a claim for compensation “for all damage done to the civilian population of the Allies and to their property by the aggression of Germany by land, by sea, and from the air."[1] This is letting Germany off lightly; but, after stating their readiness to make peace on the basis of the fourteen points, if amended as above (and also with regard to the Freedom of the Seas question) it is not possible for the European Allies, as the Prime Minister’s late manifesto says they propose to do[2] to expand this claim for civilian damage into a demand for the whole of their war cost up to the limit of the capacity of the Central Powers to pay, without a serious breach of faith.  So that the question of how much we can get out of Germany is complicated by the further uncertainty of the size of the bill for damages that we can present.  It will be big enough.  We know that the Germans have sunk 8-1/2 million tons of British ships during the war.  As to the price at which, for “restoration” purposes, we shall value those ships and their cargoes, and all the civilian property damaged by aircraft and bombardment, this is a matter which it would be obviously improper to discuss; but we may be sure that the bill will mount up to many hundreds of millions, and it remains to be seen whether, after Belgium and France have presented their account, it will be possible for us to secure payment even for all the civilian damage that we have suffered.

[Footnote 1:  Times, November 7, 1918.]

[Footnote 2:  Times, December 6, 1918.]

It thus appears that the net cost of the fighting period has been somewhere in the neighbourhood of L5500 millions, taking our loans to Allies at half their face value; and that the armistice and demobilisation period is likely to cost another L1000 to L1500 millions more, to say nothing of pensions and debt charge that will go on for years (unless the supporters of Levy on Capital have their way and wipe the debt out), and that against this further expenditure we can set whatever sum is recovered from Germany.

Seeing that our total pre-war debt was L710-1/2 millions, or, omitting what the Government returns call the Other Capital Liabilities, L653-1/2 millions, these figures of war debt and war cost are at first sight somewhat appalling.  But there is no reason why they should terrify us, and there are several reasons why they are, when looked at with a discriminating eye, much less frightening than when we first set them out.

In the first place, we have always to remember that these figures are in after-war pounds, and that the after-war pound is, thanks to the profligate use by our war Governments of the printing-press and the banking machine, just about half the size, when measured in actual buying power, of the pre-war pound.  Any one who pays L100 in taxes to-day thereby surrenders claims to about the same amount of goods and service as he did if he paid L50 in taxes before the war.  So that in making any comparison between the position now and the position then we have to divide the figures of to-day by two.