VOLUNTARY SAVING

59

is of the order of £1,750 million or more (measuredin pre-war prices), it is virtually certain, in thelight of the examination of the statistical back-ground which we have made in Chapters III andIV, that the normal methods would be inadequate.Between these limits there is room for a differ-ence of opinion. I should be inclined to put themaximum expenditure which we could safelyhandle by normal methods at an increase ofabout £1,250 million. And I should be fairlyconfident that they could not handle an increaseof £1,500 million.

We must next emphasise a consideration, com-monly overlooked, which is of the first import-ance. Let us suppose that in the absence ofdrastic methods we can rely on voluntary savingsof (say) £500 million, but that we require £750million to balance the war budget. We thereforeresort to one or other of the "drastic" methodsopen to us to find the balance of £250 million.Now the fundamental difficulty, which we haveto face and are apt to overlook, is this. As soonas we apply a "drastic" method we can no longerrely on the same volume of voluntary savingswhich was available so long as we restricted our-selves to "normal" methods. Eor some part ofthe funds which we extract by our drastic methodsare certain to be at the expense of the voluntarysavings previously available. To give a simpleexample, the volume of voluntary savings is notindependent of the level of income tax. If incometax is raised, the gross increase in the yield exag-gerates the increase in resources from taxes and