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Clause 27—(Surcharges On Employers)

Volume 643: debated on Tuesday 4 July 1961

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

Amendment proposed, In page 21, line 21, leave out "with" and insert "three months after"—instead thereof.—[ Mr. H. Wilson.]

Division No. 241.]

AYES

[6.55 p.m.

Agnew, Sir PeterAllason, JamesAtkins, Humphery
Aitken, W. T.Arbuthnot, JohnBarber, Anthony
Allan, Robert (Paddington, S.)Ashton, Sir HubertBarlow, sir john

Question put, That "with" stand part of the Bill:—

The House divided: Ayes 238, Noes 185.

Barter, JohnHarris, Frederic (Croydon, N.W.)Page, John (Harrow, West)
Bell, RonaldHarris, Reader (Heston)Page, Graham (Crosby)
Bennett, F. M. (Torquay)Harvey, John (Walthamstow, E.)Partridge, E.
Berkeley, HumphryHarvie Anderson, MissPearson, Frank (Clitheroe)
Bidgood, John C.Heald, Rt. Hon. Sir LionelPeel, John
Bingham, R. M.Henderson, John (Cathcart)Peyton, John
Birch, Rt. Hon. NigelHenderson-Stewart, Sir JamesPickthorn, Sir Kenneth
Bishop, F. P.Hicks Beach, Maj. W.Pilkington, Sir Richard
Black, Sir CyrilHiley, JosephPitman, Sir James
Bourne-Arton, A.Hill, Dr. Rt. Hon. Charles (Luton)Pitt, Miss Edith
Box, DonaldHill, Mrs. Eveline (Wythenshawe)Pott, Percivall
Boyd-Carpenter, Rt. Hon. JohnHill, J. E. B. (S. Norfolk)Price, David (Eastleigh)
Boyle, Sir EdwardHinchingbrooke, ViscountProudfoot, Wilfred
Brewis, JohnHirst, GeoffreyQuennell, Miss J. M.
Brooke, Rt. Hon. HenryHobson, JohnRedmayne, Rt. Hon. Martin
Brooman-White, R.Hocking, Philip N.Rees, Hugh
Bryan, PaulHolland, PhilipRees-Davies, W. R.
Buck, AntonyHollingworth, JohnRenton, David
Bullard, DenysHopkins, AlanRidley, Hon. Nicholas
Burden, F. A.Hornsby-Smith, Rt. Hon. PatriciaRidsdale, Julian
Butler, Rt.Hn.R.A.(Saffron Walden)Howard, John (Southampton, Test)Robson Brown, Sir William
Campbell, Sir David (Belfast, S.)Hughes-Young, MichaelRoots, William
Campbell, Gordon (Moray & Nairn)Hulbert, Sir NormanRopner, Col. Sir Leonard
Cary, Sir RobertHutchison, Michael ClarkRoyle, Anthony (Richmond, Surrey)
Channon, H. P. G.Iremonger, T. L.Russell, Ronald
Chataway, ChristopherJackson, JohnScott-Hopkins, James
Chichester-Clark, R.James, DavidSeymour, Leslie
Clark, Henry (Antrim, N.)Jenkins, Robert (Dulwich)Shaw, M.
Clark, William (Nottingham, S.)Jennings, J. C.Skeet, T. H. H.
Clarke, Brig. Terence (Portsmth, W.)Johnson, Dr. Donald (Carlisle)Smith, Dudley (Br'ntf'rd & Chiswick)
Cleaver, LeonardJohnson, Eric (Blackley)Smithers, Peter
Cole, NormanJohnson Smith, GeoffreySpearman, Sir Alexander
Cooper, A. E.Kaberry, Sir DonaldSpeir, Rupert
Cooper-Key, Sir NeillKershaw, AnthonyStevens, Geoffrey
Cordeaux, L.t.-Col. J. K.Lagden, GodfreyStoddart-Scott, Col. Sir Malcolm
Corfield, F. V.Leather, E. H. C.Storey, Sir Samuel
Costain, A. P.Leavey, J. A.Studholme, Sir Henry
Courtney, Cdr. AnthonyLeburn, GilmourSummers, Sir Spencer (Aylesbury)
Craddock, Sir BeresfordLewis, Kenneth (Rutland)Talbot, John E.
Critchley, JulianLindsay, MartinTapsell, Peter
Cunningham, KnoxLitchfield, Capt. JohnTaylor, Edwin (Bolton, E.)
Curran, CharlesLloyd, Rt. Hon. Selwyn (Wirral)Teeling, William
Currie, G. B. H.Longden, GilbertTemple, John M.
Dalkeith, Earl ofLoveys, Walter H.Thatcher, Mrs. Margaret
d'Avlgdor-Goldsmid, Sir HenryLow, Rt. Hon. Sir TobyThomas, Leslie (Canterbury)
Deedes, W. F.Lucas, Sir JocelynThomas, Peter (Conway)
Donaldson, Cmdr. C. E. M.Lucas-Tooth, Sir HughThompson, Kenneth (Walton)
Doughty, CharlesMcAdden, StephenThornton-Kemsley, Sir Colin
du Cann, EdwardMacArthur, IanTiley, Arthur (Bradford, W.)
Duncan, Sir JamesMcLaughlin, Mrs. PatriciaTurner, Colin
Eden, JohnMaclay, Rt. Hon. JohnTurton, Rt. Hon. R. H.
Elliot, Capt. Walter (Carshalton)Maclean,SirFitzroy (Bute &N. Ayrs.)Tweedsmuir, Lady
Elliott, R.W.(Nwcstle-upon-Tyne,N.)Macleod, Rt. Hn. Iain (Enfield, W.)van Straubenzee, W. R.
Emery, PeterMacLeod, John (Ross & Cromarty)Vaughan-Morgan, Rt. Hon. Sir John
Erroll, Rt. Hon. F. J.McMaster, Stanley R.Vosper, Rt. Hon. Dennis
Farey-Jones, F. W.Maddan, MartinWakefield, Edward (Derbyshire, W.)
Farr, JohnMaginnis, John E.Wakefield, Sir Waved (St. M'lebone)
Fisher, NigelMaitland, Sir JohnWalder, David
Fletcher-Cooke, CharlesMarkham, Major Sir FrankWalker, Peter
Forrest, GeorgeMarshall, DouglasWalker-Smith, Rt. Hon. Sir Derek
Foster, JohnMarten, NeilWall, Patrick
Fraser, Ian (Plymouth, Sutton)Mathew, Robert (Honiton)Ward, Dame Irene
Freeth, DenzilMatthews, Gordon (Meriden)Webster, David
Gammans, LadyMawby, RayWells, John (Maidstone)
Gardner, EdwardMaxwelt-Hyslop, R. J.Whitelaw, William
Glover, Sir DouglasMaydon, Lt.-Cmdr. S. L. C.Williams, Dudley (Exeter)
Glyn, Dr. Alan (Clapham)Mills, StratumWilliams, Paul (Sunderland, S.)
Glyn, Sir Richard (Dorset, N.)Montgomery, FergusWills, Sir Gerald (Bridgwater)
Godber, J. B.More, Jasper (Ludlow)Wilson, Geoffrey (Truro)
Goodhart, PhilipMorgan, WilliamWoodhouse, C. M.
Cower, RaymondNabarro, GeraldWoodnutt, Mark
Grant, Rt. Hon. WilliamNicholls, Sir HarmarWoollam, John
Green, AlanNicholson, Sir GodfreyWorsley, Marcus
Grimston, Sir RobertNoble, Michael
Grosvenor, Lt.-Col. R. G.Nugent, 8ir RichardTELLERS FOR THE AYES:
Gurden, HaroldOakshott, Sir HendrieColonel Sir H. Harrison and
Hall, John (Wycombe)Osborn, John (Hallam)Mr. Finlay.
Hamilton, Michael (Wellingborough)Osborne, Sir Cyril (Louth)

NOES

Ainsley, WilliamBacon, Miss AliceBlyton, William
Albu, AustenBaxter, William (Stirlingshire, W.)Boardman, H.
Allen, Scholefield (Crewe)Bence, CyrilBowden, Herbert W. (Leics, S.W.)
Awbery, StanBenson, Sir GeorgeBowles, Frank

Boyden, JamesHynd, John (Attercliffe)Roberts, Albert (Normanton)
Braddock, Mrs. E. M.Irvine, A. J. (Edge Hill)Roberts, Goronwy (Caernarvon)
Brockway, A. FennerJay, Rt. Hon. DouglasRobertson, John (Paisley)
Brown, Alan (Tottenham)Jenkins, Roy (Stechford)Robinson, Kenneth (St. Pancras, N.)
Brown, Rt. Hon. George (Belper)Johnson, Carol (Lewisham, S.)Rogers, G. H. R. (Kensington, N.)
Butler, Herbert (Hackney, C.)Jones, Dan (Burnley)Ross, William
Butler, Mrs. Joyce (Wood Green)Jones, Jack (Rotherham)Royle, Charles (Salford, West)
Callaghan, JamesJones, J. Idwal (Wrexham)Shinwell, Rt. Hon. E.
Castle, Mrs. BarbaraJones, T. W. (Merioneth)Short, Edward
Chetwynd, GeorgeKelley, RichardSilverman, Julius (Aston)
Cliffe, MichaelKenyon, CliffordSilverman, Sydney (Nelson)
Cronin, JohnKey, Rt. Hon. C. W.Skeffington, Arthur
Crosland, AnthonyKing, Dr. HoraceSlater, Mrs. Harriet (Stoke, N.)
Crossman, R. H. S.Lawson, GeorgeSlater, Joseph (Sedgefield)
Cullen, Mrs. AliceLedger, RonSmall, William
Davies, G. Elfed (Rhondda, E.)Lee, Frederick (Newton)Smith, Ellis (Stoke, S.)
Davies, Harold (Leek)Lee, Miss Jennie (Cannock)Sorensen, R. W.
Davies, S. O. (Merthyr)Lewis, Arthur (West Ham, N.)Spriggs, Leslie
de Freitas, GeoffreyLipton, MarcusSteele, Thomas
Delargy, HughLoughlin, CharlesStewart, Michael (Fulham)
Diamond, JohnMabon, Dr. J. DicksonStones, William
Dodds, NormanMcCann, Johnstross,Dr.Barnett(Stoke-on-Trent,C.)
Dugdale, Rt. Hon. JohnMacColl, JamesSwain, Thomas
Ede, Rt. Hon. C.Mclnnes, JamesSwingler, Stephen
Edwards, Rt. Hon. Ness(Caerphilly)McKay, John (Wallsend)Symonds, J. B.
Edwards, Walter (Stepney)Mackie, John (Enfield, East)Taylor, Bernard (Mansfield)
Evans, AlbertMcLeavy, FrankTaylor, John (West Lothian)
Fitch, AlanMacPherson, Malcolm (Stirling)Thomas, Iorwerth (Rhondda, W.)
Fletcher, EricMallalieu, J.P.W.(Huddersfield,E.)Thompson, Dr. Alan (Dunfermline)
Fraser, Thomas (Hamilton)Manuel, A. c.Thomson, G. M. (Dundee, E.)
Gaitskell, Rt. Hon. HughMapp, CharlesThornton, Ernest
Galpern, Sir MyerMarsh, RichardTimmons, John
George, LadyMeganLloyd(Crmrthn)Mendelson, J. J.Tomney, Frank
Ginsburg, DavidMilne, Edward J.Ungoed-Thomas, Sir Lynn
Gordon Walker, Rt. Hon. P. C.Mitchison, G. R.Wade, Donald
Gourlay, HarryMonslow, WalterWainwright, Edwin
Greenwood, AnthonyMoody, A. S.Warbey, William
Grey, CharlesMort, D. L.Watkins, Tudor
Griffiths, Rt. Hon. James(Llanelly)Moyle, ArthurWeitzman, David
Griffiths, W. (Exchange)Mulley, FrederickWells, William (Walsall, N.)
Grimond, J.Neal, HaroldWhite, Mrs. Eirene
Hale, Leslie (Oldham, W.)Noel-Baker, Francis (Swindon)Whitlock, William
Hall, Rt. Hn. Glenvil (Colne Valley)Oliver, G. H.Wilkins, W. A.
Hamilton, William (West Fife)Oram, A. E.Willey, Frederick
Hannan, WilliamOwen, WillWilliams, D. J. (Neath)
Hart, Mrs. JudithPadley, W. E.Williams, Ll. (Abertillery)
Hayman, F. H.Pannell, Charles (Leeds, W.)Williams, W. R. (Openshaw)
Healey, DenisParker, JohnWilliams, W. T. (Warrington)
Hilton, A. V.Parkin, B. T.Willis, E. G. (Edinburgh, E.)
Holman, PercyPavitt, LaurenceWilson, Rt. Hon. Harold (Huyton)
Holt, ArthurPearson, Arthur (Pontypridd)Winterbottom, R. E.
Houghton, DouglasPentland, NormanWoodburn, Rt. Hon. A.
Howell, Charles A. (Perry Barr)Popplewell, ErnestWoof, Robert
Howell, Denis (Small Heath)Prentice, R. E.Zilliacus, K.
Hoy, James H.Price, J. T. (Westhoughton)
Hughes, Cledwyn (Anglesey)Probert, ArthurTELLERS FOR THE NOES:
Hughes, Emrys (S. Ayrshire)Randall, HarryMr. Redhead and
Hunter, A. E.Rankin, JohnDr. Broughton.
Hynd, H. (Accrington)Reynolds, G. W.

I beg to move, in page 21, line 34, to leave out from "week" to the end of line 39.

I think that all subsequent Government Amendments to this Clause, to Clause 34 and to the Fifth Schedule deal with the same matter. Perhaps what I say now may be taken to refer to them all.

When in Committee we discussed the position of Northern Ireland in relation to the employers' surcharge, I made clear that I accepted from the beginning that the Exchequer would derive no benefit from the surcharge in Northern Ireland if it were imposed. The question between us, therefore, was not one of prin- ciple but of administration, whether it was simpler to insist that the surcharge be collected in Northern Ireland and then refunded in some way by the Northern Ireland Government or whether it was better to exclude Northern Ireland altogether from the compass of the surcharge. I undertook to look further into the administrative problem in consultation with the Government of Northern Ireland. I said that, if there were no great administrative difficulty involved, I thought I could meet the point of view expressed by my hon. Friends.

Consultations have been held. It is clear that it is not impossible to exclude Northern Ireland from the scope of the surcharge. I do not pretend that it will be a wholly satisfactory arrangement. I think that some employers and employees, as well as the Ministries concerned, may find themselves put to a certain amount of trouble and inconvenience if the surcharge is imposed. The Government of Northern Ireland, after due consideration of what is involved, prefer, on the whole, that we should proceed on the basis of the total exclusion of Northern Ireland rather than by the method I proposed originally. In the circumstances, I propose that the matter should be dealt with in that way, and I have accordingly put down the necessary Amendments. I hope that the House will accept them.

I say only that I regret that the form of the Money Resolution and the rules of order do not allow us to exclude other places where there is grave unemployment.

Amendment agreed to.

Further Amendments made: In page 22, line 6, leave out from beginning to "shall".

In page 22, line 9, leave out paragraph ( b).—[ Mr. Selwyn Lloyd.]

I beg to move, in page 22, line 12, at the end to insert:

"and
(c) shall be treated for the purpose of subsection (2) of section three hundred and seventy-seven of the Income Tax Act, 1952, as though they were contributions paid by the employer under the National Insurance Act".
The object of the Amendment is to remove what might appear to be an unfortunate discrimination against that limited class of employers who are not entitled to make the ordinary deductions open to a trader under Schedule D. Those who have to employ their staff under Schedule A have to reclaim their expenses by a maintenance claim spread over five years, and this, of course, includes the wages of maintenance staff. The contributions which such employers pay under the National Insurance Acts, as I under stand it, are put on an equal footing with those of all other employers under the provisions of the Income Tax Acts, that is to say, they may be deducted in the year in which they are paid.

Clause 27 gives power to my right hon. and learned Friend to collect surcharges from all employers, but it seems to make no provision for putting all employers on a footing of equality in respect of the surcharge as they are in respect of contributions. I am grateful to my right hon. and learned Friend for writing to me on this matter. I think he appreciates the point I make, that the result is that those who employ estate maintenance staff and who have to make claims under Schedule A will have the surcharges spread over five years instead of being able to deduct them in the first year as ordinary traders do.

The legislation in this Clause is in the form of a power for the right hon. and learned Gentleman, and it gives him a certain latitude. Under subsection (2) of the Clause, he can choose the person in respect of whom the surcharges are to be paid, and he may fix different rates. I want to ask him, in the first place, for a clarification, for it has been publicly stated, I think I am right in saying, by a member of the Government that it is probable that this power would not, at any rate in the present year, be used in relation to agricultural workers.

The first point on which I would ask for clarification is whether this could be taken to include those other two classes of employees who are intimately associated with agriculture; namely, those who are employed in the maintenance of agricultural buildings and those who are employed by those who operate their woodlands under Schedule B. If my right hon. and learned Friend is unable to give me that assurance, I ask him to accept this Amendment, which has the object of bringing the Schedule A employers, if I may so call them, on to a basis of equality. It means treating them on the same footing as contributions under the Income Tax Acts instead of on the same footing as wages.

I suggest to my right hon. and learned Friend that what I am putting forward is both logical and just, and I express the hope that if he cannot give the assurance for which I ask he will accept the Amendment.

I do not think I can give the assurance for which my hon. Friend the Member for Ludlow (Mr. More) asks, because that relates to the broad policy of Clause 27, and on that I cannot add to what has been said by my right hon. and learned Friend the Chancellor and other Ministers since the Finance Bill was first published.

I should, however, like to clear up one specific point raised in my hon. Friend's Amendment. I know that this matter has caused some concern, and I hope that what I say tonight might possibly be of some help. As I understand it, the purpose of the Amendment is that, by treating payments of surcharges like the payments of National Insurance contributions, it will give relief for surcharges paid for the tax year in which they were paid, and thus not merely accelerate relief to estate owners for surcharges paid in respect of estate staff, but also give relief to employers of domestic labour for any surcharges which they have paid.

What I would say in reply to the Amendment is that, in general, it seems to me quite logical and really essential for the whole scheme of Clause 27 that payments of surcharges should be treated for tax purposes in the same way as the wages of the staff to whom they relate. That is indeed the effect of Clause 27 and of the Fifth Schedule as drafted. I think there is clearly no justification for giving relief to domestic employers for their surcharge payments if Clause 27 is put into action. After all, a domestic employer, not being a person trading for profit, gets no tax relief on the wages he pays his housekeeper or gardener, and there is no reason why he should get tax relief for the surcharge.

I know the anxiety which my hon. Friend expresses in the case of estate owners. There are two possible grounds which could be adduced for accelerating relief to estate owners. First, there is the point that in the Bill, as drafted, he obtains relief more slowly than a trading employer; and, secondly, that the surcharges are less favourably treated than National Insurance contributions.

On the first point, that under the Bill the estate owner obtains relief more slowly, it seems to me that there is very little merit in the proposal that we should single out surcharges for exceptional treatment as compared with the other outgoings of the estate owner. In this year's Finance Bill, we have not put in a Clause relating particularly to estate owners, but we had one in last year's Finance Bill. I cannot feel that there is a case for singling out this surcharge for exceptional treatment.

7.15 p.m.

On the second point, it is true that National Insurance contributions paid by non-trading employers receive more favourable treatment than wages. This follows the decision by Mr. Dalton—now Lord Dalton—in the 1946 Budget that all contributions to the National Insurance scheme, by whomsoever they might be made, would be treated as due deductions for Income Tax purposes.

As a counterpart to this proposal, all income benefits were to be assessed for Income Tax. I am not going into the merits of that decision now, though I am relieved to see that my hon. Friend the Member for Tynemouth (Dame Irene Ward) is not in her place, so that I can get a clear run for what I have to say. There is something in the argument for giving relief for these contributions, because, broadly speaking, these contributions go to provide benefits which are taxable; but this argument could not be used with regard to the surcharges, because they do not provide any taxable benefits.

We are not now discussing the whole object of Clause 27, but this is, after all, one of the economic regulators which, if put into force, would be designed to affect the level of purchasing power in the economy, and we are not dealing with any forms of financing of taxable benefits. This is, for this year, a surcharge on National Insurance stamps. For these reasons, I do not think it is reasonable to suggest that we should in this Bill provide for accelerating relief to estate owners, though I quite understand the anxieties which my hon. Friend expresses. He has put his case, both in correspondence and again tonight, with exemplary fairness, but I cannot advise the House to accept the Amendment. I hope that my hon. Friend will not press it, and I assure him that in all our legislation affecting tax regulators and anything else my right hon. and learned Friend will bear in mind not only the impact of this legislation on those who trade, but on estate owners and on people whose assets are in other forms as well.

I should like to thank my hon. Friend the Financial Secretary for replying in a way which brings it home to us that very careful consideration has been given to this matter. My right hon. and learned Friend the Chancellor in his Budget speech made it clear that the method of levying the surcharges might be reviewed from year to year, and I only ask that the points I have put forward might be kept in consideration. I therefore beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Amendments made: In line 14, leave out "of the United Kingdom".

In line 19, leave out "paragraph ( a) of".

In line 43, leave out subsection (7).

In page 23, line 2, leave out from "'contribution'" to end of line 4 and insert:

"except where the context otherwise requires, means a contribution (other than a graduated contribution under the National Insurance Act, 1959) payable under the National Insurance Acts".

In line 7, leave out from "contributions" to end of line 8.

In line 12, leave out from "1957" to end of line 15.

In page 23, leave out lines 21 to 26.

In line 30, leave out "in their application to Great Britain".

In line 31, leave out from "1946" to end of line 33.—[ Mr. Selwyn Lloyd.]