BRITISH AND GERMAN WAR FINANCES

Dominion, Volume 11, Issue 21, 19 October 1917, Page 6

BRITISH AND GERMAN WAR FINANCES

A COMPARISON

SOLVENCY FIGHTING BANKRUPTCY

(From an official paper issued by aulhoriiy of the War Office.) By March :i!, 1017, tho total British State expenditure during the war amounted to jjf,:liS,000,(!l)0. Out of this total JJU7O,OOO,UUO' irf represented by loans t'> Allies, thus leaving the net • expenditure at 43,348,000,000. The expenditure on non-war purposes August, 1911, and April, 1917, may bo estimated at JJS:!O,OOO,UUO. If this is deducted from the total net expenditure given above a total of je2,825,0U0,000 is left which may be taken as the net war expenditure (including interest on Ihe war debt.! down to .March 31, 1917.

It is impossible to estimate even approximately the total amount of the German war expenditure. Light votes oi credit, totalling have been passed by '.he Iteichstag sinco the outbreak of war. Th 3 laot vote was on February 23, 1917, for ,E750,U00,01H), su, taking the monthly expenditure, of the Umpire at ,£150,000,000, the total war expenditure, of the Empire at the end of March 1917, amounted to .63,350,000,000. To make this comparable- with the abovo statement, of English State expenditure, account must also bo taken of the normal expenditure on non-war purposes during tho war (this includes interest on the war debt), amounting to about .£550,000,000, which males a total national expenditure of £3,900,000,000. Germany s very considerable loans to her allies aro not included in her war expenditure figures. But" to this must also be added very large, though quite incalculable, sums expended by the Federal States and the municipalities on war relief, separation allowances, and other forms of expenditure resulting from the war, which in England would be included, ra the national war expenditure. The State of Prussia alone has handed over £25,000,000 to the municipalities in aid of their expenditure on war relief. The municipalities are for the most part heavily in debt owing to additional outlay occasioned by tile war. Thus, by June, 1917. Hamburg had spent already during the war .£11,250,000 on war expenditure There can be no question therefore that the total German war expenditure is vary much higher than the corresponding British expenditure. . T . -i. • Down to March 31, 1917, Great Britain had raised out of revenue as much as .£1,137,000,000, or 26.3 per cent, of the total expenditure, and 33.9 per cent, of the net State expenditure deducting advances made to Allies and Dominions). The remaining was rawed by loans. No other .belligerent State can show a proportion which is nearly so favourable as this Germany, .down to the corresponding date, had raised only a small proportion ot her expenditure by means of revenue. . She has not even succeeded in covering interest on the war debt without juggling with hei Budget figures so as to make be position appear much more favourable than it reTlly.is, e.g., by taking pw-ww military expenditure out of., the Budget. l.'e Empire has not raised during the, war »o?e than at a maximum out of revenue, 'which onlv represents ■141 per cent, of the total Imperial expenditure of .£3,900.000.000. Position After the War.

During the financial year 191G-17 the British-revenue (apart from loans) •mounted to U the rev enue from tho excess profits duty nna other revenue which will be non-recur-ring after tho war 19 deducted onthis sum a permanent revenue ot £41G,108,000 remains. On tho other side, it has been estimated that a debt charge (interest and sinking fund) of £153,700,000 per annum (at the rate of 5J per cent, of the net debt) would pay off the whole of the debt in from 42 to •13 years. Pensions, assuming the war to stop> Uus autumn, may bo estimated at AW.UU",000 Pre-war expenditure (without uei>t charges) amounted to *W.«». ■£ minimum, therefore, of £Jsß,ioo,wiu would have to be raised after the war. But this is covered, by the permanent Tevenuo of ,£476,108,000, with a surplus of about .£59,000,000 at the disposal oi tho Chancellor of the Exchequer, the war loans raised by Great Britain are thus abundantly secured by tho ordinary revenue of the State. Even another year of it« will not irtpose. on lisr burdens which her citizens will be unaole. to bear with comparative case. • The peace revenue of the German Jimpire before the war was about £150.000,000 (the revenue in 1913 of ,£170,000,000 was swollen by including part of theroiiv recurring capital tax of £50,000,0110). It has been estimated recently by a very competent writer in ttte "Kolmscho /,oitune" that if the war were to end in. August, 1917, the debt charge (including; sinking fund at the rate of 1 per ctt-t.) will amount to ,£218,000,000, while pensions alone will require an annual expenditure of at least i!10O,00O,009 for tho fir=t few years after tho war. The Empire has to pay back to tho States und municipalities a proportion 'generally from 40 to 50 per cent.)/of tho sums which they have spent o'n .var relief. Not less, certainly, than .£125,000,000 will have to be forthcoming for this purpose. Enormous sums will be required for compensation for war Manage. £125,000,000 has already been exnen-led. mainly for the . reconstruction ci lost Prussia. But if-tha Empiro con pensates for losses to German uiizens abroad and in the German colonies U,:? sum will only represent a fraction of the total amount to be covered, which will certainly run into hundreds of millions sterling. Finally, there are the usts inciclental~to the restoration of peaoe conditions, the replacement of depreciated and worn-out material, the funds to be placed at the disposal of those whose businesses have been closed owing to tho war, and tho very large arrears of administrative expenditure, Which has cecii reduced to a minimum during the war. The outlay on the Army uid tho Navy necessary to place' them in a position to fight- again, with refilled stocks of material, munitions, etc., will be verv great, and inav well amount to £100,000,000 or £150,000,000. The writer in the "Kolnische estimates that at least. £800,000,000 will require ,to be raised by the Empire on the conclusion of peace. A considerable portion of this will, however, be non-recur-ving, and after the first, six or seven Tears the annual expenditure may fall to between £500,000,000 and £600,000, 000.

Outlook in Germany. 1 The pre-war revenue may bo taken as .6170,000,000; heiice, even assuming the. possibility of covering or .£2.50,000,000 by means of a loan at tiio end of tho war, a pormanont increase iu revenue of over Ji-10,000,000 will be essential if the Empire is to meet its imperative obligations. Down to the present moment (Jane, 1917), the additional taxation imposed by tho Empire during the war (which includes tuxes ou coal and transport) has not succeeded in raising more than =£'85,000,000 per annum permanent additional revenue. A capital incremont tax, with high rates on increases in capital which have _ taken place since the war, was imposed in 1016, and is now being assessed. It is hoped to draw .£100,000,000 to .6130,000,000 from this tax, but it will not be continued ifter the war, and, like tho British excess profits tax, does not provide any nermanent increase lo tho annual income of tho State. The Empire, therefore, wilt still have to raise after the war more than twice its present income ot about .£250,000,000 per annum. When it is remembered that the chiet source ot TmDerial revenue before the war-the fS sUnlv brought in .£35,000,000, it wUI Z evident that the Empire will be unable to meet any appreciable part ot its requirements, without having recourse to direct taxes.. But within the Empire a number of Federal States ovist each with independent financial ,ontrol and dispensing large sums of ;,?,"„.?•'each y.,,A Tt has. always i,^ the nast been a recognised principle ot bei?*u, finance that d.rect taxation (above ■ill taxes on income and property) should 'be'reserved for the individual States (and'i municipalities) while the Empire meets its requirements, mainly from indirect taxation. Tn 1913 the expenditure of the Federal States, including the free cities of Lukeck, Bremen,! and Hamburg, amounted to .0323,253,000, and this sum has been much increased during tho war. It will be quite impossible for the Em-

j)ire to raise anv appreciable part of tho additional JMOO.OOO, ,(10 of which it 6tands in immediate need after the war without oncroaching deeply on the direct sources of revonues which hitherto have been tha jealously guarded tax preserves of the Federal Stales. Heavy Imperial taxation will inevitably diminish the receipts of the States, and will be fiercely resisted by them. German writers themsolvcs reaiiso the hopelessness of the financial position after tho war,' and the soie solution that they can find is by cherishing tho vain hope that an indemnity may bo forthcoming from their enemies. The. German people are still being urged by their leading men to believe that tho chief and sufficient security for the sums that they have contributed to the war loans lies in victory, and iri the indemnities which they aro to receive at the end of tho war. Thero can bo no doubt that, failing decisive victory, Germany will be compelled to write oft', perhaps by means ,-of a capital tax, a large part of her national debt after the war, or even to suspend payment of interest on it: for many years. Jt is safe to say that any political crises there may be in Germany after the. war will be aggravated, perhaps to breaking point, by the insurmountable financial difficulties with which the Empire-will be confronted.