FINANCIAL DEBATE

New Zealand Times, Volume XLIX, Issue 11296, 23 August 1922, Page 7

FINANCIAL DEBATE

OPENED IN PARLIAMENT LAST NIGHT

“DAMNING INDICTMENT DY AUDITOR-GENERAL”

OPPOSITION LEADER'S SPEECH

The Leader of the Opposition (Mr T. M. Wilford) opening the dehate on the Financial Statement last night, in the presence of a full House and full galleries, said that he proposed to show that though the Prime Minister had preached economy and stated that waste and extravagance must ceases and we must cut our coat according to our cloth, ,that was certainly not the practice of his Government. The chief Reform newspaper in New Zealand had well described the Prime Minister’s Budget as like offering a cookery 'book to a starving man. (Liberal laughter and Reform interjections of dissent.)He did not think that any- j one could more aptly the Bud- I get. (Hear, hear omd laughter.) A' Government failed', he declared, when the excessive cost of that Government robhod the people of opportunity; and he proposed to show that, not only had the Government blundered and made a tremendous muddle of the finances of the country, but. apparently—which was more regrettable than all—tihe Government did not realise the muddle it had made. Written right across the Budget in plain letters was the word incompetence. (Reform laughter.) To back up that statement he produced, not only his own analysis, but also the statement of the Controller and Auditor-General in reference to the departments administered by the Government. MOST DAMNING INDICTMENT. He proposed to iudict the Government on the report of its own AuditorGeneral, and show that the most damning indictment ever put forth against a Government in this country had been brought against the Reform Government in an official document issued by the Government under the hand of the Controller and Auditor-General. That document might be found) in what was called the Public Accounts for the Financial Tear 1931-20. The indictment, which was made against every Minister of the Crown and every head of the public departments of State, was so clear and emphatic that he made no excuse for placing the whole of it on record. On September 28th last year he had drawn the Government’s attention to the fact that the stores department in the various Government departments were in ai had state. He had asked the Minister for Public Works whether he did not know that the buying of tools and the issuing of tools Without any issuereceipt had been a scandal; and h® had replied that he did not know anything of the kind He (Mr Wilford) said that he knew it was so, and the Minister replied)—ungrammatically, but emphatically—"l know different from that." (Laughter.) His warning, however, had no effect on. the Government; but he felt perfectly certain that the following statement from the Controller and Audi-tor-General, if it had no effoct on the Government, would at least have an effect bn the public mind, as showing the state of things existing to-day and that the figures of the Budget were totally'misleading. "BYE-OPENER TO COUNTRY.” On page 47 of his Financial Statement the Prime Minister claimed that the Government had made economies on Stores control running into not less a sum than <£200,000. That sum, declared Mr Wilford, could -not be saved this year, and the losses to the departments of State would certainly be an eye-opener to the country. The Auditor-General’s report was a damning indictment of the Reform Government, ibut the Reform Party would sit tight and would swallow the indictment. SEVEN COUNTS IN’ INDICTMENT. The Auditor-General makes seven charges:—(l) That in very few of the Government departments ig the control over stores efficient; (2) very considerable losses 'have occurred in the past, losses which have remained undetected, owing to inefficient control; (3) multitudious regulations' and amendments cause confusion, and do not bring about efficiency; (4) the present form in which Pub!io Accounts are presented to the House nakes it impossible to include any reference to the value of stores; (5) the jrgetice of piecemeal purchase and for , immediate use has been prevalent, with j all its attendant evils; (6) the system of j vriting off stores lost or stolen 'has been ■ aorfunotorily carried out; and (7) Parliament cannot judge of the efficient and economical working of the departments. The Auditor-General then went on to lndiot these deportments—Agriculture, Defence, Education, Mental Hospitals, Publto Health, Marino*. Mines, Police, Prisons, and Public Works; adding that these were the only departments that he had so far gone through. So that Hie rest of the Ministers and departments bad not yet been examined, and conse'quently no report had been made to the Government upon them. ’ LOOSE DEALING WITH STORES. The Auditor-General further showed Ithat stores 'had been purchased and never brought to charge; stores had been written off without sufficient inquiry and without any authority of Parliament whatever; there had been insufficient cheek on deliveries, which opened the door to short deliveries and other frauds; While insufficiency of check and the easo with which articles could be written off opened the door to theft. There had been an utter absence of a proper costing system and stock-taking, making it .m.possible to see if peculation was going on; and audit investigations had also proved that there had in some cases been free issues of stores, of Government goods, to Government officers, and issues at reduced cost. What sort of an Indictment was that for a party that pretended that no waste had occurred and that extravagance was not rampant? How mnoh did that run into? He had not gone Into the figures for snore than the past three years, but the amount lost, as admitted in the Government’s books and. in the Government publica. tions, would surprise hon. members'. "MANY THOUSANDS LOST." Thousands and thousands of pounds had been lost. .There was absolutely no check whatever on the issue of stores. The Minister for Education knew quite well that in his particular department a very huge deficiency had occurred after the Controller 1 and Auditor-General made Ihis audit. The Hon. C. J. Parr: That is not the 'Wilford : The Auditor-General shows it is. Mr Parr: Nothing of the sort! • The Prime Minister: He does not. Mr Wilford declared that he did, and that the Auditor-General’s report was the strongest indictment ever made against any Government by any public officer in the history of the Parliament of New Zealand. Mr Massey : It is an indictment against you too. , , . •, ,Mr Wilford: There is no doubt whatever that this requires an answer, and that the Prime Minister ami other Ministers will have to answer to the country. Mr Massey: You were Minister foi Marine when this was going oil. (Reform laughter, and Liberal cries of "Order!") Mr Wilford said that the Teport showed that in every department of State appeared this lack of supervision and administrative control, and of that overseeing which was the duty of every Minister. The country would hold the Government guilty on the written statement of the Auditor-General against anything that might bo 6aid ill reply.

"ANOTHER SERIOUS POINT." CAPITAL AND REVENUE EXPENDITURE CONFUSED. Tilers was another serious point in the report The Prime Minister stated in his Budget speech that the financial position of the country was clear, and everybody could understand it. But the Auditor-General said that capital and revenue expenditure were not shown separately in the appropriations. He would quote the exact words (page 5): "It is difficult for the audit to check the dissection of capital and revenue expenditure in some departments, for the reason that the records held by the departments contained very brief particulars of the services rendered, while the appropriations made by Parliament contained items covering both capital and revenue expenditure. This could be overcome if in the appropriations capital and revenue expenditure were shown separately." Consequently, stated Mr Wilford, the Prime Minister was able to bluff through amounts of money in the appropriations, and no hon. member, according to the Auditor-General, was able to check it. (Reform laughter.) That statement was clear, and could not be controverted. FREE OF INCOME TAX. GOVERNMENT AND WAR BONDS. The Prime Minister had told the country of the amount of free of income tax war Bonds redeemed by the Government, but the Budget showed, although the Prime Minister did not stress the point, that the inscribed stock specially provided under the statute as being available for the payment of death duties, and running into something like <£276,000, constituted a large portion of the so-called olear-of-income-tax debentures, which had come into the possession of the Government. His side of the House had done its best in the past for years to induce the Government to use every opportunity of taking out of individual hands these free-or-inoeme-tax bonds. There were men in the country to-day with incomes of thousands and thousands a year who paid no income tax at ail. Men who had sold their properties in the boom times aud war profiteers had put their money Into the 41 per cent, debentures clear-of-in-oome-tax and were absolutely free of income tax to-day.- As local bodies had been trying to teach the Government, it would have been sound finance fiom the time of the issue of these debentures for Ihe Government to have purchased them whenever opportunity offered, and bring them back into the pubUo Treasury. LIMIT OF TAXATION REACHED. NO RESERVE OF TAXABLE CAPACITY. Referring to the Taxation Commit. tee’s report, Mr Wilford said that the Govemment did nothing off its own bat, but set up Royal Commissions or Committees of inquiry to show it the way to go; and the report of the committee was just what one would expeot. But there was one statement in the report that everybody should carefully consider. That was the statement at the beginning of the report, where the committee unanimously decided that the limits. of taxation that the country couild bear had been reached, indeed) exceeded, and there was now praqjically no reservo of taxable capacity. Did the country understand that? Did everyone realise what that summing up of the financial position of the country meant? Yet today they heard that they were going in for more loans, and extra taxes were to he placed, on the people; but the Taxation Committee reported that the country had absolutely exceeded the limit of taxation and that there was practically no reserve of taxable capacity. The cables recently reported the speech made by the Federal Treasurer at Melbourne in regard to taxation exemption proposals, and it was noticeable that while there were for the lowering of our income tax exemption of £3OO, he foreshadowed an increase of the general exemption to £2OO, spoke of the reduction or the existing graduated income tax rates by 10 per cent., a reduction of company taxation from 2s 8d to 2s fid in the pound, the removal of the war surcharge of 25 per cent., the removal of the amusement tax on admission tickets under Is, and the reduction. of the Customs duties on galvanised iron, barbed wire, eto. "KILLING. PRODUCTION." The company taxation in this country, declared Mr Wilford, was killing production, preventing the farmers obtaining advances at a reasonable rate of interest, and causing the purchase by companies with their surplus funds, even when they were lending; companies, of Government stocks free of inoome tax rather than using the money in the ordinary avenues to supply loans to carry on the production of the country. Companies that were paying 7s to 8s and more in the pound in income tax found it quite impossible to lend money on mortgage to tho man who wished to bufld a house, to improve his property) or to buy the necessary implements to work his farm. Tho companies found it did not pay them to lend money at interest, beoause the rates they would have to charm would be so extravagant that no producers in these times of falling, prices could possibly pay them. If they lent money at the ruling rate to-day. Which was largely controlled by the bank overdraft rate, in order to get the clear 4i per cent, which they got on those war bonds, they would have to charge the borrower anything from 10 to 11 per cent, on ordinary mortgage even with a big margin. The manager of one of these firms had told him that if the companies had not been .wise enough to put thetr surplus money into these bonds ha did not know how they would be able to keep going with the present heavy taxation. EXTRAVAGANCE AND BLUNDERING They would be told that out of the 219 millions that the country owed, 80 to 90 millions was due to the war, and therefore unavoidable, but extravagance and the blundering of the Government had produced a state of .disorder which could have been, and should have been, prevented. The House heard of the amount of money that the Government was receiving from the Bank of New Zealand by way of interest and dividends, and by Way’ of land and income tax; but one thing the hank directors in the country looked for, in his opinion, was largely to see that their shareholders’ dividends Were big dividends; and until the Government did as tho Commonwealth Government had done in Australia, provided the remedy, which was a simple one, and made the hanks toe the mark, as the Liberal Government hml made the insurance companies toe the mark in man be i exploited, and so long would producers of the country be exploited, so long would every farmer and business man be exploited; and so long would the condition of things described by the Taxation Committee prevail

THE BANKING TRUST. ATTITUDE OF GOVERNMENT CONDEMNED. The Bank of New Zealand had been helped by the Reform Government. Why? Because, it needed the State’s assistance. But, while the State assisted the bank, would the Government in any possible bhape or form control the policy of the bank witn relation to tbe public? Tho public, so far as tbe banks were concerned, were paying the piper all the while, and. the -r>rice that the Government was getting to-day from the Bank of New Zealand, representing £500,000 a year, or more than that, in no possiblo way equalled the amount of benefit that wopld accrue to the public generally were the dividends less and thq overdraft rate less as well. Everybody knew that there was no closer corporation, no closer trust, than the banking trust. Half-a-dozen men meeting together in a morning could alter the rate on deposits or on overdrafts and affect every trader, every business man, every farmer,, every producer in this country. And, while the Government boasted of the money it was receiving from the Bank of New Zealand by way of income tax, land tax, aud dividends, if that amount were less end the benefit received bv the people were more, that would he the policy of a Government that was prepared to help the people as a whole and not stand for that close corporation whioh had absolutely no body to be kicked and .no soul to he damned. The present high mortgage rate, which was hindering production and hampering expansion, crippling the small trader and the large trader alike, and limiting our borrowing capacity through this taxation of companies, was evidence of the fact that there was good reason for the shortage of money for lending l purposes. But it was not an unpreventable reason. It was a preventable reason; and it was tbe dutv of the Government to see that facilities for obtaining cheaper money, at-least by the agency of the banks,. were brought about. How long, he exclaimed, l: ad the country to wait for this to be brought about? , Dr Thacker (Christchurch East): Next December. (Hear. bear, and laughter.) THE TEST. What was the test as to how far incomo tax could go? As soon as it was found it was impairing the earning power of the people a halt should be called. There were no proposals in tho Budget to help the matter, no suggestion, no ideas; merely platitudes, and if platitudes satisfied the financiers and the farmers they were satisfied with veTy little. On one hand the Premier preached economy, and in a speech at Te Puke he said that every glass of whisky drunk, every pipe of tobacco smoked, and every pound put upon the totalisator assisted the revenue. There had been taken from the State Advances Department the sum of £2,187,273, and it was found that it had been, taken to invest in Government securities. The Advances Department was brought into being for the purpose of helping the local authorities, but no wonder it ha<d to be announced that the loans would have to bo curtailed "BIGGEST FARCE OF THE BUDGET." Mr Wilford passed on to the "biggest Faroe of the Budget’*—the savings of the Government. Hie did not know how the Prime Minister could put such a confession of incompetence into his Budget. The Prime ’Minister said that we must make our revenue and our expenditure 'balance. This was not being done. Even the Railway Department was living on the reserves of maintenance provided by the Liberal Govemment. In these days of economy the building of the Waiuku railway, at about £16,600 a mile, had gqne merrily on, ihough an absolute waste of public money. As to his savings, Mr Massey raid: "I have not spent as much as I estimated; consequently I have saved." A more ridiculous, idiotic statement was never made in a public Budget. If the Premier wanted to nake a big saving on these lines all he had to do was estimate £50,000,000, spend £25.000,000, and eay he had saved £25,000,000. Two millions of the so-called savings were thus accounted for. If that was the way the finance of the country was being run there was no possible hope for the Minister for Finance. The Premier told the public of the savings he had made by using the accumulated surpluses for capital purposes. DM he Chink the people did not understand that if they were not used for capital purposes they would still be interest earning and that the interest would earn must be taken into account? "WANTON AND RECKLESS."

Bee .how our revenue had decreased Last year it was £28,128,000. The year before it was £34,266,000. This year the Premier expected £26,250,000. or he expected to receive £8,000,000 less than he got in 1920-21, and (he had asked for authority to spend £119,000 more than was spent this year. What oould be thought of a Minister for Finance who mode suoh a statement? That was wanton and reckless extravagance of the worst possible type. Mr Massey said the expenditure must balance with the revenue, but the whole budget was a contradiction of such a thing. It was proposed to increase the expenditure on the Post and Telegraph Department, and at the same time they were dispensing with the servioes of numbers of men. "FLAG WAVING AND LIP UTTERANCES."

Referring to Mr Massey’s Foxton speeoh Mr Wilford said he noticed that whenever the Premier ihad a speech te deliver he went to a small town. At Foxton Mir Massey said Mr Wilford had admitted in the House he was prepared to negotiate with Mr Holland to put the present Government out of office. That Statement hit below the belt, and was a slander on the Liberal Party. The Liberal Party stood for Elmpire, constitutional methods, and law and order. They were loyal Britishers, and their candidates also were loyal Britishers, and those who supported them were pleased to have the protection of tho Union Jack. Sovietism to their party was death, and Liberalism was life. They claimed they were as loyal as the Prime Minister.

Mr Holland: That is not 6aying much! Mr Wilford said tho Premier and tho Reform Party were afraid, and instead of coming down with a policy they came down with the cry that everyone opposed to Mr Massey was a Red Fed. "I tm ptjoud of my King and country, and so i§ everv member behind.” added Mr Wilford. Ho had never said he was prepared to negotiate with Mr>Holland. Ho said he wa« prepared to enter into negotiation with Labour to prevent vote-split-ting to get proportion!:] - representation. The Liberal and the Labour policies were far apart. There w;»s no _man on the Liberal side of the House who yielded to the Premier in loyalty; the Premier’s ioyaltv was flag-waving and lip utterance. THE HON. G. J. ANDERSON VARIOUS SUBJECTS TOUCHED. The Hon. G. J. Anderson, Minister for Marine, said it had been remarked that when Mr Massey had a speech to deliver he went to a small town. Dr Thacker: So he does. Mr Anderson said he recolleoted the Prime Minister going to Christchurch to speak once, and he woe not given an uninterrupted hearing, but he faced the audience. Mr Howard: Backwards! Mr Anderson said the interrupters were Red Feds. Mr Howard said that was wrong. They were returned soldiers. Mr Wilford had referred to the stores, but during his term of office in tho National Government, Mr Wilford had not put that matter right. It had since been put right. The Government knew the limit of taxation had been reached, but how was taxation to be reduced? Mr Wilford •. I know you can't see how, but we can. Mr Anderson *aid that if the taxation

on companies was reduced it would hare to l>e increased on individuals. Mr Wilford: That is not so.

Mr Anderson said that Mr Wilford was driving at taking the taxation oS the big company and putting it on the small individual. The Prime Minister had never made the Te Puke observations that were attributed to him. He thought the electors would decide at the next election that Mr Massey was the safest leader to follow. Mr Wilford had not referred to the sinking funds, but the Premier had a scheme for putting them on a much better footing than they were on now. Mr Anderson maintained that the cause of the slump in New Zealand was the fact that we imported £19,000,000 in one year more than we exported. Therefore, we had to send that value of goods out of the country, and that left our own coffers depleted. He did not think taxation could be lessened for a year or two, hut some adjustment might be made. He hoped to see a large new coalfield in full working order near Oreymouth in a very short while. A large area of coal had been discovered there. He hoped soon to make sealing in the South Island a Government monopoly. In the last few years the Government had had a difficult task, but had tackled it with determination and success. Farther econo-, mies must take place. Mr Wilford explained that he had never said he was prepared to tako the tax off the big man and put it on the small man.

Mr T. K. Sidey (Dunedin South) moved the au.'o’r :imcnt of tho debate, and the House rose at 9.35 p.m.