THE FINANCIAL STATEMENT.

Otago Daily Times, Issue 14699, 6 December 1909, Page 3 (Supplement)

THE FINANCIAL STATEMENT.

HEAVY NEW EXPENDITURE,

NAVAL DEFENCE,

COMPULSORY TRAINING FOR YOUTHS.

FRESH PROPOSALS FOR TAXATION,

In tl'.o House o! Representatives on l!io 10th ult.'tk Minister of Finaneo (Sir .1. (i. delivorocl the Financial Statement. In the course o[ his remarks he said: — It was my privilege lo place before tho Homo during the. .short .session in •!"»« llie financial results for tho year ended 21st March, ami 1 now propose In deal further with Iho financial position of the country, to review some of the conditions of the past, and lo .submit important pro- ■ posals alfocting (he future. I PUBLIC DKIST. J I will first deal with I lie public debt. \ Tho increase of the public debt for the past | year was £'4,484,627, hut it is only right to j Bay that of this amount no less than £2,633,919 may bo regarded as directly | interest bearing, with on additional profit, j The gross public debt of the Dominion | grew from £38,830,350 at 31st .March, 1891, , to £70,938,534 at 3kt March, 1909—nit in- *■ crease- of £52,108,184 —cijun\ to 82 |>cr cent. | Of this amount no less a sum than i '.£21,090,070 was spent on directly rcprcduci'tivo objects, such as advances'to settlors, tndvnncos to workers, land for eottloinfliils, 'loans lo local bodies, State coal mines, Xativo laud purchase, etc. "What does the other side- of the balance ' riic-ct show? The capital value of laud, publicly and privately owned, in 1909 is £270,537,296. 'i'ho capital value of land, publicly and privately owned, in 1891 was £122,225,029, to that there has been an in- : crease in (ho value of land alone—irrespective, of mimy other sources of property, Blocks, clc.-of £148,312,267, equal to over 121 per cent. The incrcace in the value of railways and rolling stock for the period 1891-1209 was £13,844,058—fr0m £15,208,374 to £29,052,432-e<pial to over 91 per cent. The figures may therefore he stated as follows: Increase on opened, railways and equipment from 1891 to 1909, £13,844,058; incicased capital supplied for advances to . bottlers, land for settlements, Htate coal ' inir.es, loans to local bodies, Native land ' purchase, etc. (all directly reproductive), £21,090,070, -total, £34.934,128. The surplus, lifter paying full interest and all tho expenses of the Advances to Settlors Office (now over £70,000 per annum), the- State ooitl mines (now nearly £20,000 per milium), land for settlements (£40,000), and Native land purchase (£37,419), tho bulk of which is being capitalised, is more than siillio-iont to mako up for the deficiency on the railways, eo that the total amount of £31,934,128 i»«y u0 considered reproductive. PUBLIC AND PRIVATE WEALTH. It is useful to place before you an estimate of tin private wealth in 1909:— Total canila! value of land privately' owned £205,845,053 Total value of live stack, machinery, implements, rolling stock, etc 27,349,338 Total capital invested in trading and manufacturing, estimate.! on the total income returned for taxation, capitalised at 5 per cent, (a low estimate) as the average return on capital invested ... 197,735,020 Native liuui capital value ... 16,270,236 Lessees' interest in Crown lands 10,546,231 Church and oilier lands not otherwise included ... ... 2,625,202 Education land* 5,038,615 Fixed deposits 20.084,880 Banks' mortgages not taxed ... 7,500,000 Public Trust Common Fund mortgages 2,309,415 Building society mortgages ... 2,000,000 Post Ollicc Savings Bank deposits 12,159,293 Bank note issue 1,587,051 Total 511,056,384 Tho land values aro proved to be fully 30 per cent, below actual sales, so no one can term them boom values. In addition to what 1 stated, there 13 tile private wealth represented by incomes derived from salaries and professions amounting to £5,731,144. These directly employ little or no capital, but indirectly represent capital, if capitalised at 5 pur cent., to the amount of £74,622,880. Then there arc wageearners who make no returns of income, ,their estimated total income being £45,061,350. The public and private wealth in 1909 was £613,518,825—an increase from 1891 of £300,000,000, produced to 11 largo extent by the expenditure of public money and the corresponding development of the country. The public ami private wealth (icr head of mean population is £763, an increase of £376 from 1891 to 1909, with an increase of population of 51 per cent. These figures and facts prove Unit although tho public debt has been in-crea-seu by the amount 1 have stated, the assets in the rapid development of (he country have increased in vastly greater ratio. Fur £1,000,000 increase in'the public debt the assets have increased fully bv £10,000,000. This in commercial circle's would be considered very sound business. Iu the 13 years, 1896-7* to 1908-9, there was an unusual increase of income returned for taxation alone of £9,325,976, an average increase year by year of £717,459. In the 15 years, from 1893-4 to 1908-9. there was an annual increase of £10.043,703 in the incomes returned for taxation. The expenditure or public moneys upon the development of (ho country and upon public utilities produces vastly increased wealth anil earnings in return, and a very small perccntago of this returns to the Treasury in tho shape of Utxca on capital expended. Tho balance, by far the greater proportion, goes into the pockets of the people. This shows (he soliif basis of tho progress uttd prosperity of (ho country. LOAN TRANSACTIONS. During the session of 1908 Parliament nuthoiisei! tho raising of £1,250,000 for public works and £1,000,000 for the nurcliaso of the Wollingten-.Vlana.watu railway. During the financial year just closed debentures amounting to £3,133,238 fell due, and it. may be of interest to lion, members to learn that of this large amount no less a sum than £2,148,483 was renewed by (he holders, leaving £984,750 to be provided for by the sale of new debentures. In this connection I may say that a large saving in interest charges was made, debentures for over £1,000,000, which previously carried a iak> of 4 per cent., lieing placed at 3i per cent No one, unless deliberately refusing to acknowledge the splendid results achieved under this head of our finance, can contradict me in asserting (hat the results aro must satisfactory, the exact position being as follows:— Amount matured— A < 'I I 1" it'"t £2.010,800 Ai 3 2 per cent 1,057,438 At 0 i«r cent 65,000 Total ... £3,133,233 Renewed or provided for— -\t 4 per wnt £810,825 At 3J per cent 2,221,763 Outstanding 650 Total £3,133.23S Loans Maturing.—Durimr (he present financial year £2,618,023 falls due. Of this amount £1,552,650 fell due during the last six mouths, of which £63.800 has been renewed by the holders and ££67,850 |>aid oil'. This has been done wilhoui any additional charge on the Dominion for interest, In fact, in" one instance a parcel of £40,000, 011 which we had heretofore to pay 6 per cent., was secuiwl at 'I |hm' cent. 1/oans to Local Bodies.—The balance at the crcslit of tho loans to local bodies ac-

count on the 31st .Match, 1903, was £11,211. Debentures for £250,000 were created and issued during the year, and refunds of unexpended balances of giants amounting to £i2O were received.

LAND AND INCOMK TAX. There has been a steady increased amount cf land lax collected. This is largely accounted for l, v ihe incrca.se in values and partly by ,I K , legislation of 1937. The increase in ih o ordinan- land tax last year amounted to £43,677, which is wholly from mcieased „„ literal ion in the rates of the ordinary l am | tllx having taken place. '!!»• :„«.':,.„ j„ Uk , laud tax amounted to £25,2tS.'resulting also from itu.-ca-id valuations, iH the scale was the same as in ltio previous year. The absentee tax increased l, v £i£g, eonse<iuent oi tho uicivus'al graduated tax It mav not be out of place for my to note here'that, on, the other bide, the increase of private wealth in laud alone during t!;e last 15 years is £113,573,887. The enormous increase in tho wealth of the Uonjiuion,

to which 1 have already referred, during the last 15 years, aftw careful examination and analysis, 1 estimate within that period amounts to the large sum nf £250,000,000. It lias increased at a much greater rate than the population proportionately. The whole of the direct taxation—viz. land tax, income tax, and death duties — is contributed by comparatively few persons, who, it is evident, have reaped the benefit of liie publb expenditure to a very large extent. In 1903-9 39,133 taxpayers contributed the whole of the diicel' taxation of this country, amounting to £1,185,11)3, equal to £'30 per taxpayer. In 1893-4 15,3?,7 taxpayers contributed £448,151, equal to £29 per taxpayer—an avorago increase of £1 per taxpayer per annum in 15 years. At tlie same timo the average wealth of these, persons was increased £9131, which equals an average increase at the rale of £612 per annum, in addition to those increased incomes which are not included as iH-thli, _ amounting to £4,000,000, but which, incidentally, represents wealth, and if capitalised at S per cent, would represent nearly £1500 per annum of an increase. The income tax revenue for years past has also shown a consistent increase which, as an indication of progress ana prosperity of the Dominion, is interesting. The incomes returned for taxation havo increased over what they were 15 years ago by the enormous sum of £10.043,703 for the year ending March, 1909, increasing, by 'large amounts each year. During that time there has been mi increase of 7196 income tax payers, equivalent to 315 per cent.

LAND REVENUE AND'SETTLEMENT. Tlie tola] land revenue from all sources mis £696,375. This is £37,531 more than tho revenue of Hie previous year, which. 1 informed you in Inst year's Budget, had been tho largest received by the department. The territorial revenue amounted to £222,356, and the revenue received as rentals from lbs lands dealt with under the Land for Settlements Act. was £237,831. Tho sum carried to " territorial" is less than in previous years, as a portion of the moneys hitherto credited as such now belong to the National Endowment Fund. The amount received for this latter fund during the past year was £76,222. It is estimated that the gross land revenue for the year 1909-10 will amount to tho sum of £659,000, of which £224,000 will belong to " territorial."

possible to fay wlial the exact amount of the expenditure will lie, but it will bo within the amount T have named. Having regard to the nature of the expenditure, you will, I hope, agree with me that it should not be Irful-ed a.s jjarl of our permanent public debt, ami 1 propose that wo make provision for paying it off within 18 years. For this purpo.-'e a sinking fund of 4 p':f cent, will require to lx> provided, and proposals in this direction will be submitted to you.

LANDS FOR SETTLEMENT. Five estates were dually acquired and o|Oned for close (settlement during the past year at r. cast, with incidental excuses, of £383,426. Up to March 31, 1909, 1,195,292 acres wero purchased at a cost of £5,136,909, with a further expenditure of £452,682 for expenses incidental to the 'acquisition and subdivision, into smaller farms and construction of new roads. Rents, etc., received have amounted to £1,710,012, and interest paid tc £1,331,980 for the whole period—a satisfactory I'mancial result, especially as it is obtained from a process of closer settlement which has in itself proved so bcnclicial in other ways.

At the conference, the overseas representatives were of one mind in their willingness to take, fomo share, in Imperial defence, though they differed as to the form it should take. Local sentiment and local conditions no doubt weighed with them. Home preferred local navies; ethers, amongst them myself, thought (be more excellent, way was to contribute a quo! a to the British navy itself.

ADVANCES TO SETTLERS. This eminently serviceable and profitable department continues its success. About 28,000 settlers and workers have received assistance amounting to £9,810,725. The avcrago amount of the advance* now outstanding is £390 for the settlers and £251 for tho workers. The total amount of tho advances for tho combined departments during tho year amounted to the record sum of .111,792,010, and this average has been maintained throughout the •year. Tho department acKanueil during the year in tho settlers' office alone £1,521,409—an excess over the previous year of over a quarter of a million. The repayments to tho department from all sources totalled £802,980. These show a' steady increase as a result o£ tho largoamount of money that is being advanced annually, but a considerable reduction has taken "luce in the amount of mortgages icpaid in full or in part this yeai' compared with former years, and it will bo ohscrved that the claims made on tho department have grown unexpectedly quite out of proportion to the moneys repaid. This will, however, adjust itself when money becomes easier.

ADVANCES TO WORKERS. The advances paid during the year numbered 1115, and amounted to tho sum of £298,184 6s—an excess over tho previous year of 336 loans for £94,206 3s lOd. Up to the 31st March last, loans aggregating £603,800 hud been grunted to 2399 workers, who have been able to acquire homes for themselves and their families under the favourable ml liberal conditions offered by tho act. The increase of the borrowing [lowers from £200,000 to £500,000 in any one fimucial jcar, as provided by tho net passed last session, has materially aided this branch of the department in its endeavours to meet and supply the growing ncede of the workers. OCEAN MAILS. Negotiations have been proceeding with the view of including Auckland as a port of cull of the Vancouver steamers, and I «m hopeful that, tho sympathetic attitude of Canada will insist "towa.rds securing hide of Canada will assist town wis securing tho desired result. 1 havo devoted much attention to tlio possibility of establishing a service by Netv Zealand sleameis between Auckland and Sau Francisco by way of Tahiti, only to lind that without assistance from the American Government the cost of such a service is beyond our resources. There is, however, some reason to bolievo that in the next session of Congress the muchdebated Shipping Subsidy Bill will become law, wliou a scrvico by American Meamere will, it is practically" certain, be undertaken. At tho same time I do not think we should overlook the advantages to New Zealand of having a suitable service via Suez. It is deeply to be regretted that after so many years of control by the Suez Canal Company the obtaining of large profits is made paramount to a lowering of the scale of charges, by which increased trade by that route would be encouraged, to I he great, advantage of the Motherland and some of her principal oversea dependencies. 1 am hopeful that, liualjy, wo may have the advantages to this country of regular services by the three routes -namely, 'Vancouver, San Francisco, and Suez. OLD-AGE PENSIONS. The widening of the scope of tho act of 1908 has been mainly responsible for an increased expenditure of £11,560 during the financial year just closed. As, howover, the majority of those taking advantage of the new provisions did not participate until after October the lull effect will lie much more pronounced during the current year, for the first six months of which the increased expenditure has been at the rale of £26.0C0 per annum. The uumbrr of pensioners increased by 827, the numerical advance since 1930. The percentage lo tho population eligible by age is 34, as against 32 in 1908. During the early part of ibis year iberc was a marked im.r.'ase in the number of new claims recorcied, due. no doubt, lo the financial stringency. I am glad to he ahlo to announce that, there has been during the pa-t two months an almcst equally marked fallimr off. FERRY SERVICE. The development of the railways in both islands and the consequent necessity for having a complete State-owned link for the conveyance of mails and passengers between tlio two islands has been from time to time receiving the consideration of tint Government, and the lime is approaching when this important, matter should/ be dealt with on practical lines. NAYAL DEFENCE. Hon. members are aware that the Imperial Defence Conference, which was attended by me as the representative of this Dominion, arrived at decisions in connection with the strengthening of the British navy which call for action mi the part of New Zealand. Tlio offer of a Dreadnought made In this country wa; accepted by the British" Government, and the necessary steps require to be taken to enable tho vessel to be built atxl handed over to the Admiralty. For this purpoie. I propose to ad; the House for authority to raise a loan of up to two millions, at a rate of interest not exceeding 3J per cent. Until . the. vessel is actually completed, it is not

It would be quite out of place for me to attempt to question or even eriliei.-e tic decision of Canada and Australia to establish local navies. It is for these great dependencies themselves to determine the lines on which to proceed, and 1 fully recognise that they are t.lio best judge* of their own best interests. Jt will be clearly understood, I Iran, that liie reasons which mo-ved me in the course I ttjok had uo relation to them. Omitting all such controversial points as the diliicuhy of maintaining a common standard and of arranging interchanges, the risk of defeat in detail if the British Heals should he crushed, and so on, there remains one consideration, which is purely personal to New Zealand, and in my opinion determines the whole question—thai of cost.

Thi! proposals made by me involve; a tola! yearly ex|>endilure of £250.000. hv.klo up thus:— Dreadnought (interest and sinking fund for ouch of 18 years), £150)000; contribution to the Admiralty to cover the diU'erenue between linperial'and local rates of pay, etc., £100,000; —£250,000. Deducting from this the £100,000 which wo arc at present paying as contrib.ition to the cost of tho Australasian eqtiadron, and which will be dropped when tho new scheme is adopted, tho net result will bo a yearly increase of £150,000 on the. amount wc sit present pay. Recognising, as wc all do, our duly to take upon us a reasonable share in the general burden of Imperial defence, I feel satisfied that neither Parliament ior the country will consider that such an expenditure will be excessive. Proposals on the subject will be subinittcd at an early date for your consideration. IXTEKXAL DEFENCE. The time has arrived when a definite-course must, bo taken with the view of placing the home defence of the Dominion on a more satisfactory footing. To carry this out tho defence system mu.-t undergo a complete reorganisation, and I propose to submit legislation this scission that will substantially increase tho efficiency for defence purposes of tho .scheme now in operation. This reorganisation will, as far as local conditions will permit, bo on lines approved at tho Imperial Defence Conference. Those are designed to provide an active trained force for emergency, consisting of coast and garrison defence and mobile forces. All arms will bo so arranged that should tho Dominion bo required to 6iipply a. expeditionary force suitable for service oversea it can be promptly sent without any dislocation of our own defences. I propose that, all boys between tho ages 01 12 and 18 ?Jiall undergo elementary and progressive training cither in junior or senior Cadet divisions. Boys under tho former age will undergo physical training only. All young men, except those physically unlit, between tho years of 13 and 21, will undergo two years' compulsory training. Ibis training will bo on stated evenings and on .half and whole days during tho year. In addition, there, will lie training on 14 days in oacli year in ft training camp. As a further part of tho proposed schemo an active force will be organised, consisting of 20,000 of all ranks, composed of men between tho ages of 18 and 30 years who choose to join voluntarily. This force will bo organised on Imperial lines as to arms, equipment, establishment, and training. After those, men have completed their services they will pa.-s to the reserve. In tho event of such a force not being equipped in point of. numbers by voluntarily enlisting, a selection will bo mndo from theso undergoing compulsory, training, as abovo outlined, to make up tho total. This active forco will ho established on tho Ist March next in tho larger centres of population only, 'fho mounted rides in the country, ■however, will bo included as the staff instructors .gain experience, and as material and equipment becomo available tho schemewill bo extended beyond the larger centres to the outlying districts of tho Dominion. Compulsory training for junior and senior Cadets and young men between 18 and 21 will commence as soon as tho requisite registration can bo completed. I feel that the useful services of rillo clubs should not bo lost to the Dominion, and the continuance and formation of these will be encouraged in every way As it is most desirable that there should bo uniformity between the scheme followed by the Imperial I General Staff and our own Genera! Sla/T, steps will be taken to insure the necessary similarity in training and in methods oE defence. As a permanent central training ground will bo absolutely necessary in each island, the House will be asked to authorise the setting apart of a considerable area of say, 12,000 acres, in each island, where continuous training will take place, whoro the permanent instruction staff will be located, and on which the necessary buildings, ranges, and other equipment will be erected

RETRENCHMENT. Tlio revcnuo for several years had, as you are aware, continuously increased to uucli a.n extent that from time to time heavy reductions by way of remissions boih in taxation and in tlio receipts of various departments wore ell'octoct. I would remind you of the fuct that during the last 15 years the total amount of remissions amounted to nearly seven millions, and of that amount during the session of ISO 7 remissions m taxation and reduction of revenue were made to tho extent of £000,000 per annum. The extraordinary drop in (.he vuluo of some of our principal products brought about, an alteration j» tho commercial condition of the country that told its tale upon the revenue, and more particularly witn respect to that derived from tV. Customs branch. The Government at" once faced tiw situation, though naturally with reluctance, as tho removal of men from their positions entails a most painful duty upon any Government, Advantage wa3 taken of (be position of affairs to amalgamate it number of departments, and where we formerly had 30 departments wo have now but l'J-lhai is, 15 of the civil service and lour of outside dopaitmcnts-namelv, the Government i.ifc insurance, the Public Trust, U W Slate Fire, BU d tho Advances to Settlors. Sonic mouths ago 1 set ap a committee, consisting of •vo of tic high odiors 0 j Lho b . be service, of wide financial experience namely-the eontrollor and auditor-general tue secrvlary of the Troasurv, iho com! missicnor of laxcs, the. assistant sccelarv of the I'iwt Ulllcc, and the accountant oil railways for the of examining into the whole sysleiu of t |, a „ cwim! 6 US aimed ontothevMK-usdepanmems with the view of Ihe establishment of a uniform svsiom and 1 hope before long to receive a report from the oilkom named. The outcome of tln_s will certainly load to fun.lrer economies being cll'celej. Necessarily it will take some time under the aiiialsiwiHitcd departments More it can be expected that the full results will - be achieved.

LICUNSLVI.! LIiCUSLAXRiX. I propose l-o introduce impuriiMit amendmouls 10 the Licensing Act. I have been fm- .sonic time past impressed l, v llio fact that the existing lc.tri.slaticn is'not. sufficiently in aceoul with tho principles of democracy, and material alterations in the law will bo made both to further these principles and to provide a (air incisure of consideration for tbosy whose material interests will be greatly ail'ected by theso proposed alterations. I have rceogni6c<l that such important changes as these contemplated would have a ciifKoulty in beconiinj law, especially this session, in connection with such a contentious subject-matter ns licensing legislation, and, experiencing this difficulty. I ha.vo taken step*-, through the good offices c f one of my colleagues, to induce the two great parties to this ipiestiou. independently through thoir nvogn-ised representatives, to modify thoir full demand'* for or opposition to certain pivpcs«l amendments. In, this aim, I am glad lo say, the results have been entirely successful owing to tht> spirit of reasonable and honourable concession on both sides. RACIST! I.ECISLATIOX. The attention of the Government has Iven called to the conditions under which gallov.iy a ml potty race* are conducted, and it is of opinion that they 6hou!d bo stopped, and the House will bo asked to do so. The race meetings held throughout the Dominion are too numerous, and a proposal will be submitted to limit them. At the jam? time the House will be, given the cipponunity of deciding what form of betting is to be allowed on racecourses. Sport, racing or otherwise, followed out legitimately, is deserving support, eo that those who enjoy it as a. pastime or recreation may do so. The, Ixst way to do

Ihis is lo remedy any flagrant abuses that may exist. NEW LAND PROPOSALS. Ac I oilimalcd earlier in the session, legislation will be introduced with n view to the more satisfactory settlement of Iho land question in New Zealand In dealing with th: disposal of its binds the State should observe two great, principles: First, suitable close settlement must bo promoted and encou-rag.-d by every reasonable moans; second, the Slate must, in just ire to us present ami future people, as a whole, reserve to them some part of that value which public expenditure will create in the hinds it is now parting with to private, hands. There is room for wide difference of opinion as to the extent to which State operations ami private, effort resjpeelively create values in land, but while there mav he this difference as to llie degree there surely can be no such difference as to the fact that iti a young and sparsely liooplcd country like this, where such enormous national development work is being done, mainly at the expense of the people as a whole, some iirereascTT value will bo steadily added by the Slate operations :o the lands if is parting with, and of that increased value the people arc entitled to at least a share. The State's right share of the. increasing unimproved value will .roughly vary with the degree to which that increase is duo to Hie activities and a"encies I have indicated, aird this principle I have endeavoured to maintain throughout mv land proposals. As "to the lands already leased for 999 years, it is widely asserted that the lessees earnestlv desire to convert this tenure into a freehold, and I deem it the duty of the Slate to permit this if it can bo done without anv material sacrifice of its permanent interestf. The chief advantages to the State of the present tenure are that it secures the existing condition as to limitation of area and occupation. The value of

if loft to children, under our present law. As a further example, if £20.0t0 is divide.! anions,' the children, all under age. the estate lias to pay the same duty as if the whole amount went to one son. I propose to introduce a new Death Duties Hill, which will impose two descriptions of duty —viz.. death duty in respect of the estates

of deceased persons, ami gift duty in re sp"ct of gifts made by a person in his lifelime. Tiio former is substituted for tn.

a reversion postponed for 999 years not vory appreciable, evon where the State is the reversioner. In my opinion the conditions as to limitalion of area and occupation can bo effectively safeguarded even under a grant of the freehold, as I shall later show, and, this being so, the only question left is what- should the holder of ono of these leases for 999 years pay for a. title in fee simple. I therefore proposo to oflw lease in perpetuity Icnanis, whether on lands originally Crown lands or of lands acquired under the Land for Settlements Act, ono of the three following options:—(a) To retain the tenure as it stands; (b) to purchaso the freehold within a period of two years at a price equal to Hi.: original valuation, plus one-half of tho difference between that value and tho improved value at tho date of exercising the option; (c) purchase the freehold at original wiluation, subject lo five recurring charges in favour of the Crown—the first, equivalent to ouc-teut.li of the increase in the unimproved value between the date of the lease and the expiration of the first period of 33 years, and each thereafter equivalent to one-tenth of tho increase in the unimproved value between tho expiration of each succeeding and ac-h immediately preceding period of 33 years, the land to become an absolutely uncharged freehold at the end of 165 years from the date of the lease. The purchase money for the freehold may be either in one cash payment or by an instalment of I 25 per cent., and by the payment of the balance, with interest at 4 per cent., on the instalment system prevailing under tho Advances to Settlers Acts over a period of 33 years, with the right to-pay off in whole o:- in part at any date. These changes will create, no persona! liability on the part of the owner, but will be a charge upon the hind only, and be payable in cash or at the owner's option by instalments over each succeeding period of 33 years, with interest added at £4 per cent. Renewable Lease of Ordinary Crown Lands.—Next, with regard to the tenants under the renewable lease, system of ordinary Crown Ijinds. Under this system the lessee obtains a right of perpetual lease subject, to recurring valuations every 66 years, upon which valuation the new rental is based. Hero tiho.ro is secured to the State practically the wholo of the increase of the unimproved value in the form of rent at each renewal. The problem before me has been to contrive a system under which tho freehold might be given to these existing- leaseholders while securing not only the conditions as lo area and occupation, but also securing to the State some reasonable i>ortion of tho unimproved value which is already secured by the means I have indicated. Under the present system, in my opinion, the following scheme presents 'a fair equivalent from tho point of view both of tho tenant and the State: the freehold is to be given lo these lessees at tho original value, subject lo a recurring chargo every 33 years equivalent to one-fifth of the incrct.jc in the unimproved value found to havo taken place between fcheso periods. Such a system, while it sacures to tho State some portion of tho unimproved value righly belonging to the State, leaves the greater portion of that unimproved value to tho interest at fee simple, affording an ample margin in his favour. To give him the fullest encouragement the purchase, money payable for lihe freehold in these cases may bo paid a 6 in the ease above outlined in the purchase of lands now held under lease in perpetuity.

Renewable Leases of Land for Setljement Lands—Next, as regards the renewable leases of land for settlement lands, these tenants have now tho right to a |wi'l«lual lease with recurring valuations every 33 years, tho to.rm being half onlv of tho term of the renewable lease of ordinary Crown lands. It will bo remembered, further, that these lauds acquired under tho Land for Settlements Act woro in most case* more or less highly improved awl ready for settlement, and "much manfully furnished than the ordinary Crown lands with tho means of communication and all tho other facilities of civilisation.

Jn connection with these lands, therefore, tho State has now, by the means of a recurring valuation upon which each new rent is to be based every 33 years, secured to it practically the whole of tho increase in tho unimproved value. My purpose, therefore, in this case was to find some equivalent in the form of freehold tenure which would fairly secure to the State a reasonable share of the unimproved value in these lands. I propose to grant the freehold at the original value just as in the case of ordinary Crown lands, but with double the recurring charge—that is to say, two-fifths instead of one-fifth of tho increase in the unimproved value. European lands acquired in future under tho Land for Settlements Act will be open for lease as at present, but the fee simplo of tho land leased may be acquired upon the recurring system already explained. As regards tho remaining Crown lands outside of the endowment area the present optional system will continue. FUTURE ACQUISITION AND EUROPEAN SIOTLE.UIOT OF NATIVE LANDS. The legislation I propose to introduce will empower the Slate to acquire, compuliiorily if necessary, from the Native owners areas of Native iand equivalent in value to £500,000 per annum, and in order that the most convincing earnest should ho given to Parliament and to the people of New /rfahtnd that this forward movement will ho titken, I propose to ask Parliament to amend the Land for Settlements Act by increasing Iho present amount authorised for tho purchase of lands to £1,000,000 per annum, £500,000 of which is to acquire Native lands each year to the value of tiny half-million. The 'lands when so acquired will be paid for out of the Land for Settlements account. They will be classified into two classes, according to tho degree of Ihoir improvement and their remoteness from settlement, ami of tho extent of labour in clearing, draining, or otherwise bringing them into cultivation. The class "Improved Lauds" will be held and dealt with in the same way as European lands—i.e., renewable lease, with power to purchase tho fee simplo upon the. recurring charge system. The class "Unimproved Lands" will be disposed of by tho State under the optional system now applicable to ordinary Crown lands, but tho proceeds from either lease or sale will bo paid into the Land for Settlements account. Tho present law as to Native townships under existing conditions requires amending, and tho new Land Bill will provide for the purchase by the Government of Native townships, preserving allotments set aside in such townships [or the Maoris and now occupied by them, and these will bo disposed of under a freehold tenure on conditions which I will submit in the Land Rill. DEATH DUTIES. The existing law with regard to tho imposition and collection of death duties calls for amendment, not only for the purpose of taxation but for the purpose of securing a, fairer adjustment of these duties in accordance with both ihe amount of estate and shares taken by beneficiaries or next of kin. Tho existing scalo is illogically graduated, and, moreover, many of tho largest estates in New Zealand to-day cscaps taxation altogether. No matter how great the fortune left to a widow or widower may be, no duty is paya-ble, whereas duty is payable on small estates, even

duty imposed bv the existing consolidated " Death Duties Act, 1908," while the latter will take the place of the deed and gift <lutv imposed by "The Stamp Duties Act--1908." The death duties tinder the pro posed bill will consist of two kinds—via.,

estate duty and succession duty. This is not the tints or tha place for details, but, speaking eenerally. the new measure will deal with'the subject on modern lines and equitable principles. It. will provide for a graduated rise, vising from 2 per cent. ; n estates of £1000, and increasing lo 8 per cent, in the cases of estates of £100,000, and other important alterations will bo proposed. Unlike estate I'.ity, mctes-

sion duty will bo imiwsed as in England, " not upon the aggregate properly of a deceased person, but upon each separate interest taken in that property by the several persons who succeed, whether as legatees, devisees, or otherwise. The rate of duty will depnd upon the relationship between the successor and the deceased. Up to a very large amount tho widow, child, or grandchild pays no succession duly. Up to a large amount the man who succeeds his wife's property pays 2 per cent., and nftor that amount is reached the rate is increased. Oilier relatives not- more remote than a cousin pay 5 i>or cent., and mow romote relatives and strangers in blood pay 10 per cent. Mo succession duty is payable on any properly let in trust for any charitable, educational, religious, or other public purpose in New Zealand. Although estates under £1000 are exempt from estate duly, they will pay succession duty in the same manner as largor estates! Duly will be imposed upon all gifts made by any poison in his lifetime, with the exception of gifts of less than £500 in value and of gifts to any .charitable use. Tho rate of duty will bo 5 per cent, on the value of the gift. The now duty will dilk-r from the existing duty in two chief respects-first, the new duty will bo imposed on all gifts whether made Ivy an instrument in writing or not. Under the existing law gift duly is merely a stamp duty imposed upon the instrument of gift, if there bo such an instrument; consequently gifts of money and other gifts, however great in value, now escape duty altogether. Potent illuslra- j tions have "shown how the existing law may j be employed to ell'ect successful evasions- j of death duties in some of Iho largest i estates. Second, the existing gift duty is > levied at the same rale as. the existing j death dntv, and therefore deiiends partly ; on tip aggregate value of the donor's estate, and'partly on the relationship between him and the beneficiaries, instead of depending solely en tho amount of the gift. tho existing law, if righteously enforced, would in many cases require the donor to show the commissioner what property he possessed, and might involve inquisitorial investigations into a. man's business and properly. The proposed scheme will obviate all litis. The general aim of this new law will be to relieve the burden now imposed by our death duly upon the smaller estates, especially where they go lo the children and grandchildren, and to increase the burden upon the very large estates, which in many cases now escape taxation either wholly or in part. Another principle which has been followed is that of inducing testators to distribute their wealth rather than concentrate it upon one or a few persona by imposing an increased rate of duty where the amount left to any one person exceeds a stated sum. It is estimated that the amount of death duty collected on the total deceased estates taken over a period of tho last 15 years has been tnlv a little over 3j per cent., while on estates of £100,000 and upwards the average, if you include estates given to widows, is barely 5 per cent. BANK TAXATION.

The banks have not been contributing to | the revenue a fair proportion of tho in- j come tax by comparison with other public j companies or private llrms. An arbitrary method was adopted on tho inception of J the land and income tax assessment, which; has not proved sufficiently clastic to provide for tho expansion of trade; so thai whilst the rcveuu.i derived from trades, manufactures, etc . t.a-s developed rapidly, the proportion contributed Ivy the banks has not increased at the same ratio as it should have done. An increase was made in 1900, but even this has not recovered any of tho lost ground. The ratio of the average assets and liabilities to bo taken as forming the basis for taxation was increased to 10a per cent, in 1900. Since then the increased prosperity of tho Dominion, in which th-3 batiks have shared, has further accentuated the position, and there can be no doubt: that the banks are not paying a fair share of taxation, and this, as a matter of equity, they should do. 1, therefore, propose to further increaso the rate, in order to produce £14,000 per annum additional, but, oven then, this increase does not reasonably do so. and I will ask for authority, in order to bring it more into a fair proportion of the total revenue obtained from this source, to increase tho charge made under "'l'he Stamp Act, 1908," on the bank note issue from 10s per cent, to 15s per cent. This will give £16,000 additional revenue.

GRADUATED INCOME TAX. The graduated income tax needs re-ad-justing on a more equal graduation. It is anticipated that the scalo which is appended will produce an increased revenue of about £80,000, and equalise the dill'evonce in rates as between linns and persons and companies. I propose to ask the House to make provision for a system of graduated income tax upon the following scale, allowing an exemption of £300;— Under £400, at 6d in the jjouud; from £401 to £600, at 7d; from £601 to £800, at 8d; from £801 to £1000, at 9d; from £1001 to £1250, at 10c!; from £1251 to £1600, at lid; from £1501 to £1750, at Is; from £1751 to £2000, at Is Id; over £2000, at Is 2d in the pound.

BETTERMENT SYSTEM FOR RAIL WAYS.

In order to prevent the possibility of unpayable tirlways being established in the country—railways that upon careful examination it is found arc likely to render a return of loss than 3 per cent—l propose to submit legislation to protect the inroad that such Josses make upon the general railway revenue of the country, by the construction of railways that are not likely to return as low a rate of interest as that I have named. Fortunately, (here arc but few railways throughout the Dominion that, ary a drag upon tho general railway revenue, and whero this is found to be the case, an increase in tho rate and a lessciuiijj of the service over such lines will ho necessary. Legislation upon this important matter will be submitted duriii" the scission. ° li * l ™ A l SUPERANNUATION FUND ™ 10LICE SUPERANNUATION

In order to build up a strong reserve lor the railway superannuation find, I propose to provide £15,000 per annum in sunport of that fund. All the funds, as you are aware, haw to have the guarantee of the country behind them. The railway superannuation fund does not however, receive any contribution from the consolidated revenue, and I am of opinion that it should in this respect ho placed in a similar position to that of the other branches of the service. I am not satisfied with the position of the police superannuation fumv. The option was given the members of that service of joining the public service fund, but so far thev have not exercised that privilege, and I "am of opinion that this should be enforced by legislation, as I do not consider 'that a separate fund should bo allowed to continue. I therefore propose that this fund should lie merged, and that a contribution of a. sum of £5000 should be paid into the public service fund upon the members of tho police service joining it, PUBLIC SERVICE SUPERANNUA- , TION. I propose to introduce legislation in connection -\vil.h tho superannuation of the public employees of tho Dominion. The system has now been upon trial for some time, and as tho result of careful investigation feel that there should bo some restriction placed upon tho amount of superannuation to lie paid in the future. Tho existing rights of the present beneficiaries must, of course, be uphold, and to enable this to bo done I propeso that on all salaries of £400 n. year and ovct no alterations shall bo mado, but those receiving below that salary at present, as well as thoso who may join the superannuation fund, shall not exceed £250 per annum. If any of those who are now contributors arc not satisfied, all payments made by them, with interest added, will he returned to them, and in such cases' they will ho called upon to dtoduot S per cent, from their salaries and lodgo tho sanVe, as was formely the cass, with tho Fublio Trustee. Under this alteration ths sunej-

animation system will he a most- generous one, but I am strongly of the opinion, to protect the absolute stability of (lie fund. I hat a maximum amount of j>ension mu.-t be fixed in order to enable the Coverunient io retire officers under conditions lhal may arise. Tit.* House will he ashed toamend Iheact to allow of Ihis being done. - KKSPLT OF PROrOSKI) CHANCES. As I here mn-t of necessity bo a certain amount of doubt as to what the position of the Customs revenro with be at the end of the year, which depends upon the general coudiliou of trade, 1 feel that it is incumbent in the best interests of the country that our financial position should be put upon such a basis as will provide both for any possible shrinkage of Customs revenue and also for the fresh expenditure iivcurreil by the new undertakings that circumstances render it necessary to establish. To enable this to i>o dune, it will lie wtt'.-sm'.v lo provide additional revenue, and I ijow submit a proposal by which I consider the result (li'sirctl can' be arrived at. The increased expenditure under all heads is as follows: — Interest nnon t.ho ciwt of Dreadnought, £70,000. 4 tier cent, per annum for the extinction of the loan, £80,000.—total, £150,000.

Contribution to the Railway Superannuation Fund, £25,(100; conlribu'ion to the Public Service Superannuation Fund on account of merging the Police Fund, £5000;— total. £30,000".

Additional cost of internal defence, £100,000; additional armament and equipment, £150.090 extended over three years. £50,000;— total, £150.000, which gives a grand total of £-330,000. To meet this, 1 propose to obtain from the altered svsloui of death duties an additional £150.000; by abolishing the break in the long distance mileage rates upon the railway, miking the rates uniform lo Id per mile second class, and Ud per mile first class, £100,000 i-ev annum; by the adjustment of the in:nine tax by making it a graduated one, £C0,G00; by imposing 1 per cent, additional upon the true value of all dutiable goods, £50,000; by charging 2A per cent, on the total reeoints of i ace clubs, £33,000; from the banks, £30.000. This gives a total increase, of revenue of £448,000, leaving a balance of £118,000not, in my opinion, 100 large a sum in order to provide for unforeseen expenditure. I do not think that any reasonable exception cun l>e taken lo the various source from which this increase is to be obtained. It is only fair that all classes of the community should give a slight contribution towards the strengthening of our position in matters of defence, and in respect of the item of 1 per cent, upon Customs, I propose lo ask the House for authority to fix it until March 31, 1911, only. It is hut reasonable to expect that by that time the improved and increasing condition of | our trade will give a much larger return ! than we are at present obtaining from Citsi toins and other sources by revenue. I canI not impress too strongly upon lion, members a-nd upon the country generally tho I fact that in face of the concessions amount- | ing to, in round figures, £600.000, that I came into operation during that period, mI chiding £400,000 in Customs, our revenue, I which amounted to £9,000,000 last year, was only £55,000 short of that of the previous ! year.

FINANCE, 1909-10. EXFENDITUItK. Tlie expenditure for the present year is estimated at £9,015,878, as against an actual cx|icii[litur<) Inst year of £8,785,513. The permanent chaises shot .in increase of £292,767, while ilio ordinary departmental expenditure shows a decrease of £48,27:). Doalinsr first with the permanent charges, a large additional expenditure arises principally from the charges for interest, which has to be provided for t.ho dcv loans recently raised. Under flic permanent acts an additional expenditure of £150,820 is anticipated, of which £67,000 is to meet, charges against the residue set aside in respect of national endowment land for education and old-age pensions, £60,000 (or miviil defence, mid £25,000 for subsidy and endowments to local authorities provided for by acts of Parliament. The amount required for departmental votes is staled at £5.513.081. or £48,275 less than the actual of last year. Hkvenuk. The estimated revenue for the current year is set down to produce £9,020,000, or £18,815 more than the actual of last year. I Jiavo now placed before you the estimates of the expenditure and revenue for tho current financial year, and will proceed to Eot down the estimated results at the close of the year: —

Balance brought forward from last year, £184,321; add estimated revenue, £9,020,000;-total, £9,204,321; deduct estimated expenditure, £9,015,878; leaving a surplus of £188,443 at the close of the year, subject, of course, to provision being made for items on the- Supplementary Estimates.

PUBLIC WORKS. The balance at credit of the I'ublio Works Fund on 31st March last was £533,709, to lie augmented by the balance of t.h* 1908 loan not raised, amounting to £50,000, making a total ways anul means available at that date of £433,709. During the short session I found it necessary to iwk Parliament for authority to raise a loan of £1,250,000 for public works purposes. This amount will only be sufficient at the existing rate of expenditure to curry iui on till the end of December. Our requirements cannot stop on reaching 31st March, t,o that wo must provido to carry on for six months beyond that date, and for that reason I obtained authority for another million, which' will enable the construction of Uie public works so necessary for the development of the country to procimxl up to tlio owl of September, when further funds can be provided for by Parliament if required. The position of tho fund may therefore be set forth as follows :-Unlance 31st March, 1909, £383,709; balance loan 190 D, £50,000; loan authored by "The Finance Act, 1909," £1,250,000; loan authorised this session, £1,000,000; far 18 mouths' expenditure, £2,683,7G9.

REVIVAL OF TRADE. Tho financial stringency which has prevailed throughout the world cluring tho year may happily be regarded as a thing of the past. The great rovival of busincca throughout the world, to which the prico of our staple products has promptly responded, and the general tone of confidence in commercial circles, giro abundant reason for predicting that tho tic/j of renewed prosperity is flowing, and that before long the wealth of the Dominion will bo materially augmented. Wool has risoit to a satisfactory figure, the price ol frozen meat: has advanced, and will, I hope, soon reach its normal level. Flax shows an upward tendency, which competent critics are satisfied will be maintained. Wheat is high, ami butter and chws>e are finding a ready market. Equally satisfactory, that noil-known laumaer of trade—tho post and telegraph revenue—has a rapidly rising tendency, the results for the fust six months of the year showing a large excess over the corresponding period of 190S-9. CONCLUSION.

I have placed before you matters of great moment tlio importanca of which, 1 am sure, will bo recognised by you nil. By giving elfect lo the proposals that it has been my duly to set before you our financial position will be enormously strengthened. I da uot think it is wise for this country to continue borrowing annually for public works to the extant that il lias been doing, and if tlio proposals I have outlined are given effect to wo should with, I hope, an early increase of revenue from the Customs, together with u general improvement in tlio business of the Dominion, be able to set aside ut least £500,000 per aitnuni after the altered luxation has been in full operation for a year. 'J'o tli;it extent (Jie future borrowing tor tils purpose of carrying on the necessary works for Lite development of tho country curt be reduced. The prospects before its are brighter tban they liave been for some time, and, with tare and economy exercised both privately and publicly, the efforts of our people to improve their own position—thus at the samo time improving the position o-r the Dominion as a whole— must ercsmo success. I liavo tho (.u-eatest confidence in our future, and tlio fact of our having tJirougJi a somewhat difficult period will, I fell sure, stimulate our people to greater exertions, and will certainly enable tliem to show that a temporary set back is not going to deter them from coiitinuir,g the excellent traditions that up to now have been the bright characteristic of tho people of Ihis Dominion.