Finance
The City and the Budget
WinLE the .Cify is prepared -to 'pass Mr. Chamberlain's latest Budget as fairly sound, it is not altogether enthusi- astic upon the point. The concessions made by the Chan- cellor in the Matter of remissions to the small taxpayer, the restoration of cuts in Civil Service salaries, and even the concessions in the .matter of Entertainment Taxes, were anticipated and, on the whole, approved. It had been quite thought, however, that Mr. Chamberlain would have -been able to make these concessions without en- croaching upon the Road Fund, as he has done, to the extent of 14,470,000.
SERVICE OF THE DEBT.
Moreover, criticism on this point is somewhat empha- sized by the fact that although the Chancellor of the Exchequer a year ago spoke of the necessity for restoring the fixed Sinking Fund, he has only made the same allow- ance for the service of the Debt as a year before. It is quite true that, thanks to the cost of the National Debt service during the past year having fallen much below expectations, quite a large amount of debt was actually paid off. Nevertheless, it is clear that we cannot confi- dently rely upon this continued reduction in the service of the-National Debt by reason of cheap money, and Mr. Chamberlain himself has been careful to take powers to borrow, if necessary,- to meet the requirements of con- tractual Sinking Funds.
CAUTIOUS ESTIMATES.
As against these points Of criticism, however, has to be set the fact that so far as can be gathered Mr. Chamberlain has again been very 'conservative in his estimates of revenue for the current. year. This would seem to be especially so in the case of Income Tax, where he has budgeted for an increase of only £8,000,000. He. explained to the House that his caution was due to the fact that Income Tax during the past year had come in so rapidly that he was without the usual-arrears to draw upon for the current year. Given a continuance of satisfactory trade conditions, however,- there would seem to be no reason why the taxpayer should not make an equally quick response during the coming year, and from the emphasis laid by the Chancellor of the Exchequer upon the solid improvement which had taken place in trade during 1984, it would seem that assessments for the cur- rent year arc likely to be much higher than in the previous year. However, if the Chancellor has under-estimated the revenue from Income Tax so. much the better, and the same may be said with regard to EstateDuties, where he anticipates a shrinkage of £1,356,000. In the matter of Customs and Excise the Chancellor showed more optimism, estimating for an increase Of over £6,000,000.
SMALL PROVISIONAL SURPLUS.
After, however, budgeting for a total increase in the ordinary revenue on the present basis of taxation of about £19,000,000, Mr. Chamberlain found himself with a prospective surplus of only £5,610,000. This he supple- mented by taking the amount already named from the Road Fund, obtaining also just over £1,000,000 from new indirect taxation of which an increase of £800,000 from a higher tax on hydro-carbon oil formed the principal contribution, a tax which no doubt will not be at all un- welcome to the railroad industry.
LOOKING AHEAD.
I have referred to the Chancellor's estimates of revenue for the current year as erring. on the side of caution, but perhaps something in the way of qualifica- tion is needed. The present concessions in the shape of lessening of taxation on,entertainments and the restora- tion of cuts in Civil Service salaries will involve a loss to the Exchequer this year of £9,580,000, but in the following year—that is fOr a full yearthe loss • to the Exchequer will be nearly £17,000,000. so that with the possibility of a still further rise in military, naval and air defence expenditure, the outlook for the taxpayer' is not too cheerful. Of cotirse, ranch; indeed everything, so far as the next year is concerned, will depend upon whether there is a sufficient further improvement in trade. to bring in larger revenues to meet the increased expenditure, and so far we haVe at least some assurance of the continuance of that public confidence which is so intimately connected with a balanced Budget.
Nevertheless, the City looks with some concern at the rapidly rising tide' of public expenditure, the more so, perhaps, in remembrance of the unsettled inter- national political outlook, while the high standard rate of income tax and absence of a fixed Sinking Fund. in view of the size of our National Debt, are also matters for sonic concern.
Two INTERESTING POINTS.
I must not forget to mention two small points_ in the Budget in which the City, and, indeed, the general public, is interested. From the Chancellor's reference to the possibility of further loan conversion operations it would seem that there is an expectation in high quarters of a continuance of cheap money and a rise in Govern- ment securities. Another point Mentioned by Mr. Chamberlain was one also of great interest to the City and to the country. The operations of what is known as the Exchange Equalization Account are necessarily kept secret, and sometimes rumours are even: current as to some loss having been sustained. I am glad, therefore, to give prominence to the fact that in the course of his speech Mr. Chamberlain said that last year he mentioned to the House that the Equalization Account had shown a profit. "This year," he said, "-I may repeat that observation with greater emphasis." .Mr, Chamberlain is not the man to give such emphatic reassurance .without good cause,. and. the last thing. I would desire is to convey the -impression that the City is actually dissatisfied with the Budget. It is fully recognized that the pressure upon the Chancellor to restore the cuts and give some relief to the very small Income Tax-payer was a very real one.. I should, there- fore, perhaps best sum up the feeling in the City if I said that mingled with satisfaction that the Chancellor has once again given us a balanced Budget.is just a little apprehension with regard to the future, an apprehension which was not in evidence a year ago.
ARTHUR W. KIDDY.
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