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Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 11th April 1957.

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Photo of Mr Enoch Powell Mr Enoch Powell , Wolverhampton South West 12:00 am, 11th April 1957

I was just coming to that.

If there is justification for a preferential treatment of income which is earned as against income which is not earned, then that preferential treatment ought not sharply to be terminated at an income of£2,000. It is, however, the case that as the total income rises, and one gets into the higher and higher income bands, a higher proportion of more incomes comes to take on the nature of unearned rather than earned income. There comes to be an increasing element of return to investment of some kind or another. the higher the income which is in question.

That is the reason why my right hon. Friend reduced the level of the rate of earned income relief at£4,000 and terminated it at£10,000. Indeed, the general notion that there is a justification for a differentiation around£4,000 or£5,000 was accepted by the hon. Member for Stechford (Mr. Roy Jenkins) last night, when he gave qualified approval—I admit, under certain conditions, but, still, qualified approval—to earned income relief for income of—he raised his figure as he went on; he started at£3,000, went up to£4,000 and finished at about£5,000.

It is a misconception to suppose, as the hon. Member did, that the bulk of this relief will go to the higher incomes in the Surtax range between£2,000 and£10,000. In fact, if the entire relief were stopped at£4,000, the cost would still be 80 per cent. of the cost of my right hon. Friend's proposals. Approximately 80 per cent. of the persons now affected by the full proposals are in the£2,000–£4,000 income band. This relief will go, to an overwhelming extent, to those earning incomes between those two amounts. [Interruption.] I take£4,000 as a statistical figure to illustrate the extent to which incomes are crowded together at the lower end of the scale.