THE BUDGET AND THE FUTURE

THE Budget contained no sensations, and sprang no surprises. Yet the Chancellor of the Exchequer unfolded new conceptions of national finance. Just as total war brings the Government into direct relationship with nearly all of the nation's activities, so that branch of the Government which is concerned with finance in- evitably touches the nations economic life at an increasing number of points. Sir John Anderson showed that he is fully conscious of the change that has been taking place, and that he is deliberately adjusting his policy to direct it. He expressed the hope that the Budget would increasingly be an occasion when " the financial and economic health of the country as a whole can be reviewed." Thus it was that his review of the past year and his estimates for ex- penditure and revenue in the coming year fell almost into a sub- ordinate place in his speech. Yet the very fact that that was possible is remarkable evidence of the soundness of our war-time finance. Expenditure has reached its peak, touching an estimated total for next year of £5,937,000,000, of which k5,000,000,000 will be for the war, and to meet this the Chancellor is preparing to raise without extra taxation £3,102,000,000. That is to say, we shall be paying no less than 52 per cent. of the total expenditure out of current revenue, meeting the remainder out of borrowing. On the saving and lending side, too, the public has responded readily. In spite of greatly increased earnings arising from larger wages, longer hours, and full employment, the public has kept down its consump- tion in terms of money. Though personal incomes in 1943 were £600,000,000 above 1942, the amount spent on consumption in real terms was actually reduced, and the savings, with the additional taxes, amounted to more than the additional earnings. The Chan- cellor was entitled to speak of this as a remarkable achievement which ought to be made known to the whole world.

Gratifying as-this is, Sir John Anderson uttered a note of warning about the relation between rising wage rates and a cost of living kept down by increasing subsidies. The cost of living has been stabilised at a figure of 25 to 3o per cent. above pre-war, but wage tatei. have now risen by about 4o per cent. ; and increases in the cost of coal are likely to have their indirect effect on the real cost of living. There obviously must be some limit to Government sub- sidies on foodstuffs and other necessities, and Sir John foresees that in the coming year the cost must be stabilised upwards from between 25 and 3o per cent. to between 3o and 35 per cent. The Government intends to adhere to the stabilisation policy, but it is quite rightly insisted that prices cannot indefinitely be kept on an artificial basis, and that a general upward movement in wages would present grave dangers. With these words of warning addressed to all sections of the community, Sir John turned to the prospects of the future. In spite of the fact that we have parted with most of our foreign investments, and have ceased to be a great creditor country, he did not take a gloomy view of our capacity so to increase our exports that we shall be able to maintain or improve our standard of living For some years to come we shall have to retain rationing, to endure heavy taxation, keep consumption within bounds, and go on lending to the State, but the Government intends to pursue a policy which will enable industry to re-equip itself for peace purposes, and go forward on the basis of full employment. He foreshadowed relief from taxation in the post- war years in respect of capital and current expenditure for scientific

research, and reminded business men that payment of Excess Profits Tax at the too per cent. rate entitled them to a post-war

credit of 20 per cent., which would help, them to face the problem of rehabilitation and reconstruction ; and he was able to offer immediately a modest degree of relief to small businesses. The

Chancellor's speech was more than an ordinary Budget speech. It was an indication of a future financial and economic policy by which the Government will seek to create the conditions necessary at home and abroad if industrial enterpnsc and initiative are to have full scope.

Reluctant Bombing

German propaganda is of course making as much capital as it can out of the fact that our bombing of targets in France inevitably causes destruction of French property and casualties among French civilians. It is one of the lamentable facts about the German occupation of France and Belgium, and the German use of French and Belgian factories and railways, that we cannot strike at the occupying forces, and destroy the German power of resistance, without causing suffering to our friends. The invasion of French territory from the sea and the liberation of the French nation could not be accomplished except by attacks directed at Germans which in some cases must cause losses to civilians. If part of our own country were occupied by the enemy we should have no choice but to take the same measures there that now we are taking in France. It cannot be too strongly emphasised that the utmost care is taken to limit our bombing attacks to strictly military targets such as war factories, railway yards, bridges and viaducts. It is precision bombing that is aimed at all the time, and it is enjoined upon pilots that they must spare no efforts to avoid inflicting

damage on civilian houses and property. It is one of the most painful facts of this war that a ruthless enemy has dragged his victims into his employ, and has exposed them to some of the consequences of blows aimed at himself. It is a stern ordeal for the French, but they have given abundant evidence that they under- stand the situation, and would not have it otherwise.

Programme for Peace

The document entitled " The International Post-War Settlement," drafted by the National Executive Committee of the Labour Party, and published this week, is an encouraging demonstration of the unity of national opinion on this all-important question, for there is virtually nothing in this admirable statement which would not be accepted by nineteen Conservatives or Liberals out of twenty. To find the • Labour Party declaring officially that " experience shows that, for any period with which we are concerned, pacifism is an unworkable basis of policy " is to realise what effect Nazism has had in hardening those schools of political thought in this country which abandon pacifist ideals the least willingly. Another shrewd obserta- tion in the Labour Report deserves quotation. Admitting fully the existence of a large number of decent Germans, the authors add pertinently, "The trouble is, not that good -Germans don't exist, but that they are singularly ineffective in restraining the bad Germans." To which it may be added further that it will be a formidable task after the war to distinguish the really good Germans from the Germans who will pose as good Germans. In devoting a special paragraph to Palestine the Report mixes the particular with the general, and in suggesting that Jews should be admitted to Palestine till they form a majority, and Arabs " be encouraged to move out," it is committing itself to something highly contentious.

The I.L.O. and its Scope

Reports from Philadelphia, where the conference of the Inter- national Labour Organisation is in session, leave no doubt of the importance the principal governments represented, those of Great Britain and the United States, attach to the discussions. It is right that they should. The I.L.O. is an international organi- sation which has maintained its existence and activity (at Montreal) during the war, and is able to resume its annual conferences with all its efficient mechanism intact. But its ambitions must have certain limits. Its Director's report proposes that the I.L.O. should be given responsibility for scrutinising all international economic and financial policies. This is going far outside the organisation's original, and it may be added far beyond what appears to be its proper, scope, which is to " endeavour to secure and maintain fair and humane conditions of labour for men, women and children." It must not be forgotten that what, on the whole, was the most suc- cessful section of the League of Nations, the financial and economic section, mainly built up by Sir Arthur Salter and a number of able colleagues, has also maintained its existence unbroken—at Prince- ton, New Jersey, under Mr. Alexander Loveday. It is a singularly competent organisation, specialising with great ability in the field which the I.L.O. now apparently proposes to occupy. The British Government, at any rate, should scrutinise this situation very closely before accepting it. The other important event at Philadelphia is Russia's reply to the invitation to return to the organisation, and assume a seat on its Governing Body. The conditions Moscow seeks to impose are clearly unacceptable, and the I.L.O. is clearly right in intimating that plainly.

Italy's New Cabinet

Marshal Badoglio has achieved what recently seemed the im- possible, and has formed a Cabinet in which six parties of the Demo- cratic Front are included. This he has been able to do, thanks. to the King's promise to resign when the Government is in Rome, and to the initiative of the Communist, Signor Togliatti. There Were long discussions and negotiations before this interesting union of opposites was achieved, many concessions having been required before at length the Action Party was induced to come in. Marshal

Badoglio successfully insisted, however, in retaining his three Service Ministers, and will continue to be Foreign Minister himself. Signor Croce and Count Sforza are Ministers without portfolio. So is Signor Togliatti. A Socialist is Minister of Economits, a Communist is in charge of Agriculture. A millionaire banker is Minister of Finance, and one of his under-secretaries is a Communist. Men scarcely on speaking terms before are now colleagues in the same administration, which is, of course, a provisional Government only, and subject, like the monarchy, to the chances and changes of the future when Italian opinion can really -be tested. A broadening of the basis of this Administration is very welcome to the British and American autho- rities, with whom it has to. work. Its members would do well to remember that their country has yet to " work its passage home," as Mr. -Churchill put it, before it can assume all the privileges which it forfeited as an enemy country.

Turkish Chrome

Our fully justified representations to Turkey about her continued supply of chrome to the enemy have had their effect, and she has now announced the cessation of all chrome exports to Germany and her satellites. • She has wisely decided not to seek a compromise in the matter by merely reducing the. supply, but to stop altogether this form. of aid to the enemy, which, if it had gone on, must have raised serious questions about the meaning of her alliance with Britain._ Turkey has had a very natural desire to maintain an economic balance between essential exports and imports, and she has been maintaining as much as possible of her trade with Germany because that represented a continuance of the old flow of trade between Turkey and Europe. Great Britain, however, has made great efforts to compensate her for loss in this direction both by supplying her with arms and other materials, and by taking off her hands produce which she was anxious to export. It should be added that chrome is by no means the only material which she has been, and is still, supplying to Germany and her satellites, and the cessation of her chrome exports does not mean that she has stopped all trading with the Axis countries. It cannot be said that her alliance with Britain has involved her in very serious sacrifices, certainly there have been none comparable with those which every belligerent must bear. She seems likely to•come out of the world war relatively pros- perous, and she has no just grievance if we seek to dissuade her from part at least of- such trading with the enemy as, in the case of a more remote neutral, we should automatically cut off by our economic blockade. Germany, meanwhile, seems likely to lose most or all of her supplies of wolfram as the result of British and American representations at Lisbon and Madrid.

Polish Anti-Semites

A difficult situation has arisen from the series of events which culminated in trials of 3o Polish Jewish soldiers by Polish courts- martial in a Scottish town, and long sentences 43f imprisonment. These soldiers had undoubtedly deserted, had appealed to Downing Street against alleged anti-Semitism in the Polish Army, and had asked to be enlisted in the British Army. Other trials are to be opened to deal with the cases of.'24 non-Jewish Polish soldiers who are asking to be returned to their native country, Argentina. It would clearly be a very delicate matter for the British Government to interfere with the internal discipline of the Polish Army, even though it is on British soil, and it would not do to allow any men who might be discontented with their service to demand transference to the British Army as a matter of right On the other hand, if it is the case that .Jews are being ill-treated on grounds of .race or religion on British territory, there would undoubtedly be strong and justifiable resentment in this country. Means would have to be found of stopping it, and in the first place there should be a searching inquiry. Mr. Eden said on Wednesday that he had impressed on the Polish Government the necessity of eradicating anti-Semitism, and ensuring that action is taken in the lower ranks of the Polish Army. The Polish Government is holding an inquiry. What matters is that action taken as a consequence of inquiry should really produce results.