Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 19th April 1961.

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Photo of Mr Gilbert Mitchison Mr Gilbert Mitchison , Kettering 12:00 am, 19th April 1961

That, of course, is not the only objection which I have to this tax, but I want for a moment to turn to what the object of this arrangement is supposed to be. It has, of course, nothing whatever to do with exports.

As my right hon. Friend pointed out it might just as much be concerned with imports as with exports, and with home trade as with trade abroad. It is supposed to be an incentive to people and a remedying of an injustice. I can see no justice in allowing people who are making a very handsome income so large an amount and at the same time imposing on people who are only getting ordinary weekly pay packets a poll tax which is to be difficult enough for many of them to carry and for which there seems to be no reason whatsoever.

It is time, I suggest, that the Committee listens again to the one piece of concrete evidence which we have ever had on this question. It was in the Second Report of the Royal Commission on The Taxation of Profits and Income. The Commission said: Such rates"— these are Surtax rates— are criticised as tending to repress effort and to discourage the taking of risks, Probably they do, to some, though quite an unascertainable extent. All heavy taxation may be said to have this repressive effect just as, though again to an unascertainable extend, it tends to stimulate effort by diminishing the individual's disposable income. Of course, that is perfectly true in conditions of heavy taxation. But if we are asked to infer from this that the heavy rates have any special disincentive effect upon the receivers of the higher levels of income, so as to justify a shifting of the existing weight of taxation from these ranges to lower levels of income"— that is to say, to justify relief to the Surtax payers at the expense of putting it on a national poll tax— we are bound to reply that we see no evidence that the higher income earners are specially affected by disincentive. And then the Commission gives reasons for its conclusions and summarises them like this: But in the meantime, we should not conclude either from our own observations or from such evidence as we can extract, that the high managerial post, for instance, is declined because its rewards are not thought worth obtaining or that the artist or the professional man abates his energies because tax has made it not worth while that he should exercise them to the full. That was said by the Royal Commission some time ago, and I have never seen any definite evidence to the contrary. I think that it is a very fair and balanced statement of the position. I have never heard anybody who had to deal with this statement say anything, in effect, to contradict it, or to qualify it.

Now we have the Government saying, "There is a great injustice here. There is a great disincentive. There is, in fact, the special disincentive effect", which is exactly what the Royal Commission denied, "and, therefore, we shall, at the very time when we are putting on a poll tax on the population, reduce the levels of Surtax, and do it at a time when we admit that our country's efforts by way of production and world trade are falling behind those of our competitors, at a rime when we recognise that more money has to be collected from the public at large, and that a bard Budget, or a fairly hard Budget, is called for by the circumstances of the case."

What a moment to do this thing. What sense of justice is there in a Government that behaves like that as between the body of taxpayers as a whole and the 2 per cent. of the working class represented by the Surtax payers whose income is earned? That is a very remarkable effort on the part of the Government as far as I can see.

Let us see what else the Government propose. They propose, among other things, to deal with business expenses in a manner that reminds me of someone trying to pick up a red hot poker. Are they really so afraid of their business friends and supporters? Could they not have a little more courage in the matter?

Take one very simple matter, the cars about which we have been talking. It seemed to me that the Economic Secretary was hopelessly confused between investment allowances and initial allowances. But let that pass; it was not the only confusion in his speech. Take the very simple example of cars. No steps must ever be allowed to be taken merely to let the public know that Mr. X, who is driving a Rolls Royce down the street, is driving one belonging to the Y company and not to Mr. X. It is, after all, quite a simple matter to have that stated publicly on the car. But no, it would be too shocking. They could not do anything of the sort. We have heard so much about the Government's attitude towards business expenses, and what amuses me is that they think they are doing something this time—I only hope they will succeed.

Now I turn to the question of the two regulators. The first point is this. If one is to apply a regulator in the hope of dealing with a foreign exchange crisis, one should do it quickly. It does not seem to me that either of the two regulators suggested is suitable or, indeed, possible from that point of view. Moreover, the men of Zurich usually get very active in September, and in September the House is not sitting. These have to have an affirmative Resolution of the House. Does the Economic Secretary, or the Chancellor, suggest that the House will have to be called back in September to get this done? If so, it will certainly not be done quickly.

If the object of these regulators is to deal with a foreign exchange crisis—and such a thing is by no means remote from our present position—then I say that, among other things, they are both slow and unsuited for the purpose.