THE New Zealand Herald AND DAILY SOUTHERN CROSS. WEDNESDAY, FEBRUARY 24, 1932. BUDGET PROSPECTS.

New Zealand Herald, Volume LXIX, Issue 21115, 24 February 1932, Page 8

THE New Zealand Herald AND DAILY SOUTHERN CROSS. WEDNESDAY, FEBRUARY 24, 1932. BUDGET PROSPECTS.

With little more than a month needed to complete the financial year, the condition .of the national accounts has become a question of the moment. There is abroad at present a strong impression that there will be a deficit of considerable proportions—the figure of £3,000,000 is definitely named. Coupled with this is the unusual forecast that next year will see a prospective deficit of from £11,000,000 to £12,000,000 to be grappled with. Such stories are freely told, and the impression is given that they trace back to an authoritative source. If March 31 is really to witness a debit balance of £3,000,000, it means there has been grossly incompetent budgeting this year, despite the two Financial Statements that have appeared. It is true the increased profits from the Post Office, which were to have brought over £1,000,000 into the revenue side, have not accrued—as the Government was warned from the outset they would not. Customs revenue is down, to a serious extent, far below the cheerful estimate made of its yield. The railways will contribute about £IOO,OOO less to the Budget than was demanded from them, a better result than seemed likely in the earlier part of the year, but still a contribution to the debit side. These three items between them cannot account for a deficit of £3,000,000. The rest can only be explained by the possible failure to realise reserves on which dependence was placed, by general over-estimates of revenue, and by gross exaggeration ol the effect of economies. One of them certainly was over-estimated when £1,390,000 was allowed for the effect of the salary cut, this including all Government service salaries, those paid out of loan moneys as well as revenue. It can only have been reliance on such estimates—in plain words, bad budgeting—that has allowed the accounts to get into such a state.

If the current estimates represent unjustified optimism there is no such flavour in the forecast of a threatened deficit reading £11,000,000 or £12,000,000 next year. The only way such a result can be explained is that it must be based on a purely arbitrary calculation of a shrinkage in State revenue, making no allowance for any reduction in expenditure through economies deliberately imposed or economies arising from the lower cost of supplies and similar movements. In any event, a fall of revenue by 40 per cent, or more throughout the accounts is incredible. There are certain items on the revenue side which will not be so affected by the general depression in the country. The contribution of the railways to the Budget should be higher next year than this. The Post Office should also earn enough to pay the fixed interest on its capital. In fact, to make a comprehensive percentage reduction of revenue is not a reasonable proceeding. And even if it were, even if revenue was to fall to £14,000,000 or £15,000,000, what right has anyone to subtract such a figure from current expenditure and declare a deficit in advance 1 Revenue would have to be cut drastically to meet the fall, and there is no use recoiling from the fact. No Government would dare to budget for a deficit of £12,000,000, so what is the use of talking now of such a position a year hence? As a matter of fact, from the unjustified optimism which caused the last Budget to gloss over the real position there has been a swing to the blackest of pessimism, equally unjustified. When the National Government in Britain set to work to deal with the financial position last September, it was said in comment that the country was given the first honest Budget for years. That is what New Zealand wants, an honest Budget, one in which the difficulties are neither evaded nor exaggerated. Then this country requires honest clear-sighted effort to handle what the Budget reveals.

Assuming that a deficit oF £3,000,000 or something like, it is in prospect at the end of next month, that there is a threat of greater difficulties next year—discounting the £12,000,000 forecast — why has the country been reduced to this pass' Because the Government lacked the courage to tackle the position the moment it was returned in strength wholly sufficient for the purpose. There lias been far too much reliance on taxation, which, while universally burdensome and bothersome, is incapable, through falling yield, of bridging the nap and making ends meet. The possibilities of raising revenue have been stretched to the utmost limits. It only remains to deal with the expenditure side, to handle it firmly and practically, and so to balance the Budget as business budgets, as domestic budgets, have had to be balanced throughout the country, by real effective economy. The homely saying about cutting the coat according to the cloth was never more applicable than to the national finances in their present condition. There are one or two other things the Government might do to reinforce the effects of economy. It might, for example, deal firmly with transport competition and thus make the railways pay their own interest, as they arc heroically striving to do under the stimulus of new management. But whatever else there is to attempt, nothing can be a substitute for economy in administration. Plenty of lip service has been paid to that cause in the past couple of years, but the time for mere talk is ended. The fact that the possibility of a £12,000,000 gap between revenue and expenditure on the existing scale is being mentioned, exaggeration though it may be, shows that when Budgets of this character arc envisaged, action, courageous and unflinching, must be taken in handling the finances of the country.