Parliament OPENING OF FINANCIAL DEBATE

Dominion, Volume 33, Issue 239, 4 July 1940, Page 11

Parliament OPENING OF FINANCIAL DEBATE

Reduction In Public Works Expenditure

Urged By Opposition Leader

POLICY DEFENDED BY PRIME MINISTER

Tlie financial debate was opened m the House of Kepresentatn es last night by the Leader of the Opposition, Mr. Hamilton. Ihe Budget, he said, professed to recognize the need foi economy, but did not practise it. The country was paying dearly today foi the extravagant spending of the past five years, which had made things harder than they would otherwise have been. A reduction by .lall in the expenditure on public works was advocated by Mr Hannl ton, who contended that the borrowing of £15,000,000 for this pm pose would add greatlv to the difficulty of obtaining capital for production. Mr. Hamilton was followed by the Prime Minister, Mr. Fraser who said it was satisfactory to know that what criticism theie lac been of the Budget had been directed at the civil side of it and not at the war expenditure. The Leader of the Opposition had not indicated where votes could be cut. Mr. Fraser, who defended the Government’s public works policy, said that irrigation, afforestation, and river erosion protection works were absolutely sound and could not be described as wasteful expenditure. The only other speaker in the debate was Mr. Lee . (Democratic Labour, Grey Lynn), who was interrupted by the adjournment at 10.30 p.m. An amendment was moved by Mr. Lee to the effect that the Budget proposals were not acceptable in their present form in that they made no provision for the use of the public credit. The debate will be resumed when the House meets again at Z.ou p.m. today.

“I am not sure whether I am open ing this debate or replying to statements in the Press and broadcast addresses given by members of the Government since the budget was presented,” said Mr. Hamilton. “This is wartime, however, and I have to remember that in spite of the fact it is my duty to be critical.” The Government was asking for nearly £100,000,000, the largest amount ever sought from the people of New Zealand, Mr. Hamilton said, and the subject of how the war was to be paid for provided the only possible approach to the Budget. These were abnormal days calling for abnormal action, and no one could shirk an equitable sacrifice. Nevertheless, the war itself would produce far harder cases than the system of financing it, for anyone who thought some proposal asked him for an excessive contribution should also remember the incomes lost by those hit by the war—tradesmen, importers, employees generally—not to mention the men who had volunteered from well-paid jobs for service with the forces. “Taking all this into account,” Mr. Hamilton added, “it remains dear to me that the Budget has not captured the proper approach. Above all, it lacks the example of sacrifice which it demands in almost every line, and while lacking tills example and sacrifice, proceeds to distribute, its demands in such a ’way that it can be said to be weighted against the family men on the lower income scales. A budget that hits the cradle or the family at this time misses its greatest opportunity to protect the basis of national life and provide for the future." Extravagant Spending. The Dominion was paying dearly today for the extravagant spending of the past five years, Mr. Hamilton said. In spite of three or four very prosperous years with export trade averaging more than £60,000,000, the overdraft at the Reserve Bank was at limit, the sterling funds were depleted and rationed, there were huge domestic commitments, and public works and sustenance were at peak. Nothing was available from the Reserve Bank for war, the very sort of purpose for which it was intended, and the Minister of Finance, Mr. Nash, had himself been reported as.saying that had lived -beyond its income in this respect to the extent of £28,000,000 in four years. Large overseas funds would have been particularly valuable today, Mr. Hamilton said, but instead we hud to loan on Britain. Domestic commitments had risen by 50 per cent, in the past four years, and in spite of a contrary statement by the Minister of Finance, the Estimates this year would cost more, not less, than last year, even with defence expenditure omitted. So far as public works and sustenance were concerned we were still struggling, and there was no indication as to what fund was to be drawn on to pay the Scheme 13 men. This position must be a nightmare to the Government in wartime. Higher Cost of Living.

dividuals or companies making too much as a result of wartime demand, but surely a really high yield or even a fairly substantial yield from such a tax would mean that the Government’s policy bad at least moderately favoured a particular class, which was not its intention. The Budget did not indicate on what basis this tax was to be levied, and till that was known it was very difficult for people to make their plans. Unless the position was cleared up immediately it would stifle enterprise. No details were given either, Mr. Hamilton said, of how it was intended to realize on overseas securities held by private people or companies but it had been pointed out that there was a verv large weight of investments against us should another country take similar action against us. This was a point that had to be considered. Lead In Economy Wanted.

“Any lead in economy must come from the Government,” Mr.. Hamilton said, in urging a reduction in the estimated expenditure. He pointed out that New Zealand’s estimated war cost for the year was only about 40 per cent, of the total requirements, whereas in Britain the war was absorbing 75 per cent, of public expenditure. Domestic expenditure accounted for £61,000,000, and it was nonsense to say'that this could not be reduced. He hoped a real effort would be made to effect economies. That sentiment was in the Budget, and everybody agreed with it, but this wasi no time for the leisurely fulfilment of good intentions.

Mr. Hamilton pointed out that taxation was to provide 371 per cent., and borrowing 62} per cent, of the current year's war expenditure of £37,500 006. If the war continued for three years it would take eight years of that taxation to pay the debt. The taxation proposals were well spread, and very few would feel they were not making a contribution to the war effort. Discussing public works, Mr. Hamilton said that an effort should be made to halve this vote during the year, as had been done in 1915-16, when the total amount involved was £2,640,000. This year the amount required for public works was £20.589.000, whereas in 1935-36 the expenditure was £5,630.000. The borrowing of £15,000.000 for public works would use much-need-ed money, and would greatly add to the difficulty of obtaining capital for production. Family Man Hit. “In some respects the Budget is not severe enough, particularly in regard to the Government’s own contribution," said Mr. Hamilton. “It floes hit the family man in the lower income groups, and it is unnecessary to penalize the family in this way. If the Government puts its own house in order, on the basis of the sacrifice it is asking from the community, these people would not need to be hit quite so severely.” Mr. Hamilton said financing a war and marshalling a nation for a war effort was an immense task, and in his criticism he wanted it understood that he was fully aware just what an immense problem it was. Making economies was an unpleasant job, but it must be done.

Examples of a higher cost of living caused by the additional sales tax and other causes were given by Mr. Hamilton. More goods, he said, must be produced to satisfy our own and overseas requirements and to stabilize our prices. Mr. Hamilton said that since 1935 the cost of living had increased by fully 20 per cent. High wages to meet high prices favoured the single man and hit the family man, whose plight today, with a low salary, was grave indeed. This increase in the cost of goods struck at the very heart of our economy, and a greater effort to prevent its cause was necessary.

“I repeat, the first thing is some attempt at equality of sacrifice,” Mr. .Hamilton said. “My criticism has been 'based on the .search for that objective. The Minister, of Finance, Mr. Nash, points out that, in great part, no one can absolutely foresee the demands that will be made upon us. Let us, then, regard this Budget critically, and hope that, as a result of that criticism, we may be able to improve our policy at a very early date. “We should not even have to wait a year for that. Those who can make sacrifices must, and most can. Those who cannot, without inequitable hardship. must be protected. Those who can make further sacrifices may have to he called upon. Review Of State S]>ending.

“No one would say we are working at our maximum effort yet,” said Mr. Hamilton, when stressing the necessity for organization to produce more goods. “Wo retain our 40-hour week and awards and conditions are still almost on a peacetime basis, while Britain works the clock round. I know there are some things in which, for instance, longer hours will not bring about greater assistance to the war effort or our production, but there arc scores of ways in which extra effort to assist us can be made by longer hours and proper co-ordination between all sections of the community. ‘All-in’ is not just an idle phrase.” Quoting actual examples to show the increase in the cost of living, Mr. Hamilton said that it suit which cost 105/last year would now'■'cost 120/- with the additional sales tax. Overalls which previously cost 7/11 were now 10/6 and overcoats costing 115/. had advanced to 139/-. A boy’s tweed overcoat could have been purchased for 44/6 last year, but it would now costan extra 10/-. Lack of Information.

“Uncertainty and doubt must be cleared away, particularly in regard to proposals for excess profits taxation, the taking over of securities and the compulsory loan proposals. As to Government expenditure, it must come under review immediately, and I feel sure that by the end of I lie year credits can have been progressively established.”

Mr. Hamilton said additional, goods and services must be produced by thorough organization for the country’s civil needs, on a basis comparable with its military effort. Undoubtedly one of the greatest contributions to this end must come from the organization of manpower and womanpower, particularly in the adjustment of manpower now leaning on the State, and in the waiving of hours and conditions of work, where that sacrifice, for the war tieriod only, would assist to victory.

Complaint of a lack of information in the Budget concerning the proposals for a complusory loan, an excess profits tax, and the regulations giving the Government power to take over overseas securities was made by Mr Hamilton. Referring to the compulsory loan proposal, he said that full details should have been given to avoid confusion and misunderstanding, as no business or enterprise could p'an for the future without definite information. The Government should tel 1 the people the worst, for when a person knew what his obligations were he could arrange his affairs accordingly. Mr. Hamilton pointed out tha: an excess profits tax had been intro.iuced in 1916, but had been dropped the following year as it had proved inequitable. A high rate of excess profits tax was theoretically desirable to bring In more revenue and to prevent particular in-