Finance
A Recovery Budget
THE greatest surprise in the Budget was the fact that the prospective Surplus for the current year on the existing basis of taxation fell far short of any of the- Press estimates which had been formed. Nevertheless, and for the reason explained later, it is this feature of the Budget which, on careful consideration, has commanded special approval in the. City. Outside estimates of the possible .Surplus had ranged from anything from £30,000,000 up to £60,000,000, but the actual figure was just over £29,000,000.
CAUTIOUS ESTIMATES.- •
It was in the matter of Income Tax and Surtax that forecasts went particularly astray. Having regard to the much better conditions of trade _ prevailing during recent months, it had been imagined that the Chancellor of the Exchequer would budget for a substantial in- crease under these heads. As a matter of fact, however, when allowance is made for the _fact that the Exchequer will benefit to the extent of £12,000,000 through receiving the whole of the Tax under Schedule " D " within the year, Mr. Chamberlain budgeted for a decline, the estimate of Income Tax being for an increase of only £11,000,000, while in the case of Surtax the Chancellor looks for a fall of £2,590,000. That the official estimate errs on the side of extreme caution there can be little doubt, and, indeed, that remark applies to almost every item in the Budget. Estate Duties, it is true, will not receive the windfall from such a huge estate as that which had to be dealt with last year, but, allowing for the rise which has taken place in prices of securities, the anticipation of a decline of £9,270,000 for the year is certainly a cautious one Nor does the anticipation of a further increase of £4,473,000 in Customs seem to reflect any undue optimism, and altogether, not- withstanding the admitted evidence of greater prosperity, the expected increase in the entire Revenue is only £4,604,000, in spite of the additional £12,000,000 Income Tax under Schedule " D " which, as already noted, the Chancellor should receive during the year.
DEBT REDEMPTION.
Not only, however, is it true that another year must elapse before the Exchequer obtains returns on higher in- comes for taxation, but we shall also do well to remember that the present Budget can be better described as a " Recovery " than a " Prosperity " Budget, and because of that, caution is still necessary. It is, however, the Chancellor's clear recognition of this fact which imparts the greater value to the concessions which he has made in the shape of restoration of " cuts " and unemployment benefits, together with the reduction of 6d. in the standard Income Tax. Although not definitely re- establishing the Sinking Fund, Mr. Chamberlain has devoted the whole of last year's realized Surplus to Debt redemption, while it is reasonably certain that his estimated figure for the service of the Debt for the coming year will leave him with a good margin for a Surplus for Debt redemption. In fact, and unless we should experience unexpected vicissitudes during the current year, I have no hesitation in expressing the opinion that the year will close with another substantial realized Surplus.
INCREASING CONFIDENCE.
Therefore, the City is quick to perceive wherein lies the real merit of the Budget. If the concessions as
regards taxation and unemployment pay had been accom-
CHEAP MONEY PROSPECTS.
I am glad, too, that the Chancellor of the Exchequer acknowledged quite frankly a point to which I have re- ferred more than once in these articles, namely, that the claim of the Income TaXpayer for some relief was undoubtedly strengthened by the fact that, as an investor, he or she has suffered a considerable diminution in income as a consequence of Government Debt conver- sions, while this reduction in incomes promises to be pro- gressive if the rise in investment stocks continues. Indeed, the only remark in the Chancellor's speech which jarred slightly, was the cheerful reference to the hope of a continuance of very cheap money, with its effect upon gilt-edged securities. The hope was, of course, a natural one from the point of view of the Debt service demands upon the Exchequer, but, all the same, I think that the extreme famine in investment stocks, which is due, to some extent, to the restrictions on new issues of capital, is not without its dangers, serving, as it does, to make the investor search too eagerly for securities giving a higher interest yield at the expense of safety.
There can be no doubt, however, that, taken as a whole, Mr. Chamberlain's Budget is regarded in the City as a triumph of financial Statesmanship, for it combined the production of a sound Balance Sheet with just that measure of encouragement in the shape of taxation con- cessions most likely to stimulate industry and, therefore, stimulate the National Revenues for the current year. Having listened to very many Budget speeches _in the House of Commons, I should find it difficult to give a higher place to any previous Budget, statement in modern times, while its favourable reception from all members of the House was something to remember.'- panied by a too optimistic estimate of future revenues, much of the good effect of the concessions would have been removed because there would have been fears with regard to the position a year hence. As it is, all those benefiting by the Budget concessions can do so with an assured feeling that there has been no strain on the Exchequer, but rather that the Chancellor has been as careful to consider the necessity for a sound Balance Sheet as for giving- such encouragement to business enterprise as lay in his power. It is too early, perhaps, to talk about the possibility of a further reduction of 6d. in the Income Tax a year hence, but, at all events, to use the Chancellor's own words with reference to his present concessions, " We can venture to remove a sub- stantial portion of the load which we have been carrying without fearing that presently we shall have to put it back." 11...; •
ARTHUR W. KIDDY.
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