Next, I should mention an adjustment in the taxation on National Insurance benefits and contributions. As the Committee is aware, it was considered a
necessary counterpart of the allowance of relief in respect of the contributions that all benefits of an income nature should be charged to tax. Some of these benefits, however, namely unemployment, sickness and maternity benefits, are purely occasional, and the taxation of these occasional benefits is a great trouble, both to the Inland Revenue and to the recipients, and cannot, of course, be allowed for in P.A.Y.E. tables.
I propose therefore, that in future, unemployment, sickness and maternity benefits should be exempted from tax, but that relief should not be allowed in respect of that part of the contribution relating to these occasional benefits, that is, in the ordinary case, 1s. 7d. out of the 4s. 7d. In other words, the allowable deduction for Income Tax will be 3s. and not 4s. 7d. No difficulty arises as regards other income benefits, such as pensions, and no change is necessary in regard to them.
Effect will be given to the reduced allowance automatically in the P.A.Y.E. tables. To enable this to be done, a new Table A, to be used in conjunction with the existing Table B, will be printed and distributed to employers, in time for use on the first pay day after 11th May. Though, theoretically, this should lead to a reduction of receipts, I hope, in fact, as a result of this change, the Exchequer will be £10 million better off than otherwise it would, since it will be able to collect the tax on contributions whereas it is almost impossible to do so on benefits.