THE TABLET April 19th. 1958. VOL. 211, 6152

THE TABLET

■published as a Newspaper

A WEEKLY NEWSPAPER & REVIEW

Pro Ecclesia Dei, Pro Regina et Patria

FOUNDED IN 1840

APRIL 19th, 1958

N1NEPENCE

Dl\ Adenauer in London : The E u ro p e an Policy

Science in the Catholic S chools:

1: T h e Danger o f being O u ts trip ped. By L. Connell I I : C a th o lic Beneficiaries from Industry. By A . H. W illb ourn

\ O U t l l a i l d Religion : A Y.C.W. Enquiry. I I : Do Young Catholics go to Mass? Life and the Law : A Positivist Speaks Rashly. By L. L. McReavy

Critics’ Columns : Notebook : Book Reviews : Letters : Chess

CAUTIOUS IMPROVEMENTS

i 'J 'H E new Chancellor of the Exchequer has made a number of sensible and welcome changes in his Budget. In particular, he is simplifying the purchase tax, and lowering the ra te on many goods.

It has long been a puzzle why successive Conservative Chancellors of the Exchequer not merely continued, but actually increased, the differential rate of profits tax on distributed and undistributed profits, and why it has waited for Mr. Heathcoat Amory, in the seventh year of Conservative Government, to substitute a flat rate of 10 per cent whether the profits are distributed or not. The Conservative Party could have been expected to recognise that the profits of a company belong to the shareholders, and th a t the whole system functions on that assumption : th a t they bear the losses, often wait long periods, but are entitled to the profits when they are made, and should not be charged 30 per cent in addition to the standard income tax which companies and shareholders have to pay.

The theory has been th a t money retained in businesses would be used productively on modernising plant, whereas distributed as dividends it would go into personal consumption. There has been some force in this, although it is wages and not dividends which determine the volume of consumption and the course of inflation. But the differential tax and part of the income tax has been an inducement to companies to spend their money on almost anything which may give them a longterm advantage, including advertising and public re lations activities, since it has been made so expensive to pass on their profits to their shareholders ; and much of this expenditure, justified in tbfe case of each particular company, has added up to a volume of company spending inappropriate to the nation’s economic position, and less in the public interest than a straightforward distribution of more of the profits.

But this was the only issue on which the Opposition immediately challenged a division, and ¡1 must be recognised that the differential tax on dividends has a strong psychological appeal in the Labour Party. It will have until much more progress has been made in getting the artisan population, which spends such very large sums in wagers on the turf, interested in the share market like its American counterpart. This is an activity for which there is today a margin th a t used not to exist ; but the habit has to be introduced and fostered, and if it can be it will give a much more wholesome sense of the social importance of property and respect for property.

But these changes and concessions of the new Chancellor do not add up to more than about fifty out of five thousand millions ; one-hundredth part of what has been collected is being given back. The broad picture remains of a heavily over-taxed society, continually thanking successive Chancellors for small m e rc ie s ; this year towards the cinema trade, and for port and sherry. There are welcome if small reliefs to elderly people with fixed incomes, which will make them a few shillings better off every week. But there is no real solution for the country except through a rise in the national income, not accompanied by a parallel rise in taxation, and the future of the country’s economy turns on this happening. Here the Chancellor has to move with extreme caution, not professing to be able to see ahead, not able to share the Opposition’s cocksureness that the major danger now is not inflation but unemployment through the effects of world trade recession. The Government dare not do more to encourage the moderisation of plant and competitive efficiency, because they dare not stimulate demand in the home market or for imports, and the two demands go together. So far British exports have stood up remarkably well, but this can change all too easily from one quarter to another. The Government is in the galling position, for a Party pledged to an expanding economy, of having to maintain the credit squeeze to restrain spending on modernisation so necessary and desirable for future efficiency.

The Chancellor is making concessions to nationalised industries, letting them deduct their fixed interest pay­