PUBLIC FINANCE.

Press, Volume LXVI, Issue 19957, 18 June 1930, Page 10

PUBLIC FINANCE.

THE 1928-1929 DEFICIT. STATEMENT BY PRIME MINISTER. (tEESS ABSOCItTIOST TEL SQEAM.) WELLINGTON, June 17. The Prime Minister and Minister for Finance, the Hon. G. W. Forbes, in an interview to-day, said: "My attention bas been drawn to remarks concerning the deficit of £577,000 in tho ordinary revenue account of the Consolidated Fund for; the year 1928-29, in which the suggestion is made that such deficit was 'more apparent, than real and that had a change in accounting for Post Office receipts not been made the deficit would not have occurred.' Tho deficit referred to was quite real as indicated by the following. figures taken from last year's Budget

Expenditure ... 24,176,928 Revenue ... 23,599,676 Deficiency ... £577,252 "In public finanoe as in private finance each year's transactions are judged separately and the State, in the same way as the individual, either lives within its income or it dots not,. For the year in question it did not, and no amount of discussion will alter that fact." Postal Bevenue. In respect to the Post and Telegraph Department, the Prime Minister draws attention to the Post and Telegraph Amendment Act of 1927, which separates the Post and Telegraph finances from the ordinary revenue account of the Consolidated Fund and provides for the Post Office accounts to be kept on a commercial basis with provision therein for setting up adequate depreciation and renewal ' reserves. "That change was made by statute and could not have been departed from unless fresh legislation had first of all been passed by Parliament," said'Mr Forbes. "It is true that the ordinary revenue account of the Consolidated Fund received less revenue from the Post Office in the year 1928-29 than it did in the years prior thereto. The additional receipts referred to and used for general expenditure purposes actually represented Post Office depreciar tion reserves which, according to the procedure adopted in ordinary commercial practice, should have been retained intact until such time as those moneys were required for the renewal of telephone and telegraph lines and apparatus, all of which ere comparatively short-lived. Capital expenditure on this type of asset has been very heavy in the last few years, and if a change had not been made in the direction of enabling depreciation funds to be created it would merely have meant unsound finance to use the excess receipts to relieve the taxpayer in the interim, as within a comparatively short period when renewals become necessary the taxpayer would have been called upon to find en bloc a considerable sum which should have accrued over a period of years." . Illustrating this point, the Prime Minister remarked that a statement prepared In 1926 (the year before the amending Act was passed) shows that in 1940 it is estimated that £1,250,000 will be required for renewals alone. The only alternative to setting up reserves for this purpose would bo to resort to the unsound practice of capitalising such expenditure out of loan/ funds to replace assets worn out in a period very much shorter than' that S'rovided in the legislation governing ie repayment of the public debt.

Profits of Deportments. The Prime Minister added that a further suggestion had been made that the profits of all Government trading Departments should be handed over to the Treasury. "Whether, for example," remarked Mr Foßbes, "the Government Life Insurance Department, the funds of which belong to the policy-holders, is included in such recommendation is not clear, but in any case a reference to that Department serves to illustrate the value of such a casual suggestion. The fact that legislation last year was passed to provide for half profits in the Pitblie Trust Office being paid to the Treasury is also referred to, but that criticism entirely overlooks the fact that for a number of years that Department retained the whole of its profits, which were used to build up fairly substantial reserves. When that stage has been reached in post office finance it will be time to talk about allocating profits to other sources. Under ail the circumstances the setting aside of surplus post office revenue, after meeting working expenses and interest charges, was the right and proper thing to do, notwithstanding the temporary inconvenience to .the Consolidated Fund, hence the suggestions made by the critics merely amount to nothing jnore or less than advocating the adoption by the Government of unsound fl&aneial methods, which suggestions it is not my intention to adopt."