THE BUDGET DEBATE

Evening Post, Volume CXII, Issue 33, 7 August 1931, Page 4

THE BUDGET DEBATE

BORROWING POLICIES COMPARED

LABOUR LEADER'S CRITICISM : MINISTERIAL REPLY

The second day of the debate on the Financial Statement in the House of Representatives yesterday was full of interest. Labour's view of the taxation proposals of the Government was outlined- at some length by the Leader of the party,1 who took strong exception to increasing the burden on the lower-paid section of the community. He indicated that the Labour Party would vote against the proposals as the Bills came down. Support was given 'by the Hon. W. Downie Stewart, a former Treasurer, to the policy- - of balancing the Budget, but he, too, reserved judgment on the 'Bills. The debate was carried on by the Minister of Railways' and other speakers.

which it had been elected, it would havo lesigncd and gone to the country at the earliest poasiblo moment. NOTHING CONSTRUCTIVE. "., The Minister of Railways (tho Ilori. W. A. Vcitch) said that Mr. Holland had described tho Budget as dreary, but bis own speech was far from elevating. Mr. Holland had not inado one constructive suggestion. Mr. "VW E. Parry (Labour, Auckland Central): "You ought to set that to music." ' Mr.'^Voiteh said they might take it that Mr. Holland was anxious to hinder rather than help, as ho had criticised Mr. Coates for saying oxactly the opposite. ' Tho position of the country to ; day made ainyjchange of opinion on taxation proposals justifiable. Conditions had' changed rapidly since last year. This year they were faced with a deficit of almost £7,000,000, and one would have thought that every section of the community and 'party leaders would havp divested themselves of all'party considerations and applied themselves to tho solution of tho difficulty. Tho reason1 why an investigation into the wheat duties had not been made this year was that an immediate decision had been necessary in order that the farmers would know under what fiscal conditions they would •reap next season's crops. 'There were no cases in which reductions in wage's had been made contrary to the law, and if it were so the House could rest assured that those affected would have taken immediate action. 'The'difference between, countries like France and Belgium, which were supposed to have little unemployment, was that they had no schemes for dealing with unemployment. Thus there was no need for the men out of work to register and there r was no way of making a tally •of those seeking employment. As soon as \ unemployment, relief ' waa inaugurated men rightly ' registered in tho hope of obtaining work) and the numbers were easily obtained. "When tho Prime Minister had' said that the dolo was having a demoralising effect in England^ho was sharing the belief of a .large number of people. The basis of\the scheme in England was unsound. The State, the employers, and the employees each paid a third, but those who received' unearned incomes did not pay, a penny.' This', meant ' that the more one "employed .the more one. had to pay. •- In -.New 'Zealand tho basis of payment was much sounder, as.it included, everyone. - The Leader of the Labour Party had made a statement that,the poor man paid as much as tlie rich in.unemployment tax, but it was laid down that tho tax, on top of the flat-levy, was'3d^in'the"£lvcThe.man on £4 per week paid &2 12s 2d per annum, and the man on £2000 paid £35-. .- •. - • "Mr.'Holland: "My statement was that they paid the sarao rate." LABOUR AND BORROWING. Mr. Veitch said that "he had been amazed at tho Labour Party's protest 'against borrowing, especially as Labour was continually asking for increased social services and standard wages' on relief works. , 1 .These requests could not be ' .granted unless taxation was made so heavy that it could not be gathered, or unless a heavy borrowing policy waa put into operation. He .thought thoy wero entitled to know tho Labour Party's policy,, in respect of borrowing. It would bo a fino thing if they could stop borrowing altogether, but his experience of public affairs had shown him that this was impossible. A sudden stoppage of borrowing would prove so disastrous that it would not be worth- the money saved. _ .He was in favour of a gradual reduction of borrowing until it reached a vanishing- point. Mr. Veitch said he wished he could share Mr. Holland's view that high wages would mako for prosperity, but ho could not see tho virtue of such an opinion when the money to' pay the high wages was not available. Even Henry Ford had been forced to change his opinions on tho subject. The Labour Party apparently believed that all the revenue that was required should bo made up out of income tax, but the party did not realise that that would havo involved an increase of 60 per cent. Tf the Labour Party carried out its commitments to the peop)o it would have to! raise £13,000,000. instead: of the £I,Boo,ooo'which had had to .be raised by the present Government. BUILDING UP .RESERVES. The Hon. "W. Downie Stewart (Bef orm, Dunedin. -West) observed that the difficulty of imposing extra x taxation when times were bad pointed1 to the vrisdom of building up reserves when times-wero good; The.right way to ease the burdon when th'o back was weak was to carry tho heavier load when the back was'strong5. In'"other words, sufficient taxes should'be levied in prosperous times to'ensure a-.reasonable surplus being carried "'to reserve that would be available,in times of stress. Taxpayers, however,' did not appear, to have sufficient faith in Governments to allow that to' -be done, but ,it was a question whether it wasl wise'-to'leave the matter of building reserves in* the hands ( of taxpayers sinco their savings were not kept in the form of avaflablo reserves, but often in the shape of fixed assets. It was true that an increase in taxation must be faced at the present time, but it was unfortunate that the increased charges .being Imposed would very probably not raise the revenue" to the .point where expenditure would be met; JUDGMENT RESERVED. Mr. Stewart said that although, ho agreed with the principle of balancing the- Budget, it did not follow that ho approved all the details' of 'thp' methods proposed1 to bring 'that about". -He intended <to deal with "the taxation proposals when the relevant' Bills were before the House, but in connection with tho increase in income^ taxation his personal opinion was that in view of tho heavy increases it'would have been wise for tho Minister to "have-reviewed tho position of the'single taxpayer as compared with a married man with a family. "Until now,.the married man had enjoyed- exemption respecting his children, and while the general exemption was high, the relative position of the single man and tho married man with a-family was not badly out'of balance, but now that th'c exemption had boon reduced and the taxation incrensed to the extent it hail ljc-n. r'i<l tin- wage? taT and direct (Y.^touiv <•!■ i". « »■: i« oprr. ating, the relative position of the singlu

ffhe Leader of the Labour Party (Mvi H. E. Holland) continued his speech after "Tho Post" went to press. The Leader of the Opposition, he said, had stressed the need for balancing the , Budget, and no one disagreed with'the advisability of doing that;" it was tho method that was in dispute. The tfnitcd Party»and the Reform Party wore prepared to mako the wage worker, the salaried employee, and the man on the lower income pay out of all, proportion to tho payments made by those on larger incomes. It was perfectly true that the Eeform Party had-always balanced its Budgets, - but, they were' entitled to ; ask how .it was done. During the war years the Budgets wore .balanced largely on borrowed money, as loan money camo indirectly into tho departmental revenues. From 1923 to -1928 the Budgots were balanced at the expense of tho Civil servants, ■and to the b,enqfit,of the wealthier in-come-tax It was apparent to them all that there'would have to be a reduction of their borrowing policy—less borrowing overseas, a better method of arranging credit in -.connection with inter-Im-perial and international transactions, and the mobilisation of credit sources within the Dominion. OUT-HERODING HEROD. Mr. Holland-,went on to refer to the borrowing policies of the Liberal-Lab-our, Reform^ and "United Governments. "When'the Liberal-Labour Government -went out of office" the National Debt was £40,000,000; when Reform went but of office in .1929, the National Debt ■was £256,652,371, including war debts, or at the rate of' £6,000,000 average yearly increase. ' ■ l Much of the War debt could have been wiped out in the war years if the National Government had been as keen on taxing war profits as on making levies on human life. - ' The, United Government, in its turn condemning the reckless borrowing of Reform, came into office pledged to raise millions at no cost to tho taxpayer, and at the end of MaTch, 1931, Jh# net indebtedness had been' in; creased'in two years by £18,698,23 ii lEach party condemned the other on the question of borrowing^ but each faied tfd outdo' the other when it camq into* office. The .position was now so serious that half the annual revenue ■was being taken up to pay, interest and sinking fund chargesin connection Jtvith debts. An instance of the type "o? borrowing", -was -illustrated.; in the gift of a battleship to England in 1911. The battleship cost £1,795,165, but instead of "s the money being raised in New Zealand,' as "one .would ' r have thought it would be in the case'of a gift, it was borrowed in England, and in 1926 a statement of the account had been presented to the House, showing, that : up_to..that.tinao £247,331 had been- -repaid, leaving a balance outstanding -of £1,547,830, of which £715,800! had ; been included in the funded . debt, .which' would be repaid about -1958k 'The ship had been sunk in; 1923 under the • "Washington Treaty. One .of:, the loans for the ship' fell due in "1940," and another in 1963, and this would mean 'that the last payment would be made r about ,40 -years, after the •ship had-..been destroyed. :Even then the debt might not "be paid off, but converted into another loan. -• THE BANKING SYSTEM; Mr. Holland asked the Prime Minister'Avhat the Government proposed to do with' regard to the.xepOTt of Sir Otto Nienieyer." Far-reaching changes weTe referred to in the Budget. Did the Prime" Minister propose to give effect to -Sir .Otto's*' recommendations? He ilso asked what was tho cost of Sir Otto's visit to the Dominion. >The Prime Minister: "Nothing." ;Mr.' 'Holland: ' "Then perhaps the Prime Minister will toll us who paid for his visit to New Zealand?". 1 Mr.' Hollard said his opinion was i that Sir Otto had been sent to Aus- ; tralla, and New Zealand by tho big | tfnaaeton',of England. The Minister of Agriculture (the Hon. 'A. J. Murdoch): "He wasn't sent here at all." ' Mr. Holland said tho Budget intended to convey, that there Kad been an all-round decrease of 10 per cent, in, wages and salaries, but actually -the decreases had been "much greater in many cases. He quoted the case of tunnel workers, and suggested that v the reductions which had been made were 'a, violation of the Statutes. Many teachers had also suffered a'greater cut tjian 10 .per.cent, by,, reason of N tho abolitioni of,' .the remote allowance. There had' "been no all-round' reduction in, v the' cost of living, as there -were cer-tain-get" payments which the working classes had to-meet which had not been decreased. In many thousands of homes it was absolutely impossible to make the income <meot the necessities of food/clbthiug, and shelter. The Labour Leader quoted figures with .the object of showing that Now Zealand was worse off in regard to unemployment than many other countiies. Itt was unfortunate that tho Prime Minister had seen fit to disparage the dole as paid at Home. It was not a free payment, but was as a result of payments made into a fund'by the workers and by the employers. The Right. Hon. L. M. S. Amcry, when in New Zealand, had declared emphatically that it was not a dole. Mr. Holland criticised the manner in which demands were being made for the unemployment levy. \ Mr. Forbes: "It's all needed." Mr. Holland: "Yes, but that's what the burglar said when he broke into the bank." (Loud laughter.) Mr. Holland said there was something ominous in the statement in tho Budget that the Government was taking stock of the position regarding education expenditure, and that it was endeavouring to effect economies while at the same time-maintaining the present high standard. For the purpose an Economy Committee had been set up. Mr. Holland said ho took that as a preliminary "to'a move for cutting down the Education/Vote.' ' ■ , r -In conclusion, he referred to the Bud- ; get ot last year, described as tho "Black '•Budget,"- and appliod the term "the 'Black and Blue' Budget" to >this year's document?,-If'the Government-had had I full'appreciation of its" own position | When 'it found it. was apparently help-1 ■-lenß-'and .that, it was necessary; to get-1 tison- almost «very item of'policy on.

man and.;the married man -with a family should vbe : considered^ ■ ;".■: "" ' PUBLIC WORKS EXPENDITURE. Mr. Stewart, said he was pleased to learn that it was proposed to cut down Public Works expenditure by 40 per cent. That would" make a substantial reduction', in "New Zealand's loan rcquiroments, and it would be a welcomo change from the policy of tho last two or three years, during which theic had ■ been rapid. increases in Public Works expenditure and in the Public Debt. It I appeared, in addition, that the Govern- I meiit had come- to realise that it was unwise for New Zealand to continue pouring unlimited millions into the Stale Advances Department. In his opinion, it would be wise to consider the whole question, of oversea borrowing. During prosperous" times tho burden of interest charges was not so severely fett, but when prices fell it proved a menncc. The point was also made by Mr, Stewart that if Public Works expenditure was proving reproductive the case would not bo so serious, but one had only to glance at the railway accounts to see that that was not so. ' TAPER OFF BORROWING. "Mr. Stewart stressed the need for determining a definite policy in the matter of oversea borrowing. There wero two possible courses; one was to cease borrowing overseas at once, and the other was that of. tapering off borrowing, as the 'Reform Party was doing before it went out of office. Tho chief objection to the first was that it would cause a violent shock to tho economic life of the Dominion to introduce too sudden a reversal of a policy of long standing. He was; of opinion that New Zealandwould be wise to 'revert to the policy laid down some years ago of steady curtailment of our annual requirements so that at the expiry of a short period of years it would no longer be necessary to bor-row-money : overseas. Dealing with the question of economies, Mr. Stewart said it had been questioned whether the Government was doing all that could be done. There was a widespread bolief that economics could be effected in education expenditure without impairing efficiency. The Government seemed to be doing nothing but promise 'the setting up of a Commission, and the delay .indicated that for some' reason the Government was standing pat on the problem. Tho speaker urged the Government not to relax its efforts towards achieving further possible economies. An Economy Commission had been suggested, and he believed.it would give the,greatest satisfaction to the people if it were decided not to limit the personnel too much; A GLOOMY SPEECH. Mr. H. G. R. Mason '(Labour, Auckland Suburbs) said that Mr. Stewart's speech had been a gloomy one without a solution for the present situation and without a policy. He had excused his Government for remitting income tax because huge surpluses were being accumulated, but during that period the Government was borrowing abroad. The Reform Government had. shown a lack of vision .and had thus accentuated the problem from: which the Dominion wasnow suffering. So far as a tariff leaned in "tho direction of protection, so far did it lean away from producing revenueV Tho business man was in just as precarious a position to-day as the f armor, and'it was not fair to. hold out to the farmer that the business community could carry the load. If there was another section which could bear the; burden-it should be mentioned. There was utter inconsistency in the philosophy upon which the Budget was founded, and a lack of. policy for the solution of the present difficulties. Mr. Mason said that there wero greater problems than the fall in revenue, and the biggest loss was the enforcod idleness of a large number of the people. Too much had been produced and uot enough consumed^ yetiho'Primc Minister was advocating thrift which would mean still loss consumption. -In the tobacco tax the Government seemed to be sacrificing the interests of the growers for tho sake of revenue, and he could not understand why the' Government had delayed putting into operation the recommendations of the Parliamentary Committee. It was obvious that New Zealand companies using large quantities of imported tobacco were evading taxation, and the Committee had made recommendations to avert this. The debate was adjourned.