§ The existing practice of the House is that Income Tax and Surtax, being annual taxes, are founded on Resolutions passed in this Committee at the beginning of the year to which they apply. I must therefore ask the Committee to pass a Resolution, which will be tabled in the next day or two, authorising me to include in the coming Finance Bill the changes which I am now going to indicate, and which will take effect as from April next. They will be announced now, so that all concerned will realise, as I think it is advantageous and in the general interest, that they should, the plan according to which we are working.
§ I propose first to stop, at the end of this financial year, the creation of new post war credits for Income Tax payers. Second, I propose to raise some of the Income Tax allowances. Third, I propose to reduce the Standard Rate of tax; and, fourth, I propose to increase the Surtax.
§ The Income Tax post war credit dates from 1941. Part of each year's Income Tax has been treated, in effect, as a forced loan from the taxpayer—a very brutal operation! The total amount of post war credits accumulated up to the end of last 1892 March was some £575,000,000. It is estimated that the present year will add another £225,000,000 to this, and make a round total, up to the end of next March, of £800,000,000. I propose that no new post war credits should thereafter be created, that is, after the end of this financial year, at the end of next March. The repayment of the credits already created, either in whole or in part, cannot as yet be safely undertaken, until the supply of goods is increased and the risk of inflation is correspondingly diminished or lifted. So much for the Post War Credit.
§ I propose, in the second place, an increase in the personal allowances to individuals. The institution of the Post War Credit coincided in 1941 with a reduction of those allowances and it would, therefore, seem natural to make some comparable increase in them now that no new Post War Credits are to be created after the end of this financial year. But, quite apart from this, I am anxious to increase these allowances on merits, regardless of the post-war credit arrangement as one of the first acts of tax relief for which I shall be responsible. The Income Tax has pressed hardly in the last few years upon many people with small incomes, whether small earnings or small rentier incomes, many of whom never paid the tax before. There is plenty of evidence to show that it has depressed morale, reduced incentive, and has, in the aggregate, diminished production. To this extent it has been a bad tax, which must be judged, in the field I am now speaking of, as, on balance, undesirable in relation to its effect upon productive activity.