Taxing problem of rising debt

Britain National Debt rose from £650m at the start of the war to around £7 billion by the autumn of 1918.

Borrowing to finance the conflict led to the increase and the financial burden was likely to shape the lives of a generation, the Observer said.

Even the repayment to Britain of almost £2 billion loaned to Allies and Dominions was unlikely to reduce the borrowings total.

Nearly £600 million of the £2billion total was owed by Russia.

It was the paper’s view that the only way of wiping out the debt within the lifetime of a generation was to “produce more, consume less and export more”.

New sources of revenue would have to be found to replace the Excess Profits Duty due to end with the war.

The Observer was sceptical about the money-making potential of a tax of luxuries which had just been mooted.

“All inordinate expenditure on dress, pleasure and personal indulgence, is so much wasted national energy and what the Luxury Tax would check in this way would be so much gained,” the paper added.

“Its one objection is that it would be costly and troublesome to collect.

“The criticism that it would make for shoddiness will not bear examination because a scheme that will not tax boots below the price of 35 or 40 shillings, suits below £7 and seven shillings and £8 and eight shillings and most other things on the same level is not open to the charge.”

The Observer said the Luxury Tax was a workable and a sound financial measure in accordance with the “modern principle” of taxing people based on ability to pay.