Debts and Taxes

Afraid, like most British women, that a heavy tax was about to be laid on cosmetics by Chancellor of the Exchequer Sir John Simon, a young London extrovert last week put on a pre-Coty gown of crinoline and a wig, went swishing to No. 11 Downing Street. The idea was that a paint-&-powder tax would send her back to the horse-&-buggy days. The idea did not permeate, for she was deftly grasped by London bobbies and whisked away as the tall, dry, Nonconformist Chancellor emerged from No. 11 with the worn and faded dispatch box in which for generations the British budget has been carried to the House of Commons.

As usual, Sir John spoke in such low tones that most of the House had to strain and cup ears, this time for 127 minutes. He refreshed himself occasionally with a few drops of Lady Simon's personally concocted throat mixture (lemon juice, brown sugar and honey), sipped gingerly from a tiny horn cup.

"And that's that!" The Chancellor proposed to spend during the coming year $25,500,000 per day.* Putting the year's total war and domestic expenses at $9,334,500,000, Sir John proposed to raise $4,319,000,000 from existing sources of revenue, to get $353,500,000 by additional taxes (including a wholesalers' sales tax whose rate will be set by the House), and to borrow the remaining $4,662,000,000. Many defense items appeared in the new budget in token form and Sir John frankly guessed when he put the "presumed cost of war" in at the round figure of -L-2,000,000,000 ($7,000,000,000). As the London Financial News said afterward, "The war will cost whatever it costs, and that's that!"

Surprise of the new budget was that it did nothing about cosmetics, radio sets or bicycles--all slated in pre-budget forecasts to take a rap. Instead, Sir John announced new taxes which put ordinary British cig-arets up in price from 20-c- per pack to 25-c-; matches from 11 1/2-c- to 2-c- per box; beer from 9-c- to 10-c- per pint; whiskey from $2.50 to $2.80 a bottle. In Britain telephone and telegraph are State monopolies and the Chancellor raised their inland rates 15%, left overseas business rates unchanged to favor British trade. Finally Sir John almost doubled the ordinary British postal rates. Armchair London economists quickly figured that all these measures will cost the "average Briton" an extra shilling and sevenpence weekly (28-c-).

In the top brackets British income and supertax payers are being assessed 85% --basic British income tax rate is 37 1/2%. The Chancellor last week invaded lower brackets, making supertax begin at incomes of $5,250 instead of $7,000, and again treating the British white-collar class rough. A married but childless Briton making $1,050 whose income tax was $17.50 the year before last and $24.50 last year will now pay $52.50.

"Willing Exertions." In the most significant part of his budget speech the Chancellor left no doubt that His Majesty's Government stands for preserving as much laissez faire in British economy as stress of war permits. He said he had carefully considered but had finally rejected the famed scheme of Professor John Maynard Keynes to force compulsory saving on the British people by impounding at interest considerable portions of their incomes for the duration of the war (TIME, March 25). "Why," asked Sir John warmly, "should we suppose that the willing exertions of our people, if properly roused and directed, will produce less recruits-- than if we attempted to apply a cast-iron formula to compel our people to lend? Nobody is better qualified than the British trade unionist to know what is at stake, for a victory of Hitler means the end of trade unionism. Nobody has better reason than we who enjoy freedom to be willing to pay the full price necessary to preserve it!"

Nettled Professor Keynes sour-graped: "It is a cowardly budget and therefore it's popular!"

Since British business will need large reserves to weather the storms of war and post-war economics, Sir John announced a measure antipodal to the U. S. undistributed profits tax. The Chancellor said that for the duration of the war British firms will be restrained from paying dividends of more than 4% (or the maximum figure they have paid during the past three years). This "will tend to reduce the spending power in the hands of share holders but it will tend to increase the reserves of companies from undistributed profits." Taking advantage of the period of grace before the law enacting new revenue measures becomes effective, British Ford Motor Co. declared a 7 1/2% dividend, British Pressed Steel 27 1/2%, British Ever Ready Co. (flashlights) 40%. (For a note on flashlights see p. 58.)

"Injustice!" The new budget was in deed generally popular but a few out spoken Conservative, Liberal and Labor critics attacked the Chancellor for pro posing to spend "only 52%" of the British national income at a time when both France and Germany are spending more than 60%.

Prominent Laborite Dr. Hugh Dalton, who is no Communist and was long the Labor Party's chief expert on foreign affairs, proposed that the "very rich" be taxed two pounds for every pound of their incomes, the odd pound being collected by a capital levy. Cried Dr. Dalton: "Six per cent of the population of this country hold 80% of the property, and less than 2% hold 40% of the property. This is an injustice which our soldiers, sailors and airmen certainly are not fighting to maintain.

" Representing unemployed Welsh coal miners, Liberal National Clement Davies, M. P. chimed: "It is quite obvious to me that we are waging two wars in this country. The first is against the enemy and the other against the upholders of the doctrine of laissez faire." The whole German press soon screamed at Sir John Simon under such headlines as "NEW TAX BURDENS ON MASSES--PLUTOCRATS SPARED!"

"Little Glass Bowls." Unperturbed at No. 11 were Lady Simon and Sir John, who jocularly called her "a very sound economist" after she chirped to reporters: "I've introduced two meatless days. . . . We have cut out the sweet course at midday. . . . Now we have fishcakes, and fish sauces when there's any fish left over. We put odd scraps of fish into rissoles. Sir John often has for luncheon pudding left over from dinner the night before, served attractively in little glass bowls and disguised. He always pretends he doesn't recognise it."

* Converting the pound sterling at $3.50, its average rate during past weeks. * The latest British war loan of $1,050,000,000 was oversubscribed within 48 hours.

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