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present taxation and paying by future taxation." Three charges, however, clearly fall upon the taxpayer at once :-(1) Interest on the War Loans; (2) sinking fund for their redemption; and (3) pensions and allowances for the disabled and for widows and dependents of the slain. These charges will all grow with each month that the war lasts, and, as we have seen, the rate of interest grows too, so that from Mr. McKenna's promise to accept Second War Loan Stock as payment for a Third Loan, if one should be issued, we must face the possibility of a debt at over 4 per cent. running far beyond a thousand millions. Two further considerations influenced us in recommending a large and immediate increase in taxation: "borrowed money is spent more extravagantly than income, whether by Governments or by individuals," and during a war everyone connected with war industries earns higher wages than in time of peace. Consequently the nation as a whole can bear more taxation now than it will be able to bear when peace comes and the war industries become slack again.

An interesting memorandum sent to us by Mr. Joseph Kitchin compares the probable cost of this war with the actual cost of former wars. Writing before the Budget, and assuming that the war ends when it has cost only a thousand millions (which is now out of the question) he makes out the following table :

Napoleonic Wars, 1793-1815

Direct cost of war to

United Kingdom... £831,000,000 £67,500,000 £211,000,000 £1,000,000,000

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£440,000,000 £32,000,000 £143,000,000 £920,000,000

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53%

47%

of revenue during

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Portion of cost raised

annually out of

revenue during war £19,500,000 £13,500,000 £25,000,000 £48,000,000

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Proportion of National

income paid in

taxes before and

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Professor Bastable, I ought to add, does not accept Mr. Kitchin's figures for the Napoleonic Wars, and puts the amount raised by loan so high as £600 millions. But he says that borrowing took place chiefly in the period 1793-1800, and that much greater efforts were made to secure an adequate tax revenue during the later years of the war; the earlier use of the income tax would have greatly lightened the financial strain and the accumulation of debt." After making allowances for the Professor's correction, the last line in the table remains very significant. It is clear, as Mr. Kitchin argues, that we can pay in taxes a higher proportion in respect of a present income of £2,250 millions than could our forefathers in respect of their income of £250 to £350 millions.

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Some little difference of opinion prevailed as to the precise period when war taxation can be borne most easily. Mr. Kitchin anticipates two or three years of abnormal prosperity after the war, followed by a period of depression; so he argues the time to tax heavily and to relieve posterity is much more the time when savings are high by reason of private economies and special war income than when the inevitable period of depression has come.' Professor Dicksee and Mr. F. W. Hirst agree with Mr. Kitchin, although the Professor stipulates that the taxation shall be intelligently applied so as to hit those who are benefiting financially from the war." Professor Boyd Dawkins, in a speech which evidently voiced the opinion of the Section, argued both for the taxation of war profits and for the extension of the income tax to the more prosperous artisans. As a result of personal inquiries in Lancashire Dr. Boyd Dawkins was convinced that the working man was ready to do his bit in paying for the war. Mr. McKenna has already incorporated both these ideas in his Budget. Mr. C. T. Needham, M.P., supported the demand for an immediate increase in taxation, and laid stress on the fact that the country was experiencing a period of “fictitious prosperity."

Our "reference" says nothing about detailed proposals for raising further revenue, and in the case of direct taxation any such schemes would have involved us in the fiscal controversy; so the Conference made no attempt to arrive at a collective opinion. However, suggestions reached us which seemed worth recording. Mr. Barnard Ellinger urged both in his memorandum and in his speech on September 10th that the amount of indirect taxation through existing Customs duties should be very considerably raised. Whether this brought in more revenue or merely checked imports, the result, he maintains, would be good; in fact, he sees four advantages to be secured by reducing imports. There are : (1) it helps to rectify the adverse balance of indebtedness; (2) so far as the previously imported commodities are not replaced, the

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consumer can increase his savings; (3) the decreased demand will lower the price of such imports as still come in, thus helping No. (1); and (4) the decreased price to the consumer offers him a further chance of saving. There is something to be said for this policy if it could be carried through without setting up vested interests and if it could be dropped at once when the war was over, but the reception of Mr. McKenna's proposals has been discouraging.

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Thinking, however, that direct taxation roused less controversy, we suggested that the income tax might be raised, "especially if its graduation were improved and if it were extended, necessarily at a lower rate of charge, to a much greater number of tax-payers. Our suggestion was influenced, I believe, by the grave warning conveyed by Professor Bastable's memorandum, which we print almost verbatim. The great lesson to be derived from former wars is the need of immediate adjustment of the financial system on the outbreak of war. The easy course of borrowing is open to the conclusive objection that it mortgages resources that will soon be needed, while it induces the ordinary citizen to think that he is not called on for any additional effort. But in no previous case has the necessity for this adjustment been so great as in the present war. Though Pitt bequeathed a heavy burden to the British taxpayer of the nineteenth century, the immense development of British industry as the result of the manufacturing system and Colonial expansion furnished a counterbalancing force. It is not within the range of reasonable probability to hope for anything similar in the twentieth century. Moreover, the call on the national dividend' is proportionally greater." Heavy though the cost of the Napoleonic wars was, the borrowings of the State never absorbed the whole savings of the country; but the present rate of war expenditure "exceeds threefold the annual savings of the United Kingdom in peace time."

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Dr. Bastable and Dr. Scott each make an estimate of the national income and of the proportion available for the war. The Dublin Professor regards £2,000 millions as an under estimate of the national income, and thinks that "for a limited period of strain £500 millions would be the available tax revenue." The Glasgow Professor takes an optimistic view. Subject to three provisos, (1) that the cost does not exceed £1,000 millions a year; (2) that the national income keeps up at not less than £2,000 millions; and (3) that "we put our backs into it"; then we could finance the war ourselves indefinitely.

Much was said about methods of borrowing, both in our report and in the discussion.. Mr. Drummond Fraser demanded a

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simpler form of Government borrowing, and invited Mr. McKenna to issue Treasury war bonds "repayable in three, five, seven, or ten years, at a fixed rate of interest payable half yearly, the interest for the first half year to be calculated from the date of investment." The bonds might be of any multiple of five pounds, with scrip vouchers for smaller amounts, and should be salable over the counter from day to day. By this plan the savings of the people would be attracted directly into the Exchequer, a much sounder method than that of large subscriptions to war loans by the banks.

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Our last question was one which has recently come into great prominence the foreign exchanges. At the outbreak of war the exchanges throughout the world "suffered complete disorganisation," from which they gradually recovered. We pay a tribute to the "masterly" way in which the Treasury re-established the position of the sterling bill and with it the foreign exchanges. But since the outbreak of war found London the creditor of the world as regards short-dated obligations and so caused a stampede for sterling remittances," the moratorium had a curious and unexpected effect. It saved enormous sums to foreign countries which were indebted to London," and arrested the rise in our favour. Then began a second period, "the gradual cumulative effect of war conditions and war expenditure upon the financial relations of each of the combatant nations with its Allies and with the principal neutral countries." Our views on the question, How can the balance be restored? have now only a historical interest, since the Government has adopted the plan of an American loan. We did, in fact, suggest such a loan free of British income tax, but we preferred to lay stress upon more lasting remedies. The adverse trade balance, we say, may be permanently affected by the discouragements of imports into this country, by the encouragements of exports, by increased economy of consumption, and by taxation."

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M. Yves Guyot, the distinguished French economist, attended the meetings of the Economic Section and spoke in flattering terms of our report. He agreed with its main thesis, and especially with the exhortation to less spending and more production. Economy was a negative virtue, but intensity of production was a positive virtue. It was, he said, for the Governments to give the lead in economy, though he had little faith in their doing so. J. E. ALLEN.

ARMENIANS AND THE PARTITION OF ASIA MINOR.

"Europe ought to know more than she has hitherto known of the achievements of the Armenian race, whose annals stretch back to the sixth century before our era, of its prowess in war, of the great men it produced, of its learning and its art, the most advanced in Western Asia."-Lord Bryce, Introduction to Tchobanian's The People of Armenia.

THE speech of Lord Bryce in the House of Lords on October 6th in which he described the Armenian massacres has reverberated through the civilised world. He solemnly declared that "nearly the whole nation has been wiped out." Almost each succeeding day brings fresh details which show that the worst excesses and cruelties practised by "the Great Assassin" have been surpassed, that never in the long history of their martyrdom has the Armenian race suffered so greatly or on so vast a scale. To exaggerate is impossible. Literally hundreds of thousands of Christians have been "rounded up," driven from their homes when they have not been murdered on their own thresholds, men, women, and children segregated and then dealt with separately, the men killed in cold blood or driven off to make labour brigades for the Turkish forces, the women outraged, slaughtered, or sent into a life-long captivity worse than death; the little children-it maddens one to write it-slaughtered before their parents in indescribable ways or torn from their homes and sent to Moslem households to be brought up as Mohammedans! The policy of solving the Armenian question-as it presents itself to the Turkish Government-by exterminating the Armenians has been ruthlessly carried out. Turkish Armenia has been deluged in Armenian blood, and to an unimaginable extent depopulated. Evidence shows that in certain districts Armenians have taken to the mountains and hidden themselves in their recesses. Whether they can survive till "the indignation is overpast" is a question only time can answer, but their sufferings-those of the children especially-in the interval chill the blood to think of. Winter on the uplands of Armenia with a temperature of - 22° F. suggests that few can survive the rigours of the months ahead. In any case, the broad, incontrovertible fact remains that practically the whole Armenian population west of the Russian lines, and those of the Armenian volunteer bands, have been "dealt with" at the express orders of, as Lord Bryce phrased it, "the gang who are now in possession of the Turkish Government."

All this "frightfulness" on the part of Germany's ally only emphasises the TWOFOLD DUTY now facing the Entente Powers.

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