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Orders Of The Day

Volume 393: debated on Tuesday 2 November 1943

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Wage-Earners' Income Tax Bill

Order for Third Reading read.

Motion made, and Question proposed, "That the Bill be now read the Third time."

I beg to move, to leave out from the word "be" to the end of the Question, and to add instead thereof:

"re-committed to a Committee of the Whole House in respect of the Amendments 'the New Clause (Interpretation) and the New Schedule (Conditions as to Emoluments and Pensions)' standing on the Order Paper in the name of the Chancellor of the Exchequer."
The House will recall that when this matter was debated the week before last, I gave an assurance that I would give careful consideration to the possibility of extending pay-as-you-earn throughout the whole range of Schedule E incomes. I have given, in the interval, very careful consideration to that question, and I have found not unexpectedly that a fresh problem emerges and gains importance as we mount the income scale. That fresh problem arises from the possibility of an adjustment between profits which are assessed under Schedule D and income which is assessed under Schedule E. Such adjustment, which would be quite practicable and quite lawful in a variety of cases, if no special safeguard were applied, might result in the loss of considerable sums of revenue. I will give an illustration in a moment which I hope will make quite clear just how this difficulty arises, but I may first, with advantage, make a few general observations. The first is this, that the possibility of what I may call a tax evading or avoiding adjustment increases in proportion as there is identity of interest between the proprietor of an undertaking and those employed in connection with the undertaking. An extreme case is, perhaps, the case of the one-man business, and I will take that case for purposes of illustration, and I hope to be able to make the matter perfectly clear.

Let us assume a business in which the managing director, being himself the principal proprietor, normally receives £2,000 a year as dividend from his investments and another £2,000 a year as remuneration. In regard to the dividend on investment, he pays tax on the basis of the previous year. At present, in regard to his remuneration he also pays tax on the basis of the previous year. When we pass to pay-as-you-earn, his position, so far as investment income is concerned, remains the same, but in regard to the remuneration under Schedule E, he will be taxed on the current year. Suppose that in respect of the particular financial year now current, the management of the business and the managing director agree between themselves—they being in fact identical—that for this year there shall be no distribution of dividends but that the remuneration of the managing director shall be increased from £2,000 to £4,000. In respect of the reduction of dividends, the Exchequer loses tax on £2,000. In respect of the personal income of the managing director, the Exchequer does not make a corresponding gain, because as a result of the transition, under pay-as-you-earn, from the previous year's assessment to the current year's assessment, the assessment for this financial year, if the transition takes place at the beginning of the next income year, will result in a Schedule E income for this financial year never being brought into assessment at all, either for Income Tax or for Super Tax. I hope I have made the position clear.

Supposing the managing director is paid on a weekly basis, what will happen?

If my hon. Friend will forgive me, that is a very special case, which should not be brought up for the purpose of obscuring the argument I am putting. I am dealing with the general aspect of this question in connection with a Motion for the recommittal of the Bill, leading up to my reasons for recommitting the Bill, for the purpose of considering the Amendments on the Paper. I am perfectly prepared to deal with the case of the high income person who is paid on a weekly basis, but that is different.

Surely it is perfectly simple to overcome that case in exactly the same way as the same kind of transaction was overcome in connection with the Excess Profits Tax. In the Finance Bill of 1941 a provision was inserted—slightly amended on my representations—to the effect that if the main purpose of any transaction was the avoidance of tax, the transaction was wiped out. A similar provision would completely meet this case.

I do not know why the hon. Gentleman interrupts me at this stage before I have completed what I have to say. I have not taken up the time of the House unduly; I am aware of the device to which he has referred, and I shall have to say something in a moment, which is relevant to that point. I gave an illustration explaining how the perfectly lawful avoidance of tax would be facilitated by this. The customary safeguard would not apply, I only want to add this to what I was saying. The average range over which such adjustments would be possible would, in practice, probably be very considerable, because not only are one man businesses directly involved, but any concern in which members of the proprietor's family are employed, might also resort to such adjustments for the purpose of escaping part of the very heavy burden of taxation. May I point out that the amount of income which would escape tax might, in certain cases, be on the top level of the Super-Tax scale where the accumulated rate of tax would be no less than 19s. 6d. in the £. Therefore, I think it must be clear that, if this plan is to be extended over the whole range of Schedule E, some suitable safeguard should be and must be applied.

As to the form of safeguard, I have gone into that matter as best I could with my advisers, and I think the question of the best safeguard is one which this House would very reasonably wish to debate. I am advised—I hope the hon. Gentleman who interrupted will give his attention to this—that the only safeguard which would be fully effective would be to levy a supplementary assessment on any increase of remuneration in respect of the current financial year. That supplementary assessment would, if it were done in that way, cover not only special additions arranged for the purpose of avoiding taxation but additions which in fact would have been made in the ordinary course. The difficulty which arises—and on this the Inland Revenue Department have much experience—in applying any such remedy or safeguard is, as the hon. Gentleman the Member for South Croydon (Sir H. Williams) has suggested, that it introduces the element of motive and that is exceedingly difficult from a practical point of view. I am bound, therefore, to say quite frankly to the House, that the advice I have had is that the only really effective safeguard would be one of the kind which I have described.

In the ordinary course it would have been possible to put down the necessary Amendments in connection with this Bill, with the Resolution that would be required, and the whole matter fully debated. I should have no objection to that course, but there are exigencies of Parliamentary time, and there is, I believe, a real danger that the Bill might be lost if we took that course now. I have an alternative suggestion to make. As I explained in the last speech I made on this subject, there will have to be in the next Finance Bill various provisions dealing with the transition from one class of Income Tax payers to another in connection with these Lend-Lease proposals—I apologise for some slight confusion—these pay-as-you-earn proposals, and I propose that I should now give the House an assurance that I will include either in the next Finance Bill or in a special Finance Bill a provision for extending pay, as-you-earn, as the House would obviously desire, to the whole range of Schedule E taxpayers, with the appropriate safeguards, which the House will be in a position to debate. The arrangement I propose will make no practical difference, if the House sees fit to pass the next Finance Bill in which these provisions will be included, to the date at which the benefit of pay-as-you-earn is given to the taxpayers who are not included in the Bill as it stands, with the Amendments on the Paper, because it can perfectly well be arranged that the change in the cases not now covered should take effect from the same date, the beginning of the next Income Tax year. The Inland Revenue authorities would have no difficulty in making their arrangements in that connection on the footing that the plan is expected to extend over the whole range.

I hope the House will agree that that is not an unreasonable suggestion, that it is a business-like course, that it will enable us to consider at reasonable leisure the extension of the plan throughout the range, and at the same time the safeguards or remedies which have to be applied. For that reason I am proposing that the Bill should now be recommitted for the consideration of the Amendments which were on the Paper in my name on the last occasion. There are one or two things I must add in order to make what I propose perfectly clear. I propose that the Bill to be passed now should extend Lend-Lease—these formula: are very confusing—should extend pay-as-you-earn not only to wage-earners, manual and non-manual, but also to salaried workers up to the £600 limit, and I do not think there is any reason why the special remedies that I am suggesting should apply below the £600 limit. It would be quite impossible to apply any remedy or any safeguard in the case of the wage-earner whose receipts vary from week to week, and I do not think that the risks of collusive evasion below the salary limit of £600 are sufficiently great to require special action. I suppose it would be possible when the Finance Bill comes before the House to include additional safeguards if it were thought necessary, but I do not at present think it will be necessary to deal with more than the new classes that are to be brought in by the extension above £600 a year.

A word as to the position of the Civil Service and certain salaried employees of railways who at present pay-as-they-go on the basis of the previous year's assessment. In those cases there will be no tax discharge, as is, I think, already understood by the House, and therefore I do not propose that the special safeguards that I suggest should extend to those cases. I only say that not because the House is being asked to commit itself now, but in order to make the provisional view I at present hold perfectly clear.

Would that not also apply to persons who have come into a new employment and were therefore assessed under the present Regulations actually on the earnings for the year? When persons take over a new employment they are assessed in that year on that year, even though they may pay in arrears next year.

That is true. They pay twice on the same income. I think I am right in saying that it is not particularly relevant to the points I have been putting, but I think that will be covered by the transitional provisions which will be included in the next Finance Bill. For the reasons I have given I hope the House will be willing to agree to the recommittal of the Bill for the consideration of the Amendments.

My first words—and I imagine this would be the wish of the House as a whole—will be to thank the Chancellor of the Exchequer for listening to the expressed desires of the House and meeting us so substantially. I should like to set out the position as I see it. The original request to the late Chancellor was that manual wage-earners should pay on the principle of pay-as-you-earn. When Sir Kingsley Wood set out to carry that into effect he found it desirable to include in the Bill before us not only the manual wage-earners but certain other people paid on a weekly basis who were in a very similar position. That is how far the matter was carried in the text of this Bill. When he opened the Debate on the Second Reading the present Chancellor was already aware that there was a desire to extend the principle further, and he announced, before there had been any Debate, that he was prepared to extend the principle to all persons under Schedule E in receipt of under £600 a year. The Debates on the Bill showed unmistakably that Members thought that all persons under Schedule E should be included. The Chancellor has examined that proposal and, as I understand him, has accepted the principle completely, with one, not reservation exactly, but what he called safeguard. He is giving an assurance that the whole of the Schedule E taxpayers will be included in pay-as-you-earn. He has not seen fit to introduce that extension by Amendments actually before us, and there may be some people who have not entirely gathered from his statement that by the inclusion of those taxpayers in the next Finance Bill, or in a Finance Bill specially designed for the purpose, all classes of Schedule E payers will be simultaneously affected by these provisions—that is, those who are affected by this Bill, those who will be affected by the Amendments which are to be incorporated in it, and all who will be brought in by the new proposals which the Chancellor has pledged himself to bring about early next year.

It may be asked why, if the whole thing could have been carried through in next year's Finance Bill, it has been necessary to introduce this Bill. I understand the answer to be that in order to enable the Inland Revenue authorities to get forward with the elaborate tables and other preparations required for implementing the provisions of the Bill so far as weekly wage-earners are concerned, it was desirable to get the approval of the House at this early stage. The extension of the principle to the whole of Schedule E taxpayers can be carried out in a Bill some time in the spring of next year, and they will therefore get the benefits of the proposal precisely at the same time and in the same way as those who are included in the present Bill or in the Amendments the Chancellor will move.

Our thanks are due to the Chancellor for having met the wishes of the House and, as far as I understand, having met them completely. Having said that, I come to the question of safeguards. Let me first say something regarding a matter raised by the Chancellor at the end of his speech. He said that he did not contemplate introducing these safeguards for persons whose incomes under Schedule E were under £600 a year, but he said that it might be possible to alter the Bill when it was introduced so that something with regard to safeguards could be done. I do not think we ought to put too Much on to that remark of the Chancellor's, because I want to point out that the House certainly could not move to bring them in, because that would be a case of the private Member imposing taxation, which of course he cannot do. Therefore, only the Chancellor of the Exchequer or the Government could bring in a proposal with regard to safeguarding. I understand that it is the intention of the Government to confine this matter to persons of over £600. The man under £600 need not be under any misapprehension that, by some action of this House, the Bill will be extended to bring him into the new proposal.

The Chancellor of the Exchequer does not ask us to pronounce specifically on the particular safeguards that he intends to employ. I understand that they will involve the result that the over £600's do not get the full remission of the intermediate portion of tax, in the event of their salary increasing in the course of the two years, but, generally speaking, the failure to remit will be on a very small scale, unless there is an attempt to evade taxation. I do not think we ought to cavil at the safeguards just announced, and I shall have no hesitation in supporting this Motion.

A point I ought to have made clear in my speech in relation to the extension to cover Schedule E taxpayers is that it will not extend to members of the Armed Forces, as it would be quite impracticable to make the necessary arrangements.

I accept the Chancellor's explanation, and I amend what I may have said on that subject.

I was glad to hear the statement made by the Chancellor of the Exchequer, but I want to make a complaint. The Amendments in the Chancellor's name were not circulated to hon. Members until Friday. Having regard to their nature, they ought to have been available while the House was in session so that hon. Members were in a position to table Amendments and have them printed to-day. I sent Amendments to leave out the reference to £600, but they do not appear. I make the protests that when this procedure is adopted hon. Members should be given ample opportunity to indicate whether they differ from the proposals of His Majesty's Government. The whole thing could have been done to-day, and I am not in the least impressed with the difficulties. The Department have had a fortnight's notice. I regard this as face-saving by people who made a mistake and have not been willing to own up.

In regard to embodying these matters in the next Finance Bill, that will not be good enough. It will be the ordinary Finance Bill after 5th April, but this scheme is to come into operation on 5th April, and we do not want people in a position of uncertainty. We ought to have an assurance that the necessary Finance Bill containing the safeguards will be introduced so that it may receive the Royal Assent before 5th April. I hope it will have its Title so drawn that we shall be able to amend the provisions of the Bill we are now considering. I hope we shall have satisfactory assurances. If the Government had not been so stiff-necked a week ago, we should have been able to pass the thing properly, but they were obstinate. The sooner the Chancellor realises that he will be more successful as Chancellor of the Exchequer if he is less obstinate, the better. One of the reasons why the late Chancellor was successful was that he had a quick nose for public opinion. It is a great danger to have Ministers who have not been trained on the hustings, and we have too many of them decorating the Government Front Bench.

I have no desire to echo the lecture to which we have just listened, but I want to echo the words of the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) in expressing appreciation of the way in which the Chancellor of the Exchequer has bowed to the wishes of the House. If we are to avoid imposing unreasonable safeguards on innocent people in our desire to impose them on assumed guilty people, we need time to consider the safeguards which the right hon. Gentleman has in mind. I hope that we shall endeavour to avoid people deriving benefit from the extension which they would not be entitled to receive, particularly those accustomed to receive annual increments. There will be great difficulties in dealing with the variety of Schedule E payers. Some are to be given seven months, while others, such as temporary civil servants, are to be deprived of the chance to even up by getting a tax holiday. I hope there will be an opportunity later to deal with transitional cases over £600 a year as well as under £600 a year. We are told that all Schedule E payers are to start from the same date, and naturally we rely upon the assurance given by the Chancellor of the Exchequer. I am sure that the approach of the Chancellor of the Exchequer to this matter will give widespread satisfaction.

I join with those who have praised the Chan- cellor of the Exchequer, but I would ask him to deal with the anomalous position of State servants. I understand that he is not proposing to touch that issue. If we acquiesce in the Motion, we shall be deprived in Committee of an opportunity of discussing the matter. I shall be glad of guidance if I am wrong, but as I understand the position this Motion, if carried, means that the only Amendments we can discuss in Committee will be those that the Chancellor has put on the Paper, and none of those Amendments have the effect, which I and other Members desire, of giving a particular kind of treatment to State servants. Therefore we are put in this position: We could not put down Amendments ourselves to-day because until five minutes ago we did not know whether the Chancellor would meet the point or not. If he had met it, any Amendment on the Order Paper would have been superfluous. It is only now that we know he does not intend to agree, and it seems to me that if we pass this Motion, we are deprived of an opportunity of discussing the matter. Would it be in Order for me, Mr. Speaker, at this stage to comment on the merits of the case of Crown servants in the hope that even now, before this Motion goes through, I might induce a change of heart on the part of the Chancellor? If that is not in Order, perhaps you would be good enough, Sir, to advise me at what further stage of our proceedings there will be an opportunity of raising and discussing this issue, which affects nearly 750,000 people.

I think the hon. Member starts on a false assumption. He assumes that nothing can be discussed but the Amendments which are down in the name of the Chancellor of the Exchequer. Surely it is open to the hon. Member to move a manuscript Amendment on the Motion for recommittal.

Would it be in Order to move to add to the wording of the Chancellor of the Exchequer's Motion which appears on the Order Paper:

"and to consider also the position of Crown servants under the Bill as it stands"?

That would not be an actual Amendment to the Bill. I could not accept an Amendment of that kind.

Would it be in Order to move to add to the wording of the Chancellor's Motion:

"and such other Amendments as Members of this House in the exercise of their sovereign discretion may suggest"?

The hon. Member has, I confess, rather puzzled me. The normal way in which to move an Amendment is like that on the Order Paper:

"and in respect of the Amendments standing in the name of Mr. Douglas."
I should have thought in an Amendment by the hon. Member stating:
"and in respect of the Amendment standing in the name of Mr. W. Brown"
would possibly be accepted.

Would it be in Order for the hon. Member to move to amend the Chancellor of the Exchequer's Motion by leaving out all the words after "House" in the first line?

Hardly. That would really mean going back into the whole Committee stage again. I do not think I could accept an Amendment of that kind.

Should I be right in assuming that I would have an opportunity on the Motion that Clause 3 should stand part or on the formal putting of the Motion for Third Reading on the Report stage?

Whether the subject which the hon. Member wishes to raise will be in Order on the Clause is really not for me to say. As to whether it would be in Order on the Third Reading, I would say not, as it is not in the Bill. The hon. Member could move an Amendment to the Clause on the Report stage, and in this way he might have an opportunity of raising the subject he wishes to raise on the Report stage.

I only wish to support what the right hon. Gentleman opposite said in thanking the Chancellor for acceding to our request and in recognising the great difficulties which make these safeguards necessary. In the Bill as it now stands, and as it is proposed to be amended, and also as it is proposed that it should be extended, there will inevitably be a great many differences in treatment. Some people will get off a great deal more tax than others. I do feel that the only way in which we can hope to get this great reform through is for each one to consider whether his own circumstances are to be tolerable under the provisions of the Bill and not whether or not someone is to get off more tax than himself. The second thing I wish to say is that while I do not fully agree with the tone of the observations of my hon. Friend the Member for South Croydon (Sir H. Williams), I did think that in his speech there was something of importance and substance. He urged that we should be able to debate the provisions of this Bill at some time before the close of this financial year. It is most important that we should do so, for since the Chancellor has now taken the plunge of agreeing in principle to extend the provisions of this Bill throughout the whole of Schedule E, I believe that the door has been opened to a wide range of simplications and modifications of Income Tax procedures, including the very procedure in this Bill. I believe that now we shall be able to take a new view, scrap the cumulative feature and substitute a much more simple system. I am prepared to give the Chancellor this Bill now in case the view I am putting forward now is wrong, but we ought now to have a chance of suggesting to him how to get rid of the very complicated provisions in the Bill itself.

As it was in response to a suggestion I made in the Committee stage that the Chancellor agreed to consider this matter, I wish to take this opportunity of associating myself with what has been said by the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) to-day. I agree with him most heartily that the House should be most grateful to the Chancellor for the way he has responded to the arguments put forward by Members on the Committee stage. I think back benchers should be grateful to him. We have before us in the next Session a lot of very complicated legislation, and it is a great encouragement to back benchers to take the trouble of trying to make the best contribution they can to the legislation of this House if they can feel that Ministers will act as the Chancellor has acted, listen to arguments put forward in the House, and try to amend the legislation where these arguments seem to deserve it, and not, as so often has happened in the past, come to the House with a pre-conceived idea and rely on the Whips rather than on argument in the House.

As there was on the Paper an Amendment in my name and in the names of some hon. Friends which had for its purpose the extension of this system to certain classes of salary earners, I desire to say that the assurance which has been given by my right hon. Friend the Chancellor meets the purpose which that Amendment had in view and which proved to be in accordance with the wishes of this House. There were two conditions which I think were essential if the wishes of this House were to be fully met. The first was that this system of pay-as-you-earn should be extended to all classes of Schedule E Income Tax payers without reference to the amount of their individual income. The second essential condition was that all classes of Schedule E Income Tax payers should be brought within this system at the same time. As I understand the assurance given by my right hon. Friend today, both these conditions will be met. Therefore it seems to me that the House ought not to quibble about the manner in which the Chancellor proposes to bring about that result. It is perhaps true, as the hon. Member for South Croydon (Sir H. Williams) said, that the Chancellor might have surmounted all these obstacles by a single impetuous bound. But that is not the way my right hon. Friend likes to act. He prefers to proceed more cautiously, step by step. Those of us who pressed this matter on him at the beginning ought not to be too critical of the way in which he proposes to meet our wishes. He has a great administrative responsibility in a matter of this nature, and certainly I myself, and I think those hon. Members who were associated with me in putting down the Amendment to the Bill in its original form, would not desire to criticise the way by which the result which he desired is to be brought about.

My hon. Friend the Member for Northampton (Mr. Summers) referred to that class of Schedule E taxpayer whose remuneration normally advances by periodical increments. I understood from what my right hon. Friend said that it would not be possible to separate that class of Income Tax payer from the class of Income Tax payer who could so adjust his remuneration from other sources as to bring it within pay-as-you-earn and within the scope of forgiveness of Tax which is an essential part of this system. It is possible that on further consideration these safeguards which the Chancellor proposes to introduce may be so designed that they will not extend to that perfectly innocent class of person who without any intention to avoid payment of Tax will in fact receive an increment which will not under the safeguard come within pay-as-you-earn. If it is possible to exclude that class of taxpayer from the safeguards which it is now proposed to introduce I hope that the Chancellor will see his way to do so.

I express to my right hon. Friend my thanks for the manner in which he has met us in this matter. I desire to associate myself with everything that has been said by the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) and to say further that it will, I am sure, be a matter of satisfaction to all those whose wishes have been made known through the action of the back benchers, to know that the Chancellor has been so willing to listen to their desires and to give effect to them.

I am much obliged to my hon. Friends for what they have said about my right hon. Friend the Chancellor. I will apologise to my hon. Friend the Member for South Croydon (Sir H. Williams) for the fact that the Amendments were not on the Paper earlier. I am sorry that that is so; but, in the circumstances in which we were working, it was difficult. Some of the points raised by my hon. and learned Friend the Member for Ilford (Mr. Hutchinson) and my hon. Friend the Member for Northampton (Mr. Summers) will be more appropriately dealt with on the Bill which is to be introduced subsequently. More than one Member has asked whether a Bill will be introduced before the Finance Bill. If it is necessary to introduce a Bill to implement the undertaking which the Chancellor of the Exchequer has given, such a Bill will, of course, be introduced.

Will it be possible on the introduction of that Bill to Debate again the provisions of this Bill?

Question, "That the words proposed to be left out stand part of the Question," put, and negatived.

Question proposed, "That the proposed words be there added."

I beg to move, in line 5, to add:

"and in respect of the Amendments standing in the name of Mr. Douglas."
If the Chancellor of the Exchequer is not going to resist this Amendment, I will not detain the House by arguing it.

Amendment agreed to.

Main Question, as amended, put, and agreed to.

Ordered,

"That the Bill be re-committed to a Committee of the whole House in respect of the Amendments, the New Clause (Interpretation) and the New Schedule (Conditions as to Emoluments and Pensions), standing on the Order Paper in the name of Mr. Chancellor of the Exchequer, and in respect of the Amendments standing in the name of Mr. Douglas."

Bill immediately considered in Committee.

[Major MILNER in the Chair.]

Clause 1—(Basis Of Charge And Method Of Collection Of Income Tax On Certain Emoluments)

Amendments made: In page r, line 29, leave out from "subsection," to the end of line 4, page 2, and insert:

(d) any emoluments arising from any employment if the person in receipt thereof satisfies, as respects the year 1943–44, the conditions as to emoluments specified in Part I of the Schedule (Conditions as to Emoluments and Pensions) to this Act;
(e) any pension, if the person in receipt thereof satisfies, as respects the year 1943–44, either the conditions as to emoluments specified in Part I or the conditions as to pensions specified in Part II of that Schedule."

In page 2, line 5, leave out from "being," to the end of line 9, and insert:

"pay, pensions or other emoluments payable in respect of service in or with the armed forces of the Crown."—[Sir J. Anderson.]

Clause, as amended, ordered to stand part of the Bill.

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

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.

Clause 3—(Transitional Provisions)

Amendments made:

In page 4, line 27, at the end, insert:

"other than emoluments of any class which, in relation to tax for the year 1942–43 was generally treated for the purposes of the regulations under Section eleven of the Finance (No. 2) Act, 1940, as a class of case where tax was deductible from emoluments otherwise than by virtue of those regulations."

In page 5, leave out lines 29 and 30, and insert:

"(6) Where a person enters an employment."

In line 33, leave out from "forty-four," to the end of line 34, and insert:

"and the wages and other emoluments arising to him from that employment are by virtue of paragraph (b) of sub-section (2) of Section one of this Act, but would not apart from that paragraph be, emoluments to which this Act applies, those wages and other emoluments shall be left out of account for the purposes of sub-section (3) of this Section."—[Sir J. Anderson.]

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

I wish to raise a matter which I think will affect some constituents of every Member in the Committee, and will in all touch the fortunes of some 750,000 people. I refer to servants of the Crown. When this Bill first came to the House, servants of the Crown were excluded from its scope, and it became my duty to urge that Crown servants should be brought within the scope of the Bill. The Chancellor of the Exchequer was good enough to agree to that, and I may say that whatever difficulties I shall shortly refer to, it is in my opinion sound in principle that State servants should be brought within the scheme. But if they are to be brought within the scheme, I think the State servants themselves are entitled to ask that the incidence of the scheme, as it affects them, shall not be more unjust than the treatment given to other categories of taxpayers. I propose to show, I think beyond any possibility of dispute, that the way this thing is to be applied to State servants is fantastically unjust, and that the Committee ought not to let the Bill leave the House without insisting upon very definite assurances that the complaints I shall outline will be dealt with.

I will take two main types of case. The first is the case of the individual who to-day is employed in private enterprise in commerce or industry, and who to-morrow comes into the public service, as a temporary clerk or officer, for the period of the war and perhaps for some time afterwards. In order to make the calculation easy, let us assume that the day he comes in is 5th April, 1943, or 1944. In outside industry he will have been paying up to this date one year behind, that is to say, he will be paying this year the tax that accrued on his income of last year. As soon as he comes into a Government Department he begins, from the very first months, to pay tax on his current earnings. So that, for the first 12 months in his employment in a Government Department, he is paying tax on two years' income within a single year. First he is paying this year's tax on salary earned last year, and then he is also paying this year's tax. (We have had this system of deduction at source for a long time in the public service.) I submit that this is a monstrous thing. It is wrong, unjust and unfair, and the Committee should not tolerate that a Crown servant should have to pay two years' Income Tax on one year's income. I am not alone in complaining about this. The Chancellor will probably be surprised to know how much discussion there is within his own Department, very vehement discussion, which the tender ears of the Chancellor had perhaps better not hear. This discussion is justified, for the position cannot be defended. I ask the Chancellor to meet that kind of case straight away, in a way I will shortly suggest.

When we first complained that it was monstrous to deduct two years' tax from one year's salary the Chancellor of that day said, "Well, it is pretty rough now, but after all, these temporary civil servants will go out into private enterprise again after the war and then they will have the accumulated reward of virtue, for they will, for a period after going out into the world again, be exempt from tax." That at least was some sort of reply. [Interruption.] That reply was given by the late Sir Kingsley Wood. But that reply cannot apply now, because from now onwards these men will be on the pay-as-you-go system, and when they go into the outside world again there will be no question of a period of exemption from taxation. They will have to go on paying, so that the justification advanced in this case at an earlier stage cannot now apply at all.

I now wish to raise the general question. It has been decided—and I am not quarreling about this at all—that when the wage-earner comes into this scheme he is given a 10 months' discharge of tax liability, in order to make it possible for him to come into the scheme. The salaried worker is to get a smaller but a substantial, discharge of seven months, in order to facilitate the changeover from one scheme to another in his case. I wish to impress on the Committee that for decades past civil servants have been paying on a pay-as-you-go basis. It is true that they have paid this year on last year's assessment, but they have been paying currently all the way through. In other words, the Chancellor of the Exchequer has been getting his tax from us months before it was due—months before it would have been due if we had been ordinary taxpayers in the outside world. The only justification he has had for that is that we have been to hand. We have been near by, and within his clutches. We have been servants of his, and he could get hold of us in a way that he could not get hold of a member of the outside public. For long years past we have been paying currently on our incomes. In other words, we have been paying months ahead of the outside community. The outside community get their demand notes six months after. If they pay promptly, they are six months behind civil servants. And they do not always pay promptly, as hon. Members know.

At best the civil servant has been six months ahead, and in many cases years ahead, of the outside taxpayer. That ought to have counted to him for merit, but what does the Chancellor say? He says, "Because you have been so good, because you have paid in advance, we shall not give you the seven months' rebate or the 10 months' rebate which we give to the outside world, to whom this scheme is applied for the first time." I submit that is monstrously ungenerous and unfair. Now the Chancellor may very well say that he has collected this money, and that however hard it is for him to forgive contingent moneys in the future, that is nothing to the hardship it would impose on a Chancellor to ask him to pay back money he has already got. I can very well understand that the Chancellor would entertain the strongest objection now to paying out seven or 10 months' acquired tax which he has wrongfully had, year after year, from the civil servants—wrongfully from the point of view of there being any justice about it. I do not intend to ask him to do that, because our present Chancellor is not merely Chancellor but is Scotch too.

What I urge is that there is a way out which will satisfy our sense of justice on this without at the same time involving him in paying out large sums of money from his acquired store. That way is to give the civil servant a credit—both the temporary who has come in for the period of the war, in respect of that double payment, and the ordinary civil servant in respect of the seven or 10 months' discharge. Give him a credit note which can be used, not now, but in the last year of his service with the State, so that he gets a corresponding rebate even though it is at the very end of his career and not now, as it is in the case of the outside wage-earner. I submit that if the Chancellor did that, it would satisfy our sense of justice on this matter, and it would not involve him in the immediate pouring out of public money. This proposal is such that I am astounded at my own modesty in making it. I understand that the Staff side of the National Whitley Council, which represents the organised civil servants, is sending a declaration either to the Chancellor or to the Financial Secretary in a few days' time.

I do not know whether we need an Amendment of this Measure to make what I have suggested possible. I believe it is possible without an amendment of the Act, because civil servants hold an exceptional position in regard to Income Tax legislation, as they are paid direct by the Crown. I hope that the Chancellor will do this, and that when that deputation comes to see him in a few days' time, he will not give them a stone when they ask for bread, he will not give them merely the soft answer which turns away wrath; but that he will give that just and generous answer which is the mark of all great souls, among whom I include my right hon. Friend.

The hon. Member for Rugby (Mr. W. Brown), in his delightful speech, has brought forward a case which he believes to be very strong. My point is rather different, but my case is even stronger. The hon. Member has been arguing that people who receive the same income in 1943–44 should be liable to the same treatment, even though they are in different kinds of employment. My argument is that we must be absolutely certain that people who have earned the same amounts in 1943–44 in similar kinds of employment receive the same taxation treatment. As it is, this Clause lays down that the taxation of two people in virtually identical circumstances may differ radically, according to the dates of their death. May I give a practical example? Let us take two individuals, whom we will call Bill and Tom. I had thought for a moment, in order to bring it home to the Government, that I would call them John and Ralph, but I will not do that, because my story postulates the early death of both of them.

Both are in similar employment. Their earnings in 1943–44 would make them liable to tax of about £120 for the year. That would be deducted at the rate of about £10 per month in the last two months of the year, February and March, 1944. Bill, however, dies on about 7th April, 1944, and, benefiting from lines 7 to 15 on page 5 of this Bill, his widow or dependant will be free from any further tax liability. The £20 will have been paid, and the remaining £100 will be discharged. Tom is not so fortunate. He dies a week earlier, just at the end of the current Income Tax year, when he has had all his earnings but, unfortunately, has not lived beyond the critical date of 5th April, and so has no advantage to accrue to him from the terms of this Clause. In fact, therefore, while he, too, will have had £20 deducted from his earnings, his widow will be faced with a demand for no less than £100 on account of tax arrears. It seems to me indefensible that two peoples, whose cases are in no way different except for the chance dates of their death, will have to pay in the one case £20 and in the other £120—six times as much—in Income Tax for 1943–44. I am fortified by a phrase which the Chancellor used on an earlier occasion, when he said:
"Taxpayers are inclined to look very closely at the treatment meted out to other taxpayers, and a feeling of injustice, which is bad from every point of view, can very easily be engendered if hasty action is taken without carefully considering all the possible implications."—[OFFICIAL REPORT, 20th October, 1943; col. 1450, Vol. 392.]
Of course, I realise that the Chancellor could not hastily at this stage amend this Bill to correct the anomaly I have mentioned, but I hope I have established to the satisfaction of the Committee that injustice arises here. I hope that the Chancellor will be able to give an assurance that this can be treated as one of the points remaining open for further examination, with all the other transitional points which he has said will have to be settled up in the later Bill which is promised to us.

I would like to emphasise the importance, which has been mentioned by my hon. Friend, of clearing up the position of the burden on widows. I would like to mention a case. I do not know the man, but I knew of him; he was employed by a company with which I have some connection. He made rapid progress, and at the time of his death he was receiving a salary of £1,250 per annum. In the last years of his life he had a series of illnesses and expensive operations, and he left only £960, but the widow had to find £380 for Income Tax. This is a more serious matter than Death Duties—the widow was, in fact, owing about 18 months' tax. Although the position has improved, as I understand, by the proviso to which my hon. Friend has referred, I hope that something further will be done, and that the Chancellor will take note of what my hon. Friend has said. I imagine that this Bill, as it contains such a variety of administrative provisions, cannot be certified as a Finance Bill so far as another place is concerned. Mr. Speaker has to decide whether there shall be a certificate, but if there is none some parts of the Bill may be susceptible to alteration in another place, and perhaps my right hon. Friend will bear these points in mind then.

I am much impressed by what was said by my hon. Friend the Member for Rugby (Mr. W. Brown). Perhaps I might quote my own case. In January, 1928, I went to the Board of Trade as Parliamentary Secretary. I had at home one of those interesting documents asking me to make certain payments to the collector of taxes. I had not in fact made the payment by 15th January. Two days later the first official interview which I had, after meeting the head of my Department, was with a gentleman calling himself the assessor of taxes, who wanted to know all about my private affairs. On 31st January I had a payment made to my bank. From that they deducted my Income Tax, so I was in the unhappy position of being taxed on the employment I had left and on the employment I had entered under His Majesty. The effect of becoming a junior Minister was that my income was reduced anyhow; and, altogether, I had a rather unhappy time in that position. I notice that the present holder of that position is in his place; I do not know how he has got on there. In May, 1929, the Prime Minister of the day decided to resign, and I automatically got the sack with him. I went back to my old job. Before long I had a communication from my previous collector of taxes. He said, "I shall have to raise an assessment on you." I said, "What are you going to assess me?" He said, "You will have to guess what you will earn, and we shall have to make some adjustment later, if necessary." So I never escaped. I paid twice in one year, and did not get out of paying anything in the other. The Chancellor seems somewhat perturbed at that, but he is not nearly so perturbed as I was. I have tried to see some way in which I can help myself over this Bill, but I cannot see any. However, I am not a jealous person, and because I am a Schedule D man I do not feel that those coming under Schedule E ought not to have a measure of justice. I hope, however, that my right hon. Friend will see what he can do to meet the point put by my hon. Friend the Member for Rugby and my hon. Friend the Member for West Lewisham (Mr. Brooke).

My hon. Friend the Member for Rugby (Mr. W. Brown) made an eloquent plea on behalf of the Civil Service. I would like to begin by assuring him that my general attitude towards the Civil Service is no less sympathetic than his, although I occupy for the moment a position of greater detachment. My hon. Friend put forward his plea under two heads. He dealt first with the case of over-lapping payments. This point was also made by my hon. Friend the Member for South Croydon (Sir H. Williams). It is true that when a person who has been taxed on the basis of the previous year comes into the Civil Service, as a great many public-spirited people have done for purposes connected with the war, there is for the time an overlapping of payments. There is an obligation to pay the overlap of tax, if it was on Schedule E, for seven months after the beginning of the Income Tax year in respect of the previous occupation or employment, and there is the current obligation to pay tax as a civil servant. I have no doubt that those who have felt a sense of injustice on that score have in many cases been comforted by the assurance that there was a good time coming when they would have, on their reversion from the Civil Service to outside employment, a corresponding tax holiday, We are doing away with that tax holiday so far as Schedule E taxpayers are concerned by introducing pay-as-you-earn. I am perfectly ready to promise between now and the Finance Bill, when we shall be dealing with transitional problems, special consideration of that particular trouble.

Will that cover the case of railway salaried officers as well?

It should be taken that when I speak of civil servants I include those who by this Bill are treated on the same footing, salaried railway servants, and, may I say, Ministers of the Crown—my hon. Friend will realise the difficult position that puts me in. Let me come to the second proposition that my hon. Friend advanced with such sweet reasonableness. He said, in effect, "Inasmuch as you are giving as part of this plan of pay-as-you-earn, a remission, or a discharge, of tax for seven months or ten months, as the case may be, you ought surely, in equity, in order to avoid an unnecessary sense of grievance, to give a similar discharge to the civil servant." He very kindly suggested a method by which he thought that that process could be made less painful to a Chancellor of the Exchequer. Let us look at this thing on merits. Civil servants have been on the system of pay-as-you-go, if not precisely pay-as-you-earn, from the beginning of time. The hon. Member tried, not perhaps with his usual success, to make a grievance of that, because really pay-as-you-go is what civil servants under his guidance are asking now. They want pay-as-you-go made one better, that is, converted into pay-as-you-earn. When they are asking for that, it is rather difficult for them to make of the fact that they have been half-way there from the ginning of time a grievance seeking for special remedy.

I did not make a grievance of that, but that it was not the same for everybody. It is not an absolute grievance.

The whole of the grievance as I understand it is one of relativity, that other people are being treated better. It is not very easy, as I think he must have felt, to build on that particular feature, seeing the position that civil servants occupy in relation to this business. My predecessor did not propose to include them. I included them as an Amendment to the Bill as drafted. Why? Because, rather to my surprise, the civil servants came along in deputation and said that they wanted it. I did not at first understand that, because in the case of many of them with rising rates of remuneration the effect of this Bill, by substituting the current year for the previous year, may make a lot of civil servants pay more tax. Then I was told that there are all the people who are earning large sums for overtime and that when conditions became normal and overtime ceased, those people would benefit by being on the current year's assessment. Then there were all the people who during the war, because of the expansion of the public services, have been holding acting appointments. Some of them may expect in the ordinary course to revert. They will benefit at that time if they are now brought in. For those reasons the civil servants, through their organisations, asked not only that the scheme be extended to them on the footing originally contemplated, that is, for manual wage-earners and non-manual wage-earners and then civil servants up to £600 a year, but over the whole range of Crown servants without limit of remuneration. It was at their request. It was made clear to them at the time that in their case, as there was no question of overlapping payment, there should be no discharge. That was made clear, and nevertheless they ask to be brought under this scheme.

What are the merits of the proposal that civil servants should be given a discharge? I made it perfectly clear in my speech on the Second Reading that discharge of tax was a feature of this scheme which was not advocated for its own sake. It was included in the scheme because it was an essential condition of securing the introduction of what was regarded as a superior method of assessing and collecting taxation under Schedule E; its object was to ensure that there should be no overlapping payments. It was in order to get rid of these overlapping payments resulting from the introduction of pay-as-you-earn that discharge of tax was included as a feature of the scheme.

I must hold firmly to the principle that discharge could only be conceded where there is an element of overlapping. If I were to give way to a plea which can be put forward in a way that excites sympathy, that we ought to try and treat all classes alike and inasmuch as the ordinary Schedule E tax payer is getting what in effect is a substantial remission of tax—though in the course of Debate attempts were made to whittle down the effects of that remission, by urging that it amounted to very little—if I were to try to accept this plea I should really put my foot on a very slippery slope. It is not possible to make such changes as we are making now without creating distinctions which will inevitably give rise to a sense of grievance. I said so, and made it clear, when I first told the House I was prepared to consider extending pay-as-you-earn over the whole range, that I knew quite well the concession asked for, if it was made, would become the basis for applications for adjustments of all sorts of supposed hardships, not in themselves substantial hardships, but hardships by comparisons made between one class of taxpayer and another. I have to resist such claims. If not, I should be in a hopeless position in regard to people under Schedule D. There are taxpayers paying on earned income under Schedule D who have just as much claim to remission and adjustment as anybody else, but it cannot be done. Great as my sympathy is for civil servants, but putting on one side altogether any personal feelings, as I must, I find it inevitable that this plea should be rejected.

Now I come to what was said by my hon. Friend the Member for West Lewisham (Mr. Brooke) on a cognate question. My hon. Friend drew attention to the contrast between the treatment under this Bill of the taxpayer who dies just before the end of the tax year and the taxpayer who dies just after the end of the tax year. I repeat what I have said already with regard to the plea of the hon. Member for Rugby. I must hold firm to the principle that discharge can only be granted where there is an element of overlap. In the case of the person who dies before the beginning of the tax year there is no current assessment in the following tax year. There is, therefore, no element of overlapping. Where a person dies after the beginning of the tax year there is an element of overlapping. I admit frankly that we are not being particularly logical, because we leave the person who dies before the beginning of the tax year to meet the whole of his obligations for the current year. But we do not propose, where a person dies after the beginning of the tax year, that if overlapping ceases because he has died and is no longer earning and liable for tax in the current year, to re-impose upon him the balance of the tax to be discharged for the previous year. That is perhaps, as I have said, illogical, but it seemed to me and my advisers impossible to carry the thing to so fine a point as that. So we have said that where a man dies after the end of the year he has the full discharge, although there may not be overlap for the full period of seven or ten months as the case may be. My hon. Friend asked whether the point would remain open if the plea were rejected now. The answer to that is clearly "Yes; it can be raised subsequently," but it is only right that I should make clear to him, as I have done, what view I take of the merits of his proposal.

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

Clause 4—(Short Title, Construction And Repeal)

Amendment made: In page 6, line 1, leave out "Wage-earner's Income Tax," and insert "Income Tax (Employments)."—[ Sir J. Anderson.]

Clause, as amended, ordered to stand part of the Bill.

New Clause—(Interpretation)

In this Act except where the context otherwise requires the following expressions have the meanings hereby respectively assigned to them (that is to say):

"employment" means an employment the emoluments of which are assessable to income tax under Schedule E;

"pension" means a pension assessable to income tax under Schedule E or, by virtue of Section thirty-two of the Finance Act, 1921 (which relates to pensions payable out of certain superannuation funds) under Schedule D;

"service in or with the armed forces of the Crown" means—

  • (a) service in the armed forces of the Crown;
  • (b) in the case of a woman, service in any of the capacities mentioned in the Schedule to the National Service (No. 2) Act, 1941 (which defines, in relation to women, the exemption from the liability to be called up which corresponds to the exemption for men already serving in the armed forces);
  • (c) such other service, if any, in connection with the armed forces of the Crown as may be prescribed by regulations to be made by the Commissioners of Inland Revenue.—[Sir J. Anderson.]
  • Brought up, read the First and Second time, and added to the Bill.

    New Schedule—(Conditions As To Emoluments And Pensions)