DEFICIT AND SINKING FUND.

New Zealand Herald, Volume LXVIII, Issue 20890, 4 June 1931, Page 8

DEFICIT AND SINKING FUND.

The official announcement that the national accounts for 1930-31 reveal a deficit of £1,639,111 is misleading without reference to the fact that the year's expenditure included payments of a large amount, out of revenue, in redemption of debt. The net appropriations for sinking funds, repayment of debt under the 1925 Act and reduction of the funded debt to the British Government amounted to £1,638,672, so that the real excess of ordinary expenditure over revenue was only £439. Actur ally, the repayment of debt was effected by drawing upon the balance brought into the account from the previous year. This explanation of the position agrees with the analysis of the British Budget, which disclosed a deficit only because revenue was inadequate to provide the fixed prescription of sinking funds. Actually, debt to the amount of £-15,554,000 was redeemed out of the year's revenue, and even when allowance is made for new borrowing, including that by the Unemployment Insurance Fund, the British accounts show a real surplus of about £7,000,000. Under existing legislation and contractual obligations, it will be necessary to provide in this year's New Zealand Budget about £1,750,000 for debt redemption, but the only source from which debt can be repaid is an actual surplus of revenue. If there is a deficit in ordinary transactions, the statutory debt repayment can be made only by drawing on reserves or by fresh borrowing. In the present circumstances, there is abundant justification for suspending the redemption of debt under the 1925 Act, the provisions of which would require about £1,300,000 to be appropriated from revenue this year. Authority has already been given for the application to that purpose of some £330,000 of reparation receipts, previously reserved fox supplementary redemptions. That arrangement need not be disturbed. But the Budget should be relieved of the balance of £1,000,000 since that sum can be provided only by the imposition of extortionate taxation, superimposed upon the new exactions that will be necessary to balance current expenditure. There is also the payment of about £450,000 in reduction of the Imperial funded debt, an obligation corresponding to that from which Australia has gained a respite for two years. If it is humanly possible, that liability should be met punctually. It is the only contractual obligation in New Zealand's debt redemption system, and its postponement or modification would directly embarrass the British Government, whereas the other statutory debt payments can be postponed without inconvenience to anyone. By the adoption of this suggestion, a substantial contribution toward the solution of the Budget problem will be made in a perfectly legitimate way, to which not the slightest objection can be made.