Tuesday 10 June 2014

Snowden's 1931 emergency Budget

It's about time I gave you some background to Snowden's 1931 emergency Budget. I've mentioned the thing so often, I feel I owe you that.

Philip Snowden was a funny character. A strict Methodist and teetotaller, he was also the first Labour chancellor serving under Ramsay MacDonald. In 1931 things started to get out of hand, with the economy doing poorly and a growing budget deficit. The cabinet couldn't agree on how to handle the crisis, some proposing higher import tariffs, others spending cuts.

With the cabinet unable to agree, the government resigned in August 1931. It was repalced by the National Government, which included members from the Conservative, Liberal and Labour parties. The latter group included prime minister Ramsay MacDondald and chancellor Philip Snowden. The Labour partty itself mostly chose to go into oppostion and expelled members, such as MacDondald and Snowden, who supported the new government.

Snowden's first act was to force through an emergency budget full of spending cuts and tax increases. It's all starting to sound very familiar, isn't it? Here are some more details:


Mr. Snowden. the Chancellor of the Exchequer, made in a crowded House of Commons Thursday afternoon his stern call to the nation to shoulder the additional burdens to restore Britain's financial position. It was, he said, one of the most disagreeable tasks that had ever fallen to his lot.

An unbalanced Budget was regarded as one the symptoms of a national financial instability.

It was not deficit at the end of the year that mattered so much as whether measures were taken or not to meet the deficit.

Nationally for some time past had been living beyond our means and living to a considerable extent on our capital. We had been under the delusion during the last few years in these times of unparalleled depression that we could maintain the expenditure of prosperous times. The Government had decided that borrowing from the Unemployment Fund and the Road fund must cease.

There was a £25,000,000 drop in Inland Revenue, and £4,000,000 in Customs and Excise. The estimated deficit in this year Budget was £74,700,000.

The deficit on next year's Budget would be £70,000,000. Nine-tenths the proposed enconomy were proposed and approved by the late Government.

The Chancellor spoke for minutes, and when he concluded he received a great ovation." Taunton Courier, and Western Advertiser - Wednesday 16 September 1931, page 1.
The chancellor was insanely optimistic about the impact of his tax increases. This is the exact damage to beer:

One penny per pint on beer. An increase both Customs and Excise duties will be made on all ordinary descriptions of beer by 31s per standard barrel. This represents a penny a pint on beer. The increase on beer to date from Friday. The anticipated yield is £4,500,000 this year.

Customs duty on tobacco to be raised from from 8s 10d to 9s 6d a lb. Other forms of tobacco to be increased in the same proportion. The increase of 8d in the tobacco duty would yield this year £2,500,000, and next year £4,000,000."
Taunton Courier, and Western Advertiser - Wednesday 16 September 1931, page 1.
I don't know why they've listed the increase as 31 shillings. It was really 34 shillings. The duty had been 100 shillings per standard barrel*, but there was a flat rate 20 shilling rebate per bulk barrel. The emergency budget increased the duty to 134 shillings per standard barrel.

That 1d per pint increase doesn't add up, either. 34 shillings is 408 pence and there are 288 pints in a barrel, making the increase 1.42d per standard pint. Average gravity was about 1043 in 1931, so we need to multiply that 1.42d by 43 and divide it by 55 to get the average price increase. It comes to 1.11d, or a little more than the 1d stated.

This is what really happened with the tax yield from beer:

1930 £71,254,674
1931 £69,269,299
1932 £68,710,020
1933 £67,097,581
Document B/THB/C/256c held at the London Metropolitan Archives

Not quite the extra £4.5 million Snowden had anticipated.

Snowden wa quite an accompl;ished public speaker, but this sounds a bit creepy:

The Chancellor, in the course his speech, referred to the many letters had received since the crisis. They were, said, the most amazing letters, which showed the willingness the nation — of men and women of all classes — to make their contribution to the common need.

Old-age pensioners had returned their pensions (Opposition groans and cries "Shame!"). War pensioners had offered to forego their pensons for a year (renewed groans and jeers). National Savings Certificates had been returned cancelled (more jeers).

The Chancellor looked up with the same understanding smile with which had faced his former friends at the beginning of his speech. After the jeers had died down he continued:—

"Postal orders, large and small, have poured in. Children have sent from their money boxes shilling or half-a-crown. (Opposition jeers and cries of "Shame!"') These little children have helped the nation in its need. (Laughter and jeers.) Factory girls have come to me with the proceeds of collections taken in workshops. (More jeers.) To-day I received a five per cent. War Loan Bond for £1,000 cancelled." (More jeers.)

"The country will accept these proposals and in doing so will show the world an example of the indomitable British spirit in the face of difficulties" he declared, and then, regardlees of the irresponsible mutterings and cries the Socialists, flung in their faces the words of Swinburne's Ode on England.

"All our past proclaims our future: Shakespeare's voice and Nelson's hand,
Milton's faith and Wordsworth's trust in this our chosen and chainless land.
Bear witness: come the world against her, England yet shall stand."

"England yet shall stand," cried the Chancellor as, slowly and with difficulty, resumed his seat.

There came a cheer from the Conservative benches. It became a roar as Mr. MacDonald, Mr. Baldwin, and all the Ministers on the Government Front Bench stood and looked admiringly at Mr. Snowden.

Behind them were cheering ranks of men whose feelings had been roused by the word "England " — men who had forgotten Mr. Snowden's "unpleasant and disagreeable measures " which he said he regretted to have bring forward.

Before the seated figure of Mr. Snowden, relaxing after his ordeal, were the Socialists, dumbfounded and a little shamed-looking that they could not share in the demonstration raised in honour of the man who was and no doubt is — were it not for party machinery — one their stalwarts.

The sound half-hearted booing came from their benches. But this was drowned the enthusiastic cheers the Conservatives, caught for the moment by the spark of intense faith and patriotism shown by the Chancellor.

Quickly it all ended. Experienced parliamentarians said they had never witnessed such a demonstration."
Taunton Courier, and Western Advertiser - Wednesday 16 September 1931, page 1.
What was the reaction of the trade? To increase prices:

"Burton brewers have decided to increase the price of all draught beers 24s per barrel, equivalent to a penny pint. This took effect on all orders executed on and from Monday.

The London Bottlers' Association, at their meeting on Monday, resolved to advance bottled Bass. Worthington, and Guinness prices 8d per dozen on half-pints and 1s 4d per dozen pints. This makes the price to the trade 4s 11d per dozen and 9s per dozen half pints and pints respectively."
Taunton Courier, and Western Advertiser - Wednesday 16 September 1931, page 1.
24 shillings is exactly 1d per pint. The increase in the price of bottled beer was more than 1d. 16d per dozen is 1.33d per pint.

* 36 Imperial gallons with an OG of 1055.

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