Rearmament Finance It was inevitable that the Defence Estimates, of
£580,000,000, in Sir John Simon's Budget would be exceeded in the course of the financial year ; but the Supplementary Estimates of Liso,000,000 have surpassed expectations. They bring the Defence Bill for the year to the staggering total of £730,000,000, total expenditure to £1,429,000,000 and the prospective deficit to nearly £500,000,000. The deficit will be covered by borrowing, and will thus, on the usual estimate, absorb almost the whole of the nation's annual savings ; an inflationary situa- tion therefore appears inevitable, with a considerable rise in the cost of living. If inflation is to be kept in check, an increase in income-tax will next year be unavoidable. The present method of financing rearmament can only be justified as a temporary means to meet an exceptional emer- gency and by the hope that next year a diminution in the tempo of rearmament may be possible. Such optimism seems excessive at the present moment ; and the Govern- ment would therefore be well advised to adopt new methods of financing rearmament calculated to distribute the further sacrifices which will be asked of the nation as equitably as possible.
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