Orders of the Day — Finance Bill

Part of the debate – in the House of Commons at 12:00 am on 4th May 1961.

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Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland 12:00 am, 4th May 1961

I have known the hon. Member for Spelthorne (Sir B. Craddock) for a long time, but, as he says, we are always learning new things. I knew that he was a successful musician and successful politician and a successful business man, but I never knew that he was a poet, and I congratulate him on this new outbreak, rather late in life, and I look forward to further maiden poems in the House of Commons.

His closing remarks struck me as odd. If the Budget has commended itself widely to thinking people, they have not made that very clear at the ballot box. I am interested in the reaction to the Budget on the Tory benches, because it is about the same year by year. Hon. Members opposite praise it in general and condemn it in every particular.

The Chancellor must be particularly disappointed by the reaction to what is obviously one of his pets—his little scheme for a payroll tax. It has been referred to on the benches opposite as an interesting ballon d'essai, but it is clear that the Tories hope that the balloon will never leave the ground. Most keen balloonists want to get afloat at some time, but I have a feeling that that will never happen in this case, because there are few more vulnerable things to attack than a balloon. Hon. Members who saw the film "Kind Hearts and Coronets" will remember the words: "I shot an arrow in the air; it fell to earth in Berkeley Square". If the Chancellor brought in a payroll tax, that might happen.

The other think that usually happens on the benches opposite is that there is a paean of praise for the the incoming Chancellor. Each new Chancellor is hailed with high hope and a shower of compliments, but when he departs he is sent upstairs, or even further away. The curious thing is that for most of the people in the country these high hopes and new departures are not apparent. What is apparent is that our economy has remained very much in the same rut for the last ten years. We have lacked growth and we have always been on the edge of a balance of payments crisis.

The Budget's unpopularity in the country is due not solely to the Chancellor's preoccupation with Surtax payers, but to the growing realisation of the Government's complacency with the country's economic performance. The troubles of our economy stick out a mile. As has so often been said, we lag behind other great industrial countries in our rate of growth and we are losing our share of the export markets. At the same time, our reserves are constantly in danger of falling below the tolerable limit and we get nowhere near earning a surplus of £300 million which Conservative Chancellors have told us is the minimum we need.

Every now and again, The Times publishes one of those little graphs showing how the value of the £ has declined quite steadily and almost at the same rate under Tory Governments as under Labour Governments—and what trouble the Labour Government got into in the days when the Tories were the Opposition!

In the circumstances, one would have expected a Finance Bill deliberately designed to encourage productivity and efficiency. The first question we have to ask is whether there is anything in this Finance Bill which will do that. The only thing which Government speakers have pointed to as an incentive to productivity is the reduction in the Surtax rate. I do not deny that there are people in the £2,000–£5,000 bracket who are deterred from changing their jobs because of the high rate of taxation. That is the point. It does not follow that they will get up earlier or work harder because they have had this concession, but it will create more mobility at an admittedly important point in the economy. I admit that, but the change should have been introduced as part of a general revision of taxation, with a graduated Income Tax and some scheme for encouraging wider share ownership—co-ownership and profit-sharing—with a tax on short-term capital gains and on increases in land values. In that context it would have made sense and would have been combined with a general incentive to the community.

I do not altogether despair of the Government bringing in a capital gains tax, because we can be sure that Conservative Governments will encourage something and then knock it on the head. As the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) pointed out, the Government had done just that by encouraging horticulturists to change over to fuel oil and then putting an extra tax on it. Having encouraged trustees to go into the equity market, they will soon introduce a capital gains tax.

There are no other major proposals in the Budget aimed at meeting the country's pressing need for a more efficient and lively economy. The various Government spokesmen have made no effort to make out a case that there is anything else in the Budget. With the present difficulties with exports, I should have thought that the Government would have attempted to reduce costs. Instead, they have increased the duty on fuel oil, which cannot be considered encouraging to industry, agriculture or horticulture and which is certainly not a direct inducement to lower costs. They have perpetuated the double taxation of companies and, whatever the Chancellor may say, the result of the increase in Profits Tax must be to reduce, at least to some extent, the amount of money available for investment.

One would have thought that we could have had a cut in tariffs to make our economy rather more lively, and to reduce costs, but when an hon. Member asked a Question the other day, the President of the Board of Trade still refused to remove the duty on machinery of under £2,000 in value, even if it was not made in this country, but which was essential for a small business which, in turn, might help the export trade.

I do not suggest that the increase in the vehicle licence will be a very severe addition to costs, but I protest against the argument put forward by the Chancellor in favour of it. The argument seems to be that if a duty has not been increased for some years, it is therefore its turn for an increase now. I protest against that, and we cannot accept the new proposition that any taxation which has not been increased for five years must automatically go up.

If we examine this Budget for its relevance to growth it fails, and growth is, I maintain, if not the most essential one of the two most essential needs in the economy. The other is to have growth without ravening inflation. The Chancellor's object with the proposed regulators which are to be brought in is to prevent inflation in the economy. They are to be used to skim money income if the circumstances demand it. The first criticism which I have of these regulators is that if they are brought in early in August we should either have to have Parliament back or we should lose one of our most cherished privileges—the right to discuss taxation, if not in advance of its being levied at any rate soon after.

There is a genuine difficulty here with any regulator, and that is that we must bring it in quickly. I agree that it is somewhat anomalous that we debate some minor matters at some considerable length, but we are under no obligation, and seldom do, to debate very important increases in the rate of interest. There is an anomaly in the situation in that we can increase the Purchase Tax by regulations, but I beg the Government to realise that there is great anxiety about the possible size of these new departures—which has been said to amount to £200 million—particularly with the payroll tax. I beg them also to realise that however we may admire and respect them—much or little—it is not enough to say, "We would not do anything wicked". The point is that it is the duty of the House to see that the Government could not do anything wicked; not to rely on their good will.

If we look at the payroll tax, I do not deny that there may be a case for a tax designed to increase the use of machinery in some industries at the expense of labour if an industry is using too much labour. This tax is not designed to do that, but is simply designed as an economic regulator, in which case it could have some very undersirable results in its present form. It would fall with peculiar severity on some industries which cannot avoid employing much labour, and among these industries are the shipyards and the nationalised industries. The nationalised industries would be pushed into the red by the tax and would simply go back to the taxpayers with demands that their deficits must be met. I very much doubt whether that is what the Government desire. Surely, if we should have this tax at all, there must be some method of differentiation. I appreciate that there is some differentiation in the Bill as between different classes of employed, but the difficulty is that with this sort of taxation there must be differentiation between districts or between industries.