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The Financial Statement

Volume 41: debated on Monday 14 June 1920

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

To ask His Majesty's Government—

  • 1. Does the figure of £345,000,000 appearing as the total of the National Debt Services for the current year in Table XII., Final Balance Sheet, Financial Statement, 1920–1921, include any, and, if so, what provision for payment of interest on the debt due to the United States.
  • 2. In view of the figure, £98,172,000, shown in the footnote at page 2 of the Memorandum C.M.D. 802, is not the real deficit for the current financial year, i.e., the difference between the total expenditure and revenue from sources other than the realisation of capital assets, £165,974,000 and not £67,802,000 as shown in the said financial statement.
  • The noble and learned Lord said: My Lords, I hope that the noble and learned Lord on the Woolsack, if he is prepared to answer my Question, will not think I am unduly persistent in repeating, in the form of two Questions placed seriatim on the Paper, certain observations which I made in the course of a recent debate upon public expenditure. The first part of my Question relates to a matter to which the noble and learned Lord gave me an answer which I think will be sufficient, and I introduce it again here in order that I may bring together the two sets of Questions in the first and second part of my Question.

    The answer given to the first Question was, as I understand, that there is no part of the payment of interest provided in the annual Expenditure. Of course, the result necessarily must be that, regarded simply from the point of view of Revenue and Expense, we are to that extent to the bad, because there is no difference between postponing payment of interest and borrowing money for the purpose of paying.

    The second is by far the more difficult and important part of the Question. A number of Estimates appear in the Financial Statement upon which the Balance Sheet was based, and in a Memorandum which was subsequently circulated, and they differ materially. For example, if one takes the Ministry of Munitions the figure is £27,000,000 in the Financial Statement and £65,000,000 in the subsequent Memorandum. Indeed, the Memorandum itself recognises that there is this marked distinction, and points out that as between the gross figures that appeared in the Memorandum as the actual gross Expenditure of the different Departments and the net provisions, there is a difference of £98,000,000. I do not understand where that money comes from. It is said to be got from receipts appropriated in aid, and certain Votes are mentioned out of which it has been obtained, but it seems to me that it cannot come out of the Revenue for the year, and therefore it must come from some capital sources. It may be that my unfamiliarity with this form of accounts prevents me from being able to gather from it what is the actual source from which the payment is made. If, in fact, it comes out of capital, it is obvious that the deficit on the year is not £67,000,000, but £165,000,000. If, on the other hand, it is provided by the use of other monies that are included in the Financial Statement, or from sources other than capital sources, then the deficit will only be £67,000,000. But I should be glad to know what is the position. I confess that I am quite unable to understand it.

    My Lords, I understand from my noble and learned friend that he is now satisfied with the answer that I gave in the course of the debate a few nights ago in relation to the inclusion in the Estimates of interest on Debt for 1920 and 1921, and the provision for the payment of Debt to the United States Government. I understand that no provision was made for the payment of interest on Debt to the United States. Obviously, it would be impossible to provide in the Estimates for the year a charge that would not arise in that year. We have, of course, to face that charge at some time, but the point made by the noble and learned Lord as to whether or not it was included in the Estimates contained, I thought, a latent suggestion that it ought to have been so included. I feel sure that he will agree that it would be impossible to include anything in an Estimate unless it is a charge which arises in the year.

    As to the second point about which my noble friend asks, I do not think he is right in this matter. The figure of £98,172,000, mentioned in the footnote on page 2 of Command Paper 802, is the total of the amount authorised by Parliament to be appropriated in aid of the various Votes. These sums represent all kinds of Departmental receipts—in particular (in the case of munitions) payments to the factories from the Government Departments whom they supply. If the noble and learned lord wishes for details, I can give him the whole of those which have been supplied to me, but I imagine that the purpose of my noble friend is a broader one. The principle of appropriation in aid is of very long standing and is a fully recognised part of our financial system. It was sanctioned by Statute—the Public Accounts and Charges Act, 1891. The exact amounts appropriated in any given year, as my noble and learned friend knows, are authorised by the Appropriation Act of that year.

    In any case these appropriations are not relevant to the Budget surplus or deficit of the year, as that figure is reached by comparing the net Expenditure—that is to say, Expenditure less appropriations in aid —with the Revenue. If the sums appropriated in aid were paid straight into the Exchequer as Revenue and not appropriated the Expenditure side of the account would be correspondingly increased, and the balance of the year would remain the same as it is on the present system. Let me give an illustration. Take the year 1920–21. The Budget Revenue was £1,418,300,000, and the Budget Expenditure of that year was £1,184,102,000. The balance therefore would be £234,198,000. I suppose that if appropriations in aid were brought in as Exchequer Revenue, the effect would be that the Revenue would be £1,418,300,000 plus £98,172,000, giving a total of £1,516,472,000—that is, the Expenditure would be the £1,184,102,000, plus £98,000,000, giving a total of £1,282,000,000 and the balance would be £234,000,000. have given round figures.

    I appreciate the difficulty and fully understand, but what I want to know is whether that £98,000,000 is derived from a realisation of assets, or whether it arises from revenues that are not brought into the Budget. The noble and learned Lord is perfectly right. It is a pure Revenue receipt, but I want to know whether it is derived from realisation of capital assets.

    The real point of the noble and learned Lord is that it is wrong to count what we call assets as Revenue. It may or may not be arguable as to whether the £302,000,000 derived from the sale of surplus assets should be treated as general Revenue or earmarked for Debt. A few observations may reasonably be made upon that matter. My noble and learned friend will forgive me for saying that this is not an original discovery of his. It was pointed out in debate by the Chancellor of the Exchequer when he made a statement regarding his figures. He said that this was the method that was being pursued, and that there was justification for it. The noble and learned Lord wants the £302,000,000 earmarked as a capital asset for Debt redemption, but the Budget proposes to use £234,000,000 for Debt redemption. Therefore, the difference between the Government and Lord Buckmaster at best is only £68,000,000.

    This year's Estimates contain very heavy remanet war charges, at least as much as £302,000,000. Is it reasonable to expect the taxpayer to meet all this from taxed Revenue without using any of his assets? I do not suppose that my noble and learned friend would suggest extra taxation in order to enable that to be done. But had these war remanets been met last year they would then have been met from extra borrowing. This year's Revenue covers Expenditure, and my noble and learned friend will forgive me for reminding him that that is contrary to the prophecies which, I think, I recollect he made in the course of last year. While it is important to make a substantial start on Debt redemption, as His Majesty's Government is doing, I am certainly not convinced that it is common sense to carry this procedure to the extent of depriving the taxpayer of some slight relief from his assets.

    I may, perhaps, add that all these matters were fully discussed in the House of Commons, and will be found reported in the OFFICIAL REPORT. That House, is, of course, more closely concerned with financial burdens than this House, and in the House of Commons, when the Second Reading of the Finance Bill was moved, the proposal of the Chancellor of the Exchequer was approved in principle. I have occupied some time in dealing with the point advanced by the noble and learned Lord, because I think that the substantial matter raised was not a mere question of bookkeeping but a suggestion that, in substance, these things ought to have been dealt with as being capital assets.

    I am grateful to my noble and learned friend for such answer as he has given; but the real thing I asked has never been answered—namely, is the £98,172,000 taken out of capital or out of Revenue?