THE FINANCIAL STATEMENT

Otago Witness, Issue 2905, 17 November 1909, Page 13

THE FINANCIAL STATEMENT

HEAVY NEW EXPENDITURE, - . - ' — — ' \i&l NAVAL DEFENCE. I COMPULSORY TRAINING FOR YOUTHS. FRESH PROPOSALS FOR TAXATION. A GRADUATED INCOME TAX. BEVISEB DEATH DUTIES. INCREASED RAILWAY RATES.

WELLINGTON, November 10.

In the House of Representativ'ss this evening the Minister of Finance (Sir J. G. Ward) delivered the Financial Statement. In the course of his remarks he said: —

It was my privilege to place before the House during t&te short session in June the financial results for the year ended s list March, and I' now propose to deal turther with the financial position of the oountt-y^ to review some of the conditions of the past, awd to submit important proposals atfecting tne future.

PUBLIC DEBT I will first deal with the public debt. Tne increase of the public debt for the past year was J8+,48*,627, but- it is only right to tay that of this amount no less than ..•4635,919 may be regarded, as directlyinterest bearing, with an additional profit. 'JL'he acquisition of the 'Manawatu railway, which was in full working order, and therefore immeddately revemie-prcducing, necessitated a loan of £1,000,000 to complete the purchase. To enable advances to be made to settlers and workers as additional £1,172,300 was obtained, £250,000 was raised for lending moneys to local authorities under the Loans to Local Bodies Act, and £211,495 was provided for the purchase of lands under the land for settlements scheme. These items, with the 6mall sum of £124 invested ih New Zealand consols, make up the £2,633,919, all of which is not only interest-bearing, but yields a profit, cite* paying interest and working expenses. This leaves a sum of £1,850,703 for general purpose*, a large portion of which, however, is «3Cpended oa additions to open lines and raihvsAs construction works that will E'J-i to our revenue receipts later on. The gross- public dobt of the Dominion grew from £58.830,350 at 31st March, 1891, to £70,933.534- at 31st Ma'rcn, 1909— an increase of £32,108,184— equal to 82 per cont. Of this amount no less a sum than £21,090,070 was spent on directly reproductive objects, such as advances to settlers, advances to workers, land for settlements, loons to local bodies, State coal mines, Native land parohese, etc. What does the other side of the balar.™ Ciheet show? The capital value of hui£. publicly and privately owned, in 1569 i;> £270,537,296. The oapatai value of !anti. publicly and prtvafcty owned, in 1831 was £122,225,029, 00 tb-it there has boei; an' increase in tl» valae cf land alone — irrespective of m&ny other sources cf proj^rty, Btcclcs, eta.— of £143,312.267, eq::?.f to ovor 121 per cent. Tho iner^a-"* >n the vai:.<^ of raily/avs and rolling stock for t' 1 ? ~ r ~»- <i 1891-1909 was £13,344.GS£— ir&rr. £1^03.371 to £29,052,-13!-<?ousl to ov«r 91 j-. r cop... Tho figures may therefore V.-3 sti-f-r' ns :o'iows: Increase on opcnp-i railway* nn<i equipment from 1891 to 1909. £13.844,053: inou-ased capital supplied for advances to eettl-e: % 3, land for spttk»ments, Slate coal znir.ea, loars to Joca ! bodies, Native land purchase, etc. (all directly rejm-rfucrivej, £21,030,075;— t0ta1, £Z4.934,125. T!---> surplre, after paying full interest and ail the 4»xpen«-.es cf the Advances to &sitl<«i> Office (now over £7C.00Q per annum;, t':-^ State cor.) mines {now near!*- £20, 0 C!) x.-r: land for settlements .£4o.Coo>\ ;ir.<) Xat've an-ti purchase (£37,419), th« bulk of v.hic'i 5 bei.'ig- capitalisc-d, is more than suSicient 'o make up for th* deficiency on the raii--a v -s, so that the total amount of i.'^?. 93*. 128 may be considered reproductive. Tha hufease in the nublic dsbt during KlO came period— lß9l-1909— was £52,108,184. '^hii whole of the increaee in ihc public < o!>t ww utilised in directly reproductive ..bjocts, r-rod^cing a profit in addition, and f.j expondJiuro on unrsprcductive obj-scts, <-u;;b as roads, bridges, mines, public buildn«.s, teurisi: and health lesorts, etc., was .•riividfld out of revenue, but the effect of . he buVnr cf the expenditure is to open up ho country and promote development and repress, tlscreby increasing: its wealth and -uiV.ng power It may also be taken to "> to a j«r«a*c extent reproductive in the -^burn of revenue from increased taxes Vi'.d. Tho profits earned by the Slate (•productive investments reach nearly 200,000, after the payment of interest and <IjChsc*, and are increasing rapidly 3'ear v' year. In addition to this, very benev.'ai results accras in the reduction of .poiises and the cost of living to tho 3iieral public. It was not intended that c investments should reduce rates to what

ould be ruinous competition for private • radera and investors The object was to maintain a fair and reasonable average in order that the public might benefit by obtaining money, coal, and land- at rea--onable rate*, wh:ch may be said to have -eachsd a minimum. Notwithstanding this -he profits continue steadily to increase. I anticipate that the time is not far distant vhen *hese profit-earning institutions will >c the means of providing a large annual t»um. which, in return for the great services rendered by the State in establishing them, can be fairly regarded as a contribution towards the increased charges for interest upon, general loans, after full interest and expenses have first been paid on the sums invfeted. ST4.TE COAL MINES. The investment in the State coal mines tvas proved no successful that in a few

( yeare* time these properties will be gcod J value for nearly half a -million, and will ' stand to the Dominion practically free of cost. i POPULATION. ' During the period 1891-1909 the population, exclusive of Maoi is, increased from 034.053 to 960,642— an increase of 326,584, equal to 51 per cent., and the country has been opened up and developed with steadily increasing rapidity. These are factors which should not be lost sight of when considering our" financial stability j yet they ! aro usually ignored by pessimistic critics. j PUBLIC AND PRIVATE WEALTH. ' It is useful to place before you an estimate of thi private wealth in 19C9 : — Total eanital value of land privately . . £205,845,053 -Total value of live slock, machinery, implements, roiling stock, etc 27,3.49,338 Total capital invented in trading and manufacturing, esti- : mated on the total income , returned for taxation, capi- « 1 talissd at 5 per cent, (a low estimate) as the average Teturn on capital invested . . 197,735,020 Native land capital value . . 16,276,236 Lessees' interest .n Crown lands 10,546,231 Church and other lands not otherwise included . 2,625,202 Education lands 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 Office Savings Bank deposits 12,159,293 Bank note issue 1,587,051 Total 511,055,384 The land values are proved to be fully 30 per cent, below actual sales, so no one can term them boom values. In addition to what I stated, there is the private wealth represented by incomes derived from salaries and professions amounting to £'3,731,14-. These directly employ little or i.o capital, but indirectly represent capitaJ, if capitalised fit 5 per cent., to the amount of £74,622,880. Then there are wage-Car-Jiers who v.uks no returns of income, their climated total income being £<5.G61,3r>0 Trie public and private wealth in 19Q3 was £613,518,825— an increase from 1831 of £300,000,000, produced to a large extent by the expenditure of public rrtofvey .md the corresponding development of (he country. The public and private wealth per head of mean population J.s £768. an increaee of £376 from 1891 to 1909, with an increase of population of 51 t^r cent. These figures and facts prove tLafc aitnough th« public debt has been increased by the , amount I have stated, the assets in the rapid development of tho country hay» increased in vastly greater ratio. For £1,000,000 increase in the public debt the aesefcs have increased fully by £10,000,000. This in commercial circle's would be considered very sound business In 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 inorease year by roar of £717,459. In the 15 years, from 1893-4 to 1908-9, there was an annual inore^.o of £10,043,703 in the incomes returned for taxation. The expenditure of public moneys upon the development of the country and upon public utilities produces vastly increased wealth and earnings in return. an<l a very small percentage of this lcturns to the Treasury in the shape of ta\.<s on capital expended. The balance, by far the greater proportion, goes into the pockets of the people. This shows the eolicf basis of the progress and prosperity of the countiy. The steady and rapid increase of public and private wealth in New Zealand during- recent years has indeed been remarkable, and must bo considered when dealinjr with th«» increase of the public d-sbt. The population has not increased at nearly the same rate us tho increase in wealth and income, so while the amount of taxation |>er head has increased the wealth and incomes have in-crea.?-ed at a very much greater rate proportionately — there has been no increase in the- rates of taxation, direct or indirect, during the period 1891 to 1909. On the contrary, there have been enormous concessions in nearly every branch of the public revenue. are 890,353 persons in New Zealand who pay no direct taxation whatever, and included :n: n these are 297.809 wasre-earners who pay no direct taxation. Increases in the rate of the graduated tax have been more than compensated for by the loss of revenue owinc to the promoting of closer settlement. The increase in the graduated tax revenue is accounted for entirely by the increase in the values of land, which were created to a preat extent by the expenditure of public money. There are enormous undeveloped resources in New Zealand which the influx of capital in the shape of public exnenditure would brine rapidly into use, thereby producing public and private wealth and incomes srreatly in excess of the capital expanded. In my opinion it is not well that the resources of the Dominion should remain undeveloped and its progress retarded, and that bringing them into immediate use , would produce a quick return on the capital I

I in shape both of public revenue and public ana 1 private wealth. I. - f.o^^ TRANSACTIONS.. tfefe^6<?s3icfri of 1908 Parliament gyithofised *ts4i raisgig of £1,25,9p0tf for "public tvorks S(indri3sl,OOO,OOO . foi^the purchase of the Wellrngton-Manawstu ra.ilwuy. .Detailed particulars are given as to the thanner ir which the money was xiaj&ed and the price realised. - f x\ *'- During the financial year just dosed -<Le-” ibentiires amounting to £3,133,238 fell due, and it may be of interest to hon. members 'to learn that of this large amount no less a sum than £2,148,488 was .renewed by the 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 mads, debentures for over £1,000,000, which previously carried a rate of 4 per cent., being placed at 3£ per cent. No one. unless deliberately refusing to acknowledge the splendid results achieved under this head of our finance, can contradict me in asserting that the results are mest satisfactory,* the exact position being as follows: — ■" ' " Amount matured— At 4 per cent. .„- . r . £2,010,800 At 3£ per cent. .. . >. 1,057.438 At 3 par cent. . - • » . »^_ 65,000 Total . .. „.£3,133,238 Renewed or 'provided for — 1 At 4 per cent . £810,825 At 3i per cent 2,221,763 Outstanding .. . 650 Total . •-. - ... -. £3,133,233 Loans Maturing. — During the present financial year £2,618,023 falls due. Of this amount £1,552,650 fell duo during the last six months, oi which £68,800 has been renewed by the holders and £867,850 paid off. This has been done without any additional charge on the Dominion for interest. j In fact, in one instance a parcel of £40,000, I on which we had heretofore to pay 6 per cent., was secured at 4 per cent. Loans to Local Bodies. — The balance at the credit of the loans to local bodies account on the 31st March, 1908, was £11,271. Debentures for £250,000 were created and issued during the year, and refunds of unexpendsd balances of grants amounting to £529 were received. Applications from local bodies for loans for public works under Local Bodies Loans Act have this year been th-3 largest since the act of 1886 came into operation, which is no doubt attributable to the great difficulty experienced by local bodies during the year in obtaining money &t a reasonable rate of interest within the Dominion or from sources. I have already submitted to the House a bill altering the conditions under which moneys for 'oeal bodies can be obtained. LAND AND INCOME TAX. There has been a steady increased amount of land tax collected. This is largely accounted for by the increase in values and partly by the legislation of 1907. The increase in the ordinary land tax iast yeaT amounted to £43,677, which is wholly from ineieitsed values, no alteration in the rates of the ordinary land tax having taken place. The increaee in the graduated land tax amounted to £23,248, resulting also from increased valuations, as tho scale was the same as in the previous year. The absentee tax increased by £129, consequent 01 the increased graduated tax It may not be out cf place for me to note here that, on, the othsr side, the increase of private wealth in land alone during the last 15 years is £113,573,887.-.T < he enormous increase in the public and private wealth of the Dominion, to which I have already, referred, during the last 15 years, after careful examination and analysis, I estimate within that period amounts to the large sum of £250,000,000. It has increased at a much greater rate than the population proportionately. When it ie remembered that the gain in public and private, wealth is £10 for every £2 of expenditure of public money, the natural sequence to this is that there has been a large increase in revenuo from direct taxation, whilst at the same time there ha 3 been, no increase in the rates of tax. It is due to the increase of private wealth and incomes entirely. 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 the public expenditure to a very large extent. In 1908-9 39,133 taxpayers contributed the whole of che direct taxation ! of this country, amounting to £1,186,133. equal to £30 per taxpayer. In 1893-4 1546 taxpayers contributed £448,151, equal to £29 per taxpayer — an average increase of £1 per taxpayer per annum in 15 years. At the same time- the average wealth of these persons was increased £9181, whicn equals an average increasa at the late of £612 i>er annum, in addition to thos>e increased incomes which are not included a-s wealth, amounting to £4,000,000, but which, incidentally, represents wealth, and if capitalized at 5 per cent, would represent nearly £1500 per annum of en increase. The income ta\- revenue for years past has also shown a consistent incre.i-c which, as an indication of progress atiJ ( prosperity of tho Dominion, is intero-t- j ing. The ineomrs returned for taxation have increased over what they were 15 years ago by the enormous sum of £10 043,703 for the* year ending March, 1909, increasing by largo amounts each year. During that time- there h&s been an increase of 7186 income iax payers, equivalent to 315 per cent. There is also to be taken into account the incraasa in incomes of those- in employment who do not contribute anything to direct taxation, which the Commissioner of Taxes estimates at an average of 10? per week all round, and this is certainly a low estimate, which amounts to a very larjce bum in the aggregate. These figures will ecnvey some idea of t!*e enormous develop- > ment and prosperity of tho country dur- , ing the past 15 years, which alone has ' contributed the increase? in revenuo from . direct taxation, and this may be attributed j to a large extent to the expenditure- of j public money in opening up the country, , without which it would have been im- ; possible. During that time there has been t no increase in the rat"s of income tax, | but, on the other hand lai-tje concessions have been made from lime to time. , POST AND TELEGRAPH { DEPARTMENT. The revenue of the Post and Telegraph Department again shows a material increase, having: reached no less a figure than £910,995. All the principal sources— viz., postages, telegram*, and telephone exchanges—have materially contributed to tbe . £91,356 by which the previous year's ro- 1

venue was exceeded. As ;n; n the past, "concessions have increased the business. The money order and postal note commission, which waft* reduced by 50 rjer^eati-* silo wed 75 "per cent .. of the 'previous .year's A»venue. I This, considering - the largeness of hhe reductions, is^mostr satisfactory- Tjjestimate thaif at least £958,000 of re^eri&efnvill be I received during the, 'curren^i -year., -j LAND REVENUE AND SETTLEMENTS

The "total" kind -revenue- from tvtt "epurceir was £696,375. This i 5"£37,581 morerfiain the revenue of the previous year, which, I informed you in last year's Budget, had been the largest received by the department. The territorial revenue amounted to £222,856, and the revenue received as rentals from the lands dealt with under the Land for Settlements Act was £237,831. The sura carried to " territorial "- is less than in previous years, as a portion- of the. moneys hitherto credited as 6uch 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<-19G94.0 • will amount .to ihe jp of £659,000, of which £224,000 ■ will teTong to " territorial." -The number of Crown tenants at the close of the year was 25,204, an increase of 1108 during ttie> year, the area held being 28,264,003 acres. The area ■disposed of during the year for immediate sale for cash payments was 42,176 acres to 371 purchasers, the amount received being £4^,689. In 'addition to the disposal by . immediate sale, the freehold was acquired by 232 holders of deferred payment, perpetual leases, occupation with right to purchase, and lease in perpetuity holdings', "to the extent of 55,372 acres. Tlje, total area selected during the year on settlement conditions—that is, exclusive of paetoral and miscellaneous holdings — was 521,245 acres by 1863 persons. During the current year the work of preparing Crown lands for settlement is being energetically pursued, and it is believed that, the transactions and number of settlers will compare favourably with the figures of the past year.