BRITISH BUDGET

Press, Volume LXII, Issue 18678, 29 April 1926, Page 9

BRITISH BUDGET

TRADERS DELIGHTED, j j APPROVAL OF PREFERENCE J CLAUSES; i ADVANCE IN DEVELOPMENT. (BT CA9LE-PBJSSS ASSOCUTIOS—COrraWHT.) (AUSTRALIAN AXD K.Z. CABLE ASSOCIATION) LONDON. April 2"British and Dominion traders are delighted with tho Budget proposal to stabilise-preferences for LO years, con sideriu'g that it removes the annual fear of alteration or revocation, which previously has been the greatest deterrent to the fullest exploitation of tho Empire's commodities. Mr Ben Morgan (chairman of the British Empire Producers' Organisation) said: ''lt means an enormous advanco in the development of preferences. and will justify the employment of greater capital in Empire industries, resulting in the expansion of interEmpiro trade." Motor traders point out that the extension of the McKenna duties to commercial vehicles will assist the development of exports, which will further be stimulated if petrol, instead of horsepower, is taxed in 1927, as promised, resulting in the more extensive manufacture of long-stroke engines suitable for Dominion requirements.

"BREACH OP FAITH." (Received April 28th, 5.50 p.m.) LONDON, April 27. In the House of Commons, Mr A. V. Alexander, a Labour member, said the Dominions might have ground for a charge of a breach of faith if a future Government romoved food taxes, thus abolishing preferences. Mr Winston Churchill, in reply, said that preferences fell if and when the tax fell below the preference level. The House adjourned until to-morrow.

BETTING TAX. LABOUR'S CAUSTIC .CRITICISM. LONDON, April 27. In the House of Commons, Mr Philip Snowden, during the Budget debate, said that the betting tax was imposed in the face of the expert opinion that collusion If twee n barker and bookmaker was very easy, and both were interested in evasion. Mr Churchill was at the end of his resources when he degraded tho revenue by a tax on one of the greatest present evils. Last year it was a rich man's Budget. He could now say that it was the Budget of a profligato bankrupt. Sir John Simon wished it clearly understood that any future Ministry could sweep away the whole protective system recently created. Mr E. Harmsworth congratulated Mr Churchill on tho preferential proposals, and hoped that future Budgets would include some steps in the direction of real tradlng-agroement between the different Dominions and the Mother Country.

LABOUR'S DECISION. (REUTEE'S TELZGBAHS.) (Eoccived April 28th, 8.50 p.m.) LONDON, April 28. A meeting of the Parliamentary Labour Party decided to oppose all the new featnres of tho Budget,, including the betting tax. INTERNATIONAL ASPECTS. (BPIOIAL TO 'THE PRESS.") (By the Eight Hon. Philip Snowden, M.P., late Chancellor of the Exchequer.) [Tho following article was written by Mr Snowden in the middle of March, and it shows very clearly the lines of attack which the Opposition will follow.] Tho experience of the world during tho last seven years has brought homo very painfully tho economic and financial interdependence of all nations. It is a matter of vital importance to every country, not only that its own national finances should be in a sound and stable condition, but that the financial condition of every country with which it has commercial and economic relations should bo sound and stable. Tho failure of Bome of the Continental nations to balance their Budgets since the war has resulted not only in disaster to themselves, but in serious injury to world trade generally. The sound financial policy of Great Britain has helped in jio small measuro to avert tho world catastrophe of universal bankruptcy. Apart from tho United States, Groat Britain' is the only one of the countries burdened b, the colossal cost of the war which has manfully shouldered its financial responsibilities, and imposed burdensome taxation to meet them.

This has involved great sacrifices and temporary hardship and suffering. But it was a necessary policy in order to restore economic and financial stability. The reward of these sacrifices will ultimately be reaped. Great Britain's Budget for 1926-7, which is just about to be submitted to the House of Commons, is beinjj looked forward to with exceptional interest. A year ago the Chancellor of the Exchequer announced the decision to return to the gold standard—a decision of great international importance. The step was surrounded by difficulties. But I the general verdict, after twelve months' experience, will be that on tho whole the benefits have outweighed the disadvantages. The efforts of the British Chancellor of the Exchequer, assisted by a number of Economy Committees, to effect a reduction of expenditure have dismally failed. It seems certain, from' the totals of the Estimates for next year which have been published, that the aggregate of national expenditure to be provided for in the coming Budget will be in excess of the actual expenditure of the past year, apart from the coal subsidy. Sources Drying Up. Sources of revenue which have been lucrative in recent vears are drying up. The receipts from the abolished Corporation Duty, from the Excess Profits Tax, and from the sale of surplus war

stores, mil be negligible. The full effect of the reductions of taxation made in recent years will be operative in the next Budget. It does not seem at all liiely that the Chancellor of the Exchequer will be able to afford any remission of the total of taxation in this year's Budget. He may, and this is not at all improbable, impose new taxes in order to enable him to reduce the rate of some of the existing taxes. If the Chancellor does resort to this expedient, it is certain that he will select for taxation what ho calls "luxury consumption." Indeed, he has already foreshadowed the possibility of additional taxation on tho use of motor vehicles, and he has been considering the practicability of a tax on betting transactions.

However iutercstiug and important such taxation on internal consumption may be, it is not a matter of international importance. But if for the double purpose of getting revenue and "protecting" British manufactures, the Chancellor should propose to impose Customs Duties on certain manufactured imports, other countries will take a lively interest in the British Budget. Last year, Mr Churchill re-imposed the duties on imported motor-cars, watches. clocks, pianos, films, etc. These duties are very heavy, and are distinctly Protectionist in their character. They were originally imposed during the war, neither for revenue nor Protection, but for the purpose of restricting cargo space and national expenditure on superfluities. Mr Churchill re-iinposed these duties last year, and he strongly repudiated the motive of Protection. He re-impoß-ed them, he declared, purely for revenue purposes, and if they were protective in their effect, that, he asserted, was an incidental result, and not the primary motive But there can be no doubt that the roal purpose in re-imposing these duties was to'give a sop to the Chancellor' 6 Protectionist friends. Mr Churchill is undoubtedly a Prec Trader, but his party is overwhelmingly Protectionist. Herein lies the danger of tho Chancollor further sacrificing Free Trade policy to rolieve his financial embarrassment, and to gratify his Protectionist friends.

"Very Large Measure of Protection." It is true that tho Prime Minister is pledged not to introduce Protection iu this Parliament, oxcept by the ntir-: row door of tho Safeguarding of Industries Act. But narrow though that door may be, it is sufficiently wide to aciinit a very large measure of Protection. The few industries which navo already received Protection under this Act are of relatively small importance. The effect so far has been neither to make the industries jyosperous, nor to give the Chancellor any substantial revenue. It seems that up to the present Mr Churchill has succeeded in resisting tho pressure of some of his colleagues and his Party to embark upon a large-scale Protectionist policy. It was no doubt due to his opposition that tho suggested duty on imported steel was rejected by the Cabinet. The application of the linen industry for a tariff against competitive imports lias been turned down, no doubt, also, owing to the Chancellor's opposition. But the question is, How long will Mr Churchill be able to resist his Protectionist colleagues, and the temptation to impose Customs tariffs for the sake of the revenue he so sorely needs? But the Chancellor knows the Free Trade case too well to believe that he can at the same time give effective protection to a home industry and a considerable revenue from imports. His experience of nine months' working of the silk duties cannot encourage nim to extend this irritating and unremunerative form of taxation. There are, of course, many classes of articles imported into Great Britain which only to a small extent enter into competition with British productions. It is in this sphere that the Chancellor may seek to get revenue by new Customs duties.

Effect Upon International Relations. The bad effect upon international relations of duties of the latter class is hardly less than duties primarily aimed at the exclusion of foreign manufactured articles. Germany is protesting against Mr Churchill's re-impOßition of the McKenna Duties last year as a breach of the Anglo-German Trade Agreement. A large increase in the duties on foreign wineß and fruits would bring Great Britain into conflict with other European States. It is particularly important at the present time that Great Britain should not embark upon a policy of taxing foreign imports. Such a policy would defeat the object of the Dawes Scheme, and the payment of the debts owing to us from the Continental States. It must be remembered that Mr Churchill is relying upon the payment or German Reparations, and debt payments from Italy and France, to balance his Budget for the coming year. Without the £10,000,000 from Germany, and the £4,000,000 from Italy, tlio British Chancellor would be in a dilemma from which he could" only extricate himself by imposing heavy new taxation.

It would be a suicidal policy to impose Cußtoms duties on the imports from these debtor countries, which in effect would be to cut off the only wn.v in which they can now pay their debts. This is a truth which will probably be forced upon the United States lonfi before the last of the sixty-two annual payments of the debt which Great_ Britain incurred to her for the Continental Allies is due.

The balancing the British Budget in the years immediately in front depends upon one of three things. There must lie a substantial reduction of national expenditure, which Mr Churchill has now admitted to be hopeless. There must' be nn increase of total taxation, which the country will not tolerate. Or, there must be payments by our Continental debtors of at least a sum equivalent to the annual payment of £34.000,000 which America "is exacting from us under the Baldwin Agreement.

Our Allies in the Great War have never appreciated the financial sacrifices which Great Britain has made, and is to make for generations to come, through her participation in that conflict. Any payments they may make to us on account of tho sums we advanced to them will leave the burden of our internal debt unrelieved. The sums we. receive from Germany, and which we hope to get from Italy and France, ought on sound financial policy to go to tho reduction of the National Debt, and ought not to be treated as revenue to meet current expenditure. But the burden of our annual expenditure, the chief item of which is the debt service, is so colossal that there may be some excuse for appropriating these receipts for current expenditure. Since the Armistice, Great Britain has paid off nearly a thousand million pounds of Debt, and is under a statutory obligation to set aside not less than £50.000,000 each year for that purpose. Mr Churchill is raiding several funds, but in view of the importance of maintaining national credit, in order that blocks of War Debt which mature in the near future may be converted on advantageous terms, it is inconceivable, whatever else he may do, that he will raid the statutory Sinking Fund.