THE FIRST MILLION

Dominion, Volume 34, Issue 125, 20 February 1941, Page 6

THE FIRST MILLION

Small savings, aggregated, have done much to produce the first million pounds in the National Savings Bund, and the Minister of Finance has rightly paid a tribute to those who have subscribed. It is sound finance, and, as Mr. Nash said, “a direct contribution to the war effort.” The fundamental task of war finance, as one authority has put it, is to transfer resources from consumption to the purposes ol war, and the raising of money in this way is one excellent method by which this can be effected. The transfer of. £1,000,000 from individuals to the Government for war expenditure represents, a limitation placed on personal expenditure. In an essay dealing with the problems of financing this war, the editor of the London “Economist” said: “The touchstone is this: Have the pounds that the Government is borrowing been taken out of somebody’s income .' Would they have been used, if they had not been, lent to the Government, to increase somebody’s expenditure.-' ’ 11 the answer is that they would have been so used, then the borrowing is genuine. This amount, the first it is to be hoped of a much larger sum. represents purchasing power voluntarily surrendered, so that the State may use the money for the war effort. That is one effective way to prevent inflation. The issue has been stated in this way: It the Government’s expenditure increases without the public's expenditure being reduced, pound for pound, then, whatever the outward appearance of the financial devices adopted, they are, in fact, inflationary. It is to be hoped that the progress made in this direction will cause the Minister to review his plans. The compulsory loan did not comply with the conditions as outlined by the British financial expert above quoted. “Compulsory borrowing (he said) comes half-way between taxing and borrowing, and, in many respects, has the defects of both. In assisting the subscribers to obtain bank advances in order to pro.vidt their allotments, the Minister could not avoid a margin of direct inflation. What the people, by small savings, have provided in the course of about four months, should do something to convince the Government that a war loan—and nothing but a war loan —would be equally well supported. This course lias been followed -with distinct success in the other Dominions, and there is no obvious reason why it should not be equally successful here. The War Savings Fund has showed plainly that the people are willing to help in the war effort. The most should be made of that fact.