WAY TO ECONOMY

Press, Volume LXVII, Issue 20342, 15 September 1931, Page 14

WAY TO ECONOMY

COMMITTEE'S GRAVE WARNING. £96,500,000 CUT. PROPOSED ABOLITION OF THE E.M.B. (racrn ocr own cokrespond.ent.) LONDON, August 7. Sir George May s Committee on National Expenditure has issued its report, which is regarded as one v of the most important of post-war documents. It emphasises tho urgency of immediate actios', Tho recommendations prove f,\Uy as drastic and farrcaching as vas anticipated. The composition of the Committee, which was appointed In March, was agreed upon by the three Parties, two members having been suggested by each. The chairman, Sir George May, was, until shortly before his appointment, secretary of the Prudential Assurance Company. The other members were: Mr P. Ashley Cooper, Sir Mark Webster Jenlunson, Mr Charles Lathom, Lord Plender, Mr Arthur Pugh, and Sir Thomas Royden. Tho terms of reference were virtually identical with those of the famous Geddes Committee. The Committee were required to make recommendations for effecting forthwith all possible reductions in national expenditure on the supply services, having regard especially, to tho present and prospective position of the revenue. Questions of policy were reserved exclusively for the Cabinet, but tho Committee were empowered to review expenditure and to indicate economies i which might be effected if particular '.policies wero either adopted, abandoned, or modified. Where Outs Might be Made. Tho Committeo propose cuts in the national expenditure which would effect an immediate saving of £96,578,000 in a full year. Their proposals include: Wholesale reductions in grants, cuts in the pay of the police, teachers, and fighting services; reduction of insurance ; curtailment of development schemes; the suppression of the Empire Marketing Board. Imediate proposals for economies include : Unemployment insurance, £66,500,000; National Health Insurance, £1,000,000; Education, £13,600,000; Fighting Services Pay, £2,199,000; Police Pay, £925,000; Roads, £7.865,000: Empire Marketing Board, £400,000; Ministry' of Agriculture, £500,000; 8.8.C., £475,000; Universities and Colleges, £250,000; other economies, £2,864,00(3. Total £96,578,000. In addition the committee propose the limitation of many items of future expenditure, notably: Revision of pension conditions .of police and fighting services; future redistribution of Empire defence burden; investigation of Air Ministry .organisation; abolition of Road Fund; restriction of unemployed grants; reduced housing subsidies; abandonment of £1,500,000 maternity scheme. Even so, there* would still be an estimated defiicehcy next. year of £20,000,000 to, £30,000,000. To bridgo the gap, •the committee foresee only recourse to additional taxation. The Prime Minister has informed Mr Stanley Baldwin that the Cabinet had set up a Cabinet Committee to consider, during the recess, the report of the Economy Committeo. The Committeo consisted of himself, Mr SnoWden, Mr Arthur Henderson, Mr J. H. Thomas, and Mr W. Graham. The Probable Deficit. The Committee, before detailing tlio -headings of the suggested economies, explains that' it has proceeded on the basis that the anticipated borrowing in 1932 on behalf of the Unemployment Insurance Fund and tho Road Fund should be regarded as a , revenue liability.' On that basis it is estimated that to produce a properly-balanced Budget in 1932, including ,the usual provision for the redemption of debt, a deficiency of the sum of £119,000,000, say £120,000,000, has to be infide good by fresh taxation or by economy, apart from 'any further liabilities that may be incurred under pending legislation. _ The report takes no account of any adjustments in the national accounts which may be necessitated by the moratorium on reparations and war debts now under consideration. Pruning the Dole. To help to meet the deficiency the Committee has submitted numerous recommendations, the outstanding feature of which is a cut in-the outlay on unemployment insurance by £66,500,000. To attain this result it is suggested .(inter alia) that benefits be cut by 20 per cent., while the weekly contributions will be increased-to 10d each for workers, employers, and the State. (It will be recalled that the Royal Commission's recommendations piovided for a. saving of £41,900,000. Contributions were to be increased, the worker paying 2d additional, the employer Id, and the State lid, thus malting all the respective contributions 9d). Education comes next with a reduction of £13,600,000. Teachers' salaries would be reduced by 20 per cent, and the grants curtailed. A slowing down of. road development schemes and a lowering _of the present high standard of maintenance 53! it is estimated, save £7,865,000. A downward revision of police pay by 12J per cent, and the introduction 1 of the" 1925 rates of pay for. all personnel of the fighting services is suggrants made by the Ministry of Agriculture and Fisheries would be reduced, the Empire Marketing Board abolished, expenditure on forestry revised, ajid the Colonial Development Fund grant restricted. ' There is scarcely' a Government Department which is not affected by the suggested, immediate or eventual economies. As to the pay of the Civil Service itself, there is no recommendation for any reduction, but it is suggested that the present scale of leave should be cut by one-third. As regards the limitation of items of future expenditure, the abolition of the Road Fund, is recommended, together with a decrease in the housing subsidy and. the reduction of grants for work to relieve .unemployment. The revision of pension conditions of police and fighting services is suggested and the future redistribution, of Empire Defence burdens. No recommendations are made 101 improving the machinery of Treasury control, but the Committee tlunk that it would be of definite advantage if-a comprehensive review of the financial position could be given to Parliament and the nation more frequently than on the opening of the annual Budget. It suggests that on the analogy of the Committee of Imperial Defence there, should be a ; standing Finance Oojmnittee of..the. Cabinet winch would be -kept fully, informed .of the .state of

national revenue and expenditure, nnd •would examine alt schemes pnlitiiiMnd to the Cabinet. A Grave Warning. "What are tho alternatives to the reductions we suggest.?" tho Committee asks. "The nation can continue as ut present borrowing to meet current requirements and deluding that by still showing a sinking fund item in the national accounts it is not only meeting its liabilities but actually paying of? debt. "This course will lead inevitably to an- intensification of the financial difficulties until the day • comes when far greater sacrifices than those wo suggest are forced upon the country. "The -other method is to endeavour to right tho position solely by means of additional taxation, but to achieve a truly balanced Budget next year in this way, the extra taxation would need to be very heavy and we fear the. consequences. The margin of safely is already narrow. Who knows whether the future may not ■ have further troubles in store for us that will make that reserve of financial strength of inestimable value? "The savings arising from our recommendations only total about £96,500,000 for the first year of their full operation. How the ga,p of £20,000,000is to be bridged is a difficult question raising issues so much beyond our sphere that we cannot submit any definite recommendation." A Twin Caucus. Before the report can be discussed by Parliament the Trades Union Congress at Bristol and the Socialist Conference. at Scarborough will have declared their view. This twin caucus lays down tho policy of the Party, and therefore of the Government; so that it is almost a work of supererogation for Mr Mac Donald to appoint a Committee of five Ministers to consider the Blue Book. The agenda for Scarborough contains many motions protesting against any idea of reducing benefits or increasing contributions to the Insurance Funds and of diminishing dole paymeuts. It is stated to be the opinion of some Conservatives that the programme of economies presented would not restore the finances of the country to the condition in which they should be. Economy, combined with the introduction of an emergency tariff, is, they hold, what is required at the moment.