12 JUNE 1920, Page 5


WE note with great satisfaction that the Associa- tion of British Chambers of Commerce is taking up and supporting, in no half-hearted manner, the move- ment for the reduction of Government expenditure. Like wise men, instead of assuming that the only way of making two ends meet in the British Treasury is for the Govern- ment to tax us more and oftener, they demand plainly and clearly that there should be less expenditure. Not being Bureaucrats, that is, men who spend other people's money, but persons accustomed to deal with their own resources, they realise that in making an honest and efficient balance- sheet it is quite as important to cut down wasteful and unremunerative expenditure as it is to raise more capital. They know, in a word, that to meet a deficit not by spending less but by spending more can in the end mean only one thing—bankruptcy. In view of this fact the Council of the Association of Chambers of Commerce, a body which represents 124 Chambers scattered throughout the country and having fifty thousand members engaged in manufacture, trading, banking and various other commercial occupations, on Friday week passed a series of admirable resolutions dealing with the whole matter. These resolutions are so sound in themselves and so well and clearly expressed that we cannot do better than quote them verbatim :- RESOLVED by the Association of British Chambers of Commerce that the present policy of the Government which calls for 500 millions sterling for Civil Service Estimates, to- gether with a further 230 millions for the reduction of National Debt, all in one year, places upon the energies and the economic system of the country a burden so great as to do more ultimate harm than the contemplated social reforms and the reduction of the National Debt can do good.

This Association respectfully recommends the House of Com- mons :—(1) To urge the Government to revise its policy and reduce the Estimates, and the amount proposed for the reduction of National Debt. (2) To secure that House of Commons Committees be accorded greater powers of supervision of Government policy giving rise to expenditure. (3) To restrict the opportunities of Departmental officials to initiate or influence, or control policy. This Association, the organised representative of British Com- merce and Industry, out of which taxes are produced, placing the safety and good of the State before everything, is compelled, by the existing circumstances, to publish to Parliament, and the country, its carefully considered and deliberate opinions as above, and in such a manner as to admit of no misunderstanding of their meaning.

Before dealing with the essential question of how to do what the Association wants to do, we desire to make one or two comments. Though we realise the great importance of the debt and the necessity of adopting a policy which shall tend towards its reduction, we are heartily at one with the Association in deprecating the devotion in one year of so large a sum as 230 millions for the reduction of the National Debt. Indeed, we would go so far as to say that if the assignment of so large a sum for reduction necessitates a crippling, and therefore wasteful and injurious, form of taxation we should not be really reducing the debt, but increasing it by such a form of reduction. By impoverishing the country by excessive taxation you may be killing the goose that lays the golden eggs of annual interest. Our system of taxation must be stabilised before we deal on any big scale with the Debt. We must not plant Upas tax- trees which will kill commerce throughout our taxable domain.

The resolution in favour of securing a greater power of supeivision by the House of Commons over Government policy when it gives rise to expenditure is also one with which we are in the heartiest sympathy. If the House of Commons would only take its functions more seriously it would, though not interfering with the power of the ExecutiVe, insist upon seeing that no more money was raised than could be paid without injury to trade and commerce. -Further, we are delighted to see the Association of Chambers of Commerce putting its finger upon a matter which is too often neglected. They wisely ask that restrictions should be placed upon " the opportunities of Departmental officials to initiate or influence, or control policy." We heartily agree. We fully realise that in pre-war days and when we had a larger proportion of what we may call the old-fashioned type of official, and especially Treasury officials, the influence of the permanent men at any rate at the top was very much in favour of economy, sound administration and a wise restriction on public action. Now unfortunately a change and a very serious change' has come over the Departments. The new Bureaucrat is by no means the same type of person as the old Civil Servant. The new Bureaucrat is zealous—nay, over-zealous, in his calling, and unfortunately, like the members of the modern Trade Unions, considers that the prestige of his office, and so his own social prestige, depends on the number of rooms it occupies, clerks it employs, and money it spends. In these days a man is actually ashamed of belonging to a small thrifty department occupying sonic small and unpretentious building from which millions are controlled. The man of the type who writes too much and thinks too little feels humiliated when he meets a colleague who scatters more public money than he does. He returns to his office determined to make its activities as great and as expensive and thus as important as any to be found in the country. Witness the demand for more public offices and a larger personnel which is arising throughout the official world. Everywhere, instead of the officials keeping the politicians in order, as they used to do, and preventing them from being spendthrifts, the new officials do unques- tionably, in the words of the Association, initiate a policy which leads to a greater expenditure."

One word more on the text of the resolutions. We are very glad to note that the Association was not content with mere frigid phrases, but added in strong and simple language that can be understood by. all business people a final paragraph which says how seriously the Chambers of Commerce take the matter and how fully they realise that it is the road to ruin upon which we have entered financially. We are also glad that they did not, out of any false shame, refuse to claim, as they have every right to claim, that they are acting not in their own selfish interests, but are "placing the safety and good of the State before everything." It is their duty to warn the country out of the fullness of their knowledge and to insist that if the Government are foolish enough to persist in pursuing their present course no one shall be able to say that they were not warned by the business men of England, Scotland and Ireland.

As we said last week, we shall have to return again and again to the question of how to cut down the Fstimates. We will here merely sketch in rough outline the machinery which we suggest, and would ask the Association of British Chambers of Commerce to give the design their attention and where necessary " lick it into shape." Before we put forward any positive plan we have a word to say on the negative side. The Government tell us that they have carefully revised their Estimates and that they have cut down expenditure to the very bare hone. In a word, they allege that it is impossible to carry on the government of the country on less than they propose to spend. Even assuming—as we are far from doing—that this is true, we say that it is a bad argument, and meet it with a direct negative. It is of no use in a case like the present to talk about this or that item of expenditure as being absolutely necessary and of its being absolutely impossible to reduce it. It may have to be reduced whether we like it or not, on whether we can or cannot safely get rid of it. Every man knows that in private expenditure when financial diffi- culties arise there is a point when expenditure must be reduced, no matter how necessary it seems. If you have only got ten thousand a year to spend and have reached the point where your liquid assets come to an end, it is of no use to talk about its being impossible to reduce your expenditure below eleven thousand. You have got to reduce it whether or no. We do not say that we have reached the point where we cannot raise another forty or fifty millions. We do say, however, that we have got very near it. What is more, if, as many people think is the case, we shall have to go through a period of acute commercial depression—a visitation which will probably in the end do us commerci- ally a great deal of good, but which may mean three or four very lean years—we shall very probably reach the point when many of the new financial developments will prove to be useless or even worse than useless. In a word, if we are wise we shall absolutely refuse to take the answer " Impossible " from the Government when we tell them that they must spend less.

Our concrete proposal for cutting down expenditure is based -upon the hard, cold fact that the necessity for cutting down expenditure may be greater than the necessity for spend- ing, even upon things which with a fair show of reason can be labelled essential. If we are to begin at the right end in our efforts to straighten out the national finances, we must insist that there shall be no increase of taxation. We must, that is, ascertain the amount which we lave got to spend- i.e., which we can safely raise out of the taxes. In a word, the House of Commons must ration the Government and its Departments as a whole, and put in Trustees to see that the rationing is properly carried out. The Trustees which we propose to put into the nation's house will tell the Government that they do not propose to interfere with our Parliamentary "political system. They will add, how- ever, Here is the money the nation can afford to spend ; make the beat use you can of it." But knowing what our politicians are, our Trustees must go further than that. We would have them, that is, allot the money -under four or five big headings. For example, we would take the case of National Defence and say, " Here ere so many millions for defence. We will let you, the Government of the day, say what percentage of this money is to be spent on sea force, what on land force, and what on air force, but we refuse to allow any one of the Departments to come to Parliament and say that they must have more money. If the case for ' must ' is made out in any one case, then the necessary money must be saved in some other branch of national defence." That may sound risky, but as a matter of fact it need not prove so. Where there is room for extravagance there is always also room for thrift.

Next, so much must be allotted to Home expenditure. Here, however, the amount could best be allotted more in detail. In the first place a certain fixed amount must be allotted to the service of the National Debt, a sum, even during the reconstruction period, which will notonly amply secure theocarrying out of the obligations of the State, but which will allow for a small yearly amortization of the debt under conditions which will make that amount increase, at first of course slowly, but later more rapidly, each year. In other words, the fixed service for the debt would be five or six thousand more than the amount actually required for interest.

Next, a fixed sum must be allotted for thceservices of the Home Office, the Ministry of Health, and so forth so on, but here, as before, the principle must be : " Here is all the money we can afford to give you. See that you spend it not in red tape and )bureaucratic machinery, but in actualities." Finally, let the official loaves and fishes of the honours and emoluments of office go to those who spend least and get on with the smallest official staffs, and not to the ingeminators of a Bloated Bureaucracy. Remember, though we want a smaller Civil Service, we do not want a badly paid set of officials, but one with salaries high enough $e get the very best talent in the country and the very highest characters.

But no Government will by itself bring this about. The House of Commons must take the bit between its teeth and put in the Trustees for national expenditure as we have proposed for a period otsay, three years. These men must stand -between us and national ruin, and must make their Instrument of salvation the principle of rationing. One word by way of postscript. There is a great talk just now of all sorts of schemes, dodges anfl ingenious devices by which to get rid of the floating debt. We have read many of these proposals with a great deal of interest and a great deal of admiration for the intellectual agility of their constructors. We venture to say that in our opinion, however, these schemes are for the most part of little or no value. In this matter of the floating debt, as in other things of this world, moral, political an commercial, we have to pay the price for what we get. We may camouflage as much as we like, but we shall in the end get what we pay for, and not one single ounce more. Therefore, though we suppose we shall be regarded as a kind of economic Hay- seeds " for saying so, we believe that in the end the best and cheapest plan for getting rid of the floating debt will be to go into the money market and borrow the necessary thousand millions at whatever price has to be paid for money at the present time. When we have got that money funded, we shall probably have to pay another 68 millions a year interest on debt. But we are at present paying interest on the money in the form of floating debt, and at the same time creating an enormous amount of unrest and uncertainty in the City. No doubt the extra 68 millions a year would be a heavy burden, but remember that under our high system of direct taxation some 38 millions or so would revert to the Treasury under income tax and super tax ; and again, every year large amounts would return by the door of death duties. We admit that this is dangerous -talk, and we have no desire to let people think that they can ever make themselves richer by borrowing. They can only make themselves poorer. The more you borrow in one year the less you can borrow in the next. Therefore we should be the last people in the world to recommend a new loan. But the proposition is quite different from that. We have got the money ; the only question that confronts us is how to deal with it. We hold that the best and safest plan is not to try fancy finance, but to raise the money frankly and straightforwardly—a direct loan, at the market price for loan money.