“CONTINUING CLIMB TO PROSPERITY”

Press, Volume XCI, Issue 27639, 21 April 1955, Page 13

“CONTINUING CLIMB TO PROSPERITY”

(Rec. 8 p.m.) LONDON, April 19. “By this Budget the Government is leading the people of this country further along the road of confident expansion,” the Chancellor of the Exchequer (Mr R. A. Butler) said in his Budget speech.

“I am satisfied that the world at large Will applaud our continuing climb back to the uplands of prosperity and I rely on our people to respond to the trust which I have placed in their sure and steady steps.”

In a broad survey of Britain’s financial and economic position, Mr Butler said the Budget came at “a particularly tantalising time,” both from the. political and economic point of view.

“In this last year we have learnt much about the problems we must solve if we are to succeed in combining expansion and stability, particularly when competition is becoming fiercer and the terms of trade less favourable,” he said.

But the expansion of the economy had brought many improvements in living standards for the British people. “Our experience in 1954 has shown us how rich an opportunity we have of increasing the future standard of living of our people. Now we must decide how we may best maintain that progress and at the same time keep in balance with the rest of the world,” he said.

Balance of Payments Speaking of the balance of payments situation, Mr Butler sale* th last war had shown that while it was right to run the island’s econopiy in a free and expanding mood, problems could spring from the very success which it ' had been “their happy lot to achieve.” Mr Butler said Britain’s unfavourable trade gap—the difference between exports and imports—in the latter half of last year had caused him to raise the bank rate and to take other steps to discourage too much spending. He said: “Thank God we took < that action in time.”

“Already, in the field of exchange, this action has produced results which take the shape I had hoped for.” The sterling-dollar rate had risen from about 2.78 J in the third week m February to a little more than 2.79 g. The rate of transferable sterling rose from 2.72 dollars to a little more than 2.77| dollars —“a very cons, arable rise.”

He commented: “We have thereby fortified sterling, but it will naturally take some time for the effect of the bank rate and the tightening of credit to make themselves fell on our .balance of payments. “If we are to be competitive, above all in price, we must combine a policy of incentive and expansion with continued restraint in the demands we make for our own personal satisfaction,” Mr Butler said.

Between 1953 and 1954 the output a man over the economy as a whole rose by about 2| per cent., but the increase in wage rates was more than 4 per cent. “If this tendency continues, prices will be subject to constant upwards pressure and effects, hoth at Home and in the export markets, will be adverse,” he said.

Any increase in money income which was faster than productivity must lever up prices or tilt the balance of payments against Britain. Restrictions on hire purchase should prevent the excessive growth of personal consumption. The national health service in the coming year would need £32,000,000 more than in the last year, education £25.000,000 more, war pensions £8,000.000 more and the Exchequer contribution to the National Insurance Fund would require £100,000,000 more.

These figures were “striking evidence” that social services would impose a growing burden on the Exchequer. • In the last year “a vigilant watch” had been kept on Government expenditure. If this had not been done, the Chancellor said, he would not now be able to offer the prospect of so favourable an ’out-turn for 1955-56.

The Chancellor estimated that on the basis of taxation as it existed the total revenue for 1955-56 would be £4,844,000,000—an increase of £106,000,000 over the actual yield in the previous year. He estimated that expenditure would be £4,562,000,000—an increase of £39,000,000 over the estimate of last year.

There were Government cheers when Mr Butler said that though he had budgeted last year for a small surplus of £10,000,000, in fact he had realised a surplus of £433,000,000. On defence, Mr Butler said: “The development of new arms and changes following the ending of the occupation in Germany, and continuing reduction in American aid, emphasises the need for securing within the existing framework every possible economy we can in this field.”

Mr Butler said: “It is not enough for us to earn enough abroad merely to meet the cost of imports. We have to ray our debts and to resume our traditional position as the supplier of capital for the Commonwealth and colonial Empire.

“We have to establish an expanding volume of world trade and we must be sure that British industry is equipped to take full advantage of its chances.” Mr Butler warned his hearers that some export markets might be difficult, but in general there were good prospects that world markets would offer Britain substantial opportunities to increase exports this year. “But we shall not achieve this essential increase unless our goods stand up to competition, particularly from the United States, Germany and Japan.” the Chancellor added. Taxation Relief Talking of representations made to him by industrial and other interests, he said the most obvious conclusion was that the sheer burden of taxation was too great. , “I am convinced that some further lightening of the load is needed to give industry the spur to be more competitive.” He said he would very much like, in the light of the recent report of the Royal Commision on Taxation, to give some help to the family man, “On whom the present load of taxation falls with a specially discouraging severity.” He said: “So if my first task is to lighten the sheer burden of the economy, I can think of one measure only which would enable me to combine with this objective the type of direct incentive I am seeking—one measure only which would be regarded as the most positive and heartening encouragement to all employers and workers alike.” >

This would be a simple reduction of 6d in the £ in the standard rate of income tax. This would be accompanied by 3d reduction in each of the reduced rates. The Chancellor said he did ndt feel justified in making any general reductions in indirect taxation, but he had carefully considered the representations that purchase tax was bearing heavily on some sections of the textile trade.

The Government -had great sympathy with difficulties in Lancashire and Northern Ireland textile centres. So he proposed to reduce the purchase tax from 50 per cent, to 25 per cent oq piecegoods, sheets, towels and other textile articles of rayon, cotton and other non-woollen materials.

These changes would take place from midnight on April 19, and would cost the Exchequer £2,250,000 this year and £3,000,000 in a full year. The 6d reduction for industry would offer the prospect of a relief of rather more than £40,600.000 —which should give fresh encouragement to expansion

“and a keener to our competitive power.” To the individual it lightened the burden on any extra income earned by greater personal effort. Mr Butler said the personal allowance (a part of income on which no tax is paid) would be increased from £l2O to £l4O for a single person and from £2lO to £240 for a married couple. He proposed to increase the tax-free allowance for each child from £B5 to £lOO.

Mr Butler said he also intended to provide some relief for people living on small incomes from investments,— “a class very deserving of help.” The limit of tax relief would be raised from £250 to £3OO a year. Mr Butler said the starting point of liability to tax would be raised for a single person from £155 sterling to £lBO. For the married man with no children it was raised from £270 sterling to £309. A married man with two children would start paying tax at £566 a year instead of £489 as at present, and a married man with four children would start at £823 a year instead of £707 as at present. ’ He said he ivould recoup slightly on the concessions by decreasing the amount of income on which taxpayers would pay only 2s 3d in the £—the lowest rate. They would pay this on the first £6O of their taxable income instead of -on the first £lOO.

No fewer than 2,400,000 taxpayers would be removed from tax liability altogether. The tax changes would become effective on the first pay day after July 5. The proposals would cost £ 134,000,000 in 1955-56 and £155,000,000 in a full year.