8.—6.

shown that, with the provision made, the first method was not effectively possible. In short, reliance has come to be placed on the second of the two methods, that is to say, on the State's responsibility for current requirements. It is of interest to note that only the second method is applied in Great Britain; retiring-allowances to Civil servantsj are a part of the regular expenditure provided for in the annual Budget. No fixed fund is accumulated. Is there any necessity for continuing to build up a capital fund to cover future superannuation requirements of Government employees ? This is the question to which I invite attention. British experience is certainly significant in suggesting that there may be something in the view contrary to that which we have hitherto accepted. Already we have gone far in New Zealand in applying the principle that the Government's responsibility should attach to the meeting of current requirements rather than to the amassing of funds. The Government is thus responsible for for payment of additional allowances to widows and dependent children, and for reimbursing the funds for loss of income due to statutory adjustments in interest-rates. The State's contribution to the three funds for last financial year amounted to £430,000, made up of £340,000 in fixed subsidies, £55,000 to offset the reductions in interest on investments as a result of conversions and the statutory reduction in mortgage interest, and £35,000 to cover pensions paid to widows and children of deceased contributors and annuitants and cost-of-living bonus to annuitants with small pensions. Of the aggregate cost approximately £385,000 was borne by the Consolidated Fund directly or indirectly, and the remaining £45,000 by the trading Departments. The proposition put forward, as an alternative to the revision of superannuation legislation on lines that would make the funds actuarially sound, is as follows : — (1) The Government to accept direct responsibility for payment of all retiring-allowances due: (2) The existing funds, which amount in the total to £5,166,000, to be held intact as a reserve fund, the interest thereon being applied towards meeting retiring-allowances of each class. The accumulated funds to be held in trust by the Public Trustee, but not to be further increased: (3) An absolute statutory right to retiring-allowances to be conferred on Government employees, provision being made for payment thereof without further appropriation: (4) The control and administration of the existing funds to be unified under one authority. Before legislation is introduced early next session of Parliament, every opportunity will be afforded to those affected to make representations. Meanwhile, it is proposed for this year to pay into the funds an additional subsidy of approximately £200,000 required to provide for present pensions without further diminishing the existing capital of the Funds. As honourable members will have gathered from my remarks in regard to the revenue, there are now definite indications that the position is steadily improving, although economically we have still some difficult problems to solve. In these circumstances, the Government feels justified in granting a 5-per-cent. increase in salaries and wages as from Ist April last to all public servants and others charged on the Budget who suffered both the first and second cut. This will be almost equivalent to a restoration of the second cut so far as the lower-paid officers are concerned. The net cost to the Budget will be approximately £380,000. To the extent of £175,000 this will be reflected in lower receipts, chiefly from interest on railway capital already allowed for, while the balance of £205,000 will mean additional expenditure out of the Consolidated Fund. In view of the state of the public finances at the time, with all items of revenue shrinking rapidly, the cuts were unavoidable, but all along it has been felt that as soon as the position of the finances would enable it to be done, in justice to the public servants, steps should be taken to restore some portion of the reductions. It is also proposed to grant a 5-per-cent. increase in old-age pensions, operative from Ist October next, the cost for the balance of this financial year being £34,000.

Partial restoration ol cuts in salaries and wages.

Increase in old-age pension!

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