The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News, The Echo and The Sun. MONDAY, JULY 22, 1940 WAR FINANCE.

Auckland Star, Volume LXXI, Issue 172, 22 July 1940, Page 6

The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News, The Echo and The Sun.

MONDAY, JULY 22, 1940 WAR FINANCE.

For tha cause that lacks aot&tanec. For the vyrong that need* resistance, For the future in the distance, And the good that tee can do.

The verbal clnsh between the Prime .Minister and Mr. Lee over methods of war finance deserves more than passing attention. There is undoubtedly a body of opinion in the country which, ever since the last dopres.-ion, has been in favour of taking the line of lea-st resistance in monetary policy, and wants to take that line now. It conceives that I there is an easy way of paying for the war, or at least a less painful way than the way of taxing and borrowing. For this body of opinion Mr. J. A. Lee is an assiduous and skilful spokesman, and his speeches on the subject are unwelcome to the Government, some of whose leading members in the past have used the some arguments and some of whose followers still support those arguments. This fact goes far to explain the acerbity with which the Prime Minister answered Mr. Lee on Friday. His answer —and it was a sound and courageous one —was that whatever the Labour party advocated in the past they had to keep open minds and meet every problem with the measure best adapted to it. He indicated that in war finance the Government would depend on a combination of taxing and borrowing, but if that did not prove sufficient, "inflation would have to come." It is a pity Mr. Eraser did not add that both Government and people still have a great deal to do that can be done before there will be any real excuse for an inflationary policy.

The fundamental task of war| finance, it has been well said, is to transfer resources from consumption to the purposes of war. The raising of a given sum of money is only the method by which the transfer is brought about. "Taxation and borrowing do it by taking money out of the pockets of the people before they can spend it; inflation lets them spend as much as before, but sees that they get less for it." The Government's new and increased taxes will substantially reduce public consumption, but if New Zealand is to play the full part in the war that she aspires to play, consumption will have to be still further restricted by borrowing, including the borrowing of current savings. Nearly a year has passed since the late Mr. Savage, in his last Budget, announced a national 'savings scheme. It did not appear, but it is announced again in the present Budget. It ought to have been in full operation long before now. The longer it is delayed, the greater will become the temptation to borrow by the easy method of going to the Re*erv« BiinV,

But it must be said that the Government is not in the strongest position either to promote small current savings or to invite the lending of large sums of past savings while it insists on maintaining its own high rate of expenditure for civil purposes. People will save and lend to help the war effort, but they will not do so with the same willingness if the opinion persists that the Government's total demand for money is excessive, because much of its expenditure is unjustifiable in wartime. Parliament has completed the Budget debate; it still has to deal with the Estimates. It can perform a valuable service to the State if, in considering* those Estimates, it forgets all preconceptions and insists on reductions in a large number of items.