THE New Zealand Herald AND DAILY SOUTHERN CROSS TUESDAY, MAY 10, 1927. FINANCES OF THE STATE.

New Zealand Herald, Volume LXIV, Issue 19632, 10 May 1927, Page 8

THE New Zealand Herald AND DAILY SOUTHERN CROSS TUESDAY, MAY 10, 1927. FINANCES OF THE STATE.

The Minister of Finance, giving an interim statement which is in some respects an anticipation of the Budget, contrives to be commendably cheerful in tone. There would be, to some people, a decided temptation to gloomy reflection in some of the cii-cumstances he describes, but Mr. Downie Stewart prefers to emphasise the essential and undoubted soundness of the country. It should be sound, and it is, notwithstanding the assertions of those who, deliberately or otherwise, are doing their utmost to prove the contrary. The Minister is not of their number. His tone of caution, tempered with optimism, makes his survey of State finances interesting. It is more than that in part, where he endeavours to meet his critics halfway. Mr. Downie Stewart challenges attention most when he deals with taxation, with borrowing 4 and with lending. The first of these three subjects is introduced naturally by his discussion of the surplus. He endeavours to show that in budgeting for a greater fall in revenue than occurred, in refusing to consider a reduction in taxation, he was count ; ing all the ascertainable factors, that the unexpected bulk of customs revenue accounting substantially for his half million surplus could not have been foreseen. In other words, it was an unexpected windfall. It sounds plausible, but experience shows that the same thing has hap pened over and over again. Anxiety to balance the Budget is used in justification of a refusal to reduce taxation. The Budget balances, and much more. The usual surplus ap pears, to be described as wholly un expected. It has happened so often before that Ministers of' Finance might now venture to forecast their revenue in a little more optimistic way, give the taxpayer the benefit, and avoid the necessity of finding the unexpected circumstance leaving them in a better position than anticipated.

Having used the customs taxation to excuse his surplus, Mr. Downie Stewart in a few words declines to discuss the pending adjustment of the tariff. This is regrettable. It is the one point on which he might have taken the country into his confidence, at least as far as the general nature of the change goes. Obviously more than minor alterations are contemplated. A lead as to whether increases or decreases in the level of customs taxation were intended would have been valuable. If the duties are to be lowered, early information on the point would be about the best possible corrective to over-importation between now and the time when the new schedules are announced. It would tend more than anything else could to produce that reduction in the bulk of importations which is needed at a time when exports are bringing smaller returns, and producing, in conjunction with heavy overseas buying, an unfavourable trade balance. Relief in customs taxation is desirable in every way. This would be the worst possible time to increase it. The probability of a balance being narrowly secured in the year's accounts, or even not being secured at all, was the excuse in the last Budget for failure to reduce taxation. The estimate was too cautious, and the excuse falls to the ground. Even without the half million surplus which the accounts, actually produced, the Minister does not allow for the credit balance of well over £4,000,000 with which he started the year. The practice of keeping so huge a sura in the accounts has grown recently without any justification. That fund might have been drawn on to relieve the taxpayer. It is still available, and could be be put to no better use. A measurable. reduction in customs taxation would be the best form of relief the country could be given. An announcement that it was to be made would have given the Minister's statement a feature it now lacks, some hope and encouragement for the individual, whose prospects are not exceedingly bright, measured by Mr. Downie Stewart's survey, with all its optimism. It would have sweetened all his arguments about the country as a borrower and a lender.

In defending the Government against the charge of Excessive borrowing, the Minister quotes all the undertakings to which it is committed, and asks if they could be discontinued. So far as it concerns great development schemes like those fop electric power, the answer must be emphatically in the negative. They must be prosecuted to the end.

In any event the financial commitments they involve were endorsed by the country long ago. .Another service which calls for .much borrowing, according to his survey, is the provision of cheap money for country and town. All the Minister says about the farmer's difficulty in finding accommodation from the private investor is unfortunately borne out by fact. The State, in coming to his rescue, should be assured that its ad/ances are applied to development, as Mr. Downie Stewart suggests. Assuring itself of that, it is justified in filling the breach. When it comes to advances for housing the position is rather different. The system of looking to the Government as the only source of money for house building has been overdone. The proceeding would not be so bad if there were not such an infinite number of other calls on all the loan money that can safely be raised. In addition, application for a Government loan has become a regular lottery, the demand having grown so enormously beyond the possible supply. Reduction of the limit from the absurd sura of £3500 to £I2OO has been a move in the right direction, but the State might go further in declining to provide easy money for those who should make their financial arrangements in other ways. The State has too much on its shoulders already without this task. It is not justified in utilising valuable credit for a purpose for which, as the Minister says, the cities might them selves supply the funds by some form of investment., Here is a direction in which the demand for loan money might be lessened, with a diminution of the enormous calls on the Government for finance, as described in detail during the Minister's statement.