I beg to move in page 7, line 33, after the first "of," to insert: Section thirty of the Finance Act, 1946, and of. I think the Committee is familiar with the point which lies behind this Amendment. We had in Committee of Ways and Means—first in Committee and then on Report stage last night—a Resolution which authorises the inclusion of this Amendment. It inserts in Clause 9 a provision to enable P.A.Y.E. to be applied to the Forces. The original Resolution in Committee of Ways and Means unfortunately overlooked the fact that until this year the Armed Forces of the Crown did not come into the P.A.Y.E. machinery as did other people who paid Schedule E. By this Amendment we are putting that into the Clause, in order to make from 6th April this year members of the Armed Forces, both men and women, subject to what is now the usual P.A.Y.E. arrangements.

Amendment agreed to.

Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

This is the Clause which imposes the standard rate of Income Tax for the current year. It would be a pity to pass it without comment. Although I have no doubt that the Chancellor, or the Financial Secretary, in reply, will tell us that there are comforting words in Clause 10—dealing with alteration of certain reliefs—I think that in the second full year of peace it is a calamitous thing that the standard rate of Income Tax should still be running at 9s. in the pound. When we recall that it was at the blackest moment of the war, when we were standing alone, that the late Sir Kingsley Wood raised it to 10s., I think that we should have gone further on the road towards the relief of the basic rate of this very serious burden. I should like some elucidation of Subsection (2), concerning the provisions relating to transport or electricity. But my main purpose in rising was to make my protest, and I am sure that of other hon. Members, that the standard rate of Income Tax should still be 9s. in the pound.

I do not think that we can very usefully go into a detailed Debate on the standard rate, but perhaps I may make an observation or two about it. But for me it would still be 10s. in the pound. I inherited the 10s. standard, and in my first autumn interim Budget I took a shilling off and reduced it to 9s. Hope springs eternal in all breasts—even in the breast of the hon. and gallant Gentleman and those of many others—and I should be very disappointed if we could not get a reduction in due course. I think mat it is in Order at this stage—I do not think that I am anticipating the next Clause—when I say that, having to choose between the alternative needs of giving help to industry, and having made an initial reduction from 10s. to 9s. in the pound in my first Budget, afterwards, both in the Debate of last year and in this Debate, it seemed better to proceed by way of improvement in the various allowances, both the total exemptions of the earned income relief and the allowances for children and the dependant allowances, than to have a further flat cut in the standard rate.

We have, in other words, to try to take first things first in regard to reliefs to the different sections of the community. That does not, of course, mean that we are at the end of our works of mercy, and I hope it may yet be part of my destiny to reduce the standard rate still further. I must not commit myself and I must be careful to allow no Budget leakages in regard to next year. I shall be disappointed, however, if my time at the Ex- chequer comes to an end with the standard rate of Income Tax 9s. in the £. I do not think I can add more today.

6.30 p.m.

The right hon. Gentleman was asked by my hon. and gallant Friend the Member for Holderness (Lieut.-Commander Braithwaite) to say something about Subsection (2) of this Clause.

It was to be dealt with by my right hon. Friend the Financial Secretary to the Treasury.

I did not realise we would have two Ministers running together on this matter, particularly as the right hon. Gentleman did not stand up.

He did not stand up in competition with the right hon. and gallant Gentleman, but my right hon. Friend will be glad to say a word on that if it is the wish of the right hon. and gallant Gentleman and his Friends.

That is the point. My hon. and gallant Friend asked for this information.

As only one of his points.

But the right hon. Gentleman the Financial Secretary to the Treasury never got up.

The right hon. and gallant Member was too quick.

I quite agree, but I understood the Chancellor was going to answer the questions himself. I only want to make one comment on what the Chancellor has said. I am rather shocked in this Committee to hear the ironical cheers with which any reference to a reduction in the standard rate of Income Tax is greeted. The Chancellor said in all seriousness that he hoped without committing himself to make a further reduction. I see no reason why that should be greeted with ironical cheers by his supporters, because there is no question about it that one of the great measures of assistance which he could give to trade, industry and business generally in this country would be so to arrange financial matters and the expenditure for which he is responsible as to make it possible to have a reduction in that standard rate. The right hon. Gentleman said just now, as if it were a trump card in his game, that he had reduced the standard rate from 10s., where it had been when he took office, to 9s. That is quite true. He has done that, but if he succeeded in doing that he has also succeeded in presenting through this Finance Bill to the Commons an expenditure which is far larger than last year.

We cannot go into that now.

I agree we cannot discuss that now, but the fact does remain.

On a point of Order. Is it in Order to refer to expenditure on this Clause?

I have done so, and I am prepared to justify the statement I have made at any time if it is in Order to do so. I made the point without going any further now, but the fact still remains that if expenditure was brought down to a reasonable level it would be far more easy to secure—[HON. MEMBERS: "Order."] It is perfectly in Order to make a general statement like that. I am not specifying how it should be done. I did so on the Second Reading of the Finance Bill and the Chancellor himself has referred to it in previous speeches. All I am saying now is that if the Chancellor gave as much attention to that side of his business as he does to some others, and cut down expenditure, it would be possible to envisage far sooner a reduction in the present rate of Income Tax. While in present circumstances we appreciate the difficulties in which the Chancellor of the Exchequer is, my hon. and gallant Friend the Member for Holderness is quite right in protesting at the continuance of this high rate of taxation now that the war is well over. That was the only point which I wanted to emphasise, as well as protesting at the way in which any references to a reduction in the standard rate of Income Tax are received by the Chancellor's own supporters. Having said that and having given the right hon. Gentleman the Financial Secretary time to wind himself up to get up to reply to the question which was put to him, I will now sit down.

I am sorry indeed that I did not get up sooner, because the last thing that I want to do is to engender heat in this Committee. So far we have got on extremely amicably, and I am hopeful therefore that we shall make excellent progress and shall rise a little earlier tonight than has been expected. I would not for a moment do anything which would cause any ill feeling or a prolongation of our discussion. The hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) asked me if I would indicate why these words are included in Subsection (2): Subject to the provisions of any Act of the present Session relating to transport or electricity…. The answer is we have been dealing during this present Session with two Bills, one concerned with electricity and one with transport. Under those Bills certain payments are to be made during the final period before the transfer of the undertakings from their present ownership to a new board or authority. Strictly legally, those payments will not be dividends or interest, and we have in both Bills inserted provisions which lay it down that notwithstanding that they will not notionally or legally be dividends or interest in the hands of the recipient, the Inland Revenue authorities are to assume that they are. Really, of course, they will be income in the hands of the recipients, and the mere fact that the money is not coming out of profits made by the concerns should not mean that the recipients should escape paying Income Tax and possibly Surtax on them. Therefore, in both those enactments we have inserted provisions—and they are not unfamiliar to some hon. and right hon. Members opposite who took part in the proceedings in Standing Committee upstairs—in this particular form of words.

I am at a loss to understand the right hon. Gentleman's explanation. I suppose they are money made in virtue of those Bills, but the right hon. Gentleman said that legally and notionally they are not income but are to be treated as income. I do not think that is what he meant. What I think he meant was that they are legally income, and notionally are to be treated as such. The right hon. Gentleman did not explain what moneys these are. Are these compensation payments made in respect of the taking over of these undertakings, or are they, in fact, interest and dividend receipts? What are these sums of money to which the right hon. Gentleman referred, for I am quite at a loss to know what sums he was talking about? I am sure we ought to know because it seems to me that this Subsection may very well be related to the subsequent Clauses 4 to 18 dealing with compensation. Are they sums of money of a similar kind, and will he explain what sums they are?

I thought I had briefly indicated what these moneys are. The Electricity Bill is going through this House at the present time, and in another place there is the Transport Bill. The financial arrangements of both Bills are fairly complicated, and I should be completely out of Order if I attempted to explain them now. A date is being fixed for the transfer of the assets from their present ownership to either the new electricity authority or the Transport Board, and as part of the winding-up and in order to pay off finally and completely under the provisions of those Bills, certain payments are being made. Some of these will come out of the profits which have legitimately been made and some will not. I think I should be out of Order if I went into a detailed explanation of the Measures in question, but under the law as it now stands the payments concerned are not strictly income in the sense defined by our Income Tax law. They are to be paid out of the profits of these undertakings for the settlement of the final period, and although in the hands of the recipients they are not profits strictly speaking, notionally they are to be treated as if they were profits and will remain subject to Income Tax and Surtax. Reference here is to the provisions in both those Bills which do what I have just tried to explain.

6.45 p.m.

The right hon. Gentleman has so telescoped what he wanted to say that he has made it far from clear, and I hope that he can tell us a little more about this. After all, we have to deal with this Bill, and if it contains references to other enactments I cannot believe that it is out of Order to refer to them, at least sufficiently to make it clear what we are doing here. Unless the right hon. Gentleman tells us a little more about what particular payments he has in mind I am afraid that many hon. Mem- bers who were not on the committees which dealt with the Bills to which he has referred will have not the slightest idea of what he is talking about. We are trying to make out what this Bill does. The Financial Secretary to the Treasury spoke of the transfer of assets which were paid under the other two Bills, and by which the holders of something or other were being paid off. He said that some of that money came out of profits but was not income. That string of words, which I took down, does not mean anything very much to me. Is the right hon. Gentleman talking about compensation payments? We know that under these Bills certain compensation will be paid, but I take it that that is not being treated as income. If, then, it has nothing to do with compensation, I am still not clear what payments are referred to. Is it a question of something which would correspond to a dividend which would be paid on a certain day if it were not for the fact that the transfer is to take place before that day? If that is so, why does the problem arise at all? I think that the right hon. Gentleman really must give us some further explanation. I hesitate to press him because it is obviously a very technical and complicated matter, but in dealing with this Clause we are entitled to know exactly what kind of money we have to decide about. I cannot believe that it would be out of Order to refer to the other enactments, but if it is, Major Milner, I hope that you will stretch the rules of Order sufficiently to allow enough allusion to them to enable us to understand what is being done here.

I will, if I may, endeavour to clarify the position without trespasing upon the Rules of Order on the one hand, and without becoming too complicated on the other. The two enactments concerned, one of which is now in another place and the other of which is moving towards another place, relate to the reorganisation of the transport service and of the electricity service. Provisions with regard to taxation would be out of place in those Measures. Since all these Bills are moving forward together, it is necessary to make any such provisions as may fall to be made in this present Finance Bill. The point is that there is a period prior to the date of transfer of the assets—the vesting date as we call it—at which certain, payments are due to be made. I do not think that it would be reasonable for me to be expected to go into great detail as to what those payments are, but there are provisions, for example, to prevent excessive payments of dividends, as we judge it to be, in this final period, and so on. There are certain payments due to be made both under the Transport Bill and the Electricity Bill in this limited period before the vesting date. The purpose of this Clause is to provide that those payments, which are essentially of the character of dividends or interest—though it should be made clear that they are of an exceptional character in so far as they are being made in this exceptional period lying between the enactment of the Measure and the vesting date—shall be regarded as income for the purposes of Income Tax assessment. I hope that I have succeeded in making clear the general meaning of this provision. I do not think it would be proper for me to go into an elaborate disquisition on the terms of the other two Bills. We merely desire to save for Income Tax assessment certain payments made in the period between the enactment of those Measures and the vesting dates. I hope that that explanation may be sufficient to enable the Committee to come to a conclusion.

We will study what the two right hon. Gentlemen have said and, if necessary, will raise the matter again later on, but I do not quite understand why there should be any doubt about the position.

There is nothing we desire to conceal. It is all perfectly above board, and if there is any doubt perhaps we could have a further discussion on the Report stage. Should the right hon. and gallant Gentleman care to communicate with me or with my right hon. Friend as to the points upon which he would like further elucidation we should be only too glad to seek to give it.

Clause, as amended, ordered to stand part of the Bill.