COMMENT ON THE BUDGET

Press, Volume LXXXIII, Issue 25161, 17 April 1947, Page 7

COMMENT ON THE BUDGET

Tobacco Tax Shocks Commons

“NO INCENTIVES FOR INDUSTRY”

(N.Z. Press Association—Copyright) (Rec. 11 p.m.) LONDON, April 16. The increase in the duty on tobacco —it will make Britain’s cigarettes 2d each retail —was the shock of Dr. Dalton’s Budget speech. There were gasps in the House of Commons when Dr. Dalton announced the startlingly heavy tobacco tax. The Budget is described in the Parliamentary lobbies and the press as a “less smoking” and a “no smoking” Budget. A spokesman for the Imperial Tobacco Company said it was a staggering increase in duty, and that smokers with lower incomes would be particularly hard hit. Mr S. Phillips, a director of Godfrey Phillips, Ltd., said: “It is a great shock to the public. It will be a miracle if it does not reduce the consumption of cigarettes. There has never been a price rise approaching this one.”

The president of the Retail Tobacconists’ Union said there was little doubt that the new duty would reduce the consumption and imports of Virginian tobacco. The tobacconist must face a serious decrease in sales.

The Conservative Party’s finance committee has dissected the Budget and has decided that, apart from the reduction of income tax, which mainly affects wage-earners, there do not seem to be any incentives in it for anybody. The tobacco duty shocked the committee, which felt that it discriminated against the smoker, while the spectator of American films did not contribute.

Some Opposition critics would have liked the Imperial preference ratio retained for tobacco, but it is believed that this is impossible under the American loan agreement. Some Labour members would Jiave preferred tobacco rationing to a new and exorbitant tax. “Main Need Fulfilled” “The Times” says that the taxes on tobacco and electrical appliances are punitive but not unreasonable in relation to their special purposes. “The taxpayer,” it adds, “could expect little or nothing for the current year in view of the need to combat the inflation threat, and that is what he has got. It is time for a pedestrian Budget with a modest swing from direct to indirect taxation and with special emphasis on consumption requiring dollars, coal, or electricity. Though sundry lesser items in the Budget may be questionable, the Chancellor has fulfilled the main need.”

The “Daily Telegraph” says that Dr. Dalton’s decision to budget for a surplus of £270,000,000 savours of orthodox finance to an extent few City people expected.

The “Daily Mail” says that nothing Dr. Dalton said in his speech will arouse so much resentful comment as the tobacco duties. “They are among the highest impositions in indirect taxation ever levied in this country. We must credit Dr. Dalton with considerable courage. This step will be highly unpopular, but smokers must ruefully admit that it is sound.” The “Daily Express” says: “The tobacco tax is a heroic measure. Dollars are running out, and tobacco may be only the first casualty in a long series of human pleasures to be sacrificed for essential food and raw materials. The tobacco tax should not be counted against the Chancellor.” Neb Result of Proposals The Parliamentary correspondent of “The Times” says that the result of the Budget proposals is that taxation in the full year will be increased by £53,000.000. Government supporters appeared to be, pn the whole, well satisfied with the Chancellor’s speech, but Opposition members criticised it as not providing the hoped-for incentives to industry and production. Specific Opposition criticisms were: (1) that the Chancellor had budgeted for a needlessly high surplus of £270,000,000; (2) that a net increase in taxation at this interval after the end of the war is discouraging; (3) that the Government appears to be stabilising expenditure at an unreasonably high level. Disappointment was also expressed that no reduction had been made in the standard rate of income tax.

The Opposition’s considered criticisms will be given by Sir John Anderson in his speech to-day. “Dr. Dalton’s all-embracing Budget is unlikely to do much to cheer the City,” says Reuter’s financial correspondent. “It was confidently expected that whatever he did Dr. Dalton would reduce the standard income-tax rate to assist industry by encouraging the workers, and while the tax allowances are greater no other special consideration is given employees to encourage them to consider a 40-hour week the minimum rather than the maximum. “The increased profits tax did not come as a surprise, as it was generally realised that some form of new or increased taxation was necessary to take the place of the now defunct excess profits tax. ‘‘As was feared, the Chancellor is taking a gamble regarding tobacco revenue in order to reduce dollar spending for American leaf. “The main theme of the Chancellor’s budget has been to counterbalance more evenly imports against exports, and all other considerations have been thrown to the wind in order to accomplish this severe task. It will probably take some time for the City to digest all the aspects of this budget. but the first reaction was unenthusiastic.”

Dr. Dalton, in a 8.8. C. broadcast, said that he was giving first place in the tax reduction to the income-tax payer and especially to the man with children. “We must take special thought for salaried people and wage earners who are bringing up a young family. “Many people, including Mr Churchill, have said that we are smoking too much. We are spending almost as many dollars on United States tobacco as the United States is spending on all her imports of British goods. The imports we cut down must be those we need least, and we need food more than tobacco.”