Clause 10. — (Alteration of certain reliefs.)

Part of Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 10th June 1947.

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Photo of Mr Arthur Howard Mr Arthur Howard , Westminster St George's 12:00 am, 10th June 1947

I had an Amendment down to this Clause which presumably was not selected, and I therefore want to say a few words on the question of the earned income relief in support of the case for extending the range of the relief rather than for increasing the rate. An Amendment was discussed on the Budget Resolutions in exactly similar terms to the one which has not been selected, and I think it met with a great deal of support from all quarters of the House. It is particularly because of the manner in which the Chancellor dealt with that Amendment that I wish to remind the Financial Secretary of what was said on that occasion. The Chancellor said: There may be a few million pounds to give away by the time we reach the Committee stage of the Finance Bill, and, if I feel it reasonable, I may be able to bring forward a suggestion."—[OFFICIAL REPORT, 23rd April, 1947; Vol. 436, c. 1094.] That was a definite indication that if the Chancellor felt it reasonable, presumably dealing with the earned income allowance, he would bring forward a suggestion. I am therefore rather disappointed that the Chancellor has not so far brought forward any an suggestion for improving the provisions he has made in the Finance Bill by giving up a very small proportion of taxation.

The argument in favour of extending the range of the earned income allowance rather than the rate is in two parts. The first one, which will of course appeal to the Chancellor in his capacity of collector of revenue, is that it is much less expensive. He himself said on a previous occasion that this small increase in the range would cost but £4 million, while the slight variation in the rate which he himself indicated he thought was preferable would cost £40 million. I was rather surprised when I heard the Chancellor of the Exchequer saying that he thought that a relief of taxation which would cost £40 million was preferable to one which would only cost £4 million, but he did say so, and the only point of difference on principle between us was whether it was better to deal with the rate or the range. I want to argue that there is a very strong case for extending the range, particularly in view of the fact that the Chancellor did not find it possible to make any alteration in the standard rate of tax this year.

7.45 p.m.

I do not think that either he or the Financial Secretary would disagree with the view that probably there could have been no finer incentive in the whole of the Budget than a reduction in the standard rate of tax. It would have had a psychological effect over the whole country which would have been far in excess of that of any one, two or three individually selected reliefs. He stated, however, that he found it impossible to afford the revenue which would have been required to make any substantial reduction in the standard rate of tax, and he also reminded the House at that time that there was a moral obligation on any Chancellor to increase the earned income allowance at the earliest possible moment, having regard to the circumstances in which the alterations were made by one of his predecessors. Everyone would agree that, having regard to what was said when the adverse alterations in this particular relief were brought into effect, there is no doubt that returning this relief must be a prior charge on any revenue which the Chancellor can forego.

The fact that he was not able to make any reduction in the rate does, I submit, make it even more important that he should make some gesture as to the desirability of extending the range over which taxation reliefs are given rather than the rates for particular classes. The particular range which I have in mind, the upper range of the carried income relief class, is a particularly important one for two reasons. The persons affected are persons who can probably bring forth a greater hardship claim than almost any other section of the community, and from the far more important point of view of the good of the community as a whole, they probably embrace a larger number of individuals who can indirectly affect the productive capacity of this country than any other range of taxation. Within the higher earned income relief groups are included the key men of our production drive. Their actual production with their own hands at a particular machine may not be directly noticeable, because in some cases they will not be working on machines, but their indirect effect through the leadership which they can give if they are encouraged will, in relation to the economic stability of this country, be second only to the lead which the Government can give. They are, I believe the most important group to whom we have to look today.

On a previous occasion I mentioned particular groups which covered not merely the managerial class in industry, but professors in universities; and just as the managerial class in productive industry are the people to whom we must look for immediate results, the professors, whether engaged in training the young or in research work, are the people to whom we must look for results in the years to come. This group would also embrace the higher range of civil servants, probably the most overworked class in this country today, and those particular ranges outside industry, in the educational field and in the civil service field, have probably felt the increased cost of living and of taxation more than any other group, because their remuneration has not been improved, as the cost of living has increased, to anything like the same extent. I do not think the Financial Secretary would disagree with that. They have increased costs to bear, but they have had nothing like the increases in income which have been received—and rightly received—by many other classes of the community. In fact, as a result of taxation, they have had definitely less. However, they have not only as great personal responsibility hut, from the point of view of the future of the country, they have possibly the greatest responsibility of anyone in the country outside the Government. I hope, in view of what the Chancellor said in dealing with this matter, both in the Bill and on the Budget Resolutions, that the Financial Secretary will be able to give some suggestion that at a later stage he will be able to introduce some relief.

This plea is not brought forward at the request of any pressure groups. It is brought forward because I honestly believe relief in this direction can have a finer effect in helping to get us through our economic crisis than relief in any other direction. In so far as my constituents are concerned, there is only one individual I know of who would be directly affected by this. I have not asked his advice about it, but I cannot believe that he would be prepared to come down to this Committee and say that it would make his work of less value to the country if he received rather better earned income relief. The only member of my constituency whom I happen to know personally who comes within this range is the Financial Secretary to the Treasury, and I think he would feel great diffidence in supporting my point of view because he might feel that he had to declare a personal interest in it. However, with his responsibility for looking after the whole of the Civil Service, of deputising on many occasions for the Chancellor, can he really say that he would not work 25 hours a day instead of 24, as he does now, if he had this extra little incentive added?