B.—No. 2.

The country is just now on the eve of recovery from a prolonged period of depression, and to insist upon satisfying the deficiencies of the past year out of the revenue of the current year, would have a retrogressive effect. Eor some years past the majority of the people of New Zealand, from various causes, have not been so fortunate, in the way of accumulating wealth, as they were entitled to expect, especially when the reduction in the value of property is taken into account. We certainly believe that the time has come when the opportunity of increasing the wealth of the country by the industry of its inhabitants is again opened to the residents of New Zealand; but we also believe, that to ask from them, at once, a too large contribution to the revenue, would tend to retard the recovery which all must desire. The Government, therefore, propose that of the deficiency of £136,000, one-third, or £46,000, shall be met out of the revenue of the current year; that the balance shall be satisfied out of the revenue of the next two years; and that Treasury Bills representing the amounts shall be issued. I- hope that honorable Members will recognize in this plan a determination on the part of the Government not to allow the permanent debt of the country to be increased because of any temporary deficiency in the revenue. It is true that we would have preferred charging the whole of the amount in question against the revenue of the present year, but for the reasons I have already enumerated it is not expedient to do so. It cannot, however, be said that the arrangement we propose, at all partakes of the nature of a permanent addition to the burdens of the country. Moreover, there is a precedent in the shape of a similar provision in the case of a deficit in 1860 : the Legislature then decided to spread the deficiency over three years. PROVISIONS FOE THE TEAK. I must now invite the attention of the Committee to the provisions which we submit for the service of the current year. But before entering into details, I will ask the Committee to agree with me generally in the conclusion that some considerable portion of the financial year having already passed, we cannot expect that much gain to the revenue will result before the close of the year, no matter how actively the various measures may be pushed on by which the Government hope to develop the resources of the country, and to increase its population. When honorable Members further consider that we have to commence the year by providing for the deficiency of £46,000, as already described, they will see that there are difficulties of no slight nature in the way of making provision for the services of the year. Ido not think there is any more disagreeable task for a Minister than that of having to meet a Legislature with a statement of financial affairs which comprises a demand for provision for a deficit, instead of the welcome announcement of a surplus. However, such a task I have to perform. Pleasing as it would be to announce a flourishing state of finance, I regret that on this occasion it is not in my power to do so. And since men are sufficiently selfish to feel pleasure at having companions in misfortune, I am not digressing, perhaps, in pointing to the fact that in more than one English-speaking community —and notably in the Imperial country, as well as in Victoria and New South Wales ■—large deficiencies in revenue have recently had to be dealt with. It is not altogether improbable that the reasons Avhich have led to financial disorders at so many points might be traced to some common source; just as, when volcanic eruptions occur in different parts of the world about the same time, scientific men are led to suppose that the causes of those eruptions have had something in the nature of a common origin. I will ask honorable Members at once to agree with.me, that even apart from the deficiency with which we have commenced the year, if we are to continue expenditure on the scale of last year, we shall have to resort to very considerable additional taxation. The first duty of the Government when they find that the expenditure has exceeded the revenue, is to consider whether it is possible the expenditure can be reduced, and to endeavour to establish to the utmost extent a direct relation between the necessary expenditure and the means available. I may

And of the total £136,000, pay onethird from this year's revenue, and the balance during next two years.

This will not be increasing the permanent burdens; and there is a precedent for the proposed course.

Whatever measures may bo adopted, much gain to the revenue during the remainder of this year cannot be txpectcd.

England, Victoria, and New South Wales have had recently to provide for deficits.

Apart from deficit, expenditure must bo reduced, or taxation increased.

8

FINANCIAL STATEMENT.