FINANCES OF THE COUNTRY

Dominion, Volume 19, Issue 253, 9 July 1926, Page 10

FINANCES OF THE COUNTRY

A SURPLUS- OF £1,150,000 PROSPECTS FOR THE CURRENT YEAR NO TAXATION CHANGES A surplus of £1,150,000 was revealed in the Financial (Statement presented to the House of Representatives by the Minister of Finance (Hon. W. Downie Stewart) last night. The increase in revenue (after certain deductions), compared with the previous ‘financial year was £959,860. In forecasting his proposals for the current year, the Minister estimated the total revenue receipts to amount to £24,266,200 and the expenditure to reach £23,986,616. It was stated elsewhere in the Budget that it would be inadvisable to expect any increase in gross revenue, the preparation of the Statement having been based on the expectation of a possible reduction. There are to be no ■taxation changes; the unescapable burden of war debt services combined with the largely increasing social services, are held to retard movement towards lessened taxation. In his concluding remarks the Minister said there were some difficulties ahead, but he predicted that the effect of the trade balance would only be temporary and that matters would adjust themselves in due course.

•‘lt is gratifying to find,” said the Minister, “that as a result of last year’s operations the Dominion finances have been maintained in a sound and satisfactory state. The surplus revenue of £1,150,000 shown in the Ordinary Revenue Account of the Consolidated Fund is largely due to increased Customs receipts, while the expenditure, although showing an increase on the previous year, is "not more than was anticipated. The principle of enforcing economy and effecting savings has been sustained, and in this respect I will adhere to the established policy. “For the current year it will be inadvisable to expect any increase in the gross revenue—in fact, the preparation of this statement is based on the expectation of a possible reduction. It is imprudent to expand services in reliance on increased revenue mainly derived from Customs duties, a source inherently liable to fluctuations. Inflated revenue due to increased imports cannot be regarded as stable, and surpluses from such a source should, when available, be applied as far as possible to debt-reduction purposes, and not be regarded as a basis for reducing taxation. In this connection, and apart from our statutory obligations to reduce debt, the year’s surplus has enabled about £•114,000 out of the Ordinary Revenue Account to be utilised for debt - reduction, besides ensuring the transfer of £500,000 to Public Works Fund.

EFFECT OF RECENT LEGISLATION. Briefly explaining the effect on account of the Consolidated Fund of certain enactments of last session the Minister said that consequent on the passing of the Government Railways Amendment Act, 1925, the railway receipts and payments no longer form part of the Ordinary Revenue Account, but were to be found under a separate Working Railways Account. In place of those there was a new item of revenue, “Interest on Railway Capital Liability,” that was practically an equivalent of the difference between the railway receipts and payments formerly appealing on either .j side of the Ordinary Revenue Account. The net result of that change, so far as the Ordinary Revenue Account for 19215-26 was concerned, left a gain to the Consolidated Fund of £99,958, against which sum, however, there was a further set-off of the additional interest on that part of the public debt allocated to railways during the financial year, with the result that the net effect on the Consolidated Fund was approximately the same for both financial years.

After referring to the operation of the Public Department Act, 1925, the Minister pointed out that against the additional revenue of £314,697, there was about £190,090, being that part of the increase in the sinking fund and statutory d?bt-reduction payments consequent on the passing of the Repayment of the Public Debt Act, 1925. As the payments under that Act would increase every year, that net gain to the Consolidated Fund would thus automatically disappear, and in view cf the writingdown of the discharged soldiers settlement capital it might be largely wiped out during the present financial year. In that connection it would’be remembered that the amount advanced out of the accumulated surplus for settlement of discharged soldiers now formed part of the Public Debt Redemption Fund. REVENUE. ”In the comparative revenue table,” said the Minister, “the amount received in 1925-26 for interest on railway capital liability is compared with the excess of railway receipts over payments for 1924-25. The net increase in the total revenue is shown as £1,719,345, but, as I have explained, £114,788 on account of 'lnterest on railway capital liability,’ and £314,697 for 'lnterest on Public Debt Redemption Fund,’ may be set aside as being only nominal increases. Deducting these two amounts totalling £759,485, there is left a real increase in revenue compared with that of the previous financial year of £959,860.” The principal increases in the regular items were Customs, £814,488; stamp and death duties, £119,536; Post and Telegraph receipts, £370,853. Decreases were recorded by land and in-

come tax (£86,128) ; miscellaneous revenue (£182,536) ; recoveries on account of previous years (£60,019). Of the decrease in land and income tax, £68,592 was on account of land tax, and was attributable to the mortgage exemption and to the annual shrinkage due to normal subdivision and succession of holdings. There were also less arrears to be collected. Reductions were made in the rates of income tax last year of an estimated annual value of £150,000, but it was gratifying to note that that was largely compensated for by an increase in the income of taxpayers generally, the net decrease in the amount ot tax collected being only £17,536. It would be seen, therefore, that by far the greater part of the real increase in revenue was due to increased customs receipts resulting from a greater volume of imports. EXPENDITURE. Dealing with expenditure, Mr. Stewait said that for the purposes of comparison the railway payments bad been omitted from the figures for 1921-25. The net increase shown amounted to £1,807,466, of which £948,417 was on account of permanent appropriations. The net increase in permanent appropriations was about £388,000; the increase in expenditure under departmental votes amounted to £859,049. The principal increases in that connection were:—Maintenance and repairs to roads, £52,679; Pensions Department, £88,409; Internal Affairs, £68,796; Naval defence, £157,847; Defence, £88,387; Electoral, £94,375; Education, £102,448. The Minister said that the increases

for Pensions and Internal Affairs Departments were largely due to taking over new liabilities on account of soldiers’ treatment and war graves, etc., consequent on the closing of War Expense! Account. The increase for Naval defence was owing to the fact that a second cruiser joined the station during the year; while increased provision for military camps and trainees accounted for much of the increase in the Defence vote. The increased expenditure under Electoral vote represented the cost of the general election, while that for Education was due to the usual expansion. The Minister noted

wi t h satisfaction that in reviewing the differences between appropriations and actual expenditure over the last few years, the estimating by departments, considering their ■ more extended operations, was showing closer results. SUMMARY OF YEAR’S OPERATIONS The Minister said that as indicated below, a surplus of revenue over expenditure was again shown on the operations last year:— £ Revenue • 24,725,762 Net expenditure 23,570,083 Leaving a surplus of £1,155,679 The following showed the result in the funds of the Ordinary Revenue Account at the end of the vear:— £ Balance forward, April 1, 1925 4,150,806 AddSurplus. 1925-26 1,155,679 Reparation moneys received from Germany 186,227 Balance of New Zealand Consols Account transferred 475,992 Special receipts 858 5,969,562 Less—- £ Special payments... 1.917 Transfers during vear to— Public Works Fund 500,000 Working Railways Account 473,392 Loans Redemption Account... 566,161 — 1,541,470 Balance, March 31, 1926 .. £429,092 The balance was held as follows:— £ Cash 2,343,168 Imprests outstanding ... 226,350 Investments 1,858,574 £4,428,092

RAILWAY ACCOUNT TRANSFER. "The transfer of £173,392 to the Working Railways Account, to provide funds for working capital,” said the Minister, "represents the balance ot the excess of railway revenue paid to the Consolidated Fund from April 1, 1896, to March 31, 1925, after allowing the interest on capital at the policy rates. The total excess was £1,327,649, from which were deducted moneys paid out of the Consolidated Fund for railway stores and other charges outstanding at the latter rate, totalling £854,257, leaving a balance of £473,392. The year’s revenue has not been charged with this non-recurring expenditure, as the excess railwav revenue in past rears has helped to build up the accumulated surpluses of the Consolidated Fund, and the payment has been regarded as a refund therefrom. "Of the £186,227 reparation moneys received from Germany, £151,824 was included in the £566,161 transferred to Loans Redemption Account, and has been applied in reduction of the war debt. "The New Zealand Consols Act was repealed bv section 11 of the Finance Act, 1925.’and the £475,992 shown as transferred to Ordinary Revenue Account above represents the balance of cash .and investments of that account. Consols to the value of £475,492 were redeemed out of the Consolidated Fund during the preceding financial vear, and the balance of £569 in 1925-26. “The result of the year’s operations is better than was anticipated, as, although last vear the indications were for an increase in Customs revenue over the previous year, it was not expected to reach the excess of £584,000 over the estimate. While it is a matter for satisfaction that the year’s working shows a substantial surplus, it has to be recognised that the bulk of it comes from sources that cannot be counted upon to persist.” NET CHARGES ON TAXPAYERS. Comparative charges on taxation for the various services provided for out of the Consolidated Fund were given to illustrate the present and the 1914 positions in regard to taxation. In making a comparison, allowance had to be made for the fact that receipts and payments for 1913-14 were not comparable with those for 1925-26 without considerable adjustment, because within the period covered there was a fall in the purchasing-power of the pound. To obtain a true comparison between those two vears, the figures for 1913-14 should be increased by about one-half. The charges on taxation were dealt with in the appended table: —

Tn order to facilitate the comparison of costs, the amount per head of mean population was assessed in each \case, and the respective amounts for 191314 increased as mentioned above. That was to say, the total taxation receipts for 1913-11 averaged out at £5 Bs. 4d. per head, but in the table above had been increased by one-half—to £8 2s. 6d.—which figure approximately represented the average receipts in 1913-14 in the values of to-day. WHAT WE ARE PAYING FOR. "On this basis,” proceeded the Minister, "the increase in the per capita receipts during the period is £4 Is. 13d. The first striking fact to be noted is that the cost of the charges directly due to the Great War averages £3 13s. 3d., and this accounts for nearly the whole of the increase in the taxation receipts per head. The other noteworthy increase is in the total amount devoted to social services, under which heading I group health and hospitals, pensions (excluding war pensions) and education. The actual charge on taxation for these three items amounted in 1913-14 to £2,120,000, which is roughly about one-third of the total collections for the vear. During the last financial vear no less than £5,735,000, or nearly one-half of the total collections less war charges, was expended on social services. On a comparable basis the expenditure on social services per head of population rose from £2 16s. 6d. in 1914 to £4 2s. 4d. in 1926, an increase of 45 per cent. "The cost of defence for 1925-26 includes the expense of the second cruiser which recently joined the New Zealand station, for only part of a year, so this item will show an increase for this financial year. The net expenditure on Naval defence for last yeat amounted to £441,203, an increase of £157,847 over that of the previous year. "Setting aside the amount required to cover war charges and social services, which in 1925-26 absorbed £8 19s. 4d. out of a total of £l2 4s. 4d. per head of revenue collected, the remaining revenue for other services does not represent in 1925-26 any real increase over that required in 1913-14. The results demonstrate that economy and control have been consistently applied to administrative expenditure, and that there

has been no undue inflation of departmental services. “In regard to existing social services there will, of course, be a steady rise due to increases in population, but this should be met by increased revenue receipts due to the same cause. Any new departures or extensions, however, can obviously only be made at the expense of increased taxation per capita, unless reduction can be made in the relative amounts required for other services. PENSIONS, HEALTH, AND EDUCATION. In regard to last year’s actual expenditure as compared with that of the previous year, the Minister said: —"Including £37,505 from national endowments on account of old-age pensions and £2499 from gold duty in respect to miners’ pensions, the total net payments on account of pensions for the last financial year amounted to £2,480,155, as against £2,403,614 for the previous year, an increase of £76,541, notwithstanding the fact that the war pensions showed a reduction of £62,630. Turning to expenditure on health, it will be seen that the subsidies under the permanent appropriations for hospital and charitable subsidies in 192526 totalled £600,000, the actual amount paid being £575,777. in addition to which a special subsidy of £lB,OOO was paid to the Nelson Hospital Board. It is estimated that an appropriation of £600,000, the same as last year, will be required for the current year. Subsidies on capital levies increased from £72,000 in 1923-24 to £115,000 in 1925-26, but it is not anticipated that the amount will further increase this year. The net expenditure of the Department from the Consolidated Fund other than subsidy was £34,968 more than that of the previous year. For education the net expenditure under the vote amounted to £2,879,719, to which must be added £157,341 received under special Acts, making a total provision out of the Consolidated Fund of £3.037,060 for 1925-26, as against £2,949,115 for 1924-25. • In addition, there is also expenditure out of reserves and endowments, full particulars of which are given. TRADE BALANCE. For the financial year 1925-26 the Dominion’s imports exceeded the exports by £4,328,269. As the favourable balance for the preceding year was small the indications were to expect some curtailment of imports at an early date. » "In view of the state of the trade balance,” added the Minister, “and

keeping in mind the uncertainty of the future trend of prices of our produce, I have conic to the conclusion that the Customs revenue for the coming year, notwithstanding the normal increase of population, will be substantially less than for last year. My estimate of the revenue for 1926-27 from this source is £7,650,000. “The excise dutv collected on New Zealand-brewed beer during the year 1925-26 was £629,558 (compared with £650,384 during the preceding year). The revenue from this source during the current financial year is estimated at £630,000. PUBLIC WORKS BIG CAPITAL OUTLAY PRODUCTIVE EXPENDITURE "In the last financial year,” said the Minister,” including £soo'ooo transferred from the Consolidated Fund, a total of £6,924,520 was made available for carrying on the public works and general development programme of the Government. The net expenditure on capital works out of account to which the additional loan capital was allocated may be summarised as follows:— £ Railway construction, additions, and improvement ... 2,786,190 Telegraphs and telephones ... 931,661 Hydro-electric supply ... 945,573 Main highways and ’roads ... 949,077 Irrigation, swamp-drainage, and rivers improvement ... 229,569 Public buildings, including schools 849,041 Other public works ... 489,368 Total ... ... 7,180,479 While admitting that in view of the Dominion’s population the capital outlay for one year was large, the Minister directs attention to the fact that £4,700,000 of it was expended on rail-

ways, telegraphs and telephones, and hydio-electric power schemes, all of which were productive works which as soon as completed would earn a large part if not the whole of the interest pavable on the relative portion of the public debt. Main highways and irrigation and swamp-drainage could also be classed as productive, though the return was in some cases not so immediate. “In regard to such productive works it is essential that every phase of the question—and particularly the probable earning-capacity —should be carefully considered before extensions or new works are undertaken,” said the Minister, "but once construction has been commenced, it is obviously sound business that the work should be completed as quickly as possible, in order that the concern may start to earn interest. For this reason curtailment of finance for undertakings in hand would undoubtedly leave us with unproductive assets.” The second class of expenditure on roads and schools and other public buildings — could not be classed as unproductive, though there is no immediate monetary return. Roads, for instance, were necessary to open up new lands for settlement and tc improve the existing means of communication, while education was vitally necessary to enable the next generation to be properly equipped to maintain and improve the standard of prosperity in the Dominion. "In that class of expenditure it was essential that the State should take the long view’; but such expenditure was in the meantime a direct charge on the taxpaver as such, care must be taken to see that the spending-rate was regulated in accordance with the real needs of the country and the financial strength of the Dominion. Although that class of expenditure could not be placed on a commercial basis it was essential that the cost of renewals and replacements should be met out of revenue. WAR BURDENS. An important consideration was the weight of the war burdens. The war debt in itself was a heavy dead-weight charge, and if further direct charges were placed on the taxpayer at a rate in 'advance of the increase in population and wealth of the Dominion, it must mean increased taxation, which in turn would retard business and hinder the development of the country. Another important factor affecting productive expenditure was the price at which fresh capital could be obtained. The Joan recently raised in London cost —including redemption of the discount and expenses over the period of the loan—about £5 6s. 2d. per cent. Used in the construction of productive works that meant ultimately increased costs of the sen-ices to the consumer, and it was certainly too expensive to be used for works not financially productive. “I hold the view,” said the Minister, “that on completion of the large undertakings now in hand in respect of railways and hydro-elec-tric power, a tapering-off policy should be adopted until a further national stocktaking justifies extensions commensurate with our increasing population and trade.

DISCHARGED SOLDIERS THE SETTLEMENT ACCOUNT REVALUATION OF PROPERTIES Retelling to the Discharged Soldiers’ Settlement Account, the Minister said that new loans granted during the year had, as for some time past, been restricted mainly to T.B. and incapacitated discharged soldiers and to advances on current account for improvements to farms and purchase of stock, the total amount authorised during the year being £282,011. The advances paid over during the year, which included commitments from the previous year, totalled £725,974. The repayments and recoveries of principal amounted to £901,393. The amount of instalments and interest in arrear and in postponement account as at March 31, was £633,130, being/ a reduction of £121,820 on the previous year. The reduction, however, was largely due to the operations of the Dominion Revaluation Board by remissions of interest granted on its recommendation. REVALUATIONS. Following the revaluation of discharged soldier properties under the Discharged Soldiers Settlement Amendment Act, 1923, the Dominion Revaluation Board had been giving its attention to adjusting the current accounts of settlers in the manner authorised by the amending Act of 1921. As a consequence, reductions in capital of these accounts up to March 31, totalling £49,242 were made, while a sum of £5,403 was transferred to Suspense Account. A summary of the position in regard to revaluation reveals—- £ Reductions in capital value of leaseholds 1,754,007 Reductions in value of buildings charged under leases 15,188 Reductions in mortgages ... 726,601 Reductions in current ac/'t. 49,242 £2,545,238 In addition, substantial relief by way

of remission of rent and interest has been given where deemed necessary, and in other cases postponement for varying terms up to ten years has been arranged. The loss of capital entailed in these revaluations would in due course be written off the £13,500,000 advanced out of the Consolidated Fund. FREE-OF-INCOME-TAX SECURITIES. The conversion scheme inaugurated in September, 1922, by which the public were afforded an opportunity of ■converting free-of-tax securities into inscribed stock (not free of tax) had been availed of to the extent of £3,128,450. The sum, together with renewals and redemptions, had accounted for a reduction of £13,426.071, the total outstanding at March 31, 1926, being £38,307,334. The reserve fund in London ot £2,000,000, said the Minister, is invested in gilt-edged securities; the interest earned by the fund during the past year amounting to £90,550. THE PUBLIC DEBT SUBSTANTIAL INCREASE WHAT MONEY WAS RAISED FOR The Minister said that the gross public debt at March 31, 1926, was £238,855,478, as compared with £227,814,647 twelve months previously. The debt'is allocated as follows:— £ Ordinary 125,992,741 War 75,333,648 State advances 27,771,153 Discharged soldiers’ settlement 9,757,936 £238,855,478 £ The increases are— Ordinary debt 6,055,882 State advances .... 6,334,973 £12,390,855 £ Decreases— Discharged soldiers 51,950 War debt 1,298,074 . £1,350,024 leaving the net increase in the gross debt at £11,040,831. Mr. Stewart pointed out that increased debt of £11,040,831, State advances (settlers, workers, and local authorities) absorbed £6,334,973, or 57 per cent. The total borrowed for ordinary debt purposes was £6,859,566, but by redemptions out of Ordinary Revenue Account (£445,513), from the accounts (£356,071), and by the removal from the debt of debentures totalling £2lOO, the increase in ordinary debt for the year was reduced to £6,055,882. Details were supplied to show the movement in the gross debt during the year. The principal new loans were raised for State advances (£6.346,955), public works (£3,939.870), electric supply (£830,000), main highways and railways improvements (£500,000 each), and education loans (£478,650). The charges and expenses were:—Public works (£294,032) ; Electric supply (£42,005) ; Main highways (£42,004)'; Railways improvement (£42.005) ; State advances (£168,018) ; making a total of £13,374,539 LOANS PAID OFF. Loans paid off during the year were:— By transfers of cash from— £ Ordinary Revenue Account 899,419* Nauru and Ocean Islands Account 40,000 Nauru and Ocean Islands Sinking Fund Account ... 20,150 Cheviot Estate Account ... 35,613 Conversion Account 6,074 Discharged Soldiers Settlement Account 13,250 Discharged Soldiers Settlement Loans Act, 1920, Depreciation Fund Account 38,371 Land for Settlements Account 22,575 l Native Land Settlement Account 2,400 State Advances Office 100,000 War Expenses Account ... 17 Westport Harbour Account 23,707 By utilising cash in Public Debt Repayment Account 870,638 By sinking funds released ... 88,771 By loans raised in 1924-25 for redemptions in 1925-26 ... 64,680 Miscellaneous war credits applied to reduction of debt 62,409 Portion of amount advanced TTicrh Commissioner in 1921-25 used for redemption in 1925-26 (Westport Harbour securities) .. .. 3.000 Debentures outstanding for more than ten years, removed from debt table ... 2,100 Discount on securities redeemed below par 40,504 £2,333,708 ♦lncludes amount from German reparations so applied. £ Net increase as shown by above figures 11,040,831 Add gross debt at March 31, 1925 227,814,647 Gross debt at March 31, 1926 £238,855,478 In addition to the above transac-

tions, securities to the amount of £5,266,476 were renewed, £453,250 converted, and £17,786,565 debentures and inscribed stock and £6,500,000 Treasury bills were redeemed, in each case by the issue of new securities of an equal face value. WHERE THE MONEY WAS BORROWED. The gross debt at March 31, 1926, was held as under:— £ New Zealand 107,164,718 Australia 3,843,100 London 128,047,660 £238,855,478 Gross Annual Charge. £ Interest 10,670,170 Annual sinking funds 7,000 Repayment of funded debt 350,074 Public Debt Repayment Account 928,492 Total gross charge 11,955,736 Estimated recoveries from trading and other accounts 2,500,849 Net annual charge at March 31, 1926 £9,454,887 "The assets held by the State which may be set off against the debt are detailed elsewhere,” said the Minister. “I am pleased to be able to state that as a result of considerable research into the history of the debt, the consolidated stock shown under the heading of Miscellaneous in one of the debt tables has now been allocated to the respective accounts concerned. This for the first time enables a true apportionment of the public debt to be made, and ensures a more accurate capitalisation of the various Government undertakings, an important consideration in view of the balance-sheet system now in operation. A separate paper to be laid on the table of the House will explain the results of the investigation. DEBT REPAYMENT. "By the Repayment of the Public Debt Act, 1925, means were provided whereby the whole of the public debt, other than those portions for which separate sinking funds existed, will be extinguished in approximately sixty years from the time of comintr under the provisions of the Act. The Redemption Fund Capital Account, established by section 8 of the Act, was as under: — Moneys held by the Superintendent, State Advances Office, £3.258,956; moneys held by the Public Trustee, £7,966,689; moneys transferred by wav of loan from the Consolidated Fund to Vhe Discharged Soldiers Settlement Account, £13,500.000; total, £24,725.645. Interest earned by this amount was credited to the Consolidated Fund as a set-off to the amount paid into the Public Debt Repayment Account under the provisions of the Act—viz.. 1 ner cent, of the public debt outstanding which comes under the Act, and 4 ner ccni. of the debt redeemed in accordance with the Act. LOANS FOR STATE ADVANCES. Of -the £6,346,955 borrowed last year for State advances £2,000,000 was included in the London loan of 1925. Apart from other small loans the -Government, in order to provide funds to meet arrears of application for State advances, placed a s|-per-cent. issue on the market. Lip to March 31, £4,233,705 had been received for State advances, of which about one-half came from overseas investors. In addition to the above, £650,000 was raised under this issue for public works and hydro-elec-tric purposes. After allowing for expenses, the money was expected to cost about £5 10s. Bd. per cent, per annum. THE LONDON LOAN. At the end of May, London advised that, the general strike having been called off, a resumption of the lending market was at hand, though the position was, in view of the continuance of the coal strike, still reported to be somewhat uncertain as to terms obtainable. It was, however, decided to proceed, and a loan of £6,000,000 was underwritten. It was issued to the public on May 31, at £9B 10s.; interest 5 per cent, maturing on January 1, 1946; the yield to investors being £5 2s. 6d. The result was in all the circumstances somewhat surprising as the application list was closed in two hours, the sum of £119,600,000 from 24,059 applicants having been offered, while the loan subsequently went to a premium. FUNDED DEBT. Payments amounting to £1,651,930 were made in 1925-26 in respect of £27,532,164, loans advanced by the Imperial Government, and funded in terms of the agreement dated September 6,, 1922. The half-yearly payments represented both principal and interest, and a table was furnished to show how the debt had been reduced to £26,257,022. DEBT EXTINCTION POLICY. The Public Debt Commission, constituted under the Repayment of the Public Works Debt Act, passed last session, held its first meeting early in March of this year to formulate the policy to be adopted in the matter of debt-repay-ment and to set in motion the machinery provided under the statute. The amount available for debt-repayment for the financial year ended March 31 last was £872,734, and the Commission applied this in discharging from the debt securities purchased from time to time at a discount, together with further suitable securities held by Treasury Investment Accounts. Securities of a total nominal value of £889,733 were accordingly cancelled and redeemed. As opportunity offered for purchase of securities on favourable terms, it was the intention of the Commission to apply its resources to the reduction of deadweight and overseas debt. Details of the transactions affecting the debt coming under the provisions of the Act would be available in the statement and account of the proceedings of the Commission to be laid on the table of the House.

. THE CURRENT YEAR’S OUTLOOK NEED FOR CAUTION NO TAXATION CHANGES “In setting out before members the estimated position in the current year, there are first of all several broad considerations affecting the question of taxation and revenue that I will briefly refer to,” concluded the Minister. “As I have shown earlier in this Statement, the absorption of direct and indirect taxation by social and educational services shows considerable proportionate increase as compared with pre-war conditions, while the cost of defence is rising rapidly. These items bring before us some outstanding facts directly affecting taxation. “It is, nf course, always a question for Government consideration, and particularly since the war, what relief can be given to the taxpayer? Further substantial relief from taxation cannot be expected so long as the war-debt services have to be borne—an linescapable burden—which, combined with largely increasing social services. retard any movement in the direction of lessened taxation. In oertain quarters there will no doubt

be some criticism of the fact that I have not seen my way to recommend nny reductions in taxation this year, hut I am strongly of opinion that the uncertain outlook in trade and finance calls for the utmost caution. Moreover, the various legislative proposals of the Government, to be given effect to this year, will impose considerably heavier charges on the Consolidated Fund, and this consideration applies particularly to the proposed scheme for assistance to large families. Indeed, it is possible that it may become necessary to raise additional money, but I am hopeful that the revenue will remain sufficiently buoyant to avoid this. “Furthermore, I do not . think it wise to make any changes in the incidence of taxation which may have the effect of yielding a lesser tax revenue this year. At any rate, so far as the proposal to substitute taxation of individual shareholders for company taxation is concerned, I think further consideration of this matter must remain in abeyance until the data now being collected is complete. "I am also anxious to continue m long as possible the practice of applying. surplus revenue to war-debt reduction, and I do not think relief from taxation at the cost of impairing that policy is advisable. I intend to ask fr authority to transfer up to £1,000,000 to the Public Works Fund as ways and means permit. ESTIMATED REVENUE. “I have given the most thorough consideration to all the expected variations or conditions likely to arise in the next twelve months, and I estimate the total revenue receipts into the ordinary revenue account at £24,266,200. This is based on the present rates of land and income tax, and the expected reduction in Customs revenue resulting from trade-balance adjustments. The expanding business of the Post and Telegraph Department will provide increased receipts. Revenue was estimated as under:— £ Customs - 7,650,000 Beer duty 630,000 Stamp and death duties 3,189,250 Post and Telegraph —■ 3,290,000 Land tax 1,200,000 Income tax 3,300,000 Registration and other fees 200,000 Marine 112,000 Interest on public moneys ... 600,000 Interest on railway capital ! liability ; 2,050,000 Interest on Public Debt Re- ' demption Fund 0.. 1,102,000 Local Bodies’ Loans Act, 1908. section 76 20,000 ’ Rents of buildings 95,000 ’ Tourist and health resorts 57,250 Miscellaneous 50,000 . Territorial ; 205,000 Departmental and other receipts •... 585,700 Total 24,266,200 ESTIMATED EXPENDITURE. "In submitting the estimates of expenditure, I may state that some months ago the Government appointed a Committee of Departmental heads to investigate expenditure and scrutinise the preliminary estimates of Departments. The committee’s recommendations were duly considered by the Government in framing these estimates. "The estimated expenditure is £23,986,616. The sum is £416,533 in excess of the actual expenditure of last year, a good indication that the control over vote expenditure is well maintained when it is remembered that this increase covers extension of naval establishment, education expansion, and also departments whose increases an* met by corresponding revenue receipts. The estimated expenditure under—- £ Permanent charges is ... 13,693,759 Annual appropriations ... 10,292,857 Total 23,986,616 ESTIMATED RESULTS. "I anticipate, therefore, that the post tion, provided no obligations of a substantial nature due to unemployment or to new legislation fall on the Account during the present financial year, will be:— £ Reveue 24,266,200 Expenditure 23,986,616 Balance £279,584 "This amount will, I estimate, cover supplementary estimates, but will leave very little margin; and, either way, the ultimate result will depend a great deal on the uncertain factor of imports. "In view of the reference in His Excellency’s speech as to the policy ' proposals of the Government, I have found it unnecessary in this Statement to devote any space to these mat ters,” concluded the Minister. "There are some difficulties ahead of ns, the principal one—that of our trade balance—touches, of course, our primary industries, but the effect, I predict, will only be temporary, and matters will adjust themselves in due course. With regard to onr secondary industries, I regret to state that some of these are not in a flourishing condition. The Government is now considering how far it may be necessary to render assistance during the present session to certain industries that are most seriously affected, but it is not proposed to make any general revision of the tariff this year.” SURPLUS CASH BALANCES Referring to temporary investments of surplus cash balances, the Minister said that advantage was taken of the short money-market in London to invest Public Account cash balances which were not immediately required. The total interest earned on these investments during the year for periods ranging from a few weeks to three months was £28,069. With increasing interest charges it was desirable to make the fullest possible use of investing cash balances more closely, and the Minister said he was taking steps to enable our facilities in that respect to be improved. CUSTOMS AND EXCISE Including the tire tax direct to the Main Highwavs Account, the customs revenue for the financial year 1925-26 amounted to £8,573,388, while that tor the preceding financial year was £7,689,192, an increase of £884,196. TREASURY BILLS Treasury bills in anticipation of the 1925 loan amounting to £500,000 were sold in London at 4 3-8 per cent, discount at the beginning of April, 1925, and were duly redeemed out of the loan receipts. Further Treasury bills amounting to £1,250,000, issued in anticipation of revenue were sold in .New Zealand in April, May, and June, the rate 'of interest being 5i per cent, in “each case. The whole of these revenue bills were redeemed late rin the year, when the bulk of the revenue was received, so that there wre no bills of this description outstanding at the close of the year. The redemption bills outsanding nt March 31, 1926, amounted to £1,400,000, for which a corresponding amount of debt was redeemed on the issue of the bills.

THE AUTHOR OF THE BUDGET

CHARGES ON TAXATION. Allocation of Taxation 1913-14 1925-26 Receipts per head of mean population. 1913-14 Adjusted to a comparable basis 1925-26 £ £ £ s. d. £ s. d. War pensions and debt charges — 5.101,015 — 3 13 Other debt charges 1,402,222 1,656,135 1 17 3 1 3 9 Social services (health and hospitals, pensions and education 2,123,815 5,735,419 2 16 6 4 2 4 Defence (land, sea and air) 538,373 891,099 0 14 5 0 12 9 Other charges (general and administrative) 1,040,8.39 2,483,040 2 3 7 1 15 8 Surplus for year 403,797 1,155,679 0 10 9 0 16 £6,109,046 £17,022,387 £8 2 6 £12 4 4