§ The proposals which I have put forward on direct taxation will cost this year £8½ million.
§ In the light of this, I return to indirect taxation and what should be the size of the surplus. Taking the Inland Revenue changes into account, the prospect is for a surplus of £434 million above the line and a net borrowing requirement of £73 million. Having regard to the circumstances which I have set out, the prospects, the opportunities and the risks, I have come to the conclusion that this 985 borrowing requirement is about right, and that I should not, at this stage, in the Budget, add to or withdraw purchasing power.
§ This brings us at once to the question of what I should propose about the two regulatory powers in last year's Finance Act. The Committee will remember that the second power for which I asked last year was to impose a surcharge on the employers' National Insurance contribution. This proposal did not receive what one might describe as widespread and enthusiastic approval. I was interested to notice the horror aroused in many quarters, including the trade unions, by the idea of an increase in employers' costs amounting to 4s. per employee per week. I was also interested to notice how many supporters, in theory, of a payroll tax shied away when confronted, in fact, with something analogous.
§ I do not propose to ask for a renewal of the power to levy this surcharge. This does not mean that I think that the idea of a payroll tax should be abandoned. There may be a place for such a tax, not as a regulator, but as a permanent part of our fiscal system. I think, however, that the idea is one which can be more appropriately considered in connection with a comprehensive review of business taxation.
§ The 10 per cent. surcharge or rebate on Customs and Excise duties was more readily accepted. It was used on 25th July. It has worked effectively. There is one course I could take with regard to it. I could leave it in force under the existing powers until 31st August and ask the House to extend it from that date to the end of the financial year. That would achieve my Budget objective. I do not, however, think that this would be the right way to act. It is the essence of the regulator that it should be available for use between Budgets. Now that we have arrived at the Budget, I believe the right course is to bring the current surcharge formally to an end, so that we can consider now the rates of taxation for the year as a whole, and whether or not a new power for this sort of surcharge should be given.
§ I therefore propose to do three things. First, to impose rates of indirect taxation which will give in this financial year a yield broadly equivalent to that 986 which would have resulted had the present surcharge remained in force for the whole year; in other words, a yield approximately equal to that which I gave earlier in my speech when I outlined the Exchequer prospects for 1962–63. Secondly, I propose to bring the 1961 surcharge itself to an end from midnight tonight. Thirdly, to ask Parliament for a similar power of surcharge or rebate for possible use during this financial year.
§ I take, first, the duties on tobacco, alcoholic drinks, and on light hydrocarbon oil and derv. I propose to consolidate these duties broadly at the level at which, inclusive of surcharge, they now stand. This means that in these cases present retail prices should not, in general, be affected.
§ Certain minor adjustments have to be made at the same time. In the first place, there are the margins between the full and preferential rates of Customs duties, and also between the Customs rates and the Excise rates, where there is a protective element. These margins were inevitably increased by the application of the percentage surcharge to specific duties, and I have to take account of this.
§ Secondly, I intend to simplify in minor respects the structure of certain duties, especially by abolishing small differential charges that have ceased to have any real significance. The results of these changes can be studied in the Financial Statement.