The Press THURSDAY, APRIL 17, 1947. Britain’s Austerity Budget

Press, Volume LXXXIII, Issue 25161, 17 April 1947, Page 6

The Press THURSDAY, APRIL 17, 1947. Britain’s Austerity Budget

Although Dr. Dalton claims, with some justification, that the anticipated surplus for this financial year is “ a clear sign ” of Britain’s internal financial strength, the Budget he has presented to the House of Commons is an austerity document. It could scarcely be anything else in Britain’s present position. It is true that Britain has come through the last financial year with a deficit of “ only ” £569,000,000, which is £157,000,000 less than the deficit for which Dr. Dalton budgeted a year ago, but even this figure promised, until the last month or two of the financial year, to be infinitely more favourable. Revenue and expenditure accounts do not, of course, show the full excess of Government spendings over receipts. Expenditure on such “ capital ” items as excess profits tax refunds, war damages payments, post-war income-tax credit payments, housing, and coal nationalisation, most of which have been financed by borrowing at home and abroad, bring the “ true ” deficit for the year to about £ 1,050,000,000. In the buoyant revenue results for the last year, too, there are some windfalls in the shape of non-recurring receipts.

The Budget for this year will probably gain fairly general approval for its stern resistance to inflationary tendencies; it goes without saying that it will be vigorously attacked on specific points. Taxation, in total, has been increased, although some relief has been given to the payers of income tax—especially the lowerpaid groups—by the increase in the earned income allowance from an eighth to a sixth and the raising of the maximum relief on which no taxation is paid from £l5O to £250. The income tax relief was increased a year ago from a tenth to an eighth. There is additional relief in the increased allowances for children and dependent relatives. The increases in taxation follow, on the whole, expected lines. Legacy, succession and stamp duties relating to stocks and shares have been doubled, an increase has been made in the tax on distributed profits (in order to direct profits into capital development and away from shareholders’ pockets), and the tax on domestic heating and cooking appliances has been increased, no doubt to discourage the unnecessary use of equipment that will draw on Britain’s slender power resources. Dr. Dalton has apparently postponed any action to reduce the cost-of-living subsidies, although in his Budget speech he showed some perturbation at their continued rise. He said a year ago that stabilisation could not be guaranteed indefinitely. The cost of the subsidies was then estimated at three-quarters of the annual cost of the national debt; it will rise this year by £50,000,000 to £425,000,000. When these subsidies were introduced in 1941 it was stipulated that wages should be held at approximately the same level. In the last few years, of course, they have risen sharply. Dr. Dalton’s promise to revise the present unrealistic cost-of-living index “ in a few “ months ” will help the position, but it is time something was done to pass on a bigger proportion of the real costs to consumers. There has been much discussion in Britain about the advisability of changing the system of motor taxation. It has been argued that the substitution of a petrol tax for the horse-power and cubic capacity system of taxation would encourage the production of the larger types of cars demanded by the export trade; but the experts are not yet in agreement. Others contend that while petrol remains on the rationing tendency would be the opposite—toward the production of still smaller cars of lower horsepower. Dr. Dalton has made no change but has indicated that he is willing to review the position up to the committee stage of the Finance Bill, provided there is no loss in taxation.

The most surprising feature of the whole Budget is the penal tax on tobacco. This required courage. Any extra revenue from the tax is a secondary consideration. The real purpose is to save the dollars which are being drawn upon improvidently to satisfy “ the insatiable demand for “ tobacco smoking ”. Britain’s tobacco imports for home consumption last year cost £46,000,000, of which £38,000,000 went to the United States. This is a staggering bill. Dr._ Dalton hopes to cut it down by a quarter, to gain £75,000,000 in taxation revenue, and to save 30,000,000 dollars. He must have decided, with reluctance, that taxation on betting would be too costly in administrative machinery to justify the revenue produced. The failure to tax imported films heavily is harder to understand; this seems a promising avenue for adding to revenue and saving dollars.