The Press THURSDAY, APRIL 22, 1937. The British Budget

Press, Volume LXXIII, Issue 22073, 22 April 1937, Page 8

The Press THURSDAY, APRIL 22, 1937. The British Budget

Such details of Mr Neville Chamberlain's sixth Budget as have been cabled suggest very plainly that he is no more in danger of losing his head during a boom than during years of depression. He has been sharply criticised for his compromise with financial orthodoxy in arranging to finance the huge defence programme partly—and in large part—out of loan money,.even though he left the Treasury free to diminish the amount of.borrowing by the application of realised surpluses; but the most striking feature of his new proposals is one that shows him to be fully aware, first, of the dangers of intensifying a speculative boom by spending nearly a million pounds a day on war material, and second, of the validity of the narrower protest against allowing a new tribe of war-profiteers to flourish unchecked. Mr Chamberlain plans to apply to all commercial and industrial incomes a special tax on profit increases above the standard set by the years 1933-1935. He searched for a tax " capable of growth," or responsive directly to business expansion, for one which would spare taxpayer-groups otherwise marked out for increases last year and this, and for one which could fairly be described as a "special and temporary contribution to- " wards the cost of national defence." It is impossible to deny his skill or his justice in devising this form of tax, the principle of which is a levy Von extra profits due to emergency measures of national expenditure, and the mechanism of which is arranged to discriminatei apparently, between the responsibilities of heavily capitalised concerns and those thriving on a smaller capital. Mr Chamberlain appears to have startled Conservative members when he propounded his plan; but there is nothing notably disturbing in their comment that he has " imposed a drastic tax on industry, " the repercussions of which will be widely " felt." That it should be widely felt is clearly part of the Chancellor's intention; he wants the tax to operate as a distinct brake on the upward course of an artificial inflation. Moreover, the necessity for it is statistically evident; and the capacity of industrial and commercial concerns which have felt and are feeling and will, continue to feel the stimulation of general recovery plus the new "expenditure may be estimated by the regular surveys of industrial profits published and by a comparative test. The taxation levels of three years ago were supportable—because they were in fact supported and did not prevent rapid expansion; a further tax, even up to the extent of onethird, on increases of profit to be made can hardly be called " drastic," a word which may be reserved for disabling appropriations. The further opinion that Mr Chamberlain's proposal makes "a substantial advance towards the re- " distribution of capital" and that a future Labour,government may use it as "a precedent " for a capital levy " is not easy to understand on the evidence. It is only necessary to say this: the redistribution of capital is not apparent . ip., thq,£tate's making "a special and tem"porary" effort* to recover in the national interest a part of the extraordinary profits due to. its action in the national interest, while Labour, if it ever occupies the Treasury benches in ■ a similar situation, will need no " pre- " cedent" of this indirect sort to prompt it towards really "drastic" measures. Unless the Labour Party has completely changed its thinking, it has some form of capital levy firmly fixed in its mind.

The remaining provisions of the Budget call for little comment. They are ruled into shape, broadly, by the exigencies of the rearmament programme on the one hand and the buoyancy of revenue on the other. The 3d increase in income tax must inevitably be a disappointment to taxpayers who hoped at least to escape without further burden; but Mr Chamberlain's estimates, which were completed some weeks ago, showed that he needed, chiefly for defence, a gross increase of revenue of £134,700,000. When deductions were made under several headings—borrowing for defence (£80,000,000) s and £22,500,000 from the Road Fund, principally—he needed to obtain a minimum of £32,000,000 in fresh revenue, or, if contingencies were to be allowed for, as last year, perhaps as much as £60,000,000. Normal revenue increases on the existing tax basis might be estimated to cover the minimum amount, but not the larger. The new revenue budgeted for appears to amount to about half the difference between the minimum and maximum figures and permits a possible surplus of £250,000 to appear. It may be noted as a point of some interest, exhibiting Mr Chamberlain's uncertainty about revenue and expenditure estimates in present conditions, that power is being taken to borrow for the statutory sinking fund. A summary judgment on the Budget might be that it is a politically bold and financially cautious attempt to stabilise conditions in which the danger of growing instability and ultimate collapse is gravely threatened.