An Insult to the Taxpayer
By NICHOLAS DAVENPORT
IT is a good thing that Mr. Maudling is presenting the White Paper on the reform of the Exchequer Accounts (Cmd. 2014) as a basis for discussion, for the proposals as they stand are an insult to the intelligence of business people. This technical ques- tion has been considered at the Treasury for over three years and as long ago as 1961 Mr. Selwyn Lloyd in his Budget speech said: 'I am sure that we have to produce a less confusing presentation.' Of course we have! We have got to give the public a better understanding of (a) the nature of government expenditure and parliamentary control of it and (b) the economic significance of government operations, including the nation- alised industries and insurance funds. 'The prob- lems,' says the White Paper, 'turned out to be more complicated and difficult and the scope for reform to be more limited than had at first been imagined.' Nonsense! If the accounts for (a), which are the cash accounts for all incomings and outgoings of the Consolidated Fund, and the acc,nting for (b), which requires merely econ- omic statements and statistical tables, are entirely separate and reconcilable only for economic dons and statisticians, there is no problem at all. The public will understand both—if each set of tables is intelligently presented.
As regards (a) the cash accounts, all the public needs to understand is the Financial Statement which is published on Budget day. (The rest of the Exchequer accounts can go hang, as far as the public is concerned, but should be made to conform to the shape of the Financial Statement.) This Statement contains the out-turn of all cash incomings and outgoings of the pre- vious financial year, comparing each item of expenditure and revenue with the estimates of twelve months earlier and the new Budget esti- mates for the coming year. It also details the proposed changes in taxation and their effects upon the next year's out-turn. The only trouble about this Financial Statement is the inexact
nature of its dividing line between expenditure 'above' and expenditure 'below the line.' The division is not a rational, functional division, but a legalistic one determined by section 4 of the Sinking Fund Act of 1875 which dis- tinguishes between expenditure which can be met by borrowing and all other expenditure (which has to be met out of current revenue). The line suggests that expenditure which can be met by borrowing (which is 'below the line') is the whole of the Government's capital expenditure. But it is not. Included 'below the line' are pay- ments for the post-war credits and interest re- ceipts from advances (which are applied to the interest on national debt 'above the line'), while included 'above the line' are some capital receipts from debt repayments (sales of assets acquired out of income being treated as income, not
capital). •
Now for any businessman the simple solution of this muddle would be to transpose the items incorrectly placed, so that only capital items are 'below the line.' (It need not be absolutely exact.) But to the solemn, superior Treasury hierarchs, out of touch with ordinary business life, such a distinction is 'inappro- priate and misconceived.' First, they say, 'it is only when the cash comes to be spent . . . that a distinction between current and capital can be made'; secondly, they say, 'a proper accounting distinction between current and capi- tal cannot usefully be drawn in a purely cash account.' I wonder what chartered accountants have been doing all these years! Does the Treasury not employ such simple, practical people? Apparently not, for the next statement in the White Paper shows it to be unnecessary in the rarefied spiritual atmosphere in which the Treasury works. It reads: 'A valuation of the Government's total capital assets, tangible and intangible, most of them not revenue-producing, would be meaningless.' But who on earth wants such a valuation? And how do you put a book value on 'intangibles'? This startling idea must have occurred to these Treasury metaphysicians, for they go on to declare in their superior man- ner: 'The Government is not primarily . . . en- gaged in making a profit or earning a return on "capital." [Dr. Beeching please note!] In terms of the enduring benefits created by government activities the tangible fixed assets produced (hos- pital buildings, schools, roads, etc.) are not necessarily as significant as the intangible assets produced. Hence the distinction between current and capital in the normal commercial sense is
not of prime importance.' This may be a fine statement of the English mystery, and one whieh, will appeal to the scribes of the British Council, but it will not impress the ordinary business' man who is merely anxious to see how the Government is spending its money on current and capital account. For the Treasury now . to propose in the White Paper that because the line previously dividing current and capital ex" penditures was inexact, it (the line) must he abolished altogether, so that the items are more hopelessly jumbled than ever before, is, as I said, an insult to the intelligent taxpayer. When will the Treasury come down to earth and behave like a simple human being? All -Qvf mortal taxpayers ask for is a government cast account each year broadly divided between (a), current revenue and expenditure items and (b) capital expenditures to be met out of savings-- which, we know, will be voluntarily loaned to the Government when the economy is more or less in balance or forcibly extracted from us by extra taxation when the economy is suffering anIE flation. We are not such fools as not to under stand the significance of the different way's .111 which the Government chooses to finance it5 capital programmes. But the proposed new foto of Exchequer accounts which the White PaPec presents—a Budget account with no division between current and capital items and 3 financing account from which it is impossible to tell how the Government is really financing itself is, in my opinion, a retrograde step and, indeed, 3 threat to effective parliamentary control of government expenditure. It is tantamount 10 saying that because there was one incomprehen- sible before, there shall be two incomprehen- sibles tomorrow.
As for making the public understand the economic significance of all government spend- ing, including that of the nationalised industries, this can only be done through an intelligihle Economic Report presented annually to Pa rh. ment (with the new tables suggested in the White Paper for statisticians). But the economics of the Budget will be better appreciated when the Finan- cial Statement is broadly divided between current and capital expenditures as any rational Man would expect in his own business. For the superior people to say that government is no! business will will only bring the retort that this Is no reason why it should be bad business.
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