604 TRANSACTIONS OF SECTION i\ 



This table, we may observe, makes no allowance for the large increase in the 

 gold stocks of all the banks mentioned. So far as the Bank of England is con- 

 cerned, Mr. Franklin, writing on August 13, says : ' Comparing the gold position 

 to-day with that of August 13, 1914, I notice that the entire note circulation 

 could be redeemed in gold, and the Bank would still have the same amount of 

 gold in its vaults as this time last year, namely, 32 millions.' 



Coming to the second part of the question as to ' what provision, if any, 

 should be made for the withdrawal of Treasury Notes,' we find it more easy 

 Ho agree upon a recommendation, and this is that the Treasury Notes should 

 be gradually withdrawn. If paper money for sovereigns and half-sovereigns is 

 still required, this should be provided by Bank of England notes of these 

 denominations. ■■"' From this recommendation Mr. Franklin dissents, suggesting 

 as an alternative that the issue should be adjusted vmtil each note is balanced 

 by its equivalent in ' ear-marked ' gold. ' By this method the amount of circu- 

 lating currency would not be increased, while the Government would have 

 control of a large stock of gold.' We are by no means sure, however, that it is 

 wise to leave a large stock of gold in the hands of a Government Department. 

 A Chancellor of the Exchequer in difficulties might be tempted to raid it. 



V. War Taxation. 



What proportion should he maintained between the amount borrowed for the 

 War and the amount raised by Taxation? 



On this question it was not probable that the Conference would come to a 

 unanimous conclusion. The general opinion is that no fixed proportion can be 

 maintained in the case of a war which is not yet within sight of its end and 

 has already cost a sum surpassing that spent in any previous war."' At the 

 same time the Conference has no hesitation in agreeing with Professor Bastable's 

 opinion that ' the need of immediate taxation is great.' 



While it is difficult, and perhaps ultimately impossible, to discover any 

 principle upon which the cost of a war should be divided between money raised 

 by borrowing and money raised by taxation, nevertheless, since all loar..<-', even 

 when raised by national Governments, should be regarded as being repayable 

 at some time in the future, the real choice is between paying by present taxation 

 and paying by future taxation. By a curious irony the Imperial Government 

 has found itself forced, by stress of circumstances, to adopt the rule, which it 

 has imposed, amidst so many protests, on our local governing bodies — that loans 

 shall be repaid at a fixed and early date. It is probable, no doubt, that the 

 Government would have preferred the unilateral option of Consols, i.e., of 

 repayment at its option only. But the disastrous experience of Pitt, who issued 

 his loans at a ruinous discount, and the risk of a refusal on the part of investors 



°° Sir Inglis Palgrave makes an interesting, if somewhat revolutionary, sug- 

 gestion in this connection, namely, that the Bank should be allowed to issue 

 its notes against suitable business securities. ' These might be first-rate 

 mercantile bills and floating securities of that class, the requirements of the 

 Bank Act as to the holding of gold coini and bullion against the notes issued 

 beyond the fixed limit of 18,450,000?. being suspended for the time while the 

 Bank was directed to pay its notes in specie. If the Bank of England were left 

 to its own judgment in the matter, as it was before the Act of 1844 was passed, 

 there ought to be no anxiety that it would fail to provide for cashing its notes 

 and meeting the demands on it in specie. The rate of discount might at times 

 have to be raised to a high point if the foreign exchanges were much against 

 this country, but this, as well as the arrangements needed for the maintenance 

 of payments in specie, might safely be left to the management of the Bank of 

 England.' As an alternative Sir Inglis suggests that the other banks in England 

 and Wales, whose rights of issuing notes have been gradually cut down since 

 1844, should be allowed, under proper safeguard, to make a new issue of small 

 notes. 



^' Mr. Sidney Webb protests strongly against the attempt to assign any 

 ratio_ between loans and taxes. 'No such ratio,' he writes, 'can have any 

 relation to the amount which it is economically desirable and practicable to 

 raise by taxation.' 



