BRITISH BUDGET PROPOSALS

Press, Volume LXXVII, Issue 23300, 9 April 1941, Page 7

BRITISH BUDGET PROPOSALS

Increased Taxes On Income

REDUCTIONS IN ALLOWANCES

(Received April 8, 7.30 p.m.) (8.0. W.) RUGBY, April 7. A standard rate of income tax at 10s in the £, an increase to 6s 6d of the reduced rate payable on the first £165 of taxable income, a reduction in the chief reliefs and allowances, except the allowances for children, and a reduction in the exemption limit from £l2O to £llO, are the effective revenueraising proposals of the war Budget which was presented in the House of Commons to-day by the Chancellor of the Exchequer (.Sir Kingsley "Woodl.. The Budget provides for £500,000,000 more in tax revenue than in the last financial year, or £1,000,000,000 more than in the last pre-war year, and for the raising by taxation of about half

of the net estimated expenditure to be financed from domestic loans and taxation together. There is no increase in indirect taxation, and other proposals affecting the excess profits duty and the medicine duty are of secondary importance. The income tax proposals will add 2,000,000 new taxpayers and introduce the entirely novel feature of "compulsory saving," since the additional tax levied in consequence of reductions in reliefs and allowances will be credited up to a maximum of £65 to the taxpayer in the Post Office Savings Bank at the end of the war. The following comparisons illustrate the “bump” taken by the various income groups.

„ Basis of Planning The Chancellor made it clear at the outset that he was planning for a financial basis, not only from which to surmount the difficulties of the war and maintain a sound budgetary position while it lasts, but to pursue the post-war sequel which all desired to see achieved. Britain’s financial structure had stood firm. A strong foreign exchange position had been held by an effective system pf exchange control and the mobilisation of dollar securities. In this respect, what was done in the last war had been far surpassed. Now, said the Chancellor—and the reference drew cheers from a crowded House—Britain had an assurance, by reason of the great gesture by the United States in the Lease-Lend Act, that no difficulty in financing purchases in America would hamper the full development of the country’s fighting strength. At home, control of the capital market had provided a low rate of interest for Government borrowing, below 2 per cent, compared with 6 per cent, in 1916.

Sir Kingsley left no doubt as to the Government’s intention to keep down Interest rates, not only to reduce the burden of war-time borrowing upon the post-war taxpayer, but to facilitate the expansion and recovery of industry and trade after the war. Rapidly reviewing the experience of the last year, the Chancellor said that the total expenditure was £3,884,000,000, On the revenue side income tax had yielded a new record of just under £524,000,000. The scheme for deduction from wages at the source, which came into operation in October, was working smoothly. The national defence contribution and the excess profits tax had given £26,000,000' in excess of the estimate of £70,000,000. The total re-, venue of £1,409.000,000 left a deficiency of £2,475,000,000. Question of Inflation This brought the Chancellor to an examination of the question of inflation as it concerned the last year and the future. He emphasised the vital distinction between expenditure at home—and especially that which generated a great volume of purchasing power in the hands of the public which might come into markets depleted of consumers’ goods—and expenditure incurred abroad. Expenditure abroad had been financed hitherto either, by the sale of capital assets or out of accumulated sterling balances held in London by the Dominions and India, In the first 18 months of the war armament expenditure was roughly £4,650,000,000. Taxation met roughly £2,000,000,000 and overseas resources roughly £1,000,000,000, leaving a balance of £1,650.000,000, from which it was necessary to deduct all genuine saving and investment by the public before it was possible to arrive at the “gap” which might be inflationary. He gave it as bis opinion that the difference between total expenditure and Budget revenue had not so far introduced inflationary dangers, and he did not conceal that it was the primary purpose of the increases of taxation which he later'announced to avoid any such dangers in the new financial year. Turning to the new year, Sir Kingsley Wood said that his estimates of expenditure at this juncture would exclude the value of supplies to be received under the Lease-Lend Act, also payments to the United States on existing orders. Votes of credit were the most difficult and most conjectural figures in his estimates, but he proposed to put their total at £3,400,000,000. The total estimate of revenue on the existing basis of taxation he made £1.646,000,000, or £227,000,000 more than last year. Having examined other factors, including the Increase in the normal saving affecting the inflationary position, the Chancellor said he felt that he must raise by taxation some £250,000,000 in addition to the existing yield of taxes to bring the inflationary “gap” down to safe proportions. Effect on Higher Incomes Revealing his proposals to the House, be announced what must be one ef the

simplest Budgets of the last 100 years. He mentioned, in connexion with his changes, that their result would be that the rate of income tax and surtax had reached a maximum of 19s 6d in the £ on the highest incomes. To enjoy a tax-free income of £SOOO yearly it would be necessary to have a gross income of £60,000, and very few people, Sir Kingsley added, to-day had incomes approaching that sum. In his speech, in which he also explained administrative changes and the excess profits duty, the Chancellor intimated that it’was the Government’s intention not only to maintain existing subsidies to keep down the cost of several staple foods, but to consider their extension to prevent increases in the cost of other essential goods or services including transport, which might include a general upward movement in prices.

TAXES OX HIGHER INCOMES

“DISGUISED FORM OF CAPITAL LEVY" LONDON, April 7. The “Daily Mail” in a leading article says that in the higher income ranges the new rates of taxation are really a disguised form of capital levy. The new scales mean that a wealthy taxpayer must use his capital if his estates are to be kept going and his work people retained in employment. The Budget must be unique in completely ignoring indirect taxation. “The Times” says it is deeply regrettable that the new taxation weighs so heavily on people of modest means, particularly the family man, who. although the already low allowances for children are not altered, will be hard hit by the reductions in other allowances.

“Too little consideration,” the newspaper says, ‘‘is consistently given in this country to those who, by proper and largely inevitable expenditure on their children, seek to build up the country's future. But the Budget, which is a ‘stabilising budget,’ contains consolations. The most important single proposal is the Chancellor’s promise to subsidise where necessary the prices of all essential goods affecting the cost of living and also the cost of essential services, for instance, gas, coal, and electricity.

Present New Post-war Income. Tax rate. Rate. Credit. £ £ s. £ s. £ s. Single persons— 120 ,. _ 7 10 7 10 200 .. 16 13 32 10 10 16 500 .. 105 14 156 2 26 13 1000 .. 282 15 361 2 43 6 Childless married couples— 160 .. 1 6 1 6 200 . . 13 0 13 0 500 .. 75 19 126 2 31 13 1000 .. 253 0 351 2 46 6 Married couples, one child— 220 .. — 2 12 2 12 500 .. 54 14 101 2 31 13 1000, .. 231 15 326 2 48 6 Married couples, two children300 .. — 9 15 9 15 500 .. 36 13 76 2 28 9 1000 .. 210 10 301 2 38 6 Married couples, three children350 .. — • 8 2 8 2 500 .. 24 3 52 0 20 11 1000 .. 189 5 276 2 ' 43 6 All these rates are on earned incomes.