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HOW TO PAY FOR THE WAR

credit for the pre-war yield of taxes and for thosesavings on which we can rely in any case, thereremains about £950 million of incomes in privatehands which must not be spent but must bediverted to the finance of the war.

I suggest that perhaps as much as one half ofthis, namely £500 million, can be raised by taxa-tion. Indeed in a full year and disregarding time-lags in collection the war taxes already imposedin Sir John Simon's emergency budget may pro-vide £400 million towards this. I include in thisat least £100 million from Excess Profits Tax evenif we avoid any significant degree of inflation.Inflation would, of course, greatly increase theyield of this tax; but the yield should be sub-stantial even without this adventitious aid, partlyas a reflection of the higher level of output andpartly on account of the distribution of profitsbetween individual businesses being materiallydifferent from what it was in the base year. Otherfiscal devices, including a sales-tax on certainclasses of non-necessities, should be capable offinding another £100 million. But it would notbe easy for our fiscal machine to raise much morethan this with due regard to justice and efficiency,except by a general sales-tax, a wages-tax or theuse of inflation as a tax-gatherer.

The idea of bridging the remaining gap of £450million, in addition to the £400 million for whichwe have already taken credit, by voluntarysavings without any aid from inflation is chimer-ical. It must be remembered that we havealready assumed an annual subscription by the