THE FINANCIAL STATEMENT.

Evening Star, Issue 7625, 30 May 1888, Page 1

THE FINANCIAL STATEMENT.

WELLINGTON, Mat 29. In Committee of Supply this evening the Hon. Sir H. A. Atkinson made his Financial Statement as follows: Mr Hamlin: The recess which has just ended has been so short—only about one-half the ordinary length of our Parliamentary recess—and the work imposed upon the Government so much greater than usual, that with every effort on my part I have been unable until to-day to submit to tbe consideration of the Committee the Budget proposals of the Government, These proposals necessarily depend to a large extent upon the reduction of expenditure rendered possible through the reorganisation of the Civil Service, and it was not until within the last few days that that work had sufficiently advanced to enable me to summarise tbe results for the information of the Committee. It will be in the recollection of hon. members that when the Government took office In October last the financial position and prospects of the colony were such as to require the immediate and earnest attention of tbe Government and of Parliament. So far as timepermitted, important changes were introduced during the session, and others promised or foreshadowed. The Government undertook to largely reduce the loan expenditure on public works. This has been done, and still further reductions are now both possible and desirable. We also undertook to make large reductions of the expenditure charged against the Consolidated Fund; and although the sum reduced has not reached the (amount we had hoped, we shall, I have no doubt, be able to satisfy the Committee that the reductions we have made and are making are very substantial in amount and of a good and permanent character* We farther undertook to charge against the ordinary revenue certain works and services, the funds for which have hithebto been provided from loan. This also has been done, and hon. members will find in the current ordinary Estimates proper provision made for these services. These salutary changes have not only been immediately and directly beneficial, but have also been indirectly of great advantage to us in their effect outside the colony. It is much to be regretted that our credit in London and elsewhere has been and still is greatly injured by hostile and unfair criticism. No one denies that there are very obvious points in our past finance fairly open to adverse criticism ; that for so small a community we have become largely indebted ; that in the past we not only borrowed largely, but sometimes spent unwisely and too freely. But assuming the truth of these things, they only tonoh one side of the case. If we want to see their real present significance, their bearing on oar financial position and prospects, not one but two'aspects have to be viewed. We must obviously, in the first place, and before we can strike a balance, look at the other side of the account and consider the character of our population, its energy, industry, and skill, and the great resources, developed and undeveloped—the wealth actual and potential which here exist. It has been said that New Zealand colonists are heavily taxed. Let us, without stopping to consider the qualifying facts, assume this to be true, and then look at it from the other side. Here is a community of some 600,000 people, who in a time of long-oontinned and almost unexampled commercial depression, with some of their main staples very low in market value, yet raised a public revenue of say L 3,500,000 a year. That is the sum they annually contribute to the State, mainly, if not wholly, out of their earnings; and it may be fairly inferred that these earnings and the wealth they represent bear no unfavorable comparison with those of other peoples, when out of them, and as I have said, in time of long-continued depression, they are able to make and maintain such a contribution, Yet, in spite of this very large contribution —I hope I may even say partly in consequence of it—there is, I believe, no community in the world of the same number andt spread over as large a surface, where, on the whole (and allowing for inevitable exceptions) the material conditions of life are more favorable or possessed by the people lb greater abundance. In tbe second place, it is not less necessary to bear in mind the important and salutary financial changes already referred to. These changes are bet only important in themselves as involving large and immediate economies in the administration of public works, but still more so as showing emphatically that we both mean to live within our means and have approved of and adopted the steps necessary to ensure this most desirable result. The misrepresentations I have spoken of are greatly to be regretted for their effect on our credit in London, and still more so because, owing to the extraordinary ignorance of the great mass of the English people of all things mating to the colonies, they tend most materially to tom from our shores that class of settlers whom we most need, and who would do best here—men with some capital, who could make profitable use of our waste lands, whether agricultural, pastoral, or mineral. It has very often been said, yet I would again repeat it, that the introduction and settling on our unoccupied lands o£ this class of settlers is one of the most important functions of the Legislature and Government of the colony. It may be convenient that I should state briefly at starting what, in the opinion of the Government, is the chief financial work which requires to be done this session.

Firstly, to see that our ordinary expenditure is reduced to the lowest practicable point, and, this being done, „ . . Secondly, to devise means to raise sufficient revenue to prevent the recurrence of a deficit. And in doing this we must, as far as can be done without lose to the community at large, assist our local industries and manufactures ; Lastly, we have to reduce the expenditure of borrowed money on our public works to a much greater extent than was proposed last session. The general course of action I have here indicated will, I am sure, meet with the cordial approval of the Committee. It is not, and cannot be, the work of any one party. No doubt hon. members may object to this or that proposal of the Government for accomplishing what is aimed at, but the difference will be only as to the means to be uspd and not as to the result to be achieved. With these preliminary remarks, I pass to the consideration of the financial transactions or last year. im , „„ REVENUE AND EXPENDITURE 1887-88- . It will be remembered that when the 1 mancial Statement was made last November I was blamed by a high financial authority for haying predicted a much larger deficit than was likely to occur. I regret to say that the results of the year have been less favorable than I anticipated. Upon the proposals then submitted, particulars of which will be found in table No. 9 appended to last year’s Statement, it was estimated that the deficit on the year’s transactions would probably be L 253.305 on the ordinary revenue account and Land Fund account conjoined. The estimate was subsequently increased to L 312,653 by tne disallowance o£ some of out proposed reductions, by the late period at which the session ended delaying the application of our proposals fir retrenchment, and by the Supplementary Estimates of Expenditure, the increase of L 59.348 being the difference between the estimate of expenditure given m table No. 9 referred t0—L4,286,702—1e5s proposed reductions L 71.000 and estimate of L 4,275,050 arrived at after the passing of the Appropriation Act. But this increased amount did not include any estimate of the sura required for compensation for loss of office, which in last year’s Financial Statement was treated as a matter outside the ordinary estimates of expenditure. I shall presently refer to this question of compensation more fully.

the receipts of the year. Still keeping the ordinary revenue and Land Fund account conjoin ed for the purpose of comparison, my estimate last session fell short of the actual expenditure of the year by L 382.047 as against L 312.653 anticipated, being L 69.394 in excess of the estimated deficit for 1887-88 or, deducting L 22.104 paid for compensation for loss of office, deducted for the reason first mentioned, the excess was L 47,290._ Before explaining how the estimated deficit came to bo exceeded, it may be well to state what it actually was at 31st March last. As I have just said, the expenditure exceeded the receipts of the year by L 382.047; but, if we add the deficit left over from the preceding year of L 146.556, we get a total of L 528.603 for the two years. The liabilities outstanding at the close of the year were in respect to the ordinary revenue account L12G,184, and of the Land Fund account L 18.772, making together L 144.956, being about L 60.500 less than they were at the 31st March, 1887. I shall now as briefly as possible explain to the Committee how the actual deficit at 31st March last exceeded our anticipations. In the first place, the revenue as a whole did not realise the amount estimated by L 103.386. The railway receipts did not reach the estimate by L 68,174, nor the land sales by L 29.503. The revenue derived from the depasturing licenses, rents, and other sources also fell short by L 7.239, but the Customs duties and stamps were both slightly in excess of the estimate. lam informed by the railway authorities that the falling short of the estimated railway receipts is m some measure due to the late harvest, and also to the low price of wheat, which caused farmers to delay threshing and delivering their gram m the hope that a rise might soon take place. ‘That the smaller quantity of grain conveyed before the 31st of March does not arise from a less Quantity grown, and ultimately needing conveyance, is shown by the fact that 28,000 tons more grain are estimated to have been carried over our railways during this month than in the same period in the previous year. The expenditure, as a whole, was less than the estimate byL33,942, or. excluding compensation paid for loss of office (L 22,104), it was LR6,046 less than the estimate, which sum deducted from the revenue short received (L 103.336) gives the excess deficit of L 47.290 for the year the amount I have already named as exceeding our anticipations. I should, however, inform the Committee that, excluding interest and Sinking Fund, and other charges under permanent Acta which are not so directly under the control of Ministers, and also compensation for loss of office not paid under the Civil Service Act, the amount expended last year was within th© votes of Parliament by LS6,fiSS. Included in this sum is L 19.882, the unexpended balance of amount voted for the General Post Office, Wellington. . , , , The total expenditure out of the Consolidated Fund under Appropriation Act, including services not provided for, was L 2,168,713 for the year 1887-88, including the whole charge for defence services, as against L 2,241,513 for 1886-87, with L12.G00 added for defence services charged to loan, being a reduction of L85,300in favor of last year. I bav© atatod to the Committea that the transactions for the year of the ordinary revenue and Land Fund accounts conjoined resulted in a deficit of L 382.047. Separately the accounts stood thus; Ordinary revenue account, L 302.960; Land Fund account, L 79.087. To these sums we have to add the deficit with which the year began, made up of L 92.293 ordinary revenue account and L 54.263 Land Fund account. There was therefore for the two years a deficiency of L 394.253 in the one account and L 133.350 in the other, making a total of L 528.603. But Parliament having last session, in anticipation of a large deficit at the close of the year 188788, made provision for L 400,000, I have to-day to suggest only a means of meeting the much smaller sum of L 128.603. This I shall presently, but I may as well at once say that I shall not propose to add the amount to the permanent debt of the colony. THE PUBLIC DEBT. The gross public debt at the 31st March, 1887, as stated in detail in table No, 3 appended to my Financial Statement of November last, was 135,741,653, During the year the following reductions in the debt have taken place: Debentures for L 300,000 of the Now Zealand loan of 1850, which matured on 31st January, 1888, have been redeemed by the trustees of the Sinking Fund of that loan, and have been cancelled and returned to the colony. The debt under the Consolidated Loan Act, 1867, has been reduces by L 42.400 ; debentures of the “ drawing ot 1887 redeemed out of the Sinking Fund. The additions to the debt have been :-L69,000 under the Consolidated Stock Act, 1887, for expenses of conversion; L 500.000 borrowed on short dated debentures under the North Island Main Trunk Railway Loan Act, 1882; L 7.000 under the New Zealand State Forests Act, 1885; L 125.000 under the Government Loans to Local Bodies Act, 1886; L 258,154 under the Consolidated Stock Act, 1884, for the increase of the Sinking Funds during the year; and L 400.000 under the Public Revenues Act, 1887 (No. 3). The debt paid off having amounted to L 342.400, and the new debt incurred to L 1,359,184, the total gross debt at the 31st March, 1888, was 136,758,437. Ihduotmg the Sinking Fund accrued, L 1,222,050, the net public debt at that date was therefore L 35.356.381, as against L 34,314,454 at 31st March, 1887. It will be observed from the table of the debt appended to tb;s statement that the following loans fall due within the current financial year—viz, L 500,000 or, the 31st July, temporarily borrowed under the North Island Main Trunk Railway Loan Act, 1882; 1L250.000 on the Ist November, under the Colonial Inscribed Stock Act, 1882 ; and L49.5D0 on the 15th December, under the General Purposes Loan Act, 1873, It will be necessary to obtain the authority of Parliament to renew the two latter loans. In addition to the loans I have named as falling due within the current year there are L 25.000 due on the Ist October, 1888, and L 25.000 on the Ist January, 1889, under the New Zealand Loan Act, 185fi. These two sums will be repaid out of the accumulated sinking funds of that loan. In the “drawing” under the Consolidated Lean Act, 1887, which took place in London on the 18th alarch last, bonds to the amount of L 172,500 were drawn for redemption. Of that amount L 131.600 represents bonds which had been converted into other securities under the Consolidated Stock Acts, which sum has accordingly been paid into the public account by the Crown agents, and. in conformity with the law, has now been applied to the reduction of debentures, issued under the Consolidated Stock Act, 1884. There is also a contingent liability which should, perhaps, be mentioned under tbs heading “ public debt,” although a very remote one. The Government have guaranteed L 47.000 Kaiha Valley Railway 5 per cent, debentures. and also LIOO.OOO of the Grey Harbor Board 4 per cent, debentures, and LISO.UUU Westport Harbor Board 4 per cent, debentures. But the security is in each ease, _ I believe, ample to insure the Government in any event from loss. rVtIW WORKS FUND, Hon, members will recollect that in consequence of the earmarking of the North Island Main Trunk Railway loan, and the loan authorised in 1886 to specific purposes, it became necessary to establish three distinct accounts in the Public Works Fund —No. 1 being _ an account of the balance of the loans raised before 1886, No. 2 the account of the North fqlftml Main Trunk Railway loan, and No, 3 the account of the loan authorised in 1886,

No. 1 Account.—The balance at the credit of No. 1 account on the Slat March, 1887, was L 491,245, of which there was expended during the year L 440.854, leaving a balance of L 50.391. I shall not give here any details of expenditure of the Public Works Fund. Some further information will be found in tables appended, but full particulars will be supplied when my hon. colleague, the Minister for Public Works, makes his Statement. It will be remembered that the Loan Act, 1887, which authorised the borrowing of one million, provided that one-half of the amount should bo carried to the credit of No. 1 account, and onehalf to the credit of No. 3 account. During the year it became necessary, in consequence of the “earmarking” already referred to, to create debentures under the Loan Act, 1887, for L 300,000, which were taken up out of the funds at credit of No. 3 account (I need scarcely say this transaction does not affect the amount of public debt), whereupon L 150.000 was carried to the credit of No. 1 account. This sum, together with the L 50,391 already mentioned as the balance of the old loans, made 1200,391 the amount which stood at credit of No. 1 account on the 31st of March, 1887. The liabilities outstanding at that date chargeable upon this account were L 205,323. No. 2 Account. —Up to the 31st March, 1887, there had been expended, in anticipation of raising the North Island Main Trunk Railway loan of L 1,000,000, L 325.685. During the past year a further sum of L 152,315 has been expended, making in all L 478,000, and leaving a balance of L 522,000 unexpended. As honorable members are aware, this loan has not yet been placed upon the market; but in order to provide funds to cover the expenditure both made and in progress it became necessary to obtain temporary advances to tUe extent o£ Ualf-a-milliou upon short dated debentures pending the raising of the loan. The liabilities outstanding at the 31st March, 1888, chargeable upon the balance of L522.Q00, amounted to L 75.904. , . . , No. 3 Account.—The unexpended balance at the 31st March, 1887, of the loan of 1880—including L 391.300 balance of the loan, and subject to a deduction of L 242,800, district railway money not belonging to this account was L7G9.234. The expenditure during the year amounted to L 372.990, leaving an unexpended balance of L39C.244 ; or, adding the moiety of the L 300.000 debentures created under the Act of last session, to which I have already referred, the balance at credit of No, 3 account at the 31st March, 1888, was L 546.244, subject to liabilities amounting to L190,4G7. Summary.—The actual balance at credit of the Public Works Fund as a whole on the 31st March, 1887, was L78G.294 13s 9d, subject to a deduction of L242.800’ for district railway debentures sold with the loan of 188G, hut not forming part of the Public Works Fund. The balance at the beginning of the year for public works expenditure was therefore only L540,4.)4 13s 9d. During the year we received the balance of theiloan of 1880 (L 891,300) and an advance of L 500.000 borrowed by the late Government upon the North Island Main Trunk Railway loan. These sums made together L 1,434,794 13s 9d, of which there was expended during the year L 966.159 12s 6d, leaving an unexpended balance at 31st March, 1888, of L 468,635 Is 3d; consisting of cash in the public account, L 408.715 8s lid; Imperial guaranteed debentures, L 5,000; advances in the hands of officers of the Government, L 54,919 12s 4d; total, L4C8.G35 Is 3d. The loans authorised, but unraised, amount to LI,500,COO; being L 500.000 of the North Island Trunk Railway loan, and the L 1,000,000 (re-authorised this tession). The balance in hand at the 31st March last, and the loans authorised but unraised, make together L1,968,(135 Is 3d, subject to liabilities at 31st March last of L 471,695 6s 3d.

GOVERNMENT LOANS TO LOCAL BODIES. Up to 31st March, 1887, there had been borrowed under the provisions of the Government Loans to Local Bodies Act, 1880, for the purpose of making loans to local authorities, the sum of L 50.000, and there had been lent L 15.270, leaving L 51,730 in hand. Last year there was borrowed a further sum of L 75,000, and lent L 93.571, so that the total amount borrowed to 31st March, 1880, was L 125,000; ot which there had been handed over to local authorities L 108.841, leaving a balance of L1G.159 unissued. At the same date the liabilities outstanding amounted to 129,224, consisting partly of balance of loans not fully taken up, certain local authorities having elected to take their loans by instalments. The applications received in response to a notice published in the ‘Gazette’ on the 19th January last, under section 16 of the Act, amounted to L 78,330, of which Lb,980 are for second years’ loans. Nearly all of these applications have been provisionally granted, and should the local authorities complete the steps necessary to give the security required, a further sum of about LOO,OOO will have to bo borrowed to enable the Treasury to make the loans, which will bring the total amount borrowed on this account up to L 215.000. The Government Loans to Local Bodies Act provides that the Treasurer may grant loans to local bodies to such an amount as shall be appropriated by Parliament for the purpose; but, in the event of no sum being appropriated, the Act authorised the Treasurer to make loans up to L 200,000 in each year. In the first year no appropriation was made. Last year LIOO.OOO was appropriated, and as these two sums are largely in excess of the total amount of the loans applied for to date and granted, it is not intended to ask Parliament to appropriate any money for this purpose in the present session. The scheme of these loans to local bodies contemplated an annual payment of 5 per cent, per annum for twenty-six years, the colony to be response's for payment ot the principal sura, and to meet it by setting aside yearly a sinking fund of 2 per cent, to redeem the debentures at maturity. It was thought that the money could be borrowed at 1 per cent, less than the rate at which it was to be lent to the Local bodies, and that a contribution of 1 per cent, from the Consolidated Fund would makeup the Sinking Fend c f 2 per cent. As, however, the rate of interest being paid by the Government is 5 per cent., it is probable that with respect to future loans the amount payable by local bodies may have to be increased, and I shall during the present session make a proposal to the House upon the subject. REDUCTIONS EJECTED IN PUBLIC EXPENDITURE. Mr Hamlin ; Before going further I will ask the attention of the Committee to the important subject of the reductions proposed last year to be made in the public expenditure. It was proposed in the Financial Statement of November, 1887, to reduce the public expenditure by L 300.000, particulars of which were given in table No. 10 attached to that Statement. But the House disallowed the proposal to raise the school age to six years, which was estimated to effect a saving of L30,000,_ so that the proposed total reductions, according to table No. 10 as amended by the House, was L 270.000. But besides the sums 1 have named, there was error in the item of public buildings of LB.OOO, tjiat amount having been deducted twice froni the' estimated expenditure for the year. This item further reduces the possible saving under table No, 10 to L2C2.000. The actual saving so far made is L 233.097, or L 28.903 less than we had hoped to accomplish. Hon. members will recollect that in table No. 10 the proposed reductions in the several departments were shown, and that there was ap undistributed amount of L 74.050 to be saved from those departments on which no reduction was shown from travelling allowances and from reductions in the (lumber of persons in the Public Service who a»c receiving salaries of Ll5O and under, o? are paid at daily rates, 'fhe total salaries and pay of this class amount to L638,51!>. The salaries of all other persona in the service of the colony, except the police and military forces, and country postmasters, amount to L3f15,704. .1 hayo fiad a table propared showing the caving thua ipr and also for the sake of easy comparison f have had table No. 10 reprinted. These tables will be attached to this statement when published, and by a glance at them hon. members will see that in every department under the annual appropriations, exept Defence, more than the promised reductions Lave been made, and that of the L 74.050 undistributed L 53.730 has also been saved. This saving of L 233,0 9 !/, although not so much &s the Government had hoped to make, will, I trust, bo considered by the Committee as a not unreasonable approximation to our undertaking of last cession as modified and approved by the House. The saving upon the defence expenditure is L 42,434. We hpd estimated to save L 46.000 [ but my ce!Jeag;aa found, upon going very carefully into the question, that it would not be prudent for the present to make further reductions than have been 110 Itts not desirable that I should hero go at any length into an explanation of the principles which have guided us in reducing the numbers or salaries of the Civil servants. That will ho more conveniently done when the Civil Service Bill which the Government have prepared and propose bringing in shortly is before the House. I may, however, here state that wo propose to classify the wh.Qic of the Civil Service and strictly limit the of each class by Act, from which no deviation will oe allowed without the approval of Parliament. I may also briefly mention other important changes in the direction of simplicity and economy without the sacrifice of efficiency, and therefore such as will, I am sure, meet with the approval of the Committee. We propose to amalgamate the Native Department with that ot the Colonial Secretary, making it a branch of that department. Our intention js, before the end of the year, to ,abolish the Public Works Department, We shall propose to continue the construction ot such of the railways as are to be proceeded with under the staff of the constructed railways, and to hand over the whole of the road work to the Survey Department, which is already charged with a large part of that work, employing local bodies whew in carrying them

out. A large saving will be effected by this arrangement, and it will no doubt be strong and satisfactory evidence to the people of the colony and the outside world that we are really, bringing our large borrowing policy to an end when the department which has been, if I may say so, its organ and symbol finally disappears. I may say that the reducing of the Native Department to a subordinate position and its amalgamation with the department of the Colonial Secretary has been made possible and desirable by the fact that the Natives are desirous of taking a larger share in the management of their own affairs, so as to reduce greatly the work of the Native Office, and this desire the Government think it right to encourage and assist. Bills with that object in view are now before the House. FUTURE PENSIONS AND RETIRING ALLOWANCES. We propose to bring in a separate Bill, supplementary to the Civil Service Bill, providing for the payment of all future pensions and retiring allowances to Civil servants not now entitled to a retiring allowance out of a fund which will be kept up by monthly contributions from all the members of the Civil Service who are not now entitled to the privileges of the Civil Service Acts at present in force, with perhaps a small contribution from the State. The principle, we have no doubt, is a sound one, and its operation will be beneficial to all concerned. ESTIMATED EXPENDITURE FORTHF. YEAR 1888-89, ORDINARY REVENUE ACCOUNT. This brings me to the proposed expenditure for the year 1888-89. The estimated ordinary expenditure is L 3,953,593, full particulars of which appear iu the Estimates, which will be in the hands of hon. members at the earliest possible moment. The estimated amount of interest which will he paid during the year is L 1,838,539, being L 72.872 more than the interestpaid daring the year 1887-88. The chief items comprised in this inert ase of L 72.872 are L 13.500 for about six months’ interest paid at the beginning of this year on the L 500.000 borrowed temporarily by the late Government in October last; L 20,000 interest on the L 400.000 issued to cover in part the deficits of the past two years, and about six months’ interest on the L 3,000,000 about to be raised, With regard to the latter, I may state that while the full amount estimated to be payable appears in the estimates of expenditure, a largo saving will be effected by investing in our own or other securities the balances of the loan not immediately required for expenditure. LAND FUND. The estimated expenditure chargeable against the Land Fund is L 107.245, made up of LIB,BOO for payments to local bodies under permanent Acts; L 2,400 votes on Crown lands, and L 86.045 for Crown lands and surveys. Last year the total expenditure was L 1.50,474 Ll6,r>ol being for payments under permanent Acts, L 40.724 for rates, and L101,249f0r Crown lands surveys, on which latter item there is for this year a reduction of 1715,40,'!. The rates on Crown lands it is not intended to continue this year, except in special cases where rights have arisen. TOTAL ESTIMATED EXPENDITURE. The total estimated expenditure is therefore L 4,060,838, being L 3,953,593 against ordinary revenue, and L 107,245 against the Land Fund ; but no provision is made in the Estimates for school or other public buildings, and for sub sidles to local bodies. Our proposals for these I will submit presently. ESTIMATED REVENUE FOR THE TEAR 1888-89.

The estimated ordinary revenue for the year 1888-89 on the basis of the present taxation, including the sum of L 263.200 to be received as proceeds of the sale of what are known as the Sinking Fund debentures, is L 3,897,400. Particulars of the sources whence this revenue is expected to be derived will be found in a table appended to this Statement. The estimated revi nue from land is L 319.000. ESTIMATED RESULTS OF THE YEAR 1888-89.

Our total estimated revenue is, therefore, from all sources L 4,016,400, and the estimated expenditure being L 4,160,838, leaves a deficit of L 44.438 on the whole revenue ; but as the Land Fund is estimated to give a small surplus of L 11.755, and as we do not now use any surplus Land Fund as ordinary icvcnue, wo have to provide a sura of L5C.193 to make our ordinary expenditure and revenue balance, in addition to the amount required for school and other public buildings, and for subsidies to local bodies. The amounts which the Government estimate will be required for expenditure on public buildings from revenue for the year is LOO,OOO, being L 30,000 for school buildings, L 17.000 for the General Post Office, and L 13.000 for other buildings, particulars of which will bo given by my colleague the Minister for Public Works in his annual statement. This, added to the estimated deficit of the ordinary revenue, and including L 30,000 subsidies to local bodies to be referred to presently, makes the total amount to be provided L 146,183, if no further reductions are thought prudent. Upon that supposition we have now to consider how the large sum I have named is to he raised, for we are all agreed that sufficient revenue must bo raised to meet our expenditure. But before I show how the Government think this amount should be raised I mu»t bring under the notice of the Committee the question of subsidies to local bodies. SUBSIDIES TO LOCAL BODIES. I last year expressed the opinion of the Government that if subsidies to local bodies were to continue, one-half of the amount should no longer be paid from loan as is the case at present, but that the whole amount, whatever it might be, should be provided for, that is to say, by taxation. The Government, after careful consideration, have come to the conclusion that the payment of subsidies must be continued, or the work of local bodies will be practically paralysed, causing serious inconvenience throughout the country districts. But they think that the colony should clearly understand that continued payment means additional taxation. The Government are also ot opinion that if the payment is to be continued a special tax or portion of a tax should be set apart for subsidies, au*! that the amount raised should be divided amongst the local bodies on the same plan as is now in force. It is also desirable that the tax set apart should be one which will increase with the increase of population. They therefore propose that the tax on tea should be increased by 2d per lb, and that one-half of the whole duty received from tea shall be set aside and devoted to the payment of these subsidies. Through speculative clearances and two months of the year having already passed, the estimated produce of the tax for this year, with the additional duty added, will only be L 114,000. One-half of this will bo L 57,000. This amount will not be enough to pay a subsidy of 5s in the £ for the current year. I shall therefore ask authority to provide tho amount, if deficient, from general revenue for the year 1888-89; but next year and afterwards, when there will be no disturbing cause in the collection of the tax, I propose that one-half the tea duty should be set apart for subsidies, and that that amount, whatever it may be, and whether more or less than the proportional payment now made of 5s in tho £, should be all the aid that will be given from the general revenue, that is by the colony at large, to the local bodies. This, if adopted, will cause a loss for the present year to the general revenue of about L 30,000, which it will be necessary to make good from the general Customs duties. PROPERTY TAX. It is not proposed to make any alteration in the rate of the Property Tax this year, but I shall ask tho House to agree to remission of certain amounts on some classes of machinery. The loss to the revenue, if these remissions are agreed to, will probably be about L 4,000. TARIFF. I now ccrae to the question as to how the L146,15)3, which I have shown to bo wanting, can best be raised. After much careful deliberation the Government have determined to apk authority to raise the amount required by an isproaae in the Customs duties as being on the whole the best pourso in the general interests of the community. But tllen' arises tffe further important question: WhethertheSncreaso should be general over a large number of articles included in the Tariff, or whether the amount required should be raised from two articles, tea and sugar? With regard to the first of these I have already expressed the opinion of the Government, that to furnish the subsidies to local bodies, an additional duty of 2d a pound should be put upon tea, which is as much as we think it should bear. There remains the question of an additional duty on sugar, and tho Government are fully alive to all that can be sai4 in favor of this, Nevertheless, the Government do apt propose to put any additional duty on sugar. Tlie 'reasons which fed them fo this determination are briefly these; Sugar may fairly be called a necessary article of food—the most widely and largely used of any food imported. It is extensively used in our manufactures, and it will always be available if at some future time and upon some unforeseen contingency a need for some additional revenue should arise; and it will, moreover, be available with tho least possible disturbance of trade. Wo therefore think that tho sum required should bo raised by an increase of a general character. I have given the subject of the Tariff much anxious thought during the recess. The very numerous suggestions received from manufacturers and the many conflicting interests concerned of _ both producers _ and consumers have received careful consideration. The Government have endeavored in the duties proposed to adjust fairly between these conflicting interests the burdens to be borne, recognising the fact that a Freotrade Tariff and a Prohibitive Tariff are equally intompatible with the amount whiotf we must raise. And admitting what all must admit, that the imposition ot heavy Customs duties 'necessarily affects thp course of trade and industry, we have endeavored, while making revenue our first object, so to adjust the proposed duties as to assist oup local manufactures without any more pressure,

as we believe, on the consumer than is inevitable, if we are to raise by Customs duties a yearly sum of not less than L 1,450,000 for the purposes of ordinary revenue; and it does not seem to me that we can prudently reckon to do with less than that sum from the Customs for some years to come, when we look at the total amount of the revenue which must be raised and at the other sources of revenue open to us. I have said that careful attention has been given to the details of our proposals; but I can hardly hope, in so complicated a matter as a complete revision of the Tariff where so many conflicting interests have to be dealt with, and so far as possible reconciled, and where it is imperative in this case to raise a large revenue—l say I can scarcely hope that errors will not be found. I trust, however, that if any such there are they will, with the assistance of the Committee, be amended or removed, I will ask hon. membera—both Freetraders and Protectionists—in approaching the consideration of the question of the particular duties proposed, to keep very prominently before their minds the one inexorable condition of the problem—the necessity we are under of raising a larger revenue by means of these duties. If this essential point is given its due weight, a great deal of the difficulty which would otherwise attend the detailed discussion upon the Tariff will, I am sure, be removed. I will not here give hon. members details of the proposed increases and alterations, because in a few minutes they will have to be read out in the form of a resolution for the approval of the Committee. I may, however, say that it is proposed to raise a large number of articles from 15 per cent, to 20 per cent, ad valorem, and some to 25 per cent., and to increase the specific duties in many cases proportionately, due regard being given in both classes to the requirements of the colony and the conflicting interests involved. Some articles have been added to the free list, and some removed which experience has taught should not be free. The total amount which these duties will raise is estimated at L 173,000, but I can only give these as approximate, as under the circumstances (for reasons which will be ebvious to hon. members) it is impossible to estimate with anything like accuracy the results of the considerable changes we are proposing. I may here point out that L 25,000 of this taxation would not be necessary if Parliament saw fit to raise the school age at which capitation is payable to six years instead of five as at present, and to abolish the Education Boards. The Government do not intend to propose the alteration this year, in deference to what they believe to be the wish of Parliament as expressed in the last session; but I feel it my duty to point out to the Committee whore another L 25.000 a year could be saved without any injury whatever to our educational system, and I would ask hon. members again to consider whether the colony can at present afford so large a sum to provide what is little more than nursery accommodation. REDEMPTION OF DEBENTURES ISSUED TO FAY OFF DEFICIENCY. It will be in the recollection of the Committee that last session I pointed out that the Consolidated Fund was actually benefiting to the extent of about L 40.000 a year by the creation of debentures for the full amount of the accretions of the Sinking Fund, and that I proposed to set this sum aside yearly to pay off the L 400,000 4 per cent, debentures issued last year to pay off the deficiency. From the facts I have already stated, 1 think hon. members will agree that to do so this year would be putting too great a strain upon the taxpayers ; but there is a sum of L 70,000, known as the Assurance Fund, under the Land Transfer Act, which the Government think may wisely be applied to the payment of a part of the L 400.000 just referred to. The real guarantee fund under the Land Transfer Act is the Consolidated Fund, which is responsible for the errors of the Land Transfer office The public using the office pay an insurance fee for such guarantee, and the Government are of opinion that these fees should be paid in as revenue ; that any claims arising should be paid as they arise, and then come before Parliament as unauthorised expenditure. It is practically useless to set aside a fund which may be too large or too small for its nominal purpose, which requires investment, and all the annual labor and expenditure whicli that entails, and which, when invested, as it always has been, gives those with a right upon it only the same security they would have without it—the liability of the colony. UNRAISED LOANS. The error which occurred in the nineteenth section of the Loan Act of last session rendered it impossible to float that loan in London until the Act was amended, and it also raised some doubt of the wisdom of placing the North Island Trunk loan upon the market until after the amendment had been made. The Government had therefore to consider whether sufficient funds were available for carrying on the public works and for other necessary purposes without floating these loans until Parliament should meet at the usual time. If funds had not been available Parliament must have been called together about the end of February. I found, however, that satisfactory arrangements could be made, and so avoided the great public inconvenience of holding a session before the Government had time to prepare any of the work they bad undertaken to submit to Parliament at its present meeting. The arrangements made were: Firstly, an agreement with the Colonial Bank of New Zealand for an advance of L 400.000 at 5 per cent, for three years upon the security of the L 400,000 of 4 per cent debentures issued under the Public Revenues Act No. 3 of last session to cover the estimated deficit. Of this sum, L 300,000 was paid into our public account in London, and LIOO,OOO was taken in the form of a draft at ninety days’ sight, also payable in London. No commission of any kind or exchange was paid. Secondly, the advance obtained by the late Government from the Bank of Now Zealand of L 500,000 upon the security of L 500,000 of the North Island Trunk loan short-dated debentures, which fell due in April last, was renewed until the 31st July next at the same rate of interest as was charged on the original advance—viz., 5 per cent, forL4oo,ooo and G per cent, for LIOO.OOO, We have received no other advances, except advances obtained by the Agent-General on the Imperial guaranteed debentures, and_ the usual ones upon deficiency bills in anticipation of revenue. The only large payments we have to meet in London shortly are L 200,000 repayment of deficiency bills due in July, apd the L 500.000 short-dated debentures of the North Island Trunk loan due on the 31st July next. My reasons for asking Parliament to correct the error which had occurred in the Loan Act of last year before the delivery of the Financial Statement were that the error to bo corrected was an admitted oversight—hardly more than a clerical error; that tho policy involved in the Act had been very fully discussed last session and carried by large majorities; that by the advice of our AgentGeneral it was important to have the loan ready for floating in this present month now just ending; for in the event of any great disturbance of the London market as by a European war occurring before the loan was raised, serious loss would result to the colony in raising it; that a delay in passing the Act would have caused embarrassment and loss in making necessary further temporary arrangements for meeting engagements, those temporary expedients being the very thing I had with much trouble been arranging to avoid; and that serious delay must have resulted if the amended Act which has been passed had been postponed until after the delivery of this Statement, And now let me say a few words as to THE EXPENDITURE OP LOAN MONEY FOR THE YEAR.

We think that no further contracts should be let on the North Island Trunk railway, and very little, if any, work done on the other lines named in the schedule of the Loan Acts for the present year. But it may be naturally objected : If wo are going to spend so little, why should wo not have borrowed less? I think, Mr Hamlin, the reply to that is sufficient, We are now about to go upon the London market for the last time for three years at least. Whatever, therefore, may bo wanted within that period must be provided now; and having to look forward so far, and considering the large works unfinished, ssme of which must bo continued as our means and the other circumstances of the colony will allow, whilst others of little comparative magnitude but of immediate necessity have to be undertaken, it would be eminently unwise not to allow ourselves some reasonable margin. But I certainly need not recapitulate here the arguments which last session induced the Legislature, while insisting on great retrenchment, to sanction this loan as involving true economy; and though we are now proposing to expend the loan even more slowly than was then contemplated, the colony will not bo put to the least additional expense by reason of the whole of the loan being immediately raised. Part of proceeds of the loan not required can be at once invested in redeeming the Imperial guarantee debentures and others if those should not prove enough. POST OFI'ICE SAVINGS BANK. The Committee will remember that last year I promised I would as soon as possible invest some of the Post Office Savings Bank deposits in Imperial guarantee debentures. This has been done to the extent of L 200,000. The Government are desirous of increasing the amount invested on easily saleable securities, but the difficulties are great if the present rates of interest which is payable to the depositor is continued; and this seems desirable as long as it can be done without loss to the colony. It is very gratifying to find that the deposits and number of depositors continue to increase, and that oven during tlm first three months of ibis year the increase In the deposits has been L 67,000 over the withdrawals. The amount of the deposits on credit in the Post Office Savings Ban}c on the 31»t March, 1888, was L 1,861,337, and iri'thp bther savings hooks, which are also guaranteed by the polony, L6t)0,96'/, making pi

grand total of not less thah L2,4G2,304 amongst 99,277 depositors. These figures and the fact they disclose, that a large part at least of our industrial classes are able to put by and Invest such very considerable sums from their earnings, afford satisfactory evidence of the substantial prosperity of this most important class of our community, PROVISION FOR THE DEFICIT OP 1887-88. I have now, Mr Hamlin, to state how it is proposed to meet the L 128,603 standing to our debit on the 31st March last. We are, I assume, all agreed that it must be paid off, and not made part of the permanent debt. This being so, and there being nothing in hand to pay it with, the question arises as to what form tho necessary taxation shall take. It is clear to the Government that we must not let the paying eff of this debt depend upon the occasion of a sufficient surplus at some future time, and we think a special tax should be imposed and set apart for the purpose. Our proposal, if somewhat novel, will, I hope, meet with the approval of the Committee. It is that a primage duty of 1 per cent, should be levied upon all goods imported into the colony, whether free or dutiable, for two years, and that the proceeds be applied to the payment of this L 128.000. The duty, it is estimated, will yield about L 58.000 a year, and the small balance over may be safely met from the ordinary revenue. THE CROWN AND NATIVE LANDS RATING ACT. This Act, as I stated last year, it is the intention of the Government to ask Parliament to repeal, reserving any rights that have been created under it, and the local bodies interested have received notice not to expect any further payments under the Act. I much regret the necessity for repealing this Act, for there is no doubt that the repeal will severely affect some of tlie local bodies. GENERAL SUMMARY. To summarise, then, for the convenience of hon. members, the result of my proposals, we find that after the reduction of our ordinary expenditure by L 233,000, the expenditure which we deem necessary is some L 70,000 for the year more than our income from our present sources of revenue; that to provide schools and public buildings from revenue an additional LGO.OOO is required; that to continue the subsidies to local bodies and to pay them all from revenue, as must be done if they are to be paid at all, another L 64,000 is necessary ; and that to pay the balance of last year’s deficit of L 128.000 a sum of L.58,000 must be provided this year, and the balance in the succeeding year. Adding, then, these several amounts together, we find there is required to balance revenue and expenditure L5G,000; to provide for schools and public buildings, LGO.OOO; to provide for subsidies, L 64.000; total, LIBO.OOO, and L 58.000 for two years on account of last year’s deficit of L 128.000. To provide this sum of L 190.000, I have proposed additional Customs duties estimated to yield L 207,000. If the estimate prove correct we shall have a surplus of L 17,000, so that the margin allowed is not too much. The Commitee will remember that last year the Property Tax was increased by LC5.000, hut no alterations were made in the Customs’ duties. I would desire here to call particular attention to the fact that of this LIBO.OOO now proposed to be raised by additional taxation, L 107.000 is for subsidies, and L 15.000 for defence. Hon. members will no doubt feel with the Government that the proposed additions to our taxation are large ; but if after consideration it is found necessary to continue these services, it is clear money must be found. My endeavor has been to place early before the Committee what our real wauta are —to point out what services are rendering the increased taxation necessary, and to show how the required funds can, in our opinion, be best provided. The matter is now in the hands of the Committee. I have laid before them the material facts relating to the financial position of the colony as clearly, as fully, and as fairly as I could. If the task has not been the pleasant one it would have been if instead of providing for a deficit wo had to dispose of a handsome surplus, we have the satisfaction of knowing that a searching examination of the material circumstances of the colony would, in spite of adverse facts, show beyond doubt its substantial prosperity. And lam sure the Committee will agree in the opinion, which I hold strongly, that one of the surest means —at least the necessary condition—of increasing that prosperity is by adhering firmly at whatever present inconvenience to the sober financial policy of last session.