THE New Zealand Herald AND DAILY SOUTHERN CROSS WEDNESDAY, SEPTEMBER 29, 1937 LABOUR'S SECOND BUDGET

New Zealand Herald, Volume LXXIV, Issue 22846, 29 September 1937, Page 12

THE New Zealand Herald AND DAILY SOUTHERN CROSS WEDNESDAY, SEPTEMBER 29, 1937 LABOUR'S SECOND BUDGET

The first public reaction to Mr. Nash's Budget may be relief because the Minister of Finance imposes no new taxes. The second will take in the fact that the staggering load of taxation is not to be lightened. And the third will be to cast anxious eyes on the unprecedented total of expenditure and to wonder how long New Zealand can keep up the present financial pace. Nevertheless the fact that the Budget proposes no changes presents an element of stability welcome in a community much disturbed latterly by the constant need to make fresh adjustments. It should be noted, however, that while rates of taxation remain the same, the yield is estimated to increase by £3,397,000 from general taxes and by £919,000 from "emergency' 5 unemployment taxes. That is, a total of £4,316,000 extra is to be taken from the taxpayer this year, or a little less than £3 per head. Revenues from all sources are expected to amount to the colossal figure of £39,958,000, and ordinary revenues to < £34,778,000. All the money is to be spent. The sum of ordinary expenditure is estimated at £34,728,000, leaving a surplus of £50,000. So the Budget is balanced, always a cause of satisfaction, although there must be reservations at. the ominously high levels to which the figures have mounted on both sides of the ledger. The Labour Government is running true to the financial form of its prototypes in other countries by providing a most expensive administration. The budget for unemployment offers an illustration. .There are fewer out of work, but Mr. Nash keeps wages tax and levy at the old level and expects to net an extra £919,000. Apart from public works spending, he requires far more to supply a smaller need.

On the score of expenditure, the most arresting item is the sum of £17,367,000 provided for works and development. Most of the money " will go to Mr. Semple for public , works, almost £10,000,000 being for roads and railways, £1,680,000 for public buildings, and £1,053,000 for aerodromes, plant and materials. Of the total only a small percentage can be considered as directly reproductive. Railways finance, for instance, is going back under political control and Mr. Nash has fco allow for a smaller contribution to the interest bill. As for roads, the Government's policy is to restrict their use for commercial or reproductive • purposes. The financial question therefore poses itself insistently. What part of the seventeen millions is being found out of revenue and what part out of loans? Mr. Nash is vague on a point concerning which a Finance Minister should be precise. Some money is to coine from revenues and some from deipartmental loans. If the amounts are not sufficient, "further credit as required -will be made available." I This looseness in accounting in the principal financial document of the yiiiar is - not reassuring. The references to the use of public credit without an explicit statement as to amounts and the method by which they are to be monetised are bound to prove disquieting to the public mind. Mr. Nash should throw light into this dark corner and so minimise apprehension. Social services at £12,168,000 comprise the next largest item of annual expenditure, a rise 'in a single year of £2,255,000, mainly due. to the increases in the number and scale of pensions. Two questions suggest themselves. How long can the taxpayers afford to foot this lengthening bill? Would it not be truer economy and contribute more to human happiness if larger Bums were spent on constructive health services and preventive medicine, so reducing the calls on a negative service like pensions 1 When it comeß to the national debt, Mr. Nash can show a reasonably satisfactory position. The net increase amounts to £5,109,000, not an abnormal figure; overseas debt was reduced by £2,675,000; and, mainly owing to advantageous conversions, annual debt charges involve an increase estimated at only £15,000. When all is said, a doubt remains —the doubt whether this little country can stay the financial course set by the Labour Government. The hot pace of the first financial lap has been warmed up in the second. Mr. Nash and other Ministers speak of further acceleration in the future. As it is, the national engine is taxed to the emergency limit. It contains no reserves of financial power. Every tax item except land tax has again been keyed up this year. The yield, is a record, but nothing is to be kept in reserve. Let the economic grade stiffen or a head wind blow and the Government will find that the country has been allowed to conserve no financial strength to draw upon. The same thought seems to have occurred to Mr. Nash in framing his Budget. More confident than those of wider experience and knowledge, the Minister discounts "the inevitability of booms and slumps." Yet the fast spending policy of himself and his colleagues is surely producing the boom conditions that precede the slump. They are spending revenues this year verging on the unprecedented figure of £40,000,000 and even that is not enough. They intend to borrow more, the sum being undisclosed. Mr.' Nash talks of "conscious progressive purpose," but the people cannot help doubting the sort of planning that, ignoring the lessons of the past, goes full speed ahead into the obscurity of the future. Taxable reserves or actual surpluses should be accumulated now, to be brought into action when the economic machine shows signs of flagging. The Budget has its good points, but these arc cancelled out by the general effect of improvidence..