prospect that the war may continue for many half-years yet, and every half-year, as it is at present financed, leaves us with a load of debt which will require the total yield of the income tax and the super-tax before the war to meet the charge upon it.  Why have we allowed our present finance to go so wrong?  In the first place, perhaps, we may put the bad example of Germany.  Then, surely, our rulers might have known better than to have been deluded by such an example.  In the second place, it was the cowardice of the politicians, who had not the sense in the early days of the war to see how eager the spirit of the country was to do all that the war required of it, and consequently were afraid to tax at a time when higher taxation would have been submitted to most cheerfully by the country.  There was also the absurd weakness of our Finance Ministers and our leading financial officials, which allowed our financial machinery to be so much weakened by the demands of the War Office for enlistment that it has been said in the House of Commons by several Chancellors of the Exchequer that it is quite impossible to consider any form of new taxation because the machinery could not undertake it.  There has also been great short-sightedness on the part of the business men of the country, who have failed to give the Government a lead in this important matter.  Like the Government, they have taken short views, always hoping that the war might soon be over, and so have left the country with a problem that grows steadily more serious with each half-year as we drift stupidly along the line of least resistance.

Such war finance as I have outlined—­drastic and impracticable as it seems—­would have paid us.  Taxation in war-time, when industry’s problem is simplified by the Government’s demand for its product, hurts much less than in peace, when industry has not only to turn out the stuff, but also find a buyer—­often a more difficult and expensive problem.  There is a general belief that by paying for war by loans we hand the business of paying for it on to posterity.  In fact, we can no more make posterity pay us back our money than we can carry on war with goods that posterity will produce.  Whatever posterity produces it will consume.  Whatever it pays in interest and amortisation of our war debt, it will pay to itself.  We cannot get a farthing out of posterity.  All we can do, by leaving it a debt charge, is to affect the distribution of its wealth among its members.  Each loan that we raise makes us taxpayers collectively poorer now, to the extent of the capital value of the charge on our incomes that it involves.  The less we thus charge our productive power, and the more we pay up in taxes as the war goes on, the readier we shall be to play a leading part in the great time of reconstruction.

V

A LEVY ON CAPITAL

January, 1918

The Objects of the Levy—­Its Origin and History—­How it would work in Practice—­The Attitude of the Chancellor—­The Effects of the Scheme in discouraging Thrift—­Its Fallacies and Injustices—­The Insuperable Obstacles to its Application—­Its Influence on Production—­One of the Tests of a Tax—­Judged by this Test the Proposed Levy is doomed.