TAXATION REVENUE (Hansard, 24 November 1966)

§ LORD REDMAYNE
My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

§ LORD SHEPHERD
My Lords, I have looked into this matter very carefully, and I am afraid that it is not possible to give the noble Lord an aggregate of the sort for which he asks. Some tax changes have a fairly stable full-year yield which can be estimated, but for others the yield varies widely from year to year. The effect of some is short-lived, and is not concurrent with others introduced later. If the noble Lord will look at Table II in the Financial Statements published with each Budget, he will see that, although full-year yields are given for some tax changes, they are not given for others, and no total figure is given. It follows that I cannot give the noble Lord an answer to the second part of his Question. In addition to the problems of giving aggregates which I have mentioned, this is also because of the radical nature of the changes in the system of direct taxation, the effects of which, on the economy, have not yet been fully worked out.
I apologise to the noble Lord that I have not been able to help him further. 350 There are considerable difficulties involved in this matter, but if the noble Lord would wish to have an explanation of those difficulties I am very ready either to see him or to write him a detailed letter.

§ LORD REDMAYNE
My Lords, may I thank the noble Lord for a most unsatisfactory Answer? May I ask him whether he is aware that in fact I can get nearly all that I want from the Financial Statements, and that those Statements show that, in fact, of these enormous increases in taxation industry and commerce have borne something like two-thirds, possibly more than two-thirds? I would ask the noble Lord how he reconciles this with the Chancellor of the Exchequer's Party political broadcast last night in which he said that private industry under a Labour Government can and should look for encouragement and will get it? Does this indicate a change of heart on the part of the Government and the Chancellor, or is it simply "double talk" for Party political purposes?
May I ask the noble Lord two specific questions?—and if he cannot answer them now I hope he will see that I get an answer later. What is the estimated out-turn in a full year of corporation tax at 40 per cent. and how does that compare with income tax paid by industry and commerce at the previous rates, allowing for the fact that it was increased by the Government in 1965 by no less a sum than £78 million? Secondly, what is the effect as a result of increased taxation paid of the reduced value of the investment incentives?

§ LORD SHEPHERD
My Lords, I will certainly see that the noble Lord is provided with an answer to those two questions. I think he will agree that we may well have to wait for the full twelve months in order to be able to provide the answer, particularly in regard to corporation tax. I did not have the advantage of seeing the television programme of my right honourable friend the Chancellor of the Exchequer, although my wife tells me that it was a most excellent one.
In regard to the comment the noble Lord made about the burden of taxation falling most heavily on industry, he will be aware that the old income tax rate on 351 company profits and the profits tax and income tax was in the region of 56¼ per cent.; whereas, under the corporation tax there is a tax of 40 per cent. on the profits, although there is added tax on dividends when dividends are made. But, clearly, if a company ploughs back its profits into its own organisation, which is what the Government would wish to see, it is infinitely better off than it was under the old system of taxation. However, in regard to the selective employment tax—the noble Lord did not mention this, but I think it was one of the taxes which he has in mind—it is clear that certain industries, particularly the manufacturing industries, will be much better off under this tax than they were in the past.

§ LORD REDMAYNE
My Lords, may I ask whether the noble Lord is intentionally spurring me to draw his attention to the fact in respect of the selective employment tax that the distributive trades and service industries are paying no less than an increase of £373 million in tax arising out of S.E.T. alone? So far as the Chancellor of the Exchequer's broadcast is concerned, I was asking the noble Lord whether there was any advantage in listening to it.

§ LORD SHEPHERD
My Lords, I am quite sure that to the noble Lord, Lord Redmayne, there is a great advantage in listening not only to that particular broadcast but to many others; we can all learn. In regard to S.E.T., it is true that the service industries are severely affected by it, but it is the policy of the Government—and I should have thought it was accepted by most people who appreciate our economic difficulties—that assistance should be given to the manufacturing industries. Therefore, this is one of the problems when one starts to generalise. In this case the manufacturing businesses will be infinitely better off than they were in the past.

§ LORD CONESFORD
My Lords, did the Minister mean what he said, that the Government wish companies to plough back their profits in all cases, irrespective of the use the company can make of the profits ploughed back? If so, does he realise that his advice is the direct opposite of a unanimous conclusion of the Royal Commission on Taxation?

§ LORD SHEPHERD
My Lords, here again we must not generalise, and that is what the noble Lord is asking me to do.

§ LORD CONESFORD
That is what the noble Lord, Lord Shepherd, did.

§ LORD SHEPHERD
No, my Lords, I do not intend to generalise here. But certainly in the case of manufacturing industries, and certain of the service industries, if profits are ploughed back to give increased efficiency by the use of machines then our whole economy will be infinitely better off.