THE BUDGET

Hawera Star, Volume LIII, 10 November 1933, Page 5

THE BUDGET

DEFICIT OF TWO MILLIONS

Minister Presents Statement NO INCREASE IN TAXATION Fall in Income Tax Receipts t ißv Tclegtapn —Press Association.) WELLINGTON, Nov. 9. “Efforts have been made to effect eti.ll further economies in expenditure, but, after the successive drastic overhauls that have taken place during the last few years, culminating in the review of the National Expenditure Commission, it has to be recognised that we have practically reached the limit in that direction,” said the lit. Hon. J. G. Coates in his Budget speech to-night. “The relief to the Consolidated Fund from savings and adjustments in expenditure was set out- in my January statement, and these items, .together with underexpenditure of appropriations for last financial year, meant a total saving of £iO,UUU,wu. “Needless to say, rigorous control of expenditure will be maintained and efforts to obtain any further economies will be continued. In many instances, however, economies that are possible for one or two years cannot be continued indefinitely, and slight increases in various directions have already been necessary on this account. . For instance, expenditure on repairs and replacements may be light for a year or two, but obviously cannot be curtailed indefinitely. • , “Arrangements have been made with the Bank of New z «£l a nd liquidate this year a further £2,(XX), WO of reserves invested in discharged soldier settlement mortgages by advancing against hypothecation of the securities. A sales tax and the gold export duty were imposed, while increases were made in the Customs duties on motor spirit, tobacco and sugar. Having regard to these increases' in taxation, the upward trend in prices and other indication's here and abroad that conditions are improving the revenue prospects are somewhat brighter than they appeared in January last. The revenue for the first half of the year is, of course,

now definitely ascertained. . “Under the revised estimates it is anticipated that receipts from taxation will amount to £10,214,000, an increase of £609,000 over receipts tor last year. Under the various headings of taxation additional revenue compared with last year will it i® estimated, he obtained as follow: From Customs, £69,000; sales tax,^£1,712,000: gold export duty. £124,000; miscellaneous items, £49,000; total, £1,954,000. Against this must be set off decreases under other headings aggregating £1,345,000. INCOME' TAX. “The heaviest fall _ is anticipated under the heading of income tax. Receipts for last year exceeded expectations, but were £891,000 less than for 1931-32 For this year a further drop of £857,000 is expected, making a total decrease of £1,748,000, or over one-third of the revenue, in two years. This heavy shrinkage illustrates the budgetarv difficulties with which, we have to contend. The estimateifor land tax is now' down to £450,000, a decrease of £49,000 compared with last year’s receipts. Two years ago £1 146,000 was received under this heading, the two-thirds reduction being due to the abolition of the graduated land tax, lower land values' and inability to collect the tax in a number of cases. . , * ‘Stamp and death duties show a comparative decrease of £399,000, but £240,000 of this is due to the abolition of the stamp duty on interest on Government securities consequent upon the conversion operations. Otherwise the decrease is on account ot death duties and is attributable to tall in the value of properties . “The highways revenue from petrol tax, tyre tax and fees and fines ha-s been less affected by prevailing conditions than other items, but a decrease of £30,000 has been allowed for. “In regal'd to interest receipts, the position is better tban formerly ticipated, there being now an estimated net decrease of £90,000 only. The decline in railway revenue now appears to have Deen _ checked, and the estimated decrease in interest payments 'to the Consolidated. Fund is now only £59,000. For the balance of the net decrease lower interest rates for temporary investments of moneys in London are responsible. “In the third revenue group, ‘other receipts,’ there is an estimated comparative shrinkage of £780,000, of which £500.000 is due to the fact that assistance from reserves this year will amount to £2,000,000 a,s against £2,500,000 for last financial year. The balance of £280.000 represents further, shrinkage in departmental receipts, ' the principal item concerned being post and telegraph profits, where the estimated decrease is £206,000. ESTIMATED EXPENDITURE. “On the other side of the picture we have first to make provision for £555,000 additional debt charges. The automatic increase under the statutory debt repayment scheme accounts for £75,000, and payment of guaranteed loans of Land Settlement Associations £54,000. These loans have been met on maturity, but it is anticipated that a considerable proportion of the amount will be recovered in due course. The largest contributing item, however, is an increase of £415j000 in interest charges. “The gross annual saving in interest as a. result of the conversion operations is approximatelv £1,010,000, but the full benefit will )>ot .be received during the current financial year. The ''hole of the accrued interest- on March 31 on the internal debt has, pursuant to the conversion arrangements, been the subject of special payment this financial year. Owing to the changes m interest dates, a full year’s interest on a portion of the debt affected will be paid in addition. In other words, the accrued interest as at March .>1 next on the debt subject to conversion will be £490,000 less than was paid on this account up to March 31 last. To this extent the full benefit will not be received during this financial vear, but the amount so lost will, of course, be saved in subsequent financial years. Redemption; effected mean a- saving in interest charges of £135,000.- but thu provision to "tho or has to be made for interest charges or new loans to finance the capital pro gramme. . A r . “In addition, much more use wil have to be made this year of shor term borrowing on Treasury bills. lh< additional interest on the floating deb for the vear ns estimated at £090,000 Furthermore, recoveries of intere-s k f rom the State Advances and otlie ■ a-counts will be less as the benefit fron

conversion, in so far as it affeuts the capital of those accounts, passes au nvtticall- to them, the amount recovered bein- based on the interest puvai.te As against this, a portion ot the charges on the new loans will be crease in recoveries is _£2«l)4a4>. raw mu ail these factors into cons.delation, the net. result, as ah-eadyincli-cated is an increase of £4IS,WJ 111 interest charges for the year. “Concerning highway® revenue, it will he recollected that legislative pro-v-is ion has been made to retain up to £500,000 for general use in the Con validated Fund, but m doing so steps have been taken to ensure Jth^suff t Highways Board is. provided with sum cient ‘hinds for maintenance and othei essential work. EXCHANGE REQUIREMENTS.. “The raising o>f the exchange ra e, while clearly necessary as a step m economic adjustment, has the effect ot increasing Government expenditure, ameasured in New Zealandourrency, on external debt charges. This was anticipated when the rate wasrauseu and full provision is made m the yeai s estimates to cover the item. Ihe amount required to meet interest and other payments in London is eSt -™*U ed ax £7.230,(XX), while about £1,210.000 will be. utilised m Austiaha 'Pho latter item will not call foi acl ditional expenditure, as the exchange costs will be recovered in remitting from London to Australia, where the currency is similarly depreciated Ao oer cent, below sterling. the ex change cost on London requirements is estimated for the current financial year at £1,7.90,000. “During the half year ended on September 30, London funds purchased from the banks amounted to £13.345 (XX) but from this amount musx be deducted the £4,845,000 as surplus sterliiv' asset®. This last amount is erreater than it should have been ownm to the cumulative effect of a number of- factors, .among which 1 may mention the remittan'ie of funds to New Zealand in .advance of export requirements and the holding back and temporary avoidance of purchasing exchange on the part of importers and others vdio normally would have remitted funds from New Zealand during the period in question. In clue course these outside factors will even themselves out. and there is some evidence that the reflex action is already started. For instance, ! know of several cases where substantial sum. formerly held back are now being re mitted. “The situation has been aggravated by unfounded rumours started from time to time to the effect that a fall m the exchange rate is about to occur. This state o,f uncertainty is bad for business, as merchants hesitate at tne risk of being caught by a sudden fail! in the rate. To remove the uncertainty in regard to the matter, the Government has decided that the exchange rate will he kept at the present level until at least the end of the present export season. This does not mean that, at the end of the season, the rate will be reduced or that it will not be increased. It does mean, and it means definitely, that the rate will not be reduced prior to that date, this assurance has been given to remove any doubts on the matter. It is an ■assurance that concerns not only producers hut alll who have financial obligations to meet in the United Kingdom. “The surplus London assets- taken over under the guarantee arrangement will in no way embarrass the Government. The intention is to utilise the funds through the machinery of the Reserve Bank to pa.y off the Treasury •Jill® issued to the banks in New Zealand in payment for those assets; in other words, the London funds- haive been acquired in exchange for Treasury bills, and as soon as the Reserve Bank commences operations it will, in effect, be possible to reverse the process and use the London funds to pay off bills. “'the Budget estimates of expenditure may be .summarised as follow: Debt services . £10,445,000

Exchange on normal requirements £1,790,000 Transfer of motor taxation £1,179,000 Other .permanent appropriations £340,000 An n ual v otes— Social services £6,900,000 Other votes £3,597,000 Total £24,251,000 “The estimated budgetary position at March 31 next is thus r Expenditure £24,400.000 Revenue £22,306,000 Shortage £2,094,000 “The actual deficit that accrues at the end of the year will have to be carried forward in the form of floating debt, but I would point out that the estimates of expenditure include £1,366,000 for repayment of debt under the statutory debt’ repayment scheme. Thus the net. increase in debt as a result of the year’s operations on the basis of the estimates will be about £750,000 only. “It is accordingly not proposed to make any .further increases in taxation, but on the other hand it will be clear from the position 1 have outlined that reductions in taxation are out of the I question at present. We may justifiably hope, however, that the time is