SOCIAL SERVICE EXPANSION

Dominion, Volume 31, Issue 243, 11 July 1938, Page 10

SOCIAL SERVICE EXPANSION

Mounting Costs Analysed

POSITION IF NATIONAL INCOME FALLS

Dominion Special Service.

Christchurch, July 9.

The expansion of expenditure on social services is held, in a bulletin issued by the Canterbury Chamber of Commerce in consultation with the De-

partment of Economics of Canterbury University College, to be the chief cause for the growth of State taxation to an amount twice as high as it was in 192829. The bulletin states that the cost of social services, the largest single item of which is the payment for pensions, now accounts for nearly half of the total expenditure from taxation. Since the start of the State pension system in 1898 by the introduction of the old-age pensions, the population had doubled, the number of pensions was multiplied by nine, the total cost by more than 40, and the cost a head by about 20, the bulletin states. Moreover, if present plans were carried out, the total cost would about double again within the next year or two. Dependants on the State. "Both tlie number of pensions and the amount involved are large. There are approximately OSO,IKK) persons in the Dominion classed as bread-winners and, if the numbers dependent on the employment fund were added to the number of pensioners, probably at least one in six of those receiving incomes iu the Dominion would be shown as dependent on the bounty of the State. Moreover, both the nuuita and the expenditure has grown very rapidly in recent years and both appear likely to grow further.” The growth of pensions, from £157,000 in 1898-1900, and £540,000 in 191415, to about £6,770,000 in the latest year, was itself sufficient, to show the snowball effect of pension schemes. The chief causes of the recent rapid growth had been the removal of restrictions on qualifications, which increased the number of pensioners, increased rates paid for the various pensions, and the widening range of the pension schemes. The development of pensions showed that there wag a strong tendency for them to-roll on through the years, gathering further and further accretions, until their total become so large as to be quite unmanageable. But the pension schemes, large though they were, constituted only part of the social services provided by the State. Other services had grown as well, and in 1928-29 the total cost of social services, including the pensions schemes, was approximately £7,000,000. Earnest attempts were made during the depression -to keep this expenditure under control. But because of the conditions of the depression years, big additions had to be made to provide for unemployment relief. It was generally expected that both the necessity to relieve unemployment and the consequent employment taxation would be removed as the country recovered from the depression. This expectation, however, was not realised, and total expenditure on social services, including pensions and unemployment relief, had continued to grow.

“Unproductive Expenditure." Since most social services involved expenditure that was unproductive in the commercial sense, they brought in no revenue to the consolidated fund, and their cost had to be met wholly from taxation. Over the last three years State taxation had increased by £12,000,000, or about 50 per cent., and it was now much the heaviest in the history of the Dominion. The greater part of this increase was used to meet increased expenditure on social services. The change had been due largely to a great increase in the use of taxation as an instrument for the redistribution of income. This redistribution took income earned by the productive and independent section of the community and used it to support an increasing number who, however deserving, were unproductive and were dependent on State bounty. The result was directly to discourage thrift, effort, and enterprise in both sections and directly to encourage dependence on the State. It should no’t be forgotten that in this matter the State was merely the agent of the people, and that what -the State spent, the people must pay for.

Since 1928-29 taxation has increased by £19,000,000, and had more than doubled. Practically all the old rates of taxation had been increased and the amount now extracted was much greater in the case of income tax, customs duty and highway taxation. In addition, the new taxes imposed to meet the emergency conditions of the 'depression, which were expected to be abolished when the depression was over, now yielded nearly £9,000,000, an amount approximately equal to the increased cost of social services. Since 1928-29 Government expenditure, from revenue alone, including expenditure from the employment fund, had increased by £15,200,000, or by 63 per cent. Of this increase £9,000,000 represented increased expenditure on social services, and £4,000,000 increases in other expenses, mainly departmental. The Government had become more bountiful and more liberal, at the expense of the taxpayers. The new and most burdensome taxes, sales tax, employment tax, and the miscellaneous group, just sufliced to pay the increased cost of the social services.

If Income Falls? “There is no doubt that taxation is now uneconomically high, and it is very uncertain whether the present high yield can be maintained indefinitely, even in the best of conditions.” the bulletin concludes. “Should prices fall and national income be reduced, the tax revenue would necessarily fall. In that case the Government would not have the revenue required to maintain present expenditure, and the unproductive expenditure must necessarily be the first to suffer reduction. It is considerations such as the.e that set limits to unproductive expenditure. At present, at the peak of prosperity, New Zealand is expanding its expenditure ou unproductive services. That expenditure can now be supported only by a level of taxation which hampers production and seriously impairs the Dominion’s competitive position. Taxation and expenditure which can barely be sustained in a time of record high export receipts and consequent prosperity cannot be sustained if national income and taxable capacity should happen to be reduced/;