TRANSACTIONS OF SECTION F. 605 



to subscribe to an irredeemable loan, have led to the adoption of a sounder 

 policy. It is no doubt true, as Mr. Gibson suggests, that one reason for 

 the early date of redemption, at the Government's option, is to secure the 

 possibility of conversion to a lower rate of interest if the War Loan stands 

 above par. 



In the case of a local authority Parliament only permits borrowing for 

 purposes which have a permanent value, such as the purchase of property or 

 the building of a Town Hall, and it insists, in every instance, that a sinking 

 fund shall wipe out the whole loan before, say, the Town Hall wall need 

 rebuilding. Thus at the end of the period the town possesses its Hall free * 

 of debt. Consequently the local sinking fund need only be fixed at the small 

 percentage required to wipe out the debt within the forty or fifty years 

 specified by Parliament. But in the case of money borrowed by a Government 

 for a war the conditions are very different. The money has been spent, and 

 there is no property or work of permanent value to show for it ; it has gone 

 like the money which a man borrows to keep his home going during an illness, 

 not like the money which he sinks in building himself a house. Consequently 

 a greater effort must be made to pay for it out of income rather than by 

 borrowing. No doubt, w-hen a successful belligerent gets an indemnity or an 

 increase of territory, this is an asset to be reckoned against the new debt of 

 the war ; or, to continue our analogy, it is like a firm borrowing to buy the site 

 for a new building. Clearly the smaller the war expenditure the larger the 

 proportion which should be raised by immediate taxation. Mr. Gladstone added 

 very little to the National Debt as a result of the Crimean War^ though he 

 increased taxation immediately. During the Boer War laxer principles pre- 

 vailed. 



Now, however, with the rate of expenditure so enormously increased beyond 

 anything known or thought of even fifteen years ago, precedents give little help, 

 for the proportion raised under Mr. C^ladstone is clearly out of the question. 

 Nevertheless, some principle or proportion must be found. Interest on the War 

 Loan must be met out of taxation : there can be no two opinions here. Two 

 further annual charges must be faced, though both should gradually decrease, 

 viz., Sinking Fund, and Pensions for the disabled and for widows and depen- 

 dants of the slain. These charges, like that for the interest on the War Loans, 

 naturally depend upon the length of the War itself, but all three charges will 

 grow with each month that the War lasts. Another thing grows, and that is 

 the rate of interest which has to be paid for each successive loan. The earliest 

 batch of Treasury Bills was subscribed three times over at an average rate of 

 discount of 3| per cent. ; the first War Loan, issued on a basis of between 

 3| and 4 per cent., was subscribed with difficulty; and the second Loan 

 required much advertising and appeals to patriotism before it could be floated 

 at 4^. And now, from Mr. jMcKenna's promise to accept 4^ per cent. War 

 Loan stock as payment for a third War Loan, if it should have to be issued, 

 we must face the possibility of a debt at over 4^ per cent, running far beyond 

 a thousand millions. 



Then it is a well-known fact that borrowed money is spent more extrava- 

 gantly than income, whether by Governments or by individuals. Finally, during 

 a war, money is inevitably spent lavishly and everyone connected with war 

 industries earns higher wages than in times of peace. Consequently the nation 

 as a whole can bear more taxation now than it will be able to bear when peace 

 comes and the war industries become slack again. Yet no fresh taxation was 

 imposed by the 1915-16 Budget, and even the Interim Budget of November 

 1914 had only doubletl the Income Tax and increased the Beer and Tea Duties, 

 a rough-and-ready plan which was excusable at the moment but is indefensible 

 as a permanent method of raising money for the War. 



Detailed proposals for raising further revenue might lead the Conference into 

 controversial topics, and have accordingly been excluded from its 'Reference.' 

 Therefore we cannot endorse the fiscal proposals made by the Bankers' deputa- 

 tion to the Prime ^linister and the Chancellor of the Exchequer, which are now 

 supported by Mr. Barnard Ellinger. His argument nins thus : 



' If the amount of indirect taxation raised through existing Customs duties 

 were very considerably raised, so long as the Exchequer were receiving the same 



