THE EMPIRE'S STAYING POWER.

Pukekohe & Waiuku Times, Volume 5, Issue 173, 12 May 1916, Page 4 (Supplement)

THE EMPIRE'S STAYING POWER.

:it is generally understood that the war as costing the centre of the Empire -alone five millions sterling per day, a .figure so stupendous as to make even .laymen in finance realise that the expenditure ia at a rate unparalleled ■in history. We learn too, of the enormous loans that arc being floated, ol :*he increasing portentousness of the interest bill, and of the consequential taxation, heavy beyond all precedent. "The question is—How long can this .kind of thing last? A writer who has evidently studied the question closely, ■contributes to a Sydney contemporary ■ar. article in which he demonstrates a decidedly optimistic view of the position. British finance, he declares, --shows no s r gn of weakening. So far there has been but little sacrifice in a financial way, wonderfully little, indeed. Taxes have been increased, it .is true, and part of the year's income "has been foregone, but everything is mot being put to the touch as is seemsingly the case in Germany. The British people are not being fed up with notes tnat are rapidly depreciating. "The country is still on a gold basis. JNot a note has been issued that is not •convertible into gold at the Bank of England. How have we managed all tthis? How comes it that, despite i&eavy contributions to the needs of ■our Allies, running into hundreds of -millions sterling, the finances of the Empire are still sound at heart and capable in all seeming of withstanding • much heavier strain ? Sir George Paisil lets us into the secret. In a closelyreasoned summary of the position i>e shows how the wonder has been nctomplished. In a period of peace the -nation in 18 months would have spent about £300,000,000 for Governmental purposes, whereas ix has spent £1,900.'.000,000 since the war began. Tli this sum, however, about £400,000,000 lias "been lent to the Dominions and o'ir Allies. Excluding this investment, the -.-expenditure has been £1,500,000,000 in 18 months, and about £1,200,000,000 oi 12 months to the end of January 1916. If from this total one deducts the normal expenditure of £200,000,000, -one reaches the conclusion that Great Britain has spent £1,000,000.000 upon war alone in the current 12 months, -without having had to tiench upon her -accumulated wealth. Of course, tiie British people had to apply to war purposes the whole of their new savings, which normally amount to about £400,--000,000 per year, but they have not needed to realise their investment. 'The proceeds of the securities they have sold and the capital they have called in have been employed for the construction of houses, factories, etc., and :n loans to allied countries. The mass of the British people in the first IS months -of the war 6pent money even more •generously than usual upon food, clothing and luxuries, and yet the nation's capital hag not been reduced, but remains at about £17,000,000,000. Moreover, the amount of the nation' 6 capital invested abroad has been but slightly reduced. Before the war it was -over 4,000 million pounds, and now it is just about that figure. Great Britain has rather less capital in the outlying parts of the world and in the United States, but more in France, Italy and Russia. In considering Great Britain's rate of expenditure at the present time it is essential to*note --that it 13 somewhat jess than it seems to be. In the early days of the war a , great deal of money was borrowed from bankers for various purposes, but since July these advances have been in pro--cess of repayment. The Prime Minister in November informed Parliament that since July the Government had repaid 101 millions sterling to the Bank of England, and from this statement it. wa6 evident that the actual expon--diture of the period was something like one million per day less than it seemed to be. Moreover, from the statement of the Chancellor of the Exchequer it is apparent that he did not expect current expenditure to reach .five millions per day, until tow'ards the end of March. Probably in 1916 the ■ aggregate Government expenditure of the British peoples will be nearly five -millions sterling per day, or 1,800 millions per year, and that about 400 millions of this sum will consist of loans to the Allies and Dominions, whereas in 1916 the Government expenditures -were about £1,500,000,000, of which £300,000,000 was money lent to Allies and Dominions. Inasmuch as the smaller sum has been found without much effort, and with the nation more extravagant in its domestic expenditure than usual, no serious difficulty, : Sir George Paish considers is likely to arise in meeting the larger expenditure, now that measures are be'ng taken not only to induce the nation to become much more economical, but !o .mobilise its realisable capital. In the £4,000,000,000 of foreign and colonial securities which Great Britain possesses, as well as *n her ability to employ her own credit, she possesses the means • of paying for all the goods she needs lo purchase abroad for a very long time to come. Moreover, if this fund of securities and of credit be supplemented by substantial economies <n domestic expenditure by the whole of the British people, not only could no limit be placed on the possible war expenditures of the country in a given year, but no limit could be placed upon the period of time over which those war expenditures could be maintained. The proposal recently placed before Parliament by the Chancellor of the Exchequer to invite holders of American securities either to sell or to lend approved stocks and bonds to him, i« the first active step in the matter ~f mobilising the capital resources of the country, called for by the great expenditures. Four British banks alone liave discovered that they hold £IOO,-. 000,000 of American bonds and stocks Sn their possession for the collection of

coupons and dividends, apart from those contained in security boxes entrusted to them for safe custody. Beyond the capital invested in securities, the British people had a large amount of floating capital abroad, on deposit with the banks and employed in the discount of foreign bills, and this floating capital brought the aggregate amount of British capital employed abroad up to about 4,000 millions sterling. Moreover, the amount was further increased in the seven months of 191-1 prior to the war, and the aggregate amount of British capital abroad when the war broke out probably exceeded 4.000 millions. The all-round return upon this capital was 5.2 per cent., and the income which the British people enjoyed from their foreign investments was thus over 200 millions per year. In entering upon 1916 Great Britain is able to look forward with equanimity and confidence to meeting her ordinary Government expenditure of 200 millions, and a war expenditure of 1,200 millions, and to the task ef providing a sum of 400 millions for her Allies out of her existing great income, through the introduction of a measure of economy into the domest c expenditures of all classes, supplemented by the sale of a relatively small portion of her foreign investments.