The Gisborne Herald. WITH WHICH IS INCORPORATED “THE TIMES." GISBORNE, SATURDAY, AUG. 5, 1939. WHAT OF THE FUTURE?

Gisborne Herald, Volume LXVI, Issue 20008, 5 August 1939, Page 4

The Gisborne Herald. WITH WHICH IS INCORPORATED “THE TIMES." GISBORNE, SATURDAY, AUG. 5, 1939. WHAT OF THE FUTURE?

The Budget which was presented to Parliament this week carried ample evidence of a determination, not to face the unpalatable facts, but to ignore them. It is characterised by a policy of procrastination, of putting off until to-morrow the things that should be done to-day. Having admitted that the national economy is seriously unbalanced, that production and income are declining, it proceeds to allow for further increases in expenditure without even making provision for commitments that have already been entered into, and does nothing to bring about that readjustment which it demonstrates to be vitally necessary. It is clear that the Dominion, already in the throes of the worst financial crisis in its history, is to be permitted to drift still further without any real attempt being made to steer a safe course. The difficulties that are being deferred for future attention, and the new ones that are being created, can be better appreciated by an attempt to consider the probable position next year, based on the information contained in the Budget and the known obligations which

the Government will then be compelled to face. If this is done, it will be found ;that it will be necessary in 1940-41, in the absence of any unexpected change in world economic conditions to provide something like £10,000,000 more than was budgeted for this year. This year’s Budget starts off on the assumption that it is not possible to reduce the national expenditure, and the State plans to spend £07,000,000, almost exactly one-half of the total value of all production or 8s in every pound of private income in the record year of 1937-38. Of this total £38,250,000 is to come from the consolidated fund, £19,000,000 from borrowed money, and £9,250,000 from social security contributions. That is the requirement for the current year, but what of the next? Social security benefits which are not yet in operation will require an extra £2,000,000, apart from any increase there might be in the claims to other benefits. Under the loan conversion plan, the Government is committed to find £2,500,000 next year to reduce the London loan, without allowing for the repayment of any of the export

credits. A third substantial item to be met is the estimated deficit of £2,000,000 in the dairy industry account. On top of these things there will be an increase in the interest bill of not far short of £1,000,000. The Government, therefore, next year will need an additional £7,500,000 in respect of only four items of. expenditure, and since it contends that expenditure cannot be reduced it means that £7.500,000 more revenue will be required. On the revenue side the position is equally unsatisfactory and disquieting. The revenue this year has been assisted by two sums that come within the category of “windfalls,” £990,000 from the sale of silver coinage and £809,000 from last year’s surplus. These things cannot be expected again next year, and that means a drop in the revenue of £1,800,000 —and that is only the start. It is estimated that in the current year customs revenue will decline by £1,650,000 and the sales tax by £55,000. Even if these estimates are conservative what can be expected next year when the full force of import restriction will be felt? Worse still, was the expectation that income tax, in the absence of an increase in rates, would decline this year by £705,000. What is likely to be the position next year following the drastic reduction of import business, a general decline in production, and an increase in unemployment? Taking into account only the known increases in expenditure next year and the known and expected reductions in revenue on the existing basis, for 1940-41 the Government will still be called upon to borrow another £19,000,000 for mostly uneconomic works, maintain all the existing taxation, and still find at least another £10,000,000 either from taxation or loans. Nor is that the end of the story because in subsequent years the position, if remedial measures are not adopted, will become progressively worse. For one thing, in 1941-42. instead of having to provide £2,500,000 for London debt repayment, the Government has contracted to find £4,375,000. By that time, also, the superannuation scheme, of which so little has been heard lately, will be in operation and will add to the cost of the social security scheme. A large part of the £5,000,000 for the State steel works — which could have been left to private capital if it was such an attractive proposition—will then have come to charge, and there will be no compensating revenue, If the national production continues its downward trend, with restrictions of both export and import trade, there will be far-reach-ing repercussions. Apart from the adverse influence on normal revenues, it is inevitable that there will be a reduction in social security contributions and an increase in the claims for benefits. Indeed, all the available evidence goes to suggest that in the next few years the Government *vill be called upon to meet ever-rising expenditure out of a diminishing income. The Budget itself contains ample warnings of this fact, but instead of heeding the warnings the Government is seemingly content to let to-morrow look after itself.