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Ways And Means

Volume 415: debated on Wednesday 31 October 1945

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REPORT [ 25th October]

Resolutions reported:


1. "That it is expedient to amend the law relating to the National Debt and the public revenue, and to make further provision in connection with finance."


2. "That—

  • (a) income tax for the year 1946–47 shall be charged at the standard rate of nine shillings in the pound and, in the case of an individual whose total income exceeds two thousand pounds, at rates in the pound which respectively exceed the standard rate by the amounts specified in the second column of the Table below;
  • (b) all such enactments as have effect with respect to the income tax charged for the year 1945–46, other than such enactments as by their terms relate only to tax for that year, shall have effect with respect to the income tax charged for the year 1946–47.
  • Table
    For every pound of—



    the first five hundred pounds of the excess20
    the next five hundred pounds of the excess26
    the next one thousand pounds of the excess36
    the next one thousand pounds of the excess46
    the next one thousand pounds of the excess56
    the next two thousand pounds of the excess66
    the next two thousand pounds of the excess76
    the next two thousand pounds of the excess86
    the next three thousand pounds of the excess96
    the next five thousand pounds of the excess100
    the remainder of the excess106."


    3. "That no sums shall be credited under Section seven of the Finance Act, 1941, in respect of any tax for the year 1946–47 or any subsequent year of assessment."

    First Resolution agreed to.

    Charge of Income Tax for 1946–47

    Second Resolution read a Second time.

    Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

    May I raise a point of Order? It was the intention of some of my hon. Friends and I and, I think, of the right, hon. Gentleman, to say something at some stage on earned income allowances. I think that it would be in Order on either this or the Third Resolution. We obviously do not want to have two Debates on the same subject, and if the Chancellor prefers it, we could have it on the Second Resolution, but I do not want to let it go by and then be told that I have lost my opportunity.

    I would be happy if we could come to an agreement on the matter. If a discussion is desired on earned allowances, it might be taken on the Resolution dealing with Income Tax postwar credits.

    If the House is agreeable, there will be no objection to that.

    I want to make a comment on the Resolution now before the House and call attention to the fact, which should be recorded, that in the forthcoming Finance Bill there will, as I understand it, as a result of our passing earlier in the day the Fourth Resolution of 23rdOctober, appear two separate sets of charges of Income Tax and Surtax. We have to put in the Surtax of 1945–46 which was in the Fourth Resolution, and now we are putting in the standard rate for next year and Surtax as well. They are linked together, but, as far as I know, no Finance Bill has hitherto had that double series of impositions laid out. I may be wrong in that, but if it is not unique it is very unusual.

    It is nothing to do with having a Labour Government. I know that the hon. Member would wish to ascribe all things, good and bad, to that, but it has nothing to do with this question. It is due to the notice which is necessary in order to get the various codes and documents drawn up to collect the tax weekly on the lower ranges of income. That makes me wonder whether, in point of fact, it will not always be necessary to have this procedure and to have a second Budget. It will not necessarily be so unless the Chancellor in the autumn has anything special he wants to tell the House, but he may be very chary of making a statement. We have already had that position in the last few weeks on other matters. Does he anticipate that it will be possible to devise any machinery which will prevent this? I do not know. I very much doubt it as things are and as they are likely to be for some years to come. That being so, it is worth the House noting the fact that this is the beginning of a new era in dealing with the financial details with regard to Income Tax and its imposition. Whether it will be in the long run a good thing that people should know so long ahead of changes in taxation, time alone will show, but on this occasion it seems to be necessary to do it. I therefore take no exception to it being before us, and I fancy that it will not be the last time.

    This point arises in two different aspects. In the first place, as the right hon. and gallant Gentleman has said, it is necessary under the existing arrangements for P.A.Y.E., which I inherited from my distinguished predecessor who is not a member of the Conservative Party. Under this arrangement which he devised, time has to be taken for the recoding and the working out of the Tables and so on. In my view—and I speak as a member of the Government which had a collective responsibility for this reform—P.A.Y.E. is much fairer to the Income Tax payers than the arrangement which preceded it. The principle underlying it is essentially sound and it was demanded for many years by hon. Members in all parts of the House. None the less, it has necessitated, in its first stage at any rate, the making of a very complicated administrative machine. We had to have a trial trip to see how it could be done. For a long time Chancellors of the Exchequer were advised that it was totally impossible, but gradually it has been found possible, and in this connection I should like to pay a tribute to the Inland Revenue staff, who have worked extremely hard at it and have shown very great ingenuity and flexibility of mind.

    The other day, in reply to a Question, I mentioned that I was going into the matter to see whether we cannot simplify it still further as we get more fully acquainted with the problem, and I do not give up hope that we may be able to make a very substantial simplification and there by at any rate shorten very much the period which now must elapse, from the point of view of administrative efficiency, between determining a change of Income Tax rates and its actual going into effect. We are working on that now, and in due course it will be my duty to inform the House of the result of our inquiries. That, however, is not the only reason why in this particular case there is a period of time which must elapse between the determination by the House of the new rates and their going into effect. There is the further reason, as I said in my Budget speech, that we must be exceedingly cautious and gradual in the relaxation of taxes, because between now and April we shall be in a period when production will not yet have picked up fully and the danger of inflation will therefore be great. In any case I should not have thought it right at once to give away the Revenue involved in allowing the lower rate to operate immediately. The new Surtax rate is also postponed because of the year of charge coming a year later.

    I am anxious to be merciful. What I have said, I hope, answers the right hon. and gallant Gentleman's point. We are going into it, and although at the moment we are in some difficulty, perhaps we shall be able to break out of it a little later.

    Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.