Evening Post. FRIDAY, SEPTEMBER 30, 1938. WHAT DID TREASURY REPORT?

Evening Post, Volume CXXVI, Issue 79, 30 September 1938, Page 8

Evening Post. FRIDAY, SEPTEMBER 30, 1938. WHAT DID TREASURY REPORT?

During 1936 and 1937 Labour > sympathisers who are not of the Lee school of Socialism used to console themselves with the thought that Mr. Nash (Mr- Lee's senior partner at I- the Ministry of Finance) was a safe 1 financial full-back; but in 1938 Mr. Nash placed upon his reputation for financial statesmanship a strain that it will not bear. In a rush to bait the General Election trap with the Social Security cheese, he took risks which no Minister of Finance ought to take; and it is beginning to dawn on some of the. people who were ■ trusting to Nash moderation that I though the voice of the Budget (the I great Blind Budget of 1938) and of 1 the Social Security Act (the great ! blank cheque on the future) is the voice of Mr. Nash, the hand looks <■ uncommonly like the hand of Mr. Lee. The first risk that the Minister of Finance took was to twist the esti- ', mates of the actuary lent by the ! British Government (Mr. Maddex). He bent them upwards where it suited . him, and he bent them downwards 1 where it suited him. But, even after ' that, his calculations still leave Social Security in the air. An examination , ©f his calculations, of what they ad- ; *mit and what they omit, leaves the ', security factor in Social Security very improbable, but clothes.in great probability a further Labour tax- , raid on middle-class incomes, and even on small incomes. In considering Social Security it is necessary to separate "the first year in which it operates (that is, 1939-40, the initial year in which Mr. Nash' hopes to avoid some of the fullweight charges, the year also of possible windfalls from the dying Employment Fund— windfalls that cannot be repeated) from the second year of operation (that is, 1940-41, when Mr. Nash proposes to make his famous and belated token payment of £10 a year, as a technical admission that Labour did promise a true universal superannuation without means test). The £10 a year (increasing yearly by £2 10s) is intended to save Labour's face without filling the pocket of the people whom Social Security bars by means test. Neither the face nor the pocket has gained very much from the £10; but as that payment belongs to the second year 1940-41, we can for the moment exclude it from consideration in order to examine the first year, 1939-40—which year, by clever timing of Social Security operation in relation to the General Election, does not come within the technical obligations of Mr. Nash's election year budgeting. In the ordinary course, if the Social Security Act had not been passed, pensions payments in 1939----40 would have increased by about £250,000. But Mri Maddex, the British actuary, finds that in 1939----40 the Act adds to the cost a further £2,500,000. That makes £2,750,000; and Mr. Nash himself added to Social Security, after Mr. Maddex reported, £550,000 for age and widows' benefits; total, £3,300,000. To this again must be added between £2,000,000 and £3,000,000 actually expended from the Employment Promotion Fund last year (out of the dying 8d in the £) for employment promotion (public works and aid to industry) other than sustenance — unless the need for this suddenly, disappears. The charge under this head may be reasonably estimated at £2,500,000. The aggregate of these sums is £5,800,000, which the Budget of 1939-40 (next year's Bud,get) will have to bear. How does Mr. Nash confront that impressive total? He? tries to reduce Mr. Maddex's cost-total, £17,850,000, to £16,060,000 by removing, from the total, war pensions and war veterans' allowances, but Mr. Nash's arbitrary action in this respect may be disregarded when considering the weight on the Budget, because if these two items are excluded, from the Social Security plan they come directly on the Consolidated Fund, which, as Mr. Hamilton has said, is everybody's pocket. By disagreeing with the actuary as to the probable national income which Mr. Nash revises upwards, he arbitrarily assumes that in 1939-40 the Is in the £ (replacing the 8d) -jvill give him an increased revenue of £500,000. His third escape lies in the possibility of initial year charges being lighter than those of succeeding years, and he therefore reduces the benefits chargeable in 1939-40 by £1,610,000. By these means, Mr. Nash assumed that the additional sum to be. met in 1939----40 is only £1,365,000; and he anticii pated in his second reading speech that this would be met without additional taxation—but before the third reading he had buttressed his flimsy finance by "the bombshell," the Is tax on companies. Mr. Nash skated over the Employment Fund item (which we have estimated at £2,500,000, on last [ year's figures) by a remark to the effect that something would have to be done to meet this "if necessary." If, by ignoring that- item; by arbitrarily revising the actuary's figures upwards and downwards; by calling 1 back his no-more-tax hopes almost before he has "voiced them; by the i use of Budget surpluses, reserves, and balances in the Employment Promotion Fund; and by the full cost of Social Security not coming to charge in the first year—if by these and other devices, accidents, and non-recurring windfalls Mr. Nash contrives to reduce the gap in his first Social Security year, he will, if still Minister of. Finance, have to face the full cost in the second year minus windfalls of ' revenue or reserves. The question—and \P is for the electors as well as for Mr. Nash—is "How?"

j That brings us to 1910-11, a year jon which the attention of the electors i should be fixed, even though Mr. Nash can be Budgetarily blind to it. In 1940-41 will come the token pay-j ment (£10) towards superannuation without means test. On August 16 Mr. Nash, questioned in the House of Representatives, stated that in its first year (1940-41) the £10 (which rises annually by £2 10s a year) would cost £600,000; and he added "if we look after 1940, I think 1941 will look after itself." This airy optimism of Mr. Nash is the best measure he has given the country of the security factor in Social Security. After Mr. Nash has used all the devices enumerated in the preceding paragraph to reduce the gap in 1939-40, what source of taxation will he-have to face the heavier burdens of 1940-41, other than incomes? As he has already hit the companies, and as a raising of the income tax of companies would prove disastrous to industry, the bulk of this new demand on incomes would have to be drawn from individuals. In 1935-36 individuals paid slightly over one-third of the income tax; it is possible that when Mr. Nash collects the £9,500,000 of income tax estimated by him, individuals will contribute a little more—say, £4,000,000. If the Government wishes to raise still more from individuals, it is worth noting that a further two millions from them would mean a 50 per cent, increase in all rates of income tax. If the additional sum required is four millions; the rates ' would have to be doubled. In 1935-36 the yield of income tax was almost equally divided between three groups of assessable incomes— incomes up to £1000; incomes from £1000 to £2000;" incomes from £2000 upwards. This showjs that the new demand must reach many of thesmaller incomes, because there is not a sufficient reservoir of large incomes to provide, even by penal taxation, the amount indicated. If our view of the financial difficulties ahead is | wrong, and if Mr. Nash's financial statesmanship has all the security which he attributes to Social Security itself, why has he made so little effort to answer criticism? Why has he not produced a Treasury report on Social Security? Mr. S. G. Holland, a member of the Parliamentary Committee that examined the Government plan, has challenged the Government to deny that it received a disquieting report from the Treasury. What is ! the Government's answer? Has it pigeon-holed the Treasury report and is it taking for the whole scheme the (attitude Mr. Nash took on the £'10 superannuation that"l94l can look after itself"? This is not security.