LABOUR BUDGET

Greymouth Evening Star, 24 October 1945, Page 5

LABOUR BUDGET

MR. DALTON’S PROPOSALS TAXATION AND INFLATION (Rec. 11.50 a.m.) LONDON, October 23.. The Government hoped while in office to go far to satisfy the widespread desire for tax reductions and increased social services expenditure, said Mr. Dalton, introducing a supplementary budget in the House of Commons. “The present supplementary Budget is on the morrow of great victories, yet my task in some respects, is harder than those of some of my predecessors. The Government will shape its policy and make its five year construction plan to reduce taxation and increase social services payments,” he said and added: “We must be resolute against inflation and must increase the production of peacetime goods as rapidly as possible, and must prepare to hold back purchasing power until there is enough goods to buy. The danger now is lest too much money should run after too few goods.” The cost of living at present was 31 per cent. more than before the war and he had decided to hold it steady at that figure until further notice, even if it meant an increase in Exchequer subsidies. He was making inquiries also as to whether he could not hold it steady at a lower cost. in total subsidy by economy of administration. “Large and continuous savings by all sections of our people is by far the best defence against inflation under the present conditions. I hope later that this will gradually become less urgent as production ex.pands and develops.” “Price controls must be retained and enforced and, if necessary, strengthened and extended. I believe that in the near future price stabilisation will be even more firm than was contemplated by my predecessor. In this period we shall keep a firmer grip than ever before on the cost of living, in which respect subsidies last year" cost the Exchequer about £200,000,000. Now, with.the cessation of lend-lease, we must reckon on a figure of at least £300,000,000, and the actual figure may prove considerably higher, especially. if a decision to peg the cost of living has to be carried otit in the face of still rising costs. Lend-lease talks have not yet reached even a provisional conclusion. We are keeping in close touch with the Dominions and India regarding the discussions. Meanwhile, it is more than evgr urgent to stimulate exports and restrict imports, especialy those costing dollars. Whatever the outcome of the Washington talks we must make the most vigorous and imaginative efforts to stimulate the balance of our external trade, and we must do tne job soon.” Mr. Dalton said.the Government would now turn, its attention to the possibility of securing lower middle term and long term interest rates, but would do nothing in this respect to hinder the success of National Savings weeks, which would go on until the end of November. If the Government should decide to reduce interest rates on new issues, such reduction would not effect the terms of existing loans. “This would apply not only to market issues, but to savings certificates and Post Office and savings bank deposits. There was a probable saving of £200,000,000 on defence and supply departments, but this was outweighed by the cost of supplies formerly provided under lend-lease and also by credit under the Anglo-French financial agreement signed last March. Service and supply departments expenditure would be faster the faster we demobilised, because of lump gratuities -and service credits. Similarly, the closing down of war contracts 'involved compensation payments, which would also be large in relation to the cost saved this financial year. The annual charge on the floating debt was now £66,000,000, but the recent reduction of interest on Treasury bills would save the Exchequer £33,000,000 'yearly, thus almost halving the charge to the Exchequer. Legal minimum prices on the Stock Exchange for gilt-edged securities imposed throughout the war no longer served a useful purpose. These would be abolished to-day. As far as could be foreseen, the yield of various items of revenue would con■form approximately to the estimates of the last budget.

FAMILY ALLOWANCES Family allowances would begin to be paid next year, and increased oldage pensions and other improved benefits were also beginning next year under legislation which the Minister of National Insurance was preparing. There would also’ be increased expenditure on housing, education, colonial development and welfare. Let no one expect that we will be able next year to present a fully balanced budget. We shall, however substantially narrow the gap between expenditure and revenue. The abolition of war damage contributions meant the relief of £40,000,000 yearly to many taxpayers. He proposed to repeal certain excise allowances on industrial alcohol and exported spirits granted for many years, in compensation for certain restrictions imposed on distillers. The Finance Bill would include provision 1 to modernise the revenue control on distilleries without the restrictions i war-time had proved necessary. He also intended to continue until the present severe shortage of liquor eased the abatement of the liquor license duty provided by the 1942 Act. “I cannot agree at present to a reduction in the totals of taxation on' motor vehicles. I have come to the conclusion that I must leave the dist ribution of taxation as between license duty and fuel substantially where it is. In the case of private ca rs, there is general agreement in the'motor industry and others wherewith I had discussions, that the present method of calculating horse-power according to the cylinder bore should go and the tax in future; should, be based on cubic capacities.” ' . , Mr Dalton regretted that he could not take off the purchase tax on cars sold in Britain. There were many other claims for remission of purchase tax which must be put first. He hoped that the motor industry was going to export many more cars than it sold at home. Post-war 'credits for income tax payers would be abolished f”om April 1, 1946 The -total amount of post-war credit accumulated to the end of March was £575,000,000. It was estimated that 1945 would add another £225,000.000 making a total of £800,000,000. "Repayments of credits already created "cannot, thus far, be safely undertaken until the supply of goods increased and the risk of inflation correspondingly diminished.

INCOME TAX CONCESSION. Mr Dalton said that he proposed from the beginning of the next financial year to raise the personal allowance for a single person from £BO to £llO and it was proposed for a married couple to raise the personal allowance from £l4O to £lBO and raise the exemption limit from £llO to £l2O. This would bring the allowances back to the pre-war level and relieve 2,000,000 persons from income tax. Single persons in 1946 would not pay income tax unless their income exceeded £2/7/weekly. No married couple would pay unless the amount exceeded £3 17/-, and no married couple witn , me child unless it exceeded £4/18/1 ’{o married couple with three child-

ren would pay on an income under £7/1/- weekly, and with five children £9/3/-. These remissions would cost about £160,000,000 in a full year subject to certain abatements. “I have come to the conclusion that ten shillings in the pound standard rate of income tax, falling as it does ;from the richest to the poorest, is •a too high .rate to be carried into peacetime. I propose, from the beginning of the next financial year, to reduce the rate ‘from ten shillings to nine shillings.” Mr. Dalton said that if he were to do this and no more, he would be treating the larger income tax payers too favourably m relation to the smaller payers. He, “therefore, proposed a new gradation ,of the standard rate. At present, the first £165 of taxable income was charged at 6/6 in the pound. He proposed that the first £so.should pay only one-third of the standard rate or three shillings; the next £75 would pay two-thirds of the standard rate land the remainder of the taxable income at nine shillings in the pound, finally, he proposed to raise the surtax .scale in order to recover from the ,richer taxpayers part of the standard rate relief which otherwise would give them too much compared with the •rest of the community. The surtax was levied in a raising scale on successive slices of income above £2(Juu yearly. It started at 2/- in the pound on £5OO and reached a maximum of 9/6 on incomes exceeding £20,000. Mr. Dalton pointed out that there were about 125,000 surtax payers, whereof nearly 100,000 had an income of £5OOO yearly or less. He said the new surtax scale materially affected only the bigger incomes. The loss to the Exchequer on income tax, taking into account the ’£225,000,000. figure relating to post-war credit liability, was about £97,000,000. The new surtax scale would bring about £7,000,000 yearly extra. Therefore, the ner loss would be reduced to £90,000,000. “I hope encouragement is given by /he general relief and that the tax will lead to intensified production and, therefore, to more abundant revenue.” Mr. Dalton expressed the hope that an increase in the net profits of companies would be spent on up-to-date plant and would not go straight into the shareholders’ pockets. “We cannot afford that now. Capital development must stand in front of higher dividends.” Mr. Dalton said from January 1 the

EXCESS PROFITS TAX would be reduced to 60 per cent. He would continue to study the possibility of alternatives to that tax. The National Defence contribution would not be changed. The net cost to the Exchequer of the reduction in the Excess Profits Tax would be about £30,000,000. The Finance Act provided that the repayment of excess profit tax should be used for the development and re-equipment of industry and not distributed for the benefit of shareholders. The Finance Bill would contain conditions which would govern the repayment to ensure that this refund would not be misused. Relief under the Excess Profits Tax would provide about £250,000,000 which should be spent over the next few years in restoring British industry. Nothing more would be payable under deficiency payments in respect of any accountancy period after Dec. 31, 1946. Mr. Dalton continued: “I propose to abolish the purchase tax completely from a range of articles of special importance in connection with the housing programme. The articles to be released from the purchase tax Will be coal and coke, stoves, grates, refrigerators, geysers, boilers and other domestic appliances which now pay 33J per cent.” Mr. Dalton estimated that this abatement would cost the Exchequer about £l,000,000 in the current financial year and about £10,000,000 in 1946-47. Mr. Dalton said that he had deliberately gone slow on tax reliefs because there was an inflationary risk in any reduction of taxation either now or in the near future. Mr. Dalton added that by April'next we would see the picture much more clearly. He would then put forward further proposals regarding taxation changes of one sort or another. He, meanwhile, had selected for announcement such tax reliefs for the next year as would give the greatest incentive to the greatest number. ‘This is the first of a series qf budgets which I hope will clearly exhibit, over the developing and expanding plan for a fuller national life, as a move forward through what I hope and believe will be a historic Parliament.” Mr. Dalton spoke for 95 minutes.

MR. CHURCHILL’S COMMENT. Mr. Churchill offered compliments to the Chancellor on “his bland, mild, temperate survey of the dark, tumultuous, tortured financial scene.” He said Mr. Dalton gaVe a great deal of innocent pleasure by the ingenious series of nets and barbed wire entanglements on which every farthing profit was caught before it reached the income tax payer’s pocket, and how after that almost every farthing of income was caught by taxation processes. This would give rise to a great deal of harmless joy. Whether m the long run the processes would be regarded purely as giving rise to hilarity would only be seen as our economic and financial future developed. On the whole, not very much had happened in connection with the medium and high rates of income tax. He warned the Government it must not be drawn into exaggerated hopes that it was on the first frontiers of large fertile territory. The taxation field had been scrubbed clean. He -must strike a note of anxiety at the continuance of expenditure at a war-time level. The maintenance of such a rate of expenditure would exercise' a paralysing effect on Britain’s recovery during the critical months in the world, when much could be won or lost.