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New Clause—(Allowance To Children)

Volume 155: debated on Wednesday 28 June 1922

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Any allowance granted to a widow in respect of a child or children under the Royal Warrant of the second day of July, nineteen hundred and twenty, shall he, and shall be deemed always to have been, exempt from Income Tax.—[Mr. Rendall.]

Brought up, and read the First time.

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

This is really rather an important Clause. Yesterday we were discussing widows' allowances and we asked the Chancellor then to exempt these allowances from taxation. He said it would cost £100,000 and that it had been discussed 20 times previously and the House had refused to exempt this money. He also said it was unreasonable to put them in a better position now than they were four years ago. None of these arguments apply to this particular claim, because these are compassionate allowances. They were granted for children during the War, and after the War was over and while they were called compassionate allowances there was no tax upon them. The Chancellor of the Exchequer got no Income Tax on these allowances given to the children until last year. The reason they did not bear Income Tax was that they were not made to the widow, but were made for the maintenance of the child. They were paid to the widow merely as guardian or trustee, and were for the benefit of the child. The Chancellor of the Exchequer shakes his head, but the words of the Royal Warrant are perfectly plain. Before the Royal Warrant there never was any doubt. The Army Council Lad absolute powers to pay these allowances to anybody. At no time had the widow any right to them. It then became the duty of the Ministry of Pensions to pay them, and they paid them to anybody they regarded as a fit and proper person. That was the position during the War and after the War was over. In July, 1920, it was decided by the Ministry of Pensions to put this matter on to a more permanent basis by issuing a Royal Warrant. The Royal Warrant abolished the compassionate allowance, and it was decided that the income of the widow should be increased by £36 a year for each child, but it was to be paid to her for the maintenance of the child. The point arises: Is this her income or is it not? The answer to that question has got to be decided, I think, according to the wording of the Royal Warrant itself. In Article 12, paragraph 5, the Royal Warrant says:
"In any case in which, in the opinion of the Minister of Pensions, it may be necessary to secure the proper care of the child on behalf of whom an allowance is payable, the allowance, instead of being paid to the widow, may be administered under such conditions as the Minister may determine."
Those words make it clear to me, and I think to the Committee, that this is not a part of the widow's income. These words show that it is not intended for her benefit, that it is paid to her merely because she happens to he the nearest relative of the child, and the most convenient person to administer the money. Also, it gives the Ministry of Pensions absolute power to pay that money to another person if the widow is found not to be a fit and proper person. But in spite of that paragraph the Chancellor of the Exchequer says, "It is the widow's income. The Royal Warrant uses the words 'widow's income.'" But I hope he will pay attention to what, I think, are very important words in the Preamble of the Royal Warrant:
"No grant to an officer, or to the family or relative of an officer, or of a nurse, shall be re-assessed to their own disadvantage."
These words plainly show that when this Royal Warrant was prepared it was understood by the Ministry of Pensions and by all those who had to do with the preparation of it that no person who was to receive money under these allowances was to be assessed for any tax if he had not been formerly assessed. Therefore it seems to me that the Chancellor of the Exchequer is doing a most unjust thing in allowing the Treasury to apply for tax on these sums. He is taking advantage of some loose wording in the Royal Warrant and trying to get money which he ought not to claim. I hope the Committee will allow this Clause to go forward and that the Chancellor of the Exchequer may 'be able to accept it. It is simply because the framing of the Royal Warrant is a little different from what it ought to have been that he is able to make this claim at all. In correspondence with the Ministry of Pensions I asked why the Royal Warrant, had been drawn so carelessly. The Ministry of Pensions, I am given to understand, has had a long controversy with the Treasury on this matter, and was very surprised when the Treasury allowed the claim to be made. The Minister of Pensions, in writing to me, is not prepared to tell me all the facts about the controversy with the Treasury, but he does use this sentence in a letter written last March. He says:
"It is probably the case that those who were responsible for framing the Warrant did not give special consideration to the point whether these allowances should be liable to tax, as this was not a matter within their competence to decide."
There is plain evidence that the Ministry of Pensions thought, in framing this Warrant, that it was not going to make these small allowances to children liable to tax.

The hon. Member has founded an elaborate argument on the selection of certain passages from the Royal Warrant and drawing the inference that the pension was a pension given direct to the child and not to the widow. That is an entire contradiction of my reading of the Royal Warrant, or the reading of everybody who advises me on that topic. It is true, as he has said, that previously the matter was in the hands of the War Office, and they acted more or less in loco parentis to the child in dispensing the pension which the child got in respect of the dead father. When the matter was put into the hands of the Ministry of Pensions the whole scale of pensions was re-adjusted: a larger sum was given. The Royal Warrant, as it seems to me, explicitly declares that the pension is given to the widow. May I remind the hon. Gentleman of the phraseology of the Royal Warrant. It says:

"The widow of an officer awarded a pension under the preceding article may be granted—"
"—a further allowance at the rate of £36 a year for each child maintained by her."
Accordingly, it, is perfectly plain that the allowance for the child is a further allowance to the mother for the child maintained by her. It is perfectly plain that it forms part of the mother's income and not part of the separate income of the child.

It may be taken away-from the mother if the Ministry of Pensions thinks she is not using it properly for the child's benefit. How can that be the mother's income?

But just in the same way as in the case where a child has to be maintained separately by its parent. If the parent cannot maintain it, nevertheless a certain sum can be derived from the father by process of law which he is bound to pay for the upkeep of the child. In order to show that there is absolutely no injustice about this matter, apart altogether from what is provided by law, the Royal Warrant clearly states it by phraseology. Let me remind the Committee. In respect of the children the mother is granted remission of Income Tax. Take the case of a private soldier. In every case of a private soldier more remission in Income Tax is granted to the mother in respect of the child than the child can possibly obtain by way of pension—for the first child £40 and for every child thereafter £30. But no child of a private soldier gets a pension to so great an extent, as that. Accordingly, the class which most requires the money their case is entirely met by the abolition of Income Tax that is given under the Order of the Finance Statute. Take the case of the officer. There the mother of the first child has greater remission in the way of Income Tax than the child could possibly obtain by way of pensions by several pounds. In the case of the second child the pension given would be rather more than the remission Income Tax. Thereafter for all succeeding children the difference is comparatively slight. Income Tax would not be paid upon more than a sum in respect of each of something like 15. Accordingly it cannot be treated both ways. If my hon. Friend's Motion were to be carried out, the mother would have to give up remission of Income Tax or else she has to bear this burden. In the case of the private soldier the widow would have to bear a greater burden in every case and by reason of my hon. Friend's Amendment I venture to put it to the Committee that there is no real ground for urging this.

Only yesterday I was reminding the Committee, and the Chancellor of the Exchequer took exception to my words, that the further we get from the War the less was the remembrance of what we owe to those who suffered during the period of the War. Only to-night the Chancellor of the Exchequer is seeking, as far as my limited intelligence is able to follow mm, to put the children of the widow in the same position as the children of ordinary married persons when both parents are alive. The difference I seek to make is this: If the widow has children and if a separate grant is made to her or an allowance is made to her in respect of those children because her husband died, either was killed in the War or died because of injuries or illness suffered in the War, then the widow and her children ought to have not only the ordinary deduction in respect of her children, but ought to have the full rights of what the State gives as additional to what she would otherwise enjoy. There is one point which I think really brings the whole matter home. Is the Ministry of Pensions in agreement with the right hon. Gentleman, or is the Ministry of Pensions in disagreement with him. As far as I am led to suppose, not only does the Ministry of Pensions disagree with him, but the whole of the ex-service movement throughout the country are unanimous on the subject and they consider the matter as one of vital importance. What I would ask the Chancellor of the Exchequer to do, irrespective of what he is going to do to-night, is that between now and the Report stage h?, will consult the Minister of Pensions whether the mistake has not been over the wording of the Royal Warrant of July, 1920, because, if we were correct in saying that the Ministry of Pensions has power not to appoint the mother as the administrator of the pension given to the children but to appoint another guardian, it stands to reason that the State cannot seek to recover from the mother Income Tax from any grant or pension which can be administered by a third party appointed by the Minister of Pensions as guardian of the children. I do think that absolutely differentiates the case from the example given by the Chancellor of the Exchequer when he sought to make these children and parents in the same position as the children of parents who did not suffer in the War, and both of whom were alive to-day.

I am very much in agreement with the last speaker, but I should like to carry a point he made rather further. I would like to put this to the Chancellor of the Exchequer. Suppose one of these children die the allowance stops, and that, to my mind proves that the allowance is made to the child and not to the mother. That is the great difference. This, I respectfully submit, proves, at any rate, to a very large extent, that the allowance is personal to the child.

I think my hon. and gallant Friend who spoke last does make a differentiation between the ordinary individual and the case of a widow whose husband was killed in the War. We are dealing now with War orphans. I was one of the Select Committee who had a good deal to do with the framing of the recommendations, and I am sure it was not in the minds of that Select Committee that these allowances to children should be reduced by Income Tax. I think the suggestion a good one that the Chancellor of the Exchequer between now and the Report stage should consult the Minister of Pensions and try to arrive at something which is really fair and reasonable in all the circumstances of the case.

This matter, although a small one as far as money is concerned, is one of very great importance, and causes a tremendous amount of irritation and grievance. The reason is that for years no tax was claimed on these lives, and now after a period of years, when the War is being forgotten, the Inland Revenue comes down to seek to get Income Tax on these allowances. The real crux of the whole thing is that these allowances should be treated as income of the children. If the children have an income over the Income Tax allowance they will be taxed, but if they receive something under £125 it will not be taxed. I want to give the Chancellor of the Exchequer an instance of where these children of officers killed in the War are in a worse position than the children of civilians who have died. Any Member of this House who was reasonably prudent and anxious to make provision for his infant children would provide that the money should be held by trustees, the income to be paid for the benefit of the infant children. The money would go to the widow, exactly in the same way as this money, but because it would be treated as the income of the child it would not be regarded as the income of the widow, and she would not have to pay Income Tax on it. I feel this is a strong point and there is little money in it. It is not a question of changing the law, but of making it clear that this is the child's income and not the widow's.

I hope the Chancellor of the Exchequer will meet the point of the allowance to the widow for the child, or will arrange with the Ministry of Pensions to meet the point of this deduction. He must recognise that to grant to a widow whose husband fell in the War an allowance for a child and then to deduct something from the allowance by way of tax is repugnant to the public conscience.

I am very willing, as everyone knows, to consult with any- body who wishes to consult with me. Therefore, I shall be glad to see the Pensions Ministry and talk over the matter, but I cannot hold out any kind of hope that it is going to make any difference in the situation, because I know precisely where we stand in relation to the Pensions Ministry. If I find that there is any injustice or misunderstanding, I shall be very glad to alter it, but I cannot at the moment give the Committee any reasonable ground to believe so. All the aspects of this have been investigated, both my myself and those who advise me.

Can the Chancellor of the Exchequer say whether he has any figure to show what this most reasonable concession would cost?

Division No. 190.]


[1.57 a.m.

Armitage, RobertFrance, Gerald AshburnerRae, Sir Henry N.
Barker, Major Robert H.Goff, Sir R. ParkRichardson, Lt.-Col. Sir P. (Chertsey)
Barnes, Major H. (Newcastle, E.)Hayday, ArthurRichardson, R. (Houghton-le-Spring)
Benn, Captain Wedgwood (Leith)Henderson, Lt.-Col. V. L. (Tradeston)Roberts, Samuel (Hereford, Hereford)
Bigland, AlfredHolbrook, Sir Arthur RichardRoyce, William Stapleton
Birchall, J. DearmanHolmes, J. StanleySwan, J. E.
Bowerman, Rt. Hon. Charles W.Hood, Sir JosephThomson, T. (Middlesbrough, West)
Bowyer, Captain G. W. E.John, William (Rhondda, West)Thorne, G. R. (Wolverhampton, E.)
Brown, Brig.-Gen. Clifton (Newbury)Jones, Morgan (Caerphilly)Walsh, Stephen (Lancaster, Ince)
Bruton, Sir JamesKiley, James DanielWard-Jackson, Major C. L.
Cope, Major WilliamLawson, John JamesWatts-Morgan, Lieut.-Col. D.
Davidson, Major-General Sir J. H.Lyle-Samuel, AlexanderWhite, Col. G. D. (Southport)
Edwards, C. (Monmouth, Bedwellty)Mallalieu, Frederick WilliamWilliams, Penry (Middlesbrough, E.)
Entwistle, Major C. F.Myers, ThomasWolmer, Viscount
Foot, IsaacNall, Major Joseph
Ford, Patrick JohnstonNewbould, Alfred Ernest


Foxcroft, Captain Charles TalbotNewman, Sir R. H. S. D. L. (Exeter)Mr. Rendall and Mr. Pennefather.


Agg-Gardner, Sir James TynteGeorge, Rt. Hon. David LloydMoore-Brabazon, Lieut.-Col. J. T. O.
Amery, Rt. Hon. Leopold C. M. S.Gibbs, Colonel George AbrahamMorden, Col. W Grant
Armstrong, Henry BruceGilmour, Lieut.-Colonel Sir JohnMoreing, Captain Algernon H.
Baird, Sir John LawrenceGlyn, Major RalphMorrison-Bell, Major A. C.
Barlow, Sir MontagueGreene, Lt.-Col. Sir W. (Hack'y, N.)Munro, Rt. Hon. Robert
Barnston, Major HarryGreenwood, Rt. Hon. Sir HamarMurchison, C. K.
Bell, Lieut.-Col. W. C. H. (Devizes)Greenwood, William (Stockport)Murray, Rt. Hon. C. D. (Edinburgh)
Borwick, Major G. O.Guest, Capt. Rt. Hon. Frederick E.Murray, John (Leeds, West)
Boscawen, Rt. Hon. Sir A. Griffith-Hacking, Captain Douglas H.Neal, Arthur
Boyd-Carpenter, Major A.Hannon, Patrick Joseph HenryNicholson, Reginald (Doncaster)
Bridgeman, Rt. Hon. William CliveHarmsworth, C. B. (Bedford, Luton)Pease, Rt. Hon. Herbert Pike
Broad, Thomas TuckerHennessy, Major J. R. G.Percy, Lord Eustace (Hastings)
Beckley, Lieut.-Colonel A.Herbert, Dennis (Hertford, Watford)Perkins, Walter Frank
Burdon, Colonel RowlandHinds, JohnPollock, Rt. Hon. Sir Ernest Murray
Campion, Lieut.-Colonel W. R.Hopkins, John W. W.Raw, Lieutenant-colonel Dr. N
Carr, W. TheodoreHorne, Sir R. S. (Glasgow, Hillhead)Remer, J. R.
Clay, Lieut.-Colonel H. H. SpenderHunter-Weston, Lt.-Gen. Sir AylmerRoberts, Rt. Hon. G. H. (Norwich)
Courthope, Lieut.-Col. George L.Inskip, Thomas Walker H.Robinson, S. (Brecon and Radnor)
Cowan, D. M. (Scottish Universities)Kellaway, Rt. Hon. Fredk. GeorgeRoundell, Colonel R. F.
Davidson, J. C. C.(Hemel Hempstead)Kidd, JamesSanders, Colonel Sir Robert Arthur
Davies, Thomas (Cirencester)King, Captain Henry DouglasSassoon, Sir Philip Albert Gustave D.
Doyle, N. GrattanLane-Fox, G. R.Scott, A. M. (Glasgow, Bridgeton)
Ednam, ViscountLindsay, William ArthurScott, Sir Leslie (Liverp'l, Exchange)
Edwards, Major J. (Aberavon)Locker-Lampson, Com. O. (H'tlingd'n)Seddon, J. A.
Evans, ErnestLort-Williams, J.Seely, Major-General Rt. Hon. John
Eyres-Monsell, Com. Bolton M.McLaren, Hon. H. D. (Leicester)Shaw, Hon. Alex. (Kilmarnock)
Falls, Major Sir Bertram GodfreyMcLaren, Robert (Lanark, Northern)Shortt, Rt. Hon. E. (N'castle-on-T.)
Fisher, Rt. Hon. Herbert A. L.Manville, EdwardSmith, Sir Allan M. (Croydon, South)
Fraser, Major Sir KeithMond, Rt. Hon. Sir Alfred MoritzSmith, Sir Harold (Warrington)
Ganzoni, Sir JohnMontagu, Flt. Hon. E. S.Stanley, Major Hon. G. (Preston)

Can the right hon. Gentleman say whether the Royal Warrant contains a proviso for taking Income Tax off these pensions of children? Was it drawn in that way by some accident or error?

I have no reason to believe there was any error in the drawing. It was constructed at the time when pension rights were being increased. The suggestion was made that this was a sudden change from the practice of years. I do not know what is meant by the practice for years. Allowances for children have never existed before in this country to the extent to which they exist now.

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

The Committee divided: Ayes, 48; Noes, 111.

Stanton, Charles ButtWalters, Rt. Hon. Sir John TudorWise, Frederick
Steel, Major S. StrangWard, William Dudley (Southampton)Wood, Hon. Edward F L. (Ripon)
Sturrock, J. LengWaring, Major WalterYoung, Sir Frederick W. (Swindon)
Sugden, W. H.Watson, Captain John Bertrand
Sutherland, Sir WilliamWheler, Col. Granville C. H.


Thomson, F. C. (Aberdeen, South)Williams, C. (Tavistock)Colonel Leslie Wilson and Mr. McCurdy.
Thomson, Sir W. Mitchell- (MaryhWills, Lt.-Col. Sir Gilbert Alan H.
Tryon, Major George ClementWindsor, Viscount