Evening Post. THURSDAY, FEBRUARY 16, 1933. "BAD STRATEGY AND BAD ECONOMICS"

Evening Post, Volume CXV, Issue 39, 16 February 1933, Page 10

Evening Post. THURSDAY, FEBRUARY 16, 1933. "BAD STRATEGY AND BAD ECONOMICS"

The New Zealand Government has been credited by "The.Times" with the endeavour "to. secure hy equitable sacrifices all round a reduction of costs in order' to meet the fall in prices," but if that has been its object it must be admitted to have set about it in a very funny way. It. is the flagrant disregard of all-roundness that has made its exchange policy so hard to bear, so incompatible with the broad national basis on which it was honoured with the country's confidence at the General Election, so galling, to the already seriously crippled/interests which are called upon to bear the burden of the preference conceded to others. The mischief of the -strategical blunder has^een aggravated by equally defective tactics. The secrecy and the suddenness with whiph the momentous decision was arrived at on what looked to the minority—if it be a minority—like an "ex-parte" hearing of the favoured interests, the lack of any attempt to soften the blow, and the apparent assumption that, after losing more than half its majority in carrying the Bill, the Government can slill carry on with the same high hand as before—all these things have sharpened the sense of injustice and the resentment under which thousands of those who were formerly strong supporters of the Government arc labouring. And now on the heels of the high exchange Bill comes the Sales Tax Bill to increase their anxiety and indignation. ' Within the last twenty-four hours, however, it is pleasant to note two indications of a better Parliamentary atmosphere. We referred a few days ago to the power of the Government to complete the breach with its recalcitrant followers by expelling them from the Coalition, and to its apparent intention to exercise the power. But though some of these dissentients were not invited to the last caucus this extreme step has not been taken, and the forces of conciliation are now so asserting themselves that.it may be hoped that no punctilios of dignity or etiquette will be allowed to prevail against them. " If even within the limits of the Cabinet the National Government of Great Britain found it necessary to apply the principle of "agreeing to differ" to so vital a question as Free Trade, the far broader limits of a Coalition party can surely permit of the same elasticity. A striking object lesson in the combination of candour and loyalty which is needed for the settlement of this difficulty was supplied by the most powerful of the Coalition Independents in his speech on the Sales Tax Bill yesterday. It was, of course, impossible for Mr. Downie Stewart to withdraw to the extent of a single inch from the* condemnation of the Government's finance which compelled 'him to resign, and which he justified al length in his speech on the second reading of the Banks Indemnity Bill.. He had indeed expressed in that speech his agreement with the Government "that we have reached the point where further measures of economy and further taxation must be adopt-, ed by, the Government on the^lines. indicated 'by the Minister' of Finance." But when the Government decided to accompany these measures by a rise in exchange costing about £4,000,000 and resulting in a huge deficit, Mr. Stewart was compelled to recognise that it was time to part. On both poipts Mr. Stewart maintained -the same attitude yesterday, and he stated it with his usual balance and fairness. In 1927 he had been against the sales lax, but under the pressure of the financial necessity disclosed in the statement that he submitted to the House in April last he was compelled to change his opinion. _ Nothing, he said yesterday, was left in sight except a sales tax. He made this Statement in order to point 'out the position and show that ho had not somersaulted on his attitude towards a sales tax. The imposition of this tax had been prevented by the hypothecation of reserves invested in discharged soldiers' settlement mortgages. Since then the pressure has been intensified by the continuous drop in revenue. Further taxation is inevitable, and it is not for Mr. Stewart to say that the sales tax to which he reluctantly consented .last year has_ ceased to be applicable because he is no longer Minister of Finance, and to oppose it might enable him to score a point against his successor. As his object is not to embarrass the Government but to support it to the full extent that the public interests will permit he had no hesitation in supporting its Sales Tax.Bill. At tiie same time he explained quite clearly the contribution which he regarded the Go v-

ernment's exchange policy as having made to the necessity for the measure. Tho Minister of Finance had estimated, said Mr. Stowart, that for next year there would be an enormous shortage of £9,800,000 in the Budget. In his opinion, £4,000,000 was due to the high exchange, and it was clear that the sales tax had been rendered imperative by the exchange increase. Even without the increased exchange, the sales tax would have had to be imposed, or, alternatively, it would havo [ been necessary to impose some other | heavy taxation. [ But while supporting the Bill, Mr. I.Stewart did not conceal his opinion , that the Government had committed 1 a double blunder when it thrust upon the country the high exchange and the sales tax in successive weeks. _ I think the grievance of the public is this: they are being shot down with both barrels at tho same timej ho said. I believe that if the .high exchange, rate had not been imposed, the public would have acquiesced in tho sales tax. Without i tho increase in the exchange, .it would have been possible to bring down tho deficit to within manageable limits. I think the taxpayer fools that a burden has been placed upon him, and that at the same time the budgetary position has hot been brought to within a safe margin. The extra cost of oxchango prevents us from achieving this margin of safety. . lln a later passage Mr. Stewart described the timing of these measures las both "bad strategy and bad < economics," and it is also, of course, in his opinion, bad finance. I am still emphatically of the opinion, he added, that where a country is deliberately depreciating its currency, iit is a matter of prime and absolute i necessity that it should- balance its Budget. Ido not know how it can be done with these extra millions being thrown on by the high exchange. ' 1 Both in where it helped and where jit hurt the Government this just and j weighty speech is sure to create a favourable impression in the couni try. We trust that it may do as j much in the House, hut it has not j pleased the Labour Party. Mr. 'McCombs described Mr. Stewart as I having "rushed to the assistance of | the Government and just tried to find j excuses for the legislation—the very I legislation which caused him to | leave the Cabinet." Coming from ,so acule a critic, such an absurdity ,is perhaps better described as a misi representation than a misunderstanding. Mr. Coates showed better sense when he met Mr. Stallworthy's description of the sales tax as "imposed to fill a gap in the Budget caused by the-torpedo of high exchange" by the words "qh, nonsense," and a reference to Mr. Stewart's speech. Mr. Stewart has relieved the difficulties of the Government with this part of its programme, and we trust that it may I relieve the. indignation of those I who are suffering from its double , blunder. ./