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New Clause—(Exemption Of Certain Voluntary Superannuation Funds)

Volume 390: debated on Thursday 3 June 1943

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Sub-section (2) of Section thirty-one of the Finance Act, 1933 (which repeals Sub-section (4) of Section thirty-nine of the Income Tax Act, 1918), shall cease to have effect in so far as the said Section thirty-nine applies to a

voluntary superannuation fund registered as a society under the Industrial and Provident Societies Act, 1893, and the said Sub-section (4) of Section thirty-nine of the Income Tax Act, 1918, shall have effect accordingly.—( Mr. McNeil.)

Brought up, and read the First time.

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

I shall try to telescope my argument as much as possible, because I do not want to detain the Committee. The basic purpose of this Clause is that the voluntary superannuation fund of the National Union of Journalists should have its position so eased as to be able to continue, and, in conformity with the usual practice of this House, I had better say that I am a member of that union, although I have no financial interest at all in the fund. I think that the argument for the Clause is fairly strong. I hope that the Chancellor will think so, too. At any rate, if he agrees that the purpose of Section 31 of the 1933 Act, like that of any other financial provision, is to enable him to collect certain moneys, to do that in an orderly fashion, and to collect it justly, I think I shall be able to show him that if he resists this Clause he will get no money by his resistance, and that he will perpetuate hazardous and fortuitous circumstances and bring injustice, at any rate to a small section of this community. This fund was founded in 1925. It differed from the ordinary superannuation fund in that it was not a joint fund, to which employers and employees contributed, because the union had found it impossible to secure the agreement of the employers.

The editorial side of the newspaper industry is a curious one. There is a considerable section of the industry which comprises free lance journalists, that is to say, those who have no salary attachment to any one employer but are paid by results, and that is the basic reason why a joint fund was impossible. To overcome this difficulty, in 1925, this fund was promoted by the Union under the Industrial and Provident Societies Act, as the law required, and thus secured the exemption from taxation of its investment funds under the appropriate Section of the 1918 Act. But in 1933, under the Finance Act of that year, this fund was compelled to pay taxation. At that time, the Union, having failed to sustain its appeals, tried to set its domes- tic finances in order within the fund, and because the taxation level was only 5s. they were able to reduce their contracting benefits and carry on for a time. But as the taxation level increased, so the difficulties became greater, until—and this is the reason why my hon. and right hon. Friends and myself raise the matter—the fund has had for the last two years to cease recruiting members. Indeed, unless the Chancellor can agree, the fund will have to close down altogether. It must be wound up. That is why I say that, even if the Chancellor resists this new Clause, he cannot secure any moneys from the fund.

It would be bad enough if the Chancellor, in pursuing a deliberate policy, felt that he had so to treat this fund. I hope that I shall be able to persuade him that it is a fortuitous circumstance and that it was never intended that this fund should so be treated. Under Section 31, Subsection (2) of the 1933 Act, the position of this fund changed and it is that portion of this Sub-section that we by this Clause seek to repeal. I could quote at some length to prove that that Sub-section was never intended to deal with this fund. When the then Chancellor of the Exchequer—the late Mr. Chamberlain—introduced this Sub-section, which was the most controversial Sub-section dealing with the undistributed profits of the co-operative societies, he said that they expressed their agreement with the majority of the Royal Commission which reported in 1920 that the amounts arising from trading with members, the so-called mutual trading, should be made chargeable to Income Tax. He went on to say that he anticipated in that year that by this Sub-section he would gain £1,200,000, all of which he calculated would be got exclusively from the co-operative societies. The then Financial Secretary to the Treasury, in piloting this Sub-section through on 31st May, 1933, made the same assumption throughout his speech. He said that there would be no distinction whatever between the co-operative society and the ordinary trader, and he went on to talk about traders and cooperative societies. Plainly, any one who cares could satisfy himself that this Subsection dealt only, and was intended to deal only, with the co-operative societies.

If there is any doubt in the minds of the Committee I would push it aside by saying that the Financial Secretary who made that speech and who piloted that Sub-section through is by coincidence one of the signatories to the Clause which I have moved. He is my right hon. Friend the Member for Devonport (Mr. Hore-Belisha) and he authorises me to say that he regrets he cannot be here and that he is firm and clear in his mind that at no time in these discussions was it ever intended or imagined that this voluntary superannuation fund, for which we presently plead, would be caught up by that Sub-section. So that, as I say, not only will the right hon. Gentleman get no additional funds, but he will be caught up by an accidental turn of his own wheel, and I think I can demonstrate too that he will be perpetuating an injustice. We are really talking about men and not a fund.

Recently the hon. Member for Gorbals (Mr. Buchanan) said in this House that what he called the decencies of life were the concern of democracy. So here we are talking about men who, previously, were excluded from a joint fund because if they had been members of a joint fund, then under the appropriate Section of the 1931 Act, they would have been exempt from this taxation. But because they had no joint contribution, they voluntarily made provision for their reetirement, and the Chancellor, in effect, says, "As you are having to carry one burden, I am going to ask you to carry three burdens." These men must first pay the tax on their own earnings; from their own earnings they have to make a sufficient contribution to ensure a reasonable standard of retirement, and now, they have also to meet this taxation. In 1933 the fund was solvent. It had a balance of £1,077; to-day it has a deficit of £22,720. Naturally my hon. Friends and I are not tied to the actual wording of our Clause. I think I can, with perfect justice, ask the Chancellor to make it possible for this fund to continue. At any rate, if he cannot see his way to do that, I plead with him to devise some amendment so that the bargain which the officials of this Union made with these ordinary, law-abiding, hard-working citizens who have tied themselves to certain contributions in return for certain benefits and who are, many of them, now near retirement, can be kept.

I want to reinforce what my hon. Friend the Member for Greenock (Mr. McNeil) has said. I am not a member of the National Union of Journalists, although I have some association with the profession, and some of my friends in the Northern part of the country have asked me specially to support this plea. I think the main point is a simple and human one. Men were encouraged by the State to enter into these superannuation arrangements, and in every other profession except this it has been possible to enter into this operation in co-operation with employers. But in the chance circumstances of this profession men have not been able to do so, and they are now reaching an age when they cannot enter into new contracts, because they are long past that stage. The circumstances are rather tragic. The men who have made provision for their old age are now approaching what will be a very uncertain future, not because of any fault of theirs, but because of the freakish application of one particular taxation Clause. If this was applied to all mutual assurance of this kind, one could understand it, but when it is not it seems to be unfair. We do not expect the wording of this Clause to be accepted, because it is rather difficult when one is not a Parliamentary draftsman, but I hope the Chancellor will give it favourable consideration.

I would like to congratulate the hon. Member for Greenock (Mr. McNeil) on the excellent way in which he moved this new Clause. I cannot hold out any hopes of agreeing to the proposal on the Order Paper, which, as hon. Members will appreciate, would make a permanent alteration in the law, but between now and the Report stage I will enter into negotiations with those who are interested to examine the latter part of the proposal made by the hon. Member. I realise from what he said that there are people who are interested in this fund—indeed, I know some of them—and I would be the last to do anything harmful to them if it could be avoided. However, as I have said, I and my advisers will consult with those interested to see whether it is possible to do something in the way proposed by the hon. Member in the latter part of his speech.

The Chancellor has met my hon. Friend the Mem ber for Greenock (Mr. McNeil) very fairly in the circumstances, but I would like to impress upon him the fact that several of us wanted to put our points of view before him on this matter, but have refrained from doing so in view of the late hour. I hope he will keep this in mind.

On the Chancellor's assurance of sympathetic consideration I beg to ask leave to withdraw the Clause.

Motion and Clause, by leave, withdrawn.