Orders of the Day — Budget Proposals and Economic Survey

Part of the debate – in the House of Commons at 12:00 am on 16 April 1951.

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Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby 12:00, 16 April 1951

I propose to talk about taxes, because it seems to me that the Budget debate is an appropriate occasion to do so. There are three types of taxes. There is the vindictive version which does not aim at doing anything to improve the economy of the country but rather at pleasing the many by hurting the few. The Chancellor is certainly not guilty of that, and I think that is a tribute to his heart, which I know is good, and also to his head, which I am sure is good, too, because I do not believe that that type of tax—sometimes called for by the extreme Left-Wing Press—is really at all acceptable to the average man and woman of this country, of whatever party they may be.

I thought the Chancellor was very fair in his views on profits, but I am bound to say that there are other hon. Members behind him who, in this and other debates, have not taken quite such a fair view. I do not know whether they have been attacking profits out of a malicious point of view because they think it will bring them personal popularity, or whether it is out of a real ignorance of the position. Those to whom the latter applies, I would refer to the White Paper on National Income and Expenditure, which shows in Tables 9 and 11 that the increase in wages in 1938 terms is 158 per cent. and the increase in distributed profits is 48 per cent. If those figures are adjusted to allow an increase in the cost of living, it means that the wage earner is 22 per cent. better off and the shareholder is 33 per cent. worse off. I am not quarrelling with that; I am not saying it is unfair; but I am saying that it is not reasonable to attack excessive profits if we bear in mind what are the exact figures. For the first quarter of this year, the company reports in the "Financial Times" show that 50 per cent. went in taxation, 35 per cent. in depreciation and reserves, and only 15 per cent. was distributed.

The second type of taxation to which I wish to refer is that to check inflation. That, of course, the Chancellor has tried to do in mopping up purchasing power. If only his predecessors had been wise enough to leave some taxable capacity in reserve for an emergency, he might effectively have done that. As it is, taxation is at such a level that I think he must consider that we are very near the point when further taxation can only cause dissaving.

The third type of taxation is redistribution of income. The Chancellor has not tried to do very much on that and now, with taxation on the bigger estates at 19s. 6d. in the £ and the heavy Death Duties, there is not very much that he can do. According to the same White Paper, there are in this country today only 5,000 people with a net income of £4,000 a year. If everything of that were taken, it would collect £2 million, or finance the country at the present rate for five hours. There are 80,000 people with incomes of over £2,000 a year net, and if all of that were taken—and without taking account of the dislocations which would occur—that would collect £62 million, or finance the country for six days. Therefore, it seems to me to be clear that we have got pretty well to the end of re-distribution until we can vastly increase the National income.

In this century there have been enormous improvements in the way of living and in social services, and great re-distribution, which all reasonable people must welcome. We welcome it chiefly, and firstly, on the grounds of humanity. We must welcome it, secondly, because if it had not taken place the practical results would have been very different indeed. It would have caused industrial trouble which would have adversely affected production and made all of us poor. Hon. Gentlemen on the other side of the Committee are very apt to take credit for the improvement which they claim in conditions today compared with those earlier in the century. Indeed, the older hon. Gentlemen are, the further back they go in their comparisons. It would be an astonishing thing, with all the enormous technical improvements that have taken place, if that were not so. It would be like being surprised because the cheapest motor car made today shows a faster performance than one made in 1901.

What I think hon. Members opposite should remember is that the pace with which we can afford to re-distribute wealth must be measured by its effect on production. Quite obviously, if we tried to make complete equality of wealth, there would be no incentive, and the only way of getting work done would be by direction of all the forces of the country, as in a totalitarian regime. We know well that that leads to low production as well as low consumption. I believe that there is an optimum point to which at any one moment re-distribution can go. I believe that the Government have gravely miscalculated, to the great cost of the country. I believe that if we are not to damage the welfare State, there have to be drastic cuts in Government expenditure. I have no doubt that much could be saved by better administration, but I am not going to claim that anything like that which is necessary could be attained by economies in administration. I believe it has to be attained by changes of policy.

I suggest to Members opposite that if the three assumptions I am going to make are justified, then these cuts are called for. I suggest, first, that prices rise when demand exceeds supply, and in demand we have to include, which Members opposite are apt not to do, Government demand as well as private demand. Some Members opposite may well say that we can prevent prices from rising by controls. I would remind them that if they start controlling essentials, then men and materials are diverted to unessentials, and therefore the net has to be spread even wider. If there are controls upon all things, then at a time of scarcity it is vitally necessary to ration in order to get fair shares and avoid black markets. I ask those Members who advocate preventing prices from rising by control whether they are prepared to have wholesale control on almost everything and rationing of almost everything, because if so, where do they differ from those who advocate complete totalitarianism?