BUDGET DEBATE.

Timaru Herald, Volume CXXXV, Issue 18948, 6 August 1931, Page 13

BUDGET DEBATE.

OPENED IN HOUSE OF REPRESENTATIVES. 1,0 WANT OF CONFIDENCE MOTION. By Telegraph—Press Association. WELLINGTON, Aug. 5. The debate on the Budget was opened in the House of Representatives when the evening session commenced. The Hon. J. G. Coates prefaced his remarks by referring to the decision of the Reform Party conference in January last to emphasise the necessity of taking steps to meet the serious situation then developing. It subsequently had been announced by him that It would be his Party’s policy to help rather than to hinder the Government. and he could now repeat that such line of action would be continued. It was not his Intention to move an adverse resolution to the Budget, but there were one or two matters concerning which the Opposi-' tion must reserve Its right to explore a wide range of alternatives before acquiescing in the Government’s proposals. Referring to taxation, he said his Party would carefully explore the situation and endeavour to ascertain whether it was possible to make further economies, and thereby avoid a certain amount of harshness involved in the taxation proposals. The careful policy of Governments in recent years had resulted in substantial reserves having been built up, and it was fortunate that the country had these reserves on which it could call in its hour of need. He agreed that it was essential in the interests of the country that the Budget should be balanced. The importance of balancing the Budget this year was more than usually important. It would inevitably place our credit on a very high plane, but even if we balanced our Budget, he added, our troubles would not be over, for it would still be necessary to look for a permanent solution of the problems facing the great primary producing industries. Continuing, Mr Coates said that unless there was improvement in revenue, or further economies could be made, it would be even more difficult to balance the Budget next year. He was of opinion that there was room for savings in departmental expenditure. He urged the Government to reconsider the income taxation proposals in two important respects, namely, the increase in surtax, and lowering the exemption, as he considered that both these proposals would inflict hardship on those earning lower rates of salaries. He quoted figures which, he contended, showed that a man with £3OO a year, who formerly paid no income tax, would next year have to pay £l/16/2; a man earning £350, would find his income taxation increased from £l/6/4 to £4/1/1, or 211 per cent. A man earning £4OO would find his tax increased from £2/12/7 to £6/7/6, or 143 per cent; and other increases would be as follows: £450 a year, £3/18/9 to £B/12/8, or 122 per cent.; £6OO a year, £lO/17/11 to £lB/13/6, or 77 per cent.; £BOO, £2B/17/6 to £46/10/-, or 62 per cent. These figures, of course, made no provision for family allowances, etc. It would be seen that taxation on smaller salaries would undergo a relatively greater increase because of the proposal to reduce the exemption to £260. His side of the House regarded the proposed taxation as being extraordinarily heavy, and it would hit harder and sooner than previously. It would hit still harder when such charges as the wages tax were added. He realised that it was impossible to reduce existing taxation in view of circumstances, but he submitted that it would be in the interests of the country as a whole if it were found passible, as a result of additional savings of expenditure, to reduce the proposed total surcharge of 30 per cent., and leave the exemption at £3OO. He asked if it was possible to reduce the surcharge to 15 per cent, or even 20 per cent.

Mr W. E. Parry: “How would you make up the balance?” Mr Coates: ”1 have already indicated that I believe there could be further economies.” Mr Coates added that there was time enough before the Taxation Bills were brought down for all possible means of effecting further economies to be explored.

Referring to Customs Increases, the Leader of the Opposition said that no one liked the impost on tea or sugar, but after all money had to be found. No one liked the Impost on tobacco, silk, or wearing apparel, but the position had to be faced. As he had said before, money had to be raised. Mr J. S. Fletcher: “What about the oil kings?”

Mr Coates: “When we get to the taxation Bills we shall have ample opportunity to consider the question of oil kings.” Continuing, he said the worst element of the Customs Increases was the primage duty, which affected all non-dutiable goods. It affected the worker and the farmer, and in addition to Increasing the cost of living, it increased the cost of production. It was a serious matter to increase the cost of production in any way. It was essential to allow the farmer to produce at a cost that would enable him to compete in thei world markets. He urged the Prime Minister to explore every possible source of revenue before imposing the proposed primage tax. He considered that it should be possible to effect economies in the Education Department without impairing the efficiency of the system. A special investigation into the cost of education had been promised In the short session, but the Prime Minister had not so far set up a committee. He had, however, stated In the Budget that this would be done. Mr Coates added that It seemed apart from salary cuts, the Education Department had escaped scot free from the economy axe. The Leader of the Opposition then referred to the proposed Increases in expenditure on railways and road construction, and asked what was the reason for loan money being used increasingly In these quarters. Mr Forbes: “Uhemployment Mr Coates: “Exactly.” He considered that If there had been any other reason the Government would have deserved castigation, but even as It was the position was serious. He asked whether loan money should be spent on projects that would not return to the country the best possible results. Was expenditure on roads and railways the wisest course to follow? Would it not be possible to cut railway and roadlng expenditure in half, and spend the remainder on the development of land? Mr T. W. McDonald: “Roads are necessary for the development of land.” Mr Coates: “There are some that are necessary, but when It Is realised that the Government has brought in only a hundred thousand acres, it will be seen that all roads are not being constructed with a view to development.” Mr Coates said that in his opinion it would be better if at least a million and a quarter were spent on development of lands. Mr J. T. Hogan: "How many men would that employ?” Mr Coates: “As many as the same amount of money would find employment for in reading work.” He did not suggest that money spent on land development would immediately pay Interest, but In a comparatively few years it would increase production, and the only thing this country could do to meet the fall In prices of primary prq.

I ducts would be to increase pi'oduction. Referring to highways funds, Mr Coates asked whether the Government had ascertained what the Board’s policy was likely to be during the current year. Was it going to give assistance to rural ratepayers? He considered that if it did not contemplate such action, there should be some arrangement whereby the Board increased the subsidy toward Ivfr Forbes r (, Th6 whole Question is before a special committee. Hon. A. J. Murdoch: “Would you support the use of the petrol tax in this direction?” , , _ . Mr Coates: “Yes, and I believe motorists would be quite prepared to assist the country ratepayer in thisway_ Mr W. J. Broadfoot: “But the Highways Board is depoliticalised. Mr Coates declared that the Board had the capacity to assist and its actions and the country’s welfare were inseparably bound up. Mr Coates expressed regiet at the position that had arisen m respect to Canadian trade, and said the two Dominions seemed to be getting as far apart as the poles. He again wished to impress on Mr Forbes the gravity of the situation. Only the other day there was the spectacle of an American svessel coming to this country and endangering the trade that had been built up between New Zealand and Canada. The American line of steamships threatened to take trade thafc had been built up by the Union Steamship Company. In conclusion, Mr Coates expressed the opinion that in spite of its difficulties this little country was sounder financially and otherwise than any other country on the face of the globe. The Hon. E. A. Ransom expressed appreciation of the attitude of the Leader of the Opposition towards the Budget. He said his remarks had been very fair. The Government had taken note of the difficulties ahead, but its precautions had not been sufficient, as the deficit showed. It was gratifying to know that Reform approved of the Government s determination to balance the Budget. Economies would have to be made, and it was necessary to avoid hardship as much as possible. Hardship was inevitable, but the Government should try and avoid personal hardship, such as would be inflicted by dismissals of employees. He believed the opinion of the country was that the Budget should be balanced, and he was glad to know that Reform would support the Government’s proposals in that direction. Reform members “Oh, no!” Mr J. A. Nash: “You are going too far.”

Labour members: “Aren’t you all agreed?” Mr Ransom remarked that the Leader of the Opposition had said the real problem would have to be met next year, but the Government believed it had met the real problem this year. However, if the same Government was in power next year, the position would be just as satisfactorily dealt with. (Laughter.) Mr Ransom said the problems of the primary producer at the present time must receive more than ordinary consideration, and he wanted to call the attention of the House to the fact that they had been given every consideration in the Budget. It had been suggested that further savings could be made in departmental expenditure, and that was so, but it could not be done without dismissals, which would lead to personal hardship, and it was for the House to say whether that was to be done or not. An Economy Committee was still in existence, and he believed it would be a good thing if a Committee formed from men outside the House could go through the whole country to see if further economies could be made. Mr W. D. Stewart: “I advised that last year.” The Minister said it had been suggested that a million sterling could be cut off expenditure on Education, but the Government was not going to make a ruthless cut there;, unless it could be shown that education could be continued without sacrificing what had been built up in the past. Dealing with income tax increases, Mr Ransom said that income tax would still be much lower than in some other countries. Various tables of figures had been published in the Press of the Dominion, but they had not dealt with cases where men would receive exemptions still in force. For instance, a man receiving £4OO a year would be asked to pay an increase of £3/9/2, but if he had one child the increase would only be £3/4/1; If two children £2/0/8: if three children £l/4/7. Then there were exemptions for insurance to be taken into account. In Australia a taxable income of £22 would bear £4/14/1. Continuing, Mr Ransom said that exception to certain proposals in the Budget had been taken by business men and others, but if other proposals for raising money in a more equitable way could be brought forward he was sure the Finance Minister would be very willing to consider them. Amalgamation of departments had been referred to, and the question whether or not it had resulted in savings had been asked. In the case of departments over which he had control, a very real saving had been made, two Undersecretaries having been retired. Replying to the claim that borrowed Ujoney should be spent on productive works, Mr Ransom said he could quote instances where borrowed money had been spent on unproductive works in the past. Mr Coates: "Go on. Quote them.”

Mr Ransom said that when the Government had proposed to put an extra penny on petrol for the benefit of backblock roads last session, Reform had objected and had had it removed, and now the Party’s leader was crying out for that money. The Leader of Reform had said that he was no longer in favour of spending money on roads, but wanted it spent on land. “He is getting nearer the policy of the United Party every day,” he said. Continuing, Mr Ransom said that it was a waste of money to employ men on forming roads, and then not to metal them. It was the policy of the Government when It opened up new settlements to form roads and metal them, so that settlers would not have to contend with mud when taking their produce to market. Mr Ransom said he could not agree with the Leader of the Opposition regarding the number of men who could be employed in developing land. It had been found in practice that once land was cleared there was very little work for unskilled labour. Mr Ransom remarked that some of the critics of the Government had very short memories. There had been long arguments against reduced expenditure, but now there were cries for more reduction and less taxation. There was a lot of talk about the need for release of hidden capital, but where was that hidden capital? The whole cry seemed to be “hit the other fellow,” and if they could find the other fellow who aid not object to being hit they would be all right. Mr Ransom dealt with economies carried out, and said they left only £1,800,000 to be found from taxation. Various social services had not been touched by the taxation proposals. Tire Leader of the Labour Party:

“Will they be touched?” Mr Ransom: “I think I can assure the hon. gentleman that he has heard the worst.” Referring to sugar tax, the Minister said the price of sugar in 1 New Zealand was still about £ll a ton less than in Australia. The increased

tax on silks would assist the wool Industry. Mr H. M. Rushworth: “How will it assist, if you are to get revenue from it?” Mr Ransom said a great deal had been done in the direction of increased production, and not only were settlers being put on the land, but the production of smaller holdings was being improved He referred v r "ulf-marking, rotational grazing, and activities of the Agricultural Depart.- , .nt, and said he thought the time had come when we should have more instructors and less inspectors going round the farms. He believed that a Commission on local body administration would lead to many problems of local bodies being solved. He believed co-ordination of services would lead to reductions in expenditure as far as counties were concerned. The debate was adjourned, on the motion of the Leader of the Labour jearty, and the House rose at 9.45 p.m.