TOPICS OF THE DAY.
THE NEXT BUDGET. THE Government wilfully and deliberately refuse to look the financial facts in the face, or to make any calculation as to the money which they will be obliged to find next year and in succeeding years. But though they thus avert their eyes from the fate before them and the country, there is no reason why we should follow their ostrich-like tactics. Disagreeable as it is to us as Free- traders to contemplate the ruin which the Ministry have made of the cause with which we believe is bound up the prosperity of the Empire, it is better to realise the worst than to try vainly to ignore it. It is not a question of hoping for the best, or believing that some happy accident will somehow or other save us from the consequences of our actions. When a nation spends money nothing can prevent it from having to pay the bill, and a nation like Britain in particular cannot avoid its obligations or compound with its creditors. The Government by committing themselves to vast schemes of " social reform " have produced financial results from which there is no escape. It will not be necessary to acknowledge these results openly till next April or May, and possibly a certain portion may be concealed for yet another nine or ten months ; but none the less they are there plain enough to see, if we have only the sincerity to look at them. It is our intention to try to make the people of this country realise what they have been " let in for" by the present Administration. No doubt we shall be told that we are alarmists, that we are indulging in the language of exaggeration, and that our " amateurish finance " is utterly untrustworthy. All we will do to meet such criticism is to ask our readers to bear in mind what we are saying to-day, and to compare it with the Budgets of 1909 and 1910 when they are published. We are prepared to be judged by such a comparison.
Unless a miracle happens, and the revenue, instead of falling as it is now doing, rises in the next three-quarters of the financial year by leaps and bounds, the Government in their next Budget will have to provide for an additional sixteen millions of expenditure,—granted, of course, that their Budget is an honest Budget, and that they do not by some financial hocus-pocus throw some of the burden which will belong to the financial year 1909-10 on to 1910-11. Let us see how this sixteen millions is made up. The first, and by far the greatest, item is naturally old-age pensions. Mr. Balfour, who in such matters weighs his words, calculates that the cost of old-age pensions under the present scheme, and without the admission of the paupers, will be eleven and a half millions a year. Our strong inclination is to agree with him, because we hold that the concessions made by the Government in Committee will increase the cost far more than they estimate for. We believe, to begin with, that a much greater number of persons will claim three-quarter-pensions, half-pensions, and quarter-pensions under the sliding-scale than is now supposed. Further, a great many more people will be able to show themselves fully pensionable than have been calculated for. Comparatively few old people of the poorer class will be found to have incomes of over ten shillings a week. Margins of income beyond that sum will dis- appear as by magic. Next, we feel sure that a very large number of the aged paupers who are now coming out of the workhouses for their summer holidays, according to their custom, will not go back. They will trust to being able to obtain pensions by the aid of a few false state- .ments which they will regard as entirely innocent, or at any rate justified by the circumstances. Let us assume, however, that Mr. Balfour's estimate is too high by two millions, and let us take nine and a half millions as the probable normal cost of the pensions scheme. To meet this nine and a half millions one and a quarter millions have already been contributed by Parliament. Therefore the net amount to be found will be eight and a quarter millions.
The next item of expenditure which the Government will have to provide for is an increase in the Navy Vote, not only for new construction, but for repairs. Mr. Asquith, Sir Edward Gray, and Mr. McKenna have one and all made it clear that they do not intend to allow our Navy to sink below the point where it can give ua absolute and complete security. But the maintenance of this principle must necessitate a very large increase in the vote for new construction. This year the Shipbuilding Vote was kept very low, but only on the understanding that next year the problem of meeting German rivalry would be faced in a serious spirit. Many critics hold that naval necessities will oblige us to have an increased Shipbuilding Vote of at least five millions next year. We will assume, however, that here again the estimate is too high, and that the Government may be able by certain economies in other directions to keep the additional Navy Estimates for shipbuilding, repairs, and new dock accommodation to a sum as low as two and a half millions. That they will get off for less than that is, in our opinion, incredible, and we gather from Lord St. A ldwyn's speech that he is of a similar opinion. And here let us say, for fear of misappre- hension, that we regard an increased Naval Vote as essential to the safety of the nation. We have now to consider the charge which the new Education Bill is likely to lay upon the Treasury. We rejoice greatly that the prospects of a compromise on this distracting subject are at present very bright ; but we cannot forget that compromises are almost always expensive things. We are, therefore, by no means surprised to hear it whispered that the cost of the Educa- tion Bill which will be the outcome of the compromise cannot be less than two millions a year. It will be remembered that sunder the old Bill Mr. Birrell began by estimating for an extra charge on the Imperial revenue of a million a year, and that later concessions increased this sum. In view of the fact that a Parliament probably more than half-way through its term of office will not dare further to increase the Education-rate, we should say that the country will be exceedingly lucky if the education compromise does not cost it a good deal more than two millions a year. Possibly the incidence of a portion of this extra two millions may be staved off for a few months, but that will not really diminish the burden.
We come next to the expenditure under the head of social reform. The Government say that they are determined to show us that Free-trade and what we must call Socialism are in no sense incompatible, and that we may enjoy these blessings concurrently. No doubt Ministers would like to put the bill for Socialism on the rates ; but here again we fancy that they will hardly dare to do so in practice. Next., the Government are, we fear, certain to yield to the temptation to deal lavishly with the unemployed. Every one expects a very large amount of unemployment in the coming winter, and unhappily such prophecies are of the kind that fulfil themselves. When employers know that the Government are obliged to make provision for exceptional unemployment, and when the workmen also know that even if they are not very active in finding a job they will none the less be secured either from starvation or the degradation of accepting poor relief, it will be exceedingly difficult to keep the roll of the unemployed within limits. If we put the money that will be required to satisfy the hopes that the Government have encouraged under the head of social reform and to make provision for the unemployed at two millions, we are afraid that we shall be by no means overestimating it. We come next to automatic increases in expenditure of all kinds. If the Government escape with a quarter of a million under this head they will be very lucky. Unless, too, we are very much mistaken, a considerable extra sum is likely to be required for the Territorial Army. Tke Territorial Associations are no doubt working extraordinarily well, but the keenness and activity which are so great a cause for congratulation are apt to be expensive. Men who are determined to make a good job of a thing almost always want a little more money. And remember, their requests for more will not be easy to refuse as soon as the Associa- tions become organised, as they will be, for common objects. He will be a bold Secretary of State for War who will refuse absolutely a reasonable demand put forward by all the Territorial Associations acting in unison.
We have already set out a formidable list of increased expenditure; but unfortunately there is another item which must be considered, and that is the possibility of a very serious shrinkage of revenue, since for our purposes shrinkage of revenue is equivalent to new expenditure. The Revenue Returns, and still more the Returns of . trade and commerce, point to a very considerable diminution in the national prosperity for the next year or two. Probably the surplus this year, if there is a surplus, will be of the most minute proportions ; and for the coming year the Chancellor of the Exchequer, if he is prudent, will have to anticipate a serious shrinkage of receipts. Remember that it will be a shrinkage, not in one item of revenue, but in all, for that is an essential feature of Revenue Returns during periods of general trade depression and reaction. We shall .probably, then, not be indulging in prognostications unduly pessimistic if we say that the Chancellor of the Exchequer . will have to allow at least a million for depreciation in the returns made by existing taxes. Let us now put in order the items dealt with above :- Money required for-
Old-age pensions £8,250,000 Increased expenditure on Navy ... 2,500,000 Education ... ... 2,000,000 Expenditure on unemployed and on various schemes of social reform ... ... 2,000,000 Automatic increase of expenditure ... ... 250,000 Sum required to make good shrinkage in revenue ... ... 1,000,000 £16,000,000
How is this sum to be obtained ? That is the problem with which the Chancellor of the Exchequer will have to deal. As we have said, it is no doubt possible that for one Budget he may by certain fiscal tricks stave off meeting a small portion of this expenditure ; but this will not really help him, for, as Mr. Asquith has reminded us, we have not got to think of one Budget only, but of the Budgets of succeeding years. Though he may escape a little of his burden by a subterfuge in 1909-10, Nemesis must surely overtake him in 1910-11. We shall therefore assume that the Chancellor of the Exchequer will take the wiser and honester course and meet his obligations squarely. The first question that we have to ask is : Will the Government try to meet the financial situation they have created in such a way as to prejudice as little as possible the cause of Free-trade ? To do this means that they must not put on taxes so unpopular that the Opposi- tion will be given the easy cry : "Let us take off these iniquitous burdens, and substitute the mild and stimu- lating expedient of a general tariff." To put on such taxes would simply be to carry Tariff Reform forward by two steps instead of one. We admit, however, that it is much easier to find fault with methods of taxation than to suggest better ones. If we are asked whether we think it possible to get an extra sixteen millions a year without jeopardising the cause of Free-trade, we say frankly that we do not think it is; and therefore, as we have said a dozen times before, we consider this Govern- ment to be the worst foes of the Free-trade cause.
Probably what the Government will first do will be to diminish the Sinking Fund. But this will not get them more than four millions a year, unless it is pushed beyond legitimate limits. Let us assume, however, that they are reckless enough to take six millions a year in this way. They will then have another ten millions to make up. Next we will suppose that they will introduce a graduated Income-tax. Graduated taxa- tion, however, is not as a rule a very lucrative business from the Exchequer point of view. It may please those whose desire is rather to penalise the rich than to fill the Treasury, but otherwise it is not likely to prove very satis- factory. Still, it is conceivable that if the Government are prepared to face the unpopularity involved in such a course, they might, through a graduated Income-tax, obtain another three millions a year. This would leave seven millions still to seek. Possibly the best and easiest way, or rather, let us say, the least difficult way, of getting such a sum would be to increase the taxes on beer and tobacco. But dare a Radical Chancellor of the Exchequer like Mr. Lloyd George propose such taxation ? We very much doubt it, especially as he would have it flung iu his face that he was not really granting non-contributory old- age pensions, but making working men pay for them them- selves. But if the Government are not willing to face such an accusation, what new taxes can they devise for this extra seven millions ? We confess to being entirely at a loss, unless possibly they should have recourse to a larger and more rigorously graduated Inhabited House Duty, and also to a large increase of the Death-duties.
We trust that none of our readers will suppose that the suggestions we have made above find favour with us. On the contrary, we regard them all as most objectionable, and calculated to injure the prosperity of the country and retard a revival of trade. We make them not so much as suggestions for " hen-roost robbing " as illustrations of how impossible it will be for the Government to raise the vast extra expenditure to which they have committed themselves without doing the country serious injury. We must leave the matter here, but we confess as Free-traders that we do so in a mood of the profoundest pessimism. Considering the waywardness of working-class opinion, we feel very little hope that the voters will have the steadfastness and courage to stick to their Free-trade principles when they are told, as they will be told daily by the Tariff Reformers, that if they will only allow the experiment of the tariff to be tried, our fiscal embarrassments will altogether vanish. " Well, why shouldn't we try it and see ? " That is an argument which may run like wildfire through the kingdom. If it does, it will not be the fault of those who, like our- selves, are determined to face the facts, but of the reckless and irresponsible men who profess to think that Socialism and a bloated expenditure are compatible with the policy of free exchange.
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