BUDGET AND THE INVESTOR
Now let us turn to share markets which, so far, have taken the additional tax proposals without flinching. Many readers may be wondering whether the surprisingly large increase in the motor tax alters the case for motor shares outlined here in pa:;t notes. Well, clearly enough, the Budget proposals do not help, but I am not convinced that they are going to hinder very much either. The chief sufferers will be the American exporters of high-powered cars, such as the Buick, Packard, Chrysler Hudson, Stude- baker, the demand for which must be affected fairly sub- stantially. Even allowing for the fact that many motorists in this country work on narrow margins,. I do not believe that, other things being equal, the total demand for motoring will be more than very slightly reduced. Purchasing power is growing and car sales, at the moment, are rising steadily; as I see the position, the chief threat to the motor trade at present is not so much a contraction of demand as a shortage of material and labour. In other words, as industry is forced to devote more of its production capacity to the needs of Defence, the motor trade may be called on to face adjustment problems.
As for the tobacco shareholder, I see no reason why he should lose much sleep. It is a well-known fact that around current prices the demand for tobacco and cigarettes is very inelastic. The manufacturers should therefore find little difficulty in passing on the extra tax to the consumer; the only problem will be to find the most appropriate method of doing this, whether by raising prices or altering the content of the packet. I think there is enough ingenuity in the tobacco trade to find the right way. Then there is this surprising decision to repeal the tax on patent medi- cines, which is obviously good for the Philip Hill group of companies, and for Aspro. In past months the City has been prepared for an increase in patent medicine duties and has valued the companies' shares very conservatively for this reason. Beechams deferred, a highly-geared equity, should benefit from the Chancellor's mysterious move.
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