DISPOSING OF A SURPLUS

New Zealand Herald, Volume LXXI, Issue 21765, 3 April 1934, Page 8

DISPOSING OF A SURPLUS

With a surplus of a little more than £31,000,000 at the end of the financial year 1033-34, the British Chancellor of the Exchequer is in a fortunate position, practically without parallel in the world. He is also in the position of having to decide how this happy result will influence his plans for the coming year—a task in which he will not lack advisers. It was conceded in early comment, when the surplus was plainly in sight, that he would end the year with a genuine, and not merely a bookkeeping, balance of revenue over expenditure. One or two factors may be mentioned to prove this correct. In the Budget he announced that he would borrow to cover the cost of the statutory sinking funds, a sum of £7.500,000. Against this, he provided another £7,750,000 out of revenue for the redemption of debt. He accepted a windfall of £10,000,000 from the 5 per cent war loan depreciation fund, ft non-recurring item on the revenue side, but he incurred a non-recurring expenditure obligation of £12,000,000 in conceding to payers of income tax the right to make their payments again in two equal instalments in January and July. This balancing of unorthodox items leaves the authenticity of his surplus beyond challenge. He will now be expected to concede something in income tax. A reduction of sixpence in the pound from the standard rate has been variously estimated to cost £27,000,000 and £25,000,000, the latter figure being the Chancellor's own. He will be vigorously reminded that he should be in a position to grant this much relief. But conjecture has been busy with other possibilities. For example, a non-official analysis of company profits announced in the last quarter of 1933 showed an increase of just over 30 per cent in aggregate net earnings. From this it has been argued that an increase on this scale in all taxable profits would mean a rise of £50,000,000 in income tax yield on existing rates. When added to this, death, stamp and customs duties all promise to reach higher levels, the Chancellor will have to deal with heavily-armed critics if he does not meet the demand for relief in direct taxation. There will also undoubtedly be a campaign for restoration of the economy cuts of the past three years, at an estimated cost of £23,000.000, while voices will be heard on behalf of the heavily retrenched Defence Services.