Page 8, 25th June 1937

25th June 1937
Page 8
Page 8, 25th June 1937 — The New Profits Tax

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Locations: Moscow, London, Ottawa


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The New Profits Tax

The new Profits Tax has somewhat surprisingly been given an almost unanimously good reception. The attitude of the City is understandable, for the tax first proposed hit very hard those who had been speculating on a big rise in industrial shares benefiting from rearmament. It also required estimates of capital values to be made—always a red rag to the City, which sees in it possible basis for a capital levy. And the new tax does neither of these things.

But neither does it tax in any special way profiteering in rearmament, which was one of the ostensible objects of the first proposal. At the same time it does (like its predecessor) fall much more severely on incomes derived from "equities " (that is to say, shares which pay a dividend varying with the prosperity of the business) than on incomes derived from debentures and other fixed interest shares. And it is the latter incomes that approximate much more nearly to usury.

Not that we should have expected the opposition to have anything to say on the latter point. But we are surprised that it has not made more of the former. Its principal 'speaker on Monday never even mentioned it.

" No Change " at the By-Elections

A long series of by-elections have had almost uniform results. On a total poll, regularly reduced in comparison with the last general election, the poll of the opposition candidate has been reduced in much the same ratio as that of the Government candidate. This is a remarkable electoral phenomenon, particularly in view of the fact that this is the third Parliament and the sevetith year in which the same opposition has been appealing to the country against virtually the same Government.

Moreover, that Government has made, and admitted to, great blunders without having the traditional excuse for making mistakes, namely that it comes about in the process of making other things. For its record has been almost uniformly one of muddling through—and proud of it! One can imagine what one of the pre-war Oppositions would have made of such opportunities both in the House and in the country. A lively, if not vital, force seems to have gone out of politics with the disappearance of the old party system, and the substitution of a more or less permanent Conservative bloc in the seats of Government and a permanently weak Opposition organised along essentially class lines of cleavage. We must allow Marx to have been right in this, that Parliamentary methods and class-conscious politics are ill-suited to each other!

M. Blum's Overthrow

A sudden reversal of tactics on the part of the Communists saved M. Blum's Government in the Chamber when the vote was taken on his demand for special financial powers, but the Senate overthrew him. An outcome that was not altogether unfavourable to the Popular Front.

Some tense negotiations broke down upon a point which made the issue exceptionally clear. M. Blum was ready to surrender many of the powers he had origin ally asked for over and above those needed to check tax evasion and speculative manoeuvres liable to injure public credit, and the Senate was ready to concede more than at first. But it stood firm upon a refusal to allow M. Blum to restrict the free movement abroad of money in any form— gold, notes, credits or securities.

This reveals the nature of the forces behind the Senate's action for, as Mr. Christopher Hollis has pointed out, the freedom of money to move where it can earn most was the master economic principle of the nineteenth century and its preservation is still the main political objective of high finance.

Its First Consequences

The action of the Senate besides giving the Popular Front a useful battle-cry has also grave constitutional implications. It has overthrown on a financial issue a Government having the confidence of the Chamber, and though this cannot compare with the rejection of Mr. Lloyd George's Budget by the House of Lords (for it was not a matter of a budget but of special powers, and in any case the recognised prerogatives of the Senate are wider), nevertheless it may well bring about a demand for some amendment of the Constitution unless the immediate political crisis which has been precipitated proves so exciting that it drives these wider constitutional questions out of everyone's heads.

That is precisely what is happening. There is no prospect that, without another general election, the Chamber will provide a majority for any combination other than one essentially identical with the present Front Populaire, and the new Cabinet is almost identical with its predecessor.

A Change for the Worse ?

It is a fact of ill omen, in no superstitious sense, that the first politician called upon to form a Ministry in succession to M. Blum should have been M. Chautcmps whose former Ministry was swept away by the bursting of the Stavisky scandal and the epoch-making riots of February, 1934.

Indeed, it may well be found that the Blum premiership has been changed for a worse. In international affairs M. Blum proved a great disappointment to those who wished to use the Spanish war to promote the more militant designs of Moscow with the strength of France and to convert the Franco-Soviet Pact into a more effective military instrument. M. Herriot, for example, would have liked to do this. The world has cause to be grateful to M. Blum for his firmness on this point, even though he allowed one of his Ministers to facilitate privately the passage of aeroplanes, arms and volunteers to the Spanish Reds.

M. Blum's Legacy

Even in domestic politics his record was not so harmful as his political label would suggest. Much of his legislation as we have said before, did no more than accomplish long overdue reforms in the condi tions and status of labour. The really grave consequence of his year in office is the new licence claimed by the C.G.T. With its six million members, it has set itself up as an extra-Parliamentary force able to control the Government of France as well as to hold up the economic life of the nation. And M. Blum has often been unable effectively to resist these pretensions. A Radical Premier who tried to keep the Front Populaire in Parliamentary existence might find himself threatened even more frequently than the Socialist by the dictation of M. Jouhaux. For the moment, however, the storm and clever tactics which have put the enemies of the Popular Front in the wrong as far as public opinion is concerned, have re-united the different elements of the Left.

The Imperial Conference Reports

The secrecy that veiled the proceedings of the Imperial Conference was scarcely broken by the generalities that fill the reports issued afterwards. Thus it is commonly believed that the future of the Ottawa tariffs and the effect upon them of the suggested Anglo-American trade agreement were among the most vehemently debated topics bihind the scenes, but all mention of them was discreetly omitted from the published documents. But a great deal of space was given to the technical arrangetnents for common military and naval action, which will only be effective when there is a common will to act.

In the sphere of policy the recommendation that the Covenant of the League of Nations should be separated from the Treaty of Versailles is easily the most noteworthy. It reflects the common feeling of most non-European members of the League, and pre-eminently of the U.S.A.; and responds also to what Nazi Germany has explicitly demanded. What makes it especially significant at this juncture is that it is presumably in line with the policy of the British Government under its new Prime Minister.

The proposal has great merits, for nothing has so much lowered the moral standing of the League as the well-founded suspicion that the Treaty of Versailles is its substitute for the moral law. But the mere separation of the Covenant from the Treaty without the explicit substitution of some other principle and basis of European order might precipitate chaos by opening a period of snatch and grab frontier revision,

A South African Sequel

The other noteworthy sequel to the Conference was a highly indiscreet remark of General Hertzog, reported in one quite responsible paper but suppiessed in another that likes to think itself more responsible. He is described as saying in effect that if the British Government did not do something about handing over the South African native Protectorates to the Union Government there would be trouble.

The chief reason for the reluctance of the home Government to hand over these native territories is, of course, that the Union Government has no native policy that public opinion in this country would tolerate for a moment. And, now that General Smuts has practically surrendered to General Hertzog on native questions, there remains no powerful political force in South Africa in the least likely to take London's view of them.

But in this matter the London Colonial Office is by no means so remote from local realities as Colonials (to use the old term) affect to think. In recent years it has made remarkable advances away from mere Anglicisation towards building upon the moral forces of the native cultures—so far as this can be done without supernatural religion. The tradition of Dutch South Africa in handling natives would make a poor moral basis for an act of Nationalist defiance.

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