16 HOW TO PAY FOR THE WAR

consumption of £1,625 (£825+£450+£350) milliona year.

What relation does this bear to present facts?The Chancellor of the Exchequer announced inthe late autumn of 1939 that the rate of govern-ment expenditure already reached represented anincrease of somewhere in the neighbourhood of£1,500 million a year. Thus if we had alreadyreached the increased rate of output assumedabove, we should have had at that time a smallmargin (of £125 million) out of which privateconsumption' could be increased. But everyoneknows that we were, and still are, a long wayfrom having organised output on this scale.Indeed it is certain, in my opinion, that theexisting rate of government expenditure leavesno margin for increased private consumption;and that the maintenance of consumption isalready leading to a reduction in stocks of com-modities and of foreign reserves at a higher rateof depletion than that assumed above,—at ahigher rate, that is to say, than is safe.

Moreover it is certain that our war expenditurehas not yet reached its maximum. Let us assumethat in the next year government expenditurerises by no more than a further £350 millionabove the estimated level of last autumn, and thatwe are successful in raising our output to the maxi-mum suggested above, which is an optimistic viewof the prospects. This will involve a reduction of£225 million below the pre-war rate of consumptionfor the community as a whole. We have, therefore,to withdraw from consumption £825 million of