Skip to main content

New Clause—(Rule 9 And 10 Of Schedule E Of Income Tax Act, 1918)

Volume 416: debated on Thursday 29 November 1945

The text on this page has been created from Hansard archive content, it may contain typographical errors.

Rules 9 and 10 relating to Schedule E of the Income Tax Act, 1918, shall be construed as providing that any amount (not exceeding fifteen pounds in the aggregate in any year) paid by any member by way of subscription to any institution or other body which is, in the opinion of the Treasury, conducted wholly or mainly for the advancement of any branch of learning, science or technology and not operating for profit, may be deducted from the salary, fees or emoluments to be assessed in respect of such person.— [ Colonel Erroll.]

Brought up, and read the First time.

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

Membership of a learned or professional society is essential to the professional man, particularly to the technical man, just as tools are to a carpenter. First, such membership adds to and refreshes the individual's technical professional knowledge, on which his earnings may depend. Secondly, by participating in the activities of the institution of which he is member he is able to add to the sum of knowledge which is stored up in that institution. Thirdly, membership of an institution confers upon a member a very important status. I hope that hon. Members opposite will not disagree with me when I say how important that status is, because it does enable prospective employers, and not only individual employers but Government employers, to assess the status and ability of the individual concerned. The letters M. Inst. C.E. or M.I.M.E. denote a status in much the same way as the degree of B.A. or B.Sc. denotes a status and a standard of teaching. There is however, one very important difference, in this matter, and that is that a degree once won, does not have to be paid for again. One has a label round one's neck for the rest of one's life, as having achieved an intellectual, technical standard; and there it is—paid for and truly earned!

Membership of a learned institution, however, involves payments year by year of subscriptions in order that one may continue to be a member and be known as a member of the institution. It may be thought that these are rather small matters, and that good men will always rise, as indeed they do, despite all lack of such qualifications. That is certainly not the case in many Government Departments, which insist upon membership of certain technical institutions as a necessary condition of Government appointment. It is no good saying that you were a member of a technical institution; you have to be able to prove current membership, and therein lies the difficulty, because the subscriptions which have to be paid are very often a not inconsiderable portion of a man's total income. I think that the income of technical men should be higher than it is, but the fact remains that for many technical men, subscriptions of six guineas a year for membership of the Institution of Civil Engineers or £4 a year for membership of the Institution of Mechanical Engineers represent a big slice out of a man's total income.

During the war. I was on the Select Committee for one of the Government Departments appointing technical assistants, and these men, even in wartime, were only to be paid £400 a year by the State. Yet the State was insisting rigidly upon membership of a particular engineering institute. Out of a total salary of £400 a year, it is very hard to have to give up six guineas a year or a year. I am, therefore, suggesting in this Clause that membership should be paid out of income before it is subjected to tax. In that way a real concession would be given to needy professional men, and it would advance the cause of learning and science in this country.

The justice of this proposition is to a very large extent already admitted by the Treasury, since a certain small concession does exist at present. The concession is that where membership is made a condition of employment, the tax shall be remitted, but where it is not made a condition of employment, or where a man is independent, such as a consulting engineer or a consulting specialist, he must pay. the subscription out of his taxed income. As the Treasury have already conceded this much to the general principle, they should go the whole way, and concede the remission of taxation to all members of professional societies in the form laid down in this Amendment.

8.0 p.m.

I would point out how much of a burden these subscriptions are to young men, particularly those who are struggling to make their way in a profession. They are now, in many cases, men who have had their careers, interrupted, and who will be returning from the Services, and who will find it difficult to dip into their pockets to pay the large but necessary subscriptions to their professional societies and institutions. It may be pointed out in reply that in a year or two's time it will be all right for them, as they will be earning more money, and it will not be so important. That is not the case, because many professional men in industry have been barred from increases in salary during the war years by the operation of the Essential Work Order, which freezes them to a particular job at a particular salary. I see very little likelihood at present of professional men being able to move about from one employer to another with the freedom which we used to know under Tory Government before the war.

There is the difficulty of the relatively wealthy professional man, in respect of whom it may be said that there is no need of a concession. That is a point which must be admitted to be a strong and important one. I therefore suggest as an alternative, if the whole Clause cannot be agreed to, that the concession might stop with the Surtax payer. A few evenings ago I was bold enough to speak in favour of the Surtax payer; I now make a suggestion against him. The real purpose of this new Clause is to help the needy young professional man, or the needy old professional man, not the more wealthy professional man. I make that suggestion as a possibility if the whole of the Clause cannot be accepted in its present form. It will prevent the concession going to men who do not so obviously require it.

There is another category of individuals who it has been suggested to me should not get it, the man who is sometimes called "the old fool." There may be a few but there cannot be very many, because in the case of membership of these societies all members must either pass the examinations of the institutions or societies, or give proof of their qualifications in some other way. They may appear to be old fools, but the fact remains that they have reached the requisite standard, and are surely entitled to the same remission as other individuals would get, if this Clause were accepted. I could sympathise with any Treasury objection on the lines that this is one more concession and that what we want is a simple scheme of taxation with as few exceptions or concessions as possible. I am told that it is already considered that there are too many concessions, that the relatively simple Income Tax form is becoming cluttered up with provisos and that this will add to the number already there.

There is a certain attractiveness in an alternative proposal, such as the granting of State subsidies to these institutions, instead of making it easier for men to be members, and by means of these subsidies to enable the subscriptions to be reduced. When this proposal was first put to me it struck me as being attractive, but after further examination, I submit that it is a most undesirable proposal, for two very good reasons. First there would be bound to be arguments and interminable discussions as to which institutions should get subsidies and which should not. Secondly, there would be arguments as to the amount of the subsidy—whether it should be increased or decreased. Thirdly, there is always the danger, and one must be frank and admit it, of Government influence where the Government subsidise. At the present time that may be thought by some Members to be a desirable thing, but, of course, the present Government might not think so after the next General Election, should they find themselves—

The hon. and gallant Member is wandering very far. Will he return to his Clause?

I hope therefore that a subsidy will not be put forward as an alternative to the Clause which I have suggested. Finally, if the Clause cannot he accepted now, I hope that the Chancellor of the Exchequer will consider the matter further. I know that there are a lot of things which he is hoping to consider further. I hope this will be one more, so that if he cannot accept it now, we may see this Clause in the next Finance Bill.

I wish to support the Clause. My hon. and gallant Friend has given many reasons in favour of it, and he also very fairly stated certain objections which might be held against this Clause. I hope that the Government will not just consider it, but will take action and implement it. The object of this new Clause is to encourage a larger membership of the scientific and technological societies which arc so important for the development of industry in this country, and for the further advancement of science, without which this country cannot make proper progress. Generally speaking, the independent professional man can claim the subscriptions he makes to these societies as a deduction from his profits for the purpose of Income Tax. The Income Tax authorities are very reasonable in this way, but there are certain cases in which professional men cannot claim. They can claim it, if it is a condition of their appointment, but in the case of many Government Departments and local authorities and certain other cases, it is not possible for relief to be so claimed. The purpose of this Clause is to enable this relief to be claimed by young men who are starting on their scientific careers and to whom a subscription amounting to £10, £12 or £15 does mean a real burden. There is every possible reason why all encouragement should be given to our young scientists and technologists to take degrees, and to maintain their membership of scientific and technological societies.

It seems to me that here is an excellent opportunity for the Government to implement what has been mentioned on many occasions, namely, their earnest desire to give all possible encouragement and help to our young people to develop their scientific knowledge and experience. This matter has been raised previously. In 1943, the then Attorney-General opposed it on behalf of the Government, and the reasons he gave were that the Clause as drawn at that time was too unrestricted and that it would enable people to deduct subscriptions to societies which did not really concern their work. This may be true in a few cases. There was some substance in that argument, and that is the reason why, in the Clause which has been moved by my hon. and gallant Friend the Member for Altrincham (Colonel Erroll), the subscription allowance has been limited to £15. It is felt that with a maximum of £15, that is a reasonable deduction and that the objection which hitherto existed should not remain. It should not be difficult to have an approved list of scientific bodies and societies members of which would be allowed to make this deduction as an expense from their income. I hope the Solicitor-General in making his reply will see his way to grant this modest and very reasonable request. We want now to see that the Government are really in earnest in encouragement of those young people on whom the membership of learned societies at present casts a burden and we hope the Government will consider sympathetically and favourably, this New Clause.

I have a paternal interest in this proposal, having moved similar Motions twice when we were blessed with a Coalition Government. On those occasions the idea was rejected by the Government but I am, therefore, much more hopeful in my approach to the present Front Bench.

My hon. Friend the Member for St. Marylebone (Sir W. Wakefield) gave the reason and it will appear in HANSARD tomorrow, if the hon. Member cares to look at it. The two points I wish to make tonight supplement points which have already been made. I emphasise that we, on these benches, are speaking on behalf of a large number of employees who are suffering an injustice in comparison with employers and independent practitioners. The independent practitioner of engineering, chemistry, or what you will, is entitled to deduct subscriptions which he pays to scientific societies, in so far as they are necessary in the practice of his profession. But a man with identically similar qualifications who happens to be an employee is prejudiced. He is not allowed to deduct the same subscriptions as his employer, but the employer requires him, as a condition of his employment, to belong to those societies.

That is an inequality we desire to see removed. We desire to plead the case of the employee-scientist and ask that he should be put in the same position as the employer-scientist.

8.15 p.m.

I believe the practical answer of the Solicitor-General will probably be that it is opening a wide door and that the Treasury cannot see where the line is to be drawn. There is no practical force in that objection because there exists in the Inland Revenue Department, a list of the societies, which is used for the purpose of dealing with the employers, when deciding which subscriptions, when paid by independent men or employers, are to count for Income Tax relief purposes. We are asking that exactly the same list shall be applied in the case of employees, on the practical ground that there is an inequality between two types of scientist with the same qualifications. The thing can be done and indeed is already being done, and we desire to urge this new Clause on the favourable consideration of the Government.

Since most of the employees will be members of the very eminent trade union, the Association of Scientific Workers, can the hon. Member say what is the attitude of that union to this proposal?

Although this is not the most important part of the Budget, it is none the less important. I have been struck by the way in which the Budget has been unfolded and I recognise it not only as a way of raising large sums of money, but as a social instrument. It impressed me that if this Clause were adopted—and His Majesty's Government might well adopt it—it would have a far-reaching effect on the standards of education, culture and science in our country. It was said, before the war, that our country was handicapped by the lack of men and women with high scientific attainments and that in Germany higher sums were paid to men with high scientific attainments.

This Clause would be a valuable contribution to raising the educational standard of our community. I do not think it would be very costly. If I understand the Government's proposals they propose to build up a series of intricate and inter-linked communities and societies with specialist knowledge and capacity. This Clause would give a valuable stimulus to such societies. During the war the Government frequently had to rely on these organisations to deal with special problems and, had these societies not existed in considerable measure, that resort would have been impossible. I would be opposed to a direct grant to a selected society, but I see force in the proposal that it should be allowed as a charge against the gross income. That is only giving the employee equal justice with his employer. I feel, with all respect to the hon. and learned Gentleman the Solicitor-General, sorry the Chancellor is not here because, knowing his background and origins, I would like to have said to him that the Chancellor, in these matters, "suffereth long and is kind" and "seeketh not his own." In accepting this, he would beseeking the public good.

:The arguments that have been addressed to the Committee on this matter can really be classified into three. One classification is that of the hon. and gallant Gentleman the Member for Altrincham and Sale (Colonel Erroll), and his argument was pitched on the note of general desirability. With regard to that, equally cogent cases can be put forward for any number of reductions in Income Tax. I agree it can be said that one is driving a hole through it, and once one has driven a hole through the Act, one sees it is wrong. That is the argument, and that is the objection. Once you accept the principle that you can amend the rules of Schedule E by allowing deductions for this sort of expenditure, you must with equal cogency accept the principle that you should allow deductions for other sorts of similar expenditure and then for other sorts of different expenditure. Once you start doing that, you do not know where it is going to lead you, and ultimately you find yourself with an unrecognisable Schedule E. Admittedly it is desirable to allow every possible allowance to taxpayers, but the line has to be drawn somewhere, and unfortunately it has to be drawn, I put it to the Committee. on the wrong side of this particular Motion. It was said by the hon. Member for Putney (Mr. Linstead) that there was a contradistinction between the position of the scientist who is an employer and the scientist who is an employee. That is perfectly true, and the reason is that the scientist who is an employer is taxed under Schedule D and the employee is taxed under Schedule E. Ever since 1918 and before, the principle on which these two Schedules are based has been completely different. Schedule D is drawn on far more generous terms than Schedule E—that has always been the case—and that is why under Schedule D a more generous allowance is given. It has been said that this would be of assistance to scientific institutions—

I hope the hon. and learned Gentleman will realise that it is small consolation to any employee to be told that a reason for this not being granted is because he happens, by accident, to be taxed under one Schedule and not under another.

I was going to apply a little comfort to the wound later on, but I shall just outline the position before I come to that. The hon. Gentleman the Member for South Edinburgh (Sir W. Darling) referred to the fact that it would be an encouragement to scientific societies if this Motion were accepted. My answer is that the encouragement has already been given by the Finance Act of 1944, because again under Schedule D deductions are permitted under Section 27 of the Act in respect of contributions to scientific research associations. That has already been done. Therefore, where do we get?' We get to the position that there is—

If I might interrupt my hon. and learned Friend, I would like to put this point. A scientific society is made up of individuals. That is what gives it life. The point is, surely, that some encouragement should be given to the individuals.

:I can only ask my hon. Friend to look at the Section to which I was referring. If he will take the Finance Act, 1944, and look at Section 27, he will see that the necessary encouragement has already been given by the Government which preceded this Government by one, so that point goes by the board, if I may say so. The two points which remain are these: First, is there a sufficiently strong case for making an exception in the principles embodied in Schedule E Rules? The second point is: Should the position remain so that there is a distinction between Schedule E and Schedule D? As regards the second point, if I may take that first, I would like to draw the attention of the Committee to the answer which was given on 6th November of this year by my right hon. Friend the Chancellor of the Exchequer, in reply to a Question which was asked by the hon. and gallant Member for North Portsmouth (Major Bruce), who in his Question did specifically refer to that difference and ask whether the contrast was justifiable. The answer of the Chancellor was:

"Under Rule 9 of Schedule E an employee is already entitled to claim an income tax deduction for expenses incurred by him wholly, exclusively, and necessarily in the performance of the duties of his employment. It is true that the Schedule D rule governing expenses is somewhat wider arid I am now considering whether this can be justified."— [OFFICIAL REPORT, 6th November, 1945; Vol. 415, c. 1086.]
So that as far as that discrepancy is concerned, it is now being considered by the Chancellor of the Exchequer. I do not say whether one will be made more generous or the other less generous, but the question of discrepancy is one which is having consideration.

It remains to ask whether a case can be made out for these allowances. A case certainly can be made out, and has been made out, but the difficulty is this. Having made that case out, why are you not to accept the same principle in relation to a number of other things which could afford the basis of a proper, convenient, helpful and fruitful deduction from salaries or emoluments of employment for the purposesof Schedule E? The difficulty which the Government are in is that, much as they would like to accept the sort of suggestion which is embodied in this Motion, they cannot do so because once they start doing that they must, as a matter of consistency and logic, go far beyond that and consider the whole range of normal and necessary needs of men who want to restock themselves or qualify themselves for their employment, or men who wish to improve themselves in their employment, and they must as a matter of consistency accept that as well.

The hon. Gentleman who proposed the Motion adverted to the fact that, if you have to pay the scientific subscription in question as a condition of keeping your employment, you are already allowed that, as the law stands at present, as a deduction under Schedule E. That is the case, and it has always been so. It is not in any sense a concession. It is in consonance with the law as it has always stood. That has always been stated as the answer to any question which arose on similar lines. I ask the Committee to say that, much as a concession like this would be desired, it is impracticable to accede to it because, as a matter of necessary logic, it would bring in a whole number of other concessions in respect to which equally cogent cases could be put forward, but which could not be accepted. The question of assimilating the rules of Schedule E in this respect to the rules of Schedule D is, as I have said, being considered by the Chancellor of the Exchequer.

:I must confess that if I have understood the hon. and learned Gentleman's answer aright, it is one of the most curious replies to which I ever had the privilege of listening. The case has been made that it is desirable, both in the case of the employer and of the employee, that they should be encouraged to join societies of this kind and that some help should be given them in doing so. It is further pointed out that that is already done in the case of the employer who is taxed under Schedule D. My hon. Friends are asking whether it. is not possible now to do the same for the employee who is taxed under Schedule E. The hon. and learned Gentleman says in reply, "I quite agree, we are in thorough sympathy. We think it is quite right that every help should be given to assist these classes, but we have talked it over and we cannot see why we should help the employees under Schedule E. But do not worry, we have got this little bit of consolation. As we cannot find a way of doing what we want for the people under Schedule E, we will "—as he calls it—" assimilate them and take away from the people under Schedule D what they have enjoyed for some years, and which all of us say is the right thing. "That seems to me to be one of the most extraordinary answers that I have heard. Surely the hon. and learned Gentleman is is not going to put up such a case as that, and simply say "I cannot do it," and then go on to say "Anyhow, for the sake of the monotonous inequality," for which he stands, "we will take away from the people in respect of whom we have been able to find a way to help, that which they already enjoy."

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