THE New Zealand Herald AND DAILY SOUTHERN CROSS MONDAY, JULY 28, 1930. SUBSTITUTES FOR ECONOMY.

New Zealand Herald, Volume LXVII, Issue 20627, 28 July 1930, Page 8

THE New Zealand Herald AND DAILY SOUTHERN CROSS MONDAY, JULY 28, 1930. SUBSTITUTES FOR ECONOMY.

The real character of the Budget is not revealed by the Prime Alinistcr s survey of the position or of his pioposals for balancing the national accounts. It can be discovered only by close examination of his statements and of the associated estimates, and even then, owing to the lack of detail in the forecast of revenue, the actual effect of the new taxation cannot be fully ascertained. There is, however, substantial justification for the conclusion that the j "drastic measures" of economy j which Mr. Forbes declared at the end of May to be essential have not been taken ; that the importance of the savings and adjustments ostensibly brought to the aid of the Budget has been exaggerated ; and that the burden of new taxation is much greater than £1,660,000, the amount to which prominence was given by the Prime Minister. Instead of proceeding with the original determination to confine expenditure to what is strictly essential, the Government has been content with "curtailing such items as can be most easily dispensed with," as his statement in May foreshadowed would be done, and postponing such liabilities as the actuarial deficiency in the superannuation funds and the accumulated deficit in the railways account. He professed to have made savings amounting to £ 1,1-1-1,000 in comparison with last year s expenditure. This comprised £316,000 transferred to the Main Highways Fund, £405,000 of non-recurrent items and £423,000 of actual savings, including £IBO,OOO by the cut in the defence vote and probably £IOO,OOO of vicarious economy by withholding grants and subsidies from charitable and philanthropic institutions. To the aid of the revenue, £90,000 was to be got bv "windfalls" from other accounts and £450,000 from the railways, which are to produce £90,000 more revenue than last year and reduce working expenses by £.360,000 —more than the whole of the savings by all other departments whose votes, apart from the £35,000 annual grant for main highways, are reduced by only £353,000. They have still the consolation of obtaining £250,000 under the supplement- | ary estimates.

The absence of substantial economy is evident from a comparison between the proposed appropriations and last year's expenditure. From the latter it is necessary to deduct the £IBO,OOO rebate of interest granted last year to the Bailway Department, leaving a total expenditure of £20,020,954. The estimates, including the provision for supplementary estimates, which will probably be wholly absorbed, total £25,120,000, nearly £IOO,OOO more than last year's actual expenditure. The amount required for interest and repayment of debt is £313,000 more ; the reduction in all other expenditure is only £214,000. In other words, the contraction in national income is not to extend to the national Budget, which is to be maintained at the inflated level of last year. Since the Prime Minister's purpose was to avoid acknowledgment of that unpleasant fact, he was constrained to omit any explanation of it. The major reason is that the proposed transfer of charges amounting to £316,000 from the Budget to the Main Highways Fund is a mere pretence. It brings no relief to the Budget for the simple reason that all revenue collected for main highways is paid into the ordinary Budget and distributed from it to the highways account and local authorities. Consequently, the additional petrol tax swells- the estimates of Budget revenue and its remittance to the Highways Fund makes a corresponding increase in the expenditure. What the Government proposes to do is to collect £450,000 of additional petrol duty, use £316,000 of it to cover charges on the Budget, and allow the Highways Board to spend the balance on roads for which grants from the Public Works bund would probably have been necessary. The charges have not been removed from, the Budget. Three items have simply been shifted from their proper headings and added to the vote under the Motor Spirits Taxation Act. Perhaps if this had been frankly explained, if the Prime Minister had candidly demanded a special contribution from motorists for the assistance of the Budget, he Mould have given less provocation to protests against raids <>n the road funds.

There w.is a purpose behind this inartistic camouflage. According to the Budget, reliance <>n the existing rates and methods of taxation would have resulted in a decline of £1.450.000 in the yield of customs, land and income taxes. That is the only factor of taxation included in the shortage of £3,095,000 which the Prime Minister proposed to meet partly by "total estimated savings on last year's expenditure, £1,681.000," after which, "allowing, say, £250,000 for supplementary estimates and contingencies, there remains approximately £1,660,000 to be provided out of additional taxation." The last figure docs not include the £450,000 to be obtained from the extra petrol tax nor is it included in the yield from the customs tariff resolutions which are to "produce about half the £1.660,000 additional revenue required." The £450.000 of new petrol taxation is counted in the total of £1,684,000 of alleged savings, so that the amount of new taxation proposed by the Government is. on its own figures, £2.110.000. That is confirmed by analysis of the formal estimates: £2,089.000 of additional taxes will be obtained from customs, motor vehicles, land and income, film hire and stamp and death duties, without counting the extra levies on the totalisator, amusements and bank notes. It must be acknowledged that part of I he additional taxation is required to cover the deficiency in railway earnings, which is to be borne by the Budget instead of be-

inc accumulated in the separate ac-, count, but this takes the place of the paper receipts from the railways and does not explain the inflation of either total revenue or total expenditure. The magnitude of the new taxation is not wholly revealed by the fact that it is to produce over £2,000,000 this year. The new customs and excise duties, petrol tax, lilm hire tax and stamp duties will operate for only eight months of this financial year, so that the annual production from the scheme would be very much greater than two millions. An interesting position would be created next year if the Government succeeded now in bringing the whole programme into operation. In framing the next Budget, it could count 12 instead of eight months' revenue from the higher scale of taxation, and would be able either to sanction a liberal expansion of expenditure or propose spectacular reductions in taxation on the eve of the general election campaign. That is, however, a remote prospect. Of greater importance is the fact that by exaggerating the shortage in the Budget and neglecting to apply any effective measures of economy, the Government is asking for "solid support and co-opera-tion" in Parliament and from all sections of the community to enable it io collect fully £500,000 more taxation than last year and raise the total of its exactions well above £20,000,000.