MONEY AND WAR
AP.D.—Armaments Profit Duty—the Government's • new tax on armament profits, has been received with a mild approval hardly to be distinguished from indifference. In some form or other the tax was inevit- able ; the pledges given by the Government that conscription would be accompanied by a limitation of armament profits were of a kind that could not be broken. Everyone in the country is agreed that the sacrifice of personal liberty involved in conscription demands that an equal sacrifice should be made by wealth—though, indeed, there are some who appear to think that con- scription is a good thing in itself. The popular feeling that there must be " equality of sacrifice " has been clearly expressed by the trade unions, whose willing co- operation in the task of rearmament, even to the extent of not opposing conscription, is given on condition that rearmament is not a business for private profit. In intro- ducing the new tax, the Government is fulfilling a part, though not the whole, of the bargain that has been entered into with the nation.
But A.P.D. can only be a beginning, though it may be adequate to the stage that has been reached in rearma- ment. Far from imposing a sacrifice of wealth com- parable to the sacrifice of liberty, it is explicitly an appropriation of a proportion of the additional profits directly created by armaments. The proportion is high —6o per cent. But it applies, firstly, only to the direct and not the indirect profits of rearmament. Secondly, it applies only to firms which have received armament orders of £200,000 in a given year ; the smaller firms escape. Thirdly, the tax applies only to the excess of profits in the accounting year over the standard profit earned in certain other years, and for the majority of firms affected the standard profit will refer to the profits of the years 1936 or 1937, which were years of boom resulting from rearmament. To take one example : it is calcu- lated that Vickers, with a standard profit of £1,820,000, would pay A.P.D. of £70,000 on the year 1938. Further, it is not expected that the yield of A.P.D. will be large, though derived from profits of Government expenditure on arms amounting to over £400,000,000. Perhaps it may be added that the acquiescence with which the tax has been received in the City is evidence both of its inevitability and its mildness.
A.P.D. may thus be accepted as a normal and by no means severe levy on the additional wealth created by rearmament, which, however, in no way satisfies the demand for a " conscription of wealth." It will run for three years ; by that time either rearmament will have served its purpose, and more normal conditions will have returned, or the existing armed peace will have become open war, in which far more severe financial sacrifices will be called for. If the second alternative occurs, a terrible sacrifice of life will have to be borne ; what sacrifice in any way comparable can be imposed on wealth? In fact, no comparable sacrifice can be made ; there can be no equality of life and wealth, of men and money. The demands for " equality of sacrifice " and " conscription of wealth " are phrases to which it is difficult to attach any exact meaning ; at the most they describe the demand that no one should be allowed to prosper through a catastrophe which will cost the lives of millions, and this demand can only be completely satisfied by the complete appropriation of all profits derived from armaments. That is hardly possible without nationalisation of the arms industry ; but it may well be that the compulsion which will have to be exer- cised in wartime will not stop short of that.
Even thus, however, the real problem would not be solved. The real problem is how to devote, not merely wealth derived from armaments, but the entire wealth of the country, most efficiently to the financing of war and war preparations ; and the country has the right to demand that the Government should at once proceed to draw up a financial plan covering all the national resources, which can be immediately applied in time of war. What must be the nature of such a plan? The essential problem of war economy is to ensure that the Government can dispose of a sufficient proportion of the national income to provide the goods and services neces- sary for waging war efficiently ; calculations based on the cost of the last year of the Great War show that this proportion cannot well be less than a half. The same problem can be put in other words by saying that private consumption must be restricted to a point which releases a half of the national income to be devoted to the needs of war.
So far at least the Government has not faced this problem, though to some extent it must arise even with- out war if war preparations continue at their present, or, as is more likely, at an even higher, rate ; the present method of financing rearmament by borrowing can be continued only at the cost both of throwing an intolerable burden of debt on to the shoulders of the next genera- tion and of leaving private incomes to compete with the Government for the goods and services that are needed. At the least a deliberate restriction of all luxury expendi- ture should be imposed in wartime, and the most effective weapon for achieving that end is direct taxation, which, for incomes in excess of £5,000 a year, might approach too per cent. Further, high as income-tax already is, in time of war it would be possible to raise it considerably higher without fear of the consequences which would occur if the same steps were to be taken in time of peace. So far as the Prime Minister is justified in believing that we no longer live under peace condi- tions—and by this belief he justified the introduction of conscription—a considerable increase in income-tax is also justified at the present time, or at least as soon as rearmament has advanced so far that a condition of full employment has been reached. It is by such measures alone that the demand for a " conscription of wealth " can be satisfied ; and it will be seen that, vague as the phrase is, it points towards measures which in fact are necessary for the efficient financing of a war economy. Whether such measures will have to be applied will depend largely on the events of the next few months ; but the country would feel more confident if it knew that, in case of need, the Government was ready at once to organise its wealth to the best possible advantage.
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