Loss, Cost, and Effort Involved in These Episodes

As in previous chapters, Table 6.1 summarizes our assessment of the extent of loss imposed on citizens and voters, the extent of reputational cost and stress incurred by governing politicians, and the degree of effort exerted by the state machine in handling the squeeze.

The Butler squeeze of the 1950s does not seem to rate at more than a moderate level on the spectrum we identified in Chapter One relating to three dimensions of intensity of fiscal squeeze. There were some significant

Table 6.1. A qualitative classification of imposed loss, political cost, and state effort associated with 1950s and 1960s fiscal squeezes

Low

Moderate

High

Overall classification

1953-55. SqueezeType: Soft Revenue/Soft Spending Conservatives 10/1951-5/1955

Loss [1]

[1]

Moderate

Cost [4]

[1], [2]

Moderate

Effort

[1], [2], [3]

Moderate

1960-61. SqueezeType: Hard Revenue Conservatives 8/1959 onwards

Loss

[1]

High

Cost

[1], [2]

[3]

High

Effort

[1], [3]

Moderate

1964-67. SqueezeType: Hard Revenue

Labour 10/1964-3/1966

Loss

[1],[3]

High

Cost [2]

[1], [2]

Low/Moderate

Effort

[2]

High

Labour 3/1966 onwards

Loss [3]

[1]

[2], [3]

Moderate

Cost [1]

[1]

[1]

Moderate/High

Effort

[1]

High/Moderate

1968-69. SqueezeType: Hard Revenue

Labour 3/1966-6/1970

Loss

[1]

[1]

High

Cost [2]

[1], [2]

High

Effort

[1]

Moderate

Note: Numbers in square brackets refer to categories in Table 1.2, ChapterOne.

extra charges (NHS prescriptions, school meals, and transport), but the revenue hit fell far short of some others imposed in the century and although Butler's early moves included imposition of extra import controls and a doubling of Bank Rate, non-fiscal austerity in the form of rationing fell away during this period. As far as political cost is concerned, we saw earlier that the incumbent politicians at first struggled to deliver on their tax-cutting election promises and even briefly imposed a special Excess Profits Tax early in the electoral cycle, but they had readily available scapegoats in the form of the previous Labour Government, and by the end of the electoral cycle had succeeded in cutting the standard income tax rate by some two percentage points and raising tax thresholds. In terms of effort by the state machine, the changes required to shed wartime programmes to make room for tax cuts went well beyond the incremental level, but the ending of the Korean War meant a 'peace dividend' that limited the effort required at the end of the period.

The other three squeezes discussed in this chapter seem to have involved a greater degree of imposed losses in terms of extra taxes or charges, for instance, with three tax-raising budgets in a row between the graduation of National Insurance payments in 1961 and the income tax increases of 1964, the two successive tax-raising budgets under the first Labour Government and the later tax rises after devaluation in the 1968 and 1969 budgets. An element of non-fiscal austerity also applied in the form of policies of pay restraint under both Conservative and Labour Governments, the latter case ultimately involving statutory powers to restrain wage increases along with price increases.

In terms of cost to the reputation of incumbent politicians, the Jenkins squeeze of 1968-69 (even though it only just registers as a squeeze on our method of counting from reported financial outcomes, as explained in Chapter Two) seems to rate high, and the Conservative tax squeeze of the early 1960s also seems relatively high. In the latter case, a right-of-centre government was approaching the end of its electoral term with a succession of tax-raising budgets, while in the case of the Labour Government of the late 1960s, a left-of-centre government was reining in types of spending that it had promised to increase, as well as imposing swingeing tax increases in the run-up to an election and re-imposing the NHS prescription charges it had promised to abolish in 1964. In both of those cases too, the government concerned had been in office for more than one electoral term and so could less plausibly put the blame onto its predecessors for the relevant squeezes.

For the effort imposed by the state machine, all of these squeezes seem to go well beyond the minimal level we identified in Table 1.2 in Chapter One, but arguably the greatest effort was associated with the Labour squeeze of 1964-67, particularly with all the new taxes (such as Selective Employment Tax, Corporation Tax, Capital Gains Tax) that were brought in over that period, as well as the development of non-fiscal austerity in the form of wage standstill policy (along with price control) in the mid-1960s.

 
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