STABILISATION.

Evening Star, Issue 25170, 9 May 1944, Page 8

STABILISATION.

TO THE EDITOR. I

' Sir, —Sir John Anderson, British Chancellor of the Exchequer, when presenting the Budget, said that the present cost of living figures could not longer be regarded as sacrosanct. He also stated that subsidies paid to hold prices down had steadily increased from £70,000,000 in 1940 to £190,000,000 in 1943. In New Zealand we, too, have a stabilisation plan. Without wishing to be pessimistic, or to pose as a prophet, I wish to draw attention to the fact that our stabilisation plan must break down under the present debt system of finance. Aside from other causes, one factor alone will prevent prices from remaining stable—that is, an ever-increasing national debt. An attempt is made to collect the interest payable on the national debt hy taxation; therefore, as the national debt steadily increases, so must the incidence of taxation increase, and taxation is the first cost charged into prices, and as this first cost is increased' prices are likewise increased. Alternatively, if the subsidies are increased in an attempt to keep prices stable, from whence can the increased subsidies be paid? Bearing in mind thai under the existing rules (long overdue for a change) the Government lias only two sources of income—taxation and borrowing—it becomes evident _ that if the increased subsidies are paid from increased taxation they will destroy their own benefit. If the increased subsidies are paid from further borrowing, thus increasing the national debt, in time the increased debt requires an increased interest payment. This increase has then to be met by an increase in taxation or further borrowing. If the latter, the total debt is again increased. So it goes on, and must some day break down. In any case, all goods are not subsidised, and many items have increased in price due to the foregoing factor, together with other factors, In the wake of increased prices comes an insistent and understandable demand for increased wages to meet the higher cost of living. As wages are a cost or charge into prices, the increased wages mean a further increase in prices. Wo are witnessing the procedure time and time again, and must continue to do so until sufficient people know and understand that it can be changed, must be changed, and demand that it be done. —I am, etc.. Stability. May 5.