Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 13th April 1959.

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Photo of Mr Patrick Gordon Walker Mr Patrick Gordon Walker , Smethwick 12:00 am, 13th April 1959

Our claim is that by steady expansion we could do this. I will come back to this very important point of whether the Government with their present policy can achieve steady expansion without inflation. I am going to argue that the Government cannot. This loss of £1,500 million to £2,000 million a year is a colossal loss of wealth which we could have had. In comparison with that, the £250 million that was thrown away at Suez appears almost modest. One thing that has gone up under this Government is the standard by which we have to measure waste.

One criterion which the most obstinate Conservative will have to accept by which to judge the Government is the Lord Privy Seal's statement about doubling our standard of living in twenty-five years. As always with his remarks, there has been doubt about what he meant, but we have had a recent authoritative and unambiguous interpretation in "Glossed Over," the latest official publication of the Conservative Party. On page 33 it states: The target set by Mr. R. A. Butler of doubling the standard of living in twenty-five years represents an overall increase of production of 2–3 per cent. Thus, when the Lord Privy Seal said on 24th March that we were running a bit ahead of schedule, what he must have meant, according to that interpretation, was that we were achieving an annual overall increase in industrial production of at least 3 per cent. If that is not the correct interpretation, the statement was meaningless, and I cannot believe that the Lord Privy Seal makes meaningless remarks.

What are the facts? The Lord Privy Seal gave his pledge in October, 1954. In the three years since then, our industrial production went up by 0·9 per cent. That is an annual average, not of 3 per cent. as the Lord Privy Seal wanted, but 0·3 per cent. I calculate that at the rate we have achieved since the Lord Privy Seal gave his pledge, it would take between 200 and 225 years to double our standard of living.

One of the major themes of our debate naturally has been the question of the distribution by the Chancellor of the reliefs that he felt it proper to give. The general inequity of these reliefs within themselves has been shown by my right hon. Friends the Members for Huyton (Mr. H. Wilson) and Battersea, North (Mr. Jay) and by my hon. Friends the Members for Fulham (Mr. M. Stewart), Gloucester (Mr. Diamond), Sowerby (Mr. Houghton) and others. I do not want to go over the ground which they so admirably covered, but I want to sum up what they said in two points which seem to me to clarify this issue and the question of whether the Chancellor has chosen to distribute his reliefs with equity.

The first point is that of the Income Tax reliefs £166 million goes to persons as distinct from companies. That is the sum that must be measured against the increase by £111 million a year ago of the National Insurance contributions on employees. That was a charge put upon employees, not upon employers, and we have to measure the personal reliefs of £166 million against the £111 million raised by a regressive poll tax which inevitably falls heaviest on the poorest people. The personal reliefs were, therefore, largely paid for by this poll tax.

Let me try to put these rather impersonal and large figures into more human terms. In the last 18th months, the weekly stamp deduction has gone up by 3s. 2d. Under the Budget, it is not until we reach the £1,000-a-year man that this increase of 3s. 2d. a week is offset by the reliefs in Income Tax. All those earning below £1,000 a year are paying more in increased poll tax than they are getting in relief in Income Tax, and, of course, enormous numbers are getting no relief whatever in Income Tax against this increase in the poll tax.

The second point is that as a result of the Budget, 12,200,000 Income Tax payers earning up to £750 a year get an increase of an average of £4 a head per annum. The 200,000 Income Tax payers earning over £3,000 a year—I have not chosen a very high figure—get £165 a head a year, as against the £4 that is got by the 12,200,000.

Whilst the Chancellor was making these disproportionate reliefs to the rich, he was saying in his Budget speech that this year there could not be a wage increase as large as there was last year of 3½ per cent. It seems to me extraordinary that in one and the same Budget the Chancellor can say that the workers must not have a wage increase of 3½ per cent. when he himself takes deliberate steps to increase the spending money of the £4,000-a-year man by 4½ per cent. This is almost a deliberate affront and undermines the appeal that the Chancellor is making for wage restraint.

There is an important relationship, which we all realise, between wages and prices, although Conservatives have made too much of a fetish of it and it is not as important as they say. None the less, it is important. As my right hon. Friend the Member for Blyth (Mr. Robens) said, however, if an appeal is made to the trade unions for restraint, this must be part of a policy of social justice. There must be some equality of restraint. This the Chancellor has wholly failed to achieve, but he could have achieved it within the scope of his Income Tax reliefs.

The Chancellor could have done four things. He could have made larger reductions in the lower levels of Income Tax by raising allowances. The hon. Member for Lewisham, West (Mr. H. A. Price) made a wise remark about this on Wednesday. He said that a greater reduction in the lower levels would exercise an incentive effect far greater than similar amounts of money devoted to concessions higher up in the Income Tax level."—[OFFICIAL REPORT, 8th April, 1959; Vol. 603, c. 282.] That is the answer from their own side to hon. Members opposite who seek to justify inequitable tax reliefs on the ground that they give incentive. There is no doubt that if we want to give incentive we give the biggest incentive by raising the allowances and concentrating the reductions on the lower levels.

Secondly, I do not think the Chancellor should have given £63 million Income Tax to companies. There was a letter in The Times on 11th April which pointed out that the United Kingdom has one of the lowest company taxation levels in the world, and I do not think there is any case now for making this rate lower still. Indeed, I think the time has come when we really should consider separating personal and corporate Income Tax. It is a hindrance to a sensible fiscal policy that they have to go up or down together all the time. Thirdly, the Chancellor should have imposed a capital gains tax to offset the effect of his own Budget in further favouring the rich by their increased capital projects.

Fourthly, he really should stop the scandal of tax avoidance by expenses and other devices. The Finance Bill will contain two anti-avoidance measures. We welcome these, though I must point out that this is the second time we have had to stop dividend stripping since we were told by the Minister of Housing and Local Government that the loopholes had been stopped for all time. What does it mean, that we have these two anti-avoidance Clauses in the Finance Bill? What it means is that the tax dodgers have once again had a run for their money, that once again they have had fat pickings before the Chancellor has been able to catch up with them. I am absolutely certain that they have got fresh and clever tricks waiting after these loopholes are blocked.

There is only one way, I think, of dealing with these gentry, and that is to block these various avoidance devices before they become profitable. We should take statutory powers to stop this sort of avoidance device by Order to be confirmed later by Parliament in the Finance Bill or otherwise.

The supreme test of this Budget, as the Paymaster-General was saying, is whether or not it can achieve steady expansion without a balance of payments crisis, without inflation. I must say to the Chancellor that his own justification for his policy fills me with doubt. What did he say? He said that we can expand because there is slack. What, I ask him, happens when the slack is taken up? Do we have to check growth again? Do we have a return to stagnation? That is the logic of what he says, if he says that we can expand now because there is a lot of slack in the economy and that we could not expand before. This is saying we cannot go on expanding when the slack has been taken up. It looks to me as though the logic of the Chancellor's case is, as he would put it, I suppose, that the national undistorted state of the economy is really one of general stagnation interspersed with short bursts of picking up the slack, which by chance happen to coincide with elections.

There are already disturbing signs. The balance of payments was down in the second half of 1958. It looks as though it is going to be less favourable. Both the volume and the prices of our imports are going up. The worst aspect of this state of affairs is our exports. The Times said in a leading article today: The prospect for exports is the least satisfactory aspect of Britain's present economic situation. They fell by 3½ per cent. in 1958, and it looks as though there is now a further decline.

It seems to me that the Chancellor is frighteningly complacent about our exports position. The most disturbing and humiliating fact of 1958 is that we fell in that year to the third place as an exporting Power. West Germany passed us last year for the first time as an exporting Power. What a comment that is on the Conservative stewardship of our national economy for eight years. By their deliberate policy of stagnation they have allowed us to fall behind in this most vital of all races. Instead of complacently preening themselves they ought to be hanging their heads in shame. [Laughter.] It is not a laughable matter to be passed by Germany. It is an extraordinarily ill and humiliating record for the Government.

But the major and immediate issue before us in this Budget is the crying injustice of the shabby treatment of the old-age pensioners. The right hon. Gentleman is a Pharoah of a Chancellor. He finds it very easy to harden his heart. He must have a heart of stone not to give anything to the old-age pensioners in a year when he is distributing £360 million worth of reliefs.

The Financial Secretary said that the Chancellor was going to deal with this question when winding up the debate. I hope that he will not seek support from the callous leading article in The Times which clearly does not regard old-age pensioners as top people. That article is full of fallacies. As the hon. Member for Sheffield, Park (Mr. Mulley) pointed out, we cannot measure the need of old-age pensioners by the general cost of living index. The movement of prices can affect them quite differently from the rest of the population. Indeed, that happened during this last year. The Economic Survey, paragraph 55, shows that prices went up by two points in 1958, and nine-tenths of that was due to the rise in the cost of food and housing. These are two factors which hit old-age pensioners particularly hard. As my hon. Friend the Member for Glasgow, Kelvingrove (Mrs. McAlister) pointed out so well, the Rent Act particularly adversely affects old-age pensioners.

To argue, as The Times does, in that leading article that because the position of old-age pensioners is relatively the same, or even a little bit better, nothing should be done about them is to condone and defend the persistence of the last element in our society of real grinding poverty. —poverty in old age.

The Paymaster-General tauntingly asked us how we would find the money and what reliefs we would introduce, as did the Financial Secretary. This is a cheap attempt to set the beneficiaries of the Chancellor's reliefs against the old-age pension. Otherwise it has no meaning at all. I would answer them by saying that if there were the slightest will to do this, a way could be found. Most beer drinkers, as has been said on both sides of the Committee, would be willing to forgo part of their remission if they felt that the old-age pensioners would benefit. The hon. Member for Louth very courageously said that he would not only have been in favour of taking only 1d. off beer but of 3d. less off the Income Tax to help the old-age pensioners and widows. If only ld. were taken off beer that would yield £20 million, but even if that were not done, much could be done. If the Chancellor had not extended Income Tax reliefs to companies, that would have given us £63 million that we could use, and if he had imposed a capital gains tax, as he should have done, the two together would have given enough for a very favourable rise in the old-age pension.

We are going to fight this issue by all the means at our command. We are going to do the utmost we can to force the Government's hand. We have tonight put down a Motion of Censure on the Government for their cold-hearted refusal to do anything for the old-age pensioners in a year when it would have been easy to do so and when no one would have grudged it except this Chancellor and this Government.