8.—6

Delay in obtaining plant and machinery from overseas, added to the fact that we cannot do everything at once even in our more fortunate circumstances, means delay in building up a flow of consumable goods sufficient to meet the tremendous demand represented by huge wartime accumulation of purchasing-power belonging to the people. Thus in the immediate post-war years there is much greater danger of inflation than during the war. Prices soared more after than during the last war, and potentially the position could be much worse this time than in 1920. The people will want freedom from controls —which is understandable after six years of war — and will naturally feel that, having saved their money and gone without things for so long, they are entitled to spend their money freely when the war ends.^ Continuation of the stabilization scheme and of price control over this critical period will be a vital necessity, but price-control procedures will be so altered and simplified as not to impede the expansion of production, which alone can provide the real solution —an adequate supply of goods and services. To obtain the all important expansion in production it is the policy of the Government to give reasonable priority to factory buildings, to accord_ any necessary priority or sponsorship in the importation of essential machinery or tools, and generally to give every practicable assistance and encouragement towards the reconstruction and expansion of our industries. We will ensure that any worthwhile activity that is economically sound is not held up for lack of finance. War taxation presses heavily upon all sections of the community, and it is recognized that it leaves little to cover the risks inseparable from undertaking new ventures. The time has not yet come for a general review of taxation, for we still have heavy costs of war and rehabilitation to meet. Nevertheless, this is the time when plans and preliminary arrangements should be made for expanding production as soon as man-pOwer and materials are available. Those contemplating new industrial activities are naturally wondering what will be their post-war taxation position. To assist and encourage them the Government propose to make certain adjustments in the basis of taxation to first become effective in respect of the income earned during next financial year. It is proposed to provide for a special depreciation allowance of 20 per cent, of the cost of new plant and buildings in such cases spread over a period of five years, and to allow as a deduction in assessing income-tax the cost of royalties, research, and patent rights. In connection with the decision to grant a special rate of depreciation on buildings and plant, the following shows the effect of a special allowance of 20 per cent, spread over a period of five years : — £ £ Plant cost . .. .. •• 100,000 Buildings cost .. .. .. 100,000 £ £ First year, 11 per cent. (D.Y.).. 7,500 First year, 1 per cent. (0.C.) .. 1,000 Plus .. .. •• 4,000 Plus .. .. .. 4,000 11,500 5,000 88,500 95,000 Second year, 7A per cent. (D.V.) 6,638 Second year, 1 per cent. (0.C.) 1,000 Plus .. .. .. 4,000 Plus .. .. .. 4,000 10,638 5,000 77,862 90,000 Third year, 74 per cent. (D.Y.) 5,840 Third year, 1 per cent. (0.C.) 1,000 Plus .. .. •• 4,000 Plus .. .. .. 4,000 9,840 5,000 68,022 85,000 Fourth year, 74 per cent. (D.V.) 5,102 Fourth year, 1 per cent. (0.C.) 1,000 Plus .. .. •• 4,000 Plus .. .. .. 4,000 9,102 5,000 58,920 80,000 Fifth year, 7£ per cent. (D.V.).. 4,419 Fifth year, 1 per cent. (0.C.) .. 1,000 Plus .. .. 4,000 Plus .. .. .. 4,000 8,419 5,000 Residue .. .. .. £50,501 Residue .. .. .. £75,000

Inflation.

Taxation.

Taxation adjustments.

14