THE New Zealand Herald AND DAILY SOUTHERN CROSS. SATURDAY, AUGUST 19, 1922. THE BUDGET AND TAXATION.

New Zealand Herald, Volume LIX, Issue 18173, 19 August 1922, Page 8

THE New Zealand Herald AND DAILY SOUTHERN CROSS. SATURDAY, AUGUST 19, 1922. THE BUDGET AND TAXATION.

Study of the full text of the Financial Statement with explanatory tables contained in the appendix affords enlightenment on several minor points, but also raises important questions regarding the character of the Government's policy. In the first place, the estimated reduction of expenditure, in comparison with last year's account, is somewhat larger than appeared from the Budget. Previously it has been the practice to transfer only the net balance of the Printing and Stationery Department to the Consolidated Fund account, but it has now been decided to show both the receipts and the expenditure of this department. If allowance is made for this adjustment, the Estimates, main and supplementary, for the current year, comparable with previous expenditures, total £27,980,090, showing a reduction of £486,748 from last year and of £88,630 in comparison with 1920-21. On the main Estimates only, the estimated increase in debtv charges, £540,000, exceeds reductions under the' heading of Special Acts by £152,000, and the latter amount has to be deducted from the prospective savings in departmental expenditure of £889,276. Nowhere, however, is there a complete explanation of the wide discrepancy between the programme of savings totalling £4,725,000 and the actual figure of £486,748 which is all the Budget promises to realise this year. There is a tradition which leads to conservative estimates of revenue and liberal estimates of expenditure. On this occasion, the Budget creates the impression that full value has been given to every source of revenue, but there is no reason to suppose that there has been any departure from custom in calculating the expenditure. Taking the Budget estimate of revenue at its face value and accepting Mr. Massey's decision to draw £2,000,000 of the excess customs revenue of 1920-21 into the account, it appears that the sum available for expenditure will be £28,250,000. This figure is larger by £123,000 than the actual revenue last year, which fell short by £340,000 of the actual expenditureHence to balance his account this year, Mr. Massey needs to reduce his expenditure by £217,000, and any savings beyond that amount should permit a corresponding reduction of taxation. On his own estimates, there is £270,000 available, but the accounts for the June quarter suggest a more favourable position: They disclosed a reduction in comparison with the first quarter of last year of £1,512,963, and unless some abnormal circumstance either inflated last year's figure or diminished this year's account, that reduction would seem to be a better test of the i Government's economies than the estimates given in the Budget. There is, however, indication of inflation last year in the fact that the expenditure under the heading of Working Railways was then £1,978,000 against £931,000 in the June quarter of 1920. This year the railway expenditure was £1,265,000. Probably none of the other departmental appropriations are liable to such wide fluctuations, and a conservative basis of comparison will be reached by ignoring the apparent saving on railways and accepting the Budget forecast for the whole year in respect of that department. Under all other headings the expenditure in the June quarter was £5,234,000, a reduction of nearly £800,000, which may safely be taken as an actual achievement of retrenchment: The results of %e economy campaign will naturally <e progressive, and it is reasonable to assume that whatever ground was gained in .the first quarter will be maintained and augmented during the remaining nine months. Having begun to economise, 1 Mr. Massey will surely not be satisfied unless every other quarter shows a reduction on last year's figures. Even if there is no further saving, there is apparently a reduction of at least £800,000 for the June quarter, and with the full year's saving of £300,000 on the railways shown by the Estimates, the expenditure should be at least £1,100,000 less than last year's On t!he Budget policy of supplementing

the revenue, there should therefore , be from £800,000 to £900,000 available for remission of taxation. In setting forth the savings effected and proposed, Mr. Massey has confused the position by combining with economies that have actually reduced expenditure from its former- level, those savings secured by preventing possible increases in expenditure. Having pruned off six inches, he calls it a foot because had the twig remained it would have doubled its length. Whether he has not over-reached himself by claiming credit on that score may be judged by contemplating the censure he would have invited by neglecting his pruning entirely. This confusion has entered into all the Government's calculations of its economies, with the unfortunate results that neither the Budget nor the supplementary tables disclose a clear estimate of retrenchment in terms of last year's expenditure, and that Mr. Massey has failed to apply such a positive test of his achievements as the June accounts. As a consequence, the Budget is unnecessarily discouraging and overclouds the Government's ability to reduce taxation immediately. In the last British Budget the Chancellor took the bold step of suspending the reduction of debt so that he might reduce taxation. The Australian Commonwealth Treasurer has also recognised that reduction of taxation is imperative. Mr. Massey, has shown that he has the means to reduce debt, and has outlined part of his plan. He has also claimed that he can reduce expenditure substantially, and the June quarter accounts show that he has accomplished in one quarter much more than he proposes for the > whole year. Yet the logical conclusion of economies in administration and reduction of debt charges—a corresponding reduction of taxation—does not appear in the Budget. Coming from a Finance Minister who prides himself on his optimism, the Budget becom.es by this omission n. most perplexing" and tantalising document.