WELLINGTON NEWS

Hokitika Guardian, 31 August 1931, Page 3

WELLINGTON NEWS

THE BRITISH CRISIS. (Special Correspondent). WELLINGTON, August 28. There can ue no doubt hut that a great deal of interest has been taken in the British financial crisis by many people in all parts of New Zealand and it is safe to say that few people know the genesis of the trouble. The Chancellor of the Exchequer in the Labour Government, Mr Philip Snowden, balanced the. Budget for IC3I-32 by various expedients, just as his predecessor, Mr Winton Churchill, had done, at the same time he warned Parliament that grave financial danger s were ahead. Those dangers arose mainly from the unemployment insurance or the dole, as some term it. At the insistent demand of the Conservatives and the Liberals the Government appointed an Economy Committee to probe the matter. The Committee, under the Chairmanship of Sir George May, in their recommendations stated that they reached the conclusion that the anticipated borrowing in 1932 on behalf of the unemployment fund and the road; fund should be regarded as a revenue liability, and on this basis it was estimated that to produce a properly balanced Budget in 1932, including the usual provision for the redemption of debt, a deficiency of £120,000,000 had to he made good by new taxation or economies. The Committee was of the opinion that an immediate saving of £96,578,000 could ho made, the most substantial contribution to this £66,500.000 which could lie saved by reduction of 20 per cent of unemployment insurance benefits, increase of -weekly contributions .for ’workers, employers and the .State in the case of men, and extension of the scheme- to include certain classes now outside it. and in an application of needs test to all applicants who have exhausted their insur-ance-frights, hut are still within the insurance field. It is on this matter that the Ram a.v MacDonald Cabinet split. The Cnmmitee reported on July 31, s;o that it ha s had jus/ over three weeks for the crisis to develop and come to a head. The dole Iris been rigbtlv described as a hideous cancer, and has been condemned by all intelligent people. In the official communique issued by the Prime Minister it is stated: “As the commercial well-being, not only of the British nation, hut of a large part of the civilised world, is built up and rests upon well-formed confidence in sterling, the new Government will take whatever steps are deemed necessary to maintain that confidence.” Foreigners have been losing confidence in sterling and tliis ha s been shown in the past few weeks bv the persistent raids on the Bank of England’s gold reserve. , This reserve was reduced from £164,000,000 to £130,006.000 in a few short weeks, and the Bank had to obtain the sanction of the Tre/sury to issue £15,000,000 in additional fiduciary currency-, < for it had not the gold to base this in.-.- ' creased currency. .. 'I he effect of the format’on of..a.Nat-,. ional Government specially to dleal .with; the balancing of the Budget, will he.to. . calm the feeling of the foreign owners of £250,000,000 of short-term investments/in London. No doubt their feehi ; ings were the sharper from the know- : ledge that British investors have £ISW- I 000,000 in Germany in short-term commitments in the shape of bills discount ed, acceptance - credits and deposits. Tlie Germans realise that the British crisis is intimately linked with the German crisis, England’s difficulties having partly arisen from Germany’s.

The seriousness of the position is recognised oiul the best is being done to grapple with it; in any event the world cannot let Great Britain drift into difficulties rnd endanger the very civilis--lt'nn of Europe. Me cannot take a much more optimistic view of the world’s economic situation. There is hound to he greater co-operation on the part of ho nations, and one important min will lie thaif Washington will lie ihligi-d to abandon , its isolationist theories. A scaling-down or canc Thietion of war debts is now within the hounds of probability and is not tiulikey that-the problem of tariffs wil also eceive c< nsideration. History will most likely the date/ of dispersion i’ the depression from August. 193 ,