The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News and The Echo and The Sun WEDNESDAY, AUGUST 5, 1936. A MODERATE BUDGET.

Auckland Star, Volume LXVII, Issue 184, 5 August 1936, Page 6

The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News and The Echo and The Sun

WEDNESDAY, AUGUST 5, 1936. A MODERATE BUDGET.

For the cause that lack." assistance, For the wrong that needs resistance, For the future in the distance, And the good that tee can do.

In .the Labour Government's first Budget is to be found little to justify the hysterical fears that some had entertained concerning it, and it also falls short of the hopes of some of the Government's extreme supporters. The document which Mr. Nash read to an expectant and slightly apprehensive people furnished unmistakable evidence that this Government means at present to keep to the middle of the road. In financial methods Mr. Nash—despite the undoubted temptation and pressure to embark on spectacular and dangerous experiment—is as orthodox as most of his predecessors have been. Admittedly 1 he took over his office in favourable circumstances —his immediate predecessor had produced a small, surplus, the State's revenues were fast increasing—but when account is taken of the extravagant faith held by many people in the possibility of inducing universal prosperity by legislation, and of the pressure upon the Government to give proof, in its first Budget, of its devotion to that faith, the country as a whole has reason to feel relieved, though hardly pleased, at the Government's moderation.

The Budget for 1936-37, provided expenditure is held within the Avidened limits which the Government is allowing, should be balanced. That is Mr. Nash's expectation, and if it can be realised the Government will have surer ground for its claim to the peqple's confidence than is to be found in the fact that already it lias given legislative effect to many —though not all the most important—of its promises. A large Parliamentary majority makes the passing of legislation easy, but it is not necessarily a help in the exacting task of administration. The Budget is to be balanced at a higher level than any known in the Dominion's history, and a comparison of the significant items in last year's accounts with the corresponding items in this year's Estimates is illuminating:— Revenue. £ £ 1935-30. 1936-37. Actual. Estimate. Customs 8,101,101 9,100,000 Sales 2,462,001 2,900,000 Land tax 458,873 1,300,000 Income tax 4,581,328 0,000,000 Total taxation.... 21,556,415 26,017,000 Unemployment taxes ..3,920,026 4,210,000 Expenditure. £ £ 1935-36. 1936-37. Debt charges 9,345,954 9,269,000 Exchange 1,593,536 1,455,000 Social services 7,756,213 10,302,000 Defence 1,014,370 1,264,530 Total expenditure.. 25,890,567 31,054,000

v, The outstanding increase in expenditure, one of two and a half millions for social services, is to be approximately met by increases in direct taxation. The remaining increases in expenditure, fortunately for the Government, are likely to be balanced by the growing yield from indirect taxes. But the Government is optimistic in assuming—and the assumption is basic to its whole policy— that the yield from direct taxation will be as great as it estimates, and that the upward tendency of Customs and sales taxes will continue beyond the financial year, or even to the end of it. Business recovery, which has b'gun, does not necessarily proceed steadily; it is notoriously subject to setbacks, some of 1 vcai origin, others originating outside the Dominion. Can the taxpayers of this Dominion, who directly or indirectly paid 25J millions to the Government last year, pay at least four millions more this year? If they can, will their tax-paying capacity remain unimpaired? They may pay the taxes this year, but next year be unable to afford the goods and services which are the source of a considerable part of the State's revenue. No final opinion can be expressed,' but a Government which increases taxes to such a level —and undoubtedly expects to be able to maintain it in later years—is giving hostages to fortune.

Social services—health, hospitals, pensions and education —cost the State in 1913-14 £2,123,815, in 1930-31 £6,415,416, and last year £7,756,213. This year they are to cost £10,302,000, or nearly one-third of the largest Budget in the Dominion's history. They constitute a class of expenditure which naturally has many advocates and is always difficult, and sometimes impossible, to oppose in detail. They also constitute a superstructure which makes the ship of State exceedingly difficult to navigate in a storm. When expenditure on them has to be reduced, the reduction falls with crushing hardship on the recipients. There is therefore a duty on every Government, before it increases the rate and the scope of State payments to individuals — and this Government is increasing both—to consider not only whether the extra burden can be sustained by the current Budget, but whether it is reasonably likely to be bearable in the future. Judged by that test, the increase in the expenditure to over ten millions is alarming. The appetite for State bounties of all kinds grows faster than it is fed, and the experience with the proposed pensions for deserted wives is likely to underline that point.

The Government's support of the more basic social service—Defence —is much less impressive. If the Government's .Defence policy is fully represented by Mr. Nash's remarks and the Estimate figures, then it has failed to appreciate the implications of the international situation, to which Mr. Nash devoted some attention. Wliat the country needs is the assurance that it will be provided with the kind of defence which is reasonably likely to be suitable to the circumstances of these times. To build up an economic structure and a standard of living is not sufficient. The people who live under that structure need protection from an external attack, which, if it came, would be no less disastrous to it than to them.