12 Desarrollo y evaluación experimental

Chancellor: Selwyn Lloyd; Prime Minister: Harold Macmillan (Conservative)

Context

The restrictive measures during 1960 were actually monetary: the Bank Rate rise in January then June, the April hire-purchase restrictions, and the use of special deposit requirements. The Economic Survey for 1961 was to argue that “largely as a result of these measures, the rise in home demand slowed down considerably after the first quarter of 1960”.238 However, imports rose and exports fell, worsening the balance of payments. Heathcoat Amory retired in July to be replaced by Selwyn Lloyd. Mr Lloyd was to note in his speech “the other side of the medal was the dangerously high pressure of demand on productive resources, the signs of a return of increasing costs and prices, the failure of our exports to increase sufficiently, and the consequent serious weakness in our balance of payments”.239

Overall Budget Objectives

In setting objectives the new Chancellor singled out “the first and obvious need is a marked improvement in our balance of payments”240 and “we have a long way to go in fostering the growth of our exports. We must ensure that opportunities are not lost because there is an overload of domestic demand on our productive resources”.241 Furthermore “the danger of chronic cost inflation from which we suffered up to 1958 has reappeared”.242 In summing up his judgement, the Chancellor argued that the “broad effect of the Budget 233 Ibid. 234 Ibid. 235

HC Deb 04 April 1960 vol 621 c53 236

HC Deb 04 April 1960 vol 621 c52 237

HC Deb 04 April 1960 vol 621 c54 238

Economic Survey for 1961, paragraph 1. 239

HC Deb 17 April 1961 vol 638 c797 240

Ibid. 241

HC Deb 17 April 1961 vol 638 c798 242

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must be counter-inflationary”243 but that encouragements to investment must continue and “I must also consider whether any additional incentive to effort and initiative can be provided”.244 There appears to have been a dual focus on endogenous, demand management and some exogenous changes. However, the remissions led the Chancellor to seek offsetting revenue and so, as before, I will include an alternative classification for these seemingly exogenous measures of endogenous, demand management.

Budget Tax Measures

The Chancellor first dealt with a number of concessions. Some alterations to the income tax allowances for National Insurance contributions were made from 6th April 1961. These were described as giving “relief for the taxpayer in the matter of the tax allowance for National Insurance contributions”245 and so in an otherwise deflationary Budget I classify this as exogenous, ideological. However, as discussed above, I provide an alternative classification of endogenous, demand management (the classification of the increases). Income tax relief was also granted in respect of payments by the German Government as compensation to victims of Nazi persecution. The Chancellor noted “there is undoubtedly considerable sympathy for the recipients of these payments and I have decided to put forward a clause in the Finance Bill to authorise relief because of the very special circumstances of these cases”.246 I classify this as exogenous, ideological (and with the alternative classification). Implementation was backdated to the 6th April 1956.

Two measures were proposed for Surtax: “In the modern world, the work of the manager, the scientist, the technologist is of increasing importance, not only to himself but to the community. In other countries there are much higher rewards for individual effort and skill. Therefore, I want to do what I can to ensure that the present incidence of Surtax does not act as a disincentive to those who have positions of responsibility in our industries and elsewhere in our national life”.247 The earned income relief allowance was raised and a further earnings allowance introduced. Both measures took effect from 6th April 1961. The purpose was to reward and stimulate effort and incentives; I classify these as exogenous, long-run (but with an alternative classification).

On capital taxes, a simplification was made to Stamp Duty on bills of exchange from 1st August 1961: “It has been represented to me that the complications in calculating this duty are an obstacle to trade, particularly the export trade. I have come to the conclusion that we ought to get rid of the ad valorem scale”.248 This appears a long-run reform to aid exporters and I classify it as exogenous, long-run (again with the alternative classification).

As discussed above, the economic situation called for a deflationary stance. The Chancellor argued that all remissions had to be more than covered by increases, “having regard to the economic circumstances of which I have already spoken, I have decided that this surplus is not enough…I have, therefore, decided to raise an additional £80 million of tax”.249 There was an increase in the Profits Tax: “in the circumstances of today, I propose to cover by far the greater part of the cost of the Surtax remission by increasing the Profits Tax by 2½ per cent with effect from 1st April, 1961”.250 Consumption taxes were also increased: Television Advertising Duty was raised on 1st May 1961 (“I propose to look to expenditure on television advertising for a modest contribution to the Exchequer”251); motor vehicle duties were altered on 18th April 1961 (“Next, I have decided to turn to Vehicle Excise Duties, where the revenue has been very buoyant recently and where the rates have not been raised for some years”252); and finally Hydrocarbon Duty was increased on 17th April 1961 (“my third proposal for obtaining extra revenue relates to the hydrocarbon oil duty”253). Referring back to the overall objectives which frame this, I classify all these increases as endogenous, demand management.

243

HC Deb 17 April 1961 vol 638 c801 244

Ibid. 245

HC Deb 17 April 1961 vol 638 c810 246

HC Deb 17 April 1961 vol 638 c812 247

HC Deb 17 April 1961 vol 638 c820 248

HC Deb 17 April 1961 vol 638 c813 249

HC Deb 17 April 1961 vol 638 c817 250

HC Deb 17 April 1961 vol 638 c822 251

Ibid. 252

Ibid. 253

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