3 MAY 1924, Page 28

rINANCE—PUBLIC & PRIVATE.

[BY OUR CITY EDITOR.] THE CITY AND THE BUDGET. [To the Editor of the SPECTATOR.] Sri,—It is too soon to give you a carefully considered view of the City concerning the Budget, as I am writing in the morning after the speech. On the whole, however, I can say at once that there is much in it which commands approval, while, for my own part, I would like to place on record that I have seldom heard a more effective Budget speech in the House, or one which had a more attentive and appreciative hearing. Whatever its shortcomings—and to some of them I shall refer— it had throughout the ring of sincerity, and, moreover, was by no means lacking in a recognition of those sound principles of finance upon which our great Budgets in the past have been based.

Rather than I should attempt any detailed criticism of the Budget, it will be better, perhaps, that this week I should simply give you opinions which have already reached me from representative circles in the City as to its main features, both favourable and unfavourable. Need- less to say that the City warmly endorses the full main- tenance of the Sinking Fund established by Mr. Baldwin, and, indeed, there was no finer part of Mr. Snowden's speech than that in which he dealt with the advantages accruing to the National Credit, and to each member of the community from a sound financial policy with regard to debt redemption. Moreover, it is simple justice to the Chancellor of the Exchequer to recognize that he was not paying mere lip service to those principles, because, both in the letter and in the spirit, he carried out Mr. Baldwin's programme of a year ago in further raising the Sinking Fund for the current yearto £45,000,000, which is, undoubtedly, a fine total having regard to the great amount of debt which has been redeemed during the last three years. A further point in the Budget also commanding particular approval in the City was the abolition of the Corporation Profits Tax which, from the outset, has been regarded as an unsound and a vexatious impost. The abolition of the Inhabited House Duty, which was quite an unexpected feature of the Budget, is also to be welcomed, while it is satis- factory to note that the rumours industriously circulated of an increase in Super Tax and Death Duties proved to be unfounded. These rumours, however, were never very seriously regarded in the City, because, from the moment that it became clear that there would be a considerable surplus in the Budget, it was unthinkable that Mr. Snowden would make a further addition to the burden of direct taxation.

The weakest part of the Budget, as judged by the City, is the optimism shown in the estimates of Revenue, and, arising out of this criticism is a further apprehension with regard to the prodigality shown in the matter of distributing favours. It is, of course, an easy matter to assert that official estimates of Revenue are unduly cautious or optimistic as the case may be. In the present instance, however, there would certainly seem to be some ground for anxiety that there may have been undue optimism. With an anticipated surplus (on the old basis of taxation) of about £88,000,000, the Chancellor of the Exchequer has given taxation conces- sions which, in a full year, means a loss of Revenue of £48,000,000. Under ordinary circumstances, some allow- ance might be made for the normal elasticity of Revenue, and an automatic reduction in debt charges, owing to the operation of the Sinking Fund. When, however, it is remembered that, not only is the sacrifice of Revenue in a full year of £48,000,000 rather suggestive of a deficit for 1925-26, but that the situation is prejudiced by the fact that the current year's Revenue includes for the last time— according to Mr. Snowden—the item of £30,000,000 under the head of Special Revenue, the risk seems to be rather a serious one.

Moreover, this view of the situation must be emphasized if it is found that the estimates of Revenue themselves are over-optimistic, and here again the internal evidence seems to warrant some apprehensions. A year ago Mr. Baldwin referred to the probable sagging tendency of Revenue for the current year, 1924-25, and especially to the likelihood of a further heavy fall in Income Tax Revenue, yet we find that the new estimates only antici- pate a decline under the head of Income and Super Tax of less than £4,000,000, and quite undaunted by the disappointments of preceding years, Excess Profits Duty is once again put down as yielding about £8,000,000. With most of the actual taxation remissions, and especially those on some of the more important foodstuffs, the City is in accord, but there are two remissions which are not approved. It is felt that in the present state of the national finances and a 4s. 6d. Income Tax, the great reduction in the Entertainments Tax is a piece of wasteful finance, while a good many Free Traders, quite as much as Protectionists, consider the abolition of the McKenna Duties as unnecessary and unwise.

When considering whether Mr. Snowden's Budget will be justified by the results at the end of the year, there is, of course, the question to be considered of the possibility of further much-needed reduction in expendi- ture. Nor was the Chancellor unmindful in his speech of those opportunities, but, unfortunately, he referred to them in a manner which was far from reassuring from the taxpayers' standpoint. It was, in fact, only when at the close of his speech he referred to the Govern- ment's intentions later on in the session to bring in proposals for enlarging the operation of Old Age Pensions, that he indicated that he expected to get the necessary funds from further economies in the national outlays. In other words, it was to be a case of saving in certain directions to spend in another. These closing observa- tions of Mr. Snowden, together, perhaps, with a regrettable lack of acknowledgment of the fact that the surplus (Continued on page 726.) now at his disposal was entirely due to the financial policy of the previous Administration, formed, indeed, the principal- blemishes in a Budget . which in many respects must command the respect and even admira- tion of business men. In the City itself, much, hoWever, has been forgiven for the sake of an adherence to sound financial principles in the matter of maintaining the Sinking. Funds.-I am, Sir, yours faithfully, ARTHUR W. KIDDY.

The City, April 80th.