Stabilize Wages But Reduce Tax
Page 25
Page 26
If you've noticed an error in this article please click here to report it so we can fix it.
PrHE present policy of the Labour Government is to discourage in general the increasing of wages and salaries, unless any additional remuneration be accompanied by a rise in production—in other words, there is to be payment by results. It is recognized, however, that in exceptional cases increases may be justified for particular classes of work in which it is found necessary to attract personnel.
In our view, this policy is, in the main, a correct one to adopt in the difficult circumstances prevailing to-day. It is an endeavour to halt the vicious spiral of wages, prices and living costs in general, but it is unlikely to prove successful unless the latter two factors can also be reasonably well stabilized or, preferably, reduced.
Lead in Economy Needed The Government has issued what is in the nature of an ultimatum, as a result of which it will probably be seriously involved with the majority of trade unions and the individual workers. We may well• ask, however, what it is itself doing to make this line of action reasonably effective. Is it cutting its coat to suit its cloth? While advertising extensively to encourage the British people to be thrifty,, it is expending vast sums of money in many questionable ways. The bulk purchasing of food, commodities and raw materials, often by.officials who are not fully versed in the requirements of trade and industry, with the markets in which they have to compete, and in the particular characteristics of the materials in question, is in the view of many business experts a most unsatisfactory and uneconomic system. The formation of what• are, in essence, huge trusti, by the nationalization of large sections of industry, is proving far more expensive than was estimated, mainly, it is claimed, because of the top hamper of officials and the wide gap between them and the workers.
There is another factor, however, and one of the greatest importance in its effect upon the reaction of people of every class, and particularly those who earn their living. We allude to the excessively high and extremely burdensome taxation on personal income, whether this be by way of salary or wages. By the retention of such a high basic figure as 9s. in the pound, the Chancellor of the Exchequer is encouraging, rather than discouraging, the claims of workers for higher remuneration, and that not in small amounts. What might, in the ordinary course of affairs, be a living wage, according to the circumstances of the recipient, is usually reduced to a figure below the value of the emoluments of pre-war days. This, apart from making the worker discontented, tends to make him demand more.
Therefore, if the Government be sincere in its present campaign, it should prove its good faith not only by effecting economies in every possible direction, such as by a reduction in the hordes of redundant civil, servants, but also by a reduction in the standard rate of income tax. A cut of, say, 2s., would be the equivalent of an all-round rise in salaries and wages, which would go far towards satisfying_ the workers and encouraging them to give their fullest energy to the huge task of rehabilitation with which we are all faced.
The Chancellor will no doubt endeavour to prove that any additional cash in the hands of the individual is disadvantageous to our stability, for the reason that there will be a tendency to spend it, and this might result in a largely increased demand for more goods in the home market. Well, what of it? The Government has full power to control the supply, and can, therefore, make it well nigh impossible for everyone to have all that he or she wants; any surplus then remaining can go into those National Savings to which our constant attention is being drawn.
Peace With War Taxation At present we are living in a time of so-called peace, but under the dead weight of what closely amounts to, or in some instances exceeds, wartime taxation. It is large4 for this reason that prices are so high, and that we have to compete in the overseas markets against the goods of other countries which have reduced their similar burdens to far more reasonable levels. It may be that some of these countries are, in one way or another, subsidizing their exports. We. on the other hand, are artificially inflating the cost of almost every. thing that we send abroad, thus making our selling problem one which will increase in difficulty.
We do not know, at the moment, the condition of the Exchequer, but about half-way through the financial year it was announced, with some glee and self-congratulation, that there was likely to be a considerable surplus. If this eventually proves to be the case it will not be an occasion for felicitating the Chancellor upon his acumen, but of pointing out that this is merely evidence of the overload which we •are all called upon to bear. Whatever the surplus is, it could in any event be much larger but for the profligate way in which the Labour Government has been expending our resources.
As far back as February, 1943, in an article entitled "'Encourage the Leaders of Industry," we referred to another effect of the huge direct taxation of incomes, pointing out that although this is, perhaps, the easiest method of obtaining large amounts of money, it has a particularly unfortunate result. It levels up matters to such an extent that the remuneration for exceptionally good work and the acceptance of responsibility is severely cut, this being accentuated by the comparatively low level at which super-tax becomes payable.
This has the effect of removing much of the incentive to greater individual effort, sometimes to such a degree that promotion is almost unwelcoined. In a normal way, the reward should fit the task; mere prestige is not always sufficient, but the tax collector steps in. and after his drastic pruning there is little left but honour.