THE BRITISH BUDGET UNHAPPY PRODUCT OF MIXED PRESSURES

Press, Volume LXXXVII, Issue 26394, 12 April 1951, Page 6

THE BRITISH BUDGET UNHAPPY PRODUCT OF MIXED PRESSURES

(By

RICHARD DINMAN.

of tM "IconomM.’*)

(Rec. 9.30 p.m.) LONDON, April 11. Mr Gaitskelfs first Budget Is the unhappy product of a mixed array of economic and political pressures. It implies no disrespect to say that the Gaitskell of 10 years ago, the academic economist with moderate Leftwing leanings, would himself have criticised it in quite considerable detail. There were three main difficulties in his way. In the first place toe claims on scarce resources that the new defence programme will exert mean that personal consumption—or in other words, toe standard of living —has to be cut this year. Second, the need to enforce this cut in consumption comes at a time when many taxes have already been pushed to the limit of profitability to finance the vast increase in Government expenditure and social services over the last 12 years; the tax on beer and tobacco, for instance,, was not raised yesterday because any stiff increase might well have led to a more proportionate fall in the amount consumed, and thus to an actual decline in the yield of these taxes. Third, however, the need to cut Government expenditure or to raise taxes also comes at a time when rising import costs have made it inevitable that retail prices should rise; the Economic Survey put the average expected rise in retail prices this year at no less than 7| per cent. This threatened rise has led to quite considerable lobbying within the Labour Party for increased social service benefits and food subsidies. NO Increase to Subsidies Lobbying for higher pensions and Other direct transfers in the relief of Sistress, before which the Chancellor as yielded some ground, was largely justified. But tha demand for higher food subsidies was in effect a demand that the burden of ■higher living costs should be shifted off the back of the already favoured consumer on to that of the already over-burdened taxpayer. The Chancellor deserves credit for Withstanding such an iniquitous demand. He would have deserved even S eater credit if he bad made some ow of reducing the subsidies on less essential items of food, and also, perhaps more important, of reducing subsidies on local authority rent?. As it is the only cut in social service expenditure that Mr Gaitskell has felt able to risk has been that implied in the decisions that the Government should henceforth pay for only half the costs of adults’ spectacles and false teeth. So much, for the background of this 'STB-™ .v W e„ t <h. t the Chancellor felt compelled by political considerations to do no more than nibble at social services’ expenditure, it was clear that new taxes to the tune of about £150,000,000 would have to be imposed if the requisite cut in personal expenditure was to be present financial year, and they are distributed in a way that accords quite remarkably with tpostunoffieial foraA .-i n.wn a.wwra w*

cuts before the event In place, of course, there is the an-L!* 6d increase in income tax ratra*? most significant feature hereh «?* the increase is not differentially buted. There has been no rise in iurt_ rates—in fact those who are top bracket have had their curt** reduced so that toe top rate of iw-™ and surtax will remain at a 6d in the £, without bridging the Am fid gap towards total conflscatinn” Fetrol Tbx Oosnparativoiy The increases in Customs andeirin. duties are also in accord with emnS? tions. Petrol has got off connZ* tively lightly in view of the Ming? of Transport’s desire to drive nsnSS traffic as possible off toe road* anu the railways and thus maintain » their present unnecessary employn»s 99,000 redundant railwaymen. ifoS people had expected another itwiSz of 9d in the gallon instead of th*iffi crease of 4Jd now announced. The increases in toe purchase are wisely directed towards those tfSg whose production competes for Ktal resources especially needed for the iZ armament programme (such as eta wireless sets, and television sets) ag toward* appliances that add to the a, cess demands now exerted on eletrt 1 city generation (and thus contributed power cuts); toe reasons for the h> ’ creased rates of purchase tax on * appliances arc perhaps not so ent. Stuck to National Interests The list of goods on which re*s». tfons of purchase tex are to be is a revealing exercise of some jK ner’s assessment of what can be n. garded as essential: it ranges dogffiK over some 70 articles from bodkJSj hotwater bottle stoppers. maining important change in duties—the levy of Id or motoX, cinema seats—is another tax tbit S hit as hard at the pockets rfjE; Labour Party’s supporters as at ftep of the legendary rieb. In his proposals for both incM taxes and indirect taxes, thereforc th Chancellor stuck to the line of natKm rather than party Interest It iq> probably inevitable, therefore, that Ihi Budget should Include one frankly » economic proposal to spite the ratis of Tuscany and rouse the rankTg, Rome to cheer. This inevitable ptgjg, ogl makeweight, however, need to have assumed the size it did. proposal to raise the distributed j*», fits tax from 30 to 50 per cent to; to make the new rate retrospectiwEl January 1 last is nominally exMaM! to bring in about £5,000.000 thiiijjfia i and about £60,000,000 next yaatMffl The other burden imposed oq toatei try by this Budget is the unexMto announcement that no "initial tow ances” will be granted for an induafcrt: investment expenditure after AtefA; In view of the burden that indtMff ! will have to bear in the f<*rm of hi|M raw material rod .plant crate mj|K plemented by a higher profits tax,lßt new burden on investment seetnsß unwise levy on Britain’s indutoH future. *®|