NATIONAL FINANCE.
AMONG the many interesting articles in Mr. Gibson Bowles's new Candid Quarterly, the most valuable is one, which may fairly be attributed to his own pen, dealing with the subject of national finance. This subject Mr. Bowles has long made his own. But though his treatment of it, as of all subjects, is marked by his strong individuality, which frequently challenges criti- cism, in the main all students of public finance will agree with his conclusions. Broadly speaking, those conclusions ere that our present financial administration
has become—especially since Mr. Lloyd George went to the Exchequer—utterly reckless, end that, though the evils of this recklessness can be borne without serious difficulty in times of exceptional prosperity, grave dangers are threatened if a period of trade depression should shortly ensue. Our prosperity is itself, as Mr. Bowles shrewdly points out, one of the contributing causes to financial recklessness. "Light come, light go" is an old proverb which receives an admirable political interpretation from Mr. Bowles's phrase that " material prosperity, as ever, has bred political apathy." It is this political apathy which has permitted one of the most reckless of politicians to play ducks and drakes with the national resources, and to pile upon the country in time of peace taxes that should have been reserved for the stress of war. This heavy taxation has been imposed, not so much to meet the necessities of national defence, as the Little England Radicals are fond of alleging, as for the purpose " of undertaking to do for the citizen what he has hitherto done for himself." It is this so-called "social reform" which really accounts for the growing difficulties of our public finance, while at the same time it has certainly failed to produce that conciliation between classes which was one of the main arguments advanced in its favour.
The ultimate futility of transferring money by Act of Parliament from persons presumed to be rich to other persons presumed to be poor is neatly exposed by Mr. Gibson Bowles. As he pertinently asks, where is this policy to end P When the State has succeeded in making a new race of rich, or moderately rich, people out of those who are now poor, it will, on Lloyd-Georgian and Socialistic principles, be compelled to repeat the process, and tax those who have received its bounty in order to create a further bounty for other classes. An amusing illustration of this has already arisen. In 1908 the Government established gratuitous Old-Age Pensions to be given to all persons over seventy who could plausibly represent them- selves as being poor. In 1911 the same Government established a contributory system of insurance for the benefit of all wage-earners, including many who certainly could not be described as poor according to the normal acceptation of that term. It is stated in the Press that cases have occurred where old-age pensioners in receipt of 5s. a week have been compelled to pay 3d. a week out of that sum for the insurance of charwomen employed by them, though probably in every case the charwoman was better off than the old-age pensioner.
Apart from " social reform," which, as we have said, is the main cause of our present financial embarrassments, there is a steady leakage in process, owing to administrative careless- ness, to -which Mr. Bowles properly calls attention. The importance of this point can hardly be exaggerated ; yet unfortunately it is one which the average newspaper reader and the average politician ignore. We are all of us apt to accept the figures of national income and expenditure exactly in the form in which the Treasury publishes them to the world. Those figures, as Mr. Bowles was fond of proving when he was in the House of Commons, are widely deceptive. They profess to set forth the total expenditure and the total revenue of the country, but as a matter of fact they only give part of the figures in each case. The main cause for the discrepancy between the real facts and the published figures is the habit of deducting from the expenditure side of the account money arising from what are known as appropriations-in-aid instead of adding these to the revenue side of the account. Appropriations-in-aid arise from all kinds of causes—contributions, for example, from the Government of India and from some of the Colonial Governments, sales of old stores, refunds of previous expenditure, and so on. In any true system of national account-keeping all these sums would be credited to the national revenue, so that the other side of the account would show the full expenditure incurred. The amounts at stake are enormous. According to Mr. Bowles's figures, which we have not yet independently checked, in the current year the aggregate of appropriations-in-aid for the Army, Navy, and Civil Services amounts to no less than £8,610,000, and this huge sum, instead of being treated as part of the national expenditure, is cancelled from both sides of the account. There would be a possible excuse for this system of account-keeping if it were con- ducted on a consistent plan so as to show the true net ixpenditure chargeable to the taxpayer, but there is no
consistency in Treasury methods. Take, for example, the following illustration from a recently published volume on Official Finance in Government Departments : "The British Museum receives £2,300 from the sale of publi- cations. This' is treated as an appropriation-in-aid. On the other band, the National Portrait Gallery receives £16 Ile. 5d. commission on the sale of photographs. This is treated as an item of national revenue." But even if the system of appropriations-in-aid were consistently and logically applied, it would still be a bad system of finance. To make this clear, take a haphazard item extracted from the Finance Accounts of the United Kingdom for last year. Under the head of " Law and Justice " County Courts are entered as having cost £6,002 14s. 9d. As a matter of fact, the actual cost was nearer £600,000, the difference being represented by the Court fees, which were treated as an appropriation-in-aid. On the other hand, the Supreme Court of Judicature is entered as having cost £326,369, becauseinthis case the Court fees are credited to the national revenue and appear on the revenue side of the account.
The result of this system, as Mr. Bowles insists, is to give the country an entirely false idea of the cost of its public services. He takes, for example, Mr. Asquith's candid admission in 1907 that whereas the Army in that year appeared to be costing only £27,765,000, the actual cost was £32,050,000. If we are to have any real economy in public expenditure, one of the first reforms to be undertaken is the improvement of our system of national accounts, so that the principle upon which they are based shall be really carried out. That principle is that the whole expenditure shall be shown on one side of the account, and the whole revenue, from what- ever source arising, shall be shown on the other side.
Another point emphasized by Mr. Bowles, and upon which emphasis has often been laid in these columns, is the supreme importance of reverting to the old practice of our Government that the Treasury should be solely a supervising Department. Under Mr. Lloyd George the Treasury, which ought to be the watchdog of public finance, has become itself the most extravagant of spending Departments. Old-Age Pensions and National Insurance are directly administered by the Treasury itself, with the necessary result that independent supervision of the expen- diture under these two heads has practically disappeared.
As regards the immediate future the outlook is dis- tinctly unpleasant. According to the latest Treasury statement of public income and expenditure, the revenue up to February 7th last had increased by £3,701,000. as compared with the corresponding period of last year. Meanwhile the expenditure had increased by £9,122,000. It is true that in the remaining seven weeks of the financial year considerable sums will certainly be collected, especially under the bead of Income Tax ; but, on the other hand, there is still a heavy expenditure to be met quite apart from the Supplementary Estimates which must shortly be laid before Parliament. There is, therefore, grave reason to fear that the present year will close with a deficit, and there is a virtual certainty that heavy addi- tional taxation will be necessary to meet the additional burdens of the next year. Already the Income Tax for a considerable section of Income Tax payers is at as high a level as it has stood even in time of war, while Death Duties are at a higher level than they have ever been before. Even professed Socialists are beginning to show alarm at the manner in which this high rate of taxation is affecting the employment of capital within the country. In a recent article in the New Statesman Mr. Chiozza Money, who possesses the great merit of honestly facing facts instead of trying to bend the facts to suit his theories, calls attention to the heavy export of capital from Great Britain to British possessions across the seas and to foreign countries. He contrasts the large sums now being invested abroad by Englishmen with the comparatively insignificant sums being invested at home. His own remedy for this evil appears to be further State control over private capital, a remedy which would certainly aggravate the disease. The simple truth is that it is im- possible for any Government to prevent private owners of capital from employing their money where they can secure the best advantage to themselves, and if industrial enter. prises and realized property are subjected to a heavy rate of taxation in this country, persona in command' of capital will send their wealth abroad.
Previous page
