Orders of the Day — Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 21st April 1955.

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Photo of Mr Reginald Maudling Mr Reginald Maudling , Barnet 12:00 am, 21st April 1955

That is an interesting political comment. I am quite certain that the right hon. Gentleman will produce his usual statistics to make his point later in the debate.

Reduction of Income Tax affects many millions of taxpayers, and, indeed, their dependants, and, of course, the reduction of direct taxation is very different in its inflationary aspects from indirect taxation. Reductions of direct taxation provide an incentive to saving and to increased output; reductions of indirect taxation are surely more an incentive to increased spending. I would have thought that it has always been a classical doctrine of the economists that if there is any danger of increased demand we should concentrate on reducing direct rather than indirect taxation. When we come to the point on savings, surely the increase in personal saving since my right hon. Friend has been Chancellor has been conclusive proof of our argument that, by reducing direct taxation, saving is encouraged.

The other matter on which the right hon. Gentleman spoke was the position of companies. Apparently he dislikes the idea of companies having any relief of taxation. He talked about giving money away to them. I must say that, in the circumstances, "giving away" seems a little hard. After all, it was their money. I do not quite understand the right hon. Gentleman's objections to big companies. Admittedly, if any organisation is big it is likely to be more powerful, and that applies just as much to public as to private organisations. But, in general, I would say that if a company is big, it is because it has grown by its own efforts and its own efficiency. Surely, in the modern world, it is nonsense to imagine that the economy of the country can be conducted without a large number of thriving big companies side by side with the medium and small businesses to which we also attach great importance.

The right hon. Gentleman appeared to regret that this measure would mean tax relief for companies. I am glad that it does. I believe that by giving further tax reduction to industrial undertakings, we will help this country as a whole, because in the first place our industrial companies have to bear the burden of competition with other countries, in many cases with a far lower level of taxation than we have; and, secondly, from the savings of industry and the ploughing back of profits we can develop the new undertakings, factories, plant and machinery upon which our employment and standard of living depend. I consider it one of the good and most favourable factors of my right hon. Friend's proposals that they will enable British industry to make an even greater spurt than it has done in the last year.

The other thing about Income Tax in the right hon. Gentleman's remarks which interested me was his objection to the reduction in the standard rate. He said that no doubt we on these benches would argue that it is perfectly right when reducing taxation to reduce it more for the rich than for the poor, because the rich are paying more taxes. That, he said, was the difference between us. Does that mean that he would never reduce the standard rate? Does it mean that he considers that it is always wrong to bring in a reduction of the standard rate because it means more help to the higher taxpayer than to the lower taxpayer? I would be interested to know whether that is what he believes.

Then the right hon. Gentleman came to a different theme—I would have thought, a rather quaint theme for him. He talked about my right hon. Friend running away from the economic crisis and having an Election. Of all people, he is the last who should say that. In 1951, we were facing considerable balance of payments difficulties. In July, 1951, the reserves fell by £43 million; in August by £75 million; in September by £96 million; and in October we had an Election. What we did not have were any measures to do anything whatever about the situation. The right hon. Gentleman was content to continue and let this drain on our reserves grow and accumulate, without taking any measures of any kind whatever. That, of course, made the situation for his successor infinitely more difficult. What would he have done? He does not think it right to raise the Bank Rate, as he explained yesterday. But he believes in import restrictions. He believes in safeguarding sterling by controls and regulations. He had this apparatus of controls and regulations in his hands. Why did he not use it? Why leave it to my right hon. Friend to use?