OUTPUT CAPACITY AND NATIONAL INCOME 15

of their pay, allowances and keep), from shortageof raw material and shipping, and from A.R.P.On balance an increase in output of 15 to 20 percent should be practicable when our organisationis working properly. Taking an intermediatefigure of just under 17| per cent, let us assume anincrease of £825 million in the value of outputmeasured at pre-war prices. It is important toadd that no such rise in output has taken placeas yet.

There are two other sources from which govern-ment requirements can be met. Included in thecost of public and private consumption there is afigure of £420 million for the cost of making goodcurrent depreciation, in addition to about £300million spent on additions to capital. Some ofthis output, costing £710 (£420+£290) millionaltogether, could be diverted to government pur-poses. Let us put the contribution from this sourceat £150 million from depreciation funds and £300million from normal new investment, making £450million altogether.

The second and only remaining source is fromselling our gold and foreign investments andborrowing abroad. If we are to be prepared fora prolonged war, we must be strict with ourselvesin limiting the rate at which we expend theseresources. I put the maximum contribution whichwe can safely take from this source in a year at£350 million. 1

Altogether this yields us resources for additionalgovernment requirements and current private

1 Some details in justification of this figure are given in Appendix II.