BRITAIN’S BUDGET

Greymouth Evening Star, 27 April 1945, Page 8

BRITAIN’S BUDGET

NO TAXATION RELIEF ] ( expenditure increase I RUGBY, April 24. ' The maintenance of present rates ol : taxation, the conclusion of a treaty with the United States on double taxation, and the prospect of complete relief from double taxation within the Empire were the chief features ol the Budget introduced iri a crowded hoUbt. of Commons by the Chancellor ol the Exchequer (Sir John Anderson). In view of the tremendous events impending throughout the world, said Sir John Anderson, he had no firm basis lor many calculations, and the Budget might possibly have to be suspended before the year was put. in the year just closed total expenditure was £0,063,000,000, or £126,000,000 more than the estimate. A large proportion of the excels, however, arose from expenditure on war damage. On the revenue side his expectations had been realised. His inland revenue, estimated at £2,000,000,000, was passed by £29,000,000, and income tax at £1,317,000,000 showed an increase of £17,000,000. Excess profits tax. national defence contributions, and estate duty also showed curoluses. Beer duties exceeded expectations "by nearly £20,000.000 in spite of the absence of many consumers on active service abroad. Revenue and expenditure exceeded the estimates by £135,000,000 and £ 125,000.000 respectively, with the result that expenditure for the year exceeded revenue by £2,825,000,000, or Cll 000.000 less than the Budget estimate; but the really significant feature of the 1944-45 Budget was that 53 per cent, of the total expenditure had been met from revenue. The pay-as-vou-earn system of income , tax payment had been of great benefit to employees. An amount of £540,000,000 was received this way during the year, an increase of £100,000.000 over the previous year. The Chancellor said that negotiations with the United States had resulted in a double taxation treaty between the two countries. The treaty covered all income liable to tax in both countries. It contained important provisions regarding dividends, interest, royalties, rents, and income from employment. For interest and royalties, provision had been made reciprocally for complete exemption from tax in the country from which interest or royalties were derived. The treaty applied to royalties received by British film producers for the exhibition of their films in the United States. It was hoped to conclude treaties of this kind with other countries, and first and foremost they desired to come to an arrangement with the Dominions which would allow complete relief from double taxation within the Empire. He had informed the Dominions of the general sense of the agreement with the United States, and hoped to be able to open negotiations with the Dominions during this Summer.

COMING YEAR ESTIMATES

Dealing with the estimates for the coming vear, Sir John said he had to assume that the war in Europe would encl early in the Summer, and he proposed a vote of credit of £4,500,000,000. This would mean that ihe total expenditure would be £5,565,000,000 for war and civil purposes. Revenue was estimated at £3,265,000,000, resulting in. an excess of expenditure over revenue of £2,300,000,000. Sir John sa'icl it was impossible yet to know how speedily the lighting men would return or the speed at which industries could be brought back to a peace looting. It was estimated that during the war period the amount provided by way of taxation and saving towards financing the Government’s expenditure, and therefore no longer available for expenditure on personal consumption, had been no less than 42 per cent, of the whole personal income of the community during the period. Discussing Britain’s post-war indebtedness, the Chancellor mentioned the liberality of American leaselend and Canadian mutual aid, outhe added: “This does not mean that the whole of our expenditure in those countries is covered in that way. Last year, for instance, we incurred in the United States dollar expenditure to the order of a billion dollars in cash on items not covered by lend-lease. This was met from various sources m dollar income, including substantial personal expenditure by the American forces in Britain.

“The best means of liquidating the consequences for the pari we have played in the war, so as to free the flow of international, commerce and to allow the maximum possible freedom of use of sterling balances, is an outstanding problem of the post-war settlement,” he said. “It would be contrary to the reputation of this country for fair dealing that we should settle this matter by some unilateral act without preliminary consultation and an attempt to arrive at a settlement which all concerned will be able to regard as reflecting the true facts of the position. At the same lime, it would be contrary to the elementary principles of justice and fair dealing between nations that obligations incurred in this way should be treated as ordinary commercial debts. In any case, it need not be thought by anybody that the final burden upon us of the settlement will be light. For the first three years after the war I foresee a very heavy deficit on current account and balance of payments. For imports absolutely essential to feed our people and provide raw material for industry wo shall have to incur further indebtedness.” How much this indebtedness would be depended on the urgency with which they treated the expansion of export trade, -even if it meant waiting a little longer to satisfy personal wants, and on how far they were willing to enforce strict economy in external cash expenditure.

POST WAR OBLIGATIONS

Britain would have heavy obligations hi the interests of world security. She would have to aid the reconstruction of her overseas dependencies, to enable them to build up their own income, improve their own standards of living, and put their own products at the disposal of the world as early as possible. Post-war conditions, from an anti-inflationary j oint of view, would be the most difficult yet experienced in Britain. It would ioe possible to support the continuing rate of expenditure only if for the time being the greatest restraints were continued in personal expenditure. That might seem hard doctrine on the morrow of a great victory, after five years of great sacrifice, but it was none the less true. He relied on the savings movement to bring home to the people more than he could do himself the fact that this was necessary in the interests of the country. Present taxation rates apart from the minor alterations referred to, would remain unchanged for the present, first, because the burden of war was still upon them, and it would be highly dangerous to throw a greater pressure of purchasing power upon the market before they could receive a corresponding increase m supplies; and second, because they had not yet reached the stage when the task of the Chancellor in relation to post-war taxation could be begun. Any major reductions of taxation must be made as part of a comprehensive review by the Chancellor of the ' probable cost of post-war expenditure and its effect on the taxation

system as a whole. Forty-nine per cent, of war expenditure came from taxation. This could be done only because the needs of industry for replacement and re-equipment had been postponed. These sacrifices and deprivations, added to the country s great productive effort had made that expenditure possible. He hoped,, however, that no one as a result of what he had said would lake a too pessimistic view. “We must not conclude from the readiness with which all classes have borne the pressure of taxation that it ‘would be possible or desirable to carrv that over into peace,” he said. “The present level of taxation has undoubtedly been depressing to the spirit of enterprise in industry. There should be early alleviation of heavy obstacles to normal development. Thirty-three per cent, of the taxpayers’ income, apart from -excess profits tax, was much above the level any country could be expected to maintain in peace. It was his conviction that taxation of this l< ir jd should not be continued nor should it be, if they avoided continued defence expenditure on a vast scale. Il they could achieve that they could also carry out the social schemes to which they had set their hands. Sir John estimated that income tax in the coming year would yield £1 350,000,000, an increase of £35,000,000 over 1944-45; excess•profits tax at £500,000,000, or £10,000,000 less than was received last year; tobacco tax at £400,000,000; beer tax at £300,000.000. The amount to be borrowed to balance the Budget—£2,300,000,000 —was some £25,000,000 less than last year.

LABOUR MEMBER’S CRITICISM RUGBY, April 26. The Budget debate was continued in the Commons, to-day. Mr Shinwell (Labour) said he found the Budget exciting, because the Chancellor directed attention, to the economic future of the country. The Chancellor warned them ol grave dangers that were ahead, and that there were many problems likely to confront the nation. He found it a little difficult to reconcile that with the note of lofty ultra optimism disclosed in the speech of Lord Woolton,, who saiu they were going to run into such a oeriod of., prosperity they never dreamed of. It would be useful if the Government could reconcile these conflicting utterances. The Financial Secretary to the Treasury had said yesterday that there would be controls for the next four years. How members of the Government' could reconcile that emphatic declaration with the utterances of the Chairman of the Conservative Party organisation. and, indeed, the utterances o', the Prime Minister at the Conservative Party’s conference, , which were no doubt intended for window-dress-ing purposes, it was difficult to exShinwell emphasised that everyone of them ought to desire to raise the standard of living of the people in this country, and obviously lor that purpose they should maximise production. He went on to say, “if we are going to build up and rehabilitate our industries, and in particular assist and rebuild pur expov.. trade we must introduce into industry the highest form of mechanisation ” He believed that industries could be rehabilitated, but they must be harnessed to the national scheme, in which the State must play a very large part. Mr Manningham-Buller (Conservative) referred to the provision in the double taxation treaty concluded with America, affecting film companies, and said that although, the agreement was extremely desirable with, regard to double taxation, it is going to be move beneficial to AmeHcar'is in the first few years than to this country. He was a little sui - prised that'there had not been some other quid pro quo received lor tins vast concession. Il any pait ol tnc. rent of foreign films shown m this country did avoid tax liability, he hoped the Chancellor would say when the practice started and what sums had gone out of the country. The debate is continuing.