§ On the revenue side, the Budget Estimate was also £1,418,000,000. Again there will be very considerable variations under the different heads, but I am advised—and it is the best information I can give to the House—that there is at present no reason to anticipate that the revenue which I expected will not be collected. I think that the year will end with between £200,000,000 and £230,000,000 or £234,000,000 for the redemption of debt. Substantially, my anticipations are likely to be realised, but there will be less for the redemption of floating debt, and that for a reason, amongst others, which I think the House will appreciate, that we are getting less from the sale of new Savings Certificates than I had allowed for. They fell off very much in the early part of the year, and if we have bad trade it cannot be expected that they will amount to the old figure. Moreover, as the House knows, I have agreed that one-half of the new money should go to helping housing funds, and will not therefore 2494 be available for debt purposes. I believe that the House will be reassured to know that, on the best review that my advisers and I can make at this stage, and subject to the inevitable uncertainties of the months which have still to run, we believe that the Budget which they were asked to sanction, and did sanction, will substantially realise the expectations that were then put forward.
§ Last year, in spite of the fact that we were forced to additional borrowing at home, we repaid £86,000,000 of foreign debt, and in the current year we shall repay something over £90,000,000 of foreign debt, including obligations in the United States, in Canada, in Japan, in Holland, in the Argentine, and in Uruguay. In part as a result of this repayment of debt, there has been since our financial year began a noticeable improvement in our exchange position with the Argentine, Uruguay, Spain, Holland, Norway, and Sweden, markets of no little consequence to the people of this country. The American exchange at the moment is less satisfactory, but it must always be remembered that the American exchange is liable at any time to be affected by the continental demand for dollars, and it is not necessarily at any given moment a true criterion of our own standing and credit. It is not an Anglo-American exchange, it is a European-American exchange, done over and through the London market and the great financial resources of this nation.
§ If the picture which I have drawn, and the account which I have given, is realised, need we be gloomy? No other country can show the parallel. My right hon. Friend quoted from the report of the League of Nations. They had the Budget statements of I know not how many countries, but in all Europe there is only one besides ourselves that is paying its way, and that is Denmark. Denmark is the only other which has presented a Budget with a balance on the right side. The United States of America itself is not secure of a balance in its Budget. If we can pay off £230,000,000 of our" debt, including £90,000,000 of our foreign debt, we shall have achieved a great result which justifies even the great sacrifices for which at my invitation, the House called.2495
It is not very convenient that my right hon. Friend should renew a very old argument in the middle of a new statement, but since he renews it, he brings me to a point to which I shall have to recur later. It is sufficient for me to say that the accounts which we present to Parliament are cash accounts. We do not have a capital account, except to a very small extent, and if it be true that what you may describe as capital is brought into revenue on the one side, what is equally capital is charged to expenditure on the other side. May I now proceed with my statement.
I want to say a word to the House as to the policy of the Government in regard to debt redemption and to deflation. I have sternly set my face against further inflation starting a new cycle of increased costs and increased wages, but I have felt all the time that any sudden deflation on a great scale would produce a crisis as surely as and more quickly than a continuous steady inflation. My policy, therefore, in that respect is to avoid renewed inflation and, if it be in any way possible, gradually, very gradually, to deflate as opportunity offers, and as the conditions of the time permit with safety; and as regards debt reduction, my policy has been that when we could redeem debt, we should redeem all the debt that we could, just because I saw that the good times would not always last and that we must try and lighten the load before the bad times came upon us.
I think the House will see that this statement, though it travels rather wider than my right hon. Friend's motion, is yet germane to an examination of the general financial position of the country and the policy of His Majesty's Government. What I have said in regard to deflation has a bearing upon the policy of funding, on which I have often been questioned. It is not possible to raise money for funding the Floating Debt on the scale on which loans were raised during the War. In the first place, the money that was contributed to the Government in the loans was first, so to speak, printed by the Government at its press. The Government created the money, and paid out the money, which was subsequently 2496 loaned back to it. In the second place, there was at that time, practically speaking, no other demand on the money market. New issues of other kinds there were practically none, while now after the War comes all the rush of industrial enterprise requiring new capital, come Dominions and foreign countries seeking the help that they have been accustomed to find from our money market, and comes some-thing else which I have to consider even more closely, and that is the finance of local authorities which are engaged in finding money, not only for the works of public health and utility which were held up during the War, but also to carry out the programme of housing which is a necessary condition of industrial development and of social stability. Any attempt by me to fund on a considerable scale in the circumstances of the present moment, would, I think, obviously destroy the success of all those local issues. If it were successful on a large scale, it would produce a sudden deflation, which, I think, under present conditions, would be dangerous. That is the reason why I have not attempted to carry out, or even to propose, any considerable funding operations at the present time.
To return for a moment to the redemption of Debt—and I do this because the figures I am going to give to the House are of importance to my subsequent argument—I have said my idea was to pay off the maximum of debt while you can, but there is a minimum which you must meet in any one year, and I put it this year at £160,000,000. That is made up of statutory sinking funds and depreciation funds to the extent of £35,000,000, and all obligations of the State tendered in payment of taxes which we are obliged to redeem to the extent of £75,000,000—making £110,000,000 together. Then this year I put aside £50,000,000 for the repayment of matured debt. Next year there is £140,000,000—I am talking in very rough figures—of maturing debt; I think about £70,000,000 of foreign debt, and £70,000,000 maturing in this country. A portion of that, no doubt, will be re-borrowed. Some portion must be paid off, but for the mere purpose of meeting your statutory sinking fund and depreciation, and of redeeming the obligations, you must start with a minimum of debt reduction of £110,000,000 when you sit down to make a Budget. I have said all—I think not too much—but all I desire 2497 to say to the House as regards the prospects of the present year, and as regards the policy which we have been pursuing in the matter of debt reduction.