FINANCIAL STATEMENT.

Gisborne Standard and Cook County Gazette, Volume I, Issue 62, 3 November 1887, Page 2

FINANCIAL STATEMENT.

THE BATING ACT.

Wellington, yesterday morning.

The Fuanoial Statement was delivered last night by the Colonial Treasurer, Major Atkinson, who said Mr Hamlin,—l have on several similar occasions had the honor of addressing you and your predecessors in that chair, but I need hardly say that on no previous occasion have I felt a greater sense of responsibility and of the difficulties which lie before us, yet I Will add that never previously have I felt more confident that these diffloultiea can arid will be overcome, since the colony, and I believe this Committee, reflecting as it does the mind of the oolony, has determined that our difficulties shall be met and dealt with in the right spirit, It was in May last that the country began in earnest to recognise the fact that a serious problem had to be faced. Parliament was then told by Sir Julius Vogel that, every possible economy having been practised in the ptopoSed piiblid expenditure.additional taxation to the extent of £250,000 must be imposed. Parliament, however, though as fully resolved as the Government not to let the current revenue exceed the current expenditure, emphatically refused the proposed additional taxation, in the belief that further 'arge reductions were possible, and could be made in the expenditure, before imposing further butdons, so that these latter if really needed might at all events be reduced to a minimum. In consequence of this refusal an appeal wcs made to the electors, but they fully confirmed the decision of last Parliament, and I am here to-night to propose the first step towards giving that decision effect. I take, therefore, as my starting point, this firm determination of the country for retrenchment ; a detorm’nation, which under the still continued depression of trade and low price of some of our main itaples, no one can say it is not reasonable. The Government at all events are imong those who fully believe in the reasonableness of this determination, and they believe also the country is prepared for the necessity of self-sacrifice which it involves. To some extent I hope retrenchment may be effected by greater care in administration, but there is no doubt that speaking generally retrenchment means self-saorifiee in some shape on the part of the Community, Attention was then drawn to the great difference there was last year between the current revenue and expenditure. The deficit as given by the late Colonial Treasurer for the year 1886-87 was £92,293, but if we omit from the revenue considerable items which will not recur this year, namely, the surplus of £37,859 with which the year 1886-8? began And the windfall of £104,749 of the realised Sinking Fund, We shall find that what I have called the recurrent revenue fell short of expenditure by £234,901. Bearing this in mind hon. members will be better able to unde-stand how the late Government, aft -r making all reductions in expenditure they thought possible and expedient, felt constrained to propose no less a sum than a quarter of a million of taxation over that of the year ending 31st March last.

LAND FUND. It is desirable, before going further, that I should briefly refer to the position of the Land Fund accounts. It must be remembered that although the Land Fund has been kept in separate account since 1879-80, and very wisely so, it is in law a part of the Consolidated Fund, and While a surp us should be used, not in aid of the Consolidated Revenue, but ipon roads and bridges, to gtve facilities for settlement, any deficiency in the Lind Fund is properly a deficiency of the Consolidated Fund, and should.be so treated. On the 31st March, 1687, the Land Fund Was in debt £54,203, so that if, to the £92,293 we add, as we should, this £54,263, the deficit of the Consolidated Fund at the close of the year which had to be provided for, including Land Fund, was £146,556, and, as a matter of fact, it is included in the deficiency bills outstanding. I shall now proceed to state o the Committee what Would be the probable deficit of the Consolidated Fund account At the close of the present year on the twofold supposition, firstly, that the expenditure continues at the rate prevailing When the present government took office, and, secondly, that no additional taxation is imposed.

CONSOLIDATED IFUYD EXPENDITURE (ORDINARY REVENUE ACCOUNT) FOR THE YEAR 1837-1888.

The estimates for the current financial year, as laid before Parliament by the late Government, having been reconsidered in the light of the six months’ ACtfiai ciperietic?, with the view On the one hand of showing prdbAbie swings, which under ordinary circumstances would have accrued on the votes at the end of the year, and on the other of adding to the other original estimates the cost of additional services for which no provision had been made, but which, so far as they did not relate to services under permanent Acts, would have been brought down and voted in the Supplementary Estimates. It now appears that the probable expenditure for f,he current year would amount to £4,118,395 as against the total of £4,088,804 appearing in the estimates of the late Government, It is hardly necessary that I should enter into any explanation of the differences between these two estimates, There are savings and excesses in various directions, and members will find them set out with sufficient fullness in a table which will be appended to this statement. I may remark however that so called savings on votes, which we ordinarily expect to find at the close of the year, will not prove so large as usual because the estimates appear to have been framed with little margin over the sums proposed to be actually spent. Among the services, either not appearing on estimates or unsufficiently provided for, are the following :—lnterest on advances recently obtained from the Bank of New Zealand compensation for loss of office paid to officers whose services were dispensed with by the late Government, expenses attending a second session of Parliament within the year, expenses of a General Election, Stock Department insufficiently provided for, liabilities in respect of the Indian and Colonial Exhibition, and additional exchange on remittances to London. In arriving at the above estimated total of £4,118,395 I have not allowed for the par oentage reduction of salaries,estimated to amount t0£20,000, proposed by the late Government, but which had not been acted on when we took office. ORDINARY REVENUE FOR THE YEAR 1887-88.

The revenue proper received for the six months ending the 30th September last was £1,510,862. This was £16,844 less than was received during the same period of the financial year 1885-86. The Customs yielded £29,446 less, the railways £18,433 more than the previous year. To this must be added the proceeds of debentures, which amount to £258,184, issued last April under the “ Consolidated Stock Act, 1884,” on

account of the Sinking Fund to accrue during the financial year 1887-88, but I do not add the proceeds of deficiency bills sold, because my object is to show what the probable deficit will be at tho end of the year. The total receipts were therefore exclusive of proceeds of deficiency bills, £1,769,047. In estimating the

revenue for the remainder of the financial year, I do so upon the assumption that the taxation, including the property tux, is not altered from last yean I may remind hon. members that no property tax has beeii collected, the annual Bill not having yet been passed With reg.rd to the other items of revenue I have adopted the estimates of my predecessor, except as regards stamps and railways. Tho experience of the past six months leads to the probability that the stamps will not reach the estimate by £32,600, and the railways by £50,600, Taking these circumstances into consideration, ! estimate tile revenue for the sik months ending the 31st March, 1888, will amount to £2,019,460, making a total of £3,788,507 for the year, as against £4,156,184 as estimated by the late Colonial Treasurer, which included the proposed additional taxation, THE LAND I’UND,

I have already informed the Committee that on the 31st March there was a balance of £34,263 at the debit of the Land Fund account. On the 31st March, 1884, there was a balance of £80,447 at the credit of the Land Fund, The expenditure has, therefore during the last three years, exceeded the receipts by an average of £44, 900 a year. Last year the expenditure exceeded the receipts by £33,879. It is expected that the receipts for the current year, es'imated by the late Government at £108,899, will be realised, and a revision of the expenditure, estimated at £170,967, results in a probable decrease of £2600 ; thus the expenditure of the year would have exceeded the revenue by £59,417. I may say that this ekceSs of expenditure is exclusive of the outlay amounting to £168,260, which lias been made from loan during the last three years in opening up the land before sale, and of liabilities of £76,908 since incurred on the same account. It is also exclusive of £lBOl expended on village settlements to 31st March last, with liabilities of £6?,886 since incurred) blit tills latter expenditure is to be capitalised and interest obtained for it in the shape of rent if possible. The money, however, has yet to be provided either out of loan or consolidated fund, no provision having fatten made by Parliament, The Millts Of the revised estimates of expenditure of ordinary revenue account being as I Have stated £4,118 093, and the feVenue being £3,788,307, the expenditure will exceed the revenue by £329,888 on the ordinary revenue account, and if we add the excessive expenditure of land fund £39,417 we get a total of £388,303. The late Government proposed to meet tho deficit antioipat«d on the ordinary revenue account by additional taxation amounting to £250,003 and by a percentage reduetion of £26,000 from salaries. With regard to the laud fund they proposed “ That for a term of years, until the increasing revenue will permit otherwise, the deficiency between the land revenue and the land expenditure should be made up by charges on land, supplied by such local borrowing as may be required. How the present Government propose to deal with the deficiency of the consolidated fund as a whole and prevent its recurrence I will shortly state, but first I niust Ask ask your attention to thO piiblio debt and the public works fund account. THE PUBLIC DEBT.

With the view of showing the effect of the public debt of the operatiort during the last three years of the provisioti of “The N. Z, Consolidated Stock Act, 187?," And more especially “The Consolidated Stock Act, 1884." I have had a table prepared to accompany this Statement. The gross public debt at the 31st March, 1884, as set forth in that table was £31,075,820, exclusive of £398,000 for deficiency bills; on 31st March, 1887, it was £35.741,633 exolusiVe of deficiency bids for £279,100 then outstanding. Since that date further deficiency bills to the amount of £715,900 have been issued, the total of those now outstanding being £995,000,in addition to debentures for £258,184 issued in April last for increases of Sinking Fund, for the current year. The amount at the 31st March, 1884, in the table to which I have referred differs from the total given by the late Colonial Treasurer in his Financial Statement of the 30th September, 1884. It is unnecessary to mention th 6 items constituting the difference, excopt in one particular, because the table prepared in 1884 was to ascertain the extent of the approximate statement, The exception is exclusion from the table of the amount of bonds issued under “ The Consolidated Loan Act, 1887," drawn, redeemed, and eanoslled prior to the 81st March, 1884. It is true that the scheme of that loan required that tho annual chirge for interest and Stoking Fund in respect of the total anioiint of debentures issued should remain the same until the whole loan was repaid, It is right, therefore, to include in debt only the amount of principal for which the Oolony is liable. It will be observed from the table that during the three years ended Slab March, 1887, bonds for £9,796,800 were converted under the two Acts to whioh I have referred into other securities of the nominal value of some £9,993.884. Prior to that date bonds for £5,390,300 had been converted, now represented by a debt of £3,499.571. I now come to consider the effect of those provisions of 11 The Consolidated Stock Act, 1384 ” which empower the Colonial Treasurer to issue debentures in each financial year to an amount equal to accretions of the Sinking Fund for the year. The total amount of these nccre tions for three years 1884-87 was £742,728 of whioh the Consolidated Fund contributed £597,236, the balance of £145,492 being the product during the same period of investments made by trustees, partly trustees, partly in bonds of this oolony,and partly in the securities of other colonies. The amount contributed out of the Consolidated Fund is one per cent, on the original debt of £7,283 100, together with 5 per cent, on cost of bonds, drawn and cancelled, whioh increases year by year, and is now £1.982,100. lam desirous that the Committee should appreciate the marked distinction in accretions of the Sinking Fund between the amount whioh the colony contributes direct from the revenue and the interest received by the trustees on their investments. When in his Financial Statement of 1884, the late Colonial Treasurer brought the position of the Sinking Funds under notice of Parliament, he did so with the object of propounding a schema which would have the effect of relieving the Consolidated Fund of a heavy burden. He said s—“ I propose we should nob be idiotic enough to tax the people to pay off a little fragment of our debt ; no other oolony does it.” Now it is claimed that the maintenances of the contributions of the Sinking Fund direct from the revenue was an unnecessary tax upon people, a tax which in view of our continuing to borrow should, without breaking faith with the bondholders, be removed. Whether or not that is a right view to take I shall not now discuss, but the increases derived from past investment of these contributions stand upon an entirely different footing. They constitute no burden upon the people. The result, as it was stated would be the case, has been that as regards loans outstanding at 31st March, 1884, the net Public Debt has practically remained stationery.

PUBLIC WORKS FUND ACT. The account is now divided into three separate accounts,a separation necessitated by the legislation of the session of 1886, which had the effect of what has been termed earmarking North Island Main

Railway Loaii, and the loan authorised in 1886 for the specific pufposes set forth in the two loan Acts; . 1 No, ! Account. —this is an account of the balance of the loans raised before 1886. The credit balance in this account was on 81st Marcli last £491,945, subject to liabilities amounting to £335,774. On the 30th September last there W»l a credit balance of £247,292. subject to liabilities amounting to £280,493. Agaitt.t thia fund is charged All miscellaneous works, such as harbor d.fances, roads, bridge’, school buildings,purchase of NativebnliS and telegraph expsndi'iii’e, Hon, members will therefore see that without further borrowing, neither can our liabilities be met, nor can necessary works of the above description be undertaken if we adhere to the wholesome restrictive principle of the Ao's of 1886. No. 2 Account,—This is fehe account of North Island Main Trunk Railway Loan. On the 30th September.last ths unexpended balance Was £615,258, With liabilities amounting to £137,474. No. 3 Account—This is an account of the Loan of 1886,being the amount authorised in 1886 to be raised for railway construction. On the 30th September last the credit balalioe was £536,644, and the liabilities £304,004; there is therefore still available £252,640 in this aUcdUrit. GOVERNMENT LOANS TO LOCAL

BODIES, Up to 30th Sept, last we had borrowed £100,600 under th« provisions of the Government Loans to Local. Bodies Act, 1886, Of that amount £171,686 nad been disbursed at that date, Laving a balance of £28,314 in hand,With UabUitiet amounting to £99.181, to meet whidh a sum of about £lOO,OOO will be required, consisung of balances of loans to local authorities who had elected to take their loans by instalments, £38,580, and £60,601 for loans provisionally .granted in the fl.rst year of the Act, It is the intention of the Government to ask Parliament to appropriate the sum of £lOO,OOO for the purposes of the Act for the current year. MAORI LANDS; The ajipatenMy insoluble problem of dealing with ndtive lands iti a fair and equitable Way. in., the interest of the Maoris and of the settlement of the Country has occupied probably more of the time of the Government and Legislature of the colony than almost any other question, I shall only indicate the broad lines which the Government propose to follow in legislation liport this subject In the opinion of the Government there are large districts in the colony, in which many Maoris are living,..where the same laws can, bo applied with advantage to both natives and Europeans alike. We shall, therefore, in repealing, as we propose to repeal, the Crown and Native Lands Rating Act, ask for authority to declare districts in which the law will apply equally to individuals of both races. The Maori, on the ofie habd) will be liable to pay rates and taxes as his fellow subject of the European race is, and on the other Hand, -he will be permitted to deal with hiß lands as freely as Europeans after the Crown title has been obtained, except to this extent that he will be compelled to retain a sufficient amount of land for the maintenance of himself and family, and of all those possessing large tracts of country it will be required the land shall be Sold in blocks only of a moderate size. In all other districts of the oolony which are not proclaimed, and therefore not subject to taxation, the Maoris will not bo permitted to part with lands to anyone but the Crown, except under more stringent conditions. Bafore, however, proposing final legislation on these subjects, we shall, in the recess, consult with the natives on the several points, but we intend at once to introduce a Bill to remedy certain pressing evils.

THE TARIFF. Until this question is settled with some sort of permanence, the trade of the colony will, in addition to its present unavoidable difficulties, continue to be disturbed and irritated. During the present session it is impossible to deal with it completely. The Government are of opinion that it should not be touched until it can be so dealt with as not to need further serious revision for a considerable time to conic. It will be necessary to charge against revenue many works which are now charged against loan, such as public buildings, school buildings, and telegraph extension. It seems to the Government clearly right that no attempt should ba made to revise the tariff this session. PROPOSALS TO EQU tLTSE EXPEND!* TURE AND REVENUE. I have now to answer A very important question: How is it possible, without further taxation, are revenue and expenditure to be balanced ? The excess of expenditure during the current year over the receipts of the Consolidated Fund, including the land fund, Wil! probably amount to £389,303. It must be evident to anyone who is acquainted wi'h the condition of the colony that something more is now needed to reitore confidence than mere trivial economics. Our chief difficulties have undoubtedly arisen in a great measure from a too lavish

expenditure, more especially of borrowed money | that must be stopped, and our first duty therefore i« to apply the pruning knife with an unsparing hand. There is another duty not less important. We must indeed take all possible means to prevent waste both of our ordinary revenue and of money borrowed for public works, but we must also promote ths settlement and occupation of the lands of tho colony by rendering them attractive to persons willing and able to cultivate them, and to develop their many and varied resources with their own skill and capital, and we must also so far as practicable encourage all our other industries by all reasonable means in our power, that is to say, we must encourage such industries as will in the long run increase the wealth and prosperity of the colony. There is no surer way <>f lifting ths country out of its present difficulties than by the introduction of considerable numbers of persons possessed of sufficient means and knowledge to cultivate the land profitably, not only as ordinary farmers, but as fruit growers or growers of plants suitable for manufacture or the supply of other industries. Our efforts at retrenchment will be comparatively unavailing to restore prosperity unless we cm obtain considerable accession to our population of persons

in a position to employ labor. We think the time for this is very favorable, and if the House should approve of tha course we shall propose on this subject we hops to see at no distant period a considerable accession to our population of persons of the class above referred to. The time also apparently is favorable to the establishment of pensioner settlements. The Government are of opinion every effort should be made to induce a considerable immigration of this class of persons to the colony. The Government propose to amend and simplify the land laws, and as far as possible make them uniform throughout the colony, to allow selectors full freedom of choice as to tenure, and above all, and as the dominant idea, to enable tho bona fide settler to get possession of a title to his land with the least possible delay and expense. It is perhaps desirable here to declare that the Government fully recognise the wisdom of the principle, which has been acted on since 1879 80, namely, that the proceeds of the sale and disposal of our lands should be treated not as ordinary revenue, but as a special fund for opening up the country and promoting settlement.

kiINING INbUfiTRY;

The yield of gold from the. quartz mines appears, to -be steadily ii:creasiiu| and there is a steady and increased output from the coal mines. There can be nd doubt that when the harbors on the Wcat Coast are completed 'he latter industry will aaiume still larger proportions.

RAILWAY MANAGEMENT, The management of ouf railways front the first has never given eatisfalltiort id the public I do not shard in thia di«; satisfactioiij believing that our officers off the whole have been efficient, ana thdt It is the inherent defects of the system, and n,t the management, which are at the bottom of the dissatisfaoti n. A non • political B -ard of Management has been advocated for some yean, and the introduction of that pl.in into Victori* has enabled us to Watch tile jjraettoet wdriting of the system. It is now admitte4 that the system has proved a great syoeassi The Ministir for Public Works Wilt ask for leave to introduce an Act this session in Parliament to constitute a non-political Board of Management for the N.Z, Railways. We have to deal with serious present deficency in our revenue, Now, it is obviods that without ah in« crease in number of taxpayers there only threfi ways in which a deficiency of revenue can be met; or, rather, its continuance or recurrence avoided—first, taxation may be imposed for the whole amount required) second, expenditure may be reduced to the whole extent necessary, if that be possible | third, A reduction of oipenditlire they be madej and additional taxation may be imposed; which, shall make up the r»« quireu Sura.

PROPOSED REDUCTION IN SERVICES.

. h»y<By nceesaary forme io esy thsJ it will be imprafitwafale to oo*er deficiency of current year by reduction of expenditure. Seven months of the financial y*«i have already passed, and it is impossible for two or three mouths to eome to obtalt much, if any effect , ftotti the rfadnetidh; The prdpdsalS I ahull aiibmit will; f hope prove to be of A sufficiently compr.ehenstvi character jo satisfy the most thorough ateformer. There is an impression in the public mind that sufficient reductions can be made in the public expenditure by i reduction in numbers and salaries of ths civil servants, but I need hardly point oul to honorable members that it Will bt altogether impossible bo effect the who!! of the necessary savings in that difootioi’ alone. It will be necessary also to curtai the convenience and ajds which are now being enjoyed by the pubife and thJ local bodies. I will now state to ths Committee that our prop -sed reduction: in the services are : In the first place, w< propose to begin with the highest office ir the Colony, that of tho Governor. Thii induction eannot take effect pntil the appointment df A neW. GoVerno?, The Governors salary shall remain a £SOOO, but this shall include theqost pi his staff and all aliowanees. This will be a total reduction of £2,500. I will now deal with the Legislative and Executive branches of the Government. We propose with regard to the salaries of Ministers that the Premier shall receive £loooi instead of £1750, now paid and that tht other Ministers .shall receive £BOO, in< stead of £1.250, and we propose to reduce tha number of paid Ministers fr. n seven to six, simultaneously with th< reduction in the number of members ol the House of Representatives, which 1 shall shortly mention. As to travellinf allowances, the allowance should b( arranged a<> as merely to recoup necesaarj outlay, and we propose toallow £llos pi 1 day while actually travelling on publ't service, and limit the total to be paid tt the whole Ministry to £IOOO in any on< financial year. The average amount tc each Minister for the last three years has been £l9O. With regard to the expenaei of the official residences of Ministers, w< think that large reductions can bo made We think tio one known as “ Tinakoi Road North” should be sold as beitq too large and expensive. Of the other, we propose one should be retained ai a residence for the P.-rrtiier, the coat o maintenances of all bdt tho lioiiio iliel being defrayed by the occupants. Will regard to other Ministers, looking to thi difficulty upon short notice of finding suitable accommodation,we think it desir able that this should ba provided for semi al least of them,and .that those not obtain ing a house should receive a house allowance of £2OO per annum, but upon th’i subject, we will shortly make more specify proposals, I now come to the LEGISLATIVE EXPBNDITURS!;| The Government will invite the Legislative Council to express by resolutions iti opinion that the honorarium paid iti members should not exceed £IOO, and w< shall ask this House to reduce the honorarium paid its own members to £loo,with an allowance of £SO in consideration ol the additional eApmsas hece<sarily ini ourred by them, We think that no payment should bo made to the Chairmen ol Selejt Committees of either House, that all officers of Parliament whose salarioa are provided by Act should not receivs more than the statutory pay at prelent provided, all extra amounts annually voted being struck off, and the salaries ol tha other officers of the House being reasonably reduced. The Government intend this session to introduce a Bill to reduce the number o! members of ths House of Represintatives to 70, inclusive of Maori representatives. Though this change cannot take place until the end of the present Parliament, next session they will submit a Bilb to the House altering the mode of election, with other necessary reforms of the electoral laws. They wi'l a’Si during the present session invite the Ligis'a’ive Council t > devise a plan by which their number may be reduced to 35, one half of the number of members propose I for this House, and thereafter limited to that number. Now let us consider what reductions are possible in the OIVIL SERVICE. Tha total number of persone in the pay of the colony, including the Governor, Ministers, Judges, and others, but exclusive of police, military forces, and country postmasters, is 7163. and the amount they received in salary, pay, and wages is £1,004,273. Of these. 5862 are receiving weekly wages, pay, or salaries not exceeding £l5O a year, the total paid this class being £638,519. The Government do not propose to make any substantial alteration in the pay made to these persons. It is probable, however, that their number may bo reduced, but at present there has been no time to go into this question. It follows, therefore, the amount £365,754 paid to persone in receipt of salaries over £l5O a year is the principal amount upon which it is possible to make reductions. At present tho reductions proposed in the departments generally I do not propose here to refer to in detail. These will be dealt with in committee by the several Minister* in charge of departments, but I will Say a few words upon our EDUCATION SYSTEM. > In regard to which, while admitting it has given great satisfaction from the purely educational point of view, specialists agree that relatively to the population and revenue, the system is too costly. They differ only as to means by which reductions may be best effected. The proposals to be submitted by Government .will show where moderate saving may be made without weakening the system. Our principal proposal will be to limit the capitation grant to the statutory amount of £3 15s a head, which we think,

Under the circumstances ot the colony, is ample for necessary purposes; and not to pay capitation upon any child under six years old, but we shall make provision so that no bountry school shall be closed in consequence of this olange. The saving on the education vote we estimate at about £60,000 per annum. RETRENCHMENT.

I ha' e had to consider carefully how to subait clearly t 0 the House the reductions that ths Government propose, and have thought it beet, in view oi the short time at ths disposal bi the Government, to bring down a schedule, lihwnich will be shown in one column the total amount cf each class of expenditure as proposed in the estimates introduced by the late Government in May last, with supplementary estimates for services either inadeqeately or not all provided for; the next aolttmn, the reduced amount the Governm- h propose for the current year, seven months of which have alieady peered and two more of Which will at least pass before it will be pos*:bl» for the reductions to take eSect; the third column will (ho* what is the amount of the reductions, of the estimates for the twelve tPonths which the Government already see their way to make and which will take eSect in proportion as our proposals have time to operate. We propene to take one vote for each Of the clbm** and sums mentioned in the second Solemn oi the schedule, under the head of 11 Annual Appropriation," instead of following the usual course of taking votes for the |

Several iervioes on each class. Honourable hi embers. will recognise that it conld not be possible for the present Government in so short a time to bring down a revision of the estimates of the late Government, showing in detail the reductions we propose to make and that there is no other course open In the cirtamstan*es than to take a vote toy each EJi£a of expenditure only with regard to a redufiBen of> sum ; of £13,000, which has not been »i'oe«tM th any elaes, hut which will, when given effect to, be distributed over all of them in ouch manner as Government may determine, A clause will be inmtted in the Appropriation Act, which will lltriit the power o! expending under the votes to the total amount of the classes, less the sum of £16,000. Before leaving this part of my subject I wish to say that the GovernB:nt in making reductions desire to use all saible bohsideration for the persons directly ected, so far as their duty to the pub'ic Will allow, more particularly as regards those of special, occupations, such as Postal and

Seledraph officers, and those now- entitled to pensions and allowance. The Government will do their utmoet to make the redactions and other changee press with as little hardship as possible, subject only to the necessities ot the case and to their paramoant duty to the public. If our proposals are assented to Parliament »ill reduce the total amount of departmental Appropriation out of the Consolidated Fund lor a fall year by £251,500. The reductions Comprised in this amount hare been made jupon the probable expenditure for the same services during the current financial year under the estimates and engagements of the late Government. I may, in passing, inform the Committee that before making them, all services of a nonrecurrent character, so far as they could readily be traced, were first eliminated from the estimates tot the current year each as expenses ot a general election, and the same pourse was penned with reference to payments under permanent Acts, such as .allowance to members of the General Assembly for attending a second Parliament. If in determ-

ining the amounts of these reductions any Ben-recurrent items have been overlooked the omission will probably be adjusted by ths ocburbenoe of other items of like character in the estimates for next financial year. We already see our way then to effect departmental reductions t'O the extent of £250,500, and we believe we can still make further, we hope, substantial reductions by means of a more perfectly organised system and amalgamation of offices compatible with each other. It is clear that sufficient time must be given fe Any &o verninent undertaking re-organi-Ution of the Service, and full power must be given to that Government if the work is to be done successfully, but when the work we are how proposing to do has been done to the Satisfaction of the House, if it is not to be again undone, it will be necessary that far greater restrictions should be placed upon the Government ot the day than is the case at present, Vigorous retrenchment is affected by One Government in times of depression they are replaced by another Government, and much of the work they have done, if times are a little mote prosperous, or if a more sanguine view of the prospects is taken, is undone by their successors. I may give an instance ot what I mean. In the year 1380

mere were seventeen ruspev.urs v, r L ; After careful consideration it was determined that eleven Inspectors would perform the work, and reductions were made accordingly. Eleven Inspectors eatisfactoiily performed the work up to 1884, at a cost of £4,300, having 448 men ol all ranks undrr them. There are now no leas than eightet n Inspector!, at in annual -cost to the colony of £BOOO. The total number of police being 802. I Simply give this as an instance, as thawing how it will tend to economy if this number of officers ot the several glades in the service is limited by Act of Parliament. The Goftniment are of opinion that if the reforms now being instituted are to be permanent, it will bo necessary to classify the Civil Service, limiting the number of each class, and making it necessary to report to Parliament the employment of any extra or outside assistance. The Government have a Bill in preparation, but it would be premature to introduce it during the present session. We propose to make ths main changes, and to see that they work well before asking Parliament to legislate. I may say, however, that a leading provision in the Bill will be the appointment of a Civil Service Board, through whom all appointments and promotions will bo made. If we are to have a really efficient Service, the tenure of officers must be reasona vnnat hfl able to Innlr

libly secure—a cadet must be able to look forward to the Service he enters as a profession, and one in which his advancement will depend upon his capacity, character, and attention to his duties, and not upon the favor of the "Minister of the day. Under a well-considered Act the work can be done at a minimum cost to the country. Before leaving the subject of departmental expend!ture, I Would say that there appears to be a considerable waste of money in travelling. I have not yet had time to look into the matter as I should have wished, but the Committee will probably be surprised to learn that the amount expended on travelling during the year from October 1,1886. to September 80, 1887, was £5,647. I do not mention this as exceptionally large, but as an example. This includes the expenses of Ministers, but does not include the computed travelling allowance which is granted to many officers. There is, however, some portion of it returned to the oolony in the way of railway fares, but it is impossible to ascertain the amount to which the railway revenues are benefited. The Government are of opinion that very considerable reductions should and can be made in this item, the leading principle to be kept in view being that this allowance is merely to recoup legitimate expenses actually incurred.

PROPOSED REDUCTIONS IN GRANTS IN AID.

I now come, Sir, to the consideration of grants to local bodies, and, however painfu it may be, we must recognise the fact that if the assistance now being given them is to be continued, our taxation must be increased to

In the first place let me ask your attention to the Grown and Native Lands Bating Act. When this Act passed, it was estimated there would be sufficient surplus in the Land Fund to pay the rates on Crown lands. That estimate has, however, proved incorrect. As a matter of fact the Land Fund is insufficient by more than the amount paid for the rates on Crown lands. To meet the charges as voted by Parliament it must also be admitted that advantages conferred by this Act have operated very unequally in various parts at the oolony. It is with much regret the Government propose that it should be repealed from January next, with the necessary reservations as to securities given under the Act, for nothing can be fairer than the principle that all lands by whomsoever owned should contribute to maintenance of the roads of the district in which they are situated. But as money must be found for opening np new lands for fresh settlement, and we cannot always continue borrowing largely for that purpc se, it seems to be better in the interests of the colony to use the land

fund at our disposal than to apply it as it has been applied since the passing of the Crown ana Native Lands Rating Act, to the relief of local taxation. By the repeal, however, of this Act a very large question is opened up—the question of Maoris paying rates upon their lauds in settled districts whore their fellow Bottlers of the European race are doing so, and it seems to the Government that the time has arrived when the Maoris should be placed on an equai footing in this and other respects with European fellow settlers in those districts which may be properly called settled districts. I have already referred to the corelative lights whiih it is proposed would be conferred upon natives to compensate them for being called upon to perform this duty. Lt the Act which we are now considering is repealed there will be a eavifig to Consolidated Revenue through the Land Fund of £34,000 per annum, and a further saving of the expenditure of money now borrowed to pay the native rates ot £lO,OOO per annum. Although this money is recoverable, it will be some years before it will be repaid. There has been recovered up to Septembir 30, £1843, and there is at p e ent outstanding on this account about £322,000 which has been borrowed from the Public Works Fund. SUBSIDIES TO LOCAL BODIES.

These subsides under existing arrangements have always been regarded by everyone acquainted with our real financial position as a most precarious source of revenue to the local bodies, and the late Government, no doubt with much regret, proposed to Parliament to reduce the amount of the subsidies paid last year by one half for the current year, and I, Sir, also with much regret, have now to make a similar proposal at the present, and we hope to be in a position to continue them at the —e rate next year if Parliament shall see fitCLui we «« ;;- inion th ! present year these subsidies stWHls —arged wholly upon tevenue: and noi as now. one half upon loan, and further that they shall be separated from our ordinary finance, and not only fixed for a definite time, but be paid from a definite source, ns for instance by appropriating to the purpose a given fraction of the Properly Tax. For the present there is no doubt that the local bodies are hardly pressed to provide funds to carry on their necessary works, and we regret we Can do no more for them. Ido not, however, wish the Committee to understand me, as representing that Government, ceasing to pay rates On Crown lands and the subsidies, are effecting a

saving to that amount in public expenditi re—using that term in a popular sense we are. Indeed relieving the Consolidated revenue to the full amount is our first duty, but we are throwing upon localities whatever amount out of these sums is absolutely required for carrying on necessary services, and so far the change induces local economy. There is an absolute saving in all senses, and it is clear that if we are to restore our finances to a satisfactory condition, and if we are to recover our credit in London it can be only done by making a very firm stand against all expenditure which can be possibly avcided. It may no doubt be said that not only these grants about which we are now speaking, bat also much larger sums of money, could be profitably spent by local bodies, and I do not propose to dispute that, but we have not got the money to spend, we have been spending far too freely, and we must now stay our bands tor some time from useful local works, or raise funds for them locally;

SUMMARY OF REDUCTIONS. Adding together then the whole of our proposed reductions, we find that when completed, effect is given to them. The expenditure chargeable a year upon the revenue of the colony will be reduced by £300,000. I shall, for the convenience of members, briefly recapitulate the leading items ot which this large sum is composed : Salaries of Ministers, £3450 ; allowances to members of the General Assembly, £10,000; departmental appropriations, £252,550, including reductions in respect of Ministers’ residences, travelling allowances, etc. ; rates on Crown lands, £34 000; making a total of £300,000 for a full financial J ear. The amount we shall probably be able to obtain by these reductions within the current financial year will be about £71,000, particulars of which will be found in a table appended to this ettstemefit.

PROPOSALS RELATING TO CURBENT YEAR. I have already informed the Committee that it is estimated the expenditure of Consolidated Fund during the year ending 31st Match, 1888, would exceed the revenue by £389,305 if expenditure proceeds at the old rate and further taxation be not imposed. This sum will, however, be lessened by savings during the remainder of the year, arriving from the reductions we shall be able to give effect to; a reduction estimated at £71,000, and we propose to still further reduce it by increasing the property tax from thirteensixteenths of a penny to one penny. These reductions will leave a sum of about £253,000 expended in excess of revenue to 31st March to be provided for. This, together with the deficit of last year, amounting to £92,298 on the ordinary revenue account at 81st March, 1887, and of £54,263 on the land fund account, making a total of about £399,600, for which provision has been made. It will also be necessary to meet the amount to be paid as compensation for loss of office. This will probably be a considerable sum, indeed, large in proportion. The ultimate saving is large, but it is impossible to state the amount even approximately at present, or until the Government have determined upon specific reductions and amalgamations, which will have to be made if Parliament should see fit, as we trust it will, to ratify our proposals and limit the total Bost of respective services. Now I must ask hon. members to bear in mind that, as I shall hereafter explain, we are proposing to reduce greatly on public works expenditure, and also to shape our ordinary finance as to gradually enable the Consolidated Fund to meet many chargee for works now borne by loan. It we succeed in doing this, as I think we must, it will entail a heavy burden on the revenue and render it impossible to meet the large amount to which I referred, otherwise than gradually. The Government therefore propose that the proceeds of debentures issued under “ The Consolidated Stock Act, 1884 ” for interest on investments of Sinking Fund, to which I have referred in my remarks upon the public debt, amounting now to about £40,000 a year, but increasing yearly, and which for four years, including the present year, have been paid into the Consolidated Fund and used as revenue, should, from March next, be applied to redeem yearly a like amount of this deficit until the debt is finally extinguished. We propose also that any credit balance of ordinary revenue from year to year shall be devoted to the same purpose instead of being carried forward to the next account, and, in the meantime, we propose that short-dated debentures, payable only in the colony, shall be issued to cover the two amounts.

PUBLIC WORKS PROPOSALS. The Committee will naturally be anxious to know what the Government propose about public works and further borrowing. It will undoubtedly be necessary to place the North Island Main Trunk Bailway loan upon the London market early next year. The late Government had contemplated issuing this loan about the end of this month, but owing I suppose to the result of the election the matter was allowed to stand over, but in order to obtain the necessary funds the Colonial Treasurer made arrangements with the Bank of New Zealand here to advance £50,000 re-payable in London in April next in securities of this loan. The Government therefore propose to place this loan upon the London market at the first favourable opportunity. The question will naturally now be asked by Hon. members how long will it be possible to continue necessary public works with the amounts at our disposal in the several accounts of the Public Works Fund. In order to answer this question let me again call the attention of the Committee to the state of the three accounts in this fund. No. 1 account, which contains the balances of loans raised prior to 1886, is really exhausted. There was to the credit of the account on the 30th September last £247,292, with liabilities amounting to £280,495, of which at least £162,000 will come in for payment by March next, leaving only £85,292 for expenditure next year, without standing liabilities £118,495. It is therefore evident that no new votes can be taken against this account and yet my colleague, the Minister for Public Works, assures me, and he will show you when he makes his statement, that (there are works to the amount of at least £150,000,

which it will ba impossible to avoid executing as they are absolutely necessary complements to undertakings already entered into and must therefore be authorised this session. They consist principally o£ roads to open up Crown lands before sale, public and school buildings, purchase of native lands, telegraph extension, and harbor defences. In point of fact the £150,000 is a liability, though not brought to book, almost as much a» liabilities which have been brought to book, and must therefore be provided for. In No 2 account—the North Island Main

Trunk Railway loan—there are ample funds to continue the work for three years at least. In No. 3 account the funds for several im. portant works which must be completed are practically exhausted, and, therefore, without funds, it will ba impossible to continue, after the present contracts arc done, either the Manawatu Gorge or Otago Central, even up to the middle of March, which is the least distance to which it may be carried to be of any practical use at all. There are three courses open to Parliament —l. We may stop those works for which the funds are exhausted. (2.) We may use some of the ccsh to the credit of the unexhausted item, either in No. 2 or No. 3 account, to continue the work of the exhausted items ; or (3), we may determine to raise another loan. The choice thus forced upon us is not a

pleasant one, and yet it must be made. Wit regard to the first course the Government i of opinion that all works, the stopping < which will not materially retard the progres of the country, should be stopped. Mere pre sent inconvenience must not be considered but to go further than this would, they thin! be a very unwise and short-sighted policy The Government cannot therefore recorrinlen the adoption of the first course. We will noi consider the second course. Shall we use th money allocated to one work, temporarily o uermanently upon another work. If th, liolise m— 1,130 determine, it will be possible with the money ftt ofir to find th, funds to carry oil necessary works to & mode rate extent, by borrowing from one aflduaat it aid of the funds exhausted in another, an< by doing this, and limiting our public worki expenditure to the average of £70,000 i month for the next fifteen months—Which 1 am informed it can be gradually worker down to, in comparison with an average ol £90,000 a month, which it has bean during the last twelve months, ending in September—it will be possible to find the means ot carry, ing on our publia Works until the end of December, 18bE>;

BORROWING. Many difficulties would, however; probably arise if we postponed taking authority to borrow until next session, in the event of any serious disturbance of the English money marked, for by the end of December, 1888, even if Parliament does give tbe authority to use the balances as above suggested; we shall have run very close with the Public Works Fund, and it would then be necessary either to cease altogether to undertake anything further, or else obtain a loan on the best terms we could, in order to understand our real position ; in fact it is necessary that the Committee and the bountry should clearly recognise that by the end of December, 1888, in the absence of any further loan, and even if transfers from one fund to another are authorised, the total cash to the credit of all the loan accounts will be only about £37,000, and we should have liabilities already incurred; and rapidly accruing, due to about an equal amount; and besides the works in hand would be scarcely any of them complete or in a profitable state, as the borrowing from one fund to the other to keep things going would necessarily leave every fund short of the purpose for which it was originally intended. The second of our alternative courses is therefore a possible one if Par. liament sees fit to adopt it, though after much consideration Government do not feel justified in recommending, because while breaking down safeguards which the House has set up against spending money provided for one work upon another; it would, nevertheless, fail to place us in a satisfactory position in other respeo.s. The Government are strongly of opinion that the colony does not want such a policy, if it can be called a policy, Rs is involved in merely saying “ that we will not borrow this year; let us want for a year.” What, in our opinion; the colony wants, and wants imteratively, is a total change of policy as to orrowing. Altogether, We want so to shape our public works expenditure is to be able to cease borrowing entirely at an early data, We first and at once need to reduce this expenditure ; to reduce it largely, and reduce it at a constantly increasing rate, so as to practically and within short time reach the vanishing point. We think it quite possible to reach this desirable end. but not by the second of the proposed courses. The third course consequently > in our opinion, seems to be by far the most prudent, and the Government therefore, though with great reluctance, recommend that authority should be granted for a loan during the present session of £1,000,000, to be raised at such time as under all’ circumstances Government may deem most favourable. If Parliament agrees to this we shall make that the purpose of this

loan shall be distinctly defined ; that no new undertaking shall be put in hand, and further we shall give a distinct pledge that no more borrowing will take place for three years from March 1888. We must in any case, as I have shown, place the North Island Trunk Railway loan on the market early next year, and as it is inadvisable to make repeated application to London for money, the Government think it important to be in a position to place both loans on the market at the same time if they should be so advised. We have come to this conclusion as I have said with extreme reluctance, but it is, we believe, in

the interests of true economy. The Committe, I trust, has ample evidence before it that the Government is entirely in earnest in its intention to retrench, to stop all superflous expenditure, to see, in homely language, that the Colony lives within its means, and we should have been glad to avoid what to a hasty judgment may look like inconsistency in retrenching largely our ordinary expenditure, while proposing to borrow further for public works, but you cannot bring such a system of public works as ours to a sudden end without absolute disaster. We believe, and I think the Committee will agree with us, that if we at once or shortly stopped the large and important works now on hand

and unfinished, and comparatively useless, we should be losing far more than we should 1 sa ve—in other words practising extravagance in room of economy. My hon. friend the Minister for Public Works, will, I think, be able to show in his Statement that with the expenditure we propose our principal works can be brought to what may be called a state of interim completion, where we may pause without serious loss, and the Committee will observe the safeguards we propose, and the condition we annex, that no further borrowing

shall take place, at all events, for three years from March, 1888. If hon. members will add the amount of the proposed loan to the available balance left of previous years, and divide the total by the three years and a half over which it has to spread, they will find it amounts to £690,913 a year as available for public works of all classes; and |if they will further compare this with actual expenditure from loan on public works for the last three years, which has been at the rate of £1,381,866 a year, they will see that the expenditure we propose is at a rate less by exactly 50 per cent. In a word our polioy is at once to reduce this expenditure as largely and as rapidly as possible, and, as I have said, a constantly increasing rate that, by the time the proposed loan is expended, we may ba absolutely relieved of the necessity of borrowing further. It is therefore a practical application of that policy of “ Tapering off ” which has met with general approval in the colony, and will now, I trust, receive the approval of this Committee. If that approval should be given it will enable our public works to be carried on without any sudden break, but at a greatly reduced rate of expenditure for the next three years and a half, by which time we hope to have transferred to the Consolidated fund a large number of works hitherto charged on loans, and to reduce to very narrow limits our expenditure on other works which are rightly charged on loan.

THE MIDLAND RAILWAY. There is one large and important work—the Midland Rail way—which I have not mentioned, and which I shall here but briefly refer to, as the Government intend to deal with the question immediately in another way. The importance of the work, in a colonial sense, has been repeatedly recognised by the Legislature, but the Com-

mittee will have seen from papers laid on the table, that negotiations with the Company are still incomplete in important particulars. The Government, however, hope with further aid o£ the Legislature to bring these negotiations to a successful conclusion. CONCLUSION.

Before I conclude, hon. members will no ddubt desire to be made acquainted with the probable effect of our. proposals upon the position of the Consolidated Fund next year, and what prospect their is of our being able to equalise revenue and expenditure without resorting to additional taxation. Except for the purpose of relieving the loan of certain charges which I have already indicated should be borne upon the revenue, I have no doubt they will be pleased to hear that on the assumption that the ordinary revenue for 1888-89 comes up to the amount now estimated for the current year, and after making provision not only for half a year’s interest of £20,000 on the North Island Trunk Railway loan proposed to be raised in April next, but providing for the extention of say £40,000 of deficit at the end of this year in the manner already stated to the Committee, we hope to be able as nearly as can now be fore een, and it will be our earnest endeavour, in 1888-89 to carry on the services of the colony, chargeable upon

ordinary revenue without being under ti necessity for proposing additional taxatioi With reg.rd to Land Fund, if our ptoposi with respect to it are agreed to, we have ever reason to hope that the revenue will be quit equal to the expenditure without sacrificin public estimates. Now, Sir, I have complete my task. 1 have lai I before the Committe as clear and complete aa account as I coul frame of the financial position, the conditio of the oolony, and measures which, in th opinion of Government are best calculated t relieve its present difficulties, and to pfeVet as far as it is possible to prevent a recurreua in future. The account I have giyen neithe conceals nor exaggerates those diffioultiei while it shows that it is entirely within ou power io overcome them, Xt needs but th will to do it, and the measures I have pro posed embodying as they do three trite bu vital economic principles; of foregoing suet things as we can mote easily spare than pa; for, our making such money as we sneni produce the best possible result, and of iu creasing and encouraging wealth producer of the colony, and embodying also, last but not least, a wholesome self-reliance. These measures, I trust, will recommend themselvei to this Committee, as I believe they will t< the country at large.