MSNISTER'S REVIEW

Evening Post, Volume CXXXV, Issue 131, 4 June 1943, Page 6

MSNISTER'S REVIEW

AID TO WAR EFFORT

FINANCES ANALYSED

Mr. Nash said that as New Zealand Minister in Washington he had had exceptional opportunities of comparing and contrasting conditions in New Zealand with those overseas and in regard to our war effort in the services, in the factories, on the land, and in other' directions, and the strides which had been made in recent years in the material well being of the people, the comparisons were not unfavourable to the Dominion. Much still remained to be done, but he was confident, although disappointments might he many, and hardships not a few, that the tide of war had at long last turned in favour of those who were fighting for freedom.

Until victory was achieved and the foundations laid of an enduring peace the people must concentrate their energies on the problem of providing the greatest aid.!to'the war. effort. Mr. Nash referred :,tp'the steps taken to overcome manpower difficulties and said the success that had been achieved iii this connection .was such that the factory output in 194142 reached the record value of £ 155,500,000, which was more than 36 per cent, above the value of production in pre-war years. The increase was principally connected with essential war needs, such as engineering, footwear, and woollen goods. The primary production results had also been most' satisfactory!' 'With a slight decline in 1941-42, from the record figures of the previous year, primary production was still exceeding all prewar records.

There had, however, been shortages of certain classes of goods, but having in mind the hardships of tne valiant forces overseas there was no question but that the people would accept ungrudgingly and uncomplainingly the minor stringencies which must inevitably be imposed^on the "Civilian population. The Government had taken measures to mitigate the position and'to prevent inequalities by a comprehensive system of rationing. P«.r. Naslvalso referred to the introduction on December 15 last of the stabilisation scheme covering wages and essential items in the cost of livmg, and to the importance of this policy nn the interests of the welfare of the whole community.--OVERSEAS'ASSETS. The satisfactory production results, together with the United Kingdoms ability to provide shipping for New Zealand's exports, continued Mr. Nash resulted in a record banking figure at overseas assets totalling £46.600000 during the year. This sum receded somewhat by the end of the financial year due to repayments to the United Kingdom Government of part of our overseas indebtedness arising out ot the war, but, nevertheless, at the end of March last the Dominion's net overseas funds totalled £37,100,000, compared with £30,900.000 at the close of the previous year. ■ Dealing with the position of the Consolidated Fund, Mr. Nash said that the public finances reflected the national activities which had taken place during the past year, both as regards war and the normal civil operations of the State. In the Consolidated Fund there was a budget surplus of £4.200.000. which, as on similar previous occasions, would be transferred to the War Expenses Account where it would be applied towards meeting the current year's expenditure, thereby reducing borrowing. In the °oc.l^l -Security Fund, after transfers from the Consolidated Fund of £3.800 000, which was £200.000. in excess of the amount appropriated, the revenue was sufficient to meet the expenditure leaving a like balance at the end of the year to the sum carried into the accounts from the previous year. RECEIPTS AND EXPENDITURE. The total receipts for the year, said Mr Nash, were £199,900,000, made up as follows:—War Expenses cco. ls t> *p 146 800 000- Consolidated Fund, £37,----100 000; Social Security, £ 18.000.000. Apart bom the Consolidated Fund surtTius of £1,672,000, which was included in the War Expenses Account taxation figures the taxation receipts tor the ytav totalled £88,800,000. Of this amount direct taxes accounted tor £59100,000, made up of £25,600,000 income tax, £10,400,U00 social security charge and £16,800,000 national security tlx Land tax produced £1,000,----nnn estate duty £3,500,000, succession duty £1000000 y gift duty £200,000.and the social security registration fee £600,000. Indirect taxes amounted, to £27 700 000, and were made up as fol-lows:-Customs duty, £9,400.000; beer duty £2,900,000; sales tax, £11,000,000; highways revenue, £1,700.000; stamp duties, £1,700,000; other taxes, £1.000,000.' . . . "Due to general expansion in incomes and to the increase last year in the surtax for war purposes from 15 per cent, to 33 1-3 per cent., income-tax receipts show an increase of £6.600.----000" continued Mr. Nash. "'Largely as a result of raising the rate of national security tax from Is to Is 6d, the receipts from this tax were greater by £6,300,000. Sales tax produced £3,900,000 more than in the previous year as a result ,of the increase in the rate on certain classes of items from 10 per cent, to 20 per cent. Other increases were beer duty £1,000,000, estate, succession, and gift duties £900,----000, and Customs £700.000. These increases were offset by minor reductions totalling £300.000. leaving a net increase of £19.100,000.

"It is worthy of emphasis that £59,----100>000, or 68 per. cent., of the total taxation revenue, \vas found by way of direct taxes."

The total receipts were expended during the year as . follows:—War, £142.800,000; debt charges, £12,400,-, 000; social services, £25,600,000; civil administration, £10,900,000; increase in cash balances and imprests, £8,----200,000; total, £199,900,000..

Public Debt operations since last year, said Mr. Nash, resulted in a gross increase in the debt of £83,465,000, which was obtained from the following sources:—Public loans in New Zealand1 (including advance subscriptions), £28.901,000; national savings investments, £3,972,000; voluntary in-terest-free loans, £31,000; Memorandum of Security Agreement with United Kingdom Government, £16,----437.000; departmental issues and Reserve Bank, £35,124,000; total, £83,----465,000.

Against this gross increase must be offset repayments during the year of £5.038,000, the year thus closing with a net increase of £78,427,000, of which £73,908.000 took place in the Dominion and the balance of £4,519,000 in the United Kingdom. Apart from the Memorandum of Security Agreement, debt domiciled in London was reduced by £2,918,000 during the year. The amount of the debt under the Memorandum of Security Agreement on March 31, 1942, was £2,818,000, while transactions during 1942-43 were: Borrowings, £15,437,000; repayments, £8,000,000; leaving the amount outstanding on March 31 last at £-10,255,----000. The repayment of £8.000,000 in London was financed from borrowing in New Zealand, and thus had the effect of transferring the domicile of the debt to New Zealand. Since the close of the financial, year a further sum of £2,255.000 had been repaid,' leaving £8.000,000 unpaid for goods supplied under the agreement prior to March 31 last. '

Referring to the item of "departmental issues and Reserve Bank." Mr. Nash explained -that departmental issues covered the surnlus funds of the Post Office Savings Bank and other State institutions, and. owing to the substantial increase, compared with last year's' Budget estimate, of expenditure in New Zealand for both the Army and the Air;Force it was necessary to finance thp deficit by drawing on the Reserve Bank by means of Treasury bills tn thp extent of a net amount of £ 13.960.000.

Mr. Nash said that since the present Government became responsible for the public finances, aoart from war debt, the dfbt domiciled in London has been reduced by £10fi95>.n00 and the Australian debt W £730.000. R"»n including th^ war dfbt. the net decrease over the period was £1.167,000. NATIONAL DEVELOPMENT WORKS. Loans for needs other than those of war would be restricted' to the absolute minimum, continued Mr. Nash. There were certain types of national development works, however, which, if the essential needs of the community were to be met, must be continued and even increased within the limit of the men and materials available. He named the two main classes of work coming within this category as housing, for which an expenditure programme approaching £4,000.000 was planned for the current year, and the further development of hydro-elec-tricity, for which loan provision slightly in excess of £2,000,000 was being made. Housing and hydro-electric development were complementary, and were important, not only at present, but in the post-war era. Allowing for funds in hand it was anticipated that a national development programme of £6,500,000 would require to be authorised for this year. This was £1,500,000 more than last year's authorisation for the same purpose. This national development loan programme would be provided from departmental funds. CONSOLIDATED FUND, 1943-44. Mr. Nash said it was estimated that the Consolidated Fund revenue would, be some £800,000 less than v that received last year owing principally to a prospective reduction in Customs revenue. • While income tax had been set down to produce the same total as for last year it was anticipated that any possible falling off. under this heading would be offset by additional receipts from a proposed "drive" against defaulting taxpayers. Mr. Nash gave the following summary of the Consolidated Fund estimates: — Revenue. £ £ Taxation— -~ Customs fi,600.000 Beer duty 1.800,000 Sales tax 3,500.000 Highways 1.fi00.000 Stamp duties 1,700,000 Land tax 1,000,000 Income tax 19,100.000 Miscellaneous 200,000 35,500,000 Interest recoveries from trading activities, etc. 4.100.000 Other receipts 2,000,000 6,100,000 C4i.e00.000 Expenditure. Permanent appronrlntions (Including transfer of £ 1 500,000 to War Expenses Account) . I9.fiofi,ooo Annual votes 21,554,000 41,220,000 Supplementary estimates and contingencies .. " 380,000 £41,600,000 "The expenditure provided for in the estimates," said Mr. Nash, "shows a net increase of £3,014,000 as compared with the actual expenditure for last year. Increased debt charges alone account for £2,500,000 of this increase, practically all of which is in respect of war, and which is in fact a war cost which is being met from the ordinary revenues of the State.

"Other increases are £113,000 for education. £300.000 in the amount to be transferred to the Social Security Fund, and £ 1,108,000 for war pensions,

these increases being offset to some extent by decreases in other items." SOCIAL SECURITY FUND. Mr. Nash gave the following summary of the Social Security Fund, for the current year:— , • .' Expenditure. Monetary benefits — £ £ Age 8,100,000 Wmows ;.... 965,000 Orphans ......... 22,000 Family 920,000 Invalids 1,030,1)00 Miners 80,000 Unemployment .. 60,000 Sickness 420,000 Universal super.- . 820,000 Emergency 130,000 Maori War .80 — 12,547,080 Hospital, etc., benefits — Hospital 2,067,000 Medical '.:. 1,030.000 Maternity 539,000 Pharmaceutical ... 536.000 Supplementary .. 160.000 — 4.332.000 Administrative expenses .... 524,000 £17.403,080 Revenue. Social security charge 11,600,000 Registration fee and miscellaneous 575,000 Transfer from Consolidated Fund 4,100,000 £16,275,000 "Thus it will be seen," said Mr. Nash, "that the resources of both the Consolidated and the Social Security Funds will be sufficient to meet requirements without increased taxation." After reviewing the measures adopted for the rehabilitation of service men and women, Mr. Nash said that everything necessary to ensure their complete rehabilitation would be fostered and, carried out by the Government, the objective being as far as possible to place them in at least as good a position as t they would have been in had they continued their normal employment.

Mr. Nash said that an examination of the estimated cost of the war would show the futility of attempting to take the amount required by taxation, but inside the objective (the maximum production of goods and services) taxation should be used to the extent that it would give the best results. The goal set by the Government had been to pay one-half at least of the cost of the war from taxation. Owing to abnormal capital expenditure in the past year that goal had not been reached, although the proportions would have been closer had all income taxes been collected. The short collection in many cases had been due to the large proportion of experienced assessment and inspection officers engaged with the armed services, but an adjustment of staff was being made, and it was expected that reasonably large sums would be recovered.

"If we are to make our maximum war effort, whilst "ensuring good foundations for our post-war policy, it is essential that the currency and monetary system be wisely managed and controlled," said Mr. Nash. "At the present . time the wisest course is to rely on subscriptions to the war loan to meet the sum not provided by taxation at existing rates during the current year.. ;.

."Measured in figures, no less than £230,000,000 has been spent on the war over a period of three and a half years by less than 1,750,000 people, while the fact that the aged, the sick, the widow, and the family have been fully cared for speaks well for the future," Mr. Nash added. "The correct measure of progress is reflected in the quality of our men in the face of the hardships and dangers, of the present campaign; in the record volume of goods produced by the men and women in our factories; in the" extraordinary work of our primary producers who, in face of unprecedented difficulties, have made a great contribution to the feeding of the people in the United Kingdom during Britain's greatest heroic years; and in the men on the sea, who. continuously carry and guard the food and other goods that sustain the life of Britain. We must see to it" that our plans are well laid to care for our soldiers, sailors, , and airmen when they return, and at the same time build anew an economic system that will provide reasonable standards for our own people and also make a contribution .to the expansion of life in less fortunate areas of the world. "This country is greatly blessed by the fertility of it's soils, its climate, and by its beauties; but these blessings bring great* responsibilities. We have lived up to and met these responsibilities in the years that have passed. The evidence is that we will accept and live up to like responsibilities in the future. ■ "We have a great opportunity to lay the foundation of a productive and distributive system in which all who serve with hand and brain may so serve without the fear of poverty, unemployment, or the menace of un-cared-for ill health. "We should remain the country to which all may turn for an example of what can be done, where all are willing to do their share of the work which makes a full life possible."