PUBLIC FINANCE.

Press, Volume LXVI, Issue 19941, 30 May 1930, Page 15

PUBLIC FINANCE.

Deficit of £3,000,000 in ■ Prospect

fifOTES AND GRANTS TO BE tl:'. : • CURTAILED.

Taxation May be Increased.

CfBSSS ASSOCIATES nSLXMAU.)

WELLINGTON, May 29. The Prime Minister and Minister for Finance, the Hon.

G. W. Forbes, In a statement made yesterday, reviews the < financial position of the Dominion. The relative contributing are traversed and the approximate Budget difficulties to be surmounted are set out Mr Forbes, in describing "the methods to be pursued in the solution of a difficult finanTT\ <sial position, adds "that with the loyal co-operation and sup- - * port of the people there is no reason why we should not ere I ■>■- look back with satisfaction on an embarrassing mile- ! ripest safely passed." 1 it/:'i

i >/• „• ! - "frfc Joseph Ward," says the Prime I kftiijjtef," " h *» banded over the port* i Ptfof Wane* after doln * a Breat8 reat h/wiito B » h » aM th 6 p ubUc etedit of I kmi pamiaion. His record 6t service i*'s%tf&9tXto a t sphere is one that t *'fi to»y well be proud of, and I think *- Mftfc_ft**yT»ne in the country will bo 1 'K3 ; tMt, though Us last year as { 3»J»ter for Finance was a difficult one, ? jjjsJsM able to uphold his repntation \ BKS**« *«?pu»t» with B • ur P luß I ifflWttxiwttely «150,000. -., i ,??rtl*m «orty to-say that the present ! f m#l y«», which it my responl WUdeed, and I desire at the outset ? Wt&9 the country into the confidence 1 «f-tttt6»?W I «« ,t * B re ?* rd *°. th " ■ .$ ipjipr&lQetiJtiei. which have to be 1 ' I JHll§Siar AS- in the P&** a *}>■ I M*wloi.JW pwmary products fn the i «TeMl«kli**¥ , # particularly wool I miWfwHM 9 meant a lessened I The financial year I wi »^ , JWW t M fuU export season, 1 tat the-«fflwW :Baverth6l6BS '* Vl&jßafflaP WB9-80 *inquntod \'WJ&tt&BEßmr drO P of approxiSffra^M'" wa P a " j with the we^^mmW-If 6&T - Imports for ~: * S3*wSßbW|ss> small excess of im« * W#*HS|9 £122,097, as against *■' yMK This ' slpßipd§"''l* B trade position is te* j«eW}g:tliri)Wklng position, where (Jie,||am. H ßt"the end of the year in ei>mpwaoh-'with the position twelve ; moptifljearh'er show a decline in liquid ' to> about £9,600,m. 3%jfpftfMtAon of the national wo-must curtail our a«*hd«/botk'wWately and nationally, flucttiafogrffliXlii^pF6* previously, and tihe trade position, but from Austrarates are l&WMm&ihf) importers. There however, and that s#** W«*«fig?to*» »™ benefiting by WrTßwton, gPhe contraction in the wsw*tMeßs/ coupled with the exmust, result in a conin imports, and this fttfwwpW fcieans a corresponding dewk i&djmm* revenue, which it is JJgMHffipwlU' probably be over ' 'iMn^im ,M»»» .it was last year. will'also have an ad- ' -t«!fc effect pn the yield froni income • , tyHad also -land tax, though, of course, 9*i(iftJW3rthmg like the same extent fts ' tjKpavy"fa!(ling"off in the expected from taxation is, I regret to say, F TJ, Wf*Wt '• rartpSri Win>aaaHion 'We have got ► wffi)kftMft<lt jft»t thfl railways have ' t fs>i"?ehe4 a position when, on the ' ' nXSr^lPt l °t operations, .they can their interest bill, the PWBted eh'ortage being about £1,250,J t, y it^oMn H t0 H Sained by l sfflwSFJw , e nositiQn or attempting tq for little can ',' »&!s&* to remedy matters unless the of the position is fully. ■ Sfflr* V-^ e people generally. The * -sum totnt of > may result-, from '"&«sPr*^» a expenditure, must this 'ljaSjbfl eartied by the - taxpayers. Many h|^^ 3 *ttejr,will doubtless wonder Why limn'' * DUrden has" fallen upon them f ffiS ß fro., the skies, A IS£KI .***?*'% wilway figures 4urffllffllit if 7 ' *"** Wlll P e " a P ß m>ke * M^P^ w l^# l | » Job J«t of placing Mfflffiyys upon a commercial basis, , iSStywcntment -of that timo paised . flPWe«<gji«Niiii)g the railway fl»jß&wtffitv'W''i>tih(> Oonsolida.ted ' lß»njißt e ' t W' to bfl U P - depreciation, and in- ' BSTJ. cost of the capi- '• ISfffc*! whi « h ' however, was and isolated •V ol>at,<>f * 1»327,6« re--1188 fpr fomflr to the raUJ'i 'lHlHfl9»Sit9^ s ««fc "Were the f e°r years l idKiK^Ki. Aft «f »oeiv- &: tJIMSBMff&Wmi on bunch lines, a' JFwBmim&'MWMQ. for 1925-26 sltt£B33mmWtQW- far 1928-29, the |5 !^BBP^ ril ' follows: & ''wSSa* " 100,009 W 4«B»WI*«IJKw '*■: *i' 291,000 M *©<|gi«l»tioji passed last «■ «H^I«KW W ll l P ai4 "> ,, ** nai »oial Wi 4R|AmL rWSBW tbe railway tnF* ftSS-SLT^l 11 * * Sbgt P»*t offset by ! Pi \A not r*k **¥»*'#l,2lo,ooo, m«k----4 WJMbtoA. b« ,ult *' w « bowever, these I 9 - ini aef.' Ji* "■ Aptlrt **»& a «ash ad-

vanoe of £150,000 to enahle the railways to complete the payment for last financial year, the interest due to the Consolidated Fund has been paid out of the cash resources of the railways, and the losses that I have referred to, apart from those oa branch lines, did not fall upon the taxpayer.

Xo Gash Resources. "For the current financial year, however, from sheer lack of cash resources, the railwftya must fall short in their interest payments by the amount of the not loss for the year, estimated on the present basis of operations at about £1,250,000. The interest on the relative portion of the Public Debt will, of course, be paid in the usual way, so that the extent of the railway shorttage will this year mean just so much more to be found out of taxation or savings in other directions. ''lt may be added that the serious position of the railway finances already has been clearly pointed out by Sir Joseph Ward. In his last Budget he stated, inter alia, that he was satisfied that if the present drift was allowed to go on for only a few years longer the taxpayers of this Dominion will hare to find not less than £2,000,000 a year to meet railway deficits. As pointed out by Sir Joseph, the chief cause of the trouble is direct competition Instead of corordination between road and rail transport services. Further, again to quote the last Budget, 'the irony of the situation is that the heavy losses on the publicly-owned railway/ are 'being largely-'brought about by good motor roads being built also with pnbliq money to facilitate direct competition with the railways; in other words, State capital is being provided to assist in the direct undermining of the earning power of £57,300,000 of State capital already invested,in railways.' Now that the railway losses have to be. met directly out of taxation, it .will, I think, be generally realised that the present state of affairs cannot be allowed to go on any longer, and the measures that the Government will bring down to co-ordinate tho road and rail construction policies, and tho steps to be taken to obtain coordination between road and rail transport services will, I feel sure, have tho hearty support of the people.

Falling Eevenue. "To return to the Budgetary position! It will be seen from what I have already stated that the Government has to cope with a falling off in the revenue of the Consolidated Fund amounting to something like £2,500,000, In addition, in the ordinary course, thero will be automatic increases in debt charges, pensions, and other statutory payments of a rigid nature, bo that if the various services at present supplied by the State are all to be carried on as heretofore, an increased expenditure of about £600,000 would be necessary. A shortage- of £3,000,000 that is tee position as I find it, without doubt a formidable problem for any Minister for Finance to solve. Still the Government is ready to tackle the problem resolutely, and given the co-opera-tion and support of the members of Parliament and the people generally, I am confident that the position can be mot and the Budget balanced as, of course, it must be, without any serious hardship, for the general financial position 'of the Dominion as a whole _ is quite *onnd, and courage, determination, and a capacity for hard work are typical characteristics of the New Zealander. Then, of course, the scope for development in this naturally well endowed country Is very large, and hard times like the present can best be met by redoubling our efforts to tap the potential wealth of the Dominion. In the immediate present, however, it must be recognised that we have got to cut our coat according to our cloth, bptn privately and nationally, and review our expenditure with the object of temporarily eliminating or curtailing suob items as can be most easily dispensed with. This is the line of action tho Government propose to take in balancing the Budget for the current financial year. Needless to say every effort will be made to obtain the greatest possible economy in administration, but as this is a matter that has already received considerable attention, there is no possibility of saving anything like tne £3,000,000 required in this way.

Curtailment of Services. "Before considering the question of increasing taxation, the Government is reviewing the services at present supplied by the State, and by services I mean monetary assistance granted as well as work done by State Departments. It. is proposed to curtail or even suspend services, where this can be done without upsetting the basic organisation of the Departments or causing undue hardship to the institutions or seotions of the community who nro indirectly benefiting by particular items of expenditure: in other words we have got to determine what is essential and what is not, and for this year at any rate, eliminate or at least severely curtail the nonessential, under the circumstances, most people will agree, I think, that this is the right course to adopt, but in dealing for instance with grants and subsidies the institutions or sections of the people directly benefiting naturally have a somewhat biased opinion as to wnat is essential, and the Government is left with a rather invidious task. How-

ever, reductions in expenditure are the only alternative to heavy increases in taxation, and in the interests of the country must be made. Accordingly I appeal to the people to view the matter from a national standpoint, and support the Government in carrying out an unpleasant duty. Departmental Expenditure. "The net expenditure out of the Connolidated Fund last year amounted to approximately £25,200,000, of which £17.227,000 was incurred under permanent appropriations, that is to say continuous authorities, and £7,973,000 under annual votes, which comprise the Departmental expenditure, numerous small grants and subsidies, and various miscellaneous items. Nearly half the lattor amount, or £3,219,000, was for education, in connexion with which there is practically continuous pressure for more and more expenditure in various directions.

"While on the subject of education I would like to say that the expenditure out of the vote is by no means the total cost to tho State. In addition there is expenditure under various Acts of Parliament included under permanent appropriations, and also out of tho revenue from national endowments and roserves. Then thoro ia the annual charge amounting to about £330,000 for interest and debt repayment charges on the loan expenditure Thus tho total annual cost of education is at present ovor £4,000,000, and it is steadily increasing year by year. In roviewing the expenditure this huge annual cost of education requires serious consideration, and tho question arises whether the limit of the burden on the taxpayer has not been reached.

"Another large item of expenditure that calls for serious overhaul is naval and military defence, which, in total, is costing the taxpayer over £1,000,000 per annum. This is a heavy drain on the Consolidated Fund under present conditions, and as was announced by Sir Joseph Ward somo weeks ago, steps are being taken to bring the whole defence policy under review. In the meantime the suspension of military camps will enable considerable savings to be made. The votes generally are being very carefully examined, and for this year Departments will be allocated only such amounts as will enable thorn to carry out their proper norma) functions efficiently, while exercising continuous rigid economy in detail. Less essential or extraneous items will have to be eliminated as far as possible, having regard to the degree of hardship likely to result to the outside organisations concerned. In this way it is hoped to save over £500,000.

Debt Charges. "Of the £17,227,000 of expenditure under permanent appropriations, £10,697,000 is interest and debt repayment charges, whore no reduction* are possible. Debt charges of coarse are governed by the amount of tho Public iobt and the purposes to which the borrowed capital is applied. Capital used for State Advances and other purposes that are earning full interost obviously imposes no burden on the taxpayers as such. On other items of capital expenditure there is a partial recovery of intorest, and in some cases no direct recovery whatever. Even 80 such expenditure may be really productive in that the wealth and earning capacity of the community may be increased as a result of such capital expenditure by more than sufficient to offset the relative burden on taxation for loan charges. Still such indirect leturns are very difficult to measure, and I think we have now reached a stage when great care must be exercised in investing further loan moneys in purposes from which the return is so indirect. I repeat that great care is necessary, but, nevertheless, the Goternment will not hesitate to provide the capital that is considered essential for tho economic development of the C °-AnTther aspect of the matter that needs careful consideration is the involved question of what should be provided out of revenue and what out of loan capital. Even iii the commercial world this question is on occasions the subject or diverse opinions, but in State finance, where the public interest is the broad aim as opposed to profit in private entorprise, the problem is much more difficult of solution. What the GovernmTnt will aim at will be to arrange its programme of development in such a way that the interest and sinking fund charges on the loans raised for the various purposes will be absorbed without causing the country financial embarrassment. At the same time every endeavour will be made to ensure that 20s of value materialises for every *i expended.

Expenditure Under Various Acts. "Deducting interest and debt repayment charges there remains on the basis d! last yeaVs figures £6,530,000 of expenditure under various special Acts of Parliament. This amount included approximately £2,750,000 for pensions and family allowances, a rigid item where no curtailment of expenditure is possible without altering the basis of the various pension schemes. In fact, an Automatic increase in pensions is to be expected annually. A further £1,500,000 consisted of automatic transfers of petrol tax and other earmarked revenues to the highways account and the local bodies, while £910,000 was absorbed in subsidies to hospital boards and local authorities on rates, and £380,000 for subsidies to the superannuation funds and the National Provident Fund. Apart from these items the expenditure under special Acts of Parliament amounted in the aggregate to £990,000, so that it will be seen that the scope for reductions is not nearly so great as the total figures would lead one to expect. Part of the subsidies to hospital boards is on account of capital expenditure. In view of the financial position hospital boards will bo requested to reduce capital expenditure to an absolute minimum in the interests of both the taxpayers and the ratepayers. At present bequests and voluntary contributions for public purposes are generally subsidised by the Government. I am afraid that this expenditure will have to be curtailed and subsidies withheld in cases where no undue hardship will result from such action. For instance, many bequests are in tho nature of windfalls and quite additional to the normal finance of the institution benefiting. Obviously, no serious hardship or disorganisation can result from the withholding of tho subsidy in such cases. It is probable that further savings can be effected in connexion with making good the Budget and each ono will be examined closely in the light of the principles that I have already enunciated. Further, all special funds will be reviewed in connexion with making good the Budget shortage. In regard to highways, as I have already indicated, tho whole policy will have to be dealt with from the point of view of promoting coordination with tho railways.

Economy in Hallways. "The fact that tho railways have roached the end of their financial resources and are unable to meet a large part of their interest charges is the principal cause of the present financial predicament. Before calling upon the taxpayer to make good the shortage it is the intention of the Government to have the expenditure of tho Department minutely overhauled with a view to obtaining the greatest possible economy in operation consistent with the 010111100-

ance of a proper standard of safety for the travelling public and efficient train services. In other words, the railway shortage, to be met out of taxation, must bo reduced to an absolute minimum. In order to do this the Government proposes to set up a special Commission from outside the public Bervice to investigate fully all branches of the Department's activities and advise the Government where economies can be effected.

Summary of Position. "To sum up it is estimated that there ia this year a Budgot shortage of about £3,000,000. This shortage must be made good out of savings or increased revenue or both. In view of the contraction in the national income due to falling prices, the Government is especially anxious that as much as possible of the amount is obtained through sayings. Drastic measures are essential jf any worth-while progress is to bo made in this direction, and it must bo recognised that not only is the Government unable to enter into fresh commitments at present, but that savings cannot be made without a curtailment of some of the existing services. It is probable after all feasiblo economics are made that some additional taxation will be unavoidable. However, it is with confidence that I appeal to all sections of the community quietly and resolutely to face the unpleasant hard facts and accord to the Government solid support and co-operation in order that the difficulties of the position may be surmounted without strain and with as littlo disturbance as possible in the economic life of the people."

Cast your mind back to your childhood days. What was the popular, tried remedy for a cold? Exactly the same medicine that holds premier place to-day. Bonnington's Carrageen Irish Moss. Bonnington's has gained its place in public favour by sterling worth. —2