CRITICAL ANALYSIS.

Otago Daily Times, Issue 10359, 14 May 1895, Page 3

CRITICAL ANALYSIS.

WHAT SOME LEADING MEN SAX. ..-.A AOF IT. A '

(From Ode Own Correspondent.) _,:..., _. Wellington, April 21. The 3ubilant announcement at Marton by the Premier of a gross surplus of £430,031 was received with Buch general incredulity thafc I thought it well to procure the best oninions obtainable upon a subject thafc must lie the mosfc engrossing topic of the hour for some time to come. I have been fortunate in securing statements from Sir Robert Stout, the Hon G F Richardson, and Mr G. Hutchison, M.hr ' than whom there are probably no three public men more capable of expressing an opinion upon the financial situation of the country.

INTERVIEW WITH SIR ROBERT STOUT. I found that Sir Robert Stout had the figures nt his fingers'end. He said: " There is som? difficulty in comparing this year with last because of the different way the aid under "The Consolidated Stocks Act 1884" had been dealt with. For example, in 1893-94 we issued £284,500. worth of debentures under that act as aid to revenue, bufc by the end of the year we had paid off a considerable portion of them. This year we have adopted a system recommended by Mr Gavin of only issuiDg the amount we actually require, at all events for the last nine months. The old system continued for the first; quarter. The issue is £117,800, and that is a loan in aid. Bufc for this issue, we would have had. .to pay cash. There are three or four ways of looking at the tracsaefcions for fche year.", Reporter: Can you tell .me how we stand in cash basis ?

Sir Robert: Yes. Let us fake that'aspecfc first; I assume Mr Seddon's figures are correct. Well, thee, he ,had a revenue pf £4,406,515! Let us deduct the amount borrowed nnder the" Consolidated Stocks Act,'and our net revenue is £4.288,715; we spent on ordinary exDenses £4,266,722, and paid £250,000 to the public works fund. Cur deficit was, therefore. £228,007. '

Did you say deficit ? Yes; deficit. ■ That is the faefc. Well, then, how does Mr Seddon get his surplus ?

I'll show you. You asked me for an actual cash basis, and I have given ifc to you. Lefc us see how we get a surplus. ' We had £290,238 last year as a surplus, and we borrowed £117,800, as I have shown you. Add these together they come to £408,038. Deduct the deficit on fche year's transactions, £228,007, and we get the surplus of £180,031 which appears in Mr Seddon's statement.

Do ypu admit; a surplus, then ?.'..'a, •-.. Yes,; We have, mads one by ; adding together our borrowed money and our last year's'surplus; hut the true transactions of the year, leaving put borrowing and deficifc,is as ;I. have stated. -In what other aspects can the position be -"viewed.?': ,;.-.,--,

_You-may compare last year's revenue with this. Last; year the customs revenue was ■SH!!;*-!' 502- -CJle '-Treasurer estimated only £1,600,000; but it is said .the revenue is £30,000 less than the,. estimate.77 Compared *^|to last year, there is therefore a drop of £85,502. Then our railway revenue has fallen. It was estimated afc £5547 less than last yeav bufcit has fallen £17,000 below that estimate • so there is a drop of £22,547 there. These'two items of revenue show a drop of £107,049. The other revenue must have kept up in a remarkable way. I have no details, bufc judging by what was published for the nine months of the year I should fancy the stamps will come up to la6fc year. Last year they were £674,647, but the Treasurer only estimated bur revenue afc £638,000. It will nofc surprise me to find that the revenne will show aboufc the same as last year. Then I think our land tax revenue was under-estimated. You will notice that leaving out sinking fund bonds (borrowed money in fact) our revenue has fallen as a whole from £4,368,537 to, £4,278,715, a decline of £72,822.- I do not sea how that can be called a splendid result.

Hogr has the expenditure stood compared frith'last year? .";■'■'

Well, you see. because of the change of the method of dealing with bonds under the Consolidated Stocks Act, and in the absence of the published account, one cannot; actually say, but I expect_ if; will appear fchafc our expenditure, mainly *in interest, will, show an increase of £40,000 or £50,000. I find a total increase of £46,364. ,

What do you think of the position of the public works fund ?

That cannot be accurately judged unless one counts fche liabilities, but -it: seems to me to be about stranded. ~

But the Premier talks jubilantly aboufc it ?. _ ; Yes; but the true figures show no ground for jubilation, as I shall show.. Last year our credit for appropriation was £568,419. We had liabilities of £214,742 on 31st March 1894.*- We voted for expenditure, with a recklessness never equalled, £578,530, or £10,111 more than we had to spend. Luckily we have,only spent—l am speaking of Part; I of the account— £317,000. .This leaves us a balance of £251,419 We are to have £150,000 paid from fche consolidated fund. This will give.us £400,000 in round numbers to start the year ; but we have liabilities—l expect at; least £225,000, perhaps more, so fchafc is not much for railways, roads, and public buildings, &c. Do you consider ifc safe to go on with a public works fund so depleted ? -...-■'

Ido nofc. If; must mean great contraction in our expenditure. &c. lam afraid there will be more trouble with*the unemployed. What of the railways, Otago Central, &._. ? Afc this Sir Robert smiled. "Oh," he said, "they will be content .as before wifch honeyed words, and be informed that the Ofcago Central Railway League is a political association."

What do you consider the outlook ?

Well, our customs revenue is falling and our land revenue must fall, as rents must go down. Tbe position is one requiring great care, but with thai; we shall pay our way. Whafc has to bs noticed is thafc notwithstanding that our exports have gone up our imports have fallen off, and thafc means capital is not seeking investment in the colony. Whatever the cause, confidence is nofc increasing. Bufc I never lose faith in the colony. Adam Smith once said England could stand many "ruins." That conld be applied to New Zealand.

"It seems 'The Consolidated Stock Act 1884' comes in very handy when you want a surplus ?" I suggested. Yes; that was passed by our Ministry when the colony was in great straits—had a big and increasing deficit,—and by its aid we were able to stave off taxation—indeed, reduce it. Bnt these and other benefits conferred on tbe colony by our Administration are sometimes forgotten.

One question more. Will you tell me how tlie past year compares with fche year before as to revenue ?

Well, in 1893-94 we had an increase of revenue over 1892-93, leaving out the question of consolidated stock debentures, of £38,746 Ms Bd. This jear on ths whole there is a

decrease of £79,822. This does not show progress. Expenditure, ds I have said, has risen, bufc I cannot; apportion the items until the public accounts are published. WHAT MR GEORGE HUTCHISON SAYS. Mr Seddon, at Marton, did nofc seem (ssid Mr Hutchison) to be conscious of the fact thafc m disclosing the results of the past financial yenr ho was justifying the criticisms recently directed to the public finances. The figures admit.a serious deficit on the ■ year's transactions, and this is what was shown to be inevitable. The figures given by .Mr Seddon are arranged in such a way as to convey an erroneous idea of the position. For instance, the £250,000 transferred from fche consolidated fuud to fche public works fund is treated as a contingency or after thought, whereas ifc is provided tor in the Appropriation Act; as any other of the items chargeable against revenue. The expenditure for the pasb financial year, therefore, was not £4,266,722, but £4,516,722. The receipts boing put down by Mr Seddon is fi..,-. 06,515, ifc follows that on the transactions of the year there is a deficit of £110,207. These "receipts", include £117,800 borrowed against sinking funds, an amount; which is not properly revenue, bufc may pass as income borrowed to save taxation. But the deficit; of £110,207 is claimed ko be extinguished by tho "surplus" of £290,238 from 1893, and as a matter, of accounting this no doubt converts the loss on fche year's transactions into a credit balance afc the end of the year of £180,031. The figures quoted by Mr I Seddon would be the better, more intelligent, and convincing if supported by the audited ; accounts for the concluding (March) quarter of the financial year, which must now be available for publication. Why are they not gazetted ? The estimated revenue for the year was £4,235,000, which, wifch £117,800 as proceeds of debentures floated to equalise sinking fund payments; made up a total estimated income of £.-,352,800. The public accounts as already pazetted for, the three quarters ending the 31sfc December show the revenue collected up fco that date ss £2,995,833. This and the £117,800 borrowed against the sinking fund and brought to credit in the first quarter.- made a total income to the 31sfc December of £3,113,633. The estimate for customs and railways for the whole year was £2,770,000, and oE this there was col-' lected up to fche 31sfc of December the sum of £1,913,720, leaving as the amount; to fill the estimate duriog the March quarter of £856,280. But we are now iold fchat these two services, which represent aboufc two-thirds of the total revenue, are short on fche whole year by £4-7,000, so that the actual income for the March quarter from these two sources could, only have been.£Bo9,2Bo. The other items making up the ordinary; revenue account* are stamps and post and telegraph, land, and income tax, beer duty, registration and other fees, marine, miscellaneous, and " territorial.. The estimated revenue .from these sources for the whole year .was £1,465,000, of which £I,oß2,ooo'was collected up to tha 31sfc of December .(including, aboufc £272,000 for land, tax: collected in the' June quarter), thus leaving aboufc £383,000 to come in during the March quarter. Ifc is there thafc the doubtful part of IJJr Sed_lon"s financial statement ■ comes in. While he admits; that the two chief sources of revenue .show a loss _on_ the Treasurer's estimate. of £47,000, he indicates that this is not only made up, but the revenue from the, other subordinate sources of revenue (by a coincidence) actually produce an excess on the whole estimated reyenue. for the year' of exactly the same amount as the deficit on the two most important sources—namely, £47,000. That is: to say, these subordinate sources of revenue have bettered their estimates by £94,000, and this, fcoo, in the last; quarter' of the year, about which we are given no particulars, except as fco fche deficits in the customs and railways. In other words, instead of yielding in the March quarter £383,000 as estimated, they have contributed no less than £477,000. This is, of course, not impossible, bufc is so unexpected .(by the Treasury); thai; fche detailswould be interesting. Assaming these.ascertained, and approximately the amqunfcs to' be correct, and ..they aggregate close :on the figurtes Mr Seddon gave as the "actual : receipts," and assuming the. unexpected, (and unexplained) advance in; the last quarter under '• the smaller heads of revenue of nearly £100,000 to be genuine, there is stillj-the deficiency on the year's transactions of upwards of another £100,000, relieved by a balance which is traceable back to 1892. The admittedly nece-Esary reduction from £250,000 (as the vote has stood in each of the last* two yearsJ7fcb £150,000 this year for; supplementing the public works fund indicates a recognised and continued shrinkage of revenue, and a total exhaustion within 12 months of the public works fund. Whab then ?

The question cannot be leffc over to be ! answered in a session meeting in 1896, three or four months after the end of the present financial year, which will see the end of the present public works fund. It must be faced next session, VIEWS Ol* THE HON. G. I*.' EICHARDSOS. As to ordinary revenue and expenditure (said Mr Richardson) there is .cause for congratulation that in these dull times the revenue.'has . come ih so well and that we have a surplus as ' real as preceding ones, if not so large. - There ' is another aspect; which is nofc quite so rosy. The revenue proper—thafc is, exclusive ef debentures for sinking fund increases—for fche past year is £79,800 below fchat of 1893-94, and £41,000 less than in 1892-93; while.oa fche other hand, fche costs of government, excluding interest and sinking fund charges, for 1894-95 exceeds 1893*94 by £21,000, exceeds 1892-93 by £51,000. and 1891-92 by £102,000. The figures may not be very large, but their trend on both sides of the ledger is significant and in the wrong direction—revenue steadily falling and ordinary expenditure as steadily rising. As to the public works fund, in claiming for the past year "the lowest expenditure since the public works policy was inaugurated," the Premier has forgotten his ' claim in 1892 of spending a still smaller amount, and also that under recent acts moneys are directly borrowed for expenditure formerly charged to the public works fund, so fchat his comparison is of little value. As to other expenditure entirely outside of the consolidated fund and public works fund accounts, there are now powers of borrowing and expenditure to very large amounts annually under many acts. For instance, ifc is understood that the first loan of £1,500,000 under the Advances to Settlers Act is just aboufc to be raised. Under these circumstances ifc is clear thafc unfcil the March quarter of the public accounts is published it is impossible fco arrive afc a true conclusion as to the year's transactions, a most important feature being the increase bf the public debt. At present we only know that to 31sfc December 1894, exclusive of the Cheviot debentures 1 £250,000 and consols £151,000, some £340,000 has been borrowed, and the public debt thereby increased.