The Budget and the Future
NOT for many years has a Budget in this country called for so little comment as that introduced by Mr. Chamberlain on Tuesday. The Chancellor dis- appointed some hopes, but few expectations. His policy was imposed by the force of circumstances and very little personal effort or resource went to its shaping. Things might, of course, have been otherwise. There was a choice to be made between the prosaic path of what is commonly regarded as sound finance and more exhilarating aerial excursions into the unexplored realm of inflation. But it was inconceivable from the first that a man of Mr. Chamberlain's temperament, with the Treasury holding him firmly by the heels, should ever seriously consider leaving the solid earth and deliberately budgeting for a deficit in order to knock a shilling off the income-tax. And, all things considered, the Chancellor's decision must be approved. Income-tax reduction to-day would be a simple gamble. It might serve its purpose of getting money moving and giving a general stimulus to trade, btit it would have to be a very marked stimulus to ensure such an increase in tax-yield in the next year or two as to liquidate the immediate deficit. On the other hand it might largely fail in its object ; British industry to-day is more affected by external forces which no Chancellor can control than by internal ; and in that event a dark outlook would be made alarmingly darker. If this country were largely self-contained ; if it were only slightly, instead of enormously, dependent on foreign trade ; if it could somehow make itself immune from the consequences of other countries' misfortunes ; then a Chancellor of the Exchequer might be justified in displaying some audacity and laying before the House of Commons a frankly experimental Budget which would leave the situation either a good deal better or a good deal worse. But for a Chancellor who is driven to borrowing to meet a deficit of £32,000,000 on his last year's accounts to propose open-eyed a further and far heavier deficit for a year hence, and that at a moment when Sinking Fund payments are being suspended, would be a plunge into the empiric which the present House would never countenance and the electorate would never demand.
The most a country sound but struggling can hope for is some shifting of its burdens rather than a relief from them. The effects of the depression are vividly enough demonstrated by the fact that in the last year 12,000 persons dropped out of the surtax-paying class and the income-tax yield fell short of estimate by £8,000,000. No improvement in either of those fields can be looked for in the coming year. On the contrary some further reduction is certain, for the assessments are retrospective, and incomes in 1982-3 were, on the whole, lower than in 1931-2. In those circumstances it is something to have the practice of two equal pay- ments, in January and July, restored in place of the recent innovation by which three-quarters of the tax is due in January, though in fact the Chancellor may be only rebuilding a henroost for some successor to raid. That change, the penny off beer and the penny on paraffin, the new taxation of heavy motors, the suspension of Sinking Fund payments, and the decision to make no provision for the payments due to the United States, make up all that matters in the Budget. The reduction of the beer duty is a financial rather than a social measure and is justified as such. A revenue tax so heavy as actually to result in a reduced • yield rather than an increased must obviously be lowered. The heavy motors have come off lightly by- comparison with the contribution they would have made if the Salter Report proposals had been adopted. There will,• no doubt," be coMplaints from hauliers, but the true criticism is that the Chancellor has fallen quite unneees-- sarily short of a standard framed by the rail and road members of the Salter Conference after full consideration of all the circumstances. The Sinking Fund decision is clearly right ; it would be carrying financial purism to absurd lengths to be insisting on paying off debt at a moment when it is only by a superhuman effort that we can meet current expenses. And since in theory (whatever the hard fact may be) we shall receive from our Allies and Germany the equivalent of whatever we may have to pay the United States, the Chancellor is able to leave that item out of both sides of his balance-sheet without appearing in any way to threaten America with default in June.
So the country faces the sombre prospect of its burdens for the coming year. There are some grounds for qualified encouragement. If the American payment had not been made last• year, or if it had been balanced as it should have been by payments from our Allies and Germany, the deficit would have been only in the . region of £3,000,000, and if over £14000,000 had not gone in debt redemption in that year there would have been a surplus of over £11,000,000. Ordinary revenue did in fact show a reasonable margin over ordinary expendi ture. It would be going too far to count on a similar result this year. That depends far too largely on factors whose working remains obscure. We have kept our house in order internally. The question now is what we can do to solve the far more baffling problem of how to get the world's house back to order. For that very obvious reason what was happening at Washington on Tuesday was about ten times as important as anything. that was happening at Westminster. No definite -results from the Washington talks are announced, except the satisfactory report that the World Economic Conference is to open, if possible, on June 12th. That is as it should be. The Prime Minister did not go to Washington to conclude agreements. To do that would be both improper and unwise. The world is in no mood for anything like an Anglo-American dictatorship in the financial or any other sphere. Even Anglo-American leadership will have to be exercised with the greatest tact, valuable and almost indispensable as a preliminary understanding between the two countries in essentials must be. An Anglo-Franco-American understanding would be more valuable still, and it is earnestly to be hoped - it may be reached as the effect of M. Herriot's presence in Washington, for France, as the great defender Of the gold standard, holds a strategic position in the field of finance, just as for other reasons she does in the "field of disarmament. With Britain, America and-France pursuing a common policy at the Disarmament and Economic Conferences success in those fields would be already half achieved.
And it is here, in these conclaves of the nations, that the character of British budgets of the future will be deter- mined. Some reminder of the relation between the Disarmament Conference and the Budget speech was given by the Chancellor's statement that the fighting services this year call for £4,500,000 more than a year ago. We are paying £91,000,000 out of a total expenditure of £464,000,000 (leaving debt services out of account) in preparation for a war which we pray may never come. It is an appalling insurance premium. But in a serve the chief immediate importance of the Disarmament Con. ference is not the direct financial reductions it may make possible, but the fact that unless it succeeds the Economic Conference is virtually bound to fail. And it is on the Economic Conference that our hopes for the immediate future are set. Of all the decisions to be taken the most important is regarding the gold standard. Its abandon- ment can hardly be considered, but the conditions of return to it must, as every British Minister has always insisted; be so defined as to ensure that the standard will not fail us a second time. In this and other matters there is something to be said for the theory that the world had to plunge into the abyss in order to nerve it for the effort to regain firm ground. In that, and our growing experience of the working of international institutions, particularly, in the financial sphere, of the Bank of International Settlements, lies the justification for the belief that the Economic Conference has some chance of success. And before the Conference is convened there may be news of preliminary understandings that will make the prospects brighter than they are today.
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