THE New Zealand Herald AND DAILY SOUTHERN CROSS MONDAY, APRIL 3, 1933 BRITAIN'S BALANCE-SHEET

New Zealand Herald, Volume LXX, Issue 21457, 3 April 1933, Page 8

THE New Zealand Herald AND DAILY SOUTHERN CROSS MONDAY, APRIL 3, 1933 BRITAIN'S BALANCE-SHEET

National budgets and national accounts have drawn to themselves a great deal more popular interest nowadays than, possibly, they have ever enjoyed before. For many reasons, especially because of the example it sets to a large portion of the world, Great Britain's financial management as disclosed by the year's accounts is the most worthy of study. The results for 1932-33, which have just been made public, reflect in various features the fluctuating fortunes of the year. The result, taking into account everything allowed for in the Budget produced last April, has been a deficit of £3,323,000. This falls short of expectations by some £4,000,000, since Mr. Chamberlain budgeted for a surplus of £BOO,OOO in round figures. Ho made no provision, however, for the debt instalment to the United States, perforce met last December. If this amount is counted the deficit becomes £32,279,000. There was a considerable shortage of revenue compared with the estimate. Two uncounted savings were in the cost of interest on and management of the public debt—reduced because of the exceedingly low price of Treasury bills during the second half of the year—and in the amount required to be found for the sinking fund. This was lower because certain loan redemption operations are suspended when the price of the securities concerned appreciates in the open market. The relief, in both departments, can be regarded as the first reward from last year's conversion operations and the cheapening of money rates. Had the cost of unemployment relief not been greater than originally expected, a substantially better result 'would have been forthcoming. When Mr. Chamberlain presented his Budget, it was generally described as hard, or grim. The position he had to face was that, on the basis of then existing taxation, there would be a deficit of £34,700,000. Direct taxation was not increased. The added imposts of the previous year, and the promptness with which payers of both income tax and surtax had responded to the call upon them, were the principal factors in balancing the accounts and leaving a surplus of some £360,000. The payer of direct taxation could bear no greater burden. .In fact, it was estimated that the yield on the existing scale would be some £28,000,\p00 less in the year just closed than in 1931-32. The accounts show the fall to have been under-estimated by £13,750,000. It is a clear instance of taxation having passed the point of diminishing returns. The Chancellor'expected that the yield of customs duties imposed as part of Britain's altered policy, and revenue duties on tea, sugar and other small items, would enable him to bridge the gap between revenue and expenditure. The return from customs and excise is shown as having been £12,000,000 below the estimate. There are no details showing where the loss was made; but recent Board of Trade returns revealing a considerable shrinkage in imports suggest that the customs revenue was estimated on a volume of trade greater than was actually the case. These are the circumstances explaining why, in spite of lower debt charges and a saving of £10,500,000 on supply services—annual appropriations, in the language of the New Zealand Budget—there has been a deficit of £3,323,000 instead of the modest surplus expected, apart from the American debt instalment. It means that the Budget has not been absolutely balanced as it was in the previous year; but, considering how small the gap is, relative to the size of the figures involved, it can still be said that Britain sets an example to the world. A price has had to be paid for what the accounts for the past two years show. The chief part of it is a general level of taxation higher than that levied in any other country. In addition, within the past 12 months there have been conversion schemes heavily reducing the interest paid on enormous blocks of the public debt—all effected without compulsion or the hint of a penalty. With these sacrifices the accounts have been brought more nearly to a balance than in almost any country that can be named, although unemployment relief added some £18,000,000 to the expenditure side after the year's operations had been planned. But for this addition it can be assumed that a considerable surplus would have resulted within the limits set by Mr. Chamberlain. Outside those limits stands the Amei'ican debt instalment, increasing the deficit to more than £32;000,000. The unemployment problem is wholly a domestic question. That of the American debt is not. As the accounts show, if Britain had been paid what was owed to her in 1932-33, the American demand would not have swelled the deficit in this fashion. In fact, there would have been a credit balance sufficient to cover the domestic deficit nearly three times over. Budget difficulties are pleaded by the United States in demanding payment, and by Britain's debtors in seeking relief. Britain, paying on the one hand, not being paid on the other, has had to face Budget difficulties as great as those confronting any of the others concerned in this great problem. They are met in Britain by measures from which the others shrink, by sacrifices their citizens are not called upon to bear. There are many reasons, moral and practical, why something should be done to resolve the great obstacle to world stability and recovery created by the war debts. The situation which has developed in the past year has added another, the necessity that elementary justice should be done the one nation which is apparently expected to bear the burdens of all. This feature of the position is made clearer than ever by the central item in Britain's accounts for the year just closed.