FINANCIAL STATEMENT. (Hansard, 25 April 1939)

§ The Chancellor of the Exchequer (Sir John Simon)

In the year 1853 Mr. Gladstone presented the first of the 13 Budgets for which he was responsible during his long service at the Treasury. The expenditure of that year for which he had to provide reached the grand total of £52,183,000, and Mr. Gladstone expounded his proposals to the Committee in a magnificent speech which lasted for 4¾ hours. His biographer tells us that it was followed with the closest attention throughout and that there were frequent indications of enthusiasm. The reason, perhaps, why our ancestors felt enthusiasm was that on that occasion Mr. Gladstone proposed to abolish the Income Tax (which then stood at the figure of 7d.) not immediately but step by step until it finally disappeared in 1860. Unfortunately, about six months later, the Crimean war broke out, expenditure rose, and the prospect of abolishing the Income Tax vanished beyond recall. My task is to present Budget proposals at a time when the standard rate of Income Tax is 5s. 6d. in the £, and to invite the Committee to address itself to a total expenditure which is nearly 20 times greater than that with which the Budget of 1853 had to deal. The only consolation that I can offer to the Committee is that the time I will occupy will not be proportionately extended to the length that that august and spacious precedent might suggest.

I will first draw the Committee's attention to the actual results of last year, and in order to draw as clear a picture as I can without going into too many confusing details, I will use round figures and will take the totals before commenting on any separate items. The revenue, as hon. Members will see from page 3 of the Blue Paper, I estimated might produce £944,750,000, and it has, in fact, shown a total of £927,250,000. That is £17,500,000 less than the Estimate, but, I may add, nearly £55,000,000 more than the revenue of the previous year. In view of the uncertainty which arose out 976 of the international position, it is not surprising that there should be this falling off from the total estimated revenue. Indeed when some of the component figures are studied, they indicate clearly a power of resilience after sustaining a setback which quickly registers a restoration of confidence. For example, in the end the short-fall in Customs and Excise amounted only to £3,500,000.

Expenditure from revenue last year, including the payment of over £13,000,000 made in respect of sinking funds, totalled £939,999,000—call it £940,000,000—which was £4,400,000 short of the estimate. The net result, therefore, for last year was a deficit of £12,714,000, a sum slightly smaller than the amount provided for reduction of debt.

There is another set of figures to be extracted from last year's accounts which I would wish to put before the Committee, not only because of their special importance but as material for comparison with the present year. The whole of our contemporary public finance is governed and conditioned by our Defence expenditure. It is this cruel necessity which transforms our Budgets and increases our borrowings, and makes it necessary to shoulder grievous burdens and face unprecedented totals without the pressure of which taxpayers and Chancellors of the Exchequer alike might look for a lightening of the load and the extension of social benefits. I wish, therefore, to take out of last year's figures the amount provided for and spent upon Defence, whether by way of revenue or by way of loan. As hon. Members will see from the figures on page 2 of the Blue Paper, the expenditure from revenue on Defence last year was £254,500,000, and the Committee will remember, I dare say, that borrowed money was to provide a further £90,000,000 in the first instance, and that I announced in my Budget Speech last year that the Supplementary Estimates necessitated by the acceleration and extensions of the Defence programme then contemplated would also be found out of borrowed money. In the event issues under the Defence Loans Act last year amounted altogether to £128,000,000. That, when added to the £254,500,000, charged to the Defence Votes, gives a total of £382,500,000 for the three Defence Departments. But there is another addition 977 which should be made. If we add, as we should, last year's figures for Food Storage and Air-Raid Precautions, which are really Defence matters, the gross total is almost exactly £400,000,000. In the previous year the corresponding figure was £265,500,000. I invite the Committee specially to note this figure of £400,000,000 spent on Defence last year. This is the figure which it is most relevant to bear in mind when we come to the far bigger expenditure on Defence which we have to provide for in the present year.