§ With initial allowances restored and a term set to E.P.L., British producers will 60 have a chance to plan ahead. But my diagnosis shows that long-term prospects are not enough—an immediate quickener is indicated. I have already referred to the numbing effect of excessive direct taxation. We must banish the hopeless feeling that extra effort is not worth while. I have looked for a method which will relieve corporate industry and which will not forget the vital human element. I have not lacked advice. The machines may be happier for their allowances, and the calculators for the ultimate demise of E.P.L. but we must look at industry as an organic structure of men and women. So I have examined the classical method—a reduction of the standard rate of Income Tax.
§ I find that more than half the benefit of such a reduction would go to corporate industry and the rest to individuals in every walk of life, in trade, agriculture or the professions. I therefore propose that the standard rate of Income Tax should be reduced by 6d.—from 9s. 6d. to 9s. in the £. This of itself will cost £64 million in 1953–54 and £73 million in a full year. At current levels of profits and distributions—and this is why I am impressed by its value for industry—the reduction of 6d. would represent £45 million relief on the undistributed profits of companies—a very potent augmentation of the company reserves available for maintenance, innovation, and development, upon which, I trust, it should be spent.
§ I have not forgotten the smaller incomes, and with this proposed reduction of 6d. in the standard rate of Income Tax I link proposals to reduce each of the reduced rates by 6d. At present the first £100 of taxable income is charged at 3s. in the £; the next £150 at 5s. 6d. and the next £150 at 7s. 6d. These rates, for the same bands of taxable income, will become 2s. 6d., 5s. and 7s. respectively. Thus the benefit of the reduction in the standard rate will be carried down, without restriction, to the lowest incomes that are liable to Income Tax. The cost of this concession in reduced rates will be £53 million in 1953–54 and £61 million in a full year.