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Fiscal Snub

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11th November 1955

Page 173

Page 173, 11th November 1955 — Fiscal Snub

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pART of the Budget ritual consists of the long queue of suppliants who plead their case for special treatment before the Chancellor or his Under-Secretaries. The road transport industry is always well represented in the queue, and the Chancellor must by now know by heart what items operators would most like to see in a Budget. They would like a reduction-in the fuel tax, the abolition of purchase tax on commercial vehicles, and a substantial increase in the allocation for road development. It is not unusual for people to want to pay less and receive more, but road transporthas an unusually good case, which year after year receives a resounding fiscal snub., There was even less hope than usual that any notice would be taken in the autumn Budget. Its purpose was to strengthen the position of sterling and to check inflation. As the Chancellor explained in his Budget speech, the vigorous expansion of the economy is outstripping the resources available to maintain its strength. There is an unsatisfied demand for materials and labour. As a result, development in some directions has to be curtailed. Spending must be curbed, and the flow of imports slowed down. On the other hand, exports are encouraged, reducing still further the products for

the horne'market. . • • • '

in these -circumstances, the Chancellor can hardly be expected to cut taxation or sanction increased expenditure. Road operators may have felt resigned to getting no concessions in this Budget. Nevertheless, they are surprised and hurt that the purchase tax of 25 per cent. on commercial goods vehicle chassis went up to 30 per cent. They may have suspected that the Chancellor had forgotten the harsh things said to him about this particular tax. But he made some amends by his apologetic tone in giving the bad news about the road programme.

Real Wishes He explained that he had to 'balance the needs of the education system, and of pensioners, against the case of the roads, "with a programme which I cannot increase but which is already insufficient to deal with the indus

trial needs of the country." At a later stage he• emphasized that the Government could not agree to an extension or acceleration of the programme, "much as we should like to." Thus, as far as he was able, he gave a convincing performance of a man in the grip of circumstances that prevent him from carrying out his real wishes.

The natural reaction is to sympathize'with Mr. Butler. On reflection, one is not so sure. He has several times had the opportunity to do something for road transport, and has not' taken it His deprecating tone may fit the present situation, but the words are to the same effect as previously.

Many of his arguments can be used against him. He wishes to check inflation, the giddy spiral of prices and wages. Not the least important element in inflation is the rise in fares. This could be checked and even reversed by a reduction in the fuel tax. Hauliers would also benefit, and be given additional encouragement to keep their rates down.

The Exchequer would lose more in expectation than in comparison with past years. The revenue from fuel tax is rising swiftly. The receipts from this source rose from i226m. to £253m., between 1953 and 1955: In other words, a tax of Is. a gallon this year would have produced as much revenue as in 1953 with the tax at 2s. 6d. The increase in consumption of fuel, and therefore the amount of tax, may be contrasted with the fact that the Government are taking justifiable pride in reducing the amount they spend. The Chancellor has said that four years ago Government expenditure was devouring 29 per cent.' of gross national production, whereas this year the proportion has come down to 26 per cent.

Another factor that keeps road transport charges high is the inadequate road systern. Millions of pounds are lost each year because vehicles are held up, or cannot travel at their most economical speed, or are compelled to take a circuitous route for lack of a bridge or tunnel that should have been built many years ago.

Serious Difficulty The shortage of materials and labour is another of the Chancellor's problems. Road construction does not require large quantities of the materials, such -as steel, where the shortage is so acute that imports have been found necessary. Labour for road building presents a more serious difficulty at a time when every industry is bewailing the lack of manpower. Better roads might help even here. They would enable more economical use to be made of road transport workers, as well as bringing materials more quickly to where they are needed.

Exports remain the key to the situation. They cannot be allowed to decline, although some countries, such as Australia, are putting up the shutters. New outlets must be found in markets where the competition is becoming fiercer. The cost of transport to the docks may make the vital difference in the export price of a commodity. .Business may be lost because the carrier's charge is unavoidably distended by taxation on his industry and delays on the road.

Two years ago the Chancellor put forward a comprehensive plan under which he hoped to double the prosperity of the country in the following quarter of a century. Within the framework of this plan, the railways were allowed to peg out their own modernization scheme, to extend over 15 years at a cost of il,200m. Companion piece to this, if on a somewhat more modest scale, was the expanded road programme announced by the Minister of Transport early this year, and estimated to cost .€200m.

The Wrong Way The Chancellor has found it necessary to mark time, and he is wise to check consumption in some directions so as to keep the balance between physical resources and manufacture. Perhaps he is not so wise in his choice of direction. Road construction is an easy prey, for expenditure is entirely within the Government's control. A more satisfactory criterion would be the true needs of the economy. Each year the failure to provide a better road system becomes more serious. Mr. Butler would do well to reconsider any further delay in the comprehensive plan to which the expanded programme, already announced is no more than a prelude.