BALANCING THE BUDGET

Patea Mail, Volume LIII, 8 April 1932, Page 2

BALANCING THE BUDGET

ESTIMATED DEFICIT OF £8.60 M. ECONOMIC COMMITTEE’S REPORT The Economic Committee in a summary of the question of balancing the Budget state that the inroads on public revenue made by the fall in the national income will be even more serious in 1932-33. Expenditure to provide for unemployment and exchange <pn the external debt has increased notwithstanding the fall in national income. Thp preliminary estimated deficit for' 3931-32 is about £3 m. A net expansion of expenditure since 1929-30 of approximately 12 per cent, and a reduction of revenue of 30 per cent, have helped to bring about the preliminary estimated deficit of £B.2fi ra. in 1932-33. If the IToovbr moratorium is continued, the preliminary estimated deficit will be £8.60 m.

A preliminary budget deficit of £9.26 m. for .1932-33 with a possible reduction to £8.06 m. should the Hoover moratorium be continued, demands drastic action in public finance. Adjustable expenditure, embracing all expenditure other than debt charges, unemployment, and exchange, was £14.47 m. in 1929-30, and is estimated at £13.10 m. in. 1932-33. Adopting 25 per cent, as a standard for economics on the amount for 1929-30,, the expenditure for 1932-33 should be reduced to £IO.B m. This would yield £2.25 ni. in further economies. By reducing the unemployment expenditure from £2.9 m to £2 m. and making the whole expenditure a charge upon special direct unemployment taxation, the Budget would be relieved by a further £1.45 m. An interest adjustment of 20 per cent, down to a minimum of 3J per cent would save a not amount of £0.3 ra. The total economics would amount to £4 ra. On the revenue side taxation could be increased by £1 m. by amendments and extensions of existing taxes. A special sales tax to replace part of the loss on account of Customs revenue might yield a further £1 m. Reductions in wages and salaries in the Post Office and Railways would increase the net revenue from these Departments by £0.6 m. The total revenue would thus bo increased by £2.6 ra., and the total contribution towards the Budget deficit would be £6.6 ra., leaving an uncovered deficit of £2.06 m. This is regarded as j manageable amount which can be reduced later, cither automatically as trade recovers and unemployment expenditure declines, or by further special economies and taxation.

THE COUNTRY’S FINANCES,

MINISTER PRESENTS STATEMENT. ’ 10 PEP CENT. SEDUCTION IN CIVIL SERVANTS’ SALARIES. 13 OR 20 PER CENT. REDUCTION IN RATE OF INTEREST. The Minister of Finance, Hon. W. Downio Stewart, presented a comprehensive financial statement to Parliament last evening. After a general outline of the position in respect to the figures available regarding the last financial year, Mr, Stewart said that the net expenditure as a whole would exceed the revised estimates by approximately £500,000, due to increased debt charges and costs of exchange arising out of the financial emergencies in Loudon. On the revenue side, he stated ‘that the shortage would be about £2,000,000, notwithstanding that shrinkages of over £6,000,000 had been provided for in the main and supplementary budgets. Thus the total deficit would be about £2,500,000". Regarding the current year, Mr. Stewart

laid cn the table of the House concurrently vith the statement those portions of the Economic Committee’s report dealing with, the budget which were withheld when the main portion of the report was published. After reviewing the principal items of .the revenue and expenditure sides of the budget, Mr. Stewart announced that unless far-reaching adjustments are made to decrease the expenditure and increase revenue the prospective results for the current financial year would be as follows: — Expenditure, £2(5,120,000. Revenue, £17,820,000. Deficit, £8,300,000. The Minister stressed the seriousness of the position', especially when it is remembered that last year taxation was largely increased, reserves heavily drawn on, and resources generally strained in the effort to balance accounts. He showed that millions cannot be saved without very drastic economics involving a serious curtailment, and in some cases even the abolition of various grants, subsidies, and services which have been undertaken under more prosperous conditions. His statement indicated that the Government’s actions must be_ governed mainly by what the country could afford, and appealed to members of the House and the people of the Dominion generally not to add to the difficulties by opposing each and every economy that was proposed. The remedial measures detailed in the financial statement arc as follows: —

Reduction in salaries, wages, and pensions, £1,100,000. Abolition of .subsidy on unemployment funds, £1,450,000.

Assistance from highways funds, £500,000. . Subsidies to local bodies to remain a charge on highways account, £125,000. Reductions in other items. £.‘525,000. Hoover moratorium (if extended), £OOO,OOO.

Reduction in fixed charges, £1,100,000

Tu paragraph 97 of the economists’ report it is stated: "A reduction of

20 per cent, in fixed money claims would make a substantial contribution towards bridging the gap between costs and prices.” They further indicate that both rent and interest should be reduced on this basis. They also indicate a further reduction in wages of 10 per cent, as being necessary. The Royal Commission on national expenditure, in paragraph 134 of their report, recommend a general reduction of 10 per cent, in salaries and wages of public servants. They also recommended a reduction of cither 15 per cent, or 20 per cent, in the rate of all classes of interest, both private and public. In order to give effect to that part of the Government’s programme which contemplates a general reduction of rent, interest, salaries, and wages, a comprehensive Bill will be presented to the House at an early date with regard to a wage" reduction. Both the Royal Commission and the economists’ report contemplate a reduction of ton per cent. The Royal Commission holds the view that a graduated reduction is not advisable, but the Government proposes, however, to graduate the cut as regards the civil service, and particulars of this ■will appear in the legislation in paragraph 140. The Royal Commission recommend that insofar as the cut affects the Public Trust, the Government Life insurance Office', and the State Fire Office, these Departments should not be deprived of the benefit of the reduction in wages as was done last year, and the Government acquiesce in the view.