BRITISH REARMAMENT

Evening Star, Issue 22571, 12 February 1937, Page 9

BRITISH REARMAMENT

HEAVY DRAIN OH FINANCES STATEMENT BY CHANCELLOR Press Association —By Telegraph—Copyright LONDON, February 11. (Received February 12, at 10.35 a.m.) In the House of Commons Air Neville Chamberlain said the expenditure on defence was growing at,a pace which it was impossible to meet entirely from revenue. He would shortly

introduce a Bill authorising the raising of capital or the use of Budget surpluses, specifying a limit of £400,000,000, spread over five years, redeemable in 30 years. Parliament would control the annual expenditure. The general experience of the last 12 months, the Chancellor said, had in no way relieved the urgency of the heavy task nor lightened the cost of raising the forces to a proper standard of defensive strength. It had only confirmed his earlier judgment. “ How much may be made available out of current revenue, and in what manner, must he left to the Budget statement. So far, however, as the revenue is concerned, it must be supplemented by appropriations from capital. It is necessary to ask for preliminary statutory authority.” Neither the total amount to be raised nor the total period' over which it mustbe spread could at present be predicted. Flexibility and adaptation to changing circumstances were the essence of the defence programme, but traditional usage required that the upward limits should not be exceeded unless by further statutory authority, which should be specified in the Bill. The Chancellor described the provisions for service and redemntion of any capital raised and for safeguarding parliamentry control. The Bill authorising the action proposed would not itself give authority for any expenditure. The whole of the proposed expenditure of the defence departments, both normal and exceptional, would continue to be laid before the House of Commons. No suras would bo applied from capital or from realised surpluses towards meeting the expenditure save with the knowledge of and after the approval of Parliament, which would in this way control in each succeeding year both the total expenditure on defence and the proportion in which it was to be met from capital. Provision would be made annually on the defence votes for interest on the new debt, and also after the end of the borrowing period for the redemption of the debt within 30 years. The Leader of the Opposition called attention to the serious import of the proposal, which was unprecedented in times of peace, and asked for the presentation of . a White Paper on defence before the House was called upon to reach a decision. The Prime Minister promised to consider whether a White Paper would be the best means of presenting the information which the House might desire to have in advance of the general debate, for which he offered facilities. Mr Chamberlain was asked whether his statement meant that soon after the Bill giving authorisation for the raising of Targe sums of money was passed there would, in fact, bo issued stock for the purposes of raising the money. The Chancellor replied: “I cannot possibly answer that question to-day.” METHODS OF FINANCES (Received) February 12, at 1.20 p.m.) A Treasury memorandum explains that the Treaury will issue from the Consolidated Fund sums not exceeding in the aggregate £400,000,000 within a period of five years, beginning on April 1, 1937. The Treasury is authorised to replace these issues by borrowing in any manner in which the money may be raised under the War Loan Act, 1919, but if during the period there is a Budget surplus this may be applied to the defence services instead of being devoted to debt redemption under the Sinking Fund Act, 1875, the Treasury’s borrowing powers being reduced by the amount of the surplus appropriated. The wdiole of the proposed defence expenditure will continue to be shown in the parliamentary Estimates, in which also sums issued from the Consolidated Fund will be shown as appropriations in aid of votes for the Navy, Army, and Air Services and ordnance factories respectively. Interest only at 3 per cent, will be payable during the period of borrowing—namely, to March 31, 1942. After that date the sums borrowed will be repaid in 30 annual instalments of principal and interest combined. The memorandum emphasises that flexibility of defence expansion is no less important than last year, when the programme was begun, and it would be misleading to attempt to state even in

general terms the total cost of the programme, which is intended to be spread over a period of years, and which is necessarily subject to substantial modifications. The figure £400,000,000 therefore does not purport to represent the cost of the programme, but the maximum aggregate sum that can be borrowed within five years. “These limits on the sums that can be borrowed are not final, and may be modified by parliamentary enactment if conditions so require.” Finally it is stressed that borrowings will not be permitted to relieve the Budget from recurrent expenditure on the Defence Forces, and will be confined to votes bearing on the major part of new expenditure.