I beg to move, in page 9, line 37, after "incomes)", to insert:
the limitation by age shall no longer have effect, save in relation to claimants to whom the next following subsection applies; and accordingly, save in relation to those claimants, the said section thirteen shall have effect with the omission from subsection (1) thereof of the words "if he proves that at any time within the year of assessment either he or his wife living with him was of the age of sixty-five years or upwards "and, in paragraph (a) of that subsection, of the word "also" and (at the end of the paragraph) the word "and", and of paragraph (b); and with the substitution in sub-paragraph (i) of the said paragraph (a) of the words "the year of assessment" for the words "that year".
(3) This subsection applies to claimants not entitled to relief under the last foregoing subsection; and in relation to those claimants, in the said section thirteen of the Finance Act, 1957".
These Amendments have a simple purpose—to increase the number of people at the bottom end of the income scale who do not pay tax. Their purpose is that any single person earning less than 5 guineas a week, roughly, and a married person without dependants and earning less than £8 10s. a week, shall not pay Income Tax. That seems to be a proposition which should command the support of the whole Committee. I cannot believe that anyone would seriously argue that a married couple earning less than £8 10s. a week have any sort of margin with which to pay Income Tax, as well as the increasing amount of indirect taxation which they are now called upon to pay.
I have worked out roughly what I think they pay now. As far as I can make out, a single person earning 5 guineas a week pays roughly £8 5s. a year Income Tax and a married couple earning £8 15s. about £14 a year Income Tax, just over 5s. a week. These people should be exempt and the Committee ought to make provision for their exemption. It would be ridiculous to argue that the state of the country is such that we cannot afford to do that.
I acknowledge that the Clause to which this is an Amendment increases the amount of the exemption for people on small incomes. I am very grateful that the Government have moved in this direction, a direction which was pressed on the Government from this side of the Committee last year and rebutted with ferocity, in so far as he is capable of ferocity, by the Financial Secretary. In arguments which will no doubt be repeated in this debate and which I therefore do not propose to repeat, he told us that it was not possible for this exemption to be made. The Government have now found it possible although the total amount of relief in relation to the total of the Budget is tiny. The increase of the exemption limits will cost £1½ million in a full financial year and the age exemption £2½ million, so that the relief which the Government are giving to old people who come within these extended limits, and for which every person whose total income is lower than £400 a year will be grateful, is £4 million.
My proposition is simple and I need not spend much time on it. It is simply that every single person earning 5 guineas a week and every married couple earning less than £8 10s. a week should not pay Income Tax. In considering the composition of these groups, the Committee ought to weigh the fact that, according to the Annual Report of the Commissioners of Inland Revenue, many of these people have dependants. It may be argued that single persons earning up to 5 guineas a week are probably young adolescents who would spend the money on lipstick or "pop" records and so on, but that is far from the truth.
Table 70 of the Annual Report of the Commissioners of Inland Revenue for last year—I cannot make the exact comparison, but it is close enough as tables go—shows that there are more than ½ million single people who are earning £10 a week or less and who have children or dependants. I cannot go lower than that, but that points the problem. There are 700,000 married couples at the level of £9 to £10 a week who have children or dependants. That is a substantial figure.
I am ready to accept, and no doubt the Financial Secretary will say, that those people do not pay Income Tax because the child allowances relieve them from it, but married couples without children where the wife is not working are suffering considerably from the present burden of taxation. My hon. and learned Friend the Member for Kettering (Mr. Mitchison) referred to Table 32 of the Commissioners' Report. I ask hon. Members whether they think it right that over the last ten years we should have increased the number of taxpayers at the bottom end of the scale.
I believe it to be profoundly wrong and unnecessary. The noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) said that he wished that we would get away from this argument and that there were no votes in it. I do not know whether there are votes in it, but coming from such a stern moralist as the noble Lord I am surprised that that should be regarded as a criterion. The simple truth is that this is a gross injustice to the people whom I want to be exempted from the payment of Income Tax.
There is nothing sacrosanct in the figures which I am about to give, but at least there is a pattern of consistency about the exemptions which we have had previously. In the immediate postwar period, in 1945 for example, out of 19½ million taxpayers more than 4 million were free from tax, the people at the bottom end of the scale. In 1951, the figure was 4·4 million, still more than 4 million. The number had risen in the days of the Labour Government but had diminished because of the Korean War, but there were still more than 4 million people in the time of the Korean War who were at the bottom end of the scale and who were exempt from Income Tax because their incomes were regarded as too low.
For the first four or five years of the Conservative Government, nothing was done about this and the figure remained fairly stationary at about 4 million, slightly more or slightly fewer according to the margin of taxation. But, as with so many other things in this country's fiscal arrangement—and it becomes only too clear when one takes the ten year period as a whole, a period during which the Government have done a great deal of harm to the poorest people in this community—since hon. Members opposite were returned in 1955 has been the period when the number of people at the bottom end of the income scale who have been exempted from Income Tax has steadily diminished. The figure of more than 4 million in the immediate post-war years represented about a quarter of the total taxpayers—the figure varied between 20 and 25 per cent.—but today the figure is less than 10 per cent. This country is so poor that we can afford to exempt only 10 per cent. of the people at the bottom end of the scale. According to the last Annual Report of the Commissioners, of a total of 21 million taxpayers, only 1·9 million were exempt from tax, the lowest figure I have been able to find in the records since the war.
It may be said that this is because people are getting wealthier, their incomes are rising, and we should rejoice at the fact that they are now brought upon to pay tax, because it means that their incomes have increased. So has their expenditure. Both have increased, and the simple truth is that whereas we kept a pretty steady ratio and the bottom 20 to 25 per cent. of the population did not pay income Tax, since 1956 the figure has dwindled until now we can afford to exempt less than 10 per cent. of the population, and this is wrong.
I have become a little tired of some of the discussion this afternoon. We have been treating Income Tax as though it were a regulator purely and simply to keep the economy on an even keel, and something to be used to make sure that there is the maximum growth. That has its value, and I am the last to deny that it should be used in that way, but Income Tax has another major purpose, which is to redistribute wealth and to ensure that people's capacity to pay is the measure of what they contribute to the revenue needed by the Chancellor. It is in this respect that the Government have fouled the Income Tax system over the last few years.
The Financial Secretary thinks that he is making, a good point when he says that the direct tax payer is paying his proper proportion of the total social service contribution. May be he is. What I complain about, and I hope that this side of the Committee will concentrate on this, is the fact that over the last seven years the Government have altered the ratio within that total, and that the people at the bottom are paying more while the people at the top are paying less. That is why I said to the Financial Secretary earlier that he ought to be prepared to say now, in answer to the noble Lord the Member for Dorset, South, not that he will reduce the standard rate of Income Tax, but that the Government will exempt the people at the bottom end of the income scale and increase the personal allowances. This was the case made by my hon. Friend the Member for Glasgow, Craigton (Mr. Millan).
When I consider the way in which the Government have hoodwinked the people of this country over the last seven years, I am not surprised that these people are now in revolt because they instinctively feel What has happened even though they do not understand it. Let us consider the way in which relief has been provided. Just before 1959, at a cost of about £230 million, Income Tax was reduced by 9d. in the £. In 1957–58 the relief in earned income to Surtax payers amounts to £24 million. There was, I agree, an increase in child allowance for parents who had children over 11 years of age.
If hon. Gentlemen opposite want to understand what is happening to their fortunes, they should realise that people are beginning to understand that the burden of taxation and the nature of reliefs have over the last few years been spread in such a way that if a person earns over £2,000 a year he does well out of it but if he earns less than £15 a week he does not. Some people defend this distinction. I say that it is wrong and shall continue to say so, even though some of my hon. Friends regard this is reactionary.
I believe in a direct system of taxation. I believe that such a system should be related to capacity to pay and to the ability of people to bear the burdens placed on them. The Government have deliberately twisted the fiscal system of this country during the last few years to ensure that those at the bottom of the scale pay more and those at the top pay less. That is why I want the Committee to decide whether we should ask a single person earning less than £5 5s. a week or a married couple earning less than £8 10s. a week to pay Income Tax.
I think that I have made the case for these Amendments. My hon. and learned Friend the Member for Kettering (Mr. Mitchison) drafted these Amendments with considerable ingenuity, because he has managed to graft on to something dealing with people over 65 an Amendment dealing with people under 65. I am extremely grateful to my hon. Friend. There is a social justification for this Amendment. There is a great deal of real poverty in the country today. There are a lot of people who earn good wages but who are still thoughtful of the problem that exists. We do not all visit council houses in which the tenants serve cups of tea on silver trays and ask us to stay for cocktails, which apparently is what happens when the noble Lord goes canvassing, I have been into many council houses, as I am sure hon. Members on both sides of the Committee have, which are sparsely furnished, especially if there are children in the family. My objection to what the Government are doing is that they are increasing taxation on necessities such as furniture and carpets. The price of these articles is being increased, and the Government are altering the burden of taxtion so that the poorer people are not even exempted from this increased indirect taxation.
Something pretty sinister is happening. I choose that word sinister and I mean it. It is sinister in this sense, that a number of hon. Gentlemen opposite, those who probe into these things, want to reduce the rate of direct taxation as much as they can. They say that the thing to do is to tax spending and not earings because to tax earnings is a disincentive whereas if spending is taxed it is left to the individual to decide whether he will in fact pay any tax.
That argument is rubbish when applied to the necessities of life. There is no doubt that the Government are moving towards greater inequities in incomes between those at the bottom and top of the scale. This Amendment is an attempt to resist that movement by the other side of the Committee and by the Chancellor, and to exempt those who are less able to afford this increased direct taxation, which in days gone by they were not required to pay. It was not until we became a so-called affluent society and were told that we had never had it so good that those whose need was greatest and whose incomes were the lowest were called on to pay this direct taxation.
As my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) has rightly said, this taxation is causing great concern amongst the poorer section of the community who are unable to afford this tax and consider it to be extremely unjust. Nevertheless, if that injustice stopped there one could understand it, but it seems to be growing.
My hon. Friend referred to the inequity between people in the bottom and top income groups. On 14th June last year there was a heated discussion on this problem. My hon. Friend the Member for Sowerby (Mr. Houghton) gave one or two clear examples of how this question affected people. I admit that the Government have made some slight improvement in the position, but we want them to go considerably further. That is why we have tabled this Amendment.
I am concerned particularly about the effect that Clause 8 will have on old-age pensioners. We talk about giving something to Surtax payers, and to one or two other categories of people, but the Government have failed to give any real help to old-age pensioners. A short time ago the position of people who reached the age of retirement this year was brought to my notice more forcibly than ever. An old man of 65 ceased work and got his retirement pension, but he discovered that, later on, when he had to make returns of his Income Tax he was brought within the limits of taxation. Surely it is a grave injustice that we should call upon such people to pay Income Tax. This man started his working life at the age of 12 and worked for fifty years in the pits. Then, when he retired after all those laborious years, he found not only that he had paid for his pension, but that it was subject to Income Tax. Surely, this country, with its increased prosperity that we boast about from time to time, can afford to exempt such people.
I re-echo what my hon. Friend the Member for Cardiff, South-East said. It is about time that we exempted every woman over the age of 60 and every man over 65 from paying Income Tax. We have sufficient money in the till to do that. When we last debated this matter we extracted from the Economic Secretary the fact that it would cost about £3¼ million to exempt these people. Since that time there has been some improvement in our economy—although I know it has slumped a little recently—and we ought to be able to stop asking these people to suffer to this extent. Surely we can lift our minds in the right direction and say to them, "You have served the country. You have served your day and generation. You are travelling towards the western shore of life. We can give you help by the way." If we did that we should be giving them some reward for the services that they have rendered.
I am amazed that the Government have not made a concession in this direction. We are asking only for a little. We are like Lazarus sitting at the table of the rich man. We are thankful for any crumbs that may fall. This section of our people has been ignored in the past, and greater inequalities in taxation are beginning to reveal themselves. I support the Amendment, as I have done on previous occasions, and I hope that the Government will increase the exemption limit.
I support the Amendment. I wish that I could speak with the same passion as did my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan), because I feel it, but am reluctant to give way to that kind of thing in the Committee, since it is apt to be misunderstood. My hon. Friend did justice to the case in the language he used.
Last week, whenever an hon. Member on this side of the Committee mentioned Surtax he received a waspish reply from the Treasury Bench. Government spokesmen asked, "Do you believe in levying Surtax on £700 a year?" By that I understood them to mean that they think that £2,000 a year now will provide about the same necessities of life that £700 a year did before the war. I do not intend to quarrel with that estimate; it seems to accord with the facts of life as revealed to me by my housekeeper.
Earlier, my hon. Friend the Member for Wallsend (Mr. McKay) made comparisons between the average wage of wage earners before the war and the average wage today. He seemed to think that money wages had advanced about four times in the period between then and now, and therefore that if we take the man now earning £15 a week—which my hon. Friend gave as the present average wage—we should regard it as comparable with a wage of about £3 15s. or £4 a week before the war.
My hon. Friend the Member for Cardiff, South-East will realise that I am trying to proceed on what appeared to be accepted by the House. I have my doubts whether the problem does not become greater the lower one goes in the income group. Before the war no one would try to defend an argument for bringing into the Income Tax group weekly wage earners with two or three children to support. That is my reason for supporting the Amendment. When people are told that they have never had it so good some woman—more plucky than a man—mentions how much it used to cost to run a family before the war and what is costs now. Such housewives do not find that the present standards have improved for them.
Replying to the last Amendment the Financial Secertary said, "Think of the social services that people get now. They get improved education, especially in villages." I am very glad that they do. I strove hard to get a better standard of education for them, and there is still much to be done before we can rest content on that score. All these things create a living standard that I would have hoped would be generally welcomed. They make a call on the financial resources of the family to an extent that was unknown before the war.
I want to see a rise in the real standard of living of wage earners and also of small salary earners. In these days the small salary earners often find that their costs are constantly increasing. Season ticket rates are raised; those who are too proud to live in a council house, and are buying a house, find that the mortgage interest rates continue to rise, and then there is a by-election in Orpington, and everybody says, "Of course, that is a mere protest." I hope that the Committee will recognise the justice of the claims put forward by my hon. Friend, merely that on the facts as we know them the lower wage earners and lower salary earners have become to a far greater extent than others, upon whom we should not waste so much sympathy, the victims of inflation and the difficulties that confront people who are faced with a rising standard of life.
I hope that the Government will be able to accept the Amendment, for I am certain that it is an attempt to obtain social justice, the necessity of which ought to be recognised.
I am sure that those hon. Members who watched the hon. Member for Cardiff, South-East (Mr. Callaghan) listening, not absolutely patiently, to the discussion on the previous Clause, were glad that he was able to make the speech which he did on this Amendment. I know that strong feelings exist on this subject, and I do not want to say anything which would be jarring to the Committee. But after listening to the hon. Member for Cardiff, South-East, I was for a moment, reminded of the first remark ever made in this Chamber by my right hon. Friend the Member for Woodford (Sir W. Churchill). In an answer to Mr. Lloyd George, as he then was, my right hon. Friend said, The right hon. Gentleman, instead of making his violent speech without moving his moderate Amendment, might have done better to move his moderate Amendment without make his violent speech."
It is not true to say that those earning £15 a week or below come off really badly under our present tax system. There was a letter in The Times this morning about the matter. If one looks at the table published in answer to a Written Question on 7th May, one will find that the hon. Gentleman's argument is not borne out. I will quote but one figure to the Committee. Let us take the case of a man who is earning £1,000 a year today. Ten years ago he would have been earning £767 a year, and, therefore, I will refer to a person earn- ing £1,000 a year today as earning roughly £15 a week—£780 a year—in 1951–52. It is a fact, in acordance with the table given in answer to a Written Question by the right hon. Member for Middlesbrough, East (Mr. Bottomley), that that man who was paying 11s. of his income in tax in 1951–52, is paying a little less than 10s. today. So, with respect, one must not exaggerate that point.
I do not agree with that comparison. I absolutely disagree with the whole thing. What is the point of saying that a man with £1,000 a year today would have been earning £767—or whatever the figure was—ten years ago? I am not making that point. The point I am making is that if a person had £1,000 ten years ago he was paying less tax then than he would be paying now. and we cannot get away from that proposition.
If the hon. Gentleman turns to columns 15 and 16 of the OFFICIAL REPORT of 7th May, he will find that he is not right. The reason is the decision of the present Home Secretary in 1952 to increase the unearned income fraction from one-fifth to two-ninths Which made a very big difference.
If I may now go on—
May I now come to the Amendments? Their object has been clearly explained to the Committee.
As the law now stands, the age exemption, originally introduced in 1957 by the present Minister of Aviation—I looked round then, because this is a point upon which my hon. Friend the Member for Tynemouth (Dame Irene Ward) feels strongly—grants exemption from Income Tax to single persons of 65 or over in all cases where the total income does not exceed £275, and to a married couple where either husband or wife is 65 or over, if their joint income does not exceed £440.
The proposal in Clause 8 of the Bill is that these figures should be raised to £300 for single persons and £480 for married couples. The first Opposition Amendment—I join in the congratulations to the hon. and learned Member for Kettering (Mr. Mitchison) in the drafting of these Amendments—is designed to make a similar exemption available up to the old pre-Budget limits for those who did not possess the age qualification. Hon. Members may feel that the style of drafting is just a shade obscure, but it is certainly ingenious and there is no doubt about what the Amendment is designed to do.
I think that the hon. and learned Member for Kettering may have nodded a little in relation to the second Amendment, which is intended to be consequential. In practice, I do not believe that it would have any effect.
The cost of this proposal, as drafted, would be £3½ million in 1962–63 and £4½ million in a full year. We have been told, perfectly fairly, that in the view of hon. Members opposite an increase in tax allowances generally is overdue. Later, if it is selected, we may be discussing a new Clause designed to increase both the basic single and married personal allowances. I should welcome a debate on that subject. I think it important from the point of view of the tax structure generally. But this afternoon we are dealing with the more limited, though certainly important, point of whether or not we should have a special tax relief in favour of small incomes as such.
Quite apart from the question of cost —I do not want to rest my argument purely, or even mainly, on considerations of cost—I believe that there are a number of arguments against a special tax relief in favour of small incomes as such. Even if my right hon. and learned Friend the Chancellor of the Exchequer had £4½ million to give away, I do not consider that this proposal deserves the degree of priority which the hon. Member for Cardiff, South-East accorded to it.
In the first place, the ordinary reliefs applicable generally to all taxpayers already have the effect of imposing only a relatively small liability on the smallest incomes. As the Committee knows, the first slice of assessable income goes free of tax in accordance with the general scheme of personal allowances. Then there are a number of reduced rates which affect quite considerable bands of income. While I know that it is sincerely felt by some hon. Members—perhaps they are not entirely on one side of the Committee—that the reduced rate bands of income need revising, it is the fact that from both points of view the position of taxpayers with small incomes was improved considerably since 1951.
The single person's allowance has risen during this period from £110 to £140; the married person's allowance has risen from £190 to £240; the earned income fraction has risen from one-fifth to two-ninths—with respect, I think this the most important change—and the child allowance from a flat allowance of £70 to a sliding figure of £100 for a child up to 11; £125 for children from 11 to 16 and £150 over 16.
Just now, I did the hon. Gentleman an injustice. If he compares the adjustment with 1951–52, there is something in his argument although people are still worse off, taking into account the National Insurance contribution. But the point I am making, and the one I made in my speech, and the one to which I should like the hon. Gentleman to address himself now, is, what has happened since 1956–57, since when a great deal of personal tax has been given away, running into hundreds of millions, and practically nothing in personal allowances and exemptions?
While I am on my feet, may I ask the hon. Gentleman what he thinks—if the Chancellor had £4 million to give away—would take higher priority than the exempting of married couples earning less than £8 a week? The hon. Gentleman said that he did not necessarily think that, had the Chancellor £4 million to play with, it should he used in that way. What does he think would take higher priority than exempting from tax people who earn less than £8 a week?
I will answer that question at the end of my remarks. But my short answer is this. I think that, as economic circumstances permit, we certainly should look carefully at the whole question of both age and personal allowances and at reduced rates, and make a number of concessions. But allowances for small incomes as such, in the way suggested by the hon. Gentleman, are not, I believe, the right way to help those taxpayers who need help. I shall develop some figures to show that that is so. Where general tax allowances are concerned it is much better to do something worth while as and when economic circumstances permit. I am not convinced that a case is made out for quite a new kind of tax allowance, or a small income exemption, for those who are not retired as the hon. Gentleman is proposing.
I am sorry to interrupt the Financial Secretary again. But what does he mean by a new kind of tax allowance? We have had an exemption limit before; indeed, in some senses, we have it now. The Royal Commission was in favour of an exemption limit. We had it before the war. There is nothing revolutionary about this.
Without being discourteous, may I say to the hon. Gentle man that I shall explain why I think that our present age exemption limit is quite a different matter from an exemption limit for small incomes as such.
To continue from where I was, comparing the present situation with the situation ten years ago, we have to remember that the reduced rates affecting poorer taxpayers have changed also. In 1951, the reduced rates were 3s. on the first £50 of taxable income; 5s. 6d. on the next £200 and then the standard rate of 9s. 6d. Today, the situation is that the taxpayer pays 1s. 9d. on the first £60 of taxable income; 4s. 3d. on the next £150; 6s. 3d. on the next £150 and then a standard rate of 7s. 9d. Surely the right way to help those below retirement age with small incomes is, as I say, to look as economic circumstances permit at the general system of tax allowances, and also at the reduced rates, rather than by introducing a specal relief in favour of small incomes as such.
That leads me to my second point, and here I will answer the question which has just been put to me by the hon. Gentleman. The special reliefs which have already been introduced for small incomes are designed to deal with what are demonstrably rather special categories. The age exemption, which the hon. Gentleman quite fairly mentioned, which we are raising in this Clause, was meant to help elderly people living on the smallest incomes of all, since it is precisely because they are elderly that they are likely to find difficulty in supplementing their income. It is obvious that a man on retirement who is living on a small income is likely to find it harder to supplement his income than somebody who is not of retirement age.
Again, the small income relief, which we are also extending by this Clause, is not an exemption at all. The decision to tax investment income at the lowest levels at the same effective rate as earnings of a similar amount is based on the view, which I think is a perfectly fair view, that there is little difference in taxable capacity between earned income and investment income at the lowest income levels of all.
The purpose of this small income relief is not to grant any exemption, as is proposed in the Amendment, but to give fair tax treatment to those who, for one reason or another, have to retire from work prematurely and live on a very small income derived from investments. There is a perfectly good case for the reliefs and exemptions that we have introduced in this field, without necessarily thinking that it would be a good thing to have special tax relief in favour of small incomes as such.
My third and most important objection to this Amendment is that, as the hon. Gentleman himself indicated when moving it, its benefits would be spread in a very unsatisfactory way. It is quite true that single taxpayers with incomes between £180 and £275 a year would cease to be liable for tax amounting to a maximum of £8 4s. a year, and childless married couples with incomes of between £309 and £440 would gain up to £27 12s. a year. That is quite true, but, as the hon. Gentleman has indicated, the benefit to married couples with children would be negligible where earned income is concerned. Because of the earned income relief of two-ninths, the minimum personal allowances due to a married man with one child under eleven would be sufficient to prevent any liability arising in respect of earnings up to £438 a year.
I am sure that the hon. Member for Sowerby will have done the sum, because I know how quick he is at these calculations. He will agree that two-ninths of £438 is about £98. The difference between £438 and £98 would just be covered by the married person's allowance of £240 and the child allowance of £100, so that an exemption for incomes of £440 or less would be of negligible advantage to a man in this class—a married man with one child under 11—whose income was earned.
Of course, if the child was over 11, so as to attract the higher child allowance of £125, or if he had two or more children, he would quite certainly be exempt on earnings up to a higher amount than £440. Therefore, this Amendment is open to the very serious criticism that it largely concentrates its benefits on single persons and childless married couples and does very little indeed, and in most cases nothing at all, to help the family man.
I want to make the Government's position absolutely clear. My right hon. and learned Friend the Chancellor does not consider that it would be a good idea to have special tax relief in favour of small incomes as such. We already have the small income relief and the age exemption, and we do not believe in a special tax relief for small incomes, whether in the case of retirement or not.
My point, and I repeat it for the benefit of the right hon. Member for Battersea, North (Mr. Jay), is that the right way to deal with this matter is to look at the general system of tax allowances and to reduce the rates as and when economic circumstances permit. I have indicated already, in reply to my hon. Friend the Member for Dorset, South (Viscount Hinchingbrooke), who did not look very pleased, that the Government certainly will have no dogmatic views in their minds. When the time comes when it is possible for direct taxation to be reduced, whether they should give greater priority to these tax allowances or the standard rate of tax is something that would have to be decided at the time, but I am sure that that is the right way to help those living on small incomes.
May I make one further point? The criticism of the Amendment which I then made in reply to the hon. Member for Cardiff, South-East, is that it does not apply to age exemption, because when a married couple approach the age of 65 in nearly all cases their children are grown up. There would not normally be young children in the home at that age. There is the further point that this Amendment, ingeniously drafted as it certainly is, and I paid tribute to the hon. Gentleman in his absence, as did his hon. Friend, makes no provision for marginal relief.
No. The hon. Gentleman must wait. There is a point about that which he has missed.
It could not be sensible for a single person under 65 to be exempt from tax so long as his income did not exceed precisely £275, but liable for several pounds of tax if his income rose by only £1, and the same would be true of a married couple. It is important to remember that if the Amendment were amplified so as to provide for an appropriate measure of marginal relief for incomes just above the relevant limits, the cost would be a good deal higher than the £4½ million in a full year which I have already indicated to the Committee.
I could not, without further notice, give any estimate, but it would be quite substantially higher than the £4½ million which I have mentioned. I think that I heard the right hon. Member for Battersea, North saying sotto voce that it would double it.
It may not be very far from doubling it, when we consider the marginal and tapering provisions that would have to be made.
I have devoted some time to this Amendment and to explaining why I cannot advise the Committee to accept it. Of course, my right hon. and learned Friend realises the problems of taxpayers with small incomes, and I hope that it will not be too long before economic circumstances permit some further reductions in the general burden of direct taxation. As the Committee knows very well, my right hon. and learned Friend, when framing his Budget, concluded that at present he ought not to make additions to purchasing power, and the extension of the existing reliefs for small incomes went as far as he felt able to go.
In any case, I have given the Committee a number of reasons for concluding that this proposal does not, perhaps, merit a particularly high degree of priority, as hon. Members opposite have suggested. Even if the Amendment were so recast as to provide for marginal relief, at considerable additional cost, it would not give any worth-while relief to married couples with families, and, in many cases nothing at all. This point about single people and married people with families cannot be overlooked. A great many young people at the very start of their earnings are in fairly low-paid jobs, and I see no compelling reason why they should be given a higher priority for tax reductions than married couples with families.
In answer to the hon. Member for Ince (Mr. T. Brown), whom we are always pleased to welcome, and who raised the point about pensioners which has been raised again and again in Finance Bill debates, I must say the only fair basis for any tax system is that we should treat the taxpayers in accordance with their general economic circumstances. It is for that reason only that no Government have been able to accept the view which he put forward, though I know very well his sincerity and how strongly he feels about these matters.
I will give two answers. First, as I have been saying to the Committee, I believe that this is not the right sort of relief for the House of Commons to give. The right thing to do, as I said just now, is to wait until economic circumstances permit some wider reductions in the general burden of direct taxation that would help particularly lower-paid taxpayers, perhaps by doing something about the tax allowances and the reduced rates.
We have dealt very often with the Surtax question. I hardly dare mention Profits Tax again, although from the revenue point of view it is a fact that the reductions in Surtax were just about balanced by an increase in Profits Tax.
In reply to the point which has been raised by the right hon. Member for South Shields (Mr. Ede), it is important to remember that we have to consider whether, in present conditions, it is right that those people earning between £2,000 and £5,000 a year should pay Surtax over and above what is a steeper and more progressive rate of Income Tax than they paid before the war.
The hon. Gentleman said that it would not be fair as between the single person and the couple with children to give relief in this way. There is no fairness in giving reliefs anywhere. When he increases, as he will before the General Election, the personal allowance to married couples, that increase will go to the Surtax payer as it will go to the person at the bottom of the income scale. It is the Surtax payer who will attract a greater proportion of the revenue than he ought to.
The hon. Gentleman talks about single people and, of course, there are many young single people who do not have liabilities; but, on the other hand, a large number of other single people have dependants for whom they may not be able to claim. There are also many young single people living in lodgings. If one is living in lodgings on 5 guineas a week there is not much margin for anything, let alone taxation. If we cannot be absolutely fair, as we cannot, in giving these allowances, for goodness' sake let us help the people who need help most, namely, people at the bottom of the income scale:
I am surprised to heat the hon. Gentleman say that he does not mind the idea of a tax relief which would help single people more than married people with families.
However, that is not a major consideration. I say this in all good faith. In past years we have heard hon. Members opposite say that there is scope for what has been called lateral redistribution between those with heavy family responsibilities and those without. I am surprised to hear the hon. Gentleman make that point.
With regard to his view that all changes in tax work out unfairly, it seems to me that the least unfair system must be one which says: we have a system of taxation which covers everybody, but in considering what special allowances and what special features there should be in our tax system we want to take into account the special circumstances of individual taxpayers. Judged by that test, there is a case for small income relief whereby up to a certain figure investment income is treated in the same way as earned income. There is certainly a case for age exemption which does not apply in respect of special tax relief for small incomes as such.
I apologise for intervening in the debate at this point. I came to the Chamber only a few minutes ago and missed the earlier part of the debate. I should like to raise an important point and perhaps my hon. Friends who will, no doubt, want to divide on the Amendment will excuse me if I raise two matters with the Financial Secretary.
I thought the hon. Gentleman was making an extraordinarily poor defence of the Government's position on this Amendment. Let us first consider the question of comparing the single person, or married couple without children, with the married couple with one child. It is extraordinary to reject one concession on the ground that it will give no benefit at all to people who are already in circumstances in which they pay no tax. If a married couple with one child pay no tax at all on £440, obviously any concession that one gave in any way could be countered by saying that one can go further up the scale and that there are couples with three, four, five and six children who do not pay tax and that therefore we are discriminating against them. Obviously, if people are paying no tax at all it is impossible to give them tax concessions. That being so, it is extraordinary that the Financial Secretary should use that as an argument for giving this concession.
The Financial Secretary's other point was that we would need marginal provisions. I had thought in my innocence that this Amendment would automatically cover marginal provisions, but if it does not that is a technicality compared with the acceptance of the principle. I should have thought that there was no difficulty at all in accepting the Amendment and inserting these marginal provisions which we already have in outline at a further stage of the Bill.
The Financial Secretary said that we must leave this matter until we come to the question of dealing with personal allowances as a whole. That is a perfectly legitimate argument, but it ought to be pointed out that any general increase in personal allowances is an extremely costly affair. If we were to increase ordinary personal allowances by, say, £10 a year it would probably cost £25 million a year or something like that. If we increased personal allowances by £20 all round, people would still pay tax, single persons at about £200, and married couples not at £300 but £320 or £330. These levels would still be too low. Therefore, it is not an answer to say that we must wait until we increase personal allowances.
Unless the Government suddenly become almost unbelievably generous we shall not within the foreseeable future be able to increase personal allowances to a level required to provide the kind of exemptions that we want to provide by this Amendment. This Amendment is therefore necessary. If we want to make some special arrangement for people on low incomes we can only do it by exemption limits. We cannot do it, except at enormous cost, simply by increasing personal allowances. Up till 1952 we had special exemption limits quite apart from personal allowances. All we are asking is that we shall go back to that system now.
If there is some dispute about the level at which this Amendment puts the exemption limit, the Government could put forward alternative proposals. We want the Government to accept the principle. Nothing that the Financial Secretary has said so far has come near to answering the case in principle that has been made out for this Amendment. I hope, therefore, that my hon. Friends will continue the argument so that we may hear from the Financial Secretary again. If not, I am sure we shall want to divide on the Amendment. In any case, I hope that we shall continue to press the point not only in debating this Finance Bill but on future occasions, because this matter certainly needs attention.
The Financial Secretary said that the cost would be comparatively small compared with a number of the other kind of concessions which we shall be discussing later in respect of personal allowances and so on. I wish the Government would look seriously at the question of accepting this proposal in principle, even if they cannot accept the Amendment.
I do not know what they are waiting for, but it would have been interesting to hear from them on this Amendment.
One of the biggest obstacles to reform in fiscal and social security matters in the House is technical difficulty. We are always running into it. Hon. and right hon. Members opposite gleefully seize upon the technical difficulties and leave the substance alone. I think that it will be necessary one day to devise a way of moving Amendments to Bills before the House which do not get bogged down in technical difficulties and enable us to discuss the substance of the matter.
I am the last person to pretend that there are not technical difficulties in this Amendment. Of course, there are. We cannot reconstruct the Income Tax code and accommodate our reforms with symmetry and absolute equity all round. What we have to do in this Amendment is to focus our desire for tax exemption upon a certain group of people with low incomes. We want to get them out of Income Tax now, without, for the time being at least, consequential effect upon others in the Income Tax system. We fully acknowledge that there would have to be marginal relief. In the case of a married couple the marginal relief would run out at £489 a year, and in the case of a single person at £303 a year. So we can at least provide the answer to marginal relief.
The Financial Secretary asks the Committee to await a review of personal reliefs as a whole. Later in our debate, we shall come to personal reliefs as a whole. When we propose to increase personal reliefs for a single person by £10, for a married couple by £10, and the married woman's special earned income relief by £10, we shall be told that the total cost of this will be £82 million in a full year and that it is quite out of the question. For those small improvements in personal reliefs, amounting in the case of a single person, I think, to a tax relief of £3 17s. 6d. a year, we shall be told that the aggregate cost to the Exchequer is so great that modest improvements of that kind are outside the Chancellor's consideration this year. We shall probably be told that they are out of his consideration next year unless things change favourably in the meantime.
We have tried to escape the obvious problem of legislating for the whole of personal reliefs by concentrating on those at the bottom. The Financial Secretary said that we are not, even in concentrating on those at the bottom, giving adequate reliefs, or we are giving no relief at all, to a number of married couples with young children. When my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) intervened to say that many single persons are having a struggle to live in lodgings or in moving from one town to another, he is taxed with being in favour of relieving single persons from tax rather than married people with children. This is a distortion of what my hon. Friend said, and it is a distortion of the intention of the Amendment.
Those who are already relieved of tax by the personal allowances of married couples with children will not benefit from our Amendment. That is obvious. We hear repeatedly from the benches opposite, when this situation arises, that one cannot relieve from tax people who are not paying any. This applies here, However, what we can do is to relieve from paying tax those who are paying tax. That is what we want to do.
The main beneficiaries from out Amendment would be single persons, widows, married couples with one child or married couples without children. There are many young married couples today who are struggling to establish themselves in their homes. All the pressures are upon them, the pressure of the high price of houses, the high prices for rented accommodation, the high prices of furniture and household equipment. Young married couples are having a fairly rough time when they have to live on only £8 or £8 10s. a week.
Single persons, too, are being asked to move about and take jobs in different parts of the country. I have with me at this moment the list of transfers of Schedule E assessments in the Inland Revenue from London to Manchester in order to avoid bringing staff to London who cannot afford to live here when they come. This is necessary because of the strain upon the slender resources of young people when they leave home and are transferred away and have to go into lodgings or hostels and seek accommodation of some kind. I hope that hon. Members opposite will not run away with the idea that single persons and young married couples are not worthy of the consideration of the Committee when it comes to Income Tax.
We hear a great deal about the comparison between pre-war and post-war levels of taxation and incomes. In a mischievous moment, I asked, in 1960
what would be the equivalent tax reliefs at present money values of the personal tax reliefs for 1938–39…"—[OFFICIAL REPORT, 17th May, 1960; Vol. 623, c. 101.]
I find that the equivalent relief for a single person today, based on the pre-
war figure of £100, would be £281, and for a married couple the equivalent relief today would be £506. So if the reliefs today for single and married persons were to reflect the difference in the value of money, all single persons would be exempt under £281 a year and all married couples under £506 a year. This is disregarding the earned income relief in both cases. There is nothing outrageous in the suggestion that single persons up to £275 should be exempted and married couples up to £440 should exempted.
If we have to wait for the whole job to be done, this relief will, I fear, have to wait much longer than we on these benches wish. As my hon. Friend the Member for Cardiff, South-East pointed out, if all that is done is to increase the personal reliefs, desirable as that may be, not only will the overall cost be very great but the relief given will be carried right up the scale into the Surtax level. However, if the Chancellor wished to do something for the people with low incomes, he could, in reconstructing the reduced rate bands, take away in the higher incomes the benefit which he intended to concentrate on those at the bottom of the scale. But that is something which we in Opposition cannot do. That is why we have to concentrate on the simple expression of our desire to relieve these lower-paid people from tax altogether.
I am surprised that the cost is as low as it is. It can be accommodated even within an austerity Budget. The Chancellor is recognising this year what he denied last year, that is to say, for the incomes of old people a higher age exemption and for those on small incomes a higher small incomes relief. The Chancellor is accommodating the additional cost of the proposals in Clause 8 within his Budget this year. In our view, he could easily accommodate the very modest extra cost that this Amendment would entail. I believe, also, that this step and others which the Chancellor of the Exchequer could take would relieve the pressure on the wages front. Surely that is what he wants to do.
The other great point about reliefs from Income Tax is that they are the only tax-free wage increases which can be given. The Chancellor has the power to do that, and he can believe the pressure on the wages front by relieving people in the lower income bracket from tax—for instance, married couples, with up to £8 a week or thereabouts.
There is nothing in our Amendment which should occasion the Government any difficulty. It is modest in its intention and specific in its purpose. The overall cost would be almost negligible, and nothing but perversity can possibly stand in the way of its acceptance.
I should like to ask the Financial Secretary a question about marginal relief. I could not understand him when he refered to it. Subsection (1) provides for people under 65 with small incomes and subsection (2) provides for people over 65 with small incomes. I am well aware that in the first case the provision is only by way of a two-ninths deduction and that in the second case there is total exemption, but in both cases the marginal relief provided by the Sections in the 1952 and 1957 Acts is to go up to £550 in one case and up to at least £480 in the other case.
One answer to the Government's objection that there is no marginal relief in this Amendment is that it is unnecessary to provide it because the Government's Amendments to existing legislation provide it. If the Financial Secretary chooses to say that it will be provided in a different form, we should be only too pleased if he would show us the different form on Report. But the fact that its exists seems incontrovertible.
Member for Kettering (Mr. Mitchison) about marginal relief. Marginal relief was originally provided for by paragraph (b) of Section 13 (1) of the Finance Act, 1957, and the hon. and learned Gentleman's second Amendment expressly directs that this paragraph shall be omitted from the alternative version. That is the difficulty.
As I explained, that was not the only matter at issue. However, since I was asked a technical question about the drafting, I thought that it was only courteous to answer it.
What I said about the second Amendment was correct. I should like to examine the first Amendment more closely before giving a full reply. However, I do not wish to mislead the Committee in any way. I thought it right to raise the point about marginal relief, but, as I made clear, this is a straight difference of view between the two sides of the Committee about the way in which we should proceed in this matter.
|Division No. 194.]||AYES||[7.14 p.m.|
|Ainsley, William||Brockway, A. Fenner||Delargy, Hugh|
|Albu, Austen||Broughton, Dr. A. D. D.||Dodds, Norman|
|Allaun, Frank (Salford, E.)||Brown, Rt. Hon. George (Belper)||Driberg, Tom|
|Allen, Scholefield (Crewe)||Brown, Thomas (Ince)||Ede, Rt. Hon. C.|
|Awbery, Stan||Butler, Herbert (Hackney, C.)||Edelman, Maurice|
|Bellenger, Rt. Hon. F. J.||Callaghan, James||Edwards, Walter (Stepney)|
|Bence, Cyril||Castle, Mrs. Barbara||Evans, Albert|
|Bennett, J. (Glasgow, Bridgeton)||Collick, Percy||Finch, Harold|
|Benson, Sir George||Corbet, Mrs. Freda||Fitch, Alan|
|Blackburn, F.||Cronin, John||Foot, Dingle (Ipswich)|
|Blyton, William||Crosland, Anthony||Foot, Michael (Ebbw Vale)|
|Boardman, H.||Crossman, R. H. S.||Fraser, Thomas (Hamilton)|
|Bottomley, Rt. Hon. A. G.||Cullen, Mrs. Alice||Galpern, Sir Myer|
|Bowden, Rt. Hn. H. W.(Leics.S.W.)||Darling, George||George, LadyMeganLloyd (Crmrthn)|
|Bowies, Frank||Davies, G. Elfed (Rhondda, E.)||Greenwood, Anthony|
|Boyden, James||Davies, Harold (Leek)||Gourlay, Harry|
|Griffiths, David (Rother Valley)||MacDermot, Niall||Royle, Charles (Salford, West)|
|Griffiths, Rt. Hon. James (Llanelly)||McKay, John (Wallsend)||Shinwell, Rt. Hon. E.|
|Grimond, Rt. Hon. J.||McLeavy, Frank||Skeffington, Arthur|
|Hale, Leslie (Oldham, W.)||Mallalieu, J.P.W. (Huddersfield, E.)||Slater, Joseph (Sedgefield)|
|Hall, Rt. Hn. Glenvil (Colne Valley)||Mason, Roy||Smith, Ellis (Stoke, S.)|
|Harper, Joseph||Mayhew, Christopher||Sorensen, R. W.|
|Hayman, F. H.||Mellish, R. J.||Soskice, Rt. Hon. Sir Frank|
|Henderson, Rt.Hn.Arthur(RwlyRegis)||Millan, Bruce||Spriggs, Leslie|
|Herbison, Miss Margaret||Mitchison, G. R.||Stewart, Michael (Fulham)|
|Hill, J. (Midlothian)||Moody, A. S.||Stones, William|
|Holman, Percy||Moyle, Arthur||Strachey, Rt. Hon. John|
|Holt, Arthur||Mulley, Frederick||Stross, Dr.Barnett (Stoke-on-Trent, C.)|
|Houghton, Douglas||Noel-Baker, Rt. Hn. Phillp (Derby,S.)||Taylor, Bernard (Mansfield)|
|Howell, Denis (Small Heath)||Oliver, G. H.||Thomas, Iorwerth (Rhondda, W.)|
|Hughes, Cledwyn (Anglesey)||Oram, A. E.||Thorpe, Jeremy|
|Hughes, Hector (Aberdeen, N.)||Padley, W. E.||Tomney, Frank|
|Hunter, A. E.||Parker, John||Wade, Donald|
|Hynd, John (Attercliffe)||Pavitt, Laurence||Wainwright, Edwin|
|Irving, Sydney (Dartford)||Pearson, Arthur (Pontypridd)||Weitzman, David|
|Jay, Rt. Hon. Douglas||Peart, Frederick||Wells, Percy (Faversham)|
|Jones, Dan (Burnley)||Pentland, Norman||Wells, William (Walsall, N.)|
|Jones, Jack (Rotherham)||Popplewell, Ernest||Wilkins, W. A.|
|Jones, J. Idwal (Wrexham)||Prentice, R. E.||Willey, Frederick|
|Jones, T. W. (Merioneth)||Price, J. T. (Westhoughton)||Williams, D. J. (Neath)|
|Key, Rt. Hon. C. W.||Pursey, Cmdr. Harry||Williams, LI. (Abertillery)|
|King, Dr. Horace||Randall, Harry||Willis, E. G. (Edinburgh, E.)|
|Lawson, George||Rhodes, H.||Winterbottom, R. E.|
|Ledger, Ron||Roberts, Albert (Normanton)||Woof, Robert|
|Lee, Frederick (Newton)||Roberts, Goronwy (Caernarvon)||Wyatt, Woodrow|
|Lee, Miss Jennie (Cannock)||Robertson, John (Paisley)||Yates, Victor (Ladywood)|
|Lever, L. M. (Ardwick)||Robinson, Kenneth (St. Pancras, N.)|
|Lewis, Arthur (West Ham, N.)||Rogers, G. H. R. (Kensington, N.)||TELLERS FOR THE AYES:|
|Mabon, Dr. J. Dickson||Ross, William||Mr. Charles A. Howell and|
|Agnew, Sir Peter||Craddock, Sir Beresford||Hollingworth, John|
|Aitken, W. T.||Critchley, Julian||Hornby, R. P.|
|Arbuthnot, John||Cunningham, Knox||Hornsby Smith, Rt. Hon. Dame P.|
|Atkins, Humphrey||Curran, Charles||Howard, Hon. G. R. (St. Ives)|
|Balniel, Lord||Currie, G. B. H.||Howard, John (Southampton, Test)|
|Barber, Anthony||Dalkeith, Earl of||Hughes Hallett, Vice-Admiral John|
|Barlow, Sir John||d'Avigdor-Goldsmld, Sir Henry||Hughes-Young, Michael|
|Barter, John||Deedes, W. F.||Iremonger, T. L.|
|Baxter, Sir Beverley (Southgate)||de Ferranti, Basil||James, David|
|Beamish, Col. Sir Tufton||Donaldson, Cmdr. C. E. M.||Jenkins, Robert (Dulwich)|
|Bell, Ronald||Doughty, Charles||Jennings, J. C.|
|Bennett, F. M. ((Torquay)||Drayson, G. B.||Johnson, Dr. Donald (Carlisle)|
|Berkeley, Humphry||du Cann, Edward||Johnson, Eric (Blackley)|
|Bevins, Rt. Hon. Reginald||Eden, John||Kerans, Cdr. J. S.|
|Bidgood, John C.||Elliot, Capt. Walter (Carshalton)||Kirk, Peter|
|Biffen, John||Elliott, R.W.(Nwcastle-upon-Tyne,N.)||Langford-Holt, Sir John|
|Biggs-Davison, John||Emery, Peter||Leather, E. H. C.|
|Bishop, F. P.||Emmet, Hon. Mrs. Evelyn||Lewis, Kenneth (Rutland)|
|Black, Sir Cyril||Errington, Sir Eric||Lilley, F. J. P.|
|Bossom, Clive||Farey-Jones, F. W.||Lindsay, Sir Martin|
|Bourne-Arton, A.||Finlay, Graeme||Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)|
|Box, Donald||Fletcher-Cooke, Charles||Lloyd, Rt. Hon. Selwyn (Wirral)|
|Boyd-Carpenter, Rt. Hon. John||Fraser, Hn. Hugh (Stafford & Stone)||Loveys, Walter H.|
|Boyle, Sir Edward||Fraser, Ian (Plymouth, Sutton)||Lucas-Tooth, Sir Hugh|
|Brooke, Rt. Hon. Henry||Gibson-Watt, David||McAdden, Stephen|
|Brown, Alan (Tottenham)||Gilmour, Sir John||McLaren, Martin|
|Browne, Percy (Torrington)||Glyn, Dr. Alan (Clapham)||McLean, Neil (Inverness)|
|Bryan, Paul||Goodhart, Philip||Macleod, Rt. Hn. Iain (Enfleld, W.)|
|Buck, Antony||Goodhew, Victor||Macmillan, Maurice (Halifax)|
|Bullard, Denys||Gower, Raymond||Macpherson, Niall (Dumfries)|
|Bullus, Wing Commander Erie||Grant, Rt. Hon. William||Maddan, Martin|
|Burden, F. A.||Grant-Ferris, Wg. Cdr. R.||Maltland, Sir John|
|Butcher, Sir Herbert||Green, Alan||Manningham-Buller, Rt. Hn. Sir R.|
|Campbell, Sir David (Belfast, S.)||Gresham Cooke, R,||Markham, Major Sir Frank|
|Campbell, Gordon (Moray & Nairn)||Gurden, Harold||Marlowe, Anthony|
|Carr, Robert (Mitcham)||Hamilton, Michael (Wellingborough)||Marples, Rt. Hon. Ernest|
|Cary, Sir Robert||Harris, Reader (Heston)||Marshall, Douglas|
|Clark, Henry (Antrim, N.)||Harrison, Brian (Maldon)||Marten, Neil|
|Clark, William (Nottingham, S.)||Harrison, Col. Sir Harwood (Eye)||Mathew, Robert (Honiton)|
|Clarke, Brig. Terence(Portsmth, W.)||Hastings, Stephen||Mawby, Ray|
|Cleaver, Leonard||Hay, John||Maxwell-Hyslop, R. J.|
|Cole, Norman||Heald, Rt. Hon. Sir Lionel||Maydon, Lt.-Cmdr. S. L. C.|
|Cooke, Robert||Henderson, John (Cathcart)||Mott-Radclyffe, Sir Charles|
|Cooper-Key, Sir Neill||Hill, J. E. B. (S. Norfolk)||Neave, Airey|
|Cordeaux, Lt.-Col. J. K.||Hirst, Geoffrey||Nicholson, Sir Godfrey|
|Corfield, F. V.||Hobson, Sir John||Noble, Michael|
|Costain, A. P.||Hocking, Philip N.||Nugent, Rt. Hon. Sir Richard|
|Coulson, Michael||Holland, Philip||Oakshott, Sir Hendrie|
|Orr-Ewing, C. Ian||Ridsdale, Julian||Taylor, Frank (M'ch'st'r,Moss Side)|
|Osborne, Sir Cyril (Louth)||Roberts, Sir Peter (Heeley)||Taylor, W. J. (Bradford, N.)|
|Page, Graham (Crosby)||Robertson, Sir D. (C'thn's & S'th'Id)||Teeling, Sir William|
|Pannell, Norman (Kirkdale)||Rodgers, John (Sevenoaks)||Temple, John M.|
|Partridge, E.||Roots, William||Thomas, Leslie (Canterbury)|
|Pearson, Frank (Clitheroe)||Ropner, Col. Sir Leonard||Thompson, Kenneth (Walton)|
|Peel, John||Royle, Anthony (Richmond, Surrey)||Thornton-Kemsley, Sir Colin|
|Percival, Ian||Russell, Ronald||Touche, Rt. Hon. Sir Gordon|
|Peyton, John||Scott-Hopkins, James||Turner, Colin|
|Pickthorn, Sir Kenneth||Sharpies, Richard||van Straubenzee, W. R.|
|Pike, Miss Mervyn||Shaw, M.||Wakefield, Sir Wavell|
|Pilkington, Sir Richard||Shepherd, William||Walder, David|
|Pitt, Miss Edith||Skeet, T. H. H.||Walker, Peter|
|Price, David (Eastleigh)||Smith, Dudley (Br'ntfd A Chiswick)||Walker-Smith, Rt. Hon. Sir Derek|
|Prior, J. M. L.||Smithers, Peter||Williams, Dudley (Exeter)|
|Profumo, Bt. Hon. John||Smyth, Brig. Sir John (Norwood)||Williams, Paul (Sunderland, S.)|
|Proudfoot, Wilfred||Spearman, Sir Alexander||Wills, Sir Gerald (Bridgwater)|
|Pym, Francis||Speir, Rupert||Wilson, Geoffrey (Truro)|
|Quennell, Miss J. M.||Stanley, Hon. Richard||Wise, A. R.|
|Ramsden, James||Stevens, Geoffrey||Wolrige-Gordon, Patrick|
|Rawlinson, Peter||Stottdart-Scott, Col. Sir Malcolm||Wood, Rt. Hon. Richard|
|Redmayne, Rt. Hon. Martin||Storey, Sir Samuel||Woodhouse, C. M.|
|Rees, Hugh||Studholme, Sir Henry||Worsley, Marcus|
|Rees-Davies, W. R.||Summers, Sir Spencer|
|Renton, David||Talbot, John E.||TELLERS FOR THE NOES:|
|Ridley, Hon. Nichols||Tapsell, Peter||Mr. Chichester-Clark and|
Even though hon. Members opposite appear to be interested only in a capital gains and not in relief for small incomes, I want to ask the Financial Secretary one or two further questions before we part with this Clause. Apart from all the intricacies we went into on the Amendments which we have just discussed, how does he justify the present position by which all other small incomes are exempt from the reliefs now being given? The Financial Secretary argued at one point that Income Tax payers with small incomes paid only very small amounts in Income Tax anyway and, therefore, seemed to think that there was not a great case. I should have thought that that largely made the case for granting a bigger concession.
If it is true, as I believe it is, that we are raising very small amounts of revenue from a very large number of people, is there not a strong ground for believing that these small amounts of revenue do not justify the administrative effort and all the complexities of raising them? According to the latest Inland Revenue Report, and the Financial Secretary may be able to confirm it, there are about 16 million or 17 million Income Tax payers about 5 million of whom at the lower end of the scale probably do not yield more than about £50 million of a total Income Tax revenue of about £2,000 million. If anything like that is true, I should have thought that there was a strong administrative and practical case for omitting altogether a large number of very small taxpayers at very little cost to the revenue and that the Financial Secretary was strengthening the case against which he was arguing.
How can the present situation be defended if one compares it with the lower exemption limits for Income Tax before the war? In 1938, the effective exemption limit from tax for a single person or married couple—it was the same in those days—was about £3 a week. In terms of prices, that would be about £9 a week today. To reach the situation of before the war, we would have to exempt all incomes of £9 a week and downwards, whereas the exemption limit for a single man is about £3 15s.
This is an extraordinary change of tax and is a revolutionary pushing down of the level of tax to large numbers of people who, before the war, would not pay Income Tax. There may be a case for some such change, but it is a drastic change. If it was not right before the war to impose Income Tax on people earning less than £3 a week, it cannot be right now to impose it on people earning less than £4 a week. How can the Financial Secretary possibly justify that situation?
The right hon. Member for Battersea, North (Mr. Jay) has asked two questions which both raise in a different way the same question—whether we should have a tax relief for everybody with small incomes as such. His last question—whether I thought that tax allowances in some form or another should be such as to give the same real limit of exemption today as we had' before the war—goes beyond the strict limits of the Clause. However, he asked me another question which I should like to answer in some detail, as it was perfectly fair.
The hon. Gentleman asked whether, if we carried the principle in the Clause rather further, it would not produce valuable administrative savings and whether our present tax system was rather wasteful from the point of view of administration. I have looked into the idea that an extension of the relief in the Clause could effect an administrative saving by eliminating from the P.A.Y.E. machine many taxpayers who now contribute a few shillings a week.
Tax is automatically deducted under P.A.Y.E. Unless the employee is given a code number which, in conjunction with the tax tables, shows that his pay does not exceed the allowances and reliefs due to him. For technical reasons, the tax tables could not be made to incorporate an exemption of the sort which the right hon. Gentleman and his colleagues have in mind. It would have to be arranged for by an indication in the code number book stating the deduction, and technically the adjustment of code numbers for this purpose would be a very hit-or-miss affair and the work would have to proceed on the basis of estimates of the pay likely to be obtained, which would often prove not very accurate. There would be a considerable number of cases where adjustment for repayment or the subsequent recovery of tax under-deducted proved to be necessary after the end of the year. From the administrative point of view I asked for this to be examined, because, like the right hon. Gentleman, I thought it was a point very likely to be raised.
Does this really mean, then, that there is no more administrative effort involved in collecting tax from 16 million people, or whatever it is, who pay it now, than there was when less than half that number paid it before the war? It is very difficult to believe.
What I am saying is that where the form of income relief as such is of the sort we have been discussing this evening, this would not be a saver from the administrative point of view.
I think that nobody disapproves the purpose of the Clause, which is what we are meant to discuss, and nothing else, in this debate. We have discussed fully whether the principle of the Clause should be extended to cover a rather wider ambit, but I think that perhaps the time is coming when the Committee may feel that we can approve the Clause, which, at any rate so far as it goes, does put what the whole Committee wishes to see on the Statute Book.
I am sorry that I missed some the earlier part of the discussion on the Amendment, but I rise now because I am tired of hearing always from the Chancellor of the Exchequer and the Financial Secretary and others on the Treasury Bench, when any proposal is made to give tax relief to certain groups, particularly those I would call the under-privileged groups, that there is some technical reason why it cannot be done. It is a most extraordinary thing that in the eleven years I have been a member of this Committee there have always been no technical difficulties in imposing taxation but tremendous difficulties in giving deserving people relief. Quite honestly, I am just tired of hearing it. It does seem to me quite absurd that what is technically possible in one direction is technically impossible in the other.
Anyone knows from just moving around the country that a single person, a young man or woman, paying lax on just under £4 a week, with Purchase Tax imposed on everything he or she buys——
Order. I am sorry to interrupt the hon. Member, especially as I have only just come into the Chair, but apparently the Committee has been discussing this aspect of the matter previously, on the Amendment which was moved. I hope, therefore, that if the hon. Member is going on to speak on this Question, That the Clause stand part of the Bill, he will discuss something we did not discuss on the Amendment.
Well, I am trying to elicit from the Financial Secretary the reason why he says this relief cannot be given. That is what I want to know. He just says that technically he cannot give the relief to a particular group of taxpayers. The Financial Secretary said this himself——
On a point of order. This is a Clause which, after all, gives relief to certain types of small incomes. I should have thought that it would be in order for my hon. Friend—if I may submit this to you, Mr. Williams—as it was for the Financial Secretary, to argue whether or not this is desirable, and what administrative difficulties are or are not involved in doing it.
Further to that point of order. We have already taken that question on the Amendment which we were discussing, whether there should be a small incomes relief as such and whether the Clause should have a wider ambit, and when replying to the right hon. Gentleman the Member for Battersea, North (Mr. Jay) just now I deliberately refused to go into detail on that subject. I answered the right hon. Gentleman's point about administration because there, I thought, he was asking something different, namely, how the Clause would work out administratively, as it now stands, whether it was wasteful or not administratively. It seemed to me that the hon. Member for Dunbartonshire, East (Mr. Bence)—and he and I have known each other too long for me to want to score a point over him—was discussing what we were discussing on the Amendment.
I rose to speak because I heard again that here there is an administrative difficulty, and it is that with which I am dealing. I want to elicit why this is administratively difficult. That is the question I am dealing with.
Possibly if I had been in the Chair earlier it might have been easier to have shown the hon. Member what I have in mind, but I think the Minister is quite right. I think he stretched a point of order in replying to a certain point made by the right hon. Gentleman the Member for Battersea, North (Mr. Jay). I do not think we ought to consider that argument any further.
I would submit this to you, Mr. Williams, that on the Amendment we have already discussed the proposal to extend this particular relief in one particular way, but that what my hon. Friend is suggesting is that it is also possible to extend it in other ways, not necessarily the one we have discussed already. I do not think my hon. Friend was necessarily concerned with only the special form of relief we discussed on the Amendment.
I accept your Ruling, Mr. Williams, and I will confine myself to the Clause, which limits relief to those over 65 years of age and grants marginal relief to certain income groups on the formula stated in the Clause. I suppose that I should be out of order again if I were to say that I do not think the Clause goes far enough in that it does not give relief in wide enough directions, and so in view of your Ruling, and the fact that, apparently, the Financial Secretary answered the question about administrative difficulty—although I did not think he did—I think it is just as well that I resume my seat.
I know that the Financial Secretary is anxious to get on, but I hope he will not mind if I dwell for a moment on his own inglorious past. In the speech I made on Second Reading of the Bill I did promise him that I would tease him on the speech he made last year on the very reliefs which are given in this Clause.
This Clause does two things. It raises the exemption for a single person over 65 from £275 to £ 300 and it raises the exemption for a married couple, one of whom is over 65, from £ 440 to £ 480. That is exactly the proposal which we made to the Committee last year. We gave it very high priority indeed, and urged upon the Chancellor and the Financial Secretary that hardship would be caused to retirement pensioners, who were then getting a somewhat higher retirement pension, if the age exemption were not raised above the previous limits.
That is the first thing. The second thing which the Clause does is to raise the limit of small incomes relief from £300 to £400. Small incomes relief, as the hon. Gentleman explained a few moments ago, does not exempt anybody from tax and it has no age limit, but what it does do is to give the benefit of earned income relief to investment income where the total income from all sources does not exceed the prescribed limit, now £300, proposed in the Clause to be £400.
What we proposed last year was a much more modest increase in the small incomes relief limit. We proposed to raise it from £300 to £325. Now, in this Clause, it is proposed to raise it to £400, or £75 higher than we proposed last year. I think that the Financial Secretary will agree that we on this side of the Committee are entitled to feel resentful that the modest improvements in these reliefs which we sought last year were rejected by him on 14th June, 1961, and this year he comes along full of smiles and graces and says, "This is what we propose to do."
The urgency behind the matter last year was the improvement in the retirement pensions. It so happened that many retirement pensioners who had the benefit of total exemption under the old retirement pension scales and on the old exemption limits were brought above the exemption limits by the increase in retirement pension. A number of people found themselves going from a total exemption to a tax payment of 3s. or 4s. a week. A case was cited in the course of that debate where a married couple went from total exemption to a tax of 5s. 7½d. a week as a result of an increase in retirement pension of 12s. 6d. a week for a married couple. This is marginal taxation with a vengeance.
I do not know whether I ought to torture the Financial Secretary with quotations from his speech of 14th June, 1961. He is a most able and affable defender of the Chancellor's faith. He has defended more lost causes in the course of debates on Finance Bills than perhaps any other Treasury Minister, but it is difficult to keep one's patience when one reads what the hon. Gentleman was saying last year against the very increases which he is proposing to make this year.
Last year, the hon. Gentleman saw no reason why a higher retirement pension should not bring many of these old people within the tax bracket. I quote from a sentence of his on that occasion when, referring to the increase in retirement pensions, he said:
… it is not unjust that those who are at the margin for tax reliefs should benefit less from special tax treatment as a result of the increase in their pensions.
He said again:
My right hon. and learned Friend thought that it would not in any way be inconsistent with this purpose if an increase in income carried with it a small increased tax liability.
He was talking about increased pensions each time.
I have another quotation from the hon. Gentleman. He said:
… I think that there is a strong case for not discriminating further in favour of old people in a year when my right hon. and learned Friend has found it impossible, for economic reasons, to give any general remissions of direct taxation or to make any changes otherwise in our system of tax allowances.
When it came to our small incomes relief proposal, modest as it was, the hon Gentleman, first, criticised it on the ground that it would not benefit anyone below £300 a year and would not benefit anybody receiving more than £325 a year. He went on to say:
Secondly, we should remember that many of those whom it would help would not be old people, but young people in the early stages of their earning career who have, in addition to their earnings, a small amount of investment income. I cannot see that they have any special claim to tax relief."— [OFFICIAL REPORT, 14th June, 1961; Vol. 642, c. 587-9.]
And here it is on a plate. What is the difference between last year and this in the context of these two proposals in the Clause?
The Financial Secretary ought to give a good case now for not repaying these people the tax that was levied upon them last year by his refusal to accept our proposals, and from which they have suffered ever since. A great many people have lost some pounds during last year out of their very meagre increase in retirement pension. I do not think that the Financial Secretary can pass from the Clause without a word of explanation of this extraordinary somersault. Of course we welcome it. All I am complaining about is that it is a year late. It should have been done last year. I do not like to use an unnecessarily strong term, but these retirement pensioners with very modest incomes are given the benefit of an increase in pensions and then are robbed of the full advantages of that increase by the stubbornness of the Chancellor and the Financial Secretary in declining to accede to these proposals last year.
I remember so well that we on this side of the Committee thought, "Here are two things which surely the Chancellor will do. The Chancellor probably could not have foreseen before his Budget statement that the increase in retirement pensions would have this effect for the purposes of tax. When we give him examples of what has occurred, surely we cannot have a Chancellor who will not be moved to make small concessions to meet this difficulty." I remember, also, that we put these two proposals at the top of our list of new Clauses. So anxious were we to keep them at the top of the list so that they could be discussed before any other concessions were looked at that my hon. and learned Friend the Member for Kettering (Mr. Mitchison) stayed near the Table, in a great state of agitation, waiting for the conclusion of the debate on Second Reading to pop these two new Clauses on the Table the moment the debate ended. Then this is what happened.
The Financial Secretary must be quite ashamed of all this. He is not a "stooge". He is not just a gramophone record. He always gives the impression that he believes what he says. We credit him with great sincerity as well as great ability and I was shocked when I heard his speech twelve months ago. We are delighted that the Chancellor has felt able to do it this year, but what was there about the economic situation— and I will not mention Surtax— and about the condition of the Finance Bill last year that prevented these concessions being made then and how different are they today that they enable these concessions to be made?
Am I rubbing it in too much? [HON. MEMBERS: "No."] I think that the Financial Secretary deserves every word of this. He made the speech. He cannot pass it off. He could have chosen his own words, but when the Chancellor said, "Do the dirty job" the hon. Gentleman entered into it with gusto and enthusiasm and produced all the arguments. He said that many of these people were not old people, but young people at the beginning of their careers, and he could not see that they had any claim to tax relief. But here we are now with an exemption limit not of £325, but of £400. It is very welcome, but it is a very strange situation indeed.
Perhaps the Economic Secretary will get up and make the excuses for the Financial Secretary. The Leader of the House is here, and he may decide that the Government's reputation for integrity is now so much impugned that he should get up and defend the Chancellor of the Exchequer. But what has the Financial Secretary to say? What excuse has he to give for his astonishing and reprehensible behaviour last year? I leave it at that.
I should not like the Clause to pass without my making a personal reply to the questions which have been asked by the hon. Member for Sowerby (Mr. Houghton). I very vividly remember the debate last year, not least because we had one of the "love-hate" sessions with my hon. Friend the Member for Tynemouth (Dame Ward).
I am not quite sure, but I think I was almost the only hon. Member in the Committee between 11 p.m. and 11.15 that evening to listen to the speech of the hon. Member. That is evidenced by the fact that only 92 hon. Members opposite voted on the important Clause. The situation was, I think— it does occasionally happen at night when we have already had several days dealing with the Finance Bill— that hon. Members were occupied primarily with the question of how soon the Division was to be.
However, the hon. Gentleman's speech received close attention from me, and I am glad to think that he listened to my speech, because I am sure that he was the only hon. Member in the Committee who did. I am also very glad that one year later the Government have shown signs that at least one of their members listened to the speech of the hon. Gentleman. Further, I am glad to think that the hon. Member still remembers my speech.
Looking at the legislation that we are seeking to amend under the Clause, and at the result of the amendments sought to be made, what strikes me is that there is a very sharp line indeed between the treatment of people who are under 65 and have small incomes and the treatment of people who are over 65 and have small incomes. That extends to the definition of "small incomes", which is different in two cases, and also to the question of whether they are single or married affecting the amount of relief and, lastly, to the amount of the relief itself. Looking simply at the Clause without referring to the two Finance Acts quoted, one would say that there must be some close similarity. In fact, the 1952 Act, providing for people under 65, gives only very limited relief of tax on two-ninths of the income, while after 65 there is full exemption.
Does the hon. Gentleman regard the present state of affairs in that respect as satisfactory? It seems to me that the difference between the type of relief, the amount of relief and the limits of relief before and after the age of 65 is the result of the way things have grown. It is not really a satisfactory arrangement at all. We have discussed and rejected an Amendment which would have gone some way, within a limited field, to meet the difficulty. However, I am not dealing with that. I am on the broad question of whether the Government have any views about this matter. They must have some views. After all, they have taken the opportunity of amending the two Sections in question. Are they satisfied on the point that the two kinds of relief before and after the age of 65 are so different as to be quite incongruous and to fit with difficulty and unfairly into the tax system?
I appreciate that when one is dealing with old people there is the difficulty that one has to draw the line at some point, and for a number of obvious reasons connected with other legislation, 65 is undoubtedly the point at which to draw it. But I do not look at the taxation question in quite the same way. It seems to me that when deciding what relief to give, although one may have to have a sharp line of demarcation at which to make a change, it ought to be one's endeavour in this sort of case to make the change as small and as gradual as possible. So far as I can see, in this case there is no attempt to make the change gradual. It is undoubtedly a very sharp change for the reasons I have given.
Do the Government regard that as satisfactory, or are they in process of considering some more equitable system of relief as between the two groups of persons? I do not want to be misunderstood about this. I entirely agree that persons over 65 should have full exemption, but I would see any change made by increasing the exemption for small incomes of persons under 65. Equally, I have no objection to the fact that the Government propose to make these increases in amount. I have no objection to their being quite substantial increases.
But what puzzles me is whether in doing this, and in limiting it to these changes, the Government have forsworn or merely postponed what seems to me to be inevitable— the tidying up of this part of the tax system. I do not want to repeat what many of my hon. Friends have said and what I think has been admitted by the silence on this point on the other side of the Committee, but it is monstrous that in a prosperous country people with such small incomes as we are concerned with in this kind of case should have to pay tax at all.
I should have thought that any reasonable Government would strain every effort it could and face every administrative difficulty— that is, leave no stone unturned and no avenue unexplored, as the advertisements in the Tube used to make perfectly clear— in order to get a bit of sense into these arrangements. They conspicuously lack it at present, and they lack it because of the way this legislation has grown up and because no Government have had the courage to face the really human problem involved in this kind of legislation, the difficulties of passing from one age to another and the question of whether for very small incomes there ought to be any difference on account of age.
Having listened to this battle between the Conservative Front Bench and the Opposition Front Bench, I felt that I might address one or two remarks on the subject. I am, of course, delighted that my right hon. and learned Friend has at last done something. I do not think he has done a very great deal, but I am always thankful for small mercies. That is one of the things I have learnt since I came into the House of Commons.
I noticed that it was suggested from the other side of the Committee that between last year and this year same softening up of the Chancellor and the Financial Secretary might have been done by some of us on this side of the Committee. I agree with what has just been said. But it has been extremely difficult to get the Chancellor down to looking at the problem which is involved for people who live on small fixed incomes.
I have not the experience or the knowledge which the hon. Member for Sowerby (Mr. Houghton) always brings to these debates— I am always fascinated to hear what he has to say— but I think he would be quite interested if I were to ask the Financial Secretary to produce all the correspondence which he has received from me during the course of twelve months on some of these questions. Then the hon. Gentleman might have a little more information.
I do not in the least mind what was said last year as long as some progress is made this year. As I have said, I am thankful for small mercies. All I would say to the Financial Secretary is that I do not think he can have been particularly inspired by listening to the speeches criticising what he said last year. It is stupid to bring up all the arguments used in the past; they can always be brought up in the present and the future.
But it would be a good thing if the Financial Secretary took heed of what has been said, and then perhaps next year we might get some first-class concessions and have the whole question of taxation for people living on small fixed incomes brought into line with what I believe are the general views and desires of the country. We have discussed the line drawn at 65. I see no reason why we should not go downwards— to 60, 55 or even 50. But there never is any opportunity in this place for a proper human discussion of the whole problem.
Though, as I say, I very much support what the Chancellor has done in the Budget, I do not in the least mind how embarrassed the Financial Secretary may be at having his speech of last year quoted against him by the Opposition, and I hope that my hon. Friend will learn and inwardly digest so that we do not have to have a repetition next year. I look forward very much to having not only crumbs next year but a whole big loaf or cake.
I am grateful for the remarks of the hon. and learned Member for Kettering (Mr. Mitchison). I have already spoken twice on this Clause. Therefore, I will reply very briefly to the hon. and learned Gentleman, who asked me about the marginal arrangements particularly with regard to the small income relief.
The situation is that at present the marginal relief is given for incomes just over £300 provided that, if it is to his advantage, the taxpayer's liability shall be taken as equal to the sum of two amounts: first— this sounds rather like an Amendment drafted by the hon. and learned Gentleman, if I may say so— the tax that he would pay with the benefit of the small income relief then due if his income were exactly £300; and, secondly, two-fifths— 8s. in the £— of the amount by which his actual income exceeds £300.
In principle, this method of determining marginal reliefs will be retained for the current financial year, 1962–63, with the substitution of £400 for £300. But the fraction of two-fifths used in the second part of this formula will have to be adjusted a little. It would be tedious for the Committee if I went into full details now of what we propose to do, but we have noted the point which the hon. and learned Gentleman properly raised. I have no reason to think that, with a slight alteration, we shall not be able to manage the problem perfectly well.