asked the Chancellor of the Exchequer whether he has considered the recommendation of the Select Committee on Members' Expenses that the practice whereby, since 1913, £100 out of the payment Members receive has been automatically allowed tax free as an expense allowance should be discontinued: and whether he will make a statement.
Yes. As the Select Committee point out, the Treasury. were empowered by Section 3 of the Finance Act, 1913 (now paragraph 8 of the Ninth Schedule to the Income Tax Act, 1952), to fix for any class of persons remunerated out of public funds a sum on account of necessary expenses which would be automatically deducted from their remuneration in assessing Income Tax thereon. A Treasury Minute of October. 1913, fixed, in the case of Members of the House of Commons not in receipt of salaries as Ministers or Officers of the House or Officers of His Majesty's Household, the sum of £100, which has remained unchanged ever since. The provisions of this Minute are now virtually a dead letter, because practically all such hon. Members incur necessary expenses of more than £100 a year, and are therefore entitled to claim tax relief on a sum greater than £100. The Government therefore agree with the Select Committee's recommendation.A further reason for discontinuing the 1913 arrangement is provided by the institution of a Sessional Allowance. This enables hon. Members to recover their necessary expenses, within limits, by a cash reimbursement instead of bearing them out of their salaries. It would not be consistent with this arrangement to provide at the same time that the first£100 of salary should be automatically relieved of tax on account of necessary expenses.
A new Treasury Minute is therefore being made, revoking the Minute of 1913, with effect from the same date as the institution of the Sessional Allowance. This will, of course, have no effect on the Income Tax position of hon. Members who already declare to the Inland Revenue that their necessary expenses exceed £100 per annum. Other hon. Members (who are very few) will no longer be entitled to any automatic tax relief, but they will be entitled to claim relief under the ordinary law in respect of such necessary expenses as they do incur.