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THE FISCAL POLITICS OF SAVINGS AND SHARE OWNERSHIP IN BRITAIN, 1970–1980*

Published online by Cambridge University Press:  03 August 2012

CLARE MUNRO
CLARE MUNRO*
Affiliation:
Wolfson CollegeCambridge
*
clare.munro@talktalk.net
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Abstract

Between 1907 and 1984 unearned income in Britain was taxed at higher rates than wages and salaries, a bias that was supported intermittently by limiting shareholders’ dividends and attempting to tax capital wealth. Although apparently accepted as part of the fiscal order until 1979, Margaret Thatcher's government was able to complete the dismantling of the bias in favour of earned income by 1984. This article examines the events and politics of the 1970s to explain the volte-face. The article initially charts the role of political prejudice against rentiers in maintaining higher taxes on unearned income in the context of 1970s economic turmoil and inflation. The article then considers the 1970s fiscal shift from the perspective of equity shareholdings, juxtaposing the use of tax and dividend restraint as a mechanism for control of investment capital with pressure for wider share ownership, particularly for employees. Finally, Avner Offer's theories on prudent financial behaviour are imported as a backdrop for the trend away from tax relief for long-term, illiquid savings towards market-driven incentives. Ultimately, the article detects a change of approach in both main political parties which in turn creates a more stable environment for future policy formation.

Type
Articles
Information
The Historical Journal , Volume 55 , Issue 3 , September 2012 , pp. 757 - 778
Copyright
Copyright © Cambridge University Press 2012

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Footnotes

*

I am indebted to Professor Martin Daunton for his advice and encouragement and to Dr Martin Chick for his comments.

References

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