Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 20th April 1970.

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Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby 12:00 am, 20th April 1970

Do not tell me about income tax, for heaven's sake! There is a lot of work in deciding whether or not people are exempt, whether or not they are married, whether or not the children belong to them. All these factors come into deciding what a taxpayer's code is. It is his code, in conjunction with his earnings, which decides whether or not he pays tax. The re-coding that must now be started will cost a great deal in overtime.

It is about time the Government looked afresh at the staffing provision in those departments frequently subject to exceptional burdens of work arising out of statutory review. It is no good just providing the staff when the work arrives. Some preparation should be made for it. It is important for the morale of the staff concerned that reserves should be provided against additional burdens of work of this kind. I looked at the Inland Revenue staff sheet this morning and found that 125 people were shown as having resigned last week. There is wastage and replacement of experienced people by trainees. Some offices have as many as 40 per cent. trainees. This is the problem of Inland Revenue administration.

Another thing the Chancellor should examine is how to save the enormous amount of paper work. All the coding is done, all the millions of coding notices are sent out, and then as soon as the Chancellor sits down after his Budget statement a great deal of that work has to be done again. Is there nothing better than this? It is the most wasteful use of paper and pen and ink in the Civil Service today.

The Chancellor should try to get away from the rigours of the April Budget and forecast possible changes in his taxation system in advance. He has done that in one respect this time. He announced in the autumn the change he proposed to make in the conditions of the dependent relative allowance, and authorised all the coding to be done on the assumption that the changes would be made in this year's Finance Bill. This could be done on a wider scale. For the longer term I am advised that as a result of this Budget more and not fewer staff are required in the Inland Revenue.

I want to say something now about child poverty, because this is the next big question to be raised in discussion on my right hon. Friend's proposals. The Tory interest in child poverty is certainly welcome, though I am not sure there is much evidence of genuine concern in the past. My right hon. Friend the Chief Secretary went over the record. What it amounts to is that only once in 13 years did the Conservative Government improve family allowances, and then they raised the allowance by a very small amount for the third and subsequent children. My right hon. Friend the Chief Secretary gave details of the changes we have made since 1965.

I am all for relieving child poverty and for preventing it as well. I wish that many of those who come to the fore on the relief of child poverty would be equally eloquent on the need to prevent it as far as possible. I hope that those who want to eliminate child poverty by fiscal means or social security payments will come out in favour of a national family planning scheme, with all that should go with it, to enable people to make their choice intelligently and in full knowledge of how they can do it. There is too much ignorance and irresponsibility on the important function of parenthood in Britain today.

But, of course, we cannot visit the sins or fecklessness of parents on their children. How then are we to deal with the matter? My right hon. Friend referred to what the right hon. Member for Enfield, West (Mr. lain Macleod) had said about child poverty and the method he would like to follow to deal with it, but my right hon. Friend did not pursue the matter to reveal the Chancellor's line in this respect.

I believe that the combined operation of improving family allowances and adjusting income tax child relief at the same time has a great deal to be said for it as a satisfactory way of dealing with the problem. I sponsored this scheme when I was a Minister. I did not see it in operation before I left, and unfortunately when it came into operation it was done so clumsily, in two stages, that a great deal of confusion and dissatisfaction arose among taxpayers as a result. These two things must be done together. Unfortunately, it is too late for this method to be adopted this year, because the family allowances should be in payment now so that the adjustment of child relief for tax purposes can be made at the same time and not later in the year.

The Child Poverty Action Group, which now seems to be in a position of considerable influence on the benches opposite is in favour of this method. It is called the claw-back scheme or give-and-take scheme. It has the merit that we can improve the family allowance more in this way than if we do it in any other way. What happened in 1967 and 1968 shows that by clawing back some or all of the increased family allowance by an adjustment of the income tax child reliefs it is possible for the same net expenditure to give much higher benefits for those who are tax-exempt.

This year it is only possible, I think, for the Chancellor to announce his intentions, if he feels able to do so. If he could announce that he would propose that family allowances should be increased and corresponding adjustments in income tax child relief made in 1971, that would not be electioneering but a prudent announcement of what the Government intend to do. If it is not done before next April, it cannot be done at all for that year. I sincerely hope that the Chancellor will apply his mind to the matter very quickly. He said in his Budget Statement that he hoped there would be a new look at the whole subject of family endowment. That may be desirable, but in the meantime nothing more is being done for the children of today.

I want to finish with a word in defence of the surtax concessions, which have also been the subject of some scornful references. The bulk of surtax payers who would benefit from the concessions are working men who are earning rather more than other working men—dockers, printers, journalists, public officials, executives, engineers, scientists, laboratory men and so on. Who will deny that they are workers? Who will say that they should not receive some consideration?

The effective exemption limit for earned income for surtax is £5,000 a year, but under the scheme introduced by the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), although people are exempt from surtax on earned income up to £5,000, they have to pay surtax on investment income over £2,000. That is the grievance, and I heard it from a national trade union leader within the past three weeks. He told me that his two problems were unemployment on the one hand and workers earning £60 on the other, and that under a surtax system of the present kind workers earning more than £2,000 a year, whilst they pay no surtax on their earnings, are having their building society interest grossed up and their Post Office savings bank interest, which is exempt from income tax, brought into surtax. What they are saving is not only being taxed in some cases at the standard rate of income tax without earned income relief but is the subject of surtax as well. The Budget proposals, which, as my right hon. Friend the Chief Secretary reminded us this afternoon, will not be effective until 1st January, 1972, are intended to meet that grievance. I do not think that a Socialist Chancellor should be inhibited from removing tax grievances, even if they come from those half-way up the scale.