A history of British budgetary battles





Chancellor Alistair Darling is due to deliver his Budget on Wednesday 24 March, but why does he bother?

It is less than four months since he made his pre-Budget report, so we have a good idea of what he is planning to do with taxation this year, and chief secretary to the Treasury Liam Byrne said last week that taxes would not have to go up, although there has been some backtracking since that statement was made....

For an example of an occasion on which the Finance Bill was not passed, you have to go all the way back to 1909.

Liberal Chancellor David Lloyd George was trying to pass his People's Budget, which introduced higher income taxes for higher earners and also a land tax, in order to fund programmes such as the introduction of old age pensions.

The Conservative-Unionist-dominated House of Lords vetoed the Budget, which meant that a Finance Bill was not passed until 1910, after a general election had been held.

The veto of 1909 led to the Parliament Act of 1911, which stripped the House of Lords of the power to block financial legislation.

Questions were asked in the House of Commons in March 1910 as to whether people would be entitled to tax refunds on the basis that the Finance Bill had not been passed.

The Chancellor replied that he had received legal advice that a bill allowing income tax to be collected for 1909-10 did not have to be passed before the end of that financial year and that as a result it was fine to collect the taxes in anticipation of such a bill being passed.


"It depends entirely whether there will be a Finance Bill which will eventually sanction the collection of the Income Tax," he told the House.

But in December 1909, Prime Minister Herbert Asquith told the House that his government would have to borrow money because of the failure to pass a Finance Bill.

By early 1910, the Treasury estimated a shortfall in taxation of more than £31m, which was a hefty proportion of the £162.6m in tax revenue the government expected for the year, according to Roy Douglas, emeritus reader at University of Surrey and author of several books about the period.

This was blamed almost entirely on the near impossibility of collecting income tax.

"The Lords did at last pass the 1909 Budget (or at least most of it) in 1910, although controversy did continue over the powers of the House of Lords until the Parliament Act was passed in 1911," says Dr Richard Toye, associate professor of history at Exeter University.


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