Orders of the Day — Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 7 April 1949.

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Photo of Mr Roy Jenkins Mr Roy Jenkins , Southwark Central 12:00, 7 April 1949

The hon. Member is now trying to modify his attitude. What he means is that dividend limitation ought to be swept away, but not wage limitation. If his speech did not mean that, it meant nothing at all.

We heard from him, and from the right hon. and gallant Member for Gains-borough, a general objection—in the case of the right hon. and gallant Gentleman it was put very moderately indeed—to the present level of taxation. It is certainly a very high level of taxation about which hon. Members on this side of the Committee should not feel complacent. It is a heavy responsibility to take more than 40 per cent. of the national income in taxation. We should all be aware of that fact and face up to it, but we should see the thing in its proper perspective and realise, as my hon. Friend the Member for Chesterfield (Mr. Benson) pointed out, the many benefits which the nation as a whole is getting in return for that very high level of taxation.

Furthermore, the Opposition are not really in a very strong position at the present time—as I think the right hon. and gallant Gentleman realised this afternoon—to complain about this high level of taxation, not only because they have not put forward any specific large-scale suggestions for its reduction, but because a great part of their by-election propaganda is devoted to saying that if they were in power the social services would be even more generous than they are at the present time. Every mother would have analgesia. The health centres would be better. The schools would go up more quickly. They even hint that war pensioners would have all their grievances remedied, and that even old age pensioners might get something better.

Fortunately, the electorate does not appear to believe this, but it certainly puts the party opposite in a very weak position from the point of view of complaining about the present high level of national taxation. In view of this, they are driven back by the logic of their own propaganda—if they have any respect for its logic—into the sort of position in which the right hon. Member for North Leeds (Mr. Peake) found himself last year when he put forward suggestions for what one might call certain small administrative economies. These were not matters of policy, but matters of administrative efficiency. And if it is a question of administrative efficiency, and if I have to choose between my right hon. and learned Friend and, perhaps, the right hon. Member for West Bristol (Mr. Stanley) or another right hon. Gentleman opposite, my money would be on my right hon. and learned Friend every time.

I think it is true to say that it is the higher level of direct taxation more than anything else to which the principal objection of the Opposition is directed. If they could cut down expenditure, I think they would certainly give a very high degree of priority to reducing the level of direct taxation. But this question of high direct taxation is, I suggest, bound up with something more than the question of a high level of national expenditure. Since 1938, we have carried through in this country a very considerable measure of redistribution of income. According to some figures I obtained from the "Economist," up to the end of 1947, the effective purchasing power of the wage earner had increased by 16 per cent. over that of 1938; that of the salary earner was down by about 19 per cent.; and that of the dividend drawer and rentier was down by 4 per cent. These trends were certainly not reversed during 1948, and this represents a very important move towards greater equality of income in this country. It is a move which I am sure every hon. Member on this side of the Committee regards as being extremely desirable and long overdue.

But—and this is the important point here—a large part of this redistribution has been carried out, not by changing the distribution of income at source, but by means of redistributive taxation. This poses a difficult future problem for us on this side if we want to go further towards equality of income, but it also poses a very great problem for the Opposition. They want rapid and substantial reductions in direct taxation. Are they prepared to say quite clearly and openly that they stand for a move away from the present comparative equality of distribution of income, that they want to go back to the sort of distribution which we had in this country in 1938? Is that their wish? If not, what are their proposals for changing the distribution of income at source?

From a long-term point of view, I regard a standard rate of tax of 9s. in the £ on earned income as undesirable in itself. But I also want to preserve at least the present degree of equality of that income in this country. Therefore I say that we on this side of the House have to do some thinking about how we can change the distribution of income at source. We have to consider how the nationalised industries, which have not been used for this purpose in the past to any appreciable extent, could be used as a weapon in this direction. What is the attitude of the Opposition? Are we to understand that a return towards greater inequality is a plank in their programme, or have they any plans or any thoughts about changing the distribution of income at source, because without that, a reduction in direct taxation inevitably means a substantial return towards greater inequality of income.

I now turn to the relationship between direct taxation and industrial re-equipment. The Opposition say that the present rates of taxation have a crippling effect on the ability of industry to reequip itself. I think that is a great exaggeration. There is no evidence at all to suppose that in 1948 we could have carried on the re-equipment of our industry at a greater rate had the rates of taxation been lower.