Orders of the Day — Budget Proposals and Economic Survey

Part of the debate – in the House of Commons at 12:00 am on 12 April 1951.

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Photo of Sir Arthur Salter Sir Arthur Salter , Ormskirk 12:00, 12 April 1951

I wish I could have as much effect, though of a somewhat different kind, as the wolf in the fable had.

When we turn to consider the incidence of present and proposed taxation on different classes, one fallacy must be killed at once. The Chancellor yesterday gave us a very misleading statement as to the extent of tax remission since the end of the war, and the Financial Secretary has repeated it. I do not say that the calculation which he made was incorrect on the basis on which it was framed. What I do say is that the Chancellor and the Financial Secretary totally ignored the basic fact, which is behind their calculations, that prices, monetary incomes and the total national income, as expressed in terms of the pound, have all been rising together. The result is that all those whose wages and incomes have increased in correspondence with the rise in prices have, without any increase at all in their real or relative income status, been swept automatically into higher taxation categories and outside the exemption limits.

How absurd a calculation of that kind can be unless that qualification is made, can easily be shown if we imagine a great inflation which might have the result, let us say, of quadrupling all our prices, wages and incomes. Then, if we retained the same monetary limits for the exemptions and for entry into the Surtax range, we might at once double the real burden of taxation in spite of doubling the extent of nominal reliefs as calculated by the Chancellor. It is a fantastic calculation, unless those qualifications are made.

I do not think that the full consequences of rising prices, not only since and during the war, but from an earlier period, have been fully realised by the public generally. I remember that, before the war, we used to think of a Surtax man earning about £2,500 a year as a rich man, and so he was, with the purchasing value of the £ as it was then and with taxation as it was then. Do we realise that today a £2,500 a year man is equal in real economic status to the £750 or £800 a year man before the war, and that the same kind of thing is happening through all the wage and income categories?

Let us look for a moment at rising prices only, and their effect on the ability of different classes to bear taxation. The pound of 1938 had become about 14s. in 1945, and is now about 10s. The pound of 1945 is now about 15s., and likely soon to be a little less.