THE BUDGET.

New Zealand Herald, Volume LIX, Issue 18170, 16 August 1922, Page 11

THE BUDGET.

TAXES U WjEANQED

DEFICIT OF £1,038,215,

DRAWING ON SURPLUSES,

GRANT FOR PUBLIC WORKS.

DEBT REDUCTION PLAN. [BJ TEIXGBAVH.—SPECIAL SJEPOETEJL.] WELLINGTON, Tuesday. The Financial Statement was delivered in the House of Reprijsentativcs this evening by the Minister for Finance, the Right Hon. W. P. Massey. After setting forth the details of the revenue and the expenditure for the past financial year, Mr. Massey stated that as a result of the ecoMomies introduced by the Government, the rapid annual increase in expenditure had been checked. This was illustrated by a statement of the expenditure for the last nine yearii, showing that the increase in 1921-22 was £398,108, as against £4,287,2136 in the previou3 year. For the last year interest and sinking fund .charges increased by £610,685, and scale increases to the salaries of State employees amounted to £226,445, The small net increase for the year is, however, more than set off by an asset in the reserve stock of coal held by the Railway Department. "The decrease in the rate of expenditure is definite," ' said Mr. Massey. " Conditions, however, are such as to make it imperative that the present rigorous policy of economy must bo adhered to, for safe finance demands that public revenue and expenditure should balance. Future expenditure must be subject to careful review, and comtant pressure applied to ensure that money is spent wisely, also that, the State receives full valne for its- expenditure. The rapid fall m "the price of oar primary products had a marked effect upon the year's operations, but the situation improved with the increase in values. While it would not be prudent to assume that the improvement will continue or that an early return to normal conditions is to bo looked for, I am confident thai the worst, has been passed." A summary of the years operations oompires as follows with the Estimates for the current year, set forth, in the concluding portion of the Statement;—

1921-22. „ im2& ■ Actual. Estimate. Decrease. UmBM. t • £28.137.007 £26.5150.000 4L877.007 KSitare 28.408.833 28.188.215 278.623

DeEcit • • £339.831 JEL938.215

The deficit of last year was reduced to £279,831 by the repayment cf £60,000 previously advanced to the Southland Electric Power Board.

The Accumulated Surpluses.

The accumulated surplus at March 51, 1921, was £23,671,209. Of this amount £15,300,000 has been invested, £560,011 teed to redeem maturing debt, and £279,831 taken to balance the deficit on last year's accounts, having a bakuice at April 1, 1922, of £7,531,367. Following are details of the investments :—Discharged soldiers' settlement £13,500,000, and depreciation fund account, £100,000; transfer to Public Works fund (1920-21), £500,000; reserve fund securities account, £1,200,000.

Current Year's Estimates. The following estimates of the current ve&r's revenue were presented, the corresponding receipts in 1921-22 being given for comparison :— 1922-23. 1921-22. Estimate. Actaat. £ £ Customs „. ». 6.160,000 6.095.436 B«i duty .. .. 660.000 458.898 fauways •• •• 7.200.000 6.683.236 Stamp and death duties 2.726,000 3,444,504 Post and telegraph .. 2.766,000 2,748.481 Land tax .. .. 1,500.000 1,637,816 Income tax . . . . 4.100.000 6,002,887 Begistration and other „._.__ fees 147.000 146.548 Marine . .. .. 52,000 51.849 Miscellanooua ~ L 400.000 1,410.478 Territorial .. • - 202.000 200,697 National endowment 105.000 102,481 Departmental and other leceipts .. .. 242.000 143.596 Total ~ ..£26,250,000 d 28,137,007 The expenditure is estimated at comprising permanent charges £13,026,689 and annual appropriations £14,911,526. The former comprises civil list, £29,831; interest and sinking fund— ordinary debt, £4,315,667, war debt, £4.667,437-—£8,933,104; pensions—civil and MiUtary—£l,o6l,o96, war, £1,650,000 --£2,711,096; - under other Acts, including subsidies for social services, £1,302,658.

Meeting the Deficit. Air. Massey stated that to the estimated revenue he proposed to add £3 000.000 of the excess customs revenue of 1920-21 specially reserved for the purpose of meeting the Inevitable effect upon the revenue of the years immediately succeeding the period of over-impor-tation. The net surplus brought forward from last year **s £7,531,367, including excess customs , revenue. Securities representing £1,600,000 ' temporarily invested in the railways authorisation improvement account aire also included. He proposed to transfer £1,250,Q0Q to Public Works and other developmental accounts, thus Teducing loan requirements for the year and at the same time making eubBtantiaJ provision for unemplovaient. The estimates for the year may be summarised as follows :,— £ ■ £ Balance at April. 1222 7.531.357 Est.imu.ted revenue .. 28,250,Q0Q £33,781,367 Estimated expenditure 27,938,215 Supplementary estimates 250.C00 Traubf er to public works 1,250.000 £29,438,215 Estimated c&sli balance at March 31. 1923 .. .. .. £4.343.162 This balance will be available during tho ensuing year to cover the margin between expenditure and revenue, and to meet with regularity the Dominion's commitments without incurring heavy interest charges prior to the receipt of tho land and income tax receipts.

Reviewing tbo past year's trade, Mr. Massey presented a return, showing that the imports in 1921 amounted to 1,719,201 tons, compared with 1,923,383 tons in 1920 and 1,538,755 tons in 1914- It is doubtful if the volume of imports this vpar will exceed that of last year. On this assumption, had it not been for certain increases in the duty on luxuries made by the new tariff, we would, in view of the reduced prices of most daises of goods, have expected this year to collect much less revenue than during 1921-22. Under the new tariff the duty on spirits, was doubled and that on tobsxico was increased by over one-third. The full effect of r the duty on spirits will probably not be felt during the current financial year, because merchants, in anticipation of the new duty, cleared abnormal quantities at the old rate, and there are ptill considerable duty-paid stocks in hand. Large concessions of duty were made last year in certain classes of machinery and appliances necessary for industrial development and other goods. On the other hand, a number of items were added to the list of goods liable to preferential duty, and until traders are able to adjust their businesses and obtain their supplies from British sources it is likely that there will be a slight increase in duty owing to the continued importation of these goods from foreign countries. The amusements tax fs expected to proouca £60,000 additional this year. Referring to land settlement, Mr. Maseoy said that over 400,000 acres of Jand are now open for application by the teneral public, soldiers having preference, to believed thaj impacted prices vjlj be

followed by an increased demand for land. The Government policy of encouraging and facilitating settlement will bo rigorously pursued Two large Moots nave been prepared for settlement under the wjaste-landsrdevelopmnt system—the I ■ Rl 7*f ll . ead » containing some 10,000 acres, subdivided into 65 sections, and another area between Rotorua and Taupo. Loans totalling £19,744,950 had been made to discharged soldiers, and repayments oi principal left £18,171,630 outstanding on mortgage. Instalments totalling ±,26,470 had been postponed, and arrears of interest and principal payments amounted to £385,845! I small percentage of men who from want of experience and other causes would not succeed even under favourable conditions are gradually gmn g up their holdings and seeking more suitable employment. Repatriation Nearly Complete. The work of re-establishing discharged soldiers in civil life, -which has been proceeding for over three years, is Hearing completion, and the early absorption of tbis special branch has been arranged. A great measure of success has been aitaimsd in what was admittedly one of the gravest tasks confronting the Government at the conclusion of the world war. Up to March 20 last, 26,854 men had been placed in employment, and tho number awaiting employment- at that date was only It has been necessary to make unemployment sustenance allowanced in only 188 cases of hardship during the past two years, and the total amount expended as 4 out of work "' pay is but £5536, or an average payment of Is 4d per demobilised soldier. Training was arranged for 7417 partially disabled soldiers, apprentices, etc.. and 6897 of these have finished their traimng No less than 91 per cent, of this number completed the full course laid down, and were absorbed by the industries in which thoy had been trained. The amount expended on training and sustenance of men during training is £382,022, an average cost of £55 for each completed trainee. Loans under the repatriation scheme amount to £1,803,194, of which more than 50 per cent, has been repaid. The expenditure on education services from Government sources during the year was £3,446,113, including £565,670 of loan money on buildings, and, in addition, revenue from education reserves,,, £79,800 was spent, making a total of aliout £3,526,000, as compared with £1,420,000 in 1913-14. The increase in the past eight years has therefore been 148 per cent. Provision has been made for £350,000 to be available during the current year for land and school buildings. Every endeavour has been made to curtail expenditure without seriously affecting essential services. Economies have so far resulted in a total estimated annual saving of £125.000, including £105,000 from the first reduction in the cost-of-living bonus or increase. Under the Housing Act the number of dwellings provided during the year -vraa 297, the expenditure being £228,544. The future operations of the Government in connection with the building of homes for workers should be in the direction of gt anting financial assistance to enable them to build for themselves rather than in building for subsequent disposal on application. ; and it is proposed that this be undertaken by the State Advances Office instead of by the Labour Department. Pensions and Social Services. The cost of war and military pensions was £2,791,184, the liability for thei current year, including cost-of-living allowances, being £2,639,273. "The policy of our pension system and its, increasing obligations on the public revenues has teen receiving my special attention for some time," said* Mr. Massey. "The expenditure on old-age, widows, and other civil free pensions has, in the last seven years, more than doubled—mainly the result of additional benefits and concessions from time to time. In reviewing the capacity of the State to meet £hese charges it is necessary to look at the proportion to the whole, of these and mmilar r.on-revenue-producing charges, which can [be termed "social services," and which are gradually overweighting the ordinary [revenue. If we take pensions, education, publio health, special Acts, etc., interest ard sinking-fund charges, none of which can be much reduced as things now stand, i we find that the expenditure in 1921-22 : [amounted to £15,390,776, compared with £4,965,886 in 1914. "Expenditure on other services can bo reduced by rigid economy, but the cost of these JKxaal services can only bo brought to a due proportion of the total by a change in policy. Especially is this so in dealing with pensions, as the present system of annually amending and extending the Acts, means that by a gradual process the charges imperceptibly increase without a due regard to the fundamental piinciples that should govern their administration. The system, moreover, abounds in anomalies —such, for instance, as the payment of higher widows' and children's benefits in the schemes than are obtainable by contributors to the subsidised service funds. I propose, theiefore, to have an inquiry made into the whole question, to ascertain in what directions improvements in the administration, of these important services can be brought about."

Superannuation Bonuses. The authority for the payment; of cost-of-living allowances to superannuated public servants and to the widows and children of contributors to the different State superannuation funds lapsed on March 31, at which date bonus payments amounting to £137,461 had been made. "Notwithstanding the financial stress, I have, pending a further appropriation by Parliament, authorised a continuance of the allowance, in addition to the annual pension for the current year, at the following rates:—Annuitants, in cases of hardship, up to £26; widows, £13; children, £13- These bonuses will necessitate the payment of approximately £40,000, in addition to animal grants to the superannuation funds, totalling £204,000, viz., pufclio service fund £86,000, teachers' fund £43,000, railways fund £75,000, with the prospect of further expenditure to stabilise. I must, however, point out that the object •of the superannuation funds is to ensure an allowance to public servants on' their retirement from the public service relatively to their pay and length of service, not to provide an insurance against death, for which contributors are expected, like other members of the commujiiuy, to make provision out of their own savings. Increased benefits can bo provided only by means of increased contributions.

Rural Credit Associations. I have arranged with the Public Accounts Committee to inquire into the Government's proposals with regard to agricultural banks or rural credit associations. This matter will be taken in hand at once, and the evidence of experts will be heard so .that the necessary legislation may reach the Statute Book during the present session.

Economies and Savings. Reviewing the results of the retrenchment measures, Mr. Massey said a general reorganisation to effect economy must be a gradual process, as Unconsidered savings only lead to extravagance and waste. The duty which has devolved upon the Government is by no means a pleasant one, especially when faced with the absolute necessity of reducing cash grants and services, as well as dispensing with staff, at a time when employment is difficult to obtain, but the balance between taxation and expenditure must be maintained upon an equitable and sound basis. Justifiable and desirable expenditure has had to be postponed, for the simple reason that at present the country cannot afford it. As the adjusting and co-ordinating process is gradual, the full effect of the economies under action and proposed cannot yet show in the annual appropriations.

Reviewing the period from April 1, 1921, Mr. Massey said the estimated expenditure under departmental votes for 1921-22 %vas £16,396,243, and the actual expenditure £15,592,677, showing a reduction of £803,566. The estimates for the current year were £14,703,401, a reduction on the actual expenditure of 1921-22 of £889,276, making a total in departmental reductions over the period of £1,692,842. Expenditure under special Acts in 1921-22 was £4,341,466, a reduction of £332,309 below the estimates, and the pgtimatec fox the current, year, £4,013,754 t

: showed a reduction of £327,712 on last . years expenditure, making the total I economies, under special Acts over the , period £660,021. Adding the departmental • reductions, the total was £2,352,863 . m Continuing, Mr. Massey said the" sav- , mgs in interest and other economies in • course of being effected amount to a considerable sum. Taking interest and sinkt ing fund charges, the position is that had . he during the preceding years albwed . the surplus revenue to be expended on . animal services, not only would the Con- . solidated Fund expenditure have been i much greater than it is, but the interest • and sinking-fund permanent charge? would have increased proportionately. The use i of these surpluses for capital purposes i such as soldier settlement undoubtedly obviated borrowing at heavy costs. As a result he estimated the savings undor this heading as follows:—Savings in interest and sinking-fund charges on £14,560,000, £436,800; on funding Imperial debt, £53,000; by profits on investments, Imperial war stock, £63,150; through deferment of loan flotation, commissions, eta, £51,000; Treasury bills used instead of selling cecuntie3. £93,000. Total, £696,930. Other economies effected, now being effected, and proposed, were as follows:— Due to services reduced and financial adjustments, 1921-22: —Expenditure voided owing to reduced services (including £578,106 duo to termination of butter and flour subsidies, being difference between payment 1921-22 and estimated season's subsidies, £1,000,000), £780,000; amalgamation*; co-ordinations, increased fees, etc., £160,000; improved stores control, £200,000; proportion, not yet operating, of annual rate of total reduction in cost-of-living bonus in terms of Public Expenditure Adjustment Act, £466,000; estimated savings on proposed redemption and cancellation of death duties stock warloan securities, £45,000; by proposed transfer of £1,250,000 from surplus to public works and development iiccounts, £25,000. Total, £1,676,000. The total result was a saving of £4,725,813 on the Consolidated Fund, and £464,606 on the Public Works Fund, and miscellaneous departments and accounts, altogether £5,190,419. Increases in Other Directions. "It is necessary to remember," Mr. Massey explained, " that the estimated expenditure includes the cost of those automatic increases which inevitably follow the growth of population and expansion of business. These aro substantial items which being statutory cannot be avoided. As the country develops new services require also to be undertaken. All of this represents expenditure that cannot be eliminated, and amounts to a large sum, which tends to obscure the effect of the economies. The estimated savings in full in respect of the economies and adjustments in course of operation should in the main be realised by the end of the current financial year. " I do not suggest that this is a complete programme of what is required to be done, as I am convinced that the most important part of the policy of this country for a considerable time to come (along with energetic development) must be retrenchment and economy. Every possible effort on the part of the Government, Parliament, and people should be used in the direction of reducing the cost of government, of reducing the cost of production, of reducing taxation, and consequently keeping the public expenditure within the public income. There will be no satisfaction until this is accomplished, and there should be no slackening-off." Economy and Industry. " I think I can claim, and with reason, that the outlook for the present financial year is very much better than was the case at the corresponding date in 1921," said Mr. Massey in conclusion. "It is true that since then there has been a serious drop in revenue, but there has also been a decrease in departmental expenditure. The withdrawal of part of the costoiMiviug bonuses has naturally caused a certain amount of dissatisfaction, but I am glad to be able to express the opinion that the great majority of those in Che Public Service realise that the burdens which the State is carrying at present are too heavy, and must be reduced if within a reasonable time we are to get back to normcVi prosperity.. " Economy and industry must be the watchword of the citizens of this country for a considerable time to come. So far as industry is concerned there is little to find fault with. Undoubtedly the war and the aftermath of the war have had a very unsettling effect, but the manner in which most of the people of this country have gonei baek to work is beyond ail praise, and this result is shown in the steadily increasing volume of our exports. It should be the duty of all concerned to reduce the prices of commodities required in New Zealand, and to reduce the cost of production wherever possible to enable us to compete successfully in the markets of other countries, and at the same time bring down the cost of living in this country. " There is no royal road to prosperity, and there is only one way, and that is the of industry and co-operation. In a crisis 'such as that through which we are passing, every citizen must be prepared to do his share of the work an?

carry his share of the burden. No other method will bring complete success. In a country like_ New Zealand, with its good soil, good climate, and industrious population, and the best markets in the world ready to receive its products, a financial depression, however severe it may be, cannot last for long. With the steady application of those qualities which" I Believe New Zealanders possess in an unusual degree the time must come, and soon, when the depression will pass away as mist disappears before the morning sun."

OUTLOOK FOR RAILWAYS. POSITION IMPROVED. PROFIT OF £1,036,000. [BY. TELEGRAPH. —SPECIAL REFOBTEB.] WELLINGTON. Tuesday. The financial position of the railways is reviewed at length by Mr. Massey in the Financial Statement. He gives an estimate of the current year's results, which compares as follows with the actual results for last year :— 1921-22. 1922-23. Actual. Estimate. Receipt» .. £6,643,591 £7,200,000 Expense .. 6.237,727 6,164.000 Workimr profit £405.864 ~£h<mfioo Mr. Maasey remarks that last year's net revenue represented a return of only 1.07 per cent, on capital cost, but consideration must be given to the fact that the railways h-iye been working under abnormal conditions, duo directly to the economic effect.of the war. It must not be forgotten that the railways act powerfully in the development of the country and the promotion of its industries, and in pursuance of this policy they daily render services to the Dominion in many cases at below actual cost.

DEBATE ON THE BUDGET.

FIRST SPEECHES ON TUESDAY [BI TELSGEAPH. —SPECIAL BEPOBTEB.] WELLINGTON. Tuesday. Tfiere was an unusually small attendance in the House, especially on the Opposition benches, and also in the pubbc galleries, when the Prime Minister commenced to read his Budget speech this evening. Only five members of the Opposition and three Independents were on the Opposite- benches. Four member? of the Labour Party were in attendance. The reading of the Statement took two hours and a-half. The Prime Minister was applauded at the conclusion of his task. Mr. Wilford, Leader of the Opposition, then asked that the debate on the Budget should not be commenced on Friday but postponed till Tuesday. Mr. Massey said he would like to commence the debate on Friday, so that the important work of the session might be taken without unnecessary delay, but on Mr. Wilford pressing his request, he agreed to the postponement of tie debate ,tiil Tuesday,.