The British Budget

Press, Volume LXXVII, Issue 23301, 10 April 1941, Page 6

The British Budget

The British Budget for 1941-42 is very simply described. The expenditure for the financial year just closed was £3,884,000,000, an excess of £417,000,000 over Sir Kingsley Wood’s revised estimate in July last. Total revenue, including income tax,; excess profits tax, and national defence contributions to a total of £620,000,000, was £1,409,000,000, or £73,000,000 more than the July estimate. The deficit was £2,475,000,000, or £344,000,000 more than the estimate. For the current year. Sir Kingsley Wood estimated an increase of £237,000,000 in revenue on the existing tax basis; i.e., a total of £1,646,000,000. But after reckoning with the present and prospective rates of expenditure and making every allowance for anti-inflation-ary controls, he decided that £250,000,000 more mfist be raised by direct taxation to “ bring the “ inflationary ‘ gap ’ down to safe proportions." Total revenue, therefore, is estimated to reach the gigantic figure of £ 1,896,000,000. But since the Chancellor of the Exchequer indicated that he would.require authority to raise credits to an estimated; amount of £3,400,000,000, it is clear that he has in view a deficit of that order, or approximately £1,000,000,000 mote than last year, and total expenditure of about £5,296,000,000, or £1,412,000,000 more than last year. The costs of the war continue to mount as they did through 1940-41, much faster than revenue is being raised to meet them. ‘ This fact directs attention to Sir Kingsley Wood’s concern over the inflationary risks, of the situation, the essehtial character of which is defined in the ratio of revenue to expenditure. Revenue covers only a shade more than a third of it. The State’s war disbursements create a great volume of (nominal) purchasing power against decreasing supplies of consumer goods and services; and the inflationary thrust upon their prices has been only partly offset by the issue of internal leaps, by the savings plan, and by the system of price-subsidies and other controls. It is true that the British Government last year was able to congratulate itself on having avoided. anything like vicious or “ malignant ” inflation, as it is called, and was even congratulated by Mr Keynes; but there were dangerous movements and dangerous anomalies, as for instance in the disturbing rise of transport costs and in the marked and widening disparity between wage levels in different trades and industries. Moreover, one by one, as the “Economist” observed,,the brakes were being taken off, and it was becoming clear that the difficulty of 1941 would' be to limit the inevitable development of inflation. It is not

surprising, therefore, that Sir Kingsley Wood announced an extended system of subsidy controls to keep down not merely staple food prices but those of other essential goods and services which might be included in “ a general “ upward movement.” But it is surprising that he made no reference (as reported) to wage control and that he-has adopted only in a very tentative fonn the compulsory savings principle first advocated by Mr Keynes. Sir Kingsley Wood has adopted it only in application to certain income tax reliefs and allowances. He has abolished them but proposes to allow part of the equivalent tax increases, on a scale, to be credited to taxpayers in the Post Office Savings Bank to a maximum of £65. Unfortunately, no estimate of the value of the reliefs and allowances or of the savings-credits has been reported; but the annual total of the latter can only be. small, and the extension of the principle over the whole field of national income is again postponed. The Chancellor’s reluctance to abandon voluntarism as the basis of the savings plan is regrettable. He refuses the full use of a direct instrument in the control of inflation and must ipake control by all other means correspondingly more difficult.