FINANCE-PUBI;IC AND PRIVATE

BUDGET PROSPECTS

BY ARTHUR W. KIDDY

THE National Accounts for the Fiscal Year which ter- minated on March 31st closed with an actual deficit of 114,088,120, and the position is one where it would be easy to take either a pessimistic or an optimistic view. Personally, I take, if not a pessimistic, at least a serious, view of the national finances, but in this short article I will endeavour to state, briefly and simply, the actual facts, leaving it to the impartial reader to form his own judgment on the matter. A year ago the Chancellor of the Exchequer budgeted for a total Revenue of /801,060,000 and a total Expendi- ture of 1799,400,000, leaving a prospective surplus of £1,660.000. The total of Expenditure showed, for the first time since -the• War, an increase, the advance being about £4,000,000, and impressed, possibly, by that fact,- Mr. Churchill announced that an Economy Committee would be set up at once, not merely to bring about economies in the following year, but to see what could be done to reduce the Estimates for the year budgeted for. Iii fact, the hint was throsyn out that a . saving of C10,000,000 Might possibly be effected. So far, however, from that expectation being fulfilled, Supplementarg Estimates were subsequently introduced which, quite apart from the Coal Subsidy, raised the Expenditure still further by 16,985,000 while, adding the Coal Subsidy, the total Estimate of Expenditure was raised to £825,885,000. Even this 'figure, however, was slightly exceeded by the actual results, the Expenditure chargeable against Revenue for the past year being no less than £826,000,000!

REVENUE ESTIMATES EXCEEDED.

. In view, however, of the heavy amount of the Coal Subsidy, the public had been prepared for a Deficit of about the amount of the Coal Subvention-namely, £19,000,000, and therefore the fact that the actual deficit was only £11,000,000 came, in a sense, as a welcome surprise. That the deficit was not greater was due, of course, to the expansion in the Revenue. The Chancellor had budgeted for an increase of .C1,624,000, but the actual advance was 112,626,063, the total of Revenue being 1812,061,658. No'w, although the Revenue of one year does not necessarily constitute a guarantee of its repetition or its expansion in the-year following, it is-nevertheless a Very important guide in that respect, and if ordinary tax revenue does improve, it affords grounds for encourage- ment. It intik do so in two Ways. Within Certain limits, it offers evidence Of the natural buoyancy -of Revenue and of the fact that it has not • been "unduly impaired by high taxation. Similarly, on the same -lines of reasoning, it gives some reason for setting off against increased Ex- penditure the probability of a further expansion in Revenue.

IS NORMAL REVENUE EXPANDING?

The question, therefore, which immediately arises is how far the expansion in Revenue for the past year can be regarded as an indication of real buoyancy in the Revenue or -how far it must be attributed to exceptional circumstances. That point can, perhaps, best be shown in the following-table which compares the actual increase or decrease which has taken place in Revenue for the past year with the original Budget Estimate :- Original

Estimate of Inc. or Dec. for year.

+2,096,000

+2,092,000 +1,336,000. +7,050,000 +1,150,000 -450,000 -11,216,000. +3,300,000 -7-9,100,000

+1,550,000 -60,000 +660,000 +3,037,000 -421,000

Total .. +1,624,000 + 12,626,063

SUGGESTIVE MOVEMENTS.

From the foregoing it will be seen that the Revenue exceeded the Chancellor's estimates by almost exactly £10,000,000. It will also be seen, however, that not only is more than the whole of the expansion due to other than ordinary sources of Tax Revenue, but that in very leis instances do the individual results in the different Depart. ments tally with the original estimates. In the case of Customs, for example, the results exceeded the estimates by about £1,800,000 while in the case of Excise they fell below the estimates to nearly the same extent. Even morn striking, however, was the shortcoming in the matter of Estate Duties, where, as against a hoped for increase of £7,000,000 the advance was only £1,750,000. On the other hand, Income and Super Tax exceeded anticipations by nearly £.3,006,000, and it is rather interesting and perhaps suggestive to note that where the Chancellor's estimate was pleasantly falsified there had been a reduc- tion of taxation in the Budget while in the case of the Estate Duties, where the resurts are so disappointing, higher duties had been imposed.

EXCEPTIONAL RECEIPTS.

From the standpoint, however, of the forthcoming Budget, the practical point to note with- regard to the past year's Revenue is the fact that the main expansion occurred in the exceptional items which come under the head of "Interest on Sundry Loans" and "Special and Ordinary Miscellaneous Revenue." Li the latter case there is no doubt that Italian and other Debt payments and German Reparations have played an important part, and while it is conceivable that they will not only be repeated, but may increase, in the coming year, if France should in the meantime make a settlement, it is impossible

Customs .. Excise Motor Vehicles Duties ..

Estate Duties . Stamps .. Land Tax and House Duty Income Tax and Super Tax Excess Profits Duty .. Corporation Profits Tax . . Post, Telegraph and Tele- phones ..

Crown Lands . Interest on Sundry Loans Miscellaneous :- Special .. . Ordinary

Actual Inc. or Doc.

E - -1- 4,143,000 -56E4000 +1,892,000 +1,750,000 +1,850,000 -500,000 -8,595,000 +1,300,000 -6,430,000

1,900,0(0 -10,000

+ 3,003,576

+9,961,429 +2,929,058

to regard Snell exeeptional receipts as these as justifying enlarged Expenditure of an unproductive character. If Mr. Churchill had not obtained the special expansion under the last three heads shown in the foregoing table, the Deficit for last year would have exceeded even the amount of the Coal Subsidy.

LITTLE MARGIN FOR NET EXPANSION.

The importance of bearing that point in mind becomes the more apparent when allowance is made not only for the size of the Expenditure in the coming year, but for the automatic loss which must be reckoned for in the Revenue. As a result of the changes effected in taxation a year ago, the Tax Revenue in the coming year is estimated to involve a further loss of over £6,000,000, while the abolition two years ago of the Corporation Profits Tax means that an item of £11,670,000 received during the past year will not be repeated though conceiv- ably there may be something obtained in the shape of arrears. As against this reduction may, of course, be set the normal expansion of Revenue, but it is just here that special significance attaches to the fact that last year's expansion in Revenue was exceptional rather than general. In other words, the Revenue as a whole cannot be regarded as having shown anything remarkable in the way of expansion. Not only so, but if, as is generally supposed, some exceptional pressure was applied during the past quarter to get in the Revenue, then there is of course the less margin for expansion in the new year. .

AN ORGY OF SPENDING.

It is difficult, therefore, to see in the National Accounts much hope for the direct taxpayer so long as the present orgy of spending continues. It seems, indeed, with our modern legislators, to be a case not of striving for retrench- ment but simply of looking round for the least objection- able methods of raising fresh revenues and, so long as this habit of mind is persisted in we shall never get the kind of economy which brings back industrial prosperity. It is, of course, quite possible that even on the present Occasion we may get some further small concession in the Income Tax, but it will only be through some fresh avenues of taxation being explored, and in that connexion the opinion still exists in some quarters—and not least in the City—that Mr. Churchill will impose a tax on betting and give some relief in those directions most calculated to assist trade.

The main point, however, with which I am really con- cerned is the need for more stalwart upholders both within and without the House of Commons—and espe- cially, perhaps, within—Of economy. Without such stal- warts we find successive Governments at the mercy of what may be termed the spendthrift section of the Oppo- sition for the time being. If the Government of the day considers that in the cause of economy there should be Some reduction, say, in educational charges, or in outlays by the Ministry of Labour, we immediately get an outcry that we are intellectually starring the next generation or are legislating for the classes as opposed to the masses. In other words, there is a kind of competition, which may be said to have been started many years ago by Mr. Lloyd George, as to which Government when it leaves office can be said to have spent the greatest amount of money on social services, irrespective of whether as a net result the country is really in a more satisfactory or prosperous con- dition. It is time that a halt was called to this process and that more was heard about the necessity for economy as a means for promoting real prosperity.