The Press Thursday, April 19, 1923. The British Surplus.

Press, Volume LIX, Issue 17742, 19 April 1923, Page 8

The Press Thursday, April 19, 1923. The British Surplus.

The fact that Mr Masscr lias announced a handsome surplus, and has promised that, in consequence of it and of the conditions which produced it he will propose a reduction of two millions a year in taxation, lends mur-h interest to the problem confronting the British Chancellor of the Exchequer, who also finds himself with a very large surplus

for the rear ended March 31st last. The position in New Zealand is entirely free from . difficulty. This is a borrowing country, and will long continue so, for very many years must elapse before the work of development can bo carried on without loans. It would be absurd, therefore, to apply surpluses to the reduction of the debt, and borrow more money the next day, as it w-ero. The surplus must be applied to the reduction of' taxation, and this can be done with perfect safety frcm the Government's point of view, since the period of depression is ended, and there is. every indication that the economic conditions will remain good. In Britain tho ca.se is quito otherwise. Britain is rot a borrowing country, and the reduction of tho enormous indebtedness incurred through the war is a matter of great importance. Before the war the business of tho Chancellor was to balance his accounts as closely as possible^—to avoid large surpluses as well as deficits. What his duty is to-day is a point upon which people who are entitled .to bo heard differ very seriously. The burden of taxation is very high, and it can be materially reduced only by neglecting altogether to paj off any of the debt or even to provide for Sinking Funds other than those which are obligatory, as for instance, the i per cent, on the debt to America. The Government has decided that the surplus of 100 millions must be applied to the ends of debt reduction, Mr Baldwin giving, amongst others, the following J'atber curious reason: that to hold up a surplus of 100 millions in the Exchequer would produce a crisis of very great severity in the money market. While, therefoi'e, the peculiarities of the money market prevent the Chancellor from carrying forward the surplus, he has announced reductions in taxation amounting to 34 millions for the coming year.

The business community and the taxpayers generally will need all their fortitude to agree with the advice given by many responsible commentators (and adopted by the Government) that they Avill in the long run be in a better position, if the work'of debt-reduction ifl kept up as the* first duty of the Government. A sinking fund of 50 millions a year—which is the Chancellor's aim—is a large sum to take from the taxpayer, but it makes a- comparatively trifling difference to the annual charge for interest. . Nevertheless, at 5 per cent., it would extinguish a debt of 5000 millions in about 37 years. This 13 the calculation of the "Economist," which urges that the burden of debt per head will not shrink through the growth of national income in the way in which it shrank after the Napoleonic wars, and that, in the industrial competition of the future, Britain must • make a sorious and sustained effort to disencumber herself of a handicap from which many of her competitors will be free. The "Economist" brings forward an argument which suggests that a policy of debt-redemption may operate as effectively as a policy of tax-reduc-tion to increase the funds available for investment in industry in Britain: "Money used for the repayment of in- " ternal debt is merely the transfer of " purchasing power from one set of "hands to another. The difference in "the economic effect between transi'er"ring money from taxpayers to holders "of "War Loan, as compared' with leav- " ing- it to be spent by the former, is " not precisely calculable; but, generally "speaking, it may be presumed that, " on the whole, the transfer would tend " to take money from people who would " spend it on consumable goods forth-t " with and hand it to those who would " re-inve'st it in industrv."