WELLINGTON NEWS

Hokitika Guardian, 20 August 1931, Page 5

WELLINGTON NEWS

BRITAIN’S CRISIS

(Special Correspondent)

WELLINGTON, August 18

It would be rank folly on the part of New Zealand not to take cognisance of tlie apparent financial crisis in Britain. Our best, and practically the only reliable and consistent purchasers of our primary products are the people in the United Kingdom and anything that tends to impair the purchasing power of the British people must inevitably react on New Zealand. The crisis, which is obviously financial, lias developed with remarkable rapidity, and appears to have reached the acute stage. At tliis end and with the limited information available it is hard to say how or when the crisis started. We all know that in June last prior to the launching of the Hoover moratorium, everything was normal, with every indication of improvement in business. The money market was easy, tlie Bank of England’s stock of gold had increased enormously, and there was an expectation that Bank Rate would fall to tlie. traditional minimum of 2 per cent. Just as London was congratulating itself on the improved outlook the moratorium was announced and with sonic suddenness owing t/ the parlous plight of Germany, find from that moment there was an upheaval in Hurt)pean financial circles. As a matter of fact Europe has uvtm suffering from a complex of political, financial and business troubles.

The losses sustained by the Credit Austalt, the largest and highly regarded bank iti Vienna, caused a shock to European financial centres, which was further accentuated by the disclosure of the virtual bankruptcy of Germany. , The scare thus engendered caused a panic scramble for gold, the Bank of England being the principal sufferer. But relief has been afforded both Germany and Austria, and there is not likely to be any run on the Bank of England’s gold reserve because the Bank of France and the Federal Reserve Bank of New York are co-operating with the Bank of England to prevent that. The British crisis, such as it is, has its origin in quite a different set of circumstances. Some time ago the parties in opposition to the British Labour Government insisted upon' a commission being appointed to investigate the British public finance and indicate what eeonmies could be effected. The report of this commission has caused a political commotion, and it is likely that Parliament will he called in session next month, and it is quite within the hounds of probability that the Labour Government may suffer defeat.

The Chancellor of the Exchequer. Mr Phillip Silowdcn, balanced the Budget, or is supposed to hftve doiie so, by temporary expedients, a lid white till? may be possible it is not probable, because the conditions • have wince the announcement of the Hoover moratorium gone on from had to worse. The economy commission has indicated the direction in which economies can lie made, and in particular it urges revision of the Unemployed Insurance or dole system. The unemployment fund has been living on loans, and the recomniedatioa is that it should b e selfsupporting. To curtail dole expenditure, or to in any way tighten up the scheme would make the Labour Government very unpopular with the rank and file of the Labour movement, and the crash of the Government is therefore not unlikely. That the crisis is rather severe is seen in the past that hankers have presented Cabinet with proposals which include a serial fiat rate tax on all incomes from bonds bearing fixed interest, including not only Government but also industrial debentures. This of course would he in addition to the ordinary income tax. Tlie point for us tto remember is that the British people who are already staggering under heavy taxateion, will have to endure more tax burdens which will curtail the spending power of the great middle class who are the principal buyers of our primary products. The export season which is just beginning was devoid of promises of improvement but now we must be very thankful it prices do not go lower. M e can stand a reduction of the cost of Government in New and the idea is developing. '