TOPICS OF THE DAY.
THE BUDGET.
WHAT should we say of a dentist who, when he had taken out two or three teeth more than was neces- sary, boasted to the patient of his prowess, congratulated himself on "a very skilful extraction," and pointed out how little pain had been caused owing to the potency of the " patent gas " which he had so freely administered P Surely we should say that the dentist was a very sorry practitioner, and that, instead of boasting over the fact that ho had taken out more teeth than was necessary, he ought to repent in sackcloth and ashes for not having left the teeth in the patient's head as long as possible in order that they might there do their proper and essential work. The Chancellor of the Exchequer, with his realized surplus of nearly seven millions, is exactly in the position of the dentist we have described. Owing to his imperfect calculations both as to raising revenue and spending it, he has extracted from the pockets of the tax- payers, the majority of whom are very poor men, six and a half millions more than he need. have taken, and now, to add insult to injury, he is bragging of his cleverness, when in reality he should be apologizing for his ineptitude. A Chancellor of the Exchequer must, of course, make ample provision for all the essential needs of the nation, and especially for its adequate defence ; but every penny he takes over and above that is a crime. When it passes into the dead hand of the State the money ceases to multiply and to be a source of fresh wealth and energy. If, however, it is left in the pockets of the public, by far the greater part of it will bring forth fresh wealth, some seven-fold, but a great deal twenty-fold, sixty-fold, or even a hundred-fold. Yet, strange to say, these element- ary facts seem to be quite ignored by the rank and file on both sides, though we are glad to see that Mr. Austen Chamberlain shows signs that he, at any rate, realizes the true duty of a Chancellor of the Exchequer. The politician in the House, however, as we have pointed out so often in these columns, appears to be in love with taxation for its own sake. To him it is no longer a necessary evil. It has become a positive good. He wrangles no doubt with his brother politicians as to how this positive good is to be applied, but both sides insist that if you can only get the right kind of taxes—one side is for direct and the other for indirect—you will secure a sort of patent manure which will make prosperity spring up from our fields and from our factories like the golden daffodils from the grass. The Chancellor of the Exchequer, with his unrivalled capacity for muddled thinking and tall talk, has clearly persuaded himself that he is the greatest of all public benefactors. Ho believes that he has taxed the nation into prosperity, whereas in truth he has interfered with and cut down that prosperity, or, rather, taken away a groat deal of its solidity from it, and made it rather a boom for the rich man and the speculator than a source of improvement for the hand-workers and the small traders. Though they may not know it, it is on them that falls chiefly the ultimate weight of every tax, no matter where it is first applied. It is they who are " kept in their place " by bloated taxation and prevented from obtaining that rise in life which they ought to have, and might have, under a better system. And hero we may say, as we have said elsewhere, that it is very greatly to be hoped that in the inquiry into the labour unrest attention will be paid to this side of the question and to the manner in which the weight of rates and taxes depresses the poor and acts as one of the chief agencies for the manufacture of paupers.
Let us turn, however, from the so-called glory, but in truth the disgrace, of the Budget—the raising of an un- necessary six and a half millions—and consider the manner in which Mr. Lloyd George proposes to deal with his realized surplus. Here we are glad to say that we are able to find ourselves in agreement with him, for we have no desire to treat him as the bogey man of politics. He is not that, but only a very flighty politician with few political scruples to whom an unkind Fate has handed over the management of that vital national interest, the guardianship of the public purse. By law, and most wisely. in general circumstances, the realized surplus goes automatically to the repayment of debt. Our circumstances, however, are not normal, and therefore the Government—we must not assume that finance is as yet considered altogether Mr. Lloyd George's private preserve, a matter on which he alone has the right to express an opinion—have decided. that they call for a suspension of the rigid applica- tion of the law. At the present moment we are waiting to see whether Germany merely goes on with the policy announced in the original Navy Act of building up a fleet of certain proportions and then being content with maintaining it in strength and vigour, but not develop- ing it further. If she does that, the provision already made by our Admiralty for naval construction and for the manning of the fleet may be regarded as adequate. If, however, she is not content with her original naval pro- gramme, but decides greatly to augment her fleet, then, as the Ministry realize, and as they have already announced, this country must add to her Navy on a large scale, and lay down two new capital ships for every extra capital ship laid down by the Germans. But this will mean huge extra expenditure on our part, though we trust it will not be maintained for any considerable number of years. That being so, it is quite reasonable that this extra and abnormal, and in a sense temporary, expenditure should be met by abnormal and temporary financial arrangements—resort being had, we will not say to a naval loan, but to something of that nature. But if recourse is had to anything in the nature of a loan, the first effect must be to stop the paying off of debt or to reduce such payments. No sane man borrows with one band and pays off debt with another. To put it in another way : If the Government are going to borrow for any purpose, they should begin by borrowing from themselves. Clearly it would be absurd to pay off six and a half millions of debt in April and borrow six millions, or even three or four millions, in July or August. At the same time and as the question of the German naval increase is banging in the balance it would be unreasonable to impose new taxes for our extra naval expenditure when it is possible that those new taxes may, after all, not be required. The sensible and businesslike thing is to keep the realized surplus in band for another twelve months and see whether it is wanted or not. We may point out here, however, that the arguments which we have just used only apply to the possibility, or we fear the probability, of there being need for great extra naval expenditure. Such probability justifies the suspension of the Sinking Fund. Other financial expenditure—such, for example, as bribing the Irish people to accept the Govern- ment's Home Rule Bill by lavish and unjust doles to Ireland, or the greasing the wheels of the Insurance Act by extra grants of money paid, not out of annual taxation, but out of money which ought to go to the decrease of debt—is a very different matter. Here resort to the realized surplus is utterly unjustifiable. We assume, therefore, that the Government intend to earmark the realized surplus of 1911-12 as emergency money for the Navy, which, if required, will be spent upon the fleet, but which, if not required for that special purpose, will go to its proper destination, the repayment of debt.
The next point to be considered in the Budget is the question whether or not Mr. Lloyd George was right in not reducing taxation in view of his large surplus. 'Theoreti- cally, and if he assumes that this year will be like last, he is, by leaving the taxes at their present height, in danger of once more playing the part of the inexpert dentist which we have described above, and of extracting money un- necessarily from the taxpayers' pockets. In the present circumstances, however, we bold that it would be foolish, in spite of his grandiloquent language about the increasing boom in trade, to assume that the coming financial year will be as prosperous as the past. For our own part we expect that he has under-estimated rather than over- estimated the injury done to our finances by the coal strike. All the signs point, not only to a reduction in the yield of taxes, both on rich and poor, through the closing of the mines for seine six weeks, but also to a general shock to trade and public confidence. No doubt things are not nearly so bad as they might have been, but in all probability one of our greatest industries has received a very serious wound, and a great many other industries have suffered sympatheti- cally. Again, the trade boom, like all trade booms, is likely to break down within a short time, and we can hardly doubt that the processes of reaction will be considerably accelerated by the strike. • We must never forget that when once a commercial reaction begins, it travels very quickly indeed. But not only may we expect a falling-off of revenue. There is every reason to expect that the Insurance Act will cost a very great deal more money than is provided for in the sanguine estimates of the Chancellor of the Exchequer. It is possible, no doubt, or rather, we should say, exceedingly likely that, owing to administrative difficulties, the Act will not be able to come into operation till January 1st, 1913; but till that decision is come to we are bound. to assume that expenditure under the Act will begin on July 1st. That the Rome Rule Bill will propose a very con- siderable waste of the taxpayers' money and involve extra i burdens is, we think, certain ; but as there is no possibility of the Home Rule Bill passing this year, or even next, these financial contingencies need not be considered. We hold, then, that, owing to the precarious nature of the com- mercial situation, to the likelihood of the yield of taxes being interfered with by the strike, and to the fact that the Estimates are up by nearly six millions, the Chancellor of the Exchequer was right to leave taxation for the coming year at the same rates as in the year that is past.
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