FINANCIAL STATEMENT.

Lyttelton Times, Volume CXXII, Issue 15717, 9 September 1911, Page 9

FINANCIAL STATEMENT.

-- [From Orx CoERMsroxDENT.] WELLINGTON, September 8 The Budget was delivered by the Primo Minister (Sir Joseph Ward) ill the Houso of Representatives this evening before a well attended House and full galleries. The Statement was the longest on record, and its reading occupied from 8.15 p.m. until 10.40 p.m'., a space of two hours and twenty minutes, without a break. The Prime Minister was listened, to with great interest. He finished his trying performance as fresh as- when he started it, and Was rewarded with a round of applause. The House then adjourned for the week, the members being entertained by Sir Joseph Ward at an oyster supper. THE STATEMENT. The following is the text of the Statement:— Mr. Colvin—l have the pleasure to submit to the Committee the Budget of the year’s finances, as on March 31 last. 1 shall also deal with matters affecting the current year’s operation, and, as on former occasions, it will be my duty to submit subjects for consideration affecting the future that I feel sure will be recognised as of considerable importance to the dominion. The abstract of tho accounts,- showing the receipts and expenditure of the financial year, will be found in the tables attached to tho statement. Last year I had the pleasure of announcing that a substantial balance of £432,316 was available at the end of the year. It is with much satisfaction that I state that the present year’s results have exceeded that of any . previous year in the history of tho dominion. REVENUE. I proceed to give details of the revenue of the year just closed, which I am pleased to say was a record one, amounting to £10,297,023. The increase from railways amounted to £225,492, from Customs £356,708, stamps £289,328. The total increase of revenue from Railways and Customs amounted to £582.200, and was due to the activity of trade in all its branches. The largo increase in stamp revenue, both of the Stamp Department, and the Postal Department is due partly to the prosperous condition of the country and to tho alteration in stamp duties affecting deceased estates, of which a larger number than usual have been dealt with. Tho increase from Stamp duties under all headings amounted to £289,328, so that the increase from the three departments, Railways, Customs and Stamps was £871,528. As there has on former occasions been a desire expressed that more details should be given regarding our revenue and expenditure, I propose to sot them out more fully than heretofore. Details are shown in the table below:— Consolidated' - In- DeFund— 1610-11. 1903-10. crease, crease. Ordinary revenue £ .£ £ £ Customs . 3,027,6:29 2,671,121 256,708 Stamps (Stamps Department U 519,839, Postal Department .€816,396), total . 1,636,115 1,316,817 299,323 Post and telegraph cash receipts . 211,216 190,535 20,728 Land tax . 028,723 642,270 Income tax 407,235 316,835 90,400 Beer duty . 118,100 116,363 2,731 Railways . 8,453,755 3,258,263 225,492 Registration end other fees . 100.026 88,305 11,721 Marine . 45,933 42,918 8,015 Miscellaneous . 827,123 296,093 33,024 Territorial revenue . 255,032 202,587 62,445 Endowment 55,861 07,142 Totals 10,297,023 9,238,261 1,058,762 Compared with 1908-9: 1908-9. 1910-11. In- _ £ £ crease. Revonue 9,001,185 10,237,033 1,295,838 EXPENDITURE. The estimated expenditure for the year was set down as £9,472,278, to which has to bo added an additional appropriation for Railways of £233,750, making a total of £9,706,033. Of this amount £9,343,106 was spent, a saving of £362,927. being effected. Permanent appropriations show a saving of £29,260 and the Departmental expenditure is £333,667 less than the amount authorised, but of this amount Railways are credited with £192,4913 being tho balance unspent after excess revenue, as allowed by law, was added to the appropriations, so that if we eliminate railways we have a direct saving for tho year of £141,171 on our departmental -votes. With the exception of the legislative class it will be seen by reference to the totals attached that, every other class has been kept within the amounts voted by Parliament. AMOUNT ESTIMATED. Permanent charges .... Annual appropriations . . . s’sOOJG3 Additional appropriations for rail- ’ ways - - . . ■ . . 233,755 Total £9,700,033 AMOUNT EXPENDED. Permanent charges .... 3,642,850 Annual appropriations . . . 6,700,256 Total £9,848,100 Saving on appropriations . ... £362,927 COMPARISON OF EXPENDITURE 1909-10 AND 1910-11. EXPENDITURE. - 1910-11. 1909,10. More. Loss. Permanent appriations— £ £ £ £ Civil list . . -.34,373 33,730 643 ' Interest and sinking fund 2,458,452 2,397,461 63,991 Under special Acts . . 482,139 452,491 29,628 Subsidies paid paid to local •authorities . 103,017 94,208 13,809 Territorial revenue . . 40,397 66,400 3,997 _ Endowments . 163,459 158,066 Old age pen Bions . . 366,033 342,053 23,980 Totals . 3,612,850 3,614,409 133,018 4.607 Annual appropriations— Legislative Departments . 37,611 28,634 6.977 Department of Finance . 48,023 36,773 11,250 P. and T. Department . 911,819 856,652 53,957 _ 'Working railways Deportment . . 2,270,814 2,165,159 102,625 Maintenance of roads . 51,103 86,729 —. 5 a -in . Native Department . . 21,661 18.574 2,787 1 Justice Depart- : meat . . 370,182 365,920 4.262 Mines Deport- j ment . . 22,457 21,704 Department of • Internal Af- j fairs . . 262,142 256,466 5,676 Defence Department . . 212,939 194,050 18,639 Customs, Marine , and Inspection of Machinery Departments 114,737 122,782 Department of i Labour . 22,725 24,212 1,487 \ Department of ’ i Land Survey 206,660 233,753 Department of . : Agriculture. J Commerce , Tourists . 154.579 189,914 Education Do- * ment . . 921.777 359,243 65,534 Services not provided for 8,027 10,418 Totals . 5.700.256 5.476,513 275,957 52,214 -j Grand totalo . 9,343,-106 8,930,922 409,003 56,821 Comparing this with the expenditure f in 1909-10 we have i— 1

’ Annual Permanent ApproprioCharges. Rons. Total. £ £ £ 1910-11 .. 8,642,850 5,700,266 9,843,106 1909- .. 3,614,409 5,476,613 8,990,922 Increased’ expenditure . . £352,184 Analysis of increase in. expenditure, 1910- as compared with previous year:—l9lo-11, £9,343,106: 1909-10, £8,990,922 ; increase, £362,184 accounted for as follows: £ Interest and sinking fund . . . 61,000 Under special Acts . ... 2,000 Payments to local bodies . . . 14,000 Old ago pensions 24,000 Public Service superannuation . . 28,000 Legislative Department . . . 9,000 Department Minister of Finance . 11,000 Postal Department .... 66,000 Working railways .... 102,000 Native Department .... 3,000 Minister of Justice .... 4,000 Department of Internal Affairs . . 6,000 Defonce Department .... 191,000 Education Department . . . 65,000 Total £404,000 Savings on Department of Lands and Survey . . . . . 27,000 Customs, marine inspection, machinery , 8,000 Minister of Public Works . . 1 . 6,000 Minister of Agriculture . . . 5,000 Miscellaneous 6,000 Total £52,000 Not increase £352,000 RESULT OF YEAR’S OPERATIONS. £ £ Balance brought forward, April 1, 1910 . 482,316 Receipts during - year— Revenue . . . 10,297,023 Other receipts . . 250 Expenditure during year— Appropriations . . 9,343,108 Excess of receipts over expenditure . . £954,167 The credit balance, including £432,316, amount carried forward at tho beginning of the financial year amounts to a surplus on March 31 last of £1,386,483. From this I transferred to the Public Works Fund £BOO,OOO, leaving a balance on March 31, 1911, to begin the present financial year of £586,483. In the Budget last year 1 estimated the surplus at £727,421, less the amount required for the Supplementary Estimates. It is pleasant to announce that the estimate has been exceeded by so muoh. The excess is, as I have already said, due largely to the widespread revival of trade, both in and out of the dominion. TREASURY EILLS. As will be seen, there were none outstanding on March 31.- These from time to time will have to be again resorted to, of course, in anticipation of revenue, for which the law rightly prorides, but it must be satisfactory for honourable members to note that, as promised by me, the large amount for several years appearing under this head, which had practically become part of our permanent debt, has disappeared.. The position for eighteen years is shown by this table:— Year. £ 1893-4 .... 811,000 1834-5 . , . 810,000 1995-6 . . . 735,000 1893-7 . . . 730.000 18978 . . . 730,000 1898- .... 710,000 1899- . . . 700,000 1900- . . . 700,000 * 1901- . . , 700,000 1902- . . . 700,000 1903- . . . 700,000 1304-5 .... 700.000 1906-6 . . . 700,000 1908-7 . . . 650,000 ISO 7-8 . . . 400,000 1908- . . . 250,000 1909- . . . 100,000 1910- . . . Nil t As -the whole of the £700,000 has been paid off out of ordinary revenue since my Government took office in 1906, I think I may reasonably take credit for the satisfactory, clearance of what had come to be regarded as part of our permanent debt. v PUBLIC WORKS FUND. A community like ours, which i 3 developing its heritage by the expenditure of public moneys, must look with interest on the condition of the funds available for the construction of public works. The balance from last year was £312,366. During 1910-11 it received as loan moneys .£1.984,742, transfer from revenue £BOO,OOO, other receipts £6506, total £3,103.614. The expenditure was: Under appropriations £1,892,851, other charges £70,718, balance at March 31, 1911, £1,140,045: balance loan money to be received £181,650; .available public works moneys to start current year £1,321,695. The balance at March 31 is made up as follows: £ Cash in Public Account . . . 381,259 Advances in hands of officers of tho Government . . . 8,730 Invested at fixed deposit Bank of New Zealand, London . . 750,000 Total . . . . . £1,140,0.45 Tho total amount transferred from revenue to the public works fund since 1891 amounts to the large sum of £8,030,000. I give the actual amount for each year during that period:— Year. £ 1891- . . . 30,000 1892- . . . 200,000 1893- . . . . 250,000 1894- . . . 250,000 1895- . . . 150,000 1886-7 ... 160,000 1897- . . . 300,009 1898- . . . 425,000 1899- . . . 450,000 1900- . . . 500,000 , 1901- . . . 500,000 1902- . >. . 300,000 1903- . . . 3X0,000 1 1904- . . . 600.000 I 1905- . . . 500,000 1906- . . 775,000 1907- . , . 800,000 , 1908- . . . 800,000 1909- ... Nil ! 1910- . . . 800,000 If the amounts transferred from , revenue had been borrowed instead of ( being provided in this way the interest paid thereon, reckoning it at 3£ per j cent, would have totalled £2,001,400 to ( date. , OUR PUBLIC DEBT. As in the case of taxation, which, as I have shown, in comparison with 1 other countries is very light indeed, so 1 there is another popular delusion which, j in my opinion, requires to lie dealt ' with, that is, that our debt is a griev- 1 ous burden almost too great to * be ‘ borne. It is nothing of the sort, and ] the true position, must be stated again 1 and again at the risk of appearing 1 wearisome in iteration. Our gross debt 1 is large, but so are our assets. In con- J sidering the position of anv individual j company or nation, the debt must not J be referred to alone. What has been 1 done with the money borrowed? Are £ there assets to represent it? What percentage of it lias been applied to - the increase of the earning power of the 1 business? These are some of the ques- I tions which must be answered before an 1 opinion can bo formed as to the heaviness or lightness of tho debt under con- 1 sidoration. Our debt may be examined i in detail thus:— t £ ■ Total gross Public Debt . . 81,073,122 Loss accumulated sinking funds 1,240,784 Net debt . ... . . €79,657,888 I 1 The gross debt is shown in detail | thus:— ■ 1 J •8 ! Borrowed for Maori War 2.857.000 i Defence . . . . . 2,783,727 i Railways . . . . . 25,602,948 : Roads and bridges construction . 6,871,251 j Publio buildings .... 5,240,231 TolegrapU and telephone linos . 1,431.617 1 Harbours and lighthouses . . 573.683 Immigration .... 2,463,002 Lands settlement ... 6,303,486 Government advances to settlers . 6,974,935 , Government advances to workers . 964.765 * Bank of New Zealand shares , 609,000 7 Now Zealand Consols . . , 462,166 Purchase cf Native Lands. . . 2,461,167 Tourist and health resorts . . 131,607 c Development of goldfields and coal c mines 687.588 Loans to iocal bodies , , , <1,682,>X>0 ; Stato Firo Insurance , 1 , , B,OOC‘ 1 Reserve Fund securities , , , 690,003 5 i

Scenery preservation . • • 40,009 Deficiencies in revenue, charges and expenses of raising loans, increaso by conversion, etc., provincial liabilities and miscellaneous .... 9,244,990 Total , £81,076442 ANALYSIS OF DEBT. Railways, £2,560,948. —The railway! pay more than interest on the money* borrowed for construction. The general taxpayer contributes nothing to their upkeep, but indirectly benefits by their existence. Advances to Settlers and Workers, £7,939,700. —This money is lent out at higher rates than those at which it was borrowed. The difference more than pays the cost of working the. Department, and makes provision for a special sinking fund to pay off the loans, together with a reserve fund for all possible looses. Considerable profit will ultimately go to tlie State. Like the construction of railways, 'lending this money indirectly helps the taxpayer by increasing settlement, contributing to the dominion’s prosperity, and' has conferred widespread benefit on settlers and indirectly upon the traders of the dominion. Land for Settlements, £6,303,485. — Largo estates have been purchased with this money and closer settlementbrought about. The rent and other income from the lands purchased, more than pay interest on the money borrowed for this purpose. The expenditure indirectly helps the taxpayer, and without the system being in operation a large number of people in the doming ion now in good l positions could not have enjoyed the happiness they experience. , Telegraph and Telephone Lines, £1,431,647.j—This sum, too, finds its . own interest and provides necessary efficient public conveniences. We have undeniably a most .efficient telegraph and telephone system, and I hope to see it still greatly improved. Bank of New Zealand Shares, £600,000. —Tho money for the. purchase of these shares was borrowed at 3} per cent. The State has ‘ to pay £18,133 per annum interest on this, and on the expenses of converting it into stock, but it receives dividends much more than £18,133 per annum. Since 1904 the State has paid in interest £125,900 and has received in dividends £262,500, giving a net profit of £136,600 in seven years. If the shares were now sold they would bring much more in the open market than the half-million paid for them. I think you will agree with me in saying that apart from being a profitable investment, the attachment of tho bank to the dominion is a matter of public policy and a wise one. Loans to Local Bodies, £4,882,000. — This money was borrowed to help local authorities. Interest is paid by the borrowing authority for twenty-six, thirty-two or forty-one years, according to the rate of interest paid, 4£, 4 or Si per cent per. annum. Tho loans have been no burden to tho taxpayer, although the principal will have to be repaid by the State and not by the local bodies. The indirect benefit to the State has, however, been-substantial. Local authorities . can obtain a sufficiency of funds to enable them to carry on with reasonable activity local works of great value and convenience to those whom they serve. Under tho old system the work of local bodies was cramped and restricted. Reserve Fluid Securities, £BOO,OOO. — This amount was borrowed and as soon as possible invested in England in undoubted securities, which at any time can be easily realised, ihe interest received almost equals that paid. The investment was created to form a reserve which 'can bo drawn upon in case of some great emergency, peril or national disaster. The creation of this, reserve has the approval of the greatest experts in finance. I hope that in years to come an additional £200,000 may be added to tho present sum, making £1,090,000 in all. 'The advantage to this country by so doing would be very great. REPRODUCTIVE DEBT. CAPITAL FOR STATE ENTERPRISES). I now show the division of,our debt that is self-supporting:— EARNING INTEREST. Amount expended on railways, £25,602,948. Loans to local bodies, £4,882,000. Telegraph and telephone lines, £1,431,647. Reserve fund securities, £BOO,OOO. New Zealand consols, £462,166. Total, £33,178,761. PROFIT EARNING. Advances to settlers and workerc, £7,939 700. Lands for settlements, £6,303,485. Bank , of New Zealand shares, £500,000. • Stato fire insurance, £2OOO. Total, £14,745,185. It will thus be seen that £47,923,946 of our debt •pays interest, and some of this gives more than the interest paid for its use, being actually profit-produc-ing. If from this is deducted the sum borrowed to help local bodies, which, when due, will be paid by the dominion, . there remains a sum of £43,041,946, which is no burden from the point of view of taxation, and never will be to the taxpayer. Of the remaining portion of our publio debt some is indirectly interest-bearing, such as the purchase of Native lands, £2,461,167. This has been well spent. Some lands purchased have been sold, some leased and some are still owned by the Crown. The returns to the State in the way of rent, moneys received for sales and the assets still remaining would be more than sufficient to set off against the. liability. Tlis item roads and bridges construction, £6,871,251, may be considered indirectly interest-bearing. It is well known that a very large portion of it lias been loaded on the land and is direct interest-bearing, but for present purposes I call it indirect interest-bear-ing. The physical configuration of our country, its deep gorges, high hills and numerous large rivers made it imperative that a heavy expenditure should bo incurred for intercommunication amongst its scattered settlements, otherwise settlement in many parts of the country would have been next to impossible, as without racilities for transport thousands of poor people would have been in a sorry state. Were money not. freely spent on such works the development of tlie dominion would have boen seriously retarded. I shall, however, in the ultimate analysis consider it as non-interest-paying. _ . Expended on publio buildings, £5.240,251.—This amount may be _ regarded as indirectly interest-bearing. Rent would have to be paid if tho State did not erect offices. To the foregoing might- bo added the loans raised for immigration and tourist resorts, but it is safer to regard them as non-interest-bearing. THE DEBT BURDEN. I will now state tlie loans that- art non-interest-bearing:— Loans for roads and . bridgea, £6.871.251. Immigration, £2,463,002. Maori War, £2.357.(MX). Defence. £2,783,727. Harbours and lighthonses, £578,683, Development of goldfields and ccai mines, £987,598. Tourist and health resorts. £131,507. Scenery preservation, £40,000. Charges and expenses, .of raisingloans, increase by conversions, etc., to-

gather- tvith provincial liabilities taken over on the abolition of the provinces, £9, 244,990. Total, £25.452,755.' The public debt may be summarised 'flhus:— : PercentDivision. ■ Amount. age. £ Profit-earning . - 47,920,94<5 58 Indirectly interestbearing .... 18 11 Is on interest - bearing .... . . 25, ImJs.Toy Cl A STRIKING COMPARISON. ' If the period of the dominion’s borrowing i 3 divided into two parts, that , before 1891 as the first, and after that date as the second, it will be seen that the burden of our debt is really decreasing. although tho total has largely increased during the second term. ■ The interest-bearing and non-interest-bearing portions of our debt up to 1891 and- from 1891 to the present date ore : BEFORE 1891. Interest-bearing--, . . : £ : Railway loans 14,580,000 . Public buildings . . . 1,800,000 -Telegraphs and telephones 769.000 ■ Purchase of Native lands 1,546,000 ' Loans to local bodies . 325,000 * Total . . ... . . £19,020,000 Non-interest-bearing—- ; Maori War loans . . 2,357,000 Defence 1.638,000 Roads and bridges . . . 5,106,000 ’ Harbours and lighthouses 484,000 [lmmigration . : . . . 2,459,000 Goldfields and coalfields . 571,000 Cost of raising loans, etc. *7,195,350 ’*■ ‘.Total . . . . . £19,810,350 In 1891 49 per cent of the debt was directly or indirectly interest-bearing and 51 per cent non-interest-bearing. ' 1891 TO 1911. ' Since 1891 our debt has been increased, from £38,830,350 to £81,078,122, but it will be seen that more than 86 per cent of the increase is self-supporting. Interest-bearing— J . £ Railway loans . . . . 11,022,948 > Public buildings . . . 3,440,251 Telegraphs and telephones 662,647 ■ ■ Land for settlements . 6,303,485 • 'Advances to settlers , 6,974,935 ■ Advances to workers 964,765 • Bank of New Zealand . . shares ..... 500,000 •, New Zealand consols . 462,166 Purchase of Native lands 915,167 ■ Loans to local bodies . 4,557.000 State,.Fire Insurance . * 2000 Reserve fund securities . 800.000 ~ Total . . . . . . £36,605,364 ■ Percentage of increase that is in-terest-bearing, 86.7. i Noij-inberest-bearing—- .. Defence loans .... 1,145,727 . Roads ,and bridges . . . 1,765,251 . Harbours and lighthouses 89,683 Immigration . 4002 , Tourist and health resorts 131,507 ■. Goldfields and coalfields development . . 416,598 Scenery preservation . 40,000 ! Cost of raising loans, con- , versions, etc. . . . 2,049,640 ...... V Total ..... £5,642,408 Percentage of' increase that is not beaming interest, 13.3. It will be seen that prior to 1891, 49 per, cent of our debt wa3 directly or indirectly interest-bearing, and from 1891 . to 1910 the percentage of increase of loans that were interest-bearing was S 3 per cent; while prior to 1891 loans that were non-interest-bearing were 51 per cent, and from 1891 to- 1911 the percentage of increase of our leans that was not bearing interest was only 13.3. -These facts speak .for themselves, arid should be remembered by those who are so ready to cry out against our financial position. The average fate of interest paid on our loans was considerably more in 1891 than it is now. On March 31, 1891, it was £4 10s 3d per £100: since then it has decreased by about 174 per ' cent, and is now about £3 14s 6d. Taking tire difforenco in population, the fate of interest per head on the non-interest-bearing portion of our debt is much less now than it was twenty years ago., That which is earning interest, it cannot be too often repeated, does not oppress the taxpayer at all. In 1891 the population of the dominion was, exclusive. of Maoris, 634,058; it is now 1,008,407, an increase of 59 per cent. The non-mterest-bearing debt'has now Increased by only 12.8 per cent. In 1891. it was £19,810.350 ; it is now only £25,452,758. At the rato of interest paid- on our loans, in 1891, the annual sum-to be paid on the'£19,810,350 of non-interest-bearing debt Would be £803,446 ; • that is, £1 8s per head of the population. At that same rate of Interest, the amount per head on the £25,452,758 of dead-weight' debt now owing would be £1 2s. But we are paying less interest now, and for the £25,452,758 non-interest-producing debt now owing the present amount of interest would be £946,842, or 18s 7Jd per Head only. If we regard the whole amount Of our debt as a dead weight, one that is neither profitable nor selflUpporting, as the greater portions of the' national debts of many countries unfortunately are, it will be seen that it is' Dot so onerous now as it was twenty years ago. The interest paid per head on the whole debt was in 1891 £2 15s 3Jd; it is now £2 10s old, »• decrease of 8 per cent. But in 1911 only 31 1 per cent of our debt can be laid, to be dead weight, while in 1891 51 per' cent of it was of this nature; ■ and the amount .payable on it has fallen from £1 8s to'lßs 7£d per head of the population, a decrease of 19.4 per- cent. How-can anyone, in view of these ptriking facts, say that our debt is increasing our taxation and is being Eiled up to such an extent as to be unearable? It is to be much regretted that statements of this kind should be po-persistently spoken and written by those who should know better. Ignorance in connection with this subject is to be expected in ill-informed persons, but for public men and newspaper Writers who have access to the records of ■ the dominion to make such misrtatements is inexcusable. They have ■done serious injury to our country, whether they meant to do so or not. It is the duty of every person who speaks as one having authority in public matters, to make himself acquainted with the truth respecting our debts. !The mpre,minutely they are examined, the more surely it will he found that they are a diminishing load for the taxf layer to bear; that they have been, on he whole, well expended, and that the Inhabitants of the dominion have benefited enormously by them. The provision now established, by which they will be,wholly extinguished in seventy- • five rears from the present time, should •further relieve well-wishers of the country from any anxiety in respect of them.

J have considered it desirable to go ipmewhat at length into the position of our indebtedness, owing to the persistent misrepresentations made about the financial position during the last fen - months. There appears to have

been almost a widespread conspiracy > of defamation of our country’s financi.\- condition, which has made the i foregoing full analysis necessary. As in mwibanical laws so in political action and rear ; tion,aro equal and opposite and I when aironeous statements are made ! often a recoil is to bo expected. I shall return to this.question again and ' as often as appears to be necessary. \ WEALTH AND ASSETS. There arc so many wrong impressions convoyed .regarding the general position of New Zealand, that I think it .will be recognised as of use to our people if I set .out an estimate of the private wealth in 1911- Our position may be seen at a glance by comparing our liabilities with seme of our assets: Liabilities .... • ”.9.837,388 (of which only £25,452a 08 is deadweight debt) A Crown- Lands . .. * • 22,000,00? Education' Lands . • 5,008,610 Government Railways open and under construction . . . • 31,009,960 Other Public Works, Telegraphs, Lighthouses, Harbours, Water • Supply on Goldfields • 6,000,000 Valuo of Lands held as security for amounts borrowed or ad- ■ vances to settlers and .workers 20,000,000 Value of Lands held • under Land for Settlements Act .... 6,000,000 Bank of New Zealand Shares, say '. . • 2,000,000 Reserve Fund Securities 800,000 Total £93,348,575 This does not, of course, cover all our assets, private land and mortgages being taxable as against public debts. If we include all our wealth, such as land, live stock,.bank deposits, timber, etc., the total exceeds £650,000,000. The sales of land have shown that the valuations are very much below that of actual sales, so that no exception can be taken to the valuations under this head, as they are well on the low side. I am not taking into account incomes derived from salaries and professions, which now approach about four millions sterling per annum, nor do I take into account the earnings of wage earners, tho estimated .total income of whom is £46,000,000 per annum. The public and private wealth in the dominion is over 650 millions sterling, and I would again call the attention of members to tho fact that for every million, increa>3 in tho public debt tlie assets have increased by rather more than ten millions. It must be recognised that the money will have to be oorrowed for the further construction of railways and to make proper provision for the public service of tho people, and thoso who recognise this fact should not shut their eyes to the other side of the ledger. Though our debt is increasing through tho expenditure of money on well-con-sidered proposals for the general benefit of the people, the financial stability both of tfie country and its people is beyond all question, and per capita of population our assets and wealth today are the highest in. the world. The large increase in the private wealth of the neonle of the dominion from year to year" shows • that our per capita wealth is increasing much faster than our indebtedness.

•PRICE OF NEW ZEALAND STOCKS,

A great deal has'been said from time to time as to our indebtedness affecting adversely the credit of the dominion. The best answer to this will be iound in examining the price of our stcck compared with that of other dominions at latest quotations, which I now give: 3 per 3J per -1 per 1 cent. cent. cent. New Zealand . . £6l ' ■97 104 New South Wales . B*4 . 1041 Victoria .• • S4l 96 102 South Australia . S2 93 Nil Queensland • • S-i \O2 West Australia . £s>i 07 Nil Tasmania - 8-41 07 Nil

.There are bound to be fluctuations from time to time. The law of supply and demand affects the price of money as of any other commodity, and I take the latest quotations as a reasonable guide to our position. Ye sometimes find our stocks ruling higher than our neighbours’ and sometimes lower, but it cannot be suggested that by giving the latest quotations I have attempted to select a favourable period. Yet they compare well, and our position, is a. strong answer to those who express doubts as to our standing at the world’s financial centre.

PUBLIC DEBT EXTINCTION ACT. The amount that will be required to bo paid out of the Consolidated Fund for the liquidation of the public debt will, during this year, be £l4-1,885. This is a large sunt and a good beginning, but as was fully explained-in last year’s Budget, it will involve but little extra trouble to the taxpayer and will be sufficient to pay off pur present National Debt in seventy-live years. The amount will bo made up as iollowsv — Saved to Consolidated Fund by discontinuance of contributions for sinking fund for old war and defence loans and for repayment of moneys raised for lending to local bodies, £92,308. Interest to be received .from Public Trustee on sum of £992,292 held by him and set aside under the Act as permanent endowment to assist in repayment of whole of our public dobt, £39,691. . ; ... Amount tb be paid in addition out of Consolidated Fund, £12,886. Thus, for an additional payment of £12,886 out of the Consolidated Fund more than was paid last year, the whole of our present debt, not provided with an internal reserve or sinking fund for its repayment, will be entirely extinguished in seventy-five years. The scheme has como well out of criticisms, friendly and otherwise, to which it has been subjected, and the more carefully it is oxamined the more satisfactory it will appear. I had the pleasure of fully explaining the system to financial experts in London, and I am glad to say that it met with general approval. Inquiries 'have been made about the system from tho Commonwealth States and other countries. Like many good things first introduced by the New Zealand Legislature, it is certain to be adgpted elsewhere. I note with regret that the old but most common objection to it is still feebly vocal occasionally, that is, that some future Parliament will repeal the Act and undo what has been done under it. This argument would be just as unsound if urged against any legislation. Tho abolition of capital punishment for minor offences, the freeing of slaves, or any other enlightened measure could have been opposed with a like contention. Wo cannot, of course, bind future Parliaments in matters of this kind, but why should we assume that our successors will be less honest than we are? The world is getting better, fortunately, and repudiation of their financial obligations by modern States is becoming rarer than formerly, and uc such idea has, or ever will be. entertained by this dominion. The mischievous statements recently made with such persistency in this country about present and past Governments seizing, or, as it has been meiegantly termed, ‘‘ collaring” sinking funds, deserve the strongest censure. I assort with emphasis that at no time in the history of New Zealand has any Government improperly used cno single penny of a fund set aside for the repayment of a loan. Where accumulated sinking funds ■have been liberated and used for public p”eposes, this was done in every case a ■ )J- the full consent of the louder. When this fund has been in existence [for some years it will have a beneficial effect on our finances, and enable renewal transactions to be effected with

advantage to the , dominion. The amount saved in interest will go a long wov towards providing the annual instalments required to bo paid under it. amounting to only 4s Sjd per --100 of our debt. In such matters as tins wo must look beyond tho present J) or years I have anticipated the establishment of a well-thought-out system by which the repayment of the w l.ole of our debts would bo assured uithm a reasonable time. In .my Financial Statement of 1895 I said: The question of the extinction of °ur las aiYon me much concern. The tune is approaching .when in my opinion it would add to the stability of the colony and place it in the forefront of any country in the world if we would resolve to make a moderate sacrifice in providin'* with our annual interest a 'small payment to enable loans to be extinguished within . « ; period. I fully, recognise the fact that financial authorities m;ge that a borrowing country should not provide a sinking fund until it has ceased to borrow. Circumstances alter cases, and I say that with prospects of obtaining money at such a low rate as would enable us to provide for tho gradual reduction and extinction of our deot.without adding to our actual huroens, the provision of a sinking fund is a course that has much to commend it. While posterity has doubtless to reap tne reward of the efforts cf ourselves and those who have preceded us, and should bear a full share of the burdens created to make the country, still no prudent men wo should, while recognising the necessities cf the times in which wo live, endeavour to make 9'VJ, legacy as Jio-lit as possible.” This will prove to honourable members that I have long considered such a plan and that it is not, as some critics have unKinuv suggested. a sudden inspiration, due to a desire to make the way easier for further borrowing. I feci great pleasure, in realising that t.ns longcherished object is now in actual operation. • THE FIVE MILLION LOAN. I- learned upon my return to the dominion that tnere had been much criticism by those opposed to the Government concerning tne dotation or Uie five million loan. When in Jimgland 1 ascertained from various financial authorities that the operation was regarded as a most successlul one. Nor aid the fact that the underwriters ot tlie loan retain a large portion ox it m any way weaken our credit or do anj injurv to the dominion, ihc abnonnal causes that led to the underwriters taking up so large a portion of the lean ■were well known to rinancial houses .111 England, and the fact that they were within a comparatively short time able to dispose of as much of their holdings as they desired to the investing public at a. profit showed conclusively that tho disparaging statements as to the success of the loan, made at this end, were without foundation in fact. Moreover, we obtained a higher price for cur loan than any of the other countries that were borrowing for some months before or since that period. In consequence of statements that I .learned had been circulated during my absence regarding the loan, T felt' it necessary to cable to the High Commissioner (August 26), and I will put on record his reply to each of the questions. I will give questions and their replies in their sequence, so that they may be more easily understood : 1. It is stated here that flotation five million loan was a failure because of fact that large proportion loan was net taken up by public but retained by underwriters. Please state facts in connection noth this .aspect, matter. Reply—Statements did not justify describing loan as failure. After full experience of other issues and general conditions underwriters were not awaro that little public- response probable. Nearly every important financial institution had an opportunity to underwrite, and not one has been dissatisfied with his bargain or been unable to unload his stoclr if. required. This is the true test, and' that loan was underwritten on most favourable terms. 2. It is further stated that credit of dominion was such as to account for underwriters having to retain so large proportion of loan. Reply—Quite untrue. This is proved by the fact that, despite serious depreciation of .giltedged investments consequent in part on huge capital creations over ail world, Government of New Zealand able to place hero some £5.000.000 during 1903-9 and further £1,'850,000 in April, 1910, nearly all being converted to inscribed stock by investors by last November. "Without the highest credit such operations would be impossible. 3. Had the amount of loan anything to do with underwriters retaining the amount they did? Reply—With regard to public response, No. Size of loan necessitated a like distribution of underwriting and enabled all important city interests to participate, many doing so for investment Transaction was regardod rather in nature of sale to investors.

4. Please state any facts in connection with flotation of loan that you consider necessary. Reply--But for •serious political crisis owing to breaking down of conference between both Houses of Parliament then sitting, probable that small premium'while the list remained open and as a consequence some applications would have been attracted from speculators’ who would have immediately sold loan at premium. Had conference resulted in an agreement and. same been known before list closed a considerably different result might have been obtained. 5. Should be glad if you would state also how loans raised by other countries immediately prior to and since flotation New Zealand loan have fared, giving dates of flotation and name of country. Reply—Particular's loans issued and percentages underwriters as follows:—April, 1910, South Australian, * 32 per cents, underwriters 67 per cent. Province of Manitoba, 4 per cents, underwriters 874 per cent. May, 1911— Canada, 3} per cents, £5,000,000, underwriters 78 per cent; over £2,000,000 wqs conversion. West Australian, 34 per cents, underwriters 884 per cent. June—Port of Bombay, 4 per cents, underwriters 78 per cent. City of Vancouver, 4 per cents, underwriters 80 per cent. July—Grand Trunk- Pacific, 3 per cents, underwriters'7s per cent. Newfoundland, 34 per cents, underwriters practically all. October— Straits Settlement, 34 per cents, under : writers 9SJ p3r cent. December—Province cf Saskatchewan, 4 per cents, underwriters 88 per cent. February, 1011 —Vest Australian, 3j per cents, underwriters conversion loan. MarchIndia, 34 per cents, underwriters conversion loan. March—lndia, 34 per cents, underwriters 38 per cent. Port of London, 3j por cents, underwriters 50 per cent. April—Vancouver, 4 per cents, underwriters. 77 per cent. Queensland, 3J per cents, underwriters 91 per cent. .June-—Province of' Ontario. 4 per cents, underwriters 73 per cent.

6. Have New Zealand stocks upon London money market been in any way depreciated as outcome of flotation of five million lonn? Reply.-—As the result of tho issue there lias been little or no depreciation. The form of issue whereby stock need net be created in excess of the demand protected us in that respect. Just previous to issue (lie price ruled about 9fU. Price to-da.v is about 97, but it would be well to remember that during this period there hud been adverse fluctuations in British Government securities, ranging from 2 per cent to 3 per cent. British Consols,

I New South Wales, Queensland and Tasninanian 34 per cents have dropped one \ to two points since November. | 7. Is 'it. or is it not a fact that a ] large portion of the loan was taken by investors to bold ns investors’ stock? Reply.—lt is a fact that very large 1 amount cf underwriting was arranged by banks as investment. Recent years policy of bankers and others has been to take this class of security in preference to stocks of long currency. . 8. Prior to flotation of loans, would publicity of the intention to do so be injurious or otherwise to the dominion? Reply.—ln large financial arrangements in city any public discussion in advance would' be detrimental and likely to affect negotiation. Among other reasons is following:—ln accepting new liability city houses often find it will he necessary and profitable to reduce in another direction. Without security this would be often impossible'. It will, therefore, be seen that underwriters held 1 large portions of all these countries’ loans, and Now Zealand secured a higher price than any of them, even those paying a higher rate of interest than we did. R AIL WAY CONSTRUCTION.

'The expenditure during the year on railway construction and improvement amounted to over one million pounds. The year has witnessed the steady prosecution of now railway construction in various localities. The completion of the main arterial lines is a principal objective, and the chief efforts in the way of construction have again been directed to this end. The commission sot up during the recess to consider the comparative merits of rival suggested routes for the main line north of Auckland has completed its investigation and submitted a unanimous report recommending the adoption of what is known as the western route to Mangakahiapa. and thence to a point near Kaikohe. Construction work on this and Other main lines has been vigorously pushed on during the year. Much remains to bo accomplished before the system of arterial railways necessary to provide nclequate transport facilities for the producers now on the land and meet the needs of our over-extending settlement can be said to be complete, but the Government is endeavouring by the prudent expenditure of the funds at its command to gradually extend the system so as to provide the necessary convenience to the settlers without sacrificing its value as a re-venue-producing enterprise. Some further lines of brunch railways are necessary. and fresh authorisations will be asked for this session. ROADS.

The expenditure during the year on the formation of roads and tracks and the erection of bridges to provide means of access to comparatively new settlements was hardly so heavy as was anticipated,. principally owing to a. dearth of labour during the summer months, when road construction in the more remote districts can best be pushed on. The services of the County Councils and Road Boards throughout the dominion have again . been utilised to carry out the larger part of the expenditure under subsidy or grant, and in cases where tho local bodies were unable or unwilling to undertake or supervise the works the Government’s own staff was entrusted with the expenditure. Some minor difficulties were encountered when the system was initiated, but. these are gradually being overcome, and it is probable that the local bodies will during the current year be entrusted with tho expenditure of an increased proportion cf tho votes available for road works. In many cases the settlers concerned have displayed a commendable willingness to rate their lands for loans to be expended on road improvement, and in most instances of this kind tho Government has assisted those who endeavoured to help themselves by granting subsidies on the amounts provided by means of loans. Much of the road construction work now in progress is in localities remote from the larger settlements, and in many places tho climatic conditions and uncertainty of obtaining regular food supplies make it difficult to keep the works manned during tlie winter months. IRRIGATION. Satisfactory progress has been made with tlie development of the scheme lor irrigating the lands in Central Otago, the. productive power of which has deteriorated during a succession of years of insufficient rainfall. Surveys recently completed show that a largo area of fertile land in the Ida Valley can be irrigated by gravitation at an annual cost to the landholders, which would be returned many times over by the increase, in the productive power resulting from bringing in an abundant water supply. The scheme is a very promising one, but the co-operation of the settlers is required and the Government is now placing definite proposals before them that should enlist their interest and permit of tho enterprise being brought into successful operation. The irrigation of other areas in Central Otago is also proposed,-and much necessary survey work in connection therewith has been undertaken. There is .good reason to believe that in many places where the natural conditions are favourable, irrigation would be practicable and successful from an economic point of view, and would be the means of restoring prosperity to this old settled district. The output of minerals for the year shows a slight decrease over that of the previous year. This decrease in other minerals is balanced by a large increase in the production o? coal, so that the total value of tlie output of the underground wealth of the dominion shows an increase for the year. The decrease in the production of gold and silver is largely attributable to the restricted operations of the Waihi Goldmining Coy., but it is hoped that the check is only temporary, and that when the cheap power from the Horahora Falls is available the company will be in a position to profitably treat low grade ores which at present are of no value. New Zealand is not solitary in showing a decreased yield in gold, as most of the Australian States also show decreases. Notwithstanding the decrease the mines are showing

well, and the year under review witmessed considerable improvements in some and a brightening in the piinspects of others. There is every J us to fication for regarding the future with confidence, and for recording the conviction that with fair encouragement in the work of development an even more prosperous era than the industry has yet experienced is dawning. One mineral that show 3 a large increase in production is sheelite, which is being actively mined in Central Otago, also in . the Marlborough District. I lie driving of the deep-level crosscut at the Thames is being actively carried on, and tho striking of good prospects in the course of the work entourages the hope that favourable anticipations will be realised. The production .of coal continues to increase, and for the first, lime in the history of tho dominion the two million tens mark lias been passed, 2,197,362 tons having been produced as against 1,911,247 tons for tlie previous year. AGRICULTURE.

The year has shown very gratifying progress in the work of the Department of Agriculture. This progress is very marked, both in the activities of the Department and in the greater interest displayed in its undertakings bv the agricultural community. The. ail important dairy industry has received particular attention with the object of increasing the profit to the farmer arid to assure .a still higher quality of the products of that industry, butter and cheese. Of these the herd testing associations arc being highly appreciated by the farmer. They have become more than popular. Tlie demand for the establishment of these associations is in excess of the capacity of the staff of the division available for that purpose. These testing associations liave demonstrated most remarkably the difference between the profitable and tlie unprofitable cow. J liese have been revelations to even tlie most skilled of the farmers who are occupied in that industry. The pasteurisation of milk will have a most important bearing on the future of this industry. It will assure the provision of a Detter quality of our dairy exports, and further, in view of' the latest scientific knowledge, this pasteurisation assures the maintenance of the health ot. the farm animals, and is very materially connected with the health of the human consumer of meat and milk. In this there is one of the principal means that will ultimately provide control of the White Blague, tubercule. The Government is taking into consideration the question of turning into profitable account the waste products from our butter and cheese factories. The result of this will be an increased revenue to the dairy farmers of the dominion. Tne dairy industry occupies a large share of the work on the experimental farms, in fact there was at one of these farms the initiation of milk recording and herd testing, and from these tnere have developed tne associations already referred to. Tnese farms make special experiments in forage crops especially suitable for milking cattle, and every effort is being made to encourage the cultivation or that great plant ior the dairy farmer,, lucerne. . . Agricultural education is one ol the most important subjects affecting the couutrv. At one of the farms (in Waikato) a number of youths ana young men are established lor training in agricultural practices. At Vaerengu, iiT tho Auckland district, on land mat was at one time considered useless, but which by experiment was found suitable for fruit-growing, a series of small farms, each or about twenty-five acres m extent, have been prepared, cultivated and planted in fruit trees. Tnese farms were lately offered for selection. They are all taken up. The aggregate value of these farms is estimated at about £6001), and they have been provided for from ordinary revenue. A community such as will ultimately be established at Waerenga would assist very materially in bringing about an organised export of fruit, and it is in this export that the fruit industry must seek its success. The department has also undertaken very extensive work ill the testing of certain lands in different parts ol the dominion, for instance the pumice lands of the extensive Taupo plateau, the gum lands of tlie northern peninsula and the intractable lands on the West Coast of the South Island, and it is making a series of experiments with the object of regrassing depleted pastoral lands of the central regions in the South Island. Associated with this work is the all-important soil survey of the dominion. The chief agricultural chemist and a surveyor are undertaking a soil survey of the forest lands of Otago, and Southland, with a view of enabling tho farmer to treat and cultivate those lands on scientific lines. Surveys are in progress applying to a million acres iff the North Island, where an affection of stock militates against successful occupation of the land. The. experimental farm is in demand throughout New Zealand, and it will be gratifying to inform you that such an institution will.be established in tho South Island. This farm will be particularly useful as applying to conditions of climato and of soil that have so far rendered the work of those in the North Island hardly applicable in the South. With this will be associated plant-breeding at three different stations. and plant-breeding is probably one of the most useful cf the undertakings on the 'modern experimental farm. In Sweden with cereals, in Germany and in America with beet for sugarmaking, the increase in the value of tho crop by selection and breeding has been phenomenal. The department in many of its undertakings and on the experimental farms has but experienced what has been so universally felt in other parts of the world where similar undertakings exist. There is first the period of a criticism, next of some appreciation, and finally that of both appreciation and confidence. These farms, in addition to their great value to the agricultural community, have. I am glad to say. shown a profit on the operations for the year. WATER POWER.

Important progress lias been made in the direction of giving effect to' the decision of Parliament to bring into profitable use the latent power in our rivers and streams by the development of electrical energy on a large scale. The Government has secured' the services of Mr Evan Parry, a professional gentleman of high standing with considerable experience of hydro-electric power schemes, to act as chief electrical engineor, and has appointed Mr Lawrence Birks, another engineer with high professional credentials, as chief assistant to Mr Parry in this work. It is satisfactory to note that the preliminary investigations and survey work carried °'it, principally under the direction of the late engineer-in-chief, were in the right direction, and that the first schemes to be undertaken by tlie new engineers will be those evolved and advocated by the late Mr P. S. Hay. The policy of the Government is to develop one largo proposal first and study results before embarking on a more extended programme. With this end in view preparations’ are being made for developing n large scheme at Lake Coleridge • and convoying the power to Christchurch, Lyttelton and surrounding districts where there is likely to be a market tor it. From the outset it >• also hoped t.o demonstrate the advantages of electricity for haulage purposes on tho railways generally'' apart from its value in special cases' where conditions are unusually favourable. Inquiries are being made with a view to establishing within the dominion new electrochemical industries, which would

obtain their power supply from the Government mains. One of the most promising is the manufacture of chemical fertilisers, for which there is likely to be a large and increasing demand throughout the-world. With the natural conditions obtaining in New Zealand it is probable that products of this nature cou'ld be manufactured on a large scale at a price which would make the industry profitable in itself and of benefit to the whole community. Another feature of the development of our water powers on a large scale, winch would have an important bearing on the social life of the people, is its possible influence in the home. The problem of assistance in carrying on domestic work under existing conditions is one which is steadily becoming more acute. In most ''civilised countries a practical solution seems difficult of attainment, but will doubtless ultimately be reached by reducing the amount of personal effort roquired to attain a given degree of domestic comfort. In my opinion the day is not far off in New Zealand when, with an abundant supply of electric energy available at a cheap rate, it will be within the means of most people to utilise the new power for all the lighting, heating and cooking required without any trace of dust, dirt or excess of heat. Under these conditions the kitchen would become as clean and as comfortable as the drawing-room, and domestic duties would no longer bear the stigma under which they labour while existing conditions prevail. The estimates of expenditure and revenue in connection with the Lake Coleridge project indicate possible prioes for the supply of cur--rent which warrant the hope that such a consummation is within the range of practical achievement in New Zealand, ihe important question of electrifying the Lyttelton tunnel, through which a large number of passengers travel annually, has been given careful consideration by the Government, and the electrical engineer, Mr Parry, has been instructed to report upon this matter without delay, and to prepare the necessary plans with *a view to the work being put in hand at an early date. He has also been instructed to furnish a report upon the utilisation of Lake Waikaremoana for the supply of electrical power for lighting and .industrial purposes in the North Island. This is expected to be available at an early date, and I am hopeful that the waste power latent there will before long be made available for the uses of the people. NATIONAL PROVIDENT FUND.

This fund, established by the Act of last session, commenced operations in March last, and the Department is now actively engaged in distributing information relating to the benefits and in corresponding with employers, local bodies and industrial organisations throughout the dominion. The applications so far received show that all classes are desirous of enrolling, farmers, artisans, labourers, domestic and clerical workers of all grades, indicating, I think, that the scheme is based on right lines, and that by the time it is in full operation a considerable number of our workers not otherwise provided for will be enjoying the security of the fund. Interest in the working of omr Act of last year has been much stimulated by the comprehensive scheme now before the Old Country and based on compulsion, wherein it differs fundamentally from our voluntary system. One of the most striking features of the British proposals is the thorough manner in which the machinery of Friendly Societies is to be utilised, and it is dear that any scheme to deal with this problem must take’ into account the work of these well-organised and deserving bodies. In considering any extension of our system, therefore, the interests of the Friendly Societies can be relied upon to be carefully protected. There is no doubt that the compulsory policy in respect’ to this important social reform has, in recent years, made considerable headway in public opinion, and few students of the problem doubt its efficacy in the older countries where highly organised industrialism and extensive distress exist side by side. The extremes of poverty and wealth existing in European States, however, find no parallel, even comparatively, in our land, where we are still fortunately in the position of being able to forestall many of the evils so inherent in older social systems. There is, I think, the opportunity in this country to attain universality of sickness and health ’ insurance by the most economic methods, and at the same time on sound actuarial lines that is bv enlisting the young into insurance and preventing them from lapsing from it throughout life. It should also be our aim to secure the gradual co-operation of the various organised- bodies having kindred objects. The lines upon which the fund mioht enlarge its scope would be to provide ’ for immediate sickness and enter into the question of assisting local bodies to overcome their superannuation difficulties, By following the policy J have outlined it should be possible' without entailing heavy financial obligations on the State or the individual eventually to arrive at as good results as would be attained by the adoption of an immediate oompulsory system The insurance against unemplovmVnt proposed in the British scheme is admittedly experimental am restricted. It is the first national scheme of its kind and the developments will be watched with absorbing interest in those countries where the problem is under consideration.

PUBLIC SERVICE CLASSIFIC'A-.I'iO'-N.

As was stated in the Financial Statement of last session the amalgamation of departments and extensive letienchmonta upset in a great measure the classification which had been almost finished bv the Board appointed under the \ct of 1908. Dunne, the recess the Classification Board appointed a committee to . draw np the tho classification ot the 'y to ie ° the mi blip service excluding the Railways public se , Telegraph DepartrL tb hifdVvW ” d he rc.oort of the Beard will be presented‘to Parliament shoitly. It u.ll not bo brought into force tins year, and fiS i-S meat ary Estimates. PUBLIC TRUST O^'ICE AUDI 1. ~ , i nf the Public i rust* e •At the rcqncst ol .tm t]m arrangements ' taking over the Auditor-General i* l , J Ue T .nist office inspection ol 'o' w } lic h. for some branches and agenu t j,„ 0 «: he on caned out ov i > “uko : ea s, has : ces of travelling mitself. 1, ( > s.- ce T>fi ~t mci;t v .iJl specters of the A 111 an <] viU r, available l’ ! audit being insure an lnaepenuci^

made, which is much more desirable than a departmental one. PUBLIC SERVICE SUPERANNUATION FUND.

The income during the year ended December 31. 1910, amounted to £156,008 14s 7d, including £32.785 15s 4d, being the value of the police provident fluid ,_ transferred on. April 1, 1910, and £22,500, annual subsidy by the Government. The amount,contributed by members of the fund during the year was £90,214 13s 6d, not including £1904 11s Bd, which officers of the police force contributed to their provident fund during tho three months immediately prior to the date of 1 merging, the balance of the income being made lip of interest £10,211 16s 4a, fines £296 9s sd. The total outgo for the year of £46,608 16s 3d includes allowances to members and to widows and children of deceased members £36,009 17s 3d, as against £17,862 5s 9d for the previous year; contributions refunded £3744 13s 5d ; compensation £3197 0s 7d, and expenses £1657 os. The total value of the fund at the end of the year was £263,948. the greater part of which was invested by the Public Trustee at rates ranging from 4J per cent to 5 per cent. The number of contributors at the beginning of the year was 7323. and 1520 new contributors have since joined, including the 773 members of tho Police Provident Fund. The number of officers who ceased to contribute during the year by reason of having left the sendee, retired on pension or died, was 472. leaving a total of 8371 effective members of the fund at the end of tho year. The statutory triennial examination of the fund is being made. POST AND TELEGRAPH DEPART-' MENT OPER ATIONS.

The returns of the Post and Telegraph Department indicate a very successful year. For the first time in the history of that Department the revenue has exceeded one million pounds, as will be seen by the table of revenue. The balance of revenue over expenditure for the year amounts to £123,196 9s sd. The Savings Bank deposits reached the large sum of £10,708,938 16s lOd, bringing .the balance to credit of depositors up to £14,104,989 19s 2d. Tho turnover of the money order and postal note business for the year exceeded five and a half million pounds. These figures show a very healthy state of business in tho dominion. Steady progress lias been made in connection with the extension of the telephone system to remote districts. The recent decision under which the Department takes half the risk of the estimated deficiency on telephone lines applied for has been the means of providing communication to many places where the business would not have warranted sucli facilities unless on payment of a comparatively heavy subsidy by ihe settlers. At the same time the rate of interest hitherto charged on the capital cost of construction, on which the subsidy is based, hjs been considerably reduced, and minor charges have been abolished. _ The demand for trunk telephone lines between the larges towns continues. This class of service involves a heavy capital investment, but as thes? facilities invariably result in a profitable business, the Department is endeavouring to cope with the demand as fast as means will allow. The construction works carried out during the year amounted to 426 miles of poles and. 2456 miles of wire. There wore 103 new telegraph offices opened during the yenr. The experimental-wire-less station at Wellington ha 6 been of practical value in announcing, the near approach of vessels installed iktli like apparatus. It is proposed to have the permanent station on a site on the South Tinakori Hills near Wellington, thus enabling communication to be held with vessels within a 300-mile radius. Sites have been selected at Awanui, north of Auckland, and .at Avarua Blaine, between Invercargill and Bluff, for the establishment of high-power stations having a radius of 1250 miles. Contracts for the two latter works have been let, and it is anticipated that the Awanui station will bo in working order early next year, and the Awarua Plains station a few months later. Low power stations at Gisborne and in the neighbourhood of Christchurch are expected to be in. operation in the near future. LAND AND INCOME TAX.

Both taxes were paid up very well, the percentage outstanding at March 31 being small. This branch of the revenue continues to bo collected at a very low cost. Tho percentages of cost to revenue aro as followslncome tax 1.75 per cent, land tax 2.71 per cent; both taxes, 2.23 per cent.

Income Tax.—The amount collected for the year was £407,325, as compared with £316,835 for 1909-10, an increase of £90,400. The increase is due to the new graduated rates of taxation, which were in force during the period under review. The estimated result of £BO,OOO additional revenue due to the new scale was more than realised. Land Tax. Amount • collected £628.723, as compared with £642,270 for the previous year, a decrease of £l3 457. Honourable members will recollect that the decrease was anticipated in last year’s Budget, as I estimated the probable revenue at £625,000. Land and Income Tax.—l estimate receipts for 1911-12 as follows: Income tax £410,000, land tax £635,000. These figures are very little in excess of the collection of last year. I have. before pointed out that we cannot expect a recurring increase in the land tax, as it is found that the increase resulting from the enhanced valuations made from time to time by tho Valua-

tion Department is equalled by the diminution in the graduated land tax caused by the subdivision of estates which necessarily followed this particular form of taxation. LAND SETTLEMENT FINANCE ACT. Very satisfactory progress has been made under this Act. Amendments introduced last session somewliat simplified . the procedure, but further amendments are required to complete tho measure. The total number of associations incorporated or approved under the Act is 18, with a membership of 107. An area of 14,965 acres, valued at £209,677, has been dealt with by them. lir addition, there are five other associations under considers' tion, and eleven proposals to form associations to purenase lands have been declined for various reasons. The Board had to exercise very considerable care in dealing with the forma--tions, as it is found that members ar* apt to enter into an agreement without due consideration. The responsibilities which each member is supposed to undertake are not well understood, neither are the conditions of purchase in some instances being complied with. Further safeguards are still very necessary. The system of land purchase and closer settlement provided for by tho Act will have a great development when it is better understood. LAND FOR SETTLEMENTS ACT. There have • been a considerable number of estates purchased during the year, of a total area of 14,399 acres, valued at £158,796. The bulk of these have beeii taken delivery ; of and satisfactorily settled. There is an increasing demand for land, both pastoral and agricultural. Every effort is beiim marie to secure suitable areas at anything like a price that will leave a living margin to the settler. NATIVE LAND SETTLEMENT. The activity of the Native Laud Court and its effects upon progress towards the settlement of Native lands during tho past year has been most marked. During the year ended March 31 the Native Land Court investigated the ownership of a total area of 186,679$ acres hitherto unclothed with title, and dealt with 833 partitions, affecting an aggregate area of 503,829 acres. In addition to the foregoing the Court confirmed 49 transfers, comprising 11,628 acres, and approved of 24 leases of a total area of 5086 acres. These transfers and leases were in respect of lands not situate within the Maori Land Board districts. MAORI LAND BOARDS. • As to the general statement of Native lands dealt with by the Maori Land Boards, the position during the year is as follows Some 435 alienations by way of leaso were approved, covering a total area of 116,498 acres; 660 transfers, comprising 78,346 acres, were consented to, while under Part 18 of the Native Land Act, 1909, some 37 transactions by , way of sale and lease, covering 93,923 acres, were completed, making a total of 293,766 acres dealt with by way of approval of arrangements made between Native owners and alienees. The various Boards administer as vested lands 975,010 acres, and have issued 422 leases for a total area of 282.402 acres; '24 transfers, comprising 6003 acres, remaining. Areas are being surveyed' into subdivisions and also for roading, etc., preparatory to their being placed on the market. The advantages of the assembled owners provision (part 18) have not yet received the full attention of the public, but every indication points to tills important feature of the Native Land Act-, 1909, being better availed of in future. Although during the first six months practically no application under part 18 had been received, a considerable area was dealt with in the last half of the year, and the settlement of 115,143 acres was thereby determined. The Boards during the year issued requisitions for surveys of 112,685 acres, which, it is anticipated, will be completed and the lands offered during the current year. NATIVE LAND PURCHASE BOARD. . The Board, as constituted by section 361 of the Native Land Act, held twelve meetings and considered offers aggregating 902,074 acres. The purchase of 75,437 acres has been completed, while some 430,560 acres are under negotiation. Private aliens tion has been prohibited in respect 'of 271,05 S acres, while offers of 85,933 acres are held over pending appeals. Only two offers, totalling 162 acres, were declined by the Board. The fees paid to the public account were: By Native Land Court £5945, Maori Land Boards £3469, other sources £92, in all aggregating £9507. • DEFENCE. The new Defence Act, which is now in operation, provides for the gradual military training of every male above

the age of' fourteen in New Zealand. >fhe enormous amount of work involved, in connection with the putting into operation of this Act is, I think, quite apparent.. It is hoped that we shall .i build up a citizen army : which in its organisation, training, and .efficiency will enable us to pveserve our .shores inviolable from invasion by a Iforeign foe. I would mention that a .ptaff of specially-selected officers has ■ jbeen engaged from the Imperial Army >in order to assist in carrying out the organisation and training of tho new force on the roost modern lines. It is very gratifying that such excellent ..headway has already been made towards, placing our defences on a more ' securo footing.: The authorisations ask- ' jecl for are within the amount placed before the House when submitting tho ’. liew defence schonio. To enable the necessary equipment to be provided, I .propose to pay out of ordinary revenue f the full amount required, which isi esj.timated at £150,000. It is not desir'able that equipment should be provided ■out of. loan moneys, and, holding this opinion, I am making tho necessary •provision to enable the course 1 am now -indicating to be followed. The extremely practical outcome of the new Act, whereby all youths who are physically St and who hath attained tho ago of Fourteen years undergo a course of military training will, I am confident, bo , on undoubted benefit to the individual ..'ill after life. During his period of training special efforts are being piade to ensure that the building up of ,:this force will be carried out wiQi a minimum of. inconvenience to employers and employees, and without in any way ..interrupting -the ordinary routine of trade, and commerce. The necessity of always; being prepared to defend 1 our shores is of paramount importance, and t'.it behoves us all to do everything in .our power to assist the scheme and endeavour to bring home to the people -of the dominion the great responsibility ■ which rest 3 with themselves. The building up of a citizen army on the '•niost economical lines possible will depend in a great measure upon the support and' sympathy of tho people, who ■ must provide, in addition to the necessary funds, tho spirit and will to give It life. NEW ZEALAND DREADNOUGHT. -In connection with the Dreadnought ... battleship, I have tho pleasure to inform members that it lias been duly launched,' and it is anticipated that it will bo commissioned and ready for the Pacific by 1912. v’ VOLUNTEERS. , Last year you will no doubt remember my mentioning, the excellent work . -the Volunteers have done in connection with our defences, and I would like to take, the opportunity of reiterating how thankful I am to all the officers, noii-commissioned officers and men for their valuable services in the past. I : am very glad that some of them Will be- able to continue in tile good work until that day comes when nations will be persuaded to abandon their arma- . ments and forego the right of moulding their own destinios at tho expense of ,v others. I intend to ask Parliament to ..; pass a resolution expressive of our appreciation to those who have served in ; the past. .-V ADVANCES TO SETTLERS. The amount granted to settlers during the year was £1,204,510, an in- ' crease over the previous year of £109,190. The number of applications received proves the largo demand still existing for cheap money. C ADVANCES TO WORKERS. ■ This branch shows record business. Tho amount granted to workers for

i building or acquiring homes during tho year was £4O/,700. Complete plans . and specifications have now been print- | od and are ready for inspection at the Valuation Offices in Auckland, Christi church and Dunedin and at the princiE 1 al post offices. Copies aro supplied to orrowers free. They comprise eighteen different types of building, of from two to seven rooms, costing from £l2O to £750. They liavo bean planned with a view to the maximum convenience at a reasonable cost, . and when availed of will do much to increase the comfort of workers and their families. ADVANCES TO LOCAL AUTHORITIES. As anticipated, a large amount of business has been dene m this branch. The total amount applied for during tho year was £3,701,012. Of this £1,857,394 was provisionally approved, that is, granted subject to sufficiency of soeurity and, , validity of procedure. Applications for £1,843,918 wore declined. .Those for loans for recreation grounds, installations of electric light, etc., wore refused, as it was thought desirable to favour loans for roads, bridges, water supply, etc. Loans for repayment of moneys already owing by local bodios wore also refused. Apart from what is owing to the Government under the Local Bodies Loans Act, I there is a sum of £13,000,000 owing by local authorities. It is obvious that if I tho Advances Department were ad- | vancing its fund at 3i per cent to roj pay . such debts, the average rate ! of interest of which is about £4 12s per cent, there would Ibo little left for .carrying out ur- | gently needed works. At present nono ' can be spared for repayment of old : loans, but it is hoped that the existence of the Department will have a ton- ; doncy to lower the average rate of interest paid on such loans. On first- ! class security, such as is given by our I local bodies, tho average rate of inter- ■ est paid for loans outside of tho Goveminent should boles 3 thau it is. The procedure for obtaining loans has been greatly simplified, as pvomisod in the last Budget. After the ratepayers approve a loan, the department does practically everything. A pamphlet has l been issued giving full instructions to applicants how to obtain an advance, j Interest is_ charged only on the moneys | obtained from the office during the progress of the work, so there is a great saving in interest and costs and a voidance of worry. Full details of the average amounts of loans to settlers and workers on freehold and leasehold, and tho provincial districts receiving them, aro given in tho annual report, I already laid on the table of tho House. I The total amounts advanoed, including : repayments lent again, since the de- . partmont commenced business aro:— I £ 1 Advances to settlers . 10,547,970 Advances to workers . . 1,277,765 Advances to local authorities 405,195 Total . . £12,230,930 There can be no doubt that these 1 largo sums spread amongst so many borrowors at low rates of interest and on easy terms have contributed largely to tho prosperity, of the dominion. Much of this money has been expended in assisting numerous sottlers, who j would have been unable blit for the Department to obtain homes for themI selves. j OUR TAXATION NOT HEAVY. ! I am of opinion that in tho best interests of tho country it k desirable to deal with the widely made and pori sistent statements that have been cir- ! tula ted in reference to tho taxation of • the country, statements which have boon the means of creating an erroneous belief as to tho amount of taxation j borne by our community. It is someo times honestly but mistakenly stated that New Zealand is tho most heavily taxed community in the British Empire, if not in tho civilised world. This is far from being true. In comparing the taxation paid by individuals in different countries we aro mot witn serious difficulties in getting tho exact position. Some countries levy more from direct taxation than others. The rovonue derived from property tax, land taix, estate duties or incomo tax is collected in different ways by different governments. In some countries there is no incomo tax, in others no land tax. In some inheritance taxes aro considerable, in others wholly absent. Tho incidence of taxation, direct and indirect, differs greatly in most systems, in some the poorest members of the community paying an unreasonable proportion of the whole. It is necessary to distinguish between taxation and charges for services rendered by the State. In a country liko New Zealand, winch owns its railways, the income of the ! service is regarded as revenue, and it is an error to speak of this as taxation. If tho total earnings of tho railways of the United States of America (£580,680,445) or tho United Kingdom (120,174,052) woro added to the revenues of those countries, as is done in New Zealand, tho taxation would appear to be enormous, and so with other Stato activities. Only by a careful analysis can tho real amount of taxation bo ascertained. A country with a small revenue per head may liavo a more oppressive system of taxation than one with a much larger per capita revenue. The status in civilisation of a country may be gauged roughly by the proportion of its revenue applied to useful . public purposes and tho equitable incidence of taxation, that is the proportion of revenue collected from these best able to boar it. Judged by this standard Now Zealand holds a high position indeed. Take a small business man, farmer, artisan <, r labourer, with four children in Nqw Zealand owing land valued at not more than £SOO, on which the homo or business premises is creotod, at a value of £I6OO, or even more, ind in

receipt of an incomo under £3OO per i annum. Ho pays no direct, taxation ! whatever to tho General Government, and may contribute .vei-y little through tho Customs if ho is a teetotaller and non-smoker. Even if ho and liis wife and children use an average quantity of dutiablo p,'oeds, including silks, jewellory and other articles deemed luxuries, ho will pay only about £6 8s 2d per annum. If he consumes an average amount of tobacco and alcohol in addition he will pay in all £lO 5s 9<l in indirect taxation. If they elect to go without what are considered luxuries, ho and his family will pay hardly anything at all in tho way • of taxation. For the amount paid, supposing it is £lO 5s 9d per annum, ho geffi much in return. His children receive free education. At £5 8s per annum, the cost of education of each child from the age of five to fourteen, lie receives from tiro State £2l 12s yearly. If his children are talented they can win their way to any position dependent upon superior education. When his children begin to work they aro looked, after by Government officials to sea that they have sanitary surroundings, get a minimum wage, sufficient air space, and are not worked too long . each day. Ho is also safeguarded in many ways during his working hours, and if he has been unfortunate will at sixty-five receive a pension from tho State for the rest of his life. His lot in respect of taxation and tho benefits obtained therefrom will compare favourably with’ that cf any worker anywhere In. tho world. In New Zealand, no income tax is paid on an income of Jess than £3OO. This is a very high exemption. In Britain it commences at £l6O, in Japan at £3O, and it rapdily progresses there until at £IO,OOO per annum as much as 4s in the pound is taken by tho Stato. In Germany, taxation on the poorer mombers of the community is much higher than in the dominion. In addition to heavy Customs duties cn meat and other necessaries of lifo tho income tax which they have to pay is, compared with ours,' very severe. Hero aro some examples which should be studied in order to realise how fortunate wo are in comparison. Tho amount of oxsrhtion varies in different States ef the German Empire, In Prussia all incomes, £45 or over, earned or unearned, must pay income tax. In some States tho exemption is only £2O, and as tho tax is assessed on the whole earnings of the family, and not thoso of tho father only, few escape. It is graded from a | por cent to 3 per cent on an incomo of £45, and increases as the income grows. Take the case of a servant girl in Saxony with a salary of £ls per year. Taxation of incomes begins in Saxony at £2O but income includes food, lodging, Christinas presents and other gratuities. The employer is compelled by law to cive the authorities a list of these items. Feed, lodging and other things will ho at the lowest computation £23, making tho income £3S per annum, bringing tho girl under Class 3. Tho direct tax is 4s per year, but in Germany local taxation is based upon the Imperial tax. In some towns it is the same; in others more. Tlius in Frankfort-on-thc-Main the local tax is 125 per cent of the Imperial tax in Duisburg 200 per cent, at Elberfeld 230 per cent, at Berlin 109 per .cent. In some places it reaches 250 per coat. At Dresden the servant girl, in addition to 4s direct taxation, must pay for general purposes 3s for churoh and school tax, about 3s 6d, a total of 103 Od. If the total income is £4O instead of £3B slio is placed in Class 4, which applies to incomes of from £4O to £47 10s. She will then pay 18s in direct taxes. Consider tlio position of a married couple in Dresden, each working together and earning £IOO. They aro taxod together and will pay £4 10; out. cflglGO. If in different occupations and separately earning only £SO each they would have to pay incomo tax amounting to £1 163. But in Now Zealand it is not cnly tjie poorer persons who aro lightly taxed. These who are members of what in other countries are called the middle classes are hotter off hero than olsowhero. Wo will tako tho case of a man receiving £IOOO per annum iu New Zealand, England and Germany. In New Zealand lie will pay £29 lis Bd, that is. Is lOcl in the pound on £7OO, all in excess of tho exemption of £3OO. A Londoner receiving £IOOO, half of which is earned and half unearned, will pay on £SOO earned at 9d in tho pound £lB ss; on the £SOO unearned at Is 2d in tho pound £29 8s 4d; total, £47 18s 4d. At Frankfort-on-the-Main a person in receipt of a similar incomo will pay £96 per annum. The German Empire is purposely tnken for comparison. It is one of the great woi-ld Powers, in the front rank of civilisation and prosperity. Were a poor or backward State referred to it might be said that the comparison was uni air. It is not necessary, however, to< go as far as Europe to find a country whore tho small man is more heavily taxed' than in New Zealand. In Tasmania income tax is payable as soon as tho incomo reaches £BO per annum. The exemption begins to diminish at £llO and disappears at £4OO, so that on an income of £3OO, on which a New Zealandor pays nothing, a Tasmanian paj’s incomo tax on £270 at s}d in tho pound, that is, £6 3s 9d. There is no exemption for land tax, which is payable on every . pound of unimproved value, and if lie owns unimproved land wortli £SOO be will pay £2 Is 8d land tax in addition. A glance may be taken at the direct taxation systems of other Australian • Statos. 111 South Australia a man owning land l of tho value of £SOO, exempt from taxation in New Zealand, would pay id in the pound, £1 0s lOd. An absentee beyond the Commonwealth pays 20 por cent more. If his income is £3OO and derived from personal exertion (exempt in New Zealand! lie will pay 44 d in tho pound on income ovor the exemption of £2OO, £1 17s 6d. If his income is from property the rate will be 9d iu the pound. That is £3 15s. In Victoria the unimproved values tax on land is .’.d por pound. Tho owner of £SOO will pay £1 0s lOd as in South Australia. Incomo tax is at the rato of 3d. in the pound on an income of £3OO per annum if such incomo bo derived from personal exertion (other than income arising, from live stock, wool, moat, milk, dairy proctuce, fruit, fodder and other crops arising: from land under tho unimproved value of £5,000, after allowing an exemption of £150) and 6d in tho pound if arising from any other source except incomo from interest on Government debentures, dividends from companies, etc. A person in receipt cf an income ot £3OO per annum, at winch a New Zealander is exempt, will pay from £1 r/.s Od to £3 15s ‘ In Queensland tnere is uo land tax ‘except that of the Commonwealth, and tho local authorities rating, but incomo from land, exempt iu Now Zealand, is taxable, with au exemption of £2OO. Above £2OO it is 9d in tho pound, so that an income of £3OO per annum derived from land would pay £3 15s in taxation. On incomo denvod from personal- oxortiou tho first £2OO is exempt and Od is payablo 011 ovory pound ovor £2OO. . I t, is intorosth lor to comp iiru .^“ e taxation oil dividends of companies in Ocr-, many with that of N'c>v Zealand. Let US suppose that this country a I company with a cnpit-1 o. -MOO,OOO makes £IO.OOO profit and distributes £BOOO in dividends. Tho taxation pay- | able will bo .-—lncomo tax £BOOO, at Is : 2d in the pound, £iob 18s 4d: annual license fee at Is por cent,- £o0; total, £516 13s 4d. A similar company 11. j one of the German Maces., cay. Dries- | burr where local taxation is twice that I lovi'od by the Imperial Government, :

will pay:—lncome tax on £IO.OOO (less 3 a po r C ent on tlio capital of the company, that is £o500), £.2(50; to the city, on a £IO,OOO trade license at 2 per cent, £200; income tux, local, S per cent, £800; total, £.1260, but on tbo £BOOO paid: in dividends income tax has to be paid bv-tne recipients. Tho amount will depend upon tlio total income of each of tho shareholders, as income tax is graduated. If they aro persons in receipt of incomes of £SOO per annum they pay tho State 3 per cent £240; to the local authority 6 per cent, £460; to tiro Church 0.-15 per cc-nt £36; total, £756, bringing tho total taxes on £IO,OOO to £2050. In New Zealand, income.tax is not,, of courso, levied on dividends received from companies, 0110 tax at tho source only being collected. "We hear a lot of "complaints about our laud tax. This is not high until tho graduated tax becomes payable, but it must be remembered that our graduated land tax is not imposed for revenue purposes, but with the intention of causing closer settlement by subdivision of largo ostaios, which will, of course, reduce the revenue denvod from tho graduated tax. In New Zealand an owner of land of the value of £SOO or under is, 03 stated, exempt from land tax, no matter what the value of his house or other improvements may be. In many other countries not only is there tax on land cf small values and all improvements thereon, hut a portion of the increase in values is also claimed by tho State. Tims, in England duty on the increased value is a tax of 20 pci- cent levied on any increase in sito value. . It is to be paid whenever the land is sold or let on lease for more thau fourteen years, and whenever, is changes hands 'by death the duty is £1 for overy complete £5 of j increment.. The tax payable on tho determination of a lease of land payable to the owner or lessor is £1 for overy £lO of increased value. Again, there is a duty on undeveloped laud at the rate of id for every £1 in value." There are certain special exemptions, of course, to all those taxes, but their existence shows how much better off tho landowner is in Now Zealand. In Germany, on all inhabited houses and landed properties that change ownership within a period cf from twenty to sixty years a State tax of 1 per cent j and a local tax of 2 per cent must be paid on tho sale price, that is, 3 per cent, no matter wnet.her it is sold at a loss or gain compared with the pro- ) vious sale price. If there is profit, that is, an increase over tho previous j sale prico, there is a graduated scale | of taxes amounting to 4 per cent on an increase /of from 25 por cent to 30 | per cent, and 1 per cent on each increase of 5 por cent above that. INHERITANCE TAX. There have been complaints without real justification made as to tho ■ amount that i> obtained in this country from inherited estates, bub 1 propose to show that it is not excessive in New Zealand. It is increasing in ail countries. Estates of £SOO or under are exempt in New Zealand from estate duty. Those taking inneritance pay according to relationship, the successor to a deceased stranger paying 10 por cent. Great care has been taken in our legislation to protect tiro family. In some other countries not only is the succession duty as high as ours, but the interests or tho wife and children of a decoasod person are not nearly so well guarded. In the United Kingdom ostates of over £IOO and under £SOO pay 1 per cent, so that £4 would be payable where in this country there would bo no tax. Succession duty is higher on collateral heirs in the United Kingdom than it is in Now Zealand, and tlio maximum is the same, 10 per cent. In Western Australia the inheritance tax would be, on an estate of £SOO, if tho wife and oliildren woro at the date of decease bona fide residents iu Western Australia £2 IO3; if not £5. In Quaans-land-tho duty on au estate of £SOO left to wife .and children would be 1 per cent, £5. In South Australia there is an exemption of £SOO if the estate goes to wife and children. Strangers • have to pay, as with us, 10 per cent. It is the same in Tasmania. Of the United States all) but ton levy inheritance taxes. Tlio tax varies greatly in somo of them. The amount roaches 12 per cent, 15 per cent arid in one, New York, in tho case of large estates and unrelated or distant persons, an inhorituncy of 25 per cent is taken. The maximum estates duty (15 per cent) and succession duty (10 per cent) is-the same in the United Kingdom as in New Zealand, but higher duties are reached much sooner in New Zealand, while smaller estates up to £3OOO are more lightly taxed here. If wo look round tlio world and compare the taxation systems of this country with those of others we must he impressed with the advantages our people enjoy in this respect. A man may own a homo worth £SOO, receive an income up to £3OO per annum,, and he, will not jay ono penny of direct taxation during his life, nor will his estate on his death if it passes to Ins family. How many countries are there in the civilised world, tho inhabitants of which ore in such a fortunate position? COST OF LIVING.

Tins has increased within the last f-SiV years in all tho countries in the world to an alarming extent. It has been the cause of. much suffering and serious disturbance in many places. The cause is explained in different ways. It is attributed to various causes, but authorities ..who havo investigated it, slate that tho principal cause is due to the increased production of gold, and in consocjuonco the corresponding increase in the exchange value of goods purchasable, by gold. That is, more gold is required for purchases now than when gold was scarce. Whatever the cause the effect is very serious, especially to the poorer members of tho community. All right-thin Ling peoplo are anxious tq find a remedy if possible, and with this object in view the Royal Commission to inquire into the Unemployment Insurance Scheme will also fully investigate tho matter. As far as New Zealand conditions nvo affected I hope valuable suggestions will result therefrom. REMISSIONS. Tho condition of tho revenue warconcessions in cur gift duty, as also those connected with estato duties wlian tho disposition of tho latter is to ft stranger in blood, and I will ask the fiouso to remove the duty on gifts up to £ICOO, and on gifts from liusoand to wife, and wife to husband, as also from parent to child, and up t0.£200 on property left to a stranger m blood. INSURANCE AGAINST UNEMPLOYMENT. I. a 'a of opinion that tho time has arrived when a practical scheme of insurance against unemployment and sickness should be established in this country, and to enable it to be carried out on effective lines I propose to sot up a Commission of representatives of j employers and employees of the dominion to examine into the scheme submitted to the British Parliament by -; ie Honourable O- Lloyd Leorgo, m or< i ei . to adapt it to our circumstances and to make provision i? r ou a scalo that will meet the circumstances of those who, either irom sickness, incapacity, or other causes lind tlion:.selves unablo to obuaiu or ara.il themselves of work, iko nun ter requires to be approached from a broad-minded standpoint, but at the same time with care and caution. Mv loea is that it should be associated with I n-endly Societies throughout- tho domnimn, and that with tie aid of the Government associated with teose bodies a humane and practicaolo scheme can be adopted. ENLARGEMENT of scope of old , AGE PENSIONS. iiio burden . °f life in old ago most heavily on men and women who have u> sunpqrt j ;i indigent circumstances a family of young children, and where a woman over lifty-fivo

years of age, or a, man over sixty, has two or more children below the ago of sixteen, I propose to ask the House to authorise a pension to be paid to her or him at the rate of 50 per cent higher 1 than now paid under the Oltl Ago Persians Act. 1 estimate this will cost about £IO,OOO per annum. ASSISTANCE TO WIDOWS. J. propose to submit a system for the partial relief of widows with children left in poor circumstances. Tho amount to be paid will range from 7s Cd to 10s for tho widow weekly. It will he worked in conjunction with tho old ago pension system.. At present there are about 7000 widows between the ages of twenty-lire and fifty-live in the dominion. I estimate that over onethird of this number would bo sufficiently provided for and would not require assistance, and as one marriage in five is. infertile the number coining under the scheme would bo about 3000. I estimate the amount required for this laudable purpose will be about £55,000 per annum. OIL AND IRON WORKS. It is recognised that New Zealand must do its best to promote tho development of its oilfields and its minerals. Tho institution of these great industries is beset by many difficulties. Among these is the' large amount of capital required, and I feel that all re isenable relief should bo given to these trying to establish these important undertakings. With this in view I propose in connection with ©il plant either to admit it, with tho machinery for tho development of our oil fields, free of duty or to remit it by a provision on tho estimates, or where such machinery can be locally made to meet tho requirements of those industries to givo a bonus to our local manufacturers equal to tho amount of _ tho freight. Assistance must also be given to enterprise seeking to mako our iron oro and sands available for profitable use, and State assistance will be givon in these cases on conditions that the State lias the right of acquiring the iron works and fields on proper conditions if Parliament should deem such purchase desirable. At tho present time the Government has an offer to establish tho iron industry in New Zealand upon giving an annual contribution for a period of forty years. The condition asking for the contribution to bo for a long period of years is one that tho Government is of opinion S should bo reducod, and provision made giving tho right to acquiro such works by tlio Government on terms fair to the j owners at any time on reasonable 1 length of notice boiug given. The alJ tentative is to continue tho subsidy for a longer period. I am of opinion that it is of groat importance to the country that wo should encourage tho production of iron from our ores and ironsand and h.avo it supplied at a rate to our manufacturers that would enable them to successfully compete in tho work of manufacturing articles against competition from beyond New Zealand, lr such a work is put in hand I should expect in a few years to find at least ten thousand men employed in a great industry of the kind. We need for our public purposes as well as for private requirements to have iron and steel available at much lower values than they can now be imported at. This would bo encouraging a great local industry, with tho advantage of keeping the money within ibo country, giving employment to a largo number ot men and giving an impetus to our iron industry, winch at the present is recognised to he most necessary. Should, however, private enterprise not be attracted to tho iron industry on tho inducements I have stated, the Government will consider immediately tho expediency of developing tho iron resources of the dominion as a State enterprise. FINANCE FOR WORKERS. Somo amendments to the Advances to Workers Act will be submitted. The provision limiting' an advance to a worker to the value of his building will bo abolished. To further assist ] tho workers to provide homes for them- | selves, authority will be asked to iu- • crease tho present amount authorised to be borrowed by £2:0,000 per annum, making £750,000 per year instead of £500,000 as at present. These alterations will further increase tho usefulness of the measure. FARMERS’ CO-OPERATIVE BANKS. It is desirable to enable small men or small associations of men, to whom credit is not readily, if at all, accessible under our existing banking system, to obtain it for productive purposes, insuring economy. Tin’s, in fay opinion, can be done by the formation -of fanners’ associations of evon comparatively small numbers. I propose to submit a scheme to enable this to bo done-. These will be incorporated and empowered to borrow money for purposes of loan to thoir mombers on such security as they think fit for productive purposes, but repayment of the money so borrowed will bo guaranteed under proper conditions by the State. This will enable it to be obtained at reasonable rates of interest from ordinary banks, and if not so available, then from other sources. Each member of the association will, subject to proper safeguards and conditions, be liable for tho default of any one of their number. This last provision, it is conceivod, will prevent wasto or abuse of the system. The security for a loan to small farmers under such a scheme is not necessarily, as it is under present banking methods, the value of proporby tho small farmer can offer, but rather the industry, character and skill of the farmer himself. Such a scheme provides for an expert test of the moral risk involved in the porsonal knowledgo tho lending associations will have of tho borrowers, and for a watchfulness secured by a keon sense of collective responsibility of the capacity of the borrower to turn tbo loan to profitable account. Thus the qualifications of tho small farmer for his business become in largo measure the security on which he can borrow, and men with small cr oven no material security can obtain capital. Similar schemes have boeii found formerly beneficial by small farmers in several European countries. They have not only made capital availablo to struggling men, but greatly cheapened tho rato3 at which it could bo obtained. This, too, will tend to reduce any attempt at monopoly which might arise under our present banking system. In Gonnany fifty co-operative banks of one typo alone keep about £100,000,009 steadily in circulation in credits in tho country. Germany has indeed about twelve thousand of such banks in all, and by far tho greatest number are employed in financing agriculture. I have every confidence in stating that as Die result of close examination into tho matter this can be done without risk to ; tho dominion or injury to our financial institutions. FINANCIAL ASSISTANCE TO FARMERS. A system of farmers’ co-operativo banks for certain specified purposes can bo usefully employed by tho family land settlements which I also propose to provide for. These settlements will j be promoted on tho following lines: — j Lands new inaccessible but well suited j' for settlement will be acquired ; by the Crown. Of these there are con- I sidorable areas, both with Native and j 1 European owners as well es areas still ’ Crown land. A schemo oi public works will bo submitted to provide communi- j' cation to these areas by road cr rail, j Applications tor these lands will bo j called for, and the applicants may be j of two kinds, (1) individual applicants j and (2) applicants ns associated set- ’ | tiers. The latter will consist of not 1 ' fewer than ten nor more than twenty- j live men, preferably married men or | ‘ women with fauilica. In neither of these cases will there be allotment by 1 ballot. A careful examination of tbo j applications will be made, and suitable ' areas allotted. Public works Consisting _ *

of roads or railways will be promoted contemporaneously with these settlements, and whore applicants are without the means necessary to enable them ) to carry on the work oi' bringing their farms into cultivation up to the reproductive point settlers will be otiored work on tho roads and railways for either a certain, number cf days a week or a certain number of weeks a month. By this means i anticipate these settlers will bo enabled t-o carry on until tlieir farms are sufficiently productive to maintain their owners. Ample facility will be given, moreover, to these settiers to for in farmers’ co-operative banks, and so obtain capital to help members of the associations. , 1 bis proposal, by eliminating the ballot system, will remove much of tho present discouragement in failure to draw an allotment, and will also check to some extent tho traffic which has here and there arisen in selections under our Land Act. I expect that this system will bo applied to private lauds to be voluntarily or compulsorily acquired from present owners, both. Native and European, and also to large aioas of Crown lands. It aims at promoting the dual purpose of public works development and closer settlement. In order that these assisted settlements may be made more attractive to settlers with young children, a relief telephone system, connecting the settlers with a centre from which medical aid and other urgent needs may bo obtained, j will be supplied by the Government. < STATE NOTE ISSUE. I proposo to ask tluj House to change the system cf issuing bank notes. These will in future, after reasonable notice is given, bo issued by the Government, as is done in Canada and other places. It must be understood that this is not in any way a recognition of paper money in lieu cf the present methods of exchange. Tho proposal is to make a State monopoly of an operation hitherto carried out by private institutions, and will bo based upon tbo principles.of the Canadian system, which has worked most satisfactorily for many years past. .The’ value of the notes in circulation in New Zealand is about £1,600,000. Tho tax on this is 8 per cent. This will, of course, bo lost by the dominion, but the State will gain in other -wajjs. Tho banks will pay gold to th.o Treasury for the notes, and tho State will not have to pay interest on moneys so received. Tlio Treasury must keep a full reserve iu gold coin to ensure stability of tho notes issued. I will submit fuller details when submitting legislation. In case of loss or destruction of tlio notes tho dominion will, of course, benefit. There aro sound reasons for and against tlio change, but on the whole I am convinced that it is in the interests of the country that the issue of notes should be a function of the State. -This can be done with much advantage to the people and without injury or dislocation to the business of too banking institutions of the dominion. REDUCTIONS AND INCREASES. Oviing to a heavy shrinkage of revenue m 1909 I asked the House to adjuot the railway rates for loim distances, and I think, in view of tho satisfactory position of our- revenue, wiese may now be readjusted, and I • propose to do so. partly to the public wjii to the railway employees. . . a vhnv to facilitating and encouraging long distance travel I proposo to reduce toe fares for all distances over J)0 miles the present rates are 1-jd f « r iwt-da® and Id per mile j° r *>econd—class, irrespective of distance. Under the proposal lam submitting tho rate per mile for all distances over 200 miles will be lid per | mile nrst-elass and Id per mile secondI +’i aSS i' The value of this concession on ohm fefi 13 °L tho « xl sti«g traffic will be whole of th ° long-dis--1 ™ fcombdass carriages are being i -Th'fHed from tho present loimit.u- ---! - Hf' oat3 -ii t 0 re ''T silj!G chair seats. ! U ' VI neatly add to the com- ! "j: .“i 0 lar J e - r section of the travelProposals will also bosubto, Luniso for amendments to tho schedule to the Government Railways Act. This will nrortde for raihva 503 ° f P l 7 to oe, ' tai » sections or cSu-di nnd°^ er f (permanent' and about "ao m° !w au expenditure of aoout £OO,OOO over and above the amount required to provide for tho, t *® s accruing under tho Act in the ordinary course'. These scale increases approximate £35,000 and ~akoii in conjunction with tho amount £°sffi)o b ° T', til3 , f £ra !? increase will bo &„o,uuo. Ino alteration m respect to casuals mil be in the directffif of ° minimum pay at the rate of l s Hd'per hours €qU f'i a £ nt 93 pe u da ' v eight "™*, - la keeping with tho recent Post and n ? r r Veme l lt ti ot ' PW in the wovoLrf h le ? raph Department it is wave of lncrease tho minimum teUrlt, t V WflSeS ™ on H tO i>, ro * i* REMISSION OF TAXATION Axm CONCESSIONS IN CHAIiOES It Will bo interesting to note what has been given by way of reduction in taxation and cf concessions in the ?Qin 1C S | C ‘‘' V ] C > 0 I }>T tho Government, since , In Customs tlio savings to the people during that period, and the loss of revenue to tho Government, 'amount to the sum of £5,322,013. During the time I have nad the honour of beinw head of the present Government the reduction m taxation upon the Customs amounted to the sum of £1,764 070 and tho increases to £300,523. ’ Deducting tins from tho amount of the reductions it will be seen that tho not saving to the people bv reductions of < k l , !sto . l ; v ?, amo, ! nt ? t 0 the large sum of winch amount has been saved to the people during my term o. office as Prime Minister. Articles required for the breakfast table, including coftee, cream of tartar, dried fruits, mustard, rice, salt, spices and sugar, nil of which were dutiable, have been placed entirely on the free list Concessions in lares and freights of H 1 ° #7? P ame the amount °f -I, lot),000 ha Vo been granted, and out of this sum the agriculturalists end pastorahsts have benefited to the extent of £650,000. There lias been no increase of rates, excepting for loim distance travel, and this f am dealiim with later on. In addition to the reductions referred to in these two important Departments there have been concessions made to the public in the lost and Telegraph Department to tho amount of £378,745 per annum. Tho total reductions to tho public in the tureo directions named during tho period to which I have just referred amount to £6,850,793, so that thoro who are criticising the Government in connection with its taxation should in order to be fair, not overlook ’tlio enormous reductions that have been made. Tlio amounts stated above have been carefully compiled by each of tho departments concerned, and can bo robed upon as correct. I attach detailed rowirns of same to tho Statement, wmen will well repay perusal by all who take an interest in the wellbeing of their follow men. 1 desire to further point out that during tho sumo period - wio increases of pay and concessions in hours in tlio Railway Department amounted to £8(0,090, while in tho other branches of tho public service the annual increment, of salaries durum the period I have been head of tho Government amount to £348.530, so Ji k I am fairly c-ntitled to say that tio pu.mc service has not been overlooked. LAND SUBDIVISION AND TAXATION OF LARGE ESTATES. During the past five years, since 1 Imre been the head of tho Government, tho number of persons who selected Crown lands amounted to 3200 and tho area taken up by those settlors aggregated 2,692,200 acre.;. I uni excluding from these figures all those who selected pastoral lands and lease* fer short or temporary periods. They, however, in- j cludo tho selections of areas in estates

: purchased under the Land for Settle- ‘ monks Acts, Under these latter Acts ’ tho figures are 1500 selectors placed i upon 442,200 acres. The amount, ex- ’ ponded during the same period in pur- , chasing and subdividing 50 estates for closer settlement was £1.6)6,090, and > the area acquired was 260,872 acres, i Notwithstanding the substantial pro- > gross which has boor, made in the ■ subdivision and closer settlement of the i largest estates in tho dominion the pace > demands acceleration, and I think this can best be effected by an increase in 1 tho graduated, land tax on all estates ’ where tho unimproved value exceeds £100,090. I propose, therefore, to in--1 crease the rates found in tlio present ! graduated ‘scale cn 'estates by 25 per cent, and to allow- owners reasonable ; time to-cut up-their estates themselves to give them throe years before putting the increase into operation. TRADE OF THE DOMINION. Despite the fact that last year was. ’ a record one in the expert trade of the dominion, the year ending March 31 , showed an increase of £52,091 in-value over the previous one, the actual figures . being: ,1911. £2i,543,900; 1910. : £21,191,309. Tho imports, for tho year were valued at £17,713,183, an increase oi' £2,359,001. Present prospec-ts. give me every reason to believe that’ the general improvement will continue and that, the producers of the country and our traders may look forward with confidence to steadily, surely growing progress in tlio trade of the dominion. FUTURE BORROWING.! As I pointed out during last session, tho end of our Public Works scheme is new in sight. The main .arterial system ol' railways will not take many years to complete, and tlio cost of this and the future main roads of the dominion can new he approximately ascertained. The whole should, be completed in a pei iod of fifteen or twenty years. There will be no important. departure from the plan as now laid down. The only question to be considered is this: Are the works to be completed out of revenue or by loans, or partly by one and partly by the other method? Finished these necessary works must be. iTo discontinue would be inconceivable | folly. They are necessary for development and will go on. It.would, in my opinion, be wrong to throw the whole burden of constructing them on the present generation. It will hand them on to our descendants, and some of the cost should bo borne by them. The most business-like method is to spread the cost over two or' three generations, tho moneys required to be borrowed for finishing them being repaid bv the sinking fund now established. This is fair to us and those who will succeed us., W© must remember that our great neighbour, Australia, is about to enter upon a vigorous policy of railway construction and carrying out other great public works, involving tho spending by’ the different States and the Commonwealth Government of perhaps thirty millions within the next ten years. If. our poliev were slackened, it would mean the loss of many thousands of our best woikers. To allow this, while cur own public works aro so necessary, in order .to round off our system cf intercommunication amongst' our scattered communities, would bo national imbecility. _The policy of tho Government in thi3 will bo to borrow sufficient to push on as quickly as circumstances will permit the railways, tho roads, and other public work:: that- are most urgently required, supplementing the lean moneys each year by as much as can bo transferred from the Consolidated Fund. A full st-at-ment will bo mado later as to tho particular railways, roads and other works now t-_>-mining to bo constructed, and tho estimated cost and. the time required for tho completion of each. It would, in my opinion, be a good plan to hove tho question of what, are necessary railways in each island once -and for ail determined by a commission of members and experts, and that only such works should be completed with borrowed moneys,. Any further sums required in excess of a certain amount per annum should be found out of revenue. This method would givo a finality to our scheme of railway construction, and it is desirable from many points of view. By such a course the country would know what' was necessary over a I period of‘years, and an amount an-' liuaily could, then bo devoted to this purpose. I wish to state emphatically that the Government will cany on a ! vigorous policy of railway construction. Recognising as I do that railways aro reproductive, and that it is of the mostvital importance t-o our settlers and our business people that the fullest possible facilities should bo given for carrying on the work of those settled oil our land and those intending to settle, that they aro essentials to their successful existence, and that nothing helps to develop business moro than transit facilities and . railways, they prill, consistent with iho amount of money that can ho devoted to thorn yearly, ho pushed on as rapidly as possible. i FINANCE FOR 1911-1012.

There is every reason to hope that the year we are now in will bo a good one. Prices for our staple products are on a satisfactory scalo and trade throughout the dominion is active. There aro comparatively few out of employment. From time to time fiuctatious in tho labour market occur in all countries, and wo may not unreasonably congratulate ourselves upon being comparatively, free here. I therefore

j look forward hopefully to a successful ! year, and I am justified in anticipating that there should bo a substantial surplus at the end of march next. EXPENDITURE. The progress and -prosperity of the country have made such strides that it is- only natural-with the increasing demand for- further facilities in' railways and Postal services, education | and tho establishment cf universal training, that an increased .expsndiI tore of public, moneys will be'required. I This is estimated at £10,136.563, an increase of £793.461 over that of-last I year. Tho increases will be as follows: Permanent Charges . £227,741 Departmental -£565,720 . Tho permanent charges - must !, increase. * The interest on each sum borrowed is, of course, a permanent Mucrease. The principal increase .is for interest, .£205,104: Departmental.-, expenditure will reach £565,720 in excess of that for 1910-13. The principal increases aro:— -. . - £ Railways . . . .... . : = - 104.187 Education - •- - -. •• ' 93.150 Defence . . .... 171.63-5 REVENUE;. J estimate tho revenue for 1911-12 to be £10,4*29,010, beingi£l3l.9B7 more than that last year. I estimate the -revenue as follows : • .v' ' , o . .. Railways . ..-7 -- ■ 3,-525,000 Customs -. . .. . . ■ 3,000,000 Stamps . . . . .- ,860,000 Post and Telegraph- re- . - venue .... . 1,095,000 Land tax . . • . . 635.000 Income tax ... .. 410,000 Beer duty . - . 115,000 Registration and other fees.'. 104,315 Marine. . . . . • 45j000 Miscellaneous ... 338:150 Territorial revenue .. • 238,550 Endowment revenue . . ■ 62:365 L-OAN FOR PUBLIC WORKS PUR- . POSES. .' ■' Works which should be gone on with during the next twelve months, will'irequire so much money that an .additional loan will he necessary. The balance in tlio Public Works Fund on March 31 was £1,140,045. This will be strengthened, by transferring £500,000 to it from the Consolidated Fund- .As stated, however, this will not .suffice; for the prosecution of urgently required works, which must be vigorously pushed on, and 1 therefore propose to ask Parliament to authorise, a loan- of £1,500,000 for the construction-of railways, roads, bridges and . additions tc open lines and other public works, v'. summary. ; 1 focus what is now proposedßemissions in railway fares; assistance '.to widows of railway employees; additional funds for workers’ houses.; .remissions in gift , and estate duties; State assistance to iron and oil industry; advantages to ok! age .pensioners;. Government aid to farmers -through'-co-operative, banks; State note issue; electrification of Lyttelton tunnely.Jiarnessing and utilisation’ of Lake IVaikaremoaua: purchase and settlement-of Native lands ; irrigation ; prosecution of roads; development of mining; national' providence; public service classification ; defence on practical basis; land for settlers under the Land Settlement Finance Act; insurance against unemployment; cheapening cost of living; financial assistance, to associations• of farmers ; improvement to public service (other than railways and* postal service) on Supplementary Estimate; increase of graduated land tax .on large estates; land settlement; progressive railway, reads and public works policy; advances to settlers, workers and local public bodies; promotion of- agriculture throughout the dominion; Establishment of a State farm in tho South Island : maintaining the stability of "ST® dominion’s finance.

I have new about finished my, task. I sum up by. pointing out that a" strong financial position exists in tho country. There is an abundant supply of money. Tho dominion generally* is* vory prosperous. _ The development- of the-coun-try requires as much attention now as it- iinfi done *or voftrs past. Ways and means enable tho prosecution of our public worms to bo.carried on vigorously out prudently, as suggested.. ■ and these will bo shown in detail bv my coUoaguo at an oarly date- in tbe Rub--1,0 Works Statement. As railways, ionus, bik.vjos .and tolcpthoiiGs arty■•too;Hired ni various parts of tho* country It is obvious that until these are .reasonaoly provider, lor. our people further loan money is necessarv. So long a? it is m reproductive works, as tho gient bulk of it is, there is no valid ground for fear. No one can deny-ihnt money advanced to our settlors, workers, local public*bodies and for the nuro chase ot land for settlement is of groat value to those for whom, it is obtained li the country- is satisfied, and I feel sure it is, that this policy is a good one i? P ro ffcute. them I ask with confidence tnat. tlio proposals I have now , the honour to submit may bo agreed to. in that case I am confident that-'by carrying them out with courage and determination tho prosperity of tho dominion will continue to. incroaso on broad and solid lines. Such a policy* aided by the individual efforts of thg people, will command success and-de-monstrate to bur descendants tii© wise mid strong laith we liave in the future °f X « v Zealand, a country that has already accomplished much, and: is destined by Providence to become a con|picu°us star in the constellation. 0 ? t-.at .form tlio British Empire-