THE NATIONAL FINANCES.

Wairarapa Age, 30 April 1932, Page 5

THE NATIONAL FINANCES.

No Addition to Taxation This Year. FINAL CALL ON RESERVES TO BE MADE. SPECIAL LOAN OBTAINED, FROM BANKS. HON. W. D. STEWART’S SURVEY OF ECONOMIES, WELLINGTON, April 29. The Minister of Finance (the Hon. W. D. Stewart) made the following statement in the House of Representatives this afternoon: “It was pointed out in the financial statement recently issued, that in present circumstances bridging the gap in the State’s finances must be largely accomplished by means of reductions in expenditure. In view of various statements that have been, made suggesting that adequate steps have not been taken to reduce expenditure; I wish to review briefly the economies effected since the depression began to grow acute, during the financial year 1929-30.” At the commencement of the trouble the Minister continued, economies were made in departmental votes to the extent of £260,000. During 1930-31 and 1931-32 economics were made amounting respectively to £1,360,000 and £4320,000. Thus in the three years to March 31 last, the economies and adjustments effected amounted to £5,940, 000 per annum. In regard to the current financial year, the Government had now dealt with most of the recommendations contained in the interim report of the National Expenditure Commission. The savings recommended by the Commission totalled £2,976,262. The savings effected for 1932-33 totalled £2,040,290. Further savings approved for 193'3-34 totalled £246,100, leaving £99,662 held over. “I may mention,” the Minister said, “that some of the savings held over have not yet been finally dealt with. It will be seen that of £2,976,262 savings recommended by the Royal Commission, no less than £2,286,390' have been effected or approved by the Government. These economies and adjustments do not complete the list for the financial year. In addition, relief to the Consolidated Fund will accrue from the following items: Abolition of subsidy on Unemployment Funds, £.1,450,000; relief to hospital subsidies from Unemployment Funds £200,000; Hoover moratorium (if extended), £600,000; further reductions by the Railways, £100,000; total, £2,350,000. Add savings in accordance with the Commission’s recommendations, £2,040,000; total savings and adjustments at present in sight for 193233, £4,390,000. The grand total of the relief to the Consolidated Fund over the period under review is no less a sum than £10,330,000, of which approximately £2,500,000' has been obtained by various adjustments and the balance of £7,830,000 from economies. STRENUOUS EFFORTS MADE, 4 ‘ These figures indicate the strenuous efforts made to cope with the position. However, notwithstanding the economy measures adopted or contemplated—and sayings of this magnitude are not obtainable without drastic action—the summary of the position set out in the financial statement indicated that there would still remain a substantial prospective deficit for this financial year. In the financial statement of April 7, 1932, it was estimated that to confine the deficit to not more than £2,000,000, it would be necessary to effect savings and adjustments of £4,100,000 and to impose extra taxation to yield £2,200,000. Since that statement was made, I have reviewed carefully the available sources of taxation which might yield the amount of £2,200,000 indicated as necessary. It is clear that the remaining taxable capacity of the Dominion is limited and it is difficult to devise ways and means of obtaining additional revenue without adding to the formidable burden of private businesses, both primary and secondary. Tn the area, of direct taxation, it would only be feasible to obtain any substantial amount by a series of minor impositions or an, irritating nature by way of various stamp duties and reductions of the exemptions in regard to income tax and so on. In the area of indirect taxation, it would be necessary to resort to a sales tax and to taxation on various items of consumption in daily use. ( , TAXES AND LIVING COSTS. m „/ h ® se . v ?r°, us expedients could be made to yield, by way of taxation, the amount of £2,200,000 indicated in the financial statement, but in the process of doing so the items of indirect taxation such as sales tax, ete., would inevitably tend to increase the cost of living at the very moment when, by various reductions in wages and fixed charges, we are seeking to reduce the cost of living. The one process would ~®, to S ??® ® xtent negatived by the S' * loreover : at the present time, lurther taxation cannot but have a depressing influence at a time when the uttio mTiT-7 is flghting a hard battle to hold its own against an unprecedenteJ depression. <<rr KKLIEr FOR THIS year. Having all these factors in mind I •^ Ve ». wise t 0 make a snecto afford the comm unity some dcS h T g Spa °® from furthcr tax burdens. I propose, therefore, to withhold our remaining taxable capacity meantime and to fill up the gap by a further nno° ° Ur ™ervt,Counting to ’ «S nVeSted “ the Discharged boldier Settlement mortgages. As I have previously stated, these reserves were built up out of surplus revenue in prosperous years. In order to get over the difficulty that it would be unwise to sell them at a heavy discount on present day market values, I took power in last year’s legislation to draw against them by hypothecation of the securities, pending the time arriving' when they can be sold at -their real value, or the receipts therefrom can be made available. This authority was not used last financial year, but it was hoped some use could be made of it this financial yea*. • nwi LOAN SECURED FROM BANKS. “Since then I have been negotiating with the Bank of New Zealand, and have now to announce that I have concluded a satisfactory arrangement to Obtain £2,500,000 by hypothecation of the securities. I understand the National Bank of New Zealand proposes to take a proportion of this amount. The amount will be paid off out of funds provided by the repayment of

loans by the discharged soldier settlers. “About £200,000 from this source was allowed for in the financial statement, so the additional amount thus made available is £2,300,000. This procedure wil enable us to keep in reserve for a later date whatever taxable capacity the community still possesses, and still reach the result already laid down as desirable, viz., that we should end the year with a manageable deficit of £2,000,000. It is true that by imposing the taxation of £2,200,000 and at the same time throwing into the firing line the reserves now being called on, we could actually balance the Budget this year, but I 'do not think it wise or desirable to exhaust both our taxable capacity and our reserves in this year, when we do not know what yet lies in front of us. It should be noted, however, that this proposal, combined with the deficit for last financial year and the amount, up to £2,000,000, that may eventually be carried forward this year, will practically absorb the effective value of our remaining Discharged Soldier Settlement reserves, after allowing a safe margin for the investment losses that may be suffered on account of the depression. This means that any further 'declines in revenue must be met by economies in expenditure or increased taxation. This valuable assistance to the Government afforded by the Bank of New Zealand and the National Bank of New Zealand will be additional to their share of the extensive Treasury Bill programme necessary to finance remittances to London, maturing loans and general requirements, during the year. Arrangements m regard to this general finance are being made with . the Associated Banks, which are in this way affording great assistance to the Government in meeting its difficult financial problems.”— (P.A.)