Mr Balfour's Poodle(19)

What were the proposals which this famous Budget contained? Today they inevitably seem unexciting, as do the sums of money involved, for financial issues survive the passage of time even less well than do most other subjects of political controversy. The Chancellor wanted £164m., against the £151m. which he had received in the preceding year, and the £148m. which he calculated existing taxes would give him in the year that was then beginning.1 This left him with a prospective deficit of £16m., and as the increased expenditure on battleships and social services was likely to be cumulative, it was important that he should close this gap by taxes of which the yield would increase as time went on.

His first proposal was for a reduction of £3m. in the sinking fund payment. Death duties, and the associated legacy, succession and settled estate duties, were to bring in another £4m. in the current year, and another £6½m. in subsequent years. This involved increases in scale to the extent of making estates of £1m. and over liable to a total duty of approximately 25%. The income tax was adjusted to yield another £3m. The rate of tax on the former remained at IS. (9d. under £2,000); on the latter it was increased to IS. 2d. A £10 children’s allowance, to apply only to incomes under £500, was another innovation. A much more important one, however, was the introduction of the super-tax. This was to be charged, at a rate of 6d. in the £, on the amount by which all incomes of £5,000 or more exceeded £3,000. It was to bring in £500,000 in the current year and £2,300,000 in the following year. Of all the Chancellor’s proposals, this was much the most pregnant with social change; but this was not appreciated at the time, and it was not the proposal which aroused the most controversy.

This distinction was reserved for the land taxes. There were three of these. The first provided for a tax of 20% on the unearned increment in land values, which was to be paid either when the land was sold or when it passed at death. The second provided for a capital tax of ½d. in the £ on the value of undeveloped land and minerals;1 and the third for a 10% reversion duty on any benefit which came to a lessor at the end of a lease. These taxes were to bring in only £500,000 in the current year, but their yield was expected to increase considerably in subsequent years.

The next important group of new taxes related to alcohol and tobacco. The licence duties were to be increased so as to bring in another £2,600,000. Spirits were to pay another 3s. 9d. a gallon, which would have the effect of increasing the price of whisky by ½d. a glass, and the tobacco duty was raised by 8d. a pound. The combined yield of these two taxes was to be £3½m. in the current year.

The taxation of the road-user became for the first time of moderate importance. For motor-car licences a graduated scale, varying from two to forty guineas according to horsepower, was introduced. Motor bicycles were to pay a flat rate of £1. In addition, a tax of 3d. a gallon was imposed on petrol, but there was to be a rebate for taxicabs and buses. The yield of this group of taxes was put at £750,000, but this sum was to be paid into a Road Fund and not used to meet general expenditure. In the same way the proceeds of a mineral rights duty of a shilling in the £ on mining royalties and wayleaves were to be used to finance a Miners’ Welfare Fund.

These, with a few other miscellaneous changes, were the provisions of the ‘People’s Budget’. Lloyd George introduced them to the House of Commons on April 29, and despite the fact that he had lightened his task by the innovation of circulating beforehand a printed statement of the financial results of the past year, he took four and a half hours to do it. As a speech, it excited mixed comment. ‘(The Chancellor) was fagged before he began,’ Austen Chamberlain wrote to his stepmother. ‘Halfway through he was dead-beat, and had to ask for a half-hour adjournment. He recovered somewhat after this, but much of the speech was read, and badly read. He stumbled over the sentences, rushed past the full stops, paused at the commas, and altogether gave the impression that at these points he did not himself understand what he was saying.’k But Austen, more than most men, had the gift of believing that the speeches of his opponents were as bad as those of his friends were good. The half-hour adjournment had been very willingly granted by the House. According to The Times, it was suggested by the leader of the Opposition, who leant across the table to speak to the Prime Minister, and was taken up with sympathetic shouts of ‘Half an hour’ and ‘Give him an hour.’ And the same newspaper wrote of the speech as a whole as ‘a wonderful effort’.