ANOTHER AUSTERITY BUDGET IN BRITAIN

Gisborne Herald, Volume LXXVI, Issue 22916, 7 April 1949, Page 5

ANOTHER AUSTERITY BUDGET IN BRITAIN

Meat, Butter, Cheese To Be Dearer (N.Z.P A.—Reuter—Copyright.) (10.45 a.m.) LONDON, April 6. The Chancellor of fhe Exchequer, Sir Stafford Cripps, told the House of Commons today that it was "quite impossible to reduce taxation so long as defence and social services were produced on the present scale."

11l presenting his fourth post-war Budget to a crowded House, Sir Stafford Cripps said that 1948 had been a year of great achievement for the British people but a serious dollar problem still existed.

INCREASES IN FOOD PRICES

Sir Stafford Cripps announced the following Budget proposals:

ffi A reduction of tea duty by 6d per lb. and sugar by lid per lb. Prices to the public and manufacturers would not be altered. This would reduce the necessary subsidies by £11.000.000 for tea and £22.000,000 for sugar. 9 Increase in the price of the following commodities to meet adjustment to subsidies account: Cheese 4d per lb. i® Meat 4d oer lb. Margarine Id per lb. Butter 2d per lb. The food subsidies should not, therefore, exceed £465.000,000 in a year. Sir Stafford Cripps said that beer would be reduced by Id a pint. Telephone fees would be increased. Certain stamp duty charges and duty on the bonus issue of securities would be repealed. The duty on light table wines would

be reduced by 2/- a bottle and 12/- a I gallon. I Death duties and legacy and succession duties would be moderately increased “Income tax was too large a task for the moment,” said Sir Stafford Cripps. Saying that 1948 had been a year of great achievement for the British people, Sir Stafford Cripps added this should encourage the people in the heavy task that lies ahead. There still remained the serious and baffling problem of the dollar balance for which a solution must be found by, at the latest, 1952, when the European recovery programme would end. Britain had already reduced her adverse balance on overseas accounts from £130.000,000 in 1947 to about £120,000,000, according to provisional figures for 1948. In the latter half of last year, an overall balance in overseas payments had been achieved, but there was still a formidable deficit on dollar accounts amounting over the year to £430.000,000 for the sterling area as a whole.

EXPORT TARGET EXCEEDED

Sir Stafford Cripps then told the House that the export target for 1948, which many people had proclaimed as being far too optimistic, had been exceeded over practically the whole field of exports and to most destinations. This target for 1949 had been set at 155 Der cent over the 1938 total. This would not be an easy task. “In many countries the end of the sellers’ market has been or is being reached,” he said. Sir Stafford Cripps dealt at length with the forecasts already made of Britain’s progress in the coming year. He said that the net invisible income for 1948 would probably show a surplus of £100.000.000 against a deficit in 1941 of £190,000,000. A gradual increase in the net receipts from shipping and the earnings of British oil companies was foreseen. Unless there was a fall in prices, obtained for exports, a substantially larger overseas income for 1949 was ex-

pected. There were signs that the progressive increase in world prices of primary products was coming to an end. Sir Stafford Cripps said that for the first time in many years the value of goods and services that Britain got from the rest of the world was being matched by the total she exported or performed for the rest of the world. He repeated his warning that this should not be permitted to conceal the size and gravity of the dollar deficit, much as it had been improved since 1947. He said that at the end of March the gold and dollar reserves stood at £471,000.000 compared with £553,000,000 at the beginning of the European recovery programme.

“In very broad terms we have been able to restrict our dollar expenditure to what could be covered by our dollar earnings, together with the aid at our disposal and we intend to continue that policy,” he said.

DOLLAR DEFICIT MUST BE WIPED OUT

There was, however, still a dollar deficit of £360,000,000 a year and this must be eliminated in the next three years. Imports from the Western Hemisphere had been reduced from 46 per cent of the 1947 total to about the prewar figure of 32 per cent in 1948. The aim would be to balance trade with the Western Hemisphere not at the lowest but at the highest possible level of imports and exports. “We are making a very considerable contribution to the increase of world supplies and to the recovery of other countries,” said the Chancellor. Reviewing Britain’s internal economic situation. Sir Stafford Cripps said that one of the reasons for increased production in all critical sections was the general improvement in the stocks of materials and components. He pointed out that the total investments in industry during last year had exceeded the Government’s estimate. This should be regarded as a real achievement as it took place without further inflation and was accompanied by a large increase in exports and the maintenance of the British living standard. The total call on national resources for investment in 1949 was expected to be about the same as in 1948—perhaps a little lower.

Referring to the indications of disinflation in the United States. Sir Stafford Cripps said that the disinflation indications in other countries were important to Britain. He believed that there had been a comfortable but not excessive degree of disinflation in Britain, but did not think it had gone too far. Sir Stafford Cripps told the House that the national debt had been brought down to £25.168,000,000 by March 31 this year—a fall of £453,000,000 since March. 31, 1948. This redemption had been achieved from the overall Budget surplus and the sterling proceeds of a Marshall Aid special account, applied with the United States consent, to redeeming a shortterm debt. “The debt has never before been redeemed on, anything like such a scale and the operation has aroused a great deal of interest during the year,” he added. Sir Stafford Cripps said that last year’s accounts showed that the expenditure exceeded the original estimate by £200,000,000. but this had been matched by increasing revenue. “The distressing fact is that while certain items on the expenditure side are almost certain to persist, the same cannot be said of some of the items on the revenue side.”

HIGH RATE OF TAXATION ESSENTIAL

Summarising the revenue accounts, the Chancellor said that the incometax, £1,309.000,000, and the “once-for-all” special contribution, nearly £BO,000,000. had all yielded more than was estimated.

Sir Stafford Cripps pointed out that £3.176.000.000 had been spent, comnared with the estimate of £2,976,000,000.

The amount 1 of Durchasing power represented by the increase should strictlv be withheld from the home market, but over the last half-year the country had been in balance. The cost must be found by the Budget. It was quite imnossible to reduce exnenditure and, therefore, taxation, so long as defence and social services were produced on the present scale. “On the whole, it seems that we should follow the same general nolicy as last year for our Budget, but not with so sharn an accent on the urgent need to cb-ck inflation. We shall certainly n«ed an overall balance on the right side, thouirh not as large as we realised last year. “We should aim also at a true revenue surplus which, again, need not be so large as that realised last year. "We must remain alert to watch the trend of disinflation and to arrest it if it threatens to widen into a generally harmful deflation.”

Sir Stafford Cripps said that *eslim-

ates made on the existing basis of taxation called for a total expenditure in the next financial year of £3,414,000,000. The cost of social services had risen sharply. It was estimated that the receipts from tobacco and other customs and excise duties would rise, but receipts from alcohol, death duties .purchase tax and entertainments duty, among others, would fall. The total revenue on the existing basis of taxation would have been £3,800,000,000. There would thus have been an above-the-line*, surplus of £386,000,000 compared with £831,000,000. This would have meant a true revenue surplus of £408,000,000 compared with £608,000,000 last year. This reduction arose primarily from the increase in Government expenditure, the three main ingredients of which were defence, food and social services.

The Chancellor said there could not be any marked reduction in expenditure on defence and socal services costs would increase over the next five to 10 years.

“We have to face the facts,” he said. “As long as the defence forces and social services are maintained, whatever Government is in power, a very high rate of taxation will continue to be necessary. There is not much further immediate possibility of a redistribution of national income in this country.”