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Clause 12—(Income Tax On, Offices, Employments And Pensions To Be Chargeable Under Schedule E)

Volume 155: debated on Tuesday 20 June 1922

The text on this page has been created from Hansard archive content, it may contain typographical errors.

  • (1) Such profits or gains arising or accruing to any person from an office, employment or pension as are, under the Income Tax Act, 1918, chargeable to Income Tax under Schedule D (other than the profits or gains chargeable under Case V of Schedule D, or under Rule 7 of the Miscellaneous Rules applicable to Schedule D), shall cease to be chargeable under that Schedule and shall be chargeable to tax under Schedule E, and the Rules applicable to that Schedule shall apply accordingly subject to the provisions of this Act.
  • (2) Rule 2 of the Rules applicable to Cases I and II of Schedule D (which relates to the assessment and charge of weekly wage-earners), shall be deemed to be one of the Rules applicable to Schedule E.
  • (3) Rule 7 of the Rules applicable to Schedule E (which relates to the charge of tax in respect of offices and employments of profit held under a railway company), shall apply to all offices and employments held under and pensions paid by, a railway company:
  • Provided that nothing in this Sub-section shall affect the provisions relating to the quarterly assessment and the collection of Income Tax in the case of weekly wage-earners employed by way of manual labour.

  • (4) Paragraph (5) of Rule 18 of the Rules applicable to Schedule E shall have effect as though the words "or in which he is employed" were inserted at the end thereof.
  • (5) The following paragraph shall he inserted at the end of Rule 5 of the Rules applicable to Schedule E: "If any person proves to the satisfaction of the Commissioners concerned that the amount for which an assessment has been made in respect of his salary, fees or emoluments for any year of assessment exceeds the amount of the salary, fees or emoluments for that year, the assessment shall be adjusted and any amount overpaid by way of tax shall be repaid."
  • (6) The provisions of Sub-section (1) and Sub-section (3) of this Section shall have effect and shall be deemed always to have had effect, for the purpose of any assessment to Income Tax which is made or becomes final and conclusive after the first day of May, nineteen hundred and twenty-two, in respect of any employment (other than that of pa weekly wage-earner employed by way of manual labour) under any public department, or under any company, society or body of persons or other employer mentioned in Rule 6 of the Rules applicable to Schedule E.
  • (7) Income Tax in respect of profits or gains which would, but for the provisions of this Section, have been chargeable under Schedule D for the year 1922–23, may be charged for that year either under Schedule D or under Schedule E, but the tax shall in all cases be computed in accordance with the provisions and Rules applicable to Schedule E as amended by this Act.
  • The Amendment in the name of the hon. and learned Member for Moss Side (Lieut.-Colonel Hurst) and other hon. Members—[at the end of Subsection (1) to insert the words

    "Provided that allowances granted under Royal Warrant to a widow in respect of her children shall not be treated as forming part of the pension or income of such widow for the purposes of her assessment for Income Tax, and shall cease to be so chargeable as against her"]—
    would have to come as a new Clause.

    I beg to move, in Sub-section (2), after the word "wage-earners," to insert the words

    "have effect as though after the word 'quarter,' where that word secondly occurs, there were inserted the words less any cost of travelling to and from their places of employment,' and such rule as amended by this Sub-section."
    When, during the War, the wage-earners were made subject to the Income Tax, they were granted a concession whereby a man could deduct from his wages, in the amount of assessment to Income Tax, the cost of travelling to and from his work. This concession was made mainly because of men having to remove during the War very large distances from their homes to their work, and now we are afraid that the Chancellor of the Exchequer has not got a proper understanding with regard to the situation that still continues. The concession was made at that time in the form of a Regulation, and the object of my Amendment is to continue that concession, on the ground that the conditions that obtained during the War have not yet been removed and will not be removed for some years to come. There may be other hon. Members who will be able to speak for their own districts, but I speak more directly for the industrial district of South Wales, both in regard to mining and other industries. Take mining industry houses, which are still very scarce. We have men travelling from Cardiff, Barry, Swansea and Newport almost to the ends of the valleys, and especially the valleys converging on Cardiff. They travel distances of 22 to 28 miles from their homes to the pits. That means that where they are living at Cardiff, or Llandaff, or anywhere around the Barry district, where houses are more plentiful than with us in the valley, it entails upon those men a cost of anything between £22 and £28 per annum to enable them to carry on their occupation. At a time like the present, when the cost of living is so high, they can ill afford that sum. The point may seem a small one to the Chancellor, but it is a very important one indeed to those men, who are forced to live a long distance from their work. It is a question of equity and justice as between them and the people in other spheres of life. Commercial people are allowed to put their expenses against their assessment of Income Tax, and it would only be a measure of justice and equity to these people that they should be allowed to account for any money they are paying to enable them to fulfil their occupation at the collieries, and thus be treated on exactly similar lines as other people in the country.

    It is quite true that this concession was made during the War, particularly owing to the necessity of large bodies of men leaving their homes and going, in some cases a great distance, to work at munition works especially. It was a concession made without statutory authority, and strictly speaking, was illegal. But it was made in order to meet the peculiar exigency of that time. The hon. Member who has moved the Amendment has moved it on the express ground that it is fair to put wage-earners, whose Income Tax is assessed quarterly, on the same footing in regard to expenditure as other classes of the community. That ground, of course, would have been a ground of almost irresistible force had it been a well-founded ground. But that is not the case, and, indeed, anticipating that possibly some question of the kind might arise, I took the trouble to bring here the leading book on the subject of the Income Tax Acts, in order to tell the Committee exactly what the legal position is. It has been quite clearly decided for many years, and is undoubtedly the law, that travelling expenses cannot be deducted. There was the case of a solicitor who carried on his profession at Worcester, and, on certain days of the week, had to go to a neighbouring town some distance away, where he was clerk to the Justices, and he was told that those travelling expenses could not be deducted. In the same way, directors who live at a distance from the offices of companies where board meetings take place, are not allowed to deduct expenses in going from their house to those offices.

    That being so, the main ground upon which the appeal to the Committee is made that wage-earners should be put upon the same footing as other people, not only fails, because it is not based upon a true appreciation of the actual position, but, indeed, it has exactly the opposite effect. To grant the Amendment would be to put this particular class of Income Tax payers, who pay on a quarterly assessment, on a different and privileged footing as compared with everybody else. When this concession was made during the War, to meet the peculiar case of the munition workers, other people in a very similar position, but not the same, made complaint that they were not given the same privilege. Those complaints, I am informed, have been very frequent from various classes of Income Tax payers, who think that their position is similar to that of the wage earners. Consequently, it was felt that, as the wage conditions began to recede into the background, although I appreciate that, in regard to housing, the position is still not normal, yet a time came when it was essential to deal with the matter of principle, in order that all Income Tax payers might be put on a footing of equity in regard to the basis of their assessment. Mr. McKenna, the Chancellor of the Exchequer who introduced it, authorised it as a purely temporary concession, and this year it has been expressly stated by the Chancellor of the Exchequer that, after due consideration, it was felt quite impossible to continue the concession as a special privilege to a particular class. There always must come a point of time where, as a matter of degree, you cannot say that the particular grievance continues to any extent as to justify peculiar and exceptional treatment.

    May I say that the grievance has existed for many years in our district so far as the scarcity of houses is concerned, and that there is no analogy between the case of director travelling from his residence to his office in Cardiff or elsewhere and the workman who has to travel 24 miles to his work at the colliery?

    The case I took, I think, covered the case of the solicitor who is not entitled to make the deduction, and directors' position is the same. The Committee must take it there is no question of doubt about this; that the law is that travelling expenses cannot be deducted. Any idea that in any other classes of the community travelling expenses are allowed is erroneous, and the claim put forward cannot be put upon those grounds. If it be said in answer to the argument I put forward that it ought to be made general that travelling expenses should be treated as a deduction, then I would like to quote the findings of the Royal Commission upon Income Tax, which we all recognise was an extraordinarily impartial body and which made a Report which was received with a very wide measure of general approval. That Commission said

    "Travelling expenses incurred by the taxpayer in going from his place of residence to his business should not, in our view, be our allowed. The question of travelling expenses is one which reacts on other private expenses, such as the expenditure on rent and rates. It is more truly an expenditure or disposal of income than an expense essentially necessary to earn the income. We are of opinion that a general allowance for travelling expenses would result in very grave inequity."
    There is another observation to be made, that one of the reasons present with the Royal Commission in expressing that opinion was that it is a very difficult thing indeed to deduct this. I cannot help feeling sympathy with the hon. and gallant Mover of this Amendment. I know the Rhondda Valley and the difficulties there. The valley is very narrow. There is no room for more houses, and you cannot put them on the tops of mountains. The result is that the workman has to go considerable distances, I know, in many cases. It is a hardship, but for all that you cannot make a general rule of this kind applicable to a vast number of taxpayers unless you make it general. You cannot do that merely because there is one particular small section in a particular locality that, under the existing law, feels a particular hard- ship. I express sympathy, and I regret, on behalf of the Government, I am not able to express anything more.

    The Solicitor-General has expounded to us the law on this question. But it would appear to me that it is desirable to consider aspects of this question other than the purely legal aspects. The law as it is now is not necessarily above Parliament. Parliament can elevate itself above the la The law is what it is now because Parliament made it. This Order Paper in my hand is strewn with Amendments—this one at least being in order—proposing an Amendment of the law. It is not a sufficient answer to that Amendment to tell us what the law is, and to cite the practice that has so far been pursued. If these Amendments are in order in relation to the Bill which the Committee is now considering, it is within the province of the Committee to determine to change the law.

    If that is so, may I suggest that the case which my hon. and gallant Friend has put forward is a case for justice, and a case to judge in view of the different circumstances which have arisen. My hon and gallant Friend himself would be the first to admit that the law is against the workman in these expenses, and, therefore, my plea that the case is one for argument in view of the circumstances which now prevail. The workmen have no choice in these matters. The compulsion which drives them to travel many miles to their labour is a compulsion which penalises them, and they may be penalised to the extent of £20 or £30 in the year in paying travelling expenses to their employment in comparison with their fellow workmen who live close to their colliery, steel works, or other employment.

    What does the Amendment propose? It is not to confer a privilege, but to remove a disability; to remove a real grievance and to create a state, not of favour or privilege, but of equity. That is what it aims at. I cannot believe that the administrative difficulties are insuperable.

    The right hon. Gentleman will forgive me for intervening, but in what way would he suggest he could differentiate in the cases? I have myself said that I recognise the hard case of the Rhondda Valley, but there are other cases, and what is to prevent us, once we start, giving this concession as a general thing to everybody?

    There must be some limit fixed—a low limit if you will—below which there would be no allowance for expenses. That is commonly done in connection with the numerous exceptions and exemptions which are strewn over the Income Tax paper which we receive. The House has, throughout all the handling of these questions in relation to every form of tax, shown consideration in cases of hardship where there are groups of persons or even individuals treated rather hardly by the incidence of the law. There is exemption for this, and for that. There is this exception and the other exception. In this case we are asking, as I said, not to put men into a privileged position, but in a position of something like equality with the neighbours who have not to travel and who earn the same wage. The position of the man who travels is that he is expending certain sums to earn his living, and that in order to get a certain income he must incur a certain expenditure. The claim in this Amendment is not to impose a tax upon that part of the workman's wage which he must pay in fares. This to him is really not income at all. He does not get any benefit whatever from it. If the country taxes him upon what is left after he has received his money and met the cost of travelling, then, I think, so far as any Government reasonably can give consideration, they should do so.

    The illustration adduced by my right hon. Friend does not at all destroy the argument upon which this Amendment rests. I cannot imagine the Commission in the instances cited having in mind the workman. The Report speaks not of the workman's labour or his work, but of a man's business. When we are speaking of workmen's employment we do not speak of the workman's business at all. It is only when we come into the regions of business, in which a man earns not a few pounds a week but hundreds, and in some instances thousands, a year, that we talk of business. Clearly, what the Commission had in mind was the case of a man's business, and to allow him no remission of Income Tax from that item of his income which was incurred in the pursuit of his business. That, however, is a different thing altogether from considering the case of the workman, and his ordinary means of employment.

    There is another point. These fares are very much higher than they were, and distances are much longer. Housing and social conditions in industrial centres have driven the worker further and further away from his place of employment, so that in both ways the total cost has been very much increased until now it is considerably more than it used to be in the case of many workmen. If it be true that this only applies to odd cases, and a few instances in certain sections and parts of the country, then the revenue would lose very little by doing a just thing to those few who are affected. I am not, however, adducing that as an argument, but I wish to point out that there is a tendency more and more for an ever-increasing number of workmen to be forced into incurring costs in order to travel to and from their employment. If the workmen could get a house near to his work, or if he could get employment near to his house, there would be something to be said for the argument of the Solicitor-General in regard to treating all people alike. I suggest that no Commission, no law, and no precedent stands in the way of the Government accepting this Amendment, which clearly is aimed not at putting any class in a position of privilege, but would have the effect of placing every section of workman in exactly the same position.

    It would be very wrong if any hon. Member got the impression that there was a lack of sympathy on this question with the miners employed in the Rhondda Valley.

    I hope the hon. Gentleman will not think that I was confining my proposal to the miners. I did not refer to other sections of workers because I did not want to bore the Committee by citing other cases.

    My hon. and gallant Friend has anticipated my point. I hardly think the right hon. Gentleman (Mr. Clynes) has displayed his customary clearness of thought in suggesting that particular persons who travel to their work are entitled to any special consideration. In my constituency a number of people are obliged to live in very hot, close, and expensive dwellings in order to be near their work. This Amendment might allow them to go and live in the country and save about 10s. a week. A season ticket might amount to about 10s. a week. A man could deduct that from his expenses, and then he could practically live rent free, and that would mean taxing those who have to live near to their work for the benefit of those living in more healthy surroundings.

    So far as the Rhondda miners are concerned, I think the right remedy is that they should be paid a wage appropriate to the place in which they live, and to the circumstances under which they offer their labour to the industry. Unfortunately, owing to the mistaken idea of a national settlement, these local considerations are precluded from having proper weight given to them, but it would be a complete fallacy to suppose that a person who has to incur expenditure in railway travelling is entitled to greater consideration in this respect than a man who has to maintain an expensive house in the country or in the city. Some people would like to live near the Houses of Parliament, but they cannot afford it. Some people might think it desirable to live near St. James's Park, but some of us have to be content to live in less attractive and cheaper parts. Why should we be given an allowance in respect of our travelling expenses because we cannot, live in an expensive house near St. James's Park? However well-intentioned this Amendment may be, I am sure it would produce an intolerable anomaly in the Income Tax law.

    9.0 P.M.

    I hope the Committee will not be led away by the illustration put forward by the last speaker. The Clause itself deals with weekly-wage earners. The hon. Member for Central Bristol (Mr. Inskip) would have us believe that there are wage-earners earning wages sufficiently high to allow them to live in the vicinity of St. James's Park, but such an argument is too ridiculous for words. The Solicitor-General has some sympathy with us, but his sympathy is very much like mustard without beef to the hungry man. We require some more practical sympathy. In the course of his remarks the Solicitor-General said that there must be a point of time when these War concessions should cease, and I entirely agree with him. I want to submit very sincerely that there could not be a more inappropriate moment to dispense with this War concession than the present time.

    The difficulty as far as housing is concerned has been put by one or two other speakers. I want to draw attention to the fact that, besides travelling from day to day to their employment, there are many people who travel day after day into the various cities and towns trying to get employment, paying travelling expenses, and finding nothing to do, and they go home and come again very often the following day. They have to keep coming in order to see whether there is any employment for them. It appears to be nothing to the Solicitor-General that railway rates 'are still as high as ever they were. On the other hand, what have working men been experiencing? There has been a constant demand that if we are to stimulate trade and economise the only thing to be done is to cut down the wages of the working classes, and the result has been that wages have been decreased on every hand. The wages of some workers have gone dawn considerably and their travelling expenses have not, decreased one iota. This is an increased burden on these people, and I want the Solicitor-General to view the matter in that light and give to these people some concession, thus removing a hardship which they are experiencing in this connection.

    I want to deal with this question from quite another point of view. Supposing these workmen do not pay their own fares and the company provide the travelling facilities. It can hardly be argued that the company in that case is debarred from charging that to the general account for carrying on the business, and thereby reducing the balance which ultimately pays Income Tax. What difference does it make whether the tax is deducted from the earnings of the worker or from the profits of the company? I quite recognise the difficulty of the Solicitor-General, but I think, if he would view the matter from the point of view I have suggested, he would be bound to admit that the cost of conveying these workmen would be a legitimate charge on the cost of running the concern, and therefore it would be deducted from the amount on which Income Tax is payable to the Government. Surely that is exactly equivalent to the tax being remitted as against the worker. I recognise the difficulty of establishing any general rule. What I suggest is this, that under the Income Tax Act a fairly wide discretion is left to the officials to assess each case according to its merits, and where there are really bonâ fide grounds for a man having to travel some distance to his work, and where there is no responsibility on the part of the employer to find accommodation for the man near his work, then I submit the remission of the tax on the travelling costs of the man would be perfectly legitimate. I hope, before the Committee stage on this Bill is reached, the hon. and learned Gentleman will consider whether some such discretionary power cannot be given.

    May I offer something in the nature of a reply to the suggestion made by the hon. and learned Member for Central Bristol (Mr. Inskip). Surely if a private firm for its own benefit were sending out men to work on a job and the railway fares of those men were paid by the firm the sum so paid would go on to the wages sheet and no Income Tax would be charged upon it in any way. I see no difference between that and the workmen themselves who receive no income at all being relieved of the tax. I want to call the attention of the Committee to the fact that the workmen never really receive this income. Can it make any difference to the State whether it be the employer who charges the fares on his wages sheet and does not pay Income Tax upon them or whether the worker himself is relieved of the burden of paying Income Tax on his travelling expenses. In the wildest estimate that I can make by the use of pencil and paper, I can scarcely get beyond an average charge of 10s. per week for railway fares. That for 52 weeks in the year represents a total of £26, and a 3s. Income Tax on that, 3s. being the usual amount paid by workmen, produces the magnificent sum of £3 I6s., a sum no doubt of considerable importance to the poor worker, but quite inadequate to enable him to go out on the Mendip Hills to live there by taking advantage of rebate he gets from his Income Tax. There ought to be some perspective and some reason in the arguments put forward, and to talk of men being enabled to live on the Mendip Hills out of their savings from Income Tax is surely drawing the long bow in a way the hon. and learned Member for Central Bristol very seldom does. I want to appeal to the Government to accept this Amendment for still another reason. Not only does the workman never receive this sum as income which we claim he ought to have deducted from his Income Tax, but the mere fact that he must live away from his work makes him spend more time every day in travelling to his work. A man who can get a home near the place where he works, is far better off than the man who lives farther away and who not only has to pay Income Tax, but has to spend his own time in travelling to and fro. From the point of view of equity, justice and elementary fairness, I appeal to the Solicitor-General to accept this Amendment.

    I am much disappointed at the attitude taken up by the Solicitor-General. There is a good deal to be said for the Amendment as far as miners and iron workers are concerned. In my own district we have men who travel a considerable distance to work for two reasons. In the first place they desire to have the benefit of living in a town and of the use of the educational facilities therein provided. The other reason is that at the collieries where they are employed there are no houses to be had, and they are therefore forced to go into the towns to live. The sum paid by a man for travelling to and from his work is really a deduction from his wages. There is no doubt about that. In cases with which I am acquainted, in Lanark for instance, men have to travel a considerable distance by train and it costs them a good sum every year in that case. The sum ought to be charged in such a way as not to be subject to Income Tax. One hon. Member just now spoke of the cases of men who travelled to and from their work at the expense of their employers. I would like to bring to the attention of the Solicitor-General the case of painters and other tradesmen, men who have to go a distance into the country to do work and who are taken there by motor cars, the cost of which is charged against the employer and is not liable to Income Tax at all. What is the difference between an owner taking the men to their work and the man himself paying the fares to his work. I know that in some cases men do not desire to live near the collieries, because they prefer the comforts afforded by towns. Surely, however, when men have to travel for a long distance, something might he done by way of an allowance, not, perhaps, to the extent of all that they pay but to a certain extent, in connection with Income Tax. After all, it is only fair that a man who has to pay for getting to and from his work, because he cannot get a house there or for other reasons over which he has no control, should have an allowance made to him on his Income Tax. Therefore, I appeal to the Government, while they may not be prepared to accept the Amendment on the Paper, to bring in on Report a Clause providing for some modification in the case of these men who are certainly compelled to pay more than they ought for getting to and from their work.

    I trust that the Government will not accept this Amendment. What are the real facts in connection with it? A man lives some distance from his work—I understand that the hon. Gentleman was alluding to men who live permanently at some distance from their work—either because he gets his house cheaper, or because it suits him better for some other reason. In these circumstances, why on earth should he be excused from paying Income Tax? It has been mentioned that there are many cases in which the employer pays the workman's travelling expenses, and no doubt that is the case; and, as has been pointed out by the hon. Member for North Lanark (Mr. R. McLaren), this will relieve the employer of paying the workman's expenses. It is desired to shift that on to the Exchequer. As an Income Tax Commissioner I have had some experience of the working of the Income Tax Acts. In many cases people say that their income is so-and-so, but the surveyor says that it is a considerably larger amount, and I, as a Commissioner, have asked how these two statements are reconciled. "Oh," they say, "the surveyor is quite right, but we have deducted the cost of living before we think we ought to pay tax." This is not an isolated case. It has come before me, during the last six months, at least seven or eight times. With this idea prevailing, nothing could be more mistaken than to begin to introduce something which will enable a man to say, "My travelling expenses are free of tax; why should not my tailor's bill also be free? It is just as necessary for my work that I should wear clothes, and, therefore, the cost of clothes ought to be deducted." There is no greater mistake than to make all these concessions. Over and over again people come to me and say it is unfair that they have not been included in the exemption. You not only do no good, but you create a spirit of grievance. If Jones has been exempted, and Smith, because he does not live so far from his work—though he may pay 2s. or 3s. a week more for his house—is not exempted, he has a grievance. Therefore, I trust that my hon. and learned Friend will adhere to the proposal in the Bill.

    The right hon. Baronet who has just sat down has told us that he has had considerable experience of the working of the Income Tax Acts.

    I fear that he will require to get a little more experience still, because he has entirely missed the point raised by my hon. Friend, even having regard to his own experience. The right hon. Baronet, as everyone knows, is interested in railway companies. Railway companies carry their men every day many miles from their homes for the purposes of their work. These men are carried free. The railway company pay whatever cost is incurred thereby, and the railway company are not charged Income Tax on the cost of carrying those workmen.

    The railway company do not carry them to and from their work if they live at a distance from their work. All that the company do is this: If they want to send a man, say, from King's Cross to Peterborough, or to bring him back, they do so, but they do not carry him to and from his own house.

    The railway companies convey hundreds of men every day to and from particular points for the purpose of their work, and they do not charge them for travelling. My point is that the cost of that to the railway company escapes Income Tax, whereas the individual workman who has to travel 20 or 30 miles in the Rhondda Valley or elsewhere—because this is a matter that affects workmen all over the country—the individual workman who has to travel 5, 10 or 20 miles to his work has to pay his fare, and he is charged Income Tax on the money that he has paid. That is an unfair position in which to place the workman. On the broad general ground of justice, the Chancellor of the Exchequer and the hon. and learned Gentleman who is assisting him in the conduct of this Bill ought to accept this Amendment. It will simply be placing a section of the workmen of this country in the same position as their fellow-workers. There are men living near their work who have not to bear this burden. It is placed upon those who have to bear it, because of the fact that they cannot get housing accommodation near their work. There is also another large section of the workmen of this country who have their travelling expenses paid. That means that the section with which this Amendment deals are placed in an unfair and unjust position as compared with their fellows, and that ought to be remedied. The Chancellor of the Exchequer can very easily remedy it. It would not cost a very large sum. I know that the Chancellor, under the conditions which surround us for the time being, has no very large balance upon which he can draw. He has, however, a sufficiently large balance to enable him to give to the section of the workers who are covered by the Amendment this measure of justice. It is purely and simply a measure of justice for which we are asking, and it is something which the Chancellor of the Exchequer ought to give and is able to give.

    I think the Committee would like me to say just a word in reply. Take the case of London. There are a vast number of men in London who have to travel backward and forward every day to their work. Some of those men are engaged in manual labour. To those men, and to those men only, this Amendment will apply.

    Yes. It is an Amendment of the rule of the Income Tax Act, which is limited to weekly wage-earners employed by way of manual labour only. There are, in addition to those men who travel backward and forward to their work in London from the suburbs, or wherever they live, a vast number of clerks who do not earn one penny more in the week or the year than many of the manual workers. Not one of those men would get the benefit of this Amendment.

    What would be more invidious than that there should be two men sitting side by side in the same train, a manual worker and a clerk, and that one of them should have this exception and the other should not? To give the advantage of the Amendment to the manual worker alone would cost £250,000. To extend it to all those who earn similar incomes, but not by way of manual labour, would add enormously to the cost of the Amendment. If you gave it to, those people, you would at once get a claim from the next grade higher to get the benefit of the Amendment also. Then we should all get it, and the general result of our all getting it would be that something extra on the Income Tax would have to be imposed all round.

    The, truth of the matter is that the position of apparent, hardship in cases such as have been mentioned is met by the system of the Income Tax Acts having a graduated scale of payment and extra allowances in exemptions at the lower end of the scale. Most of the workers in regard to whom the Amendment is urged are men who would be in the neighbourhood of the lowest rates of those who have to pay tax at all. They would be on the 2s. 6d. rate, and many of them would have very large exemptions, and would have to make very small payments in consequence. All that can be done in taxation is to treat everybody alike. There must be some cases of hardship, and I assure the Committee that this Amendment is one which will be utterly impossible to work in practice, even with fairness to those who apparently come within it.

    I do not feel that we can allow such an interpretation of this Amendment to go by without some sort of protest. I have yet to learn that it is possible to read into it any such meaning as the Solicitor-General seems to imply; because a wage-earner is a wage-earner, whether he is fighting for it at a dock gate or on a daily job one day in 10, or whether he is drawing what you are pleased to call a salary. If it can be proved in legal phraseology that this Amendment has that limiting power and effect, then I am quite certain it is foreign to the intention of all those who have it at heart. After all, we on this side of the Committee and hon. Member's on the other side have our differing opinions as to who should pay the burden of' taxation. We will be perfectly frank about it, and say that the struggle is unceasing and will he ceaseless until the cost is borne by those best able to shoulder it. Until the time when Income Tax is paid by those best able to bear it, we shall press this Amendment continuously until we get some kind of consideration. I have received dozens of letters from men who are paying many shillings a week more than the ordinary worker mentioned in order to keep up an appearance, although the Solicitor-

    Division No. 159.]


    [9.34 p.m.

    Acland, Rt. Hon. Francis D.Guest, J. (York, W. R., Hemsworth)Raffan, Peter Wilson
    Adamson, Rt. Hon. WilliamHall, F. (York, W.R., Normanton)Rendall, Athelstan
    Ammon, Charles GeorgeHalls, WalterRichardson, R. (Houghton-le-Spring)
    Banton, GeorgeHartshorn, VernonRoberts, Frederick O. (W. Bromwich)
    Barker, G. (Monmouth, Abertillery)Heyday, ArthurRobertson, John
    Barnes, Major H. (Newcastle, E.)Hayward, EvanRose, Frank H.
    Barton, Sir William (Oldham)Henderson, Rt. Hon. A. (Widnes)Royce, William Stapleton
    Bell, James (Lancaster, Ormskirk)Hirst, G. H.Sexton, James
    Benn, Captain Wedgwood (Leith)Hodge, Rt. Hon. JohnShaw, Thomas (Preston)
    Bowerman, Rt. Hon. Charles W.Hogge, James MylesShort, Alfred (Wednesbury)
    Bramsdon, Sir ThomasHolmes, J. StanleyStich, Charles H.
    Briant, FrankIrving, DanSpencer, George A.
    Bromfield, WilliamJohn, William (Rhondda, West)Spoor, B. G.
    Brown, James (Ayr and Bute)Johnstone, JosephSutton, John Edward
    Cairns, JohnJones, J. J. (West Ham. Silvertown)Swan, J. E.
    Cape, ThomasJones, Morgan (Caerphilly)Thomas, Rt. Hon. James H. (Derby)
    Carter, W, (Nottingham, Mansfield)Kennedy, ThomasThomson, T. (Middlesbrough, West)
    Clynes, Rt. Hon. John R.Kiley, James DanielThorne, G. R. (Wolverhampton, E.)
    Cowan, D. M. (Scottish Universities)Lawson, John JamesThorne, W. (West Ham, Plaistow)
    Davies, A. (Lancaster, Ciltheroe)Lunn, WilliamWalsh, Stephen (Lancaster, Ince)
    Davies, Alfred Thomas (Lincoln)McLaren, Robert (Lanark, Northern)Waterson A. E.
    Davies, Rhys John (Westhoughton)Maclean, Neil (Glasgow, Govan)Watts-Morgan, Lieut.-Col. D.
    Davison, J. E. (Smethwick)Maclean, Rt. Hn. Sir D. (Midlothian)Wedgwood, Colonel Josiah C.
    Edwards, C. (Monmouth, Bedwelity)MacVeagh, JeremiahWhite, Charles F. (Derby, Western)
    Edwards, Hugh (Glam., Neath)Mills, John EdmundWignall, James
    Entwistle, Major C. F.Murray, Hon. A. C. (Aberdeen)Williams, Col. P. (Middlesbrough, E.)
    Finney, SamuelMurray, Dr. D. (Inverness and Ross)Wilson, James (Dudley)
    Foot, IsaacMyers, ThomasWood, Major M. M. (Aberdeen, C.)
    Galbraith, SamuelNaylor, Thomas EllisYoung, Robert (Lancaster, Newton)
    Gillis, WilliamNewbould, Alfred Ernest
    Graham, D. M. (Lanark, Hamilton)O'Grady, Captain James


    Graham, R. (Nelson and Colne)Parkinson, John Allen (Wigan)Mr. Walter Smith and Mr. T.
    Graham, W. (Edinburgh, Central)Poison, Sir Thomas A.Griffiths.
    Grundy, T. W.


    Adkins, Sir William Ryland DentBarnston, Major HarryBridgeman, Rt. Hon. William Clive
    Agg-Gardner, Sir James TynteBarrand, A. R.Briggs, Harold
    Amery, Rt. Hon. Leopold C. M. S.Barrie, Sir Charles Coupar (Banff)Broad, Thomas Tucker
    Armitage, RobertBartley-Denniss, Sir Edmund RobertBrown, Brig.-Gen. H. C. (Newbury)
    Armstrong, Henry BruceBeckett, Hon. GervaseBuckley, Lieut.-Colonel A.
    Astbury, Lieut.-Com. Frederick W.Bell, Lieut.-Col. W. C. H. (Devizes)Bull, Rt. Hon. Sir William James
    Atkey, A R.Bellairs, Commander Carlyon W.Campion, Lieut.-Colonel W. R.
    Baird, Sir John LawrenceBigland, AlfredCarr, W. Theodore
    Baldwin, Rt. Hon. StanleyBirchall, J. DearmanCasey, T. W.
    Balfour, George (Hampstead)Bird, Sir William B. M. (Chichester)Chamberlain, Rt. Hn. J. A. (Birm, W.)
    Banbury, Rt. Hon. Sir Frederick G.Blake, Sir Francis DouglasChamberlain, N. (Birm., Ladywood)
    Banner, Sir John S. Harmood-Borwick, Major G. O.Cheyne, Sir William Watson
    Barlow, Sir MontagueBowles, Colonel H. F.Churchman, Sir Arthur
    Barnes, Rt. Hon. G. (Glas., Gorbals)Bowyer, Captain G. W. E.Clough, Sir Robert
    Barnett, Major Richard W.Breese, Major Charles E.Coats, Sir Stuart

    General suggests that they are not the type of worker we have in mind. These men are paying something like 8s. 6d. a week to the railway companies out of their earnings, yet they are not allowed one penny more in the way of reduction in Income Tax. Whether or not the Solicitor-General reads the Amendment in this way, that certainly is not the intention of those hon. Members who support it. If his contention is proved to be right, then, at some stage or other, we shall have to make clear, by some other Amendment, what is the intention and effect of the proposal mow before the Committee.

    Question put, "That those words be there inserted."

    The Committee divided: Ayes, 96; Noes, 243.

    Cobb, Sir CyrilHunter-Weston, Lt.-Gen. Sir AylmerReid, D. D.
    Cohen, Major J. BrunelHurd, Percy A.Remer, J. R.
    Colfox, Major Wm. PhillipsHurst, Lieut.-Colonel Gerald B.Remnant, Sir James
    Colvin, Brig.-General Richard BealeInskip, Thomas Walker H.Richardson, Sir Alex. (Gravesend)
    Conway, Sir W. MartinJackson, Lieut.-Colonel Hon. F. S.Richardson, Lt.-Col. Sir P. (Chertsey)
    Cope, Major WilliamJames, Lieut.-Colonel Hon. CuthbertRoberts, Rt. Hon. G. H. (Norwich)
    Cowan, Sir H. (Aberdeen and Kinc.)Jephcott, A. R.Roberts, Sir S. (Sheffield, Ecclesall)
    Craik, Rt. Hon. Sir HenryJohnson, Sir StanleyRobinson, S. (Brecon and Radnor)
    Dalziel, Sir D. (Lambeth, Brixton)Jones, Sir Evan (Pembroke)Robinson, Sir T. (Lancs., Stretford)
    Davies, David (Montgomery)Jones, G. W. H. (Stoke Newington)Rodger, A. K.
    Davies, Thomas (Cirencester)Jones, Henry Haydn (Merloneth)Rutherford, Sir W. W. (Edge Hill)
    Davies, Sir William H. (Bristol, S.)Joynson-Hicks, Sir WilliamSamuel, A. M. (Surrey, Farnham)
    Dawson, Sir PhilipKellaway, Rt. Hon. Fredk. GeorgeSamuel, Samuel (Vedsworth, Putney)
    Dewhurst, Lieut.-Commander HarryKelley, Major Fred (Rotherham)Sanders, Colonel Sir Robert Arthur
    Doyle, N. GrattanKing, Captain Henry DouglasSassoon, Sir Philip Albert Gastave D
    Edge, Captain Sir WilliamLane-Fox, G. R.Scott, A. M. (Glasgow, Bridgeton)
    Ednam, ViscountLarmor, Sir JosephScott, Sir Leslie (Liverp'l, Exchange)
    Edwards, Allen C. (East Ham, S.)Law, Alfred J. (Rochdale)Seddon, J. A.
    Elveden, ViscountLeigh, Sir John (Clapham)Shaw, William T. (Forfar)
    Erskine, James Malcolm MonteithLewis, Rt. Hon. J. H. (Univ., Wales)Shortt, Rt. Hon. E. (N'castle-on-T.)
    Evans, ErnestLister, Sir R. AshtonSimm, M. T.
    Falcon, Captain MichaelLloyd, George ButlerSmith, Sir Allan M. (Croydon, South)
    Falle, Major Sir Bertram GodfrayLocker-Lampson, Com. O. (H'tingd'n)Smith, Sir Harold (Warrington)
    Farquharson, Major A. C.Lorden, John WilliamSprot, Colonel Sir Alexander
    Fell, Sir ArthurM'Connell, Thomas EdwardStanley, Major Hon. G. (Preston)
    FitzRoy, Captain Hon. Edward A.Mackinder, Sir H. J. (Camiachle)Stanton, Charles Butt
    Ford, Patrick JohnstonMacleod, J. MackintoshSteel, Major S. Strang
    Foreman, Sir HenryMacnaghten, Sir MalcolmStephenson, Lieut.-Colonel H. K.
    Forestier-Walker, L.McNeill, Ronald (Kent, Canterbury)Stewart, Gershom
    Forrest, WalterMacpherson, Rt. Hon. James I.Sturrock, J. Leng
    Fraser, Major Sir KeithMacqulsten, F. A.Sugden, W. H.
    Frece, Sir Walter deMagnus, Sir PhilipSurtees, Brigadier-General H. C.
    Fremantle, Lieut.-Colonel Francis E.Mallalieu, Frederick WilliamSutherland, Sir William
    Ganzoni, Sir JohnMiddlebrook, Sir WilliamTaylor, J.
    Gee, Captain RobertMoison, Major John ElsdaleTerrell, George (Wilts, Chippenham)
    Gibbs, Colonel George AbrahamMorden, Col. W. GrantThomson, F. C. (Aberdeen, South)
    Gilmour, Lieut.-Colonel Sir JohnMoreing, Captain Algernon H.Thomson, Sir W Mitchell (Maryhill)
    Glyn, Major RalphMorrison, HughTownley, Maximilian G.
    Goff, Sir R. ParkMunro, Rt. Hon. RobertTryon, Major George Clement
    Gould, James C.Murchison, C. K.Turton, Edmund Russborough
    Gray, Major Ernest (Accrington)Murray, Rt Hon. C. D. (Edinburgh)Vickers, Douglas
    Green, Joseph F. (Leicester, W.)Murray, John (Leeds, West)Waddington, R.
    Greenwood, William (Stockport)Nall, Major JosephWallace, J.
    Greer, Sir HarryNeal, ArthurWaiters, Rt. Hon. Sir John Tudor
    Greig, Colonel Sir James WilliamNewman, Sir R. H. S. D. L. (Exeter)Walton, J. (York, W. R., Don Valley)
    Gritten, W. G. HowardNicholl, Commander Sir EdwardWard, Col. J. (Stoke-upon-Trent)
    Guest, Capt. Rt. Hon. Frederick E.Nicholson, Reginald (Doncaster)Ward, Col. L. (Kingston-upon-Hull)
    Hacking, Captain Douglas H.Nield, Sir HerbertWard, William Dudley (Southampton)
    Hamilton, Sir George C.Norris, Colonel Sir Henry G.Warner, Sir T. Courtenay T.
    Hannon, Patrick Joseph HenryNorton-Griffiths, Lieut.-Col. Sir JohnWarren, Sir Alfred H.
    Harmsworth, C. B. (Bedford, Luton)Oman, Sir Charles William C.Watson. Captain John Bertrand
    Harmsworth, Hon. E. C. (Kent)Ormsby-Gore, Hon. WilliamWheler, Col. Granville C. H.
    Harris, Sir Henry PercyParker, JamesWhite, Col. G. D. (Southport)
    Henderson, Lt.-Col. V. L. (Tradeston)Parry, Lieut.-Colonel Thomas HenryWild, Sir Ernest Edward
    Hennessy, Major J. R. G.Pearce, Sir WilliamWilliams, C. (Tavistock)
    Herbert, Dennis (Hertford, Watford)Pease, Rt. Hon. Herbert PikeWills, Lt.-Col. Sir Gilbert Alan H.
    Hickman, Brig.-General Thomas E.Peel, Col. Hon. S. (Uxbridge, Mddx.)Windsor, Viscount
    Wider, Lieut.-Colonel FrankPerkins, Walter FrankWinfrey, Sir Richard
    Hinds, JohnPerring, William GeorgeWise, Frederick
    Hohler, Gerald FitzroyPickering, Colonel Emil W.Wood, Sir J. (Stalybridge & Hyde)
    Holbrook, Sir Arthur RichardPollock, Rt. Hon. Sir Ernest MurrayWoolcock, William James U.
    Hope, Sir H. (Stirling & Crckm'nn, W)Purchase, H. G.Worsfold, T. Cafo
    Hope, Lt.-Col. Sir J. A. (Midlothian)Rae, Sir Henry N.Young, Sir Frederick W. (Swindon)
    Hope, J. D. (Berwick & Haddington)Raeburn, Sir William H.
    Hopkins, John W. W.Handles, Sir John Scurrah


    Hopkinson, A. (Lancaster, Mossley)Rankin, Captain James StuartColonel Leslie Wilson and Mr.
    Horne, Edgar (Surrey, Guildford)Ratcliffe, Henry ButlerMcCurdy.
    Horne, Sir R. S. (Glasgow, Hillhead)Rawlinson, John Frederick Peel

    I beg to move to leave out Sub-section (3).

    The subject of this Amendment is, unfortunately, a little dull and technical, but I think the Solicitor-General will agree that it raises a point of very great importance. The Clause makes a very important change in Income Tax practice, in that it transfers to Schedule E, the old Schedule for salaries and the emoluments of public offices, a very large number of salaries and profits which were formerly assessed under Schedule D. That is, of course, in keeping with the recommendation of the Royal Commission on Income Tax, and to that general proposal we take no exception at the present stage. But in this Clause, and particularly in Sub-section (3), it is provided that Rule 7 of the Rules applicable to Schedule E, which relates to taxes in respect of offices and employments of profit held under a railway company, shall apply to all offices and employments held under and pensions paid by a railway company. The precise Rule to which the Section refers is very short. It is provided under Rule 7 of Schedule E, in the Act of 1918 that
    "The tax in respect of offices and employments of profit held under a railway company shall be charged by the special commissioners, who shall notify to the Secretary or other officer of the company the particulars of the assessments."
    The second point provides that
    "Any such assessment shall be deemed to be and shall be an assessment upon the company and the tax in respect thereof shall be paid, collected and levied accordingly, and the company or the secretary or other officer may deduct out of the emoluments of the holder of any such office or employment of profit the tax so charged."
    The difficult position which is raised by this proposal is comparatively simple. Hitherto the salaried officials of railway companies in this country have been charged under Schedule E. That has been the subject of a very important case which was decided by the House of Lords recently, and which it would only be relevant to discuss on a subsequent Amendment. The point I am putting to the Chancellor of the Exchequer at this stage is this: Why should it be necessary to put this Sub-section in the Finance Act of the present year, continuing this exceptional system—for it is an exceptional system—in the method of imposing Income Tax, and collecting Income Tax from the officials of the railway companies. There are only one or two similar cases in the country, but there is no doubt that this method of imposing and collecting the tax has led to a very great deal of irritation and ill-feeling among the railway clerical staffs. There was a recent experience in the case of the Caledonian Railway Company, in which, in 26 cases, the company owed men a total of £133. I agree that they were not very large sums in each case, but they were important to the men in respect of excessive deductions, and it was only after very great delay that these sums could be recovered. I would cite here the case of other railway companies in which similar experience has been found.

    I do not in any way blame the railway companies for this difficulty. I am prepared to blame the system under which this tax is imposed and collected. I suggest to the Chancellor of the Exchequer that now that he is making this very wide transfer of classes of people who were formerly assessed and taxed under Schedule D to Schedule E, that there is no longer any case for the exceptional treatment of one or two large concerns in this country, by means of which the tax is imposed and collected by railway companies in this way. The Solicitor-General will appreciate that I am not making an attack upon collection at the source—there may be some' other method of providing for that—but I am attacking in this Section the method employed in the case of railway companies, and one or two other cases, and I suggest that, as a great change is taking place, in keeping with the recommendations of the Royal Commission on the Income Tax, that the time has come when we should not repeat this Subsection in the present Bill, but should allow it to lapse.

    As the hon. Member has said, this is an extraordinarily technical point, but I understand that his Amendment is intended for the moment to limit it to the one question, namely, whether or not, as is proposed by Clause 12 (3), the railway companies should be the medium for collecting this tax. The answer on that point is that at the present time, and for a great many years past, the railway companies have been the medium for collecting the tax from, at any rate, certain of their employés. The recent case in the House of Lords has thrown the system that has been in use for half a century or more into confusion by a decision that certain employés who were supposed, and had been supposed through all these years, to come within the definition of Schedule E, really came under Schedule D. The main object of Clause 12 is to put that confusion right, and in regard to that I understand that the hon. Member makes no complaint. That being so, the position is, as regards the railway companies' employés, and the Clause which puts such employés under Schedule E, we have the position that some of these employés are already taxed through the railway company, under the existing practice, which has worked very well, and for the sake of simplicity it was thought much the best, in the interests of everybody, that the whole of the employés should be treated in the same way as some employés. Consequently, Clause 12 (3) provides that the existing practice of collection through the railway companies should apply to all. We believe there is no objection on the part of the railway companies to this method of collection of the tax at the source. It seems to be a means by which the Treasury can be saved a very considerable amount of expense, and, it being a cheap and simple way of doing it, I submit that it would be a great mistake to go back upon the practice which has existed and worked well for a very large number of years, particularly when that practice is one which saves money to the Exchequer.

    Amendment negatived.

    I beg to move, at the end of Sub-section (6), to insert the words

    "but these provisions shall not apply to assessments in respect of offices and employments (other than offices and employments of profit) held under, and pensions paid by, a railway company, for the years ending the fifth day of April, nineteen hundred and nineteen, nineteen hundred and twenty, nineteen hundred and twenty-one, and nineteen hundred and twenty-two, and readjustments and repayments in respect of such assessments for those years may be made on the basis of Income Tax having been chargeable under Schedule D, notwithstanding that such assessments would, but for this provision, have become final and conclusive."
    I will not detain the Committee with any long argument, because the Solicitor-General has referred to the case which gives rise to this Amendment. The case was brought a considerable time ago by the Great Western Railway Company. The important point is that it was brought by the railway company and not by the employé, the clerk, who was involved. They raised an action in which they contended that a clerk at Swindon was entitled to be assessed, not under Schedule E, which was the practice enforced by the Inland Revenue authorities, but under Schedule D. The litigation lasted for about three years, and in March last the House of Lords decided, one judge dissenting, that the clerk in question was entitled to be assessed under Schedule D, and that he had been wrongly assessed under Schedule E.

    It is perfectly plain that that raises a question, as the Solicitor-General has suggested, of very great importance. The point as regards Schedule E was that this was employment in a public capacity. The learned Judges argued that it was not public any more than any other employment which might be followed by a clerk in a hundred and one pursuits. So that contention went by the board. It was clear then that, on the ground of being public employment or in some public service, the clerk did not come within Schedule E. That was, I think, an overriding consideration. But it led to certain important results for the clerk and all the other thousands of railway clerks in this country. It indicated that the Inland Revenue authorities had been wrong in assessing the clerk under Schedule E. Under Schedule E he was denied the right to the three years' average, which was applicable under Schedule D, because there was only a one year's basis so far as Schedule E was concerned.

    10.0 P.M.

    Immediately after the decision was reached the railway clerks applied to the Inland Revenue authorities to get the tax made on the average of the preceding three years, to which they were entitled under the decision. They were met by the reply on the part of the Inland Revenue authorities that that request could not be entertained, that the case applied to the one man, Hall, in respect of whom the action was brought. The reply to that is that the ease of Hall was obviously a test case, and that, if the Inland Revenue was wrong in the case of Hall, it was wrong in the case of the whole class of railway clerks, who were in exactly the same position and were entitled to take the benefit of any advantage which Hall got by reason of the decision reached in the House of Lords. The statement was made that, if Hall made a claim for the benefit of the three years' average, he would be entitled to it, but that in all the other cases the other clerks were to be denied the right which this one clerk obtained, simply because the action had been brought in his name. I have seen part of the correspondence, and I have no doubt that the case has been stated by me with substantial accuracy. I am simply asking in this Amendment that effect shall be given to the decision of the House of Lords as regards all these other thousands of railway clerks. That is, that the law as it was in reality throughout, if the House of Lords' position is accepted, as it must be, should be now applied, no doubt at a distance of some years. It is an Amendment under which we are simply seeking to do justice to railway clerics, from whom justice was withheld by a misunderstanding on the part of the Inland Revenue authorities. I am not making any request as regards the future. We agree to Schedule E and the one-year basis for the future, but the Solicitor-General must admit that it is very wrong to deny to all these thousands of clerks the concession which will be open to Hall by reason of the decision of the House of Lords.

    I am going to apeal to the Solicitor-General to see if he cannot consent to this particular Amendment. So far as money is concerned, I think that there is very little involved. It is confined, as the hon. Member for Central Edinburgh (Mr. W. Graham) has said, simply to the time up to the present and does not extend to the future. But my objection to the Clause as it stands is that it is to some extent retrospective taxation. My hon. Friend was right in what he said about the case which was heard by the House of Lords. They decided that certain employés were taxable upon the three years' average. It had generally, I believe, been supposed to be the opposite. Now the House of Lords gives this decision and down come the Government and say, "Notwithstanding the decision of the House of Lords, the law shall be held to be something different from that decision and this provision shall cover the last three years."

    The point was really covered by Sub-section (6) and Sub-section (3), which has already been dealt with, but my hon. Friend does not propose to leave out Sub-section (3) but to modify it by Sub-section (6) so far as to preserve the rights which are covered by a decision of the House of Lords by allowing them the benefit of the average on the past three years. There can be very little money involved in that, and the Government will be doing an act of justice at a very small cost if they refrain from the very objectionable principle which they adopted last year, and which I opposed at the time in another matter, in their Budget, of trying by legislation to say that what they intended should have been the law in the past and which was not the law should be the law. That is nothing more or less than retrospective taxation. I hope that the Government may see their way to accept this particular Amendment.

    The hon. Member for Central Edinburgh (Mr. W. Graham) and the hon. Member for Watford (Mr. D. Herbert) have delivered very interesting speeches, but they do not in the least adequately represent the existing position. It is true that the decision of the House of Lords was stated by the hon. Member for Central Edinburgh in a speech that might have been made by a member of my profession, having regard to its accuracy. It is true that the House of Lords did say that these men who had been taxed under Schedule E ought to have been taxed under Schedule D. The House of Lords said that in the middle of last March, which is three months ago. Down to that date this House certainly, the Treasury and Inland Revenue certainly, and the great bulk of lawyers also, thought that the employés of companies were properly taxed under Schedule E. The House of Lords held that the word "public" in Schedule E was an over-riding word, and for that reason said that these employés could not come within Schedule E, which deals with public employés or employés of a company of a public character. But the fact is that all these assessments have been made during the past year, and the taxes paid by all these men under Schedule E.

    I do not think there have been any exceptional protests. For the space of a month or two, till the full statement was made by the Chancellor of the Exchequer, the position was an interregnum between the period during which everybody thought that Schedule E was the right Schedule and the intimation by the Chancellor of the Exchequer, which was really in accordance with what was an implied suggestion in the judgment of the House of Lords—that legislation should be, introduced to regularise a position which it was believed always had existed until the House of Lords gave judgment in March last. The Amendment now proposes that all the assessments made during the last three years should be ripped up, that in all these cases new assessments should be made, and that in a vast number of cases enormous trouble should be taken. Under existing circumstances, from the common-sense point of view and not from the legal point of view, is it reasonable to rip up all these assessments? It would mean vast expenditure and vast trouble. And for what? In order that a number of individuals should be put on a basis on which this House during the time that they were taxed did not think they were entitled to be put, on which the general public did not think they were entitled to be put, and very few people thought they were entitled to be put. There is no ground of ordinary fairness or equity why it should be done.

    What is the proposal? It is that the employés of certain companies, to wit, railway companies, should have this done for them, not that the employés of all other companies to which the House of Lords decision applied should have it done. Why should railway employés be put in a privileged position? Lastly, the difference in the aggregate is not very much. Under Schedule D the tax is paid on the average of three years; under Schedule E it is paid upon the income of the preceding year, except in the case of manual workers, who pay on the actual earnings of the year of assessment. In the aggregate there is not a very great difference. Under the circumstances the proposal is one that ought not to be accepted.

    After the statement of the learned Solicitor-General, I think my hon. Friend the Member for Central Edinburgh (Mr. W. Graham) might reflect upon the compliment paid to him. Reference has been made to the difference between the legal point of view and the common-sense point of view. The action having been entered by the railway company indicated, I understand, that the case was to be a test case. The point at issue was that these clerks have been overcharged for a certain number of years. Surely, if judgment is given on that point and the taxing authorities are held to be wrong, it must follow that they must refund the money in respect of which judgment was given. The House of Lords sat as a judicial body to try this particular case. It is not a question of the amount of money at stake, but a question of equity, and a question whether or not, for a cer- tain convenience, the Government can defy the decisions of the Courts of Law. The House, for the sake of maintaining the dignity and prestige of the Courts of Law, surely cannot allow this sort of thing to stop on the statement of the learned Solicitor-General.

    Let us understand what this Clause does. It really increases the Income Tax paid by a large number of salaried people. It substitutes one schedule for another, and, generally, as salaries rise, that means an increase in the Income Tax payable. The Government would not have made the change unless they had expected to get more revenue out of it.

    Then why not accept the Amendment, reduce the amount of money you expect to lose, and at the same time please those who are concerned?

    The hon. and gallant Gentleman does not understand the character of the Amendment.

    The character of the Amendment, as I understand it, is that these railway clerks have hitherto been assessed for Income Tax under Schedule E.

    The hon and gallant Member does not seem to understand that we lose £500,000 by the introduction of this change. The Amendment does not prevent the change taking place.

    The Amendment prevents the change taking place retrospectively. It gives to the clerks the rights they have obtained in a Court of Law and prevents them from having to pay the increased charges that they might have to pay under Schedule E. To that extent these clerks will benefit by the Amendment. Are they legally entitled to enjoy this benefit? They carried the case through the Courts. Now you are going by the Clause, not only for all future time to assess them under Schedule E, which I hold, would bring more money into the Treasury, but for the last three years the basis of assessment is to be affected.

    Can the hon. and gallant Member point out which word provides for that?

    I am simply seeking for information. The hon. and gallant Gentleman says the Clause itself alters the law and makes it retrospective for three years so that these men cannot get their money back. Where in the Clause does he find that statement?

    I cannot say where it is in the Clause, but if the right hon. Baronet had listened to the speech of the Solicitor-General he would understand that such is the intention of the Clause and the effect of it. The effect of it is to reverse the decisions which have been come to by the Courts of Law—to reverse them for the future—and to make the law what the Treasury always held it to be and what the House of Lords found it not to be. That is, I believe, the object of the Clause. It is, by Act of Parliament, trying to defeat the decision of the House of Lords. Observe how differently the Government treat a decision of the House of Lords when it goes in favour of the railway clerks, who are small taxpayers, from the way in which they treated it in the case of the landlords who defeated the intention of the Budget of 1909–10 in the Law Courts. There, the action of the Law Lords was accepted as a permanent defeat of the intentions of Parliament. Here when the Law Courts defeat what the Treasury believed to be the intention of Parliament, in passing the original Act, immediately a Clause is introduced in the next Finance Bill to put the matter right. I do not, mind their putting the matter right in the future, but they need not retrospectively affect the interests of the people who won the case against them in the Lords.

    I object to my hon. and gallant Friend attempting to give the Clause any meaning which is not justified. I do not think the Mover of the Amendment made out a case that there was anything in Clause 12 which was retrospective for three years. The Clause provides that from the present time these men shall be taxed under Schedule E, and there is nothing retrospective about it. I understand from the decision of the House of Lords that these men can to-day in spite of Clause 12 apply for re-assessment.

    Sub-section (6) contains the words

    "shall be deemed always to have had effect."
    That is what makes it retrospective. The hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood) is perfectly correct. The House of Lords decided that for the last three years the law has been something different to what was supposed. This Sub-section now says that the law shall be deemed always to have been something which the House of Lords says it was not.

    Sub-section (6) says:

    "The provisions of Sub-section (1) and Sub-section (3) of this Section shall have effect and shall be deemed always to have had effect, for the purpose of any assessment to Income Tax which is made or becomes final and conclusive after the first day of May, nineteen hundred and twenty-two."
    I submit that it does not apply to assessments made in 1921, 1920, or 1919. Perhaps the Solicitor-General will tell us whether I am or am not right, and whether this Clause is or is not retrospective?

    I want to ask the Solicitor-General whether it is not a fact that under this Clause assessments under Schedule E, signed by the Commissioners after the 1st May, 1922, and assessments under the appeal or otherwise open for any previous year, which become final and conclusive after the 1st May, 1922, will, in effect, fall to be, determined as if the decision referred to had not been given, and that to that extent assessments will be made on past years?

    In answer to the hon. Member for Twickenham (Sir W. Joynson-Hicks), I agree with his interpretation of the Clause. Sub-section (6) applies only to assessments which are made or become final after the 1st May. In answer to the hon. Member for Northeast Derbyshire (Mr. Holmes), I think that assessments that were open on 1st May would then become final, and that, therefore, they would be made under the terms of the new law.

    I think the Committee will agree that an important principle has been raised in this Amendment. Unfortunately I am by no means satisfied with the reply which the learned Solicitor-General has given. He suggests that the effect of this Amendment will be to rip up all the assessments which have been made during the past three years, to lead to great administrative and other difficulties, and probably also to involve a considerable sum of money. In reply to that point, for at least a part of that period, many of the salaries which were paid were very low, and the aggregate numbers involved may not he considerable, but even if they were larger than we have any reason to assume to-night, the fact that the railway companies made these returns under Schedule E on the particular basis laid down in that rule of the Act of 1918 makes the accessibility of these returns very easy and places at the disposal of the Department a mass of information which, I think the Solicitor-General will agree, they do not often get where Income Tax assessments are concerned, so that we must not strain the administrative difficulty in giving effect to this Amendment.

    There is another point on that head which I am rather surprised the Solicitor-General should ignore. He refers to our going back over assessments for three years, but he knows perfectly well that this litigation has been going on for three years, and that it was not till about 26th March last that a final decision was given in the House of Lords. So that it was perfectly impossible, of course, for any railway clerk, or for the Inland Revenue authorities, to come to any definite decision. It was only in March last that the decision emerged, and it is only now that we can give effect to this remedy. Important as those considerations are, there is another consideration which, I believe, although I speak with great respect of the law, to be final in this matter. The House of Lords' decision makes it plain beyond a shadow of doubt that this was an erroneous assessment, and that sums were wrongly collected from these people under the assessment. I venture to suggest that nothing can get round that argument, and that we are entitled, even if it be a case of going back three years, to give effect to the position which these men should have occupied all that time, and to put into force the basis of assessment on which the authorities should have proceeded. The learned Solicitor-General has also failed to meet the point I made, namely, that the concession is being withheld from all other clerks, although this obviously was a test case applying to railway clerks in the country as a whole.

    These considerations will compel me to go to a Division on this Amendment. The learned Solicitor-General urges another argument in conclusion. He says: "You are, by your Amendment, proposing to give a preference to one section of employés, namely, the clerical staff of a railway company. Why do you not suggest a similar concession to all other people in this position?" My reply to that is that there may be some small number, but it must be a very small number of people indeed, who are in this position. This litigation, however, was brought in respect of the clerk of a railway company, and in respect of all clerks of railway companies; and, further, the railway company was in an exceptional position under Schedule E of the Act of 1918. There can be no comparison of the employés of a local authority and of the other bodies named in Schedule E to that Act, because they are quite clearly defined. There was a doubt in the case of a railway company, and it took three years of litigation to remove that doubt by a judgment in the House of Lords. So that I think in that reply I have tried to meet the arguments which were put by the learned Solicitor-General, and I cannot understand why he should refuse to give effect to a decision of the highest court in this land, and to give these men a right, of which they should never have been deprived, and, in fact, which they possess in law under the Inland Revenue system of this country.

    I have listened with very great interest to the very moderate speech made by the hon. Member for Central Edinburgh (Mr. W. Graham), and I am sure he and the Committee will accept my assurance that the Government does not want to do anything that could be remotely described as an injustice in a matter of this kind. But I should like the Committee to understand the considerations which moved us upon this matter. The decision of the House of Lords was, undoubtedly, a surprise, not merely to the Treasury officials and the Government, but, I think, to the great bulk of people who knew anything about Income Tax law. The result was that it threw into confusion the whole basis of assessment of employés in this country, and it was hinted in that judgment of the House of Lords that something was necessary to be done, and it was obvious to the people who had the administration c) the law in their hands that it was necessary to out the whole matter on a proper foundation. We decided, accordingly, not to take advantage of the judgment of the House of Lords, because it would have been an advantage to us at the present time, as a mere matter of money. We decided not to take advantage of the judgment of the House of Lords, but to bring in at once legislation which would have the effect of putting all employés of the country of the character described on the basis of Schedule E instead of Schedule D, so that there would be no further difficulty. We are now in a time of falling salaries. By the process of making this change at the present time we should lose something like half a million in the present year. The hon. Gentleman who moved the Amendment is still supporting what the Government is doing, and this would, as I say, involve us in the present year in the loss of half a million.

    But the Committee is asked to address itself specially to the case of the past and not the future. My hon. Friend on the Front Opposition Bench addressed himself to the future, or the future mixed with the past, and I do not think that he disentangled them. But about the past, and about the particular case of these railway servants, what are we to do? In the first place, let me say while I am not at present in active practice as a lawyer, I do not entirely forget my legal training, and I think anybody who tries to consider the judgment of the House of Lords will find it extraordinarily difficult to decide just what class of people that judgment will apply to. There was a vigorous examination of the case of this particular claim, and the particulars relating to the clerk, the particular posts which he had held, the salary which he then had, and say with confidence that you could not so easily, as my hon. Friend seems to think, discriminate between the classes of railway servants or say with any great certainty that the judgment in the case deals with a certain grade, and would apply to that and no other. Nor could you take any group or body of servants, and say that in their case the judgment would necessarily be followed if the matter was raised. More than that, if you were to apply the judgment in the case of all railway servants, as my hon. Friend suggests, you will equally require—to do justice—to apply it to a great many servants of public companies other than railway companies. You are thus immediately landed in a morass of difficulties.

    What about equity? If there had been any great appearance of injury or damage either to individuals or a large class of individuals, we might have found some rough measure of dealing justice in the matter. But what is the situation? It is quite right to say that the Lords pronounced a technical judgment that these were people who had erroneously been assessed under Schedule D instead of Schedule E. What had they been doing? Nobody could say that they were doing other than paying upon the actual amount which they had earned. Therefore, from that point of view, there is no appearance of damage or injury, that is, from the equitable point of view. All we can say is that from the technical point of view, at a. time when salaries were rising, they had not the advantage of reducing their Income Tax by working upon the average which would have produced this result, that at a time when salaries throughout the country were on the increase, they did not get an advantage to which they really and ordinarily would not have been entitled. When salaries began to fall, they were again paying upon the salary of the year so far as the assessment to Income Tax is concerned. I do not think that anybody here will regard that as really a case of real injury which requires exceptional measures to be taken in order to prevent injustice being done. If the matter were an easy one we might, perhaps, have looked at the whole affair with a greater desire to put it right. It is not easy, and there is no very obvious injustice. It is not easy because, in point of fact, what we should require to do would be to rip up the assessment not merely of the railway employés, but of large bodies of other employés in this country back for a period of three years. That is not easy and I doubt very much whether we should derive more justice from that line than the line we have taken. Although I am willing to give further consideration to this matter, and I have been much impressed by the case put forward by my hon. Friend the Member for Central Edinburgh (Mr. W. Graham), I think upon the face of it this matter is not one upon which we have been neglecting the interests of the parties with whom we have been dealing.

    I do not think the Chancellor of the Exchequer has answered the point which was put by my hon. Friend the Member for Central Edinburgh. I want to put this case on the ground of equity. During the years 1920, 1921 and 1922 hundreds of thousands of assessments were made under Schedule D. I agree with the statement made by the right hon. Gentleman that the decision of the House of Lords was a surprise, but what is being done by this Bill is that there are still a certain number of people who have not been assessed for 1920, 1921 and 1922 because they have escaped the

    Division No. 160.]


    [10.40 p.m.

    Acland, Rt. Hon. Francis D.Graham, D. M. (Lanark, Hamilton)Parkinson, John Allen (Wigan)
    Adamson, Rt. Hon. WilliamGraham, R. (Nelson and Colne)Poison, Sir Thomas A.
    Adkins, Sir William Ryland DentGraham, W. (Edinburgh, Central)Raffan, Peter Wilson
    Ammon, Charles GeorgeGriffiths, T. (Monmouth, Pontypool)Remnant, Sir James
    Banton, GeorgeGrundy, T. W.Randall, Athelstan
    Barker, G. (Monmouth, Abertiliery)Guest, J. (York, W. R., Hemsworth)Richardson, R. (Houghton-le-Spring)
    Barnes, Rt. Hon. G. (Glas., Gorbals)Hall, F. (York, W. R., Normanton)Roberts, Frederick O. (W. Bromwich)
    Barnes, Major H. (Newcastle, E.)Halls, WalterRobertson, John
    Barton, Sir William (Oldham)Hartshorn, VernonRose, Frank H.
    Bell, James (Lancaster, Ormskirk)Hayday, ArthurRoyce, William Stapleton
    Benn, Captain Wedgwood (Leith)Hayward, EvanSexton, James
    Bowerman, Rt. Hon. Charles W.Henderson, Rt. Hon. A. (Widnes)Shaw, Thomas (Preston)
    Briant, FrankHerbert Dennis (Hertford, Watford)Short, Alfred (Wednesbury)
    Bromfield, WilliamHirst, G. H.Sitch, Charles H.
    Brown, James (Ayr and Bute)Hogge, James MylesSpencer, George A.
    Cairns, JohnHolmes, J. StanleySutton, John Edward
    Cape, ThomasIrving, DanSwan, J. E.
    Carter, W. (Nottingham, Mansfield)John, William (Rhondda, West)Thorne, G. R. (Wolverhampton, E.)
    Clynes, Rt. Hon. John R.Johnstone, JosephThorne, W. (West Ham, Plaistow)
    Collins, Sir Godfrey (Greenock)Jones, Sir Evan (Pembroke)Tillett, Benjamin
    Conway, Sir W. MartinJones, J. J. (West Ham. Silvertown)Walsh, Stephen (Lancaster, Ince)
    Cowan, D. M. (Scottish Universities)Jones, Morgan (Caerphilly)Waterson, A. E.
    Davies, A. (Lancaster, Ciltheroe)Kiley, James DanielWatts-Morgan, Lieut.-Col. D.
    Davies, Evan (Ebbw Vale)Lawson, John JamesWedgwood, Colonel Josiah C.
    Davies, Rhys John (Westhoughton)Lister, Sir R. AshtonWhite, Charles F. (Derby, Western)
    Davison, J. E. (Smethwick)Lunn, WilliamWignall, James
    Edwards, C. (Monmouth, Bedwelity)Maclean, Neil (Glasgow, Govan)Williams, Col. P. (Middlesbrough, E.)
    Entwistle, Major C. F.Maclean, Rt. Hn. Sir D. (Midlothian)Wilson, James (Dudley)
    Erskine, James Malcolm MonteithMills, John EdmundWilson, Col. M. J. (Richmond)
    Finney, SamuelMurray, Dr. D. (Inverness & Ross)Young, Sir Frederick W. (Swindon)
    Fitzroy, Captain Hon. Edward A.Naylor, Thomas EllisYoung, Robert (Lancaster, Newton)
    Foot, IsaacNewbould, Alfred Ernest
    Galbraith, SamuelO'Connor, Thomas P.


    Gulls, WilliamO'Grady, Captain JamesMr. Walter Smith and Mr.


    Agg-Gardner, Sir James TynteBaldwin, Rt. Hon. StanleyBarrie, Sir Charles Coupar (Banff)
    Ainsworth, Captain CharlesBalfour, George (Hampstead)Bartley-Denniss, Sir Edmund Robert
    Amery, Rt. Hon. Leopold C. M. S.Banbury, Rt. Hon. Sir Frederick G.Beckett, Hon. Sir Gervase
    Armitage, RobertBanner, Sir John S. Harmood-Bell, Lieut.-Col. W. C. H. (Devizes)
    Armstrong, Henry BruceBarker, Major Robert H.Bellairs, Commander Carlyon W.
    Astbury, Lieut.-Com. Frederick W.Barnett, Major Richard W.Benn, Sir A. S. (Plymouth, Drake)
    Atkey, A. R.Barnston, Major HarryBenn, Capt. Sir I. H., Bart. (Gr'nw'h)
    Baird, Sir John LawrenceBarrand, A. R.Bennett, Sir Thomas Jewell

    net, and by this Clause we are going to get them into the net, and we are going to catch them for past years. That is not a matter of equity. Surely, having, regard to the decision of the House of Lords, and the House of Lords having suggested that the law should be altered, the Chancellor of the Exchequer is perfectly entitled to alter the law, but let him start from April, 1922, and say that from that time they shall all come under Schedule F. Do not catch them by this Resolution after hundreds and thousands of them have got through. The Chancellor of the Exchequer has said that he will consider this point further, but I put it to him that he should accept the Lords' decision from the 5th April, 1922, backwards and from that date everybody should come under this few Clause.

    Question put, "That those words be there inserted."

    The Committee divided: Ayes, 99; Noes, 252.

    Birchall, J. DearmanHarris, Sir Henry PercyPickering, Colonel Emil W.
    Bird, Sir William B. M. (Chichester)Henderson, Lt.-Col. V. L. (Tradeston)Pollock, Rt. Hon. Sir Ernest Murray
    Blake, Sir Francis DouglasHennessy, Major J. R. G.Pownall, Lieut.-Colonel Assheton
    Borwick, Major G. O.Hickman, Brig.-General Thomas E.Purchase, H. G.
    Bowles, Colonel H. F.Hilder, Lieut.-Colonel FrankRae, Sir Henry N.
    Bowyer, Captain G. W. E.Hinds, JohnRaeburn, Sir William H.
    Boyd-Carpenter, Major A.Hchler, Gerald FitzroyRandles, Sir John Scurrah
    Breese, Major Charles E.Hood, Sir JosephRankin, Captain James Stuart
    Bridgeman, Rt. Hon. William CliveHope, Sir H.(Stirling & Cl'ckm'nn,W.)Rawlinson, John Frederick Peel
    Briggs, HaroldHope, Lt.-Col. Sir J. A. (Midlothian)Remer, J. R.
    Broad, Thomas TuckerHope, J. D. (Berwick & Haddington)Richardson, Sir Alex. (Gravesend)
    Brown, Brig.-Gen. H. C. (Newbury)Hopkins, John W. W.Richardson, Lt.-Col. Sir P. (Chertsey)
    Buckley, Lieut.-Colonel A.Hopkinson, A. (Lancaster, Mossley)Roberts, Rt. Hon. G. H. (Norwich)
    Bull, Rt. Hon. Sir William JamesHorne, Edgar (Surrey, Guildford)Roberts, Sir S. (Sheffield, Ecclesall)
    Burdon, Colonel RowlandHorne, Sir R. S. (Glasgow, Hillhead)Robinson, S. (Brecon and Radnor)
    Campion, Lieut.-Colonel W. R.Hunter-Weston, Lt.-Gen. Sir AylmerRodger, A. K.
    Carr, W. TheodoreHurd, Percy A.Rutherford, Sir W. W. (Edge Hill)
    Casey, T. W.Inskip, Thomas Walker H.Samuel, A. M. (Surrey, Farnham)
    Cecil, Rt. Hon. Sir Evelyn (Aston)Jackson, Lieut.-Colonel Hon. F. S.Samuel, Samuel (W'dsworth, Putney)
    Chamberlain, Rt. Hn. J. A. (Birm. W.)James, Lieut.-Colonel Hon. CuthbertSanders, Colonel Sir Robert Arthur
    Chamberlain, N. (Birm., Ladywood)Jephcott, A. R.Sassoon, Sir Philip Albert Gustave D
    Churchman, Sir ArthurJohnson, Sir StanleyScott, A. M. (Glasgow. Bridgeton)
    Clough, Sir RobertJones, G. W. H. (Stoke Newington)Scott, Sir Leslie (Liverp'l, Exchange)
    Coats, Sir StuartJones, Henry Haydn (Merloneth)Seddon, J. A.
    Cobb, Sir CyrilJoynson-Hicks, Sir WilliamSeely, Major-General Rt. Hon. John
    Colfax, Major Wm. PhillipsKellaway, Rt. Hon. Fredk. GeorgeShaw, Hon. Alex. (Kilmarnock)
    Colvin, Brig.-General Richard BealeKelley, Major Fred (Rotherham)Shaw, William T. (Forfar)
    Cowan, Sir H. (Aberdeen and Kinc.)Kidd, JamesShortt, Rt. Hon. E. (N'castle-on-T.)
    Cralk, Rt. Hon. Sir HenryKing, Captain Henry DouglasSimm, M. T.
    Curzon, Captain ViscountLarmor, Sir JosephSmith, Sir Allan M. (Croydon, South)
    Dalziel, Sir D. (Lambeth, Brixton)Law, Alfred J. (Rochdale)Smith, Sir Harold (Warrington)
    Davidson, Major-General Sir J. H.Leigh, Sir John (Clapham)Sprot, Colonel Sir Alexander
    Davies, Alfred Thomas (Lincoln)Lewis, Rt. Hon. J. H. (Univ., Wales)Stanley, Major Hon. G. (Preston)
    Davies, David (Montgomery)Lewis, T. A. (Glam., Pontypridd)Stanton, Charles Butt
    Davies, Thomas (Cirencester)Lloyd, George ButlerStarkey. Captain John Ralph
    Dawson, Sir PhilipLocker-Lampson, Com. O. (H'tingd'n)Steel, Major S. Strang
    Dewhurst, Lieut.-Commander HarryLorden, John WilliamStephenson, Lieut.-Colonel H. K.
    Doyle, N. GrattanLoseby, Captain C. E.Stewart, Gershom
    Edgar, Clifford B.Lyle, C. E. LeonardSturrock, J. Leng
    Edge, Captain Sir WilliamM'Connell, Thomas EdwardSugden, W. H.
    Edwards, Major J. (Aberavon)Mackinder, Sir H. J. (Camlachle)Surtees, Brigadier-General H. C.
    Edwards, Hugh (Glam., Neath)McLaren, Robert (Lanark, Northern)Sutherland, Sir William
    Bleeder. ViscountMacpherson, Rt. Hon. James I.Taylor, J.
    Evans, ErnestMallalieu, Frederick WilliamTerrell, George (Wilts, Chippenham)
    Falcon, Captain MichaelManville, EdwardThomson, F. C. (Aberdeen, South)
    Falle, Major Sir Bertram GodfrayMarriott, John Arthur RansomsThomson, Sir W. Mitchell- (Maryhill)
    Farquharson, Major A. C.Martin, A. E.Townley, Maximilian G
    Fell, Sir ArthurMatthews, DavidTryon, Major George Clement
    Flannery, Sir James FortescueMeysey-Thompson, Lieut.-Col. E. C.Turton, Edmund Russboreugh
    Ford, Patrick JohnstonMiddlebrook, Sir WilliamWaddington, R.
    Forrest, WalterMitchell, Sir William LaneWallace, J.
    Foxcroft, Captain Charles TalbotMolson, Major John EisdaleWalters, Rt. Hon. Sir John Tudor
    Fraser, Major Sir KeithMond, Rt. Hon. Sir Alfred MoritzWalton, J. (York, W. R., Don Valley)
    Frece, Sir Walter deMorden, Col. W. GrantWard, Col. J. (Stoke upon Trent)
    Fremantle, Lieut.-Colonel Francis E.Moreing, Captain Algernon H.Ward, Col. L. (Kingston-upon-Hull)
    Ganzoni, Sir JohnMorrison-Bell, Major A. C.Ward, William Dudley (Southampton)
    Gee, Captain RobertMunro, Rt. Hon. RobertWaring, Major Walter
    Gibbs, Colonel George AbrahamMurchison, C. K.Warner, Sir T. Courtenay T.
    Gilbert, James DanielMurray, Hon. A. C. (Aberdeen)Watson, Captain John Bertrand
    Gilmour, Lieut.-Colonel Sir JohnMurray, Rt. Hon. C. D. (Edinburgh)Weston, Colonel John Wakefield
    Glyn, Major RalphMurray, John (Leeds, West)Wheler, Col. Granville C.
    Goff, Sir R. ParkNeal, ArthurWhite, Col. G. D. (Southport)
    Gould, James C.Newman, Sir R. H. S. D. L. (Exeter)Wild, Sir Ernest Edward
    Grant, James AugustusNicholl, Commander Sir EdwardWills, Lt.-Col. Sir Gilbert Alan H.
    Gray, Major Ernest (Accrington)Nicholson, Reginald (Doncaster)Windsor, Viscount
    Green, Albert (Derby)Norris, Colonel Sir Henry G.Winfrey, Sir Richard
    Green, Joseph F. (Leicester, W.)Norton-Griffiths, Lieut.-Col. Sir JohnWinterton, Earl
    Greene, Lt.-Col. Sir W. (Hackn'y, N.)Oman, Sir Charles WilliamWise, Frederick
    Greenwood, William (Stockport)Ormsby-Gore, Hon. WilliamWolmer, Viscount
    Greer, Sir HarryParker, JamesWood, Hon. Edward F. L. (Ripon)
    Greig, Colonel Sir James WilliamParry, Lieut.-Colonel Thomas HenryWood, Sir J. (Stalybridge & Hyde)
    Gretton, Colonel JohnPearce, Sir WilliamWoolcock, William James U.
    Guest, Capt. Rt. Hon. Frederick E.Pease, Rt. Hon. Herbert PikeYea, Sir Alfred William
    Hacking, Captain Douglas H.Peel, Col. Hn. S. (Uxbridge, Mddx.)
    Hamilton, Sir George C.Pennefather, De Fonblanque


    Hannon, Patrick Joseph HenryPerkins, Waiter FrankColonel Leslie Wilson and Mr.
    Harmsworth, C. B. (Bedford, Luton)Philipps, Sir Owen C. (Chester, City)McCurdy.
    Harmsworth, Han. E. C (Kent)

    The next Amendment, standing in the name of the hon. Member for Thornbury (Mr. Rendall), to leave out Sub-section (7), is consequential. The hon. Member has, however, handed in a manuscript Amendment.

    I beg to move, in Subsection (7), after "1922–23" ["chargeable under Schedule D for the year 1922–23"], to insert the words "and for the three following years."

    I apologise to the Committee for the fact that this Amendment is in manuscript, but they will sympathise with me when I say that I put down some Amendments to this Clause which attempted to realise more fully the object I have in view, but that those Amendments were ruled out of order on the ground that it was possible that I was laying the subject open to a further tax, which it is not within the province of a private Member to do. Consequently, I put down this Amendment, and I will endeavour to explain its object. Hon. Members will see that Sub-section (7) says that:
    "Income Tax in respect of profits or gains which would, but for the provisions of this Section, have been chargeable under Schedule D for the year 1922–23, may be charged for that year either under Schedule D or under Schedule E."
    Hon. Members are, of course, aware from the preceding discussion that large numbers of persons, who have been accustomed to pay Income Tax upon an average of their income of the last three years, are going, as a result of Clause 12, to be compelled to pay Income Tax on their prospective incomes. The argument was adduced by the Chancellor of the Exchequer the other day that this change has been made necessary after the House of Lords decision, and that it was a very happy moment to make the change, because incomes were falling, and, therefore, for a large number, and perhaps the majority of salaried persons, it will be better for them to pay on their prospective incomes, as they will pay less than on the average of the last three years. I am not concerned to deny that it may be better for the majority of those persons that this alteration of the law should take place, but I am very much concerned, and the Committee ought to be concerned, to see that in making what may be a thoroughly good alteration of the law we are not doing a certain injustice to a minority of persons.

    I think I can prove that this alteration would be a serious injustice to a minority of persons, and it seems to me they ought to be protected by some saving Clause. I endeavoured to put down a saving Clause to prevent this alteration of the law harming certain persons, but because I was unable to draft the Amendment in the proper way it has been ruled out of Order. Consequently, the best I can do for those I seek to serve is to try and get this alternative of being taxed for this year on Schedule D or Schedule E in Sub-section (7) extended for a period of three years. That, at least, would help a great many hard cases and would not do much harm to the Treasury. It would make the injustice which is certainly going to be done by the Clause rather less if we spread it over that period. I should like to give an example of what is going to happen to an ordinary person who is not a Corporation employé, and who has been able to average his income. I have a case in my hand where a man was in receipt of an income of £145 in one year, 2280. the next year, and £400 in the third year, This particular taxpayer made a return a month before the Budget was introduced in which he showed that during the last three years he had made an average income of £265. After allowing for the deductions to which he is entitled, he would have to pay Income Tax on 2109, and that would amount to rather over £15. As a result of the proposal in the Bill this particular person is going to be asked to pay Income Tax on £500, to which his income has recently been increased. Therefore, as a result solely of this Finance Bill, if it becomes an Act, he is going to pay £50 Income Tax instead of £15. That seems to me a real injustice to accrue from an alteration of the law which may be a desirable thing in itself, and may be desirable for everybody in the long run, but which certainly ought not to be passed into law and to inflict so very serious an injury upon individuals who had no reason to expect such an alteration, and. who will have some difficulty in meeting an impost which they naturally did not anticipate having to pay. Such a person will come under the alternative proposal for one year, but he will not come under it in later years, and what I seek to do is to give him the option of being taxed under Schedule D or Schedule E for three years in addition to this period. That seems to me a fairly reasonable request to make, and I make it on other grounds as well. It is true that a large number of persons have had bonuses knocked off and their salaries decreased and have perhaps had misfortunes in recent years, and therefore the Chancellor of the Exchequer has told us this is probably the most desirable moment in which to make this change. But when the War was over a large number of young men came back into industry. They had had their industrial training put off and they commenced with very low salaries. They have been gradually working up from £150, say, to £250 or more since that time and suddenly we say to a young officer who has been trained and maybe has increased his income and has been relying on that increase of income which he has won by merit, "Instead of charging you £15 tax this year, as you expected would be the case, we are going to turn that tax into £50 this particular year and in future you will not be allowed to average your bad years when you were training and getting very small sums." That seems to me a very grave injustice to young men who have done a great deal for their country, have had their careers interfered with very badly and have a right to look to the country, at least, not to make any sudden alteration of the law, which, while it may be good for the country and taxpayers generally, is a real hardship to young men of this kind who have had to make their way and have had great difficulty in doing so. It is not rewarding their meritorious conduct or training or hard work as it ought to be rewarded, but inflicting on their success a special legal hardship. That, I think, the Committee ought to avoid if it can. I therefore propose, in addition to the one year's hardship, which the Chancellor of the Exchequer proposes to save them from, to enlarge that very slightly, at very small cost to the Exchequer, and give three extra years during which they will average instead of paying on their prospective income. It is not only a hardship this year, but it may be a hardship next year. Their income can still go up in view of their meritorious work and we have every reason for saying to these men, whose career has been interrupted, "We will not make an alteration of the law which will he had for you, although it may be good for a great many other people."

    11.0 p.m.

    I understand the object of the Amendment is to give persons taxed, by reason of the provisions of the Clause as a whole, under Schedule E, the option to be taxed under Schedule D, not only for the year 1922–23 but also for the three following years. The objection to accepting the Amendment is, that this Sub-section has nothing whatever to do with the subject. The Sub-section does not give an option to the taxpayer to be taxed under one Schedule or the other Schedule. Consequently the Amendment to extend the number of years will not confer a power that the Section does not give for the first year. This Sub-section is a pure machinery Sub-section, and has nothing whatever to do with any question of option as to paying under one Schedule or the other. The simple and sole object of this Subsection is this: during the last few months, as the result of the House of Lords' decision, some assessments have been written in a book called Schedule D hook, which I shall call the blue book. Some have recently been written in Schedule E book, which I shall call the brown book, and this Sub-section simply says that assessments which have been written in the blue book need not, as a matter of clerical work, be transferred to the brown book. Whichever book they are in, the tax shall be computed as the Clause provides, under Schedule E.

    Amendment negatived.

    Clause ordered to stand part of the Bill.