FINANCE-PUBLIC AND PRIVATE
THE BUDGET AND THE CITY By ARTHUR W. KIDDY.
IF the point is once conceded that the present level of National Expenditure is justified, then, from the City's point of view, Mr. Churchill's second Budget can be described as thoroughly sound and in many respects helpful to the National Credit. Unfortunately, how- ever, this major point cannot be conceded and it is one to which I shall return at the close of this article. Turning aside, however, for the moment from the general question of National Expenditure, there are many favourable things which can be said with regard to the Budget. In the first place, it is clear that Mr. Churchill's policy has been dominated by a perception of the nr.-ertainties of the outlook. At the close of his speech, indeed, the Chancellor in no uncertain terms reminded the country that his Budget was based on the assumption of peace and that, if we were about to enter, upon an era of strikes and industrial strife, there would most certainly be an immediate imposition of additional direct and indirect taxes.
SINKING FUND STRENGTHENED.
The outstanding favourable feature in the Budget* is the liberal provision made for debt redemption. Having budgeted first for a Deficit of about £6,000,000 on the former basis of taxation and then, as the result of taking £7,000,000 from the Road Fund and imposing ,certain additional taxes, having transformed the Deficit into a Surplus of over £14,000,000, Mr. Churchill retains only £4,000,000 as a possible Surplus and adds the £10,000,000 to the former Sinking Fund of £50,000,000 raising it to £60,000,000 for the one year. By reason of last year's Deficit (arising out of the Coal Subsidy) about that amount of debt which would otherwise have been redeemed has remained outstanding, and, therefore, by his present action Mr. Churchill makes it possible to say that we have met the whole of the Coal Subsidy out of Revenue and that debt redemption has not been allowed .to suffer. That is undoubtedly the right and courageous policy to have pursued and it will bring its reward. Nor should the taxpayers, to whom this question of extensive debt redemption may not at first appeal, forget that it is their own interests which are being considered all the time. Only by these extensive Sinking. Funds can debt conversions be rendered probable and it is largely by debt conversions that we must hope to reduce annual Expenditure. It is also true that some of the money paid for debt redemption goes to swell the general volume of capital available for industrial developments.
• THE BETTING TAX.
With regard to the remaining features of the Budget it must be understoOd, of course, that I am merely recording the general consensus of opinion in the City, • because," with regard to such matters, for example, as the tax on betting, there will, no doubt, be a good deal in the way of political dissensions. In this place I am only concerned with the financial aspects of the Budget. From that standpoint it may be said at once that the City approves the tax on betting, believing that the Exchequer will benefit to the extent estimated and that so far as the volume of betting is concerned no effect will be produced by the• tax one way or another. The pro- posal to reduce the three years' average system in the matter of Income Tax returns is also approved. It will make for simplicity in assessments and in that connexion should lessen the cost of machinery of collection, while it will enable the payers of Income Tax to feel that they are up to date in discharging their liabilities to the Ex- chequer and that it is not a case of having to make up arrears at some later and possibly less convenient time.
STATE CREDIT.
A further point in the Budget commanding approval in the City, and one still further emphasizing the good effects of the enlarged Sinking Fund, is the decision not to renew the Trades Facilities Act after the present year. I have referred more than once in these columns to the free use made by the Government in recent years in giving these State guarantees for loans and the tendency for the policy to react unfavourably upon the National Credit. In fact, throughout the Budget there is now evidence of a sincere effort to keep this question of the National Credit in the forefront.
THE MOTOR TAXES.
Similarly, Mr. Churchill is to be commended not only for having refrained from imposing any vexatious imposts likely to harass trade at the present time, but for having shown throughout his speech a sympathetic appreciation of the difficulties under which some of our industries are labouring. This was apparent in his reference to the railroad industry in connexion with the increased tax on heavy motor lorries. I certainly hold no brief for the railroad management of to-day, which, I am inclined to think, lacks enterprise at many points so that in many districts high fares and poor services have literally forced the travelling public on to the roads. Nevertheless, it is not fair that the railroads should be called upon to play so great a part (as taxpayers) in keeping the roads in condition for competing traffic. From every stand- point the rearrangement of the motor duties is thoroughly equitable. Nor is there any diskositiott in the City— which is usually hypercritical in these matters—to criticize the withdrawal of £7,000,000 from the Road Fund to meet the present situation. The whole point is that when the_withdrawal has taken place the accumulated Fund of £12,000,000 remaining, in. addition to the new annual revenue, appears to be ample for fulfilling the purpose for which the Fund was intended. Not only so, but in earlier years, when the Road Fund was inadequate for requirements, the Exchequer came to the rescue.
HIGH EXPENDITURE.
On the whole, therefore, the City considers that -Mr. Churchill's second Financial Statement constitutes what may be termed a sound Budget, and but for two circum- stances it would undoubtedly have produced an exceed- ingly good effect upon prices. In the first place, however, the situation is entirely dominated at the moment -by the coal crisis, and until that problem has been solved it is useless to look for any. big move-forward either in indus- trial or financial activities. In the second place it .is recognized that even a sound Budget does not get over the one cardinal defect of high Expenditure; and-the ' Government will make a ,great mistake if it assumes that business men. are read9tito-.aCeept the position of :the present level of the national expenditure being- irreduc- ible. Briefly, the picture presented by Mr. Churchill in his anticipated expenditure for -the new year of £810,000,000 (110,000,000 is exceptional Sinking Fund outlay) is that all we can hope for is that this total shall not be increased and that we must look for any relief from taxation to arise from expanded revenues without: a corresponding further expansion- in expenditure. This will not do at all. It is not, indeed, consistent with the Government's own statement of the position shortly. after taking office. Here is the passage in the King's .Speech of December 9th, 1924, on the reopening of Parliament.
" Estimates for the public services will be laid before you in duo course. Every effort will be made to, reduce public expenditure to the lowest possible limit consistent with the security and effi- ciency of the State. The- present heavy burdens of the taxpayer are a hindrance to the revival of enterprise and employment. Economy in every sphere-is imperative- if we aro to regain our
industrial and commercial prosperity."
. _ And yet a few weeks later the first Budget presented by Mr. Churchill showed an estimated increase in Expenditure of £4,000,000 over the preceding year, while that estimate was subsequently exceeded (quite apart from the Coal Subsidy) by a further amount of £7,000,000. And now in the new Budget, which only contains 14,000,000 of Coal Subsidy, we have a total of expenditure after deducting the special addition of £10,000,000 to the Sinking Fund, of about £811,000,000, or £13,000,000 above the total before the present Government came into power. Granted that many of the objects to which the expenditure is devoted are excellent, the fact remains that until the promised economies are carried into effect, we cannot expect a speedy return to industrial and financial prosperity. • -
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