THE New Zealand Herald AND DAILY SOUTHERN CROSS. SATURDAY, SEPTEMBER 6, 1919. THE FINANCIAL POSITION.

New Zealand Herald, Volume LVI, Issue 17258, 6 September 1919, Page 8

THE New Zealand Herald AND DAILY SOUTHERN CROSS. SATURDAY, SEPTEMBER 6, 1919. THE FINANCIAL POSITION.

The preparation of the Financial Statement for the first year of peace has been entrusted to Sir James Allen. The task presents many difficulties. Four Budgets have been written in terms of war. Sir James Allen has now to restore the country's finances to a peace footing, to overhaul the methods of taxation with a view to relieving the demands upon the taxpayers while preserving adequate means to meet the war debt charges, and to develop the Dominion's resources. A review of the finances of the war period may be simplified by confining it to the last four financial years. The finances were not placed on a war footing in 1914-15; the expenditure, in comparison with later years, was small; no special measures were taken to expand the public revenues, and the funds required for war purposes were obtained by advances from the Imperial Government. The period of war finance corresponds with the regime of the National Govment. It has been marked by growth of the war bill from year to year, increases in taxation, and the raising of war loans. The most notable result, so far as the Consolidated Fund is concerned has been the accumulation of surplus revenues exceeding £15,000,000, as the following table shows: —

The balance carried forward from the 1914-15 account was £149,047 ; in addition sinking funds amounting to £14,960 were set free in 1915-16 and 1916-17. The accumulated balance was therefore on March 31 last £15,239,561, of which £12,021,529 was invested in London in Imperial Government securities as a special reserve " to meet any possible sudden demands resulting from the war." The disproportionate increase in revenue, beyond current requirements, is demonstrated by reducing the figures to a percentage basis. During the three years ending March 31, 1914, the average expenditure, including transfer to the Public Works Fund, was nearly 95 per cent, of the revenue ; in 1914-15, owing to the unexpected demand on the fund, it was 99.41 per cent, of the revenue. Since then the practice of devoting the major portion of the year's balance to public works has been suspended. The annual expenditure and the surplus have been equivalent to the following proportions:—

The policy of the National Gov- ! ernment has been to meet all expenI diture for war purposes out of loan [ moneys. The only charges imposed upon the Consolidated Fund have been interest and sinking fund payments in respect of war loans; payments of : war pensions; and the additional cost of administration arising from temporary falling-off of revenues and such additional charges as bonuses to the Public Service. The whole cost of the military —recruiting in all its aspects, training and transport of troops, and maintenance of the forces in the field—has been charged to the War Expenses Account, the revenues of which are almost entirely from loans, the small balance representing patriotic donations. With a single exception, that of pensions. the expenditure from the Consolidated Fund, attributable to the war, cannot be exactly determined. The total payments in war pensions during the four years have been £1,908,858. Interest on war loans has amounted to approximately £6,000,000. Otherwise the increase in expenditure has arisen from causes which are partly attributable to the war but had no direct relation with the country's military effort. Thus the Defence Department, so far as the Consolidated Fund is concerned, has cost less during the four years than before the war. The two revenue-producing departments —railways and post and telegraphshave, with the aid of war taxes on fares and fees, made much larger contributions to the public funds than in pre-war years.

During the past four years, only 80 per cent, of the total revenue has been expended; and of the receipts 58 per cent, has been derived from direct taxation, without reckoning such taxation as the railways and post office have collected. The task of the Minister for Finance is now to restore the financial position to a peace footing. The destination of the accumulated surpluses is a matter for deliberate consideration. Future revenue collections can be brought into closer approximation to expenditure, and the way thus prepared for material reductions in taxation. It is, of course, impossible to return to the pre-war basis, since the country must now meet an annual liability for pensions of about £2,000,000 and debt charges of upwards of £7,000,000, or more than double the expenditure on this head in the first year of war. The whole system of taxation will presently require revision, but in the meantime, the country will probably be well satisfied if the Treasurer adopts a cautious policy, and provides for a partial remission of taxation, leaving the complete adjustment until next year. There should be little difficulty in dispensing with those war taxes which have directly added to the cost of living, among which are the primage duty of ] per cent, on all imports, the war-tax on letters and telegrams, and the duty on tea. The tax on amusements should also be discontinued as soon as possible. Whether or not the Minister is able ! to reduce the taxation of incomes, there can now be no justification for I

distinguishing between " ordinary" and "special" duties. They should be assimilated in a single schedule, and as a result, the benefit of the deductions for children, insurance premiums and payments to friendly societies extended to the whole assessment. The year with which the Budget will deal shows a balance of £3,678,773, of which over £3,000,000 was in the Treasury on April 10. Part of this sum should be available for public works, permitting the Minister to resume the former practice of contributing from revenue towards the development of the country.

Revenue. Expenditure. Excess. 1915-16 £14,507,530 £12,493.107 £2,01» 1816-17.. 18,355.194 14,058,770 4,r9(i'.42^ 1917-18 20,206,222 15,120,288 5,0 5 9M 1913-19 .. 22,352,372 18,673,639 3,678,773 Totals . . 75,421,318 60,345,764 15,075,554

Per Cent, of Revenue. Expenditure. Excess. 86.11 13.89 1916-1/ 76.69 23 41 1917-18 74.83 25.17 1918-19 ... 83.54 16.46