DOMINION'S FINANCES

Timaru Herald, Volume CXXV, Issue 18552, 26 April 1930, Page 4

DOMINION'S FINANCES

SIR JOSEPH WARD’S REVIEW SURPLUS OF £150,000.

By Telegraph— Fret* A**oci*Afiin. ROTORUA, April 24. It was indicated recently in the press that the Rt. Hon. Sir Joseph Ward would make an announcement regardin':: the financial position at an early date. The Prime Minister has now released the following statement for publication :-rPublic Finances. some pieliminary figures of the results for the last fins lie’s'l year. The returns j are not yet absolutely complete, and the accounts are all subject to audit, but the preliminary figures T have indicate the year ended, on March 31 last, closed with a surplus of approximately £150,000. Taking,;*]! the circumstances into account. 1 think it j Will be agreed that the position cl’s- j' closed is a satisfactory one. It will be remembered that on taking office, the Government were unfortun- 1 ate in falling heir to a deficit. The Government. however, did not hes ’tate to do their duty, and notwithstanding , strenuous opposition in the House, prompt steps were taken to remedy matters. In this connection when the Government’s taxation proposals were . under discussion, it was ma’utained bv the Opposition that they were entirely unnecessary, and a surplus of J1T,000.000 or more was freely predicted in and ! out of Parliament. Now that the i I year is over, it will be seen that the ! additional taxation was, in fact. absoI lutely necessary. A State with its large resources can bolster up an unhealthy position for a much longer period than j is possible in the case of a private business, but the ultimate result must be the same in either case. A Govern- t ment’s term of office depends in the ! long run on its management of the . public finances, and solid progress can- ' not be made unless the State pays its way. In any case, we, as a country cannot afford to have a deficit very often, while we are dependent upon , overseas investors to provide a large j part of the capital for developmental purposes. Putting on additional taxation is never a popular tiling to do, but it has been proved that the Government was acting in the true interests of the Dominion in putting forward proposals last year to ensure a balanced Budget. The revenue received during the year amounted to approximately £25.350.000. which is about £IBO,OOO in excess |of the Budget estimate. The Customs ! revenue exceeded expectations, and | was nearly £500,000 in excess of tlie j estimate. A substantial falling off in the last few months of the financial year was anticipated, but it did not eventuate. The income tax exceeded the estimate by £130,000, and the land tax by about £IO,OOO. Against these increases the estimates of stamp and death duties failed to materialise to the extent of approximately £210,000 . v The petrol tax and other revenue earmarked for the highways showed an increase of neatly £70,000 over the estimate, but this item, of course, i« offset by an equivalent additional amount transferred to the Highways Account or distributed to local authorities. Then the writ ng off of £8.100,000 of railway capital, effected by the legislation passed last session, resulted in the interest, receipts from the railways being £310.000 below the amount allowed for in tlie estimates. In round figures the expenditure amounted to £25,200,000. including £l7 230.000 under permanent appropriations, and £7.970,000 under annual rotes. Under permanent appropriations is included the expenditure on interest and debt repayment, pensions. subsidies to Hospital Boards, and to local bodies, and other permanent items payable under various Acts of Parliament. Debt charges, all told, absorbed £lO 695,000. and other payments under Acts amounted to £6,535.000. Details of these payments are not available at present, but the expenditure will, ot course, be fully analysed in the Budget. The position in regard to Departmental expenditure included in the annual votes is very satisfactory. As stated iu the Budget, the estimates for last year were most carefully over hauled before being finalised. Even so, a rigorous control over expenditure during the year resulted in savings under most of the votes, and these savings in the aggregate amounted to about £220,000. Trade and Banking:. Having such a relatively large external trade, this Dominion is very much concerned with the state of trade in other countries, and particularly in Great Britain, where the greater part of our exports arc sold. Happenings in the realm of international finance and general economic conditions operating abroad, have, in the lust few. months, brought about a marked change in the economic posit on. and the outlook of the Dominion. As a result of falling prices and delay in realisat on the value of our exports have declined considerably, and during the last financial year were hardly sufficient to pay for the year’s imports, which showed an increase of about £4,000 009. During tlie two previous financial years, however, there was an excess of exports amounting to approximately £22.500,000. so that over the longer period the wade balance is satisfactory. The published banking figures for the March quarter, 1930. show an excess of deposits of £355,000 as compared with £8 1)85,000 for the sflir.? quarter of the previous yr*ar. This decline in the relative position was brought a boat by a •light lull in tlie volume of deposits, and a considerable increase in advances. The change in the banking figures, of course, is largely the effect of the change in the trading figures. The rise in imports and advances, however, indicate increased activity in business. Tho exceptional conditions ruling outsdo the Dominion have given rise to high rates of exchange, which rates «*ro by no means a true indication of ■ the present financial position of the > Dominion, in fact, the position is auito f a sound one. and but for outside influ--1 cnees would have been regarded as ■ quite normal. Special Land Tax.

As additional taxation was unavoidable last year, the Government endeavoured to place the additional burden equitably and at the same time to create as little disturbance as possible in business and trade, in order that the economic progress of the Dominion should not be hindered. As it was considered that the largo farming incomes had not borne their fair share of taxation in recent years, a special land tax was imposed on large rural estates, with an unimproved value of over £14.000. Large farming incomes were also made assessable for income tax, but subject to a set off of the amount

paid in land tax. In order to ensure that the special land tax should not impose undue hardship in particular cases, provision was made in the legislat on for a Special Hardship Commission to which land owners were ai liberty to state their case. .This Cornhand by the Government, which accepted the r decis'ons in all cases. As a result tlie special land tax has been wholly or partly remitted in a number of cases. In matters of taxation, as in manj other thugs governed by arbitrary rates, absolute justice can neve* l-o completely attained, but the provision for appeal in the case of the special land tax at least prevented undue hardship being imposed on particular iudiv'duals. After deducing remissions amounting to nearly £IOO,OOO, the spec a 1 laud tax brought about £250,1*00 additional revenue. The data obc tint'd from the income tax return*of large fanning incomes lias not yet been fully analysed, • »uL it is c ! ear that the contention contained in I -t veal’s Budget that large farmiug incomes have *iot, in recent years, carried their fair share of taxat ou was in accordance with the facts. This is proved by the tact that u conside able amount (definite figures not being available yet), was derived from income tax on farming incomes, after deducting land tax both ord nary and special. This means that previously some farming incomes were contributing less than half of their fair share of taxation. It will thus bo *een that the Government was quite justified ni i It j’ng part of the necessary additional taxation on thu section ot the community. Additional Primage Duty. This was to provide the balance of cbe additional revenue that was required to bridge the gap between the escimated revenue and expenditure for last year. The primage duty on iinp.ets wa« increased from 1 to 2 pen cent. Tiie pr.mage duty, of course, purely a revenue duty imposed upon practically all imports, whether chit lable or not. The obtain ug of the additional revenue through this channel meant spreading me burden equally oyer the whole community. The uddit’cnol impost on indiv’dual classes uf goodx JroiU a retail point of view is practically neglig’fcle, but even so the Government did not des’re tlie tax to remain cu f od any longei than was absolutely f ssury. Accordingly, it was provided .u the enipowe -- r 'eg’Slation that the add tional piii . duty on ioodstntis and also cu ln-murcs, was to be If ted automatically on •March 31. If JO. Accordingly all such goods arc now I subject to the normal 1 per cent primage onlv In regard to the additional primage duty on other classes of goods, it is prescribed in the Customs Amendment Act, 1929, that tlrs may he terminated ;\t any time now by Order-in-Cnnocil.

*t is not. usual, however, between Parliamentary sessions, to make any forecast as to what w.ll be done regaydin r Customs taxation, and I do" not intend to make any pronouncement concerning ;t at ths juncture. The mat- , tor will be dealt w tli when the whole of the financial proposals for the current year ar-e finally under review. Defence Expenditure. A\ ith a view to ensuring that the financial, year will close satisfactorily, and in the interests of the taxpayers, it will be necessary for all items of expenditure to Le overhauled, with a view to possible curtailment. Accordmgly, as already announced, it has been decided to suspend all territorial camps, pending a careful consideration by the Government of the whole system iof land defence. The Government’s proposals on tlie matter will be submitted to PaiTament in due course, when the whole matter will be open for discussion. In the meantime, no further camps will take place. State Superannuation Funds and Salaries. As indicated in my last Budget, the financial position of the State Superannuat on Funds was found to be very unsatisfactory, due to the neglect in tlie past to give effect to the actuarial reports and certificates in respect to subsidies. Tlie Special Committee of Inquiry has been set up, and is now exploring the pos tion fully. In the meantime, 1 am pleased to say that 1 have been able to do something during the pust year in the direction of increased subsidy payments, which were long overdue, an additional amount of £175,000 being pa d over for this purl>ose. | am also glad to say that in respect to the lower paid Post and Telegraph employees, an improved scale of salaries has been adopted, and put into operation. Public Debt. The public debt on March 31 la*t amounted to approximately £237,380.000. the figures again being provisional, and subject to aud’t. This is a net increase of £3.190,000 for the year. Tt may be explained, however, that this unusually large increase was due to the fact that £5,380,000 of the new loan moneys raised in the prev'ous financial year, being port of the £7.000.000 London loan, raised in January. 1929, w*as really part of this year’s finance. The new loan moneys received during 1929-30 totalled approximately £5,700 - 000, including £1,620,000 in London, being the last instalmert of the £7 000.000 of January, 1929, and £4,080,00() obtained from local issues. As a partial set off against these new issues, there were redemptions of debt during tho year amounting to about £2,510,000, leaving the net increase at £3.190,000 as already stated. Of the redemptions, some £406,000 represented funded debt payments to the British Government, and £1.160,000 the operations under the statutory debt repayment scheme, while £260 000 came from reparations, and the balance from other accounts.

The most important debt operation during the year was the satisfactory arrangements made for dealing with the balance of the 4 per cent New Zealand Consolidated Stock, which was due on November 1, 1929. On April 1, 1929, there was §till £11,274 000 of this stock in the hands of the public. A further conversion offer to convert up to £5 000,000 of 4 per cent, 1929 stock into 5 per cent stock at par, to mature on July 1, 1945 (with an option to the Government to redeem on or after July 1, 1935, together with a cash payment of £2 per cent on November 1) was made to holders of the old stock in September, 1929. This offer was underwritten, and was taken up bv the holders to the extent of £3 628,000. In view of the fact that the London money market at that time was seriously disturbed by the reactions from the boom on the New York Stock Exchange, coupled with tlie Hatry affair, and the outflow of gold to the European

market, the Dominion was fortunate in placing the stock on these terms, which were favourably commented upon by London financial papers. The remaining £6,274,000 of the 1929 stock was either purchased before maturity, or repaid at maturity.

The necessary funds for these operations were provided from New Zealand. £672,000 being provided put of the best repayment moneys and the balance from the proceeds of local issues in redemption. The conversion and redemption of the £29.490,000 of 4 per cent consolidated stock was the largest and most important financial operat'on in the Dominion’s experience, and when it is remembered that it had to be largely carried out over a period when the London money market was adversely affected by intecnat'onal complications, it will be realised that the Dominion is to be congratulated on the successful termination of these 'large operations. It may be added that tlie transaction resulted in approximately £1 170.000 of the debt being repaid, and in about £6,000,000 of debt being

transferred from London to New Zea land, which fact is of considerable significance economically.

While dealing with tlie public debt. I would like to refer briefly to the rise in the interest rates at which local issues are made. The rate was increased from oh per cent to 5£ per cent on January 9, 1930, and 1 have received many protests against the action taken in this connection. T need hardly say that the Government is desirous o-f

obtaining as cheaply as possible the necessary capital for carrying out its policy in connection with public works, land settlement. State advances, etc. It was found, however, that as a result of the high rates offered in Australia, and the relative scarcity of capital, that the amount required by the Government could not he obtained at the rates previously offered. The local requirements of the Government were also affected by the large sums it was found advisable to provide for the redemptions of 4 per cent consolidated stock already referred to. The Government cannot control the price of money any more than it can control the price of butter, or any ether commodity for wh’ch there is a world-wide market. The Government, in order to carry on its programme, approved by Parliament, thus had no option but to increase the rate of interest on deben-

tures and inscribed stock issued in New Zealand.

The loans fall’ng due in New Zealand during the current financial year include the following amounts:—Held by the public £1,041.680, bearing interest at 5 4 |>er cent, due on July 1 next; £326,909. bearing interest at 5 per cent, due on Jula 15 next, £4,887,840, bearing interest at 4-i per cent, due on September 1 next.

In regard to the. first two loans. I have to announce that flic holders of the securities will be offered a renewal for a further per od from the respective maturity dates to February 15, 1937, with interest at 5£ per cent, payable on August 15 and February 15. Holders of inseiibed stock will shortly he communicated w'tli direct from the Treasury, and applications for ‘eiiewal

of this form of security, as well as bearer debentures on issue in respect of these loans', may bp made at the <fli«-R of the Trea>uc*v at Auckland. Wellington, Chrstcliurch and Dunedin, or at

Pend ng th° working out of these farreaching economic changes, the Government has not neglected the q• 'ration of providing immediate work for tho unfortunate members of the community, who otherwise would be out ot' employment. Immediately the Government took office arrangements were made to provide additional employment on public works in various parts of the Dominion. The necessary rtna.nc.ial provision was made during the short session in December, 1928. when Parl aUKiit also authorised an increase from £300.000 to £400.000 in Hue total •mount of subsidy which could be paid to local bodies in respect of relief works undertaken by them. Later a Spec.al Committee of the Cabinet was set up to organise additional work through the various State Departments, and generally to deal with unemployment. The additional avoilts provided have for the most part been on road and ma n highways construct‘on and afforestation, while railway trunk 'i n cs completion, lands improvement and irrigation works have been speeded up These are all useful and necesary developmental j works. As most of the work was under--1 taken on the co-operative principle and the men pa d by results at prices which would enable men of fair average ability Averting industriously to earn the G v era merit oUnaard daily rate ol

I any branch of the Batik of New Zealand |in the Dominion. The terms rq lie j offered to ;he holders of securities ir the £4,887.5i0 4/ per cent loan will be announced liter State Advances. One of the chief planks of the 1 Government’s policy on taking off we was to pro:\de all the capital nccessaiy xc enable ti e Slate Advances Offi* e to cope with tli2 cicmaud for loans. When the Government took office. I found that there vert several thousands of applications on hand, invol/ing ail amount of i 1-cut £4,000,000. Under these circumstances the G'ovvu'uonfc gave the matter of State Advances its immediate attention, and in a few months the accumulation of application was overtaken. Since the Government assumed office on December 10. 1928, up to March 31 last, about 11,800 applications for loans, totalling £13,350,000 were received. The loans authorised in this period totalled approximately £9.540,000. including £5,195,000 to 4,336 settlers, and £4,345,000 to 5,170 workers. The loans actually paid over amounted to £8,070 000, including £6,920,000 during last financial year. This last item constitutes a record for the office. This achievement of tho Government, in addition to providing capital for the purchase and development of rural lands, enabled many Tanners to rearrange their finances, and obtain the savings arising from long term instalment # mortgages, with freedom from financial worry. The assistance thus rendered has undoubtedly aided in carrying out the Government’s policy of closer land settlement. Further, the expenditure of a large sum of money in providing comfortable homes for the people has very materially assisted in solving the housing problem throughout the Donrnion. nnd has incidentally been tlie means of stimulating the timber industry, and of providing work Tor a large number of people, including builders, carpenters, painters, plumbers and other tradesmen. In this way the activities of the State Advances Office have indirectly teen of considerable assistance to the Government in dealing with, the unemployment problem. Intermediate Rural Credits. Complementary to the State Advances Office, there is the system of rural intermediate credit, which, broadly. was designed and constituted to bridge the gap between the long-term instalment mortgages and the day-to-day current account facilities offered by the banks. Accordingly, the Ilur Intermediate Credit Board is empowered and intended to assist the man on the land by granting advances as cheaply as possible (tbe present rate of interest being 6£ pot cent), for clearing, fencing, draining, buildings, and other iarm improvements, the purchase of implements, stock, seeds, etc., the marketing of produce, and generally the year to year finance of farming opej ations.

During the last session of Parliament an amending Act was passed to make the system more workable, and among other things the maximum amount that could he lent to a farmer was increased from £I,OOO to £2,000. Following this amendment, arrangements have been made by the Board to grant special credit facilities, calculated to be of particular benefit to sheep farmers and grain growers. Under these special arrangements the Board will fix the limit of advances for individual farmers, who will then be able to draw the money as they require it. interest being charged on the amount outstanding only. Relief of Unemployed.

wage, the taxpayers have generally re ceivcd value for the monev expended and tlie workers a reasonable reward foi their labour

Since the present Government assumed office. 26.635 men have been provided with employment through Government labour bureaux throughout the Dominion. Uf that number 16.380 were placed on Government works, 6.100 with local bodies and 4.146 with private employers. When men are sent to Government avo;l>s, they aro

This is a matter which has been receiving the earnest attention of the Government ever since it assumed office. It was recognised from the start that a permanent solution of the problem was a matter that would take time, involving as it does the stimulation and expansion of our industries, both primary and secondary, and particularly the former. In this connection every endeavour is being made to foster a farming spirit, to have more land brought under cultivation, obtain closer settlement of the existing farm lands, and generally to assist the farmers to increase the total production of primary produce.

g.ven orders lor their fares and also meals en route, and tlie cost is later deducted from their earnings. It may be added that 3,700 men have refused Government work offered to them, while 9,735 lmve left Government relief \ oi L* of their oku anuoi-ri. A.s is well known, in accordance with the undertak ng given by the Government last year practically every able bodied man who \ .as registered as unemployed at, tlie Government labour bureaux was prov tied with woi'K in October and N< vein her, 1929, if he was willing to accept tlie same. Tht Cab n.t Employment Committee still holds frequent meetings, and tlie position regarding unemployment in the various parts of the Dominion Is reviewed and instructions are issued for tlie plaei'ng of additional men eu Government Avorks,. when other employment is not available. The expenditure by the Government in prov ding additional work durng the last financial year. 1929-30. .amounted to approximately £1,300.009. This includes £900,000 expended by the Public Works Deportment pviiu- pd’y on roads and hi-gh-*vay?, £200,000 by the State Forest Service in arc-.-derating the programme of afforestation, £130,000 by the Ua’hvay Department, and about £20,000 by the Lands Department. In addition, subsidies to local bodies on account ot relief works amounted to £112,500, so that tbe total cost to the St ate was £ l ,4! 2,503. The pe-r'od in which local bodies could raise rel'ef of unemployment lo ins without tak'ng a poll of ratepayers was extended last session to June 30, 3930. During the Ipst financial year 18 applications from local bodies to mice such loans, totalling approxhuatelu £120,000. were sanctioned by the Local Gove: ument Loans Bon-d. Subs’dies to local bodies author'sed during the year amounted to about £117,000, and the amount which was actually paid over to local bodies was £112,500 as already stated. Finally I may say that the Special Committee set up to investigate the problem of unemployment has now subnutted its final report, which is being very carefully considered by the Government, definite proposals arising otit of the Avork of this Committee, nnd the investigations made by the Government itself, will be submitted for the consideration of Parliament next session.