TOPICS OF THE DAY.
THE BUDGET.
MR. RITCHIE'S first Budget is not a sensational Budget, but it is wise and politic in the best sense, and he deserves, and will receive, the congratulation of the nation as a whole. Its main features are the reduction of the Income-tax by 4d., and the total abolition of the Corn- tax. We have never sided with those who regard a high Income-tax as an evil so great that it is to be got rid of at all costs ; but we are heartily glad that Mr. Ritchie has been able to reduce it by the very substantial sum of 4c1. in the pound, and we hold that he was justified in thus singling out the Income-tax for special relief. There has been a good deal of exaggeration in the talk as to the in- ability of the country to bear a high Income-tax, but un- doubtedly the nation is fiscally in a far safer position with a reduced Income-tax. With the Income-tax below ls. in the pound the Chancellor of the Exchequer can always feel that he has room to turn round in. When, that is, the tax is below ls. he knows that if he has a bad year to get over he can obtain a couple of millions or so by putting another penny on the Income-tax, and he is thus relieved from the odious necessity of inventing a new tax. But if the Income-tax stands at a figure like ls. 3d., it is practically impossible to increase it except in a great emergency. Thus Mr. Ritchie by taking 4d. off the Income-tax has not only relieved the taxpayer of a very serious burden, but has also given elbow-room to future Chancellors of the Exchequer. The abolition of the Corn-tax is, in our opinion, an even greater subject for congratulation: We protested as strongly as we were able against the imposition of the tax, and we feel the most unfeigned satisfaction in recording that it has only lasted one year, and that once again the staple food of the people is on the free list and untaxed. We feared that if once corn were taxed, it would never again be free, but happily our fears have been proved to be unfounded. That being so, we do not regret the tax, for it has shown that as a war measure a Corn-tax is possible. To the moderate taxation of corn in a great national emergency we have no objection, and it is useful perhaps to know that such an instrument exists, and can still be employed in war without endangering our Free-trade system in peace-time. So much for Mr. Ritchie's remissions of taxation. The matter of next importance in his statement was the re- establishment of the Sinking Fund. The question before Mr. Ritchie was to settle the round sum to be devoted every year to the service of the Debt,—such part of it as was not used to pay interest being used to pay off capital. When Sir Stafford Northcote established the Sinking Fund the total National Debt was about the same as it is now. (To be exact, it was then £769,000,000, and it is now X770,000,000.) But at that period the interest was 3 per cent., against 21 per contr. now. Owing to this fact, £25,500,000 devoted to the service of the Debt at the present moment would be as effective in extinguishing Debt as weal-18,000,000 in 1875. Having regard to all these con- siderations, Mr. Ritchie proposed to fix the annual amount at £27,000,000. " Altogether the amount was the largest, both absolutely and proportionately, that had ever been paid, and he believed he was not taking too sanguine a view when he said that if the Debt was not added to, and the annual charge was kept at the proposed amount, the whole of the gigantic Debt could be wiped out in fifty years from now. That was a startling result to be antici- pated from the Sinking Fund." We fear that this is a contingency which will never happen, but the fact that it might happen is proof that a sufficient sum is allotted in time to the service of the Debt. In other words, Mr. itchie has observed the canons of sound finance in dealing with the Sinking Fund, and has not yielded to the tempta- tion to decrease taxation rather than to arrange for the automatic paying off of Debt. As is usual in Budget statements, Mr. Ritchie devoted a portion of his speech to a general review of the economic condition of the country. We agree with Mr. Ritchie in finding, it satisfactory. If wages are slightly lower, and the number of the unemployed somewhat larger, the prices of necessaries have not increased, and trade both at home and abroad is good. In foreign trade both imports and exports have increased, and the soundness of commercial conditions at home is proved by the fact that there hag been a large increase in the production of coal and iron, and that the railway returns show an increase both in goods and passengers. Bankers' clearances also show an increase, as does the tonnage of vessels entered and cleared in cargo. But Mr. Ritchie naturally felt that against these signs of soundness and prosperity would be placed the fall in the price of Consols. He showed most clearly that there was no foundation for the gloomy allega- tions in regard to the national credit. Consols, to begin with, seem low now because they were so abnormally high a few years ago. And they were high then for two very good reasons. The first was that owing to commercial depression and panic many banks bought Consols in order to secure themselves from risk. At the same time, owing to our fiscal prosperity, the Government were buying very largely for the Sinking Fund, and still more for the Savings Bank. Of late that process has been reversed. The banks have not been large buyers, and the Government, instead of being great buyers, almost every month have bought nothing. More than that, Government have been great sellers of Consols, for to raise new loans is to bring new Consols into the market, and so to produce the same effect as selling. Consols, that is, have not fallen from any loss of credit or because they have ceased to be considered a desirable investment, but simply because the supply was increased and the demand was diminished. There is no commodity in the world which would not fall in price under similar conditions. In truth, those who have of late tried to prove that our national credit has declined have only succeeded in showing themselves unable or unwilling to appreciate the true fiscal position.
Before we leave Mr. Ritchie's Budget speech we must mention his announcement that he thinks the time has come for an inquiry into the working of the Income- tax. He was not quite satisfied, he said, with many matters in connection with the Income-tax. " It was forty-two years since an inquiry was made into the opera- tion of Income-tax, and it would be advisable that further inquiry should now be made into the equity of the burden, into its machinery, and even into its evasion." He was told the evasions were very great. There ought to be some method by which this leakage could be stopped. If that were the case, they could probably take a penny or two more off the Income-tax and still raise the same sum. He thought, then, that the time had arrived "when there ought to be some inquiry into its operation, and that by a Committee of the House of Commons. If the suggestion was favourably received, he should be glad to act upon it, and have an inquiry made." That is a decision which will meet with general approval. We hold the Income-tax to be, on the whole, a thoroughly sound tax, and we do not favour the idea of whittling it away by too many concessions. We know that in it we have an unrivalled instrument for the quick, and almost automatic, supply of money to the State, and we must be careful to preserve this advantage over all other States which we thus possess. At the same time, we do not doubt that there are certain minor inconveniences which may be remedied, and we also do not doubt that the evasions in certain cases have become serious.
To sum up, then, we can only end as we began, by con- gratulating Mr. Ritchie on his Budget. It is one worthy of the best traditions of our Exchequer. Mr. Ritchie is in the fortunate position of Peel and Lowe. Hewill be able to boast that he has relieved the bread of the poor from taxation.
Previous page
