THE OTAGO DAILY TIMES THURSDAY, October 28, 1937. THE BUDGET DEBATE

Otago Daily Times, Issue 23334, 28 October 1937, Page 10

THE OTAGO DAILY TIMES THURSDAY, October 28, 1937. THE BUDGET DEBATE

The Minister of Finance closed the Budget debate with a speech that did him credit. It was a moderate and lucidly-reasoned defence of the Government's financial policy and, in some respects, an effective reply to the criticism heard during the currency of the debate from the Opposition benches. It is not the Minister's habit to spin words. He is accustomed to meeting argument with argument. The robustious rhetoric of some of his colleagues is not in his line—fortunately, it may be suggested, for the Government, since the country is as well able to recognise differences in debating methods as it is to appreciate candour and competence. Nevertheless Mr Nash's summing-up of the debate will not win the Government many fresh adherents, even when its straightforwardness is admitted. He did not, for instance, offer much hope to the taxpayer. Apparently his creed, like that of the Prime Minister, is that the taxpayer exists to be taxed, on the assumption that his money will be better spent by the Government than by himself. " We are using the money obtained from taxation in a way that will probably stimulate prosperity more than if we did not take it," he asserts. It will not avail the taxpayer who glances in the direction of the heaviest expenditure—railway works of dubious merit—to register his dissent from that view. The Government wants his money, and is obviously determined to go on having it. The Minister speaks smoothly of taking money from people "who have more than they need" and passing it on to people who can use it. The man of moderate income, who is taxed up to the hilt, frequently to an extent that must almost involve actual deprivation, may wonder how or where he comes into the Minister's classification. Apparently he ought to be satisfied to know that he is .the State's best asset, and thus an eminently useful member of society. Mr Nash seems to argue that if the average taxable capacity is £22, the taxpayer ought to be taxed up to that limit. The objection to such, a theory—apart from the personal one, as it affects the taxpayer's ability to conserve his own hard-won resources—is that it does not allow for the existence of a reserve source of revenue to the State which may be called upon in time of national emergency. The Government believes in plumbing the uncertain depths of the taxpayer's pocket all the time, and, what is more, in spending what it finds there. " Tomorrow" is not in its vocabulary. It is surprising to find Mr Nash sup-, porting the comfortable belief that slumps are things of the past, when he must know that such an assumption is opposed to all experience. No Government can promise to a country which exports at least 80 per cent, of its produce that it shall be immune from the effects of depressions in other countries; least of all in the United Kingdom.

Mr Nash refers with satisfaction to the Government's avoidance of overseas borrowing, except for loan conversion purposes. Self-reliance in respect of the Dominion's financial needs is wholly desirable, whatever may be said about a policy which makes uneconomic use of the revenue derived from taxation. But a contrast between present practice and that of 1925-29 may be thoroughly misleading unless there is some appreciation of the reasons for the increase in the public debt that was due to the borrowing policy followed in those years. The borrowed money went in large measure to the State Advances Department, for purposes which more than one Government member was reasonable enough to applaud during the debate just ended. Much of the balance was spent on essential public works of various kinds, including telegraph extensions, highway construction, and the development of hydro-electric supply—the last-men-tioned one of the best investments the State has ever made and unquestionably reproductive. Moreover, it is not on record that the Labour members of Parliament of those days voted against the policy then deemed necessary. It was natural that Mr Nash should pay serious attention to the allegations made during the debate that capital was leaving the Dominion in amounts sufficient to cause grave uneasiness. And, so far as his reply covered the reasons for the hitherto unexplained reductions in the London balances it was adequate. Mr Nash, however, sought to make light of the Opposition's charges as a whole, and failed to do so because the facts are against him. Australia is attracting investment funds from New Zealand. There was a report from Wellington only a week or two ago that one insurance company had sent £1,000,000 to Australia for investment, to secure a higher return with less liability for taxation. The amount may not seem large to the Minister; but, as a single instance, it is likely to impress most people. There is, in fact, plenty of evidence of the difficulty the Government is experiencing in its endeavours to keep interest rates down. It is finding that it cannot control the price of money. Loans authorised by the Loans Board are nominally to be issued at the rate of 3h per cent., but municipalities and other local bodies have met with considerable difficulty in securing the accommodation they require at this rate. In more than one instance the discouraging reply has been received that funds are not

available at the rate specified. And the evidence, from the Government point of view, that loans are not regularly negotiable at 3£ per cent., is provided in the fact that there is h-irdly an issue of the New Zealand Gazette that does not contain an Order-in-Council permitting some departure from this rate.