War-Time Financial Problems

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ace will bring to Germany-A Comparison with American Finance-How much have we raised from Revenue?-The Value of the Pound To-day

of the people who are obliged to study the figures of Government finance would feel inclined to reply that, if this is really so, the Chancellor and the Treasury seem to have curiously narrow limitations in their capacity for clearness. Very few accountants, I imagine, consider the official figures, as periodically published, as models of lucidity. Nevertheless, we can at least claim that in this respect the figures furnished to us by the Government during the war have been quite as lucid as those which used to be presented in time of peace, and it is greatly to the credit of the Treasury tha

many's monthly expenditure was ￡100 millions. It has now risen to over ￡187 millions. That means to say that their expenditure per diem is ￡6-1/4 millions, almost the same as ours, although our

ecause their taxation during the war has not covered peace expenditure plus debt charge. Up to 1916 they imposed no new taxation. In 1916 they imposed a war increment tax, something in the nature of a capital levy, which is stated to have brought in ￡275 millions. They added also that year ￡25 millions nominally to their permanent revenue. In 1917 they added in a

t least ￡400 millions, a sinking fund at 1/2 per cent. will be ￡40 millions. Their pension engagements, which will be much higher than ours owing to their far heavier casualties, have been estimated at amounts ranging as high as ￡200 millions. The Chancellor was sure that he was within the mark in saying that it will be at least ￡150 millions. Their normal pre-war expenditure was ￡130 millions, so that they will have to face a total expenditure at the end of the war of ￡720 millions. On the other side of the account their pre-war revenue was ￡150 millions. They have announced their intention of t

of the people. "The lesson to be drawn from these facts is not difficult to see. The rulers of Germany, in spite of their hopes of indemnity, must realise that financial stability is one of the elements of national strength. They have not added to their financial stability." The reason for this failure the Chancellor considers to be largely psych

s separately stated in the account because it was raised under a special Act, amounted to ￡51-1/2 millions. It is also quite possible that fair amounts of our Treasury bills, perhaps also of our Temporary Advances and of our other war securities, have been taken up by foreigners; but quite apart from that the two items already referred to now amount to more than ￡1000 millions, though at the end of March last their amount was only ￡988 millions. It is also well known that we have during the course of the war realised abroad the cream of our foreign investments, American Railroad Bonds, Municipal and Government holdings in Scandinavia, Argentina, and elsewhere, to an amount concerning which no accurate estimate can be made, except by those who have a

lem Germany has therefore an advantage over us, that her war finance, pitiful a$ it has been, has, not owing to any virtue of hers, but owing to force of circumstances, raised her a problem which is to a great extent internal, and will not have altered her relation to the finance of other countries so much as has been the case with regard to ourselves. We also have to remember that the process of demobilisation will be far simpler, quicker, and cheaper for Germany than for us. Even if the war ended to-morrow the German Army would not have far to go in order to get home, and we hope that by the time the war ends the German Army will all have been driven back into its own country and so will be on its own soil, only requiring to be redistributed to its peace occupations. Our Army wil

oo high. This estimate was 18,775 million dollars. The Times stated that the realised amount is likely to be hardly more than 12,000 million dollars, of which about 4500 million dollars will represent loans to Allies, and that the estimate for the year's largely increased tax revenue was 3886 million dollars, which now seems likely to be exceeded by the receipts. If this be so, out of a total expenditure of ￡2400 millions, of which ￡900 millions will be lent to the Allies,

doubt, owing not to economies but to shortcomings in the matter of delivery of war goods which the Government had expected to pay for in the course of the fiscal year. It certainly would have been expected that the Americans would in this matter of war finance be in a position to set a very much higher standard than any of the European belligerents owing to the enormous wealth that the country has acquired during the two and a half years in which it, in the position of a neutral, was able to sell its produce at highly satisfactory prices to the warring Powers without itself having to incur any of the expenses of war. On the other hand, its great distance from

e proportion, of course, is not so high when we try to calculate actual war revenue and war expenditure by deducting on each side at a rate of ￡200 millions a year as representing normal expenditure and revenue and leaving out advances to Allies and Dominions. On this basis the proportion of war expenditure met out of war revenue up to March 31, 1918, was, the Chancellor stated, 21.7 per cent. For the year 1917-18 it was 25.3 per cent., for the current year it will be 26.5 per cent., and for the whole period up to the end of the current year 23.3 per cent. The corresponding figures for the Napoleonic and Crimean wars are given by Sir Bernar

ccount any revenue from the suggested luxury tax. But, as I have already pointed out, the comparison of war pounds with pre-war pounds is in itself deceptive. The pounds that we are paying to-day in taxation are by no means the pounds that we paid before the war; their value in effective buying power has been diminished by something like one half. So that even with the proposed additions to taxation we shall not have much more than doubled the revenue of the country from taxation and State services a

h will realise ￡68 millions in the current year and ￡114-1/2 millions in a full year. On the basis of taxation at which it stood last year he estimates for an increase of ￡67 millions, income tax and super-tax on the old basis being expected to bring in ￡28 millions more, and excess profits duty ￡80 millions more, against which decreases were estimated at ￡3-1/2 millions in Excise and ￡37 millions in miscellaneous. He thus expects to get a total increase on the last year's figures of ￡135 millions, making for the current year a total revenue of

is likely to be that people will draw a smaller number of small cheques, and will make a larger number of their purchases by means of Treasury notes, the tax will merely result in the substitution of one form of currency for another, and it is difficult to see how this process will in any way increase inflation. Other arguments might be adduced, which make it undesirable to increase the outstanding amounts of Treasury notes, but in the matter of inflation through addition to paper currency, it seems to me that the proposed tax is entirely blameless. The increase of a shilling in income tax and super-tax produced a feeling of relief in the City, being considerably lower than had been anticipated. It is ha

luding ￡50 millions for pensions and ￡380 millions for debt charge. It seems to me that his expectation of after-war revenue is too high, and of after-war expenditure is too low. He says that the estimates have been carefully made, but that they include "a recovery from the absence of war conditions," but surely the absence of war conditions is much more likely to produce a diminution than a recovery in taxation. Under the present circumstances, wi

rtion of our debt which is represented by loans to Allies we shall have to meet interest for ourselves. He also gave an imposing list of assets in the shape of balances in hand, foodstuffs, land, securities, building ships, stores in munitions department, and arrears of taxation, amounting in all to nearly ￡1200 millions. It is certainly very pleasant to consider that we shall have all these valuable assets in hand; but against them we have to allow, which the Chancellor a