FINANCIAL STATEMENT. RETRENCHMENT AMOUNTING TO £300,000. THE GOVERNOR'S AND MINISTERIAL SALARIES. PROPERTY TAX RAISED TO A PENNY NON POLITICAL RAILWAY BOARD A MILLION LOAN. [BY TELEGRAPH.—PARLIAMENTRY REPORTER.] Wellington, 2nd.

Te Aroha News, Volume V, Issue 227, 5 November 1887, Page 4

FINANCIAL STATEMENT. RETRENCHMENT AMOUNTING TO £300,000. THE GOVERNOR'S AND MINISTERIAL SALARIES. PROPERTY TAX RAISED TO A PENNY NON POLITICAL RAILWAY BOARD A MILLION LOAN. [BY TELEGR AP H. — PARLIA MEN TRY REPORT E R.] Wellington, 2nd.

In the House of Representatives i&lte ' evfcning the Colonial Ti ensure v iilajo:' Atkinson) delivered tkc Financial fcftnfeem&nfc as follows : — Mr Hamlin-. 1 have on sevrud <--imilai occasions hft'3 liho honour of afiifcre^lnrj you and your prod," ce^-ors in iHuil * luir, l»ut 1 need hardly >n;\ r thul on kv> ];W\it'tis oec\asion have i&ft a pioater scn?r oi^ vespon-i-bility, and oHhe di f iicult u'-H", Inch' lie Liefoie ■us. Yefc I vlll odd tItAX.iuJVCi- proviousl; y have I felb-imre coniideial lilniO ' ilu dithcultiescan read will bo o\o"ertnit, e-inee the colony, and I believe thw, UoirtTisiltec, reilecting ns h does the r^^id of the colony, has determined tl.afc omr d^Vicuities shall be met atwil dealt with in ftUc ri<;lu spirit. It, was in Nft>? la^t that chc 'cov-titry began in earaesb -ie ceeognise tiso" l aet thafc

A Ssrlous Fin racial Problem had telbc faced. lVlitKncnk vas then told by tliC 'Hon. the Grih-'«i\il Tieasuter, Sir Julius T-i<gel, thai cr-iiy possible economy having been practised in the pioposcd jmMie expenditure. ariMibiunal taxation to the extent of £250, 001. per annum mv.st be imposed. P«uliamo:*\, ho\\e\er, Uiouoh.it. fully iretohcel as thc'(.!o\ eminent not to let the emvent expend •*>:;* re exceed the cuuent revenue, emphatically lefu^cd tlie propo-ed advlifcicnal taxaticn, in tho belief that further larcre iediu: sinn^ 5 inn^ ueie possible, and comlcl be made in the expenditure before imposiiiGC fiuther i'luiclei.s, ho that tlic^latter, if really neofial, might, at all events, lie reduced to a m.niinum. In consequence of this refusal an appeal \va^ made to the electors, and thej fiully con firmed rliO de dsion of the b\t Parliament, and I am here to night to piopo;>e the Hr.-t step lo%raids giving tln-v. decision eilect. I take, therefore, as mj -staiting point, thi^ linn determination cf'Lhe country for retrenohment —a detf.nination "which, undei the -still continued depression of trade and the low price oi some of our main staples, no one can say^-* not reasonable. The (ioverninent, at all event- 1 , are among those v/h-o fully belie\ c in the leisonablenc^s of ttfe detennint-.ri<r; ; and they believe aiso that the counh-y it prcpaied for tho necessary self-sacrhlct s which it involves. To some extent, I hope, ietivnchment maybe effected by gi cater care in administration, bnt there is no doubt that, speaking generally, retienckment means self saciifiee in ssme -f-hapc on tho part of the community a.t large. Hen. members will, [ tiust, excuse me if I ask them to bear this Aery obvious but very impoitant truth in mind, not only .in 'looking at the Government proposals as a "rh-ok, but when they come to deal with them iv detail.

The Deficit. It*u ill v.Oh be nece^ai y to refer at any length to the tr~ inactions of la-,t year, as they ha\e been dealt with by the I.Ho Colonial Trensmeijiii hi-. Statement of MayLi>t; but- 1 desire to ci 1 ! your attention to the great (liffei er.ee there Vtu<« in that year betweena ilio vecmrent unenue and the expenditure. The deficit, a^ j^iven by the lafe Colonial Tiea^m or foi tho yeai 1806 87, was £92,295, but if wo omit fiom the levenue two considerable items will not iccur thisjeai- — namely, the suiplu^ of £37,859 with \*>lrieli tho year 1886-87 be^an, and the windfa'il of 1104,739 of released sinking frmd, -we .shall find that what I ha-\ c called xhe recinicnt levenue fell shoit of the expcncKtuie by £234,901. Bcaiing this fact in mind, hon. meinbeis -\\ ill be better able to understand how the late dovci ninent, after malciri^ nil lerhictions in expenditure they ihonjr'ht pcssii-tle and expedient, felt constrained to j^opo^e no le^s a sum than a quarter of a million of taxation o\ er that of the year ending on the 31&t Maich last.

T7xc Land Fund. It i* de-arable, before going further, that I should biiefly lefer to the position of the Irsixl fund account. It must be rememberod filial although the land fund lias beea kept in a separate account .since 1879-80, and very wisely so, it is in law a parfc of the -consolidated fund, and, when a surplus, should be u-ed in aid of the consolidated revenue, upon road? and bridge?, to give facilities for settlement ; but any deficiency of the laud fund i^ properly a deficiency of the consolidated fund, and should be so treated. On the 31sc March, 1887, the land fund was in debt £54,263, so that if to the £92,293 we add, as we ■should, this £54,263,'1he deficit of the consolidated fund at -the close of the year, which had to be provided for, the land fund, was £146,555, and as a matter of fact it is included in the deficiency bills outstanding. I shall now proceed to state to the Committee what would be the probable deficit of the consolidated fund account at the close of the present year on the twofold supposition, firstly, that the expenditure continues at the rate .prevailing when tiie present Governmet/t took office ; and secondly, that no additional taxation is imposed

Expenditure for 1887-83 TheEstimatesforthecurrentfinancjalyear. as laid before Parliament by the late Government, having being QGnsidered in the light of the six months' acrual expense, with the ■view, on the one hand, of showing the probable saving.- which under ordinary circumstances would have accrued on the votes at the end of the year ; and, on the other, of adding to the original Estimates the co^fc of additional service for which no provision had been made, but -which so far as they did nob relate to services under permanent Acts would have had to be brought down and voted in the supplementary estimates —it now appears the .probable expenditure for the current year vould amount to £'1,118,395, as against the total ot £4,088,804 appearing in the Estimates of the late Government, It is hardly necessary that I should enter into any explanation of the differences between these two estimates. There arc savings and excesses in vaivous directions, and hon. members will iind tUom sot out with sufficient fulness in a table which will be appended to thisStatcjnont. I may remark, however, that the soculled savings on votes which we ordinarily expect to find at the close of the year will pot prove s-o large as usual, because the Estimates ppear to have been framed with little niarg-a over the sums proposed to be actually spent. Amongst the services either not appearing on the Estimate a, or insufficiently provided for, are the following :—lnterest: — Interest on advances recently obtained Iwm the Bank of N"ew Zealand;

compensation for -losfc of office paid to officers whosfe services we'i'e dispensed with 'by tho late ; expense attending a second session of Parliament within tho years Expenses bf ft general election ; Stodk Department 'insufficiently, ptxjvided for ; 'liabilities in vfedpcct of thej Indian and Colonial Exhibitibh-; ad'ditio«alj exchange 'tth remittances to Loirdon. In. atl-hing at abovo estimated '.total 1 oft C 4 ,118,395,5 have not allowfcd for the jJferce^itage reduction of salaries, trticlmated r ' J o amount "to £20,000, proposed by tho 1 -tote Government, but which had ! hcfc b'con tct%o& uponAvhen we took office.

'Oxfcl&ary Revenue for the Yea* 1887 83. The revenue proper reerfrod' for 'the six months ending on the 30lh September last was ,C 1,510,863. This was ±\16,844 less than was received during the game period of the financial year 1885-86. Tht Customs yielded i'^9,446 less, the railways .€18,433 move than the pi evious year. (l?o this must bo added the proceeds of' debentures amounting to f 258,184 issued last April under the Consolidated Stock Ac VISB4, on account of the sinking fund to n'ecrue during the iinancial year 1887-88 ; but 1 do not add the proceeds of deficiency bills sold, because my object is to show what the probable deficit will bo at the end of the year. The total receipts v ore, thoiefoie, exclusive of the proceeds of deficiency bi115, £1,769,047. In estimating the revenue for the remainder of the iinancial year, I do so upon the assumption that taxation, including the property tax, is not altered from last year. I may remind hon. members that no propeity rax has been collected, theannualbill nothaxing yet been pa-bed. With regaul to the other itenibof levenue, I have adopted thecstimates of my piedece-fcOfs, except as legaids stamps and lailways. The experience of the pa.st six- months lead? to the probability that stamps a\ ill not reach the estimates b> £32,600, and uuluays by £50,000,. Taking the^o circumstances into consideration, 1 estimate that the revenue for the six months ending b [, March, 1888, will amount to 02,019,460, making a total of €3,788,507 for the year, as against t'^, 156, 184, as estimated by the late Colonial Trea-ui or, which included the proposed additional taxation.

• The Land Fund. I have alieady informed the Committee that on the 3L-t of March last there was a balance of £54,203 at the debit of the land fund account. On the 31st of March, 18S4. there was a balance of £80,447 at the credit of the land fund. Tho expenditure ha?, therefore, dining the past three years exceeded the 1 eceipts by an n\ eragc of €44,900 a year. Last year the expenditure exceeded the rtceiptt. by 033,879. Lt is expected that the leceipt* for the current year, estimated by the late Government at L' 108,890, will be realised, and a le vision of the expenditure, estimated at 1170,907, remits in a probable decrease of £2.600. Thus the expenditme of the year would have exceeded the rexenue by £59,417. 1 may pay that this exec--- of expendituie is exclusive of the outlay amounting to £168 266, A\hich lia«? made fiom loan dining the last tluec yeais on opening v]) land before sale, and of liabilities, £70, 905, since inclined on the same account. It is also exclusive of £1,881 expended on village settlements to the 3]>t of Mt'ich last, with liabilities of £07,886, .since inclined ; bub this latter eNpondituvei^ to be capitalised, and interest obtained for it in the shape of rent if po^iible. The money, howe\er, has yet to be provided, cither from loan or consolidated fund, no provision ha\ ing been made for it by rarliament.

Results. The revised c-timatcof cxpenditureof the ordinal y rc\enue account; being, as> 1 ha\e btated, £4,118,395, and the revenue being I i' 3,788,507, tlio expenditure will exceed the revenue by t'329,888 on the oidinary revenue recount, and if we add the exccs^ive expenditure of the land fund, C 59,417, we got a total of i' 389,305. The lare (Joveinment piopo&ed to meet the deficit they anticipated on the ordinary it\enue account by additional taxation amounting to £250,003, and by a percentage reduction of £20,000 from salaries. "W ith regiu d to the land fund, they proposed " that for a term of years, until the increasing re\enue will permit otheiwi&e, the deficiency between the land revenue and the I land expenditure should be made up by ehar^o on the land supplied by such local borrow ing a« may be required." How the present Government propose to deal with the deficiency of the consolidated fund as a whole, and prevent its recimence, I vvTl shoitly state ; but, finsfc, I must ask your j attention to the public debt, and to the I public works fund account.

The Public Debt. With the view of showing the effect upon the public debt of the operations during the last three years of the provisions of the New Zealand Consolidated Stork Act, 1877, and mote especially the Consolidated Stock Act, 1884, 1 have had a table prepared to accompany this Statement. The gross public debt at the 31st March, 1884, as set forth in that table, was £31,071,582, exclusive of £398,000 for deficiency bills. At 31st March, 1887 it was £35,741,653, exclusive of deficiency bills for £279,100 j then outstanding. Sinco that date ! turther deficiency bills, to the amount of £715,900, have been issued, the total of those now outstanding being £995,000, in addition to the debentures of £258,184 issued in April last for increases of sinking fund for the current year. The amount at 30th March, 1884, in the table to which I have referred, differs from the total given by the late Colonial Treasurer in his Financial Statement of 17th September. 1884 Ib is unnecessary to mention the items coustituting the difference, except in one particular, because the table prepared in 1884 was to ascertain the extent on an approximate statement. The exception to which I refer is the exclusion from the table of the amount of the bonds issued under the Consolidated Loan Act, 1867, "drawn, redeemed, and , cancelled prior to 31sl March, 1884." Ib is true thab the scheme of that loan required that the annual charge for interest and sinking fund in respect of the total amount of debentures issued, should remain j the same until the whole loan was repaid ; I and that, after paying therefrom the interest on the outstanding portion of the debt, the growing balar ?e should be applied to annual drawing ; &ut although interest continues to bo paid on the drawn bond to the trustees of the sinking fund, there is in fact no liability in respect of the principal of such bonds, which are actually cancelled from time to time, and sent out to the colony. The interest so paid is Jn reality a contribution of the sinking fund from the consolidated revenue, and goes to swell the amount availably at each annual drawing of bonds, Ib is right, therefore, to Include in the debt only the amount of principal for which the colony is liable. It will be observed from the table that during the three years ended the 31st March, 1887, bonds for £9,796,800 were converted under the two Acts to which I have referred to olhur securities, to the nominal value of £9,995,884. Prior to thai date bonds for £5,390,300 had been converted, now repi'OFcntcd by a debt of £5,499,571. The complete accounts of all these conversions, and the expenses of amending the same, have nob yeb been received, and until they are, an exact account of the saving effected cannot be made. I now come to consider the effect of those provisions of the Consolidated Stock Act, 1804, which empmver the

Colonial Treasurer to 'issue debentures in eachifrnancial yeal 1 to an aTmotiritvequal to thei&ccrefcions of tho sinking fund for the yettu. The total amount eft 'these accretions for+ohe three years 1884-37 was £742,728, , oiKvhich tho consolidated fund contributed j h£j97,236, the balance of £145,492 being tfhe product during 'the same period of investments madfe by "trustees, partly in bonds of this colony, and partly in securities of other colonies. The amount contributed out of the consolidated fund represents in the case of each loan, except the consolidated loan of 1867, meroly tho 4 or 2 per ccrit. as the case may be on the amount of the outstanding debentures. In tho case of tho consolidated or " drawing" loan of 1867, as it is sometimes called, the amount contributedis 1 per cent, on tho amount 'of tho original debt of £7,283,100, together with 5 percent, on the amount- of tho bonds drawn and cancelled, which increases year by year, and is now £1,982,100, inclusive _of tho drawing in March last. lam desirous that the Committee should appreciate the marked distinction in the accretions of the Sinking Fund between the amount which the colony contribute? dhect from revenue and the' interest received by the trustoes on their investments, I wi.sh this distinction to be thoioughly understood, because I think considerable misapprehension exists with regaid to the operation of tho Act. When in" his Financial Statement of 1884 the late Colonial Trcasuicr brought the position of the sinking fund under tho notice of Puiliamcnt he did &o with the object of piopoundihf* a s6hcmo which would have tho cfiect of lelievmg the consolidated fund of a hua\ y burden. He«aid, " I propose wo should liob be idiotic enough to ask the people to pay off a little fragment of our debt ; no other colony does it." Now, it is claimed that the maintenance of tho contiibutions of linking fund direct from the revenue was an unnecessary tax upon the people, a tax which, in view of our continuing tn bonow, should without breaking faith with the bondholders be romoAed. Whether or not that is a right view to take I shall not now discuss, but the increases derived horn past investments of these contributions, -.tand upon an entirely difieient footing. Thcj' constitute no bin den upon the people, "and to the extent, viz., £145,492, to which during the past throe ycai-5 ending olsfc March last, the consolidation has been aided by borrowing money equal in amount to the accumulations of intercut these years leccivcd by the trustees, we ha\c, I venture to submit, exceeded the a^ owed piupoe of simply making good to ru\cnuc the amount we have paid out of it.

Reduction of Debt I find it is not generally understood thafc such has lealiy been th-j eilecl of the operation. I should, however, add thai what lvii been done has been with the pro\ision of the Act of 1384, which gave power to the Colonial Treat in w to issue debentures for mci eases of the .sinking fund from all frouicct, and that the lesult, asit was stated ■\ ould be tlie case, has been that as regaids loans outstanding on 31st March, 1884, the neb public debt has practically remained stationary.

Public Works Fund Account. The account is now divided into three separate account", a reparation necessitated by the legislation of the session of 1886, which has the etlecbof what lias been termed " eai-maiking"' the North Island Main Trunk Railway loan, and the loan authorised in 18S6 to the .specitic piu poses set forth in the two Loan Acts. Xo. 1 account is an account of the balance ot the loans raised before 188 G. The ciedit balance in this account was on the 31st of March last £491,245, subject to 1 liabilities amounting to £335,774. On the 30th of September last there was a credit balance of £247,292, subject to liabilities amounting to £280,495. Against this fund is. el. urged all miscellaneous works, such as haibour defences, loads, bridges, school buildings, purchase of natire lands, and telegraph expenditure. Hon. members wilf therefore see that without further bon owing neither can our liabilities be met, nor can necessary works of the above description bo undertaken if we adhere to the wholesome restrictive principles of the Acts of 1886. Xo. 2 account is the account of the North Inland Main Tiunk Railway loan. The unexpended balance on the 31st March, 1887, was £074,314, subject to liabilities amounting to £187,937. On the 30th September la^t the unexpended balance was £615,258, with liabilities amounting to £337,474. There is therefore a sum of £477,784 still available in this account, subject, however, to the cost and charges of raiding the whole loan in the market, which has yet to be done. No. 3 is an account of the loan of 1886, being the amount authorised in 1886 to be raised for railway construction, £1,325,000, together with £242,800, representing certain dibtiict railw ay debentures sold on behalf of the post-otHce, in conjunction with that loan. The credit balance on the 31st March, 1887, w r as £1,012,034, consisting of amount in hand, £620,734, and balance of loan to be received, £391,300. The liabilities, exclusive of the proceeds of the £242,890 district debentures since paid over to the postoffice, were £326,651. On the 30th September last the credit balance was £556,644, and the liabilities £304,004. There is, therefore, still available £252,640 in this account. The credit balances, however, of these three accounts jointly are, as I have shown, only in part represented by cash, and the power of spending depends upon our realising the securities held to their credit and floating the North Island Main Trunk Railway loan. The total cash available at 30th September last was £140,549, in addition to which we had £120,387 imprest advances in the hands of officers of the Government. The securities consisted of deficiency bills, £19,200, district railway and other debentures, £139,058, and the North Island Main Trunk Railway loan, £1,000,000, the total credit balance of these three accounts being £1,419,194, against which there were liabilities amounting to £720,973.

Loans .to Local Bodies. Up to the 30th September last wo had borrowed £100,000 under the provisions of fche Government Loans to Local Bodies Act, 1886, for the purpose of making 1 loans to local authorities. Of that amount £71,686 had been disbursed at that; date, leaving a balance of £28,314 in hand, with liabilities amounting to £99.181, to meet "which a further sum of about £100,000 will be required, consisting of balances of loans to local authorities which had elected to take their loans by instalments, £38,580, and £60,601 for loans previously granted in the first year of the Act, but awaiting the completion of the steps necessary to give the security required in connection with the administration of the Government Loans to Local Bodies Act, 1886. I may further inform the Committee that under sections 26 to 30 of that Act debentures for about £105,000, given by local authorities under the provisions of the Roads and Bridges Construction Act, 1882, have up to the 30th September last been con verted in to liabilities undei the former Act, which (section 31) provides for the paymont into tho public works fund of all moneys arising from such conversions. It is the intention of the Government to ask Parliament to appropriate a sum of £100,000 for the purposes of the Act lor the current yoar. Under section 45

T&e Maori Lauds. Before proceeding "to speak of the other proposals of t"he Qovevntnenfc with reference to equalising revenue and expenditure, arid the proposals as to public works, I desire briefly to call . attention to tho following subjects : Maori lands and tho tariff. The j apparently insdlu'ble problem of dealing with native lands in a fair and equitable way in the 'interests of the Maoris and of the settlement of the country, has occupied probably more of the time of tho Govern-, ment and tho Legislature of the colony than almost any other question. I do not propose on the present occasion to go at any length into the question. 1 shall only indicate the bioad lines which the Government propose to follow in legislation upon this subject. In the opinion of the G overmen t there are large districts in the colony in which many Maoris are living wheio the &arne laws can bo applied with adsantageto the natives and Europeans alike. Wo shall, thercfoic, in repealing—as wo piopose to repeal — the Crown and Native Land;? Hating Act — a«-k for anthoiibyto declare district- in which the law will apply equally to indhiduaJs of both races. The Maoii, on the one hand, will be liable to pay rates and taxes as bia [ fellow-subject of the Kuzopcan laco i.« ; :tnd on the other, he will bo permitted to deal with his land as ficely as any European, after tho Crown title ha^ boon obtained, except to this extent, that ho will be compelled to retain a sufficient amount of laud tor the maintenance of himself and family ; and of all those po^se-iing Ltrtje ti.iclb of country, it will bo lequuod that the land shall bo sold in blocks only of a model ate size. In all obher 'district- oi the colony which are not ]>roclahned, the INlaoiis will not bo permitted to pait w iih their lands to anyone but the Crown, except under more stringent conditions. Roto; c, howe\ cr, proposing final legislation on thix-e subjects, avc shall in the recess consult with the natives on the several points, but we intend at once to introduce a bili to lemedy ceituin pressing evils. of the Act provision i-i to bo made for tho creation of a sin king iund for the redemption of the deben tines, but as tho tian-actionr>of the consolidated fund will end in a deficit at tho close ol this year, the Go\ eminent do not intend to piopose to Parliament to appropi iate a sum for this put pose. PioM'ion will, however, be made for it.

The TariS. The revision of the tax iff i- a que^ion which ha- occupied a good deal of attention throughout the colony, and i«. one undoubtedly icquiring the eaily attention ol the Legislature. Until this question is settled with some ?oi t of permanency the trade of the colony will, in addition to its pros- cut unavoidable difficulties, continue to be disturbed and hiitaled by vvhat can and ought to be abided — the uncertainty from yeai to year — I might say, for a poition of the year, from montn to month — a -a to what our tariff is to be, and no one mcnber, 1 am sure, will doubt; that damaged tnde means loss to the whole community. The (io\cinment, dining the shoifc time at their disposal, have had tins matter under their careful consideration, and have come to the conclusion that the question should not be dealt with dining the prc-ent session because it i-> impossible to deal v\ ith it completely. The Government, aie stiongly of opinion that it should not be touched until it can be so dealt with as not to need further serious ie\ ision for a considerable time. We ha\c within the past t - \o jeai 1 -. had two serious but unsuccessful attempts hugely to alter the tariff, resulting in great dei angoment of trade, with all the 10~-> which that brings, and without the smallest compensating gain. The causes ■which led the House emphatically to reject tho-e attempts still exist. The general commercial depression may fairly be considered at lca-r, in its prosent severity, abnormal and temporary. Moreover, we cannot at pro-cnt look -offa'forward in our tinancc a« to fix m hat we shall require from the Customs even for the near future, foi on the one hand the changes the Government propose, and such fuither economics a.-, they hope to make, will correspondingly lessen the need for tevenue. On the other hand, they recognise that it Mill be necessary to chaige azain.-t revenue many woiks which are now charged against loans, such as public buildings, school buildings, and telegraph exten^um. so that with these unceitain elements at vioik, and looking at the fact that the time at our disposal is practically yery short, and that we ha\e woik now before us which, if satisfactory done, will certainly mark this as an epoch in our history, it &cems to the Government clearly right that no attempt should be made to revise the tariff this session.

Balancing Revenue and Expenditure. I have now. Mr Hamlin, to answer a very important question — a question in which this Committee and the countiy are at present mo^t deeply interested — How is it possible without further taxation for the revenue and expenditure to be balanced ? I have already shown that the excess of expenditure dining the current year over the receipts of the consolidated fund, including the land fund, will probably amount to £389,305, on the supposition that the expenditure continues as at present, and that no additional revenue is obtained by taxation. It must be evident to anyone acquainted with the condition of the colony that something more is now needed to restore confidence than mere trivial economies. Our chief difficulties have undoubtedly arisen in a great measure from a too lavish expenditure, more especially of borrowed money. That must be stopped, and our first duty therefore is to apply the pruning knife with an unsparing hand. But that is only our fiist, not our only duty. There is another not less important.

The Settlement of the Laud. We must, indeed, take all possible means to prevent waste, both of our ordinary revenue and our money borrowed for public works, bub we must also promote the settlement and occupation of the lands of the colony by rendering them attractive to persons willing and able to cultivate them and to develop their many and varied resources with their own skill and capital ; and we must also, as far as pi'acticable, encourage all our other industries by all reasonable means in our power, that is to say, we must encourage such industries by such means as in our judgment, upon a general and careful review of a difficult and complicated subject, really in the long run increase the wealth and prosperity of the colony. In these ways w e shall in due cour&e raise an increased revenuo without increase of taxation ; or, conveisely, .the same revenue with less taxation. The results no doubt concern the future, but a future not, I trust, by any means far distant. There is no surer way of lifting: the country out of its present difficulties than by the introduction of considerable numbers of persons possessed of sufficient means and knowledge to cultivate the land profitably, not only as ordinary farmers, but as fruit-growers and growers of plants suitable for manufac- J ture, or to supply other industries. Our efforts ab retrenchment will be comparatively unavailing to restore prosperity unless we can obtain a considerable accession to our population to employ labour. Wo think the time for this very favourable, and if tho ITou?c should approve of tho course w© fchall proposo it, Upon this sub-

jccb wo hope to sec, at no distant period, a con&iclerable accession to our population of persons of the class above referred to- The time also apparently is favourable lo the establishment of pensioner settlements. Much interest is being taken in this subject by leading men in the United Kingdom, and a good deal of thought and attention has been given to the details of a schemo by a gentleman in Auckland, who has devoted a large amount of time and energy to the matter. The Government are of opinion that every effoil should be made to induce a considerable immigration of this class of persons to the colony. As an essential means towards accomplishing the above important objects— and, indeed, the settlement of the country generally — the Government propose to amend and simplify the land laws, and. as far as possible, make them unifoim throughout the colony; to allow selectoi a full freedom of choice as to tenure, and above all, and as the dominant; idea, to enable the bona fide settler to get possession of and title to, hi.s land with the least possible delay and' expense. It is, poihaps, desirable heie to declare that the Government fully recognise the wisdom of the principle v, h'ich ha.s been acted on since 3879-80, namely, that the proceeds of the pale and disposal of our lands should bo treated, not as ordinary rc\enue, but as a special fund for opening up the country and promoting settlement.

The Mining Industry. It would not lie appropi iate to speak hero at length of the mining industry, though of ;,'rent 'importance. I may, bo\ve\cr, point to two hopeful signo tor tho futuic. One is that. the yield or gold from the quartz mines appears to be steadily increasing, and the other is the largo and steady and increased output fioin the coal mines. There can be no doubt that -when the harbours on the Vrc-fc Coast aie completed, tho latter industry will assume still larger proportions. The Government fully recognise tho importance of developing the mineral wealth of the colony, and for that purpooc of affording all facilities in their power tor promoting legitimate onfcipiNe, and they hope that by the "piead of wider and more exact knowledge of minerals and mineral processes and methods, by a more complete technical education, a good deal ot waste may be avoided, and lodes and ores may be found and woiked with profit which are either now passed by or are not thought payable. The (lovci nment will be willing to assist in the matter of technical education as far as they are able, and so far as they can do with real cfl'cct.

Railway Management. The management of our railways from the tir»t ha*> never given satisfaction to the public. It would be a waste of time on our part to endeavour to explain the reason for the public di.- satisfaction. The fact probably i- suflieient for us that the public have Ion 2 been greatly dissatisfied with what is called the mismanagement of our railways. I do not share in this dissatisfaction myself, -o far ad the management c^oes, believing as 1 do that our ofHcors on the whole have been eflicient, and that it is the inherent defects of the system, and not the manncrement, which aieat the bottom of thisdissatisfaction prevailing. Tho question of placing the railways under u hat is called a non-political Board or Management has been before the public for "imia year.-*, and tho inhoduction of that plan in Victoria has enabled us in New Zealand to Match the practical working of the fcy>tem. It is now admitted, I belicAC, by all those qualified to judge in Victoiia, jhat the system has proved a gicat Micccss. T.'ic Board has now been at woik ior nearly tour years, and I think Its may be fairly said that the .scheme has pa c .-cd far beyond the stage of experiment* Looking, therefore, to the dissatisfaction existing in New Zealand at our present system, and the satisfaction which the Board has given in Victoria, our colleague, the Minister for Public Woiks-, will ask for lea^e to intiodnce an Act this session in Parliament to constitute a non-political Boaul of Management for the New Zealand railways. Tho Government belie\e they are fully justified in anticipating from this change a laige incieaso in the net profits fi om tho railways.

Proposals to Cover the Deficiency. In the meantime we have to deal with the scviou-< piesenfc deficiency in our ic\enue, which I have stated. tSTow it is obvious that without an increase in the number of taxpayers there are only three ways in which a deficiency of revenue can be met, or rather its continuance and recurrence avoided. First, taxation may be imposed for the whole amount required ; second, expenditure may be reduced to the whole extent necessary, if that be possible ; thud. 1 eduction of expenditure may bemade and additional taxation may be imposed which together shall make up the requiicd sum.

Reductions in Services. It is hardly necessary for me to say that ib will be impracticable to cover the deficiency of the current year by the reduction ot expenditure. Seven months of the financial year have already passed, and it is impossible for the two or three months to come to obtain much, if any, effect from reductions. The proposals, however, which I shall submit will, I hope, prove to be of a sufficiently comprehensive character to satisfy the most thorough reformer. There is an impression in the public mind that sufficient reductions can be made in the public expenditure by reductions in the numbers and salaries of Civil servant?, but I need hardly point out to hon. members that it) will be altogether impossible to effect the whole of the necessary savings in that direction alone. It will be necessary also to curtail the conveniences and aids which are now beinsf enjoyed by the public and the local bodies.

Reduction of Jthe Governor's Salary. I will now state to the Committee what our proposed reductions in the services are. The first place we propose to begin with is the highest oflice in the colony, that of His Excellency the Governor. I need hardly remind the Committee that this reduction cannot take effect until the appointment of a new Governor. It has been said that the colony is likely to lose standing 1 and credit in jingland by reducingthesalary of the Governor, but we have no fear, after cai'eful consideration of the subject, that ill effects wilt follow this reduction. We have no fear but) that we frhall still obtain the services of officers of the same high standing as heretofore ; and, as to our credit, we have the fullest confidence that the reductions and other economies we are proposing will prove the existence of that first condition of commercial confidence —a determination to pay our way. Wo propose, then, thai the Governor's salary shall remain at C 5,000, but that this shall include the cost of his staff and all allowances. This will bo a total reduction of £2,500 from the amount at present paid. We think that tho sum I have named above should cover the total cost of the Governor to tho colony. In the next place I will deal with the legislative and executive branches of the Government, and the Committee wilt, I trust, excuse me if I take tho latter first.

The Pay of Ministers. We propose then, with regard to the salaries of ilinis^ers, tli.it the Premier shall rccoivo €1,000 instead of £1,750, now paid, and that thoothorMinistersshallrecoive£Boo instead of X 1,250,, 250, at present paid, and wo

propose to reduce tho number of paid Ministers from 7 to 6, simultaneously with the reduction in the number of members of the House of Representatives, which 1 shall shortly mention. As totravellingallowanccs, itisobviouslyimportantthatMinistersshould travel so as to mako themselves personally acquainted withtho wantsand circumstances of the&everaldistricts. Theallowance bhould be ai ranged so a c > merely to recoup necessary outlay, and wo propose- to allow Cl 10s per day while actually travelling on the public service, and limit tho total to bo paid to the whole Ministry to £1.000 in any one financial year. The average amount paid to each Minister for the last three years has been £190. With regard to the expenses of the ollicial residences of Ministers, we think that laiye reductions can be made. We think the one known as the Tinakori Road North should bo sold, as being too large and expensive. Of the othci s, we propose ono should be retained as a residence for the Premier, the cost of maintenance of all but the house itself being defrayed by the occupant instead ot from the public funds as heretofoie. With legaid to the other Ministers, looking to the difficulty upon short notice of finding suitable house accom modation, wo think it desirable this should be piw ided for some of them ar. least, if it can be done -with pioper safeguards against exceeding icasonable limits of expense, and that those not obtaining a house should receive a house allow ance of £200 per annum. But upon this subject we will bluntly mako moie specific proposals.

Legislative Expenditure. I now come to the legislathe expenditure* This is, undoubtedly, a question ot some diificulty : but, in our opinion, a considerable reduction in the legislative expenditure ought to be made, and that if made it and the 1 eduction of salaiics will tend more than any argument to induce in the minds of the people of the colony, not only a comiciion of our sincerity on this question of retrenchment, but albo of the necessity for letienehment generally. The (lovernment will invite the Legislative Council to express by resolution its opinion that the honoiarium paid to its membeis should not exceed L'loo, and we shall a^k this Hou^o to 1 educe the honorarium paid to its own members £100, •with an allowance of iso in consideration of the additional expense necessarily incurred b\ r them. We think that no payment should be made to the Chairman of Select Committees of either House, that all oih'cers of Parliament m hose salaries aie provided by Act fchou'd not rocenc more than the statutory pay at present provided, all extra amounts indhiduully voted being struck' oti, and the saluiie-? of the other om'cers of the House being reasonably leduccd. I may here take the opportunity of informing the Committee of some proposals of the Govei nment Inch, as in\ oh ing economy,arc propcily mentioned heie,but\vhich are of considerable political importance, namely, that the (io\einment intend this session to introduce a bill to reduce the number of members of the Iloiu^e of Representative^ to 70, inclu'-p c of the Maoii representatives, though this chancre cannot take eifeet until the end of the pic«ent ParJiament, and next session they \\ ill submit a bill to the House altering the mode of election and othc^ necessary reforms of the electoral laws. They will al^o during the present session invite the Legi-Jathe Council to device a plan by which their number may be reduced to 35, one half the number of membei/3 proposed foi fche House^ and there after limit to that nm.jbtr.

Retrenchment in the Civil Service. Now let us see what 1 eductions are possible in the Ci\ il service. The total number of persoix in the p,iy of the colony, including the (-o\ernor, Minittei?', judges and others, bui exclusive of police, military forces and country po-tmasters, is 7,163, and the amount they icreivc in salaries, pay and wages, i^> £1,004/273. Of thc^e, 5,862 are recen ing monthly wages, pay or salaries no j exceeding £150 a-ycar, the total ] amount paid to this class being £638,519. The Government do not propose to make any substantial alteration in the pay made to these pei son 1 -. It is probable, however, that their numbers m ill be i educed, but at present thcie has been no time to go into this question. It follows, therefoie, that £365,754 paid to poisons in receipt of salaries over £150 a-year is the principal amount upon which it is possible to make reductions at present. The reductions proposed in the depaitmcnts generally I do not purpose here to lefer to in detail.

£60,000 Saved Off Education. These will bo dealt with in committee by the several Ministers in charge of the departments ; but I will Fay a few words upon our education system, in regard to which, while admitting that it has given great satisfaction from the purely educational point of view, specialists agree that, relatively to population and revenue, the system is too coptly. They differ only as to the means b) r which reductions may be best effected. The proposals to be submitted by the Government will show where moderate savings may be made without weakening the system. Our principal proposals will be to limit the capitation grant to the statutory amount of £3 15s a head, which we think, under the circumstances of the colony, is ample for necessary purposes, and not to pay capitation upon any child under six years old ; bub we shall make provision so that no country school shall be closed in consequence of this change. The saving on the education vote wo estimate at about £60,000 per annum.

Summary of Reductions. I have had to consider carefully how to submit clearly to the House the reductions that the Government propose, and have thought it best, in view of the short time at the disposal of the Government, to bring down a schedule, in which will be shown, In one column, the total amount of each class of expenditure as proposed in the Estimates introduced by the late Government in May last, with Supplementary Estimates for services cither inadequately or not at all provided for ; in the next column the reduced amount which the Government propose for the current year, seven months of which have already passed, and two more of which will at least pass before it will be possible for the reductions to take effect. The third column will .show what is the amount of the reductions on the estimates for the twelve months which the Government already sec their way to make, \ and which will take effect in proportion as our proposals have time to opeiate. We propose to take a vote for each of the classes and sums mentioned in the second column of the schedule under the head of annual appropriation, instead of following the usual course of taking votes for the several sen ices on each class. Hon. members will recognise that it will not be possible for the present Government in so short term to bring down a revision of the Estimates of the late Government showing in detail the reductions we propose to make, and that there is no other course open in the circumstances than to take a vote for each cla.ss of expenditure only. With regard to the 1 eduction of the sum of £16,000 which has not been located to any class, but which will, when given effect to, be di.s tribute:! over all of them in such a manner as the Government may determine, a clause will be inserted in the Appropriation Act which will limit the power of expending

I under tho votes to the total amount of the I classos less the sum of £16,000.

Compensation for Loss of Office. Before leaving this part of my subject, wish to say that tho Government, in making reductions, desire to use all possible consideration for the persons directly affected, so far as their duty to the public will allow, raoro particularly as legards such postal and telegraph officers and those now entitled to pensions and allowances. The (Government will do their utmost to make the reductions and other changes press with as little hardship as possible, subject only to the necessities of the case as to their paramount duty to the public.

Amount of Reductions. Our proposals, if assented to by Parliament, will reduce the total amount of the departmental appropriations out of the consolidated fund for a hill year by ,£251,500. The reductions comprised in this amount have been made' up on the probable expenditure for the same services dm ing the current financial year under estimates and engagements of the late (-{ovemment. I may in passing inform the Committee that beforo making them all services of a non-recurrent character, so far as they could readily be traced, were first eliminated fiom the Estimates for the current year, such as tho expense of a general election, and the same course was pursued with reference to payments under permanent Acts, such as the allowance to members of the (feneral Assembly attending a second Parliament. If in determinim? the amendments of the^e reductions any non-recurrent Kerns have been overlooked, tho omission will probably be adjusted by the occurrence of other items of a like character in the Estimates for the next financial year. Wo already 1 see our way, then, to effect departmental reductions to the extent of £251,500, and we believe we can make .--till further, and wo hope, substantial reductions, by means of a more perfectly organised system, and amalgamation of uiliceseompatiblewith each other.

Supporting the Hands of tho Government. It is clear that .sufficient time must be given to any Government undertaking the reorganisation of the ser\ ice, and full power mustbegnen to that Government if tho work is to be done .successfully, but when the work \vo nic now proposing to do has been done to the satisfaction of the House, if it is not to be again undone it will bo necessary that far greater lestiiction should be placed upon the Government of the day than is the case at present. Vigorous retrenchment is effected by one Government in times of depiction. They are leplaced by another Government, and much of the woik they have done, if times are a little more prosperous. 01 if a more sanguine \ie\\ of the prospects is taken, is undone by theii successois. I may gi\e an instance of what I mean. In the year 1880 there were 17 Inspectors of Police. After carefulconsideration, it was determined that 11 Inspectors could perform the work, and reductions were made accordingly. Eleven i Inspectors satisfactorily pei formed the work up to ISB4 at a cost of £4,300, liming 445 men of all ranks under them. There aie now no less than 18 Inspector at an annual cost to the country of t'6oo eich, the total number of police being 502. 1 simply give this as an instance showing how it will tend to economy if the number of officers of the several grades in the service are limited by Act of Parliament. The Government are of opinion that if the reforms now being instituted are to be permanent it will be necessary to classify the Civil Service, limiting the number of each class, and making it necessary to report to Pailiament the employment of extra or outside assistance. The Government have a Bill in prepmatfon, but it would be premature to intioduce it dining the present f-es°ion. We propose to make the main changes, and to see that they work well before asking Parliament to legislate. I may say, howe\er, that a leading provision in the Bill will be the appointment of a Civil Service Board, through whom all appointments and promotions will be made. If we are to lime a really efficient service, the tenure of the officers must be reasonably secure. A cadet must be able to look forward to the service he enters as a profession, and one in which his advancement will depend upon his capacity, character, and attention to his- duties, and not upon the favour of the Minister of the day. This, under a well-considered Act can be done at a minimum cost to the country. Before leaving tho subject of departmental expenditure, I w ould say that there appears to be a considerable waste of money in travelling. I have not yet had time to look as fully into the matter as I should have wished, but the Committees will probably be surprised to learn that the amount expended upon travelling during the year from the Ist of October, 1886, to the 30th of September, 1887, was £56,417. I do not mention this as exceptionally large, but as an example. This includes the expenses of Ministers, but does not include the computed travelling allowance which is granted to many officers. There is, however, some portion of it returned to the colony in the way of railway fares, but it is impossible to ascertain the amount to which the railway revenues are benefited. The Government are of opinion that very considerable reductions should and can bo made in this item, the leading principle to be kept in view being that the allowance is merely to recoup legitimate expenses actually incurred.

Proposed Reductions ia Grants in Aid I now come, sir, to the consideration of grants to local bodies, and however painful it may be, we must recognise the fact that if the assistance now being given to them is to continue our taxation must be increased to a proportionate amount.

Crown and Native Lands Rating. In the first place, let me ask your attention to the Crown and Native Lands Rating Act. When this Act was passed it was estimated that there would be a sufficientsurplus in the land fund to pay the rates on the Crown lands. That estimate has. however, proved incorrect. As a matter of fact, the land fund i& insufficient by more than the amount paid for the rates on Crown lands, to meet the charges as voted by Parliament. It must also be admitted that the advantages conferred by this Act have operated very unequally in various parts of the colony. It is with much regret that the Government propose that it should be repealed from March next, with the necessary reservations as to securities given under the Act, for nothing can be fairer than the principle that all lands by whomsoever owned should not contribute to the maintenance of the roads of the district in which they are situated. But as money must be found for opening up new lands for fresh settlement, and we cannot always continuo borrowing largely for that purpose, it seems to be better, in the interests of the colony, to use the land fund at our disposal than to apply, a? it has been applied since the passing of the Crown and Native Lands Rating Act, to the relief of local taxation. JBy the repeal, however, of this Act a very large question is opened up — the question of the Maoris paying rates upon their land in settled districts as their fellow settlers of the European race are doing ; and it seems to the Government that the time has arrived when the Maoris should

be placed on an equal fooling in this and other respects with their European fellow subjects in those districts which may bo properly called setbleddistricts. Ihave already referred to the correlative rights which it is proposed would be conferred upon the natives to compensate them for being called upon to perform this duty. If the Act which are now considering is repealed, there will be a saving to the consolidated revenue through the land fund of £34,000 per annum and a further saving of fie expenditure of the money now borrowed to pay the native rates, of £10,000 per annum.. Although this money is recoverable, it will be some years before it will be repaid. There hap been recovered up to 30th Septcmbei £1,843, and there is at present outstanding on this account about £322,000 which has been borrowed from the public works fund.

Subsidies to Local Bodies. The subsidiesundere\istingarrangemcnts have always been regarded by everyone acquainted with our leal financial position as a most precarious .source of revenue to the local bodies, and the late Government, no doubt with much regret, proposed to Parliament to reduce the amount of the subsidies paid last year by one-half for the cunent year, and I, sir, also with j much regret havo now to make a similar proposal for the present Government, and we hope to be in a position to continue them at the same rate next year, if Parliament shall bee fit ; but we arc of opinion that after the present year the subsidies should be charged wholly upon ic\enuc, and not, as now, one-half upon loan ; and further, that they should be separated lroni our ordinary linanco, and nob only iixed for a definite time, but be paid from a definite somce— as, for instance, by appropriating to the paipo.se a given fraction of the property tax. For the present, there is no doubt the local bodies are haidly pressed to pro\ ide funds to carry on their necessary works, and we 1 egret wo can do no more for them. I do not, how - ever, wish the Committee to undei stand me as representing that the Government, ceasing to pay rates on Crown lands and the subsidies, are ejecting a saving to that amount to the public expenclitiue— using that term in a popular sense. We are, indeed, reviving the consolidated revenue to the full amount, as is our first duty, but where throwing upon localities \\hate\er amount out ot these sums is absolutely required for cairying on necessary services, and so far as the change induces local economy, there is an absolute .sa\ ing in all senses ; and it is clear that if we are to restore our finances to a satisfactory condition, and if we are to recover our credit in London, it can only be done by making a very firm stand against all expenditure which can be possibly avoided. Jt may no doubt be said that not only the^e giants about which we arj now speaking, but also much larger sums ot money could be pioiitably spent by local bodies, and I do nob propose to dispute that, it is a puiiicient answer to me to that we have not got the money to spend, that we have been spending lar too freely, and that we nu.-*t now stay our hand for some time, c\enfor useful local works, or laise funds for them locally.

Summary of Reductions. Adding together then the whole of our proposed reductions, we find that Avhen complete eflecb is given to them thee-\p::ndi-tuve, chargeablo to the year upon the revenue of the colony, will be reduced by 1*300,000. I shall for the convenience of members bi icily lecapitulate the leading items of which this large sum ib eom-po.-^ed :—: — Salaries of Ministers £3,450 Allowanced to members of the General Assembly 10,000 Departmental appropriation 0 , including reductions in respect ol Ministers' residences, travelling allowances, etc. .. 252,150 Hates on Crown lands, etc 52,000 Making a total for a full financial 3 ear of cSOO.OOO The amount we shall probably be able to obtain by these reductions within the current financial year will be about -€71,000, parlicukus of which will be found in a table appended to this Statement.

Proposals Relating to the Current Year, I have already informed the Committee that it is ebtiniated the expenditure of the consolidated fund during the year ending 31st March, 1888, would exceed the revenue by £389,305, if the expenditure proceeded at the old rate, and further taxation be not imposed. This sum will, however, be lessened by savings during the remainder of the year arising from the reductions we shall be able to givo eflecfc to, estimated at ,€71,000, and we propose to still further reduce it by mci easing the property tax from 13-16ths of a penny to one penny. These reductions will leave a sum of about £253,000, expended in excess of revenue to 31st March to be provided for; thus, together with the deficit of last year, amounting to £92,293 on the ordinary revenue account at 31st Maich, 1887, and of £54,263 on the land fund account, making a total of about £399,500, for which provision has to be made. It will also be necessary to meet the amount to be paid as compensation for loss of olh'ce. This will probably be a considerable sum indeed, large in proportion, as the ultimate saving is as largo ; but it is impossible to state the amount, even approximately, at present, or until the Government have determined upon the specific reductions and amalgamations which will have to bo made, if Parliament should see fit, as we trust it will, to ratify our proposals, and limit the total cost of the respective services. Now, Imustaskhon. members to bear in mind that, as I shall hereafter explain, we are proposing to reduce gradually our public works expenditure, and alto to fchape our ordinary finance as gradually to enable the consolidated fund to bear many charges for works now borne by loan. If we succeed in doing this, as I think we must, it will entail a heavy burden upon the revenue, and render it impossible for it to meet the large amount which I have referred to otherwise than gradually. The Government therefore propose that the proceeds of debentures issued under the Consolidated Stock Act, 1884, for interest on investments of sinking fund, to which I have referred in my remarks upon the public, amounting now to about £40,000 a year, but increasing yearly, and which for four years, including the present year, have been paid into the consolidated fund, and used as revenue, should from Maicli next be applied to redeem yearly a like amount of this deficit until the debt is finally extinguished. We propose also that any credit balance of ordinary revenue from year to year shall be devoted to that purpose instead of being carried forward to the next account, and in the meantime we propose that short-dated debentures, payable in the colony, shall be issued to cover the two amounts.

Loan for Public Works. The Committee will be naturally anxious to know what the Government propose about public works and further borrowing. It will undoubtedly be necessary to place the North Island Main Trunk Railway loan upon the London market early next year. The late Government had contemplated issuing this loan about the end of this month, but owing, I suppose, to the result of the elections, the matter was allowed to sband over ; but in order to obtain the necessary funds the Colonial Treasurer made arrangements with the 1 Bank of New Zealand here to ad-

vance £500,000, repayable in London in April next in securities of this loan. The Government therefore propose lo place this loan upon tho London market at the first favourable opportunity, and the question will naturally now be asked by hon. members how long will it be possible to continue the necessary public works with the amounts at our disposal in the .several accounts of the public works fund ? in oulor to anfawer this question, let me again call th«s attention of the Committee to tho state of tho three accounts in this fund. No. 1 account, which contains the balances of the loans raised prior to ISB6, is really exhausted. There was to the credit of tho account on the 30th September last, £247,292, with liabilities amounting- to £280,495, of which at least t'162,000 will come in ior payment by March next, lea\ ing only £85,292 for expenditure next year, with outstanding liabilities of 1118,495. It is, therefore, evident that no new votes can be taken against this account, and yet my colleague, the Minister for Public Works, assures me, and he will show you when he makes bisStatement,that there are works to she amount of at least which it will be impossible to avoid executing, as> they arc absolutely necessary complements to undertakings already entered into, and they must therefore be authored this se-^ion. They consist principally of roads to open up Crown lands before sale, public buildings and school buildings, puichaso of native lands, telegraph extension, and harbour defences. Jn point of fact the £150,000 is a liability, though not bi ought to book, almost as much as the liabilities which have been brought to book, and must, therefoie, be provided for. In No. 2 account, the North Island MainTi unk Railway loan, there are ample funds to continue the work for three } cars at least. In No. 3 account, the funds ior several important woiks w Inch must bo completed are piactically exhau&ted, and therefoio without further funds it will be impossible to continue after the present contracts, arc done cither the Manawatu (Jorge line or the Olago Cential, even up to Middlemarch, which is the least distance to which it may be eanicd and be o f any practical use at all. There are three course* open to Parliament. 1. Wo may stop those woiks for which the funds are exhausted. 2. We may use s-omio ot the cash to the credit of the unexhausted items either in No. 2 or No. o account to continue tho work of the exhausted items. 3. We may decline to laisc another loan. Tho choice thus foiced upon us is not a pleas-ant one, and yet it mu^t be made. With 10 gard to the first course, the Government is of opinion that all works the stopping of which will not materially retaid the progress of the country should be stopped. Mere piosent incom enience must not be considered ; but to go further than thi^ would they think be a \ery unwise and short-sighted policy. The Government cannot, there! oi c, lecommend the adoption of the last couise. We will now consider the second course. Shall \\ c use the money allocated to one svork temporal ily or peimanently upon another woik.' If the House should so determine, it i\ill be possible, with the money at our disposal, to rind the funds to carry on necessaiy works to a moderate extent by borrowing from one account in aid of the funds exhausted in another, and by doing this and limiting our public works expenditure to an average of £70,000 a month for the next 15 months, which, I am informed, it can be gradually worked down to, as computed with an a\erage of £90,000 a month, which it has been during the last 12 months — \\/.., from 31st September, 1886, to end September, 1887, it will be possible to tind the means of carrying on our public woiks until the end ot December, 1888. Dilhculties would, however, piobably aiise if we postponed taking authoiity to boiiow until next session in the event of any sarious distuibance of the English money market ; for by the end of December, 1888, even if Parliament does give authority to use the balances as above suggested, we shall have run ■seiy close with the public woiks fund, and it would then be neceesaiy cither to cea^e altogether to undertake anything fiuther, or el-e obtain a loan on the best terms we could. In order to understand our real position in fact, it is necessary the Committee and the country should clearly recognise that by the end of December, 1888, in the absence of any further loan, and even if transfers from one fund to another are authorised, the total cash to the credit of all the loan accounts will Le only about £37,000, and we should have liabilities already incurred and lapidly accruing due to about an equal amount ; and besides, the works in hand would be scarcely any of them completed, or ira profitable state, asborrowingfromone fund to the other to keep things going would necessarily leave every fund short of the purpose for which it was originally intended. The seco'.id ot our alternative courses is, therefore, a possible one if Parliament sees tit to adopt it, though, after much con«ndoiation, the Government do not feel justified in recommending it, because of breaking down the safeguards which the House has setup against expending the money provided for one work for another, for it would nevertheless fail to place us in a satisfactory position in other respects. The Government are strongly of opinion that the colony does not want such a policy (if it can be called a policy) as is involved in merely saying "that we will not borrow this year ; let us wait for a year." What, in our opinion, the colony wants, and wants imperatively, is a total change of policy as to borrowing altogether. We want so to shape our public works expenditure as to be able to cease borrowing entirely at an early date. We want first, and at once, to reduce this expenditure, to reduce it largely, and to reduce it at a constantly increasing rate, so as practically, and within a short time, to reach the vanishing point. We think it quite possible to reach this desirable end, but not by the second of the proposed courses. The third course, consequently, in our opinion, seems to be by far the most prudent, and the Government, therefore, though with great reluctance, recommend that authority shouldbe granted foi a loan during the present session of £1,000,000, "to be raised at such time, and under such circumstances, as the Government may deem most favourable. If Parliament agrees to this we shall ask that the purpose of this loan shall be distinctly defined ; that no new undertaking shall be put in hand ; and, further, that we shall give a distinct pledge that no more borrowing will take place for three years from March, 1888. We must in any case, as I have shown, place the North Island Trunk Railway loan on the market early next year, and as it is unadvisable to make repeated applications to London for money, the Government think it impoi tanfc to be in a position to place both loans on tho market at the tame time if they should be so advised. We have come to this conclusion, as I have said, with extreme reluctance, but it is, we believe, in the interest ot true economy. The Committee, I trust, has ample evidence before it that the Government is entirely in earnest in its intention to retrench, to stop all superfluous expendituie, to see, in homely language, that the colony lives within its means ; and wo should have been glad to avoid what, to a hasty judg•ment, may look like inconsistency in retrenching largely our ordinary expenditure

while proposing to borrow further for public works. But you cannot bring such a> pystem of public works as ours to a sudden end without absolute disaster. We believe, and think the Committee will agree with us, that were we at once, or shortly, to stop the large and important works now on hand and unfinished, and comparatively useless, we should be lo.sing far more than we should gain -in other words, practising extravagance in the name of economy. My lion, friend, the Minister for Public Works, will, 1 think, be able to show in his Statement that with the expenditure we propose our principal works can be brought to what may be called a state of interim completion, where we may pause without serious loss, and the Committee will observe the safeguards we propose and the essential condition wo annex, that no further boi rowing shall take place, at all events, for three years fiom March, 1888. If hon. members will add the amount of the proposed loan to the available balance left of previous loans, and divide the total by the three yeais and a half over which it has to be spread, they will find that an amount £690,913 a year available for public works of all chis-.fecs ; and if they will further compare this with the actual expendituie from loan on public works for the last three years, which has hejfn at the late of £1,381,866 a year, they will &cc that the expenditure we propose is at a rate le&b by exactly 50 per cent. In a word, our policy is iit once to reduce this expenditure largely and as rapidly as possible, and as I have said at a constantly increasing ratio, so that by the time the proposed loan is expended, we may be absolutely relieved of the necessity of borrowing further. It is, therefore, a practical application of that ' policy of " tapeiiug off ' which has met with general approval in the colony, and will enable our public woiks to be carried on without any sudden break, but at a greater reduced iato of cxpenditme for the next three \cais and a hall, by which time we hope to have tian&fcrred to the Consolidated Fund a huge number of woiks hitherto charged upon loan, and to reduce to very narrow limits our expenditure on other works which are rightly charged on loan.

The Midland Railway. There is one large and important >voikj the Midland Railway, wliich I have not mentioned, and which I shall heie but briefly leier to, as the (Jo\ eminent intend to detail the question immediately in another way. The importance of the work in a colonial sense has been repeatedly recognised by the Legislature, but the Committee will ha"\e seen fiom the paper,-, laid on the (able that the negotiations a ith the Company are still incomplete in important particulars. The (Government however hope, with the fuither aid of the Legislatmc, to biing these negotiations to a successful conclusion.

Conclusion. Before I conclude, hon. menibcts will no doubt desire to be made acquainted with the probable effect of our proposals upon the position of the consolidated fund next year, and what pio&peefc theie ib of our being able to equalise revenue and expenditure without re&oiting to additional taxation, except for the puipose of relieving loan of ccitain charges which J h<i\ c already indicated .should be boineupon levenue. I. ha\e no doubt they will be pleated to hear that on the assumption that the ordinal y levenue for 1888-89 comes up to the amount now estimated for the current year, and after making provision not only for half a year's interest (£20,000), on the North Island Main Tun.k Railway loan proposed to be raised in A rail next, bub pioviding for the extinction of, say, £40,000 of dehcit at the end of this year in the manner already stated to the Committee, we hope to be able, as neaily as can now be foieseen, and it will be our earnest endea \ our in 1888-89 to cany on the services of the colony, chargeable upon oidinary revenue, without being under the necessity of proposing additional taxation. With regard to the land fund, if our proposals with lespect to it are .agreed to we have every reason to hope that the revenue will be quite equal to expenditure without sacrificing the public interest. And now, sir, I have completed my task. I have laid befoie the Committee as clear and complete an account as I could frame of the financial position and condition of the colony, and the measures which, in the opinion of the Government, are best calculated to relieve it of its present difficulties, and to prevent, as lar as it is possible to prevent, their recurrence in the future. The account I have given neither conceals nor exaggerates those difficulties, while it shows that it is entirely within our own power to overcome them. It needs but the will to do it, and the measures I have proposed, embodying as they do three trite but vital economic principles, of foiegoing such things as we can more easily spare than pay for, our making such money as we spend produce the best possible result, and of increasing and encouraging wealth produce: s of the colony ; and embodying also, last but not least, a whole&ome self-reliance. These measures, I trust, recommend themselves to this Committee, as, I believe, they will to the country at large.