§ 6.0 P.m.
§ Now I come to the Income Taxpayers. I propose to apply to the classes of smaller Income Taxpayers a similar principle of relief to that which I have just 87 offered to the higher classes of Super-taxpayers by the relation of the Super-tax to the Death Duties. I propose to give a further advantage to earned income as against investment income in the lower ranges of the Income Tax scale. At the present moment the relief accorded to earned income as against invested income is one-tenth, with a maximum allowance of £200. I propose to increase this relief to one-sixth from 10 per cent. to 16; per cent., with a maximum allowance of 22.50. The measure of relief which this change gives to small incomes is very large. A married man with an earned income of £300 a year will find his tax reduced by 441 per cent., that is to say, he will get as big a reduction from this change in the rate as between earned and investment income —from that cause alone—as he would have got if the standard rate of Income Tax had been reduced by 2s. in the £. A taxpayer with three children, who has an earned income of £500 a year, will have his tax reduced by nearly one-fourth, or by the equivalent of 1s. ½d. on the standard rate; with an income of £750 a year he will get a relief, from this cause alone, of 10?2d. in the E. Broadly speaking, over the whole mass of Income Tax-payers with incomes under £1,000 a year—that is to say 90 per cent. of the Income Tax-payers —this relief to earned income as against investment income will give a benefit, on the average, equal to 6d. in the standard rate, and, of course, it is much more in the smaller classes of income. The full advantage of the new percentage will be obtained by incomes up to £1,500 a year, and thereafter it decreases as the income mounts to 22,000; and it is there that the Super-tax relief begins. On the whole, my curve will be found to be a continuous and harmonious progression, and will bear comparison with any of the existing curves of taxation. The cost of this particular relief to earned income, as against investment income, will be £3,000,000 in 1925, and £7,500,000 in a full year.
§ There are two subsidiary points to be mentioned in this connection. First of all, I consider that the savings of old people on a small scale are virtually earned income, and, therefore, a person over 65, whose total income from investments or any other source does not exceed £500 a year will gain the 88 advantage—we are fixing 65 as the new old age pension period—will gain the advantage of this relief to earned income, although the income may be completely derived from investments which are the savings of a lifetime. In the second place, the relief which we give to the class of the smallest Income Tax-payers, the wage-earners who pay Income Tax, is a considerable relief, and justifies me in asking them, as a small return, to accept an alteration in the system of quarterly assessments, which is designed to reduce by nearly £100,000 a year the disproportionate cost of collection of the tax in this particular field.
§ Lastly. but not least, and in addition, of course, to what I have said so far, I come to the standard rate of Income Tax. So far, the proposals which I have made affect a very large number of taxpayers. They affect very large numbers of taxpayers in varying degrees, but they do not affect them all equally. They do not, for instance, affect at all the reserves of public companies, on which the standard rate falls so heavily, diminishing the funds available for future development. I have every wish and every incentive, and I have received every exhortation, to reduce the standard rate of Income Tax; but my powers are severely circumscribed by the facts of the situation. The cost of a remission of the Income Tax rises with the increasing yield of that tax. A remission of ld. in 1924 would have cost £3,400,000 in the first year, and £4,900,000 in a full year. In 1925, the same remission of even Id. would cost £4,000,000 in the first year, and nearly £5,500,000 in a full year. Those are encouraging figures, but they are also large figures. We are approaching periods in which Chancellors of the Exchequer will be content and even proud if they can announce, as I have heard them proud to announce, remissions of Income Tax of 4d.,3d., 2d. or even a single penny. I have to think for more years than one, and I could not produce this year a Budget which would leave me stultified and in the position of having misled the House and misled the taxpayers of the country. I cannot do that, and I have to consider the possibility that I may have to stand here next year faced with the consequences of what I have done. In the circumstances, I have decided to 89 reduce the standard rate of Income Tax by 6d., at a cost of £24,000,000 in the first year and £32,000,000 in a full year.
§ I am now in a position to balance the Budget of 1925, and I do so on a revenue of 2801,060,000, and an expenditure of £799,400,000. I reserve for contingencies a prospective surplus of £21,660,000.
§ I have thus balanced the Budget in the public ledger in pounds, shillings and pence, and I have also tried, as I am sure hon. Members opposite will not deny, according to my lights—we all have our own point of view—to balance it fairly in the scales of social justice between one class and another in our varying community. Having limited resources to dispose of, and heavy burdens to carry, I have tried to present, on behalf of this new Parliament and the large Conservative majority, a scheme which has both unity and combination, which is national and not class or party in its conception or intention, which seeks to give to every class the assistance it most requires in the form most acceptable to the individual and most useful to the State—a scheme from which no class of men or women in the country, from the poorest to the richest, is excluded, and in which the proportion of advantage or relief progressively increases as the ladder of wealth is descended. I cherish the hope that by liberating the production of new wealth from some, at least, of the shackles of taxation, the Budget may stimulate enterprise and accelerate industrial revival; and that, by giving a far greater measure of security to the mass of the wage-earners, their wives and children, it may promote contentment and stability, and make our island more truly a home for all its people.