Mr. Keynes on Treasury Borrowing In two articles in The
Times this week Mr. Keynes returns to the problem of Treasury borrowing to finance rearmament, and especially to the importance of maintaining a low rate of interest. He points out that at 3 per cent. with per cent. sinking fund £2,000,000,000 can be borrowed, at 4 per cent. with the same sinking fund £1,500,000,000, at the same cost to the nation. This alone is an impressive argument, but Mr. Keynes emphasises also the need to pre- vent injury to the capital market and to normal investment when the present crisis is over. He enumerates various reasons why the laisser faire principle of maintaining a high interest-rate to discourage other borrowers should be dis- carded, and shows that, of six classes of competitors for capital, four (public utilities, building societies, transport, local authorities) can be directly controlled, the fifth (ship- building) is being encouraged and the sixth (heavy and engineering industries) is an integral part of the Govern- ment's programme. As a means to discouraging competition for men and materials, he advocates high taxation rather than a high rate of interest. No doubt Mr. Keynes' views will receive the serious attention they deserve from the Treasury—especially this: "The key to sound public finance in the present emergency is a rigid refusal to fund short-term debt at high interest-rates and a stern stiffening of taxation when we have reached the full employment of our productive forces."
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