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1966 Oct 12 We
Margaret Thatcher

Speech to Conservative Party Conference

Document type: speeches
Document kind: Speech
Venue: Winter Gardens, Blackpool
Source: Conservative Party Conference Report 1966 (pp24-26)
Journalist: -
Editorial comments: -
Importance ranking: Key
Word count: 2070
Themes: British Constitution (general discussions), Conservative Party (history), Economy (general discussions), Industry, Pay, Public spending & borrowing, Taxation, Labour Party & socialism, Law & order, Social security & welfare, Voluntary sector & charity

First I should like to thank and congratulate Mr. Don Williams on the excellent and reasoned way in which he proposed this important motion. He, and everyone of the speakers who spoke to the motion, has already shown that this nation is absolutely fed up with the Socialist path of higher and higher taxation. Last year the total tax burden on this country had risen to 34.6%; of the gross national product, a higher proportion than for 13 years past. It is a Socialist proportion, it is travelling upwards and in the wrong direction. Perhaps it would be easier if I put it another way: when we left office in 1964 the total burden of tax per head of the population was £180. High enough in all honesty. Two years later that total burden per head has risen by nearly £50 to £229 per head. Small wonder that we have a tremendous number of motions on the subject of taxation and you are asking us to reduce the burden of direct taxation on the people of this country.

I accept the need for incentives, the need for an incentive to individuals on the shop floor. There have been some very interesting statistics published recently. They show that during the period of increased personal taxation over the last two years there has been a reduction in the average working week of nearly one and a half hours. This shows what the proposer and speakers have already pointed out, that people have come to a point when, rather than work longer, they would take more leisure because tax means the extra work is not worth the effort. That extra one and a half hours a week from all persons in manufacturing industry would have sent our production soaring upwards instead of remaining static where it has been for virtually two years. There must, of course, also be incentives at the top. Now it is very interesting to see a person's reaction if you [end p1] say to him, “Look, you are in the top 2%; of incomes” . In America or in Germany if one said that to a person he would take it as a tremendous compliment and it would be an enormous source of pride. Here there tends to be a slight guilt complex about it. Now this is absolute nonsense. We want the people with high earning capacity to stay in this country, to develop our industries and to bring a higher standard of living here.

A short time ago Gallup Poll did a survey which was published in the Sunday Telegraph on 24th July. These were its findings: “The majority of Britain's leading industrialists would emigrate if they were younger men at the start of their careers. … The Government, it is felt, has not done what it should have done to provide incentives to increase production” . What an indictment of a Socialist Government. The people we can do without are Harold Wilson, and George Brown, Mr. Callaghan and Douglas Jay! Their policy results in the next generation's top people going abroad. They will take with them all hope for a higher standard of living for all of our people. So I fully accept the need for a taxation system that provides for incentives right throughout the whole system.

Naturally you will ask, “Can it be done?” Not under the present lot! It cannot because they do not want to and they would not. Mr. Macleod could certainly do it and Rab Butler certainly did. Let us draw quickly one parallel: we have been talking here of 1951, let us see how Rab Butler tackled it. He became Chancellor when there was a deficit running at the rate of £800 million a year, a familiar figure. But it did not dismay him at all. He became Chancellor at a time when the reserves of this country had just lost some £547 million within the previous six months. But he did not go about shouting about the position, he took firm steps in which the world had confidence. May I point out that he did not, at that time, as Callaghan has, have an enormous build-up of stocks, nor £11,000 million of overseas investments, because of course he came into power after six years of Socialism and not after 13 years of Conservatism. He dealt with the economic crisis, and within 18 months of taking office produced an incentive budget of the type you are asking us to introduce now. He reduced the direct rates of income tax. He gave increased personal relief and he restored capital allowances, incentives for companies, incentives for individuals.

That is the Budget we could have had last April if we had had a Tory Government returned in 1964.

A number of speakers have referred to the other side of the coin of lower direct taxation. It is, of course, Government expenditure. I accept that we must take a much more discriminating line towards Government expenditure. We cannot afford unlimited increases. The other day I looked at the figures of increased Government expenditure under this Government. They were given in the House of Commons in May. I think when they were written down in a column they shook us all. Remembering that the Government, when it was returned in 1964, shouted that it had an economic crisis you would have thought that [end p2] it would have reduced total Government expenditure. Not a bit of it; in that first year it increased it by £1,100 million. In the second year it increased it again, and this year the present Government is spending more than £2000 million than the last Conservative Government, an average of increased Socialist Government expenditure of over £1000 million a year. Small wonder we have a balance of payments crisis still, small wonder that we have stagnant production. This is also one of the causes of the tremendous increase in taxation that we have seen. If you run all the Budgets in a race called the high taxation stakes, I am glad to say that Conservative Budgets would not come in any of the first four places. The topmost prize for increased taxation would go to Hugh Gaitskell in 1951. The second prize for increased taxation would go to Callaghan in 1966. The third prize to Callaghan in 1965. The fourth prize to Callaghan in 1964. This chap Callaghan must go!

I turn for a moment to the subject of investment allowances for companies. When we left office, we had an excellent system of investment allowances, which was one of the best in the world. It depended for its efficacy on a test of profitability. It was certain. You could invoke your rights before a court of law, and appeal if you did not get the satisfaction which you thought you should have. This has been changed, in a typically Socialist way, towards asking for investment subsidies. If you do not get one, there is no appeal at all.

This is wrong. The sooner we restore investment incentives to companies and our own system of investment allowances, the better it will be for the future of investment and the future of industrial efficiency in this country. One of the very worrying things at the moment is that between the first and second quarters of this year there has been a very sharp drop in investment in manufacturing industry, a drop of 7 per cent. Let us remember that it is not Government expenditure which produces exports. It is manufacturing industry. That is the sector which should be the last to suffer from any Government cuts. But this Government are making it the first to suffer.

I cannot leave the subject of company taxation without saying that we regard the legislation referring to close companies as most oppressive. If one takes together the definition of close company, the definition of participator, the restriction on directors' remuneration, the restriction on royalties, and interest payments, this is a very damaging piece of legislation for the increased growth of the small company, and it must be drastically revised.

One of the consequences of the taxation policy and the Government expenditure policy which this Government have been pursuing is that this year they have had no money at all to give for any social service tax reliefs. If you do not have a policy incentives, the wealth is never created to distribute. If we could only get that into their heads, we would perform a great service. It is the first Budget that I ever remember in which there were no reliefs for some of the social service cases. And I am glad that that occurred in a Socialist Budget and not a Conservative one. [end p3]

There have been some hard words said about the Selective Employment Tax. Quite right. I said some hard words about it myself in the House of Commons—and what I said was but a shadow of what Iain Macleod and I thought. It is an absolutely ridiculous tax, and I agree that it must go. How any intelligent person who wanted to collect £240 million in revenue could think up a system of taking in £1,130 million and paying back, through seven Government Departments, £890 million, I do not know. If the Greeks had invented such a system, they would have had a word for it. As they have not, I suggest we fall back on one frequently used by Quintin Hogg.

It is a recipe for rising prices; and it falls heavily on the weakest—quite different from what Callaghan promised during the election, when he said, “We shall set the burdens on the shoulders of those who are able to carry them, on the strongest and not the weakest” . Within weeks of that promise, he was attempting to put a tax on charities and on the disabled. It was absolutely monstrous, and it was stopped because of the Conservative Opposition.

I turn now to a completely different subject but one which I believe to be absolutely vital. It is illustrated already by some of the changes in the tax system. This Government are undermining legal rights and respect for the law. Our legal system and the rule of law are far more responsible for our traditional liberties than any system of “one man one vote” . Any country or Government which wants to proceed towards tyranny starts to undermine legal rights and to undermine the law.

This process started with the Finance Bill of 1965, with which you will be familiar. It set out to introduce a system which was modern, simple and purposive. It is not modern: it is the old continental system which this Government was adopting at the very moment the Continent was abandoning it in favour of ours. Nor is it simple. They started with a system which, I admit, was difficult for the taxpayer to understand, and they finished up with one which was impossible even for the lawyers to understand. Now, therefore, we have reached a position where one has to ask the Revenue what they think the law is. This is legislation within legislation, and it is quite wrong. You cannot now look at the law to see what your rights are. This Act too must be drastically revised, so drastically that if will be unrecognisable by the time we have finished the revision.

Of course, it was a purposive Act, because it was intended, I believe, to take away people's rights. It has been followed by other legislation which does the same, by legislation which destroys the sanctity of contract, which compels an employer to break his honourable commitment with his employee. It is the same point—destroying respect for the law. It was followed by the investment grants legislation—no longer a legal right, but you have to go and ask the Government. It was followed by the S.E.T. legislation, when the Minister of Labour is given colossal arbitrary powers to decide whether persons shall have a premium or rebate or have to pay a penalty. All this is fundamentally wrong for Britain. It is a step not merely towards Socialism but towards Communism.

Speakers have given us a great deal of advice, all of which we will listen to and examine, about the details of the tax system. It is the fundamental strategy that is wrong, and the fundamental strategy that we must reverse. If Harold Wilson had gone to the electorate in 1964 and said, “In the next two years I am going to increase taxation by £1,200 million, I am going to introduce a taxation system that no one will be able to understand, and I am going to fine an employer if he dares to pay an employee more without my permission and on top of that I am going to pay myself 50 per cent more than any other Prime Minister for doing it” , he would have been totally and utterly rejected, as he should have been. He is, as one of our speakers pointed out, an apostle of change, a change to more power for politicians over people and their pockets. I reject that kind of change; we are more interested in progress than in change, progress through increased personal responsibility and increased personal endeavour. That is the policy enshrined in this motion, and I gladly accept it.