HUGE SPENDING BY STATE

Southland Times, Issue 24180, 17 July 1940, Page 6

HUGE SPENDING BY STATE

CRITICISM OF WAR BUDGET ; PEACE EXPENDITURE NOT LESSENED (Special to The Times) WELLINGTON, July 16. “The War Budget, providing for the expenditure of some £90,000,000 has been received with surprisingly little comment. The general attitude appears to be that whatever is necessary in a time of war should be provided without criticism. In so far as this is a War Budget one can always agree with that attitude, but the truth is that I mainly it is a Peace Budget with the War Budget superimposed,” said the Dominion president of the New Zealand Farmers’ Union (Mr W. W. Mulholland) in his address at the Dominion Conference today. The ordinary Consolidated Fund aspect of the Budget merited . close examination. So far from there being any evidence of economy commensurate with the gravity of the situation, the expenditure for ordinary civil purposes was actually several millions higher than in the previous Budget. The Budget estimated an expenditure in 1940-41 from the Consolidated Fund of £36,784,000. Last year’s actual expenditure was £37,654,000, but last year’s figures include £2,287,000 defence expenditure which was now transferred to War Expenses Account, and £926,000 expended on last year’s defence vote, which was also transferred to the War Expenses Account; Adding these items, which amounted to £3,200,000, to the Budget total of £36,784,000, there was a budgeted expenditure comparable with last year’s £37,654,000 of £39,900,000 —an increase of £2,250,000 over last year’s actual expenditure on a comparative basis. This was an altogether intolerable position, and he could only describe it as financial madness in a time of war. STEEPER INCOME TAX | Particularly in time of war, when taxation of necessity must be heavy, it j was important that it be levied in such j a way as to cause the least possible upward movement in costs. Consequently, he was pleased to find that a large amount of the increased taxation was to be raised by a direct levy upon wages and income. He felt, however, that the income taxation proposed could well have been steepened considerably on incomes from £5OO to £2OOO. The excess profits tax, however, while appealing strongly, from a sentimental point of view, and obviously designed to give effect to the* universal desire that no one would profit from the war, in practice was likely to work out most unfairly. No indication had been given of how the base, income was to be arrived at. But presuming that it was to be taken aS the income of the taxpayer in some years before the war, oi before this year, it would work out in an altogether, different way from what it was intended. For instance, many sheep farmers >in Otago and Southland and other parts of the South I Island experienced disastrous losses | through snow last winter, which would reduce their income ’ for the last year 1 1 in many cases to nothing. The pre- I

vious two years were also years in which very low incomes were experienced, and it vould well happen that a man having an income of only a few hundred pounds would be required to surrender a big proportion, or maybe the whole, of it as excess profits. A somewhat similar condition applied in many districts in the North Island which were seriously affected with facial eczema. “I am strongly of opinion that the man with the large income should pay in proportion to that income, no matter whether it happens to be a bit larger or a bit less than his previous incomes,” he said.

HIGHER SALES TAX The worst feature of the revenue proposals of the Budget was the increase in the sales tax. The sales tax was really a disguised wages tax. But because sales tax was collected in an indirect manner it would add enormously to the amount which it would cost the final payer—the consuming public and the farmer. The £2,000,000 intended to be collected in this way might well cost the actual payers £4,000,000: An addition of 4d in the £1 to the wages tax on the basis of the Budget estimates would have been sufficient to provide the £2,000,000 which was to be provided by the increased sales tax, but the sales tax method would cost the payers at least 8d in the £l.

“I would draw attention to the Public Works financial proposals,” said Mr Mulholland. “It is proposed to borrow £15,000,000 for public works. Apparently this sum is to be borrowed under the compulsory loan provision, free of interest for the duration of the war. The public has received without a murmur the proposal to borrow compulsorily this interest-free money, but it has believed it was for war purposes. This utterly unjustifiable wasting of our resources in a critical time becomes trebly “vicious when, under the cloak of our war necessity, it is proposed to finance it in such a manner. It becomes still more obnoxious when viewed in the light of the confession in the Budget admission that it is largely for the purpose of giving men employment. The huge sums which the Government has been taking from the people of New Zealand for public works and /or ordinary Government expenditure have prevented them from employing thousands of men who would otherwise have found ordinary private employment.”