Budget Proposals

Part of the debate – in the House of Commons at 12:00 am on 15th April 1953.

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Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames 12:00 am, 15th April 1953

There falls to me the always agreeable duty of congratulating an hon. Member on his maiden speech. The hon. Member for Small Heath (Mr. Wheeldon) made a most agreeable, polished and knowledgeable speech. I think that I speak for the whole Committee when I say that it was evident that the hon. Member was speaking with authority upon a subject with which plainly he is well acquainted, and that he spoke with a successful concealment of the nervousness which all of us, in our hearts, suffer when we go through the ordeal which he has just so successfully surmounted.

I hope that the hon. Gentleman will contribute to future debates with the same clarity and force as he has on this occasion and that he will feel himself no more trammelled by the need for relative impartiality than he did this afternoon during his maiden speech. He started with the great advantage of having succeeded an hon. Member whom all of us on both sides of the Committee knew, respected and admired. The hon. Member fully justified his succession to his late hon. Friend's seat by his very agreeable demeanour this afternoon. To add one not particularly impartial comment, I might say that I was delighted to listen to a speech upon local government finance by a representative of the great city of Birmingham which, as hon. Members know, has set so successful an example of recourse to the stock market under the new freedom given to local authorities.

I wish to address a few observations to the Committee in reply to certain parts of the speech made by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell). In fairness to the right hon. Gentleman, I should tell the Committee that he was courteous enough to indicate that it would not be possible for him to be here. I understand that his absence has something to do with a subsequent appearance in the Light Programme of the B.B.C. I thought that I ought to tell hon. Members that since the right hon. Gentleman, I know, observes all the punctilio and courtesy of debate and I should not like to leave the Committee under any apprehension that the right hon. Gentleman had been guilty of a breach of those standards on this occasion. I, equally, communicated to the right hon. Gentleman the fact that his absence would not wholly prevent me suggesting to the Committee one or two of the reasons why some of his conclusions appeared to me to be in some degree fallacious.

The right hon. Gentleman's speech fell very neatly into two parts. There was— and I use the term in no discourtesy—the economic lecture delivered with his usual lucidity, leading, as it always does, to the conclusion which was politically convenient to the right hon. Gentleman. I thought that the right hon. Gentleman was a little less than generous, not to Her Majesty's Government—we do not seek his generosity—but to the British people, when he went out of his way to indicate that no particular efforts and no particular sacrifices had been made to achieve the improvement in our balance of payments position.

The right hon. Gentleman's flawless lucidity of exposition would perhaps have been a little more convincing if there had not come into my mind, as I am sure there came to the minds of many of us in this Committee, the recollection that the right hon. Gentleman, who was demonstrating, at any rate to his own satisfaction, the complete perfection of his own economic policy and the imperfections of the Chancellor's, was the same right hon. Gentleman who left the finances of the country in a condition of a grave and growing balance of payments crisis which required urgent action to prevent a national disaster. It would have become the right hon. Gentleman a little better if he had at one stage or other of his observations indicated that the heritage which he handed over to my right hon. Friend in October, 1951, was not exactly that of a smoothly running concern.

I shall not seek to weary the Committee with my own observations on much of the right hon. Gentleman's arguments on the plane of economic theory, since I understand that, if he has the good fortune to catch your eye, Mr. Speaker, my hon. Friend the Economic Secretary to the Treasury will make some comments on that topic. We therefore pass, as the right hon. Gentleman passed with it seemed to me manifest reluctance, from the high plane of economic theory to which he devoted the first part of his speech to the somewhat lower level of contemporary partisan politics to which he devoted the concluding parts of his observations.

I am bound to say, as my right hon. Friend the Member for Blackburn, West (Mr. Assheton) said, that we all sympathised with the right hon. Gentleman. It was pathetic to see a fine animal with all his fine qualities struggling with the all but impossible task of finding valid and penetrating criticisms of the Budget which my right hon. Friend introduced yesterday. It is always impressive to see a fine performer playing a very difficult part. It is amusing for everybody, except perhaps the performer, and I hope, therefore, that what I am about to say about that performance will not indicate any lack of understanding of the inherent difficulties of the right hon. Gentleman's position.

His speech displayed the same confusion of counsel about the Budget as those of us who read that remarkable organ found in this morning's "Daily Herald," and it is somewhat revealing that, on this particular topic, both on the first and second pages of that charming newspaper, there is an indication that my right hon. Friend's speech contained proposals of such obvious popularity as to indicate an election in the near future. "A Bold Bid for Popular Favour" is the description conveyed by the political correspondent, yet, on the first page, these same proposals are described as "A Thoroughly Unjust Budget." The right hon. Gentleman the Member for Batter-sea, North (Mr. Jay), who, I understand, provides the "Daily Herald" from time to time with such economic information as comes his way, referred to the tax reliefs as being on an unfair and unashamedly class basis.

Neither the right hon. Gentleman nor the "Daily Herald" can have it both ways. They must take a very curious view of the English people, and the Scottish and the Welsh peoples, if they think that a bold bid for popular favour can be made by a thoroughly unjust Budget. They cannot really claim simultaneously, though they can, no doubt, do it at separate times, both that my right hon. Friend indulged in acts of oppression of the poor in the interests of the rich, and, at the same time, was openly seeking popular electoral favour. Really, a great newspaper and those who take their opinions from it must make up their minds which of these two horses they are going to ride, because, if they do not, then inevitably they will fall off and find themselves on neither.

The right hon. Gentleman concentrated his argument this afternoon very much along the lines which those of us who read his right hon. Friend's article in this morning's "Daily Herald" could have forecast with quite remarkable accuracy. The whole gravamen of his case was that concessions were being heaped upon what he described as the least deserving, by which I understood him to mean what the late Sir Stafford Cripps used to describe more politely as the higher income groups, while, on the other hand, nothing was being done for other sections of the community who were in great need. I think that is a fair summary of that part of the right hon. Gentleman's speech, and I should like to follow it up a little.

First, let me follow up the implication that the concessions on Income Tax only matter to a few very rich men. There are some 16½ million Income Tax payers today, and that represents more than 16½ million people, since in many cases husband and wife are what the Inland Revenue crudely describe as one Income Tax unit, and, indeed, the income of that husband and wife is often the main support of a family. We are dealing, therefore, as far as I can make out, with the interests of something of the order of 30 million people, and it is important to appreciate that, as the result of what my right hon. Friend has done, every one of the Income Tax payers, who, with their families, make up these 30 million, gains some benefit by reduction of his liability to tax.

Now, I do not know exactly what category of people it is to which the right hon. Gentleman suggests that my right hon. Friend was so terribly oppressive. I do not know to whom the "Daily Herald" suggests that my right hon. Friend was terribly oppressive. Is it to the readers of the "Daily Herald," because, if it is, the "Daily Herald" itself does not seem to think so. As recently as 15th January, that distinguished organ of opinion put an advertisement in the "Advertisers' Weekly" containing the no doubt sound suggestion that advertisers would do good business by advertising in the "Daily Herald." In order to support this proposition, this assertion included these words: One-third better off than pre-war (despite increased cost of living) and with more than half of them enjoying two or more wage packets every week, 'Daily Herald' families have vast spending power. They do not seem to be doing so badly, despite the gloomy views of the right hon. Gentleman, and I assume that, before inserting an advertisement of that character and suggesting that people, on the basis of this assertion, should spend money on purchasing advertising space, a responsible newspaper sought advice from the normal sources of economic inspiration, and that, therefore, these are the views of the right hon. Gentleman the Member for Battersea, North.

But I do suggest to the Committee that file fair test, in the ultimate analysis, of the Budget proposals is not as to whether they serve in greater or less degree the precise individual or sectional interests of one section of society or another. Surely, the only test which this Committee ought to apply to the Budget proposals is, aye or no, whether they serve the fundamental interests of this nation and the fundamental necessity of revivifying and restoring our economy and our competitive power. I think it would be wrong if we were to conduct these proceedings solely on the basis of X being a penny better off and Y being a penny worse off, because, surely, in this Committee, we can all take it for granted that the greatest interest of everyone in this nation is the restored capacity of this nation's economy, because if we fail to restore it, everybody in every section of society will suffer, and if we succeed in restoring it, every section of society will gain.

But I will, none the less, try to analyse a little more fully than has been done so far the direction in which the concessions on direct taxation fall. I am not going to worry very much about that figure of the right hon. Gentleman's imagination—the bachelor with an unearned income of £100,000 a year. Within my limited acquaintance, such fortunate beings do not, as far as I know, exist, and, although the right hon. Gentleman the Member for Leeds, South is apparently more fortunate in his acquaintances, I do not think any of us need spend much time on this somewhat intangible figure.

I should like to go a little more into the sphere of reality. [Interruption.] I would say to the hon. Gentleman that even the appearance of a figure in a White Paper does not necessarily connote a real figure on a bench or in a street. What I think has not been brought out is that my right hon. Friend's proposals provide for a reduction of 6d., not only in the standard rate of Income Tax of 9s. 6d,. which comes down to 9s., but also in the three existing lower rates. The 7s. 6d. rate falls to 7s., the 5s. 6d. rate to 5s. and the 3s. rate to 2s. 6d., and the Committee will recall that it is at these lower levels that those taxpayers in the lower income groups are mainly taxed.

There are some millions of taxpayers, I understand, who only pay tax at the lowest rate, formerly 3s. and now to be 2s. 6d. The 6d. reduction on the lowest rate of 3s. is a reduction in the tax bill of those who pay at that rate only of no less than one-sixth—16⅔ per cent.—and hon. Members will notice that, as the 6d. reduction runs right through the tax scale, the biggest proportionate reduction in the tax bill comes at the bottom of the scale, falling, therefore, from one-sixth at the bottom to, I think I am right in saying, little more than l/38th in the case of the right hon. Gentleman's bachelor friend.

That makes it clear that the biggest proportionate reduction in the rate of tax applies to the lowest incomes which are subject to tax. Although the right hon. Gentleman rather brushed aside the various figures in the tax tables, it is the fact that even in the case of a somewhat more real figure than the right hon. Gentleman's friend, that of a single man with an earned income of £175, there is some appreciable gain. As we come a little higher up to the single person with an earned income of £300 a year, we find that his tax bill is cut by nearly £3 from £18 13s. 4d. to £15 16s. 8d.

There is another class of society worthy, I should have thought, of the attention of this Committee. Take the married couple with three children on £1,000 a year, a not unfamiliar type faced with not unfamiliar financial problems. That couple find their tax reduced by some £8. And so it goes on through the various salary scales. I think the right hon. Gentleman was hardly fair in omitting in this way from his allegations of my right hon. Friend's failure to deal with hardship all reference to the specific concessions to this end which are included in these proposals.

The context of what the right hon. Gentleman said was less than fair to the concessions made to those who have the heavy burden of maintaining on a small income a dependent relative or of employing a housekeeper; nor did he refer to a very welcome relief indeed, the age relief, which has been raised from £500 to £600. One cannot really judge what my right hon. Friend is doing if one ignores altogether what is done for real people in substantial numbers and, instead, spends one's time talking about people with unearned income of £100,000 a year.

At this stage of the Budget debate there is a chance to get some idea of the first thoughts of people in this Committee and outside upon my right hon. Friend's proposals, and it is the fact, like it or not, that, in general, those proposals have been received outside by a public which, if I may use the words of the old hymn, has been Slow to chide and swift to bless. It is the gathering realisation growing in the minds of our fellow countrymen that my right hon. Friend has succeeded in the twin task of concentrating much of his effort upon the major factor of stimulating national recovery, while not forgetting the human necessities which he has been able to help, which is responsible for the favourable reception his proposals have had. He has succeeded—a kind of success so rarely found—in combining fundamental economic purpose with the touch of common humanity.

As my right hon. Friend the Member for Blackburn, West pointed out, it is conspicuous that this is the first Budget for many years which neither increases taxation nor imposes new taxes. Indeed, it may interest hon. Members to know that if one excepts the Budget for 1945, at a time when the war was rapidly coming to an end, one has to go back to 1935 to find a precedent for this. Therefore, my right hon. Friend the Member for Blackburn, West, in his most interesting speech, was wholly right in pointing to the new approach to the problems of taxation which my right hon. Friend's proposals embody, the realisation of the immense burden of taxation borne in this country alike by industry and by the individual, and of the dangers which lurk in a burden of that weight.

The right hon. Member for Leeds, South showed in his closing words how fundamentally different was his approach to the subject of taxation. Referring with reluctant kindliness to my right hon. Friend's decision with regard to the Excess Profits Levy, he then went on to say that he would himself, if that had to be done, impose dividend limitation and raise the Profits Tax. That was a very revealing comment because it seemed to indicate that the right hon. Gentleman regarded high taxation upon industry, not as the necessary means of raising the national revenue, but as something that was good in itself and that it was wrong, even though it might be financially possible, to lighten the burden on industry.

I thought that attitude was equally revealed when the right hon. Gentleman referred to tax concessions as largesse. It is a curious conception, when a State, as our State is doing, is raising from its citizens a higher rate of taxation than has ever been known before, that when it becomes possible to relax in some small degree that burden, a right hon. Gentleman who has himself been a Chancellor of the Exchequer should refer to this small lightening of the burden as a distribution of largesse. That is a very revealing comment and shows the vast gulf which yawns between right hon. Gentlemen opposite and ourselves on this question of taxation.

One would have thought that the right hon. Gentleman, with all his economic knowledge, would have appreciated the fact that high taxation on industry, carried on year after year, has a good many ill effects which it may be possible to exaggerate but which it is not possible to ignore. The knowledge that as profits rise so in proportion more goes to the tax gatherer must, in the course of years, somewhat blunt and diminish the willingness to make new effort, extra effort, to experiment, to plan and to go ahead, which are, of course, the very dynamics of a free enterprise society.

It seemed to me that, from this point of view, the right hon. Gentleman revealed an attitude of mind which he certainly succeeded in concealing with some skill when he sat in my right hon. Friend's place, but which, perhaps, now accounts for the greater harmony he is said to have with certain elements in the party opposite. The right hon. Gentleman was terribly anxious that the owners of industry should not get an extra penny. It is not my purpose to argue that matter on an ethical, metaphysical or philosophical plane, but it is surely fundamental to the problem of stimulating investment, which the right hon. Gentleman admitted to be necessary, to give to the prospective investor some prospect that his investment will at some time bring back some reward. What the right hon. Gentleman wholly failed to appreciate was that all Ministerial admonitions on the value of savings will not cut much ice until saving and risk taking is to be rewarded by material recompense if the enterprise is a sound and successful one.

He said—and it was less than fair— that no one under the Income Tax level gets a single penny. That is simply not true. My right hon. Friend has proposed reductions in Purchase Tax costing no less than £60 million in a full year, and many of them are upon articles which go to a great many homes. It is not for me to exaggerate—and I have no intention of doing so—what effect they may or may not have on the cost-of-living index or on the cost of living, but it is a fact that this cut is a contribution to a steady reduction in prices, which must be a peculiar and special benefit to those whose incomes are lowest and therefore most susceptible to movements in the level of prices.

No doubt the right hon. Gentleman was pressed for time, but it was quite wrong of him to make an assertion of that kind in the face of the fact that in this respect, as in others to which I have referred, my right hon. Friend's Budget is a carefully constructed whole in which he is not only serving the major economic purpose of this country's recovery but has sought, within the limits possible, to bring easement, aid and comfort to a very wide variety of people in this country.

It will in due course be for people outside this Chamber as well as inside to judge not only upon this Budget but upon the full financial proposals. I hope that I may be allowed to say that I do not believe that the attempt to play upon narrow class sectional feelings, in which the right hon. Gentleman thought it consistent with his high reputation to indulge, will cut very much ice with the British people. I believe that they will prefer the proposals of my right hon. Friend which are conceived with one purpose only—the restoration of this country's economy from the mess in which he found it.