THE BUDGET.

Dunstan Times, Issue 2092, 27 August 1901, Page 6

THE BUDGET.

FRESH TAXATION AVOIDED

MR SEDDON HOPEFUL OF A SURPLUS.

Mr Seddon made his Financial Statement on August 16. He premised by saying the revenue for 1900-01 had exceeded his most sanguine expectations, and proceeded: Notwithstanding the remissions granted in the Customs duties, railway freights, passenger fares, and the reduction in postal rates by giving the penny postage, there was a pleasant surprise in store, for after meetin- all current obligations there was a balance on the credit side amounting to £552,564. The pessimistic criticism of our finance during the last few weeks has almost verged upon the ludicrous, and thereby a feehng has been raised in the public mind that additional taxation was imperative. The financial hotch-potch created by some of the critics in mixing the ordinary revenue with the loan account proves gross ignorance and the necessity for better education in respect to nublic finance, whilst the great ingenuity and industry displayed in endeavoring to prove that this year the balance must be on the wrong side of the ledger may be appreciated by the few who desired such a contingency. I am glad to say that the few must be disappointed and the many pleased, for it is certain that the revenue this year more than meets the expenditure, and that there will be no deficit. It has been stated in several newspapers that it is proposed to meet the estimated deficiency in part by an additional Land Tax, and also by some slight rearrangement of the Customs. It was further alleged that some stringency has occurred in the finance through the claims for old age pensions being much more numerous than was anticipated, and our detractors have even gone the length of cabling this nonsense to the London journals. The. credence given to the imagination of the penny-a-liner should not be found fault with by me, for, with patriotism that does them infinite credit, and which, as Colonial Treasurer, I very much appreciate, merchants have rk<;n to the occasion, cleared kerosene, sugar, and tea, with the result that the Customs revenue this month is buoyant in the extreme, and contrasts very favorably with the same month of the last year. The only possible foundation that could give rise to what appeared in certain papers was a statement made by me warning a deputation of members and other gentlemen against pressing for an excessive public, works expenditure, thereby entailing borrowing and squandering. Incidentally. I stated that the revenue returns, as furnished by the departments, did not warrant the suggested expenditure, and that this caused me some anxiety. Again, in respect to an increase of the graduated Land Tax, I stated in the House some weeks ago that if the Government were to keep the pledge given last year in granting the reduction of id in the £ on the mortgage tax, the graduated tax on land would require to be increasedj so as to yield an amount equal to that conceded by way of reduced mortgage tax. After carefully reviewing the position, I now find that the views I expressed have been verified, for a reduction in revenue to the extent of £25,000 could not prudentlv be granted unless otherwise recouped. The announcement that revenue cannot be given away without a necessary recoupment will very naturally and properly lead to the conclusion that the revenue and expenditure are fairly evenly balanced. This conclusion is correct, but it is owing to the inclusion of nearly £120,000 of abnormal and non-recurring expenditure this year and to an increase in education and technical education, which is in excess of those of last year by no less than £67,000; also to an increase in the vote for the Colonial Secretary's Department, which exceeds the vote for last year by £69,300, caused by extraordinary services. The vote for Defence, including the capitation payable to our volunteers, is also largely increased owing to the number of volunteer corps being more than doubled. Even with these exceptional demands upon our resources there will be sufficient to meet every requirement, and. at the risk of disappointing the pessimistic alarmists, I am able to announce that there will be no deficit, but a reasonable surplus. It is well, however, that in respect to expenditure I should urge the absolute necessity for prudence and economy, for although THE REVENUE IS BUOYANT and increasing, yet, owing to reductions in the Customs tariff, concessions of penny postage, remissions in railway charges, and other concessions, there is this year, as compared with last year, a decrease of only £9,500. There should be a jealouslyguarded expenditure, for a restricted population can only bear a limited and reasonable impost of taxation. Luckily for this colony, all our eggs are not in one basket, and the curtailed spending power owing to the low price of wool is counterbalanced to some extent by the prices ranging for other of our staple products, and with a surplus of over half a million hist year and the continued favorable revenue coming in this year, there seemed every prospect that the desire of Ministers to grant concessions of taxation and reduced rates on products carried on our railways would be consummated. But in the face of the necessarily increased expenditure this year, the more prudent course is to defer this, and further expenditure should be cut down to the lowest limit consistent with efficiency, after providing for the necessary requirements. The eager and pressing desire for the rapid construction of public works and conveniences has forced borrowing up to a limit beyond which it would not be safe to go. There need be no curtailment of expenditure in respect to obtaining lands for settlement, or for roading back blocks and Crown lands, which so materially assists in furthering the settlement of the people on the land, or in respect to advancing money to settlers, or in pushing on the North Island Main Trunk and other important railways, or in otherwise developing within reasonable limits the resources of our colony, for this means increasing the output of producers—yes, and exports—and tends to promote and increase population, which the colony badly needs. In respect to the expenditure on several classes of public works, district railways, and especially buildings and works which are more a matter of convenience than of necessity, prudence demands that there should be*a reduction in the expenditure therefor, especially seeing that our population is so slowly increasing; for it should be borne in mind that the increased ratio of population is much below that of the increased ordinary expenditure. For every million borrowed and expended on non-revenue-pro-ducing works and objects an annual charge of about lOd a head is entailed upon every European man, woman and child in the colony. Coming to the demands upon the Consolidated Revenue, the several services of the colony have materially increased, and the strictest economy is necessary, for if ever the time arrives when increased taxation is required to meet ordinary expnditure, so surely will reductions in salaries eventuate. To avoid that contingency ■Bd the injustice which arose in the past, it is well for those having responsibility to do their utmost to keep down expenditure. In the Budget last year I stated that thereafter the aid to Public Works Fund from the surplus in the Consolidated Fund would have to be partially if not wholly' abaa-

doned. The public works requirements of this year are, however, so large that I am compelled to use £500,000 of the surplus, and that amount will be transferred accordingly. RECENT BORROWINGS EXPLAINED. I regret again to have to state that from various causes well known to members the money market in London continues to be unfavorable to floating a loan, and we have had recourse to raising £500,000 locally on short-dated debentures, bearing 4 per cent, interest. Recently a paragraph appeared in the Press something to this effect: “ The needs of the Treasury were so urgent that £500,000 was borrowed from a leading life assurance society at 4 per cent., with a condition that the interest would be paid at the head office in Sydney.” The facts are that the prospectus of the £500,000 local loan raised in April last provided for interest being made payable in New Zealand, Australia, and London. Some time after this loan had been closed the society in question asked the Government if they would accept an investment of £IOO,OOO, and seeing that at the time we were selling debentures openly over the counter on terms as to interest similar to those above referred to, we naturally obliged the society, and accepted their money. Other institutions and private individuals have also been glad to avail themselves of this further opportunity to invest their money in short currency security carrying a fair rate of interest. The war in South Africa still continuing and the large Imperial loans and other demands upon the London money market lead to the conclusion that it will be some little time ere any loan cnild with advantage be floated in the Mother Country. It becomes necessary, therefore, that a large proportion of the amount required and authorised should be raised locally, and this being the case there should be a careful public works expenditure until a favorable opportunity for raising the money in London arrives. THE FINANCES OF THE PAST YEAR were then reviewed at considerable length. The gross revenue was £5,905,916, representing the largest volume of receipts since the establishment of responsible government. It showed an excess of £272,320 compared with the previous year, the principal excesses being: Customs, £73,295; stamps, £43,036; Land and Income Tax, £45,936; railways, £99,028. Compared with the estimates, there was a gross increase of £429,156, the principal increases being: Customs, £157,861; stamps, £48,935 ; Land and Income Tax, £43,393 ; beer duty, £2,170 ; railways, £146,241; marine, £3,353 ; miscellaneous, £2,411; territorial, £30,203; and recoveries, £1,411. Registration and other fees produced £6,462 less than expected. As to the Customs duties, which were £157,861 in excess of the estimate, the Treasurer remarked: In my estimate I took off nearly £85,000 from the actual receipts of the previous year, so as to provide against the anticipated loss arising out of concessions, which, I stated in my Budget, would probably reach £157,000. In spite, however, of the reductions of duty on leading lines of goods, there has been an extraordinary clearing of other lines untouched by Tariff alterations, which have resulted in large increases of revenue. Take, for instance, the duty on spirits, which increased by £22,800; tobacco, £15,800; cigars and cigarettes, £9,100; sugar, £3,500; ad. valorem goods and other items, £98,000. These items, which are mainly luxuries, may be taken as clearly demonstrating the increased earning power of our colonists and the prosperity which arises therefrom. It was quite likely that the Royal visit was to some extent responsible for the inflation of the ad valorem duties. Regarding penny postage, the concession had given universal satisfaction, and the I«ss of revenue entailed thereby was sure to be made good by increased correspondence. The Land Tax came within £SOO of the estimate, while the Income Tax exceeded it by nearly £43,000. The increase of £30,000 in territorial revenue arose from cash land sales (£18,000) from pastoral rents and miscellaneous (£12,000). On the other hand, registration and other fees were over-estimated by £6,000. The expenditure totalled £5,479,703, against £5,140,127 the previous year. Of the increased cost of £339,576, permanent appropriations were responsible for nearly £50,000 (old age pensions requiring £39,500 more) and subsidies to local bodies £7,500. The departmental expenditure showed an excess over last year of £289,670, railways requiring £105,500 extra, defence £64,400, postal-telegraphic £27,700, Colonial Secretary £18,500. In some directions the expenditure was under-estimated by £206,940; in others exceeded by £113,530. The net saving, as compared with the estimate, was £90,590. After dealing with the state of the Public Works Fund, the Loans to Local Bodies Account, the Land and Income Tax, the Lend for Settlements Account, and the Public Debt (which now stands at £49,591,245, being an increase of £1,716,793 during the pg.st financial year), the Treasurer proceeded to explain the recent flotation of THE HALF-MILLION LOAN. Our financial advisers in London having reported unfavorably on the state of the money market, and advising that a very low figure would bo obtained for a 3 percent. loan, it was determined to tap pur own resources. I am pleased to say that the result more than justified this action, as the recent flotation proved a complete success. The amount to be subscribed was £500,000, authorised by the Aid to Public Works turd Land Settlement Act, 1900. It was decided to make the issue 4 per cent., with the price fixed at par. The loan was freely advertised throughout the colony, and in Melbourne and Sydney. Tenders were opened on the 23rd April, and it was found that the amount applied for was £861,300, represented by 126 tenders. The average price offered was £IOO Is 6d, the highest tender being at £lO2 and the lowest" £IOO Os 6d. One hundred and twelve tenderers received allotment by over par and 50 at par. The average price over par yielded £IOO 6s 7d. The allotment was made so as to embrace the largest number of small tenderers and to encourage bona fide investors. No less than 98 tenders have been accepted foxsums of £5,000 and under—namely, 19 tenders for £2OO and undex', 9 from £2OO to £4OO, 25 from £4OO to £6OO, 5 from £6OO to £BOO, 50 from £BOO to £1,00.0, and 2 from £I,OOO to £5,000. The remaining 14 tenders wex-e from £B,OOO to £IOO,OOO. Australia received 29 allotments, ranging from £2OO to £50,000, at (with the exception of one tender) a premium of from Is to 16s over pax*. The offer to make interest and principal payable eitlxer in Sydney, or Melbourne, or London certainly induced offers for investment of moneys'which we should otherwise not have received, and the action has been favorably commented on by leading financial journals. No fees for brokerage were paid. The expenses have beexx light, rather less than | per cent, consisting only of advertising and commission to-the Bank for the transmission of money from Australia to Wellington. An allowance at the rate of per cent, per annum was made to tenderers who chose to pay their final instalment befox-e due date. The local flotation has proved a very great success, and although the rate is high in comparison with late issues, the expenses have been so small I that I think we may consider we have got : our money nearly (if not quite) as cheaply

1 as under present conditions a 3 per cent loan could have been obtained. The currency is short, running only until the Ist April, 1904. WHAT THE SEDDON GOVERNMENT HAVE SPENT. There has been considerable adverse criticism, and assertions have been made to the effect that there has been an undue increase in expenditure during the last ten years. It is quite true that there has been a largely increased expenditure, but we have also a largely increased population and a greatly increased revenue. We have now also in existence departments of State which were in 1891 unknown, and many of them unthought of at that time. The total expenditure and revenue have been : Total. Total, expenditure, revenue. 1890-91 £4,291,215 £4,158,774 1900-01 5,479,703 5,852,796 Increase ... £1,188,488 £1,693,932 Turning to the revenue-earning departments of the State, it will be seen that whilst there has been an increased expenditure there have also been increased earning and increased profits. The returns of the earning power and expenditure of the principal departments are thus stated: Railways. 1890-1. 1900-1. Expenditure ... £700,703 £1,127,847 Revenue 1,121,701 1,727,236 Postal-Tflegraphic. Expenditure ... £26i,285 £416,364 Revenue ... 334,669 503,181 Stamps. Expenditure ... £4,659 £8,925 Revenue 565,784 792,943 Customs. Expenditure ... £33,998 £33,366 Revenue ... 1,527,207 2,180,862 . Lands. Expenditure ... £92,614 £137,565 Revenue ... 350,551 451,338 Taxing Department. Expenditure ... £7,081 £19,531 Revenue ... 357,348 468,392 CENSUS RESULTS. The latest census of the people, proved that during the last five years oui population had, relatively to the previous five years—that is, from 1891 to 1896—actually decreased in number by 7,36b persons. The opinion of the late John Ballance, as expressed in his Budget in 1891, may not be out of place, showing, as it does, the bearing increased or decreased population has upon the prosperity of the colony. Mr Ballance said :" I consider it my duty to direct the attention of the Committee to the lesson conveyed by the census returns of the population, recently issued. Briefly, the rough results of the census, as shown by the enumerators, give a population, subject to revision, of 623,352 persons, not including Maoris, against 578,482 persons in March, 1886, making an increase for the five years of 44,870. But the natural increase for this period, being the excess, of births over deaths, is 64,168 persons, so that the loss by excess of departures over arrivals is 19,298. The arrivals recorded in the five years were 73,386, and the departures 83,948, giving a loss of 10,562 persons. It would thus appear that the unrecorded departures amounted to 9,736 persons. The full outgo of population from the colony has evidently not been returned to the Regis-trar-General in the monthly statement, and it is well known that in the years 1888-90 and of late the steamers for Australia were greatly crowded, owing to a disposition on the part of the floating population to leave, mainly for New South Wales. Now, here is a loss of wealth and wealth-producing power in the departure of so many people from our shores to seek employment in other colonies which demands the serious consideration of Parliament," Between IQ9I and 1896 there was an increase in population of 76,753, and between 1896 and 1901 an increase only of 69,385 (the Chatham and Kermadec Islands not included). OUR WORKING RAILWAYS. The rapid and continued growth of the business of our railways, the principal highways and means of communication'between the various party of the colony, is one of the best indications of the continued wealth and prosperous condition of the colony. The lines were taken over by the Government in January, 1895, and on the 31st March of that year the number of miles of line open for traffic was 1,993, and the train miles run 3,221,620. At the close of the last financial year, 31st March, 1901, the mileage open was 2,113, and the train miles run 4,620,981. During the year ended 31st March, 1895, the railways carried passengers, 28,623 season ticket-holders, 444,981 parcels, 750 carriages, 705 drays, 40,890 cattle, 1,519,921 sheep, 43,292 pigs, 36,972 tons of lime, chaff, etc., 85,102 tons of firewood, 198,578 tons of timber, 388,556 tons of grain, 377,938 tons of merchandise, and 857,917 tons of minerals. The railways earned a gross revenue of £1,150,851, and gave employment to 4,957 men. For the year ended 31st March, 1901, they carried 6,243,952 i)assengers and season ticketholders, 633,770 parcels, 1,336 carriages, 1,566 drays, 72,868 cattle 2,412,191 sheep, 51,059 pigs, 78,844 tons chaff, lime, etc., 92,830 tons firewood, 280,803 tons timber, 712,571 tons grain, 551,879 tons merchandise, 1,366,241 tons minerals; earned a gross revenue of £1,727,236, and gave emplovment to 7,793 men. Thus the traffic for the year ended 31st March, 1901, shows an increase .over that for the year ended 31st March, 1895, of 1,399,351 train miles, 2,338,015 passengers, 54,298 season tickets, 18,789 parcels, 596 carrigaes, 861 drays, 31,978 cattle, 892,270 sheep, 7,767 pigs, , 1,291,296 tons of goods traffic of various classes, £576,385 in revenue, and 2,836 in , the number of men employed. The actual profit for the vear ended 31st March, 1901, was £599,389," as against £571,533 for the previous year. The capital cost of railways opened for traffic is £17,207,328. The profit on working gives £3 9s Bd, as compared with £3 8s 5d for last year. Taking into , consideration the large reductions in passenger and other rates, the increased cost , of materials, coal, iron, etc., and increased , wages, this result is eminently satisfactory, and the figures are, I venture to think, eloquent testimony of the success of the State administration of our railways. Notwithstanding the fact that the incrv.ved traffic during the past six years has been < of such a phenomenal character, there is every indication that the business for ihe present financial year will be fully equal to that of the preceding year. ; RAILWAY CONCESSIONS. 1

In connection with the results of working railways for the last financial year, the large concessions in rates granted by the Government since resuming control of the lines should not be lost sight of, as they have a very material effect on the results for the year. The total reduction made since the Government took over the railways amounted up to last year to no less than £369,439, and to 31st March, 1901, to £420,239. The following are the principal concessions granted, and the estimated value of the reductions for one year: —Reductions live stock rates, £25,000; firewood, chaff, and lime, £8,000; free carriage of lime, butter, eggs, and fish empties, £1,500; abolition of extra charge of Id per ton on branch lines, £3,000; agricultural produce, £45,000; butter and cheese, £5,000 ; artificial manures, £1,000; bricks, clay, coal, etc., £3,000; general reduction of ordinary passenger and season ticket rates, £68,000*; cheap tickets for workmen on Auckland, Wellington, Cbristchurch,

and Dunedin suburban lines, £1,600; concessions to racehorses, polo ponies, hunters, and hounds returning from races, polo matches, and hunts, £2,800; carriage of gods from centres to ports of shipment, dead weight instead of measurement, £l,lOO —total, £165,000. In addition to items enumerated, reductions have from time to time been made on a very Targe number of articles of everyday use carried over the railways, the regulations have been made of a more liberal character than heretofore, the train services improved, speeds increased, and additional trains involving an expenditure of many tens of thousands per annum, have been provided, and to further meet the convenience of the public, goods and passenger traffic have been separated wherever the volume of business has warranted such a step. NORTH ISLAND TRUNK RAILWAY. The central route having been formally determined upon for the North Island Main Trunk Railwav, immediate steps were taken to put further work in hand. The formation is now well advanced between Kawakawa and Taumaranui, while bush-felling, etc., is in hand south of the Wanganui River From the south end the works extend nearly to Turangarere, all the important works on this section being fully manned. The erection of Makohine viaduct is proceeding satisfactorily, notwithstanding that the work has been retarded bv continued bad weather. The viaduct will be completed during the coming summer, and simultaneously the railway will be opened to Mangaweka. The amount voted last session was sufficient to cover the requirements for the year, but an increased amount will be necessary for the coming vear. MIDLAND RAILWAY In accordance with the resolution passed by the Fublic Accounts Committee last session, a Roval Commission was appointed, and, after a' very exhaustive inquiry, has reported practically that the company and debenture-holders have been very well treated. They find that the total expenditure by the 'companv on the railway was £1,108,628, of which only £654,411 was expended on the actual construction and equipment of the railway, and the balance 7 —on supervision, commission, salaries, cost of raising capital, interest charged to capital account, and incidentals. The Commission state that the financial charges in connection with the undertaking were enormous in comparison with the work done, and that the sums paid for fcbi debenture interest, shareholders' interest, cost of raising money on debentures, n.-.minis tration, engineering, and law costs were out of all proportion to the amount expended on construction and equipment. They further report that the selling value oi the whole railway, based on the revenue famed and allowing for a prospective increase for ten years, is £192,833, and that the amount realised by the company from the Government land grant was £313.060, or £50,195 in excess of the value at which the grant was debited to the company. They also find that the Government provided money towards the construction of the railway to the amount of £35,439. The Commission were asked to ascertain the selling value, and, on the assumption as to relative losses, to apportion under the following conditions:—"lhe said lines of railway having been constructed by means' of moneys provided partly by the shareholders in'the said company, parVi, by moneys raised upon debentures, and partly by moneys provided by us, by our said grants of iand and out of our Colonial Treasury, in what proportion should the money value of the said railway, estimated by you as aforesaid, be apportioned among tjlio" three said several contributors to the cost of construction?" The Commissioners, on the hypothetical basis that the several contributing parties towards the creation of this asset should share in its distribution, rateably apportioned the selling value of £192,833 as follows:—To debentureholders, £126,788; to tby company, nil; to the Crown, £66,045. It will be seen, however, that £654,411 only was expended on the construction and equipment of the line, and of this sum the amounts realised by the company from the Government land grant formed nearly one-half, whilst, taking the selling value of the line at £192.833, and the amount realised from the land grant at £313,000, it will be found that £120,237 has been provided by the colony in excess of the selling value of the line. The petitions of the debenture-holders and the company presented last session should be dealt with this session. POST AND TELEGRAPHS. The Post and Telegraphs is one of the most important departments of the State, and is inseparably interwoven with the public finance, and is one of the barometers that never fails to disclose the progress of the colony and the condition of the people. In character it is more for the convenience of the people than for revenue-producing purposes; yet notwithstanding the many unpaid services performed, it has proved more than self-supporting. Last year the expenditure was £416,363, and the receipts £503,181. This year the expenditure is estimated at £441,214, and the revenue is anticipated to reach £485,800. POST OFFICE SAVINGS BANKS. The business of the post office savings banks shows a marked increase, both in the volume of business and in the total amount at the credit of depositors. Last year the excess of deposits (£4,170,428) over withdrawals (£3,827,416) amounted to £343,012 over the previous year, and the interest credited to depositors to £146,169, while the total accumulated savings stood on the 31st of December at £5,809,552—an average of £29 8s 7d to the credit of each of the 197,408 depositors. Compared with the year ended 31st December, 1890, the increase Is almost phenomenal, the total at credit having increased from £2,441,876 to £5,809,552, or at the rate of 137.91 per cent., representing an increase in the average amount at the credit of each account of £4 6s 3d. The interest paid in 1900 was £146,169, as against £92,319 in 1890, an increase equal to 58.33 per cent. Classifying the accounts, it will be found that those with a balance up to £IOO increased from 90,115 to 178,405, or 97.97 per cent, ; from £IOO to £2OO, from 4,750 to 11,173, or 13.52 per cent. ; from £2OO ta*i£3oo, from 1,502 to 5,151, or 242.94 percent. ; and above £3OO, from 841 to 2,679» or 218.54 per cent. The total number of accounts open increased from 97,208 to 197,408, or 103.08 per cent. NATIONAL EDUCATION. Capitation and Teachers' Salaries.—Out of the statutory capitation of £3 15s per annum on the average attendance which is paid to the Boards of Education these boards have to pay teachers' salaries and allowances, the incidental expenses of school committees, and their own office expenses, together with the cost of the inspection of schools, receiving, however, an additional grant of £44,000 per annum towards the last item. Tho circumstances of the various boards are very different, and it is practically impossible for the boards of the smaller districts, and even for the larger boards (such as Auckland), in whose districts small schools are numerous, to pay salaries equal to those paid in districts in which there is a greater number of large schools. The consequence is anomalies and irregularities in the salaries of teachers occupying similar positions in different parts

of the colony such' as certainly exist in connection with no other department of the public service, and probably in no other class of workers in the colony, yet it cannot be said that the highest salaries are by any means too high. So many issues were involved that it seemed best to appoint a Royal Commission to inquire into the whole question. The leport of the Commissioners contains two scales of staffs and salaries for public schools. The first—which involves an expenditure of £4 per head on the average attendance in all the public schools of the colony—is a vast improvement on the existing conditions. The second, which the Commission strongly recommend, is on the basis of £4 2s 6d per head. It has the same general features as to staffing and salaries at the first, but the salaries are higher by about £5 all round, except in the smallest schools, where the first scale is already sufficiently liberal. The salaries under the second scale, in fact, would mean, with very few exceptions, a general levelling up. As to the exceptions, the Commission suggest that for two years no salaries should be lowered, and as the cost of the concession would be trilling this suggestion may readily be adopted without interfering with the general scheme. Since January of the present year, with the £3 15s statutory capitation* and the special vote of 5s per head, the total payments have been at a rate practically equivalent to a capitation of £4 on the total average attendance. Last year the appropriation for capitation was £398,000. This year £416,200 is required to be voted, which is £18,200 in excess of the amount voted lastyear. Next year the finances of the colony permitting—as I believe they will—we hope to be able to provide for the payment of teachers on the second scale recommended. The Manual and Technical Instruction Act of last session has engaged the attention of the Government during the recess. Organising inspectors have been appointed, and the regulations required to give effect to the Act have been issued. The terms of these regulations, I believe, are such as to offer a degree of encouragement to manual and technical education as good as in any part of the world. The inspectors have already visited every part of the colony, and have met teachers and others interested, giving model lessons and such information and advice as will enable local controlling authorities to begin Work on the best lines or to extend their work where it has been already begun. The inspectors have also in hand a series of small manuals, suggesting suitable programmes of work in manual and technical classes. One of the most satisfactory features of the movement is the degree of 'interest that is being manifested in regard to the introduction of hand and eye training into the schools of the colony. Inasmuch as trained teachers are essential for defective work, special grants have been given to all the boards of education to enable them to establish classes for giving manual instruction to teachers. The extension of technical education proper will be sufficiently indicated when I say that since the passing of the Act there have been some forty or fifty applications for grants in aid of apparatus, and material. The expenditure under the head of technical instruction, exclusive of grants for buildings, for the year ended 31st March, 1901, was £2,690. The expenditure this year may be estimated at £14,000 or £15,000, exclusive of building grants, which last year amounted to £2,178. This year we anticipate an expenditure of £IO,OOO or £12,000 upon buildings and apparatus. After a few years the grants in aid of buildings and apparatus may be expected to decrease as the need is generally satisfied; while, on the other hand, the grants for capitation and other current items will increase year by year for some time. COLD MINING generally is steadily progressive, and although many companies which were floated more for the purpose of collecting calls from shareholders than for the purpose of winning the precious metal have been and are being wiped out of existence, the yield of gold is increasing. • The quantity of gold exported for the half-year ended 30th June last was 217,4780z, valued at £844,888, being an increase of 38,1750z, valued at £150,029 over the first half of the year 1900, and, as compared with the first half of the year 1899, when the quantity of gold exported for the year was 389,5580z, valued at £1,513,173, being the highest for twentysix years previouslv, the export shows an increase of 24,3470z, of the value of £94,389. It is not unreasonable therefore to expect that the yield for the present year will equal, if not exceed, that for the year 1899. Riparian Rights.—The scope of the Commission referred to in last year's Statement as having been set up to inquire and report as to claims for compensation in respect to riparian rights and land affected by dredging in Otago and Southland was extended so as to include all rivers in the Middle Island. The Commission have now concluded their investigations, resulting in reports having been made on forty-six rivers, of which number six have been proclaimed, and compensation amounting to £5,799 13s 5d paid. Notices of intention to proclaim twenty-four rivers have been issued, but as the period of ninety days within which claims for compensation can be received has not expired, the total sum that may be claimed is not yet known. On some of the more important rivers on which agricultural lands Avill be affected by mining it is feared individual claims will be large, but as in many cases farmers have disposed of portions of their holdings fronting rivers and streams for dredging purposes, the compensation claims will have to be considerably reduced before such rivers or streams are proclaimed. The question of a fair and equitable settlement between riparian right holders and the mining community is beset with many difficulties. If, however, a conciliatory spirit is exhibited on both sides, and with the information before the Government resulting from the inquiries of the Commission, it is expected that in most cases the conflicting interests will be adjusted. REDUCTION OF MORTGAGE TAX. In my last Budget I stated that " for some considerable time the interest on mortgages has steadily decreased. During the past ten years interest on mortgages has fallen about one-fourth. This makes the penny in the pound on the capital value a very heavy tax." I have not altered my opinion, and still consider that the mortgage tax is too high, and that some relief should be given provided the finances of the colon}- permit. Whilst desiring to keep good faith with Parliament, to do so Lnis session would be imprudent, unless the loss of reyenue occasioned thereby is recouped. FINANCE OF 1901-1902. Expenditure. After careful examination and pruning, I am able to submit estimates of expenditure, which, although undoubtedly large in aggregate, have been kept down to the lowest limit. After taking into consideration the abnormal and non-recurrent expenditure they contain, the estimates for 1901-1902 are set down at £5,763,814. The actual expenditure of last year amounted to £5,479,704. There is therefore a proposed increase over last year's expenditure of £284,111, and I I will as concisely as possible run over the , various heads of expenditure which cause this large excess. Loans recently raised : caused an addition of some £70,000 for in- i terest, while the old age pensions are an- j swerable for £IB,OOO, which is most of the ( excess in expenditure under permanent Acts. 1 In the Colonial Secretary's Department tha < visit of their Royal Highnesses has <

I j sitated provision for £50,000, and £IB,OOO ;i is required for the census. Exception will ■ ' not, I feel sure, be taken to the expenditure incurred upon the Royal visit. It was the r general .desire of the people that the recepi tion and entertaining should be creditable i to our colony, befitting the great occasion, j and pleasing to our future King and his i gracious lady. The increased volume of the .• business o£ the Postal and Telegraph Dei partments has necessitated additional clerical - assistance, and the ordinary increases arisE ing from the classification has added some i £15,000 to the Postal and Telegraph Estij mates, in addition to a loss of some £7,000 ; as contributions to the San Francisco sers vice. I have already mentioned tiie increase I in the proposed expenditure for educational » purposes, and shall refer at greater length to i this subject hereafter. The Department cf > Agriculture is rapidly growing, and the ; officers are undoubtedly of great service to the farming community. To meet the extra r call upon the department, a good many more [ skilled officers have been engaged, conse- ; quently extra expense incurred. But it s must be borne in mind that the department i obtains payment for the services rendered in , the shape "of fees, which are paid into the I Consolidated Fund. The increases in other . departments are small, and scarcely worth . comment. I want again to mention that. | out of the £284,000 of proposed increased expenditure this year (of which £210,000 belongs to the annual appropriation), fully 1 £120,000 arises from exceptional items, ~ which are not likely to be of a very recur- ". ring character, to which we must add the inl creased cost of postal and telegraph and „' educational services, which amount to quite £90,000, and are consequent upon the prof gress of our commercial and social surroundings and of our higher civilisation. Thus the excessive expenditure disappears, and 1 feel sure that members will not complain when the various votes come to be consid- ' ered by them. Estimated expenditure of the Consolidated P Fund (revenue account) for 1901-02, conipared with actual expenditure of 1900-01:

Net InCl'BclSG* Grand totals £5,763,814 £5,478,703 £284,111 THE REVENUE. It is now necessary to review the estimates of revenue, which I hare set down at £5,80y,000, together with £57,000 receipts to be derived from the sale of debentures for sinking fund accretions. These two sums total £5,896,000. Last year the actual receipts amounted to £5,905,506, showing that there is an estimated falling off of revenue to the amount of £9,506 during this current year. I have no desire to be pessimistic, but one cannot be too cautious while framing the estimates for the year. It is only necessary to look around to see the St.lid evidence of prosperity which meets the eye. At the same time I have to bear in mind that extraordinary events took place iJuvms; the financial year, events which v.ndoubtedly had their effect in augmenting pur revenue—events which are not likely to f.ccur again. Neither will others of a kin6rr. 1 character take their place. I allude to th« visit of the Duke and Duchess of Cornwait and York. The visit of their Royal TTiiMinesse ■•• must have caused a vast outlay, Si lead over the whole community, and much of the expenditure has found its" way to the Treasury coffers in the way of duties. On the other hand, we must not lose sight of the effect of the remissions which were made in the tariff in August last. Had it not' been for the increased consumption of dutiable good 1 ! which has been noticeable for some years past, and for the extraordinary expenditure I have just referred to connected with the Royal visit, there would have been a loss of revenue to the extent of £130,000, and I must still reckon for a loss of Customs revenue in connection with the reduction of duty to the extent of at least £IOO,OOO for the current year. Some portion of this loss will, however, be made good by the increased consumption of articles not affected by the tariff alterations, so I have set down the estimated Customs revenue at £2,110,000, or £70,862 less than last year's receipts. It may be that this - curtailment of revenue will not take place, ; but it is best to err, if at all, on the safe j side. As to the railways, the returns so '- far show that the splendid revenue of last year is being not only maintained, but is even exceeded. I feel I am therefore justified in anticipating the receipts will reach £1,760,000, or £39,359 in excess of last i year. The stamp revenue remains sub- t stantially the same. I estimate this year's ] receipts at £903,500. Last year they reached i £903,945. In last year's Budget I estimated '_ there would be a loss of revenue arising i from the adoption of the penny postage to i the amount of £BO,OOO per annum, but ow- s ing to the great activity of trade generally I c do not anticipate a greater loss than £24,000 y iota this source. Recent legislation has j: done away with the imposition of stamp - duty upon native land. This will entail *

D loss of some £4.000. On the other hand, 1 there has been a large accession of business a in the telegraph branch, and this, with fcha s i.-.'-.c:. '■ • ' '" ' mrces, will - quite 3 sustained by the introduction of penny jwst-"* , age. Compared with last year's results, s there is an estimated increase of some 3 £10,400 to the Land Tax, and £1,200 to the - Income Tax. The increase and decrease in 1 the estimates of the other items of revenue - are so small as Rot to call for remark. 9 Statement of the estimated revenue of - the Consolidated Fund (revenue account) fer 3 1901-02, compared with the actual revenue - of 1900-01: 1 ■ Estimate for Actual of 3 ! 1901-2. 1900-1. f Customs £2,110,000 £2,180,86Z 3 Railways 1,760,000 1,720,6*1 D Stamps 903,500 903,935 x Land Tax 305,000 294,584 „ Income Tax 175,000 173,809 Beer duty ... 86,000 85,171 . Registration and other ? fees 76,000 67,537 b Marine 26,200 29,553 1 Miscellaneous 127,300 126,411 3 Territorial revenue ... 270,000 270,203 t i i ! Totals £5,839,000 £5,852,706 b Debentures for sinking \ j fund 57,000 52,800 : Grand totals ...£5,896,000 £5,905,506 ' | ESTIMATED RESULTS AT CLOSE OF ■- j 1901-1902. -| The revenue being estimated at £5,896,000 i and the expenditure at £5,763,814, there res mains a balance of £132,186, to which may - be added the balance (£32,564) of the sur- - | plus brought forward from last year (after s allowing for £500,000 to be transferred to the Public Works Fund). These figures pro--1 duce a balance of £164,750, out of which " provision for the Supplementary Estimates has to be made. _ STATE COAL MIXES. The time has arrived when the colony should supply itself with coal. The output at present does not adequately meet require--3 ments. Private enterprise is not meeting ■ the general and increased demand. The ' annual consumption of coal for the several . branches of the public service amounts to about 115,000 tons. The railways alone re- [ quire 100,000 tons per year; of this, 6,500 . tons are hard or bituminous coal. It is J estimated that the bituminous coal should be obtained at 5s to 7s 6d per ton less than . we are paying at the present time. For coal delivered to one of the Government 5 steamers at Greymouth we are asked 17s, • and it is well known that the same coal can be actually, and with profit, put on,board at 10s. The inadequate supply and Me increasing demand have brought about an undesirable situation. There is a combination j of the coal dealers, and the mine owners are working in unison with them, the result i being that abnormally high prices are charged to the consumers. The effect of opening a State mine will ameliorate, if it 1 does not remove, this evil in the course of time, and should the necessity therefore j arise, we could, in addition to supplying our own State demands, extend the output so as to enable coal to be supplied to housei holders at reasonable rates. Another valid reason for the State stepping in is the neces- ' sity that exists for having a reserve of coal, at least at the four centres, to meet contin- , gencies that might arise. At the present ' time the arrival of extra steamers and vessels requiring coal interferes with the ordinary ; demand, and a coal famine ensues. We have had several in the last year or two; and that there should be a coal famine in a < country like New Zealand, which is teeming with coal, points to a serious defect, the ' remedy for which is the opening of a State coal mine. The House will this session be asked to pass the necessary legislation, the authority, and provide the means for working a State cpal mine. CROWN TENANTS' REBATE. Last session the Rebate Crown Tfenants Act was passed. Its working has not been satisfactory or equitable in its incidence. An amendment of the Act is necessary, and at this juncture it is well to speak plainly, for, from facts which have come within my own knowledge, it is quite clear that a person taking up bush land, and having little or no capital, can't pay rent until the land vields a return. There are practically no returns for two years. By that time two years' rent is in arrears, and the yields are not sufficient to maintain the settler and his family. Another two years pass over, and still find him behind in payment of his rent, or if he has paid the rent he has probably had to borrow the money for that purpose. Under these circumstances it is much better that the State should insist upon the improvement conditions being strictly complied with, and allow the tenant to sit rent free for the first four or five years. After that time the tenant would be in a position to pay the rent, and the anxiety and worry caused under the conditions now existing would be avoided. There is also another point worthy of being taken into consideration—namely, that although there is a large area of Crown land available for settlement, most of it is inaccessible, and is situated a long way from the centres of population, and is not of extra good quality; therefore some inducement is necessary which, if given, will tend to promote the settlement of the people on our Crown lands, ana relieve the existing conditions among those who prefer to go upon the lands acquired under the Land for Settlements Act, thus avoiding the hardships which fall to the lot of pioneer or back-block settlers. OLD AGE PENSIONS. Seeing that the cost of the old age pensions is alleged to have been a factor in creating the recent unnecessary alarm as to the financial positipn of the colony, it is well to set the matter at rest in order to remove the erroneous impression which has been formed. Last year the amount paid for old age pensions was £197,292, and this year it is estimated that £215,000 will be sufficient to meet all claims. The increase is therefore £17,703, but with a surplus of over half a million last year, and, so far, abundant revenue this year, that amount is not likely to materially affect the finances of the colony. The increased expenditure in old age pensions must, however, not be treated lightly, and a careful supervision is necessary, for there are reasons for believing that imposition is practised and that evasion of the law to some extent prevails. It is well known that it has now become quite a profession for some people to go round hunting up applicants amongst the native race for the old age pension, and should such applicants Jn-ove successful these people charge them a high fee for services performed. In view of the large amount now paid, it will not be prudent to press for old age pensions being made universal or for any increase in the scale. HELP TO FARMERS AND PRODUCERS. The importance and desirability of helping those located on or living directly from the products of the soil is admitted by all. How and in Arhat manner this can best be accomplished is worthy of our best efforts. The establishment of new and increased markets will assist in this direction, and it is essential that the produce for export should be carried at the minimum rates on our railways, and that the cost of transit by sea should be reduced to the lowest limit. With this, however, storage and (Continued, on page B ix,)

! Revenue Account. 1 Estimate Actual for of Difference 1901-2. 1900-x. Increase. ' Civil list ... .. £33,100 £29,173 £3,927 ; Interest and sink ;ng fund . 1,819,225 1,745,616 73,609 . Under specia I , acts ... 582,155 560,434 21,721 Totals ... £2,434,480 £2,335,223 £99,257 Annua] :, Appropriations. 1 Decrease. Legislative Department 19,887 25,265 5,378 Increase. Colonial Scorei tary's Department 185,438 116,138 69,500 ■ Colonial Treasurer's Department 44,424 39,148 5,276 Justice Department 129,961 126,436 3,525 Postal and Telegraph Department 441,214 416,364 24,950 Customs and Marine Department 89,061 87,038 2,033 Stamps and Deeds Department 26,879 26,256 623 Education Department 512,519 445,294 67,^:25 Lunacy and Charitable Department ... 69,170 63,242 5,928 Decrease. Department of Labor 7,790 7,978 188 Increase. Mines Department 23,321 17,488 5,833 Department of Agriculture ... 91,881 74,876 17,005 Working Railways Department 1,152,000 : 1,144,832 7,168 Decrease. Public a n d school buildings and domains 46,750 46,851 101 Increase. Defence Depart? ment 213,250 206,265 6,685 Police Department ±22,258 117,522 4 .iti Decrease. Lands and Survey Department 127,130 133,557 6,427 Increase. Valuation Department 25,591 23,580 2,011 Rates on Crown lands Totals ... £ . 800 531 269 13,329,334 £3,118,961 ! Total increases ... £222,467 Total decreases 12,094 Services not provided for, actual — 25,519