BASED ON ERROR

Otago Daily Times, Issue 26179, 15 June 1946, Page 8

BASED ON ERROR

MINISTER’S REPLY A MYTHICAL SURPLUS ITEMS WRONGLY INCLUDED (P.A.) WELLINGTON, June 14. “To review in detail each of the 19 separate accounts which form part of the Public Accounts as published in the Gazette this week would not assist in giving a clearer picture of the public finances,” said the Acting Minister o; Finance, Mr D. G. Sullivan, when asked to-night to comment on the statement by the Leader of the Opposition, Mr S. G. Holland. “In nearly every case the operations of the separate undertaking for which there are separate accounts are reflected in the main account, the Consolidated Fund, and it is customary, as Mr Holland admits, and necessary only to deal with this account when determining the surplus for the year. “The other major accounts —the Social Security Fund and the War Expenses Account —which are financed largely from taxation, were also dealt with in my previous statement,” the Minister said, “ because they are of particular interest to the public. They have, in (act, been referred to in similar statements each year. The idea of keeping separate accoimts is not original, nor is it exclusive to the present Government, as the form of accounts just published follows closely the procedure of many years through the administration of successive Governments. In many respects, this continuity is desirable, as it facilitates comparisons with previous years. Revenue and Loans Confused

“ The pooling of various accounts, as suggested by Mr Holland, would be extremely misleading, particularly as it would, in effect, involve the mixing of revenue and loan moneys. “Mr Holland’s calculations to produce an alleged surplus of £40,000,000,” the Minister said, “take into account lend-lease receipts and loan moneys borrowed for purposes during the year totalling £64.020,000, and a further £11,270,000 received from the realisation of war assets. Such items obviously should not be included in a summary intended to show the revenue surplus for the year. It is neither the practice nor the intention of the Government to re-

sort to such a procedure. "Another instance of confused reasoning is the reference by Mr Holland to the case of the Electric Supply Account,” Mr Sullivan said. “ This is a separate trading undertaking, and its accounts should be kept separately as is done at present. The account meets its full obligations to the Consolidated Fund, and any surplus is rightly retained in the Electric Supply Account. Similarly, with other trading accounts, the results are reflected in the Consolidated Fund, which receives interest on the capital involved. In certain cases, where required by legislation, the annual profits are paid to the Consolidated Fund. , „ “ Referring to the Social Security Fund Mr Holland states ‘that people should know how much it is costing and where the money comes from.’ It was for this reason that a separate fund was established and it does show both the total expenditure and the sources of reevnue to meet such expenditure. It was never contemplated that social security, as such, would be financed solely from revenue collected direct into the fund, contributions from ordinary taxation always having been intended to be an essential part of the scheme. “Mr Elolland states that the gratuities are part of the liabilities to be met in the current or future years, but the Government does not agree with a policy of holding over such commitments. Servicemen and women were entitled to their gratuities as at April 1, 1946, and it was only reasonable to provide cash as at March 31, so that it could be available immediately if desired. War Debt Repayment “The fact that £27,500,000 has been provided for debt repayment is commented on by Mr Holland, who appears to hold the view that the war debts are best left unpaid. As has already been stated, the major part of this was applied in repaying the overseas debt due to the United Kingdom Government, and was financed in part by the issue in New Zealand of the £8,000,000 Treasury Bills referred to by Mr Holland. “ Mr Holland mixes the comments on the accounts as published with the proposals for the present year, but it was not intended,” Mr Sullivan said, “ to provide at this stage a preview of what was to come in the Budget. My earlier review dealt only with the, facts as disclosed by the accounts for the past year. Mr Holland’s statement is merely an attempt to confuse the position. He glibly speaks of a ‘bribery Budget ’ when he has no idea what the Budget will contain. He advocates a change in the form of the accounts — a form which has been in operation for many years—and he completely confuses revenue with loan moneys, the proceeds of asset realisations and the receipts under lend-lease. “ The cold fact remains,” Mr Sullivan said, “ th2t the finances of the country have been sanely and prudently administered and that the country has emerged from a difficult year with a surplus of £1,254,000 correctly computed in relation to the year's revenue and expenditure. “ I appreciate Mr Holland’s forecast of the contents of the Budget, and his apparent terror at the possibilities inherent in his mythical £40,000,000 surplus,” the Minister added. “If he sincerely believes in the correctness of his own amazing calculations, I can imagine that it must be truly a nightmare to the Leader of the Opposition. The fa't is that his astronomical surplus has been built up in his mind by including loan moneys, lend-lease receipts. etc., and that such items are not available for concessions to the public. “This will, I am sure, relieve his political terror, but it will not Increase public confidence in the ability of himself and his party to understand the finances of the country.”