§ The Chairman
With this Amendment, it will be in order also to discuss the Amendments in line 37, leave out "£320" and insert "£350".
§ In line 39, leave out "£200" and insert "£235".
§ In line 42, leave out "£200" and insert "£235".
§ In page 10, line 4, leave out "£900" and insert "£1,000".
§ Mr. Wade
Thank you, Sir William. In moving my Amendment, I shall refer also to the Amendments in lines 39 and 42, because the three fit together. Their effect is to increase personal reliefs. In the case of the married couple, the increase would be from £320 to £390, an increase of £70. In the case of the single person, it would be from £200 to £235, an increase of £35, and in the case of a wife's earned income, from £200 to £235, which, again, would be an increase of £35.
These Amendments have a twofold objective. The first is to increase the total personal reliefs and in that way to reduce the burden of taxation. Secondly, the Amendments would help to correct an anomaly in the Chancel- 1372 lor's proposals contained in the Clause. To deal with the second point first, it appears to me that the proposals in the Clause favour the single person as compared with the married couple. In that respect, the Chancellor appears to be altering the trend of post-war legislation whereby the reliefs are weighted more in favour of the married couple than of the single person. The Clause seems to have the reverse effect. No doubt, if my calculations are incorrect, I shall be told so when the Minister replies.
Under the Clause, the personal allowance for a single person will be raised from £140 to £200, an increase of £60 or 43 per cent. In the case of a married couple, the increase is from £240 to £320, or £80, an increase of 33¼ per cent.
§ Mr. Wade
I will not argue about that. In the case of the children's allowance, which I mention in passing, for a child under 11 years of age the increase is from £100 to £115, an increase of £15 or 15 per cent. In the case of a child aged between 11 and 16, it is an increase of 12 per cent., and for a child over 16 an increase of 10 per cent. The result of the changes seems to be to improve appreciably the relative position of single persons and to worsen appreciably the relative position of married couples and especially those with children.
One of the objects of my Amendments would be to alter that balance in favour of the married couple. The increase which I am proposing would be equal to that of two single persons. Assuming that a married couple have a combined income of £500, the result would be that they would pay no tax, that is to say, a married couple with an income of £10 a week would be relieved from tax.
I arrive at that figure by taking two-ninths of the earned income as being tax-free. Two-ninths come to £111 The addition of the marriage allowance of £390 gives a total of £501. Therefore, in the case of the married couple I am advocating a raising of the relief so that on a figure of £500 there would be total relief from tax.
1373 Perhaps I should make the comment that under the Liberal tax reforms, to which I referred on Clause 10, the earned income of a husband and wife would not be aggregated for tax purposes. I have, however, to deal with the tax structure as it is. Similarly, as regards children's allowances, I would be in favour of a specific increase by way of family allowance for the first child. Apart from altering the balance as between the single person and the married couple, the intention of these Amendments is to increase the personal reliefs. I think it only right that I should make one or two general observations as I have no doubt that I shall be told that this might cost the Exchequer quite a lot of money.
First of all, these proposals have to be related to general and major tax reforms. In moving the Amendment I think I should be out of order if I were to develop that at length. Secondly, of course, an hon. Member, in moving an Amendment to the Finance Bill, can only propose tax reductions. Therefore, I cannot really give the overall picture, but the precise cost of a particular Amendment is really only relevant in the overall picture. I would not necessarily accept that the amount of the cost would be the final answer one way or the other. Allowing for those two points, I think there is a third fundamental question which rightly should be asked, and that is, are the tax concessions already granted adequate? Is the reduction in taxation sufficient, having regard to the fact that there is still slack in the economy? I take the view that the Chancellor has not done sufficient to expand the economy and to deal with the existing slack in the economy.
§ Captain Walter Elliot (Carshalton)
Does the hon. Member happen to know approximately what his proposal would cost?
§ Mr. Wade
I have made my own estimate of what the cost would be, but I have no doubt we shall be given the figure later on. I have made my own estimate, but I think that probably the Government could give an accurate figure. [HON. MEMBERS: "What is the hon. Member's?"] My own estimate is about £200 million, but the Treasury is in a very much better position to give a precise figure, and I think it only 1374 fair that we should be given the figure in due course.
I think the fundamental point we have to ask is this, is there a slack in the economy and has sufficient been done to reduce taxation in the light of that? I will say quite frankly that these proposals are designed to create a further expansion of the economy. If a more expansionist policy had been pursued last year it might well have been unnecessary to boost the economy to the same extent at the present time. So often the error is in timing. If one is asked how great a boost is needed at the present moment, one has to begin by saying, "Well, the mistake was made last year." Tax reductions needed at the moment to boost the economy are greater because of the errors made during last year. So often, as I say, the timing is wrong, but whatever one's views may be about the timing I think it is clear that something more will have to be done than has been done by the Chancellor, and as proposed in this Bill.
I was interested this morning to read a report in The Times of a speech by the First Secretary of State. He was speaking, apparently, to an audience of businessmen, and is reported to have used these words, thesteps which have been taken or may still have to be taken, because I believe there is still shack in the economy".That was what a leading spokesman of the Government said. I should like to know what we are waiting for if there is this slack in the economy. If something more has to be done, when is it going to be done, and why is it not being done now? That, I think, is the real problem which is facing us.
I have here various quotations, but I am not going to weary the Committee with them as time available is less than we bad anticipated it would be, but I think I must summarise just a few points. First, there is a considerable weight of opinion in favour of the view that the Budget will not result in achieving the target of 4 per cent. per annum in the coming years. We have to remember that the gross domestic product actually declined by ½ per cent. in 1962, and, as I said before, what we do now has to be judged in the light of the mistakes which have been made in past years, and it may well be that we should 1375 today have to aim at a higher rate than 4 per cent. to get anywhere near the average of 4 per cent. which is required. I am not at all sure that we shall not find next winter that the unemployment figures go up to about 500,000, unless more energetic steps are taken than have been taken so far; and that is a very serious prospect.
Again, we have to remember the harm which has been done in the past by wrong timing. It was Sir Roy Harrod writing in the Financial Times on 1st January, 1961, who pointed out that the nation had lost over £2,000 million worth of goods and services through the Government's inability to keep the economy on a steady rate of growth between 1955 and 1960. As I have said, we have to deal with the situation today in the light of past errors, and in the very real need for expanding the economy I believe we must take a bold course if the steps are to be adequate.
It is in view of this very real need for expansion that I am moving this Amendment. Its object, as I say, is to reduce taxation at the lower level. I think it will undoubtedly add to the purchasing power of the community. I think it will have some effect on the expansion of the economy, and I believe that to be necessary.
§ 6.0 p.m.
§ Mr. Simon Wingfield Digby (Dorset, West)
I rise to deal very briefly with another kind of relief with which I deal in my Amendment in page 10, line 4. This is what is generally known as old-age relief. I make no apology for raising this matter for in the census of the elderly it was found that Dorset has a greater proportion of retired people than any other county, and therefore I believe that my county is particularly affected by my Amendment.
The effect of the Chancellor's concession, for which I am grateful, was to give earned income relief of a total of £900 as against £800 in the past. I am rising to urge him to try to go further, if not this year, at any rate next year. It may seem to some a comparatively small concession but I believe it is one of considerable importance.
I would put my case on three different grounds. First, the cost of it is not very 1376 great. The cost of this extension from £800 to £900 which the Chancellor has given us is only £750,000 this year and £1½ million next year. So the cost to the Exchequer is comparatively small, taking into account the total extra cost of the Budget.
Secondly, the benefit to those affected retired people who are in difficulties in this age of inflation is considerable. Indeed, I gather that those who are on an income of £900 will gain by paying £37 less tax than would have been the case if the Amendment had not been moved by the Chancellor.
Thirdly, I would point out to the Financial Secretary that this class of person—again, my constituency is particularly affected—has been hardly hit by the extra rate demands which are reaching them at present. Indeed, it would be true to say in many cases that the whole of the concession is swallowed up by the extra cost of rates. People usually go into retirement on a fairly fixed budget, and many who have either constructed or bought new bungalows have been very hard hit by the extra rates.
Consequently, I hope that my hon. Friend will be able to do a little more. It would involve a comparatively small cost to the Exchequer, but in an age like the present I believe that the retired people are suffering particularly. They have not had the advantage—