How Britain Will Finance the War

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WHEN Hitler marched into Poland, he informed his subjects that since he came to power he had spent no less than 90 billion marks on war preparations. Even if we discount the elation with which he must have contemplated that historic moment, and reduce the estimate to 70 or 75 billions (the figure given by the best foreign experts), the total is still very formidable.^[i] The probable expenditure on rearmament in Germany during 1938 was perhaps equal to six billion dollars, while that of Great Britain and France combined, in the same year, amounted to not more than three billions; and before that it was very much less. Since the war began, German expenditure has mounted even higher; any estimate under eight billion dollars would probably be on the low side. These figures give some idea of the amount of leeway which the Allies are having to make up and the magnitude of the burden which they will have to shoulder in the future. The object of this article is to try to show very broadly the nature of the British problem and the resources available for meeting it.

I

To do this it is perhaps desirable to go back a little and depict the situation as we know it to have been in the financial year 1938-39.

In that year, according to estimates based on the computations of Mr. Colin Clark, the gross national income was of the order of £5,700 millions.^[ii] This total includes depreciation, wastage and transfer incomes such as pensions interest on the national debt and unemployment benefit, and is therefore considerably larger than the net value produced during the period. But for discussions of taxable capacity it is probably the best figure to keep in mind.

During roughly the same period government expenditure, central and local, was in the neighborhood of £1,300 millions, that is to say between a quarter and a fifth of the estimate by Mr. Clark. As his estimates are considered by many to err considerably on the generous side, it is perhaps not unreasonable to regard the proportion as being nearer a quarter than a fifth; and, as the taxable income includes so many elements which do not correspond to the net production of value, the real burden of expenditure viewed as a proportion must be regarded as heavier still...