11 APRIL 1941, Page 22

FINANCE AND INVESTMENT

By " CUSTOS "

AT last Sir Kingsley Wood has done it, or, more accurately, he has begun to tread the financial path appropriate to this total war. While I am not convinced that he has not been optimistic in his estimate of the potentially inflationary gap at a figure of L500p00p00, he has at least had the courage to face up to his problems and tatkle them more or less realistically. The City likes simplicity and has therefore welcomed the decision to get the additional k25o,000,00o thrown upon the taxpayer from ale source, the Dos. income tax. As I have often stressed in these notes, neither gilt-edged nor equities need suffer fromrise a rise

the standard rate since net yields no longer determine the level of investment values. Markets have, in fact, demonstrated their approval of a stem budget by a cautious advance.

In the excitement about compulsory saving—a subtle coating of the bitter pill of higher taxation—too little attention has been paid to Sir Kingsley Wood's references to "stabilising the cost of living." Obviously, -there is no effective check on inflation unless something is done to prevent costs from rising. That implies the need for a wages policy. A step at a time Sir Kingsley Wood is trying to tap the increased purchasing powl in the wage-earners' hands but he has refused so far, for pohtful2. reasons, to attempt any direct frontal attack. This budget gel" relieves the inflation risk but does not eliminate it.

INSURANCE IN WAR

War conditions have curtailed the new business of insurance companies but have not impaired tlieir financial strength. One has only to look at. the balance-sheets of companies such as the Prudential, the Pearl and the Refuge to realise that cautious policy has been successful in building up huge reserves. year the Prudential put £75o,00o to investment reserve fund.w HS ordinary branch and £4375,000 to ordinary branch cuurn21; gency fund. In its general branch investment reserve fun"

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FINANCE AND INVESTMENT

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received Doo,oco and £25,000 went to additional reserve. The valuation report states that 1,001,608 life policies are in force in the ordinary branch assuring £287,052,266, including bonusa In the industrial branch the total number of policies in force at December 31st_ was 28,627,759, assuring £625,733,142.

In his review at the Refuge Assurance meeting the chairman, Mr. J. Wilcock Holgate, emphasised the value of life assurance in time of war. Investment in a life policy was a form of saving which was easily blended with the needs of the Government's financial programme. Last year the Refuge increased its holdings of Government loans by over £3,500,000, and this policy al' investing a large proportion of life assurance funds in gilt-edged stocks will be continued. Discussing the effects of war on the company's finances, Mr. Holgate stated that although war deaths had not been on anything like the scale of 1914-18, the influence on mortality experience had become evident. Expense ratios had been raised by increased costs, and investment income was held down by low yields.

HALIFAX BUILDING SOCIETY

"We have increased our liquid assets, retained the confidence of our investors, and our borrowing members have again shown their determination to fulfil their obligations." This was Brig.- General Sir Edward Whittey's apt summary of last year's ex- perience of the Halifax Building Society. He pointed out that the society had had to face a tremendous increase in income-tax liability, but also showed that liquid assets, represented by trustee investments repayable at par at fixed dates and by cash, had increased during 1940 by £1,897,585 to £23,833,977, and that total reserve funds and individual profit, at just under L6,000,oco, were nearly 6 per cent. of the amount outstanding on mortgage securities; He welcomed the War Damage Act as strengthening the society's position as mortgagees.

VICKERS' FINANCES

For the fifth successive year Vickers' ordinary stockholders are to get a dividend of to per cent, out of earnings after taxation of over 20 per cent. Conservatism is the keynote of the board's policy as befits an undertaking which must be faced with con- siderable adjustment problems in the post-War years. Holdings of cash and gilt-edged securities amounted at December 31st to nearly £6,400,000, and there was a reserve fund of £3,000,000.

BRITISPI TYRE AND RUBBER

Sir Walrond Sinclair's criticism of E.P.T. at the British Tyre and Rubber meeting was made before the Budget speech. It may be doubted, however, whether he would have modified his remarks very greatly if Sir Kingsley Wood's concessions had been disclosed. This company is among those which have built up profits steadily in recent years through a policy of plant ex- pansion and ploughing back earnings into the business. It is therefore unfavourably placed in relation to the arbitrary E.P.T. standard fixed by the Treasury. Presumably, shareholders will have to wait until after the war for the fruits of expansion. On a long view, at any rate, the repayment of zo per cent. of E.P.T. now promised is a "bull point."