TOPICS OF THE DAY.
THE BUDGET.
THE central fact of Sir Michael Hicks-Beach's Budget was the necessity for finding a large extra sum of money to meet the increase in expenditure which will take place in the coming year. The Chancellor of the Exchequer estimates that in order to meet this expendi- ture he may calculate upon an automatic improvement in next year's Revenue over that of last year of more than £2,000,000. This, however, still leaves some £3,000,000 to be obtained .in order to produce a proper balance of income and expenditure. He proposes to obtain it in two ways —partly by paying off a less amount of Debt than formerly, an partly by fresh taxation. Before entering upon details, let us say that we consider that Sir Michael Hicks-Beach has met his. Budget difficulties with true statesmanship. His virtues are both negative and positive. He has had the wisdom to refuse to listen to those who have been trying to induce him either to tax a most important raw material in the shape of sugar, or the food of the people in the shape of a shilling duty on corn, or again to increase the Income- tax above 8d. in the" time of peace. These are the negative virtues. His positive virtues consist in his boldness in tack- ling the Sinking Fund instead of being afraid of the clamour that will of course be raised, against " raiding " the national savings-box. Again, he shows wisdom in increasing existing taxes—the new Stamp-duties are hardly new taxes— rather than in raising new ones. He realises, that is, that in taxation, as in so many matters, old chains"gall less than new.
Let us deal first with the proposals in regard to the new Sinking Fund. What., the Chancellor proposes is to devote in future £23,000,000 a year, instead of £25,000,000 a year, to the service of the Debt. Of course, the Opposition profess to regard this as a most scandalous act of weak- ness ; but if it is looked at without any feeling of party passion, we ;believe that it will be recognised as not only defensible under the circumstances, but as distinctly sound finance. We do not agree with those who think that no attempt ought to be made to reduce the National Debt ; nor, again, do we hold that it is our duty to devote too great a part of the national income to benefiting posterity. There is a mean in all things. You may pay off too much, and you may pay off too little. For the last few years we have been paying off too much. When, in 1874, Sir Stafford Northcote established the fixed Debt charge, he only provided that about £5,000,000 a year should go to reduction of capital. Then the Debt stood at some £768,946,000. Now, however, that the total is only about £628,000,000, we are paying off capital at the rate of £7,750,000 a year. Surely it is reasonable to say that under these circumstances we may legitimately slow down in the matter of reduction of Debt. Even with the Chancellor's reduction we shall actually pay off as much as we did in 1874, and relatively to our total indebtedness a good deal more. But this is not the whole case for reducing our rate of repayment. In a very few years—that is, in the period between February, 1902, and July, 1906—the falling in of terminable annuities, and the reduction of the Two-and-three-quarter per Cents. to Two-and-a-half per Cents. will reduce the expenditure on interest by no less than £9,214,000 a year. But if this were allowed to fall in, and we were also at the same time to spend another £7,000,000 a year out of the new Sinking Fund, it is clear that we should be greatly, overdoing the work of repayment. It would not be wise or fair to draw such a sum unnecessarily each year out of the pockets of the people, and also it would be most inconvenient to cancel so much stock yearly. One of the results, it may be noted, of large purchases of stock by Government is that they raise the price against themselves. During four years Sir Michael Hicks-Beach mentioned that nearly £2,000,000 more had been paid for only £18,500,000 of Debt than it would be i worth in 1923 when Consols are repayable at par. Surely that is not very provident finance. not almost makes one ask the question whether it would not be better to put the sinking Fund monies into a box and keep them there till 1923 brought round the possibility of redemption at par. But while reducing the Sinking Fund charge from £25,000,000 to £23,000,000, the Chancellor of - the Ex- chequer proposes to deal with the terminable annuities in such a way as to make them still further decrease the total of . our indebtedness. The great Savings Bank annuity of £2,200,000 expires in March, 1902. Sir Michael Hicks Beach proposes to anticipate this windfall three years hence by extending the date of its falling in until 1911. This-will save him £591,000 a year. He next proposes to use this sum to cancel certain book-debts amounting to £28,000,000 of Con- sols held by the Savings Bank and the Debt Commissioners, and in place thereof to set up terminable annuities coming . to an end in 1923 when Consols will be redeemable at par. Hence, though he reduces the new Sinking Fund, he at the same time extends the operations of the terminable annuities, and thereby helps to reduce the Debt.
But, in spite of the estimated rise in Revenue and the saving of £2,000,000 a year in the fixed charge for the Debt, it is necessary to find another £870,000 or so in order to make the. Budget balance, and to give a margin in the shape of a modest estimated surplus of £230,000 for contingencies. This must be . met by increased taxation. Accordingly, Sir Michael Hicks- Beach proposes the following additions to our fiscal system. In the first place, he proposes a Stamp-duty of 5s. per £100 on the nominal value of all documents representing foreign or Colonial bonds, stocks, or shares not at present liable to duty under the Stamps Act. Secondly, he proposes to impose a charge of half a crown per pound ordinary Mortgage- duty on loan capital or debenture stock created -by any cor- poration or company. Thirdly, he proposes to increase the Stamp-duty on companies from 2s. to 5s. per £100. - On letters of allotment a Stamp-duty of 6d. is henceforth to be charged. Next, he proposes to increase the Wine-duties,— namely, an increase from Is. to ls. 6d. per gallon on wines not exceeding 30 deg., from 2s. 6d. to 3s. on wines from 31 deg. to 42 deg., an increase on sparkling wines from 2s. to 2s. 6d. per gallon. Against the proposals in regard to , stamps we have not, under the circumstances, any desire to protest, but we think it is only right to point out that the - Stamp-duties cannot be indefinitely increased -without in- flicting rather a serious injury upon commerce. .It is all very well to say that companies do not feel this or, that .
charge, and that saying is in a sense true, but ultimately there must come a point when they will feel it. After all, you cannot take water out of a bucket without lowering the water-line. No amount of care will prevent there being less water. Our criticism on the increase of taxation in the matter of wines is of a similar character. Sir Micliael Hicks-Beach's present increases may not be greatly noticed, but they are nevertheless a burden, and we do not feel sure that it would not have been better to have put an extra shilling a gallon on beer, and so have to some extent redressed the grievance produced by the over-taxation of whisky compared with malt liquors. These, however, are not points upon which we care to insist too strongly. We realise that the money had to be got, and except as regards the beer we do not suppose that it could have been dbtained better. The main point of the Budget is, as we have said, that it does nothing to restrict the free access of an important raw material to our shores or tax the food of the people, that it does not increase - the IncomeLtax, and that it has dealt in a reasonable and statesmanlike way with the repayment of the Debt. On these grounds, then, Sir Michael Hicks-Beach deserves our warmest congratulations. He has shown himself once again a financier not only of considerable resource, but possessed of a real grasp of the essential principle of English finance,—the principle ' of preserving a free market within these islands.
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