For the pre-war Treasury, debt repayment in time of peace had been an unquestioned policy. Only thus could taxes be reduced in peacetime and, it was thought, damage to government credit minimised in wartime. This assumption was not far from the surface when, in June 1925, Niemeyer described the goals of the Treasury’s financial policy since the Armistice to have been to balance the budget out of revenue, to reduce the Debt and to cut public expenditure, so remitting taxation.1 As so often, he was simplifying to make a case. Since the Armistice, the Debt’s size and structure had been a monetary, budgetary and, above all, a political question. In the immediate aftermath of the war, a large floating debt had hampered the disciplining of the boom. Advised that funding would be impossible, a Conservative Chancellor raised taxes to help repay floating debt and came near to imposing a radical solution, a levy on wealth accumulated during the war. A conservative fiscal policy-high taxes, controlled expenditure and revenue surpluses-helped set the tone for refinancing or converting the constant stream of maturities, a threat to monetary control if they ran off into cash, and to the budget if they were refinanced clumsily. A sinking fund, the Treasury advised, was a pre-condition for a reduction in debt costs. It was a ‘good thing to redeem your debt,’ Niemeyer told the Colwyn Committee, but it was not the main purpose of a sinking fund, which was to improve ‘our credit’ and ‘enable us to deal on more favourable terms with the opportunity’ that the heavy maturities presented.2 The great prize, and the most immediate incentive for Chancellors to keep to virtuous paths, was the prospect of converting 5 per cent War Loan. Other arguments were used-repayments would not be spent by recipients, but passed straight through as increased finance for industry, financial

preparations had to be made in case of another war-but prospective budgetary savings were always at the forefront.