for the year to March 31, 1916, 4,271,6667.; for the year to March 31, 1917, 6,022,2227.; for the year to March 31, 1918, 7,387,0007. The first war budget was introduced by Mr Lloyd George on Nov. 17, 1914. Its main features were the doubling of the income tax and super-tax, an additional d. on the half-pint of beer and 3d. per lb. on tea. The second war budget, presented on May 4, 1915, contained no new taxation proposals. The expenditure for the year 1914-15 amounted to 560,474,000l., and the revenue to 226,694,000l. (189,305,000l. from taxes and 37,389,0001. from non-tax revenue), leaving a deficiency of 333,780,000l. The third war budget was presented by Mr McKenna on Sept. 21, 1915. Under this budget 40 per cent. was added to the existing rates of income tax, and certain alterations were made in the exemption and abatement limits. The super-tax was raised, the Excess Profits Duty was instituted, and the duties on many imported articles were largely increased. The fourth War Budget, introduced on April 4, 1916, provided for a graduated increase of the Income Tax, making the maximum rate 58. in the £. The duties on sugar, cocoa, coffee and chicory were appreciably advanced, while new taxes were levied on matches and table waters. The expenditure for the year to March 31, 1916, amounted to 1,559,158,000l., and the revenue to 336,765,000l. (from taxes 290,088,000l., non-tax revenue 46,679,000l.), leaving a deficiency of 1,222,391,000l. On May 2, 1917, Mr Bonar Law introduced the fifth War Budget, under which the excess profits duty was increased from 60 per cent. to 80 per cent. as from Jan. 1, 1917, and the entertainments tax was substantially increased. The expenditure for the year to March 31, 1917, was 2,198,113,000l. and the revenue 573,428,000. (from taxes 514,105,000l., non-tax revenue 59,323,000), leaving a deficiency of 1,624,685,000l. The sixth War Budget was introduced by Mr Bonar Law on April 22, 1918. The total expenditure for the year to March 31, 1918, was 2,696,221,000l., including 505,000,000l. for advances to the Dominions and our Allies, leaving a net expenditure of 2,191,221,000l. It is gratifying and significant that our Dominions and India were able to finance so large a proportion of their own expenditure. The revenue amounted to 707,235,000l., or 26.2 per cent. of the gross and 33.6 per cent. of the net expenditure. The following table, which contains particulars of the actual receipts and expenditure for the years 1913-14 and 1917-18, will show the changes in National Finance produced by four years of war: (a) Nominal provisions, the substantive provision being made under Votes of Credit. Vol. 230.-No. 456. The whole basis of taxation has been profoundly disturbed by the war. In 1913-14 direct taxation amounted to 937. millions and represented 57 per cent. of the total tax revenue. For the year 1917-18 direct taxation, including excess profits duty, amounted to 5031. millions, or 82.5 per cent. of the total taxation. It will be seen, therefore, that the burden of war taxation has fallen almost entirely upon the direct taxpayers. The proportion of the total expenditure raised by (1) borrowing and (2) revenue-that is taxation and Post Office, etc., during the years 1915, 1916, 1917 and 1918-was: For the year to March 31, 1915 (which included the first eight months of the war), the revenue was 576-77. millions, of which amount 4057. millions were borrowed and 171-77. millions, or 29.7 per cent., raised by revenue. For the year to March 31, 1916, the total sum received was 1,501:37. millions, of which 1,164 57. millions were borrowed, and 336-77. millions, or 224 per cent., were raised by revenue. For the year to March 31, 1917, the amount received was 21997. millions, of which 1,625.57. millions were borrowed and 573-41. millions, or 26.8 per cent., raised by revenue. For the year to March 31, 1918, the total expenditure was 2,696,221,000l., of which 2,989,000,000l. were borrowed and 707,000,000l., or 26-2 per cent., were raised by revenue. Mr Bonar Law, on April 22 last, estimated the expenditure for the year to March 31, 1919, at 2,972,197,000%. or 8,142,000l. a day. In his Budget speech he said: 'The rule originally introduced by my predecessor implies that at the end of the budget year we shall have revenue sufficient to meet all normal expenditure and the Debt Charges without new taxation or new borrowing. . . . As long as it is humanly possible for the country to live up to that standard it is our duty to see that it is carried out.' He then made the following calculation: Pre-war expenditure Pensions, Education and other ad- 97,000,000 ditions to pre-war expenditure 270,000,000 380,000,000 War Debt. 650,000,000 In order to comply with the principle thus laid down, Mr Bonar Law said it was necessary to impose new taxation which would produce in a full year an additional revenue of 114,500,000l.; and he accordingly proposed the following new taxation: (1) the standard rate of the income tax to be increased from 5s. to 6s. in the £ with consequential modifications in the graduated scale; (2) the limit of Super-Tax exemption to be lowered from 3000l. to 2500l., and the rates of Super-Tax under the graduated scale to be increased up to a maximum of 4s. 6d. in the £; (3) Farmers' Income Tax under Schedule B to be doubled (the 1917-18 measure of liability was the rental; it has now been increased to double the rental value); (4) Stamp Duty on cheques to be increased from 1d. to 2d.; (5) postage rates to be increased by about 50 per cent. all round; (6) the duties on spirits, beer, tobacco, sugar, and matches raised by amounts varying from 30 to 60 per cent. Finally, Mr Bonar Law proposed an excise duty of one-sixth part ad valorem on Luxuries. These additions were approved, with the exception of the Luxury Duties, which were eventually referred to a Special Committee, to be dealt with in a separate measure. For the current year Mr Bonar Law estimated that the new taxation would produce 67,800,000Z., and that the yield in a full year would be 114,500,000l. He estimated the total revenue for 1918-19 at 842,050,000l., leaving 2,130,147,000l. to be borrowed. Many people have expressed their disappointment that a larger proportion of our expenditure has not been obtained from taxation, and they maintain that the financial policy adopted in the Napoleonic wars should be applied to the present war; but this contention has not been sustained. Too large a share of the burden of taxation has been thrown upon the direct taxpayer. Under the new budget, incomes of 5000l. will pay 7s. 2d. in the £; those of 10,000l., 8s. 4d.; those of 15,000l., 10s. Od. So long as the Excess Profits Duty forms one of the principal sources of revenue, and Income Tax, Super-Tax and the Estate Duties are retained at their present levels, it would be very dangerous to place any further burden upon the shoulders of the direct taxpayers. There are already indications that the limits of direct taxation have been nearly reached, and that further additions will cease to yield a proportionate increase of revenue. From the statement made by the Chancellor of the Exchequer, when introducing the Budget, it may be assumed that the gross amount of the National Debt on March 31, 1919, will be approximately 79801. millions. From this we may make the following deductions: Million £ Advances to Allies up to March 31, 1919 . 1632 Advances to Dominions (to March 31, 1919) 816 816 244 64 1124 375 Balances with financial agents abroad Further assets of the same nature to be acquired during current financial year. Estimated amount of Excess Profits Duty accrued but not collected at March 31, 1919 Total credit items 100 572 100 672 500 2296 This would reduce the net amount of the National Debt on March 31, 1919, to 56847. millions. To this must be added the cost of demobilisation and other expenses in connexion with the conclusion of the war, so that, if the war should end this year, we might expect to wind up with a net debt of about 7000l. millions, exclusive of the capitalised value of the pensions, for which the latest valuation is 750l. millions. How much of this vast sum can be truly described as lost? Only a comparatively small proportion. I am in complete agreement with the views expressed many years ago by Sir Robert Giffen in his book on the 'Growth of Capital' (1889): 'Of course to each individual holding a portion of the National Debt, the holding is property. . . . On the whole |