§ Now I invite the Committee to turn to the estimated expenditure for the present year, 1938–39. I will take first the Fixed Debt Charge. This ha., stood at £224,000,000 for the last five years, and except for last year that amount of £224,000,000 has sufficed not only to pay the interest and management of the National Debt, including interest on savings certificates actually cashed during the year, but also to provide in full for the statutory Sinking Funds. Last year, however, the total expenditure in respect of interest, management and statutory Sinking Funds reached nearly £227,000,000. For the present year I think it prudent to put the Fixed Debt Charge at £230,000,000. I expect that once again this will provide a margin for the statutory Sinking Funds, but I propose to repeat the precaution of recent years and to obtain authority to borrow for that purpose.
§ Before leaving this subject I should like to make a general remark. In reading the comments made by various authorities on the outturn of last year's Budget I see it frequently assumed that the payment of £10,500,000 out of revenue for the statutory Sinking Funds is the same thing as a net reduction of debt to that amount. That would be so if we were providing not only for interest payable during the year—we are doing that—but for interest accruing in the year but not yet demanded. Take the case of savings certificates. Interest is payable in cash only when a certificate is presented for payment. In the meantime it is mounting up without being paid. On the large number of certificates outstanding a charge for interest therefore remains unpaid, but of course it is accruing against us year by year. When the owner of the certificate comes forward with his certificate he will get, amongst other things, the interest accruing this year. If, therefore, in any year we made no payment to reduce debt we should find our capital liabilities increased by the accumulation of interest on unpresented certificates.
§ Thus this provision of £230,000,000 which I think it right to make for the Debt Charge this year can be regarded in two lights. In form it will enable me to meet not only the interest and management expenses I have indicated, but will 50 also, I trust, enable me to meet the contractual Sinking Funds. In substance it is to be regarded as the best estimate I can make in round figures of the real burden in respect of interest and management which accrues against the State this year. This confirms me in the view that no smaller figure could rightly be adopted. I put the year's payment to the Government of Northern Ireland, including their share of reserved taxes, at £8,900,000; miscellaneous Consolidated Fund Services at £3,200,000. No payment is estimated to be due to the Post Office Fund in the year, and my estimate therefore of the total of Consolidated Fund services works out at £242,100,000, which is an increase of some £6,600,000 over last year's estimate.
§ Now I come to the Supply Services. The Committee is already aware from the published Estimates that Supply Services (excluding the self-balancing items of Post Office and Broadcasting) amount to £692,298,000. They are made up of two big blocks, of £253,248,000 for the three Defence Services and £439,050,000 for the Civil Votes. These figures, the Committee may like to be reminded, are respectively £55,000,000 greater and £20,000,000 greater than the corresponding Budget estimates last year. Again, to avoid all possibility of misunderstanding, I had better perhaps remind the Committee that the £253,248,000 for Defence does not represent the total expenditure contemplated for Defence this year, for it excludes £90,000,000 of borrowed money already allocated to the purpose. The total Defence expenditure is, therefore, £343,248,000, of which the Supply Votes amount to £253,248,000. The Civil Estimates include an increase of £3,500,000 for Air-Raid Precautions.
§ I come to the question whether there is need for me to add a margin for Civil Supplementary Estimates, and in this connection I must give the Committee some information on the subject of food storage. This information would have come more naturally from my right hon. Friend the Minister for the Co-ordination of Defence, but it was impossible for him to make the announcement before we adjourned, and I do so now only because it is very germane to the finance of the present year. The Committee will be aware that steps have been taken by the Defence Departments to build up reserves of certain raw 51 materials essential to the rearmament programme, and the Government have been asked from time to time what similar precautions they contemplated with regard to food supplies. The Food Defence Plans Department have for some time been in consultation with the trades concerned, and the Government decided early this year that at the right moment they would buy sufficient supplies of wheat, whale oil and sugar to ensure that the stocks in this country shall be maintained at a level sufficient for the needs of the civil population during the early months of an emergency. These purchases have now been made. The Committee will recognise that absolute secrecy was essential to prevent prices from being raised by the knowledge of the Government coming into the market. Had it been known, of course, the effect on prices would have been disadvantageous to consumers generally as well as to the Exchequer, and for this reason the Government took the very unusual course of acting without first applying for statutory authority, in the confidence that the House of Commons would understand our reasons and would in due course enable us to obtain the legislation conferring the necessary powers upon the Board of Trade. That legislation will shortly be introduced, and a Supplementary Estimate to cover the expenditure will also be required.
§ Apart from these transactions, some additional provision is likely to be needed during the year for other purchases where secrecy is less essential, and also for Air-Raid Precautions. Weighing these facts, and remembering at the same time the possibility that there may be savings for me on the Civil Estimates as a whole, I reached the conclusion that I must provide the sum of £10,000,000 as a margin for Civil Supplementary Estimates. I, therefore, give the Committee the total expenditure which I estimate I shall have to face this year. Excluding the £90,000,000 already appropriated from borrowed money for Defence, the total to be met is £944,398,000—that is £81,500,000 more than last year's Budget estimate.
§ Before working out how much, at present rates of taxation, will be forthcoming to meet this total of £944,000,000, I must make a slight diversion, and it will 52 be convenient to indicate certain alterations in the law relating to taxation which I have to propose. The most important of them are directed to securing that taxation at its existing level will yield its full fruit to the Exchequer. In the estimates which I shall be giving later on of the yield of taxation at the existing level, I shall include the effect of these proposed changes.
§ First, I will deal with tax avoidance, which I should define as the adoption of ingenious methods for reducing liability which are within the law, but which none the less defeat the intentions upon which the tax is founded. Legislation of recent years, as for example the provisions in the Finance Acts of 1936 and 1937, in relation to one-man companies at home and abroad, and children's educational trusts, has done a great deal to counter certain forms of avoidance, but though I have seen some very exaggerated estimates of the extent of tax loss still involved, the evil persists in various novel forms, and I am going to make some important proposals to deal with them. The subject is very difficult, complex and technical and it would be better examined in detail at a later stage, but I must table a number of Resolutions this afternoon, and the Committee, I think, will wish to have a short description of the new proposals I have in mind.