Circumstance

The budget was a stunner, in several ways. It was a beauty for balance; Hugh Dalton had achieved a surplus of about -L-270,000,000 ($1,080,000,000). It had an unmistakably Laborite look in keeping income taxes high on the rich and the middle class, while easing those of the low-income group. But it had one monstrous feature: the duty on tobacco was upped by 50%. That meant that a package of 20 cigarets, which cost 47-c- on Budget Day, cost 67-c- the day after.

Britons, who had expected some increase, were shocked. They swore at Dalton for soaking the poor where it hurt. And they swore they would swear off smoking. By this week cigaret sales had slumped more than half.

Dalton, who likes a cigar now & then, lectured the House of Commons and the nation on the dollar evils of smoking too much. Britons had spent a whopping -L-603,000,000 on tobacco last year; it was almost one-tenth of the national income.* Said Dalton: "We are now smoking one-third more than before the war. About 80% of our tobacco is imported from the United States . . . and we are drawing heavily and improvidently on the dollars which we earn with our exports. . . . The whole total of our exports to the United States at this time barely exceeds in value our own consumption of American tobacco. The thing has become fantastic."

Working people--the backbone of Labor's support--would be hurt most by the tobacco boost./- A man with a -L-5 weekly wage (about one-fifth of British wage earners get less) would have to spend about one-fourth of his pay to smoke one package of cigarets a day.

Robin Hood. Dalton gave the lowest wage group the solace of a cut in income taxes which brought them back to about the 1940 level. The basic rate of nine shillings to the pound (45%) remained. But by lifting the basic exemptions and increasing allowances for dependents, the budget took income tax entirely off about 750,000 low-income Britons. Under the new schedule, a British couple with two children will pay no tax unless they earn more than $28 a week, and they would not pay the 45% rate unless they earned more than $40 a week. The change left middle-bracket taxes murderously high. Example: a married couple with three children, earning $4,500 a year, would be taxed $1,272 (a cut from $1,326). In the U.S. such a family pays about $300.

In other respects Dalton's budget followed Labor's Robin Hood thesis of taking from the rich to give to the poor. Taxes on distributed profits (dividends) were upped from 5% to 12 1/2% (a few fortunate Britons breathed easier; they had expected a slashing 20% tax). Inheritance duties were almost doubled. Sales taxes were cut on items including boxing gloves, chamber pots and toothpicks. But a whopping 66 1/3% purchase tax went onto heating and cooking appliances.

Smelling Salts. Dalton was proud of his surplus. It was not an actual one, but was represented by a windfall of -L-292,000,000, largely from unspent wartime budgets. Surplus or not, there was no budget provision for retirement of Britain's $102,448,000,000 debt. But Dalton crowed: "I trust this [the surplus] will act as smelling salts under the noses of some of those . . . who have recently been showing signs of despondency over our financial future."

Next day cigar-smoking (and snuff-sniffing) Winston Churchill burned a rag under Laborite noses. Said he, in a London speech: "Our country is being driven to ruin and our Empire is scattered and squandered. Everyone is conscious of the approaching crisis in our financial and economic affairs. The Socialist Government is living on an American dole, and squandering it with profligate rapidity."

* The 1946 U.S. tobacco bill was about $2,900,000,000--roughly 1.7% of the national income. A recent Gallup poll indicated that 35% of U.S. smokers wish they didn't.

/- Some top Laborites would also be pinched. Ernest Bevin, Herbert Morrison and Arthur Greenwood are heavy cigaret smokers. Clement Attlee smokes a pipe. Sir Stafford Cripps, despite his dietary austerity, likes a pipe, a cigaret or a cigar.

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