§ But the most important factor in forming a judgment as to whether we can carry this enormous increase in our expenditure without a weakening of our finances or of our credit, lies in the possibility of an expansion of the revenue, and if we are to estimate those possibilities, we must bear in mind one very important circumstance, and that is, that owing to the fact that Income Tax is related to the conditions in the year preceding the year of assessment, and that Surtax is concerned mainly with conditions two years before the year of collection, there must always be a lag in the revenue recovery behind the business recovery. Suppose you take the taxes and the rate of taxes in 1929 as a basis. In that year those taxes produced £677,000,000. They began to fall the year after and continued their downward path until the year 1933, when they touched the bottom figure of £575,000,000. But the tide had already 1622 turned by that time. The worst of the depression was over some time before 1933, and even in 1936 the yield of these same taxes, at the same rates, probably fell short by something approaching £100,000,000 of what they would have reached by the natural growth of yield arising out of the increase of the adult population by that time. I consider that it is a fair conclusion to be derived from these considerations that we have still before us a considerable period when we may count on an expansion of revenue. When I take into account that the new sources of revenue which have been tapped since 1929 brought us in last year an addition of something like £130,000,000, and I add to that the new springs that have been opened up to-day, I cannot feel any apprehension of the possible failure of revenue.
§ Only two contingencies might disappoint the expectations thus aroused. One would be some great world disturbance outside our control which, sooner or later, might involve us in its vortex. The whole aim of His Majesty's Government is to use all their power and all their influence to avoid such a disaster. The other danger that might arise would be from a too reckless expenditure upon objects that were not vitally necessary. That can be avoided by wise and prudent administration. My hope is that the general prosperity, upon which, after all, the fate of every Budget depends, will pursue an orderly and regulated progress, so much to be preferred to violent advances which are often followed by violent collapses. It may well be that the proposals which I have made to-day will exercise a steadying influence in that direction. I have endeavoured to avoid, on the one hand, the tremendous increase in taxation which would have been required if we had attempted to defray without borrowing the full cost of rearmament, because I was convinced that the shock of such a sudden and such a tremendous increase of our burden would have checked, perhaps even reversed, the process of convalescence. On the other hand, I have increased taxation with a careful choice of method to such an extent as in my judgment will exercise a decided check upon any development of speculation or of feverish activity, without destroying or seriously impairing the present upward trend of national welfare.