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THE “BOWLES ACT” – CORNERSTONE OF THE FISCAL CONSTITUTION

Published online by Cambridge University Press:  12 November 2010

Joseph Jaconelli
Joseph Jaconelli
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Law School, University of Manchester.
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The Cambridge Law Journal , Volume 69 , Issue 3 , November 2010 , pp. 582 - 608
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Copyright © Cambridge Law Journal and Contributors 2010

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References

1 [1913] 1 Ch. 57. Unusually, the plaintiff subsequently published the full text of the documents in the case prefaced with an introduction written by himself: T. Gibson Bowles, Bowles v. The Bank of England: The proceedings in court (from the shorthand writer's notes) and official court documents (London 1914) (hereinafter “Court Records”).

2 A well-known work on the crisis is R. Jenkins, Mr Balfour's Poodle (2nd ed., London 1968). Jaconelli, J., “The Parliament Bill 1910–1911: The Mechanics of Constitutional Protection” (1991) 10 Parliamentary History 277CrossRefGoogle Scholar provides an account from the perspective of the rival drafts of the measure that became the Parliament Act 1911 and the phrasing of the main provisions.

3 L.E. Naylor, The Irrepressible Victorian: The Story of Thomas Gibson Bowles, Journalist, Parliamentarian and Founder Editor of the original Vanity Fair (London 1965).A noteworthy point that goes unrecorded in this book is that Bowles was the grandfather of the Mitford sisters (the most famous of whom were Nancy, Diana, Unity and Jessica), his daughter Sydney being their mother. Hence the brief account of the Bowles litigation in J. Guinness, The House of Mitford (London 1984), pp. 204–210.

4 [1912] 1 Ch. 123.

5 A tax that was imposed for the first time by the Finance (1909–10) Act 1910.

6 The terms of s. 30 were: “In order to ensure the collection in due time of any duties of income tax which may be granted for any year commencing on the sixth day of April, all such provisions contained in any Act relating to income tax as were in force on the preceding day shall have full force and effect …”

7 [1912] 1 Ch. 123,137.

8 There occurred a preliminary stage in the trial of the action, before Swinfen Eady J. on 26 June when Bowles unsuccessfully applied for an ex parte injunction against the Bank. Brief details of this stage are given only in the Tax Cases report of Bowles v. Bank of England (1911–1915) 6 T.C. 136, 139. Full details are given in Court Records, pp. 7–10.

9 As the law reports indicate, however, he did have the assistance of a firm of solicitors.

10 The Bank of England was represented by Freshfields (now Freshfields Bruckhaus Deringer), a firm which long acted as solicitors to the Bank. On the special relationship see J. Slinn, A History of Freshfields (London 1984). It is apparent from the text of the two affidavits reproduced in Court Records, pp. 5–7, that in the course of the litigation the Bank received the personal attention of Dr. Edwin Freshfield, the senior partner of the firm at the time.

11 [1913] 1 Ch. 57, 87–88. As such, it provides a neglected instance of a well established point: that legal material can be interpreted in the light of a background non-legal norm, a constitutional convention. The status of the convention is examined at greater length in section VI, below.

12 The ruling in Stevenson v. The Queen (1865) 2 Wyatt, Webb, and à Beckett 143 anticipated the outcome in Bowles v. Bank of England. The Supreme Court of Victoria stated unequivocally: “We have no doubt that these resolutions are not equal to an Act of Parliament, and that nothing but an Act of Parliament can have the effect of imposing taxation” (at pp. 148–149). In stark contrast is the ruling from New South Wales in Ex parte Wallace & Co. (1892) 13 N.S.W.L.R. 1: the practice, well established in Australia as much as in England, of levying taxes on the authority (in the first place, at least) of a resolution of the legislature was based on “sound reason and good sense” (at p. 9) and necessary to protect the public revenues.

13 [1913] 1 Ch. 57, 84.

14 For the background to Article 4 see L.G. Schwoerer, The Declaration of Rights, 1689 (Baltimore 1981), pp. 66–69. The Petition of Right 1628, the most significant pre-1689 document, contains conflicting indications. The recital refers to “consent in Parliament”, viz “your subjects have inherited this freedome that they should not be compelled to contribute to any taxe tallage ayde or other like charge not sett by comon consent in Parliament”. However, the petition itself asks of the King “that no man hereafter be compelled to make or yeild any guilt loane benevolence taxe or such like charge without comon consent by Acte of Parliament.”

15 The imputation was made in passing by Lloyd George. In replying to a question in the House of Commons he said that the government had made it quite clear that “Mr. Gibson Bowles could not escape having to pay his Income Tax by having caused to be set aside the practice of deduction without statutory authority”: HC Deb. vol. 56 cols. 23–24 (28 July 1913Google Scholar). It is, of course, quite likely that Lloyd George was making a crude political point rather than expressing a considered opinion on the legal position.See note 18 below, for Bowles' own account of his reasons.

16 E. Halévy, A History of the English People in the Nineteenth Century – vol. 6: The Rule of Democracy 1905–1914 (London 1961), p. 349n.

17 From the outset Bowles had made it clear that he would not render unquestioning obedience to the whips. The Irrepressible Victorian, p. 149, lists several occasions during his time as a Conservative MP when he voted with the Liberals. Even when he changed parties it seems that he was the only Liberal candidate in the general election of December 1910 who did not enthusiastically support the Parliament Bill. See N. Blewett, The Peers, the Parties and the People: The General Elections of 1910 (London 1972), p. 470 (n. 82), quoting from his election address to the effect that the principles behind the Parliament Bill were “in some respects manifestly imperfect, in some respects incompatible with the Parliamentary system of the country.”

18 The Times 31 July 1913, p. 6: “What I resisted, and defeated, in Bowles v. Bank of England was Mr. Lloyd George's desire to escape from having to pass the annual law imposing the [income tax] till the eve of Christmas, and his desire to levy the tax during a period of over eight months without any warrant of law whatever”.For a somewhat lengthier exposition of the same reason see the introduction to Court Records, especially pp. vii–xii.

19 See section VI.

20 [1943] 1 K.B. 314.

21 Ibid., at p. 318.

22 It should be emphasised that then, as in the rest of the twentieth century, the presentation of the Budget tended to be early enough. The problem as perceived by Bowles was the slow pace thereafter on the Finance Bill. The Budget dates throughout the century are conveniently collected in D. Butler and G. Butler, Twentieth-century British Political Facts 1900–2000 (8th ed., Basingstoke 2000), p. 428.

23 The respective Budget dates were 30 June and 16 May.

24 [1913] 1 Ch. 57, 68. How Bowles arrived at these figures is explained in Court Records, at p. viii.

25 HC Deb. vol. 40 cols. 908–909 (1 July 1912).

26 The discussion is at HC Deb. vol. 41 cols. 1521–1539 (26 July 1912).

27 HC Deb. vol. 44 col. 32 (18 November 1912), and cols. 97–98 (19 November 1912).

28 HC Deb. vol. 50 col. 410 (13 March 1913).

29 Ibid., cols. 993–1008 (18 March 1913). The adjournment was moved by a Unionist MP, Felix Cassel, who went on to take a prominent part in the debates on the Bill.

30 HL Deb. vol. 14 col. 234 (21 April 1913).

31 This is a distinction that is drawn in Australia as a consequence of s. 55 of the Constitution: “Laws imposing taxation shall deal only with the imposition of taxation….” See Re Dymond (1959) 101 C.L.R. 11.

32 For an account of its background see Jaconelli, op. cit., p. 281.

33 That this element was deemed an optional addition, is, perhaps, indicated by the fact that it stands in square brackets in the extant copy: AC 10/2/83 of the papers of Austen Chamberlain, located in Birmingham University Library. The measure that became the PCTA 1913 would not have satisfied this requirement.

34 See Jaconelli, op. cit., pp. 279–280.

35 See M. Laffan, The Partition of Ireland 1911–1925 (Dundalk 1983), pp. 39–40.

36 For the text of the resolution see HC Deb. vol. 51 col. 835 (7 April 1913).

37 Ibid., col. 836.

38 HC Deb. vol. 41 col. 1532 (26 July 1912).

39 He had been Chancellor for just over two years in 1903–1905, and was to occupy the post again for a similar period just after the First World War. See A. Chamberlain, Politics from the Inside: An Epistolary Chronicle 1906–1914 (London 1936), p. 545 (an entry dated 7 April 1913): “All my sympathy from past Treasury training and from present Tariff Reform proclivities is on the Chancellor's side, but I don't like helping him and the Party won't like my doing it.” See also at p. 502 for a statement to similar effect.

40 HC Deb. vol. 51 col. 858 (7 April 1913).

41 Bowles v. Bank of England [1913] 1 Ch. 57, 85.

42 Resolutions of both Houses are required elsewhere: for the making of remedial orders by ministers under the Human Rights Act 1998, schedule 2, para 2 (a); and for approving draft Orders in Council to give effect to a Boundary Commission report under the Parliamentary Constituencies Act 1986, s. 4(3).

43 PCTA 1913, s. 1(1): PCTA 1968, s. 1(2)(b). An early intimation of this provision is to be found in the amendment moved by Mr Steel-Maitland that would have added: “where a Special Resolution is passed by the House of Commons that it is expedient, in order to safeguard the interests of the public revenue, to give temporary effect to any Resolution of this House for imposing taxation” HC Deb. vol. 51 col. 922 (7 April 1913Google Scholar).The crucial amendment, that was promptly accepted by the government, was moved by Mr Cassel in the belief that it was “much better that the Resolution should deal with the public interest generally, and not merely with the interests of the public revenue”: ibid., at col. 1771 (14 April 1913).

44 PCTA 1913, s.1(1)(a).

45 PCTA 1913, s. 1(2).

46 PCTA 1913, s. 1(1)(e): PCTA 1968, s. 1(8).

47 Parliament Act 1911, s. 1(1).

48 In any case, the time limits soon made their presence felt. On 7 July 1914 Asquith introduced a guillotine resolution to curtail discussion of the Finance Bill then before the House. The reason was the constraints of time now imposed by the PCTA. Andrew Bonar Law, replying for the Opposition, stated his belief that it was the first time that a guillotine motion had been applied to a Finance Bill: see HC Deb. vol. 64 col. 933 (7 July 1914). On the extraordinary nature of the use of the guillotine in these circumstances, see The Budget Guillotine (dated 4 July 1914) in the papers of Bonar Law in the Parliamentary Archives: BL 38/C/17. The detailed timetable calculations that were now rendered necessary by the PCTA 1913 are illustrated by the following documents, also in the Bonar Law papers: Parliamentary Time & The Budget (dated 24 June 1914) BL 38/C/14; and The Budget and the Provisional Collection of Taxes Act (undated) BL38/C/19.

49 The consequent deletion of the stage involving that Committee was a change more of form than of substance since it was a Committee of the Whole House. In many respects, however, it was a consolidating measure.

50 Inevitably the criticism is made that the periods are not long enough to allow sufficient parliamentary control over taxation. The report, Making Tax Law, of the Tax Law Review Committee (chairman: Sir Alan Budd) (Institute for Fiscal Studies, London: 2003) proposed that the deadline of 5 August be changed to 5 October and that the default period of four months be changed to six months. See paras. 4.5 and 4.9.

51 PCTA 1913, s.1(1)(b): PCTA 1968, s.1(5)(c).

52 There is a table that conveniently sets out the dates in Blackburn, R., “The summoning and meeting of new Parliaments in the United Kingdom” (1989) 9 Legal Studies 165CrossRefGoogle Scholar, 172.

53 It is worth noting that the Irish Republic's own PCTA 1927 (largely modelled on the British precedent) was amended by the Finance Act 1992, s. 250, with the result that where the Dáil is dissolved within four months of the date of the resolution the period of dissolution is to be disregarded for the purposes of compliance with some of the time limits in the Act.

54 See G. Howe, Conflict of Loyalty (London 1994), p. 289.

55 On the Conservatives being returned to power it was quickly supplemented by the enactment of the Finance (No. 2) Act 1983.

56 See Howe, op. cit., p. 115.

57 PCTA 1913, s.1(1)(b): PCTA 1968, s.1(5)(a).

58 S.A. de Smith and R. Brazier, Constitutional and Administrative Law, 8th ed., (London 1998), p. 284.

59 Finance Act 1973, s. 50(4). For further discussion of this regime, see note 80, below.

60 PCTA 1968, ss. 1(4) and 1(5).

61 Statutory Instruments Act 1946, s. 5(1).

62 This is recorded by Courtenay Ilbert, a former parliamentary draftsman and clerk of the House of Commons at the time, who was among those who advised the Cabinet on how to proceed in the event of rejection of the Budget. See his diary in the Parliamentary Archives, entry for 26 October 1909.

63 Thoburn v. Sunderland City Council [2003] Q.B. 151.

64 A leading statement of the “new” view of parliamentary sovereignty is R.F.V. Heuston, Essays in Constitutional Law (2nd ed. London 1964), ch. 1.

65 PCTA 1968, s.1(5)(b). Superfluously, it also includes “abolishing” the tax.

66 PCTA 1913, s.1(1): PCTA 1968, s.1 (2).

67 The PCTA 1913 is not mentioned in either Lord Hewart, The New Despotism (London 1929) or J. Willis, The Parliamentary Powers of English Government Departments (Cambridge, Massachusetts 1933).

68 [1974] 3 All E.R. 263.

69 As the judge observed with regret, he was prevented from having recourse to the parliamentary debates, in particular the statements made by ministers in introducing the resolutions: see ibid., at p. 267b – c. Since then a series of cases, commencing with the landmark judgment of the House of Lords in Pepper (Inspector of Taxes) v. Hart [1993] A.C. 593, has permitted the use of Hansard in order to resolve difficulties in the interpretation of statutes. Presumably there will have been a corresponding enlargement of the range of material that may be used for the interpretation of resolutions.

70 HC Deb. vol. 51 col. 870 (7 April 1913).

71 See note 36, above. The opening words of the resolution were: “… a Resolution passed by the Committee of Ways and Means of this House for the imposition of any new tax, or for the variation of any existing tax, or for the renewal for a further period of any tax which is of a temporary character…..”

72 See the debate on the amendment moved by Mr. Murray Macdonald: HC Deb. vol. 51 col. 1709ff. (14 April 1913).

73 PCTA 1913, s. 3. Customs duties had received a passing mention at the end of Parker J.'s judgment in Bowles v. Bank of England [1913] 1 Ch. 57, 91. “I have not considered the case of Customs, as to which there may be some distinction.”

74 See B. Mallet and C. O. George, British Budgets: Second Series 1913–14 to 1920–21 (London 1929), pp. 108–109.

75 Chamberlain, op. cit., p. 551 (an entry for 15 April 1913).

76 PCTA 1968, s. 1(1).

77 For example, petroleum revenue tax was added by the Oil Taxation Act 1975, s. 11. It was subsequently provided that references to that tax in the PCTA 1968, s. 1, should be read as including advance petroleum revenue tax: Finance Act 1982, s. 139(5).

78 See the Finance Act 1993, s. 205(2)(b), which removed car tax.

79 In addition to income tax and customs and excise duties, the nine are: corporation tax, value added tax, climate change levy, insurance premium tax, landfill tax, aggregates levy, petroleum revenue tax, stamp duty reserve tax, and stamp duty land tax.

80 Finance Act 1973, s. 50. The reason is that stamp duty must be levied in a fixed amount on the execution of a document. There would be particular difficulties in regard to instruments that are documents of title if the amount of tax could be provisionally determined only under the PCTA and might have to be retrospectively adjusted, since such documents depend for their legal efficacy on being properly stamped. Indeed, as long ago as the debates on the Provisional Collection of Taxes Bill Mr Steel-Maitland anticipated that stamp duty would cause problems if it were ever to be included in the framework of the legislation. See HC Deb. vol. 51 col. 923 (7 April 1913).

81 For a treatment of the restitution issues where taxation has been improperly exacted see G. Virgo, “The law of taxation and unjust enrichment”, chapter 6 of J. Avery Jones, P. Harris and D. Oliver (eds) Comparative Perspectives on Revenue Law: Essays in Honour of John Tiley (Cambridge 2008).

82 For short, general accounts see A. Michie and S. Hoggart, The Pact: The Inside Story of the Lib-Lab Government, 1977–8 (London 1978), and D. Steel, A House Divided: The Lib-Lab Pact and the Future of British Politics (London 1980).

83 J. Barnett, Inside the Treasury (London 1982), p. 118. For another occasion when the government pleaded administrative difficulties as a reason for not reducing an interim tax rate, see the response of Edmund Dell, the Paymaster-General, to a proposed amendment to the Finance Bill which was then before the House of Commons: “There is a serious practical objection to [the] proposal. If this amendment were passed, we would need to refund the difference between 15 per cent. and 25 per cent. since 18 December. I do not know how that would be done:” HC Deb. vol. 887 col. 1196 (3 March 1975Google Scholar).

84 PCTA 1913, s.1(1)(c) – (d).

85 [1993] A.C. 70.

86 See the Value Added Tax Act 1994, s. 80 (as amended), and the Taxes Management Act 1970, s. 33.

87 See Monro v. Revenue and Customs Commissioners [2008] EWCA Civ 306, [2008] 3 W.L.R. 734. It was held there that, where Parliament had created a right or remedy in statute for the recovery of tax payments, there was a strong presumption that proceedings at common law were thereby ousted.

88 Restitution: Mistakes of Law and Ultra Vires Public Authority Receipts and Payments (Law Commission Report No. 227: Cm 2731, 1994).

89 Ibid., para. 11.3.

90 See note 86, above.

91 See note 88, above, para. 11.6.

92 It should be noted, however, that what is defined as a “temporary tax” may lawfully be collected, subject to contain conditions, for one month after the tax expires: PCTA 1913, s. 2(1); and PCTA 1968, s. 2. An additional element of flexibility is provided by the fact that the starting point for the force of a Budget resolution can be either the date on which it is passed or the date on which it is expressed to take effect: PCTA 1913, s. 1(2); PCTA 1968, s. 1(3)(b).

93 See now the Income Tax Act 2007, s. 4(1): “Income tax is charged for a year only if an Act so provides.” It is suggested that this oddly phrased provision be viewed as one of those rare examples of a constitutional convention being transformed into law.

94 Some idea of the relative importance of income tax and corporation tax can be gained from recent Treasury statistics. In the tax year 2007–08, out of a total tax and customs revenue of £451.1 billion, they yielded receipts of £147.4 billion and £46.3 billion respectively (allowance being made for income tax credits and corporation tax credits). Only the yields for national insurance contributions (£100.4 billion) and for value added tax (£80.6 billion) remotely approached these figures. See Budget 2009 HC 407 (ordered to be printed 22 April 2009), p. 231.

95 It must be conceded, in any case, that the typical “sunset” provision tends to be obliquely phrased. For an example taken at random, see the terms of the Finance Act 1994, s. 75(1):

“Income tax shall be charged for the year 1994–95, and for that year –

  1. (a)

    (a) the lower rate shall be 20 per cent.,

  2. (b)

    (b) the basic rate shall be 25 per cent.,….”

See also s. 85:

“Corporation tax shall be charged for the financial year 1994 at the rate of 33 per cent.”

96 Note the unusual preamble inserted in Finance Acts:

“Most Gracious Sovereign,

We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom in Parliament assembled, towards raising the necessary supplies to defray Your Majesty's public expenses, and making an addition to the public revenue, have freely and voluntarily resolved to give and grant unto Your Majesty the several duties hereinafter mentioned; and do therefore most humbly beseech Your Majesty that it may be enacted, and be it enacted ….”

97 See the general survey in Kearns, P.S., “The Determinants of State Budget Periodicity: An Empirical Analysis” (1993) 13 Public Budgeting and Finance 40CrossRefGoogle Scholar.

98 To quote Dicey's own words: “Sooner or later the moment would come for passing …the Appropriation Act” (Emphasis added): A.V.Dicey, Introduction to the Study of the Law of the Constitution with introduction by E.C.S. Wade, 10th ed., (London 1959), p. 450.

99 By virtue of the Import Duties Act 1932.

100 See The Irrepressible Victorian, at p. 178. It appears that Bowles had secured the financial backing of the Rothschild family for the purpose of bringing this further action. See the entry for 17 November 1912 (a mere 13 days after judgment was given in Bowles v. Bank of England) in J. Vincent (ed.), The Crawford Papers 1892–1940 (Manchester 1984), p. 286.