The Surplus
THE conclusion of the financial year brings the proof that Mr. Churchill's excessive ingenuity in the last Budget was not wasted. His luck has not merely not failed him, but has gone out of its way to treat him as a favourite son. He ends the year with a surplus of £4,239,124, which is £2,799,000 above his estimated sur- plus. This looks extremely encouraging when it is compared with the deficit of more than £36,000,000 in 1926-27, and the deficit of more than £14,000,000 in 1925-26. Only three months ago such a surplus as Mr. Churchill has got now seemed to be very unlikely, as revenue was then £150,000,000 to the bad.
Encouraging first glances, however, are generally subject to qualifications and this one certainly is. We are by no means blaming Mr. Churchill for his nimble manipulation of taxes last year (particularly as any other method of balancing the Budget would have been ex- tremely disagreeable), but it must be pointed out once more that the special sources of revenue which he tapped last year cannot be tapped again. His sufficient excuse for his expedients was that he had to make good an abnormal deficit of more than £36,000,000, due to the coal stoppage and the dislocation of the General Strike. He therefore brought into his Budget money which properly belonged to the ensuing year ; he shortened the Brewers' credit and collected the Landlord's Property Tax (Schedule A) in one lump instead of in two instal- ments. He also raided the Road Fund to the extent of £12,000,000. Obviously, to repeat such expedients would be to mortgage the whole future. £32,000,000 of the revenue in the year just ended came, in fine, from sources which cannot be drawn upon again.
Some of Mr. Churchill's estimates were considerably above the mark, but as others were below the mark the errors have cancelled out on the whole in his favour. Altogether, the revenue has amounted to £842,824,465. Income Tax yielded £15,866,000 more than in the previous year, but the greatest of Mr. Churchill's strokes of good fortune was the yield of the Death Duties. They pro- duced £9,990,000 more than in the previous year. Without this windfall there would not have been a surplus. Al- though Income Tax has been more fruitful than ever the yield of the Super Tax is down. This is a significant fact, however it may be interpreted, and no doubt the interpretations will be various.
One class of critics will say that the fact that the payers of the largest amounts in direct taxation have been paying less than before, proves that the most important industries in the country are desperately hit and that the scale of direct taxation is demonstrably too high. Trade, it will be said, is drooping under the burden. Another class of critics will say, however, that the in- crease in the yield of the Income Tax supplies the answer to pessimism. A relatively small number of people, it will be argued, may indeed be making smaller profits under our post-War taxation, but a larger number of persons than before are succeeding in making satisfactory profits, as the results of the Income Tax prove. On the whole, we are inclined to this latter interpretation. It seems to be confirmed by the growth of entirely new trades and by the unexpected development into large concerns of trades which were previously almost negligible.
Too little notice has been taken of the striking figures published a few months ago by the Ministry of Health. These show that something like a revolution has been taking place in the distribution of skilled labour in England. The south of England is rapidly becoming industrialized. The Ministry's figures indicate that 47 per cent. of the insured workers now live south of a line drawn from the Wash to North Staffordshire. The new or greatly developed trades are, of course,- the motor industry, the electrical industry (including wireless), the brick and cement industries, the chemical industry, the artificial silk industry, the transport industry, and the distributing industries. Before the War it used to be accepted as a matter of course, that the condition of the " heavy " industries, which are mainly confined to the North of England, was an absolute index of industrial prosperity or depression. It must be admitted now, however, that, though the coal industry is in temporary collapse and the cotton industry is paralysed, there is enough wealth in the country to produce this total revenue of nearly £843,000,000—a figure which would have startled Mr. Gladstone out of his wits. He blenched indeed at the thought of a Budget of £200,000,000.
It may be that the new industries, which largely account for the considerable spending of money which one can see everywhere and in all classes, are not finding permanent foreign markets. Obviously they will not survive on a mere home consumption. We must hope that they will retain what markets they have discovered abroad, and that even if they do not rise above their present level they will remain prosperous enough to help us along until the heavy industries have recovered. Some people have deduced from the Ministry of Health's figures that the characteristic industries of the North are gradually being removed to the South, but there seems to be no evidence whatever for this. Industries which consume an enor- mous bulk of coal could not remove themselves to a great distance from the coal fields. What they might save in rent and taxes they would more than lose by the increased prices of coal. That will remain-true at least till electrical power is better distributed.
One good point in the past year is the slight reduction of the estimated expenditure on the Civil Services. Mr. Churchill used to talk gallantly about a progressive reduc- tion of £10,000,000 a year, but of course, he has not even approached this amount. His total expenditure of more than £838,000,000 must be compared with Mr. Snowden's Budget of 1924-25, which showed an expenditure lower by £42,000,000 odd. The truth is, however, that every Party in the State is now committed to huge outgoings on various forms of Public Assistance. The Liberal Party, so far as we can judge, has definitely said goodbye to the doctrines of the Manchester School. Liberals no longer conceive of the function of the State as being confined to keeping the ring for an individualism exerted without fear or favour or privilege. All that they demand is that a paternal State should guarantee that all public expenditure should be constructive in character. We cannot find anything to quarrel with in that principle, though we think that the margin for economy is still very wide.
Within the past few days the. Postmaster-General has been talking of a further reduction of £10,000,000 on civil expenditure next year. May it be so ! Mr. Churchill must find ways and means of saving in his forthcoming Budget, unless he is to relinquish all hope of a remission of taxation and rely for making up the £82,000,000 raised last year by unrepeatable expedients solely upon the auto- matic expansion of revenue. The revenue is undoubtedly displaying most hopeful symptoms, but we all know from past trade cycles that even the best times are succeeded by lean years. Reliance upon automatic expansion is the method of the spendthrift and gambler.
Previous page
