Downie Stewart Presents His First Budget

Manawatu Times, Volume XLIX, Issue 3394, 9 July 1926, Page 10

Downie Stewart Presents His First Budget

No Relief Promised to N Overburdened Taxpayer Economy Urged in View of Adverse Trade Balance In presenting the Financial Statement in the House of Representatives last evening, the Hon. "W. Downie Stewart, Minister of Finance, said : It is gratifying to find that as a result of last year’s operations the Dominion finances have been maintained in a sound and satisfactory state. The surplus revenue of £1,150,000 is largely due to increased Customs receipts, while the expenditure, al- ■ though showing an increase on the previous year, is not , more than was anticipated. The principle of enforcing economy and effecting savings has been sustained, and in this respect I will adheie to the established policy. ;■ p or the current year it will be inadvisable to expect any increase in the gross revenue—in fact, the 1 preparation of this Statement is based on the expectation of a possible reduction. It is imprudent to expand services in reliance on increased revenue mainly derived from Customs duties, a source inherently liable to fluctuations. Inflated revenue due to increased imports cannot be regarded as stable, and surpluses from such a source should, when available, be applied as far as possible to debt-reduction purposes, and not be regarded as a basis for reducing taxation. In this connection, and apart from our statutory obligations to reduce debt, the year’s surplus has enabled about £414,000 out of the Ordinary Revenue Account to be utilised for debt-reduction, besides ensuring the transfer of £500,000 to Public Works Fund.

Revenue. The net increase in the total revenue „ shown as £1,719,345. but £444,788 on account of "interest on railway capital liability” and £314,607 for "interest on Public Debt Redemption Fund,” may be set aside as being only nominal increases. Deducting these two amounts totalling £759,48d, there is left a real increase in revenue compared with that of the previous financial year of £959,860. The principal increases in the regular items of revenue are as follows: Customs 514,4^ Stamp and death duties .. 119,a36 Post and Telegraph receipts 370.833 Against these increases there arc the following decreases: — , Land and income tax .... SC '^ S Miscellaneous revenue .. .. 182,336 Recoveries on account of previous years 60,019 Of the decrease in land and income tax, £68,593 is on account of land-tax and is attributable to the mortgage exemption and to the annual shrinkage due to norma! subdivision and succession of holdings. There were also less arrears to be collected. Reductions were made in the rates of in-come-tax last year of an estimated annual value of £150,000, but it is gratifying to note that this was largely compensated for by an increase in the income of taxpayers generally, the net decrease in* the amount of tax collected being only £17,536. It will be seen, therefore, that, by far the greater part of the real increase. in revenue is due to increased Customs receipts resulting from a greater volume of imports. Expenditure. The net increase in expenditure amounts to £1.807,466, of which £948,417 is on account of permanent, appropriations, and is due principally to the following; — £ Interest charges 264,537 Sinking fund and debt-reduc-tion charges 211.984 Railways on account of isolated sections and branch lines 344.830 .ncreased benefits under oldage. widows, and blind pensions 150.000 War pensions, however, show a decrease of £62,000. The expenditure on non-paying lines Is a new item, which is offset by increased returns from railways. Similarly, the increased debt-roduc-tion charges are covered by the additional receipts for interest on the Public Debt Redemption Fund. The net increase in permanent appropriations is thus only about f 388,000. The increase in expenditure under departmental votes amounts 1o C 559.049. The principal increases were:— £ Maintenance and repairs to roads 53.679 Pensions Department . . .. 55.409 Infernal Affairs 68.796 Naval defence 15 7.847 Defence . . .. 88.387 Electoral 94.375 Education 102.M8 The increases for Pensions and Internal Affairs Departments are largely due to taking over new liabilities on recount of soldiers' treatment and war graves, &c„ consequent on the closing of war expenses account. The increase

for naval defence is owing to the fact that a second cruiser joined the station during the year; while increased provision for military camps and trainees accounted for much of the increase in vote defence. The increased expenditure under vote electoral represents the cost of the general election, while that for education is due to the usual expansion. Summary of Year's Operations. A surplus of revenue over expenditure is again shown on the operations for the year, viz.,— I Revenue 24,735,762 Mot expenditure 23,570,083 Leaving a surplus of . . £1,155,679 The result of the year’s operations is better than was anticipated, as, although last year the indications were for an increase in Customs revenue over the previous year, it was not expected to reach the excess of £584,000 over the estimate. ■While it is a matter for satisfaction that the year’s working shows a substantial surplus it lias to be recognised that the hulk of it comes from sources that cannot be counted upon to persist. TAXATION INCREASES. SOME SIGNIFICANT FIGURES. The Minister presented a table showing the increases in taxation as compared with 1913-14. The amount collected in the latter year was £6,109,046, and in 1935-26 it had risen to £17,022,387. In estimating the per head increase Mr. Downie Stewart claimed that as there was a fall in the purchasing power of the pound, in order to obtain a true comparison between the years mentioned the figures tor 1913-14 should be increased by about one-half. On this basis the per head figures therefore, work out at £8 2s 6d for 1913-14 and £l2 4s 4d for 1925-26. On this basis the increase in the per capita receipts during the period is £4 Is lOd. The first striking fact to be noted is that the cost of the charges directly due to the Great War averages £3 13s 3s, and this accounts for nearly the whole of the increase in Hie taxation receipts per head. The other noteworthy increase is in the total amount devoted to social services, under which heading is grouped health and hospitals, pensions (excluding war pensions) and education Tlic actual charge on taxation for these three items amounted in 1913-14 to £2,120,000, which is roughly about 0110-third of the total collections for the year. During the last financial year no less than £5.735,000, or nearly one-half of the total collodions less war charges, was expended on social services. The cost of defence for i!>2s-2(i includes the expense of the second cruiser which reecnliy joined the New Zealand station, for only part of a year, so this item will show an increase for (his financial year. The net expenditure on Naval defence for lasi year ahonnted to f 111.20;:, increase Of E 157.547 or Or that or the previous year. Setting aside the amount required to cover war charges and social services, which in 1925-26 absorbed fS 19s 4d out of a total of £l2 4s 4cl per

head of revenue collected the remaining' revenue for other services docs not represent in 1925-26 any real Increase over that required in 1913-14. The results demonstrate that economy and control have been consistently applied to administrative expenditure, and that there has been no undue inflation' of departmental services. In regard to existing social services there will, of course, be a steady rise duo to increases in population, but this should be met by increased revenue receipts due to the same cause. Any new departures or extensions, however, can obviously only be made at the expense of Increased taxation per capita, unless reductions can be made in the relative amounts required for other services. Customs And Kxcisc. including the tirc.tax credited direct to the Main Highways Account, the Customs revenue for the financial year 1925-26 amounted to £8,573,388, while that for the preceding financial year was £7,689,192, an increase of £884,196. . The principal classes of impoits from a revenue-producing point of view give the following results:— Increase 1925-26 Over 1924-5 £ i Spirits .. 1.255.618 105,906 Tobaccos, cigars, cigarettes . . 1,385,568 49,386 Apparel and textiles . . , 1,815,396 151,2»6 Motor vehicles, tires and . . parts .. •• 1,154,168 241,601 Other goods .. 2,472,185 29 1 .29 S Primage ... 490,453 38,779 Despite the falling-off in the value of exports for the year—due partly to lower prices and partly to lessened production —the imports did not show any contraction and tho revenue has been well maintained. It will be seen that for the financial year 1925-20 our imports exceeded our exports by £4.328,269. As the favourable balance (i.c., excess of exports over imports) for the preceding year was comparatively small, the indications are to expect sonic curtailment of imports at an early date „ „ . . ■ ■ ' In view of tho state of the »r;»di: balance, and keeping in mind the uncertainty of the future trend of prices of our produce. I have conic to the conclusion that the Customs revenue for the coming year, notwithstanding the normal increase of population, will be substantially less than for last year. My estimate of the revenue for 1920-27 from this source is £7,050,000. Capital Jl.vpcuditure. In tho last financial year, including £500,000 transferred from the Consolidated Fund, a total of £6,924,520 vvas made available for carrying or. the public works and general development programme of the Government The principal items were: £ Railway construction, addi-tions,-and improvements 2,786.100 Telegraph and telephones 931,661 Hydro-electric supply ... 945,573 Main Highways and roads 949.077 Public buildings, Including schools . . . • . . ■ • 849,041 Considering the population of the Dominion, the above is certainly a largo capital outlay for one year. It will be observed however, that the greater part (about £4,700,000) was expended on railways, telegraphs and telephones and hydro-electric power schemes—all of which are productive works w'hich as soon as completed will earn a largo part if not the whole of tho interest payable on the relative portion of the public debt. Public Debt. Tho gross public debt at the 31st March, 1926, was £238,855,478, as compared with £227,814,647 twelve months previously. Of tho increased debt of £11,040,831 State advances (settlers, workers and local authorities) absorbed £6,334,91 3, or 57 per cent. post Anil Telegraph Department. The revenue of the Post and Telegraph Department paid over 'to the Consolidated Fund amounted to £3,077,735. Of this amount, the Postal Branch accounted for £1,414,081; telegrams, £371,250; toll messages, £312,120; and telephone exchange receipts, £980,283. lire telephone exchange receipts show an increase over those for the previous year of about £113,000. The net expenditure out of the vote Post and Telegraph working expenses amounted to £2,406.791. There was thus a net excess of receipts over payments of £670,943. which is available .to cover the interest on tho loan capital of tho Department. The Post Office Savings Bank figures show an improvement over those for tire previous year. There was in 1924-25 an excess of withdrawals over deposits of £830,712, whereas in 1925-26 the deposits amounted to £31,833,621 and tiro withdrawals to £32,602,506, an excess of withdrawals over deposits of £768,885. The position is still improving, as since the end of the year the amount of deposits has exceeded the amount of withdrawals. On the 31st March there were 758,188 depositors, and the total amount at their credit, exclusive of interest for the year, was £46,179,’744. Money-orders and postal-notes Issued totalled in value £5,907,171, and those paid £5,528,814. State Advances Ollicc. During the year £6,371.375 was added to the Capital Fund of the State Advances Cilice, which on tho 31st March, 1926. totalled £33,148,274.

The total advances current at the 31st March, 1926, were £-30,296,537, being* an increase on the previous year of £4,635.977. The new business for the year was as follows: Number Amount £ Loans to settlers .. 4,747 5,409,310 j Loans to workers . . 3,303 2,763,644 Loans to local ... 1 authorities . . 112 157,520 5,162 5,330,474 j As in the previous year, a very large ; sum of money was provided last year j for redemption of mortgages, and j since the monlth of October, 1922, j when it was decided to grant advances for this purpose, 9,533 loans have been granted, amounting to £12,030,265. The resources of the Oflice have been thus largely used to meet the demand for homes throughout the Dominion, and for advances to redeem existing mortgages on farm lands, but it is unlikely that new capita! will be available to the same extent as in the last three years. ESTIMATES FOR 1020-27. NO DECREASE IN TAXATION. In setting out before honourable members the estimated position in tho current year, there are first of all several broad considerations affecting the question 0 £ taxation and revenue that 1 will briefly refer to. As I have shown earlier in this Statement, the absorption of direct and indirect taxation by social and educational services shows considerable proportionate increase as compared with pre-war conditions, while the cost of defence is rising rapidly. These items bring before us some outstanding facts directly affecting taxation. It is, of course, always a question for Government consideration, and particularly since the war, what relief can be given the taxpayer ? Further substantial relief from taxation cannot be expected so long as the war debt services have to bo borne —an uncscapablc burden—which, combined with largely increasing social services, retard any movement in the direction of lessened taxation. In certain quarters there will no doubt be some criticism of the fact that 1 have not seen my way to recommend any reductions >n taxation this year, but I am strongly of opinion that the uncertain outlook in trade ami finance calls for the utmost caution. Moreover, the various legislative proposals of the Government, to be given effect to this year, will impose considerably heavier charges on the Consolidated Fund, and this consideraj tion applies particularly to the proposed scheme for assistance to large families. Indeed, it is possible that it may become necessary lo raise additional money but 1 am now hopeful that tiie revenue will remain sufficiently buoyant to avoid this. Furthermore, X do not think it wise to make any changes in the incidence of taxation which may have the effect of yielding r. lesser tax revenue this year. At any rate, so far as the proposal lo substitute taxation of individual shareholders for company taxation is concerned, I think further consideration of this matter must remain in abeyance until the data now being collected is complete. 1 am also anxious to continue as long as possible the practice of applying surplus revenue to war debt reduction and X do not think relief from taxation at the cost of impairing that policy is advisable. I intend to ask for authority to transfer up to £1,000,000 to the Works Fund as ways and means permit. Estimated Revenue. I have given tho. most thorough consideration to all the expected variations or conditions likely to arise in the nosit twelve months, and I estimate the total revenue receipts Into the Ordinary Revenue Account at £24.266,200. This is based on the present rates of land and income tax and tho expected reduction in Customs revenue resulting from tradebalance adjustments. The expanding business of the Post and Telegraph Department will provide increased receipts. . Estimated Expenditure. The estimated expenditure is £23,956,616. Tho sum is £416,533 in excess of the actual expenditure of last year, a good indication that tho control over vole expenditure is well maintained when it is remembered thoft this increase covers extension ot naval establishment, education expansion and also Departments whose increases are met by corresponding revenue receipts. ■ I 'anticipate therefore, that the position, provided no obligations of a substantial nature due to unemployment or to new legislation fall on the Account during the present financial year, will be:— Revenue .. .. 24.266,200 Expenditure . . 23,956,616 Balance .. • ■ 279,554 This amount will, I estimate, cover supplementary estimates, but will leave very little margin; and. either way, the ultimate result will depend a great, deal on the uncertain factor of imports. With regard lo our secondary industries, I regret lo state that Some of these are not in a nourishing condition. The Government is now considering how far it may he necessary lo render assistance during (he present session to certain industries that are most seriously affected, but it is not proposed to make any general revision of (lie tariff this year.