The Times WEDNESDAY, MAY 26, 1937. The Dominion’s Finances

Manawatu Times, Volume 62, Issue 123, 26 May 1937, Page 4

The Times WEDNESDAY, MAY 26, 1937. The Dominion’s Finances

A budgetary surplus of £472,000 is a satisfactory outcome of the Dominion’s first Labour Budget. It is neither too large nor too small. The year’s returns from the point of view of a balance are gratifying. The estimated surplus of £SOOO looked rather too fine for comfort, but the realised result continues the New Zealand tradition of substantial Budget surpluses. The most striking feature of the returns is the revenue buoyancy. The folio wing items exceeded estimates:—Customs, up £099,000 (4 per cent.) ; beer duty, £72,000 (10 per cent.) ; sales tax, £145,000 (5 per cent.) ; and income tax, £619,000 (10 per cent.). Bather strangely, highways revenue, derived largely from petrol and tyre import taxes, was £9OOO below the estimate. Stamp and death duties were likewise lower. The latter are notoriously liable to vary from estimate owing to the way they are influenced by a few large estates. The deficiency from estimate here seen, £47.000, is only 11 per cent. A single large estate extra might readily have converted this to a surplus item. A most curious variation from the estimates is the actual return from land tax, showing a deficiency of £252,000; being no less than 20 per cent, below estimate, it would appear possible that in estimating returns from this source Treasury officers failed to allow sufficiently for the great drop in property values that has diminished land assets by millions of pounds during the past seven years. Balancing excesses and deficiencies of taxation revenue, the net outcome was a surplus over estimated returns of £924,000. Due to an unexplained deficiency in interest returns, the final excess of revenue was reduced to £SO,OOO. Interest returns were estimated at £2,530,000, but £1,819,000 was received. The deficiency was no less than £711,000, approximately 28 per cent. This appears very bad budgeting indeed. That the estimate could be so far out is difficult to understand. These returns would be derived almost entirely from housing and land. The improved conditions claimed for the townspeople should have enabled them to meet their obligations and pay off arrears to some extent. Farming has enjoyed the best returns, gross, for many' years. The matter is extremely puzzling and an official explanation would be desirable. Turning to the expenditure side of the accounts, it is found that the year’s Budget surplus is chiefly due to savings on estimates of £387,000. Permanent appropriations, which would appear simplest to forecast, “outrun the constable” by some £243,000. The savings were made entirely from the annual a PPropriations. The chief item was one of £571,000, saved on social services. Those totalled £9,913,000, compared with an estimate of £10,484,000. They absorbed almost 35 per cent, of the whole taxation revenue. Their supply required an average revenue of £lB per head of the whole male working population of the Dominion. Truly a staggering burden! Included in the list of annual appropriations is tile item—exchange £1,581,000. From this it may be estimated that the servicing of our State debts in Britain required £6,400,000. The addition of exchange raises the sum required to approximately £8,000,000 in New Zealand currency. Actually the exchange cost amounts to but 5 per cent, of the year’s income of the Treasury. How vastly would that be reduced were the exchange reduced down to par with sterling! The loss of Customs revenue alone would exceed the past year’s exchange cost by 50 per cent. Budget balancing and exchange reduction are not compatible. Whilst expressing the Government’s satisfaction at the surplus secured, the Acting-Minister of Finance, Hon. Peter Fraser, struck a warning note. “The amount of the surplus is not by any means unduly large In view of the fact which must be borne in mind that for the current year provision must necessarily be made for a full year’s charge on account of increases in salaries, wages and pensions, together with the additional cost of the shorter working week, all of which were introduced during the latter part of the last financial year.” Doubtless the intention of this statement was to check the enthusiasm of claimants for State largesse. There is, unfortunately', in all lands, a considerable proportion of population who appear incapable of the realisation that there are limits to the State revenues. Despite the surplus shown for the year under review, the Budget totals cannot be contemplated without apprehension. Taxation is extremely high and the further raising of its level would certainly bring into operation “the law of diminishing returns.” Then, as the Acting-Minister of Finance points out, this year will see the full effects of the higher salaries, wages and pensions costs and the shorter working week. A further, and as yet scarcely discerned, cloud is that of Defence expenditure. An inevitable outcome of the present Imperial Conference, must be a considerable increase in the Dominion’s defence votes, this may reasonably be presumed to add £1,000,000 yearly to the budgetary expenditure. This past year the State’s expenditure ran to £30,675,000. The current year must go to a higher level again. In no spirit of carping criticism, but in one of genuine concern, the question may be fairly asked: “Where is the money to come from? ’