The New Zealand Times. THURSDAY, OCTOBER 11, 1917. THE NEW WAR BUDGET

New Zealand Times, Volume XLII, Issue 9788, 11 October 1917, Page 4

The New Zealand Times. THURSDAY, OCTOBER 11, 1917. THE NEW WAR BUDGET

In the midst of war the country is assailed with a new War Budget. Parliament was getting ready to separate; it had disposed of the War Budget, arranged the finances, authorises the necessary loan, and had certain serious discrepancies between the Defence Minister’s figures of cost and those of the Finance Minister explained. ‘ The Government had already floated the duo first instalment of the loan, and everything seemed to be serene, when another War Budget suddenly burst on the country, and in the sharp agony of the startling information the first thing to come uppermost in most minds was the discrepancy in the financial statements of the Finance and Defe ice Departments. The explanation which passed that matter over was that the dates of the two statements wore different. The discrepancy amounted to four millions. But the new War Budget gives us now a discrepancy of eight millions. The discrepancy, after the quiet of the explanation, is exactly double. This time, however, the discrepancy is not between the two departments of fcrtate. It is between the two estimates of the Defence Department. The Finance Minister, however, had to explain the discrepancy, premising that the Treasury, over which he presides, is not in any way responsible for tho expenditure of the Defence Department. The function of the Treasury is to pay, and the function of the Defence Depart ment is to submit estimates and asK periodically for the money. A good enough arrangement so long as- the estimates passed by Parliament are not exceeded. But after the settlement of the war finances and the explanation of the discrepancy between the two departments, some serious differences must have occurred between the rate of drawing based on the estimates and the rate of the actual drawings- When a banker finds a client exceeding the periodical rate of requirement agreed to between them, that banker promptly asks for an explanation with a view to deciding whether the existing arrangement can go on or requires alteration. This is apparently what the Finance Minister did when ho found the Defence rate of periodical drawing exceeding the estimate. As he stated in his evidently painful explanation to the House on Tuesday afternoon, he had found it necessary to ask not only for a full statement of the pension scheme, obviously required by the increased requirements, but also for a full statement of the general position of the Defence finance. He received, on October sth, a document in reply, which he subnutted to three officers, two of tire Treasury and one of the Defence Department, and these, after three days, reported upon the same. They made the startling announcement that the cost of the war had been, there was every reason to conclude from the new figures supplied in the said document, seriously under-estimated. The adverse balance they showed for tho eighteen months ending September 30tb, 1918 (of next year) as about eight millions. This is the “deficiency of eight millions” of Sir Joseph Ward’s explanation. We give the figures placed before the House by Sir Joseph Ward. They are, of course, only estimates, but they are based on such better ground of actual fact than the original estimate as to be far more reliable. cost or the won. £ Cost of the war, six months to Sept. 30th, 1917 7,300.000 Cost for 12 months to Sept. 30th, 1918 14,600,000 Cost of additional troops 324,000 Cost of maintenance by the Imperial Government for 18 months . 12,500,000 Cost of additional war pensions for widows and children 700,000 Cost of various boards 150.000 Cost of financial aid to troops at present rates 700,000 Total cost for 18 months to Sept. 30th, 1918 £36,274,000 WATS AKD STEAXS FOB THE WAE. £ Loan in hand, less security to Imperial Government 22,500.000 Cash—accumulated surplus ... 6.000,000 £28,500,000 Deficiency 7,774.000 £36,,274.000 That is practically the eight million deficiency of Sir Joseph Ward’s ex-

planation. When the Budget had been altered tho estimate of cost had risen to £27,360,000, and that shqwcd, after, deduction from the £23,00(/floo of the ways and means provided, a surplus of £640,000. That as why, as Sir Joseph pointed out in bis speech, tho amended Budget estimate had not made any alteration in tho amount of lean to be voted by Parliament. The change, then, is from an estimated surplus of £640,000 to a deficit of £7,774,000. This being a deficiency for eighteen months, the error for one year is twothirds of the amount, or about £5,600,000. The Defence Department, ithen, has underrated its requirements by £5,600,000 a year. The figure is large. To realise bow huge it is, we have to. reflect a little. Take what could bo done with such a sum as this deficiency" in the estimate of one year’s cost of the war, say in railways. At a shade over £II,OOO per mile (the average cost of the whole railway mileage of the Dominion) this deficit represents 540 miles of line. The amount would -nearly build tho railroad the whole distance from Wellington to Auckland by way of the Mana-watu, and the whole railroad between Wellington and Napier by tho Hu-tifc valley and the Rimutaka. - Take the whole deficit of £8,000,000, and the railway equivalent of £ll,too a mile stands at about 740 miles, representing addition to the Auckland and Napier equivalent of some 200 miles ■between Christchurch and Dunedin. Clearly if this is a day of groat figures, as we have often pointed out. it is also (this proves) a day of colossal mistakes. Of course something will have to be done ait onto to meet tho difficulty which if left to itself would spell disaster sufficiently strongly to send us cap-in-hand to the imperial Government for help, which would be granted at once, just as help is granted to the Allies of Fiance, Italy, and Russia, and has been extended to the Dominions. At present the menace of disaster is only to our word of promise, which covers our full share of war cost. An extension of time easily managed with the help of our partners would arrange that. Sir Joseph announced that be would ask authority for a further loan during the current financial year of £4,000,000, leaving Parliament to arrange the other £4,000,000 next session. Obviously there is no other way than by increased loan for the Dominion do shoulder the responsibility alone. The proposal to halve the shouldering between tho two years is pr.udent. It >s too late to go into the matter of taxation this year, but next year that will present a very serious problem, to which the Dominion will have to devote much careful thought during the interval. The thing, however, which presses most is tho investigation of this startling phenomenal increase of estimate the Defence Department has presented without a word, and the Finance Minister has explained with- obvious difficulty, conspicuous loyalty to his colleague of Defence, and a careful state-, ment which, amounts to clearing away rhe blame from both tho Finance Department, which has no voice in the control, and tho Defence Department which has the whole. The inference is that tho error of estimate is tho error of tho Imperial Government. But inasmuch as the inference is only supported by a reference to the moneys due to tho Imperial Government tor maintenance of the troops—only twelve millions out of a total cost of thirty-six—the inference seems more than a trifle lame. Tho explanation, in fact, does not explain. This conclusion is strengthened by reference to the Budget, wherein it was stated, on August Ist, that “the current expenditure in connection with the war may be estimated at approximately £1,900,000 a month.” Now;this agrees with the figures quoted by Sir Joseph Ward in his explanation of Tuesday, which are dated October Bth, those "figures giving the, new estimate of expenditure for the eighteen months, ended September 30th next, at £36,000,000, or £2,000,000 a month. Between the Budget and tho new figures there is practically no discrepancy therefore. Clearlv, then, the. explanation throwing the onus on the Imperial Government does . not explain. Then, how came it that no one in the Government outside the Defence Department suspected, this sensational and phenomenal -underestimate? Clearly, we suspect, because the Cabinet has no more control over the Defence Department than U has over the German . Army. This state of things requires immediatesearching, exhaustive inquiry. - and if necessary radical remedy. The uomiuion cannot he expected to mi uro for a single day a. system capable or such phenomenal and startling errors. It may be that the Minister's explanation has merely touched a mystery into life The idea is suggested by a reference in the course of the to some communication from the H fffi Commissioner. If that out let us have it properly lighted.. -