MONEY AND BUSINESS AFFAIRS.

Manawatu Standard, Volume LX, Issue 129, 1 May 1940, Page 12

MONEY AND BUSINESS AFFAIRS.

WAR FINANCE. (By “H.J.K.”) The British Budget, with its astronomical figures, gives us some idea of the costliness of war. And the British expenditure is but a part of the cost, for there are France and Germany to be taken into account, Norway and all the neutral countries of Europe, the British Dominions, and the United States. If the figures could be compiled with some degree of accuracy the total would be prodigious. The world is wasting its accumulated wealth, and making large drafts on the future. The Chancellor of the Exchequer (Sir John Simon) has budgeted for a revenue of £2,700,000,000 very nearly, and large as this sum is, the members of the House of Commons do not consider it to be quite enough. They are probably right, but the position can bo met by a supplementary Budget. Here it is sufficient to consider the British method of financing the war. It will be noted that the bulk of the revenue is to be obtained by taxation, which must come out of the current earnings of the people, or out of the national income. Can the country stand the heavy taxation ? There is no doubt that it can, for the annual national income is estimated at £OOOO trillion, and the war taxation is equal to about one-third of the income. The British people could stand up to more taxation, and yet be in a good position when the war ends. The amount to bo borrowed for war expenditure is comparatively small, so that in effect IJritain is following the rule of “pay as you go.” There is considerable merit in such a policy, for when the war ends and expenditure is reduced it will be possible to reduce taxation, whereas if the war were financed mainly by loans there would be a staggering load of debt at its close, and the heavy interest payments would make it next to impossible to reduce taxation. In Britain national finance is not a party matter, and thus wo find the members of the Opposition are not satisfied that the Budget . goes far enough in providing war finance. And tlie House of Commons exercises a watchful eye on taxation. In the Dominions it is not unusual that once a tax is imposed, it stays. That has happened with respect to tho taxes imposed during the Great War and during the world depression. The sales tax may be quoted as a case in point. It has not only come to stay, but with other taxes it is likely to be increased, if we arc to maintain social security. MAINTAINING EXPORT TRADEExcept for what lias to be paid for imports the whole ol the expenditure is mainly with the British peopletho payment of the forces and the etceteras they require, and the various industries providing war supplies all get their share of the expenditure, and there is no profiteering, no bife dividends, lor the surtax is 17s in the £, which makes profiteering a. poor game. Arid this money spent with the people goes back to' the Treasury in the form of taxes, and becomes again available for war expenditure. And wliat Britain lias to pay for imports is small compared with the other war expenditure. Her greatest difficulty is in meeting expenditure in the United States. This of course is partly met by sales of goods to f lic United Slates, but largely by making use of the securities hold by British nationals. Those securities arc sold in New York and tho proceeds applied to paying lor warplanes. But Britain is buying war supplies from other countries and to lessen the difficulties of payment is making a special effort to expand her export trade, and thus make goods pay for goods. In this matter she is making very strong efforts and is being well supported by British industry. It is perhaps no exaggeration to say that there is not a known industry catering for human wants that is not to lxi found in the United Kingdom. And Britain is now in a position to simply goods on a competitive basis. All lier industries arc keyed up for mass-production. Moreover, with Germany out of the way, foreign markets the world over are open to British trade. Recent, official figures show that British trade has recovered its pre-war level, but at present that is not quite sufficient and a further expansion in the oxnort trade is desirable. If this is achieved Britain will stand in a favourable trading position, for she will have developed fresh markots and will have established a certain amount of goodwill witli her customers, and, with on expansion of trade, recovery from tho effects of the war should be speedy. THE TRADING BANKS. The return of the trading banks for the four weeks to March 25 are now available and the figures show a slight decrease in deposits 1 with a slight increase in advances. Overseas funds show a small increase. Both classes of deposits show contraction as compared "with February, as may be seen in the tablo appended:

TIIO shrinkage in the demand deposits is less than a million, and time deposits aro lower by less than £300.000. But a different picture is presented when compared witli the corresponding date last year. Tho figures are as under: —

The demand or free deposits have increased durijjg the twelve months by

over £B,OOO 003, while the time or fixed deposits increased by about . £1.400,000. This, of course, has been due to tho tightening of the import restrictions. Applying tho same comparison to advances the position is as under; £ March, 1939 ... 55,517,310 ’ March, 1940 ... 48,161,441 Tho advances show a shrinkage of about £7.400.000, also due to import restrictions. The overseas funds stand at £13.066,903 as compared with £12.422,329 at the end of February, an increase of about £6OO 000. Tho total seems largo enough to warrant an easing of the import control. j

Demand Time February 20 .. 47.147.970 31,621.238 March 25 . 40,039.037 31,245,530

Demand Time £ £ March, 1039 .. 38,446,609 29.878,122 March, 1940 .. 46,639,637 31,245,630