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Financial Results

Volume 463: debated on Wednesday 6 April 1949

The text on this page has been created from Hansard archive content, it may contain typographical errors.

I now turn from the economic picture to examine the financial results of the past year and the prospects for the coming year. But I am sure it will assist the Committee if I start with some explanation of the alternative methods by which I shall have to measure our financial results and prospects in the course of my speech and in the Financial Statement.

There is, first, the traditional basis upon which the Budget has been balanced, taking into account only the revenue and expenditure recorded "above the line." Receipts applied to debt redemption and receipts applicable by statute to debt interest, otherwise payable out of revenue, are treated as receipts "below the line," and, on the payments side, those payments for which the Treasury has power to borrow are also placed "below the line." All other receipts and payments appear "above the line." If, excluding the" below the line "items, receipts exceed expenditure, the resulting conventional surplus I will refer to as the" above the line" surplus.

The second kind of surplus or deficit with which we are concerned is arrived at by taking into account all Exchequer receipts and payments, whether they appear above or below the line in the conventional Budget accounts. The comparison here is between the total of receipts and payments of all kinds, however classified. If all the receipts exceed all the payments, I will refer to the results as an "overall surplus."

The third form of presentation is to show receipts and payments on true revenue account only. For this purpose, all Exchequer receipts and payments, whether they appear above or below the line, are taken, and there is then deducted from both sides of the account all items which are of a loan, or non-revenue, character. A surplus so shown I will refer to as "a true revenue" surplus. By the word "true," I am not, of course, claiming that final accuracy has been reached, but rather indicating the object of this form of presentation.

This third form of presentation was given for the first time in the alternative classification in last year's Budget. Its object is to give a measure of the comparative effect of successive Budgets on the general economy. The Committee will remember that in 1948 its application was confined to the realised surplus for 1947. On the conventional, or "above the line," basis that surplus was£636 million. Under the alternative classification it became a surplus of £338 million. When I gave those figures I emphasised the experimental character of this alternative classification and invited criticism upon it. Various experts have responded to that invitation, and much useful thought and discussion has resulted. The matter is too complicated however—with its repercussions upon the form of Government accounts beyond the strict field of Exchequer accountancy—to be settled in a short time.

I have repeated this classification this year, but still as a provisional exercise. There have been one or two slight modifications of definition, but nothing to impair the comparison with last year's figures. The financial statement this year will, however, carry the matter a little further, in that it will contain the alternative classification not only of the out-turn of 1948–49 but also of the estimates for 1949–50 as they will stand if my Budget proposals are accepted. Thus there will be provided, for the first time, a detailed forecast of the items making up the Government's non-revenue receipts and expenditure in the coming year, and it will be possible to compare the true revenue surplus as realised in 1948 with the result we hope to achieve in 1949. That will enable us to compare the inflationary, or disinflationary, power of the two Budgets.

The surpluses actually realised on 31st March for the last financial year were £831 million above the line, £352 million overall, and £684 million true revenue, compared with the estimated figures of £789 million, £330 million and £609 million, respectively. Those will be found on pages four and five of the Blue Paper. The out-turn is sufficiently close to the forecast, but neither revenue nor expenditure has turned out according to plan. Far from it. Expenditure has exceeded the original estimates by £200 million, but that has been matched, fortunately, by increased revenue. The distressing fact is that, while the items on the expenditure side are almost certain to persist, the same cannot be said of some, at least, of the items on the revenue side.