THE New Zealand Herald AND DAILY SOUTHERN CROSS TUESDAY, AUGUST 18, 1931. BRITAIN'S POSITION.

New Zealand Herald, Volume LXVIII, Issue 20954, 18 August 1931, Page 8

THE New Zealand Herald AND DAILY SOUTHERN CROSS TUESDAY, AUGUST 18, 1931. BRITAIN'S POSITION.

There has como a comparative lull in the activities which began about a week ago upon revelation of virtually a state of financial emergency in Britain. Cabinet committees are at work, but nothing is expected to be divulged concerning their deliberations for a day or two. The circumstances which forced this spurt of energy during what is normally a time of Parliamentary recess and general holiday-making were not of sudden growth. Lack of Budget equilibrium is the essence of the problem ; but it was known, freely stated in Parliament, and endorsed by outside comment, that all hope of a balance had disappeared, unless further measures were taken, before the session ended. Nevertheless Parliament rose with nothing more than an assurance that the alarming report of the Economy Committee, which had just appeared, would be carefully studied by the Cabinet. The sudden call to do more than this, the practical certainty that Parliament will be summoned to meet next, month instead of remaining in recess until October, can be attributed to recognition that the state of public finance was producing consequences that could not be allowed to go unchecked. Realisation that Britain's position was not all it should be had spread abroad ; probably the seriousness of the situation was exaggerated outside the country. Rightly or wrongly, the adverse impression began to be felt in the City of London. Commercial credit, already dangerously sensitive, could not be allowed to suffer this additional handicap. Thus followed the hurried consultations and the intensive discussion of ways and means to set matters right again.

It has been predicted that when j Parliament meets in September it will have two propositions to face, new taxation and cuts in expenditure. Speaking in the Budget debate, Mr. Stanley Baldwin suggested that balancing the Budget, reduced to the very simplest terms, demanded one or other of these devices; the possibility of both being required was, of course, implied. The Chancellor of the Exchequer had not included either, to any extent, in his plans. He proposed an increase of twopence in the petrol tax, raising it from fourpence to sixpence a gallon. This was estimated to produce £7,500,000 for the current year and £8,300,000 in a full year. Anticipation of income tax payable in 1932-33 was expected to produce £10,000,000 and resort to the dollar exchange fund held in New York—borrowed money by origin—furnished another £20,000,000. By these devices, and without any increase in direct, taxation, he claimed to have overtaken the prospective deficit of £37,306,000, and to have attained a surplus of £134,000. Now it is evident that the country is face to face with the elementary principles Mr. Baldwin expounded, those of raising revenue by new taxes or pruning expenditure. All outside means of relieving the Budget appear to have been exhausted. The taking of the dollar fund and the use of income tax not normally due for payment until next July were stated by critics to have exhausted the "hen-roosts" available for raiding. Even the sinking fund was denied Mr. Snowden as a means of relief, on the contention that the mounting debt of the Unemployment Insurance Fund in effect cancelled a very large proportion of the debt repayment allowed for in the Budget. By an inexorable process of elimination the position has been reduced to one of finding new revenue and of pruning expenditure. The prosjiect is stated to be that of sacrifices for all. The phrase is an elastic one, giving no hint of what really may be expected. The Prime Minister has flatly denied that the leaders of the three parties will be associated in proposals for reduced wages and salaries. He does not close the door entirely on that device, as his words show when carefully examined; but in any event the minds of at least the Conservatives are obviously working on other lines. Mr. Neville Chamberlain, in his Budget speech, said that while Mr. Snowden was saying that as long as he held office he would never be a party to the imposition of a tariff, he himself had been reflecting that Mr. Snowden would probably be the last Chancellor of the Exchequer to introduce a free trade Budget. That same day Mr. Baldwin, opening a speech-making campaign that was to embrace the whole country, committed himself and his party once more to an emergency tariff on manufactured goods. When the Economy Committee produced' its report, recommending a drastic overhaul of expenditure, Conservative comment suggested that it would not suffice to balance the Budget without a tariff for revenue. So, in so far as the Conservatives are consulted in any degree on the new financial measures to be adopted, they will unquestionably fight hard for a tariff, primarily for revenue, but probably with an element of protection in it. To those watching the course of British affairs from afar, it seems certain that the traditional policy of free trade—or free imports as its critics prefer to call it—is nearer the point of variation to-day than possibly at any time since free trade became the fiscal evangel. If the new policy wins the day the tariff may not be very steeply protective. It may or may not give scope for Empire preference. It is likely at the outset to be frankly a revenue-raising programme. But whatever the ultimate outcome, the immediate .prospect is that of definite pressure to have this change in accepted financial measures instituted. It is called by the Conservatives an emergency tariff. Britain is face to face with an emergency from which a tariff may very easily emerge as the new departure in finance to meet the needs of the tirrjea.