MR. GAITSKELL DOES HIS BEST
THE Chancellor of the Exchequer was very careful to stress, in both his speech in the Commons and his broad- cast to the nation, that his Budget could not be popular. This very admission, combined with the sympathy willingly given to a relatively young Chancellor facing an exceptionally hard task and the respect due to an admirably clear piece of exposition, ensured that Mr. Gaitskell would not forfeit any personal popularity. A disposition on the part of the general body of taxpayers to accept some sacrifices in the interests of national defence and some apparently effective advance-dis- counting by the potential payers of profits taxes have done the rest. A painful Budget has been quietly received. But it still remains to be seen how it will be regarded when the excitements of Budget day die away, when its effectiveness in checking inflation is tested, and above all when it is placed in its proper perspective, not merely as the personal contribution of one man but as the seventh Socialist Budget, an inseparable part of the performance of the party which has ruled Britain for nearly six years.
In drawing up his Budget Mr. Gaitskell was faced with a most formidable set of difficulties. Some of these were described at some length in the Economic Survey for 1951, published last week. Three of them he singled out for special mention at the beginning of his Budget speech. They are the heavy cost of the expanding defence programme, the marked tendency for the prices we have to pay for imports to outstrip the prices we get for our exports, and shortages of raw materials. The possibility of coping with such difficulties by budgetary means is obviously restricted, but the Chancellor has made a determined attempt to overcome them. In raising the standard rate of income tax by 6d., in increasing the tax on distributed profits from 6s. to 10s. in the pound, in adding another 41d. ,a gallon to the petrol tax and in increasing purchase taxes on cars, wireless and television sets and gas and electrical appliances, he has not shrunk from imposing heavy burdens in the twofold attempt to raise revenue and defeat inflation. He has insisted on checking the rise in the cost of the Health Service by requiring part payment by patients for false teeth and spectacles. He has quite rightly protected the married couples and children from the rise in income tax rates, tried to insulate recipients of retirement pen- sions from the full force of rising prices and exempted children and expectant mothers from the new health charges. He has wisely adjusted the pension arrangements with a view to per- suading people of pensionable age to continue at work. All this has been well done. In fact there are only two really important criticisms of the particular combination of expenditure and revenue which Mr. Gaitskell adopted, and in both of them it is difficult to distinguish his personal contribution from the decisions made by the Government as a whole and laid down as the Socialist restrictions within which the Chancellor had to work. These criticisms concern the effect of the Budget as a whole on profits and the absolute size of the civil expenditure.
The attitude of the Socialist Party towards profits is sufficiently well known. It is plain that in claiming not to disapprove of profits on principle Mr. Gaitskell puts himself in a small minority. But since that is his view it is surprising that he did not give it expression in the Budget. In fact he levelled a series of blows at profits which comes near to killing the persistent goose that lays the golden eggs. The Economic Survey had already revealed that, in the financial picture as it stood before the Budget, the item undistributed profits was expected to amount to a mere £80.000,000 in a total required investment for 1951 of £2,315,000,000. The Chancellor, in his attempt to cut down distributed profits, has forced up the rate of profits tax from the existing 30 per cent. to 50 per cent. The suspension of the initial depreciation allowances on industrial plant and buildings will remove the only existing means of softening the blow. And the unfortunate investor who must take out some of his share of profits in order to live will have to pay profits tax and income tax amounting in all to 14s. 9d. in the pound. And all this is the work of a Chancellor who is a good enough economist to know the importance of profits in the maintenance of an efficient industry and a lively spirit of enterprise.
It is charitable to assume that in the matter of profits taxes Mr. Gaitskell was under a great deal of pressure from his colleagues. It is quite clear that he had to fight hard to get agreement on the levying of a charge for dentures and spectacles. But, if he ever fought the battle for the reduction of civil expen- diture as a whole, he lost it. A'nd the passage of his speech in which he challenged the Opposition to suggest cuts in that expen- diture suggests that he never fought at all. For it is the primary business of the Chancellor in office, and not of the Opposition, to propose the ways in which expenditure is to be limited. And Mr. Gaitskell knows perfectly well where the major cuts ought to be made—in the allowance to, those latter-day monsters, food subsidies and the health service, each of which is expected to consume £400,000,000 in the new financial year. It is obvious that a really heavy reduction in either case would involve a risk of hardship for some people, but it is equally obvious that those most in need of assistance could be given it. The Chancellor has himself shown how that can be done, in the present Budget, through the special protection he has given to children, to pen- sioners and to other specially deserving classes. It really is not necessary to shower benefits on the whole population in order to make sure that the most needy are assisted.
In any case, the roots of this failure to reduce expenditure go very deep, and it is nit within the power of any one Minister, however able and enlightened he may be, to pluck them up. The present civil expenditure is the direct result of six years of Socialist policy and Socialist legislation and it has been clear for months that not even the urgent need for the expansion of the defence programme and the grave danger of inflation is going to persuade the Government to retreat from the ground they have gained. As it was, the saving of £25,000,000 a year on the Health Service was only achieved in the face of a threat of the resignation of Mr. Aneurin Bevan. This latest dernarche by the MacArthur of the British home front, who has previously been so successful in pressing his personal policies on the Government, remains as a warning to all Chancellors who try to reduce the cost of the Welfare State.
The fact is that Mr. Gaitskell is caught in the toils of his own party's policy, and the praise which he deserves—and gets—for making the best of a bad job does not remove one iota of blame from those Socialist theorists who made that job harder than it need be. And that blame attaches not only, or even princi- pally, to what they have done in the past six years. The trouble is that their policy hampers the urgent task of defence and survival. It is because it hampers that task, and narrows inexcusably the margin of resources on which the new effort must be made, *that the fantastic weight of civil expenditure should somehow hive been reduced. The risks and uncertainties are enormous, but it is just possible that, provided there is no turn for the worse in the international situation, Mr. Gaitskell's first Budget may see us through the coming year without the disaster of violent infla- tion. But no Budget of this kind, hobbled as it is with party demands and party inhibitions, could ever bear the strain of a war. What is far worse, Budgets of this kind cat into reserves so steadily and so deeply that it is almost impossible to sec how a full - scale war effort could be financed. It is not only that the standard rate of income tax is now only sixpence lower than it was at its wartime maximum. The real resources with which the effort could be made are also difficult to find. The new profits taxes do not merely check investment—which they were intended to do. They prevent the proper maintenance of existing plant, which is a situation which should never be permitted, except at the height of a desperate war. All this is very serious—so serious that it is beyond Mr. Gaitskell's powers to put it right alone. He has done what he could. But nothing short of a fundamental chance in the Government's own attitude, or its removal from office, could give any real hope of relative stability.
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