Poverty Bay Herald. PUBLISHED EVERY EVENING GISBORNE, THURSDAY, MAR. 23, 1939. SOCIAL SECURITY PLAN

Poverty Bay Herald, Volume LXVI, Issue 19894, 23 March 1939, Page 2

Poverty Bay Herald. PUBLISHED EVERY EVENING GISBORNE, THURSDAY, MAR. 23, 1939. SOCIAL SECURITY PLAN

The first instalment of the Government’s social security plan is to come into operation as from the first of next month. It is not likely that anything which might now be said would alter the intention of the Government to proceed with its proposals regardless of the financial difficulties involved—although it seems probable that the health and hospital services will be postponed indefinitely—but there are some points in regard to the scheme which should again be brought to the attention of the public. In the public mind, Mr. Nash has undoubtedly been regarded as the author of this scheme and it certainly was his responsibility to pilot it. through Parliament. According to report, however, Mr. Nash, far from having devised the scheme, contested nearly every feature of it with his own party and it was ultimately forced upon him by a small majority in caucus. He is thus placed in the unenviable position of having, as Minister of Social Security, to carry out an elaborate scheme which, as Minister of Finance, he considers to be financially unsound. That such a position should be able to develop is another indictment of the party system, for it would seem that if this measure had been left to a “free” vote of Parliament it would never have reached the Statute Book.

The real basis of this scheme is an entirely arbitrary assumption that the national income of the Dominion will be £175,000,000 and, in Mr. Nash’s words, “that the ordinary revenue of the country will go up to an extent sufficient to obviate any increase in taxation." This statement was contested at the time, but there is now proof that it is definitely wrong. The last official estimate of the national income was that of £150,000,000 in 1936-37, when the total value of production was £136,100,000. The value of production in 1937-38 declined to £135,600,000, and it is a reasonable assumption that the national income declined also. Last year, the value of exports alone declined by more than £8,000,000, and the inescapable conclusion is that the national income in 1939-40, far from reaching the estimate of £175,000,000, will decline still further from the level of £150,000,000 actually recorded for 1936-37. More than that, in 1937-38, compared with the previous year, an additional £5,600,000 of the national income was appropriated for taxation, so that the pool out of which the cost of social security must be met has been further diminished. The very foundations of the whole scheme, therefore, have been seriously undermined and .the prospects of its successful operation are open to serious doubt. It is significant that Mr. Nash, in one respect at least, has had to acknowledge the inaccuracy of his estimates. Speaking on the second reading of the bill, he was confident that no increase in taxation would be necessary. In Auckland recently, however, he told a meeting of business men that it appeared as if it would be necessary to raise' an additional £2,000,000 to meet the cost of the scheme. That is the first addition to the bill for social security, but it is by no means the last, since Mr. Nash has never at any stage taken any account of the disappearance, as from next month, of the employment promotion fund. Only last week, Mr. Langstone told a meeting of Maoris that he had asked Mr. Nash to provide £2,000,000 to provide employment for natives during the next financial year. Where will Mr. Nash secure the funds to meet Mr. Langstone’s needs? Nor is that the end of it, for Mr. Webb has an identical problem in providing employment for probably 30,000 Europeans who are at present a charge on the employment promotion fund. On the face of it, therefore, Mr. Nash’s own need of an extra £2,000,000 will be more than trebled when the requirements of his colleagues are added. And in the meantime, the revenue from nearly all existing taxes is declining. This is the position which the people of the Dominion, and the Government in particular, must be prepared to face, for, on the face of things, the social security scheme is destined to collapse under its own weight and to dislocate the whole financial position of the nation. The position will be aggravated rather than alleviated by the fact that part of the scheme has been indefinitely postponed, for this may tend temporarily to obscure the real cost and to create a false sense of security. The real situation is that a majority of the Labour Party have foisted upon the Government a scheme that depends for its operation upon some form of credit manipulation, while’Mr. Nash is attempting to make the scheme work on orthodox financial lines. A hybrid measure of this sort cannot hope to survive, and this means either a modified scheme in which orthodoxy will prevail or else a straight-out experiment in some form of credit control which will inevitably lead to all the evils of inflation and cancel out whatever benefits might appear to be conferred. At the moment, the inflationists seem to have been able to enforce their policy but not their procedure upon the Government, and it remains to be seen whether, when the full effect on the financial position manifests itself, orthodoxy or inflation will prevail in the ranks of the Labour Party.