DOMINION’S FINANCES

Southland Times, Issue 18965, 13 June 1923, Page 5

DOMINION’S FINANCES

POSITION SINCE 1918 PREMIER’S DETAILED REPLY TO CRITICISM HOW GOVERNMENT HAS MET POSTWAR PROBLEMS (Per United Press Association). WELLINGTON, June 12. When in Dunedin a few days ago, the Prime Minister, in replying to criticism by Sir Joseph Ward, stated that on his return to Wellington he would refer to detailed accounts which he had not then available. This he had done, and to-day made the following statement :—“Respecting the financial responsibilities which remained when Sir Joseph Ward ceased to be Minister of Finance towards the end of August, 1919, the position at September 1, 1919, when Sir James Allen took over the finance, is stated in the latter’s Budget for that financial year. Sir James Allen found that during the ensuing twelve months, in addition to moneys to be raised for development works and State activities, in progress throughout the Dominion, he had to provide for new requirements totalling £30,325,000, viz., £29,325,000 for soldiers and £1,000,000 for public works and education buildings. Towards meeting these, there were cash balances in respective loan accounts totalling £9,771,337, a considerable portion of which had already been spent. How then can Sir Joseph Ward take credit for fully providing for all war liabilities incurred in New Zealand? It is important also to remember that in that particular year, prices, labour and material were still increasing. Further, that nearly £2,000,000 had to be found out of revenue for war pensions and cash provided to meet the largely increased payments to public servants, teachers, annuitants and pensioners. The statement made by Sir Joseph Ward to the effect that he had made provision for meeting war advances received from the Imperial Government by including them in loans falling due in future years, is far from being correct. Reference to the Budget of 1920 clearly reveals the position; £4,131,313 had been provided for by the issue of debentures, but £22,208,931 was covered by memorandum of agreement. This in effect, left that large sum as a floating debt with no fixed date of maturity, and as such it remained until 1921, when at the request of the Imperial Government, the memorandum was replaced by debentures, which were included in the funding agreement completed last year, whereby definite arrangements were then made for an annual reduction of the debt. No attention was taken in connecting with funding this debt until March, 1921, when I received a report from the Secretary to the Treasury and then instructed him to take the initial steps. I here is no previous reference on the official files, which would indicate that such a course was contemplated, prior to the date mentioned. As regards the increased indebtedness of the Dominion, the following table will show the annual movement in the war debt since March 31, 1918, the year the war terminated: — WAR LOANS. £ 1918 46,185,234 1919 68,450,040 1920 80,089,025 1921 81,538,569 1922 .. 81,843,543 1923 .. .. .. .. .. 80,651,743 These figures of course do not include amoppts borrowed for discharged soldiers’ settlement purposes. Sir Joseph Ward relinquished the portfolio of Finance on August 21, 1919. On September 30, 1919 the war debt stood at £72,685,120. Apart from the increased liability for interest and sinking fund, charges which are met out of revenue, there was a capital liability of something like £6,000,000 on account of gratuities, as well as other heavy commitments. These liabilities, however, were unavoidable, but the point is that since March 1918, out of £68,000,000 increase in public debt, £36,000,000 was raised for war purposes and £9,000,000 for discharged soldiers’ settlement purposes, altogether £45,000,000 out of the £68,000,000 previously alluded to by Sir Joseph Ward. This leaves £23,000,000 raised for public works, hydroelectric schemes, railways, improvements, etc., over a period of five years, which sum is by no means excessive, in view of the highly increased cost of materials and labour and accumulation of public works and other commitments held over during the war years.

“Sir Joseph Ward avoids the fact that the difficulties which prevailed during his occupation of the portfolio of Finance, did not disappear with his retirement from the position, but as a matter of fact on account of the serious drop in values of exports and increases in pensions, bonuses and the prices of materials required for the various Departments, our difficulties were very greatly increased. During his occupation of the position he was not called on to finance on a rapidly falling market. His attempts to minimise the difficulties of meeting increased expenditure arising out of the war charges and post-war depression, are best answered by reference to my financial statements, which were very full and complete, also to the splendid results of the sound financial measures adopted by the present Administration, which are disclosed by published accounts for last year.

“With reference to taxation it is interesting to recall that in his Budget of 1918, Sir Joseph stated:—l am pleased to be able to inform the House that there is no necessity this year to increase the burden of taxation for the purpose of meeting the immediate requirements of the country. The great increase in cur national debt, the increased cost of administration in the various services of the Government, and the necessity for providing war persions, etc., will of course, make it impossible for me at the present time to suggest any reduction in the existing rates of taxation, and it is moreover, not possible to speak with any certainty as regards to the future, as there are many problems which will require attention, after the war has been finally concluded and these can only be determined when it is known how the trade and finance of the Dominion will be influenced by the after effects of the war.’ Now the ordinary surplus for that year amounted to £5,085,924, malting the total accumulated surplus £11,560,788, - The decrease in the land and income tax receipts amounted to £2,030,025, due to the increased rates of tax, the altered exemption and also to the war tax which replaced the excess profits tax, and the tax imposed under Section 5 of the Finance Act, 1916, in addition to ordinary income tax on assessable incomes, in excess of £3OO at the rate cf 6d in the £, where the income did not exceed £9OO, and 1/- on all incomes above that amount. There was an alteration in 1920, when the previous rates were adjusted so as to provide one rate with a maximum of 7/4, plus 20 per cent supertax since taken off, and I have already indicated that as a result of the improved conditions and economies effected, the rate will be further reduced this year. In the same Budget Sir Joseph Ward expressed the opinion that the prosperity of the country was not likely to be effected by the war. Unfortunately, his anticipation was not realised, for there followed a rapid fall in the price of cur primary products which had a marked effect upon our finances. I have repeatedly stated that after the war, the cost of labour and material continued to soar and that the full effect of the increased charges, directly due to the war was not felt in New Zealand, as well as in other countries until 1919-20, and that after comparison with the pre-war expenditude made at the end of March, 1922, disclosed that after deducting increases for which the war w r as directly and indirectly responsible, viz., £13,371,000 the net increase was £3,270,000, which is not out of proportion to the normal expansion of the Dominion’s requirements for education, postal, railways and other services. Adjustments have been taking niv.e and the taxA-

tion per head of the population in New Zealand has been reduced by £6 1/3 during the past three years, or from £lB 9/- in the year of abnormal inportatiqns to £l2 7/9 per capita. “Sir Joseph Ward, has, I notice, again repeated that since the war Great Britain had paid £500,000,000 off her debt and reduced the income tax, while in this country, we have increased our indebtedness. From this it mignt be inferred that the national debt of Great Britain hs been reduced, but since March 31. 1919, to March 31. 1922, the British national debt has been increased by £1,821,000,000. The war debt in all countries has increased since the armistice to meet post war liabilities. The difference is one of degree, but I am pleased to be able to say that for the financial year 1922-23, our debt shows a net decrease. I have already referred to the fact that tax remissions were made in New Zealand last year and that further reductions are to be made this year.”