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EFFECTS OF THE WAR ON CREDIT, CURRENCY, AND FINANCE. 279 
And I should not be in a hurry about discarding at present any taxes which 
people have become tolerably accustomed to.’ 
Professor Foxwell has expressed the same views, and is still more in favour 
of taxing expenditure and exempting savings. 
Dr. Dalton (who refers to an article on ‘ The Study of Public Finance’ in 
Beconomica, June, 1921) approves of the present exemptions and abatements. 
He thinks that ‘ ability to pay’ is an ambiguous phrase. ‘It may have refer- 
ence either to effects on production, to effects on distribution, or to current 
views of equity. I agree, however, that a large proportion of the national 
revenue should be obtained from income tax.’ 
Sir J. C. Stamp comments : ‘ The phrase is not really ambiguous in general 
use, only made so by a few writers who import new ideas into it.’ 
Mr. Lawrence replies ‘ Yes, except that in order to be really equitable the 
income tax would have to be very inquisitive; it is not a bad plan to tax 
luxuries as well, and for practical purposes to have some other taxation.’ 
Dr. Cannan, however, replies shortly ‘ No; why should it?’ 
Mr. Gibson prefers to avoid ‘a multitude of taxes,’ and most economists 
will agree with him. He would like to sweep away all existing taxes except 
the Estate Duties and Liquor Duties, and to substitute a single tax. He 
suggests a flat-rate income tax with the present abatements, and would impose 
additional graduated rates on annual increases of income, but the additional 
tax must not be too great to throttle enterprise or discourage saving. He 
thinks that existing capital ‘ is in the control of too few persons.’ 
Sir Edward Brabrook, who does not approve of the present abatements, 
exemptions, and allowances, writes : ‘ The question of ability to live on what 
is left after payment of taxation does not arise in a well-graduated tax.’ 
Question 9.—A Sub-Committee was appointed last year to inquire and report 
upon ‘The Currency and the Gold Standard,’ with Mr. Lavington and Mr. 
Robertson as Joint-Conveners, but our questionnaire was gradually extended, 
mainly by the suggestions of Mr. Lavington and Mr. Robertson, to cover 
most of the Sub-Committee’s province. The original question ran thus : ‘Can 
a paper currency (such as a “ Bradbury ”’), which is controlled by the Govern- 
ment and bears no fixed relation to any stock oj gold or silver, serve as u 
measure and standard of value or as a satisfactory medium of exchange?’ 
Our members and correspondents seem to agree with Dr. Cannan’s reply : 
‘It is quite a satisfactory medium of exchange, but a bad standard.’ 
Dr. Cannan also writes: ‘There is no reason to suppose that the absolute 
limitation of the Bank of England’s fiduciary issue to 18,000,000/., or whatever 
it has been. and the abolition of other fiduciary issues, has been of any use 
for the standard, and it certainly has not made the medium of exchange any 
better. Convertibility into free gold is all that is required to keep the paper 
at gold value; uniformity and cognoscibility make a single issue desirable, 
but that can be attained without making notes into gold certificates.’ 
Dr. Dalton replies: ‘If not over-issued to such a point that public con- 
fidence in it disappears, it is an excellent medium of domestic exchange, and 
much more economical and convenient than gold coins. If intelligently 
controlled by the Government it might become quite a good standard of value.’ 
Mr. Ellinger thinks that a paper currency, ‘if efficiently controlled, accord- 
ing to the requirements of production, and not according to the requirements 
of the Government, might be a satisfactory measure and standard of value, 
and a satisfactory medium of exchange for internal transactions, but the 
likelihood of such a control being efficient is so small, and the desirability 
of maintaining a gold standard for the purpose of international trade is so 
great, that, for this country at all events, the maintenance of a gold standard 
is essential.’ 
Mr. Robertson, who added sub-questions (1), (2), (3), and (4), replied as 
follows to the original question: ‘ Theoretically, an inconvertible paper cur- 
rency, properly managed, would be a better standard than one tied to gold, 
the value of which cannot be expected to remain stable. But the inherent 
tendency, both of industry and commercial activity, to press for a continuons 
expansion of the instruments of payment is so strong that there is a good 
deal to be said for tethering both Governments and bankers down to gold, 
which, though far from a satisfactory standard, is better than no standard at all. 
