THE New Zealand Herald AND DAILY SOUTHERN CROSS. FRIDAY, JULY 29, 1921. THE PSYCHOLOGY OF WASTE.

New Zealand Herald, Volume LVIII, Issue 17846, 29 July 1921, Page 4

THE New Zealand Herald AND DAILY SOUTHERN CROSS. FRIDAY, JULY 29, 1921. THE PSYCHOLOGY OF WASTE.

, Iso one who has made a serious examination of the finances of the Dominion can escape the conclusion that the alarming increase in national expenditure admits partly of a psychological explanation." There are obvious rea-sons why the cost of administration should have risen very substantially since 1914. The pound has suffered a violent depreciation. It purchases less material and less labour, and since the State was bound to maintain the standard of living in the Civil Service increments of salary alone account for a considerable portion of the new burden thrown on the taxpayer. Finally, the war has involved an almost overwhelming capital expen- ; diture, and in interest charges and pensions we are paying, and will oontinue to pay, no small portion I th® national income. But when I every allowance is made for these j legitimate increases in public expeni diture there remains a margin — an I appreciable margin—which is sheer wanton, woeful and wicked waste, arising out of the circum- | stance that the official mind is still j labouring under the hypnotism of | war-time finance. In war a nation j spends money as it spends life, to | win and to win as quickly as posI sible. No sacrifices are too great, I nothing is too costly, if it contributes jto victory. Economy for the time j being is a minor virtue, and if the pound is artificially depreciated and

money is produced in a far greate: ratio than commodities the com munity's sense of value is blunted There is created a consciousness o wealth which breeds extravagance A riot of spending spread .ovei every combatant country and per sisted long after the armistie< till it was checked by the reassertion of economic law. Nev, Zealand ' did not escape this phenomenon, but the fall in tht prices of our exports and the tight ness of money have re-establisb.ec individual thrift. Only the Govern inent and the Civil Service "still live in a world of fictitious plenty. Bj laying upon taxpayers burdens almost too great to be borne thej have maintained the flow of monej into the Treasury and, careless of the consequences, they have lived up tc and beyond the national income Playing with millions is an alluring and insidious game. During the wai years vast sums were taken from the taxpayers "in excess of ordinary requirements. There was no necessity to balance the national accounts and there was consequently no check upon departmental extravagance. A fresh demand for money was met by dipping into the annual surplus, and if departments were inflated, staffs enlarged, and new shoots of bureaucracy thrown out in all directions there was the unfailing excuse of a state of war. , This frame of mind now persists nowhere outside the Government departments; it cannot persist much longer there, for the simple reason that the flow of money into the Treasury will shrink. Customs returns are falling, the stamp duty will decline', and income taxation will show a shrinkage. The Herald has already expressed* the opinion that the revenue for the current year will fall to that of 1919-20, when the receipts were a little over £26,000,000. To live within this income an immediate saving of £2,000,000 is required, and since this will, of itself, admit of no reduction in taxation it can be regarded as no more than a stage on the road to economy. Much more drastio pruning is necessary if expenditure is to be brought to a level which will admit of a reasonable reduction of taxation. The country is suffering economic strangulation under its present load oi taxation. The income tax is stifling initiative and enterprise. It leaves in the hands • of capitalists no sufficient margin for the increase oi capital necessary for the recuperation and development of industry. It is mamtaining the cost of living by aggravating everything that tends to make things dearer. It is partly responsible for the financial stringency, because if the Government leaves to manufacturers and merchants less than they require for the conduct of their businesses they must go to the banks to borrow the capital they need The banks, in turn, will either manufacture fresh credit, which means more inflation, or refuse it, which means stringency and embarrassment all round. Taxation must come down because in reality it has exceeded the capacity of the country, and present payments are being maintained only by draining the nation's reserves of economic strength, We are no longer a nat'on with a wide margin of taxable capacity. We are very much poorer because of the war, and until production is placed on a broader basis winch must be a work of years, it will strain all our resources to pay our interest bills and meet ordinary expenditure of the most frugal character. Economy of administration and the energetic development of the latent wealth of the country are therefore essential. Neither will serve without the other. Both are needed to restore the buoyancy of tiie national finances. A comparison of the rates of expenditure in the years ended March 33* 19IS* and shows motsi im,*

pressively than any argument the necessity for the most rigid economy. The figures may for convenience be classified in the two main classes of appropriations :— „ 1915 1921 Permanent . . . . £4,505.177 £12,234.725 Annual . . . . £7.874.625 £15,834,005 £12.379,802 £28,068.730 The increase of nearly £8,000,000 in the permanent appropriations consists principally of interest on war loans and pensions, and must be regarded as a feature of the Budget until pensions begin to decrease or the country is able to undertake a progressive reduction of its debt. There is, therefore all the greater necessity for reducing immediately the annual appropriations representing departmental expenditure, which have more than doubled since 191415. It is exceedingly difficult to say what increase is justified, labour and materials having risen in such varying proportions. The increase in the cost of living may, however, be roundly estimated at 60 per cent, and this is probably a fair standard to apply to departmental expenditure. On this basis the departmental expenditure should be about £12,600,000, or more than £3,000,000 below last year's level. This reduction must be looked for immediately, with further reductions as the cost of living falls. Nothing less than the most stringent economy in administration will now serve the nation, for it must be remembered that as prices fall the burden of services which must be discharged in fixed amounts of money, such as the National Debt and pensions, will become proportionately heavier. It was Mr. Gladstone who established at the British Treasury the very sound policy of " saving numerous pence to spend effective pounds." No other .policy is possible in New Zealand to-day. It is hardly necessary to add that the pence must be saved in economical administration and that the .pounds can most effectively be spent in public works development, which alone will increase production and spread the burden of taxation over a larger volume of taxable wealth.