The Daily News SATURDAY, AUGUST 1, 1931. THE LIMITS OF FINANCE.

Taranaki Daily News, 1 August 1931, Page 6

The Daily News SATURDAY, AUGUST 1, 1931. THE LIMITS OF FINANCE.

Everyone who has read with ordinary care the Prime Minister’s detailed account of the means adopted to build up the receipts side of. his Budget will have realised that he has treated every possible source of revenue with a very line tooth-comb. No amount which could help him to meet an exceedingly difficult position has been overlooked, and every little windfall has been taken, into account. The result is that he has balanced his statement for the current year, but in doing so he seems to have mortgaged the future to such an extent as to promise the Minister of. Finance a very uncomfortable time twelve months hence. So far as income taxation is concerned Mr. Forbes hopes to obtain this year £730,000 more than he received last year. Since the tax payable next February will be assessed on the incomes for the year ended on March, 31 last, his estimates may be justified. But the magnitude of the levy to be made this year will impose a very severe handicap upon taxpayers at the end of what we all know is a very trying year, and it must be expected that the incomes for the year ending next March will be far lower than those now to be taxed. The Minister of Finance will have to budget next year for a serious decrease in income tax receipts, and he will not be able to draw upon the various capital accounts which have helped Mr. Forbes this year. These items are considerable. The suspension of war debt payments has given the Minister a windfall of £870,000, the transfer of the Postal Department’s profits and otlier smaller amounts £936,000, the use of reserve funds £1,140,000, and the transfer to the Highways Account of local authorities’ subsidies £125,000. These sums total. £3,071,000. The transfer of £550,000 to revenue from the London reserve fund leaves the Dominion without liquid resources in London. The Soldiers’ Settlement Depreciation Fund is deprived of its reserve of £590,000, so that there will be nothing left to meet any losses that may be sustained on soldier settlements, and in such a year as the present some provision will probably be essential. It is only in recent years that the Post Office has been able to provide out of profits a much needed fund for depreciation and renewals, but there will be no addition to that fund during the current year, which is anything but sound accounting. The raids on these various funds unfortunately may prove to be chickens of the kind that comes home to roost, and the result of the depletion of the various reserves may be to add to the demands of the future. Tn using this method of meeting a deficit the Minister certainly has taken a risk. He set out to find £6,850,000, requiring £4,810,000 to meet expected decreases in revenue, and the balance of £2,040,000 to satisfy new demands for money, including £1,100,000 for unemployment subsidy. The various items of increased expenditure were carefully explained in the Budget, and it must be admitted that the Minister had no option blit to provide for larger pensions payments, unemployment subsidy, additional interest on.- borrowed money and so on. But it must be obvious that,in making the provision the Minister has gone to the utmost limits of financial possibility; indeed, he has almost passed the limits of safety. He has had an admittedly difficult task in that he was brought suddenly face to face with the need for economy, and by the adoption of more drastic measures of economy at a time of crisis he might have intensified hardship and caused widespread distress. But it should be recognised that while the expenditure for the current year is estimated to be £2,040.000 in excess of last year’s, the’Government’s economies have only curtailed the outgoings to the extent of £1,985,000, the cut in wages accounting for £1,390,000 and other savings for £595,000. Reductions in the cost of education and other services are contemplated, the Government proposing to institute the necessary inquiries without delay, and it is abundantly evident that there will have to be a great deal of pretty ruthless pruning in many directions. If the Dominion can find a revenue of £25,000,000 this year it certainly will be incapable of producing anything like that amount next year. At a rough guess it may be said that the Minister of Finance will do well if he finds it possible to collect as much as £20,000,000 in 1932-33. That will mean not only that the growth of expenditure will have to be checked but also that the outlay on public services will have to be curtailed by far more than £1,985,000. The Dominion must face the question of a complete cessation of borrowing, and must face it quickly. No. doubt the kindness of lenders in the past has encouraged extravagant ideas and induced the country to spend beyond its means. The details of this year’s Budget show as plainly as it could be shown that the time for extravagance has gone. New Zealand must try to live within the income which the taxpayer can be reasonably expected to provide. It will be hard to get down to that level, but that

is the only way to ensure solvency, which alone is the foundation upon which future prosperity may be built.