Clause 26. — (Surcharges on Employers.)

Part of Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 13th June 1961.

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Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South 12:00 am, 13th June 1961

Secondly, what about the excess cost to the hospital service and the Civil Service, which are paid for by the taxpayer, or to the nationalised industries? The overall cost of this tax to the railways in a full year would be approximately £6 million. The Coal Board will be saddled with a similar cost. Where will they get this extra money? It will come only from higher charges or, if there is a substantial deficit in those two nationalised undertakings, by further subventions from the taxpayer through the Budget. The whole principle behind the Clause is a typical piece of Treasury nonsense, which cannot possibly be supported on any economic grounds.

The Amendment relates to lines 40 and 42 in page 20, part of which states that it is expedient so to do with a view to regulating the balance between demand and resources in the United Kingdom. One of the Amendments uses the words: and having regard to the need to maintain full employment in all parts of the United Kingdom. It seems to me that within those two broad statements, we could discuss the full effects of the payroll tax.

The hon. Member for Motherwell (Mr. Lawson) talked about what he called this small measure. If fully implemented, it will be £200 million a year. I was tempted to ask the hon. Member just how small is small. This is a substantial sum of money, and we are entitled to ask whether it will have the effect that the Chancellor hopes. By its very nature, it cannot possibly be immediate in effect. At the most it will bring in approximately £4 million a week once it is implemented. I cannot believe that we could have a financial crisis whch could be so marginally adjusted from bad to good by the simple transfer of £4 million in any one week.

Since the war, the Treasury has learned nothing whatever. Year after year, it has been proved beyond doubt that increases in taxation are highly inflationary. We must have regard to the ultimate effect when we consider what the Chancellor is seeking to do by the Clause. Will it maintain the balance between demand and resources? Will it have the effect of maintaining full employment? We have already seen that certain small imposts have had an inflationary effect, and the effect of the payroll tax inevitably must be inflationary.

It must increase production costs. It must put up distribution costs and it must lessen our ability to compete in the export markets. The Clause must be considered against the overall picture and not from the narrow viewpoint of the £4 million a week. I regard the whole principle as ill-conceived, ill-thought-out, highly dangerous and ineffective in its intent, and for these reasons I regret that I shall not be able to support my right hon. and learned Friend in the Lobby.