500 a year single man is paying tax actually on £15 less. I submit that if for no other reason than to adjust what is obviously an anomaly, and probably a quite unintentional anomaly, this question of the allowances should be tackled now before it goes any further.

On what is generally known as the reduced-rate allowance, which before the emergency Budget was five-ninths of the standard rate on the first £250, and is now half the standard rate on the first £175, the alteration in the standard rate allowance has had this curious effect. Not only was the margin of £250 reduced to £175, but the tax on this sum was increased from 2s. to 2s. 6d., an increase of 6d. irrespective of income. I am sure that the Chancellor of the Exchequer and the Financial Secretary must have given careful consideration to the matter, because it has a most unfortunate effect. The Chancellor of the Exchequer gave the assurance in dealing with this emergency taxation and the other sacrifices called for by way of reduction of salaries, reduction of wages, reduction of unemployment benefit, that he would proceed to restore in the same proportions to the same persons from whom the sacrifices were demanded, but upon examination of his proposals we find that he has done the exact opposite. He has restored only half the reduction in wages but he has restored in full the Income Tax payer's contribution so far as it affects the well-to-do. As soon as we come to examine the effect of the change upon the poor Income Tax payers we find that the right hon. Gentleman is restoring not the full increase of Income Tax made in 1931 but only half.

It is necessary to look at this matter a little closer to see how that happens In restoring the full rate of tax the rich man who is paying on a large portion of his income at 5s. goes back to the old rate of 4s. 6d. When the increase of standard rate was made the reduced rate, as I have shown, was increased from 2s. to 2s. 6d., but there is no provision for an equivalent reduction in that rate, for it is now 2s. 3d. Therefore, while the standard rate is reduced to 100 per cent. of the increase, the half rate is only reduced by 50 per cent. of the increase. In dealing with these points in his reply at a late stage of the Budget Resolutions, the Financial Secretary pointed out that the small Income Tax payers, the persons who are known as the black-coated workers, were doing very well. He produced, with his usual convincing charm, figures to support the argument that whereas the well-to-do were paying tax on a very large percentage of their income, paying tax which amounted to a very large proportion of their total in- come, the black-coated worker, the small salary earner, was escaping with only a marginal fraction of his income taxed. That is true, and it must obviously be the case.

The very principle which underlies Income Tax, and the whole conception of Income Tax, surely is, first of all, to allow the individual his minimum living requirements, that is, sufficient income to meet, so to speak, the overhead charges of his life, rent, food, clothes and all that is necessary for him in order to be able to go on earning his income. Obviously, if you taxed him beyond that point, not only would it have grave social effects but it would reduce the earning capacity of the individual. Therefore, the basic principle is, first of all, to allow a certain sum free of tax and then to tax the margin over that, the luxury margin. That being the principle of the tax it is, if I may say so with respect, completely beside the point to quote percentages and to say that this taxpayer is paying so much per cent. of his income and the small man is paying on only a fractional percentage of his income. If the hon. Member were to set aside the minimum living expenses, the overhead charges of life, and were to apply his proportions to the luxury margin he would find that his figures turn out rather differently, and that must always be so. There are very few Members of the Committee, if any, who would not agree that that is properly so, and that the basic principle of taxation should be taxation in accordance with ability to pay, ability to pay as regards taxable income after the minimum living requirements have been allowed for.

The hon. Member produced another interesting set of figures, which were designed to show that the effect of the Government's decision to restore the standard rate and leave the allowances untouched was not, as has been argued on this side of the House, a restriction of spending, and he demonstrated that the real savers of money in the community turned out to be the working people. He drew a picture, which was almost lyrical in its terms, of the amazing prosperity of the working classes, and especially the affluence in which the humble clerk with an income of £300 a year was able to live. Were not these people, he asked, building up great funds in the savings banks? Either the hon. Gentleman or some other hon. Member also said: "Look at the building societies. Look at the enormous accretions of capital which are represented by building societies. Here we have evidence that so far from these reductions in allowances creating hardship they seem to be the cause of enormous prosperity."

The real position is that there are two causes which contribute to these figures. In so far as they refer to savings banks deposits they reflect the pitiable fear of this class of worker that misfortune and disaster may at any time overtake him. He is restricting his spending beyond what is proper; he is restricting the development of himself and his family in order to scrape together a few paltry pounds which may be a meagre bulwark between him and the disaster of unemployment, or old age and sickness, which he knows is descending on his friends and neighbours. That is causing these people to save and save, and I suggest that in these circumstances saving ceases to be a virtue. It may be a necessity for the individual, but for the nation it is no longer a virtue. It is cramping the development of the family and has a very evil effect on the balance of economy within the community itself.

If we turn to the figures of building societies we only have to know something about the circumstances of these unfortunate people who, owing to the default of the Government, and of local authorities in many places, in not providing adequate housing accommodation to be let at rents which people can afford to pay, have been forced, willy nilly, to enter into contracts for the purchase of property which in many cases no reasonable business man with a free choice would entertain for a moment. The records show that these unfortunate people scrape together the deposit money somehow, commit themselves to a weekly payment by way of mortgage interest and other charges, which they are quite unable to bear, and at the first breath of adversity find themselves in a position when they must surrender the property and lose all they have paid towards its acquisition. Houses bought in these circumstances represent part of the swollen transactions of building societies, but they do not in any manner reflect the prosperity of the purchasers, who perhaps might be represented, if the true facts were not known, as having moved upwards out of the ranks of rent payers into the ranks of real estate owners. They are not the facts. I appeal to the Financial Secretary to restore all these allowances. It will cost considerably less than the reduction of the standard rate.

Photo of Colonel Alan Gandar-Dower Colonel Alan Gandar-Dower , Stockport

Can the hon. Member say how much it would cost?

Photo of Mr John Wilmot Mr John Wilmot , Fulham East

It would cost about £26,000,000 to restore all the allowances. I put a question to the Financial Secretary the other day as to what it would cost to restore all the earned income allowances and also I asked: What would be the cost to the Exchequer of substituting an allowance of five-ninths of the standard rate of tax of 4s. 6d. in the £ on the first £175 of taxable income for the present allowance of one-half of the standard rate and, alternatively, of restoring the allowance of five-ninths of the standard rate of 4s. 6d. in the £, on the first £250 of taxable income, which was in operation immediately prior to the passing of the Finance (No. 2) Act, 1931."—[OFFICIAL REPORT, 29th May, 1934; col. 29, Vol. 290.] The Chancellor of the Exchequer was kind enough to give me the following figures. The first alternative, the more limited allowance, would cost £4,000,000 a year, and the second, a complete restoration of the reduced rate of allowances, would cost £13,000,000. It has been stated that the total cost of restoring all the allowances to the 1931 position, that is to give the allowances which are provided for by the new Clause, would be £26,000,000 per year. I put it to the Financial Secretary that there is an overwhelming case for the restoration of these allowances. As a method of disposing of part of the surplus by way of a restoration of the sacrifices called from Income Tax payers it would be a better method, because it would give the relief in exactly those places and in the proportion where the sacrifices were made and where the relief is needed, and, moreover, would remove some important and indefensible anomalies which have arisen, probably quite unintentionally, as a result of restoring the standard rate in full and leaving the allowances entirely unaltered. I hope the Financial Secretary will accept the new Clause. If he cannot see his way to accept it as a whole that at any rate he will restore the reduced rate of allowances to what they were prior to the emergency of 1931.

4.52 p.m.

Photo of Mr David Mason Mr David Mason , Edinburgh East

The Committee is indebted to the hon. Member for East Fulham (Mr. Wilmot) for a very admirable speech. He has gone into this matter very fully, and given us a number of examples to build up an unanswerable case in favour of something being done to reconcile what I think is a real injustice with regard to the position of the black-coated worker and the small Income Tax payer as compared with those who come under the £2,000 limit. I hope the Financial Secretary will give a sympathetic answer to the appeal that has been made, and that between now and Report something will be done to adjust many of the anomalies which now exist. If he did I am sure that he would be meeting the wishes of Members in all sections of the House. The reductions made in the allowances are very severe, and press very hard upon those sections of the community which are least able to bear the burden. Now that we are in a position to make some concessions I think it should be our first duty to have regard to the position of those who have to bear the greater share of the burden.

I am in favour of a reduction of the standard rate of Income Tax. The hon. Member for Caerphilly (Mr. Morgan Jones) argued that it was better to spend £20,000,000 than to make reductions in taxation, because it would lead to a greater amount of employment. I do not agree. If you can put forward a concrete case like the new Cunarder or the new bridge, then I am in favour of spending money on such work, but it has not the supreme advantage which comes from an arrangement of your finances so as to relieve the burden of taxation on all sections of the community, because you not only help those classes to whom the hon. Member for East Fulham has referred, but the whole community, and in this way stimulate trade and industry. Here is a most deserving case. If you can so adjust the burden of taxation that you will increase the purchasing power of all those in receipt of these allowances it would be a great advantage to trade and industry—a legitimate advantage. You would not be spending money needlessly.

There is a surplus on the Budget for the year, and surely the first charge should be a redaction of Income Tax. But why stop at £2,000 a year? Why stop at the standard rate? If the principle is sound why not proceed to make easier the lot of the poor, make it easier for them to increase their purchasing power and so stimulate trade in every part of the country? I say that you should adjust your taxation to those who have a hard job to maintain appearances. There are very few hon. Members in this House to fight the battles of the black-coated workers. There are many who want to do something for the very poor and the working classes, but this particular section of the community have few members to speak for them, and I congratulate the hon. Member for East Fulham on the admirable speech he has made on their behalf. I hope the Financial Secretary will give it, as I am sure he will, his sympathetic consideration and that something will be done to adjust these anomalies before Report stage.

4.59 p.m.

Photo of Mr William Mabane Mr William Mabane , Huddersfield

I listened with great interest to the speech of the hon. Member for East Fulham (Mr. Wilmot) who has made this subject his own. I am in general sympathy with his proposals because they mean a reduction in Income Tax, but before I go on to show how far I disagree with his particular proposal let me deal with one or two points he mentioned, in the course of which, I think, he stated a case rather unfairly. He referred to the speech of the Financial Secretary, in which he gave some figures showing the increases in the savings of the middle classes and poorer classes of this country. The hon. Member tried to destroy that argument by saying that these sections of the community were saving to-day because they were afflicted by the fear of the vicissitudes of industrial life.

Let me mention one fact which, if the hon. Member does not know it, may surprise him. There are provisions made by the State against the ordinary accidents of industrial life, against old age, against ill health, against unemployment, against widowhood and so on. In the last year for which figures are available the amount expended on these items, that is to say for old age, widows' and orphans' pensions, National Health Insurance and Unemployment Insurance—I do not include transitional payments—was no less than £218,000,000, a sum £20,000,000 greater than the total national revenue in the year 1913–14. I think that that is convincing evidence that the ordinary accidents of industrial life are being met in a way in which they have never been met before.

Photo of Mr John Wilmot Mr John Wilmot , Fulham East

Those provisions by the State do not apply to the very class of people to whom I was referring. Unemployment Insurance, National Health Insurance, widows' pensions and all those things are limited, I think, to the £250 a year class. That is almost under the Income Tax limit. It is the very class that is called upon to pay this tax and has none of the benefits to which I referred.

Photo of Mr William Mabane Mr William Mabane , Huddersfield

I was trying all the time the hon. Member was speaking to discover at what point wealth became wicked. I gathered that it was at about £250 a year. The hon. Member was speaking, I understood, on behalf of the £200 a year man. I remember that he gave certain figures which led me to the belief that he thought that to have £500 a year was somewhat wicked.

Photo of Mr William Mabane Mr William Mabane , Huddersfield

The hon. Member was speaking of the unfair way in which certain allowances operated, and he said, for example, that the man with £200 a year got only so much—I believe the amount was £7 10s.—whereas the man with £500 a year, this wealthy individual, got £17 10s. a year. If the hon. Member is going to raise his standard of virtue and let it be virtuous to have an income of £500 or even £1,000 a year, I agree that National Health Insurance and widows' and orphans' pensions do not apply to those people. As the hon. Member correctly said, all these various forms of State assistance apply to the person with an income of £250 a year or less. I thought he was speaking on behalf of those people.

The hon. Member also drew attention with considerable force and great accuracy to certain apparent statistical anomalies; he spoke of the £2,000 a year man and the £200 a year man as if those were particular individuals who were always static, as if the man with £2,000 a year always had £2,000 a year. But what the Government have to consider, again always assuming that certain disparities of income exist and are not entirely undesirable, is the income that re- mains after the tax is paid. It is true to say that a great many of the people who have incomes on the higher level, from £1,000 a year upwards, depend for those incomes on the earnings of businesses, and it is equally true to say that during the period of depression they suffered very heavily indeed, far more heavily than those who were working for a salary and received that salary whatever happened.

Photo of Mr Tom Smith Mr Tom Smith , Normanton

No, you cannot prove it.

Photo of Mr William Mabane Mr William Mabane , Huddersfield

Let me take as an example my own humble self. I say quite definitely that as a business man I would have been very glad to have accepted the kind of cut that was imposed in 1931 as the only out in my income resulting from the depression. Very many other business men could join me quite honestly and produce figures to show that that is a fair statement of the case. But, notwithstanding these criticisms of the hon. Gentleman's speech, I am in general sympathy with a reduction of Income Tax. It is not a subject new to me. I have hitherto been met with the most violent opposition from Members on the Labour benches, notably the hon. Member for Leigh (Mr. Tinker), when I have suggested a reduction in Income Tax. I am, therefore, glad to find that hon. Members opposite have at last joined with me.

Last year I moved a reduction in the standard rate because I believed that certain costs in the Budget had been over-estimated, particularly the cost of unemployment. I pointed out last year that the Budget was framed on an estimate of an average throughout the year of 2,800,000 unemployed. I held that that was far too high a figure. I said that if that figure proved to be correct it would be indubitable evidence that the Government had failed. I did not believe that that figure would be the figure that we would see at the end of the year. If there were any doubt about it, that industry and the Government together would be successful in reducing unemployment very substantially from that high level, I thought that that doubt would be removed by a reduction in the Income Tax, and I said so. Humbly I suggested to the Chancellor that if unemployment was reduced on an average by 60,000 a month, that is to say by 720,000 in the course of the year, that would pay for a reduction in the standard rate of Income Tax by 6d. I well recollect the Chancellor's reply to me. He scoffed at me, and it is on record in the OFFICIAL REPORT, Volume 277, column 805, that when I suggested that there might possibly be a reduction of 720,000 in the number of the unemployed in the year 1933–34, the Chancellor of the Exchequer turned to me and said: If my hon. Friend believes that, he will believe almost anything."—[OFFICIAL REPORT, 2nd May, 1933; col. 805, Vol. 277.] I have always tried to convince the Chancellor from this humble seat that only one thing modifies my admiration of his determination and ability, and that is my fear that he has not sufficient belief in his own powers and merits, and that he always underestimates the effects of whatever he is to do. He said last year that any man who believed there would be a reduction of 720,000 in the number of unemployed during the 12 months, would believe almost anything. The other day I motored from the North of England to London. Throughout the journey my attention was called to a series of National Government posters assuring me that in the course of a year 742,000 more men had been put to work. So I hope that, my prediction of last year having proved true, the Chancellor will not scoff at me this year when I suggest that a similar reduction might be possible in the present year, if proposals such as are made by the hon. Member for East Fulham, or in a more modified form by myself, are accepted.

This year the standard rate has been reduced. But I want more, and for two reasons. The first reason is that the lower grade of Income Tax payers, and particularly the married men with families, can put up a very substantial case to show that they have not been treated equitably, that their share in the distribution of available resources is disproportionately low. The second reason is that this concession, if it were made, would prove profitable. I am satisfied that the increased spending that would result would be so great that there would be provided additional revenue from many sources, Customs and Excise, Death Duties, and so on—Death Duties owing to the increase in Stock Exchange values that would result; and that there would be a saving in expenditure, particularly on unemployment. Therefore the cost of the concession would be more than met by the increase in revenue and the decrease in expenditure.

I think the hon. Member for East Fulham was quite right in saying on a former occasion that a concession of this sort would be the one most likely to drive money into channels of expenditure that would contribute to the improvement of industry. I cannot go so far as the hon. Member. I have on the Paper a Clause of my own, supported by the right hon. and gallant Member for Ripon (Major Hills), which is more moderate, and I think I might ask the Financial Secretary to consider it, if not accept it, to-day. The Chancellor is being urged by the hon. Member for East Fulham to restore all the allowances that were altered in 1931. I think he has got hold of a very curious figure as to the cost. He told the Committee that the cost of this restoration would be £26,000,000. I do not profess to know what the cost would be, but I have referred to the speech of Lord Snowden, then Mr. Snow-den, at the time when he introduced the second Budget of 1931. He told the House that the cost in a full year of the alterations in allowances would be £51,500,000. Under the Section relating to personal allowances he was asked what the total cost of the concessions would be, and that was the figure he gave. I may be wrong in supposing that the amount referred only to the alteration in allowances, and if so the error is really not so much mine as due to the lack of clarity of the then Chancellor. But even supposing that the amount is £26,000,000, I want to go half way.

My new Clause suggests that instead of putting back all the allowances, the limit of £100 should remain. Previously it was £135 for a single person, and the allowance for married persons was £225; that is a difference of £90. I would like to retain the allowance for a single person at £100 and make the allowance for married persons £190, retaining the same difference of £90. I would also restore the allowance for children, from the present £50 for the first child and £40 for the second, to £60 for the first child and £50 for subsequent children. I cannot estimate what the cost of these various concessions would be, but so far as I can make out it would be about half. I am fully convinced that if they were made, the result would prove that the national finances are capable of standing those concessions. I am satisfied, just as I was last year, that the condition of the country is going to improve and that, in any case, there will he a surplus at the end of the current financial year. I believe that that surplus would he not decreased but increased if the suggestion which I have made, or a modified form of the suggestion made by the hon. Member for East Fulham, were adopted. Apart from that, I am certain that such a course would give the utmost satisfaction to a large section of the people of this country who well deserve consideration.

5.16 p.m.

Photo of Mr John Hills Mr John Hills , Ripon

I also cannot accept the proposal of the hon. Member for East Fulham (Mr. Wilmot). I do wish that the Chancellor of the Exchequer had found it possible to restore some of the allowances but here the hon. Member is asking for an increase on the debit side of the Budget, of £26,000,000. On the Chancellor's figures he has not the money to pay for the concession which is being asked. It may be that we shall see a surplus at the end of the year. I believe that the Chancellor of the Exchequer "builded better than he knew" and that his activities will produce a surplus of more than £26,000,000 at the end of the year. But that lies in the future and probably the Chancellor of the Exchequer would not agree with me in my view of the future which is more optimistic than his. There was one point in the speech of the hon. Member for East Fulham against which I would like to enter a caveat, and that was his attack on the building societies.

Photo of Mr John Wilmot Mr John Wilmot , Fulham East

I did not attack the building societies.

Photo of Mr John Hills Mr John Hills , Ripon

Unless I failed to hear the hon. Member properly, he spoke as though building societies, as a general practice, induced people to invest money in insecure property, suggesting that when these unfortunate people had paid their deposits and some of the weekly instalments and failed to continue the payments, they lost the property, which, was then taken over by the building societies.

Photo of Mr John Wilmot Mr John Wilmot , Fulham East

I should not like it to be thought, as the right hon. and gallant Member apparently thinks, that what I said was in any way an attack on the building societies. It was an attack upon a deduction drawn from, building society figures—a deduction which has led to the error of supposing that the purchase of a house by a person who cannot afford it is evidence of means.

Photo of Mr John Hills Mr John Hills , Ripon

I think it is very difficult to read the hon. Member's speech as other than an attack upon the building societies. If you attack the figures of a large commercial body like the building societies then you attack that body itself.

Photo of Mr John Wilmot Mr John Wilmot , Fulham East

The right hon. and gallant Member has missed my point. I did not attack the figure. I am sure it is absolutely accurate. I attacked the deduction drawn from that figure that because there are so many thousand or so many million houses in the occupation and ownership of poor people, then those poor people are not as poor as they look. The fact is that they cannot pay the interest in many cases.

Photo of Mr John Hills Mr John Hills , Ripon

I do not want to pursue the subject, but I think that when the hon. Member reads his speech he will see that the way in which he used the expression, "jerry-built houses" was an attack on the building societies.

Photo of Mr John Wilmot Mr John Wilmot , Fulham East

There are some. [HON. MEMBERS: "Many!"]

Photo of Mr John Hills Mr John Hills , Ripon

To come back to the point. As I say, I think some concession might be made by the Chancellor of the Exchequer. The hon. Member for Huddersfield (Mr. Mabane) has referred to a proposed new Clause which is down in his name and mine. It is a more modest proposal than that of the hon. Member for East Fulham, but still it would do something. The reason why I do not agree with the hon. Member for East Fulham is because I do not accept his canon of taxation as being the only principle which ought to guide us in these matters. Ability to pay is one of the principles that ought to settle taxation, but is is not the only one. I supported a reduction in the standard rate as against a restoration of allowances—which cost an almost equal amount—because I was and am convinced that the country as a whole, and especially those who work for wages, would be more benefited by a reduction in the standard rate than by the restoration of the allowances. That point was fully argued on the Resolution and on the Second Reading of the Bill, and I do not want to go back on it, but I would point out to the hon. Member for East Fulham, who made a very able speech, that were his principle carried to an extreme it would bring him into line with the hon. and learned Gentleman the Member for East Bristol (Sir S. Cripps) because it would result in the reduction of all incomes to one statutory level. In saying that I do not think I do an injustice to either of my hon. Friends opposite.

Photo of Mr John Hills Mr John Hills , Ripon

I appeal to my hon. Friend the Financial Secretary to restore the general balance of the Budget—not the exact financial balance to which I shall refer later—but the general balance which I think was rather upset by the refusal of the Chancellor of the Exchequer to devote his realised surplus of £31,000,000 to the relief of the Unemployment Fund. I should not be in order in referring to the question except by way of an illustration, but to my mind that was a grave defect in the Budget. The payment of that £31,000,000 for that purpose would have weighted the Budget on the social side where I think it required weighting. I think that it is rather too light on that side. The Chancellor of the Exchequer cannot now do that. He has not the £31,000,000 to spend, but if my hon. Friend the Financial Secretary could announce that there was hope of some concession on the allowances, then I suggest there is that very admirable new Clause to which the hon. Member for Huddersfield has already alluded. That would be a very modest way of dealing with this difficulty. Though I think the Chancellor was right in reducing the standard rate, still there are some arguments which the hon. Member for East Fulham used and which I find it rather hard to meet. I find it hard to meet the argument that the whole of the restoration has not in all cases gone to the right people. Although I do not go the whole way with the hon. Member, I think there is a case on those lines to a certain extent. I do not know whether the Financial Secretary, of whose sympathy I am certain, feels that he is in a position to make a concession which might involve a loss of revenue but may I cheer him by pointing out that all the prophets are of one voice in assuring him that there will be a surplus at the end of the financial year. He could make no better use of that surplus than by giving a concession in this respect.

5.23 p.m.

Photo of Sir Archibald Sinclair Sir Archibald Sinclair , Caithness and Sutherland

I am sure the Committee have great sympathy with the right hon. and gallant Gentleman the Member for Ripon (Major Hills) and the hon. Member for Huddersfield (Mr. Mabane) in the difficulty in which they obviously find themselves. They were full of admiration, as I was, for the speech of the hon. Member for East Fulham (Mr. Wilmot). They agreed with the principle of his proposal, and yet they are anxious to find some means of drawing a distinction between their views and those of the hon. Member. In spite of that, it is apparent that they are in general agreement and indeed there is in this Committee, general agreement, that the Government ought to make some concession on the lines proposed by the hon. Member for East Fulham. The hon. Member for Huddersfield always makes interesting speeches and we listen to him with delight when he makes his own fresh speeches on these occasions or even when he redelivers a speech which he has delivered on a similar occasion in a previous year. He is entitled to point out to us that last year he made a prophecy which has been crowned with unusual success. We do not like people who say, "I told you so," when they have made a pessimistic prophecy which has been borne out by events, but our hearts warm to the man who is able to claim that he made a very optimistic prophecy and that events have turned out as he foretold. I cannot understand why the Chancellor of the Exchequer was not more impressed by the hon. Member's statement last year. Perhaps it was that the hon. Member did not emphasise his opinion by his vote in the Division Lobby.

It is clear, however, that on this occasion the hon. Member is in agreement with this proposal. The right hon. and gallant Gentleman the Member for Ripon has also lent the weight of his great authority as an ex-Financial Secretary to the Treasury to the proposal and in particular to the assertion, which I think he made himself at an earlier stage in these Debates, that there will be an ample surplus on this Budget to provide for the concession for which we ask. I am not going to repeat the arguments on that point which I used, I fear at some length, in the Second Reading Debate, but I think I made a clear case and other hon. Members have done the same, to show that there is certain to be on this Budget a surplus sufficient to meet the demand which is being made by nearly every section in this Committee for some concession to the small Income Tax payers. The effect of such a concession on the trade of the country would, I believe, be as great as the effect of the reduction in the standard rate of Income Tax.

As the hon. Member for East Fulham has pointed out, the reduction in the standard rate has an unequal effect as between different taxpayers in different ranges of income. The Chancellor of the Exchequer said that the principle of the balance of sacrifice was the foundation of that part of the Budget proposals which gives relief to the taxpayers. That principle demands consideration for those with moderate incomes and the restoration, in part at any rate, of the pre-crisis scale of allowances. The Chancellor's argument is that the concession of 6d. in the £ in the standard rate will give a stimulus to industry and encourage people who are in charge of businesses and thus increase employment. But the purchasing power of the consumer and the psychology of the consumer are also important considerations. By adopting this proposal you would encourage consumers to spend and increase their ability to spend and thus produce a direct and immediate effect upon the retail trade of the country.

If the Chancellor distributed part, at any rate, of his Income Tax relief to the people with moderate incomes, who made the greatest proportionate sacrifice in 1931, it would involve no loss of economic stimulus to industry. It would be fairer and in closer accord with the principle of the balance of sacrifice—the principle of giving to each according to his sacrifice in 1931—and it would, it is apparent, commend itself to hon. Members sitting in every part of the Committee. I would, therefore, add my word to that of those who have preceded me in asking the Financial Secretary, if he does not find it possible to make on this occasion the complete concession for which the hon. Member asks—and I cannot help thinking that the absence of the Chancellor of the Exchequer is rather ominous in this connection—at any rate to give the Committee the assurance that between now and the Report stage the whole question will be very carefully considered with a view to a substantial concession being made to the opinions that have been expressed this afternoon.

5.31 p.m.

Photo of Miss Eleanor Rathbone Miss Eleanor Rathbone , Combined English Universities

I do not think I should have risen to say anything on this Clause if it had not been for the rather curious misunderstanding of some of the arguments used by the hon. Member for East Fulham (Mr. Wilmot) on the part of the hon. Member for Huddersfield (Mr. Mabane). The case of the hon. Member for East Fulham, so far as it could be expressed in figures, seemed to me crystal clear, but it is obvious that it was not so to all Members of the Committee. I do not propose to repeat the figures used by the hon. Member for East Fulham, but surely the main point of them was that, whereas the Chancellor of the Exchequer and the Financial Secretary to the Treasury repeatedly, during their exposition of the Budget and since, laid it down as the principle which has guided their distribution of the resources at their command that the first claim on those resources was that of the persons who had made sacrifices for the national emergency, and that the restitution should be proportional to the sacrifice, the actual effect of the cut in the standard rate, unaccompanied by any restitution of the 1931 cuts in allowances, was a flat contradiction of that principle—that in fact in every group of Income Tax payers you find those who, because of their heavy family responsibilities, were more hardly hit in 1931 by the double sacrifice imposed on them through the reduction in family allowances, coupled with the increase in standard rate who now get back the least of what they then gave, both in actual money and in proportion to their sacrifice; and, secondly, that as you go up in the income scale, the richer the Income Tax payer, the more he now gets back, not only actually, but in proportion to his sacrifice. Those figures are undisputed and indisputable.

What interested me was the answer or, if I may venture to call it, the lack of answer that has been given by the Financial Secretary to the Treasury. I have heard him deal with this point on several occasions, and his justification of that apparent contradiction between the principle which he and the Chancellor have enunciated and the actual effect of their proposals has been briefly this: First of all, he said that with the exception of the restoration of the total cuts in unemployment benefit, the Chancellor's proposals have carried out the principle of equivalency in restoration, because he pointed out that those who suffered salary cuts have got back just half their salary cuts, and that Income Tax payers as a class, who sacrificed £58,000,000, are getting back £24,000,000, and that is rather less than a half. I submit that that is to interpret proportionate restitution in a sense that is utterly meaningless. Does he really imagine that Income Tax payers as a class are conscious of such a strong sense of class solidarity that a man with an income of £500 a year, and a wife and five children to keep out of it, who gets back only one-tenth of the extra taxation paid in 1931 will say to himself, "It is true I only get back a tenth, and that even £4 10s., the tax I have still to pay, is rather hard to find out of my small income, but let me console myself because my fellow Income Tax payer who has an income of £2,000 a year and has been wise enough to remain a batchelor gets back four-fifths of his salary, so all is well"? I suggest that that use of the law of averages reduces it to an absurdity.

The second argument which the Financial Secretary used was that, after all, the Chancellor of the Exchequer could not do everything at once, but that those who were getting back very little under the present proposals would only have to wait another year, and perhaps they would then get something more. That is rather better than stones for bread, his first argument. It offers a hope of bread in the future, but I would like to know why, under this proposal of the Government, it is always the children that have to wait. It is so not only under the proposals of this part of the Bill, but throughout the Government's proposals. A very large proportion of the Government's supporters actually nerved themselves to go into the Lobby on an Amendment in opposition to the Government to make up the children's allowances in regard to unemployment insurance to 3s., but they did not get their way, and we got no assurance on that point. When the Milk Bill was introduced, all that we got for the children was the possibility that if there was money enough, one-third instead of one-sixth of the children of the country might perhaps get a third of a pint of milk a day if their parents could afford to pay for it. I wonder if any hon. Member here who has a child suffering from lack of milk and saw it being given to the pigs would be satisfied with that assurance. Now we find that the children of the poorer Income Tax payers come off worst to-day, because it is not only that they are given nothing, but that their parents are, so to speak, punished for having them, because they would have received a very much more substantial remission of taxation if they had not, comparatively——

Photo of Mr William Mabane Mr William Mabane , Huddersfield

Is the hon. Member suggesting that the parents would receive allowances if they did not have children?

Photo of Miss Eleanor Rathbone Miss Eleanor Rathbone , Combined English Universities

No. I am suggesting that they would have received back a greater proportion of the sacrifice they made in 1931 if they had not had children. I am pointing out that this is not restitution in proportion to sacrifice, but exactly the opposite; it is restitution in inverse ratio to sacrifice. Those who have sacrificed most are getting back least—actually, because they gave least, but also proportionalely least.

The third reply which the Financial Secretary gave was that the Chancellor of the Exchequer had to choose between two things. He could restore the standard rate, or he could restore the rate of allowances, and he chose to restore the standard rate, because he believed that it would give a greater stimulus to industry and that therefore a larger proportion of the community would gain. On that question I speak with some humility, because I do not call myself an expert on industry, but I have listened very carefully to the argument in favour of the proposition advanced both from the Treasury bench and from the supporters behind that bench, and they have failed to convince me. What is the use of giving a fillip to those who are in business by cutting down their taxes if you fail to give the best sort of stimulus of all, and that is a greater demand for the products of industry? I can imagine nothing which would have had a more direct influence upon the demand for the primary products which are suffering from the greatest depression in trade than to put more purchasing power into the hands of the smaller Income Tax payers, the men with families, the unemployed, and all the lower paid people. What would become of the extra £5, £10, or £15 a, year in the hands of those people? Would it not be spent on more coal, more textiles, more dairy produce? If money is put into the hands of the well-to-do or even of the moderately-well-off bachelor, he may invest it, saving up for the future, abroad, or he may spend it on luxuries, but money put into the hands of people with heavy family responsibilities and on the borderline of poverty is spent on the products of those industries which are suffering the heaviest depression to-day—the agricultural industry, the mining industry, and the textile industry.

I do not think anybody who listened to some of those touching speeches broadcast over the wireless by people who explained how they were spending their tiny unemployment insurance, and noted how tragically little they had to spend on the necessaries of life, can have failed to realise how, in addition to the enormous boon it would be to those people if a little more money could be put into their pockets, it would be a very great stimulus to the industries of this country. The same thing on a rather different level is true of the Clause we are now discussing. I realise that we are not going to get that Clause, because, as several hon. Members have pointed out, it would cost a large sum of money. The Chancellor of the Exchequer made his choice. He could have done one of two things, or he could have done half of each. He chose to reduce the standard rate, and he is not likely to go back on that, but there are more concessions that he could have made, and I hope that, before the Report stage, he will consider whether he will not make one or other of them. In the meantime, I think we should be glad to hear from the Financial Secretary to the Treasury a statement which will be more convincing to himself as well as to us than those he has given us hitherto, on how he reconciles the working out of the reduction of the standard rate of tax, unaccompanied by the restoration of family allowances, with the principle of restitution in proportion to sacrifice. I can imagine the effective ridicule that he would have poured upon that inconsistency if he had been still sitting where he sat two years ago on this side of the House.

5.44 p.m.

Photo of Mr Leslie Hore-Belisha Mr Leslie Hore-Belisha , Plymouth, Devonport

We are not concerned here with redressing all the anomalies that may exist under the Income Tax law. We are in this Finance Bill making some restitution to those who made sacrifices in 1931.

Photo of Mr Leslie Hore-Belisha Mr Leslie Hore-Belisha , Plymouth, Devonport

It is with regret only equalled by surprise that I heard the Government represented by the hon. Lady the Member for the English Universities (Miss Rathbone) as actually taking something away from someone. No one is losing anything as a result of this Finance Bill. On the contrary, every direct taxpayer in the country is having his burden reduced by 10 per cent. That, at any rate, is something. I have previously admitted to the Committee that there is room for a legitimate difference of opinion as to whether it would have been wiser to restore the standard rate of Income Tax to 4s. 6d. or whether to restore the allowances to the level at which they stood at 1931. There is a legitimate difference of opinion, and it has been naturally represented in this Debate, which is one of a whole series which have taken place on the subject. The Chancellor of the Exchequer—and he was supported naturally by the Government—took the view that the psychological effect of a reduction in the standard rate of Income Tax would be greater and that the industrial benefits would be more widespread than if he restored the allowances. After all, the allowances affect a limited number of persons, but the standard rate affects all persons. If it could be shown—and it has not been shown—that those in the lower ranges of income with family responsibilities were suffering severe hardships under our In- come Tax code, there might be much, more to be said for the proposed new Clause, but the Committee is aware that, so generous is our system of allowances and reliefs, that of the 8,000,000 people who have incomes within the taxable limit, 4,500,000 are exempt from tax altogether, and do not have to pay anything.

When you come to the individual families such as those whose cause the hon. Gentleman the Member for East Fulham (Mr. Wilmot) has espoused, you find that the burden on them is really extremely slight. It is easy to talk about this matter in general terms, as my right hon. and gallant Friend the Member for Caithness (Sir A. Sinclair) did. It is easy, when you have great rhetorical powers, to paint a general picture of misery and suffering, but it is not the case that the allowances system is unjust. I explained to the House on a previous occasion that it does not seem generally to be realised that a man with £400 a year income and three children pays only £4 10s. a year tax altogether. That is the maximum rate of tax which he can be called upon to pay. It is probable he has an insurance policy and he may be entitled to other reliefs. If he has an insurance policy with a premium of £20 per annum, the sum that he pays to the State is only £2 5s. A man with £500 a year income and three children who has a life insurance policy of £30 a year, makes provision towards the expenses of running the country of only £10 per year.

Photo of Sir Percy Harris Sir Percy Harris , Bethnal Green South West

There is indirect taxation as well.

Photo of Mr Leslie Hore-Belisha Mr Leslie Hore-Belisha , Plymouth, Devonport

We are discussing direct taxation, and the case as represented to the Committee. My right hon. and gallant Friend the Member for Caithness, in a charming and convincing speech, spoke of the principles of graduated Income Tax. Those principles are embodied in the Income Tax law, and it is important to observe, when calling attention to individual cases, that the standard rate of tax is not the effective rate of tax. In the case of the man with £400 a year and three children, the effective rate is 2½ in the £; with £500 and similar responsibilities, 6½d.; with £600 a year, 10d.; and with £700 a year, 1s. 3d. We have to go up to incomes of £4,000 a year before we get to the standard rate of tax, so carefully is the rate of tax graduated from an effective rate of 2½d. to an effective rate of 12s. 1½d. in the £. Therefore, I say that no ease has been made out showing that these people are suffering intolerable burdens.

I do admit that there is much to be said for a restitution of the allowances. It may be that our financial resources of the future will permit us to make it. My right hon. and gallant Friend the Member for Ripon (Major Hills) forecast a Budget surplus large enough to enable us to make part of these restitutions with confidence. It is satisfactory to know that he and my hon. Friend the Member for Huddersfield (Mr. Mabane), who made so well-informed a speech, are so confident of the success of our policy. I do not lack confidence in that policy, but I prefer to know that we have the money before we start to distribute it. There are many claims upon the national resources, and I do not think that anyone can complain if, as a result of such careful husbandry, my right hon. Friend has been able, at any rate, to reduce the standard rate of tax. I congratulate the hon. Member for East Fulham on the persistence with which he has advocated his case, and I hope that such credit as may attach to him may only be postponed for a short time. If in future it should be possible to grant what he asks, we shall only have to look back upon his speeches for all the arguments as to the beneficence of the course we shall then be able to take.

5.53 p.m.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

I am sorry that the Chancellor of the Exchequer has been unable to be present this afternoon in the discussions on the proposed new Clauses of the Opposition. It is an occasion when the Chancellor of the Exchequer generally takes the trouble to be present. I am certain he must be away from the House for the whole evening, because, of course, he will not come in when the Government back bench new Clauses are being discussed, having been absent while the Opposition new Clauses were being discussed. That would not be in accordance with the courtesy with which the Chancellor of the Exchequer customarily shows to the Opposition. I am especially sorry at his absence, because this proposed Clause is one which we consider of great importance, and one which the Financial Secretary to the Treasury always manages to avoid arguing. No doubt he realises that there is no possible argument that can be put forward to support the Government's case. In the few remarks he has just addressed to the Committee he entirely omitted to deal with the fact that these concessions, as they are called, these allowances, were taken away as a matter of emergency in 1931. We are not discussing the question at the moment as to whether or not the whole structure of Income Tax charging is as good or as bad as it might be. We are discussing whether, if some concession is to be made to the taxpayers, it would not be more equitable, in view of what happened in 1931, to make that restoration to those Income Tax payers who are less well off.

No argument has been put forward by the hon. Gentleman to show that there is either justice or common sense in the attitude adopted by the Government. He says that the Government believe that the psychological effect of the 6d. off the standard rate will be more satisfactory. Is the hon. Gentleman satisfied now that it is more satisfactory? I understand that the latest returns from the distributive trades show a falling off of 3 per cent. in the business that has been done in the last month, so that, apparently, a psychological kick has not got through to the distributive trades.

Photo of Mr William Mabane Mr William Mabane , Huddersfield

Is that not solely due to the difference in the incidence of Easter and Whitsuntide this year?

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

I am not certain that it is. Trade does not show any marked increase. I am sure that the hon. Member will be devastated if 6d. off the Income Tax does not have the effect which he has always preached that it will have. All I am pointing out is that you at least cannot prove——

Photo of Mr William Mabane Mr William Mabane , Huddersfield

The hon. and learned Gentleman's figures are false. Let me give thorn for the year.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

I do not wish to have the figures for the year.

Photo of Mr William Mabane Mr William Mabane , Huddersfield

Because they snow 1.7 increase.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

The hon. Member is over-anxious to show his enthusiasm for a reduction in the Income Tax. The fact is that during the last month, which is the only month which could have shown the psychological effect of the reduction, the figures do not show an increase in the distributive trades. You cannot therefore show from that index figure that the psychological effect has been good. It may not prove that it has been bad, but you cannot prove it has been good. I am asking the Financial Secretary whether he is satisfied that, taking the 6d. off the standard rate, has given that kick to industry which would show it had had the psychological effect it was intended to have. There would be a better reaction from industry if these allowances were put back to their original position rather than if 6d. were taken off the standard rate. The 6d. has gone off the rate now, and the question is whether, in addition, it would not be wise, having done that which we think so inequitable as to give to the large Income Tax payer the greatest benefit, to make some concession as regards the allowances so as at least, to try to right the iniquity of which the Government have been accused and of which they are unable to give any reasonable answer or explanation.

The Financial Secretary said that, after all, these people who have not got very much do not pay very much. That is one of the principles of taxation, and we have to examine what they have left to live on which is the material thing so far as the ordinary human being is concerned or so far as the hon. Gentleman himself is concerned. He is concerned primarily with how much he has left to live on, and I think, if he examines his accounts and Income Tax payments, he will find he has very much more left than the gentleman with three children and a wife of whom he gave an illustration, who has £395 10s. a year left to live on. The criterion when you are judging whether a man can afford to pay is how much he will have left when he has paid, and it is no argument to say that a man who is badly off has to pay only £4 10s. a year. That is no criterion as to whether it is fair to charge him that. The question is what he has left over compared with the man who starts with £2,000 or £5,000 a year. If it is examined from that point of view it must be abundantly clear that the right thing to have done as regards this remission of Income Tax would have been to have allowed the remission to those people who are least able to pay, and not to have allowed the large incidence of the remission to go into the hands of those people who are best able to bear the burden of direct taxation. That is the main complaint we have to make as regards the methods which have been adopted by the Chancellor in this matter. We shall certainly go into the Lobby in support of the Clause.

6 p.m.

Photo of Mr William Mabane Mr William Mabane , Huddersfield

May I say one word in reply to the hon. and learned Gentleman, because he has used some figures concerning an industry about which I do not think he has any first-hand knowledge, as I have? Referring to the retail distributive trade, he said the figures for May show a reduction of 3.8. If he had been honest he would have said that the figures for the whole year show an increase. Also, if he had known about the trade, he would have known that every person engaged in the retail distributive trade at the beginning of this year budgeted for a substantial fall in May, solely on account of the difference in the incidence of Whitsuntide; and he would know, further, that the returns for the early days of June show a substantial increase in retail distribution throughout the country.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

The hon. Gentleman does not yet appreciate the point which I made. Perhaps he will when he reads the OFFICIAL REPORT to-morrow—if he is careful. The early figures of this year have no bearing whatsoever on the effect of the Budget. Even the distributive trades are not so clever as the hon. Gentleman, and they could not foretell what was going to be in the Budget. All I said was—and it is a perfectly obvious fact, I should have thought—that no figures published since the Budget show any psychological reaction in the distributive trades as a result of the reduction of 6d. in the Income Tax.

6.3 p.m.

Photo of Mr Frank Griffith Mr Frank Griffith , Middlesbrough West

I think that the Financial Secretary to the Treasury, in presenting the psychological effects of different forms of taxation, has not shown an acute psychological sense himself. He says that the Government are not taking anything away. I put it to him that when, at a very recent date, comparatively, people have had something taken away from them, and when the time for restoration comes that restoration is not made on a strictly proportional basis, the effect on the people of not getting what they conceive to be their due is precisely the same as though they had had something taken away at this moment. I think that should always be borne in mind. A point made in an interjection by the hon. Baronet the Member for South-West Bethnal Green (Sir P. Harris) was treated very much too lightly by the Financial Secretary when he was talking about the case of the man who pays £4 10s. He ought to remember the indirect taxation that is paid, because if we are treating a class who, before we come to direct taxation, have already paid out of their incomes a very large amount, proportionately, in indirect taxation, it becomes a question at once of whether these particular people can afford to pay anything else at all. That must be borne in mind.

I am very glad that the principle of this Amendment has the support of the right hon. and gallant Member for Ripon (Major Hills) and the hon. Member for Huddersfield (Mr. Mabane). I want to ask them through you, Sir Dennis, where they stand now that this Amendment has been refused by the Financial Secretary to the Treasury. I sympathise

with him, because when things have to be refused it is he who refuses; when things are to be granted, they are given by the Chancellor of the Exchequer. He is like the parson's wife in "Candida." By his refusal of this Amendment he has undoubtedly turned down the Amendment under the names of my hon. Friends opposite which appears later on the Order Paper. They may say that the hon. Member on this side was opening his mouth too wide, and that they are more modest, but it is clear that the Financial Secretary is not going to put anything into anybody's mouth in this matter, and I hope they will see that now that the whole principle for which they contended has been turned down, there is only one course for them to take, and that is to make some effective protest. The weighty words of the right hon. and gallant Member for Ripon were that the social balance of this Budget is wrong when it is taken into consideration with leaving the debt on the Unemployment Fund. That factor still remains, and if he regards it as a matter of first-class importance, I hope that he and the hon. Member for Huddersfield will show their disapproval in the only way possible in this House.

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

The Committee divided: Ayes, 57; Noes, 301.

6.15 p.m.

Photo of Mr David Kirkwood Mr David Kirkwood , Dumbarton District of Burghs

On a point of Order. I would like to know why you are not at this stage calling my new Clause—(Reduced rate of Entertainments Duty)? I understand that another new Clause is to be called later on, but why should that be so when ours was the first, according to the Order Paper? I am informed on high authority that a new Clause on page 1372 is to be called, but we are only now at page 1362, that is, a difference of 10 pages.

Photo of Lieut-General Edward Fitzroy Lieut-General Edward Fitzroy , Daventry

The only reason that I can give the hon. Member for Dumbarton Burghs (Mr. Kirkwood) is that his Clause is not selected. If he were in my place he would appreciate that I can give no reason for that. Perhaps I may tell the hon. Member that probably—at least, it is the present intention of the Chair to select another new Clause on the same subject later on, and the hon. Gentleman may then be able to present his views.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

Are the Committee to understand that the question of the Entertainments Duty will be discussed at some time during the Committee stage?

Photo of Lieut-General Edward Fitzroy Lieut-General Edward Fitzroy , Daventry

It is quite impossible for me to say certainly; it depends upon how long hon. Members take in discussing other matters. It is certainly the intention of the Chair to take one new Clause dealing with that matter.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

May I respectfully suggest that if an official Opposition Amendment is down on the point there is a custom that that Amendment should be called in preference to a similar back bencher's Amendment from the Government side?

Photo of Lieut-General Edward Fitzroy Lieut-General Edward Fitzroy , Daventry

No, we do not recognise anything of the kind. Selection lies with the Chair, and I cannot recognise any such restriction on that right. There is a method adopted by the Chair and well recognised by those who have occupied or do occupy the Chair at the present time, and that we follow to the best of our ability. Perhaps I may add that I did not realise that the hon. Member for Dumbarton Burghs was one of the people whose names are understood to mean that any Amendment to which they appear is an official Amendment of the Opposition.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

On that point of Order. Would you be good enough to elucidate for future reference actually what is implied when you say that you do not recognise the hon. Member for Dumbarton Burghs (Mr. Kirkwood) as part of the official Opposition?

Photo of Lieut-General Edward Fitzroy Lieut-General Edward Fitzroy , Daventry

I did not say so. What I meant was that the hon. and learned Member for East Bristol (Sir S. Cripps) spoke of an official Opposition Amendment, and I always supposed that that meant an Amendment moved by or from the Front Opposition Bench.

Photo of Sir Percy Harris Sir Percy Harris , Bethnal Green South West

Might I raise another point of Order on the Ruling which you have just given? You said that a discussion of the Entertainments Duty depended upon the amount of time taken on other new Clauses. Is it suggested that whether you select a new Clause or not depends on how long we take over the Debate? We might have an extra day given to us.

Photo of Lieut-General Edward Fitzroy Lieut-General Edward Fitzroy , Daventry

I really cannot allow a continued discussion under the guise of points of Order on the duty of the Chair in selecting Amendments. The answer to the hon. Baronet's question is rather obvious. To put an extreme point: if the new Clause which I am now calling occupied the rest of to-night and the next new Clause occupied most of to-morrow night, there would be no time for many others to be discussed.

Photo of Sir Percy Harris Sir Percy Harris , Bethnal Green South West

Is it not exempted business, and could we not carry on a discussion all night?

Photo of Sir Percy Harris Sir Percy Harris , Bethnal Green South West

Further to my point of Order. This is a very important question of principle. You have ruled that whether a Clause is to be called or not depends upon the amount of time taken over a particular Clause.

Photo of Lieut-General Edward Fitzroy Lieut-General Edward Fitzroy , Daventry

I have not ruled anything of the kind. I was stating what I thought was a fairly obvious fact, that I cannot take more than a certain number of Amendments. I am quite aware that this is exempted business. Perhaps I was wrong in not going more meticulously into the matter. I am afraid that the whole of this discussion clearly shows the evil of allowing a discussion on a matter which it is contrary to the procedure and practice of the House to discuss.

Photo of Sir Lindsay Everard Sir Lindsay Everard , Melton

On a different point of Order. May I ask for your guidance. We are now about to deal with an Amendment dealing with the relief of duty on hydrocarbon oils. There are various other Amendments relating to the remission of that duty, particularly dealing with civil aircraft and other branches of industry. Would it be possible to allow a general discussion on the first Amendment.

Photo of Lieut-General Edward Fitzroy Lieut-General Edward Fitzroy , Daventry

I am afraid that I cannot allow a general discussion on any particular new Clause to go outside that Clause.