Insight - The tax-free budget.

(From Financial Director)

Byline: Andrew Sawers.

Almost exactly 150 years ago, on 18 April 1853, Chancellor of the Exchequer William Gladstone delivered one of the most memorable Budget speeches in parliamentary history. His five-hour long discourse not only gave a painstaking analysis of the financial health of the nation, it also set out a fulsome history of income tax, and even put forward proposals for its abolition.

Gladstone forecast revenue for 1853-54 of GBP 53,990,000, of which 39% was expected to come from Customs and 28% from excise duties. Stamp duty yielded another 13% of the total revenue, but income tax just 10% - GBP 5,550,000.

Even more remarkably, income tax itself had "legally expired" and Gladstone had to ask parliament to consider whether or not to revive it.

Gladstone suggested it was possible to abolish income tax, replacing it with additional taxes, licences and duties, including taxes on land, houses and other property at the rate of 6d in the pound (2.5p in decimal currency). But while Gladstone made the suggestion, he did not recommend it. Rather, he found favour with Pitt, a "great man, possessed with his great idea", who launched income tax on the British people at the end of the 18th century.

Indeed, Gladstone referred to income tax as a "colossal engine of finance".