BALANCING THE BUDGET

Evening Post, Volume CX, Issue 43, 19 August 1930, Page 4

BALANCING THE BUDGET

CRITICISM OF PROPOSALS

REFORM CHARGES- OF REPUDIATION

Another of the Government's contentious Bills, the Finance Bill, seeking increases in taxation^ was read a second time in the House of Representatives yesterday; but not without sharp opposition from the Reform Party and milder criticism from the Labour Benches. The chief objections to the proposal were that interest should be paid out of the Main Highways Revenue on capital moneys hitherto trarisf erred from the Public Works Fund and that the subsidies to local ; authorities in, respect of their general rates are to be paid in future out of the Main Highways Revenue Fund instead of the Consolidated Fund. It was contended by the Opposition that these proposals were a repudiation of the promise given to the motorists when the petrol tax was first levied and the whole of the money was; paid into the Main Highways Board. Another main argument was that, the local bodies had been led to believe that they would be relieved of some of the increasing burden of rates, but that the Government's proposals would make their position still more difficult. The Prime Minister, in his reply, stressed the fact that increased revenue was necessary and that the Government had spread the increases as wide as possible so that no section of the community would be heavily burdened. He contended that, in view of the finances of the Government, that the policy put forward was necessary in order to balance die Budget. The House rose at 2.38 this morning.

Moving the second reading, the Prime Minister (the Hon. G. W. Forbes) said he thought members would see that the taxation had been spread fairly and equitably. He submitted that it •was tight that it should be spread as ■widely as possible.. He read an explanation of the various clauses in the BilL In regard to the totalisator tax, ne said it was estimated that it would produce £100,000 in revenuo this year, font personally he thought that was an optimistic estimate, in view of smaller investments. It was very_ difficult to say how much the increase in the death duties' would bring in. In regard to the' increased fee for sharebrokers' licences, he said it was felt it would be a hardship to make it £5 for each member of a partnership, and therefore it had been made £5 for the principal partner, and £1 for each other partner. He went on to rofer : to the petrol tax Increase. ' ' ' '

S 'SOUNDEST ARGUMENT OF ALL."

The Leader of the Opposition (the Right Hon. J. G. Coates): "There is a.6 argument for it." Mr. Forbes: "What is behind it is necessity, and that is the soundest argument of all. There may be theoretical arguments, but when necessity arises theory has to stand aside." It was a. matter of importance , to make provision for payments to the Highways Board and the local bodies. Discussing the. film hire tax, Mr. Forbes said that previously the tax was imposed on a footage basis, but the weakness of that was that it was very difficult to ascertain the real value of a filni when it came through the Customs. It was felt that an. increase-in ,tae Customs duty would not bo equitable, and tho proposed method had therefore been resorted] to, by which the Government would ascertain from actual receipt returns the value of each ■film to the producers,, and the, tax •would be assessed after a deduction had been made for rental expenses. There h^d been a good deal-of comment concerning the proposal, but he thought it involved a fairer method of assessment.

. Mr. A. Harris (Reform, Waitemata): .""Will the Customs duty still obtain?"

. Mr. Forbes: "Yes." He added that no extra tax was being imposed on silent films because they would have ■a very heavy row to hoe in competition ,-with the sound films. The Bill was •estimated to produce something like .£44:7,000, made up as follows:—

Mr, ;D. Jones Mid-Oaater-Jnury)i "Is that for the balance of this year or^for a full year?" Mr. Forbes: "IfOr the balance of this jyeaf." ' ■ Mr.-Jonest "What about the payiaents to the Highways Board?" •

Mr. Fortes said that was an entirely ifllfferent matter. The payments would not be paid into the Consolidated Fund, /but directly to the local bodies and the _, fiighways Board. ■ ■. -.; LACK OP ECONOMY. The Leader of the Opposition (the Bight Hon. J. G. Coates) said tho Ec- • fornv Party would oppose the Bill on the ground that many of the provisions contained in it would impose taxation indiscriminately. The necessity for the taxation had been brought about on account of the inability of the Government to adjust its finances without passing taxation on. In his opinion the Prime Minister had not given tho House, or the country, ample and searching reasons for the imposts which he proposed to place on the people. All the reasons had been based on the cry, "We must balance our Budget, Irrespective of how we tax or where i^B tax:" Ministers had shown no real ' ferasp of the.problem of economising. I m of the opinion, said Mr. jOoatas, that these proposals are pot tho thought-out proposals of the prime Minister or of tae Ministry, but they axe the production of the Treasury. We were given to tinder- . Stand when the United Party assumed! Offlc» that that would be the end of! bureaucracy, but I believe that we JiaTe before us to-day the clearest#nt case of bureaucracy that this Country has. ever known. j .'' A. BEPUDIATION.

**I am not saying that without some knowledge of the situation or without previous experience," said Mr. Coated. "I remember that some of these proposals were placed before me when I was Prime , Minister, and they then i received the answer that I think this House should give them when it comes to divide later on, Some of the proposals are a readjustment, but they amount to a discrediting of an honourable arrangement made by a previous Administration. No Government should consider anything in the way of a repudiation. , "AN UGLY WORD." "Bepudiatloß is an ugly word, but It Is the only one that eleariy expresses what I mean."

Mr. Forbes: "There is mo idea of repudiation." Mr. Coatesi "The ion. gentleman, wh^n speaking on the Customs BUI, said his Government intended .to stand by honourable agreements and arrangements.*'

Mr. A. M. Samuel (Beform, Thames): of ioHow."

Mr. W. L. Martin (Labour, Raglan) "That won't hurt him."

Mr. Coatos: "By no means is it the sarao .system. 1 know this, that the tax will menu the end oil at lo;ist two companies in Now Zealand." The Mißistfti1 of Internal Affairs jfthp.

A. Bansom)i "How far does the Leader of the Opposition suggest there should' be no amendments to Acts of previous; Administrations 9 "

Mr. Coates: "Parliament can do what it likes, but before it makes any alterations as suggested in this Bill-it should know the facts." . .

Mr. D. G. Sullivan (Labour, Avon): "Can you give us the facts?" ■ Mr. Coates: "I will give you the facts later. The responsibility rests on the Government. The Opposition has no initiative, and the Government must take the responsibility for alterations. The Prime Minister was right when be said the Bill was an effort to bring everybody in under the taxation proposals of the Government. In my opinion some of the provisions of this Bill will prove disastrous to the people, j it is going to affect." i "A COMPLETE VOLTE FACE." Mr. Coates went on to say that tlm provisions of the Bill in respect of the petrol tax allocation were a complete volte face.- He could not understand why, when petrol was ta.xed at the rate of 4d a gallon the cities got 8 per cent,: they should get only 5j per cent, when the tax was increased to 6d. Surely the cities were still entitled to the 8 per cent. He also voiced a protest against the action of the Government in increasing by Is the charges in connection with the sales of land.

The Prime Minister: "There is a good deal of land speculation."

Mr. Coates: "Will tho Prime Minister tell nio what land speculation, is going on here? Will anyone suggest there is land speculation? There is none, j Probably there are a lot of farmers who wish there was. What the man on the land must understand, and what the man iv the city must understand, is tha^ he will have to pay an extra Is, for every transaction he lias in' connection with his mortgages.

Mr. Coates: "Oh, nothing hurts anyone." Mr. Coates Said the increase proposed was not a large amount, but there was a definite principle involved. One of the features of past legislation was to endeavour" to ' bring > down" tho costs of people going on the land, but the .present-proposal meant ;i definite increase in costs. "DOUBLE TAXATON." Referring to section 6 of the Bill, requiring investments in overseas, stock to be registered in New Zealand, Mr. Coates said the Opposition strongly objected to the proposal, as it amounted to double taxation and was open to evasion. He* did not know whether members of the House realised what the proposal meant. When speaking in the House some littlo time ago, the Minister of Lands said he could not prove that £10,000,000 went out of. the country. : : Mr. Ransom:; "lean prove it." .

' Mr. Coates: '"Well, the honourable gentleman can prove what no-one else can prove. It is a reckless statement that cannot be proved. It is impossible to prove it. Ho is just as likely, to endeavour to prove that £10,000,000 went out of the country this year as to prove that £10,000,000 went put." Mr. Ransom: "That is easily proved, too."

Mr. Coates said that people buying shares in Australia, had to register them there, and under the Bill they would also have to register them here. It was j double taxation, and on top of that itj was open to evasion. He did not care ] who the Commissioner of Taxes was, there was no chance of his discovering the purchaso of shares in other countries. . . Xhe Minister of' Health (the Hon. A. J. Stallworthy): " A good citizen would pay it." Mr. Coates: "A good citizen pays as much as he is forced to pay, and nothing more." BUSINESSES MAY GO OUT. Coming to tho amusement tax, the Leader of the Opposition said his party believed that tickets up to the value of Is 6d should be exempted. There were hundreds of thousands of pounds involved in bricks and mortar so far as the picture business was concerned, and during the last twelve or eighteen months there had been a complete change in the business. They knew that the change from .silent to sound films had been a very expensive business, and the Prime Minister should study the position before he added to the imposts of the various picture undertakings. Such undertakings were making very small profits, and some were not paying their way, and nothing should be done which was likely to injure their revenue. I The proposals .of the Government in regard to the film hire tax woulcl mean the ruination of every company formed in New Zealand on local capital, and he had had communications from abroad iSueh went to show that the passing of I the Bill would mean the end of British films jb New Zealand.

Mr. Forbes: "They get 15 per cent, advantage." Mr. Coates: "I don't think the honourable gentleman realises how serious the position is. Twenty-five per cent, of the total earnings in this country is taken off." Mr. Porbest "Most of it goes to America." '

Mr. Coates: "Does it? It is assumed [that it goes to America." ' Mr. W. J. Poison (Independent, Stratford):" "The samo system exists in Australia."

Hon. P. A- do la Pcrrolle): "Can you name them?" j Mr. Coates: "I will be pleased to do so later on." PUMPING THE WELLS DRY. Reverting" to the petrol tax allocations, ho said the proposal of the Government meant the breaking of an honourable arrangement. Tho difficulty was that tho peoplo of New Zealand wero swallowing the proposal. The Governmeu.t was doing the very thing which ought not to be done; they were making the primary' producer provide the money for the roads. Having pumped one well dry, tho Government was trying another. "The nest item," ho proceeded, "is a still more startling .proposal, and in my opinion it can only be termed a steal—tho £.220,000 which' it is,proposed not to pay by way of. subsidy'on'rates to cities, boroughs, [town boards, and county councils." He declared that the subsidy had been in force for over forty years, and the question was of sufficient importance to requirel confirmation by tho electors. They<shonld not accept tho peculiar circumstances the House found itself in, whereby a party of 26 members, with the support of the Labour Party, was going to reverse entirely a piece of legislation which had been on the Statute Book for over forty years. It was unthinkable that the Government should go as far as they were proposing, or that it should ever have crossed their minds to do so. Instead of the money being paid by the Government, it was proposed that it should come straight out of the pockets of tho ratepayers and the users of the roads. The primary producers had never anticipated that they -would be diddled out of the £.220,000, The position was the ratepayers in the future would be subsidised with their own moneys. A MATTER OF PRINCIPLE. Mr. J. M'Combs (Labour, Lyttelton): "Who imposed the petrol tax first?" Mr. Coates: "The Reform Party." Mi-. M'Combs: "Yes, the same principle." Ml". Coates: "No, the principle enunciated in tho previous legislation has been that of tho user paying, and that all the funds so derived should bo for the purpose of making tho roads."

Mr. Forbes: "These fuuds are for the samo purpose."

Mr. Coates: "The money is now to come from the petrol tax which tho user and tho farmer himself provides. Previously it came from everybody." It seemed as though they were going back, he said, to the bad old days of centralised control—passing money into the hands of Ministers. so that they might splash it about wherever they wished.

He declared that tlic 5J per cent, allocation to the boroughs and cities was parsimony, and that it was never designed by the Prime Minister or the Minister of Lauds; it was a departmental "rig up." The allocation was calculated to give the cities and boroughs exactly the same as was the case under the 4d petrol tax. It could not be justified.

Mi1. Forbes: "Nothing is being taken from the cities."

A Reform voice: "Nothing is being] given to them." j INTO THE BOOKIES' HANDS. ! Mr. Coates said he felt very strongly on the question. Turning to the totalisator tax, he said ho had received telegrams from horse-owners, trainers, and jockeys.

Mr. Forbes: "They will not pay it." Mr. Coates said that the effect of the increase would be to place money into the hands of tho bookmakers. "There is one-saving grace," he said, "and that is that it is a voluntary tax, for if you don't want to bet you need not bet."

The Minister' of Internal' Affairs (the Hon. P. A. do la Perrelle): "Will the honourable gentleman assist iv gettiiig the Gaming Bill through?" Mr-. Coates: "I have always voted for the Gaming Bill, greatly to the discomfort of some of lny best supporters." He said that while the Eeform Party did not wish to delay the business .of the House when the Bill reached the Committee stage, they would take tho opportunity of dealing with tho various clauses as quickly as possible. REFORM PRECEDENCE. ' Mr. M. J. Savage (Labour, Auckland West) said that the fact that legislation had been on tho Statute Book for forty years did not mean that it was right. If a conveyance tax was I sufficiently high it would- make the transfer of laud not quite so popular aa it had been, and would give those on the land a better, opportunity of making a success of it. Tho Reform Government had proposed, such a tax to prevent trafficking in land in 1925. Mr. Si G. R. Mason (Labour, Auck-land-Suburbs): "It is tho same thing." - . Mr. Savage: "It seems the samo to me." The Government would do well ttf'cohsider some readjustment in the highways policy. He had never agreed with the petrol tax in principle, but he did not see anything in the Leader of the Opposition's statement that an honourable agreement had been broken. It would be a sorry thing if one' Parliament could bind another, because every now and again the people asked for a change or Government.' Ho Wanted to make sure that the boroughs would not suffer, and considered that' official information should be given. on this point. A suggestion had been made that a rebate might be given to the hirers of films who employed orchestras. This would givo preference to the Now Zealand professional, and there was a principle involved that deserved serious consideration. He was sorry that the Government had not taken tho gloves off ait&gether and had not struck those who were best able to pay. EFFECT OF INDIRECT TAXATION. Some day a Government would be elected which would carry out this jUst policy. The day would come when the working men would sco that they were bearing 'far too heavy a burden. Indirect taxation fell on those least able to bear it, and the big men got off lightly. There was a possibility of tho banks evading the bank note tax, and probably they would find that there would be- fewer notes in circulation next year than there were at proscnt. Tho banks wanted to deflate the currency, and the Government might be assisting them. Tho tax did not appeal to him, and he was not defending the banks. He would rather tackle them straight out on income rather than on the' machinery of banking. Any decrease in the highways grants from the Consolidated Fund was a step in the wrong direction. Tho whole of the roading costs should bo provided by the Consolidated Fund, to which every person should contribute according to their means. INFORMATION WANTED. Mr. D. Jones (Reform, Mid-Canter-bury)-regretted that the Prime Minister had not given a review of the financial position for this year. Almost five months of the financial year had gone, and the House was presented with a Bill asking for so, much money and no information was given to support the proposals. The conveyance tax was increasing the mortgage a man had on his land. There would be a jubilation amongst the bookmakers when the incrcasod taxation on the totalisator wont through.' Death duties were exceedingly heavy to-day, and the method proposed by the Prime Minister of increasing them was a ■clumsy one. It would bo bettor to havo a graded system than just putting 10 per cont. on every ,€.IOOO. The note tax had boon ■ investigated in ~W2'2, and Hits GovctiiI mont. then-hart found that 11. could not I afford to dp it. It had been said.that

tho banks had suggested that the Government should take over the issue of notes. Mr. Forbes: "No." Mr. Jones said that the- banks h;itl stated they would not bear the burdon, but they would pass it on to the overdrafts on overdue accounts, or; something of that nature. Mr. J. M'Combs (Labour, Lyttolton): "Parliament- can deal with them." Mr. Jones: "Parliament can't." Ho hoped that tho whole position of the note issue would be investigated by the Public Accounts Committee of the House so that Parliament could deal with the position. It was dangerous to meddle with the note issue. . UNLOADING LIABILITIES. In connection with tho main highways proposals, he declared that tho Government was unloading tho whole of its liabilities on to the local bodies and motorists. That liability amounted to £461,000. In addition, the Government was now going to charge interest on the past gz-ants, amounting to £1,266,000, which were definitely given to the Highways Fund, by Act of Parliament. The charge he made was that £1,266,000 which had been given as a free gift was being treated as a loan. The interest would amount to over £60,000 per annum. He maintained that this action was worse than a repudiation of debt. Was the Government going to economise by assaulting the ratepayers? .'■■■

The Minister of Railways (the Hon. W. A. Voitch): "No."

Mr. Jones: "This is the most direct and the hardest blow the rate-

payers have ever been struck by any

Government in this country." The Bill, he proceeded, proposed to add an additional annual burden on the ratepayers aad motorists of £522,----000, and 2d additional per gallon on petrol. Something like a revolution would take place if the land tax was increased as the petrol tax was being increased. The tax would amount to from 70 per cent, to SO per cont. increase in tho land tax on country lands.

Mr. Forbes: "No, it is not."

' • Th« ' Prime Minister does not I understand his proposals, and how farreaching they are.. This is like feeding a dog with a piece of his own tail. (Laughter.) Tho Prime Minister should not delude the country by saying that the ratepayers are not paying the money. Unquestionably they are, and in addition 3d a gallon on their petrol. But they are having taken out of their pockets first of all the whole of the £522,000 in taxation." WHERE IS MONEY BAISED? Mr. Perrello: "Would you agree that 90 per cent, of the money from the petrol tax is not raised in the cities?" Mr. Jones: "That is talking about purchasers, not users. The Government are putting this £522,000 on the ratepayers and motorists and are not giving one penny back to them." Was this a time, he asked, when the ratepayers should have their laud tax increased 80 per cent? Was it a time when the ratepayers, who are already paying too heavily, should have such an enormous burden thrust on to their shoulders? i It was not enough for the Prime- Minister to say he had to balance his Budget. . Why should he balance it at the expense of tho ratepayer only? He alleged that the object of tho Main Highways Act was being destroyed under the Bill. The amendment placed on tho ratepayer and tho motorist an unprecedented amount. It was absolutely unfair. An attempt had been* mado by the Government to confuse tho issuo by saying the money was being given back through the petrol tax. He contended .that the ratepayers were not being repaid in another way what they were being deprived of, because tho additional petrol tax was paid by the con-: suiners and then handed back to thorn. It was absurd to cut down the city proportion of the petrol tax as was proposed in the Bill.

The Prime Minister: "They get the subsidy on their rates."

Mr. Jones: "Tho Minister is taking away every penny of tho £226,000." Mr. Forbes: "They have got it. The honourable gentleman has not read tho Bill."

Mr. Jones challenged any of the Government members to show him how the Ashburton borough would get a penny out of the extra 2d a gallon on petrol. , , REVENUE NECESSARY. Mi-. D. G. Sullivan (Labour, Avon) said the extremism of Mr. Jones reduced his effectiveness and his usefulness as a critic in the House. He had misrepresented the whole position in order to serve a poltical purpose. The Prime Minister had certainly spread his net very widely in an endeavour to secure revenue. No doubt his plea would be one of necessity, and to some extent that plea must bo justified. There was no doubt that the Prime Minister had to secure his revenue, and one wondered whether the Reform Party would agree to a further increase in income tax. He looked askance on the proposal of the Government to charge interest on amounts that had hitherto been transferred to the Main Highways Fund. The Government should review the proposal for repairing the earthquake damage in respect to roads ,pn the West Coast out of the South Island ~ Main Highways Fund. The principle had been recognised previously that expenditure in connection with such acts of God should come out of the Consolidated Fund or the national funds. A sum of about £250,000 would be involved. He made a plea for a greater proportion than 5J per cent, of the petrol tax revenue for the cities and boroughs. The groat bulk of the tax had bee% found by the motorists and the cities. The Prime Minister: "That is disputed by the last speaker." "Then it won't be the first timo that Mr. Jones and I have been in substantial disagreement," Mr. Sullivan replied. Mr. Jones: "I always give the facts." . . Mr. Sullivan said that while the cities would not get less than before, the city residents would pay more through the tax. Mr. Sullivan stressed the need for national control of the banking system so as to control expenditure along proper lines. We must learn to depend on our own production. He said the question of main highways finance involved the honour of the Government and of the House. They should avoid anything in the nature of a breach of agreement. Eventually the whole subject would have to be brought under the control of Parliament. CAREFUL FINANCING. The Minister of Lands (the Hon. E. A. Eansom) devoted his speed to replying to Opposition criticism. It was surely necessary, he submitted, that the Budget should be> balanced, and that in itself justified the present taxation proposals. During the previous administration the practice was to fall back on reserves and accumulated surpluses rather than call on the people to provide their financial obligations. The suggestion seemed to be that the Government should now go in for riotous expendituro of capital moneys. « A Reform voice: "Who suggested that?"

Tho lato Governmont, lio -declared, had dissipated £29,000,000 of accumulated surpluses until only £2,356,000 remained. There was evidence that if careful financing was not. resorted to now, at tho end of this financial year there would be a deficit oven after consuming the balance of accumulated surpluses. To place tho country on a sound financial footing tho Government was wiso iv taking steps to meet its financial obligations.

In regard to the sUtteoienfc that the Bill was the work of the Treasury, Mr.

Bausoni said they had been told that when Mr. Coates was Prime Minister he had brushed aside any interference by the Treasury "I will ■undertake," he said, "that if he had taken moro notice of advice from the Treasury we would not be in the present financial position and' would notj require to raise 'such a large sum by taxation. And in all probability this Government, on coming into office, would not have been faced with a deficit of £500,000." TOO HEAVY A BABY. Keplying to the statement that the Government was repudiating an honourable agreement in respect to the petrol tas, Mr. Eansom said that Parliament was not governed by agreements other than those effected by legislation. Whatever agreements might be entered into between a Prime Minister and the Main Highways Board, only that portion which was set' out by Act was binding on any Parliament. They had little knowledge of what might have been understood between an ex-Minister and tho board some years ago.

The Main Highways Act, said Mr. Ransom, was the baby of the present Leader of the Opposition, but by gross feeding it has become so heavy that the Consolidated Fund can no longer carry it, and the time has now arrived when the Government must take into consideration placing the responsibility on the road users, as should have been done years ago. ' • .

Mr. A. Hamilton (Beform, Wallace): "That is not what you,are doing." Tho Minister said that since the £200,000 was first made available for the highways system the amount required for reading expenditure had largely increased, until to-day they were paying no less than £600,000 for reading works in connection with relief expenditure. .He contended that the Government was carrying more than they should be responsible for in connection with roads. The late Government would have acted wisely if it had relieved the Government of those heavy charges at the time tho petrol tax was first imposed. The Highways Board would have been put in a much stronger position, and tho Consolidated Account would have boon:relieved of the charge on it. But it was not done, arid the fact that so much money had been made available to the board had resulted in expenditure quite beyond what the ■■conntry could afford.. It had led to extravagant expenditure. Tho local . bodies found it vory difficult to maintain the rate of expenditure demanded of them. Undoubtedly we had very fine roads as the result, and he would not say that tho money had not been satisfactorily expended, but the general taxpayer did not find himself in any easier position than before tho institution of the Highways Board. ' A voice: "Worse off." Mr. Eansom: "That being the position, those who obtain the major advantage from the expenditure should be asked to contribute more. This unscientific financing in regard, to the highways has not resulted in any.material advantasjo to the. primary producer. Therefore the advantage must be to the user of the road who handles his goods after they leave the farm." SUBSIDY WILL BE PAID. Mr. Eansoin denied that the local bodies' subsidies were interfered with by the Bill. The subsidies w_cmld be paid in the same proportion to coimty roads as before, but they •would be paid through the Highways Revenue Fund rather than from the Consolidated Account. Mr. W. J. Poison (Independent, Stratford): "Will tho Consolidated Fund pay anything to the Highways Fund?" Mr. Coates: "Not a jenny." Mr. Bansom said that the cities and boroughs would not -receive any less from iba petrol tax. Whether the cities should receive any more or not was a. question that could beu investigated more satisfactorily after a full year s working. • . Mr. J. A. Nash (Beform, Pataerston): ''That's the sop." AN ATTEMPT TO "DECEIVE., The Minister said that at present tho cities were being very generously treated in respect of subsidies for relief works. He refuted the assertion that the "Government was trying to unload its liabilities, on to the petrol tape-, payers and ratepayers; that was a misrepresentation of ' tho position. If tho Consolidated Fund were not to be relieved by the petrol tas at must be relieved from some other source, and no member had yet suggested a better means of securing the money. At present the Government was bearing the interest on £25,000,000, which _ had been expended on roads, -and yet it was said it was not carrying its responsibility. That was merely an attempt to deceive the public. A TREASURY BILLMr A. Hamilton ; (Beform, Wallace) said he doubted if the Minister of Lands or Other members of the United Party understood what the- proposals really meant. It was not the job of the Beform Party to suggest how tho money should be found. . The Minister of Internal Affairs: "Yes. it is." T , Mr Hamilton: "No, it's not. Its time tho Government introduced some ideas of its own. All this session the Government has been looking to the Opposition for advice." Mr. Hamilton said the Bill was plainly a Treasury one as all roads led to the Consolidated Fund. The.users of the roads were being asked to carry the load, but they were getting no. bonefit.^AH they were doing was to bolster up the Consolidated Fund. The petrol tax allocation was one of the worst pieces of legislation which the Government, had ever proposed so far aa the rural population was concerned. The rural rates were increasing at a time when the roadmg policy wanted more national,assistance than ever it did. Compared with the five-year period, 1909-13, the county rates had increased by 236 per cent., and the Government would be doing its duty if it decreased this burden. Instead it intended to charge interest on tho grants to the Highways Board. He did not blame- the Treasury for looking after itself, but what about'the other people's treasuries? The Hoi. W. A. Veitch: "Is the Treasury the enemy of the public?" Mr. Hamilton said that tho local bodies should rise up in arms against the injustice. The tax on petrol had increased 40 per cont., the increase on whisky had been 11 per cent., and the increase on beer 4i per cent. Why had tho Government not evened them up? The motorists would not havo objected had the whole of the petrol tax been allocated-to the roads, but instead the money was being raided by the Treasury, and the local bodies would have to pay the cost of the roads. The roads of New Zealand belonged to the Crown, not to tho local bodies, and tho Government was shedding its responsibility. ' Mr. A. M. Samuel (Reform, Thames): "The King's Highway.'' Mr. Hamilton asked if tho Government proposed to shed its responsibility to tho charitable aid boards.

A Kcform member: "They have alroady done that to some extent."

NO NEW METHODS.

Mr. W. Nash (Labour, Hutfc) said it was a, wise policy to endeavour to balance the Budget. It was difficult to see where they were going to get the necessary revenue from if they did not adopt the proposals contained in the Bill. No new methods were proposed in the Bill; all that was being done was to iimw increased revenue from existing methods. Ho thought Jhe Oo-

vciimient liad made a mistake in not giving further relief in tuc lower priced entertainment; tickets. They were acting unfairly in regard to the allocation of tho petrol tax in the towns and boroughs, and he urged the Government to make no reduction in. the grants. Ho had been hopeful that a greater grant would bo made, but at least there should be no reduction. In regard to the film hire tax, Mr. Nash said he had no objection to the tax being placed, on large American corporations, but it did appear that certain New Zealand companies had a case, which should be investigated by the Prime Minister. Mr. Nash suggested that a tax of Id per gallon should be placed on crude oil, of which over 28,000,000 gallons were imported e"aeh year. That would ensure that the oil companies would pay their fair share of taxation. If the Government could not get all the revenue it wanted from the Customs Bill and the Finance Bill, it still had tho Income Tax Bill as a last resource, and if increases were made there the Government would have his enthusiastic support. LABOUR PRECEDENT. Mr. W. J. Poison (Independent, Stratford) said that there had been undoubtedly an agreement between the motorists and the Government and thoje had been no suggestion that the motorists had any desire to scrap it. Thus they were forced back on. the ugly word "repudiation." . Mr. P. Fraser (Labour, Wellington Central): "Does"the hon. gentleman consider that one Government may bind another Government?"

Mr. Poison: "Therd are two parties in this agreement, and the consent of both parties should bo obtained before the agreement is abrogated." Mr.^Fraser: "Is not the hon. gentleman -thinking of the Medes and Persians?". , ■' , . ,'- •.'.'.:"•'.■'. ..'■•..■.■ -:

Mr. Poison: "I am not surprised at the Labour Party supporting this, because there is a Labour precedent in Queensland; where rents were incrcasd by from 300 to 500 'per cent., and made retrospective." Just;on 50 per cent, of tho motor-cars were owned by the farmers, who run their cars for longer distances than the. .car-owners of the town, and, as the.local .bodies were being called upon t<J bear a heavier burden, the farmer was being heavily pen-' alised. s ANALOGY WITH RAILWAYS. Tho Government subsidised.the railways, and could it not carry put the same policy with respect1 to the roads? The roads were carrying national traffic, 3'ust as the railways' were.' The petrol tax was a f&ir ono, and had been levied successfully in other countries, but it should be spent on road construction. The Government was a considerable "user of the roads, and even from the policy of making the user pay the Government Vflfes entitled to pay a large amount towards the upkeep of the roads. The increase in. taxation on tho farmers would mean that less nien would bo employed on the land and production from the land would fall. The farming industry was the one most needing assistance if the country was to prosper. It was a sound policy that the Budget should balance, but the Government was underestimating tho increase in.revenue.. The banks would pass on their increase, and tho rural community would suffer.

Mr. W. L. Martin (Labour, Kaglan): "It will be a crying shame if they do> with their big profits."

Mr. Poison said that there would be uo doubt that they would, and, as manyfarmers would have big overdrafts this year, they would suffer. He did not object to the conveyance tax or the picture tax, in faei,. he would .like to see the latter tax made more severe. He was in.favour of the totalisatoi" tax, as a tax on gambling was sound. However, he would like to see the bookmaker made to bear his share. At present he was gaining an unfair advautag and one of the; ways in which the Government could help the racing clubs, and at the same time penalise the bookmaker, was to allow telegraphed bets. NO IMPOST ON FABMEES. The Minister of Internal Affairs (the Hon. P. A. do la Perrelle) said tho Government was making no effort to: place an impost on the primary producers. The petrol tax had beenvimposed to enable the Highways Board to meet its obligation. If the Main Highways Board had been liberally endowed during recent years, and if he had had his way the board would have had to stand the whole cost this year without any assistance from the Consolidated Fund.. .

Mr. A. E. Ansell (Reform, Chalmers) said a definite promise had been made by the Government tliat the earthquake damage in the South Island would be repaired, but so far the Government had not spent one penny. TJndei the petrol tax proposals the vehicle owners of the Dominion were again being called upon to contribute further to the general account, and a further raid was being made on the finances of the Highways Board. The motorists- and local bodies were being called upon to face the greatest crisis they had ever had to faeo. As a service tax, the impost on potrol was quite satisfactory, but it was a different matter the users of petrol were taxed for general revenue purposes. The farmers as a class would be very heavily hit "by the petrol tax, as a very big percentage of the primary producers were owners of vehicles. Mr. Ansell : said he was of the opinion that the. temporary financial stringency had warped the moral judgment of the Cabinet. * DISAPPOINTING PROPOSALS. Mr. W. L. Martin (Labour, Raglan) said that the backbloek roads to-day were very little better than they were five years ago, and he was disappointed with the proposals of the Government in connection with the.petrol tax. It was a remarkablo statement for a Minister to say that, because the tax had been reduced by a; penny, the backblock roads were to be penalised and the oil companies were to reap big profits. Mr. Hamilton: "AH rot." Mr. Martin said that the Government must have considered the proposals thoroughly, and should have held to them. The increase which was proposed in taxation was going to have a serious effect on the primary producer. No speech by a Minister had yet justified the proposals brought down. He was certain that the Government could have got all the money it wanted by putting the burden on those best able $o bear it.

The Hon. P. A. do la Perreilo: "Who are, those people?" : Mr. Martin: "Income tax. The Minister knows tlie. position better than I do, because he has got all the figures.". It would have been-better to have increased the postage than increase tho stamp duty, as the tax then would have been placed on the business people, and chose people who inundated Parliamentarians with circulars. The Government should see that the bank note tax was not parsed on to the public. If it was passed on, the Government should consider establishing a State Bank. He was sorry, that tho Government had seen fit to obtain their taxation in the way it had.

Mr. C. H. Clinkard (United, liotorua) justified the petrol tax because of the dopleted state of the Treasury. It was quite incorrect that ■the local bodies were to be denied their subsidies, and taxation had to be applied to enable the Government to pay those subsidies". Tho petrol tax was the best source of taxation for the purpose. The oil companies had undertaken to pay Id a gallon of tho extra (ax, and tho" motorists were paying the other Id. In what other way could

they have imposed taxation and secure a subsidy similar to that which tho oil companies were to pay. The increase in the petrol tax would not hurt anyone. Personally, he regretted that it had not been larger. "CLASS TAXATION." Mr. A. Harris (Reform, Waitemata) said that they would see when the Public Works Estimates came down whether there was any proposal to make additional grants for road construction. There was no argument th.it could defend the retrospective legislation, asking 'the motorist to pay interest oil a grant that had been made over a period of years. The Treasury had exploited every ten shilling note it could. find. For the last forty years the Government had paid a subsidy to local bodies on their rates, and sow it was proposed to withdraw the subsidy. :, ■

Mr. H. G. R. Mason (Labour, Auckland Suburbs): "It is a wonder the Government is not asking tho local bodies for this money." ~ .; ' -

Mr. Harris: "I wag going, to suggest that this had been overlooked ; by the Treasury." It was class taxation in its worst form. The cities would suffer, but they would receive their 8 per cent, if he had anything to do with it. It was strange that the Government had refrained from putting a heavier tax on beer. When the House was in Committee the- division bells would ring in the hope of improving legislation which could not have been thoroughly considered. It was the duty of the Opposition to give the Government a helping hand in putting the Act into .shape. HOPES DASHED. ■ Mr. Mason said that the taxes ■■on mortgages were likely to be more irritating than revenue producing. There ■was no doubt that the rural ratepayers ■haS thought that the 'increased petrol tax would take away from them a -heavy burden, but now they hud had their hopes dashed-to the ground. "NO JUSTIFICATION TOR TAX." ; Mr. J. S. Fletcher (Independent, Grey Lynn) suggested that the only justification for-the petrol tax was that it was wanted to permit the debating of country lands. He Contended, however, that there was net need for jthe tas. As the "result" "of "the "reduced ;amount in the: Highways Fund this year, a further, large, number .of men "would ba unemployed. 'He believed the cities should get their full S per cent.: of the petrol .tax' instead: of 5$ iper cent., for they, had had little, enough out'of the tax so' far.' "THERE. IS NO CONTRACT." : i Mr. W. D.. Juysnar (Reform, Gisborne) said nbb»dy likedy the .proposals ■in the Bill,' but how : could they be avoided? He agreed that the back- ; block settlers had been penalised because of the opposition in the House, and those who made up the opposition should now accept the position they had brought about.

: Mr. J. A.-Nash (Reform, Palmerston Worth): ""What about the contract?"

Mr. Lysuar: "There is no contract. It is childisli to say that there is contract. If any .member goes outside this House and tries to put that clown the throats of the electors,.'they, will not swallow it.". • «■ -•■ ': •

Mr. Nash: '.'A scrap of paper." Mr. Lysnar: ■ "It is. not* a sera: of paper. It-depends on how the majority of members of this House_ vote. The Highways Boar'dj, as constituted, was open at any time"to review.". He said that there was too much party entering into the debate. It was not a question of the' Government going back on a contract, but of the House changing the. law. It was wrong to say that the * local bodies would be worse off because of the Government's proposals. He had no brief for the party in power, but he .^wanted to do the fair thing. ' ;* ■: ;. RESTRICTION OF ENTERPRISE. Mr. C. A. Wilkinson (Independent. Egmont) said tha tthe heavy taxation would restrict enterprise ■ and .cause moro unemployment. It was against the principle of ear-marking, any portion of the country's revenue for specific purposes. They had created a Highway Board that was an autocratic board not,responsible to Parliament, and he was of the opinion that the Act should be amended so that the Highways Board should be brought under the control of the House. Its estimates should bo open to the scrutiny of members of the- House,' and : .uhtil they had .control of the policy of- the board the, people would: not get full value for the money expended. A good proportion of the taxation should be used.for the opening olVnew country. He strongly resented the statement that the reduction-of the petrol tax had: robbed; the baekblock roads. It was, the Government that had given way, tub Prime Minister had moved the reduction,' and he would have to take the responsibility. New Zealand to-day had gone the limit in the taxation of motor-cars, and was levying a heavier toll" on the motorist than any other country in the world. He again urged the Government. to consider the question of obtaining more revenue from hotel licences. The largest hotel in the country paid only £40. The Hon. A. J. Stallworthy: "That goesftotho local.bodies."^ Mr. Wilkinson:., ; "The Government should >buy •. the local bodies out. f' He would .vote for the Bill on the second reading. - ■ '•■ ■ ■ A DEFINITE PROMISE. Mr. C. & Maemillan (Reform, Tauranga) maintained that a definite promise had been' made that local body ratepayers would be relieved of some of their taxes,but the Bill showed, clearly that their burden would be increased. The Government was not going to pay'directly for the vehicles it had on the roads. ; .. :. "' '

The Hon. A. J. Stallworthy: "Who is the Government?"

Mr. Macmillan: "That' is just the point. The Government is using the main roads and the streets, and is taxing a section of the people to pay for them." The present taxation proposals should only be resorted to as a desperate last resort.

Captain H. M. :Rushworth '(Country Party, Bay of Islands): said that the Government had shown a lack of candour in setting forth .-its' Budget proposals. The position was that they had the status puo ante Budget plus the benzine tax. He opposed, the petrol tax unless there was a proposal to de-rate country lands proportionately. He had not the'slightest objection to voting moneys to the Main Highways if it were reconstituted. Ho thought the board should bo respon; sible to the Minister of Public Works. Mr. H. S.S. Kyle (Reform, Riccavton) said the people were already "windy" over the taxation proposals. Amidst laughter, he referred to tho fall in the totalizator investments in Christehurch last week, and said it was plain tho people were going to keep their money in tweir pockets. The Government would therefore not get the^revenue it anticipated. "INGENIOUS ARGUMENT." Replying to the discussion, the Prime Minister said ho could not help admiring the ingenuity of the Opposition arguments. The whole discussion had centred around the Highways Board and the potro] tax. This did not show that the Opposition had paid any groat attention to- the Bill. He did not see how it could be said that a promise had been broken in regard to.tho local bodies subsidies. It was never expected that an agreement made some years ago would obtain for all time irrespective of circumstances. No one had a ■ right to make any such guarantee. The money for roads was being provided ou' of special taxation:- Ho deprecated the cavilling from the Opposition benches at >via| tlio Government

found it absolutely necessary to do to" balance the Budget. No section of the community . was being unduly penalised; the Government was making things as light as possible for everybody. The Government had suriui's responsibilities to face, aud he expressed resentment at much of the? criticism. He thought the time was coming when they should look into the whole position of the Highways Funds. My intention, said Mr. Forbes, is to submit the question of the Highways Funds'to the, Public Account* Committee, and go into, the question of whether the present' system of highways taxation, with all the. claims which aye being made, that. the moneys belong to certain people,caa be; put on a more satisfactory' basis.

Tito Bill was read a second tinuy

Stamp dirties - 41,000 Bank note dnties ' 50,000 Totalisator duties* ' 100,000 Death dnties and'gift duties 45,000 Amusement tax : ............ 70,000 Kim hii'etax- ' ,...'.: 50,000 Sharebrokere' tax 1,000 -Land- Assnrance Tuud ...... 00,000 Interest on reparations 30,000 Total £447,000