HC Deb 09 June 1937 vol 324 cc1889-96

Motion made and Question proposed, "That the Clause stand part of the Bill."

9.52 P.m.

Mr. Boothby

This Clause is what one might call the meat of the whole Finance Bill. It is upon this Clause that the supply of the community as a whole depends. We are raising Income Tax by 3d. to 5s. in the £ and it is the question whether the Chancellor of the Exchequer will realise his estimate on this Income Tax or not which will really decide whether or not the Budget is a success. Income Tax is much the most important tax, and because of that reason I should like to raise one or two questions with my right hon. Friend. The Prime Minister, in introducing the Budget, based his estimate on the yield from this tax on a continuance of trade recovery in this country. Five shillings is an unprecedented sum outside war or immediate post-war years. I do not think that anyone in any quarter of the Committee is disposed to dispute, and still less to vote against, that figure, but no one can say that one-fourth or 25 per cent. is a small amount of direct taxation to take.

Both from the point of view of the community and from the point of view of the Treasury it is essential that every step should be taken, while we have to maintain this very serious and heavy burden, to secure that the trade revival and prosperity should continue. The success of this tax depends fundamentally upon confidence. If confidence is shaken we shall not get from this 5s. Income Tax the revenue which the Prime Minister estimated when he introduced the Budget, and it is on that point that I want to put a few questions to my right hon. Friend the Chancellor of the Exchequer, because in the course of the last four or five weeks certain events have gone some way, I will not say to destroy, but to shake the confidence of the business community of this country. If that confidence is not restored, then I say with due respect to my right hon. Friend that he cannot hope to obtain the revenue which the Prime Minister estimated that he would get from this 5s. tax.

This is not the time to go into details of the reasons why confidence was shaken, the National Defence Contribution proposals and the so-called gold scare which followed, but I would like to point out to the Chancellor of the Exchequer that for the last five or six weeks all markets—I do not mean merely the Stock Exchange markets, but markets of every kind—have been in a condition which can only be described as stagnation. If that continues there is no doubt the Government are going to lose a considerable amount in revenue from Income Tax. In fact, it is indisputable that already a certain amount of revenue has been lost.

Mr. Mabane

Is it not a fact that Income Tax is giving a better return than last year?

Mr. Boothby

We cannot take a monthly or a weekly view; we have to take a fairly long view of the prospects of direct taxation, and I only say that it is absolutely essential, if we are to maintain successfully as high a rate of Income Tax as 5s. in the £, that the Government must take every possible step, not only to maintain but, I am afraid it must be said, to restore confidence to the business community of the country. It comes back to the same old question to which hon. Members have referred during the recent months, that there is nothing that kills business under a capitalist system like uncertainty. I have always maintained that if the party opposite ever get into office—I hope it will be a long time before they do—they will get away with quite a lot if they will make it perfectly plain what they mean, and stick to it. What no business community can stand is uncertainty, not knowing what is going to happen next. One of the things which has caused us anxiety in connection with this Income Tax of 5s. in the £ —a serious burden to impose—is the uncertainty which has arisen during recent months. There is a real danger that if the stagnation which grips markets at the present time is allowed to continue for an indefinite period it may overflow, and may well affect the activity of the business community. There is no doubt a real danger of that, and it is important that the Chancellor of the Exchequer should say something not necessarily optimistic, not unjustifiably optimistic, but something which will restore the confidence of the business community in the future of trade.

Doubts and anxieties have already been expressed during the Debate about the policy of His Majesty's Government with regard to international trade and the extension of trade agreements. The Committee would gladly receive some assurance that it is the policy of His Majesty's Government to do everything in their power to extend and revive international trade, without which industry cannot hope to sustain an Income Tax of 5s. in the £. No doubt the Chancellor of the Exchequer and members of the Government have been a little uneasy about the danger of a too rapid rise in prices in markets generally. I would say that you cannot impose an Income Tax of 5s. in the £ and then on the top of that deliberately take steps to damp down business activity. There are many ad hoc methods of dealing with abuses which may arise out of rising prices, and a general recovery, but industry cannot sustain a 5s. Income Tax if deliberate attempts are made to check the recovery and revival of trade by any government. Where psychological causes are so important, as they are in this case, it is much easier to check recovery than to start it. We have started recovery; it was getting under way very well until a short time ago, and I beg the Chancellor of the Exchequer to beware lest that recovery is checked, and instead of a continuing upward movement we get into what the economists call a deflationary slide, which, if it were to come about, would make a complete wreck of the Budget and of every hope of realising the estimate which the Prime Minister gave.

Therefore, in asking the Committee to sanction this large impost on industry, I hope the Chancellor of the Exchequer will reassure the Committee and the country, at any rate of his own faith in the present situation. The right hon. Gentleman has sources of information which are not open to us. We do not know the exact conditions of industry. We do not know whether the Chancellor of the Exchequer believes that industry is still in a condition of steadily reviving prosperity. If he does—and I think there are good grounds for supposing that to be the case—I say that he would do good service to the country and to himself if he would say that he believes that British industry is still on the upgrade.

Miss Wilkinson

Does not the hon. Member read the posters of his own party which will give him all this information?

The Chairman

I have been trying to interrupt the hon. Member because a good deal of what he is saying seems to me rather remote from the question. It is perfectly true that a tax makes many people ill, but if you were to discuss the remedies for the illnesses they thus get, I think it would be going far beyond the question.

Mr. Boothby

I am, in fact, a little surprised, Sir Dennis, that you did not interrupt me before. When I thought that you were about to do so I brought in the words "Income Tax," which temporarily saved the situation. I think the Committee as a whole is anxious that the right hon. Gentleman should secure the revenue which is estimated from this heavy tax, but I am sure he cannot do so without the background of confidence. In regard to what the hon. Member has said, I never believe any election poster, and I never issue one myself.

10 4 p.m.

Mr. MacLaren

It is interesting to note that no Amendment to this Clause has appeared on the Order Paper, but I think it is high time someone called a halt to this acquiescence in this Income Tax process. I am not one of those who think we are in a glorious state of society when I contrast some people with no income at all and others with more than they know what to do with. I suggest that if any man thinks he is going to remedy these economic contrasts in society by a process of Income Tax he is making the greatest blunder of his life. It seems to me that every Government, whatever its complexion, believes that the imposition of an Income Tax upon the people brings about some equalisation in the distribution of income, but it has been truly said that if by a process of Income Tax the State has taken all that Rockefeller ever possessed, it would by that process not have removed the causes of one man dying a pauper and Rockefeller dying a millionaire. There is a blatant fallacy in the mind of almost every citizen in the State that if one goes on with this predatory system of finding out what a man's income is, of hiring officials to find out what he does with every penny of it and then levying a tax upon it, the State is doing something to equalise incomes.

The result of people believing that is that when one looks at the Order Paper, there is any amount of Amendments to other Clauses, but not a single Amendment to the Clause dealing with Income Tax. It seems to be assented to by all hon. Members as something that cannot be challenged. It is high time that some voice was raised for economic sanity and for analysing the whole question of Income Tax. I know it would be out of order if I started to give the House a wearisome time by giving a lecture on the origins of this tax, but there can be no deluding oneself of the fact that the only person who will pay any Income Tax is the person who has a fixed income, and that the large proportion of Income Tax payers with £2,000 or £3,000 a year will pass the Income Tax on to some-body else.

Mr. Boothby

Will the hon. Member explain how?

The Chairman

The Debate is getting rather remote from the question, which is the amount of Income Tax, and not its nature.

Mr. MacLaren

I would like to know on what opportunity it is possible for an hon. Member to protest against the passive acceptance of this fallacious process of Income Tax. Many people in this country, and the majority of hon. Members, think that there is something in the' Income Tax which brings about an equalisation in the distribution of-incomes. Is there any other opportunity I can take of raising the matter?

The Chairman

I am sure I could not venture to rival the hon. Member's capacity for finding opportunities for doing it.

Mr. MacLaren

May I have your guidance here?

The Chairman

It is not my business on this occasion to give the hon. Member that particular guidance. All the guidance I can give him now on the subject is that the present occasion is not the right one.

Mr. MacLaren

Is it to be said that there shall be no opportunity given to hon. Members to criticise the Income Tax?

The Chairman

I do not think so.

10.10 p.m.

Sir J. Simon

I do not wish to say anything which will extend this Debate, which is necessarily of a very general kind, but I think it is only right and courteous that I should say a word or two in reply to the two hon. Members who have spoken. It is indeed a very significant fact that Income Tax at the standard rate of 5s. in the £ should be, as it is, accepted by practically the whole Committee and received by the country without demur. That is undoubtedly a very striking fact. It is not, I think, quite accurate to say that this rate is the highest reached in time of peace. Conditions for a year or two after the War were very abnormal and in 1920 and 1921 the standard rate was 6s.; in 1922 it had been brought down to 5s.; and I think there has been at least one occasion since then when the standard rate has been 5s. As I ventured to observe in the first speech which I made as Chancellor of the Exchequer, at a time when attention was perhaps particularly concentrated on a particular matter so that observations on other subjects hardly received more than passing notice, Income Tax before the Great War was 1s. 2d. in the £.

The hon. Member for East Aberdeen (Mr. Boothby) asked me whether I would say one or two words about general confidence, and I need not say that I should be glad to contribute anything if I thought it would be helpful, but I am not sure that words about general confidence from a new Chancellor of the Exchequer would necessarily greatly advance matters. However, I will say that I entirely agree with the hon. Member that if the country is to bear these tremendous burdens and if we are to raise these enormous sums from trade and commerce, it undoubtedly requires that the condition of affairs should be certain. The hon. Gentleman knows that uncertainty is the enemy of confidence, and I would venture to add to that platitude an observation which is perhaps not always equally borne in mind by everybody. One of the best ways of producing uncertainty is consciously or unconsciously to promote scares. The Chancellor of the Exchequer has to weigh every single word which he utters, even in answer to a supplementary question, and I think the hon. Member will agree with me that it is the duty of every man in any public position, while speaking frankly about the position as he sees it, to remember that possibly some element of uncertainty may actually be created by a demonstration of anxiety or excitement which we must all help to control.

As for the question as to whether there is good ground for believing that recovery will go on, I think there is every ground for believing it. There is no solid reason for supposing that the movement towards recovery has reached its peak. Nothing of the kind. While it is obviously true, as I said in the Second Reading Debate, that world depression has had disastrous effects, especially on international trade, and while there is still a great deal to seek in the recovery of international trade, let us not forget that unquestionably international trade has passed the worst point and is showing fairly rapid recovery. Let me add, for my part, that I would attach the greatest importance to international co-operation both in the monetary and the economic fields and any influence which I had, would certainly be used to promote that view. There shall be no effort lacking on my part, so far as I am able to contribute to promoting that end, in the responsibilities in which I now find myself.

I do not think it is the general wish of the Committee, who have other most complicated Clauses to deal with, that we should spend too long on these general matters, but it is right that in passing a Clause which, as my hon. Friend said, is the very meat of the Bill, the thing that produces the money, we should not do so without something being said on these aspects of the question. It is satisfactory to me, and I think to most Members of the Committee, that there should be such a general willingness to face this very high figure of charge. From nothing may we take more confidence than from this fact that in the Income Tax, we have a system of taxation which has been worked out, with abatements at one end and the Surtax at the other end, by every party in turn in an effort at least to get a contribution which is fairly adjusted, and thanks to which we have the certain knowledge that the whole country is prepared to face the charge and pay what is necessary.