FINANCE-PUBLIC AND PRIVATE.
SOME ADVERSE INFLUENCES.
[To THE EDITOR Or THE " SPECTILTOR."] SIR,—The official estimates of National Expenditure for the new year, so far as they have at present been published, are disappointing. I have referred in a previous letter to the figures of the Air Ministry. and during the past week there have been published the Civil Service Estimates, show- ing a reduction on last year's expenditure of 148 millions. At first sight this large decrease might appear to be satisfactory, but such is far from being the case. In the first place, it must be clearly noted that the comparison is with the final estimates for the current year. If com- parison is made with the Budget estimates of a year ago, the reduction is only 116 millions. In other words, we have got into a chronic state of these supplementary estimates running into totals almost as large as the figures of the whole pre-war Budget, and we have not the slightest guarantee that this experience may not be repeated in the current year. In fact, it is highly probable, because in view of the growing tide of indignation with regard to the size of national expenditure the spending departments have doubtless done their utmost to make, at any rate, something like a show in the forthcoming Budget, with an eye, however, to the reserve possibilities in the shape of Supplementary Estimates later on. Moreover, when this reduction in the Civil Service out- lays is examined it will be seen that nearly the whole amount is connected with services arising out of the war, such, for example, as the abandonment of the bread subsidy, the impending termination of the Railway and Canal Agreement, and so forth. When we come to the per- manent forms of expenditure, and particularly to some of the new departments, there is little sign of a change of purpose on the part of our spendthrift Government. Thus we find, for example, that the Board of Education, which spent about fifteen millions in the pre-war period, now asks for £51,000,000, while expenditure under the head of the Local Government Board, which figured in 1913 at £300,000, has now blossomed to £24,000,000 under the heading of the Ministry of Health, and new items such as the Ministry of Transport, Board of Control, Scottish Board of Health, Ministry of Labour, Road Grants, and Unemployed Grants now figure collectively for a total of about £29,000,000 as compared with na previous to the war. In fact, there is no sign whatever in the new esti- mates of any attempt to prune drastically these permanent heavy items of Civil Service outlay. On the contrary, what is becoming clearer every day is that under this head State Socialism is being steadily pushed forward, while unfortunately it is becoming plainer that it is being pushed forward not merely at the expense of the general taxpayer, but at such risk to the prosperity of the country as to threaten national bankruptcy. Meanwhile, as regards ' the national accounts, although some estimates have still to be published, it is already evident that a Budget equilibrium for the coming year can only be established by resorting once more to the special funds obtainable from the sale of realizable assets—in other words, by draw- ing upon funds which should be reserved for redemption of debt.
Nor is the state of the national accounts the only adverse factor with which the City and the Stock Exchange in particular have had to contend during the past week. The figures of our foreign trade for February still further emphasize the acute trade depression through which we are passing. The returns for January showed a fall of no less than £66,000,000 in Imports and £28,000,000 in Exports, but for February the Imports are down 73} millions, and Exports over £33,000,000. Indeed, by reason of the shrinkage in Exports the adverse trade balance itself has increased ; that is to say, in spite of the huge shrinkage in imports, the excess of Imports over Exports is £21,000,000 as compared with £14,000,000 for the previous month. Nor is much comfort to be derived from a scrutiny of the figures, for most of the decline in Imports is in raw materials, which means that as soon as trade revives we shall have to be laying in further stocks from abroad. It is true that in the case of cotton, for example, the value imported from the United States alone was about £24,000,000 less than for the corresponding period in the previous year, and at first sight the event is satisfactory as indicating an improvement in the relative trade position between the two countries. Unfortunately, however, the latest Trade statistics of the United States (and they are borne out by our own figures) show that that country is drastically economizing on its own imports so that the latest figures of American trade showed a balance more favourable to that country than for some time past. For the first two months of the current year our imports show a decline in value of £140,000,000 and our Exports a decline of £61,000,000. In noting these depressing figures I might add, however, that there is some ground for encouragement in the fact that a little progress seems to have been made at last with regard to Export Credit Schemes, under the Ter Meulen plan, and satisfaction has been felt in banking circles at the announcement that Sir D. Drummond-Fraser, the well-known Manchester banker, has accepted the post of organizer of those schemes. As anticipated, the crisis in the coal industry becomes increasingly threatening and increasingly complicated. In this, as in other industries, the Government is finding it to be one thing recklessly to raise wages, irrespective of the ability of the industry to bear the strain, and another to lower them during depression. Nevertheless, the City approves the decision to decontrol coal just as it views with satisfaction the impending disappearance of the Ministry of Transport. I referred to this latter circumstance in my last letter, and its effect has been seen during the past week in quite a substantial rally in all English Railway securities. What, however, the City very clearly perceives is that, if a catastrophe is to be avoided, closer co-operation between Capital and Labour must synchronize with the disappearance of Government control. In sortie directions there are indications of a more reasonable attitude on the part of Labour ; but in others, as, for example, in the coal industry, the outlook is obscure and even gloomy.
When allowance is made for the many adverse factors operating, it must be confessed that the Stock Exchange has shown considerable resisting power during the past week. I have not yet referred to one of the principal factors—namely, the latest development in the inter- national political situation—but, strangely enough, although of primary importance, it is the one which has had the least influence upon the City. And yet perhaps this is not altogether surprising, for the simple reason that not only the City but the nation in this ease supports the action taken by our Government in common with its Allies. The levy on imports of German goods will no doubt be somewhat complicated,'and may have a further restricting influence upon trade activities. It is quite capable of being applied, however, and I believe that within a few days the necessary legislation will be put through for carrying out the purpose of the Government. When Germany recognizes the full force of this measure, and when the German people, moreover, fully appreciate the determination of the Allies as expressed in the occupa- tion of further cities, it seems probable that it will not be long before the German Government will decide to make more substantial proposals than those submitted in London last Monday. That, at all events, is the general opinion in the City, and that is why prices have not given way further. At the same time, there is no doubt that the political and other factors to which I have referred have marred the success of some of the new capital issues, and an unpleasant feature of the week has been the announcement that underwriters of the Sudan loan would have to take up 77 per cent. of the issue.—I am, Sir,
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