BRITAIN'S BUDGET

Evening Post, Volume CXXI, Issue 131, 4 June 1936, Page 24

BRITAIN'S BUDGET

CAN SHE AFFORD IT? I p REVENUE AND EXPENDITURE * IDEAS ABOUT CAPITAL c In the seventeenth completed finan- ( cial year since the end of the Euro- * pean war the British taxpayer was t called upon to find a sum of over e £750,000,000 for the purposes of the r State, less a small proportion of this j total which was obtained not by taxa- „ tion, but by profitable public enter- } prise or ownership (£11,500,000 net I Irom the Post Office; £1,500,000 from | Crown lands), or from other revenue t resources of the State (£26,500,000 1 from "sundry" and "miscellaneous" t items), wrote the financial editor of i the "Manchester Guardjan" just before the Budget was brought down. The taxpayer unmistakably paid over i £710,000,000 out of earnings and in- I comes to defray the costs of the State e —without considering the additional 1 sums paid in rates to local authorities (round £170,000,000 in recent years), i Our countrymen now pay about one- 1 quarter of their total incomes in taxes c and rates or one-fifth in taxes alone s (assuming that the home consumer ul- t timately pays Customs duties). The t proportion shortly after the Napoleonic £ ■wars may have been about one-sixth, i and shortly before the Great War it •vtes about one-fenth. The expenditure i of the State ,is partly on debt service i and repayment,., partly on relief of. ..the .< needy, on maintenance of law and or- 1 der at home, on the Defence Services, 1 on education and health, on public i works and investments, and finally on s the dignitaries and employees who look 1 after all those tasks. 1 REDISTRIBUTED. . j A portion of the revenue taken from J the taxpayer is 1 therefore redistributed 1 to people (including himself) in repay- ] ment and reward for loans- in the- past; , another portion is taken from the people of substance and dealt out to the less fortunate as unemployment relief, old age pensions, war pensions, etc. As far as these portions go, the Budget is the Sovereign instrument for transferring income from one set of people to another. Another portion of the revenue collected is not redistributed, but is expended on the collective purposes .of. law and order, defence,, or economic development. Law and order and'defence are collective • insurances of property and incomes, but do not "pay for themselves" directly by producing any income. Economic development, on the contrary, is calculated to bring in a return which 'may be more direct or less direct; more direct if the State itself invests in profitable enterprise, less direct if it creates conditions" for profitable private enterprise which can then be taxed. Finally* by attending- to - the health and education of Citizens, - the State performs a task which, it is hoped, . improves. ,the; . efficiency and earning capacity, and so ultimately. the taxable capacity of citizens, . IS rr DANGEROUS? Is a large expenditure of the SteteTa dangerous development? • Does the quadrupling of the Budget since 1914 justify apprehension or alarm? To answer this, question at all seriously one must discriminate between the various purposes of expenditure. The redistribution of income,- from . the, wealthier to other citizens on the whale probably retards saying; the pensioner or the receiver, of the "dole" buys bread and beef, not stocks and shares, as the supertax-payer might have done. The transference of income to pay interest on war debt to those'who; in the ■war, re-lent to the State what they borrowed irom file banks may have quite the contrary consequence of concentrating a larger share of total income in the hands of those specially disposed to save. Expenditure on the defence forces and •on - law - and -■ order is an economic loss sustained to _ obviate worse losses. The more of it is necessary, the worse—though not to provide what is necessary would be worse still. Expenditure on collective economic enterprise need not be burdensome at all, except in the sense that all capital expenditure means in the "first place deferred consumption (unless . State enterprise ruins more competent private enterprise by* "unfair" competition). What is burdensome is State enterprise insufficiently planned and uncertain to produce the required financial return at the expected time. "Investment' in the health and education; of young citizens is, for example, a burdensome expense if the "Al"' young people are likely to emigrate before they become taxpayers.

RECENT FIGURES. Some of these questions may'now be briefly elaborated in reference to the British Budgets of , the present period. Expenditure in recent year's "was on these main heads (as classified by the "Economist") in millions of pounds:— 1938-7. 1935-6. 1934-5.1933-4. (Estimates;) National Debt Interest — 212 212 26Sinldnf Tunjl'C«V ..-t* \ Defence Services — • , Effectlre 139% >11T 96 .90 Non-effective (pensions, etc.) 19' .18 . 18 1° Education ...... 58 56 o3 51 Tr»alth ...' 25 24 22 Pension, m.- m m* m Labour 69 . 74 ; 6 ®/4. "2 Other heads 109 11® 93 •Also £29,000,000 to United fatates on war ...debt, account.- - Interest on the National Debt, pensions, and on labour make up the part of the Budget by which revenue is transferred through the State from the taxpayer to the recipients. Under the two latter heads the taxpayers provide some £170,000,000 annually of income for the benefit, of War pensioners (now £43,000,000), old age pensions (£43,000,000), widows and orphans (£14,000,000), and unemployed (£69,000,000). The owners of Consols, etc.. draw an annual £212,000,000 for advancing their capital, mainly for war purposes, to the Government. The other Budget beneficiaries draw their respective sums more or less for services rendered in the past. All of this money the taxpayer definitely loses when the Government takes it from him and gives it to somebody else to spend how he will. The same is true of the £18,000,000 of pensions paid out of the annual Service votes. DEFENCE. And the taxpayer in a sense loses also the sum expended on the defence services, although these services, unlike those other people, have to work for him. For the work they do does not enrich him or recompense his outlay otherwise then by sheltering him from possible interrupters. Similarly the £13,000,000 expended on the Policc Force and thes £1,300,000 on prisons, the £1,700,000 spent on diplomacy and the League bring no positive addition tc income, though- they' are expected tc safeguard it. . ' , But certain expenditure is calculat ed to bring in a money return at som< date. Several of the heads classed a: "other heads" are of this sort— deve lopment funds, Forestry Commission and (financially more important) beet sugar subsidy, cattle fund, milk sub sidy, assistance to shipping (the las four costing £8,000,000 to the taxpayer according to the new year's Esti mates). The money allocated for these pur poses is not intended as a charitabL grant; it is intended as an investmen made on behsjf of the taxpayer u certain branches of industry requii

injg reorganisation or renovation. If such investment is successful, the taxpayer, in parting with his money for such purposes, has the expectation of recouping it in future years by the emergence of a sugar industry, a shipping industry, etc., more able to take over part of the expenses of the State and to give work to those now forced to take the taxpayers' money without rendering a reward. CAPITAL EXPENDITURE. The British Budget does not discriminate with so much clearness (clearness which can admittedly be fallacious) between expenditure on capital purposes and other expenditure as do some foreign Budgets. Governments might be both more bold and more cautious if it were recognised that the taxpayers' money when passed over to industries constitutes an investment, and that the investor has a right to know the prospects of getting a return on his money. A Budget carrying large expenditure for capital development financed out o 1 taxpayers' revenue, or even out of loan, is not fairly to be compared with the Budget of a State which does not perform this service of collective investment. . Among those who are pressing for a revised mode of presentation, of the Budget some would even claim that expenditure on health and education be considered capital expenditure. A well-nourished child, they declare, costing 'the State a few pounds a year in milk and spacious surroundings, is calculated to save the State the same sum many times over by keeping off the sick-list and ;by having the energy to hold jobs and to struggle manfully against odds before resorting to State However true this is,'and perhaps it is a half-truth, the present inclination is rather towards the falsehood of accounting armaments as capital expenditure. Necessity, everybody- agrees, knows no economic law; and if survival is at stake, wealth must come second. But whereas other expenditure of the State may at best enrich the general heritage of means of production and at worst redistributes spending power to the improvident or overprovident, expenditure on military power 'has never yet fed the hungry or made the wilderness blossom.