BRITAIN'S FINANCE

New Zealand Herald, Volume LXIX, Issue 21349, 25 November 1932, Page 9

BRITAIN'S FINANCE

CRISIS OF LAST YEAR

STEADY PROGRESS MADE

DOMINION EXPERT'S SURVEY 2: *

[by telegraph—correspondent] WELLINGTON, Thursday A brief survey of the financial ..conditions in England during the year ended September 30 last was given to-day by Sir Harold Beauchamp, who returned from England by the Rangitane. "Since the dark days of August and September of last year, which led, on September 20, to the relinquishing of the gold standard," said Sir Harold, "England has been fighting her way up the slippery slope down which she had been rapidly sliding,, and has made steady progress." Sir Harold recalled that early in 1931 Viscount Snowden, as Chancellor of the Exchequer, warned the country of the financial position, but nevertheless his Budget in April was only of a makeshift nature. The May Economy Committee made, drastic recommendations with regard to cutting expenditure, but the Government contented itself with setting up a sub-committee' to look into the report. The report confirm.ed the fears that had long been felt abroad regarding Britain's economic position, and a heavy withdrawal of foreign balances commenced. The huge credits arranged for to meet these withdrawals speedily melted and at one time Britain was standing on the lirink of a financial precipice. The Ministry resigned and a National Government was formed. On September 20 it was officially announced that,it had become necessary to suspend the gold standard, and the Bank of England rate was raised from per cent to 6 per cent.

Effective Control

"The control of the nation's affairs by a National Government pledged to balance Budgets and restore confidence has been effective," said Sir Harold. "The credits , of £130,000,000 obtained from the United States and France to maintain the pound 4 have been repaid. The Bank of England rate is now 2 per cent, whereas a year ago it was 6 per cent. The British Gov- ' ■ ernment, whose borrowing on threa months' Treasury bills was then at a price to return the lender over per cent per annum, has recently been able to meet its weekly requirements at a nominal return to the holder. The wonderful success of the great 5 per cent war loan conversion scheme—the very moderate terms offered took the City by surprise—was a striking indication of the tremendous change that has taken place. "At the end of last year British Government stocks were in the doldrums. The improvement made can be realised by a .. comparison of prices existing in- September this year with the lowest ■ prices in 1931: V

Sept., 1931 193-2 War Loan. 5 p.c. .. 90} 102J Conversion. 3} p.c. .. 67 99 Funding, 4 p.c. .. 78 110 Consols. 21 p.c. 49} 731 •Non-assented. The Budget Balanced . "The emergency Budget introduced after the setting up of the Government showed that, the Budget of April, 1931, in which, there was an estimated surplus of £134,000, would actually result in a deficit of nearly £75,000,000, and the deficit for the financial year 1932-33. before taking account of economies and new taxation proposals, would be, as far as could be judged, £170,000,000. To bridge these alarming gaps was the first duty of the National Gpvernment. and economies effected, and the increased taxation imposed, . enabled the nation by a great effort to balance its Budget to April last. "Confidence has now been largely restored, but splendidly as the National ' Government has done, much remains to be accomplished, and the next big task is to reduce expenditure. A Budget of approximately £800,000,000 (as compared with about £200,000,000 in 1913-14) is beyond the country's capacity under present conditions. The conversion of the 5 per cent war loan to a 3j per cent basis will, after this year, effect a saving of about £23,000,000 per annum, but it is obvious that much more will have to be done. Boom for Economy . "In the Budget in April, 1931, the totgl amount required for service of the national debt, etc., was £312,000,000, excluding payments to the national debt sinking fund, and for the supply services, £393,000,000. Of this amount £272,000,000 was on account of civil services, and it is the expenditure under this head which will have to be searchipgly looked into. Britain's national debt at March 31,1914, was over £661,000,000; at March 31 last it was approximately £7,434,000,000. "The extraordinarily low rates ruling in the money market, as low as one-half of 1 per cent for overnight and weekly fixtures, indicate there is still a lack of confidence on the part of investors, many of whom prefer to keep their resources in liquid form. With a return of confidence, I should not be surprised to see a great expansion in business. Already a mild boom has occurred in the United States of America, where gilt-edged securities appreciated in value during July last to the colossal sum of £2,250,000,000."