BUDGET SURPRISE

Greymouth Evening Star, 17 July 1941, Page 5

BUDGET SURPRISE

NO TAXATION INCREASELARGE INTERNAL LOANS (Per Ministerial Favour) The Minister of Finance (Mr. Nash) presented the annual Financial Statement to the House, last evening, the following being a summary of the chief items: —

In. spite of the withdrawal of large numbers of our ablest men for war purposes production during the latest year for which figures are available has increased.

The previous excess of withdrawals from the Post Office Savings Bank accounts has given place to ah excess of deposits amounting to £3,864,000. The amounts standing to the credit of depositors in the Post Office Savings Bank on May 31 last was the record sum of £63,960.000. Export values reached the record total of £71,200,000. I The favourable balance of trade*' available for interest payments, debt reduction, and other charges was the: record amount of £23,300.001). | The Public Accounts for the fifth year in succession showed a surplus, that for last year amounting to £1,726,000. Agreement has been reached for the sale of the major portion of our primary production to the United Kingdom Government. ■ It has also been agreed that any; loss on reserve stocks of commodities! which are unshipped shall be equally! divided between the United Kingdoriil and the Dominion Governments. I The Government will have to meet; heavy charges in connection with the cost of providing added storage accommodation and -for the changeover from butter to cheese.

Subsidies payable to primary producers amount to £1,398,000. Trading banks have agreed to reduce overdraft rates to a minimum of 4 per cent, and a maximum of 5 per cent., with a corresponding reduction in deposit rates. To help in the stabilization of prices, subsidies are being provided for bread, sugar, and coal and other commodities will be stabilized in price as soon as the detailed work is completed. The retail-price index in the Dominion has advanced by 61 per cent, only as compared with 8£ per cent, in Australia and 271 per cent, in the United Kingdom. Last year’s surplus of £1,726,000 is being transferred from the Consolidated Fund to the War Expenses Account, and it is proposed to transfer a further £1,500,000 during the present financial year. Some adjustment of income-tax procedure will be provided for during the present session of Parliament.

There will be no increase in taxation during the current year. £600,000 has been set aside to meet the cost of medical benefits if agreement is reached with the doctors. , The estimated expenditure on Social Security benefits durihg the year amounts to £14,673,000. The Social Security benefits will be extended io: (a) Providing family benefit for the first child under the same conditions as now operate for the second and subsequent children; (b) increasing from 5/- to 10/- per week the allowance payable to an age beneficiary in respect of his dependent wife and each of his children; (c) extending the maximum benefit for invalids with wife and children to £4710/per week; (d) increasing from 5/- to 10/- per week the allowance for children of war veterans. A soldier’s domestic allowance of 1/- per day will be paid to the families of all soldiers where there are children. The estimates of war expenditure during the present year total £69,700,000. 1 „ t The pay, allowances, and allotments of all soldiers will Continue for three months after they are reported killed, or missing. It is proposed to raise war loans in. the Dominion for £10,000,000 at 2i per cent, and 3 per cent, interest. “It is anticipated that at least £3,000,000 will be subscribed this year to National Savings Accounts and Bonds. Plans for rehabilitation, repatriation, and post-war expansions are in preparation. A War Damages Bill to cover loss through enemy action will be introduced' during the present session oi Parliament. x „ The overseas debt apart from war debt has been reduced by £3,903,uu0 during the past year. The war costs incurred overseas up to March 31 last amounting to £5 988,000 have been repaid to the United Kingdom Government Internal war borrowing lor R n "?P“ cial year amounted to £11.886,000. The debt domiciled in the Dominion, including the war debt, increased by £26,012,000 during the vear. Since 1935 the overseas debt, apart from war debt, has been reduced by £5,716,000. 0 19 n50000 It is proposed to spend £12,950,000 loan-money on national development during the present financial year. 3,966 State houses were built in 1940-41, making a total of 10,425 from the inception of the scheme to 1 Consolidated Fund estimates for 1941-42 are;— REVENUE Customs £7,700,000, beer duty £1 600,000, sales tax £3,300,000, highwavs £2,172,000, stamp duties ££700,000, land tax £950,000, in-come-tax (including excess-profits tax) £16,100,000, miscellaneous £ 215,000, interest £3,146,000, other receipts £2,413,000; total £39,296,000. EXPENDITURE.

Debt services £ 10,955,000, exchange £1,600,000, transfer of highways revenue £2,172,000, transfer to War Expenses Account £ 1,500,000, other permanent appropriations £3J5,00U, social services £12,765,000, other £9,425,000, supplementary- estimates and contingencies £400,000; total £39 212,000. Leaving an estimated surplus of £84,000/ , . ' . . As compared with last financial year’s actual receipts totalling £ 40,438,000, the estimated revenue ±or the current year shows a reduction ol £1,142,000. A reduction of over £1,000,000 has been allowed for in respect of Customs revenue, in anticipation of reduced imports, and a reduction of £222,000 in highways revenue to allow for reduced petrolconsumption, but a reduction in estimated income-tax revenue will, it is anticipated, be more than offset by, revenue from the excess-profits tax, which will be payable this year for the. first time. Apart from the transfer of £1,500,000 to War Expenses Account, the estimated expenditure is £37,712,000. This total is approximately £ 1,000,000 less than last year’s actual expenditure. Debt charges , and exchange show a comparative de- I crease of approximately £ 1,800,000 i due to the repayment last year of. Treasury notes in London. On the otHer hand, the votes grouped under the heading of “Social Services” are in the aggregate greater by approximately £1,000,000. This includes £346,000 for the Health Department, mainly on account of increased sub-

’sidies to Hospital Boards, £166,000 i to provide for the normal increase in the costs of education, arid the transfer of an additional £400,000 to the i Social Security Fund. The other deI partmental votes in total show a com- ' parative decrease of £260,000. This, i however, is after'providing for £365,- ' 000 by way of additional subsidies for ( fertilisers, butter-boxes, sugar, wheat, ' and coal, increases which for the most I part arise out of the war. | WAR EXPENSES I For the current financial year pro- ; vision requires to be made for a total ‘of £69,700,000. This estimate is arrived at as follows: — j Navy £4,200,000. Army £50,000,1000. Air £9,900,000. Debt repayment (United Kingdom Government) £5,600,000. Total £69,700,000. To meet the foregoing and provide a relatively small margin for contingencies it is estimated that the following receipts will be available: — (Cash balance brought forward from 11940-41, £4,428,000. Transfer of 11940-41 Consolidated Fund surplus £1,726,000.' Transfer from Consolidated Fund, 1941-42 £1,500,000. In-come-tax £2,300,000. Estate, succession, and gift duty £3,046,000. Customs, beer, sales tax, and gold-ex-port duty £3,500,000. Postages £500,000. National security tax £10,000,000. Loans: United Kingdom Government (Memorandum of Security) £31,000,000. Loans (New Zealand), £10,000,000. National Savings Accounts and Bonds £3,000,000. Total £71,000,000.

It would be unwise to give the same details of prdposed War Expenses Account expenditure but it may be mentioned that the Army estimated expenditure of £50,000,000 includes over £28,000,000 for stores and equipment and over £15,000,000 for pay and allowances. It is estimated that a total of £3.1,000,000 will be expended overseas, mainly on account of the army, and allowance has been made for the financing of such expenditure by the United Kingdom Government in terms of the memorandum of security arrangement. Up to March 31 last £5,988,000 has been borrowed from the United Kingdom Government in terms of the Memorandum of Security agreement, under which charges for capital equipment and maintenance of the Second New Zealand Expeditionary Force and the Dominion’s share of the cost of the Empire Air Training Scheme are advanced by the United Kingdom Government on an overdraft basis. Of this sum £1,472,000 was repaid prior to March 31st last, leaving a balance owing at that date of £4,516.000. This sum has since been repaid, so that the .liability of the Dominion up to March 31 last in connection with the arrangement has been fullymet.

Fresh borrowings within New Zealand during the year amounted to a nett total of £26,012,000 and were derived from the following sources: Na - tional development loans, £2,562,000; war loans, £10,091,000 (including £l,321,000 National Savings interest free); other public issues, £869,000; departmental issues £6,049,000; and £6,441,000 from Treasury bills issued to the Reserve Bank; but it is of interest to note that at the 31st March last, with the exception of Treasury bills issued for housing purposes, the whole of the bills issued to the Reserve Bank had been purchased from funds held in Treasury accounts. The gross increase in the debt do - miciled in the Dominion has been applied to the expenditure of £11,886,000 for war purposes, £10,199,000 on hydro-electric development, main highways, and other public works, £5,360,000 on housing, together with £605,000 for redemptions and for costs in connection with loans. Redemptions totalling £4,919,000 were made during the year in New Zealand but the effect of these was offset to some extent by the issue of securities totalling £2,881,000 in New Zealand in conversion of debt formerly domiciled in London, resulting in a net increase of £26,012,000. The borrowing programme for the current year contemplates the raising of a total of £44,000,000 for war purposes; deducting the amount of £31,000,000 to be advanced by the United Kingdom Government in terms of the Memorandum of Security arrangements, leaves a balance of £13,000,000 to be raised in the Dominion. In addition, a net amount of £12,950,000 will be required for national development purposes.

SOCIAL SECURITY FUND. As regards the Social Security Fund, allowance has been made in this year’s estimates for an increase of £796,000 in monetary benefits and £ 1 223,000 in respect of medical and hospital benefits. These for the most part arise from normal increases. Thus the increase from £lO to £l2 10/- per annum payable in respect of universal superannuation, together with new entrants and late applications, accounts for an additional £250,000 and the increase in the number ol age beneficiaries for £300,000. Medical and pharmaceutical benefits account for the greater portion of the increase in the heading of hospital benefits, being reflected in the- accounts for the first time this year. The out-patients’ service and pharmaceutical benefits a"re now in full operation, while in anticipation of the general practitioner service being in full operation shortly, the sum of £600,000 has been set aside for medical benefits. Total expenditure for the year is estimated as follow: Ago £7.410,000, widows’ £855,000, orphans’ £lB,OOO, family £604,000, Invalids’ £ 1,014,000, miners’ £85,000, Maori War £5OO, unemployment £300.000, sickness £290,000. universal superannuation £490,000, emergency £135.000, hospital, etc., benefits—medical £600,000, pharmaceutical £350,000, maternity £550,000, hospital £ 1,435,000, supplementary

£65,000, -administration expenses £471,500; total £14,673,000. NATIONAL ’ DEVELOPMENT. National development works include the capital works of some eleven different Departments of State—namely, Public Works,’ Railways, Education, Post and Telegraph, Lands and Survey, Native, Industries and Commerce. Mines, State Forests, Iron and Steel, and Housing. Of these, the Public Works Department has, of course, the largest share, and its total loan allocations are £5,716,000, while the remaining £7,134,000 of the year’s loan proposals is distributed among the other ten Departments, making a total loan requirement of £12,950,000. In addition to this, a further £7,665,000 will be available from revenues of these developmental activities, thus making the national development programme for the year £20,615,000. In accord with Government policy, the public works allocation has been reduced this year. Hydro-electricity, moreover, continues to be of everincreasing importance in the development of both primary and secondary industries. Consequently this year’s loan allocation for hydro-elec-tric development has been increased to £1,987,000, as compared with last year’s loan expenditure of £1,708,000. The railway construction and improvements loan allocations, £757,000, represent a reduction of £1,173,000 as compared with last year’s loan expenditure, but this substantial reduction has been offset by the use of a larger amount of revenue-moneys which are available in the depreciation reserves of the Working Railways Account. The loan allocation of £607,000 for the railway-construction vote will be applied to advancing the various works in hand, particularly the Napier-Gisborne and the South 1 Island Main Trunk lines, all of which are nearing completion and which now have strategic as well as developmental values. A loan allocation of only £150,-. 000 will be required for railway improvements and additions, mostly for rolling stock, the balance required for this purpose will be provided from the depreciation reserves just mentioned. The roads allocation has been reduced to £350,000, as against last year’s expenditure of £599,000, while the loan allocation for main highways - is £950,000 as compared with last year’s loan outgo of £1,498,0’00. Land-development operations are of particular importance in preparing for post-war rehabilitation. The total loan allocations for the purpose for this year are £2,140,000, practic- : ally the same amount as was allocated last year, and this money is to be - applied to irrigation works (£552,uuu), small farms development ( £388,000), lands for settlement ( £450,000), Native land settlement ■ £250,000), miscellaneous works on the land ( £200,000), and afforestation , L £300.000). A further £ 1,212,000 for land-development operations will be . available from revenue receipts and ■ earnings. . ] Subject to the necessary material ■ and labour being available, the Hous- . ing Construction Department will con- ( tinue to operate to the fullest possible , extent. Provision for a total expen- i diture of £4,400,000 has accordingly s been made in the current year’s estimates, of which £3,790,000 will be ( financed from loans and the balance • from rent receipts. Those desiring to , erect houses for themselves have been offered building loans by the State Advances Corporation on liberal terms, and although there has been some easing in the demand there have ; been granted during the past financial • year 907 building loans for a total ’ value of £889,00u. , The Empire’s need for linen-flax 1 supplies the reason for this year’s in- 1 creased loan allocation of £600,000 , Tor this purpose. J The allocation to the Iron and Steel j Industry Account has been increased i to £350,000, as compared with last I year’s expenditure of only £6,500 ow- t ing to the necessity for some local i production of steel. t The public buildings loan allocation is £900,000, while that for edu- i cation buildings is £500,000, and any < new works undertaken under both I these headings are to be only those of 1 the most urgent nature. Other minor allocations lor miscellaneous services such as lighthouse and harbour works, 1 telegraph extension, and plant and < material make up a total of £1,229,000, of which £625,000 will be met from loans. PRICE STABILIZATION.

With many classes of goods for consumption in short supply owing to difficulties in obtaining imports from abroad, combined with the diversion of a considerable part of our manufacturing capacity to war work, the retail prices of goods are likely to rise unless adequate measures are taken to deal with the situation.. Realising this, the Government took early action in setting up a Price Tribunal, which has done good work in checking avoidable increases in retail prices. Increase in the cost of articles imported from overseas is beyond our control, but the Government is considering ways and means of stabilizing within reasonable limits the cost of the principal essential commodities that enter into the day-to-day living costs of the average citizen. Payment of subsidies is one method that has already been used to stabilize the prices o I bread (£288,000), sugar (£240.000) and coal (£200,000) making an aggregate annual cost of £728,000. -he objective we have in mind is protection. of the standard of living of the rank and file of the people by stabilizing retail prices of essential ; commodities as well as wages. It. might appear that the objective could 1 be achieved much more easily by offsetting price-rises wuh cost-of-living bonuses or wage-; increases, but that provides no solution at a time when goods for consumption are m short supply... n „ An illustration of the effect on New Zealand is provided by an analysis of the import figures. Dm in<# the calendar years 1938 and 1909 the value of consumers’ goods imported was £14.8 millions and millions respectively, while the value of producers’ imported goods remained’practically stationary, and wnen 1 the analysis of 1940 imports becomes available I have no doubt the down- • ward trend in consumers goods will be found to have continuedPUBLIC DEBT. The net decrease in the public debt overseas (apart from war debt) dm - ing the past vear amounts to £3,903,000 sterling. This reduction has been due to the following net repayments: Instalments in respect ot £16,000,000 sterling conveision loan in accordance with the 1939 a o i eement, £1,891,000; Treasury notes iepaid £976,000; short-term bills, £1,000,000; deferred payment stock. £98,000, less on converted stocks. £62,000. Total £3,903,000