HIGHER COSTS

Wanganui Chronicle, Volume 80, Issue 37, 13 February 1937, Page 9

HIGHER COSTS

BRITISH DEFENCES BILL FOR NEW CAPITAL Up To £400,000.000 Wanted [JO BE RAISED BY LOAN OR BUDGET SURPLUSES [ British Official Wireless. J RUGBY, Feb. 11. ao meet the rapidly-growing expenditure on the defence programme, the Government is taking powers to raise capital or to use Budget surpluses for defence purposes over a period of five years and to a maximum fixed for the time being at £400,000,000. This important announcement was made at question time in the House of Commons by the Chancellor of the Exchequer, Mr. Neville Chamberlain, who recalled that in his last Budget he had said that the exceptional nature of the defence programme made it inequitable that the whole cost should fall upon the revenue in a single five-year period. The general experience of the last twelve months had in no way relieved the urgency of the heavy task nor lightened the cost of raising the forces to a proper standard of defensive strength. It had only confirmed his earlier judgment. Revenue Insufficient. “The defence expenditure is growing at a pace which makes it impossible to meet it entirely out of revenue,” he said. “How much may be made available out of current revenue and in what manner must be left to the Budget Statement. So far, however, as revenue must be supplemented by appropriations from capital, it is necessary to ask for preliminary statutory authority. The Government therefore proposes forthwith to introduce a Bill which will authorise the raising of capital or alternatively the use of any realised Budget surpluses for defence purposes over a period of time.” Neither the total amount to be raised nor the total period over which it must be spread could at present be predicted he proceeded. Flexibility and adaptation to changing circumstances was the essence of the defence programme. But traditional usage required that upward limits not to be exceeded unless by further statutory authority should be specified in a Bill, and the Government proposed to ask for general power to raise capital or to use realised surpluses for defence expenditure up to a sum not exceeding £400,000,000 spread over a period not exceeding five years. Supervision by Parliament. The Chancellor then described provisions for service and redemption of any capital raised and for safeguarding Parliamentary control. The Bill authorising the action proposed would not itself give authority for any expenditure. The whole of the proposed expenditure of the defence departments, both normal and exceptional, would continue to be laid before the House of Commons. No sums would be applied from capital or from realised surpluses towards meeting expenditure save with the knowledge of any after the approval of Parliament, which would in this way control in each succeeding year both the total expenditure on defence and the proportion in which it was to be met from capital. Provision would be made annually on the defence votes for interest on the new debt, and also, after the end of the borrowing period, for redemption of the debt within thirty years. Facilities for Debate. At the end of the Chancellor’s statement, the Leader of the Opposition. Mr. C. R. Attlee, called attention to the serious import of a proposal unprecedented in times of peace, and asked for the laying of a White Paper on Defence before the House was called upon to reach a decision. The Prime Minister, Mr. Baldwin, promised to consider whether a White Paper would be the best means of presenting the information which '.he House might desire to have in advance of a general debate, for Ahich he offered facilities. Mr. Chamberlain was asked whether his statement meant that soon after the Bill giving the authorisation for raising large sums of money was passed there would in fact be issued stock for the purpose of raising the money. The Chancellor replied: “I cannot possibly answer that question to-day.” TREASURY EXPLAINS RAISING THE MONEY TERMS AND CONDITIONS LONDON, Feb. 11. A Treasury memorandum explains that the Treasury will issue from the Consolidated Fund sums not exceeding an aggregate of £400,000,000 within a period of five years beginning on April 1, 1937. The Treasury Is authorised to replace these issues by borrowing in any manner in which thoney may be raised under the War Loan Act. ISP?, but if during the period there is a Budget surplus this may be applied to the defence services instead of being devoted to debt redemption under the Sinking Fund Act, 1875, the Treasury’s borrowing powers being reduced by the amount •f surplus appropriated. The whole ftf the proposed defence expenditure Will continue to be shown in the Parliamentary Estimates, in which also Bums issued from the Consolidated Fund will be shown as appropriations m aid of votes for the Navy, the Army, the Air Services. and the Royal grdnance factories respectively. Interest only at 3 per cent, will be paygble during the period of borrowing,

namely to March 31, 1942. Thereafter the sums borrowed will be repaid in thirty annual instalments of principal and interest combined. memorandum emphasises that flexibility of defence expansion is no less important than last year, when the programme was begun, and it would be misleading to attempt to state even in general terms the total cost of the programme, which is intended to be spread over a period of years and which necessarily will be subject to substantial modifications. The figure of £400,000.000 therefore does not purport to represent the cost of the programme but the maximum aggregate sum that can be borrowed within five years, but “these limits on the sums that can be borrowed and on the period of borrowing are not final and may be modified bv Parliamentary enactment if conditions so reouire.” Finally it is stressed that borrowings will not be permitted to relieve the Budget from recurrent expenditure on the defence forces and will be confined to votes bearing the major part of the new expenditure.