Get ready for sacrifice by instalments

My Charge against Chancellor Denis Healey is a simple one. It is that instead of warning the people in clear terms of what lies ahead, he has chosen to blind MPs and journalists with complications and statistics.

He has opted for sacrifice by instalments.

The first instalment is the petrol price increases.

The second will be the nationalised industry price rises—30%; for electricity, 12½–15%; on rail fares, and increases for the Post Office, for example.

The third instalment will be the increases or deductions arising from public expenditure cuts.

And then we shall get increases in taxation and rates in April arising from the increased public sector spending.

The Chancellor did nothing to prepare the nation for that in his Budget statement. It would have been better if he had prepared the people for what lay ahead.

The people were ready; the Chancellor was not.

Confrontation

Of course, he was in a real difficulty—in trying not to reveal that if he is right now then he was wrong in his March Budget.

Indeed, part of the task of his latest Budget is to put right some of the wrong decisions in his March Budget, particularly those squeezing the cash available to companies.

Mr. Healey is also in real difficulty over his objective of eliminating the big deficits of the nationalised industries.

Already the complaints are coming in that these deficits should not be eliminated.

How does he propose to make his aims clear to those who are responsible for putting forward wage claims in the nationalised industries?

If his objective is to eliminate these deficits, then surely what he is saying is that any wage claim that is granted in the nationalised industries will automatically be passed on to the consumer.

This is not a confrontation between those who work in these industries and the Government.

If there is a confrontation it is between those who work in these industries and those who will ultimately pay consumer prices.

When he broadcast after his Budget, the Chancellor said: “If you're on the shop floor you can force your company into bankruptcy by asking for wages you know it can't afford.”

But there is no such limit on the nationalised industries.

Mrs. Shirley Williams has suggested there should be a penalty, through the Prices Code, on companies which went beyond the social contract.

But there could never be similar penalties on the nationalised industries. How does the Chancellor intend to deal with this?

At one point, the Chancellor said that one reason why he would not give relief on advance Corporation Tax was that it would benefit companies who had paid out the most dividends, and that he thought they were not the companies with the greatest need.

This shows just how shallow is his conversion to profitability and a vigorous private sector.

I have previously heard him say that he likes profits, but only if they go to social purposes of which he approves.

He cannot bear them to go out in dividends. How he expects to get investment if people don't get a reasonable return for their investment is a mystery.

We cannot and will not get investment in industry unless those who invest—whether they be trade unions, insurance companies, pension funds or individual people—get a reasonable return.

The Chancellor's attitude to private savings is not very favourable either.

He never hesitates to penalise those who save. So he had to have one vindictive bit in his Budget—the surcharge on savings income.

Some of the people with savings income have already suffered a capital loss on the investment. They are having to take a return which doesn't even compensate for the fall in the value of the investment in capital terms.

Extra tax

Yet still he chooses this time to put an extra tax on those people.

Then there is the longer-term threat to small family businesses.

The Chancellor's White Paper on the proposed Gifts Tax suggested there would be relief both for farmers and for small businesses.

Relief from this has been provided to a limited extent for farmers, but there is no relief forthcoming for the small business.

If none is brought forward, then the life of the small family business will end.

No family business will be passed on to a son or daughter of the next generation.

That would be a great pity, and would rob the nation of one of the most creative sources of new wealth provided by people who have one of the main incentives in life—to see that their children do better than they have done, and to direct their efforts to benefiting their children.

On this, as on a number of other points, Mr. Healey must think again. [end p1]

(2) CPC Monthly Report, December 1974:

Control, Enterprise and Savings

Mr Harold Lever, The Chancellor of the Duchy of Lancaster, whom it is my duty to shadow spoke warmly about private enterprise during the Budget debate. I wish some of his colleagues would speak about it as warmly as he does. I am afraid he is the statutory moderate in the Labour Cabinet just as I have sometimes been thought in the past to be the statutory woman. In any event the warmth of feeling towards the free enterprise system does not communicate itself through the provisions of Labour's latest budget.

The danger of taking any control policy too far, and this was always inherent in incomes and prices control, is that we create a paradise for bureaucrats. We also build into the system a great deal of delay at both ends. A firm I visited the other day told me—I got it to check the numbers—that it had to fill in 750 forms for Government Departments annually. Over 500 were statutory and 250 were voluntary. However the firm felt that it had to comply. It also had great difficulty in getting answers, sometimes, out of the Prices Commission. It would find that there would be a refusal after 27 days so that it had to start all over again. Every new built-in detail makes the job of private enterprise in responding to the immediate situation that much more difficult. We should be extremely wary of this.

The prospects for the small business are particularly bleak, consider the Chancellor's position of the treatment of the small trader as regards stock relief. At present stock relief is not available for individual traders, partnerships and companies whose closing stock is less than £25,000. Administrative reasons are pleaded. I do not fully understand that. Every person who is liable to tax has to fill in a tax return. He has to show his opening and closing stock and his trading income on that return. All the figures will be there on the return, and the return will qualify the person for a number of reliefs. Why in the world cannot the return be used to qualify that person for this extra relief? The Government did not shy away from providing extra bureaucrats for the detailed control of prices. Why do they shy away from providing extra people, if necessary, for allowing detailed reliefs. [end p2]

The White Paper, Capital Transfer Tax suggested that there would be relief both for farmers and small businesses. Relief from capital transfer tax has been provided to a limited extent for farmers, but there is no relief forthcoming for the small business. If none is forthcoming the life of the small family business will end. No family business will be passed on to a son or daughter of the next generation. They would become one-generation family businesses. We think that would be a great pity and would rob the nation of one of the most creative sources of new wealth provided by people who have one of the main incentives in life—to see that their children do better than they have done and to direct their efforts to benefiting their children. I hope that the Chancellor will look at this again.

The Chancellor stated one reason why he would not give relief on advance corporation tax was that it would benefit companies who had paid out most dividends, and he thought that they were not the companies with the greatest need. The Chancellor ignored completely that some companies have to finance their operations through preference shares. Those companies are already in some difficulty because dividends on preference shares are not allowed for tax, whereas if they had a higher gearing the interest would be allowed for tax. Those companies have no option but to pay the dividends, and they deserve some relief on advance corporation tax.

The Chancellor's reaction shows how shallow is his conversion to profitability, and a vigorous private sector. I have previously heard him say that he likes profits, but only if they go to social purposes of which he approves. He cannot bear them going out in dividends. How he expects to get investment if people do not get a reasonable return for their investment is a mystery. We cannot and will not get investment in industry unless those who invest, whether they be trade unions, insurance companies, pension funds or individual people, get a reasonable return. I know he put up the dividend limit from 5 per cent to 12 per cent, but that is not enough in today's circumstances.

The Chancellor's attitude to private savings is in general not very favourable. He never hesitates to penalise those who save. He had to have one vindictive bit in the Budget—the surcharge on savings income. Some of the people with savings income have already suffered a capital loss on the investment. They are having to take a return which does not even compensate for the fall in the value of the investment in capital terms. This time he chooses to put an extra tax on those people. He gave us a nice little sermon: ‘The senseless accumulation of material goods … can no longer be regarded as the only guarantee of human happiness or the only measure of economic success’. That perhaps ties up with the fact that after the previous election he said: ‘I never save. If I get any money I go out and buy something for the house’.