62 HOW TO PAY FOR THE WAR

of the country is £5,500 million at pre-war prices,that individual incomes (including transfer pay-ments) come to £6,000 million, that the yield oftaxation is £1,400 million, that we supplementour own output by importing £350 million morethan we export paid for out of foreign reserves oroverseas loans, and that the expenditure of theGovernment, also reckoned at pre-war prices, is£2,750 million, i.e. £2,250 million excluding trans-fer payments. After deducting £1,400 millionwhich they pay in taxation, individuals are leftwith £4,600 million which they are free to spendif they choose. But, since the Government hasalready purchased £2,250 million of the output,there is only £3,250 (£5,500-£2,250) million ofgoods (valued at pre-war prices) left for thepublic to buy with their remaining incomes of£4,600 million. Now if the public voluntarilysave £1,350 million, that is to say the whole of thedifference between their incomes of £4,600 millionand the value of the available goods, namely,£3,250, at pre-war prices, obviously the problemis solved. There will be just the right amount ofgoods available to satisfy the demand without anyrise of prices.

But, if in these circumstances, the public donot choose to save so much as £1,350 million, doesthe system of financing the war by voluntarysavings break down? Certainly not. For in thelast war we used the voluntary system success-fully; yet, since prices rose more steeply thanwages, it follows that the readiness of the publicto save cannot have been sufficient to satisfy