for Gibraltar 'ought to be studied carefully beforehand,' those of the izquierda fractions generally approve, at least in private conversation, the project emanating from General Primo de Rivera.

At the same time, it would be dangerous to regard this attitude of reserve on the part of the politicians as a sign of indifference. The Germans, in their propaganda, have derived so much profit from the question of Gibraltar, that the silence of political parties cannot be construed as a proof that Spain has forgotten the matter. The absence of declarations, and the fact that, since General Lopez Dominguez's protests in the Senate prior to 1883, the question has not been taken up again in the Cortes, are rather to be ascribed to the chaotic state of Spanish politics, and to the fact that other issues, of more immediate importance, absorb the Spanish mind.

In the first place, Catalonia, that ever-discontented and disturbed province, is claiming home-rule more energetically than ever since the restoration of the Monarchy. The Cabinet of Señor Garcia Prieto, in which Señor Rodes, a Catalonian Republican, and Señor Ventosa, a staunch Catalonian home-ruler, held the portfolios of Public Instruction and Finance, was but a temporary compromise, designed to appease the Catalonians, and especially their leader Señor Cambó, who talks without ceasing of the rightful claims of Catalonia. Next, there is the doubtful attitude of the Army, and the fear of indiscipline in its ranks. Lastly, the war has led, as elsewhere, to an immense rise of prices, and thrown the country into grievous straits. The cost of living is beyond the resources of the great majority; and the poverty-stricken population is on the verge of famine. The Government, owing to lack of coal, is unable to ensure an efficient railway communication between the provinces; the output of the Spanish coal-mines, scanty and poor in quality as it is, cannot be conveyed and distributed throughout the country; and the German submarines wage a pitiless war on the seaborne commerce of Spain.

Thus, when, in accordance with the decision of the Government quoted above, the General Election took place, early this year, there was room for anxiety, especially in the Conservative party. Nevertheless, the

critical occasion passed without disturbance. The elections were, on the whole, favourable to the Monarchy. but not to the Cabinet of Señor Garcia Prieto. The Germanophiles triumphed in many districts. Señor Lerroux was defeated in Madrid and Barcelona, while Señor Alvarez and other prominent friends of the Allies were beaten in their own provinces. In spite of these rebuffs, the Cortes are-what Spain in general isneutral; for Señor Dato, a neutral with romantic feelings for France and England, is followed by over one hundred deputies, and, with the aid of other groups of similar tendencies, is in a position to control the House.

The Cabinet crisis of last March threw everything for a time into confusion. It had, however, nothing to do with the international question, but arose from a personal quarrel between two political enemies in the Ministry. No political party having a majority in the Cortes, the King formed a mixed Cabinet, presided over by Señor Maura, in which all important sections are represented. It contains such influential men as Señor Dato, the Conde de Romanones, Señor Garcia Prieto, Señor Cambó and others. So long as it holds together, internal tranquillity appears to be ensured; and meanwhile the international attitude of Spain is unchanged. There are no signs that her determined adhesion to neutrality in the world-conflict will be abandoned for a more active policy. In these circumstances, the question of Gibraltar sleeps.

JOSÉ DE ARMAS.

Art. 12.-BRITISH FINANCE DURING AND AFTER THE

WAR.

In order to obtain a correct view of our War Finance it is necessary to review briefly the economic history of the past four years. In the first place it should be borne in mind that during the forty-four years of intensive economic development which preceded the outbreak of war, Great Britain, in common with the other leading industrial States of the world, had been accumulating immense reserves of economic strength. Our merchant fleet amounted to over 20 million tons gross, only about one-half of that tonnage being employed in the carrying trade of the United Kingdom. The national wealth of the United Kingdom was about 16,500. millions, and the annual national income 21407. millions.* The national wealth of the Overseas Dominions and Possessions was about 9500l. millions and the national income approximately 13501. millions,† making the total wealth of the Empire 26,000l. millions and the total income 34901. millions. The United Kingdom's share of the international trade of the world was 15.9 per cent., and the share of the Overseas Dominions and Possessions was 12.7 per cent., so that the British Empire transacted 28.6 per cent., or nearly three-tenths of the trade of the whole world. The steam-power equipment of our industries amounted to over 10,755,000 horse-power, and our output of coal was 280 million tons per annum. Our investments abroad were valued at 4000l. millions, and brought us an annual income of 2007. millions.

The Empire, therefore, entered upon the war with almost immeasurable reserves of economic power; but, owing to our neglect of the problem of financial preparation for war and the contempt of our people and politicians for statistics, these vast resources were utterly unorganised. The task before our Government and the nation was, first, to survey and organise the national resources; secondly, to enrol and equip an army on the Continental standard; thirdly, to transform the entire

Economic Relations of the British and German Empires,' Journal of the Royal Statistical Society, July 1914.

Imperial Defence and Finance,' Nineteenth Century,' August 1913.

fabric of our economic life, with all its international complexities and ramifications, from peace production to war production; fourthly, to increase the output of commodities on the new basis necessitated by the war; and, fifthly, to convert the resources accumulated through three centuries of commercial intercourse with the world into war munitions or war services.

Before the war, out of a total national income of 21507. millions, only 771. millions, or 3.5 per cent., were allocated for the purposes of the Army and Navy. By the end of the third year of war it had become necessary to allocate for the purposes of the war 27001. millions. As a matter of fact, part of this amount was borrowed abroad; but the United Kingdom in 1917 provided about 18007. millions, or, say, 50 per cent. of the increased national income, for the purpose of carrying on the war.

Notwithstanding the withdrawal of over five millions of men for naval and military service, the production of the country appears to have been not only maintained but increased. Dr Addison stated on June 28, 1917, that before the war the output of steel in this country had been more or less stationary at a little over 7 million tons per annum. The output then (June 1917) was about 10 million tons, and he would be disappointed if they had not reached a 12-million ton output by the end of 1918. With regard to coal, the production appears to have been well maintained. The total output in 1916 was 256,375,000 tons, as compared with 253,206,000 tons in 1915. The returns as to electricity show an increase of 528 million units or 68.6 per cent. All these facts point to the same conclusion, namely, that since August 1914 there has been an increase in the production of the United Kingdom; and I am convinced that during the war our power of production has increased by 30 per cent.

The problem of financing the war was naturally the most formidable of the economic tasks which had to be undertaken by the Government. Our war expenditure began at an average of 1,000,000l. per day. As the Army grew and the scope of our activities steadily widened, and the prices of commodities and foodstuffs advanced, the war expenditure rapidly increased. From August 1914, to March 31, 1915, it averaged 2,050,8647. per day;

for the year to March 31, 1916, 4,271,6667.; for the year to March 31, 1917, 6,022,2221.; for the year to March 31, 1918, 7,387,000l.

The first war budget was introduced by Mr Lloyd George on Nov. 17, 1914. Its main features were the doubling of the income tax and super-tax, an additional d. on the half-pint of beer and 3d. per lb. on tea. The second war budget, presented on May 4, 1915, contained no new taxation proposals. The expenditure for the year 1914-15 amounted to 560,474,000l., and the revenue to 226,694,000l. (189,305,000l. from taxes and 37,389,000/. from non-tax revenue), leaving a deficiency of 333,780,000. The third war budget was presented by Mr McKenna on Sept. 21, 1915. Under this budget 40 per cent. was added to the existing rates of income tax, and certain alterations were made in the exemption and abatement limits. The super-tax was raised, the Excess Profits Duty was instituted, and the duties on many imported articles were largely increased. The fourth War Budget, introduced on April 4, 1916, provided for a graduated increase of the Income Tax, making the maximum rate 5s. in the £. The duties on sugar, cocoa, coffee and chicory were appreciably advanced, while new taxes were levied on matches and table waters. The expenditure for the year to March 31, 1916, amounted to 1,559,158,000l., and the revenue to 336,765,000l. (from taxes 290,088,000l., non-tax revenue 46,679,000l.), leaving a deficiency of 1,222,391,000l.

On May 2, 1917, Mr Bonar Law introduced the fifth War Budget, under which the excess profits duty was increased from 60 per cent. to 80 per cent. as from Jan. 1, 1917, and the entertainments tax was substantially increased. The expenditure for the year to March 31, 1917, was 2,198,113,000l. and the revenue 573,428,000l. (from taxes 514,105,000l., non-tax revenue 59,323,000), leaving a deficiency of 1,624,685,000l. The sixth War Budget was introduced by Mr Bonar Law on April 22, 1918. The total expenditure for the year to March 31, 1918, was 2,696,221,000l., including 505,000,000l. for advances to the Dominions and our Allies, leaving a net expenditure of 2,191,221,000l. It is gratifying and significant that our Dominions and India were able to finance so large a proportion of their own expenditure. The