Funking the Fences
Sta,—You are, of course, right in your criticism of Mr. Attlee's pro- gramme curtailing our present national expenditure. The subsequent debate in the House on these proposals was a sorry performance. It is significant that Mr. Morrison found it necessary to state that the Premier's proposals were only "a first instalment." He evidently realises that the nation is not satisfied that they are adequate.
Our citizens are often confused as to the issues involved, for few of them have made a study of the problems of international finance, but these can be simply stated. They represent the difference between "capital " and "income " expenditure. Mr. Herbert Morrison claims that the ordinary worker was never better off than he is at present, and if by this he means that he is receiving larger wages in paper Ls this is, of course, true, for the average wage is £5 to £6 a week as compared with 50s. before the last war. He is, however, being paid in a currency which is only worth 6s. as compared with 20s. pre-war, and is thus receiving only a third of his apparent payment.
The ultimate question, which was not brought out clearly in the debate, is as to whether the Government are financing on income or capital, and this is the crucial issue. If our current expenditure were made from income, the situation would be less serious, although the burden of taxation to every citizen is even higher than it was during the critical period of the war ; but if we are spending capital, then obviously we are living in a fool's paradise. There can be no question as to what is happening. Our pre-war national debt amounted in 1938 to £8,163,000,000 and in 1948 to £25,734,000,000. We increased our national debt by £1,000,000,000 in 1948, or £80 for every'ramily in the country.
It has been estimated that the recent devaluation of the £ incurred a loss of capital assets approximating to £15,000,000,000, and this it reflected in the present position of Government stocks. An illustration of what it means to the investing citizen is reflected in the present price of gas stocks. These were taken compulsorily over from the investor at approximately 103 and were returning 5 per cent. Today, although the scrip for the stock has not yet been issued by the Govern- ment, it now stands at 871 on a 3 per cent. basis—a loss to the investor of £16 on every £100. Mr. Morrison's boast, therefore, only means that our citizens are apparently immediately better off because we are living on capital rather than on income. In his speech he says, " We have had it from the spokesman of the Opposition that the people think they are better off. That is good enough for me." An amazing admission I Devaluation will have the effect of making all goods imported from the dollar countries cost to three times the value that they did pre-war, and this applies both to food and raw materials. It will also greatly increase imports from the sterling areas.
Meanwhile, the present staggering burden of taxation, which of course affects every citizen in the country, whether they are directly taxed or not, is further reducing our capital assets by making it impossible to keep our productive plants up to date and allowing these to become obsolete. The result of this is that we shall be still less able to meet competition on equal terms with other countries. Lancashire is already complaining of competition from japan.
A minimum reduction in our Government administration of £500,000,000 a year would not overcome our difficulties, but would at least be a step towards making us solvent once more. To secure this result, a halving of our food subsidies (which do not finally decrease the cost of living), a reduction of £100,000,000 a year in our health expenditure and an additional tax on both beer and tobacco would be steps in the tight direction, in addition to the proposed reduction in expenditure outlined by the Premier. Sir Stafford Cripps would reply that these proposals would result in large-scale unemployment, but the plain fact is that if we were not drafting some two millions of our population into the Services, and extravagantly employing them in Government administrative posts, we would be facing this unemployment already.
Members of all political parties have stressed the fact that the only solution is harder work and increased output, and that, in a measure, is true, but with these two methods of relief the further one of largely decreased national expenditure is equally necessary. With an estimated income of LI0,000,000,000 a year, some £7,000,000,000 are being appro- priated for direct and indirect taxation, and capital depreciation, thus destroying the incentive to hard work, discouraging the incentive to trade expansion, and depreciating our credit (and therefore our currency) throughout the whole world. Until this process is reversed, the " Ship of State " steadily drifts on to the rocks.—I am, yours faithfully, ANGUS WATSON. Sunlight Chambers, 2-4 Bigg Market, Newcastle-on-Tyne I.
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