RETRENCHMENT

Grey River Argus, 30 April 1932, Page 5

RETRENCHMENT

TEN MILLIONS TO DATE FURTHER FINANCE £2,500,000 From Reserves INSTEAD OF EXHAUSTING TAXABLE CAPACITY. MINISTERIAL STATEMENT. (Per Favour of Government.) WELLINGTON, April 29. The Minister of Finance, Mr.Downic Stewart, made the following statement in the House of Representatives this afternoon:—

“Tt was pointed out in the Financial Statement, recently issued, that, in the present circumstances, tho bridging of the gap in the State’s finances must be largely accomplished by means of reductions in expenditure. 'ln view of various statements that . have been made, suggesting that ade- | (plate steps have not been taken to reduce expenditure, I wish to review, briefly, the economics effected since the depression began to grow acute during the financial year 1929-30. SAVINGS TO DATE. “At the commencement .of the trouble, economies were made in Departmental votes to the extent of £260,000 During the following two years economies were made as follows: — ECONOMIES. 1930-31. 1931-32. £ £ Reductions in salaries & wages 1,390,000 Hoover Moratorium .. . . 870,000 Grants and Subs. 130,000 135,000 Depth votes .. 425,000 865,000 Rlys. & P.O. reductions . . 475,000 1,060,000 Totals .. . . 1,030,000 4,320,000 Total economies for both years—£s,3so,ooo. ADJUSTMENTS. Subsidy on rates transferred to Highways Account—£22o,ooo. Interest charges on capital transfers to Highways Acconut—£6o,ooo. Transfers to Discharged Soldiers Settlement Depreciation Fund stopped—£so,ooo. Total adjustments: 1930-31, £1,360,000; 1931-31, £4,320,000; grand total, £5,680,000. Thus in the three years to the 31st March last, the economies and adjustments effected amounted to £5,940,000 per annum.

FURTHER RETRENCHMENT. “In regard to the current financial ydar, the Government have now dealt with most of the recommendations contained in the Interim Report of the National Expenditure Commission,” the Minister stated. “The savings recommended by the Commission totalled £2,976,262. The savings effected for 1932-33 totalled £2,040,290. Further savi ; : nrovede for 1933-34 totalled £246,1U0, leaving £99,662 held over.” “I may mention,” the Minister said, “that some of the savings held over have not yet been finally dealt with. It will be seen that of £2,976,262 savings recommended by the Royal Commission, no less than £2,286,390 have been effected or approved by the Government. These economies and adjustments do not complete the list for the financial yean In addition, relief to the Consolidated Fund will accrue from the following iteirf’: Abolition of subsidy on unemployment funds, | £1,450,000; relief to hospital subsidies from unemployment funds, £200,000; Hoover moratorium (if extended), £600.000; further reductions by railways, £100,000; total, £2,350,000. Add/ ing the savings in accordance with the Commission’s recommendations of £2,040,000, the total savings and adjustments at present in sight for 1932-33 are £4,390,000.

TEN MILLIONS IN CUTS. r - ' “The grand total of the relief, to the Consolidated Fund over the period under review’ is no less a sum than £10,330,000, of which approximately £2,500,000 has been obtained by various adjustments, and the balance of £7,830,000 from economies. These figures indicate the strenuous efforts made to cope with the position. However, notwithstanding the economy measures adopted, or contemplated, savings of this magnitude are not obtainable without drastic action. The summary of the position set out in the Financial Statement indicates that tliere would still remain a substantial prospective deficit for this financial year.

THE DEFICIT. “It will be remembered that the Committee of Economists considered that, if wo could end the year with a deficit of about £2,000,000, it could be regarded as a manageable deficit. Tn the Financial Statement of 7th April, 1932, it was estimated that, to confine the deficit to not more than £2,000,000, it would bo necessary to effect savings and adjustments of £4,100,000, and to impose extra taxation to yield £2,200,000. Since that statement was made, T have reviewed carefully the available sources of taxation which might yield the amount of £2,200,000, indicated as necessary. Tt i? clear that the remaining taxable capacity of the Dominion is limited, and it is difficult to devise ways and means of obtaining additional revenue without adding to the formidable burden of private businesses, both prim-

ary and secondary. In the area of direct taxation, it would only be feasible to obtain any substantial amount by a series of minor impositions of an irritating nature by way of various stamp duties and reductions of the exemptions in regard to income tax and so on. In the area of indirect taxation, it would be necessary to Tesort to a Sales Tax, and to taxation on various items of consumption in daily use. These various expedients could be made to yield by way of taxation, the amount of £2,200,000 indicated in the Financial Statement; but, in the process of doing so, the items of indirect taxation, such as sales tax, etc., would inevitably tend to increase the cost of living at the very moment when, by various reductions in wages and fixed charges, we are seeking to reduce the cost, of living. The one process would be to some extent negatived by the other. Moreover, at the present time, further taxation cannot hut have a depressing influence at a time when the whole community is fighting a hard battle to hold its own against an unprecedented depression. Having all these factors in mind, 1 have considered it wise to make a special effort to afford the community some breathing space from further tax burdens. 1 propose, therefore, to withhold our remaining taxable capacity meantime, and to fill up the gap by a further recourse to our reserves amounting to £10,500,000, invested in the Discharged Soldiers’ Settlement Mortgages. As I have previously stated. these reserves were built up out ,of surplus revenue in prosperous years. In order to get over the difficulty that it would be unwise to sell them at a heavy discount on their present day market values, I took power, in last year’s legislation, to draw against them by hypothecation of the securities, pending the time arriving when they can be sold at their real value, or the receipts therefrom can be made available. This authority, was not used last financial year, but it was hoped that some use could be made of it this financial year. Since then, I have been negotiating with tho Bank of New Zealand, and have now to announce that I have concluded a satisfactory arrangement to obtain £2,500,000 by hypothecation of .the securities. 1 understand the National Bank of New Zealand proposes to take a proportion of this amount. The amount will be paid off out of funds provided by the repayment of loans by the Discharged Soldier Settlers. About £200,000 from this source was allowed for in the Financial Statement, so the additional amount thus made available is £2,300,000. This procedure will enable us to keep in reserve, for a later date, whatever taxable capacity the community may still possess, and still reach the result already laid down as desirable, viz., that we should end the year with a manageable deficit of £2,000,000. It is true that, by imposing the taxation of £2,200,000, and at the samt* time throwing into the firing

line the reserves now being called ou, we could actually balance the budget this year, but I do not think it wise or desirable to exhaust both our taxable capacity and our reserves in this year when we do not know what yet lies in front of us. It should be noted, however, that this proposal, combined with the deficit for the last financial year, and the amount, up to £2,000,000, that may eventually be carried forward this year will practically absorb the effective value of our remaining discharged soldiers’ settlement reserves, after allowing a safe margin for tho investment losses that may be suffered on account of the depression. This means that any further declines in revenue must be met by economies in expenditure or increased taxation. This valuable assistance to the Government afforded by the Bank of New Zealand, and the National Bank of New Zealand will be additional to their share of the extensive Treasury Bill programme necessary to finance the remittances to London, maturing loans and general requirements during the year. Arrangements in regard to this general finance are being made with the Associated Banks, which arc, in this way, affording great, assistance to the Government in meeting its difficult financial problems.