A DEFENCE LOAN

Evening Post, Issue 28, 1 August 1936, Page 8

A DEFENCE LOAN

HINT BY CHANCELLOR

RELATION TO NEW TAX

We are to regard the increase of income tax this year as "moral justification for borrowing in future.". That significant statement was the climax of the Chancellor of the Exchequer's interesting defence of the mam proposal of his Budget (says the "Daily Telegraph"). He vindicated himself earnestly from the charge that he had under-esti-mated revenue and that higher taxation was unnecessary. He gave some suggestive indications of his views on a loan for defence. This speech was made in answer to some well-argued pleas from supporters of the Government that income tax should be kept at the present level. ■ Mr. Mabane supported his contention that the Chancellor was budgeting for too much revenue by pointing out that in recent years the Treasury had covered itself against emergencies which had not arisen and the yield of income tax had proved to be considerably in excess of the estimate. Earl Winterton countered this by maintaining that the increase was actually required for re-armament and that it was far better to provide for such expenditure by taxation than, as in foreign countries, increase armaments through piling up debt. It was undoubtedly the fact that all classes of income-tax payers here were in a far better condition than the comparable classes anywhere on the Continent. Mr. Boothby contended that the increase of 3d was not yet necessary It would have been better to put on 6d next year if that were required. Capital expenditure on re-armament should be provided for by t loan, only recurring expenditure out of revenue. He urged continued credit expansion by controlled inflation. Sir J. Wardlaw Milne predicted that this time next year we should find that the 3d increase had not been necessary. He appealed for consideration to income-tax payers who had been hard hit by the.lowering of interest on Government loans. UNDERESTIMATE DENIED. , Mr. Chamberlain, in : his reply, maintained that some speculative element in a Budget was now inevitable. There were incalculable factors in income tax. Yield of estate duty must. be guesswork. They had only a short experience of the new Customs duties. On the other side of the account, expenditure in unemployment was uncertain, and equally uncertain appropriations for the defence programme. Last year there were supplementary estimates of £14,000,000. He did not think there would be this year. We knew what we were? going to do—as much as we could. But unexpected developments might vitiate calculations. He had made the best estimates he could, and was not justified in writing up revenue to avoid an increase of taxation. With grave emphasis he declared that he had not under-esti-mated revenue in order to provide for contingencies. He had taken what he believed to be an optimistic view. A substantial increase" of income tax this year, Mr. Chamberlain continued, would have had a depressing effect which he was anxious to avoid. Though the rise of 3d had caused a shock, surprise, and disappointment, within a few. days trade recovered.