WAR FINANCE AND CREDIT

Evening Post, Volume CXXX, Issue 157, 31 December 1940, Page 6

WAR FINANCE AND CREDIT

In his address on Sunday night the Prime Minister said that the war budget was being met in several ways, "principally by increased taxation, by loans, and by the prudent use of credit." This reference to means significantly omitted the method which should have the closest attention and application—curtailment of expenditure for ordinary civil purposes. Such curtailment is being forced upon the tax-paying citizen by the Government's de- j mands, but the Government has not set the example in its own expenditure. The civil budget for spending from revenue this year is as big as ever, and the spending from loans shows a very small reduction—nothing approaching what it should be. Of the total expenditure from revenue, loan, andj credit, almost two-thirds is for civil; purposes and something over onethird for defence. Compare this with the estimates quoted by the "Daily Telegraph" last night of Britain's pre-' sent expenditure: £3,750,000,000, of which £3,000,000,000 is for defence and A.R.P. Four-fifths of Britain's taxes and loans is for war. If, as Mr. Fraser says, New Zealand's war; costs will show further increases next j year; then civil costs must be re- j duced. The country cannot go on to more compulsory lending and still heavier taxation to maintain a swollen civil budget. A question may. also be asked about "the prudent use of credit." On December 18, 1939, Reserve Bank advances to the State for purposes other than marketing were £18,325,000. On December 16 this j year the advances were £23,690,000, an increase of over £5,000,000. The 1939 figure indicated excessive use! of credit, but, notwithstanding the resort since to much heavier taxation and to forced lending, this year's j figure is higher. What authority is j there for describing this as "prudent use of credit"? At the Labour caucus a fortnight ago the retiring Governor of the Reserve Bank "gave a.statement about the present position of the Dominion as he saw it." He also "discussed with caucus the economic and financial problems of the Government during the past five years." This was the official report from the caucus, but Mr. R. M. Macfarlane, M.P., made a significant statement a few days later; The reception accorded the Governor of the Reserve Bank, Mr. Leslie Lefeaux, was cordial, he said, though most members of caucus were in disagreement with what he said. Mr. Lefeaux discussed the economic position of New Zealand today, and what its future was likely to be, and pointed out many things in the Government's banking policy with which he disagreed. What were these things? The people of New Zealand have a right to know. The Governor of the Reserve Bank is not a private expert engaged by the Labour caucus or the Labour Party. His views should be available for the guidance of all members of Parliament, and for the people who must foot the bill if failure to act on his advice involves the country (as it has done already) in grave difficulties. In 1938 the Reserve Bank advised a course which would have averted the sterling crisis that came later in the year. The advice was not heeded. What advice and what views have been given by Mr. Lefeaux now, and in what respect is the Government departing- from them, for evidently, on Mr. Macfarlane's statement, there is not agreement? When Mr. Fraser says the use of credit is "prudent," we should be told exactly what is the Reserve Bank view.