LOWER TAXES.

Press, Volume LXI, Issue 18369, 30 April 1925, Page 9

LOWER TAXES.

BUDGET STATEMENT. GOLD STANDARD RESTORED PENSIONS AND PREFERENCE. I fBT CABLE—TBESS ASSOCIATIOX—COPTEIQHT.) (austbauah AJTD N.Z. CABUS ASSOCIATION.) (Received April 20th, 5.3 p.m.) LONDON", April 23. Mr Winston Churchill, Chancellor of the Exchequer, introducing his first Budget in the House of Commons today, announced that the Act prohibiting the export of gold will lapse on December 31st. The gold standard will be resumed from to-day. This means the issuing of a special license to the Bank of England to export gold and bullion, pending the formal lapsing of the 1920 Act. Notes are to be convertible to coin at the Bank's option. The Dominions arc returning to the gold standard simultaneously, Australia acting to-day. Mr Churchill announced the application of the 1023 Imperial Preference proposals in regard to heavy and sparkling wines, dried fruits, and sugar from July Ist. There would be a surplus of £26,000,000 on the present basis of taxation.

Death duties on big estates arc to bo increased.

New duties arc to be paid on imported hops and natural and artificial silk. A new contributory social insurance scheme is to commence in 1926, providing for old-age pensions at the age of 65, and pensions for widows, plus allowances for children.

Income-tax is to be reduced 6d, and small income-tax payers will be allowed one-sixth instead of one-tenth from earned income. There will also bo a reduction in a super-tax. The House of Commons was packed and excited in anticipation of tho Budget statement. The front Government bench was filled with members of the Cabinet, and members of all parties overflowed in the side galleries. There was a big muster of peers in the gallery. Tribute to Mr Snowden. Mr Churchill was loudly cheered on rising. He paid a tribute to the careful and scrupulous finance of Mr Philip Snowden, and pointed out that tho realised surplus of £3,569,000 was remarkably close to the Budget forecast of £4,024,000. Spirits and tobacco produced £2,000,000 less than tho estimate, but beer increased by £1,000,000. Tho remission of the sugar duty had fully reached the consumer, but the remission of the tea duty had been almost entirely extinguished by higher prices. Inland revenue duties showed a surplus over the estimates of over £6,816,000. Internal and External Debt. The surplus would be devoted to the. redemption of debt. The nominal deadweight debt had decreased from £7,680,000,000 to £7,646,000,0000 during the financial year. It was most important that the policy of debt repayment should continue. The floating debt had been reduced by £38,500,000 and the external debt by £4,000,000. Savings certificates had produced £32,000,000 gross, showing a net increase of nearly £3,000,000, Savingsbank deposits had increased by £11,000,000. Tho interest on the National Debt had been reduced in five years by over £70,000,000. yearly. • The rate of Government borrowing had fallon from 64 per cent, to 44 per cent., enabling profitable conversion operations. Much larger operations of this sort were pending, from which tho taxpayers would realise important savings. The new sinking fund would be increased to £50,000,000. The capital value of the war pensions liability was now £760,000,000 and tho 'annual charge £87,000,000, as compared with over £1,000,000,000 and over £110,000,000 after the war.

Return to the Gold Standard. Mr Churchill said ihat a return to the gold standard was a long settled policy of the country and the only question had been the difficult and delicate one of how and when. The report of the Chamberlain Committee in that connexion had convinced the Government, which intended to follow the committee's recommendations in every respect. Mr Churchill emphasised that this was the most favourable moment to return to the gold standard in view of the political and economic stability at both sides of the Atlantic. It would be unnecessary to adopt gold coinage, and he appealed to all classes to continue to use notes. lie would introduce a Bill providing that untU otherwise provided by proclamation, Bank of England and Treasury Notes would be convertible to gold only at the option of the Bank of England, and tho right of tendering bullion at the mint to be coined would be confined in future legally to tho Bank of England, which would be required to sell gold bullion in amounts of not less than 400 fine ounces in exchange for legal tendor at a fixed price of 73s IOJd a standard ounce.

Big Store of Dollars. Further steps recommended by the committee, for example, the amalgamation of the Bank of England and Treasury notes, would be deferred, as the committee recommended, until we had sufficient experience of the working of a free international gold market on a gold reserve of approximately £150,000,000. When the Government decided to return to the gold standard many months ago, the Treasury began discreetly to accumulate dollars, and had now acumulated the whole 160,000,000_jlollars required for the June and December payments for the American debt, and all our other American debt obligations this year.

Finally, although he believed we were strong enough to achieve this important change from our own resources, ho had arranged, as a further protection, to

obtain, if required, credits from the United States of not less than 300.000.000 dollars, with a possible expansion if necessary. Not Moving Alone. The Government, in returning to the gold standard, was not moving alone. The United States and Gcrmapy we're either on or related to the international gold exchange. Sweden was on the gold exchange. In Austria and Hungary exchange was already based on gold or sterling, which was now equivalent to gold. Mr Churchill said he had good reason to know that Holland and the Dutch Indies were very important factors in the world 'a fortunes, and would aet simultaneously with Britain to-day.

So far as the Dominions were concerned, there would be complete unity ot action. Canada was already on a gold standard. South Africa had notified its intention to Tevcrt to gold as from July Ist. Australia and New Zealand were abolishing the restrictions on the export of gold from to-day. He believed the establishment of this great area of common arrangement would facilitate the revival of international and inter-Imperial trade. Expenditure and Revenue. Mr Churchill estimated the expenditure for 1925 at £799,400,000, the revenue £826,000,000, and the surplus at £26,600.000. The estimated expenditure was £9,400,000 over last year's Budget, and £3,700,000 over the actual expenditure last year. The disappointing result was due to the rapid political changes in the last three years not conducing to economy, and his inability searchingly to scrutinise the Estimates. The Cabinet had agreed to establish a. Standing Committee of tho Cabinet to overhaul the recurrent expenditure in addition to the Treasury's annual scrutiny. "We ought," he said, "to aim to get a reduction in Supply and expenditure of not less than £10,000,000 per year." He believed the revenuo would steadily expand, and a resolute effort would enable a yearly mitigation of the heavy burden of taxation. He pointed out that last year's remissions in taxation meant a progressive loss of revenue of £14.000,000. He anticipated a gradual but slow improvement in trade, but said he did not feel justified in budgeting for any substantial increase in trade.

New Duties. Kates of death duties, excepting the small and largest estates, would be increased, yielding £4,500,000 in the present year and £10,000,000 in a full yoar. Besides new duties on certain luxuries and hops, there would l)c a small additional duty on imported bper to countervail the tax on the home brewer. The McKenna duties would produce £1,600,000 this year and £3,000,000 in a full year. The cost of the ordinary income-tax reduction would be £3,000,000 this year and £7,500,000 in a full year. The reduction of the supertax would cost £7,600,000 this year and £10,000,000 in a full year. Pension Insurance.

The compulsory pension insurance scheme would affect fifteen million people. Employers and. workers would each contribute at the rate of fourpence for each man and twopenco for each woman. The scheme would operate in successive stages, beginning on January 4th, 1926. The State's ultimate capital liability was estimated at £750,000,000. The scheme would cover virtually the. whole area of the wage-earning population. Ho referred to the prolongation of the span* of life which, with a rapid increase of population as in Victorian times, would have the effect of increasing payments of old age pensibns to. 60,000,000 people annually in fifty years, compared with 27,000,000 at pro-* sent. The new proposals aimed at ultimately placing the whole fund on a selfsupporting basis by means of progressive increasos in contributions. He explained that the widows of insured men would receive 10s woekly plus 5s for the eldest child and 3s for others. Existing, widows of men insured under the previous Act would receive similar benefits, but only till the youngest child reached the age of 14, whilo orphans would receive 7s 6d for the eldest and 5s for others. The schemo would affect two hundred thousand widowed mothers and three hundred and eighty thousand children. All persons qualified to insure after 1928 would draw 10s weekly at the age of 60, regardless of private mcaus. Those not insured, but eligible for pensions at seventy years, will also be relieved of tho restrictions regarding means by allowing a rebate of one-sixth on earned incomes instead of one-tenth as at preßont. Incomes under £IOOO would benefit approximately by 6d, and smaller incomes by much more.

Empire Produce. He proposed to- give effect to the British Government's proposals in connexion with the Imperial Conference of 1923 so far as they did not. involve additional duties on food. He proposed to remove the existing duties on Empire dried fruits and increase the preference on Empire-grown tobacco from one-sixth to one-fourth on the full duty. He proposed to increase the preference on heavy wines from one-third to twothirds, and increase the preference on the surtax on sparkling wines from 30 to 40 per cent.; furthermore, to restore for a decade the preference on sugar to the level at which it stood before the duty was reduced last year. These preferences would operate from July Ist, and will cost £1,470,000 this year and £1,720,000 in a full year. The duty on hops would be subject to the Dominion preferential rebate of one : third.

He remarked that the Budget did not include any provision for intcr-AUied debt repayments to Great Britain, but he was budgeting for £9,500,000 from Germany, whereas £12,000,000 were received under this head yesterday. Tho new taxation would yield £10,230,000, bringing the surplus up to £36,830,000. The new taxation should yield £20,000.000 after the current year. He would propose legislation following tho resolutions of the Economic Conference of 1923 concerning the liability of Dominion Governments trading or owning property in Great Britain, and legislation for ineome-tax relief in favour of High Commissioners residing in Great Britain.

Non-Party Proposals. Mr Churchill concluded, amid cheers, ■with a peroration emphasising the non-class and non-party nature of the proposals aiming at the apportioning of burdens proportionately to aseent of the ladder of wealth, liberating the production of new wealth from the shackles of taxation, promoting contentment, and stability, and so make Great Britain truly the home of all its people. The House of Commons agreed to all the Budget resolutions after brief speeches by Mr Snowden and Mr Lloyd George. The former reserved his thunder for the protective duties, especially the McKcnna duties, which he declared Labourites would repeal at the first opp rtunity. As regards Imperial preference, the cx-Chaneellor was not opposed to rebates which were not of a protective character, but Mr Churchill's duties were protective, and consequently invited strenuous opposition. Mr Lloyd George similarly regretted the revival of controversial issues, but was generally congratulatory pending a closer examination of the proposals.

Currency Committee. The report of the Currency Committee, to which Mr Churchill referred, expressed the opinion that the domestic circulation of gold was a luxury which was dispensable. Britain was not likely to afford it for a few years, but the established national habit of using paper currency would be sufficient to prevent the absorption of an appreciable quantity of gold into domestic circulation. If there was such a risk, the committee was of the opinion that legislation would be essential to prevent an abnormal circulation of gold till the gold standard had been firmly established. The coinage of half-sovereigns in any case should not be resumed. The Committee recommended that so soon as parity is restored, the Bank of England should be authorised to prepare for printing its own notes. The experience necessary to enable the amount of fiduciary issue to be fixed should have been gained by tho end of 1927, and tho transfer of the issuo could be effected early in 1928, perhaps bofore.

Health Insurance. Lobby opinion generally is complimentary to the cleverness of the Budget and the ability with which the various interests have been balanced. The general impression is that the outstanding features arc the return to the gold standard and the extension of the health insurance to thirty million people. The effect of the insurance proposals is that men contribute 4d weekly and women 2d, and employers similarly towards the new benefits, the State's contribution being the funds necessary to make the benefits immediately available. Business men aro of the opinion that the extra 4d will be a handicap to many industries, but that eventually the scheme will result in a reduction of local rates, which will be a compensation. Labour's Eegret.

The Labour Party frankly applaud pensions to widows, but grumble that the scheme is contributory. Their chief regret is that Mr Snowden did not embark upon such a policy in 1924. Sir William Joynson-Hicks, Secretary of State for Home Affairs, speaking at tho Holbom Restaurant, claimed that the Conservatives had given the lie to the statement that they legislated for one class only. Other parties talked of widows' pensions, but the Conservatives had brought them in. The Conservative Party looked before it leaped, but when it. leaped it made a mighty splash. Miss Wilkinson, Labour's only woman member of the House of Commons, considers that Mr Churchill has given an unnecessary pension to ablebodied He should have limited the scheme to widows with children.

Mr Lloyd George, speaking in the House of Commons, welcomed the insurance extensions, but said he hoped the Government would make the contribution from the Exchequer higher, thus lessening the contributions from employers and employees during tho existing unemployment. He regarded tho whole schemo as betraying an ingenious, resourceful and exceedingly audacious mind. '

Encouragement of Commerce. Mr W. S. A. Hewinß, chairman of the Empire Development Union, says it is satisfactory that the resolutions Of the Imperial Conference will be carried out. It will have a most encouraging effect upon commerce, which depends upon Imperial trade. Nevertheless Imperial trade protagonists still are unsatisfied. Mr Smith, chairman of the Cinematograph Benters' Society, declares that the reimposition of the duty on .foreign films is preposterous, as there is no British film industry needing protection. The motor industry is delighted at the reimposition of the duties. Wiat the Press Thinks.

The "Daily Express" describes it as bad that Mr Churchill should have directed himself entirely to the relief of British .iommercc and industry. A reduction of Is on the income-tax would have stimulated trade. The paper asks: "How can the mining industry pay an additional tax of £BOO,OOO for insurance. '' The "Morning Post" appears to think that the Budget does not sufficiently stimulate industry and agriculture. It describes the industrial stag-) nation as "the skeleton sitting at Mr j Churchill's feast. Let us remember J that these calculations arc made without regard to the effects on our future. If the present industrial decay increases or even continues, Mr Churchill is budgeting in vaeuum." The "Daily Telegraph" says that the Budget will be very welcome to the vast body of people who have to earn their living. The "Daily Chronicle" says that the most immediate disappointment is that the proposals do so little for industry. Sixpence off the ineome-tax is not a big help towards setting industry on its feet. Moreover tho benefit of the remission is considerably cancelled by the new insurance burdens.

, The "Daily Herald" says that the Budget relieves tho well-to-do by reducing the income-tax, and lays upon the workers an additional weekly expense for insurance. It imposes duties which will make many things dearer, but neither Mr Churchill nor tbe Government is to blame so much as the stupid workers who voted them into office.

FREE EXPORT OF GOLD.

DECISION APPLAUDED.

"BEST THING THAT COULD HAVE HAPPENED."

(AUSTBALIAX INT) S.Z. CABI.K ASSOCIATION.)

(Received April 29th. 9.15 p.ni.l

LONDON, April 29.

The return to the gold standard is featured by the newspapers as the. most important aspect of the. Budget from tho viewpoint; of world finance. It is calculated to facilitate stability of prices, restore the confidence of traders and encourage business dealings all over tho world.

The "Mornin- Post's" city editor expresses tho opinion that- it is difficult to determine how tho money market may be affected for the next few days. It may easily witness violent movements in American exchange on London according to tho extent to which tho present developments have been preceded by speculative operations in sterling, but shortly things will settle down and sooner or later exchango must bo affected by financial and economic developments whether expressed in ordinary trade movements or tho buying or selling of securities. AVo hold, therefore, that unless it is shown that our economic position is sufficiently strong to maintain Ameiican exchange, dearer money rates might havo to be resorted to for a while. Tho importance of protective measures in tho shape of reserve dollar credits in the United States is recognised. Such credits may be regarded as constituting a reserve which is unlikely to bo lightly encroached upon. The "Financial Times" says that the fact that the wholo Empire will act simultaneously apart from the adhesionof foreign countries, who will follow suit is a remarkable achievement. Tho decision is the best thing that could have happened in the interests of British credit and prestige. Behind the gold reserves stands the credit which the Government has obtained from tho United States, recourse to which we are confident need not be frequent or extensive.

Immediately the Budget dotails wore known, sterling on tho London market reached 4.84 dollars and closed at the evening only a tiifle lower.

The Dutch Government is re-estab-lishing the gold standard to-day.

AMERICAN SATISFACTION.

STERLING LEAPS NEARLY TO PAR. (Received April 29th, 5.5 p.m.) NEW YORK, April 28.

The Fodoral Reserve Bank iu New York has complotod an arrangement, in which other reserve banks participate, to place 200,000,000 dollars in gold at the disposal of the Bank of England.

It is believed that J. Pierpont Morgan and Company will supply another 100,000,000 dollars...

The demand for sterling advanced to 4.83 9-16, the highest for 10 years, and within 2i cents, of par, within 15 minutes after the news of Great Britain's return to the gold standard. Regarding Mr Churchill's statement that a three hundred million dollars credit can be arranged with the United States if necessary, tho Secretary of tho Treasury, Mr Mellon, bolievos that such a credit is not actually needed, but affords an additional security. Mr Mellon's opinion is that, sterling has been getting stronger through the growth of foreign trade, and even if the gold embargo had not been lifted the pound sterling would have returned to par and remained tuero through economic conditions. The attitude of Mr Mellon and other high Troasury officials is that anything that may be done by Great Britain to establish a gold basis and stabilise currency is desirable from the general economic standpoint, and favourable to tho interests of the United States.

lu tho meantime, J. P. Morgan and Company, whose house ia expected to handle the British credit, if made, declared that comment would be withhold pending direct advices fTom the British Treasury. The stockmarkot hailed the British announcement as the most far-reaching step towards stabilisation sinco the acceptance of the Dawes plan, and this sentiment is reflected in tho generallyimproved tone in the finance and commodity markets, while the depression following the German election has been completely forgotten. Wheat rallied five cents following sterling gains. Almost all European exchanges advanced, while stocks showed relief from tho persistent pressure which recently kept them in an unsettled state. Financial leaders arc enthusiastically claiming that the British action means that good money will predominate throughout the world, enabling business men everywhere to carry on their operations with the assurance that no erratic movement of exchanges will throw their calculations out of joint, causing big losses. Confidence is entirely restored, and it ia anticipated that the international markets for raw materials and foodstuffs will immediately improve.

IN PARLOUS STATE:

AUSTRALIAN INDUSTRIES. (AOSTRALIAK AKP K.Z. CABLX ASSOCIATION.) (Received April 2?th, 10.25 p.m.) MELBOURNE, April 29.

Mr Guy Smith, associate president of the Chamber of Manufacturers, re-] ferring to the fear that the Federal Government will not give effect to the recommendations of the Tariff Board and grant increased protection to certain industries, said the woollen industry was in a deplorable state, and unless something were done for the engineering trade, some firms would have to close. In addition to these, the match industry and paper and cardboard industries and the ruliber trade were anxiously awaiting the revision of the tariff. The toy industry which promised great things is nearing its death knell. The surplus stocks of ! Great Britain and Germany have been dumped into Australia, and to-day Gerpractically controls the toy trade* : tho commonwealth output having fallen | off sixty-five per cent.

INTERNAL CURRENCY.

NOTES TO REMAIN

MELBOURNE. April -

Mr Stanley Isruec. Prime Minister, announces that arrangements have been completed by the Commonwealth Government for Australia to Teturn to the free export of gold concurrently with Great Britain.

He explained that it was not intended to substitute gold for notes i» internal currency.

The use of gold by individuals would tend to deplete *tlie gold reserves held by the banks, and it would be necessary to economise in the use of gold for internal purposes ia all countries.

POWER OF PROHIBITION. RETENTION BY DOMINION. (sfkcui. to "Tas raiss.") WELLINGTON, April £». The acting Minister of Finance (the Hon. Sir Francis Bell) stated to-day that the Dominions had been consulted by the British Government regarding the prohibition of gold export. He understood from tho Chancellor of the Exchequer, that th-_> embargo on the export of gold would cease to haw effect at the end of the present year in tho United Kingdom, tho Act which authorised tho prohibition betas allowed to lapse. "New Zealand/' said Sir Francis, "will retain tho power to prohibit, but will freely license tho export of gold. The New Zealand Act prortdes that there shall lie no export without tho license of the Minister. That license will bo given, but we will retain tho. power to prohibit.'' Tho (granting of licenses to export gold did not mean that soTweigns wottld come into use right away, as barik notes were still legal tender, the authority for that purpose being contained in another Act. \

EFFECT ON EXCHANGES.

BANKERS' VIEWS. Tho reversion to the gold standard in Great Britain and tho Dominion*, as announced by Mr Winston Churchill in his Budget, is considered one of the most important financial developments which has occurred since the world-wide slump at tho termination of tho war.

When approached yesterday coneeraing the matter, the managers of 3 namber of the Christchurch banks intimated that so far they had received no official notification of the change, but details concerning it could be expected to arrive here -within the cowrne ' of the next few days. How it wilt affect the Dominion when it does awite is somewhat problematical, bat one thing is almost certain, and that i» that the exchange rates trill be stabilised to a very large extent. The satoa* tion at present existing in the Donuniea is that the banks, through payment made for exports, have built up large balances in London where the main. form of investment is in Imperial G«ternment securities at 2i per eent. The banks have been unable to export such balances to the Dominions, where the money could be readily absorbed, and where GJ per cent, to " per eent. could be obtained for advances. The exchange rate on drafts for London is exceedingly favour: Me, so far as 2few Zealand is concerned, but from th* London end the rates are by no mean 80 attractive. For instance, should •petson desire to send a draft of £IOO to London from the Dominion, be woaH require to pay into the IJew Zeslawi Bank only about »8 10s, but ahead* the reverse be the case the full XKHK plus the exchange rate of 37s 6d, tree!* hare to be paid in at the London end. Should the reversion to the gold standard allow of the exporting- of KM of tho bank balances which have seeomulaliod in the Old Cbuntry to <*« Dominions, banks in 3Tew Zealand woa&f be in a position to lend mora asaaey here, but whether or not this V*«M allow of a reduction of interest rates on overdrafts i* another question, and ons on which bank managers are reticent. One bank manager stated yesterday that if interest rate* -were reduced, thcro would be an iacrcttßne tendency towards speculation, and it would be possible that interest em d»» posits would show a eorreapsadisj decrease. This may tend toward* a reduction of deposits—a disastrous eeasequence which must be avoided- H» present position with regard to the . world's gold supply was that America. had too largo a surplus, and *** exporting gold to Australia, whereat, d«- , ing the war, Australia *ra» expottfam gold to America. The United Stat** favoured the releasing; of geM be/Midi the necessary sums held for "f* 9 for such money was not being ati Heed for earning at the present time.

COMMERCIAL VIEWPOINT.

| PROMPT ACTION DJSSIREDI IJcforring to the return of the foJd standard, as announced in tie Imperial Government's Budget, Mr W. afacfcja, president of tho Canterbury Chan*h»r of Commerce, made the following statement to a representative of "The Press" yesterday:— The welcome return to the gold stawlard by Great Britain and the Poauawas is an event of immense importance, sot morely to the banker and the eee*ontfst, but to everyone in this Dominion. The banks should immediately reduce tee high rate of exchange'. It is understood that with the American exeanaga at 4.78, tho Australian banks hare beat importing gold and making a profit en it. The return to the gold standard fc will probably mean that the dollar wiU advance to 4.84 or 4-85. Thia should. enable the banks to redoec the exehangoby about, 30s per cent, which will oe an immense advantage to the shipper of produce at the present time. If would bring to the producer & welcome "come back," and partly aarrc to counter-balance the enormous i»p in wool daring the past few months. I am afraid the London wool sale* next week will show a further drop, whkh win reaet unfavourably against erery seller of lambs in New Zealand daring the remainder of the present season. A decrease in the exchange would possibly make up to him the probable redaction in price consequent on next week's sales. * On drafts which have already been discounted by the banks at the high rate of exchange, the banks should giv* a rebate in all cases where the drafts have not yet been taken up, as they will get an immediate profit on thaw drafts, and it seems only equitable that they should pass it on. I expert that the banks will make an aonouneeaH-iii on this subject before long, but in tft2 interests of the producers and the eomincrcial community it is imperative that they should do this at once. ****** Government is so largely interested w banking in New Zealand, it should take the first step immediately In the interests of the Dominion. It w.ll be the wish of all Chambers of Commerce that . action should be taken at once.