Mr. CHAMBERLAINThat review of our position brings me to the consideration of the policy which we ought to follow. The deficit of the current year, on the present basis of taxation, is, as I have said, £275,000,000 or £300,000,000. But the current year is a wholly abnormal year. Expenditure is swollen by the overlapping of war charges. Peace is not yet signed, and even when peace is signed war 188 charges continue. On the other hand, the Revenue receipts are swollen by sums arising out of the conclusion of the War, and the result is that neither side of the balance sheet gives us a true picture of our normal post-war position. But, if this year is abnormal, next year, if not equally abnormal, will, at least, be similarly disturbed alike by the overlap of war charges and the overlap of war receipts. The expenditure side will be swollen by demands arising out of demobilisation, out of the condition of the railways, and of coal production. On the other hand, there will be an overlap of existing Excess Profits Duty, and an overlap of receipts from the sale of Vote of Credit assets. Neither this year nor next year, nor, perhaps, the year after, will, therefore, be entirely normal, and in inviting the Committee to consider what our policy ought to be, I am driven to the hazardous expedient of casting my mind forward into the future to an imaginary normal year.
The Committee will recognise at once what a dangerous and difficult experiment that is to make. I recall but one case in which it was attempted. Mr. Gladstone in 1853 forecasted an expenditure over a period of seven years, and almost before his speech was uttered his calculations were upset by the outbreak of the Crimean War. God forbid that my calculations, after all we have gone through, should be upset by a similar cause! But, apart from that, I cannot conceal from myself that I may be wrong in all the assumptions I make, and that I may be wrong in many. But I must have some basis on which to ask the Committee to proceed, and as far as such a thing is possible, the future should be laid open so that Members may see something of what is in prospect. I will attempt the task. For reasons which I will explain later I shall assume that by that time the Excess Profits Duty as we now know it will have ceased to exist. I shall assume further that the available assets out of votes of credit have all been realised, and that no further funds will be drawn from them. I shall leave out of account for the present the sums we may expect to receive on account of indemnities from the enemy, and in payment of interest and repayment of capital lent to our Allies.
I shall present a picture of our liabilities and our resources standing by themselves alone. I think that will be the best 189 course to take. The necessary reductions can be made later on when our knowledge is more exact. On the basis I estimate the revenue of this future normal year on the existing basis of taxation at £652,000,000, made up of £198,000,000 derived from customs and excise, £400,000,000 from inland revenue, and £54,000,000 from other sources. The calculation of our expenditure in that imaginary year is an even more difficult and hazardous task. I can only tell the Committee the hypothesis which seems to me most nearly to approximate to the probable truth. For the purpose of my balance-sheet I assume that the deficit on the railways and the coal mines is made good, and I know nothing more urgent than that steps should be taken to deal with both of these deficits at once. I assume that all fresh loans to the allies will cease, and that other abnormal expenditure, notably that in connection with the Ministries of Labour, Food and Shipping will also have terminated. Then comes a more uncertain item. What am I to estimate for the Army and Navy; what am I to put down for the new Air Force? I see the First Lord of the Admiralty on one side of me with that Janus-like gentleman the Secretary for War and for Air on my right, and I am not sure that they will assent to these estimates at all. But for the purposes of my balance-sheet I have assumed the figure for the three forces at £110,000,000, being rather more than a 40 per cent. increase on the cost of the Army and Navy before the War. We all hope that as a result of the Peace Conference the demilitarisation of Europe may be effected without fresh naval competition being started in any other quarter. I hope that it may be possible, and I believe it should be possible to reduce the numbers both of the Army and the Navy, but whatever reduction may be possible in that respect the pay will be higher, material will be more expensive, and none of these factors, numbers, pay, or cost of material, are yet capable of exact estimation. I give my figure for what it is worth. You can vary my calculations according to your own estimates of whether I have placed it too high or too low.
The debt charge I place at £400,000,000, including a sinking fund of half per cent. The Civil Services at £190,000,000; Customs, Inland Revenue and Post Office at £53,000,000, and other services at £13,000,000, making a total expenditure 190 of £766,000,000, against which, as I have told the Committee I can count only on a Revenue of £652,000,000, leaving a deficit of £114,000,000. I propose to ask the Committee to raise this amount, approximately, not all in the current year, but by taxes which in the full year would bring in approximately that figure. On the assumption that my calculations are not unduly sanguine, on the further assumption that they are not upset by forces beyond our own control, and on the yet further assumption, about which I feel as much hesitation as about either of the other two, that Parliament will husband our resources and observe economy, the Committee knows the worst that it has to face and any funds received in repayment from our Allies or in indemnities from our enemies will be available in so far as they are capital for the reduction of our National Debt, and in so far as they are interest for the relief of our own interest charges, and either way indirectly for the relief of the burdens which I am now going to ask the Committee to assume.