REDUCED COST OF WAR

Southland Times, Issue 25747, 10 August 1945, Page 6

REDUCED COST OF WAR

ESTIMATE LOWER BY £24,600,000

(Special) WELLINGTON, August 9. War expenditure is to be reduced by £24,600,000 during the current financial year, according to figures given in the Budget. The total expenditure is estimated at £105,400,000. In presenting the Budget to the House of Representatives tonight Mr Nash said that the cessation of hostilities in Europe had in no way eliminated the complexities of estimating war expenses during the current financial year; rather had it increased them. Nevertheless, he would state that with the defeat of our major enemy, and notwithstanding the concentration of our full efforts against Japan, if was a somewhat more satisfactory task to prepare estimates covering a reducing in place of an iticreasing expenditure. Peak war expenditure was reached in the financial year 1943-44, when war costs, excluding debt repayments, totalled £152,900,000. For the year ending March 31, 1946, an expenditure' of £105,400,000 Was anticipated, the estimates being as follows:— EXPENDITURE £ Navy 6,000,000 Army 38,000,000 Air , 31,400,000 Ancillary 4,000,000 Rehabilitation 2,000,000 Reverse Lend-Lease 24,000,000 £105,400,000 RECEIPTS War taxation 49,600,000 Reciprocal aid: LendLease and Canadian mutual aid 20,500,000 Disposal of surplus assets and miscellaneous 6,800,000 ’Memorandum of Security Agreement with the United Kingdom Government 3,500,000 1945 Victory Loan 25,000,000 £105,400,000 The estimated requirements for the Navy and the Air Force were close to last year’s expenditure, both, however, showing a slight reduction, said Mr Nash. The anticipated decrease in the item for the Army, however, was substantial and was represented almost entirely by costs for war stores, most of the outstanding claims for which had been mef last year.

£507,000,000 SPENT ON WAR Mr Nash presented a summary of the War Expenses Account from the outbreak of war to March 31, 1945. This showed that the total expenditure was £507,012,000. The amount raised in war loans was £258,220,000, £173,597,000 was raised in war taxation and £26,586,000 was transferred from the Consolidated Fund to the War Expenses Account. The expenditure included £165,135,000 on war and other stores. £140,968,000 on pay and allowances, £31,629,000 on accommodation, food and clothing, £31,233,000 on land, buildings and ships and £18,558,000 on transport. The total expenditure by the Army, Navy and Air Force was £414,485,000. “An expenditure of £507,000,000 is no mean achievement for a population of only 1,750,000,” Mr Nash said. “Of this total expenditure only 43 per cent, remains outstanding in the form of war loans, as, after allowing for redemptions from other sources, we are left with an increase in the public debt on account of war of £218,750,000. Lendlease assistance from the United States of America, totals nearly £84,000,000, as against reciprocal aid, which we have supplied to their forces totalling over £58,000,000, without taking into account the fact that, in general, our price-level is substantially less than that at which lend-lease goods have been supplied to us.

INTERNAL INDEBTEDNESS “With the exception of £18,900,000 the whole of the increase (£218,750,000) in war debt is due for repayment in New Zealand. External borrowing places on posterity the burden of providing exportable produce to meet annual interest: charges and principal repayments. Internal debt, on the other hand, is repayable ’to the people of New Zealand by the people of New Zealand. The economic effects depend upon who pays the taxes and who receives the interest. The more widely the investments in public loans are spread over the whole community and the greater the degree to which the interest-receiving . coincides with the tax-paying public, the less disturbing and the less burdensome is the public indebtedness. In New Zealand, warloan investments are very widely distributed. By March 31, .1945, the net investments in national savings bonds and accounts amounted to £31,000,000, and this represents investments by over 500,000 people. During the war period the amount standing to the credit of post office savings-bank depositors increased by £53,000,000, while the amount in depositors’ funds with trustee, savings-banks has increased by £9,000,000. Substantial investments were also made by life-in-surance companies, whose funds for investment consist of the aggregation of premiums, representing the savings of many thousands of policyholders. It is thus clear that investments in war loans, either directly or indirectly, cover a very wide'range of individuals, so that the burden of debt on the community is consequently lightened. “A notable fact concerning these internal borrowing operations is the relatively small reliance upon bank credit. Loans made by banks increase the amount of money in circulation. Previous war Budget statements have explained the necessity of avoiding, as far as possible any increase in the spending-power of the public through expansion of bank advances and investments during a period of shortage of civilian .supplies of consumer goods. Since 1943, shortly after the stabilization scheme was introduced,. although the Government’s war expenditure has been on a very high level, we have avoided creating credit for war purposes through the Reserve Bank, nor have the trading-banks increased their holdings in Government securities. The relatively small expansion of credit which has occurred since the outbreak of war is evidence, that the Government, with the strong support of the people, has been successful in financing the wartime expenditure by methods which have kept monetary inflation within very restricted bounds.” DOMINION’S PUBLIC DEBT Total Now £603,200,000 (Special) WELLINGTON, August 9. Figures illustrating the movement of the public debt were quoted by Mr Nash in his Budget speech. These showed that in 1936 the public debt totalled £322,200,000, £198,400,000 being domiciled in London and ,£122,200,000 in New Zealand. By March 31, 1945, the total had risen to £603,200,000, of which £180,000,000 wat domiciled, in London and £203,500,000 in New Zealand. The most interesting story from these figures, said Mr Nash, was that the debt domiciled in London had been reduced by £18,249,433 since March 31,1936. 1