OUR REVENUE INCREASING

New Zealand Times, Volume LII, Issue 12264, 9 October 1925, Page 6

OUR REVENUE INCREASING

AND EXPENDITURE FALLING, DECLARES MR COATES LATEST FIGURES ANNOUNCED FINANCIAL POLICY OF GOVERNMENT OUTLINED The latest figures available show the revenue of New Zealand to be increasing healthily, and the expenditure to be falling. The figures are for the six months ended September 30th, and they were made public by the Prime Minister in his speceh at Oamaru last night.

(By Telegraph.—Special to "Times.”) OAMARU, October 8.

Mr Coates said the net revenue received for the six months ended September 30th was £12,034,840, as compared with £10,923,920 in revenue for the same six months of 1924, an increase of £1,110,920; but of this increase £270,000 was interest received from the Discharged Soldiers’ Settlement Account, but not paid until the end of last year, so that, comparatively, the increase is £840,920. The principal increases were:—■

EXPENDITURE The total net expenditure amounted to £12,989,161, as compared with £12,547,337 for the first six mouths of 1924,. an increase of £441,824. The principal increase was railways £317,996, mostly due to increased wages, the purchase of stores and material. An excess of expenditure over revenue in the first six months of the year is usual, but this year it is £954.321, as compared with £1,623,417 last year. GENERAL FINANCIAL POLICY Outlining the Government's financial policy, Mr Coates raid: “The financial problems arising out of the war, together with the difficulties of the postwar construction and financial deflation make it necessary that the first • and most important plank in the policy of the Government should be economy in the national expenditure, so as to enable the country to live within its income. Nevertheless that economy should not be pushed to such an extreme as to interfere with the development of the resources of the country—an object which it must ever be remembered is essential to increase the exports, extend employment, and encourage capital from abroad for development purposes, “Sound finance must always constitute the firm foundation of pood Government. The heavy war debt renders, it doubly important that we should proceed with the utmost caution. Borrowing is necessary for hydro-electricity, irrigation, _ roads, the railway system, and terminus improvements. EFFECT OF ECONOMIES “It will be remembered that in 1922, as a result of post-war conditions, aggravated by the fall in the prices of our primary products and the heavy importations due to the filling of duplicate orders previously placed with Mho manufacturers at Home, the Government had to face the question of checking the increasing expenditure and effecting economies in order to establish a balanced budget and relieve taxation. Extensive economies were instituted, which resulted in a saving of nearly £4,000,000. These economies made it possible to grant much-needed relief _to the taxpayers, and a progressive policy of reduction in taxation was inaugurated, and has been steadily pursued. Since 1922 the maximum rate of income tax has been reduced from 7s 4d to 4s 6d in the pound. nnd_ the minimum from Is to 7d. The income tax on land under cultivation was abolished, and reductions were made in the rates of land tax. Further, the exemptions in respect of dependent children, etc., were increased. “The total annual value of the lands and income tax remissions to date is estimated at £9,973,000. During the same period reductions were, made in amusement tax, and in Customs duties on tea and tobacco, and during the last Rossion the duty on mortgages was abolished. Concessions were made to rhe ing clubs, and penny postage was reestablished. VALUE OF REMISSIONS “The total value of all remissions and concessions to date is estimated to be worth £4,026,000 per annum to the taxpayers at the time. These reductions were undertaken in addition to other liabilities. The Consolidated Fund had to carry heavy subsidies for flour ami butter, the cost of which amounted to £1.860.000 for the period of 1919420 to 1922-23. “This prudent administration of the finances, aided hv our great natural assets—a genial climate, fertile soil, and an industrious and resourceful people—led to a speedy return to prosperity. In fact, there is probably no other country in the world which made such a speedy recovery from the aftermath of the war as this Dominion to-day. CHARGES OF EXTRAVAGANCE “The Government is being accused in some quarters of extravagant administration, and figures are being quoted somewhat wildly in support of this charge. The charge (where genuine) is, however, based on an incorrect analysis of the figures. It is usual when making these charges to point to the heavy increase in expenditure during the last decade (1914-1925). An increase of £15,000,000 looks imposing, but when the figures are analysed what is the position ? About £8,000.000 of the increase will he found under the heading of permanent charges, and is chiefly due to the war, in connection with which our charges for interest and sinking fund and pensions amount to £5,730.000. Then there is an increase of about £600.000 in pensions, apart from war pensions, while the interest and sinking fund on capital borrowed for development and the general needs of the country amount to approximately £1,300,000. The relatively small balance of the increase was mostly absorbed in increased subsidies to hospital boards and such like charges. ANNUAL APPROPRIATIONS “Turning now to the annual appropriations, which cover the working expenses and general charges of the Government, there is on the face of things an increase of £7,000,0X) over the period under discussion, A little investigation, however, will show that the figures in no way represent the re-

i lative increase in the burden of the taxpayers. Firstly, it might be pointed out that the expenditure for each year includes the working expenses of the railways and the Post and Telegraphs Department, which are more than covered by their receipts and impose nothing on the taxpayer, as such. Secondly, we must make allowances for nominal increases due to changes in the accounting system. For 1924-25 certain departmental receipts, amounting to about £520,000, were shown on the receipts side of the account instead of being deducted from the expenditure, as was the case ten years ago. “Finally t and this applies to all comparisons with pre-war expenditure—we must make allowances for the worldwide fall in the value of money, or, in other words, for the rise amounting to at least 50 per cent, or 60 per cent, in prices and wages, before we can get down to a true basis of comparison. Taking the lower figure, this means that-.the figures for 1924-25 must be reduced by one-third before they are comparable with those for 1914-15 A REAL COMPARISON “Now, if from the expenditure figures for 1914-15 and 1924-25 respectively we deduct the working expenses of the Railways and Post and Telegraphs, and, in addition, tak# from the balance for 1924-25 the amount of the departmental receipts already referred to, and finally to counteract the increased prices and wages reduce the 1924-25 figures by one-third, we arrive at the following figures, which are comparable, and a much better indication of the relative burden on taxation for the administration of the Public Service:

“The annual appropriations cover a great deal more than salaries and office expenses, so these figures do not represent the cost of administration alone. Even if the figures for the Railways and Post and Telegraphs are not excluded, the amount per head of mean population works out at £6 17s 6d and £6 19s 8d .respectively. These figures and particularly the respective amounts per head of the population, show clearly that the charge of extravagant administration to the detriment of the taxpayer over the last decade is entirely disproved by a closer analysis of the facts. DEBT AND BORROWING POLICY “The Publio Debt as at March 31st last amounted to £222,814,647 and concern is often expressed at the tremendous burden cast upon our relatively small population. It must not be overlooked, however, that the greater part of our debt was incurred for productive purposes, and this fact should be kept in mind when comparisons are being made with other countries, whose public debts in many cases are almost wholly deadweight. The debts of Great Britain and most European countries, for instance, have been incurred almost entirely for war purposes, and consequently the full burden of the interest and sinking fund must be carried by the taxpayer. Consequently, when compared with Now Zealand, the respective amounts per head of population are far from being an index of the respective burdens on tbe taxpayer.

“Apart from war debt New Zealand has borrowed for development work since 1912 £66,800,000, of which £54,800,000 was for productive purposes—that is, for railways, telegraphs, water power, swamp drainage, advances to settlers, t-ischarged soldiers, settlement, and settlement, etc. An amo i't of £6,000,000, used in the construction of roads, bridges, etc.. Is undoubtedly indirectly productive, while a further £6,000,000 borrowed for education, publio buildings, etc., may be financially % unproductive, but cannot be classed as deadweight. AVOIDING RISK “At March 31st. 1912. the total debt amounted to £84,300,000, of which £65,000,000, or 77 per cent., had been applied to purposes which can be classed as productive or indirectly productive. Up to March 31st, 1925, the ordinary debt had been increased by £66,800,000, and of that increase £60,800,000, or about 90 per cent., was for productive or indirectly productive purposes, thus indicating the result of the Government's consistent policy of borrowing, as far as possible, for .productive purposes. THE DEBT CHARGES “As one would expect, these facts are borne out by an analysis of the debt charges. During 1924-25, our gross expenditure under this beading amounted to £10.940,000, but onlv about £5,739,000 of this came out ot taxation, and £4,490,000 of this latter sum was on account of war loans As already indicated, such borrowing :s mo burden on the taxpayer, and, in fact the problem of reducing taxation resolves itself largely into two questions- One, borrowing only for purposes that will earn interest, so as not to increas the charges on the taxpayer; and, two, reduction or deadweight war debt. This policy is well established with us, and so long as it is ndherred to we avoid the risk of seriously straining our taxing resources over a long period, and so cncuro that til» fininccs of the country aro in a position to tarry its obligations witlioit increased or unduly heavy toxatiou.”

Customs £ 291,500 Railways 238,200 Rost and Telegraphs 188,000 Stamp and Death Duties 202,400 Interest on public monoya 267,300

1914-15. Expenditure out of annual appropriati o n a 1924-25. (Bl, Part 1)... 7,874,626 Less ■working expenses of Railways and Post and 14,760,689 Telegraph ... 4,125,656 Less departmen8,050,019 tal receipts... — 518,998 Less one-third • to adjust 50 per cent, rise in prices and 1 6,196,267 wages 2,063.890 3,748,970 Per head of 4,127,781 population ... £3 5s 6d £3 0s 93