The Sun MONDAY, NOVEMBER 16, 1914. A PROBLEM IN FINANCE.

Sun (Christchurch), Volume I, Issue 242, 16 November 1914, Page 6

The Sun MONDAY, NOVEMBER 16, 1914. A PROBLEM IN FINANCE.

Mr James Allen and Sir Joseph Ward are in agreement on one point, at any rate, and it is that a war tax should be avoided for the present; It would be unkind to suggest that the proximity of the elections has any bearing on this unanimity on. the part of men who differ on most things, but the circumstance . strengthens our disagreement with both. The temptation to avoid increased, taxation as long as we can go on borrowing is natural enough, but even if the Government gets over the financial' hurdle immediately in : front of it, and, with ths assistance of .the Imperial Government, raises 1 the money: necessary to. redeem maturing loans, what of thei immediate future ? Tha war expenditure in England has already reached the tremendous total of about three hundred millions. This is equiv'a-* lent to the ordinary, surplus of loanable,: capital which . accumulates annually, under normal conditions and becomes available for foreign investment. ; The; continuance of the war for another six months "will not only absorb all the Mother Country's surplus income, but will make inroads onher ,eapital,- with the result that needy colonial Ministers of Finance will, be able to get very little money, and then only at prohibitive rates. Meanwhile the Government is contemplating a continuance of expenditure oh.the old scale. As there; are only two sources of revenue, open—taxation and loans, it is clear that when the Minister comes' to make -provision for the next financial year, he will haye to .tap, .fresh.^sources of revenue orl. ejtfpf - ?In land, we tlvfevjincome tax -,is> about to.be raised to the figure of 2/6- in the 1 £l. Before the war it was * ne :' exemption being £1(60, as compared with £3OO in New j Zealand. What the people of thfl Dominion would say to a half-crown income- tax, with a reduction in the exemption to £l6O, remains to be discovered, but it would have the effect, at any. rate, of helping them to understand what the war involved. It. would also cause a prompt disappearance ofa lot of. the*'apathy that many people [ display towards politics and the management of public affairs. We trust it will not be necessary to adopt any such heroic step, but nothing is to be gained by disguising, the real position. The Dominion is still in a very undeveloped state, and requires a big expenditure on railways and other public works. . Its development, hitherto, has been facilitated by the inflow of capital for the establishment of industries or for permanent improvements of the land. There was no reason why much j of this necessary capital could not have been accumulated in the country and re-invested in New Zealand securities, bu't it was easy to get cheap money abroad, and once the borrowing habit became confirmed, it begot extravagance in public and private life, with the result that the. people of New Zealand consume most of their own earnings and rely on the foreigner to provide them with capital for develop 1 oient purposes. Proof of this state of affairs is to be found in the narrow margin .of exports over imports, ..the. condition of our manufacturing, industries, the high standard of living, the expenditure on luxuries, and finally by the fact that £280,000 was put through the totalisator in Christchurch in Carnival Week. The position, therefore, amounts.to this: The supply of foreign capital being about to be turned off at the meter, development works in New Zealand are going to depend very largely on the energy, the self-reliance, and the economy of the people themselves. The Advances Departments have been living mainly on their own fat for the past two years. This is shown by the relationship of the repayments to fresh advances, and they can continue to do so';with advantage to the country, but the money for new railways must be found mainly out of surplus revenue, or be obtained from the Savings Bank, or otherwise borrowed within the Dominion. When the distractions of the election are over, the Government should take the people in their confidence and tell them what they are going to do about it.