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Home arrow Political science arrow A Century of Fiscal Squeeze Politics : 100 Years of Austerity, Politics, and Bureaucracy in Britain

Loss, Cost, and Effort Involved in These Episodes

As in previous chapters, Table 5.1 puts these episodes into the analytic perspective set out in Chapter One by sketching out our comparative 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.

Table 5.1. A qualitative classification of imposed loss, political cost, and state effort associated with 1940s fiscal squeezes

Low

Moderate

High

Overall classification

1941-45 Squeeze Type: Hard Revenue Wartime Coalition:

Loss

[1], [2]

High

Cost [2], [3], [4]

Low

Effort

[1], [2], [3]

High

1946-49 Squeeze Type: Hard Spending/Soft Revenue, Labour 7/1945 onwards

Loss [2], [3]

[1]

[2], [3]

Moderate

Cost

[1]

Moderate

Effort [1]

[1], [3]

[1]

Moderate

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

The wartime tax squeeze 'of unexampled severity', coupled with severe nonfiscal austerity and a hard squeeze on civilian spending, stands out as representing the highest level of loss imposed on citizens and voters over the century considered by this book. It was also an episode that represented a high degree of effort on the part of the state machine, involved as it was in devising and implementing completely new forms of tax collection (notably in the case of the PAYE system for extracting income tax at source from employers, and the development of a broad-ranging sales tax). But as in World War I, the reputation cost or political risks run by the governing politicians in respect of fiscal policy was limited by the existence of a grand coalition and the absence of electoral competition.

For the post-war Labour Government's fiscal squeeze, tax policy in part relied on 'inertia strategies' of continuing with wartime levels of taxation, while altering the distribution by higher taxes on inheritance and higher thresholds for lower earners. As we have seen, the spending squeeze for the first three years of the government's life fell exclusively on defence, only beginning to affect civilian services in FY1948/9, and although deprivations imposed on citizens through rationing and materials shortages were undoubtedly severe, there was no fiscal equivalent to the cuts in unemployment benefit in 1931, and the high taxes and materials shortages were accompanied by substantial food subsidies. Again, the state machine expended a high degree of effort in effecting these fiscal changes, for instance, in the massive task of demobilizing millions of service personnel. For the governing politicians (as Sir Herbert Brittain had warned), the effort to continue with high wartime tax levels (as with the Lloyd George reconstruction coalition after 1918) eventually produced electoral resistance and pressures to cut spending even though the budget was in surplus. But again, in contrast to the 1931 episode, the Labour Government was not driven into widespread abandonment of its election promises in this case, and therefore could not be said to have been exposed to more than a medium degree of reputational or political cost.

 
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