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and financing the difference by inflationary methods. No less than £26 million was borrowed from the Reserve Bank during last financial year, while business enterprises under State ownership were showing large and increasing losses —all this at a time when production and prices were at a high level and every one was employed. It was clear that the position was getting out of hand and that a continuation of such methods of finance would before very long have landed the country in serious difficulties. As I have pointed out on previous occasions, inflation is an insidious method of taxing the people by reducing the purchasing power of their earnings and savings. It hits the working people and those living on fixed incomes most severely. It is remorseless and relentless, it works day and night and never lets up. The present higher costs of living are the result of past inflationary practices. Since this Government took control of the country's affairs much time and effort has been devoted to stopping the harmful drift and getting the finances on to a sounder basis. Although it will take some time to undo all the harm that has been done, what has been achieved in a few months shows how unnecessary were the methods of finance formerly followed. The first step was to grapple with the upsurge of Government expenditure, which was rising rapidly. When things are started and commitments made in all directions it is not easy to call a halt without causing disruption, but, in the interests of the people, it has to be done, and the new Ministers are tackling it resolutely. It was found that'the costs of defence and the new military training scheme authorized by the people last year, on top of all the commitments made by our predecessors in office, would have entailed a deficit of about £lO million unless further taxation had been levied to bridge this gap in our revenue accounts. Taxation is already too high, and to follow the path of inflation would have been disastrous. Removal of Subsidies The largest item of expenditure, however, was subsidies, and unless action was taken it was clear that for this financial year the cost would have exceeded £l7 million. If the all important objective of balancing the Budget was to be achieved it was evident that there must be substantial relief from this ever-increasing burden. Accordingly,

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