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Revenue For 1947–48

Volume 436: debated on Tuesday 15 April 1947

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I now turn to revenue for 1947–48 on the existing basis of taxation. I shall lose some revenue, of course—as a result of the snow, frost and floods of February and March. I cannot yet say how much, and it would be absurd to give a firm estimate; but there will be some losses there. That is one of the uncertainties which must be borne in mind in looking forward 12 months. I have not heard even a single plausible speech which blamed the snow, frost and floods upon His Majesty's present Government. None the less, we shall lose some revenue by reason of those events. But in view of much that has been written in the Press, the Committee may be surprised to learn that my advisers do not expect any appreciable loss of revenue this year—I emphasise "this year"—as a consequence of the three weeks' stoppage of industry over part of England, through the cutting off of electric current last February. This unhappy event raised the total of the unemployed for one week to over 2 million, the figure which used to be regarded as normal, year after year, in the deflationary 'thirties. Unemployment on this scale, even for only a short time, might have been expected to make serious inroads on the revenue. But here P.A.Y.E. came to the rescue, acting as a most helpful stabilising factor.

I must say a word in defence of P.A.Y.E.; so many people attack it, while not offering any suitable substitute. P.A.Y.E. provides a welcome cushion of purchasing power, in times of short-term unemployment. If wages are not paid as a result of unemployment, the tax that would have been payable On these wages is, of course, not collected; but over and above this, the tax already paid is partially refunded to unemployed workers, over and above any unemployment benefit to which they are entitled. Working-class purchasing power is thus kept relatively steady, and this prevents any serious fall in revenue from Customs and Excise. A man can still afford a drink, even in these conditions. The loss to the Inland Revenue, on the other hand, of Income Tax on wages, was probably about £5 million during the last two months of the last financial year, February and March. The three weeks' partial stoppage of electric power, together with the continuation of certain restrictions on fuel consumption, did not, of course, affect the yield, last year, of Income Tax and Profits Tax on business profits, because those profits had been made long before these events happened. Nor will these fuel shortages much affect the yield of these taxes this year, since, this year, the tax will be based mainly upon profits attributable to accounting periods of past years. But—and I am anxious to be quite frank with the Committee about this—there will be a loss of revenue, which cannot yet be estimated, but may be large, from Income Tax and Profits Tax in the financial year 1948–9. That is when we shall feel it. It is too early yet be give an estimate.

I hope not anything of that order. But that is when we shall feel it, not this year but the year after. That has a bearing on something I shall say to the Committee later on.