PAYING FOR THE WAR

Dominion, Volume 8, Issue 2351, 6 January 1915, Page 6

PAYING FOR THE WAR

BRITISH BUDGET HOW THE HUGE DEFICIT WILL BE MET The following summary of Mr. Lloyd George's Budget proposals is the best that has yet reached New Zealand. It is from the "Daily News":— In the best Budget speech that he has ever made, Mr. Lloyd George announced to the House his bold and simple plans for financing the war. Tho income tax is to be doubled. The beer; duty is to bo raised from 7s. 9d. to 255. Tea will pay Bd. instead of sd. And a loan of 350 millions, 3i per cent, stock, at 95 will be issued, redeemable at par not earlier than March, 1925, or later than March, 1928.- This means that the real interest—if appreciation be included—will work out at i per cent.

Scope of Proposals, The financial effect of theßo sweeping proposal will be as follows: £ Before the war, the year's Tovenue was to be ...;.. 207,146,000 And the .expenditure 206,924,000 Leaving balance '.. 222,000 The loss of rovenue due to the war is reckoned at £11,350,000, and the expected revenue is thus •■ only £195,796 000. Expenditure has risen thus: £ Peace Estimates 206,924,000 Additional War Estimates 328,443,000 Total 535,367,000 I Subtract 195,796,000 ! .Defioit 339,571,000 | "The question," said Mr.'Lloyd George, . so coolly that the House laughed, "is [ how that is to be met." Tho new taxes will bring in: This year. Next year. I £ £, .Income tax ... 11,000,000 38,750,000 ,',Super tax i 1,500,000 6,000,000 Beer ......... 2,050,000 17,050,000 Tea 950,000 3,200,000 I - 1 £15,500,000 £65,000,000 1 The reason for the .difference in the yield in the two years is, first, that extra income tax will be collected on only one-third of tho current year, and secondly, that extra beer and tea duty will date enly from tho present. Debt and sinking Fund. The present oharge for national debt stands at 23} millions. By peace estimates this waß divided thus: Management , ' 16,741,000 Repayment 6,759,000 * 23,500,000 War operations have already altered these figures thus: , . \ Management 17,680,000 Repayment 5,920,000 i 23,500,000 Mr - Lloyd George will not suspend! tho' whole of the Sinking Fund. A sum of £1,000,000 is due for the last instalment of tho South African Loan of 10 millions. This will be paid. Also terminable annuities will bo met, and the usual annuities on temporary naval and military loans. But the 'iest of *A e - Slnkln g Fund, amounting to £2,750,000, which would have been used in redeeming Consols, will be cancelled, and the total charco Of £23.500,000' will thus-be reduced to ±/^0,750,000. Thus, taking the current year, the deficit ,will be reduced thus: •

£ ■. i Deficit as stated ,389,671,000 Less •■■: New Taxes: £15,500,000 Decrease on Sinking Fund:.................18,250,000 Defioit to be met by loan • i , of bills , ...•.:,....,........,. -321,321,000 _At present the outstanding Treasury 5" ls io L^ 6 war are ' 91 mulions. Of these £38,500,000 are renewable' on March 31; £45,000,000 in' April and May j. and £7 500,000 in September. will be paid off or renewed Recording to circumstances, and we have left a sum of £230,321,000, needed to carry on the war: until March 31. ■ Loan Proposals. Mr. 'Lloyd George will borrow so as Treasury through until July. Ho rejects the idea of a simple i per cent, loan at par, and prefers 31 per cent, at 95, an£ repayable at pari B ,?„J?l„^ nsUTe appreciation. Of the £350,000,000, the banks,: etc., have already subscribed a firm sum ni £100,000,000. ' The stock™ to be ad-' verted in the usual way. Sums of £2 and £3 are to. b'e paid on applicai^nn.,,, 1 otment : and instalments of.£lo will be due. each fortnight.' Subscribers to this loan may have either inscribed stock or bearer bonds or denomination not leßs than £100 In future these two forms of the investment may be easily interchanged. Bearer bonds of less than £100 will not be issued, the fear being that depositors in the Post Office Savings Banks _ would withdraw their, balances for reinvestment, which ! would bo> no >pl » he Government; ' The Bank of England has "patriotically agreed," for a period of three years from date of. issue, to lend on th'e' secunty of the- stock or bonds up to £9o (the price of issue) for every £100 The rate of interest for such loans will be 1 per cent, below Bank rate. This unusual and important concession means that the stock cannot fall below £95— that is, to a discount on the issue price. • ■ \ , The nominal amount of th© loan being £350,000,000, the , proceeds in cash will amount (at £95) to about £332,000 000. The additional interest thus made payable on the National . Debt will be £12,250,000 per annum. If we add, say, 3J millions interest on bilk, we find that about £15,500,000 is th© total new interest on borrowings proposed to date. lii the next complete financial year Mr Lloyd George,will raise, say, 65 millions from new taxation, so that £50,000,000 will be available, according to the present position, for war charges, pensions, and so on.

Instructive Comparison,

■ The statement was clear and masterly. First there was a comparison with previous wars. In tho first fill] year of the present conflict, Mr. Lloyd George estimates that the cost to Britain would be 450 millions. This compares with— n Spread ' £ over. Napoleonic Wars 831,000,000 20 years Crimean Wars.... 67,500,000 3 years S.A.i War ......... 211,000,000 I years . Again, as between loan and taxeß, the comparison is: Loan. Taxes. Napoleon io Wars .... £440,000,000 £391,000,000 Crimea .... 32,000,000 35,500,000 In Mr. Pitt's day the income tax was imposed for the year 1798 and collected on only 57 millions' of income, out of an estimated 102 millions for Great Britain, excluding Ireland. We have today a national revenue of £2,300,000,000 a year, and if we taxed ourselves—2o, 25, or evcJi 33 per cent.—as Pitt taxed his generation, we should raise from 450 to 700 millions a year and borrow nothing. Because Pitt imposed these heroic sacrifices, wo are to-day saved 4d.m the £ on the income tax, and tho '. nation has been preserved from paying