The Press FRIDAY, APRIL 13, 1951. British Budget

Press, Volume LXXXVII, Issue 26395, 13 April 1951, Page 6

The Press FRIDAY, APRIL 13, 1951. British Budget

Mr Gaitskell’s task in framing his first Budget was unenviable. In each post-war year Britain’s Chancellor has had to wrestle primarily with inflation and inflationary tendencies coming from the need to export so much of Britain’s home production. For Mr Gaitskell the problem was complicated by rearmament. It was not merely the problem of finding more money to pay the current year’s share of the rearmament programme, but also of controlling, directing, and ameliorating, as far as a fiscal system can, changes, disruptions, and distortions caused by a sudden switch of manpower, materials, plant, and services to work that is, in the economic, sense, non-productive. The problem had many points of difficulty; the most intractable was how to ensure that the diversion of productive resources to defence caused the minimum of inflationary stress. Mr Gaitskell’s immediate predecessor anticipated inflationary stresses by budgeting far large surpluses. Last year Sir Stafford Cripps budgeted for an “above the line” (calculated on current expenditure) surplus of £443,000,000, and a “below the “ line ” cost (net capital expenditure) of roughly the same amount, thus budgeting for an approximate ; overall balance. In the event the “ above the line ” surplus was £720,000,000, through revenue coming out £80,000,000 above the estimate and ordinary expenditure £ 197,000,000 below. Net capital expenditures at £473,000,000 were a little above the official estimates; but even so, the overall result for th- year was a surplus of £247,000,000 of receipts over outgoings. The seemingly favourable auguries in these figures for an easier Budget this year were in reality meaningless in terms of the calculations Mr Gaitskell had to make, largely because of the many effects of an increase in defence outlays of some £500,000,000 from the 1950-51 level. True, the Chancellor could calculate on continued buoyancy of revenue that would meet most of the added expenditure; and his assessment of inflationary effects would be influenced by the knowledge that rising prices would themselves help to promote a balance between spending power and the supply of goods. But, unless he decided that a bigger inflation was the least of several evils, he had to judge the size of the inflationary gap and budget accordingly. Pre-Budget estimates put the gap at between £100,000,000 and £200,000,000. Mr Gaitskell decided that new taxes to the extent of about £ 150,000,000 would have to be imposed if the required cut in personal expenditures was to be achieved. Actually, he has budgeted for a little less.

There is general satisfaction in Britain that Mr Gaitskell has fulfilled satisfactorily the duty of ensuring that the new burdens are reasonably fairly shared. There may be reason for dissatisfaction that in his first, anti-inflationary, calculations Mr Gaitskell did not give more attention to saving on the enormous cost of social services and to curtailing expenditure on government and on the nationalised services. His purchase tax measures are calculated to ease competition in industry for scarce labour and materials. He has wisely resisted moves, that would be popular with his party to increase the food subsidies, though the effect will be a fall in the average standard of living. The increase in the standard rate of income tax is harsh only in that it is an addition to an already harsh level of taxation. *The Chancellor has been tempted by the sharp increases in company profits that became apparent in company reports for years ended after the third quarter of 1950. But it is doubtful whether he has been wise to draw off for the Exchequer so much of the profits, which in general are not excessive and are essential to healthy, virile industry. Altogether, however, Mr Gaitskell’s Budget promises to contribute adequately, as a budget should, to economic planning on the national scale. For v. hat he has done, and for wha* he has resisted doing in difficult circumstances, Mr Gaitskell is to be congratulated. It is an unhappy fact that the Budget requires Britain’s people to depress rather than raise their standard of living. For that unfortunate aspect of the Budget, it can be said that it is an instrument which reflects Britain’s firm attitude to world conditions and her determination to play her full part in the efforts which the free nations are making for their common rscurity.