THE PROPOSED NAVAL LOAN. T HERE is evidently a movement within
the Liberal Party (and we dare say that it even represents the thoughts of the Cabinet) to meet the inevitable increase in naval expenditure by a Loan. The proposal was set forth in the leading article of the Westminster Gazette last Saturday, and probably we are not far wrong in taking that article to be " inspired." Writing of the harassing competition in shipbuilding between Britain and Germany—a competition which is never absent from the thoughts of statesmen and which clouds the whole atmo- sphere of European life—the Westminster Gazette says :- " It seems to us time to consider whether next year we should not wind up the whole affair by one programme, financed, if need be, by a Loan, which will save us at least from the annual recurrence of this controversy for the subsequent three years. We know the objections to a Loan—the wastefulness and even the absurdity of raising debt with one hand while we are paying it off with the other—nor do we forget the perfectly valid pleas which have been entered against rigid programmes. But political considerations enter into this matter which may outweigh these objections." After discussing the " political con- siderations," the Westminster Gazette continues :—" The Loan which we are contemplating would not necessarily relieve the Government from financing the four-years' programme out of the revenue of the four years ; but it would, we hope, put an end to a mischievous and possibly dangerous controversy, and make clear to all parties what, if the situation remains unchanged on the other side, will be our course of action during the period covered." Such, in brief, is the proposal before the Liberal Party. Is it likely to be adopted ? When a scheme is not laid in a final, or even considered, form before the country, but is allowed to emerge apparently by accident, and to develop tentatively, it is obvious that its authors, be they official or unofficial persons, are anxious to take the opinion of the country before going very far. In this case much will depend on public opinion. Of course, the adoption of all policies which involve much expenditure depends upon public opinion, but this is in a very special sense true of expenditure on the two great Services. Let us, then, make our contribution to a discussion, of which we fully recognise the importance.
We can say at once that, in our opinion, there is distinctly more to be said for than against the policy of a Loan, if only the Loan be properly employed and safe. guarded. Our readers, who are accustomed to our extreme disapproval of all suggestions for abandoning the sound, simple, and wholesome plan of paying our bills year by year by means of direct taxation, will naturally ask what can possibly have induced us to be untrue to our principle in this case. There is a reason, and a very good reason. Since the primary fact in foreign affairs is the notorious competition between the Navies of Britain and Germany, the statements of naval policy issued at brief intervals in each country are the occasion of dangerous outbreaks of mutual mistrust, if not of loud recrimina- tion. We need not impute much more blame to the Press of Germany than we accept on behalf of our own. The truth is that the seeds of provocation are embedded in the very conditions of the naval competition. Every year each country hopes that before the next year it will have wearied its opponent, and when it finds that the other side is ready to continue witl, as much zest as ever the game of " capping navies " (to borrow a happy phrase from the Manchester Guardian) its auger is only the measure of its disappointment. Any country which enters upon this game may find itself forced by the expenditure of comparatively small annual sums into an ultimate increase which is positively back-breaking, and was never dreamed of at the beginning. It would be
a real emollient, even if it were not a solution of the whole question, to substitute for the annual provocations a clear advertisement, as it were, of our policy for several years ahead. That would be all on the side of candour. It would remove the naval question from the list of disputed to that of settled things. The annual Estimates would no longer be the signal for Leagues, and retired Admirals, to flog public apprehension up to the point where a certain disbursement is admitted to be necessary, incidentally flogging other countries into the performance of similar prodigies of self-sacrifice. When the issue is faced, the resolution of the British people to maintain their naval supremacy is always so unwavering that we might just as well make a full declaration of our meaning without any of the appearances of hesitation or of weakening which belong to it under the present conditions. How can our meaning be made perfectly clear to our competitors ? We can think of only two ways. One is that which we recommended in our issue of July 18th,—a sudden spurt in shipbuilding such as would indicate to others that it is entirely useless for them to try to " cap " us, because we mean to keep up a Navy that will guarantee our security, be the cost what it may. That is the policy of paying a large sum down in order to purchase cheaper times in the future. The second plan, which is that of a Loan, was advocated by us fourteen years ago in our issue of January 20th, 1894, and the arguments we used then are substantially those which we understand are weighing with the Liberal Party now, and which we may repeat here, as we have nothing to add and nothing to retract.
In 1894 our rivals were France and Russia, and it was to them that we wished to advertise our plain intentions by providing in advance for a large shipbuilding pro- gramme. Most happily other circumstances brought about a relief of the tension, but not before we had fallen more than once into the utmost peril of war with one of our competitors. We would not willingly ever come so near to war with Germany as we did with France; and we are convinced, as we have said, that the removal of a prove- eative question from the field of continual dispute, at all events for a few years, would be a real aid to peace. Our friendship with France and Russia to-day, indeed, bears out our contention ; naval rivalry with them is at an end, and the old ever-present danger of war has dis- appeared with it. Our competition with Germany now reproduces exactly the conditions which were in our mind when we wrote in 1894. " Our supremacy," we said, "is not endangered by any decay in our own Navy, but simply and solely by the manner in which France and Russia are increasing their fleets. What is happening to us is what happens in business every day. We are being subjected to very close and fierce competition." We then went on to try to discover " some way for choking off the competi- tion of our neighbours." We argued against continuing along the old lines of small annual increases in these words :- " If we are content with spending an extra two or three millions this year, France and Russia together will next year spend an extra four, cheered by the belief that if they can only hold on a year or two more they will wear us out, and force us to abandon the attempt to maintain a Fleet stronger than that of any two Powers. No doubt we shall not abandon that attempt, even if we decide to raise our naval expenditure by annual driblets in competition with France and Russia; but that does not matter, if France and Russia do not believe in our dogged- ness. Their want of belief in our willingness to go on perpetually, `seeing their million and going a million better,' may tempt them
to commit themselves to an expenditure from which they would otherwise recoil. If, then, their competition is to be got rid of, it must be by showing them at the outset that, cost what it will, we mean to keep the supremacy of the sea. If, then, we resolve to spend a very large sum—say, some 486,000,000—At once and 'at one go,' and make arrangements so to do, we are far more likely to keep well ahead of France and Russia, than if we spend that sum, or a greater, in driblets. France and Russia, primarily, want their money for their land forces, and would never agree to devote £26,000,000 all at once to shipbuilding. It is quite possible, however, that in the excitement of bids of two or three millions at a time, they might work themselves up to that sum."
Taking the sum of £26,000,000 as the basis of our argu- ment, we then discussed how it could be raised :-
"If a sum of only £3,000,000 is asked for, the Chancellor of the Exchequer will have to raise the money during the year by increased taxation. If, however, a sum of £26,000,000 is taken, the money mast be raised by loan. But A62e,000,000 at 3 per cont.—we say 8, Mstead of 21 per coat., in order to provide for a sinking-fund—would only bis £780,000 a year, a sum which could he placed in the Budge# withent *fur very great embarrassment. We admit that, under ordinary cir- cumstances, it would be most unwise to add to the National Debt, but the present conditions in Europe give plenty of excuse for exceptional action. If by adding .826,000,000 to the National Debt for some thirty years we can put a stop to the competition of France and Russia in the matter of shipbuilding, and so can Secure ourselves from the risk of attack, can, in fact, effect an insurance against the risks of the next ten years—.e26,000,000 spent on the Navy, if augmented each year by the normal naval expenditure, would not be exhausted before 1904—we should have amply justified an increase of the national indebtedness. 'Do not run into debt' is a sound rule for nations; but preserve yourself from the risk of attack' is a sounder."
Lest anyone should say that fourteen years ago we approached the possibility of a financial expedient, un- doubtedly undesirable in itself, with less misgiving than we have often displayed lately in our criticisms of the Government, we give the concluding words of the article from which we have been quoting :- "When it is a question of national existence, the plan of making the economic point of view the most important is absurd. You must save the State before you save its money. We speak thus with no light heart. We are fully aware that the disease of extravagance is one to which Democracies are specially liable, and we do not fail to realise that every pound collected in taxa- tion and spent by Government is withdrawn from useful work, and tends to decrease the wealth of the nation. We do not then love naval expenditure for itself. All such considerations are, however, overborne by the plain need for a stronger Navy with which the nation is confronted. When it is a choice of evils, we must choose the lesser. flat who can doubt that more taxation is an infinitely less evil than a Fleet too weak to maintain our supremacy ?'
If the Government should, after consideration, adopt the policy of a Loan, not because it has any financial merits, but because it involves a frank showing of their hand, we, for our part, should say that they were justified. Iu 1894 we remarked : " The conditions of Europe give plenty of excuse for exceptional action." We say the same to-day. You must save the State before you save its money. To the "conditions of Europe" we cannot help adding as another reason for supporting the policy of a Loan the conditions of the Government's finance. We fear that if the Government do not raise a. loan for the Navy, there is little chance of their doing what is urgently required in any other way. We need only add that we have been careful throughout to approve in the circum, stances of the policy of a Loan,—not of any particular scheme for a Loan, Indeed, there is no definite scheme before the country. Somebody is " flying a kite " • that is all. We should want to see a specific proposal before we could express an opinion on it. The frame of mind in which the Government ought to apply themselves to the raising of a Loan would be that of recognising that a Loan policy is a large and responsible policy,—conceived partly for the good of the Navy and partly as a peculiar means of showing our hand frankly to our rivals. It must not be thought of as serving any other purpose. We could have nothing to say to it if it were used to enable the Chancellor of the Exchequer to tide over his financial difficulties,—if it were used simply to relieve the pressure of a particularly bad financial year. And, of course, the Loan would have to be made respectable by the attachment of a sinking-fund.
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