§ There are severe limits, at any rate, on certain means of obtaining new revenue. Income Tax, which is not an optional tax but an inescapable one, five years ago was at the standard rate of 4s. 6d. A year ago it was 5s. 6d. To-day it is 7s. 6d. There have also been two recent successive increases in the Surtax. These taxes, which in 1935–36, with Income Tax at 4s. 6d., yielded roughly about £290,000,000, are to-day estimated to yield about £525,000,000, and it is evident that, even with the most drastic taxation, the limit of what is possible by way of direct taxation on the higher incomes is approaching. It is not always understood that if one took the whole of all incomes in excess of £2,000 a year they would only produce in extra taxation some £70,000,000 per annum. 643 But I must in the present situation ask for a further contribution from the direct taxpayer, and I believe he will willingly respond.
§ I now propose to increase the standard rate for the whole of the current year to 8s. 6d. With this increase in the standard rate I propose to alter the reduced rate of tax which is charged upon the first £165 of taxable income—that is, upon the first £165 of the actual income, less the personal allowances to which the taxpayer may be entitled. The rate chargeable on this zone of income is at present half the standard rate, and, with the increase of the standard rate to 8s. 6d. in the £, the reduced rate would rise automatically to 4s. 3d. in the £. I propose that the reduced rate should be increased to 5s. in the £. Proportionately it must be realised that this increase in the reduced rate will mean a greater contribution from the taxpayers at the lower end of the scale.
§ The usual tables will be found in the White Paper, but I might perhaps give one or two illustrations of the effect of these changes. A married man with two children and with an earned income of £400 a year who at present pays £11 17s. 6d. will now pay £15 16s. 8d. If his income is £600 a year, he will pay £68 17s. 6d. instead of £55 6s. 3d.; if his income is £1,000 a year, he will pay £210 10s. 10d. instead of £180 6s. 3d. The increase of the standard rate to 8s. 6d. in the £ and of the reduced rate to 5s. in the £ will produce in a full year £84,000,000 and in this year £60,000,000.