or less than five years after the battle of Waterloo, that the Government of the day took the first step towards resuming gold payments. The Bank of England then began paying notes in gold bullion (not coin) at the price of 41. 18. of notes for every ounce of gold, with a minimum quantity of 60 ounces. As from October 1, 1820, the price was reduced to 3l. 19s. 6d., and as from May 1, 1821, to the Mint price of 31. 17s. 10d., which meant that as from that date Bank notes were exchangeable pound for pound into gold bullion in amounts of not less than 60 ounces. In 1925, no premium was to be paid for gold, but the minimum was larger, and no coin payments were obligatory, only bullion payments. The Napoleonic programme provided for unrestricted convertibility to be resumed between May 1, 1823, and May 1, 1824. There was, however, no great demand for gold, and early in 1821 an Act was passed permitting the Bank to resume specie payments in full, without restriction of any kind, on May 1, 1821, instead of in 1823. On the present occasion, it was not possible to fix a definite period in which convertibility of the note issue should be resumed, as the gold reserve amounted to only 153,000,000l., against a total note issue of about 400,000,000l. Mr. Churchill referred to the fact that Germany, Austria, and Hungary had re-linked their currencies to gold by a process of devaluation, that Sweden returned to the gold standard at pre-war parity in 1924 with no ill effects, and that Australia, New Zealand, Holland, and the Dutch East Indies were simultaneously adopting the British policy, while South Africa would return to gold payments on July 1. At first there was a withdrawal of gold from England, but that was quickly followed by an influx which, by August, had reached a total of 8,782,000l. It was then decided to reduce the Bank rate from 5 to 4 per cent.; gold flowed out, but not rapidly, and as the discount rate was weak, a further reduction to 4 per cent. was made in October. Thence . onwards until December, when the Bank rate was raised to 5 per cent., the efflux of gold continued, and by the end of the year had reached a total of 20,377,000l., the net efflux since April 29 being 11,595,000l. Great Britain's decision to return to gold produced an excellent impression throughout the world, and enhanced the credit and prestige of this country. Foreigners and Englishmen who had transferred their balances into American dollars re-converted them into sterling, and the sterling bill again replaced the dollar bill as the international medium of commercial payment. There was a remarkable increase in the European demand for English bank acceptances. There was some criticism by commercial people that the return to gold would force down prices to gold world levels, but though this was true the ultimate effect was not harmful but good, since it helped to restore the competitive power of the country in international markets.

Another outstanding event of the year was the issue of the first report of the Agent-General for Reparation Payments, dealing with the first year's working of the Dawes Plan. This scheme provided for the economic reconstruction of Germany so as to permit of a rational settlement of the reparation problem. The report was satisfactory. The first year's

annuity in respect of reparation was paid, amounting to 50,000,000l., but as four-fifths of this amount was provided for by loans raised abroad and only one-fifth was provided out of German resources, it will be seen that it provided no real test of Germany's capacity to make foreign payments without equivalent return. But the indications of payment in the second year were satisfactory; in the first few months of the second annuity period payments were made regularly and in advance of due date. The Budget was balanced, but the working of the Dawes Plan revealed some of the terrible consequences of the previous inflation. The country had been denuded of working capital, and even after borrowing about 150,000,000l. abroad in a year the scarcity of working capital was so marked that the discount rate of the Reichsbank was as high as 9 per cent., and current account credits, the normal form of commercial credit, commanded about 14 per cent. Not until the fourth year, when the German payment rises to about 87,000,000l., will the reparation settlement be put to a real test.

Thanks mainly to the restoration of the gold standard, the course of prices in this country was downward. We reproduce below, as usual, The Times index number of commodity prices since January, 1925, based upon the price of nearly 60 commodities, with the percentage change each month, together with the number in April, 1920 (when the highest point was touched), and at the close of the years 1921, 1922, 1923, and 1924

The actual prices in 1925 and 1924 of the commodities included in the calculations are shown below:

Although commercial failures were again fewer in number, they were heavier in amount. The number of receiving orders made in England was 4,719, a decrease of 115, and the number of deeds of arrangement 2,049, a decrease of 28. But in Ireland 43 more failures occurred and in Scotland 32 more than in 1924. For the United Kingdom as a whole there was a decrease in the number of failures of 68. In England and Wales the total liabilities disclosed were 6,432,7821., against 4,780,6031., and the deficiency in assets was much heavier-namely, 4,266,2291. compared with 2,577,3161. The number of bills of sale registered was 2,423 fewer at 13,910.

The year was a more prosperous one for companies, as shown by the record of industrial profits made by the Economist. The total profits of 1490 companies declared during the year 1925 was 154,993,2231., an increase of 12,381,8141., or 8.7 per cent. Of the total profits, the sum of 91,486,816l. or 59.1 per cent., was distributed in Ordinary dividends, and 29,414,415l., or 19 per cent., in Preference dividends. The total profits were equal to 10.9 per cent. on the total Ordinary and Preference capital combined, against 10-3 per cent. in 1924, 9.8 per cent. in 1923, and 7 per cent. in 1922, and 15-2 per cent. in 1920, the year of the post-armistice boom.

Several events of importance occurred in connexion with national finance. The Budget (introduced by Mr. Winston Churchill, it being his first) made further remissions in taxation, including a reduction of 6d. in the income-tax, bringing the standard rate down to 4s., as compared with 6s. the highest figure reached—a few years previously. Relief to earned income was increased from a deduction of one-tenth to a deduction of onesixth, subject to a maximum allowance of 250l. Reductions in super-tax were made varying from 9d. in the pound on incomes of 2,000l. to 2,500l. to 6d. on incomes from 10,000l. to 15,000l. ; above the last figure no change was made. Increases were made in the death duties varying from 1 per cent. on estates valued at from 12,500l. to 15,000l. to 5 per cent. on estates from 85,000l. to 200,000l., decreasing thereafter to 1 or 2 per cent. on estates up to 1,000,000l.; but no change was made above that total. The McKenna duties on motor cars, musical instruments, clocks and watches, and cinematograph films were reimposed. Duties were imposed for the first time on silk and artificial silk. A new duty was imposed on hops, and increased preferential duties were given on dried fruit, sugar, tobacco, and wine. The estimated revenue for the year 1925-26 was 801,060,000l., and the expenditure at 799,400,000l. (including 50,000,000l. for the Baldwin sinking fund for debt redemption), leaving a hoped for surplus of 1,660,000l. But the granting of a subsidy to the coal industry in the summer upset the Budget estimates, and on December 31 the national accounts showed a deficit of 123,877,7621., against 89,066,8031. on the same date in 1924. Three issues of 3 per cent. Conversion Loan were made during the year: the first in January, for an amount of 59,660,000l., which realised a price of 771. 10s. 11.58d. per cent.; the second in April, for an amount of 30,000,000l., which realised an average price of 761. 16s. 11-82d.; and the third in September, for an amount of 40,000,000l., realising an average price of 761. 6s. 0-402d. per cent. But for

F

these issues the floating debt would have been considerably expanded. As it was, the floating debt was further reduced as follows:

The total of the National Debt on March 31, 1925, was 7,646,000,0007. The Budget for 1925-26 estimated the yield from customs and excise at 239,260,000l. (against an actual receipt of 234,472,000l. in 1924-25); that from income-tax at 262,000,000l., and that from super-tax at 63,300,000l., against actual collections in 1924-25 of 273,836,000l. and 62,680,000l. respectively. The total tax revenue was estimated to be 686,560,000l. (against 689,702,000l. in 1924-25). The National Debt services were estimated to require 305,000,000l. for interest and 50,000,000l. for sinking fund (against an actual 357,161,000l. for both in 1924-25); the total Consolidated Fund services 391,929,000l. (against 393,607,000l. in 1924-25); the Army, 44,500,000l. (against 44,765,000l.); the Navy, 60,500,000!. (against 55,625,000l.); the Air Service, 15,513,000l. (against 14,310,000l.); the Civil Services, 222,609,000l. (against 226,134,000l.); the Inland Revenue Services, 11,391,000l. (against 10,956,000l.); and the Post Office Services, 52,958,000l. (against 50,380,000l.). The net effect of the alterations in taxation on the year's Budget was estimated to cost the Exchequer 24,940,000l., and 31,170,000l. in a full year.

A feature of the Budget of much importance was a big extension of State insurance. Beginning in January, 1926, pensions were to be payable to widows and orphans, and there was announced a reduction in the qualifying age for old age pensions from 70 to 65 in January, 1928, with the abolition of the means test and other disabilities. The State contribution to the new scheme increases from 5,750,000l. in 1926 to 15,000,000. in the eleventh year, and 24,000,000l. in the twentieth year, declining to 21,000,000 in the thirty-fifth year. In the year of grace 2005 the scheme would become, it was estimated, self-supporting. The Chancellor was safe from any political backfire in making this guess. The present capital value of the additional liability of the State under this scheme was put at about 750,000,000l. The Budget year 1924-25 closed with a surplus of 3,659,000l., against an estimate of 4,025,000l. made by Mr. Snowden.

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The report of the London Bankers' Clearing House for 1925 revealed a further expansion in the turnover of money. The grand total of clearings, at 40,437,119,000l., was a new record," an increase of 2.2 per cent. over 1924. April 30, 1925, provided a new "record" for a day's clearings, with a total of 263,255,000l., and the total for January, 1925-3,770,864,000l.— was a new monthly "record.”

The rubber "boom was partly the cause of this expansion in money business; another cause was the removal of the embargo on oversea loans