Finance—Public and Private
An Ingenious Budget
THERE are practical reasons why it is, perhaps, advisable to be sparing of praise. with regard to Mr. Churchill's ingenuity in meeting his Budget Deficit. To a Chancellor possessed of Mr. Churchill's adroitness and ingenuity, it might almost be said that there is a veritable temptation to rejoice in difficult and ahnost impossible situations if only for the reason that they offer an opportunity for the spectacular. Budget days usually witness a crowded House of Commons, and this year the crowd was greater and anxiety was the more intense because everyone wished to witness the spectacle of a Chancellor endeavouring to extricate himself from most difficult position. And interest was the greater because it was known that no one was better able to accomplish this feat than the present Chancellor of the Exchequer.
A GREAT SPEECH.
And expectation was amply fulfilled. From first to last the Chancellor held the interest of the House, not- withstanding the fact that his speech lasted for nearly two hours and a-half, and that much of it was occupied with pointS of a highly technical character. Before sum- marizing very briefly the main points of the Budget, let me say at the outset that the weakest part of the Chancellor's speech was his defence of the continued growth in Expen- diture, while the strongest point was that he stood man- fully by the sanctity of the Sinking Fund, and that where new taxes were imposed these were of a character least likely to impair general trade activity.
THE NEW ESTIMATES.
Having dealt with the figures of the past year—so greatly disturbed by the General Strike and the pro- longed coal stoppage—with its official realized deficit of nearly £37,000,000, Mr. Churchill presented his Estimates for the current year on the previous basis of taxation, and it is satisfactory to note that his Estimates were fairly conservative, for in the case of Income and Super Tax alone he budgeted for a further shrinkage of over £6,500,000 following upon a decline of over £18,000,000 in the past year. Whether he was justified in looking for so large an advance as £7,472,000 in Excise for the current year remains to be seen, but as regards the entire Revenue Mr. Churchill budgeted for a shrinkage of £8,851,000, and with Expenditure (on the basis of a £50,000,000 Sinking Fund) at nearly -1820,000,000 he was confronted with a prospective Deficit of about £28,000,000. When, there- fore, after announcing that figure, Mr. Churchill began talking of looking about for increased Revenues of L30,000,000 to £40,000,000, it was evident that he was aiming either for a very large Surplus or for some further addition to the Sinking Fund. Later in his speech it became evident that it was the latter course he was adopting, and it is, indeed, that action which marks the strongest point in the Budget.
THE ROAD FUND.
From the rhetorical point of view a Chancellor always reserves his largest figures of an addition to or remission of taxation until the close, thereby sustaining interest. It will be clearer, however, I think, for the general reader, to deal in the first place with the main sources from which the Chancellor has met his prospective Deficit. From the Road Fund he has taken £12,000,000, and, excepting that he has tapped a source of Revenue which cannot be tapped twice, the City is not disposed in be over-critical, having regard to the exceptional situation which has to be met.
The next device by which the Chancellor obtained no less than £14,800,000 was a distinctly ingenious. one, ennsisting in the proposal that the Income Tax, Schedule A (the landlord's tax) which is at present payable in two equal instalments, namely, on January 1st and July 1st, should be payable in one sum on January 1st. This, of course, does not mean any increase in the amount of the tax, but by paying the total in one amount, the taxpayer may be said to be out of pocket to the extent of the loss of six months' interest on one-half of the amount. On the other hand, Mr. Churchill was quite justified in reminding the taxpayer that the custom of paying in two instalments was introduced during the War when the tax was at the high level of five or even six shillings in the pound.
NEW TAXES.
From these two sources the Chancellor will get nearly £27,000,000 and for the rest he secures £5,570,000 from increased Customs Duties, including extra imposts on wine, tobacco, matches and motor-car and motor-cycle tyres, with a small amount from a tax on translucent pottery. From Excise a further amount of 15,310,000 is to be raised, almost the entire amount being represented by a further reduction of the credit period allowed for the brewing industry in making their payments. In, eluding these changes in the amount and the incidence of taxation therefore, together with the encroachment on the Road Fund, the Chancellor obtained about £37,980,000 and this enabled him to raise the Sinking Fund to £65,000,000 for the current year and to budget for a small Surplus of £1,440,000.
A CAREFUL BUDGET.
Such, in brief, are the prOvisions of the 1927-28 Budget, and if it were possible to blot out all remembrance of extravagant expenditure, much praise might be given to the Chancellor for having met a most difficult situation in a thoroughly statesmanlike manner and in a fashion least calculated to injure either the National Credit or any trade revival. By solemnly declaring his intention of never during times of peace raiding the Sinking Fund, and by raising it for the current year, Mr. Churchill showed not only a due regard for the National Credit, but also a sense of the importance which attaches to debt con- versions in the coming year. 'While, inasmuch as new revenue had to be raised, those taxes which he has imposed are really beyond criticism.
THE GROWTH IN EXPENDITURE.
Neither the specially difficult circumstances—arising out of the industrial troubles—nor the • Chancellor's rhetoric must, however, he allowed to obscure the fact that there is real need for immediate economies in the National expenditure, for otherwise there will be no trade revival worthy of the name, and if there is no trade revival, the National Revenue itself will suffer. The proposal to abolish three new departments may, I trust, be taken as some earnest of economy, and it is also satis- factory to note the prospect of some curtailment of new entrants to the Civil Service. Nevertheless, the Chancellor's observations concerning expenditure were the least satisfactory part of his speech, and he was far too greatly concerned in defending the general cost of adMinistration. Yet, what are the facts? Even if we deduct the extra £15,000,000 just placed to the Sinking Fund and bring that fund down to the minimum level of £50,000,000, we are still left with a figure of permanent expenditure of about £820,000,000, whereas, deducting the £27,000,000 of revenue (which cannot be obtained a second time) from the total estimate for the current year, we have a figure of only £808,000,000, while if the Sinking Fund were to be maintained at £65,000,000, there would be a much greater shortage. Viewed from this stand- point, the temporary, it might almost be said the make- shift, character of the present Budget is clearly seen, though, of course, it might also be argued that the last year's figures and those of the current year, which still feel the effect of last year's disturbance, may be regarded as abnormally low and that the situation will ultimately right itself along the lines of a great expansion in revenue. It may be so, and it is certainly with no desire to belittle the Chancellor of the Exchequer's clever Budget that I am obliged to emphasize the fact that, when carefully Considered, the Budget emphasizes rather than diminishes the urgent need for economy. ARTHUR W. KIDDY.
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