The Dominion. WEDNESDAY, JANUARY 9, 1918. THE FINANCIAL STRUGGLE

Dominion, Volume 11, Issue 90, 9 January 1918, Page 4

The Dominion. WEDNESDAY, JANUARY 9, 1918. THE FINANCIAL STRUGGLE

At .various stages of tho way "a speciiU prominence has been given to tho importance of the part that is being played -by: the "silver bullet." Mb.. Lloyd Geqb'oe in one of his earlier speeches laid great stress on Britain's capacity to outstay Germany in the struggle-by reason of Britain's sounder .financial methods and superior firianciarstrength. With the ever-increas-ing growth of war expenditure and the mounting burdens of taxation and debt, the financial side of the struggle assumes an interest and importance second only to the fortunes of- our fighting; forces in the' various fields of action. In a recent review'of the situation tho Chancellor of the Exchequer, Mb. Bonab Law,: gave a very full and clear statement of Britain's financial position in contrast with.'that 'of Germany, and the facts disclosed arc of particular interest at the moment because of the light which they shed on future possibilities and the internal difficulties and dangers which confront those in authority in Germany. Up to September 30 Great Britain's war expenditure had increased the National Debt, in round to the enormous sum of 5000 million pounds. At the beginning of the war the National Debt was some 6<io million pounds, and the balance of the 5000 million has> been added as the result of tho Motherland's war expenditure and advances to her Allies and to the Dominions. Of this great sum the amount of advances to our Allies was 1100 million pounds, while tho amount of the advances to the overseas Dominions was 160 million pounds. These advances, of course, will be recoverable, and ultimately Britain's Na-tional-Debt will be reduced by amount so repaid. In addition thcro is a balance ( ,of 66 . million pounds promised by India, which will go to the reduction of the total debt. The actual position at September ;i0 last, therefore, might be summed up as follows:

Total National Debt 5,000,000,(100 Recoverable from Allies .... 1,100,000,000 Recoverable from Dominions 160,000,000 Payment by India 66,000,000 Net National Debt 3,674,000,000 If from tho net National Debt is deducted tho amount of the debt at tho beginning of tho war, £645,000,000, it will bo seen that the increase of the National Debt due to the war at September 30 last had amounted to some £'.5,000,000.000. It should he b'orno in mind that this does not cover tho whole of the war expenditure, for a substantial part of that expenditure has been met out of revenue from special taxation. It is the boast of tho British Chancellor of the Exchequer that not <.':>ly flas the country been able to meet a substantial part of the cost of the war out of taxation, but that no addition to the war debt has been incurred without first making full

provision for meeting the charges so incurred.

The position of Germany is very different. According to Mil. Bonai; Law's calculations, based on German official statements, the German Government up to the end of October had passed through the Reichstag Votes of Credit for £-1,700,000,000, but that docs not include advances to their allies, which are made, apparently through the German banks. Nor docs it include tho large amounts which are. paid as separation allowances by the British Government out of the Votes of Credit, but in Germany are paid by the individual States. Leaving these items out of account, Mr. Bonar Law points out that tho known expenditure on the war by tho German Government' is £4,700,000,000, and tho whole of that represents additional war debt because the German Government havo never raised by taxation any part of the war expenditure since the war began. The result is that though tho German war expenditure is less than that of Great Britain, Germany has made an addition to her war debt of at least 4700 million pounds, whereas Great Britain's addition, treated from the same standpoint, has been 3000 million pounds.' Tho Chancellor of the Exwas able to supply still further evidence' of tho gloomy nature of Germany's financial outlook. The growth of war expenditure, as already stated, has been rapidly increasing in all the belligerent' nations, and in Germany the rate of increase -has outstripped that in Britain. In June, 1916, the monthly rate of expenditure in Germany was £100,000,000; in Mav of 1917 it had risen to £150,000,000; that is to say, an increase of 50 per cent., whereas the increase in the same time in' Britain was about 34 per cent. Since the beginning of the war Germany has imposed new taxation amounting only to £85,000,000, and tho Government have in addition that they intend to impose a- capital "levy amounting to £100,000,000.' Assuming/that this levy has been raised, the total war taxation will be at the rate of £185,000,000. -per annum, whereas tho interest on the war debt alone is over £240,000,000 a year; so that the special war taxation in Germany is insufficient to meet even the interest oh tho war debt. Why then have the rulers of Germany allowed tho -financial position of the country to drift in this way from bad to worse 1 Mr. Bonar Law has suggested possible reasons which'"aro important in their bearing on tho internal weakness oj Germany to-day.' It is possible, lie remarked, that the German Government bave not sought to reduco this terrible burden out of taxation because tho state of the country would not enable the money to bo raised. But he does not think that that is the real reason:

I think (he 6aid) it is psychological. 1 think it means they aro afraid to put this taxation on the German people because of' its effect on theiv view with regard'to the war. More'than that, it is obvious that any; large amount of taxation, as our experience 6liows, must come from Hie well-to-do classes, and in Germany these are the classes which, to a largo extent affect tho decisions of the Government, and for that reason they Have been altogether afraid to subject them to any taxation during the war. I think it was on the, first occasion when I proposed a vote of credit that I pointed out tho colossal Biims with which wo wore dealing. I said no one could doubt the continuance of that burden, but of this I am certain, that though we cannot hear this strain indefinitely it'will not be.the want of money' which will prevent us from win-, ning the war, because we will be able to bear it longer than will be possible for our enemic3. (Cheers.) Just look at the contrast between the position of this country and that of Germany. If the war ended to-morrow the amount of taxation which we are now levying, and the amount of Tovenue Teceived, would be sufficient, and more than sufficient, to enable vs, without tho imposition of additional taxation, and without counting the Excess Profits Duty, to Tjear all the normal expenditure of tho Government. If tho war were to end to-morrow the German Government would 'find theinselVos in this position, that they must either at onco have an immense new loan or they must put on new 'axation, which T have seen in • different German -newspapers would amount to many hundreds of millions.

The German Government, of course, embarked on the policy of finance outlined by Mr- Bonak Law in the expectation that Germany woul.d recoup herself for her war expenditure by means of indemnities, the;'acquisition of territory, and the opening up of now avenues of trade. With these hopes rapidly disappearing—if thoy have not already disappeared—the Kaiser and his Government are faced with the prospect of a peace whioh will leave Germany on tho verge of bankruptcy, and which may provoke that internal revolt against the existing autocracy that many have prophesied and more'hoped for.