The Press FRIDAY, JULY 4, 1958. Auditor-General’s Report

Press, Volume XCVII, Issue 28629, 4 July 1958, Page 8

The Press FRIDAY, JULY 4, 1958. Auditor-General’s Report

More effectively than any other i evidence, the annua] report of] the Controller and Auditor-: General (Mr C. J. Atkin)' emphasises the recklessness' with which the Labour Party competed for votes at the last; General Election. It clearlv I shows that Labour promises I were made without any real ’ assurance. short of extraordinary measures, that money could legal’y be found to redeem them. It Dresents an unanswerable indictment of Labour’s £lOO income tax rebate: and it indicates the extent to which it damaged the national economy. The report is especially valuable because it contains a factual assessment of the nation’s financial state: because it is completely free from political bias: and because it is based on expert knowledge After outlining the difficulties created by the new Government’s tax rebate commitment, and the manner in which the Audit Office drew attention to them, Mr Atkin says that, because the Government’s financial provisions for meeting the situation appeared not to breach the statute law, “ the “ position was accepted subject ** to certain reservations It would be interesting to know what these “ reservations ” were. His warning against a repetition is quite definite and plain.

As Mr Atkin points out, the Public Revenues Act, 1953. vests in the Audit Office control over the expenditure of public money; and it requires the Controller and Auditor-General to be satisfied that, during any financial year, there is or will be sufficient money in a fund or account to meet the proposed payments. While accounts may be overdrawn during the year, “ it shall not be lawful for any “fund or account to be over- •* drawn at the end of any “ financial year ”. Borrowings on overdraft from the Reserve Bank are limited by the following provision in the 1953 act: . It shall not be lawful to “ borrow .. . sb that the amount “owing at any time during any “ financial year exceeds one- “ quarter of the total revenue “of the preceding year or so “that the amount owing at the ° end of any financial year *ex- “ ceeds so much of the total '* revenue of that year as ** remains outstanding and unpaid. . . The Labour financial proposals were so

I profligate that at first neither I'he Treasury nor the Audit Office could see any alternative to special legislatioif enabling the Government to borrow enough money to i tide it over the crisis. Mr I Atkin briefly indicates the ' dubious resorts to which the : Government was put in order :to save its face. Principal of . these was the withholding of the £l4 million transfer from the Consolidated Fund to the Social Security Fund, a step which the Audit Office at first opposed on the ground that the transfer was mandatory under the Social Security Act, 1938. unless special amending legislation was passed. This objection was overcome as the result of a ruling given by the Solicitor-General on January 30. , How’ever, Mr Atkin makes this comment: “ While the “ legal position is thus clarified. “ the question is raised whether “ what is in effect a subsidv “ should have been withheld “ Parliament voted the money “out of the Consolidated Fund “ and obviously intended that “ the transfer should be made. “Further, it was a basic prin- “ ciple of the scheme that “ contributions through the “ social security charge would “be subsidised by the State out “of general taxation ”. Mr Atkin makes it plain that only the buoyancy of other revenue and underspending by Government departments together with a great deal of financial juggling, made it possible for the Government to redeem its income tax pledge The deficit in the Consolidated Fund, the first for 24 years, is attributable “ not to adverse “ economic conditions, but to “ the special income tax “rebate”. If the 1957 Budget proposals had been adhered to. the Consolidated Fund would have had a surplus of about £4.8 million. These are facte with which there can be no argument. Nor can there be anything but dismay at the manner in which current balances in the various other Government accounts have been depleted. If the Government’s policy precipitated another crisis when financial resources were even less readily available, the Audit Office would have to choose between conniving at a breach of the law, or enforcing a complete stoppage of' Government financial operations.