Finance
The Realized Surplus
Tim Nation's Financial Year has closed with a realized surplus of over £31,000,000. It is the largest surplus for ten years and compares with a deficit of £32,000,000 a year ago. It may be well to remember, however, that expenditure last year included a Sinking Fund of £17,250,000, and a payment on the American Debt of £28,950,000. Last year the Sinking Fund amounted to £7,750,000, while as against the full payment of a year previously on the American Debt there was only a token payment of £3,304,000. I do not propose in this brief article to examine in detail the accounts for the past year or the Chancellor's possible estimates of revenue for the coming year. The latter figures will be disclosed in the Budget to be presented on the 17th of this month. Without, therefore, going into any details, I will simply record the fact that under ordinary procedure the realized surplus for the past year would be devoted to Debt redemption and that taking a consensus of the irresponsible estimates formed by various newspapers of the new Budget estimates, the general opinion favours the Chancellor having a prospective surplus for 1934-5 'of at least £50,000,000 to dispose of.
CITY VIEWS.
There is, however, one point I am rather anxious to state fairly in The Spectator—namely—the City's view with regard to the disposal of this probable surplus. For in some quarters there is a disposition to assume that the City is so intent upon a reduction in the income tax as to be unmindful of other claims, such as a restora- tion of the cuts in certain salaries and also to forget the outstanding problem of War Debts. This, however, is far from being the case, for the City. takes a thoroughly broad view of the responsibilities of the Chancellor of the Exchequer with regard to the disposal of his surplus. First and foremost the desire is for a sound Budget, so that, in whatever directions relief may be applied, the Budget shall he of such a character—as it was a year ago— to encourage confidence in the conduct of the national finances.
RESTORING THE " CUTS."
The City would, I believe, be actually disappointed if the Chancellor were to do nothing in-his Budget to assist those directions where the cuts of two years ago may have inflicted real hardship. But there is, perhaps, a tendency to consider that these hardships may not press with equal severity upon all the sections seeking relief, and further that just as the long-suffering income tax payer must not yet expect the substantial relief to which he may be entitled, so in the ease of the restoration of " cuts " it may be wise to adjust the matter in instalments.
Rightly or wrongly it is believed that the Chancellor of the Exchequer should be able to give at least some partial restoration of the severe cuts of two years ago, and also afford some slight relief to the income tax payer, who it must be remembered in the capacity of investor has been considerably affected by the reduction of the interest of the 5 per cent. War Loan.
WAR DEBTS.
But what is to be said about the attitude of the City towards the War Debt to the United States ? Is it seemly that with a surplus of £81,000,000 we should not be meeting our engagements in full on this Debt ? Surely, it might be said, that in the City of all places there would he a desire that we should favour our Debt contracts. This is a matter which I think requires to be very frankly faced. Moreover it is a matter from which we have no reason to shrink from facing, for our record is a clean one. Soon after the con- clusion of Peace we declared our belief that it was in the interests of the whole world that there should be an all-round cancellation of War Debts, and we offered to cancel all the indebtedness due to us if America would adopt the same attitude. America did not agree, but even then Great Britain, which gave a lead to the world in acknowledging the U.S. claims, wouk not consent to take more from its debtors than ice were called upon to pay to the United States. In the intervening period it has been proved eon. elusively that these War Debts, with their ill-effect upon the exchanges, were a prime cause of trade and financial disorganization and trade and financial de• pression. This situation was due not merely to the War Debts themselves and the. colossal payments due each year to the United States, but to the fact that America refused to recognize its responsibility as a creditor nation by declining to accept payment of debts in goods and services. Instead she delibe- rately piled up her tariffs to an extent which made it impossible for debtors to discharge their obligations in the only way which they could be discharged-. namely—by a sufficient exchange of goods and services. These impossible conditions imposed by America resulted in their turn in a complete disorganization of the whole system of international settlements and brought about gold hoards in America, alike harmful to the world's trade and, as events proved, to America herself. It is these conditions imposed by the United States which have made a settlement of War Debts an in possible proposition, and although the facts have been represented to America many times, the v has been to reach 'an adjustment of War Debts on term promising a solution not only of the debts, but of the whole problem of international settlements. In Decem. her of 1932 at great strain we sent to America the full payment (largely in gold) of the instalment due on the War Debt. It had not the slightest effect in aiding that country, which was already overstocked with gold and credits, whereas a frank acknowledgement by America of the true position accompanied by a disposition to achieve a fair settlement would have had a favourable effect upon international conditions generally, and would have gone far to avert the crisis in America itself which followed at the beginning of 1933. It is not surprising, therefore, that with no desire whatever to repudiate its debt contract the City should feel that the true settlement of the War Debts can only be reached when America formally recognizes the impossibility of their being collected under the conditions which prevail today. ARTHUR W. KIDDY.
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