The Guardian And Evening Star, with which is in corporated the West Coast Times. TUESDAY, DECEMBER 22, 1925. FRENCH FINANCE.

Hokitika Guardian, 22 December 1925, Page 2

The Guardian And Evening Star, with which is in corporated the West Coast Times. TUESDAY, DECEMBER 22, 1925. FRENCH FINANCE.

Xo\V that the l.ccarmi Pact lias been invested with the formal and weighty authority of the signatures of the chief statesmen of Europe, the financial condition of France, says a financial journal, becomes the most important question in world affairs. The French franc now has a value equivalent to just under twopence, as against a normal Ojd. in exchange on l.ondon. What wonder, then, that the Chandler of Deputies lias passed ,M. EonchonrVs finance hill, which includes provisions for a '2O jier cent, income tax and 50 per cent, each on property, profits, and securities! How France has arrived at her present parlous financial position is most lucidly and interestingly explained in a volume, “The Financial Crisis of France.” The author, the Hon. George Peel, has been closely identified with H.M. Treasury, and lias devoted particular attention to the finances of France. He begins his hook by an assertion that at the date of the opening of the Great Wat the system of French public finance was well-nigh obsolete, and needed reconstruction. but that the foundations of reforms conceived in the thick of war-

fare, though marred by many defects, were well and truly laid. Cnfortunntely. while France was being given a sound taxation system, converse things were happening on the other side of the account. Tn 10 years’ time, from the middle of 1911 to the middle of 1921, the internal national debt of France rose from about 33 milliards to about 278 milliards. Added to this, was the external debt, which, if expressed in francs at their par gold value, was approximately 36 milliards. The raising of this enormous debt had ' heen dictated bv the necessities of the life-nml-deatli struggle, but there were several avoidable errors which accompanied this process. During the war more debt was raised’ than need have heen, and. next, it was issued on terms more onerous to the State than was necessary. Thirdly, after the war was over, more debt was again raised than was essential: and. lastly, the error was committed throughout of

arranging the maturities of the various forms of debt- in a sequence which would inevitably involve the most dangerous embarrassments in the near future. Precisely in the middle of these operations, and perhaps because of them, a new and startling factor entered upon the economic scene. The franc, of which the average yearly rate had been 25.13 to the £ in 1911. and which was still held at the rate of 20.75 to the £ in 1918, fell thenceforward to the levels we know. A close examination of French financial history from the Napoleonic era onwards shows how conservatism and economy in the handling of national finances gave way, often under stress of cir- • cnmstances. to something approaching : prodigality. One great contributing ' cause was the increasing weight of mili- '

tarism, which has pressed more heavily on France since the close of the Great War than on any other State. What contributed mostly to the disastrous position of to-day was the extraordinary leniency adopted to taxpayers during the war years. It was from a praiseworthy motive, if, as it turned out later, a somewhat reckless one. ed that after the onthreak of war,

French taxpayers were in many cases relieved of the necessity of paying the existing taxes, the tax collectors being instructed not to prosecute in cases where mobilisation could be pleaded. Also, under the terms of the moratorium, proclaimed at the outbreak of war. mobilised reutpayors or their families were dispensed from house rent, farmers from agricultural rent, and debtors from the discharge of debts. Again, the families of mobilised men received allowances on a gradually increasing scale, with the result that a man with a wife and three children received eventually 40.23 francs a week. This represented a total charge on the State of more than 2-TOO million francs a year, or one-half of the total pre-war budget. Until 1917 the French Government performed the feat of carrying on the most expensive of all wars without requiring the French taxpayer to contribute a single penny. In 1913 the total revenue bad been a little over 0000 million francs. For the four years ending with 1917. the average total revenue was 1778 million francs, .so that up to the opening of 1918 tlu> revenue, on the average. was somewhat less than before the war. Kvcn when the figures for 1918. when some now taxation began to tell, are included, the average revenue up to the end of 1918 was only 0219 million francs, only a trifle higher than the revenue for 1913. Taxation contributed practically nothing towards war expenses. The financial result was that, whereas the total revenue of France for the five complete years, 191 1-1918. was 20.098 million, francs, the expenditure during that same period was 109.929 million francs. That vast gap of 143.931 million francs had, therefore, to be tilled bv borrowing in one shape or another. In fact., the whole of the war expenses proper were defrayed by borrowing. The war. as far as France was concerned, was financed bv borrowing as io 80 per cent. from within France, and as to 2(1 per cent .from outside. In its war time financial operations the Government called to its assistance ilic Bank of France, ft was the general policy o' this institution in pre-war years to

keep about 70 nor rent, in specie and about 30 per cent, in loans and discounts against its liabilities in the shape of its note circulation and deposits. By 1918 this ratio of specie to circulation and deposits had fallen to 18.49 per cent., and at the close of 1921 in 14.80 per cent. The reason for the change wa.- that advance- to iho State had swollen from 3900 million francs advanced to the Government, as at the outbreak of war. up to 211.000 million francs in February. 1919. The mite circulation of (Mini million francs at tlu> outbreak of the war had attained to 32.000 million francs in February, 1919. In that year the cm rmons sum of 20.000 million francs was raised by Treasury Bills. By that time the amount borrowed by Treasury bills, etc., was about 29 per (cut. of the

total war borrowings. Passing over the huge foreign indebtedness, the effects made bv the Government to in-

crease taxation during recent years, the failure of reparations, etc., which Mr V eel discusses fully, he envisages the future with opitiinism and “affirms bis belief that France, in spite oT the ext raordinarv difficulties of her situa-

tion. can attain to a revenue so rc-or-g-mis-d. and to an expenditure so adjusted a> to secure for herself a bearable budget, a debt, within her com. pass, and a stabilised franc.”