I beg to move, in page 37, line 27, at the end, to insert:
but not including articles made wholly or partly of rough-tanned, undyed sheep or lamb skin with wool attached, and designed specially for industrial use.
This Amendment and the next have real substance in them. This Schedule gives a list of articles chargeable at the higher rate, and one would naturally have assumed that apparel made of fur or lined with fur, including any skin with hair or wool attached, was in the luxury class. Since the Bill was introduced it has been
brought to my right hon. Friend's attention that there are certain types of industrial gloves made of rough sheep skin which would be caught under this unless we exempted them. I understand that they are especially designed for certain purposes, both agricultural and industrial. They could not be counted as luxuries. Secondly, there is a certain type of industrial wear, both head-gear and footwear made of sheep skin or lamb skin fleece, which will be given exemption under these Amendments. They are clothing, apparently designed for workers in refrigerating chambers. Everyone would wish them to be exempted and not to be counted as luxuries.
I beg to move, in page 37, line 31, at the end, to insert:
but not including headgear or gloves made wholly or partly of rough-tanned, undyed sheep or lamb skin with wool attached, and designed specially for industrial use.
While I think these words are very necessary, because enormous quantities of gloves are used for industrial purposes, in the main they are not made from sheepskin. I wish it had been possible to include some other words which would have embraced industrial gloves made from rough-tanned leathers other than skeepskin or in addition to sheepskin. Industrial gloves made from sheepskin have only a low tensile strength and there are enormous quantities of industrial gloves made from leathers other than sheepskins which have a much greater tensile strength.
Are they with wool attached? I am not sure that I take my hon. Friend's point because the definition is of "rough-tanned, undyed sheep or lamb skin with wool attached." I do not take it from what he says that the gloves he mentions have anything corresponding to wool attached to them.
I do not think the hon. Gentleman understands the position. The increased duty is being placed on certain kinds of gloves, but the gloves to which he refers are not in that category. Therefore, this Finance Bill does not increase the duty on them. All that the Amendment does is to exclude some of those that are now included in the Bill so that they shall not suffer any penalty. The gloves to which the hon. Gentleman refers are not in the Bill and it was never suggested that they should pay the extra duty. Therefore, his point is already met without further Amendment.
As there have been so many complaints from time to time that too much of the time of the House is occupied from this Bench, it was proposed that on this occasion I should merely nod to indicate that I moved the Third Reading and that my right hon. Friend would make any observations required at the end of the Debate.
It is a pity that the Chancellor is not here. The Third Reading of the Finance Bill is the Third Reading of a rather important Bill, and the Chancellor ought to be present so that any comments that there may be should be made in his hearing. I have not much criticism to offer either of the Chancellor or of the Bill. On the contrary, I think that the way in which the right hon. Gentleman has handled the finances in the past two years is a matter for which he should receive congratulations. He has been very courageous. The imposition of very high taxation such as he has introduced in the past two years requires a certain amount of courage, even though the House has backed him up well. Now that the Chancellor has arrived I would like to repeat my congratulations. He does not often get congratulations from me and I say behind his back things that I would never dream of saying to his face.
There is one point, however, at which his courage seems to have broken down. It was when he found himself face to face with the clerks to the Income Tax Commissioners. No Chancellor has been more ruthless in facing vested interests than the present Chancellor. Excess Profits Tax at 100 per cent. and the enormous taxation which he has imposed upon incomes and on beer and tobacco, two substances very dear to the public of this country, show the courageous way in which he has tackled his problems. When, however, he is face to face with a tiny body of individuals, who are really very insignificant, whose functions are purely historical and very obstructive to the machinery of Income Tax, he says that his proposals are all he could achieve by agreement. Why should he agree to small obstructive vested interests in war-time?
If you will turn to the Tenth Schedule, Mr. Deputy-Speaker, you will find the result of the agreement between the Chancellor and the clerks to the Commissioners dealing with the Income Tax machinery. The whole of that Schedule, as the Chancellor said on the Committee stage, is the outcome of an arrangement between the General Commissioners of Income Tax and himself.
That seems to me too weak a peg on which to hang the rather heavy attack in which I imagine the hon. Gentleman was about to indulge. If he confined himself to the agreement it would be another matter.
I was going to point out that the agreement is inadequate and that it is a point on which the Chancellor's courage has broken down very badly. I do not propose to reopen the whole subject for I said my say on the Committee stage, but I want to temper the congratulations I have given to the Chancellor on his handling of our finances with the statement that I am grievously disappointed with him on this small point.
I should like to join my hon. Friend in congratulating the Chancellor not only on the Bill but on his handling of the various stages of the Bill in the House. I do not think it is necessary at this stage to make any further general remarks. We are getting accustomed to large figures. I see that in the United States they reckon that their annual bill may run into what is equivalent to £10,000,000,000. Therefore, we are not very far short of half the figures for the United States. Considering that our population is well under half theirs, and that our general wealth is less, I think we are facing the burden with great courage and perseverance. There is one question I would like to ask the Chancellor. Under this Bill he is imposing upon manual workers the same Income Tax as last year, but he has told us of certain alleviations he proposes to make in the collection of that form of revenue this year, and I should like to ask him whether he is in any way extending those alleviations beyond what has already been announced. With that, I take my farewell of this Bill, of which I do not think anybody is particularly enamoured but which we all accept as part of the price that must be paid to ensure the liberties of this country.
Whatever may or may not have been said about this Bill in the course of its passage through the House, we are all agreed in expressing our good will and thanks to the Chancellor of the Exchequer for the way in which he has piloted through what is, after all, an extraordinary Measure. I imagine, too, that he would express his thanks to all sections of the community for the way in which they have stood up to, or at least not been borne down by, the extraordinary range of exactions which he has been obliged to place upon them. When we consider the nature of those burdens I think it is remarkable that they have been borne with so little complaint and so little Parliamentary criticism. We know that an Englishman regards himself as possessing two inalienable rights, one, his liability to Income Tax and, second, his right to grumble about it. Having regard to the large number of people mulcted, the Englishman has accepted the Income Tax in a remarkable way, and in view of the very real difficulties which were disclosed in the working arrangements the small volume of criticism has been remarkable and a matter for which we ought to express our thanks. I think the Chancellor has said that he would make a very careful review of the administration of the Income Tax in the case of weekly wage-earners to see whether, as time goes on, some better and easier method may not be evolved, and I trust that he will give that matter his attention. The concessions embodied in the Bill with regard to the taxation of the earnings of wives have been much appreciated and have facilitated the collection of the tax and the smooth working of our finances.
If these unparalleled financial burdens have been borne by the country so cheerfully—they are, none the less, felt to be no small burden in multitudes of cases—it is because the country feels that in general the outlay of our Budget is just in that it imposes heavy taxation upon luxuries and provides subsidies for some of the essential articles of food and has kept inflation away from the centre of our economic system. It is true that there may be inflation on the fringes, but as long as it is kept there it will not do any serious amount of harm. Further, I think the country approves the decision to maintain the Excess Profits Tax at its present rate, although with some feeling that there are some injustices which remain, but I do not know that the country has fully realised just how far war profits have been controlled and the fact that in general no war profits are being made by industry. In truth, large sections of industry are making less by way of profit than before the war. As an example of that I may mention the iron and steel trades.
That makes me a little doubtful whether some of the Chancellor's more optimistic forecasts of revenue may be realised. I think it is a habit of his Department to under-estimate rather than to overestimate, and I hope they have not departed from that habit, because without any question industry is coming to have less taxable profits than before the war, and, of course, equity capitalists have not benefited in the course of this war. The country wished that to be so and it has been accomplished. In 1938, with Income Tax at 5s. 6d. in the pound, if my memory serves me correctly, the amount distributed in dividends to equity shareholders was some £38,000,000. In 1940 that sum had fallen to £21,000,000, and I shall expect it to fall further. That fact does not seem to be fully appreciated throughout the country, and I think it as well that it should be.
There is one other matter on which it would not be out of place for me to say a word or two, although it has been mentioned before, now that we are taking leave of the Finance Bill. I refer to the simplifications which we have been able to make in our national finances as a result of the very great aid we have received from Canada and the United States of America. The wise and I would say far-seeing combination of ideas and sound regard for our future relations which have prompted this generous treatment is not always realised. It is not merely the case that it has made our finances simpler and easier, but it does show a new spirit of co-operation in the financial sphere which I have no doubt will remain when the war is over and will make the prospects of the peaceful development of the world very much greater than would have been the case if no such foundations had been laid. I notice with very great satisfaction that this new financial spirit of co-operation is being extended by the inclusion of other countries in the Lend-Lease arrangements. If we had fought this war with a disregard of future finances, I think the problems of peace might very well be such that we might have felt that it was impossible to face them, but wisdom and generosity, the spirit of the good neighbour and the co-operative family spirit, have been displayed at a very high level of sagacity by the United States, by Canada and I think by ourselves. I trust that not only between those countries but between them and others as well there will be a new standard of financial cooperation after the war. It has been made possible by those who first took the initiative in these international relations.
I think we have cause for satisfaction, in so far as there is satisfaction to be obtained from the Finance Bill and the Budget. I do not think that anybody who had been asked what our finances would be like after three years of war on this scale and at this cost, would have believed it possible that our financial transactions would be proceeding so smoothly and on a basis which did not impair the possibility of their being soundly conducted in future. For the rest, we must proceed on the lines that have been laid down. The policy is still to be one of self-denial in regard to every article of consumption. The Chancellor of the Exchequer is in the position of saying, "Heads I win, tails I win also," and having succeeded in producing his revenue by taxes and curtailing consumption, he has performed a useful service to the country. I think we can again thank the Chancellor of the Exchequer for the way in which he has conducted our finances during the past year.
It is not my intention to pursue the general topic of the Finance Bill on this Third Reading, but to hark back to points which have previously arisen and on which some light has been thrown since. It will be remembered that on the Second Reading I was one of those who urged the Chancellor to give consideration to the suggestion that the funds of trade associations dealing with export matters should be exempt from the operation of tax. The hon. Member for Northampton (Mr. Summers) put forward an Amendment which the Chancellor, in very polite and charming tones, turned down, as I expected he would. We understand his reason, which was that he could not agree to free any reserves whatever from taxation because, if he, did so, he would open the door too widely. Others would take advantage who might not have the claim that we feel we have in this particular matter. My hon. Friend the Member for Pudsey and Otley (Sir Granville Gibson) made a statement then which surprised us to a certain extent and which surprised the Chancellor also. He told us that there were ways and means of doing that and that it has been arranged by other trade associations. It was news to us. Since then we have gone into the question, and we find that, as one would expect, my hon. Friend was stating facts, and those facts, apparently were unknown to the Chancellor. As apparently such arrangements have already been made, I would like to ask the Chancellor whether some way cannot be found of achieving our object of helping export trade funds. I would like him to give consideration to any proposals which may be put forward, by which these funds could be earmarked—paid over completely to an outside organisation—and then used for the purpose of assisting our export trade when the time comes.
I bow to your Ruling, Mr. Deputy-Speaker, and I will say no more about it. The other point I raised, which certainly is in the Finance Bill, was the question of the taxation of weekly wage-earners. I made certain statements with regard to inquiries I had made and afterwards some of the hon. Gentlemen who as a rule sit near me came to me and asked whether I knew what was being said in Glasgow. I had to admit that I did not, and on this occasion I shall make it clear that I am not transgressing by saying what Scotsmen would wish to say, but am speaking purely as an Englishman and of the industry in England with which I come into contact. Since that date I have made some further inquiries, and I find that the statements I made then have been borne out in the time that has elapsed. The concessions which the Chancellor has made are appreciated, and the agitation against the deduction of tax is dying down. I do not say that people like it; I do not think anybody ever likes paying Income Tax, and I am quite certain that the weekly wage-earner who has never been used to it, has not got used to this new habit yet. But I have made a considerable number of inquiries, and I find that the statements I previously made are borne out by the facts. There are cases of hardship and other special cases, but these all seem to be due to some delay and to the fact that the period during which deductions are made is short. I hope now that the collection of the tax has settled down, the special cases will be dealt with and that delay will not occur in the future, because I believe that if we can keep it up to date, the weekly wage-earner will, in view of the concessions which the Chancellor has made, as time goes on become more or less resigned.
I am still receiving a certain number of new schemes, and I hope that the promise which the Chancellor made that he would examine these new schemes and would work with the T.U.C. and the Employers' Federation to look for a more ideal scheme still stands, because I am passing them on to him. I am receiving a certain number of letters from people who are rather annoyed and who cannot understand why their pet scheme has not been adopted. I feel sure that if an ideal scheme does come out, the Chancellor will be just as pleased as the rest of us. In this connection I was a little disturbed to hear from one of the Revenue staff associations, who seemed concerned that their pet schemes were not being considered by the Chancellor. I am very fond of the Revenue authorities for a reason which perhaps is not usually appreciated. I find that they are very helpful if you are in trouble or difficulty. My mind goes back to a period in the last war when we had the Excess Profits Duty and did not quite understand it. I was told then by an Income Tax inspector that his duty was to see that I was fairly treated; not only to see that he got from me all that the Revenue was entitled to, but also that I did not pay a penny too much.
I found that that was the attitude adopted whenever I or my people went to them with problems. I was, therefore, a little concerned to find that they were coming forward with some schemes of their own and, when they did not get them adopted, they were publishing the fact in the Press and by circular. I believe the Chancellor will find some ways and means by which this can be made unnecessary in the future. The Inland Revenue authorities, like the rest of the Civil Service, should be an organisation which impartially serves the State and which does not have to come into the arena and take sides. This House can do all that is necessary in that respect. I am not criticising what was said, but it seems to me that there might be possible danger if that sort of thing grew in the future.
There is one other suggestion that I want to put to the Chancellor. I hope he will hurry up with the certificates. I have been inquiring into this matter and I find that wage-earners are still a little dubious as to what they are to get on account of the post-war credit. I should have liked to see them have a card on which they could put their stamps week by week and watch the total mount up, but if that is administratively impossible, I hope the Chancellor will hurry up and get the promised certificates into their hands at the earliest possible moment. I am told everywhere that this would have a great psychological effect upon the minds of the wage-earners who are paying Income Tax for the first time. We are all human, and when we get indefinite promises we do not know what to make of them. It is very much like a man promising to remember me in his will. I should, no doubt, be properly elated at that, but I should not know what it was going to amount to or when it would come. On the other hand, if he told me that every year he would put a certain sum into my bank account, I should be able to see it mounting up and should feel much better about it. Instead of a pious hope, I should have a little nest-egg. I want to see the men handling these certificates and feeling that they are getting a definite nest-egg put away. It would remove much of the irritation which is undoubtedly caused by their having to pay Income Tax.
It seems common form to start speeches in this Debate by offering congratulations to my right hon. Friend. I certainly join with those who have spoken to the extent of congratulating him on the reception which he has had and the way in which he has got his Measure through the House. He knows that I differ from him on certain points on which I will venture to say a few words to-day. We are now at the stage when the curtain is rung down on one of the acts in our annual drama, and perhaps it is legitimate to make two observations on the general nature of our discussions. I will only mention them, since to discuss them would be out of order, but I would ask my right hon. Friend to bear them in mind when he introduces the next annual financial programme—and I feel sure that it is he who will do that—next year. The first point is that we never have an opportunity in this House to discuss national expenditure as a whole. The House ought to discuss that and I am sure the House wants to. The second point is that we never get an opportunity to discuss general economic policy. My right hon. Friend is entitled in his Budget speech to make references to what he is doing, for example, to avoid the danger of inflation, but we, as Members of this House, do not get an opportunity to discuss the general programme which is being followed by the country to win the fight against inflation. We certainly shall not succeed in that fight unless all our measures are concerted together or unless they are complete and comprehensive. I hope that my right hon. Friend will assert himself as head of the Treasury and will ensure that the Treasury takes a live and leading role in both those matters. I am, indeed, not satisfied that the Treasury is exercising that supra-Departmental authority which it ought to exercise to see that we are getting real value for our money, nor am I satisfied that the Treasury is able to carry out a comprehensive and complete policy to resist the danger of immoderate inflation. As regards expenditure and seeing that we get value for our money—
I beg your pardon, Mr. Deputy-Speaker. Perhaps I have said enough. I hope that my right hon. Friend will bear in mind what I have said and will give us a full review of national expenditure as a whole, showing where the money is going, when he presents his White Paper next year.
I want now to turn to matters which are directly concerned with the Finance Bill. I agree with all those who have said that we must take without complaint, and even with pleasure, the maximum possible burden of taxation. On the other hand, I feel, as my right hon. Friend knows, that there are certain aspects of his present scheme of taxation which are objectionable on two grounds. The first is that the way in which excess profits are now calculated for the purpose of attracting tax is liable to do very great injustice as between one class of taxpayer and another. My second point is that the way in which liability to Income Tax is at present assessed may do grave harm to the financial structure of business in this country and may be leading to unsound practices. When taxation reaches the levels which it has now reached, all these problems take on a new significance. It is the duty of my right hon. Friend, as guardian of the national financial interest, to have these matters inquired into. I may be wrong in this matter, but I have a strong impression from all that I see and hear, that the combination of Excess Profits Tax at 100 per cent. with the present very high rate of Income Tax is likely to be doing harm to the industrial structure in which we are all interested, and may be setting up reactions of an undesirable nature. These matters ought to be inquired into.
I would again urge my right hon. Friend, as I have urged on him several times before, for a considerable period, that he should appoint a small expert committee to inquire into these matters. I believe he has some fears that this is politically a dangerous subject to handle. I do not believe he is right about that. Everyone wants to see war profits eliminated, but I do not believe that Members on the Benches opposite want to see injustices done or practices started which will undermine the financial soundness of British industry. Therefore I should be willing, if I had to appoint the committee, to take all its Members from the Benches opposite. I believe that those Members would look into the matter fairly. I will be a little more specific than I have been hitherto. I should like to see a very small committee. I would like my right hon. Friend to appoint, as chairman of the committee, somebody like Mr. Justice Uthwatt—who has already done very valuable work for him in other fields. The chairman might be aided by two members, one to represent the Labour Party point of view, and one with a knowledge of industry, and perhaps two expert accountants as assessors. The questions which ought to be put to such a committee are something like the following—
I bow to your Ruling, Mr. Deputy-Speaker. All I wanted to make clear was that we in this House should discuss these matters with full knowledge of what is happening as a result of the present taxation, its effects on the finance of industry, the reactions which it may be setting up in business practices, in methods of tax evasion, undesirable practices of extravagance, and so on. These are the sort of points into which I think an expert inquiry is extremely desirable and extremely important in the national interest.
Finally, I would appeal to my right hon. Friend not to take the view that whatever is happening now is not of much account because it is temporary and only likely to continue for the duration of the war. I am quite convinced that we are embarked on a period when taxation of industry will be necessary on a scale such as we have never known before, not merely for the duration of the war but for the period which follows. The nation will insist that a large proportion of the national income is to be devoted to public purposes, and that will mean very heavy taxation for as long a time as we can foresee. I would not resist that or regret it, but it does mean that it is extremely important that taxation should be levied on a basis completely fair between one class of taxpayer and another, and assessed in a way which does not tend to the definite encouragement of unsound business practices. I hope that my right hon. Friend will give his attention to these matters in the months which will elapse between now and when he begins to consider his financial measures for 1943.
What I feel with regard to this Budget is that very many important concessions are being made that could be avoided. On Thursday last I obtained from the Chancellor of the Exchequer an answer that, in view of the omission to tax the lowest priced seats in cinemas and elsewhere, the Exchequer would be losing £750,000 a year. Yet when the tax on other seats is being doubled, he has refused to increase the tax on these lowest priced seats. I have been a frequenter of the sixpenny seats all my life. [Interruption.]Oh, yes, I like to see the people around me enjoying themselves. I am sure that all with me in those seats would have been delighted to pay an extra halfpenny or three farthings to the Chancellor of the Exchequer, and it seems to me an extraordinary thing that if people are willing, for their own pleasure, to go to these picture houses, from which they could refrain if they liked, they should not pay their share of taxation.
A further concession which has given me the greatest cause for reflection and anxiety is the proposal of the Chancellor of the Exchequer to raise the limit of exemption of married women earning wages from £45 to £80 in connection with Income Tax at a cost of £25,000,000. What I am afraid of is that you are thereby setting up a privileged class. We have so often heard from our friends beside me of the necessity for equality of sacrifice. You are creating here a vested interest. May I call attention to the very valuable White Paper which in this connection the Chancellor has issued. He points out in Table 2 that in the case of a married couple, where the husband is earning £150 and the wife is earning £100, at present they are paying £13. Now he proposes that henceforward they shall only pay £1 12s. 6d. Take a second case, that of a husband earning £175 and the wife £100. At present they are paying £20 6s. 3d., and the Chancellor proposes that in future they should only pay £8 19s. 9d. I have listened to the speeches made on this subject, and I must confess that I have not heard any expressions of gratitude for these most costly and extravagant concessions. On the contrary, I have observed that they are simply being used as a spring-board to extort still further concessions from the Chancellor of the Exchequer.
If we consider what we were told last Sunday after the 6 p.m. B.B.C. news, that the total of voluntary subscriptions made to the Chancellor of the Exchequer, plus loans without interest, amounts to less than £20,000,000, which is, of course, an immense sum, does it not seem an extraordinary thing that by this single concession the Chancellor should be throwing away an additional £5,000,000 by giving up a revenue of as much as £25,000,000? Look at it from another point of view. Northern Ireland is contributing at the present moment more than half her total revenue towards the war, that is to say a sum of £21,000,000. She is making this heavy sacrifice, and yet that sum of £21,000,000 is exceeded by £4,000,000 by the concession which the Chancellor of the Exchequer is now making. May I call attention to this: When under the Act of 1920 the contributions of Northern and Southern Ireland were fixed, Northern Ireland was called upon to pay £8,000,000, and Southern Ireland £10,000,000, a total of £18,000,000. Now Northern Ireland alone is contributing the immense sum, for a small country of 1,200,000 inhabitants, of £21,000,000. Surely it is discouraging to find that by setting up this vested interest the Chancellor is sacrificing more than this vast sum by making a concession costing £25,000,000. Many of us, I am sure in fact all the Members of this House, have been doing our utmost to forward the scheme of war savings weeks. It was a great joy to me to hear in the broadcast on Sunday of those towns in Northern Ireland like Ballymena and others contributing such generous sums. But speaking at those meetings I should have an easier conscience, I should feel that I could do it with greater enthusiasm, were I convinced that the Chancellor of the Exchequer had not so lightly made such an unnecessary concession as this £25,000,000.
I cannot help feeling that the Chancellor of the Exchequer himself profoundly regrets the concessions to which he has been forced. I believe that in his heart of hearts he must deeply deplore having to sacrifice this stupendous sum of £25,000,000, and I venture to express the hope that posterity will not attribute to the Chancellor of the Exchequer the melancholy confession of the great poet Ovid when he said—
The discussions at this stage of the Bill have made clearer than ever before that it is production and its proper allocation as between the war effort and the vital needs of the people which is the real problem we have to face, and that finance itself takes a secondary place. The Chancellor is chiefly concerned, by means of the taxes embodied in this Bill, and the powers given to him in this Bill to borrow money from the citizens, to remove from their personal use the redundant purchasing power which might otherwise be utilised to create an undue demand for the limited goods available. That, I think, is the basis on which the Chancellor has worked. Control of prices and rationing will help him but one cannot urge strongly enough that control should be as universal as possible. An attempt to limit spending power—or, at least, to prevent further increase of consumption—and at the same time to obtain a greater return to the Treasury, is seen in the increase in the Tobacco, Wine, and Spirit Duties. The realisation that goods, and not wages, are the real things that matter is daily becoming more prevalent among our people, especially in the case of women. This Bill actually emphasises that point. The housewife is becoming probably more conscious than ever before that it is not the weekly sum which her husband brings home that matters, but the amount of essential goods that she can purchase. She will haggle to the last halfpenny in the market place in order to meet her essential needs.
The Chancellor has had two main problems to consider. First, he has had to say how much taxation he must apply to the present taxpayer, and how much he has it in mind to extract by borrowing from the citizen, with the accompanying problem of how much taxation he must leave to the future taxpayer. That is the first problem. The second problem which is embodied in this Bill is one which I would like to make the basis of my few remarks. The Chancellor has had to see that the withdrawal of purchasing power does not react unjustly on any one part of the community, or leave it unable to get a fair share of the limited quantity of goods available or to meet its essential commitments. These two problems bristle with difficulties. The Chancellor, for better or worse, has elected to meet them on the lines embodied in the present Bill. He has an unenviable task. I have always, secretly, had deep sympathy for him, in spite of my occasional, but, I hope, friendly, demonstrations. I have never been one of those who have showered congratulations upon him, but I shall add my tribute in this way. One thing is certain: in spite of all criticisms, the right hon. Gentleman has so far enabled us to proceed without that catastrophic inflation which might have been a death knell to our war effort, or, at any rate, made the annihilation of the evil beasts which stalk through Europe and the Far East doubly difficult. I believe that, with this Bill, he will still maintain our nation on an even keel.
May I return to the two problems with which I think the Bill is concerned? I leave the more contentious one of borrowing. We shall have plenty of opportunities, no doubt, to discuss that in the course of the year. I would like to turn to the second problem, that of the equitable distribution of the burden. I would like to call attention to that part of the Bill which allows an assessment to be made on the current year if the proceeds of a trade or profession have dropped by 20 per cent. on the preceding year, on account of the war. I do not think that this Clause is as just and equitable as it appears to be. But there are many people, professional people and business people, who have not had such a drop in one year, but who during the first year of the war, on account of evacuation or of enemy attack, have seen the areas in which they worked become depopulated, and whose proceeds have dropped in the first year by perhaps 18 per cent., in the second year by another 18 per cent., and in the third year by say 15 per cent. That is to say, their income since the war began has dropped by over 50 per cent. Yet they are unable to have their assessments made on the current year. The result is that many of these comparatively small people, to whom we owe so much, have had their assessments made up from April of this year and have to pay next year on incomes at least, perhaps, one-third less than those on which they are assessed. That means that they are assessed at not 10s., but 13s. or 14s. in the £. It is useless to say that as the years go by they may have the benefit of a low assessment. They may not be in this world to receive it.
It is wrong to joke about this matter. For those people this is a very serious and tragic affair. When there is suffering in another class of the community, the hon. Member is the first to talk about it and advocate a remedy. I would like also to refer to the small rentier, who will suffer under the present Bill, and who has suffered since the war began. Take the person with an income, perhaps out of a small investment, of, say, £200 a year, who is aged 60, and who has worked hard all of his or her life. Perhaps if a woman, she is unmarried, and has no one to look to for help. That person is hit very hard. They belong to one of the most loyal classes in this country. Here is a letter from a very intelligent woman. I will read some of it, because I think it is important:
Will you take up another and more vital theme, the case of women, and men too for that matter, of over 60 who cannot earn and whose fixed incomes up to £200 are so cut down by taxation that they have in many cases fallen below a living possibility. This is really a very serious matter. It affects in the main women of the educated classes, all of them accustomed to a standard of living above that of the labouring class.
I say, quite openly, that I agree with that. If you have had a standard of living
for over 60 years and you are suddenly called upon to alter it it is a very serious thing. Let me read on:
This is not their fault and they should not be penalised for it in their old age. They seem to be put aside from reasonable and sympathetic consideration. This is unjust, and it is absolutely begging the question to make assertions in reply to Members, suggesting the 'patriotism' of these unfortunates is concerned or that they would be far worse off in some other country. We are not in other countries but are only concerned with facts. The rise in the cost of living has to be reckoned with and the fate of these people is tragic. For years my Income Tax rebate was £50 annually. Last April it was £3 18s. 6d. ! I own a small house, which I have been compelled to let, in order to exist at all. I cannot get the most modest accommodation under £3 a week and I still have to pay high rates on my house and compulsory War Damage Contribution, insurances and do repairs. I have absolutely nothing for doctor, dentist, essential repairs or renewals of clothing. Until the war I earned something by freelance journalism, a source of income washed out by the curtailment of the papers. There are a great many in the same predicament, for whom life holds so little now, elderly people who have lost their security and are frightened.
I do not want to hurt the Chancellor by reading the whole of the letter, but she adds:
The country's need would not really be affected if the free allowance was restored.
I am afraid, Mr. Speaker, you would object on the Third Reading of this Bill to this being put forward as a proposal, but, nevertheless, if the Chancellor of the Exchequer should bear in mind in the coming year the restoration of the free allowance to £100 instead of £80 to those of limited incomes, such a concession would be a mere flea-bite in the cost of the war. This letter asks Members of Parliament to help people in the position I have indicated. I am sorry to have had to read that letter at such length to the House, but it relates to, and seriously affects, a special class. The Chancellor of the Exchequer has given concessions in many other directions. He has given a concession to married women, and perhaps he will clarify the position and say whether married women will get relief only if engaged in industry? I ask him if he will make a note of that. Does it apply to women who are professionally engaged? He has given relief to all sorts of classes, to the wage-earners, and in regard to E.P.T. at the end of the war and so on, and I suggest that he should now look into these matters in regard to this class of persons whose income has
dropped and who are paying heavy taxation. He should bear in mind another point. Even people who qualify for a current assessment are often asked for their full instalment of tax in January. I know that this is a matter of administration, but he might very well inquire into it. Very frequently in January they have difficulties in doing so, and they are very hard put to it to meet the whole of the tax at that time although they may even get a repayment in July.
I would appeal to the Chancellor of the Exchequer, on the Third Reading of this Bill, which will so soon become the law of this land, to remember, in his administration of the Act, these two classes of people who strong in character and self-respect are weak in their representation in this House; who have, on the one hand, no great combination to represent them, and on the other, no great industrial and financial interests. These are classes of the community who in sturdiness and intelligence have contributed much to make our country great, and who, with self-denial and sacrifice, have given their sons freely for the ruling and building of this great Empire; helping those at home to grow rich, and thereby enabling others to obtain work. I ask the Chancellor, who, I believe, probably feels at heart much as I do, to give instructions to his officers throughout the length and breadth of this land, to his collectors and inspectors everywhere, that in these cases after proper and kindly investigation, not to allow their bailiffs—those men who by long usage of their employment have, perhaps, lost that delicacy of feeling which ameliorates man's intentions, and softens his actions—to be too eager to distrain on the meagre goods of these helpless people, thereby crushing in their hearts the gentle and noble sentiments which not even victory itself will revive. The question is not one entirely of figures—that I think is clear. It is one of arranging our affairs as a nation, as justly and as evenly as possible, and then marching together until a new dawn heralds the bright sunshine which will once again lighten and gladden this dark and dreary world.
I do not propose to follow the line taken by the hon. Member for Southampton (Dr. Russell Thomas), but to make an appeal to the Chancellor of the Exchequer on one special point. It is a question which is without doubt seriously affecting production in the country. I want the Chancellor of the Exchequer to give his attention to the stopping of taxation from the weekly wages of the workers in industry. I have been among my own people this week-end, and, to use a Yorkshire phrase, they are "very naughty" over this job. I have the case of the widow of a man who had been ill for years and was under the public assistance committee. She has four or five married sons and one son at home who had been off work for 10 weeks following an operation. After his return from a convalescent home he started work on the Wednesday morning, which was the beginning of the shift. There has been plenty of talk about absenteeism, and this man was given a chance of working overtime. He works on the surface. He put in 8½ shifts, and he and his mother were expecting a decent bit of money at the week-end. His mother had Had nothing from him for 10 weeks, only a bit of "Lloyd George." [Interruption.]That is what we call it. You call it State insurance benefit, but it has always had that name since its birth. That son was glad that he was going to be able to bring home some wages to his mother at the week-end. When he drew his money on Friday afternoon he found that £2 5s. had been stopped for Income Tax, and he had not had any wages for over 10 weeks. He said to me, "George, I felt that I could have eaten my pay-note." That is how he felt. He had only £1 15s. 6d. to take home, and he said to his mother and to me, "Look here, I am not going to work any more overtime if this is what they are doing with me."
I want the Chancellor of the Exchequer to see whether he cannot somehow or other prevent this kind of thing. He has promised that a single man shall not be taxed until he has received £2 in wages, a married man £3, a married man with one child £4, and a married man with two children or more, £5. He announced those concessions across the Floor of this House. When I go into my division they say, "Look at this pay-note," and they want to know whether I have been telling them the truth about Income Tax. I am almost afraid to tell them of anything that happens in this place, because it is not true. I ask the Chancellor of the Exchequer and the Financial Secretary to go into this question and to see to it that a man who has been off work sick for a fortnight or three weeks shall not be subject to the biggest percentage of what is stopped for Income Tax being deducted from his first week's wages.
I handed a note across the Floor on 23rd or 24th March concerning my brother, who, in one week, had 55s. stopped from his wages. When I went to visit him one week-end he was ready to throw me out of the door. He said, "What do you think about this lot?" On top of this he later received a pamphlet asking him to invest something in War Savings. It is all right for the Chancellor to laugh, but these people do not laugh. They feel it on the raw so much that they do not care a tinker's curse whether they produce coal or not. [An HON. MEMBER: "Shame.".]The shame does not lie on the man; it is on the system.
I want things to work as smoothly as possible so that our fellows can pull their weight. Everybody knows you cannot win a war without coal. Your ships, tanks, aeroplanes, T.N.T., petrol and other things are dependent on coal, and I want our men to be able to hold up their heads when we have won this war and say, "We threw our whole weight into it." The other day I was talking to a big industrial employer who was going to Sheffield and who said, "The Treasury should let employers deal with this question, because they know the personnel." I hope the Chancellor will think out some method whereby men will not be stopped 50s. or £2 5s. a week from their wages. I plead with him that this sort of thing should not be carried on any longer.
I would like to refer to Clause 23 of the Bill in a rather different sense from that of my hon. Friend the Member for the Queen's University of Belfast (Professor Savory). This Clause increases the special allowance in respect of the earned income of married women which originally was provided by the Finance Act, 1920. That special allowance was superimposed upon the general allowance in respect of the earned income of married couples. I have no objection to this provision. I think it is a perfectly reasonable encouragement to married women to enter industry and especially to those married women who, by their absence from their own homes, have to pay for domestic help. I would like to observe, in passing, that there is strong evidence that the married women who are volunteering to go into industry have been far more moved by the incentive of patriotism than by the incentive of personal gain. I was told recently by an official of the Ministry of Labour in the Midlands that these volunteer women, when interviewed, very rarely made any inquiry as to what wages they would receive. That, I submit, is very refreshing evidence of their high public spirit.
I recognise it is a well accepted principle that earned incomes should be treated more favourably than unearned incomes for purposes of taxation, but I suggest that it would be a great misfortune if that discrimination were allowed to convey the impression that there is some stigma upon unearned income or that in future unearned income may not expect fair treatment. I say that, especially, because the financial appeal, as distinct from the patriotic appeal, of the National Savings Campaign depends upon the expectation of receiving what, for Income Tax purposes, will be unearned income. A yield of 3 per cent. gross would be a small inducement to investment in Government stocks unless there were ground for confidence that it was the intention of the Chancellor and his colleagues, and those who support them, that in future, so far as they are concerned, lenders shall receive fair treatment. Recently the Chancellor demonstrated his intention of protecting lenders. He took a somewhat unpopular course in refusing to require mortgagees to pay a share of the War Damage Contribution and did that because he wished to uphold the sanctity of contract, and whatever view may be taken of his line on that occasion from a business point of view, at any rate, I feel that his action was one of the kind which will assist the Government to sustain confidence in our finances and will stimulate the National Savings Campaign.
I would like to say a word upon the question of the taxation of annuities, which has recently become all the more important, partly because of the increase in the standard rate of Income Tax and partly because of the increase in the cost of living, which affects a very large number of people who have to live upon annuities. It is well known that the Revenue authorities make no distinction between the capital aspect and the income aspect of annuities so far as Income Tax is concerned. All business people regard an annuity as being partially income and partially a return of capital, but Income Tax is charged upon the whole annuity. My light hon. Friend has in the past been prepared to make some concessions in regard to wasting assets in relation to taxation. To-day he was unable to make any further concession, but I think he has admitted that in the case of wasting assets some allowance should be made for the element which represents return of capital. Certainly, from a business point of view, an annuity is a wasting asset. It is rather curious that, so far as Income Tax is concerned, the Revenue authorities ignore the element of capital in an annuity. On the other hand, in relation to Estate Duty they look upon the matter from a rather different angle, because when the annuitant dies in certain cases the Estate Duty Office claims that some imaginary amount of capital passes on the death of the annuitant and that Estate Duty accordingly attaches.
I submit that if one contrasts the attitude of the Revenue authorities in cases of Income Tax upon annuities and cases of Estate Duty upon the death of an annuitant, one finds a curious difference. I think it is that kind of thing that gives the impression that the subject in relation to the Revenue authorities is in the position of the customer who is always wrong. The Tenth Schedule of the Bill makes certain simplifications in the machinery of administration, but the Bill does nothing to simplify the statutory provisions with regard to taxation. I suggest that it would be very helpful if we could have, at any rate to a limited extent, some consolidation of the Income Tax and other provisions. If it could only be done as far as the statutory provisions—
I referred to the fact in the Tenth Schedule provision is made for the simplification of the machinery of administration, and I was saying that I regretted that some further simplification—
I must express my apology, Sir, and leave the matter there. I conclude by saying that in war and in peace the functions of the Chancellor of the Exchequer and the Treasury are very different. In peace-time probably the Chancellor's most important function is to check any extravagance, to limit the expenditure of Government Departments, and to leave as much spending power as he can in the hands of the public. By contrast, in war-time the position is reversed. It is then the Chancellor's function to drive all the purchasing power he can into the hands of the Government, to see that we get full value for the maximum amount of expenditure, and at the same time, as far as he can, to limit the purchasing power of the public. I think that my right hon. Friend, with the assistance of those Departments which are responsible for supply and rationing, and so on, have done extremely well in checking any inflationary tendencies. I think that if my right hon. Friend can sustain his line of policy, notwithstanding the greater difficulties which will beset him as the war proceeds, we shall emerge from the war with our finances in a sound, even if straitened, condition.
As I conceive it, we Members of Parliament have two duties in connection with the Revenue side of the national accounts—first, to give the Chancellor of the Exchequer all the backing in our power in his most ungrateful and most punishing task of raising £2,400,000,000 a year by way of taxation, and, secondly, to draw his attention as early as may be to those points where the shoe is pinching on certain individuals over-much, pinching to a point at which the pain can no longer be borne. It is not only a case of pinching. It is a case of nails working their way through the sole. We all know how those nails at first begin only to damage our socks, but if we do nothing about them, they go on, sharp against the flesh, until they lame the whole body. I want to suggest that the Chancellor must be extremely careful, now that rates of taxation are raised so high, that action is taken early enough to mitigate those cases where severe injustice is now taking place as between one class of taxpayers and another.
My hon. Friend the Member for Walsall (Sir G. Schuster) referred to the operation of combined Income Tax and Excess Profits Tax. I hope the Chancellor will give further thought to the proposal for having a review of the effects of Excess Profits Tax carried out by an independent committee. It is a proposal that was backed at an earlier stage of the Budget proceedings by the hon. Member for Chesterfield (Mr. Benson) on the other side of the House. There are serious injustices remaining. The accountancy profession is aware of them. Accountants are men who by the nature of their work have these matters brought to their attention first of all, and although not an accountant myself, I am aware of a widespread feeling among accountants at this time that the Finance Acts are not being amended rapidly enough to remove most genuine injustices which are at present occurring. Sometimes accountants blame this on the obstinacy of my right hon. Friend, but more often they suggest that the House of Commons is not sufficiently alive to its own job in drawing to the attention of the Chancellor these unfairnesses which are happening. I would like to suggest to the Chancellor, therefore, that, not only for long-term purposes, but in order to secure the maximum amount of unified support and good-will for the Revenue here and now, he should take some such step as this to make it quite clear to all concerned with the Excess Profits Tax that he is prepared to submit hardships to an independent tribunal for their judgment and report.
I should be extremely sorry if the House were to think that it is only the payers of Excess Profits Tax for whom I am concerned. My argument applies in the same way to the individual taxpayer. In the earlier stages of this Bill I was permitted to move one or two Amendments dealing with Income Tax allowances. Since then I have been surprised at the correspondence these Amendments have brought me from all parts of the country, drawing attention to the extraordinarily anomalous results of the existing allowances. These allowances—and I am sure the Chancellor will agree with me—have been built up by accretion over a long period of years, and have never been fully thought out and co-ordinated with one another. It mattered less when Income Tax was at 4s. 6d. or 5s. in the £, but it matters a great deal when it is 10s. in the £. I am quite certain it is not really the will of this House that an elderly single man should be £25 a year worse off than a widower of the same age living in exactly the same circumstances; but that is the present effect of the housekeeper's allowance which we are re-enacting in this Bill. I wonder whether the House realises it Is worth £25 to be born on 4th April and not on 6th April. For some reason, quite inscrutable to me, it is possible for parents to receive the whole of the child's allowance for 12 months even if their child is born only a day or two before the end of the financial year. I, perhaps, ought not in my own interest to bring this to the attention of the House, because I was fortunate enough to have a child born on 2nd April in one year; I was surprised at the financial benefit which the Chancellor of the Exchequer granted me.
I hope the Chancellor of the Exchequer himself will, between now and the next Budget, review the whole system of Income Tax allowances. My last example shows that I am not pleading for him to give up revenue and make concessions with his left hand and with his right. I am pleading that he shall reexamine the whole system and make sure that the concessions already given are rightly directed. In his next Budget he could thus do a great deal to soften the asperity, without altering the total burden, of the tax he imposes on us.
I am very much indebted to my hon. Friends in all quarters of the House for the kind and generous observations they have made about this Bill and the Budget generally. I am sure the House will agree with me when I say what a great deal I owe to my right hon. and gallant Friend the Financial Secretary, and to my right hon. and learned Friend the Attorney-General. I should like also to say that it would have been quite impossible to have dealt with our financial affairs as drastically as we have, and to have put my Budget proposals into law as quickly as we have, without the help and full co-operation of this House. I am exceedingly obliged to the House for the consideration and kindness which have been shown to me in the conduct of this Measure. I know that hon. Members will feel with me when I say how often it is a matter of regret that I have to refuse propositions put to me from all quarters of the House, but they will appreciate that it is part of my duty and business to maintain the general and main financial proposals I have made. A different note was struck by my hon. Friend the Member for Belfast University (Professor Savory). He made a speech with which I could not wholly agree, but which, I think, will do me no harm—perhaps some of what lies behind his speech will do me some good.
This Bill represents the fifth of our war Budgets. It affects the finances of the third and fourth years of the war, and on that account, if for no other, is of considerable importance. While I appreciate all that has been said in praise of the proposals, I do not disguise from my own mind and thought that a great deal still has to be accomplished. We have always to be exceedingly vigilant to maintain our present financial position. As I say, while I appreciate all that has been said, in my judgment there is still further scope for reducing civil expenditure on non-essentials, and still scope for more and more saving. So far as the main principles of this Bill are concerned, we have endeavoured and must continue to endeavour to concentrate the financial resources of this country on war production, and that will continue to be our major aim. I would also say—and I think the House will agree—that the stabilisation of prices should go on, for the policy has proved its usefulness and success. Its importance as a factor in preserving sound moral, social and economic foundations for our war effort can hardly be exaggerated. I hope also to maintain, as a result of the proposals approved in this Bill, the policy of borrowing as cheaply as possible.
I would ask hon. Members to continue to do all they can in connection with the voluntary Saving Movement. The present need is to increase the number of savings groups. I am glad to say that new street groups are being formed at the rate of 1,000 per week, and I hope that that figure will soon be doubled or trebled. I hope that my right hon. Friends will repeat and reinforce that this country must regard unnecessary and unreasonable expenditure as definitely contrary to the whole spirit of the time and of the sacrifices which so many others are making. I hope it will also be appreciated that many things which are not luxuries, and are normally in common demand, are inevitably in short supply; and that whenever anyone refrains from buying things not absolutely necessary to him, he gives others to whom they may be of more use, a better chance of obtaining them at reasonable prices. Finally, I would say that whatever is saved should be lent to the State. It cannot be put to better use since that helps to finance the war on the soundest possible basis.
This Bill, following the Budget, undoubtedly and unavoidably adds one more layer to the heavy burdens imposed by its four predecessors, and the extent of that burden has been emphasised once again to-day. It is a measure of our will to leave nothing undone to achieve victory. Even if we exclude the Excess Profits Tax, the estimated full yield of all the new taxation imposed by the five war Budgets amounts to no less than £934,000,000, which is £38,000,000 greater than the whole of our tax revenue in 1938, so that, even apart from the Excess Profits Tax, the burden of taxation has more than doubled since before the war. Of that total of £934,000,000, £500,000,000 was accounted for by direct taxation and £434,000,000 by indirect; and a great measure of that indirect taxation has, of course, been on optional and not essential items of expenditure. Nowadays we do not pay much attention to the arithmetical difference between direct and indirect taxation in any particular year, but I think we may be satisfied that, taking our war Budgets as a whole, the burden of new taxation has been pretty fairly distributed between the various taxes.
The fairness of the incidence of Income Tax must always be carefully appreciated by me, and kept in mind by the House. Undoubtedly taxpayers with higher incomes are carrying an unprecedentedly higher burden, and I should like to pay my tribute once again to the good will with which they have shouldered it. But, since the primary object of war increases in the tax has been the reduction of consumption, it was of course inevitable that it should be extended to the lower incomes, which are specially important in this respect because in the mass they represent such a large proportion of the purchasing power of the nation. This year's special White Paper on the National Income shows that incomes under £250 accounted for nearly 60 per cent. of the total personal incomes in 1940, while incomes from £250 to £500 accounted for nearly another 20 per cent. We have endeavoured in very many directions to ensure that the burden of taxation on these smaller incomes should be as fair as possible and its collection as easy as possible. These burdens bear very hardly on certain sections of the community. I have endeavoured to meet some of their necessities—and at considerable cost to the Exchequer and the taxpayer—for instance, in the policy of stabilisation.
I should like to say a word about the deduction of tax from the weekly wage-earner. I gave a full review of the working of the scheme on the Second Reading, and explained a number of proposals which I suggested should be made, and some of which are now incorporated in the Bill. These measures included the alteration of the basis of assessment for wage-earners in seasonal employment so that their tax deductions would be spread more evenly over the year. Another suggestion which has been adopted was the deferment by one month of the commencement of the tax deduction period, so that the Inland Revenue would have a better chance to make the assessments and notify the employer promptly of the tax to be deducted. Finally, there was the alteration of the limits below which the taxpayer's weekly wage must not be reduced by the tax deduction.
I think I can claim that all these proposals, some of them now embodied in the Bill, have met with general approval, and I considered what was said about whether it would be possible to give some slight modification of the limits which might give further relief. In place of the existing limits of £1 17s. 6d. for a single taxpayer and £2 17s. 6d. for a married couple, it was proposed to introduce new limits as from 1st August next, of £2 for a single taxpayer, £3 for a married couple without children, £4 for a married couple with one child, and £5 for a married couple with two or three children. But there are other cases, where the taxpayer has dependants, and where the limit ought to be more than £2. For example, there is the case of the widower or widow with children. Obviously, if a higher limit than £2 is given to a man who has only himself and his wife to support, there is a case for something more than the £2 limit for a widower or widow with children. I have decided, therefore, to apply the £3 limit not only to the married taxpayer without children but also to any taxpayer who has a child for whom she or he can claim the child allowance. Similarly, the £4 limit will apply not only to the married couple with one child but to the taxpayer with two children, and the £5 limit will apply not only to the married couple with two or more but to the taxpayer with three or more children.
It is not possible to provide with the same degree of precision for other cases where the taxpayer has dependants and where in consequence the £2 limit would be too low. Provision will be made to see that in these other cases, if the taxpayer notifies the collector, the latter will instruct the employer to apply that limit which is appropriate having regard to the tax allowances which the taxpayer is entitled to in respect of dependant relatives. I would commend to the House the desirability and the justice of these modifications. I think that I can claim to have given proof of the way in which I have watched the scheme for deducting tax from wages, and have shown my readiness to make without delay any modifications which could be regarded as definite improvements from the taxpayer's point of view. I will continue to watch the working of the scheme with that object.
I am indebted to those who have emphasized the importance of the scheme for post-war credits, particularly for those who have the smaller incomes. Since I last spoke about this matter the actual form of the post-war credit certificate, which will be issued this year to every taxpayer concerned, has been made public. I think that those who have seen it will say that it gives the real and tangible evidence which is so necessary, of the right to post-war credit, and which will assist each taxpayer to a fuller realisation of its value.
My hon. Friend the Member for Edgbaston (Sir P. Bennett), who has taken such an interest in this matter and made such useful contributions to our Debates, referred to the recent activities of the Inland Revenue Staff Federation. This is a Civil Service association representing the clerks employed in the offices of the inspectors and collectors of taxes. This Association, like other Civil Service associations, has the fullest opportunity to raise all matters relating to staff affairs on the Whitley Council and with the Department itself. It can also at any time, in relation to any matter arising out of the work of the Department place its experience and knowledge before the Board of Inland Revenue, under whom its members serve.
There is a general Service rule that a civil servant must retain a proper reticence in discussing public affairs; more particularly those with which his own Department is concerned. The rule is directed to ensuring the impartiality of the Civil Service in administering the law and carrying out the wishes of Parliament. That impartiality would be prejudiced if the civil servant publicly identified himself with one side or another of a particular issue. This rule is of the greatest importance in the case of the Inland Revenue Department, which is bound by special conditions of secrecy, which preclude any communication of any details whatever of taxation affairs. I think that this incursion of the Federation into the public eye has been unfortunate. It is to be regretted that any body of civil servants should allow themselves to be led by any idea of serving the public interest, to adopt such a course, and to break the long-established Civil Service tradition in such matters. As I have already observed, civil servants and Civil Service associations have proper channels available for tendering advice, and it is by using these channels that their knowledge and experience can properly be brought to bear in connection with any matter affecting their Departments. I hope that this course will be followed in future.
I now turn to what has been said about the Excess Profits Tax, I would be the last to claim that it is in every respect a perfect tax. It is in the nature of things that a tax of this kind, which, broadly speaking, takes as its measure of charge the excess of current profits over profits of some past period, produces anomalous results in particular cases. From the purely fiscal point of view the taking away of the whole of the excess profits by the 100 per cent. charge has the great disadvantage that there is no cushion against the rough edges which there may be and, indeed, must be in a tax of this character. My right hon. Friend suggested the appointment of a committee, and he was reinforced in this by my hon. Friend the Member for West Lewisham (Mr. Brooke). I think that my hon. Friend got into dangerous waters when he came to discuss what that committee would have to do. He rather indicated that the committee was to be set up to consider hard cases not only in connection with E.P.T., but with taxpayers generally, and, as I understood him, to remedy any hardship or injustice that would be found. That would present great difficulties. It is a proposal to which no Chancellor could agree.
I may have failed to make myself clear. In recommending a committee, I was speaking solely of the Excess Profits Tax. When I spoke of matters such as the Income Tax allowances my appeal was addressed directly to my right hon. Friend, and I was asking that he, in conjunction with his learned officials, should study that matter as affecting individuals between now and the next Budget.
I can give the assurance that it has always been the object of myself and my advisers to do all that we can to mitigate hardships. My own general impression is that on the whole our Inland Revenue officials treat with great consideration cases that are specially brought before them for mitigation. As to the proposal of a committee in connection with Excess Profits Tax, I have made a suggestion to my hon. Friends which I think would be much more convenient, because I think that the setting up of a committee would raise undue hopes. The House must appreciate that I must maintain the revenue, and that there is a major principle of policy, which we have deliberately adopted, in the 100 per cent. E.P.T. The House will notice that throughout these proceedings I have resolutely maintained that policy and I cannot hold out any hopes that it can be the subject of modification. When we come to the question of a committee we meet great difficulties, as to how far a committee is bound by questions of policy, and how far it will go into questions of administration. I am always willing to confer with my hon. Friends on this matter, and I have also suggested that they themselves, or one of the big associations, should appoint some expert people to confer with the Board of Inland Revenue to see whether, within the scope of existing policy, there are any practical steps that could be taken to meet any of the points which people up and down the country desire to put before us.
I do not know whether the right hon. Gentleman was referring to the proposal I made. My proposal was not aimed at getting relief in any way but at getting a true knowledge of what was happening to the structure of industry as a result of the present system of taxation.
Many of my hon. Friends have approached me on this subject. It might be useful, of course, to know how the scheme is operating, but most of the big associations in conferring with me have shown that they have a pretty good idea of the working of the tax. What I was directing my mind to was whether there was any way of clearing up difficulties which have arisen within the scope of the tax. I would only add now—because, as I say, we can talk together about it if necessary—that the Board of Inland Revenue are always willing to receive suggestions, and I am sure that they would, at my request, confer with any of my hon. Friends or their representatives on this matter.
I have only to say this in conclusion: I should like to emphasise, before we part with this Bill, which, of course, is so far-reaching and affects so many people, that I fully realise that all our war increases of taxation, both direct and indirect, have been imposed for a double purpose. First, I hope they have materially assisted the financing of the war on a sound basis, avoiding recourse to what might have been easier, but would certainly have been more dangerous alternative methods. Secondly, and even more important, the increases have been made to secure the surest possible means open to the Exchequer of reducing civilian consumption. Rationing and other controls are vital parts of this financial and economic policy, and they have, of course, their special objects, such as ensuring a fair distribution of the limited available supplies of the necessaries of life, but obviously no measure can be so effective in reducing civilian consumption as a reduction of the incomes which can be spent.
I think few people will be found to-day who will question the vital part which our heavy and widely-distributed taxation is playing in furthering the war effort. But I think we can also find a good deal of satisfaction in the fact that the taxation policy which is embodied in this Bill is also, fortunately, the policy which will definitely help us to face our post-war problems. I do not think it is pessimistic to suggest that the reconstruction of the country after the war will present many similar problems to those we are now facing, and to the extent that we now finance the war by taxation instead of by loans, the repayment of which will have to be provided for after the war, our hands will then be so much the freer to make progress in directions which so many desire, and also, of course, to concentrate on new problems which the peace will undoubtedly bring. "Pay as much as you can as you go" is, therefore, not a barren or doctrinaire policy. It is a wise and eminently practical policy, which will undoubtedly show good returns after the war.
I will, of course, bear in mind the criticisms which have been made throughout the Debate, and I will keep a close watch on any developments which may be suggested as a result of those criticisms, but I think I am rightly interpreting all the Debates which have taken place on this Bill when I say that the House and the country have welcomed the Budget and the Finance Bill, as measures which not only meet fairly and squarely the conditions in which we find ourselves at this stage of the war, but also help, and that is why they have been supported, to maintain a sound foundation for the finance of future years, whether they be years of war or, as we hope, years of peace and of reconstruction.