§ I can, therefore, now strike the final balance sheet. The revenue will be £798,381,000, the expenditure £797,897,000, leaving a prospective surplus of £484,000. When I consider the magnitude of the effort which Parliament has decided is necessary in order to rebuild our defence forces, involving an expenditure on defence this year of more than £50,000,000 in excess of what was provided in the Budget of last year, I cannot think the new taxation which I have proposed will be considered unreasonable, nor do I think that it will seriously affect the improvement in trade and industry, nor that it will cause and undue hardship. The fact that we should be able to meet so large an increase in expenditure with so moderate an addition to our taxation is the best testimony we can have to the immense improvement in the financial and economic condition of the country during recent years.
57§ This is the fifth time in succession that I have presented a financial statement to the Committee, and perhaps, therefore, I may be pardoned if for a moment I look back and consider some of the changes that have taken place since I opened my first Budget in April, 1932. I do not claim that the financial policy I have followed has been solely responsible for the results which I shall quote, but I do believe that it has been the indispensable foundation upon which those results have been erected, and that it remains the best policy for the country and for the needs of the present time. The two main pillars of the policy have been the introduction of the tariff and the establishment of cheap money. The Committee will remember that when the tariff was established we had an adverse balance of payments of no less than £104,000,000 a year. The tariff has now converted that into a favourable balance of £37,000,000. Moreover, it has brought us a revenue which now amounts to over £34,000,000 a year, and by this means a valuable contribution to our national expenditure has been made without causing any perceptible rise in the cost of commodities to the consumer.
§ The reduction of interest rates by something like 2 per cent. has meant a permanent saving in Budget charges of upwards of £40,000,000 a year, and a still larger temporary reduction. The benefits of cheap money have been extended to the Dominions, who are our best customers, to the local authorities and to industry, which is now progressively reaping the advantage of lower interest rates and is daily expanding its enterprise. The building of 1,250,000 houses during this period, an astonishing feat, has been achieved largely in consequence of the cheapness of money.
§ Between them these two powerful financial engines have strengthened and developed both our industry and our agriculture, so that our agricultural output has increased by 14 per cent. and our industrial output by no less than 29 per cent. Our exports of manufactured goods have increased by more than £50,000,000 a year. The number of persons in employment has increased by more than 1,250,000. The percentage of unemployment has fallen from 22.4 to 14.4. Retail trade is now more active than it has 58 been for many years, and the record figures of holiday traffic show how the increase of purchasing power has spread through all sections of the people. Although wholesale prices in general have risen by 10 per cent., and the prices of primary commodities by upwards of 45 per cent., the cost of living to-day is actually slightly below what it was in 1932. Notes in circulation have increased by £50,000,000, and the deposits in the savings banks alone have gone up by no less than £150,000,000.
§ The recovery of the country has been reflected in the rapid expansion of the revenue. Nearly £70,000,000 has been applied to the reduction of the National Debt out of savings in fixed debt charges and out of Budget surpluses. Increased expenditure on social services has been rendered possible. Take four major items: old age and widows' pensions, health insurance, housing and education. In 1932 we spent upon those four services a little less than £121,500,000, and in this year's Estimates we are providing for the same services nearly £138,000,000. Lastly, the present aggregate value of the tax remissions which were made in the various Budgets of 1932 to 1935 amounts to over £50,000,000 a year. At the outset of this new financial year, the prospects, apart from the complications of the international situation, appear to promise a full continuance of this tide of returning prosperity.
§ I had hoped, and until quite recently I had had good reason to hope, that in this fifth Budget it might have been possible for me to reward the taxpayer for his long and patient endurance of his burdens by giving him a greater relief than anything which up to now I have been able to afford. That that hope should have to be deferred and that instead I should have to ask of him new sacrifices, moderate though they may be, has been a bitter disappointment to me as well as to the country. But no man hesitates to set his fire-fighting appliances in readiness when already he can feel the heat of the flames on his face. Our safety is more to us than our comfort, and I think the country which has applauded and approved the precautions we are taking will not grudge us the means of bringing them about in the shortest space of time that we can compass.