Clause 1. — ;(Charge of Income Tax for 1955–56 and Surtax Rates for 1954–55.)

Part of Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 27th April 1955.

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Photo of Mr Gilbert Mitchison Mr Gilbert Mitchison , Kettering 12:00 am, 27th April 1955

During the last two days we have had a considerable discussion on the amount that the Chancellor can allow in relief of taxation for the coming year. On a question of that sort, no doubt the economists will have their views, but it has always seemed to me that much of the essential information necessarily lies with the Chancellor himself, and I do not propose to revert to that question in discussing this Clause.

The fact remains that the Chancellor has come to the conclusion that£155 million can be remitted during the coming year, and out of that sum practically the whole is to come from Income Tax concessions, the most important, the most fundamental, of which, of course, is the reduction in the standard rate.

I think that in the course of Answers given yesterday to Questions considerable light was thrown on the practical effect which this reduction in the standard rate will have in the coming year. When I speak about the practical effect, I am referring to the effect which it will have on the ordinary people in the country—those whom we represent in this Committee. Out of the£155 million, no less than£42 million goes otherwise than to individuals; that is to say, it goes to corporations, particularly companies, to which my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) referred on Friday.

I shall not say any more about it than that it seemed to me somewhat incongruous that, when we had a reply to that speech, we were told that the remissions of tax in this Budget would provide relief to all those who work by hand or by brain. It seems to me somewhat difficult to understand how a company, which is, no doubt, a necessary part of the economic structure, can be regarded as something which works by hand or by brain.

When we come to the actual workers, we have to consider the individual relief. It amounts to£110 million altogether. It is given mainly by the change in the standard rate of Income Tax, but for the sake of simplicity I will refer to the total of the relief including not only the standard rate reduction but also some other minor concessions. It is obvious that the standard rate is far the most important part.

The first thing which strikes me is that it is remarkable that the total relief given in this Budget to individuals, by Income Tax standard rate reduction and otherwise, amounts to almost exactly the same as has been put upon the people by Tory dear money policy, that is to say, to the amount of the increase in the National Debt charges and to the amount of the increase which may be expected next year. The figures of£30 million and£85 million were given by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell). They add up to£115 million, which is a little more than the£110 million which is given by the Budget to individual taxpayers. The conclusion follows that if it had not been for the dear money policy the relief given to individuals could have been doubled.

I wonder what conclusion we are to draw from this. We are told that the protection against any inflationary effects, against any consequent trouble in our balance of payments—any general restriction on consumption that may be required in consequence of these reliefs—is to be made by a further use of the Bank Rate. We are told that it is a flexible weapon. I remember the impact of flexible weapons when I was younger, and I can assure the Chancellor that a flexible weapon, particularly one with knots in it, can hurt quite a lot. I would much sooner that what was proposed to be done had been doubled and cheap money preserved for the benefit of councils, among other people, and generally for the benefit of those who have to borrow as against those who are able to lend.

I turn to the incidence on the particular taxpayer. The figures given in column 740 of today's OFFICIAL REPORT are most remarkable. Roughly speaking, half the people who will have relief from the reduction in the standard rate of Income Tax, or over 8 million, will have a total relief of£19 million out of the£110 million. That means they will receive, on the average, about 10d. a week—that is half of them, and the poorest half.

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Next we come to the higher grades, who number 8,350,000. They will receive 2s. a week on the average. Then we find that those who are earning£700 to£1,000 a year, not exactly plutocrats, will receive 3s. a week. As we proceed to the higher grades, the relief given becomes quite disproportionate. Those in the£1,000 to£2,000 group will receive 7s. a week. The average figure of 30s. a week in the case of those who are in the£2,000 and over income group has comparatively little significance. The number in the group is comparatively small—325,000—against the millions in the lower groups of whom I have been speaking and, of course, in that group particularly the higher remission goes to those who have the larger income. This is bound to be and always will be the effect of a straight remission of 6d. or 1s., or whatever it is, off the Income Tax.