power gives the Government, for the moment, control of so much in goods and services at the expense of the consumer; but when once the new buying power has been distributed by the State’s payments it is in the hands of the nation as a whole.  If the process ceased, the nation would still have control of the whole of its output, which is its income, though the injustice involved, to those who are not strong enough to resist the effects of higher prices, would continue.

Thus, whatever means—­straightforward or devious—­are used for financing war, it is paid for while it goes on by the warring country if the financing is done at home, or by its foreign creditors if the financing is done abroad.  And it is, necessarily, almost entirely paid for out of income, that is, out of current production.  It is curious to find that many people still seem to think that the whole cost of the war has come out of capital.  Luckily for us it could not be done, or only to a very small extent.  Our capital mostly consisted of railways, factories, ships, roads, agricultural land, machinery, houses and other things that could not be taken and shot out of a gun.  These things we have still got, and though many of them are not in such good shape as they were, some of them are much better equipped and organised.  We have drawn on our stocks of materials and goods—­how far it is impossible to say; we have lost 8-1/2 million tons of shipping by war losses; in the meantime we have built, bought and captured 5-1/2 millions of new tonnage, and we have a claim against the Germans for such tonnage.  On capital account we have suffered by wear and tear in so far as our upkeep has been neglected owing to lack of labour during the war, and by depletion of materials and stocks, and also, of course, by the fact that if the war had not happened, we should, if pre-war calculations were correct, have put some L1700 millions into new investments at home and abroad during the 4-1/4 years of fighting and some more hundreds of millions during the after-war period of Government borrowing and restriction on private investment.  But a very large part of the money that went into victory would otherwise have gone not to capital account but into the pleasant frivolities, embellishments and vulgarities that made life an amusing absurdity in days before the war.

If, then, the war sacrifice was made during the war, in so far as its cost was raised at home, how far is it true that we are now faced with the business of paying for it?  If taxation were equitable it would only be to the extent that those who ought to have made the sacrifice and did not, will in future have to pay interest to those who did, or their representatives.  So that the first thing we have to do is to make taxation equitable, that is, lay it on the taxpayer in proportion to his ability to pay.  There will still remain the injustice to those who have fought for us, which might be cured, or amended, by special exemptions.