§ 7.0 p.m.
§ Such is the scheme of relief to productive industry. I now return to finance. It will be asked at the outset why, if the payment of relief is not to begin until October, 1929, the new taxation begins now? The reason is that the amount of relief to productive industry plus the additional money required for the concomitant local government reforms will exceed in the early years of the scheme the yield of the new taxation. The sum to be found by the Exchequer is very considerable, and there are still several factors which are unknown. According to the full returns which the local authorities from one end of the country to the other have been good enough to furnish at very short notice, the rates now paid upon productive industry, agricultural and manufacturing, and on railways, canals, docks, harbours, amount to about £34,000,000, constituting about one-fifth of the entire rate revenue. The cost of the complete de-rating of agriculture is about £4,750,000. Three-fourths relief in manufacturing productive industry direct through de-rating, and also through the medium of railways, canals, docks, and harbours, will cost over £21,000,000 a year. £3,000,000 will be required to inaugurate the new scheme of local government. Therefore, the total money to be found by the Exchequer will amount to £29,000,000 a year.
§ In the face of such a sum, it is necessary for me to accumulate in advance a substantial surplus fund from which the annual yield of the new duties can be supplemented, until with their natural growth the new income is sufficient to meet the outgoings of the Exchequer. I am not prepared to mortgage future Budgets by charges which will deprive me or my successor—for I always think of him—of all means of alleviating the lot of the general taxpayer in the next few years. The finance of the rating scheme is therefore in principle, and, to a very large extent, self-contained. A forecast has been made of this finance up to and including the year 1932. Obviously, the task of measuring the reliefs and forecasting the yield of the new duties four or five years ahead is excep- 870 tionally difficult, and to publish such calculations is to give unneeded hostages to fortune. But there are some facts resulting from our elaborate calculations which I will offer to the Committee to-night. The new revenue and the Suspensory Fund which will be accumulated before October, 1929, will balance the new outgoings up to the end of the financial year 1931.
§ A new factor then appears. Rates are at present a deduction for Income Tax purposes under Schedule D. The reduction of three-fourths of the rates on industry will result in a lesser deduction for these purposes than at present, and as the Income Tax slowly follows the events of each successive year, there will be a relief to the Exchequer which, in 1931, will amount to £1,500,000, and in 1932 to £2,500,000. By the end of 1932, allowing for £3,000,000 to bring into effect the changes in the system of local government, but not allowing for the sugar relief or for the motor licence reliefs, which I consider are remissions of taxation from the general revenue, the adverse balance on the working of this scheme will not exceed £4,000,000. Then we shall be nearing the end of the first five-yearly period, and Parliament will be free to review the whole position.
§ I do not present the finance of this scheme as if it were a sort of enclave in our national finance. I only seem to do so because I wish to show that the future has been studied as searchingly as possible, and that it is not overloaded. There is no intention in practice to keep this Suspensory Fund for the financing of this scheme separate from our general finance. Behind the Suspensory Fund stands the Exchequer, which will throughout gather to itself all the available resources, and make all the necessary payments. I have a further observation to make. Although we shall welcome and hope to profit by the public and Parliamentary discussion which will now begin, nevertheless, in its main features this scheme must be taken as a whole. It is suite impossible for the Exchequer to rescue industry from its position as a mulch cow of local needs by placing itself with its vast resources in the same unhappy plight. We cannot possibly give the reliefs which are needed to industry unless in reimbursing the local authorities, we put ourselves, the 871 central Exchequer, in a firm and secure financial position. There can, for instance, be no question of a widespread extension of the Agricultural Rates Act policy. There can be no question of giving large sums of public money to local authorities, except as the counterpart of reforms which will benefit the national economy, and of reliefs to industry which will revive the public revenues. You cannot have the new reliefs without the new taxes and the new reforms. No one can take out of this scheme the parts he likes and reject the parts that do not suit him. Everyone who approves of the general plan must take the rough with the smooth, and there is rough as well as smooth in it. All holds together, and while it is no doubt capable of modification in detail, the policy must be supported or opposed, accepted or rejected as a whole.