LOAN, REVENUE, AND ECONOMY

Evening Post, Volume CXXXI, Issue 115, 17 May 1941, Page 8

LOAN, REVENUE, AND ECONOMY

The decision of the Government to clear the field of loans maturing up to the end of' 1943 is a wise one, especially as further borrowing for war purposes must soon be undertaken. It is better to create favourable loan conditions and rely upon voluntary lending than to follow a policy which will harden the price of money, and then resort to compulsion. As every business man can tell, there is nothing that is more embarrassing Avhen fresh accommodation is being sought than the existence of unsettled old advances. But there is another factor which must also be borne in mind. The benefit of a clear-cut arrangement of old debt will be largely lost if the market is then asked to absorb an

excessive -quantity of new stock. Necessary finance for the war must be provided (though with care at all times to avoid wasteful expenditure), but. borrowing for other purposes should be subjected to the most searching scrutiny. For if the loanable money is taken for civil purposes it will become progressively harder to obtain what must be found for defence. Money will also be made scarce for private enterprises of veal national value.

It is not enough, liOAvever, to consider finance from the loan side. In the early stages of the war the Government proclaimed the intention of following, as far as possible, the principle of "pay as you go." so as to avoid the accumulation of deadweight Avar debt. We pointed out at the time lhat while this was an admirable principle, it must not be followed so far that productive and industrial capacity Avas seriously impaired. This could be avoided if civil expenditure Avere curtailed. Revenue for Avar purposes would then !be furnished in part by new taxation, but in part also by the diversion of revenue formerly applied to civil needs. Last year's Budget did not apply this principle to any appreciable extent, and even with respect to loan money the diversion of expenditure from civil to war purposes was much less than it should have been. This year it will be imperative to go much further. A Canterbury Chamber of Commerce Bulletin calculates that in 1940-41 about £31,000,000 in all Avas taken for Government Avar and civil purposes out of a net national income of some £180.000,000. together Avith Avhat could be drawn from reserves. "Since a large part of the Government expenditure does not contribute to the production of ihe national income this means that little more than five-ninths of the total productive resources are likely to be directed into the production of the income on which the community depends for its living and the Government for its revenue." Obviously this cannof go much further without seriously weakening the capacity of the country to yield revenue. It is equally obvious thai the only way lo avoid this is to obtain more of the war requirements by diversion from Government civil spending.

RUGBY.— An order by the Ministry of Food prohibits the manufacture of cocoa, chocolate, and sugar confectionery without licence, as from June 16 next. The order does not apply to Northern Ireland, „