DEFENCE LOAN PROSPECTS
I feel that the gilt-edged outlook is no better and no worse after the Budget statement. Although the avoidance of a higher income-tax is a "bull point," it is also very clear from the Chancellor's review of the Defence pro- gramme that even in providing for £630,000,000 of Defence expenditure he is merely covering the items actually in sight. The bill may well be larger and with some form of conscription projected, it looks as if an early addition to expenditure must be expected. I find it difficult, in these circumstances, to get enthusiastic about gilt-edged, especi- ally as it is now apparent that at £380,000,000 the limit of annual borrowing has been reached. My guess, in spite of Mr. Keynes, is that the Treasury will be obliged to offer the investor something substantially more than 24 per cent. unless, of course, there should be a sudden outbreak of peace.
Official anxiety to conserve the volume of investment re- sources in view of the huge borrowing programme is con- firmed by the Chancellor's " hope " expressed in the House of Commons that investors will not make further purchases of foreign securities. While I sympathise with the authori- ties' wish to achieve their ends on the basis of voluntary co-operation with City interests, I also appreciate the criti- cism that the Stock Exchange should be given official guidance as to the type of transaction which it is hoped to prevent. The onus is, admittedly, on the investor himself, but it is obviously expected that the stockbroker, banker, or other agent will draw the attention of anywould-be buyers of. say, American securities to the Chancellor's state- ment. In the absence of guidance it seems at present as if sneculative purchases, which are liquidated by sales within a short period, are permissible, but that genuine in- vestment, which takes money out of the country, is not.
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