balance only 36,565,000l. was borrowed on Treasury Bills during the year, the total outstanding being increased by this amount to 1,094,740,000l. But 176,399,700l. against 107,877,500l. was borrowed in the form of Ways and Means advances, making the total outstanding on December 31 last 455,180,7501. Thus the floating debt was increased in 1918 by 212,964,700l. as against only 50,903,500l. in 1917. But approximately 200,000,000l. less was borrowed abroad. The total was 455,160,4821. against 650,476,342/. in 1917.

Mr. Joseph Kitchin, F.S.S., has made a calculation of the gross cost of the war on the basis of the war lasting to the end of July next, i.e., five years. He puts the direct war costs of the Entente countries at 24,845,000,000l. sterling; their pre-war debt at 4,565,000,000l., and their post-war debt at 25,350,000,000l. On a 5 per cent. interest basis the postwar interest charge will be 1,270,000,000l. a year against a pre-war charge of 170,000,000l. The enemy war costs Mr. Kitchin puts at 14,070,000,000%. and their post-war debt at 14,650,000,000l., and the interest charge at 776,000,000l. yearly against 54,000,000l. before the war. These figures give a grand total war cost of 38,915,000,000l., and a post-war debt of 40,000,000,000l. against a pre-war debt of 5,775,000,000l. The annual interest charge will be 2,046,000,000l. against 224,000,000l. before the war. These figures give some idea of the extent to which the belligerents have mortgaged their future wealth. The loss meanwhile of 10,000,000 potential wealth producers adds to the problem of producing such an amount of extra wealth as will enable the burden of war debt to be carried successfully.

The course of monetary events in the past year, as in the previous three years, was entirely determined by war conditions. Government finance was indeed the only influence which affected Lombard Street, and the old causes that used to agitate it, very profoundly sometimes, failed to provoke even the smallest ripple upon its placid surface. Bank Rate remained at 5 per cent. throughout the year, as compared with an average of 51. 38. per cent. in 1917. Thanks to the differentiation made between foreign money and domestic funds, the average rate for three months' bank bills was only 31. 11s. 9d. per cent. against 4l. 16s. 2d. in 1917, and the rate for short loans was 31. 5s. 6d. per cent. against 4l. 88. 3d. per cent. in 1917. As from the beginning of June it was arranged to place the rate of interest allowed on deposits by the banks on the flat basis of 3 per cent. This arrangement, which involved the abolition of competition for deposits among the banks, was come to in order to stimulate sales of National War Bonds by widening the margin between deposits and War Bonds in favour of the latter. As a result of this arrangement the banks' deposit rates averaged 31. 1s. 3d. against 41. per cent. in 1917. It may be of interest to set out for reference purposes the course of monetary rates during the war period :

The rate allowed by the Bank of England to clearing banks for 3-day deposits of their surplus funds was reduced from 4 to 33 per cent. on January 2, and to 3 per cent. on February 14. But the rate allowed by the Bank of England on foreign money remained throughout the year at 4 per cent. This considerable differentiation had the result of materially lowering the rate for Treasury Bills. These were daily on sale, in the form of three and six months' maturities, throughout the year. At first the rate of discount was 4 per cent., but it was reduced to 3 per cent. on February 14. A beginning was made with internal reforms at the Bank of England. Sir Gordon Nairne, the Chief Cashier, was appointed to a newly created office, that of Comptroller, and Sir Charles Addis, a practical banker of marked ability, was elected a Member of the Court, thus breaking the ancient tradition that the Bank of England directorate should not include a banker.

The outstanding feature on the Stock Exchange was the general appreciation of securities, for the first time since the Boer War. During the year the 387 representative securities, included in the Bankers' Magazine calculations, rose in value by 200,000,000l. to 2,801,089,000l. In 1917 there was a net depreciation of 158,000,000l. Since the outbreak

of war these securities show a net depreciation of 571,000,000l. Practically all classes of securities contributed to the improvement, but more especially bank shares, brewery stocks, and industrial and commercial securities. Business was more active than it was in any of the previous war years, and for the first time since August, 1914, some firms made a profit. The happier experience of the Stock Exchange was due to the excellent profits made by practically all classes of companies.

The feature of the country's foreign trade was a huge increase in imports, which reached the unprecedented figure of 1,319,338,5911. This total was 255,173,9137. larger than in 1917, and 370,832,0997. in excess of that for 1916. Exports, however, decreased by 28,606,6817. to 493,478,0657., and re-exports by 38,721,4321. to 30,956,6291. Higher prices accounted

for a large proportion of the increase in imports, as the following figures taken from the Economist's index number shows:

This advance in prices of commodities is to be attributed to the increase in purchasing power that was in the hands of the public as represented by Currency Notes and Bank of England Notes, the amounts of which increased as follows:

The amount of cheques which passed through the London Bankers' Clearing House reached the record total of 21,197,512,000l., an increase on 1917 of 2,076,316,000l. The influence mainly responsible for the increases in the cheque clearing and the paper currency were heavy Government borrowing and disbursements, and this influence was more pronounced in 1918 than in 1917.

The movement towards the creation of larger industrial and business units gathered considerable momentum in 1918. Experience during the war has taught manufacturers the advantages to be obtained from large scale working in the direction of lower production costs, higher efficiency of labour and machinery, and consequent increased production. One of the most important of the amalgamations effected was the merging of about thirty explosive manufacturing concerns into one great organisation, called Explosive Trades Ltd., with a capital of 18,000,000l. Various combinations were also effected in the engineering, iron, steel, electrical, and textile industries. The formation of these large industrial units resulted in a greater concentration of banking units. Following the fusion of the London and South-Western Bank and London and Provincial Bank, Barclays in July arranged to absorb the combined institution, and in the same month Lloyds Bank absorbed the Capital and Counties Bank and acquired control of the National Bank of Scotland, and the London and River Plate Bank. The London City and Midland Bank acquired the London Joint Stock Bank, and the London County and Westminster absorbed Parr's Bank, and the Nottingham and Nottinghamshire Bank, while the National Provincial Bank took over the Bradford District Bank and Biggerstaff's banking house. An amalgamation was also effected of Martin's Bank and the Bank of Liverpool. The rapidity with which these banking combinations took place provoked considerable adverse comment, and a Committee of Inquiry was appointed to investigate the case for and against banking fusions. As the result of this Committee's recommendations the Government decided that Treasury permission should be first obtained before any further

amalgamations were carried out. An Advisory Committee was set up for the purpose of advising the Treasury on bank fusion schemes, and one scheme at least was dropped owing to Treasury opposition. Another important development of the year was the drawing up of a scheme for reviving, in accordance with modern ideas and practice, the commercial side of the activities of the old Levant Company, which in the sixteenth and seventeenth centuries was the head and front of British influence in the Near East. A parent Levant Company was formed with a capital of 1,000,000l., together with a number of subsidiary companies. The former acquired control of various local enterprises, including the National Bank of Turkey. The scheme was the most important enterprise undertaken by the British Trade Corporation since its formation in 1917.

Shipbuilding statistics for the period of the war are now fairly complete. They show that the work of the period was low as compared with that of the years immediately preceding the war, and if naval work is included it does not inflate the tonnage figures to anything like the extent that would have resulted from the same amount of work concentrated on merchant ships. Including naval work, the Clyde output in 1918 was nearly 556,000 tons, which is the highest total for any of the five war years, but 200,000 tons less than in 1913. The total number of vessels built in 1918 in the United Kingdom was 1,245, having a tonnage of 1,876,411, and engines of 4,349,306 i.h.p. The standard cargo ships programme of the Ministry of Shipping was introduced too late for its full benefit to be secured during the war, for the great deal of organisation and work of adaptation which shipbuilders had to effect in order to build vessels from common designs, common drawings, and from materials in standard sizes from common sources of supply, was scarcely completed before hostilities ceased. In all probability the organisation which Lord Pirrie set up would very soon have begun to result in a largely increased output. The naval shipbuilding record of the Clyde for the past five years is a wonderful tribute to its work in maintaining British naval supremacy without which the war could not have been won. The various yards produced 481 vessels of 770,347 tons, of 6,093,830 i.h.p. Many new records were made-and broken-in the English yards, and large new steel shipyards were built by private firms as well as by the State. Concrete shipyards were started at Amble, Sunderland, and Thornaby-on-Tees, and a feature of work on the Thames was the establishment of yards for the construction of concrete ships up to 3,000 tons apiece. The British mercantile marine may have a difficult time ahead of it, but its achievements in the past, and particularly in the war period, leave no doubt of its capacity to overcome the tasks which lie ahead of it.

F

PUBLIC DOCUMENTS.

SUMMARY OF THE REPORT ON INDIAN CONSTITUTIONAL REFORMS, SIGNED BY THE VICEROY AND SECRETARY OF STATE. (PUBLISHED JULY 6.)

A SHORT introduction, describing briefly the work performed by Mr. Montagu's Mission whilst in India, closes on a grave and serious note indicating the spirit in which the solution of a great problem has been sought.

"We do not suppose that any words of ours are needed to express our sense of the gravity of the task which we have attempted. The welfare and happiness of hundreds of millions of people are in issue. We have been called upon to revise a system of government which has been constructed by builders who, like ourselves, had no models before them, during a century and a half of steadfast purpose and honourable aim; a system which has won the admiration of critical observers from many lands, and to which other nations that found themselves called upon to undertake a similar task of restoring order and good government in disturbed countries have always turned for inspiration and guidance. England may be proud of her record in India. She should have even greater reason for pride in it in future. Because the work already done has called forth in India a new life, we must found her government on the co-operation of her people, and make such changes in the existing order as will meet the needs of the more spacious days to come, not ignoring the difficulties, nor under-estimating the risks, but going forward with good courage in the faith that, because our purpose is right, it will be furthered by all that is best in the people of all races in India. But the fact that we are looking to the future does not mean that we are unmindful of the past. The existing edifice of government in India is a monument to the courage, patience, and high purpose of those who have devised and worked it, to which, before we set about explaining our own proposals, it is fitting that we pay our imperfect tribute."

Part I. of the Report, headed "The Material," begins appropriately by reciting the pronouncement of August 20, "the most momentous utterance ever made in India's chequered history," for "it marks the end of one epoch and the beginning of a new one." Throughout the epoch which is now ending " we have ruled India by a system of absolute Government, but have given her people an increasing share in the administration of the country and increasing opportunities of influencing and criticising the Government." The development during recent years of the political situation which led to the pronouncement is rapidly surveyed; the disappointment that followed the practical application of the