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Published online by Cambridge University Press: 07 November 2014
When the Labour party came to power in Britain in 1945 and again when it was returned to office in 1950, it was committed to a programme that rejected “the claims of the few to live on the labour of the many,” and demanded that “fair shares should be the national rule.” As was noted in Labour and the New Social Order, “The first principle of the Labour Party—in significant contrast with those of the Capitalist System, whether expressed by the Liberal or by the Conservative Party—is the securing to every member of the community, in good times and bad alike (and not only to the strong and able, the well-born or the fortunate), of all the requisites of healthy life and worthy citizenship.” In 1945 “fair shares” was interpreted to mean, among other things, nationalization of certain basic industries, provision of welfare services, and taxation designed to redistribute income. It was assumed that egalitarian measures would not be difficult to apply, notwithstanding the fact that the bulk of the economy would continue to be privately owned and operated. Labour leaders and voters confidently looked forward to what one Labour M.P. called “a general levelling, upward, outward, and downward.”
1 Labour Party, Labour and the New Society (London, 1950), 4.Google Scholar
2 Labour Party (London, 1918).
3 Problems of control in a mixed economy are examined in my article “Relations between the Labour Government and Industry,” Journal of Politics, XVI, no. 1, 02, 1954, 3–23.Google Scholar
4 Manchester Guardian, May 30, 1951. The purchase tax fell most heavily on non-utility apparel other than footwear, passenger road vehicles including cycles, stationery and office equipment and supplies, non-utility tissues and fabrics, and toilet preparations and perfumery. See the statement of Jay, Douglas, Financial Secretary to the Treasury, in Hansard, vol. 473, col. 179, 04 6, 1950.Google Scholar
5 British Information Services, Labour and Industry in Britain, VIII, no. 3, 09, 1950, 14.Google Scholar These taxes, of course, were hardly redistributive, and it is even debatable whether, as the Labour Government claimed, they fell on “non-essentials.” The British working man did not generally regard as a non-essential his evening pint of mild-and-bitter at the “local”; nor did the typical smoker put his tobacco in that category. Consumption figures demonstrate, in fact, that in 1949 the average British working class family was spending over 30 shillings per week on beer and tobacco, or, on the average, spending more on these items than on rent! See, for example, Economic Co-operation Administration, Facts about the British Economy (London, 1950), Supporting Table no. 14.Google Scholar
6 National Income and Expenditure of the United Kingdom, 1946–1950, Cmd. 8203, 20.Google Scholar
7 Federation of British Industries, Memorandum Submitted to the Royal Commission on the Taxation of Profits and Income, quoted in The Times, Sept. 6, 1951.
8 Chambers, S. P., Finance Director of Imperial Chemical Industries, “Taxation and Incentives,” Lloyds Bank Review, 04, 1948, 2.Google Scholar
9 In 1939-40 companies were subject to an excess profits tax of 60 per cent. Excess profits were defined as profits exceeding the “standard profits” of a pre-war period (ordinarily the calendar year 1935, or the calendar year 1936, or the average of the calendar years 1935 and 1937, or the average of the calendar years 1936 and 1937). From 1940 to 1946 the excess profits tax was raised to 100 per cent, subject, however, to a post-war refund of 20 per cent (amounting to £239,070,017 by March 31, 1950). Throughout 1946 an excess profits tax was again imposed at the rate of 60 per cent. In 1947 the Labour Government substituted a profits tax which was charged at two rates: 10 per cent on undistributed profits and 25 per cent on distributed profits. The remaining net profit was then taxed at the standard rate of income tax. In 1949 the tax on distributed profits was raised to 30 per cent, and in 1951 it was further raised to 50 per cent. See Reports of the Commissioners of His Majesty's Inland Revenue, 1945 to 1950 (H.M.S.O.).Google Scholar
10 Daily Telegraph, Jan. 14, 1946.
11 F.B.I., Taxation: Representations Made to the Chancellor of the Exchequer, 1948–1949 (memorandum).Google Scholar
12 The Times, April 2, 1951.
13 “How Profits Tax Penalizes Efficiency,” Director, II, no. 9, 06, 1951, 61–3.Google Scholar
14 May 5, 1951, 1055.
15 Taking 1946 as 100, Dudley Seers has estimated that productivity reached 142 in the first quarter of 1951 (“U.K. Industrial Output Target,” leading article in the Financial Times, July 9, 1951). The Economist, April 14, 1951, estimated that average output per man-hour had increased by 20-25 per cent since 1946.
16 Corporate savings in 1950 totalled £559 million, or approximately two-thirds of all public savings (National Income and Expenditure, 20). In the same year new capital issues, excluding all borrowing by the British government, amounted to £313 million, a figure that was exceeded only three times between 1919 and 1951 (Midland Bank Review, March, 1951).
17 In late 1951 an I.C.I, executive revealed to the writer another reason why a revaluation of assets had an attraction in some quarters, and why, incidentally, I.C.I, applied almost immediately to the Capital Issues Committee for permission to capitalize its enhanced reserves. “It pays a business,” he said, “to be up to date on what it's worth. You never know when you'll be nationalized, these days.”
18 E.g., the Institute of Chartered Accountants. See, for example, the Accountant, Jan. 15, 1949, and July 7, 1951.
19 Report of the Committee on the Taxation of Trading Profits, Cmd. 8189, April, 1951.
20 Debate in the House of Commons, April 12, 1951, quoted in the Manchester Guardian, April 13, 1951.
21 Ibid.
22 Investors' Chronicle, April 21, 1951.
20 National Income and Expenditure, 20. Undistributed profits of public corporations excluding iron and steel totalled £10 million. If we assume that the nationalized industries produced almost this entire amount, and if we deduct it from the total of undistributed profits in 1938, the increase since 1938 is close to 250 per cent. Writing in 1949, and making a similar deduction for total profits, Bama found that profits had increased 250 per cent. Barna, T., “Those ‘Frightfully High’ Profits,” Oxford Institute of Statistics Bulletin, XI, nos. 7 and 8, July and 08, 1949, 214.Google Scholar
24 Barna, , “Those ‘Frightfully High’ Profits,” 214.Google Scholar
25 Initial allowances were a feature of the 1945 budget, and those of 1945-9 were at the rate of 20 per cent. In 1949 they were raised to 40 per cent; in 1951 they were suspended as from 1952 (National Income and Expenditure, 17). Initial allowances in 1950 totalled £260 million.
26 Barna, , “Those ‘Frightfully High’ Profits,” 214.Google Scholar
27 Briscoe, H. A., “A Case for Orthodox Profits: An Inquiry into the Business Men's Bargain with the Community,” the Accountant, 07 7, 1951, 5.Google Scholar Briscoe added that whether or not replacement costs are “true” they are clearly “dishonest.”
28 Although there was a slight decrease in the number of public companies, from 14,355 in 1938 to 12,075 in 1949, the number of private companies rose from 143,221 in 1938 to 231,482 in 1949. Moreover, the average of annual registrations of new companies from 1946 to 1950 was more than double the figure for 1940 ( Board of Trade, Companies: General Annual Report, H.M.S.O., 7, 14 Google Scholar). The bankruptcy and compulsory liquidation rates, 1946–51 (third quarter) were well below the pre-war rates (Manchester Guardian, April 20 and Oct. 8, 1951).
29 Robbins, Lionel, “The Sterling Problem,” Lloyds Bank Review, 10, 1949, 5–7.Google Scholar
30 I.e., the “scheduled territories” under the Exchange Control Act of 1947.
31 Australia, Department of Interior, Australia in Facts and Figures, no. 26, 1950, 15.Google Scholar
32 Association of British Chemical Manufacturers, Report on the Chemical Industry (London, 1949), 58.Google Scholar
33 “Industrial Emigration,” Scope, 06, 1951, 76–80.Google Scholar
34 For cement see the Financial Times, June 1, 1951. For textiles see Manchester Guardian, April 5, 1951.
35 Balȯgh, T., Dollar Crisis: Causes and Cure (Oxford, 1949), xx–xxi.Google Scholar
36 “The substantial surplus on Britain's balance of payments account for 1950—a surplus estimated at £225 million—means that a considerable volume of British capital must have been exported last year.” (The Accountant, Feb. 3, 1951, 97–8.) Of this amount an estimated £50 million was raised through market channels for overseas borrowers including governments. Investment in equities, especially South African mining shares, and in subsidiary and associated companies of United Kingdom enterprises must have accounted for a substantial portion of the remainder. For South Africa alone the inflow of capital amounted to £78 million, and was more than enough to offset the trading deficit. According to the Governor of the South African Reserve Bank, Dr.de Koch, , “It was not hot money but represented overseas confidence in the economic possibilities or strategic importance of the Union” (Financial Times, 07 26, 1951).Google Scholar
37 Based on information given to the writer by an informed Treasury official.
38 (South African) Industrial Review, Feb., 1951, 6–7.
39 Ibid. “Who buys the gold?” the article asked. “Hoarders in Europe as well as Asia.” The principal sellers, according to the Industrial Review, were South Africa and Southern Rhodesia, U.S.S.R., France, and Belgium.
40 An article in the New York Times (Oct. 28, 1951) explained the mechanics of such transfers as follows: “One wishes to transfer $1,000 to London and would rather remit £417 than the £347 one could send at the official rate. One goes to the foreign exchange dealer here and gives him a check. Two or three days later a messenger arrives in the office of one's London connection and pays him sterling.”
41 Manchester Guardian, Nov. 6, 1951.
42 “Mexico is a Dollar Market without Exchange Control,” Engineering Industries Bulletin, no. 81, June, 1950. The article began: “Mexico is a dollar market in which no restrictions are placed on the transfer of funds to places abroad.”
43 Hobson, Oscar, City Editor, News Chronicle, 04 11, 1951.Google Scholar
44 Including the Nchanga Consolidated Copper Mines, Rhodesia Broken Hill Development, Rhodesia Copper Refineries, Rhokana Corporation, and Rhodesia Anglo-American Copper Mining Co. Following the move, dividend payments increased 50 per cent.
45 Financial Times, Oct. 26, 1951.
46 Investors' Chronicle, May 12, 1951.
47 Lever Brothers and Unilever, Ltd., issued such a statement following a Reuters report that the company was about to migrate to the United States (Financial Times, May 31, 1951).
48 Oliver Lyttleton during debate in the House of Commons, quoted in The Times, May 9, 1951.
49 City Editor, The Times, May 12, 1951.
50 Walter Fletcher, Conservative M.P., in the House, May 9, 1951; quoted in ibid.
51 The chapter proposed for repeal began: “All merchants, unless they have been previously prohibited, should have safe and secure exit from England, and entry to England, with the right to tarry there and to move about as well by land as by water, for buying and selling by the ancient and right customs, quit from all evil tolls, except (in time of war) such merchants as are of the land at war with us.” (Quoted in ibid., June 6, 1951.)
52 Finance Bill, 14 & 15 Geo. 6 (1951), clause 23.
53 Douglas Houghton, M.P., in Hansard, vol. 469, cols. 1817–28, 11. 14, 1949.Google Scholar Houghton was the secretary of the Inland Revenue Staff Federation.
54 Convictions for tax violations rose steadily during the post-war years. There were 33 prosecutions of tax evasion in 1950 compared with 9 in 1945 (Financial Times, June 19, 1951). Similarly, there was a sharp increase in the number of prosecutions of customs and excise violations. Of a total of 3,736 convictions for such offences in 1949–50, 2,393 represented purchase tax offences. See the Report of the Commissioners of His Majesty's Customs and Excise for the Year Ended March 31, 1950, Cmd. 8120.
55 The Committee on Public Accounts, First, Second and Third Reports, session 1948–1949, xxi ff.Google Scholar
56 For example, the Committee on Public Accounts was rather critical of the slow rate of staff recruitment by the Inland Revenue throughout the period.
57 The Committee on Public Accounts, First, Second and Third Reports, session 1948–1949, xxi ff.Google Scholar
58 Douglas Houghton, M.P., “How to Catch the Taxdodgers,” Public Opinion, 01. 5, 1951.Google Scholar
59 Newport, C. A., “The Accountant, the Client and the Revenue,” Accountants Journal, XLIII, no. 523, 09, 1951, 221.Google Scholar
60 Quoted in The Times, April 11, 1951.
61 Nor were appeals from Labour Ministers for continued restraint in 1951 successful. Gaitskell's attempt to justify increases in prices, profits, and dividends in his address to the Trades Union Congress in September, 1951, was, as The Times noted (September 5, 1951), “heard in silence.” A month earlier H. G. Brotherton, President of the Confederation of Shipbuilding and Engineering Unions, had warned the Government that “if prices and profits are going up, then so are wages…. Our colleagues on the political wing of the movement should also bear in mind that … restraint was exercised by the trade union movement, until the outrageous increase in profits and prices showed us to be the victims of an economic swindle…. We must state with the greatest emphasis that, irrespective of the nature of the government of the day, it is the task of the trade union movement to protect and advance the interests—and above all the economic interests—of its members.” Presidential Address to the Annual Meeting, Aug. 14, 1951, 3–8.
62 Quoted in Labour and Industry in Britain, XI, no. 2, 06, 1953, 52–3.Google Scholar
