VOLUNTARY SAVING

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rate of income tax and surtax. Thus the profiteersbecome, so to speak, tax-collectors for the Treasury.More than half (more than three-quarters in somecases) 1 of the £650 million will become payableas taxes. Moreover it is likely that a considerableproportion of the balance will be voluntarilysaved; not so much because the recipients, beingrelatively rich, will save more readily, but becausethe profits will largely belong to companies whichwill be disinclined, for various reasons, to dis-tribute the bulk of them in higher dividends butwill prefer in the circumstances to save them onbehalf of their shareholders. Thus, in fact, onlya small part of the £650 million (or of this figureaugmented by such higher prices as the Govern-ment may pay for its own purposes) will comeon the consumption market in the second innings.Instead of another 20 per cent rise of prices beingrequired to preserve equilibrium, it may be thata rise of 2 or 3 per cent would be sufficient. Inthis case a modest increase of taxation on thegeneral public will be sufficient to offset theincreased consumption of the profiteers, and avoidthe necessity (if it were not for what follows ina moment) for any further rise of prices beyondthe initial 20 per cent.

Unfortunately this is not yet the completestory; for we have now gone to the other extreme,having slipped in an assumption much lesstroublesome than the facts. We have assumedthat, in spite of the rise of 20 per cent in prices,

'E.P.T.+Income Tax is 75 per cent, and E.P.T.+Income Tax +Surtax on incomes of £5,000 is 83.5 per cent of the increased income.