HC Deb 19 March 1968 vol 761 cc299-300

Having excluded an increase in the Capital Gains Tax or a further increase in the Corporation Tax, I am left therefore with the possibility of some impost upon the private wealth of individuals. In general I believe this to be a better method of approach than a fiscal reduction of company profits. The introduction of an annual wealth tax has been much canvassed. I will not spend time on a discussion of the merits of such a tax; since it would be quite impracticable at present because of the problems of valuation which would be involved. I have therefore decided that it is right, in the context of this uniquely rigorous Budget, to propose a special charge to be calculated and expressed as a charge upon investment income, as computed for the charge to Surtax for the year 1967–68. The charge will not be payable on investment incomes of £3,000 or less. The £3,000 limit will be increased by those personal allowances which an individual can claim in calculating his Surtax. Above that level it will be graduated. Between £3,000 and £4,000 it will be at the rate of 2s. in the £ between £4,000 and £5,000 at the rate of 3s; between £5,000 and £8,000 at the rate of 6s.; and above £8,000 at the rate of 9s. Its yield is estimated at £100 million, of which it is expected that £70 million will be received in 1968–69.

Although this charge Mr. Deputy Speaker will be calculated upon investment income and may at the lower ranges be paid out of income—at an investment income of £4,000 for instance, the charge for a married man with two children under 11 will be £65, and at £5,000 it will be £197 10s.—I recognise and intend that in the higher ranges it will be a small tax upon capital. I make no apology for that, because there can be little doubt that, with fortunes producing really large investment incomes, expenditure is determined much more by the possession of capital than by the size of the net income. I have no doubt that it will be said that as a small charge upon capital this will make no contribution towards reducing spending power. I by no means wholly accept that. But in any event the corollary is the extremely challenging one that the expenditure of those with accumulated wealth, unlike that of the rest of the community, must be recognised and accepted as being outside the control of fiscal policy, even at a time when all-round sacrifices are necessary. I hope and believe that this special charge will lead to some reduction in consumption. But to the extent that fortunately placed individuals decide that it should not reduce their spending, it is the more reasonable that they should make some small contribution from their capital.

This charge is imposed for one year only. It obviously should not, and indeed could not, be repeated in its present form except at long intervals. It would otherwise militate against deployment of capital so as to produce investment income—although there is a good deal of that already. This should not, however, be taken as precluding further exploration of the ways in which the taxable capacity of those who possess wealth should be differentiated from that of those who depend primarily on wages and salaries. This might make it both possible and desirable to reduce the highest rates of tax on incomes.

The net additional yield from all these changes in the field of direct taxation would be £331 million for a full year; that includes the yield of the increase in the Corporation Tax and of the recoveries of increases in family allowances and the whole yield of the special charge, which I do not intend to repeat next year. The net additional yield in 1968–69 will be £227 million.