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OUR LONDON LETTER, Issue 15691, 4 January 1915
OUR LONDON LETTER
[By W. L. George.] November 20, 1914. To all New" Zealanders London sends Christmas greetings and a wish that the coming year may honorably deliver us from war. The long-expected and long-dreaded Financial Statement of .Mr Lloyd George has now been made. It was not thought that the Statement would prove popular, for what Statement dealing with the expenditure of hundreds of millions could be popular? But it was not thought, either, that such a, cry of disgust and dismay would arise. I have often enough in those columns given due credit to the Government for their management of the financial crisis to bo allowed to say to-day that nothing cruder, moro unsympathetic, and moro stupidly bureaucratic has ever been produced bv'a British Chancellor. The position is that our revenue for the financial vcar was 'estimated to be about 3207,000,000 and our expenditure about the same. The War Estimates to the end of March are £328,000,000. As there is a shrinkage in the revenue, due to loss of trade, wo have a- deficit of about £339,000,000. Tn addition we have issued £100,000,000 of Treasury bills. To meet the deficiency the Treasury is floating » war loan of £350,000,000, to be issued at. 95, bearing interest -at 3i per cent, and redeemable between 1925 and 1928. 'J here is nothing to object to in the terms of the loan except the redemption. Tt has been suggested tit at it. might have been more advantageous to'issue. a loan at par and to make it 4 per cent, Tins would have allowed lis a few years alter the. war to convert into 3* per cent, or even into 3 tier cent., if money was abundant. On the other hand, if this were done todav, while the public response might be lar-e, the great financial interests who appreciate a' premium of £5 nngnt have stood aloof, and we cannot afford to anta-oniso them. There is another and a minor objection, which I have raised before now with regard to your own loans -namolv. that, no .scrip is Jfisued for than £loo. which bare out the small investor Tho Chancellor stated that he had done this because 'he was afraid m den'eting* the pavings banks ihcro - something in this mtime o£ vai but many small men will thmk it i.unu '"The serious trouble, however, lies hi the rapid redemption of the. loan In_mv e,ter of last week you may recall tha ■ 1■ hrr calculated the wir expenditure foi lb months at £700,000,000. 1 leel a htl e boastful at having come so clo* o jo -Mr Llovd-Goorcre's estimate, which appeals! work out at £675,000,000 tor a siimlai period. But, in calculating redemption and therefore the charge upon taxes 1 never in mv wildest moments thought tnat a British Chancellor would try to pay oil an expenditure such as thi< m as short * time as 14 years. It is e"'"S tf ' Ac V. e > and further in this letter 1 detail the disaster to taxation which is following. Mi Lloyd George made great play with precedents, with the. Napoleonic wars, which cost £831.000.000 in 20 years, oi winch a little less than hja l !" was detrayed by taxes and tho rest by loans. Pitt ventured to tax his generation very heavily, saved t,:o. nation 4d in tho £ on Income lax, and, it is .aid. £1.500,000,000 to £3.000.000.000 in interest. That is all very well; it is precedent, and in this country a horrid odor of sanctity always hangs round pro cedent. Because Pitt chose to crush commerce and landed property we are to follow him, and crush industry, which., 1 sunmit. is quite another thing. In the days of Pitt there was no factory system ; today there, is. and Mr Lloyd George is going to applv to it rules older than the day-; of'steam. * He is completely ignoring the fact that the country is to-day compelled to pick its steps carefully in tho way of monev. and that, as soon as the war lover.'its industry will have such a boom that it will then', and then only, be able to face any bill. And Mr Lloyd George will not wait; he. is kicking the country when it is down. Evidently one, cannot redeem a loan at this rate without causing financial confusion. Mr Lloyd George dons not hesitate to take existing taxes and to try and make them yield more than they will yield. Be increases the price of beer by the halfpint ; he puts up the tax on tea from 5d to 8d : and he doubles the Income Tax. Hiusually fertile imagination has not supplied him with a single new tax. _ All sorts of ideas have been offered him—taxes on railway tickets, on theatre tickets, football and cricket gate-money, on flnenlisted bachelors—some foolish taxc* and some excellent ones, and he has not touched any of them. T have no objection to the. ,d on the half-pint of beer (I don't drink beer), but Mr Lloyd George is very sanguine if he thinks that the working man will drink as much at. the rate, of L]d as he used to drink at the rate, of ]<l. His tax will not yield: it will mainly annoy. Tho tea. tax is too low or too high, for it cannot be distributed. At least, I do not see how the extra 3d in the lb igoing to be spread in tho case of the poor! who buy tea in 2oz packets. It should be 4d or 2d. But the serious grievance is in the Tncoine Tax. The. Chancellor increases tho Income Tax for the. current year from 9d to Is on earned income, and from Is 3d to Is Sd on unearned. That need not detain us, as next year the full rate will come in, and Midas only knows when it will bo reduced. From next year onwards the rale will bo ]s 6d in the £ on earned income and 2s 6d m the £ on unearned income, with Is iii the £ super-tax, making 3s 6d in tho_£ when over £5,000 a year (the first £j.ooo being- exempt). The abatements 'land. There is no hint of graduation or oi reform : the old discrepancies, which I have pointed out to you before, now. which involve a tax payer into paying an extra £2O because his income has risen £l, and he has got just above the abatement standard, continue. And they grow worse as the rate in the pound * grows higher. That, however, is an old grievance ; the new grievance is this brutal assault upon a national income. I am no friend of indirect taxes, because they favor the. middleman ; I approve of tho Income Tax, and still more of the death dues; but I do think it bad finance and bad : policy, when dealing with a civilisation " so complex as ours, to make these violent jumps. For, if we begin like this in the first year of war, what shall we do if the war lasts two years or three? Shall we have a five shillings In-, come Tax ? Shall profits cease to exist, j and industry decay, and society be hur- \ ried into Socialism before it is ready? I do not think I am exaggerating; I am merely coming to logical conclusions. If we are going'to try to pay for this war! practically out of current expenditure, wo l are going to beggar tho present genera- ] tion and thereby to imperil the future, J
It would, I think, be infinitely batter to pay an Income Tax of Is to Is 8d for 25 years, than an Income Tax of Is Bcl to 2s 6d in the war period. And it could so easily have been done if'the redemption of the loans had been spread not over 14 years, but over 30. In 30 years the generation born to-day will just be adult and ready to take on. its burden. Why should this generation take on the whole of the burden itself? To ask suddenly for these colossal sums is scare-finance; it is unnecessary and it is tyrannous. Worst of all, it is a type o"f taxation which will defeat itself : the Income Tax, which produces a fair of lying at its present moderate .rate, will surely produce infinitely more when the penalty of truth is Is 6d and 2s 6d in the £. That objec- j tion to the Income Tax has often been urged, and it i 3 a good one. Well, the j higher you raise the rate, the more liars you will make. It is possible, of course, that Mr Lloyd George may in a, year or so see his error, and that he may abandon what I will venture to call financial "swank" in favor of something saner. He cannot back out of these, proposals, nor can the Cabinet, whether it has been consulted or not; nor can Parliament, because Parliament (which seldom has power) in time of war has none. But in a year or so he may be able to recast his system, and to take money from the place whence it should be taken—namely, the death dues. I belong to the school that believes that the death dues can hardly be too high, because they are the least unpleasant of taxes, and ""because they are wonderfully supple; it is possible to vary death dues to an extraordinary extent—allowing tima for their payment, taking them m hand when it is awkward for the legatee to give money, granting special relief to smaller estates, to unprovided xvivcs, to young children; It is possible for the death duels to bo humane while the Income tax, unless managed with extraordinary skill, com-es down like a sledgehammer. Possibly, therefore, the Chancellor, who has, I know, some synipathy with these ideas, may in the coining year recast the whole system, reduce the Income. Tax to a. reasonable figure, a.nd give us a vastly extended system of death dues capable of meeting war expenses, and, by and by, financing the social reconstruction which will be necessary when the war is done. The financial outlook is therefore black, and I shall bo surprised if very soon (he discontent of the people does not produce a "Stop The War" movement which will greatly embarraes the Government, and for which they will alone be to blame. Very little reiief can, be expected even from a, victory over Germany, for the indemnity which, we could extort would be very small. Belgium and France, which have been invaded and ravaged, haveprior claims, very largo claimsT together not less than Russia-/being poor, must also insist, and Great Britav*. the rich, will come- last- in the vain attempt to wring blood from a- atone. I trust that .1 may eoon be able to <rive better news to the commerce of New Zealand, which must, of course, suffer if our own suffers, but I fear little can be done now that the British Government have committed themselves in this rash and spectacular fashion.
OUR LONDON LETTER, Issue 15691, 4 January 1915
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