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Clause 2—(Regulations Of Commis- Sioners Of Inland Revenue)

Volume 393: debated on Tuesday 2 November 1943

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I beg to move, in page 3, line 29, to leave out paragraph (b) and to insert:

"(b) the amount deducted or repaid at each period of payment of emoluments shall be related to the amount of such payment and to a proportional part of a provisional adjustment for allowances and reliefs."
This raises the question of the method by which the proposal is to be put into operation. We are all agreed about the principle which is at stake. The House was unanimous in welcoming the Chancellor's announcement of a more comprehensive application of that principle, but there are various methods by which it can be put into operation. The Financial Secretary has quoted Adam Smith's dictum, that every tax ought to be levied at the time and in the manner which is most likely to be convenient for the contributor to pay it. I might also remind him that the same eminent authority said that the time of payment, the manner of payment, and the quantity to be paid ought all to be clear and plain to the contributor and to every other person. I venture to say that it will not be plain to the contributor how much he has to pay under the Chancellor's proposal. It will require elaborate research for the wage-earner to find out how much is to be deducted from his wages. That is highly undesirable. He ought to be able to check his pay packet every week with readiness and without having to go into the elaborate calculations which will be necessary under this system, and which will involve a great many complicated references, which I will not detain the House with now, as I explained them on a previous occasion.

Not only is the amount to be paid not clear and plain, but the manner in which it is to be levied is not in all cases that most convenient to the contributor. There arise under the proposals of the White Paper a large number of instances in which the contributor has to pay a larger contribution in a week in which his wages have actually gone down. That is certainly not the most convenient manner. What is most convenient is that he should make the largest payment when his wages are largest and the smallest payment when his wages are smallest. That result cannot possibly be obtained under the system contemplated in the White Paper. I do not believe it is possible to do what the Financial Secretary said was under contemplation, to adjust the tables so that that would not arise, so long as the tables are constructed on the principle upon which they are now constructed. That principle is laid down very definitely and clearly in the paragraph which I have moved to leave out. If that paragraph is left out, the Chancellor of the Exchequer will be left in a position in which he can frame his regulations and tax tables without being limited in that fashion, and he will be able to choose between various alternative methods which are available for attaining the results which we all desire. This is one of the very few occasions on which I have found a Minister of the Crown disinclined to help in affording freedom of action in framing proposals which Parliament wishes to see carried out. I cannot understand why the Chancellor is so anxious to have his hands tied in this matter, instead of taking a little latitude in order to apply a simpler system if such a system can be obtained.

Taxes ought to be collected in the manner which is most economical in collection and which does not involve a lot of wasted labour and expense. The system proposed is not going to be as economical as some alternatives which are available. It will mean a large amount of extra work for officials in the Inland Revenue and a still larger amount of extra work for officials an pay clerks in factories. It is a system in which there is a very great liability to error, owing to the complicated nature of the calculations and of the tax tables. Some of those errors may be of a cumulative character, going on accumulating until the end of the period. That arises largely out of the fact that the apparatus devised for carrying on this system is very different from the ordinary methods of accounting and is based on a series of tax cards which are not reconcilable with the books of the business and do not lend themselves to easy and periodical balancing. In this time of war, when the shortage of manpower is most acute, it is deplorable that no effort should be made to try to put into operation a system involving less expense and trouble.

The two points of difficulty in applying pay-as-you-earn are those mentioned in the White Paper of 1942, in which the Treasury told us that it was impossible to do it. One point of difficulty arises where the taxpayer's wages vary about the point where he is subject to or exempt from taxation. So far as that case is concerned, the difficulty can be com- pletely overcome by a system of weekly adjustments which requires the use of only one single table, which can be put on one single piece of paper. I have given details of that to the Chancellor of the Exchequer. There could therefore be no excuse whatever, if that were the only difficulty to be overcome, for using the elaborate and complicated machinery which is contemplated. The other point of difficulty which can apply with variable weekly wages arises at the point where the wage varies around being subject to the standard rate of Income Tax—at present 10s.—and the reduced rate—at present 6s. 6d. There the difficulty arises because in effect the transition from the reduced rate to the standard rate effects a graduation in the rate of taxation, and, regarded as taxation on the whole income, the rate of taxation gradually rises from 6s. 6d. to 10s., but is spread over a very considerable range of income before the maximum can be obtained. For instance, an increase of £1 a week in the pay above the point at which the 10s. rate begins to operate, raises the effective rate from 6s. 6d. to 7s. 3d. A further increase of £1 over that point raises the effective rate to 7s. 9d. The result is that there is a graduation in the rate of taxation, and the difficulty is not so acute as it might at first sight seem to be. It may be possible that under the simplified scheme which has been devised some slight over-deductions will have to be adjusted sooner or later. I was told when we had this matter under discussion before that it was essential that we should adhere to the cumulative principle. Those words seem to have an element of magic in them like abra cadabra but accumulation, after all, is merely a device for ensuring that over certain periods of time the amount of tax the taxpayer has to pay is adjusted on the assumption that his wage for the whole of the year would be at the average rate for that period. It is not essential that that adjustment should in every case be carried out every week if the adjustment is of a small order.

The point which has to be arrived at ultimately is to see that the tax for the whole year is collected during the year and that it is collected to the precise amount of tax which will be payable upon the total earnings for the year, after deduction of the appropriate reliefs and allowances. That can be achieved in other ways than that which is outlined in the White Paper. It can be achieved by a system which involves a very much smaller apparatus than the Chancellor proposes and which will involve about half as much labour. The Attorney-General said to us before that the scheme had been enthusiastically welcomed. It has been as far as the general principle of pay-as-you-earn is concerned, but the details of the operation of it have not been enthusiastically welcomed, and the more people who are concerned with the practical application of it go into those details, the more alarmed they are at the work which is entailed and the possibility of error and mistake which arises out of its operation. In municipal authorities, where the task of wage calculation as a general rule is less than it is in industry, because not so many of their employees have fluctuating wages, the prospect involved in this is causing serious alarm, and with employers generally it is causing still more serious alarm. I beg the Chancellor not to commit himself at this moment to one scheme or another but to give himself a free hand within what time remains to him to accept a scheme which is simpler, more economical and more easy to work than that which is contained in the White Paper, and that is the purpose for which I have moved my Amendment.

I should like to support the appeal to the Chancellor of the Exchequer which has been made by the hon. Member for North Battersea (Mr. Douglas) when he appealed to him not to tie his hands so that he could not bring about any improvements in the procedure recommended. But I do not follow up my agreement with the hon. Member when, if I understand him aright, he opposed the cumulative tax principle.

I think that the cumulative principle is essential to the working of this plan. It is essential that the allowances should relate to the position of the year as a whole and not to that of any particular week, but what I do not agree with are the cumulative Tax tables in the White Paper. I am not at all con- vinced that the arithmetic of the White Paper is really the best that can possibly be devised. The test by which the procedure in the White Paper will be judged is the degree of accuracy that can be obtained by it and the ease of manipulation. I do not think that it is possible to evolve any plan which will be completely accurate in every conceivable case. I can think of freak cases in which the procedure laid down in the White Paper will lead to very serious difficulties. The actual figures given in the White Paper show a considerable error—as much as 15s. a week in some cases. The Financial Secretary to the Treasury has already promised that there will be some recasting of these tables in the hope of reducing this error, but in that case it will presumably mean an immense extension of these already voluminous tables.

As regards the other test—the ease of manipulation—the procedure in the White Paper does not come out very well. It requires 50 tables for each one of the 50 codes. Anybody who has had experience of calculations knows that it is only a very exceptional clerk who can be sure of not making mistakes when he has to consult tables of this length. What disturbs employers very much is the fact that all of this work which otherwise would be done during the week will always have to be done in the rush period. It will probably mean not only extra clerks to work it out but clerks to check it, and, as the hon. Member for North Battersea has already said, it will mean a big waste of man-power and also an enormous consumption of paper. I do not suggest for a moment that the procedure proposed in the White Paper is impracticable. If that is the only way in which we can get the pay-as-you-earn scheme, the difficulties to which I have referred are a small price to pay for the huge advantages.

Those who, like myself, are most anxious for this pay-as-you-earn plan are perhaps most anxious that it should go through with the minimum of friction and risk of serious hitch. For that reason, I would ask the Chancellor whether he is sure that the plan put forward is really the best conceivable plan. I would refer him to the plan put forward by two actuaries, Messrs. Kirton and Haynes, in a letter to "The Times" on 9th October, which has already been referred to by the Financial Secretary to the Treasury and which was the subject of favourable comment in the leading article of the City column of "The Times" which was devoted to it on 18th October and which was also referred to at considerable length in "The Times" of yesterday. The authors of this plan claim that the results which are only approximately achieved by the White Paper can be obtained much more directly by two simple tables. The result of it would be that, instead of 1,000 tables or more, about 100 would be required, and instead of the clerk having to make two calculations for each employee each week he would only have to make one—two very important improvements.

Since this plan was put forward there has been a further amendment to it put forward by two actuaries in the "The Times" of yesterday which further cuts down the work involved. As I understand it, the plan referred to in "The Times" of yesterday will mean the same number of calculations as the White Paper, but it reduces the number of tables required from over 1,000 to two. The plan proposed by Mr. Kirton and Mr. Haynes means one calculation instead of two in the White Paper and a reduction in tables from 1,000 to 50. I am not competent to judge between these two, but I suggest that they are well worth consideration. I will not weary the Committee with a technical explanation of this plan but I would support my contention by saying they are put forward by two very eminent actuaries—the general manager, and actuary of one of our large insurance companies, of which, Major Milner, a former Chairman was your predecessor, as Sir Dennis Herbert.

Before venturing to put these plans before the Committee to-day, I consulted employers of labour in my constituency, and I also consulted the chief accountant of one of the largest employers in the whole country, a firm employing about 25,000 men. The chief actuary in question has explored these plans with the greatest care, because he has been very exercised indeed as to the strain that is to be put upon his staff in the event of the proposals in the White Paper being adopted. He tells me that, after careful consideration, he considers that the advantages of the plan proposed by the actuaries greatly exceeds any defects that he can find. My plea to the Chancellor to look at the matter again is in no way an attack on the Inland Revenue. They deserve great credit for having found a solution to what was said to be impracticable last year by no less an authority than the White Paper of April, 1942. I have always found that the Inland Revenue are most scrupulously fair in the administration of their very difficult task, but they are sometimes inclined to be too ambitious in their plans. They want to produce something which will cover every conceivable case in theory, which means in practice that they give complete satisfaction to none. Among many millions of people who now fill in taxation forms I do not think there is any very great conviction that these forms are really as simple as they can possibly be. I suggest that the Chancellor may be faced with the choice of two different plans which, roughly speaking, will be like this. One will give complete accuracy in the vast majority of cases and far less trouble to work out, but in certain rare cases extra work will be involved. He will have to choose between that and another plan which will cover a larger variety of cases, though not all, with much less accuracy, and much more work will be involved. I hope that the Chancellor will give us some assurance that he will have these suggestions considered very objectively and impartially.

I would like to join with other hon. Members in expressing my appreciation to the Chancellor for what he has announced today. I am sure it will be carefully examined between now and the time of the next Budget. I think it is evident from the various speeches which have been made that there is a considerable amount of misgiving as to the degree of complication of the additional burdens which the Treasury plan will involve. Anomalies have been pointed out in the two previous Debates, and, indeed, the Chancellor himself appreciated these anomalies so much that he promised to have his tables recast. We have not had any details up to now, and we do not expect them yet, as to what the newly cast tables will look like, but I think it is obvious that if he is to reduce these anomalies of a higher tax for a lower wage he can only do it by introducing a further complication. That is by increasing the size of the already voluminous calculator. We know that that will ask employers and their pay clerks for even more work than was originally envisaged in the present scheme. Mention has been made by several Members of the complications to the wage-earner as envisaged by the Treasury. If we can possibly introduce a simple scheme, one which is capable of being understood by the average man and woman, it will be very desirable that we should do so, because it is evident in the minds of those who have given this matter close attention that that simplicity is capable of being achieved. Therefore, I hope the Chancellor will not definitely close his mind to the method by which the tax is calculated.

It has been said that the employer will have additional work. That is obvious, and I suggest that the additional labour the Treasury scheme will involve is not there and that the employer will have put upon him a burden that he cannot possibly bear. I would like to refer to one point in the Treasury method of calculation, and that is the reconcilation figure at the end of the year. The Treasury suggests that this figure should be used to re-code the wage-earner for the following year. Let us assume, for example, that there is a reconciliation figure of 2S. 9d., either over paid or under paid—it does not matter which. That amount of balance of tax will be converted into wages, and by that conversion the wage-earner will get into a new code if he has jumped sufficiently to enable him to do so. The figure of 2s. 9d. represents something like 9s. wages. The difference between one code and another is no less than £5, and we can see that by this method of using the reconciliation figure to re-code a man something like ten years may elapse before he is re-coded. Even if the Treasury made up their minds on their own type of pay-as-you-earn scheme I suggest that it would be a great advantage if, at the end of the year, they could have a cash settlement of the reconcilation figure. I would like to ask the Treasury how they intend dealing with those taxpayers who have responded to the request of the Chancellor and have paid their tax in advance. I am quite certain that it is not the intention of the Chancellor to do anything other than give them the same benefit as other people, but there is some misgiving at the moment, and I should be most grateful if the point can be cleared up before the Debate ends.

I would like to support the Amendment and in doing so to repeat that this is a question which deals solely with administration. It does not affect the principles of the Bill, which have been generally approved. I would also like to say how much the act of the Chancellor in recommitting the Bill has been appreciated. This question does not only affect large industries; it affects the very large number of people who are employed by local authorities. The scheme put forward is one which has been carefully considered by the actuaries and financial experts of the local authorities, and I am asked on their behalf to support it in the hope that it will be accepted by the Chancellor. Procedure under the Bill is very complicated. I am not in a position to say how many tables there should be. Others have mentioned large numbers, and we should like to cut them down considerably. But the fact that the House and the country will appreciate is that whatever the procedure is it should be as simple and as clear as possible, providing it gives us the results we require. The problem of staffing to-day is very great. In industry generally staffs have been cut down until it is almost impossible to carry on, and the same thing applies to local authorities. We know what a demand there was for man-power for war purposes. Local authorities were told to train women, and now many of them have had to go. It is almost impossible for them to carry on with their present staffs, because it is not only a question of numbers but—without being unkind to those who have generously come forward—of quality as well. Individuals may be admirable, but the effectiveness of their work is nothing like the effectiveness possessed by those who have been trained in the past and who have had to leave.

This is, too, not only a war-time question. It is equally important in peacetime that administration should be as clear and as concise as possible. It is our duty to find employment, but I do not think anybody would say that it is our duty to find employment which is unnecessary. One of the axioms that is generally accepted is that not only must justice be done, but it must appear to be done. When you get wage sheets which contain a vast number of complicated calculations, it leaves doubt in the mind of the ordinary individual, and where there is doubt there is always difficulty and the feeling that he is not being fairly dealt with, As I understand this scheme, there should be one table upon which it shall be decided what deduction shall be made with regard to non-taxable income. When that is done, it would be as well to leave calculations to be made at the three, six, nine and twelve monthly periods. Those calculations would be for the return of money and not for an extra demand—which I think is a considerable asset. If another demand is made, it goes down very badly indeed, but if by some recalculation and re-assessment there is something to go to the individual, there is not much complaint. As I have said, the local authorities support this Amendment whole-heartedly, and I hope the Chancellor will give it his full consideration.

I would like to support the closing observations of the hon. Member for North Battersea (Mr. Douglas) when he made an appeal to the Chancellor not to close his mind to the possibility of simplification of procedure under the Bill as it now stands. I think that the cumulative principle of deduction offends against another principle which is true, although it is old fashioned, namely, the principle that the best is the enemy of the good. I think there has been too great an attempt in the Bill to be accurate. I go further than many speakers in suggesting that even greater simplification than in the plan proposed by two eminent actuaries in the "The Times" and the "Daily Telegraph" can be achieved. I think it is possible to achieve it in the light of the entirely new circumstances which have been brought about by the acceptance in principle of the extension of the pay-as-you-earn system to the whole range of Schedule E tax payers. Now the plunge has been taken it becomes increasingly clear—although there will be great reluctance to accept this view—that Income Tax has become and must become more and more a people's tax. The old idea that Income Tax collection consists solely of big game hunting after the well-to-do in the wide open spaces is passing away. Big game hunting can go on because the per capita cost of it makes it worth while, but the Inland Revenue must now face an entirely new problem. Instead of big game hunting only it has also to tackle the problem of mass battues of myriad flights of starlings. I would like to warn the Chancellor that instead of killing all his birds cleanly and neatly, be will probably have to load with No. 9 shot and fire into the brown.

Once we accept the idea that in collection in the mass from small Income Taxpayers Income Tax becomes a people's tax, then deductions to be made under the tax fall into exactly the same category as what are known as the Beveridge deductions. I think the Minister will have to take a leaf from the book of Beveridge and impose bold deductions without prior assessment. There is a way in which these deductions can be estimated in advance with a far greater hope of approach to accuracy. If my right hon. Friend will consider an entirely new principle, namely, cutting all allowances except the personal exemptions out of the system of tax collecting—for instance, the marriage allowance and the children's allowance—he will then find that he can scrap the cumulative system and substitute a system of standard deductions from various rates of pay which would approximate very nearly to the ultimate result which will be achieved when each tax payer is able after the close of the year, to sit down with the tax-gatherer and reach a final determination of his exact liability to tax. Deduction could be evidenced by a system of stamps and the whole of this complication would disappear. I hope that my right hon. Friend will, in the two or three months that remain, give consideration to this possibility. Now is the time, in wartime, when it is necessary to save trouble and labour; and if he does as I have suggested, I believe he would start something which would make the whole system of Income Tax collecting more flexible in the future.

My hon. Friend the Member for North Battersea (Mr. Douglas) moved his Amendment in a form which was calculated to be attractive to a Minister. He said, "Why do you not take more power?" This is not one of those occasions on which the House says to a Minister, "You are taking dictatorial powers." My hon. Friend was seeking to press the Chancellor of the Exchequer to take greater powers than he has already. Of course, there are occasions when a Minister or a Government may not want vague and undefined powers. They may want to be confined within principles approved by the House of Commons, so that if persons come forward with suggestions, they can say, "This is what the House of Commons approved, and I have no executive power to alter it." I appreciate, and my right hon. Friend the Chancellor who has given a great deal of attention to these schemes, and my hon. Friend the Financial Secretary, who has discussed individual schemes, I think, with some of those who have spoken, also appreciate that the simpler a scheme is the better. But in most public affairs, there is no absolutely perfect solution. There is no solution to which no objection can be taken. You can produce objections to everything in this life, and the question is "Which proposal, on balance, is open to the fewest objections?" I must call the Committee's attention to what the Amendment proposes to do. As the Bill is at present, I should have thought that these words were really the core of the proposal and the thing which, contrary to what has been suggested, got this Bill and the scheme in it, accepted as a practicable and fair scheme. The words are these:

"The said tax tables shall be constructed with a view to securing that, so far as possible—"
Let me pause there. It is not absolute. You cannot get any scheme which does not leave something over at the end of the year one way or the other, and these words "so far as possible" give a certain latitude within which you can move, and within which you may be able to simplify. I resume the quotation:
"the tax deductible… on the occasion of any payment."
shall, if I put the rest of it in my own words, meet the tax bill up to that date. That is the idea and the principle—that when every payment comes along, whether at the beginning, at the middle or the end, you will say, "What has this man had so far this year?" and the answer will be, say, "£420," then you will ask, "What tax has he paid?" and the answer will be "So much," and then you will ask, "If he keeps up that average what will he get for the whole year?" and the answer will be, say, "£500." A reference to the code number will show that that means so much tax, and it will then be possible to see how his tax can be squared up in respect of what he has earned in that year. That is the scheme, and the tables are to carry out that scheme. My right hon. Friend's view is that that is the scheme for which he desires the approval of Parliament. It is based on what we call the cumulative principle, and it has been discussed and considered. Of course it involves complexities, and other schemes which are not cumulative and which leave things to be adjusted at quarterly intervals or at the end of the year can be made simpler; but that is the scheme which led my right hon. Friend to introduce this Bill, and he believes, without in any wise minimising the work which will be put on employers and the extent of the burden of the co-operation which he is asking from them, that this scheme on cumulative lines, is that basis or proposal.

May I ask whether the right hon. and learned Gentleman's reply means that the Chancellor will definitely not consider any improvement in the procedure even though that improvement does not affect the cumulative tax principle.

No. I do not think my hon. Friend has followed what I said. I quoted the words of the Bill—though I shortened and rather popularised the effect of part of it—and those are the words which my hon. Friend the Member for North Battersea wants to take out of the Bill. I have pointed out that those are words which the Chancellor regards as the heart and kernel of the principle of his scheme, the principle for which he wants the authority and approval of the House of Commons. He is prepared to welcome any suggestions and criticisms of the actual tables in the White Paper when they are under consideration. My hon. Friend the Member for Scarborough (Mr. Spearman) supported the cumulative tax principle and said that if the principle in this Sub-section were the only principle, he did not suggest that the White Paper was impracticable. Of course it is a matter of opinion whether or not this is the only principle in the sense that anybody can think of other principles, but my right hon. Friend and the Government believe that this is the right principle and that, complicated as the matter is, it is essential that pay-as-you-go should be started on the cumulative principle.

All other schemes involve to a greater extent drawbacks and difficulties, either over-deductions or under-deductions. My hon. Friend the Member for Stone (Sir J. Lamb) said, and I rather agree with him, that, on the whole, people prefer over-deduction to under-deduction but of course it depends on the point of time to which you are directing your mind. It may be extremely inconvenient to have an over-deduction just at the time when the over-deduction is made. It might be just when you wanted the money for some other purpose. I quite agree, that when a demand comes in later on, in respect of an under-deduction there is acute pain. The pain which arises from an over-deduction is spread out more and the man concerned may not be conscious of it at all at the time. My right hon. Friend the Chancellor has heard the large part of this Debate and I wish to say on his behalf that he regards this Subsection as embodying the principle on which the Bill is based and must continue to be based. Within the principle laid down in that Subsection he will be glad of any help from hon. Members, or from accountants, in seeing that the tables by which the principle is carried out, are accurate and as simple within the reasonable limits of accuracy as is possible, But he cannot advise the Committee to accept the Amendment.

Would my right hon. and learned Friend say something about the possibility of getting more staff?

The question of shortage of staff is one which arises in many other connections and I dealt with it on the last occasion. I said then that my right hon. Friend had been in communication with the Ministry of Labour and National Service and that they desired to review their instructions to the district man-power board to ensure that special consideration would be given to any additional work which might be thrown on wages clerks as a result of these proposals. But I do not minimise the difficulty.

I have had a case brought to my notice in which a person who was employed by a local authority and who gave great satisfaction, being a very good calculator, was taken away by the Ministry from the local authority to work for an auctioneer.

May I ask the right hon. and learned Gentleman how he intends dealing with the reconciliation figure at the end of the year?

That does not seem to be a point about which one would, as it were, take up arms. I gather that under the scheme as it is at present it is carried forward and that seems to have a certain advantage in that you do not have to ask the man to produce 2s. 9d. or some such sum, or pay him 2s. 9d. as the case may be. I have no doubt that is something which the Revenue authorities would be prepared to discuss with employers and with my hon. Friends and others interested, and it does not seem to raise a great point of principle.

I had not intended to speak in this Debate because I felt sure that we should get a really convincing reply from the Attorney-General to all the points which were raised, but I do not think the right hon. and learned Gentleman has been as convincing as he usually is. He took his stand on principle, which is always a dangerous thing for a lawyer to do. I do not think that the Committee which has welcomed the general basis and general object of the Bill is really very concerned with the cumulative principle. I do not think the Committee are particularly concerned with meticulous accuracy of deduction and in any case the wage-earner is not concerned with it. The objection to assessment on the previous year's earnings was that there are very large variations in wages between one year and another. Much of that was put right by the modification introduced in last year's Finance Bill. The overwhelming argument in favour of pay-as-you-earn is the fact that sooner or later there will be a very large number of people who are now in industry going out of industry. In the post-war period of industrial adjustment there would be vast masses of tax which we could not collect and it would be impossible for the Board of Inland Revenue to decide who should be forgiven tax and who should not. It is problems of that kind rather than the question of meticulous accuracy or of some unimpugnable principle that we should be concerned with. We have to weigh whether a certain amount of accuracy is worth a certain amount of complexity, and I think simplicity and ease of understanding are worth a good deal of accuracy.

Since the learned Attorney-General has spoken one has become aware of the real reason why the Chancellor is wedded to what is called the cumulative principle. I think he or his advisers are unable to get out of their minds, during the period of deduction, the conception that this is a yearly tax on yearly income, and if he allows that thought continually to block his mind all through the year he is going to have a complicated system of deductions. I suggest to the right hon. Gentleman a let-out; he can still maintain the cumulative system provided he will not accumulate until the end of the year. I should also like to say that when I referred earlier to the suggestion that all allowances should be taken out of the tax collection system I did not mean to suggest that allowances should be abolished but that marriage allowances, children's allowances and similar allowances should be distributed by a machinery separate from that of Income Tax collection, so as to simplify the problem of Income Tax collection itself.

I find the reply of the Attorney-General singularly unconvincing. My Amendment did not ask for vague and indefinite powers to be placed in the hands of the Chancellor, because there would still have remained in this Sub-section the direction that the total of tax payable in respect of any emoluments for any year of assessment should be deducted from the emoluments paid during that year. That cardinal principle, which is the real essence of pay-as-you-earn, would have remained, and my Amendment would merely leave a certain degree of elasticity in carrying out that principle. Nor do I agree with the Attorney-General that the cumulative tax system as defined in the White Paper is essential to the principle of pay-as-you-earn, because it is not. That principle can be carried out in various ways. The real origin of this proposal is to be found in the numerous cases in which workmen were assessed upon the wages of the previous year, which were much higher than the wages they were drawing during the year in which they had to pay the tax. Consequently, they were paying a tax com- puted upon higher earnings out of lower earnings. In theory the man ought to have saved the money when he was earning it, but in practice nobody can expect that to be done, human nature being what it is, and so pay-as-you-earn was proposed to overcome that difficulty and to ensure as nearly as maybe that the tax was paid out of the earnings which had attracted the tax.

It is not essential in order to carry out that principle with tolerable justice to adopt the plan of recomputing the tax every week upon the total of the earnings up to the end of that week, and even, if you do that it is not true that by that means you avoid over-deductions, because whether there are over-deductions or not depends not only upon the facts up to that period of the year but upon things that will happen in the subsequent period of the year, because it is the accumulation of those things which determines whether there has at any point been what is called over-deduction or under-deduction. It would be easy to construct examples in which the scheme in the White Paper would result in very serious over-deductions. Example B in the White Paper is clearly one in which there are serious over-deductions. It will be seen that during weeks 29 to 36, a period of eight weeks, there are refunds to the taxpayer amounting to £5 19s., which means in effect that there has been over-deduction. One could construct more extreme cases. The White Paper of 1942, which was directed to showing that this thing could not be done at all, contains an example in paragraph 32. If that example were reversed, so that the higher wages were in the first weeks of the year and the lower, or nil, wages in the last weeks, the result of applying the present proposals would be over-deductions of a startling amount—£6 5s. in the first six weeks, £12 5s. in the first 16 weeks, and even after 26 weeks there would be over-deductions amounting to £12 7s. Therefore, I entirely deny that the White Paper scheme prevents over-deductions. It merely produces a provisional adjustment at the end of each week which may be undone at the end of the following week.

The plan which I offered in all seriousness to the Chancellor of the Exchequer obtains a provisional adjustment as quickly as may be necessary. It gives an adjustment every week, which is obtained by the use of one single table upon one sheet of paper, which the pay clerk can keep in front of him and read from without having to turn over as many pages as there are in the telephone directory, as under this scheme, with all the liability to read off the wrong figures owing to the complicated way in which the tables are constructed. With the single table the pay clerk can ensure provisional adjustment every week, and in the case where wages fluctuate between the no tax point and the reduced rate of tax can produce a cumulative adjustment every week just as accurately as does the scheme of the Chancellor of the Exchequer. Where the wages fluctuate very widely there may be a slight over - deduction but that would occur only where the wages are relatively high and such over-deduction would not be a serious detriment to anybody. The refund could be made at the end of the quarter, or, if preferred, at the end of four weeks, and even if done at the end of four weeks it would not involve half the labour of the scheme the Chancellor has proposed. In any case we should be dealing with a range of wages where the slight over-deduction was no hardship, because even if the man had no reliefs at all he would have to have £3 10s. 5d. before any need of adjustment at all arose, except for fractional errors owing to the construction of the tables. In the case of a man entitled to reliefs of £80 the amount before any adjustment became necessary would be £5 4s. 7d.; and so on for higher reliefs.

I say once more to the Chancellor that he is asking employers, at a time when labour is scarce, to do something which it will be extremely difficult for them to do, because—I want this point to be noted—this work has to be done within a very short time, within a day or possibly within a few hours, or otherwise the principle of deducting the tax in the week in which the money was earned disappears. In works where there is piece work and overtime it takes days, in some cases, to calculate wages. The payment of wages has been accelerated in response to requests by the Government that pay days should not come at the end of the week, and the amount of additional work which will have to be crowded into a short space of time will upset the balance of things. Further, I would remind the Committee that if Parliament at any time alters the standard rate of tax, the reduced rate of tax or the point at which the reduced rate of tax operates, every one of these tables will have to be scrapped. They will have become waste paper and all the processes of calculation for producing another set of tables will have to be gone through again. The whole thing is extremely wasteful and uneconomic, and the result could have been achieved just as easily by means of a handful of tables which anybody could have manipulated without any trouble.

Amendment negatived.

Motion made and Question proposed, "That the Clause stand part of the Bill."

I made an inquiry at some works with which I have contact and where 2,000 men are employed. At a conservative estimate, the cost to the firm will be not less than £10 per week in man-hours and clerks' time, to make the investigations and the arrangements for collecting the revenue and it will cost about £500 a year. Among 95 per cent. of the men employed the whole system is popular. I would like to remind the Chancellor of the Exchequer of this matter, and I cannot do better than read a letter on the subject which was sent to me when I was making the inquiry. It is as follows:

"In the works, we pay on Friday for the week ending the preceding Wednesday, that is to say, we have two days in which to do all our calculations. It will be quite out of the question for us to make the tax calculations in time to pay on Friday. Our case is in no way exceptional and either we shall have to get the men to agree to a longer interval between making up and paying, or the Revenue will have to postpone tax collections by one week. The second alternative would create a number of administrative difficulties for the Revenue, but something will have to be done to give the employer more time to calculate deductions."
I am fairly sure that employers of large numbers of men will need a lot of consideration and some assistance in the work that they are to do.

I am surprised at what has been said about employers collecting taxes for the State. One of the first things that the State did to compel employers to collect taxes was to adopt the National Health Insurance system. Employers have been collecting taxes for the State under most of our schemes of social security, and in shops the employer is now collecting Purchase Tax for the State, so I do not see that the employers need to complain. After all, what is £10 a week for a man who employs 2,000 people?

Let me see how it works out. Suppose the average wage is £4 a week, that is £8,000 per week in wages, while the cost to the employer is only £10. The hon. and gallant Member should not complain at such a paltry sum.

I am not complaining. I never do complain. I am only saying that there is a case for consideration, no more.

Is not the hon. and gallant Member aware that industry does not resent the extra expenditure which will be incurred?

I never thought I should find two Conservative Members of Parliament quarrelling like that. I speak with very slight knowledge of deducting taxes on behalf of the State, but if the employers did not collect this money for the State, they would be taxed more than at present in order to pay the salaries of people employed by the State to do the job. We call upon the employers to collect the tax for the State, and I would not be a bit surprised if the employer who is spending £10 a week is not getting the work of collection done for one-tenth of the charge which the State would incur in paying a civil servant to do the job.

Will the hon. Gentleman support the release of civil servants to do this job for the employers? The employer does not object to collecting tax. He only says that it is impossible to do it with the staff he has.

This division in the Tory Party is interesting. I have seldom come across such an exhibition before. I have always known that on this side of the House there were slight differences of opinion but I never heard such a noise about such a trifle for a long time. [Interruption.] I hope the hon. Member will allow me to make my own speech, as I am a nervous person.

The hon. Gentleman has been getting far from the subject. There is nothing in this Clause which enables him to discuss whether he is a nervous person or not.

I was coming to the Clause itself, the first paragraph of which says:

"The Commissioners of Inland Revenue shall make Regulations with respect to…recovery of Income Tax in respect of emoluments."
What is the meaning of the word "emolument"? There is a tendency in this House to assume that the income of the worker is always based upon wages. What about the shops of this country?

I am sorry, but we have already had a very long discussion upon emoluments, and to discuss it now would be to go much too wide.

I did not intend to do it now, except to ask the hon. and gallant Member a question. When the employer deducts the tax from wages, emoluments or bonus, when will the Treasury be able to send to the employer a statement of how he is to deduct? Will the Treasury consult the employer as to the Regulations to be issued? It is not very easy to understand what the Income Tax collector may tell the employer. Hon. Members may think that wages are all paid once a week, but what about the man who is paid a monthly salary, which goes straight into a banking account? He never sees the money. What method do the Treasury intend to employ for the man who will never know what deductions are made from his salary? When wages are paid weekly, will notice of deduction be sent to the employer to correspond with the date when this method is first introduced? If full wages are to be paid for two, three, five or perhaps 10 weeks and then the arrangement for deduction is to come against one week's wages, a man may go home on that occasion with no wages to give his wife. I am sure that it is not intended by the Treasury, but I would like to know whether the Treasury intend to consult employers of labour before they draft their Regulations. I want them to be good enough to consult all the categories of employers about the different methods employed by those categories in paying wages. Hon. Members may think that wages are all constant, but that is not so. Where you have piece rates in operation, especially in coalmining and textiles, wages differ in accordance with the tonnage or yardage produced. Will the Regulations take note of the difference in method in arriving at the wages that are paid? I pity the Treasury. How are they to arrive at the tax to be paid in cases where wages are calculated by fractions and decimal points?

We have had a fairly long discussion on wages before, and all these points have been put many times. I think the Committee will agree that we cannot carry on discussing matters of this kind over and over again.

I am coming to a conclusion and was about to sit down when I was called to Order. All I wish is to put the two points again as definitely and clearly as I can. First, whether the employers who pay wages will be consulted before the Regulations are issued by the Treasury; and, secondly, whether there will be a denial in the deduction of taxation simply because the Treasury may not be ready in time to impose the taxation, through the employers, on the wages.

May I reply quite briefly to the hon. Member? He asked whether the Treasury, and by that I take it he means in this case the Board of Inland Revenue, will consult employers. The answer is that they are consulting the employers on these matters, they have been consulting them for some time, and they will continue to consult employers between now and the time when this new legislation takes effect. The bon. Member may be well assured that we will take into account very fully not only what employers tell us but also the representatives of the various trade unions. On the second point, I can assure him that there will be no question of a lag. The new system of taxation will come into effect during the first week of the new financial year, and I hope therefore that the hon. Member's anxiety will be set at rest.

Question, "That the Clause stand part of the Bill," put, and agreed to.