THE POLITICAL FINANCIAL REFORM ASSOCIATION.

New Zealand Herald, Volume XXV, Issue 9120, 31 July 1888, Page 6

THE POLITICAL FINANCIAL REFORM ASSOCIATION.

CORRESPONDENCE WITH THE . PREMIER. We have received the following documents for publication :— The Treasury, New Zealand, Wellington, 13th July, 1888. Sir, have the honour to acknowledge the receipt of your letter of the 2nd instant, commenting upon certain strictures I made, in a speech in the House on the '29th ultimo, upon a report by a committee of your Association on the Colonial Treasurer's proposals for increased taxation. The brief report of my speech is fairly correct, except in one particular to which I shall presently refer, and. which, through its inaccuracy, seems to have proved a stumblingblock to the Association ; but it is greatly to be regretted that you did not wait until you were in possession of the full report, when probablv you would have seen the matter in a different light and avoided falling into further error. My only desire in now writing to you is to place the facts of the case before the Association and the public as briefly and clearly as I can, and with as little comment as possible. I shall not, therefore, refer to any remarks in your letter which do not strictly relate to the question it issue. In my speech I said : — 1. That your statements about pensions were absolutely erroneous. 2. That in comparing the cost of governing in 1860-1, with the cost in 1886-7, allowing for the growth of population in the interval of 27 years, the committee of the Association had quite overlooked the fact, that in addition to Education and Public Works —which they properly eliminated from the comparison, as departments non-existent in 1860-1 — there are now numerous other services maintained by the colony, which in 1860-1 were either also non-existent, or borne upon the revenues of the Provincial Governments. 3. That the services maintained in 1860-1 at a cost of £108,061, were maintained in 1886-7 at a cost of £704,334. being, in round numbers, £22,000 less than the amount which the Association appears to have assumed to be reasonable, taking into consideration the fact, as stated in the committee's report, that the population had increased seven and a quarter times since 1860-1. I shall now proceed to support these three statements by evidence, the reliability of which can easily be tested. Firstly, with regard to pensions. It is said in the report, " the committee regrets that the Financial Statement foreshadows the application of the system of granting pensions and retiring allowances to all those members of the Civil service to whom such rights and privileges did not heretofore extend." It is clear from what follows in the report beginning with the words, "Tried by the past experience of the colony," that the Associaton entirely misapprehended the purport of the proposal. What I said in the Financial Statement was that the Government proposed to bring in a Bill providing for the payment of all future pensions to Civil servants not now entitled to retiring allowances, out of a fund which will be kept up by monthly contributions from all the members of the. Service who are not entitled to the privileges of the Civil Service Acts at present in force, with, perhaps a, small contribution from the State. (See page VII. of ] the Financial Statement.) It must at once be admitted that the effect of such a scheme upon the charges of the colony would be infinitesimal as compared with an extension of the system, limited by the Act of 1871, which the Association erroneously thinks is " foreshadowed," and deprecates so strongly ; and I venture to think that the proposals of the Government in this respect will commend themselves to Parliament and to the country. Then you say that " the principle involved in the giving of pensions has been so vicious in operation as to render the Civil servants entitled at any time to retire upon their pension independent of the Government" This statement is both misleading and incorrect. It is misleading, inasmuch as it conveys the impression that Civil servants are at any time entitled to retire ; whereas they can only do so on fulfilment of the conditions imposed by the Acts under which they entered the Service ; and it is erroneous to say they can retire independently of the Government, because it is provided in the Act of 1866 at least that the Governor-in-Council may not only require an officer who is entitled to retire to continue to perform his duties, but may also require any officer who has retired to resume his duties in his former office, or in any other office for which he is qualified; in addition to which it is made unlawful by The Pensions Act, 1884, to grant any pension or retiring allowance until the proposal to grant such pension or allowance shall have been notified to Parliament. You say, further, "it must be borne in mind that this pretended right to pensions depends not upon any contract, a fallacy sometimes urged, but is found in the ability of the country to meet such demands. ' Here again you are absolutely wrong. There is undoubtedly with regard both to the pensions of retired officers and to the contingent rights of officers now employed who entered the Service prior to the passing of the Act of 1871 (not " 1876," as in your Committee's report), an obligation on the part of the colony just as binding as is the obligation to pay the interest of our public debt. (See the Civil Service Acts.) Secondly, as to my statement that the Association overlooked non-existent services and others formerly paid for by the Provincial Governments, here is the list of the services overlooked and the cost of each in 1886-7. £ Charitable Aid and Lunatic Asylum .. 43,635 Stock Branch of Colonial Secretary's Department 54,542 Property Tax Department — ... .. 21,80-2 Bankruptcy .. .. «. „ _ 7,590 Prisons .. .. — „ ... -. 31,273

Stamp Department « 7,145 Native Land Court .. .. — .. 19,976 Mines Department .. - „ .. 32,693 Permanent Force and Volunteers .. ... 72,097 Police 102,192

£372,945 It is true, as it now appears from your letter, that the Association did not overlook the Mines Department ; but there was nothing in the Committee's report to indicate that it was included. On the other hand, they included in the Public Works Department a sum of £"28,174, chiefly for alterations and repairs of public buildings, which I did not but probably should have deducted, in part at least, as a provincial charge in 1860-1.

I might very fairly have deducted other services from the total of £2,144,654 given for 1886-7 in Mr. Barron's return, such, for instance, as the Telegraph Department, which was non-existent in 1860-1 and cost approximately £100,000 in 18SG-7, also Marine and Harbours and Wardens' Courts on the goldfields ; but I refrain from taking into account in this letter items other than those the deductions of which gave £704,334 as representing the cost in 1886-7 of corresponding services in 1860-1 costing £108,061. Thirdly, here are the particulars of the £.704,334 m the classes named in Mr. Barron's return : — The Governor. £ £ Salary ~ _ 5,000 Establishment 2,500 Government House and Grounds ... 2,993 10,493 Ministers. Salaries .. ... « „ .„ 9,250 Travelling, &c. _ _ 2.355 House allowance .. _ _ „ bsxj Residences .. ... _ _. „ 705 13,036 The Legislature _ _ _ _ 40,572 Forward .. „ .. .. £70,101

Now if you will put together— £ 1. The services in 1830-7, corresponding to the services in 1860-1 .. .. •• '04,334 2. The services either non-existent at tne latter date or paid for by Provincial Governments.. ... -• •• •• 3. Education •• •• f'J.'ZZ 4. Railways •• •• you will get the total actual expenditure tor 1886-7, £2,141,654. In the telegraphic report of my speech, lam made to say : " Still it would surprise those gentlemen to learn that while they asked a reduction of the cost of Government to v 850,000 (I said i' 726,000), the actual cost was only £704,334 even before the retrenchment of the late and present Government was carried out." This is the portion of the report to which I referred as being a stumblingblock ; because it has evidently led you to the conclusion (much too hastily arrived at, however) that I represented the whole cost of the Government to be £704, It should be abundantly clear to you now wnat these figures do represent and the purpose tney were intended to serve. _ , I now come to an error in your letter whicn I regret should have occurred through your not waiting for the full report of my speech. After expressing astonishment that 1 " should have assumed £704,334, representing the expenditure of the Department of the Colonial Secretary, Colonial Treasurer, Justice, Posts and Telegraphs, Customs and Marine, Stamps and Deeds, Native Affairs, Lauds, Public Buildings and Domains, to be the whole cost of Government outside Education, Public Works, and Mines"—an assumption which I repeat was not and could not be made by me —you observe, " all the other items of the return introduced into the comparison are forgotten. These items corrected to date by the aid of the present estimates are," and then you name the following

£ 1. The Governor and establishment „ 7,500 2. Ministers 6,(j(X> 3. The Legislature .. • j®. *05 4. Defence . .. .. . • • - • • 168, 5. Controller and Auditor-General and Assistant 1.800 6. Pensions, &c .. .. * •• 7. Native purposes ... .- — .. '> OUI

Total £242,971 which you add to the £704,334 abovementioned, and get a total of £947,205. By this process you put together actual expenditure of 1880-7 in respect of a portion of the services of that year, and estimated expenditure in respect of a portion of the services for the year current (including some services twice over), then you remark : " Thus the present cost of Government, exclusive of Education, Public Works, and Mines, is £947,213, greatly marring the sweet dream of the electors about an alleged retrenchment of £233,000." This, again, is altogether wrong. it you will look back you will see that you have included twice in your total of £947,213 the following items : — & The Government anil establishment .. 7,500 Ministers .. .. .. •• — •• 6,000 The legislature — •• 30,405 On the other hand, while including Defence £158,666, you have omitted the cost of some eight or nine departments, amongst which are Prisons, Police, Lunatic Asylums, Stamps, Property Tax, Stock, and Native Land Court; and by introducing items of expenditure not referred to in Mr. Barron s return, such as Pensions, and also by alluding to the "alleged retrenchment of 233,000' (which really has no immediate relation to the subject), you have branched off from the question of my strictures on your report of the Bth June. 'On the lines, however, of Mr. Barron's return, the estimated expenditure for the current year, as you will see by a statement which I enclose and will presently refer to, is £1,956,705, or, excluding Education K384.974 and Railways £690,000, it is C 917,731; and I may say in passing that if you will study the tables appended to my last financial statement you will find ample proof of the reality of the retrenchment you appear to discredit. It is somewhat singular that in the face of the fact that the financial statement reported upon by your Committee contained particulars in classes of the reductions of £233,097, the Committee should have written as follows : —" Your Committee have not exact details as to the proportion of the total reduction of 1 233,000 which was secured on the departments of Education and Public Works." The details are given in the statement your Committee reported upon ; and if you will refer to them you will find that the reductions were not confined to the departments you have uamed, but extended to all the departments of the Public Service, and least of all to the Department of Education. With regard to the " axiom that the cost of Government per head should decrease, as population increases," I think you will find on reflection that the effect of the increase of population upon the cost of Government per head, is largely dependent upon circumstances, and that therefore different results under different conditions of settlement must be looked for. Take two extreme cases : say that the whole of the inhabitants of the provincial district of Auckland reside within or in the immediate neighbourhood of the city, as one condition of things ; and as the other, assume that the inhabitants of the city and neighbourhood are dispersed amongst the towns, villages, and country districts—in short, that instead of density of population you have dispersion. It must at once be admitted that the cost of Government per head in the one case must widely differ from the cost in the other. As compared with other countries, the population of New Zealand is very much scattered; and as settlement advances the population will for a time become more widespread. Wherever the people spread, necessities will arise for an extension of public facilities in the form of local post offices, telegraph stations, R.M. courts, police, Hospitals, (fee., which would not have arisen, or at any rate would have been inappreciably felt, had the same people settled down in the cities. I think I have now said enough to justify the strictures I made upon the Committee s report. I have been actuated by no feeling of hostility to the Association; on the contrary, I am grateful to them for their efforts. The establishment of such associations as the Auckland Political Financial Reform Association is a healthy sign ; and there can be no doubt that if they have accurate data to deliberate upon, their opinions will greatly tend to economy in the administration of public affairs. I think, however, that when your committee have thoroughly examined the subject they will very much modify their belief that the departmental Government of this colony, exclusive of Education and Public Works, can, with its scattered population, be carried on on the basis laid down by them, at a cost of i' 728,000, when they remember the fact that they arrived at this sum from Mr. Barron's return of the expenditure for 1860-1, which did not include nec ssarv | services costing, as I have shown above, j £372,9-15 in 1886-7.

Before concluding I would draw your attention to an interesting return (enclosed) I have caused to be prepared, comparing the actual expenditure of the year 1886-7 upon the plan adopted in Mr. Barron's return, with the estimated expenditure for the current year, for the purpose of showing the reductions

Estimated Expenditure of isss-so compared with the Actual expenditure of ISS6-S7, in respect 01' THE FOLLOWING SERVICES:—

" This was the actual expenditure fur last year. l! is difficult to form an estimate for the current year, tln addition to this sum, £12,.>1)0 was charged to loan. This year the whole charge is borue upon revenue, so that the decrease amounts to ioo,4ULi, and the grand total should be £'i4s,yyt>.

effected since 1886-7. In this return I have included in the comparison the charges on the Land Fund, which were included m Mr. Barron's return. You will find that the total reductions in respect of charges on both the ordinary revenue and Land Fund account amounts to £245,996. . T I have only to add that if at any pro© I can be of any service to the Association by furnishing such information regarding the revenue or expenditure of the colony as they require for their purposes and I can properly furnish, I shall be pleased to do so. I have the honour to be, Sir, Your moat obedient servant, H. A. Atkinson. John M. McLachlan, Esq., Chaiman Auckland Political Financial Reform Association, 316, Victoria Arcade, Auckland.

Auckland Political Financial Reform Association. Offices 316, Victoria Arcade, Queen-street, Auckland, July 25th, 1888. . i, Sra,—The Committee of the Association having considered your esteemed favour of the 13th instant, in answer to their communication of the 2nd instant, has instructed us to reply as follows : — , , In the first place the Committee have to thank you for the courtesy and fairness with which you have treated the subject matter ot discussion from your point of view. . It is additional matter for congratulation that your preliminary strictures ana the Committe's reply thereto, based upon the telegraphic summary of your speech, shoui'i have been the means of putting the public at large in possession of your most valuable letter. > ' ' , The Committee place too high a value upon your contribution upon so important a subject to experience any regret at not having awaited the arrival of Hansard before replying to your Parliamentary utterances. With regard, first, to tne Pension Question, the Committee maintain that the logical effect of your proposed Bill is to extend the system, and in effect to repeal section 2 of the Civil Service Act, 1871. It is just as inexorable an economic law that, whether the State contribute to the pension fund by express grant or not, the burden of contribution must actually fall upon it; as that the consumer, and not the importer of dutiable goods, pays the duty. You cannot provide pensions in this manner without casting the ultimate expense upon the colony in the shape of higher salaries. The Committee contend that the system established by the Civil Service Acts is vicious. They direct us to present the question to you from a business point of view, and to leave it to you to consider whether you would act upon the scheme yourself, or recommend it to private employers. First, individual salaries cannot be reduced, reductions must be ratable, extending over a whole class (sec. 6, Act of 1866.) unless therefore an officer agree to individual retrenchment, there is no middle course between allowing him to remain at an unreduced salary and permitting him to retire upon his pension. Again, section 12 overrides the common law of master and servant, and instead of limiting an officer to the salary of a week, month, or year in lieu of notice, gives him the exceptional privilege of drawing one month's salary for every year of service. Section 35. of the Act of 1866, permits Civil servants, subject to ite provisions, to retire upon a medical certificate satisfying the Government of their physical incapacity for further service. Successive Governments have not been hard taskmasters, for several 5 pensioners have shown sufficient physical ; power to enjoy the bounty of the State for 20 years and upwards, and the country may be congratulated on the comparative health of the recipients of this department of State munificence. (See the Pensions Return, 16th May, 1888.) , „ , Constituting, however, the first-class Civil servants a Board for the adjudication of official grievances is a most unique piece of legislation, securing a very close approach to practical independence. (See section 10.) Under such laws it is easy to appreciate the difficulties which you must encounter in attempting to effect administrative economies. The re-entry of officers in the service is clearly subject to section 35; and no person can be recalled to resume duty at a lower salary. (See section 36.) Consequently the covenanted Civil servants are practically independent of the colony's changing conditions.

You claim that the committee are wrong in stating that " the pretended right to pensions depends not upon contract, but is founded upon the ability of the country to meet such demands," and place the payment of pensions on the same obligatory footing as that of the public debt. The Committee would be sorry to place pensions in the same rank as the public creditor.

The only known precedent for that contention has to be drawn from the reign of Charles 11., when the pensioners were paid to the exclusion of the public creditor. The payment of foreign-held bonds is an obligation of international law, which cannot be overridden by Parliamentary legislation. A pension is a privilege created by State beneficence and devoid 01 all the essentials of the most primitive contract. The so-called inviolable compact of 1866 has been amended twice at the least. Moreover it is a dangerous constitutional departure to claim that any law is unalterable. It is a singular fact that the compact made with the village settlers has not been regarded as of equally inviolable character as that with the civil servants. With regard to the remainder of your communication the Committee would point out that you misapprehend the nature of their contention.

The statement that, even, without regarding public works, education, and mines, the total administration expenditure increased between 1860-61 and 1886-87 tenfold, and population only seven and a-quarter times, is not disproved by showing that the multiplication of departments and sub-departments is answerable for the respectable addition of £372,945 to ordinary burdens. The public are fully aware that successive executives on the advice of an interested Civil Service have been ever ready to create new departments on the shortest notice for every administrative absurdity. Your testimony is a valuable admission of the gross over-government from which the colony suffers. Add education, public works, and mines, and the total cost of Government exhibits an increase of twenty fold between the years in question, whilst population multiplied only seven and a-quarter times. Past and present experience suggests the pertinent question, "Can a young nation stand such disproportionate burdens ?" It is a minor matter that you find fault with the statement that " the present cost of Government, exclusive of education, public works, and mines, is £947,213." The figures are taken from your own estimates for 1888-89.

Mr. Barron's return has nothing to do with the calculation. The return appended to your letter enables the Committee to say that they under-estimated the total cost of Government instead of over-estimating it, & £ Substractint; from the grand total for 1888-89, as shown in your return 2,045,150 Education 348,074 Mines 46,183 Public Works (both railways and other services) j _ _ 717,060 1,112,207 Gives the total .. „ .. 939,943 But the following have to be added— The Judges .. ». _ „ 7,700 Native purposes 7,000 Controller and Auditor-General .. 1,800 Pensions, compensations, and gratuities, under the Civil Service Act, 1886 25,000 41,600

Thus making the total cost ... £974,443 and not £917,731. You will bear in mind the argument relates to total cost strictly. Can the country afford this? Compared with other countries by the fair tests of its volume of trade, it certainly cannot. A comparative return on the subject is enclosed for your consideration ; it is decidedly instructive. The now pociimmus cry raised against retrenchment, doubtless, has not your sympathy, and the Committee would welcomc your assistance in attempting to harmonise public expenditure with the colony's means. At the present moment responsible Government stands so discredited by its extravagance, that but few remain loyal to it, and nothing but a strong reforming Minister can check the growing contempt for and distrust of the system. The people look to you to become that strong Minister. The Committee, though differing from you in opinion, direct us again to express their thanks to you for the kindness and courtesy with which you have met them (certainly in literary argument), and have no doubt that the discussion will be the means of arousing a deeper interest amongst the electors in tke colony s affairs. We have the honour to be, Sir, \ our most obedient servants, (Signed) (J 6 ™ Buchanan, Chairman, IH. J. Duncan, Hon. Secretary. Signed by request and on behalf of the Committee.

The Hon. Sir H. A. Atkinson, K.C.M.G., Premier of New Zealand, Wellington.

Brought forward .. . • • • — — 70,101 Departmental. Colonial Secretary « •• — - *^55 Treasury .. ... - " - - *-,889 Justice . •• -- vw./us Postmaster-General and Commissioner of Telegraphs trade and Customs' " 8<\57l Commissioner of Trade and Customs „ 80,571 Registration " - ~ ~ Native .. — — — — — 17J. Public Works - - - - ~ "a" 280 Defence — — — ~ ' Total - - - - - -£701,334

i , i «i . i $ © I 2;g» ! 1 | leg I III S fe g- 15 K « "* j q " w a CONSOLIDATED FUND. ' - ~ '!' 11 Governor— £> I £ £ £ Salary _ „ „ .. 5,000 I 5,000 i Establishment .. .. '' .. .. „ „ „ .. 2,500 | 2,500 j Government House and Grounds _ „ _ 2,903 j 1,450 , 1,543 j 10,493 j 8,050 : 1,543 Ministers— i Salaries _ _ _ _ .. 9,250 j H.COO ! 2,650 Travelling allowances ard expenses .. „ „ „ _ .. 2,:>85 | 11,518 [ 807 House allowances.. „ .. „ „ „ .. «;•.»:> ; 800 i j 104 Residences 705 450 j 255 I 13,030 I 9,303 j 3,772 j 104 The Legislature— Salaries, including extra clerks and messengers : Legislative Council .. .. „ .. ... _ „ .. 3,193 i 2,800 j 303 i House of Representatives _. .. „ „ „ .. 6,031 ] 0,212 i 419 j Honorarium.. .. .. ... .. „ .. ... . 25,040 1 18,250 7,396 ] General expenses ......... _ „ _ 11,102 j 9,213 j 1,850 i 46,572 36,505 ' 10,067 I Departments under the control of Colonial Secretary, less £162,727 and £31,542 _ _ _ .. 128,185 106,130 22,055 Colonial Treasurer .. .. .. ' ,. .. _. .. ; 54,691 | 48,727 j 5,964 Minister of Justice .. .. .. " " „ .. 118.571 I 105,645 | 12,920 t'osttiiaster-Oeiieral and Commissioner of Telegraphs " .. .. 200.040 269,251 j 20,795 Commissioner of Customs and Alanine .. .. „ ... .. 80,751 62,098 i 17,753 Commissioner of Stamps.. .. .. .. .. „ „ .. 30,120 24,911 5,209 Minister of Education .. .. " " " ** " .. 371.60.3 348,974 I 22,620 Minister of Native Affairs .. ' .. ... .. 26,830 13,347 • 13,489 Minister of Mines, add stock, £32,693 and £34,512* L." „ .. 67,235 40,183 1 21,052 Minister of Public Works' ltailwavs ...... _ _ 695,771 600,000 5,771 Other services .. ... ~ 7. " 7. „ _ • • 28,175 27,050 1,125 Minister of Defences „ 11 11 Z — w „ *182,569 158,666 j 23,903 2,074,553 I 1,001,882 I 172,671 Total Consolidated Fund .. .. _ _ _ - - 2,14-1,654 1,956,705 J 187,949 Land Fund. Crown lands and surveys .. .. .. _ _ — — .. 07,836 86,045 : 11,701 Kates on Crown lands 1. — — — — — 36,156 2,400 j S3,756 Total Land Fund _ _ _ _ _ _ _ .. 133,992 88,445 ! 45,547 Grand total .. _ „ _ ~ - .. - .. 2,278,646 2,045,150 j 233,496