Evening Post THURSDAY, JULY 4, 1940. LESSONS THAT MUST BE APPLIED

Evening Post, Volume CXXX, Issue 4, 4 July 1940, Page 10

Evening Post THURSDAY, JULY 4, 1940. LESSONS THAT MUST BE APPLIED

The tone of the opening speeches in the financial debate last night was commendably restrained. It reflected the substantial agreement of all classes and all parties in New Zealand that the winning of the war must be our main task, and that measures essential to this task must be accepted even though they conflict with preconceived ideas. But this agreement and a willingness to set aside former; policies do not imply unquestioning acceptance of all that is proposed, and the Leader of the Opposition quite rightly interpreted his duty as requiring that he should point out where the Budget was at fault and was likely to hinder, rather than advance, the war effort. He pointed to the results of pre-war extravagance: the dissipation of sterling reserves, the heavy drain upon resources which could now have been tapped iof additional revenue, and the extensive use of credit which had made any further use in the present emergency dangerously inflationary. Because of these past, excesses our war finance problem is extremely difficult. It can be solved, not by going further in the courses which have led us into difficulty, but by learning the lessons that the past^ teaches, and applying them with' wisdom and determination. The first of these lessons is that the State cannot spend, borrow, and tax without limit. Sooner or later the cost must be met, and, though the taxation may be directly levied on certain sections, economic processes will Inevitably distribute the burden over all classes—not excluding even the poorest, who will suffer through a decline in prosperity and a rise in living costs. Now we are compelled to spend for war purposes. Whatever is necessary must be found, and the only proviso is that there shall be no avoidable waste. But because of this necessity there is a double obligation imposed upon the Government to scrutinise with the utmost care all expenditure for purposes other than the war. The Budget does not show that this has, been done. In fact, it reveals that it has scarcely been begun. The civil Budget is as big as for last year, and public works expenditure, though reduced, is still far in excess of what can be afforded with safety. The Prime Minister's reply to Mr. Hamilton's criticism was not convincing upon this point. Mr. Fraser said that the Leader of the Opposition had not stated where the economies could be effected. Surely that is the duty of the Government, which has at its call the officers to advise it. The responsibility for deciding where and to what detailed extent economies shall be put into operation cannot be passed on to the Opposition. This duty has not been fully discharged, and the failure cannot be excused by pleas of the post-war usefulness of certain works. The test to be made is usefulness now. There are many works and many forms of expenditure for which a case could be made in peace which cannot be justified under the completely altered circumstances of war. Private citizens will have to forgo such forms of spending—the Budget will compel them to do so —and as Mr. Hamilton truly said: "Any lead in economy must come from the Government."

The excuse that a speedy transfer of men from public works cannot be made without causing unemployment is misleading. It ignores completely the fact that taxation and borrowing on the scale proposed by the Budget cannot be carried on Avithout severely limiting the spending power of the public. This reduction of spending power will most certainly restrict opportunities for employment. The Government's policy presupposes that all Government spending is wiser than private spending, and that, no matter how private spending may be curtailed, Government spending must continue at a high level. This is true in so far as Government war expenditure is concerned. National defence and security must come before all else. But it is emphatically not true as concerning all civil expenditure. There are many forms of private spending which are more productive immediately and for the future than some of the Government works which are to go on. Much of private spending that is unnecessary will have to stop, but the cutting should not go to

far that the public economy is damaged. It need not go this far if the Government, which is enforcing sacrifice from all individuals, sees that there is an equal measure of sacrifice and economy in the public activities over which it exercises

control