Chancellor’s Speech

Press, Volume LXXXVII, Issue 26394, 12 April 1951, Page 7

Chancellor’s Speech

The Chancellor told toe House of Commons at the outset of his Budget speech that the British people had to recognise that there must be some reduction in their standard of living. "This year we have come reluctantly to the conclusion that we shall not be able to manufacture and sell a bigger volume of exports,” he said. There < should be a fiscal and monetary policy to restrain civilian expenditure. Mr Gaitskell said fie did not think that Britain should return to a rigid wage freeje, but he added that there "wag a real danger if incomes and prices rose progressively and continuously. Britain then would be plunged into a violent situation which, in other countries, had brought the whole national fabric to toe edge of disaster. “If the Government failed to limit expenditure It would be a case of too much money chasing too few goods." He added that too severe a Budget, however, might give the country losses, unemployment, and austerity without substantial benefit to its external position. Exports and Rearmament Mr Gaitskell continued: “Because the direct impact of toe defence programme falls mainly on the engineering industries, we must expect some check on home supplies ana some interference with the exports of these industries- Our object is to carry through the defence programme as swiftly and as smoothly as possible, and to maintain a level of exports sufficient with the expected surplus of invisible exports to pay for our current import needs, excluding strategical stockpiling.’ The Chancellor emphasised that While a sufficiently tough Budget, by its effect on total expenditure, would prevent prices from being pushed up by excessive demands, it could not, by Ming even tougher, do much to prevent a rise in prices when these were caused by the higher level of costs. The limitations of the. Budget were much the same as that of price con“As a nation we cannot evade the burden, but we have the choice as to how it is to be borne within foe community," too said. No Government could try to protect consumers from higher prices by increasing the subsidies on food still further, and introducing them again for clothing and many other things, fop it would toon be essential to raise more money pn taxation to pay for these extra subsidies. The Chancellor said: “A decision pn this important matter clearly ought not to be taken by itself. It must be looked at in foe light of the Budget its a whole. The way in which this burden falls on the different group;; is also affected tor the changes in money incomes. In recept months the incomes of some groups of individuals have been going up. Such increases in incomes push up costs, and lead to still higher prices. To some extent foe higher export prices may bring us some benefit, but there are limits to the rise in export prices which can take place without serious damage to our competitive powers. During the last few years of labour scarcity and sellers’ markets, the workers have been in . a position of unexampled strength of bargaining power. Had they considered only their own immediate interest they could have pressed their advantage home. Avoiding Inflation "On the other hand, there was little compulsion on employers to resist wage claims when they could recoup themselves from prices. Between these pressures and the menace of runaway inflation stood only joint bargaining machinery. The Government decided to rely on the established system of industrial wage regulations. It assuredly is not the moment when we can afford to cast aside the restraints of the last few years. On the other band, Ido not think we should advocate a return to a complete wages freeze. "I must draw attention to the real danger of having indomes and prices rise swiftly and continuously so that there may be a progressive loss of confidence in the value of money. We have decided we can continue to trust the established system of wage negotiation to avoid a rapid and damaging upward spiral of incomes, costs, and S rices. It must clearly be our object > make sure there is no aggravation on the demands side. The Budget must help to direct production toward defence and exports, which are the physical tasks before us. It must discourage the use of consumption at home of the labour materials required for defence and export." Referring to the Budget surplus last year amounting to £720.000.000, Mr Gaitskell warned against thinking that prospects for this year were correspondingly bright. The difference of £277,000,000 between the Estimates and the out-turn was explained by excess revenue of £80.000.000 and a lower net expenditure of £197,000.000. The increased revenue was largely due to excess Customs and excise receipts of

£46,000,000, while there was an excess of £16.000.000 on income tax. "We have a gap of some £150,000,000 in the current year," said the Chancellor. "There are two ways of meeting it—either by cutting down Government expenditure (Conservative cheers) or by increasing taxation." (Labour cheers.) He said that of the prospective expenditure for the year—£4,197,000,000 —just under half was for the consolidated services and defence and the remainder, £2,125,000,000, was broadly, expenditure on civil departments. More than three-quarters of the latter amount was accounted for by social services and food subsidies. “I estimate the total tax revenue for this year at £3,877,000.000—an increase of £147,000,000 over the actual tax revenue received last year," said the Chancellor, “In some cases we face reduction. I nut Customs and Excise at £1,590,000.000, compared with £1,630,000,000. Beer and other alcoholic drinks are expected to bring £368,000.000, as against £398,000,000 laat year. Cost pf Defence Mr Gaitskell said of the future that it way a chilling prospect on the expenditure side. Against Exchequer Issues for the year 1950-51 of

£3,800,060,000 be estimated foe fetal expenditure for 1951-52 at no less than £4,I97JMK)JIOO. This was an increase cf £939,01)0,000. Nearly £20,000,000 was needed for civilian defence againet only a few millions last year. Capital expenditure on indurtrial capacity for defence production required about £50,000,006. as MfeiMt £5,000,000 last year. For the stockpiling of food, raw materials, and strategical supplies £143,000,000 was required against £13,000,000 last year. He put foe additional cost of foe accelerated defence programme at £160,000,000. The total estimate for defence preparation of about £1,490,000,000 represented an Increase of about £690400,000 over last year. Mr Gaitskell estimated intend revenue duties to be up by £157,000,000--£2,225,000,000 in comparison with £2,038,000.000 last year. Motor licences were expected to yield £624ooXWo—approximately foe same amount. A decline was expected in non-tax revenue which was expected to bring to £229,000,000 as against £248,000.000 lastyear, “The total estimate of the revenue of 1951-52 on the existing basis of taxation—£4,o96,ooo,ooo against last year’s figure of £3,978,000,060—5h0wed an Increase of £120,000.000 to be ret arainst increased expenditure of £939,000,000. “The result is a Budget deficit above the line on a conventional basis of £99,000400 Tfris deficit of £99,000.000 may be compared with the surplus of £720.000.000 last year of revenue over expenditure, so that we are faced in total with a deterioration of £ 819,000400 * Social Service#

There were some cheers when Mr Gaitskell said that expenditure on home information was to be reduced & nearly 20 per cent., or less than £3,500,000. Social services, with the food subsidy, would amount to £1,615400 000, compared with £1,589000.000 last year. There would be £250.000,600 for education, £460,000.000 to food subsidies. £400,000,000 for national insurance, and assistance and war pensions, £400,000.000 for health, and £160,000.000 for housing grants and the Ministry of Labour. Mr Galtskell said war pensions would remain the same, but supplementary allowances would be improved. Details would be given later. He said he would not increase fcx>d subsidies. The Government had decided to introduce modest charges fot some dental work and optical aerviedg. It proposed a charge of half the scale fee for denture work and about half the cost of each pair °f glasses. There would not be any charge for children's spectacles and expectant nursing mothers would continue to receive free dental treatment, including dentures The yield from these charges would be about £25.000.000 in a full y»V and

Inereaaed Taxes The Chancellor announced the doubling of the purchase tax on motor-cars from 33 1-3 per cent to 66 2-3 per cent This would bring in an extra £12,000,000 for the rest of the year and £17,000,000 in a full year. Mr Gaitskell proposed to increase the rate of tex on distributed profits from 80 per cent, to SO per cent from January 1, 1951. The tax on undistributed profits would bo left unchanged at 10 per cent. Mr Gaitskell said lie did not disapprove of profits in principle. It was foolish to ignore their function as an incentive, but because of the general economic climate, profits were rising and must be cut Other Changes

Other changes the Chancellor announced were: Income Tax.—Bd increase in each of the three ordinary rates. These would now be 3s on the first £5O of taxable income, 5s fid on the net £2OO, and 9s fid as the full standard rate on the balance.

Petrol.—An increase of 4sd, raising the price to 3s 6d a gallon. The tax on indigenous oils would be increased by the same amount. The now petrol tax would be effective forthwith and would yield £35,000,000. Cinema Seats—ld tax on seats costing 6d to 9d, 2d on seats costing lOd to 2s, increasing to 5d on seats costing Ils 7d. Thera increases would also apply to horse-racing, greyhounds, and speedways, but not to legitimate theatres and football or cricket matches. These new taxes, which would begin on August 5, would bring in £6,000,000 in a full year. The Chancellor said there would ue no extra duty on wine, beer, and spirits, as the tax was already very nigh. To counteract some hardships of the new income-tax increases Mr Gaitskell said the tax free allowance for married people would be increased by £lO to £l9O, and the tax-free allowance for each child from £OO to £7O. There was laughter when Mr Gaitskell announced he proposed to reduce the top rate surtax on incomes over £23,000 to 10s in the £l. This would prevent the total tax levied on rich people exceeding 19s 6d in the £l. The net yield of income tax changes would be £73,000,000 this year and £81.000.000 in a full year. Mr Gaitskell proposed an increase in the purchase tax of 33 1-8 per eent to 66 2-3 per cent, on wireless and television rats and valves and gas or elec-trically-operated domestic appliancls. This would yield £14,500.000 in a full year and £10.000,000 this year. Mr Gaitskell also proposed a 60 2-3 per cent, tax on portrait photographs made from materials which have not borne tax. He announced further exemptions from purchase tax tar various necessary household articles, which in no way were luxuries, such as hot water bottles. Ironing boards, and school satchels.