AUTUMN BUDGET Check Against Inflationary Tendencies

Otago Daily Times, Issue 26618, 14 November 1947, Page 5

AUTUMN BUDGET

Check Against Inflationary Tendencies

DESIGNED FOR NEW REVENUE

LONDON, Nov. 12.

The Chancellor of the Exchequer, Mr Hugh Dalton, presenting the autumn Budget in the House of Commons to-day, said that it was the second time within three years that the Government had had to present a Supplementary Budget. This Budget was necessary to strengthen without delay the budgetary defences against inflation and narrow swiftly the very wide and dangerous gap in the overseas balance of payments. The effect of the measures to that end must increase inflationary pressure by reducing goods at home without reducing the total purchasing power.

The profit tax on all profits would be doubled as from January 1, 1948, said Mr Dalton. The Budget also included an increase of Id a pint on the average latter-day strength beer, and a higher duty on stronger beer. Mr Dalton announced that the duties on whisky, rum, and other spirits would be raised by £1 13s 4d a gallon. A bottle of whisky would now cost about £1 10s. Duties on heavy wines would be raised by 10s a gallon, and on light wines to 5s a gallon, ■ with u corresponding increase on British wines.

Mr Dalton said the revenue in the first 32 weeks of the present financial year up to the end of last week was £2,013,000,000, and expenditure was £1,760,000,000. “We are within £5,000,000 of what I estimated for the full year. There is no precedent for so large a surplus at this time of the year.” “ The Government must now deal with the new inflationary pressure which must inevitably be generated by Britain’s action to close the gap in the balance of payments,”- he said. “We must reduce the total expenditure and increase the total revenue. The reduction in the armed forces would mean a substantial economy in defence expenditure next year, while a cut of £200,000.000 in total capital investment would ease the inflationary pressure.” Mr Dalton said he intended to find the £392,000,000 he had estimated for food subsidies last April. “We do not regard food subsidies as being a waste of money or a harmful distortion of our economy, or an insidious, debilitating form of charity. Their complete abolition or drastic reduction at this time cannot be contemplated.” He said he was working for a solid reduction in total expenditure, and the Budget was short and simple, designed to bring in considerable new revenue without pressing with undue weight on the prime necessities of life. No Change of Income Tax

He did not propose to change the income tax, but by next April he would examine various alternative methods of readjusting and lightening the taxpayers’ burdens. He was concerned at the large tax arrears. The Public Accounts Committee had reported that the total arrears at the end of the year 1945-46 were about £780,000,000. The arrears of income tax under Schedule D, also on surtax, profit tax, and excess profits tax, would bear 3 per cent, interest from January 1 next. This interest would not be allowed as reduction in computing on profits, and would be charged on genuine arrears exceeding £IOOO which have been outstanding over three months. Mr Dalton said he hoped to get £15,000,000 through accelerated collections and arrears of tax in the last quarter of the present financial year. The doubling of the profits tax as from January 1, 1947, would raise the rate to 25 per cent, on distributed profits and to 10 per cent, on undistributed profits. This would increase the annual yield by £85,000,000, bringing the yield next year to £170,000,000. Mr Dalton announced that only half instead of the whole of advertising expenditure would henceforth rank as allowable expenses against business profits. There would be certain exemptions and advertising for the export trade, and trade and technical journals would be on a special footing. Revenue from this source would be £10,000,000 a year. Mr Dalton increased the purchase tax rates in various groups as follows: 16 2-3 per cent, to 33 1-3 per cent.; 33 1-3 per cent, to 50 per cent.; 66 2-3 per cent, to 75 per cent.; 100 per cent, to 125 per cent. Purchase tax rates on motor cars would be unaltered. The reduction in the consumption of tobacco had not been maintained, said Mr Dalton. It had now returned to 80 per cent, of the consumption before last April’s Budget. Britain would rapidly approach a serious shortage of tobacco unless consumption was reduced, but he had resisted the temptation to raise the duty again. Duty on Spirits Increased He would, however, increase the duty on whisky, rum, and other spirits by 33s 4d a proof gallon, thereby raising the price of a bottle of whisky from 25s 9d to about 30s. Empire preference on wines, as on spirits, would remain unchanged. Duties on heavy wines would be raised by 10s a gallon, representing an increase of Is 8d a bottle, on light wines, of 5s a gallon, or lOd a bottle. Duties on British _ wines would be raised correspondingly. The duty on beer would be raised by Id a Pint on the average latter-day strength and higher on stronger beers, if there were stiff any. Duties on beer, wine, and spirits would be effective from to-morrow. They were expected to produce £56.000,000 a year, and £18,000,000 this year. A large proportion of the total expenditure, Mr Dalton said, went on betting. There had been a great increase in tote turnovers, especiallj the dog totes, on which., a tax of 10 per cent, would be placed. He would not impose a tax on horse totes, as these racecourses were not run for pnvate profit. , , , Because football pools had grown to enormous dimensions and absorbed fai too much paper, they would be subject to a new betting duty, the same as the dog totes —namely, a 10 per cent.bettine tax This would operate from January 4. and would yield £15.000,000 a vear. The new tax charges should yield annually £208.000,000. Gilt-edged Market Improvement Mr Dalton expressed satisfaction with the improvement in the gilt-edged mailet He added that there had even been signs that infiationaiy pressuie in Britain had been relaxed m recent months. Currency notes in circulation had fallen from the August peak of £1.421.000.000 a week to £1.364.000.000 last week .. t March 1 next would be the earliest date for repayment of £3oo.oUU.uuu of 3 per cent, conversion stock. Mi Dalton said. He would announce before December 1 how stock was to be of the goods subject to the new rates of purchase tax are—33 1-3. linoleum, lawnmowers, sports g°°ds, drugs medicines: 50 per cent.: headgear. sewing machines, cameras clocks, watches smokers’ pipes, tooth pastes and other toilet necessities, stationery, bicycles; 75 per cent.: space and water heating appliances: 125 per cent., clothing perfumery, cosmetics, woven fabrics and soft furnishings made from SU London° was unusually busy to-day. All traffic ways were overloaded with traffic believed to be carrying lastminute shoppers anticipating increased costs as the result of new taxation Stores reported a heavy demand, especially on cosmetics. Cigarettes and tobacco disappeared from tobacconists’ shops but reappeared later in the evening after Mr Dalton’s Budget proposals were known. Barmen were inviting customers to “ make it a pint. II will cost another penny to-morrow.” The average price for a pint of beer 1 has been one shilling and with an extra penny or three-halfpence according to the publican for better brews and grades.

OPPORTUNITY MISSED

BUDGET TO SUIT CRISIS NO NOTE OF URGENCY APPARENT Rec. 11.30 p.m. LONDON, Nov. 13. "Mr Dalton's Budget speech struck no note of urgency. The critical state from which the nation’s economy must be rescued was recognised neither in phrase or argument,” says The Times in a leader. “The country had nerved itself to face the worst and to accept without rancour whatever might be demanded of it in its critical hour. Mr Dalton's duty was to produce a Budget suited to the needs of the crisis and to the mood of the people, but he has missed an opportunity which may never recur.” The Daily Telegraph, although pointing out that the- general effect of the Budget is to increase the price of nearly everything except food, comments: “There is no evidence to support any conclusion that the Budget effectively counters inflationary forces.” > The parliamentary correspondent of The Times says .the main criticism seems to be that the Budget is inadequate to achieve the Chancellor’s object of checking inflation. The Financial Times says that Westminster was seldom so unanimous. Members of the extreme Right and Left agreed that Mr Dalton’s measures to lessen inflation are negligible. This paper discussed the “ unreal Budget.” and says that what Mr Dalton has shown does not propose any serious expenditure cuts, and nothing could be more depressing in its implications in the present crisis. The Daily Herald says that the measures which the Government has taken so far have prevented that break-away inflation which afflicts so many other countries. The further measures which Mr Dalton announced cannot fairly be objected to by any class. The Government has done well to stand its ground on food subsidies. The City’s easy money drones went home with Mr Dalton’s song in their hearts after hearing the mild Budget, says the Daily Express. The gamblers had been going for a really fierce Budget, which would have mopped up the millions of surplus money. They had for weeks discounted the expected heavier profits tax, and now find that otherwise the Budget is a gift—like all Mr Dalton’s Budgets—for speculators.