FINANCIAL STATEMENT.

Otago Daily Times, Issue 7875, 18 May 1887, Page 6 (Supplement)

FINANCIAL STATEMENT.

Ia Committee on Ways and Means on May 10, the Colonial Treasurer (the Hon. Sir JVogel) dcslivered his Financial Statement as follows:—

Mr Hamlin, —I venture to hope that hon. members will listen with attention to the information and the proposals it will bo my duty to lay before them this evening. The Financial Statement was made last year much earlier than usual, aud before the session closed I informed the House thafc I feared the estimate uf the revenue for the year would not bo realised. Notoriously tbis has been the case, and I have nofc this evening to make the announcement, so pleasant on these occasions, of a surplus. On tie contrary, I have to tell the committee that the transactions of the year just past leave a deficit.

The Expenditure vor the Yeah ISS6-7. I have pleasure in stating that the expenditure during the last financial year showed a saving of L93,62G on the amount estimated. The saving o: all kinds amount tv L12!),880, and the cxc -sses to L 31.254, resulting in a tiet savins; to tie extent 1 have just indicated. The largest i;ems were: Railways, L 65,511; public works (consolidated revenue account), L 12.035; Education department, L 11,836; customs, L 10,830; defeuce, L 5932- and mines, L 7411. Tiie nxcesses in exp ziditure wore principally L 14.338 for services not provided for, aid £10,023 for the postal service. The litter chiefly arose through the additional cost of services, because of large premiums earned, and through uuder-estimated expenditure for the maintenance of telegraph liuus. There was a saving on the estimate for subsidies to local bodies, but tho expenditure will come in daring this year, as I shall have occasion to repeat later. The Government have iv every way exerted themselves to conduct the expenditure on the most economical system. Revenue of Year 1886-7. The revenue showed a less amount than estimated 0f_L192,491. The following were the principal ifcems of deficit:—Customs, L 124.235; stamps, L 16.337; railways, L 157.513 The cistoms duties I shall again refer to. There was a saving on the estimate of railway expenditure of L 65.511, but the net loss on the railways estimate amounts to L 92.302. Tha loss a/ose principally during the earlier portion of tie year. Towards the end the tariff showed a marked increase. The loss on stamp revenue I attribute to diminished busiuess. The post office and telegraph services are considered to hive earned about L 10.500 over the returns estimated, but it is difficult to exactly determine the amount of stamps sold for postal and for oiher purposes. The augmented business of tie post and telegraph offices, notwithstanding the large use of delayed telegrams, i* one of the most satisfactory features of the yiar. The depasturing licenses yielded L 6266 m ire than was anticipated, and fche miscellaneous rj/enue shows a large excess on the estimate of ni less than L 101.231. It arose in this way. . The accumulated sinking fund on some of the English loans were much above what was required to meet the respective debts to which taey belonged. I asked the Agent-general to cill the attention of the trustees of the sinking find to the loan of 1863 to this fact, and they, i i conformity with the law, released L 104.749 . under the act of 1868, being the excess accumulated up to 1884, and they released L 39.755 under the act of 1884 on account of the excess since thafc period. The amouut set free under the act of 1863 reverts to the consolidated revenue ; that belonging to the subsequent period is applicable to paying off the debentures created n the colony, and the amount has accordingly been so applied. Some doubt is felt in the Treasury as to whether L9OOO released under the act of 1868 should not have come uuder the later act. I have called the attention of the Agenfc-general fco the circumstance, and possibly fie sum in question may have to be transferred. Ib is perhaps right to add that I have no official Cintrol whatever over the trustees of the sinking find in England. They released the amount jmder the authority of an act passed nearly 20 years since—in fact a year before I first took office. My part in the matter therefore consisted of oringing it under their notice and ! accepting the transfer. As regards the debentures created here on account of the accrued j sinking fund, I am pleased to be able to state that oufc of the amount already mentioned as released under the acfc of 1884, and from the rsS lit of the drawings of the bonds we hold by canversion, we have.paid no less than L 302.600 of the debentures created. Out of a total of £750,000 created since 1885, we have paid off already no less than L 353.400. Efforts aro so frequently and perseveringly made to discredit fie operation by which the revenue is put in funds to the extent of. the accruing sinking fund, that it is desirable I should specially refer t) the subject. Statements havo been put forfch fc) the effect that New Zealand securities have ! f illen in value because of what has un warrant- | ably been termed the seisure'bf sinking funds. | There is not a particle of truth in the allegation. The plan after it became laid iv I§B4, as was explained by the Agent-general to the London market, did,not affect,either the loan then negotiated or a subsequent one, and to suppose -that it affected a third loan is absurd. There is no necessity to justify to this committee a measure which iv the face of opposition aad after abundant discussion was accepted and b.icame law by the authority of the present House. As long as ifc is correctly degcribed, frequent references to ifc is immaterial, for no one ii jusMfied in taking exception to it. I venture to place the matter once more before you in .its /fccuß light. * P&rliam'erii in 1884 having its attention called to the fact thafc the accumulations of the sinking fund were so large as to practically amount to yearly paying off a considerable portion of the public debt, decreed that the conBDlidated revenue should be recouped by the issue of fresh debentures to the extent of the fresh accumulation of the sinking fund. There i i no more impropriety in owing this than there is in re-borrowing'to pay off a loan which is about to fall due. As by the operation of conversion portions of the sinking fund have been set free, debentures issued on account of fche increases in the fund have been paid off, 2nd the result of three years is that only £407,500 remain outstanding. If the process is truthfully described, it may be proclaimed frpm the housetops without injuring the credit of the CDlony.

When account is taken of the Supplementary Estimates brought down after the Financial Statement last year was delivered, my expecta- -. tion amounted to a small surplus of £1500. I . greafcly regret there is instead a deficiency, bufc cmsidering the fears which have been expressed of its amounting to a very large sum, hon. members, we believe, will be glad to learn that it amounts to no more than £92,293. I cannot accept any blame for this result. The circumstances which usually lead to the estimated revenue falling short have been conspicuously present; moreover I informed the House before 1 ist session terminated thafc I feared the expected r jvenne would not be realised. This is the first deficit since I resumed office in 1884, and I think I have reason to be gratified that such, is the case and that,the present amount is comparatively so small, seeing how huge have been the disappointments during this period in other places. The amount of the deficiency can be . Jlentiued iv the statement of the revenue and .expenditure of the consolidated fund 'by deducting the credit balance of £186,805 from the iOitstanding deficit bills of £279,100. The daficit in the land fund has increased, I shall hive to explain later that the change in the %md policy is accountable for fcbe result, and that it is necessary to make some permanent 'provision to moefc the altered financial condition of this class of revenue. Th» Public Worics Fund 1886-7. Last year a new and important departure was made by placing under distinct amounts the residue of old loans and the amounts to severally arise from the North Island Trunk Railway Loan and from the loan authorised during the session. I took credit in my past Statement for a balance of L 768.780 remaining out ;of the old loans, and said that when recoveries were made on its account from the North Island Trunk Loan tbere would be more than . LSOO.OOQ to be voted as the House pleased on other purposes than railways, such as buildings, purchase of Native lands, roads, and other works, on goldfield, roading, k&. I added," We look to its yielding at least two years' provision." Subsequently, in the Publis Works Statement, my colleague more particularly der scribed the transfers proposed, both for rolling stock and for the purchase of Native lands. These transfers^ have amounted to L 350.780, and together with L 8312 realised under the "Consolidated Stock Acfc 1884," have raised the amount of the old loans available for expenditure to L 1,127,872. The expenditure has amounted to L 638.626, so that there is a balance of L 491,246 available for expenditure this year. It will be remembered that exception was taken to my statement that over h BOO,OOO would be available to expend as the House pleased on the purposes. I have' already eead the passage. The argument was that there were liabilities exceeding the amount, and that the House would have to find nearly another million if the proposal was to be carried out. J explained that the column of liabilities on the public works was always included in the expenditure of the fresh year," and as these liabilities sometimes extended over more than that period, it was not without precedent that the whole expenditure of a year, including liabilities and no votes, was less than the nominal liabilities left undischarged afc the end of the previous 12 months. We. took last session fresh votes for the liabilities, and many new works in addition, and the whole expenditure has been little more ihaa the amount of the liabilities. We have expended, however, somewhat in excess of half of She amount available for the two years, which I stated would be more than LBOO.OOO, and whicb proved to be over Ll,100,000; so that though we Unquestionably made increased provision for the period.the increased provisan was nofc sufficient, because liabilities were overlooked. I was only following previous practice in including liabilities ia ibhe expenditure for the year. Later . <ra, when I speak of this year's public works expenditure, I shall include liabilities in it; and though we contemplate some fresh votes, we : shall nofc ask for a total provision much exceeding the nominal liability. The North Island Trunk Loan has not been floated yefc. Hon. gentlemen will recollect that I expressely kept at out of the market until its proceeds weroearmarked by the legislation of last year. There now stands charged against it L 325.655, including an expenditure of L70,3"j8 on the purchase of Native lands to serve as an endowment for promoting settlement along the Hn6. There is thus about L<375,000 of it still available lor expenditure. The loan of L 1,325,000 authorised last year was negotiated £t p. little over 07^-a price which is not satisfactory when tke condition of the market at the time the loan was offered is taken into consideration. I shall refer later on to the eauaeg th&t fiop>;r'ibuted £0 t£e

Low price, but meanwhile ifc is right I should say that the loan agents wero not responsible for it. .Indeed such were the difficulties which they had fco contend with, that I fear their ability and resource were even more called into requisition than en previous occasions, when better results rewarded their exertions. In the published accounts it will be observed that the full receipts on this loan had uot at the close of the financial year passed to credit in the colony. When all the instalments pass to credit, as since the end of the year fchey havo done, the balance left unexpended will amount to L 713,755, the expenditure during the year having been L 1.555,765.

Public Debt and Loan Conversions. 1 have already referred to the issue of the last loan, and I need not detain the committee with any remarks on loan conversions, as owing to the unfavourable state of the market nothing further has'been done during the past year in thafc direction. Future Expenditure. The Government have constantly had in consideration the question of reducing the public expenditure. Ifc-has of necessity come before them bscause of the diminished revenue, as also because of the very s'.rong opinion on the subject expressed in Parliament. No excuse need be made for asking hon. members to allow me to go rather fully into the question. Ib is evidentthat retrenchment in the public service may be of two distinct characters—one comprising a reduction of services provided, aud the other a reduction in the way the services are carried out. Ministers have not thought themselves justified in-depriving the colony of any of the services '.to which it has been accustomed, aud which Parliament has sanctioned. They have, however, in every caso which seemed to them practical h, diminished expenditure without impairing the efficiency. There are three classes of public services : Firstly, the class exclusively engaged in collecting revenue; secondly, the etass which renders services and receives in the aggregate remunerative payment for the same; and thirdly, the diss which undertakes useful duties for which littls or uo revenue is collected. The customs aptly illustrates the first, the post office the second, the departments of Justice and Education two kinds of the third class. It is evident that as regards the first of these classes there is no possibility of ntolition. One object in the interest of retrenchment is to carry such services as cheaply as consistent with efficiency. The same remarks apply to the second class, only wifch regard to that class there arises the question of the extent to which consideration should be given to sparsely-populated districts. The extent and nature of the departments coming within the third category must entirely depend upon the decision of Parliamen fc. No Government has the right to alter their character without fche sauction of the Legislature. It will be understood thafc as regards all three classes I admit there may be economy consistent with the efficiency of these, of which I will shortly separately speak. Afc present I am dealing wifch the question relating to the extent of the services. When I tell you that the Post Office and Telegraph departments have set up the hard standard regarding new post offices in the country districts of requiring such offices not to leave a loss, and that with a desire to avoid spending money remuneratise extensions of the telephone and telegraph have frequentlyto.be refused; and fchat as regards the Customs, several stations are rapidly being closed, the committee will see fchafc there remains little to be regarding reducing the services of the departments coming within fche two first categories. The third category depends on the will of Parliament, and ifc would be unconstitutional that their nature should be materially curtailed by the action of the Government unsanctioned by fche wishes of the representatives of the people. So that there should be no mistake, I will give a lisfc of nearly all the services which come within the range of the third class, to which I am now alluding, and which could be curtailed or abolished without apparently direct injury to the revenue, bufc I do nofc say without injury to parts of fche colony. I shall omit those for which pirmai.ent appropriation has been made, such as charitable aid—evidently the Government could not. if they wished, curtail them—and I. shall add some which apparently came within fche class, though I shall afterwards argue that they do not really do so. The list then is as follows:—The Legislative, the Audit, the Electoral, the Lunatic Asylum services, and those that come within the departments of Justice, ] Education, Native Affairs, Mints, aud Defence. I I must again remiud hon. members I am merely | bringingintoafocusthecostof the public services. I would be reluctant indeed to have it supposed that I doubt the necessity of the services alluded to for the peace, order, and good government of the colony. The point at issue is whether the scope and extent of any of the services enumerated can be beneficially curtailed. I will briefly remark on such. The Legislative department is in the hands of the Legislature, and the votes submitted are open to consideration. The view of the Government i.s thafc reductions mighfc be made, especially by allowing officers . who can be spared to follow other avocations ' during the recess. Some permanent officers are undoubtedly necessary, but where it can be avoided ifc is not right to compel idleness for the major portion of the year. It is proposed to refer the subject to a select committee; meanwhile the Estimates are presented as sent to the Speaker. Although I have included Audit department in the class of non-revenue departments, it must not be supposed that this service does not benefit the revenue. Most decidedly ifc does benefit the revenue, and which is equivalent to the same thing, it also savesexpenditure. The audit and control system of the colony has been built up with consummate labour and ability, and I am convinced hon. members would not be willing to see its usefulness impaired. I well remember, in the time before the present audit system was established, the session used to be largely occupied by continually reiterating complaints of the of Parliament to control, the expenditu^. Although the same complaint is occasionally heard now, it is but a faint echo of the dissatisfaction of former times; besides, the remedy rests wifch Parliament. It js that body which gives the Government certain powers of distributing and transferring votes, and it is within,the competency of the Legislature to limit the powers. Concerning the electoral service, there is need only to observe that ifc is an essential part of the machinery of the government of the country.' I will not affront hon. members by dwelling on the argument that no temporary difficulty should induce us to curtail the accommodation or assistance we render to the unhappy beings who require to be incarcerated in lunatic asylums. The cost does not require justification. The expenditure under the head of justice is in a great measure to provide for an essential part of the machinery of government as in the case already referred to. The Native departmentjis similarly necessary to a considerable percentage of the inhabitants of the colony. Its curtailment would much affect their interests. As regards the Education department, there are few, if any, persons who fail to recognise that in the interest of the remote future of the colony it is imperatively necessary that its people should be educated. I need not enter into the diversified views of those who think the towns enjoy too much and the country districts too little consideration, or of those who consider that private enterprise is undesirable; suffice it that the great majority of the people of this country regard education, by whatever provided, as an essential feature of the good government of the colony. Although the Mines department only directly raises a small revenue, its importance is infinitely great as regards the indirect effect it has both on the publ'c revenue of the colony and the private revenues of the colonists. For example, it notably affects the customs, and stamp, and property duties, a»d it greatly influences the commerce of the country by its bearing ou the earnings of persons of many different pursuits and occupations. The Defence department, excepting the police, is one which at first sight appear^ capable of curtailment, but before arriving at such a conclusion it is necessary to remember. that each time a tolerably wellfounded rumpur of war circulates, an irresistible demand arises for a thorough system of der fence. The expense entailed by the hasty pro„visions demanded in the time of emergency is much greater in amouut and less useful in result than that which ifc is necessary to employ to keep a regular and properly trained force. It would be a false economy, now that this system has been attained, to relinquish it because the air is less full than usual of warlike echoes. Any retrenchment of the kind might and probably would be followed by a greater expenditure on a recurrence of warlike prognostications. The committee will, I think, agree with me thafc tbe usefulness of the revenue-yielding departments and of those that neither directly nor indirectly yield revenue cannot be reduced jor in other words, that the public service must be maintained at nofc less than its present standard of efficiency. We now come to the question common to all the branches of the public service ; Can the same efficiency be obtained at less than the present cost ? This opens a wide field for inquiry, and the Government have been unceasingly engaged jn studying ifc since Parliament last separated. The subject involves the consideration of the numerical strength of the civil servants, of the amount of their salaries, and of the nature and conditions of their engagements, and when a conclusion with respect to the past character of the service has been arrived at, thejre remains the difficult task of determining in what respect there should be a change in the future. In the past the New Zealand, like other civil services, was meant to be a profession jealously guarded with privileges. It grew out of the type common to all the English colonies before tbey became selfrgoverning. \ Generally the feeling with regard to tbe service moved in the direction of freeing it from special privileges, and of treating the public servants ! more as if they were employed in private estab- j lishments. The status of the service, however, has as yet far from arrived at that level, _ and it seeips desirable to fix what its condition should bs in the future rather than to let ifc indefinitely drift. To illustrate what I have said, I may point to the various pivjl service acts, and the gradual abolition of ponsions and large allowances. Last year we passed an act of great bearing on the future of the service, and it has amazed me to bear jfc spoken of as a measure of no importance. Probably such was the prevailing impression when the former civil service acts were passed, but we have learned to estimate their importance if not to like them, because we have to pay the pensions and the allowances they entail. I use the word " we" in the (sense of tbe general opinion, for I confess that individually I feel a doubt if it is wise to go the length in reducing the status of the service to which public opinion unquestionably points. We rail against the pensions, but do we quite appreciate thelong and able services fchat have been rendered ? From the p.qint pf view from which I regard the civil sery#gtg—ap tri^d and trusty aids to the good gbvejntnept of ,the country—it does not seem

fco me fchafc we should grudge a retiring c, allowance to those whose lives have been c devoted to public pursuits. But the di- r cree has otherwise gone forth, and the f country has determined against the undoubtedly c increased expense of a service protected and pri- c vileged beyond a reasonable ox tenfc. The Go- -\ vernment do nofc, however, precisely understand < the wish to be that the tenure of the public ser- j vants should bo quite on the level with thafc of < private employes, bufc something approaching it. I The act of the lasfc session, as I have said, was i very important in this direction, for ifc provided 1 that all civil servants in future appointed shall be - entitledto only three months'notice, aud in order to," provide thafc fchey shall have some means at : their command on leaving, a percentage of their i salaries is to be impounded and hauded fco them, improved at compound interest, on their retirement;. A more radical alteration could scarcely have been decided on, aud it was the reflection or tbe determination of Parliament in favour of retrenchment which scut the Governmeut into recess with the duty before them of giving effect to the wish of the Legislature. I have already explained that they were unable to discover that a reduction of the existing services was required. It was their more economical management that was demanded, exclusive of small but necessary savings of an extraneous character, to all of which the Government have given their attention. The chief saving to be effected was in the number and salaries of the civil. servants. In studying what could be dove of this nature, Ministers were confronted with the consequences of bygone engagements in the shape of pensions and retiring allowances to which civil servants who might be dispensed wifch would be entitled. Each case has to be considered on its own merits, for in mauy instances where the national growth of a service is certain ifc would be a loss to parb with a good man on heavy terms of compensation when fresh assistance would soon be required. Bufc, again, in some oases ib appeared likely that the permanent dimensions of the service could be limited, and consequeutly could, with advantage be at once curtailed. Besides present reductions the Government have laid the train for large savings of expense in the future. Before detailing these steps I wish to say that in my opinion 10 years hence the difference in the cost of the service between what it would have been under the provisions prior to last year and under the new conditions will be equal to a reduction of 20 to 25 per ceut., supposing, of course, that the new conditions will be maintained. The reductions the Government have made occur principally under the following heads:—(«) Reduction on'travelling expenses; (&) doing away wifch offices and disoensing with officers; (c) amalgamation of offices"; (d) saving in appointments to vacated offices. Under these heads the alterations already made will result in a considerable saving; and the steps taken to continue efforts in this direction will lead to yet larger savings in the future. To secure these the Government have determined that when vacancies occur the office vacant shall, if possiole, be amalgamated wifch some other office; or, failing this being practicable, that there shall be a considerable saving in the salary attached to the appointee to the vacaut office. The scale of reductions has been laid down, aud many hon. members will appreciate the importance of the future provision made by Ministers (which, however, is of course open to remission by future Governments) that whers any departure is proposed from the conditions just mentioned, the Cabinet shall be consulted. A classification lisfc has, moreover, been drawn up ; it will be fouud attached to the tables circula ed with the Financial Statement. After the session an endeavour will be made to place all officers iv the service within one of the divisions set forth. The classification will confer no claim fco yearly increase or promotion by seniority, but at the same time it will tend to more consistent dealings with the civil servants. Hitherto, owing to the disparity of their positions and the difficulty of comparing them, there has existed more or less dissatisfaction in supposed inequality of treatment. Departmentalism—if I may use such a word to express the exclusivenessof departments—places a difficulty in the way of the amalgamation of services,'especially in the kind of amalgamation suitable to country districts, where one officer might act for several departments. The Government are adverse to separate salaries for special duties, and as a means of breaking down the walls of division, | the committee will see by the Estimates that we have amalgamated under the one head of Treasury and inland revenue the several departments of the Treasury, Customs, Marine, Stamps, Property Tax, Lands and Deeds Registry, and Post and Telegraphs; and the chief officer of each branch and the Minister or Ministers will form a board, which will sit periodically, with the view to find, means of enabling the employes of the different branches to act interchangeably. It will not be necessary lhat one Minister only should preside over all the branches. If the members of the present or future Governments desire to redivide the departments over which Ministers preside, ifc will still be open to them to maintain the consolidation of this great department. The Government bave very carefully considered whether it was desirable that a rateable reduction should be made iv the salaries of the civil servants. They feel reluctant to , adopt this course, because of its wearing the ', appearance of specialising one class of the community for subjection to an income, tax; but the House has indicated its resolve that the cosfc of the service should be reduced, and one of two courses only was open—either to arbitrarily | lessen the salaries of some officers, trusting to ' their not being in a position to refuse to accept the lower salary offered, or to make a fairly graduated reduction all t round. The latter seemed the more considerate course, because of its probably proving. , of a temporary character and of the large retiring [ allowances to pay. Besides that, the effects of , the new conditions which I have explained will ' only_ be partly felt, as a reasonable rateable re- \ duction need not be permanent. Moreover, the . civil servants must be aware that there has of ' late been a general fall in the rate of salaries L oufcf-ide the Government service, and they must { of course know that the cost of living ancl commodities has become sq muph Jess during the , last few years than any amouut they receive [ now represents as compared with the same salary a few years back a larger purchasing power. The reduction conte.n7pl.ated is nofc of au extent to fall heavily on the officers, especially those re- ; ceiving a low rate of pay. Salaries up to £150 will ■ nofc be affected, over Ll5O and not exceeding , L2OO a reduction of 3 per cent. L2OO to L3OO ; 4 per cent., L3OO to L4OO 5 per cent., L4OO to LSOO 6 per cent;., and LSOO to L6OO 6.^ per cent. The reductions in any one class are nofc to shave , the salaries smaller than the last salary in the ; class preceding. The plan will not apply to the . officers in the Agent-general's department, as they are subject to the English income tax; neither will it include policemen or men in the permanent militia, nor men on wages, whether , weekly or monthly, in any department, nor gaol or lunatic asylum warders. It will not apply to ; pp.rsons whose salaries are permanently fixed by act. Ministers, however, have accepted it as : regards tbeir own salaries, and it will rest with ' members to apply ifc to their honorarium if they , see fit. They may desire that a percentage shall be deducted corresponding with that levied on similar amounts. The actual amount the deductions are expected to yield is about L 20.000. Proposed Expenditure this Year, ordinary revenue account.

After deducting the item of interest from both estimates, the votes we submit this year are less than those of last year by the large sum of L 150.212. The amount for interest has increased to Ll 10,000. It will be remembered that in connection wifch the loan conversions I stated that of the reduction of L 240.524 (which was the result of the operations as between the two respective years 1883-84 and 1885-86) there was some L 45.000 which represented interest for a broken period, and which would be thrown on to the expenditure of thi3 year. For the three years, 1883-84,1885-86, there was a net saving of L 454.024. The L 45.000 added to the interest on the new loans, L 62.722, and the interest on the district railway purchases—which is, however, partly recouped by railway profits and by collection from the ratepayers— represents about the amount of additional interest this year. I say about, because it is impossible to exactly commute the interest payable, as part of ifc depends on the time during which the deficiency bills are current within the year, and some of it depends on the ability to avoid interest by keeping a portion of the public works fund invested. The saving of interest during tha year just passed amounted to L 11.624. Hon. members will wish me to run through the estimates and to explain some of the savings that are proposed. I am sorry to say the Government do not see their way to making subsidies to local bodies at more than half the rate of last year, and with the same conditions as to payment. The full amounts due on the of )asfc year will b.e paid but included. Then a reduction of L? 00,000 ap? pears in the estimate of consolidated revenue and in that of the public works. The subsidies altogether from both sources will be L 100,000 instead of L 150.000. The estimates of charitable aid subsidies coming in for payment shows an increase of L 140.000. In the permanent charge there is a new item under the Rabbit Nuisance Act of last session of L 7500, but a decrease in the Stock, Rabbit, Sheep, and Brands Acts of L2OOO for a number of inspectors dispensed with. The Stamp and Deeds branches show reductions of nearly L3OOO. There are large reductions in the Treasury,- miscellaneous, and property taxes estimates; but as to services not re-

quired, such as the London exhibition and cost of property tax valuation, in all these departments savings havo been made wherever, feasible. The same remarks apply to the post oflice. Savings have been made on the vacancies occurring, and as further vacancies occur they will be filled by reducing other offices where the extent of business will justify ifc. Bufc the total \ postal and telegraph business has largely iv- , creased. We reckon the returns last year to have beeu nearly L 10,500 in excass of the es'ti- , mate, and wu expect a larger revenue this yeai by several thousand pounds. The telegraph work has greatly iucreased, and it is necessary to enlarge the vote for extra labour aud materials for repairs by LSOOO. On account of the expense I was deterred last year from bringing the inland parcel post system into force. It is, however, so much needed that I shall introduce it this year as soon as the necessary arrangements can be effected. On the conveyance of inland mails we have made a saving of nearly £2000. There is one saving I regret we find it desirable to make. The island service performed by the Janet Nicoll comes to au end next month. It costs L 4200, and as we do not propose to renew it, we take a vote to June only. I am trying to make arrangements with the London Post Office to sort the mails by the American route, so as to enable me to dispense with sending mail agents by the San Francisco route. In the customs I have effected material reductions amounting to -no less than £5630. They may be considered genuine annual reductions of a permanent nature, arising from officers retiring and dispensed with and from promoting junior officers to vacancies afc small salaries; The dismantlement of the Hawk schoooer forms part of the reduction. I regret to announce that Mr Seed retires by bis own wish. It is due to him to remind the committee of the many years of able and arduous service he has given to the colony, and of the excellent organisation into which he has brought the Customs department. In fche Marine branch several substantial departmental reductions have been effected. I have to announce that the Government have determined to lay up one of the Government steamers for the remainder of the year, and use only one vessel. The Marine department will show a reduction altogether of nearly LII.OOO. In the Justice department there is a saving of L 700 0; in the department of Education the amount is about the same as last year; the Public Library vote has been lessened by L2OOO, and Is of the 5s extra capitation allowance has been deducted. There is a substantial reduction in the Native department of LSOOO, of which L3OOO ;may be deemed departmental. Thereis a large reduction of over Ll 1,000 in the Mining department, of which a considerable portion may be set down as savings on expenditure. The estimated expenditure on railways is L 13.300 less than was estimated last year. I need scarcely say the railway expenditure depends very much on the revenue. If careful vigilance is exercised, as was the case last year, we anticipate a better revenue from railways this year. The Defence department's estimate of expenditure is less by over L 7850. L 15.000 of tbe cost of the permanent militia will be charged to the haibour defence vote; instead of L 12,500 as last year. This is thoroughly legitimate, as the permanent militia are helping to complete the defence works, as stated in the Speech from the Throne, and their labour will add to the capital of the works more than the amounts stated. With these remarks I think I may leave the further study [of the Estimates to hon • members. It would certainly have been impossible for any Government to frame them with a greater regard to economy, or a more lively sense of the good old maxim, " Economy is itself an income." Future Revenue. There may nofc this year be much material natural increase in any item of revenue, whilst with the same causes still at work, quite independent of the prosperity of the country, there may be less collected on some items,- so that with estimates of expenditure such as I have explained and similar revenue, and without the LIO.OOO unexpectedly obtained, thereis obviously likely to be a considerable deficit for the year independent of the deficit of the past year. Viewing the large deficits in al- , most every country and every colony in the world, and the cdmplacent manner in which they | have been held over until a return of better ; times, we might regard the adoption of a similar course as one not without ample precedent; but I essentially do not recommend this mode of action. Though depression exists in this colony, it . is nothing compared with what other countries '■ have had to contend with; and although it has , undoubtedly affected our revenue to some ex- _ tent; the cause of a considerable proportion of , the loss of our revenue has nothing to do with , the depression, but is consequent upon circumi stances of a quite satisfactory nature. We have not, therefore, I think, any good excuse for postponing the equalisation of revenue and ex- ; pendifcure, were there even no special , reason for its being desirable to avoid postponement. Hon.. members have heard . a great deal about the depreciation in the . value of New Zealand stocks and the harsh _ things which have been said about the colony, . Without going into the often-discussed question , of Who is responsible for the statements ? it is _ beyond doubt that they have been used. The . price of New Zealaud stocks has considerably ; recovered, bufc the market is still sensitive. In , ordinary circumstances the accumulation of a deficiency, as has been dove on a large scale by r other colonies, would excite little or uo remark, , much less disapproval. But after all that has , been said of New Zealand, it is in my opinion , expedient that the colony should show that it [ can make its revenue meet its expenditure. The . Government urge this consideration on hon. , members as a duty demanding their attention. , The customs revenue last year was L 124.235 < less thau the estimate, and that estimate was [. less than the actual receipts of the previous year . by some L 400 0; so that the customs revenue . for 1880-87 is less by more than L 129.000 - than the receipts of 1885-86. It is still more . deficient when we consider thafc the customs is ; the main branch of revenue and thafc it ought to . show a natural increase corresponding with the j increased valuation and the increased services . necessary to meet its wants. The customs re- , venue in 1882-83 was L 1,494,000; whilst for . 1886-87 it was only L 1,239,000. I draw par- , ticular attention to the following return—a . statement of duty collected on spirits during the I undermentioned financial years:— ; Financial I Year. Rate of Duty, Quantity. Duty 1 ItStS ?» 8 12S 585-'"i2K»ls £110,506 1883-84 21s lis 12s 57tf,232ga1s 403 500 i S?«, 21? 11S 12s 63M02g«1a 377,696 ■ 189*i-86,frora 1 „, ~ „, s June3o,lßßs/ 21s Us 6d 500,545ga1s 359,780 ! 1886-87 21s 14s 6d 468,241ga1s 339,710 1 Hon. members will observe there has been a i continued falliug-off each year compared with ! the previous one, as follows:— i ]lf7li £27,006 1885-8(5 ... ",,. . iT qiR • isso-87 ::: ::: i 7ss So that the duty for the year just past, not- \ withstanding that its rate is £70,796 less than t the duty collected in 1882-83, has a tendency : still downwards; whereas under ordinary conditions we mighfc have looked for £100,000 in- ' crease. The use of beer has also greatly fallen ■ off. During 1882 the consumption was B'7gals per head, during 1883 ifc was 8 lgals, during 1884 it was 7-3 gals, during 1885 it was 7gals, and during 1886 it was 6'7gals. It has been said that the reduced use of strong drink is as much due to the depression as . to the growth of temperate habits, because an increased consumption of tea and I coffee is nofc simultaneously visible. A i few years since the revenue cqmn^issionprs of • Great Britain took a similar view, though I ■ believe they have since modified it. I may be . wrong—for lam unable to speak from experience, and I submit myself to correction from those > who have a large knowledge of the subject,—but it seems to me thafc because a person in the self- • denial of temperate habits consumes less alcohol, there is no reason to conclude that he will fly to tea for comfort. With a diminished use of t ardent spirits the human frame can do with less liquid nourishment. If the falling off were ' really only the consequence of' loss power of j expenditure and not due to the spread of temperance, I should expect to see a consider- ! able increase in the consumption of beer. Ou the other hand, I would look to the use of beverages like ginger beer and fruit syrups rather than to tea as a pi oof in the i direction of temperance. We are not able to ■ gauge the consumption of these delicacies; and » however large it may be, it is not a financial | compensation for the revenue lost on alcohol. Surely no one will declare that there is reason i other than for rejoicing that the colony has been spared the absorption of a quantity of fiery liquid that, put into one, would make a ' small lake. I really think the Colonial Treasurer is the one unfortunate being in the colony who has to grieve over what should rejoice him, i for he has to make up for the deficiency, and is met with insinuations that he is inpreasing the i taxation of the colony. The falling-btf in duties is not confined to spirits; there is a deficiency as between 1885-86 and 1886-87 of close 1 on L 25,000 on cigars and tobacco, wine and 1 beer; of over L 19.000 on goods by weight, ex--1 cepting sugar (on which there is an increase of L 7000) ; of L 65.000 on ad valorem goods; and of LGOOO on other duties. On a considerable portion of these goods the consumers have saved a great deg.l more than the duties in the diminished prices at which the commodities have been landed in the colony. I have had some particulars collected showing the smaller values in 1886 as compared with 1887. Had the prices of 1880 ruled during 1886, the value of imports during the year, which amounted to L 6,759,003, would have been L 8,060,198; so that people saved last year because of the fall in the prices compared with 1880 no less a sum than L 1,301,185. I should observe that on goods paying duties by quantity exact particulars as to the value were procurable in the department, but with regard to other commodities the information has beeu obtained by careful investigation. The Government deem ifc necessary to strongly urge an immediate increase in the customs duties, and they wish to record their opinion that the tariff with the increases proposed will not be so severe on the colonists as the tariff in force in years past. The alterations we propose are for revenue purposes, and eg.eh item is more or less calculated t° add to the returns. The committee, however, should be glad to learn that many of the changes are of a character likely to stimulate local productions. People are in the habit of comparing New Zealand with other colonies without remembering tbe difference in the position. It has not the land revenue of those colonies, and it started in the race handicapped with large ex penditure consequent upon Native affairs. Some idea of. the difference with regard to land revenue may be gathered from the following, which is as correct a return as I can obtain of the land revenue of the ■ Australian colonies during the last six years. It will be seen New Zealand stands fifth on the list;—

New South Wales ... ... £13 000 572 Victoria ... ... ... 4,699)711 faomli Australia ... ... :i,:ii)l 789 (,Jue«iislaiid ... ... :j'-X)0 iti'i "New Zealand ... ... 2MolX'> Tasmania ... ... ... ,'SSS7IO Western Australia ... .'.'. '302091 I shall have something else to say about the financial results consequent upon the laud policy pursued in fche colony, but in connection with the present topic ib is only uecessary to point out that we have much less use of this sort of revenue than the other colonies—in fact the expenditure exceeds the revenue. It means, of course, leaving a large source of revenue to tbe future; and as regards its effects on our loans, 1 do not know thafc lenders of money who ponder over the question shouid think worse of a colony thafc reserves its capital and does not use it for yearly revenue purposes. An increase in the customs revenue naturally brings us to a consideration of the system of direct taxation by means of the property tax. Had I, as Colonial Treasurer, a fresh field to start on, I should recommend a land tax and income tax in lieu of the property tax though I am not blind to the fact that there is a great deal to I c said on each side. The chief objections to a property tax are that ifc taxes unproductive property, discourages investment, aud leaves untouched incomes upon which savings are not made. The chief objection to a land aud an income tax are that the first leaves unaffected interests that are really beneficial to the owner of the soil and the mortgagee, and that the second would m a large number of casas leave real incomes to escape, aud would mainly reach those whose incomes arose from that uncertain commodity, brains. There is of course a vast deal more to be said about all these questions, and especially it may be urged in favour of the present system that people are accustomed to it, that contracts have' been made Spending on it (such as those betweeu mortgagors and mortgagees), and that an alteration should not be lightly made. At anyrate, as the Government do not vow propose a substitution I need not discuss ifc; but clearly with the contingency of increasing the prop-rty tax before us, we are ooundto consider its present operations from /arious points of view. A favourite alteration ofthe property tax and one frequently mentioned is repealing the exceptions. It often happens with public affairs that something becomes fixed almost by accident, and thac round it grow so many interests as to make any alteration impossible which ignores them. The exceptions now granted are a case in point. On whatever principle they were first framed, they had grown into an adopted custom, the alteration of which involves consideration not taken into account at the outset. They act as a much larger means of relief to poor people than to rich. To the person who pays on LIOO or less, it means that if he owns L6OO he pays on only a sixth of that sum. If the exemption were removed he would pay six times the present amount for which he is liable. On the other hand, to the man^payiug on, say, L 50.000 there would be an addition of only 1 per cent, to his taxation. I have had some calculations made which show materially that fche exemptions work in the direction I have indicated. The removal of the present exemption would mean that 21,591 taxpayers would pay au average increase of 8-31 per cent, on their present taxation, whilst it would also mean that 6235 of tbe richer payers would increase their payments by only 3'B per cent. It was not, I believe, intended that the exemptions should operate in the nature of a progressive tax, but it cannot be overlooked that this has been the effect, and it must be taken into account iv any changes made. The Government consider that together with an increase in the customs duties there should be a larger revenue raised by the property tax. There is more relation between the two taxes than at first sight appears. The customs tax affects most severely the men who spend the whole of their incomes, whilst the property tax affects most those who save and are thrifty. Whilst admitting these facts, ifc does not follow that the property tax is amenable to such an amount of condemnation as to forbid its use. In dealing with theoretical questions there is often left oufc of sight the necessity of comparing and of attaching to each tendency the proper strength that belongs to it. It may be argued justly enough that the tendency of a tax on property is to discourage thrift and the accumulation of capital. But may it nofc be the case that its tendency in these directions is of an infinitesimal character ? I am not now discussing the question of the amount taken from income or capital, but the discouragement that the tax may give to thrift. As regards the incidence of the tax on income or capital, there is, I think, little room m a young country in which realised wealth is comparatively small, to make the distinction, or to base anything on it if made. A generally received authority has indeed said that to provide thafc taxation shall fall entirely on income and nob all on capital is beyond the power of any system of fiscal arrangements. There is no tax which is nob partly paid from what would otherwise have beeu saved; no tax tho amount of which, if remitted, would be wholly employed in increased expenditure and no part whatever laid by as an addition to capital. All taxes, therefore, are in some sense partly paid out of capital. If, then, we leave the incidence on one side and come to the presumed evil tendency of a tax that appears to punish thrift aud therefore discourage it, I ask What is the tendency or the discouragement worth? May it not be of imperceptible weight? Can we imagine one person out of ten thousand or a hundred thousand who, because the tax gatherer asks him for less "than half of 1 per cent, on his wealth, would say " There is such discouragement to me to be thrifty and saving thafc I will squander the other 99| per cent." ? We can faucy that many taxpayers may consider it necessary to save because of the tax, bufc that the tendency to discourage thrift should find its effect in the tax leading to extravagance is a theory of a microscopically attenuated nature. I ara far from saying that the consequence may noibe to drive capital into a different direction, and that the tax does not operate mischievously as a burden on industry. These are not points I am discussiiig, and ifc is useless to raise them » a House which summarily rejected our proposals for exempting agricultural improvements and machinery. Members may ask why lam so pursuing the poiut of the tax nofc tendiug to discourage thrift. The reply is that I want to dispose of the argument that the State is not justiQed in asking from the rich a larger contribution than from the comparatively poor. As for as I understand the authorities who adopt this conclusion, they chiefly base their arguments on the mischief of discouraging saving habits. You actually punish the man for being wealthy, they say, and discourage his sxercise of thrift. They go so far, indeed, as to poirit to the conclusion that the poorer classes should be taxed proportionately in excess of the rich. I have endeavoured to show that the discouragement is more imaginary than real, and that paradoxically ifc acts in the way of inducing rather than diminishing saving. On the other hand, there is a grim indirect reality in the theory that the persons who live on tbeir incomes and do not economise should suffer in taxation more than those who save part of their annual revenues. Ifc is not through the same source of taxation they suffer, but from a different one—the customs. Beyond question the operation of the tariff is such as to ,'punish more severely the man who spends than the property tax punishes the man who saves. Suppose two men with families, with an income of LIOOO each, and that one spends ifc all, while the other puts half by and pays a property tax of ld on LSOO, equal to L 2 15s Bd. It is a moderate estimate that the other man in customs duties will pay 5 per cent, on the LSOO, and he does not save equal to L 25. Really, therefore, our system of taxation deals withthemen of moderate means through the customs, and with those better off through the property tax. Now we propose to increase the customs duties, and we think the property tax should be simultaneously increased. I have already shown to the committee how the exemption is working in diminishing the percentages of the payments of the poorer taxpayers, and in making a change in the direction of diminishmg the exemptions it would be grossly unfair to refuse to take into consideration the effect of the alterations op the possessors of different mej^ns. Close attention has been given to many varieties of modification. We desire to avoid raising the tax beyond ld to any one and to take into account the weight with which a change will fall on the contributor. The conclusion we have come to is to propose that properties worth not exceeding L 2500 shall enjoy the same exemption of LSOO as at present, and be subject on the balance to the present tax of 13-16ths; but we propose that there shall be no exemption allowed on properties exceeding L 2500 in value, and that the tax on them shall be ld. Estimated Revenue op the Yeah 1887-8. With the additions I have asked in the property and customs revenue, I estimate the following revenue for the year .-— RIiVKXD^. Estimated Estimated Actual

ln pnstice to myself, I must point out that the anticipations are made under circumstances of peculiar difficulty. In the first instance, they are arrived at long before the usual time; scarcely a month has passed since the commencement of the year, while generally three months elapsed before the Statement is made Again, apart from the early period, circumstances render ifc particularly arduous to come to an accurate conclusion this year, lhe amount of public expenditure, the price of produce, the contingency of peaoe or war, and the prosperity or depression of the neighbouring colonies more than usually affeot the results of the revenue during the year on which we have entered. I count °P the consideration of hon. members should ifc prove fchafc my calculations are greatly disturbed, but so far as I am now permitted to judge I think they will prove correct. The customs ancl property tax estimates are based, I have already said, upon the increase I propose. I havo set down a little more to the . stamp dutieo than the actual revenue of last | year on account of the increased postal business ' The other items scarcely call for remark, except- I ■ ing that each has been carefully considered. The '

reason for the disparity between the actual mis- ii cellaneouslastyfar (which included the L 100,000' c already explained) and the estimate for this year r is apparent. As the result of the year, the pro- n posed expenditure being L 4,071,304, and the n anticipated revenue L-1,156,184, a surplus' of c L 84.880 is the result. As regards the L 92.300 a deficicucy of lasfc year, although I hope to be c able to pay it off this year out of surplus and t savings on votes, I do nofc like to undertake to c do so. I propose asking that-it stand over until r the end of next session; and if the year's trans- 1 actions enable it to be so soon extinguished as I 1 hope may be the case, I shall be glad to pay it v °ff- .'.•"'• I The Land Revenue and Expenditure: r I now come to the subject wbich is the most * difficult of all the topics with which I. have had 1 or shall have to deal to-night. I have already * pointed out that the finance is getting into a < condition that makes it necessary to place it in ' a settled position without delay. The cause is ' not unsatisfactory and the House cannot think « it so, since it enjoys Parliament's own sanction. < VVe are making efforts to settle people on the < soil after a systematic plan or plans of which 1 there is no example in the previous hiitory of the colony. The importance of doing the work has always been represented. Surveying the last quarter of a century, I can never remember a t'm i at which the necessity of the promotion •■ of settlement wa.<-|nofc recognised. There were ' afc an early period the homestead and pensioner systems adopted in Auckland, there were the negotiations to carry out Godef roi and Co's scheme, there was the absolute trial of Dommett's military settlements—which, by-the-way, added another to the many proofs history has already afforded that warlike and peaceful pur--. ' suits do not*jmarch. well together. There were ■ a number of miscellaneous special settlements • of Germans and Scandinavians, and the last Government gaveafctentiontopushingasystem of special settlement on a small scale. Immigration, too, has occasionally been conducted with an especial view to settlement, as witness the Tauranga and the shipload of farmers' which was despatched out when I was Agent-general. But all these attempts have been more or less desultory.couipared wifch the organised enthusiasm, if I may use such an expression, wifch which systematic efforts are now being, made to place the people on the land in large numbers. The present work is not confined to tryiug to bring settlers out; but its main weight is directed'to settling on the land people already in New Zealand, including that very valuable class, the young men born in New Zealand who are growing up to an age at which they can take charge of their own future. It ma 3be asked how it is that more Js being done now than formerly. Ido not believe that greater weight is attached to the progress of settlement than during the many years of the past—that • is, I do not recollect any public man who has refused.to recognise its importance. The solution of the query is to be found iv the fact that in the oast the difficulties surrounding the question "have stood in the way of it being disposed of. The greatest of these difficulties has always been the infinite variety of opinion on the subject of how. the waste lands should be dealt with:' I cannot say whether there is a less difference of opinion or whether there is only a larger concentration in one direction: Be that as it may, extraordinary efforts are being made, such as hitherto have only been talked of. Then those who are doubtful of the results would scarcely have the courage of their opinions sufficiently to wish that so vigorous an attempt ma direstion fraught with innumerable advantages should be arrested without ample trial at any rate. It is embarked in with the full kmowledge and approval of the House. The system involves not only a virtual suspension of cash sales, but also tbe necessity of spending much money in giving an impetus to settlement by roading, clearing, and general aid My opinions are well known that no great principle is involved in the leasing system. I regard it as a temporary arrangement," subiect sooner or later to that complete title in'the land the desire for which is an implanted instinct in man. it present, however, or in the near future, it matters little whether the tenure is lease or freehold conditional on future payments. Either way money requires to be foupd for the aid which is being given to settlers. It is of no use to allow deficiences to accumulate and to regard them as unexpected when we deliberately adopt a policy to lead to them. The Government think that for a term of years, until increasing revenue will permit otherwise, thede^ ficiency between the land revenue and land expenditure should be made up by charges on the laud, supplied by such local borrowing as may be required. The .rents arising from the land are consolidated rei venue, and out of them it is proposed that the interest of any amounts borrowed shall be paid, aud the principal recouped by yearly allocation, Under this proposal the cost of the Land department, including roading and special aids, will go on the one side, and receipts on the other, and in a very few years they i should be equalised. When the bill is introduced I shall be able to explain the details more exactly. Included either in the same or ,in a separate bill we propose to make similar propositions for acquiring and dealing, with Native lands. '.*:.-.■' Public Works Expenditure. There was a balance on 31st March, as already stated, to the credit of the Loans Act of 1 L 491.245. This amount may be swelled by the 1 produce, if they be negotiated/ of debentures ;or inscribed stock which local bodies were authorised by the act of last year to give in exchange for debentures tbey had issued under the Roads and Bridges Construction Act. - Of the loan of last year there was on 31st March last (including an amount still to come in and since ' received) a credit balance of about L 713.055; ' and there was left of the North Island Trunk loan, after deducting the advances made on its ' account about L 675.000 which, however, will be reduced by the cost of raising tee loan when ifc was negotiated. The Estimates are nofc finally ; decided, but I shall not be much out when I state that the proposed expenditure (apart from ' authority to incur liabilities) out of .the North Island trunk loan will amount to '• about LIBO,OOO, and out of the loan of last' year to about L 487.500. As regards expenditure out of the old loans acccount, it ' will partly depend on whether we pass the measure dealing with costs of roads to ' which J have referred, and to whether early ; effect can be given to it. It will also in part depend on whether we pass another measure we ; propose to introduce to enable public buildings to be erected by means of short dated annuities. jWe think the system of borrowing in anticipation large sums for public buildings has led, and is calculated to lead, to ex- > travagance, and on the other hand it appears •__ to us that if the cost of interest and redeeming the principal has each year to appear as part of J the estimates of the respective debts, ifc ftill result in less ambitious expenditure. If these' [ f measures become law and speedy effect can be ■ given to them, they will lighten the charge on I the old loans,account, otherwise the proposed ; expenditure for the year will absorb fully the - amount remalningto credit of old loans account, andthebalanoe of about L7o,ooocoming to itf rom ! the committed securities under the Roads and Bridges Construction Act. The Minister for ■ Public Works will in due time furnish the House 1 with further details Members will, however, Ibe able to conclude from what f have said that 1 the Government consider that it is expedient to limit the issue of loans in the London market 1 and that for the present it is not desirable to undertake fresh railways beyond those already ■ »han* . Thb State of the Colony. ( Before I conclude, hon. members will permit me to say something regarding the state of the , colony. I gather from the speeches of several ', public men and in articles in some of the newsI papers that the opinion prevails in various ; quarters that the country has serious financial s difficulties with which to contend. I will assume that party feeling has ' less to do with these opinions than genuine conviction, and I will take leave to discuss them. As regards the deficit of last year and the extra taxation required, I deny that there are cvi- . dences of want of means on the part of the • polony. We have already seen that the chief ' failure of revenue has arisen through causes { that are of benefit to the people, such as the less ( cost on goods on which ad valorem duties are I £,° uected,and fche less use of intoxicating drinks. , There is again a reduction of revenue owing ;to the more thrifty habits of the people. There cannot be any doubt that less money is spent in luxuries and keeping up appearances. The failure of revenue to come up 'to the amount anticipated is significant only to the reductions already mentioned. Others nofc alluded to may arise, not from less inclination to spend, but from a less power to do so. This we will discuss directly. I believe it is a small 1 and not a large element of the loss in revenue; 1 and if for tho moment we eliminate it, we are ab|e to say that the reduoed revenue is in every way mo^fc satisfactory, because of the cause from which it arises, and that it is entirely free from a suspicion of financial difficulty. If the revenue of New Zealand is too little or its ex- [ penditure toogreat, neither necessarily evidences ! any embarassment. I assert positively that its*! people are able, if required, to add to the revenue such an amount as may be required. That to have to do si is unpleasant, goes yfithout saying. New Zealand is not so highly taxed per head as when it was destitute of tht great railway roads and bridges that probably add on an average of 25 per cent, to, the value of its produce to the producers. Let us go back to that period of 1870 when the colony was really in an alarming condition. It was handicapped with great liabilities on account of Native affairs, its population was small, and the want of means to open up the country was driving colonists away. There was nothing to he done then but to mortgage the credit of the colony and to borrow money to bring out immigrants, and to construct public works. Do hon. members think there was any doubt of the-.necessity when I remind them that the largest measure, as compared wifch the smallness of the populatipn, which, I believe, ever has been passed in any country, was made law by a moribund parliament on the eve of a general election, with the hearty approval of the people ? The country is now opened up, and there is room aa at present exists for some millions of population'if^they are accompanied with adequate capital to pursue the industries tq which the resources of the country invite them. The taxation now means thafc as the capital of the colony in the shape of its waste lands is no longer being converted into revenue ifc has to make up its annual expenditure from other sources. It is in the position in which most of tho old countries have been when they had a small population. .Consider the taxation to which Great Britain was subjeot when ifc had only a few millions of people, and how the money had to be found when there were none of tho great adjuncts to civilisation which science has placed at tbe command of the present young communities. We might, it is true, save other taxation by making heavier charges oh the • railways, but we should do bo at tbe expense ff

injuring producing interests. As to the h: capacity of fche people to' meet the taxation q required there is not any doubt, bufc I A must now consider that element I cli-" Z initiated when speaking of revenue, the p extent, if any, to which revenue suffers on q account of the diminished power of expenditure t« ofthepeojle. I believe there is a diminished s , power of expenditure arisiug from several tl causes. One of these is that in the past times 31 money was so easily obtainable that people were ii ledinto borrowing ifc for the purpose of specu- a lating inland. By this means land was forced * up beyond its intrinsic value, that is to say, n beyond the capitalist value of what would f< represent a jack rent. I need scarcely say c tnat whilst these colonies were founded on the 6 basis of their absorbing the spare population a and spare capital of older states (the mother h country especially) nothing coild be more a undesirable than that capital should be bor- v rowed for the purpose of land speculation. A v moment's consideration will show that obtaining ii capital »or such purpose means one of two 0 things, either a loss of some of the I money or that tho interest on it, whilst the and remains unproductive, falls more or less on the whole population uutil an iudividual comes _ forward to recoup the cost of the years during c which the capital has remained unproductive. 1 •Again, the colony suffers from the smaller in- i dividual profits of all classes of the community 1 Not only does the interest of the speculative 1 purchases still held in suspense weigh on 1 the people, but competition is much 1 larger m business and the profits less, besides being shared by more people. This is another way of saying that the producing and manufacturing industries have not increased ■commensurately with the number of persons who hve on the profits of interchange. Let us guage the extent of these evils. They mean probably that some losses have to be shared by a comparatively few individuals and a few capitalists. They are in process of being written off, ana when the task is completed, money will be available for the legitimate purpose of improving the land instead of for transferring liabilities from oue person to auother with improvements delayed. The diminished profits wdl be remedied as a larger variety of means of employing industry and capital become available, and as the population increases. Smaller nominal profits even now partly represent in purchasing power the larger profits of former days. Notwithstanding: taxation the cost of living has materially decreased, and probably will continue to do. The same nominal sum gives a perhaps 20 to 25 per cent, more purchasing power than formerly. I do not say this is better; it is in part the result of the gol 1 appreciation, and at any rate is a symptom of it, and it tends to discourage enterprise, but we are not to say a thing is bad because we might wish it better. I am pointing out that .circumstances are not in some respects -so advantageous in New Zealand as they were, but if ifc is any consolation, I might add that the falling off here is fractional to the falling off in other countries, ifc seems to me to be opposed to all teaching of experience to consider that the depression which has existed or still exists is likely to be permanent. The recuperative power of communities is marvellous, aud to some extent it is m the inverse ratio to the ill to be overcome, 3ust as the convalescence of an individual is more wonderful in proportion to the severity of the malady from which he has suffered. If New Zealand's recovery appears less striking than that of other countries it will be because it has much less from which to recover. To me it seems that the problem lies in a nutshell. Either the wholo world is to continue stagnant and stationary, which is an impossibility, or the favoured countries must progress. That is all New Zealand requires to *^L for then it can rely on the unquestionable fact that in climate, in fertility of soil, mineral wealth, in manufacturing capabilities, in vast and varied resources by land and sea, it possesses such a mulfcipicity of advantages as are not excelled, if even equalled, by any portion of the globe. The Wealth of thb Colony. It will be seen from the foregoing remark ttlat I consider the colony is to some extent in a transition state as regards the occupations of vie people and the remuneration they enjoy Profits have either become less or are more widely divided. The rate of salaries and wages Imu . «. Bhor?8 « tendency to reduction. ibe falling off is partly compensated by the less costjof commodities, which enables the same income to have a larger purchasing power, but the 1 net result is not pleasing to those who have to submit to it. The larger purchasing power is alfco--1 gather lost sight of, and the diminished earnings • remam an abiding cause of complaint. When we s survey, however, the aggregate position of the , colony, it would be difficult to find much reason . for complaint. The property tax assessment • lately made was much more exhaustive and , accurate than those previously compiled A . copyof the principal results will be circuited ' with the other papers connected with the State- ■ ment. The results of previous assessments also i appear, and the information thus obtained is r very interesting, not so much by way of • comparing the present and past valuation, as the 1 one now prepared may be accepted as a reliable return of the assets and liabilities of the colony The value of all real property in the colony, ex- , elusive of Native lands situated beyond five fffi e »o0f any road suitable f °r horse traffic, is j L 110,376,659, and the value of personal pro- ! ?fi r 98y 9lfiQ7dLß2^P 4 ' , m.aki»f altogether j 1.198,916,974, which is exclusive of the value of . public works. The amount is thus repre- • sented:— * ;;'f ! Crown lands ... ... __i.rt.^i_[: ■ Native.lands within five miles of "a *J*< o'o,oU' ) roadsu'table for horse traffic ... 5 847 105 • "hducation, municipal, and other re- ' > serves (exclusive of church reierves) c which are included in taxable real J estate... ... 7 9^o iti 5 Taxable real estate ... '." 47 277*142 |. Non-taxable real estate ... .„ 42',324'<523 Total ... "... ...£116,376,659 1 Personal property £43.505,538 j Non-taxable ... ... ___ 2 5 139 277 t Allowed for exemptions at present, but ' which, by ourpreseDt proposal will be -J some..hat eliminated ... ... 13,895 500 l- Total ... ... £32,540,315 » The gross returns show an increase on the »•• 1882 assessment of L 15,867,659 real property, T and of personal property L 18.540.315. I do » not, however, consider that there has been *; altogether this increase of wealth. The assess- » ments, as I have said, have been more ■ careful and searching. The table for real 1 property shows an increase on the assessment 5 of 1882 of L 2.277.142, and there is an increase on ■ similar returns of personal property of £3,505,538 » together making an increase of taxable proj perty amounting to L 5,782,680. Personal property in produce, agricultural implements, bank ■ deposits, and vessels (steam and sailing),amount- ; mg to L 6.830.891 is not included in the owners' - statement; public property to the amount of L 19,377,985 is recorded, but many millions ex--1 pended on roads and bridges are altogether -• omitted. The Government property making . ,up the amount I have first meutioned is as fol- }. lows:— Railways, cosfc ... ... 4101:0™ [ Telegraphs, 4c., cost ... .'.V 52372? - Lighthouses, cost... ... . isokU ' »*« ::: So 5. Harbours ... ... g 500 000 ,' Water supply goldfields ... ... ' so|ooo t There are 27,826 property taxpayers, and as > no one pays who has less than £500, it fol--7 lows that there are that number of persons possessed of £500 and over. I find that tbe 27,826 taxpayers includes 5998 widows' trust abfc sentees and companies, and the balance of 3 21,828 represents the male taxpayers. There 1 are 157,503 adult males in the colony by the iate - census, so that an average of one male adult 9 m.a little over seven is the possessor of at 1 least LSOO. The calculation is liable to slight - rectification to meet the separate returns of > firms, which cannot be distinguished. I do not , thmk, however, that it would much affect the 3 result. First in the list of callings come the i taxpayers under the head of graziers, sheep- .- farmers, farmers, settlers in country, dairymen 5 &c. Their number is 9747. Nexfc come trades- [ men, wholesale and retail shopkeepers, store--3 keepers, carriers, &c., 4330. Widows, wife's 3 trustee, spinsters, &c. come in third with 3049 5 in all. I think all would like to see them . more forward in the race for wealthr and the same remark applies to the next in .*■ «jrd«r, working storemen, mechanics, labourers 5 shepherds, miners, sailors, &c., who are numera- . ted at 2088. Professional men (including » authors and editors) number 1226; merchants ' \ n.?,o^t^^B,, warehousemen, contractors, &c! 5 1231, of whom 282 are firms; and agents, auc--1 tioneers, clerks, bookkeepers, teachers (uot s under the educational boards), merchants, capl tains, &c., 1134. I need npt quote the other ; numbers, excepting, perhaps, to state that > the civil servants, officers of local bodies, r. teachers under boards of education, &c., number j 649i< I have had a return very carefu'ly pre- > pared, showing the assets and liabilities of the . colony. It does not include such works as • roads and bridges. It shows under the head lof assets: Real property, L 11,637,659; and 1 personal property, L 19,377,985 j making a .. total, with the assets already stated, of ; L 218,204,959. On the other side are liabilities • ; Debt of colony, less sinking fund, L 31.688.349 • ■ debts of local bodies, L 5,616,273; debte repreiiented by mortgages, L 31,821,109; indebtedness 1 inclusive of mortgages, L 20,565,593; amounting ' {-"to 11 *° 1*89»491»324»I* 89»491»324» and leaving a surplus of l L 128,803,635; or divided amongst the population, . exclusive of Maoris, it shows a surplus of L 223 i for each man, woman, and child in the colony. It also haa to be remembered that Native lands outside the five-mile limit are not i included in the assets. I ask hon. mem- ! bers to ponder over these facts themselves; lit is unnecessary for me to draw deductions i from them. I cannot, however, resist reading a few extracts from the remarks of the experfc, Mr. Proctor Baker, who was appointed by the Royal Commissioners to report on the grain , sections of the late Colonial and Indian Exhibition:—"The average produce of over .26 bushels per acre of wheat and over 132 bushels of barley places New Zealand iq the !■ position of being among the most prolifio ooun- -, tries m the world. The samples of wheat shown in sheaf by the Canterbury Association are so remarkable as to deserve to be placed on record, in fact nothing finer than these wheats have been probably ever seen. The wheats of commerce which are shipped to England do not approach in quality these fine specimens; the samples of barley were simply magnificent, and such barleys as the Chevalier would bring in enormous prices in England. If anything like the quality exhibited can be produced in quantity and delivered in England in good condition, a ready market would be found for it; and supposing thafc the produce in beer be equal to the appearance of the barley, it would command a very high price. In the quality oi. .its oats, again, New Zealand is in the front rank: The samples of potato oats are unsurpassable. Whether g&in'ks is her* w-

hibited is common and can be obtained in quaufcity. is doubtful, but still the fact remains that in all the chief grains New Zealand has shown by these samples a production of superb quality and in prolific " quantities." No one, I hope, can have listened to this criticism without feelings of pride that ! such a magnificent encomium can be parsed on ' the colony by competent and unprejudiced judges. Remarks like these should prove strong inceutives to those interested in New Zealand, and inducements to persons in other countries who are looking out for fresh fields and pastures new. Apropos of our agricultural capabilities a few words should be said concerning the lately compiled statistics. They record an increase of C 37 freehold, 4-20 rented, and 502 part freehold aud part rented holdings of over an acre in extent, or what may be considered an addition of 1569 settlers. The average yield of wheat per acre, also oats, barley, and potatoes has in every case increased excepting in barley. There was also a larger production of these articles, amounting in net value to L 680.000. Conclusion. I have occupied hon. members' attention at such length that something in the form of an epitome of what I have said may be convenient. After taking into account the various savings in expenditure and the losses and gains of revenue^ there was a deficit in the transactions of last year of L 92,300. Additions to the customs and property tax will enable the revenue to meet the expenditure of this year, and leave a surplus of L 85.000. Exclusive of the permanent charge for interest, the Estimates disclose reductions amounting to L 150.000, and steps have been taken which will lead to still larger saving in the public revenue. I have explained also that we propose to lessen future borrowing in England, in that we recommend that the railways in hand should be further proceeded with before undertaking fresh responsibilities. The Public Works department is sufficiently provided with meaus to meet the expenditure of the financial year ending March next, and to leave a surplus for a portion of the works in progress. The falliug off in revenue has arisen from the spread of temperate habits and from the reduced cost of commodities affecting the ad valorem duties. I have referred to the efforts of the Government to aid the attachment of settlers to the land on small farms. The property assessment lately taken disclosed a large increase in the total gross value and in the value of the real and personal property. One out of every seven male adults in the colony is proved by the property tax returns to be worth property of value exceeding LSOO. A carefully-prepared balance sheet proves that the assets of the colony are fully worth L218,00O,000; whilst the liabilities, exhaustively compiled, amount to L 39,000,00 0; showing a surplus of L 128,000,000, or equivalent on the census return to L 223 to every man, woman, and child in tie colony, exclusive of Maoris, whose land except a small portionis not included in the assets. In other respects I have discussed the prospects of the colony and endeavoured to prove that the depression which has affected it is less than that from which other countries huve suffeied, and that it must pass away. Some hon members whom I am addressing may, in the old days when steam was leßs in use, have passed through the experience of being on board a ship becalmed in the tropics, surrounded by numbew of sailing vessels in like difficulty. For days the unhappy passengers remain beneath a burning sun and cloudless sky, lolling on the motionless sea as idle as " a painted ship upon a painted ocean." At last on the dis- ; tant horizon a tremor is observed on the waters, I and as the welcome wind comes up the i sails fall out and the vessel gaily comes on her course. The great and small countries 1 of the world have been becalmed for a long i while, but at length there are signs of favouring ■ breezes. In America, England, and elsewhere, i commerce and production are beginning once more to speed onward, and I cannot think that the movement will stop short of this colony. I have the honour to submit the following re- ; solutions:—

Resolved:—That in lieu of the duties of customs now charged on the undermentioned articles the following duties of customs shall, on and after the llth day of May 1887, be charged thereon on importation into New Zealand, or on being cleared from any warehouse for Home consumption in New Zealand :-— RATE OF DUTY. Acid (acetic), ld per lb. Candles—Paraffin or wax, 2d per lb; not otherwise enumerated. 2d per lb. Cement, 2s per barrel. Chocolate confectionery (and all "preparations of cocoa or chocolate other than for use as a beveraeel 3d per lb. " Fish (dried, pickled, or salted), S« per cwt. Fruit (pulp and boiled fruit), 2d per lb. Fish (preserved), ijd per lb. Iron (galvanised plain sheet). Is Od per cwt. .Macaroni, vermicelli, sago, tapioca, and semolina, 2d perlb. *■'-*. ' . Haizena and cornflour, lid per lb Mustard, 2d per lb Paints and colours (ground in oil), 2s per cwt. Paints and colours (mixed ready fer use), 4s per

Bice (including ground) and starch, ld per lb. Varnish, Is per gallon. Cordage ana rope (including house line, marline, ratline, hambroline, spun yarn) 7s fid per cwt. Pickles, Is 3d per doz. pints. Sauces, 2s 6d per doz. pints. Glue, Id per lb. Barbed wire (fencing), ls 6d per cwt. Paper bags, 7s 6d per cwt. Honey, ld per 1b.,-.. , Doors (plain), 3s each. : Doors (glazed), 6s each. ; Sashes (unglazed), 3s the pair. ■ -- ■ Sashes (glazed), 6s the pair. ■- Matches of all kinds, Is per gross of boxes containing each box 100 matches or under, and so on per gross of boxes for each additional 100 matches, part Spirits (under proof), 14s Cd per liquid gallon. Fruits (fresh), carriage and cart shafts, spokes, fe.loes, and naves, and bent carriage timber, calico (white and grey, in the piece), coloured cotton and union shirtings, cotton dress (the invoice value of \\ huh does not exceed 5d per yard), rough brown hollands, gas pipes and machinery, water pipes. 5 ncr cent, ad valorem. . .=*.'.* Vegetables (fresh), sheep dip, leather (not otherwise enumerated). 10 per cent, ad valorem. Aerated and mineral waters, twine of all kinds. 15 per cent, ad valorem". Basket and wickerware, boots and shoes, marble and stone-wrought paper, wrapping, earthen drainage pipes, garden tiles and fire bricks, iron bridges and girders, and columns for buildings and other structural ironwork, iron castings, forged or worked iron of whatever shape or in whatever stage of manufacture not otherwise enumerated. Ornamental ironwork and wf rework, iron doors for safes and vaults, gates and gate posts, lamp posts, wheelbarrows of iron, crab winch cranes and capstans, chaflcutcers. corncrushers, horse rakes, lifting jacks, crowbars, picks and mattocks, pumps, and other appliances for raising water, fittings for l.unps, engines and machinery, steam engines (~ther than for agricultural purposes) not exceeding JO- none power and part of same, brass cooks, valves, uniouß. lubricators and whistles, calendars, show cards and other pictorial lithographs and prints perambulators, 20 per cent, ad valorem. Articles not otherwise enumerated which are now chargeable with duty at 15 per cent, ad valorem, 20 per cent, ad valorem. Patent and proprietary medicines and preparations, 20 per cent. Resolved—" That in the event of any duties hereby imposed not being confirmed, or of deductions being made in the rates specified above, the amounts levied, collected, and paid in excess of the duties as may be imposed by Customs Act based on these resolutions shall be refunded to the persons who paid the same."

Civil List Interest & sinking fund Under special act Estimated, 1887-88. £ 29,750 1,764,793 232.867 Voted, 1881-87. £ i9,750 1,654,590 231,051 Expended. £ 31,015 1,612,870 232,189 Totals ... £2,027,410 £<, 915,304 £1,906,080 Legislative department ... 176,000 17,810 17,626 Colonial Secretary's depm'nt 130,515 163,238 162,940 Treasury and Reyenuedep'ment 407.838 457,323 455.609 Justice departr.f 6Uw a "7 ll0,m 118'081 H8.571 Education departxtT^a*- ,- 381'509 S33-489 371,603 Native Affairs department ... 17,817 28,300 26,836 M j n e s depart«rn?^ fc t, ., •'■ ?8'983 40.W1 32,693 Workingltailways department ... 74S.O0O 761,282 695 772 Public Buildings and Domaindep<rtment ... 35,860 40,210 27 961 Defence departmeufc .» 186,201 101,551 182,569 Totals ... £2,063,891 £2,195,919 £2,092,180 Grand totals £1,091,304 £1,111,223 £3,998,260 Services not provided for ... ,„ ... l.j ggg Deduct from sala- ' ' ries ... 20,000 ?)o|:aI(5 ... £4,071,304 £1,012,598

n . £ £ £ Customs... ... 1,460,000 1.410,000 1,285,765 Stamps, including Post & Telegraph cash ... 615,000 617,500 601.162 Property tax ... 385,000 312,000 310,897 Beer Duty ... 5ii000 55>000 53 m Hallways ... J.10J.000 1,150,000 992,187 Registration and other fees ... 38,500 36,000 37.Q34 Marine... .;. io,500 ft.OOO 13 071 Miscellaneous "... 38,000 44,000 45,234 T°tals ... '.'3.707,000 £3,637,500 £3,438,842 Depasturing Licen's rents, &c ... - 191,000 186,320 192,586 Debentures for increases of sinking fund... ... 258,184 251,100 251,000 Total revenue ... £4,156,184 £4,074.920 £3,882,428