HEAVY REDUCTIONS IN EXPENDITURE.

Press, Volume LXVIII, Issue 20494, 12 March 1932, Page 19

HEAVY REDUCTIONS IN EXPENDITURE.

Economy Commission's Report.

ten per cent, cut in wages AND SALARIES. Education Costs Under Review. WELLINGTON, March 11. Recommendations for drastic economies are made in the report of the Commission set up by the Government to investigate and make recommendations on possible reductions in public expenditure. The report was presented to the House of Representatives to-day. The recommendations, if given full effect, are estimated , to,jnake savings in expenditure of nearly £3,000,000, and there will be contingent savings coming into full effect in the following year which will raise the total still higher. A reduction of 10 per cent, in wages or salaries of all State servants, including members of Parliament, is suggested. The saving under this head will be approximately £1,250,000. Reductions in certain pensions are also advised. KThpre are recommendations, and also minority reports, on the question of the reduction of rent and interest. The education vote is reviewed at length, and a great •many recommendations are made in respect of administra- ' tioaboth by the Department and the Education Boards. The proposals involve a total saving of £369,950. The Commisgfon recommends among other things abolition of Education Boards, raising of the school entrance age to six years, the Coring of two of the four training colleges, and a modification of the present policy of free post-primary education. The Commission has urged in almost every instance that / expenditure not now under the control of Parliament should be brought into the annual appropriations, and so be subject to rwiewby Parliament. It includes in this recommendation jnowji provided for the Highways Fund, and for unemployment, taiwggests that these sums should be paid into the Coniolldtted Fund. Mr members of the Commission were Messrs G. Shirtdfej. J. Esson, A. Macintosh, James Begg, and J. L. r &m. I In the House to-day the Prime Minister said that he tiinght the discussion of the report, with the Economists' nport, should be taken on Monday.

mr Tafcwing ij the text of the report B abridged) addressed to his Extke Governor-General: — munission entrusted to us by Stlleacy directed us to enquire It on the public expenditspects, to indicate econot be effected if particular ither adopted, abandoned, id generally to make roi to the Government for iwith all possible reducexpenditure, having re- ■ to the present and prosit of the public revenues. w of Budgetary Position, imencement of our enviewed the Bt. Hon. the r, who outlined the presposition, and our subsetion of the present and iftion of the public revenue to the conclusion that es must be adopted to reire if the obligations of are to be met. swary to refer to the very i in the national income reaching effect of this reconomic problems of New ir are but a reflex of editions, although in the lealand the effect is pare, in that prices of primive fallen to a greater exa of manufactured goods, tistics available indicate production has fallen by 30 per cent, as compared e in 1928-29, which may I the "peak year." In value of production is ,300,000; in 1929-30 a reT,000,000 occurred; while oduction fell to approxi--10,000, or a decrease of £27,000,000. It is estiII 1931-32 a further fall will be disclosed, bringdown to approximately ■n 'Other words, the Doaccommodate iuclf tft a d of four years of £".-V value of production. This >afused with t>e national ich no reliable data are it.may be ass'ueed thai is fallen in approximately > «w the valu-s f produc--1 State Revenues. ' necessarily -cllccted in wues, and it follows that ? a reductional expenditure, and rhich the Dominion could prosperous times must, of leverely curtailed or even !# in the value of produeIted in reduced imports (Mtoms Revenue, and. the I next financial year point 'Stantial, "reductions. The »in business has resulted Bconje tax receipts, and !l P®te a further drop in

the yield from this source next financial year. . Similarly, under other headings ox general revenue, further decreases must be »expected. In so far as expenditure is concerned, the State has been called upon to shoulder additional liabilities, mainly in connexion with unemployment relief, hospital and charitable institutions, etc. We have in the limited time available carefully considered many aspects of Government expenditure, and have come to the conclusion that there are numerous economies which could be effected and which Would go far towards a balanced Budget. We refer particularly- to the curtailment or abolition of services which the State has given to the taxpayer in previous years but can no longer be justified under existing conditions. The expenditure of the State may briefly be divided into two categories:— (a) Permanent charges. (b) Annua! appropriations. We have found it desirable to consider first of all the question of permanent charges, as by far the greater part of the national expenditure comes under this category. The permanent charges do not come under the annual review of Parliament. They are fixed by various Acts of the Legislature, and, although shown in the annual appropriations, cannot be reviewed in Committee of Supply. CONSOLIDATED FUND. The appropriations for the year ending March 31st, 1932, total £24,627,561, made up. as follows: Ordinary Revenue Account. £

Annual AppropriationsVote, Legislative Depait- 9 _ ment • • ' „ Prime Ministers Department • • • „ Treasury Departmeut National Provident " and Friendly Soci.ticß Depart- ■ mont Land and Income Tax Department . • bS $ 67 „ Stamp Duties DePubST Buildings .. 60,712 » Maintenanco and repairs to roaus ... > Maintenance or " irrigation works, ( „ Native Department . 67,725 » Depart®®"* ° E "" 8097 ternal Affaii*

„ Department of Industries and Commerce, Tourist, and

Heavy Increase in Expenditure. A comparison of the amount provided in this year's appropriations with the actual expenditure for tho year ended March 31st, 1914, is interesting. In that year the expenditure, under all headings of the permanent and annual appropriations amounted to £11,825,864, but certain itoms must be deducted in ordor to get a true comparison with the current year. For instance, Railways and Post and Telegraph expenditure is now chargeable direct to tho accounts of those Departments. In 191314, out of a total expenditure of £11,825,804, tho Bum of £4,175,004 was in respect of Railways and Post and Telegraph Departments, leaving the sum of £7,650,800 for other services, as compared with the amount of £24,627,561 appropriated this year for the same services. The increase is £16,976,761 or, In other words, the expenditure has more than trebled since 1914. Out of a total appropriation of £24,627,561 for the current financial year no less than £17,715,888 is under the authority of permanent appropriations not actively controlled by Parliament. Granting that more than half of this expenditure is in respect of interest on and repayment of the public debt, we are of the opinion that considerable economies can be effected in respect of the remaining expenditure. It has not been possible for us to review tho whole of the dgpartmental expenditure before submitting this report, but we will deal with certain Departments that offer scope for considerable economy. We propose to deal with each of the permanent appropriations listed above, and to indicate, our views as to the possibility, firstly, of effecting economies, and, secondly, of effecting a change in the system, with a view to giving Parliament more effective control over the total expenditure out of the Consolidated Fund. Before passing to detailed consideration of the national expenditure either by way of permanent or annual appropriations wo should state that, in our view, the financial position is so serious that every section of the community must make some sacrifice. Our recom* mendations must involvo hardship, but a drastic curtailment of national expenditure is imperative.

CIVIL LIST. nit. ~iJ i?rrrtrtrt i*l fVirt

The sum.of £7OOO is provided in the Civil List for Native purposes. We understand that this amount was originally provided by virtue of the Constitution Act, 3852, but that it is now within the power of the Legislature to amend the provisions of. the Civil List Act, 1920. The preservation of this item of £7OOO seems to be somewhat of an anomaly. The amount was no doubt originally intended to ensure that the rights and interests of the Maoris were properly cared for during a period 1 when the colony itself was struggling with adversity. The amount appropriated from the public revenues for the benefit of the Maori people-is now many times in excess of the item of, £7OOO, which has subsisted since 1852, and it appears to us that the repeal of the relative provisions of the Civil List Act, 1920, would not be a breach of either the spirit or the letter of the law. In any case, if it should be found necessary to make any alternative provision for Maori purposes, we consider that this should now be done by means of an annual vote under Nativo Department. The repeal of Part V. of the Civil List Act, 1920, is accordingly recommended, and it should be possible to save the sum of £7OOO. . .

DEBT SERVICES.

Amortisation. We do not suggest that any amendment be made in the law regarding the annual payments in respect of the public debt which are by statute a charge upon the general revenues of the Dominion. It is worthy of note-in this connexion that the payment of interest and sinking fund on the national debt of Great Britain is also provided for by statute. Administration and Management. There is a net charge of £35,600 under this heading, and there appears to bo no reason why this should not be provided by annual appropriation. We recommend accordingly. Payments on Guaranteed Loans. These payments are in respect of loans guaranteed by the Government where it is necessary for the Government to pay on the default of the borrower. The guarantees, having been given, cannot be avoided, but at the same time we consider that the amount required to meet this class of expenditure should be subject to annual review by Parliament and we recommend accordingly. Operation of Hoover Moratorium. We understand that the amount required for 1932-33 for interest and principal on funded debt will show a reduction of £150,000 on this year's figures, even if there is no extension of the Hoover moratorium. If a further extension of the Hoover Plan is agreed upon, the net further saving under this heading during 1932-33 will be approximately £600,000, making a total conditional saving of £750,000.

Education Grants and Subsidies,

CHARGES UNDER SPECIAL ACTS.

Subsidies to Hospital Boards, £640,000. The amount required for subsidies to Hospital Boards should be subject to annual review by Parliament, and we re commend that in future the grants e provided under vote, Department o Health. We wish to make it « ® J we have not yet considered the poss bility of effecting economics imder tnu heading. This will necessarily involve the consideration of the whole of the expenditure both under this ica 1 g and under vote, Department of and in the time at our disposal wo have not been able to deal with the . ma "f r - We shall, however, deal with tins fully in our final report. . We recommend that subsidies on voluntary bequests to Hospital oar s should be discontinued and the statutory provisions in respect thcico - repealed. Voluntary bequests arc in tlie nature of "windfalls" and the discontinuance of the subsidies should not affect the efficiency of the Boarc a it is worthy of note that since l( - following amounts, have been paid by way of subsidies on voluntary bequests and . donations to Hospital Boards:

The amount provided by permanent appropriation under this heading for 1931-32 is £155,534. The whole of this expenditure should be subject to unnual review by Parliament, and ivc recommend accordingly. We also recommend that subsidies on voluntary bequests to educational institutions should bo discontinued altogether, and the statutory provisions in respect thereof repealed. This is a further instance where bequests are in the naturo of "windfalls" which do not affect tho efficient administration of the institutions. Tho estimated saving would, on the current year's appropriations, be as follows: — £ Education Boards .. 2000 Technical instruction 750 Secondary schools .. 1250 University colleges .. 2000 £OOOO ' Jubilee Institute for the Blind. Tho Government has in the past liberal support to this institutioh, which is, however, in the fortunate position ot having considerable reserve funds, on which, together with any donations received from the public, it could exist for tho present. The has assots valued at £160,000, of which a considerable amount is in more or less liquid securities, and in View of this the subsidy might meantime be withheld, and we recommend accordingly. The saving, at tho present time would amount to approximately £2500. The following is a statement of the subsidies paid in recent years to this institution: — Hospital and Charitable Institutions Act, 1923, and 1926. (Jubilee Institute for the Blind, AuclcPcriod. land.) £

University Bursaries. We are of the opiflion that University bursaries should be discontinued. In the past they have been the means of stimulating University education, but the cost per head of population for such education lias arisen from 7d in 1914 to Is 8d in 1931, and we feel that it is now impossible for the State to continue to help students as liberally as in the past. We understand that the Colleges have been informed that the bursaries will be continued until December 31sp, 1932, but recommend that an early notification be given that the bursaries will thereafter be discontinued. Estimated saving, £9OOO. Workers' Extension Lectures. We also recommend that grants to University Colleges for Workers' Extension lectures, £IBOO, be discontinued. Estimated saving, £IBOO. National Provident Fund. We' have carefully considered the position in regard to the operations of the National Provident Fund. We note particularly that those who receive pensions from this fund are nevertheless entitled to receive widows' and old-age pensions under the Pensions Act, 1926, and this appears to us to bo quite unwarranted. We arfe of the opinion that the law should be amended by deleting the exemption for income derived from National Provident Fund benefits, and cur recommendation in this respect appears under the heading of "Pensions." We would here draw attetion to .the fact that the Consolidated Fund at present provides an annual contribution of approximately £95,000 towards the National Provident Fund. Of this amount the sum of over £51,000 is in respect of subsidy on contributions to the fund. Careful consideration should now bo given to the possibility of altering the basis of contributions in the direction of making the fund a self-sup-porting one. With this end in view we strongly recommend that the active canvass for new members should be suspended, and that the collection of subscriptions at present undertaken by active collectors should be abandoned. If contributors will not pay their contributions except ap a result of door-to-door canvass, the Government should not be expected to pay commission on collections. In addition to tho expense incurred in collection, the Government subsidy is maintained at a high lev?!. Subscribers are definitely getting a handsome Government subsidy on their contributions, and if they do not display sufficient self-interest to keep,up their payments, we see no reason why the Government should go to any expense in persuading them to do so. Wc further recommend that nor new contributors should be enrolled on the present basis, as we are of the opinion that contributions ir the future should be on a self-supporting basis—in other words, tnat the Government subsidy on contributions from new members should be withdrawn. This would involve the recasting of the scales of contributions ior new entrants and the making of modified contracts in respect of new entrants from local authorities and busi-

OTHER GRANTS AND SUBSIDIES.

r.ess firms 'whose superannuation schemes Jire arranged through the fund. Wo hold the view that this class of scheme, particularly, should be self-supporting, and cannot see any justification for the granting of a Government subsidy on the contributions. We understand that at the present time very few new contributors are being enrolled, due to the present depression, and that the saving as a result of this recommendation would amount to approximately £.500 per annum. The net result is, however, greater than this, in that, if our recommendation is adopted, the growth of the liability on the Consolidated Fund will be stopped. There is no reason, however, why the fund should not be retained with subscriptions on a self-supporting basis, and thus be an encouragement to thrift, as it has been in the past. The fund might be made to form a valuable adjunct to the pensions schemes of the Dominion, and in time, if put on a proper basis, reduce the liability on the State for old-age and widows' pensions. Tn regard to the question of maternity allowances, wo would draw attention to the fact tl.at the amount provided under this heading for 1931-32 is as follows:

Maternity allowances to contributors, National Provident Fund .. ' .. 7,000 Maternity allowances for friendly societies .. 36,500 £43,500 We are of the opinion that, in view of the present financial stringency, those allowances should cease and that the relative statutory provisions should be repealed. We would draw attention to the fact that the State at the present time is in other ways considerably assisting in this respect. We refer particularly to tlie organisation of St. Helens Hospitals and the Plunket system throughout the Dominion. Estimated saving, £43,500.

Contributions, otc., to Superannuation Funds. We recommend that these contributions be provided by way of annual vote. In view of tho actuarial unsoundness of the funds, it is impossible tr> recommend any reduction under this heading. Subsidy to Unemployment Fund, £1,100,000. Consideration of this item of public expenditure per medium of tho permanent appropriations leads us to con- j Bid or tho principle of tho assignment of the proceeds of a particular class of taxation to a special account. We consider that unemployment taxation, like! other revenue and taxation, should be paid into tho Consolidated Fund, and that Parliament should provide each year such an amount for unemployment expenditure as may be necessary in the light of the general requirements and tho financial position of the country, irrespective of tho source of taxation from which the funds are to be supplied. Wo accordingly recommend hat the proceeds derived from the unemployment levy and wages tax should be credited direct to the Consolidated Fund. If this were donts the -necessity for a permanent appropriation would cease, and the annual appropriation of tho total amount required for unemployment relief purposes would bocome automatic. While there will be no direct saving as a result of this recommendation, the system will bo brought into line with recognised principles of sound public finance, and Parliaihont will bo enabled to review the expenditure annually. Payments to Racing Clubs of Proportion of Totalisator Tax, £25,000. Wo recommend that this expenditure should bo subject to annual review and appropriation by Parliament. Contributions Towards Singapore Base, £IOO,OOO. Tho contribution of the Dominion towards the cost of the Singapore Base is now at the rate of £IOO,OOO per annum. The total contribution was originally fixed at £1,000,00°, Ito be paid in eight annual instalments of £125,000, commencing from the year ended March 31st, 1928, and four annual instalments at this rate have already been paid. Representations were made to his Majesty's Government in Great Britain in 1931 with a view to obtaining a reduction in the annual contribution from Now Zealand, particularly in view of the decision that only the work under the Jackson contract (i.e., construction of tho graving-dock) and the work necessary to complete the Air Base should be carried out during the next five years. The proposal has been agreed to by his Majesty's Government in Great Britain, and for the next five years New Zealand is to contribute the annual sum of £IOO,OOO. At the end of this time New Zealand will have contributed £1,000,000 towards the cost of the Singapore Base. From all the information available it appears that this contribution from the Dominion was based on an estimated cost for the Singapore Base of from £10,000,000 to £12,000,000, but it appears that the present proposal for the completion of the Jackson contract and the Air Base will not involve his Majesty's Government in the expenditure of the amount originally contemplated. Under these conditions, we are of opinion that the contribution from New Zealand might reasonably be reduced proportionately to the present contemplated expenditure on the Base: in other words, if the completion of the Jackson contract and the Air Base is to cost, say, £8,000,000, that New Zealand's contribution for the present should be limited to £666,000. We presume that the sum of £IOO,OOO provided in the 1931-32 Budget will be paid, and if the contribution of New Zealand can, for the present, be limited to £666,000 a saving of £34,000 would accrue during 1932-33. In the following year the saving would be £IOO,OOO, as no contribution would then be payable. If, however, it is not desired to make representations to his Majesty's Government for a reduction in New Zealand's total contribution, we suggest that negotiations might be entered into with a view to the contribution from New Zealand being reduced next year to £50,000, and the term for the payment of the balance of £400,000 being extended to eight years—i.e., that the annual cost henceforth be reduced to £50,000. If, as we presume, the expenditure at present contemplated on the Base will not provide for the completion of the original programme, an adjustment of New Zealand's contribution in either of the ways suggested above would appear to be equitable. Contingent saving, say, £50,000. Auctioneers' Fees: Payments to Local Authorities, £10,238. \\ c recommend that the permanent appropriation be repealed, and that the amount required be provided by annual appropriation. Expenses of New Zealand Institute, £750. In the present state of the finances of the Dominion, we consider that the payment of the grant at the above rate can no longer be justified, and we recommend that the amount be reduced to £4OO, subject to annual review and appropriation by Parliament. Annual saving, £350.

PENSIONS.

Subsidies to Tire Boards, £3492. We see no reason why the Government subsidies to Fire Boards, if such are continued, should not bo provided by annual appropriation, and we recommend accordingly. We have, however, carefully considered tie question as to whether subsidies to Fire Boards are warranted under present conditions. We would point out that in those cases where no Fire Board is in existence the fire brigades are maintained by the City and Borough Councils, and no special subsidies are paid to them in respect of fire protection. All such Councils, however, receive subsidies on general rates under the Appropriation Act, 1916, and the amounts of such subsidies are not reduced when Fire Boards come into existence. The revenue of Fire Boards (apart from Government subsidies) is provided by the constituent local authorities, in most cases Borough Councils, and by the insurance companies, in equal proportions, and we are of the opinion that the subsidies paid to the Councils should be sufficient contribution for fire protection afforded to Government property in the districts. We see no justification for the payment of subsidies both to Fire Boards and to Councils, and we recommend that payments to the former be abolished and tlie relative provisions of the Fire Brigades Act, 1926, repealed. Estimated saving, £3492. Greymouth Harbour Board: Subsidy for Interest, £12,000. Land Act: Thirds, etc., to Local Bodies, £II,OOO. Fourths to New Plymouth Harbour Board, £2OOO. Fines to Societies for Prevention of Cruelty to Animals, £7O. We consider that the whole of the above expenditure should be subject to annual review and appropriation by Parliament, and wo recommend inglyRotorua Borough Act, 1922: Payment of portion of Bath Fees, £ll7O. We draw attention to the fact that the payment under the Rotorua Borough Act, 1922, ceases during 1931-32, and we recommend that, upder no circumstances, should the payment be extended. Estimated saving, £ll7O. SALARIES AND HONORARIA. Legislative. We consider, for the sake of uniformity and to conform to the traditional practice of tho British Parliament, that honoraria to members of the Legislature, with the exception of the salaries of tho Speakers of both Houses and the allowance to the Speaker of the House of Representatives, should be provided by annual appropriation rather than by permanent appropriation. We recommend that, with the above•montioned exceptions, the honoraria to members of the Legislature, with the present statutory limitation, be included in the annual appropriations, and that tho relative provisions of the Civil List Act, 1920, be amended accordingly. We also consider that tho salaries of the clerks and clerk-assistants of both Housos should be provided by annual appropriation. Although it is strictly not appropriate to tho present item, we would mention that the expenditure unedr Vote, Legislative Department, in 1913-14 was £43,700, whereas for the year ended March 31st, 1931, the expenditure was approximately £99,000. The increase in the annual cost is really not as great as the figures indicate, due to changes in accounting methods, but this is more fully explained in our comments under the heading "Vote, Legislative Department." Consideration has been given to the possibility in effecting economy by a reduction in tho number of members of the House of Representatives, with a view to effecting economy under the heading of "Honoraria to Members," as well as a corresponding reduction in Vote, Legislative Department. We would mention that if the number of ; members in the British House of Commons bore the same ratio to the population of Great Britain as the membership of the New Zealand House of Representatives does to the population of New Zealand the number of members -in the British House of Commons would be well over two thousand, whereas actually the membership is less than onethird of this number. We do not suggest that so drastic a reduction as one based on thoso figures would be possible in New Zealand, but feel that the membership might well be reduced. In recent years there has been a marked improvement in transport, and members can under present conditions travel with greater freedom and rapidity through their electorates . than they could some years ago. This leads to the conclusion that in quite a number of cases tho size of electorates might be increased. We accordingly recommend the matter for consideration. We are also of the opinion that a reduction in the- number of members in the House of Representatives should be followed by reduction in the membership of tbe Legislative Council.

We consider that a change should be made in the method of providing each year for the amount required for pensions. In Great Britain the amount required for payment of pensions is voted annually by the Legislature, and we think that the system in New Zealand should be similar. This would ensure that the growing burden of pensions expenditure is subjected to Parliamentary review each year. We have definitely arrived at the conclusion that the Dominion can no longer afford over £3,000,000 per annum for pensions. The growth of the expenditure on all classes of pensions since March 31st, 1915, is set out in the following table. The huge increase in 1920-21 figures is due largely to war pensions, although other classes of pensions have also shown notable increases.

WAR PENSIONS.

The cost-of-living statistics show that over the last two or three years there has been a marked fall in the cost of living, and on this ground alone some reduction in the rate of all classes of pensions is justified. We have considered various ways in which, the incidence of pensions might be altered, and the following recommendations provide for a fair and reasonable general reduction in all classes of pensions. The reductions recommended are not uniform, but, in our opinion, are such as will result in the least possible hardship. The alterations recommended should effect a saving; of £599,925, and this

"will reduce tlie total expenditure on pensions for 1932-33 to approximately £2,700,000. From the evidence submitted it is clear that pension claims must increase, and that it will probably not be long before the total expenditure will again reach the huge sum of £3,000,000. Our recommendations in respect of each class of pension are set out hereunder in the order in which they appear in the Permanent Appropriations. Family Allowances Act, £76,000. We recommend that family allowances be terminated, as this is a form of pension that, in our opinion, cannot be justified. The amount provided for this purpose for 1931-32 is £76,000, but, if continued, the amount required for 1932-33 is estimated at £121,000. The discontinuance of the allowances should not, in our opinion, impose an extreme hardship on the recipients. The general taxpayer is contributing large sums annually for the purpose of rendering assistance through charitable institutions and through the Unemployment Board to persons with large families who are affected by present economic conditions. Estim'ated saving, £121,000. Minors' Pensions, £62,493. We recommend Ihat the rate be reduced as follows: — (1) For an unmarried miner, from 23s to 22s Cd per week. (2) For a married miner, from 35s to 32s Cd per week. (3) Child, from 10s to 7s 6d per week. (4) Widow, from 17s 6d to 15s per week. We recommend that the maximum pension for married miners be not more than £3 per week. In regard to miners' widows' pensions, we recommend the introduction of property and income qualifications similar to those in the case of other widows' pensions. Estimated saving, £6200. At the present time there is a large number of miners' widows, ranging in age from twenty-five to seventy-seven, receiving a pension of 17s 6d per week. We can see little reason why miners' widows, so far as pensions are concerned, should be placed on a different plane to other widows, and recommend that on the death of a miner-pensioner the pension to his widow should cease at the end of two years from the date of her husband's death, and that she should thereafter be on the same basis for pensions purposes as other widows. We rqpommend that the law be amended in this direction and that those miners widows who have up to the present drawn pensions for two years or more be given six months' notice of the cancellation of the pension. When the law • relating to miners' pensions was first introduced, in 1915, tho period for which a widow's pension was granted was fixed at two years. This was amended in 1919 to continue throughout widowhood, and what we recommend is a reversion to the basis which was adopted when the law was first enacted. The estimated saving for 1932-33, if this recommendation is adopted, would be £6OOO, rising thereafter to £12,000 per annum. Under section 448 of the Mining Act, 1926, a duty of 6d per ounce is imposed on gold produced from quartzmines. This is apparently looked upon as a contribution by the industry toward the coat to the Dominion of miners' pensions. In view of the large amount involved in miners' pensions, the industry should provide a larger proportion of the cost, and this could bo achieved if the present, duty were increased. An additional of Is per ounce is estimated to provide £SOOO per annum. Military Pensions (Maori Wax), £7350. We recommend that the rate be reduced from £49 per annum to £39 per annum. Estimated saving, £1225. Widows' Pensions, £340,000. We recommend that the rates be reduced from £1 for the "first child and 10s for each other child to- 15s for the first child and 7s 6d for each additional child, with a. maximum, pension of £3 per week. We recommend also that the present exemption of £7B per annum on account of income from other sources be reduced to £65 per annum, this exemption to be the sole one applicable. At the present time, in addition to the exemption of £7B, there are various exemptions, including National Provident Fund benefits, £IOO per/ annum compensation moneys, any moneys raised J by public subscription, and other pen- ! sions under the Act. Estimated saving, £95,000. Old Age Pensions, £1,250,000. We recommend that the rate be reduced from 17s 6d per vfeek to 15s per week, and that the income exemption be reduced from £52 per annum to £39 per annum, this exemption to be the sole one applicable. At the presenttime, in addition to the exemption of £52, there are various other exemptions, such as benefits from the National Provident Fund, moneys raised by public subscriptions, etc. • We are | of the opinion that one exemption of £/39 per annum is reasonable. By way of comparison the following, table indicating'the rates of pensions : payable in New Zealand, Australia, and Great Britain is of interest:— x New Zealand: 17s 6d per week at ! the age of 65 years for men and 60 for women. Great Britain: JOs per week at the age of 70 years. Australia: 17s 6d per week at the age of 65 years. Estimated saving, £200,000.

We war pensions as being, in a class apart, and,-despite the need for the greatest possible economy, we are unable to recommend that any general reduction be made in pensions to disabled discharged soldiers. We are of the opinion, however, that the continuance of the economic pension is not justified. This pension is

payable under the War Pensions Amendment Act, 1923, as supplementary to war pensions payable, as of right, to a member of the New Zealand Expeditionary Forces and to widows and widowed mothers of members of the Forces in respect of disablement up to 40 per cent, disability or death of a member of the Forces. The economic' pension also affects the pension payable to wife and children of a soldier, and the effect is that the wife and children may draw the maximum rate of pension despite the fact that the husband may not be totally incapacitated. A reduction in or the discontinuance of the economic pension ought, to

affect the pension payable to the wife and children.

The time has arrived when the economic pension should be discontinued, but, recognising that this may cause [ hardship to those receiving economi® [ pensions, we do not feel justified in recommending the total abolition of the pension in one year. We recommend, however, that all economic pensions be reduced by one-half during 1932-33, and that in the following year economic i pensions be wholly discontinued. ' We also recommend an amendment of the Act to provide for the pensions payable to the wife and children of * soldier being proportionately reduced on account of the reduction in the economic pension. Estimated saving, £90,000. Apart from the above, we do not recommend any reduction in pensions payable to disabled soldiers. We consider, however, that all other pensions under the War Pensions Act, 1915, should be reduced. The pensions referred to are those payable to— Dependents of disabled soldiers; Widows (without children); Widows (with children); Other dependents of deceased soldiers—Parents, other adult dependents, guardians of children. We recommend a reduction of 10 per cent, in these classes of pensions. Estimated saving, £45,000. Double Pensions. No fewer than 2698 persons are at present receiving double pensions and allowances, and ten persons are receiving triple pensions. Of those receiving double pensions, 1704 receive both old age and war pen- ' sions. We can understand the principle underlying this. We cannot understand, however, why people should receive both pensions and family allowances, or both old age and miners' pensions, or widows' and war pensions,; or widows' and epidemic pensions. We recommend that the law be amended to provide that only one pension (the larger) be payable, except in the case of old age and war pensions. We exempt the latter class for the reason that' an old age pensioner may be in receipt of a war pension of from 10s to 15s a week as a dependent of a son killed at the war, whereas if the son were still living he could contribute a limited amount to his parents' support without affecting the amount of the old age pension. Estimated saving, £30,000. „ Epidemic Pensions. While considering the general question of pensions under the permanent charges, we have also given consideration to the Pensions Vote on the Consolidated Fund, and we wish' at this stage to draw attention to the item on the vote in respect of epidemic pensions, the cost of which is £5500 per annum. These pensions are payable to widows with children where the breadwinner of the family lost Ms life in the influenza epidemic of 1918, and are in addition to whatever pensions may be payable under the widows' pensions legislation. Special pensions schemes, such as this, are not justified in view of the liberal provisions existing in the Pensions Act, and we recommend that this pension be abolished. Estimated saving,- £5500. Revision of Permanent War Pensions. The War Board has at present the power to review permanent pensions of disabled soldiers, bnt no general review of all permanent pensions is carried out. We consider that all permanent pensions should be reviewed annually. There are cases, such as the loss of an eye or a limb, where no detailed review is necessary, but there are others, such as where pensioners were suffering from some partial disability which has, over a period of years, disappeared. In such eases there can be no justification for N the continuance "of thei permanent pension. We accordingly suggest that the Pen- - sions Board should review all permanent pensions each- year. GENERAL. * Before concluding our remarks on this subject, we would refer again to the ever-growing burden of pensions on the community generally. ' In recent morlths the number of applications (particularly for old age pensions) hasincreased enormously, due no doubt, to present economic conditions, iWe are, however, particularly impressed by the , fact that only approximately 30 per cent, of those eligible by reason of age to receive old age pensiOM are on the books of the Department, so that there is a very large potential liability on the State under this heading. We are led to the conclusion that, if the present system of free pensions is continued, the increasing 1 load on the V taxpayer will become unbearable, and that some alternative method that would be self-supporting should be considered. In framing our recommendations for readjustments in the incidence of pensions we have endeavoured to secure equity as between the different classes of pensioners. Our recommendations differ as between the various classes, and it may be thought that some have suffered unduly. We are satisfied that this is not so, and, that we have maintained a fair relative standard as between the different classes. In our opening remarks on this subject we may have given the impression that our recommendations are based wholly on the present position of the national finances; but,' while this is one of the reasons for our recommendations, it is not the only one. We consider that a general readjustment of money incomes is necessary jn order to ensure that the burden of sacrifice is shared by all. Our recommendations in regard to pensions we look, upon, not merely as a sacrifice by the pensioners to assist towards Budget equilibrium, but also as incidental to a. general plan of readjustment over the whole community.

MOTOR TAXATION.

Payment to Main Highways Fond, £1,760,000. •We are of the opinion that, the revenue at present credited to the Main. Highways Fund should not be paid into a special account, but should form part of the Consolidated Fund. In this connexion it is interesting to note that the Boaft Fond in Great Britain is in practicality- a similar position to the Highways Funds in this Dominion, and the report of a Committee recently set up by the British Parliament to report on national expenditure stated in connexion with the Boad Fond as follows: ' "As it is now being administered, this fund has become a liability on the national finances, and in our view drastic action is necessary to remedy the position. First among the steps ' we recommend is the abolition of the fund and placing expenditure, on road grants on the annual votes of Parliament.", We strongly recommend that the M«.i ß Highways Bevenne Fond and the Capital Fund be abolished, and that the revenue from motor and allied taxation be credited _ direct to the Consolidated' Fund. Thiß would mean that the ex-

penditurc on maintenance and capital would be subject to annual review and appropriation by Parliament. We wish to state particularly that, in our opinion, the future control of highways expenditure should be rigid. The budgetary position demands this, and, just as non-essential schemes and services in other directions must be curtailed or eliminated, so also must non-essential roading projects be postponed until (he general financial posilion improves. We cannot accept the view that motor taxation should be wholly spent on roading schemes, irrespective of the amount of general taxation available for other services. The development of the highways system must, in our view, be strictly limited ' to what the Dominion can actually afford. U'c recommend that new construction should cease for the present, and iliat no new works whatever should be undertaken during the present period of financial depression. If this recommendation is adopted, a large sum should be available for general purposes. We note that for the year ended March 37st. 1.931, the sum of £300,000 was transferred from the Highways Revenue Fund to the Construction Fund for use on capital works. We have ascertained that the cost of the renewal of bridges has hitherto in general been charged against capital, and has been met partly from loanmoney and partly from the amount transferred from the Bevenue Fund. We consider that the replacement cost of worn-out bridges should, as a matter of principle, be met /always from revenue, and recommend that no further loan-moneys be used for this class of work. We further recommend that the amount available in the Construction Fund at present should be earmarked to meet commitments in respect of work already commenced or in respect of the reconstruction of such bridges as must be replaced in the near future. In regard to the maintenance of existing highways, a considerable sum could be saved annually if only essential works were undertaken. Possibly the present high standard of maintenance could be lowered without detriment. The existing highways should , not be allowed to deteriorate, but ordinary maintenance should be carried on as economically as possible. ft is generally recognised that the progressive and rapid improvement in our highways system has been largely responsible for the drift in railway finances, and, while.we do not advocate a policy of retrogression in respect of highways, we consider that the present highways system, if reasonably maintained, is sufficient to meet the needs of the transport system of the Dominion for some years to come. It is difficult to estimate what saving can actually be effected, "firstly, by the cessation of capital works, and, secondly, by confining attention for , the present to only essential maintenance. We believe, however, that if rigid control is exercised the sum of at least £50Q,000 per annum should be made available from motor-taxation to assist towards Budget equilibrium. MISCELLANEOUS ADVANCES. Education Reserves Act, £2OO. We recommend that the 4 two items of compensation for improvements should be subjeet to annual appropriation by Parliament. Loans to Natives, £«500. , We consider that there is no necessity, for a special loans branch for the purpose of making advances to Natives, and that such loans should be dealt with under the ordinary provisions of the State Advances Act, through the State Advances Office. That office was specially constituted to deal with this class of business and has the organisation to control it. If such, business were controlled, by the State Advances Office the, loans would. be made from capital under proper' supervision, and the Consolidated Fund' would thus be relieved of an inappropriate charge. Estimated; saving, £.8500. Maintenance of Overseas War 'Graves, ' £15,375. Expenditure under this heading ceases during 1931-32. This will relieve the ' Consolidated Fund to the extent of £15,375. Compensation to Owners of Stock Condemned, £14,500. Compensation for Diseased Stock Destroyed, £17,000. The amounts provided under the above headings total £31,500. The first of these items covers compensation to owners of stock slaughtered, for food and found on inspection to be diseased. We see. no reason why the practice of paying compensation should be continued, and accordingly recommend that the statutory provision for payment , be repealed. Vendors of other foods which are condemned or become unfit for consumption have themselves to bear the loss, which is generally recognised as a loss incidental to trad- - ing, and there does not appear to be any reason why the Government should extend' special consideration to one r class of the community. * 8 ' hbwever, necessary to make provision for cases where animals are destroyed and where a ' post-mortem examination discloses no disease. Such eases do occur, and it is only just that , the owner should be protected in such i an event. We also consider that it would be reasonable to pay compensation in cases where an inspector is called in to examine stock and where an appar- ' intly healthy animal is found to be .• diseased and its destruction is ordered. It is difficult to estimate w;hat saving eould be effected in respect of stock , r killed on the farm, but probably a nominal appropriation of, say, £2OOO would suffice. This would show a total 5 saving on the two items of £29,500. We, further consider that whatever ■ compensation is provided should be V ® ub j eet to annual appropriationjby Parliament. . ; Fire Insurance Fund, £IO,OOO. _ We recommend that the annual contribution bf £IO,OOO to the Fire Insurance Fund should be suspended for the time being, and that any future - contributions be subject to annual appropriation by Parliament. Estimated saving at present, £IO,OOO. HauraJd Hains; Bates on Unoccupied , Crown Lands, £3OO. , We recommend that this expenditure > S f. u *' e ' ct t0 ai »nual appropriation by . Parliament. ■ t ' ■ ' Administration" Expenses on National Endowment Land, Cfiooo We see no necessity ior tSe appro- , pnation of the sum of £SOOO under this heading. This item, has been for the of ÜBtia K the Departmental

Annual Payment on Account of Arawa District Lakes, £6OOO. We are informed that the Arawa Trust Board lias offered to forego for three years S per cent, of tho funds received by the Board as compensation for the relinquishing of local fishingrights, so that if this offer is accepted there will be a saving for 1932-i>o of £4BO. We recommend that this amount be subject to annual appropriation. Payment of Annual Sum to Tuwliaretoa Trust Board, £3OOO. We recommend that this item be also subject to annual appropriation by rarliament. Recoupment of Balance of Loan, Motatau No. 2 Block, £3610. This is the final payment on this account. Saving for L 932-33, £3OIO. Postage Stamps to Members of Both Houses, £2200. We recommend that this privilege be discontinued. In addition to the allowance provided under this item members enjoy franking privileges during the session, and we see no justification for both the supply of stamps and the continuance of franking privileges. In our view one or the other should be discontinued, and we think that there is less reason for a monthly supply of stamps all the year round than for the granting of franking privileges • during the session. We recommend the repeal of Section ]sl of the Public Eovenues Act, 1926, which provides for the supply of stamps to the value of £2 per month to members of the House of Representatives and £1 pei' month to members of the Legislative Council. Estimated saving, £2200. GENERAL. The permanent appropriations represent an unduly large portion of the public expenditure. This, we find, is due to the indiscriminate introduction in financial measures of the words "Without further appropriation than this Act," which practically has had the effect of depriving Parliament for all time of the ability to review* and control the annual expenditure. We have therefore recommended that many of the permanent appropriations be abolished and that the expenditure be brought under annual review by Parliament. This would lead to more effective contrql of expenditure and give to Parliament that right to the annual review of the whole of the expenditure of the country which it should assuredly have. In this connexion we have noted that the Treasury has also advocated this reform* which would bring the system into line with that in operation in England, and that the Controller and Auditor-General in his report presented to Parliament in 1928 drew attention to the large prop6rtion of the annual expenditure which is exempt from annual appropriation. The Controller and Auditor-General also quoted the practice in England where the expenditure exempt from annual appropriation by Parliament is relatively BmalJ and includes only the charges on the national debt, payments to local taxation accounts, King's Civil List, and a number of special salaries, annuities, and pensions. We are strongly of the opinion that it would be in the interests of national finance in this Dominion to dispense with perj manent appropriations to a very large extent. SEPARATE ACCOUNTS. We -would here refer to the fact that the Public Account consists of a number of separate funds and accounts in addition to the Consolidated Fund and Public Works Fund. Theso separate accounts were largely created for the purposes o.f capital expenditure, and have been established in the past as various developmental schemes and trading activities have been inaugur= ated. The Treasury urges that the simplification of these accounts would lead not only to economy in administration, but would also enable the Treasury to work ; on a smaller cash balance in the bank j than is, possible at present. I - We are of opinion that the present | system of dealing with these separate [ accounts in the annual published statement of the Public Accounts of New Zealand is somewhat complicated, and should be simplified. | -Treasury and Audi*, officials are in accord as to the desirability of simplification. This could largely be effected by abolishing the permanent appropriations within the. separate accounts as already recommended with regard to the Consolidated Fund. Further simplification could bo effected by abolishing such separate accounts as might no longer be required, and by treating the matter generally on the lines laid down by recognised authorities on governmental accounting. "We recommend that legislation be introduced accordingly. SALARIES AND WAGES. Apart from the permanent charges which we have already dealt -with, a ! very large proportion of the annual expenditure is in the form of salaries and wages, and the only means of bringing about a reduction in this class of expenditure is by dismissals, or by reductions in salaries and wages, or by a combination of both. In this report we propose to deal only with reductions in salaries and wages. The amount payable by the Government in salaries and wages on April Ist, 1931, was approximately £14,000,000 per annum, but this did not include a large number of relief workers then in the employ of the Public Works Department. These salaries have already been subject to a reduction of 10 per cent, so that the total amount now payable is in the region of £12,500,000 per annum. After reviewing the national expenditure in relation to the present and prospective position of jpublic revenues, we are forced to the conclusion that further reductions are imperative. We have therefore to recommend a general reduction of 10 per cent, in salaries and wages of all public, servants as from April Ist, 1D32. This is tho minimum we can recommend, and, in addition to the reduction of 10 per cent, already in operation, means - a total reduction' of 19 per cent. We suggest that the reduction should have the same application as that imposed by the Finance Act, 1931 (Nb. 1). This would result in a total saving of approximately & 1,250,000; but the whole, of this saving would not, accrue to the Consolidated Fund. We shall refer to the effect on the Consolidated Fund later. We have considered the possibility of recommending reductions on a graduated scale, but feel that a recommendation op tjjese Knee, fronld involve many anomalies* moreover, graduation is al-

taxation. The following table illustrates this: —

[ A General Reduction in Wages. ! If the Government .decide upon a further reduction in salaries and wages we believe that the lead will be accepted by the community, and that there will be a consequent fall in the money valuo of emoluments generally. Reductions in wages will not of themselves achieve a rlturn to prosporit}-, but, as an important factor tending towards economy and lower costs of production, will help to bring about more stable financial conditions. Turning now to the effect upon the Consolidated Fund, we find that out oL' a total expenditure on salaries and wages of approximately £12,500,000 per annum, the amount payable from the Consolidated Fund is approximately £5,400,0.00. Our recommendation of a reduction of 10 per cent, will, if given [ effect to, result in a direct saving of &540,000 to the Consolidated Fund. There will, however, be indirect gains through the Railway Department and Post and Telegraph Department, as the savings in salaries in those Departments will result in increased returns to the Consolidated Fund for interest and profits. It, is safe to assume that the benefit will be equivalent to the actual reduction in salaries, which will be approximately £ 624,000. There will be some small indeterminate gains from other accounts, but for all practical purposes these need not be considered here. We wish to refer specially to the position of the Public Trust Office, the Government Life Insurance Office, and the State Fire Insurance Office, in so far as reductions in salaries are concerned. The previous reduction of 10 per cent, was taken in those Departments from the funds of the offices as relief to the Consolidated Fund, nn( }i while this may perhaps have been justified as being some return in respect of the guarantee of the Government, either actual or implied, we consider that the Departments should receive the benefit of any further reduction. These Departments are in competition with private institutions, and should not be deprived of the advantages enjoyed by their competitors. FIXED INCOMES. "We have referred previously to the urgency of the situation confronting the Dominion, and have stated that, in our view, the financial position is so serious that every section of the community must make some sacrifice. So far we have considered salaries and wages in relation to the Public Service and pensions, and have recommended reductions in both cases, in the belief that private and local body employees will suffer similar reductions. Our great difficulty has been to devise some means whereby equality of sacrifice may be obtained. "We feel that the recommendations made are in effect necessary readjustments of money incomes, but that such readjustment cannot begin and end ar. just the classes of income we have mentioned. The Dominion as a whole cannot hope to adhere to the existing level of money incomes irrespective of the value of money, and some general basis of adjustment applicable to all classes of income alike must be found. Burden of Interest. In our examination of the public expenditure we are confronted first of all •with the heavy burden of interest on the Public Debt. We cannot suggest any basis of adjustment in so far as the overseas portion of the debt is concerned. We do, however, think that those whose incomes are derived from investments in Government internal loans must, of necessity, share in the general sacrifice. In any case, the burden of having to pay the same rate of interest, though the value of mone} is greater, presses just as hardly on the national Budget as it does on trade and I industry, and we believe that some adI iustment of the interest burden of the State in so far as it relates to the internal debt must be found. In considering the question of interest we have had to Tecognise that, while the return to those who lend money must be sufficient to induce them to save and lend, it should not be greater than the debtors are able to bear. We realise that in very many cases the incomes of those affected directly and indirectly by the reductions recommended in the cases of salaries and pensions are subject to fixed charges in the form of interest and rent, and feel that, while money incomes, such as salaries and' pensions, are subjected to a reduction, so also should the incomes of the creditors of wage-earners and pensioners' be subject to a similar reduction. If this object cannot be achieved, there must, of necessity, be much dissatisfaction with a policy penalising one or two special classes of the community. If such dissatisfaction is to be avoided, then the sacrifice must be exacted from all. ... Dealing first with the position in retard to the internal Public Debt of the Dominion, we submit hereunder a statement showing the amount of loans raised bv the Government from internal sources and the rate of interest payable thereon.

61,743,883 53,270,495 115,014,378 The annual interest charge on the debt as above is £5,303,356. A considerable sum has been raised in New Zealand by the issue of loans tho interest from which is free from income tax. The on securities free of income tax is £1,423 999; and on other securities £3 879,357, making up the total interest charge o £5,303,356. Two Methods of Belief. There are two methods whereby asai2Zl "war*, the Budgetary gjbon mav be obtained in regard ta interest otT the internal Public Debt. These are ™(1) by a revenue stamp duty on coupons and interest warrants, and (2) by a voluntary conversion loan. There are advantages and disadvantages in respect of each, and be briefly summarised as follows. Revenue stamp duty on coupons and interest warrants — The advantages are (a) That the duty could be put into operation immediately. (b) That there would be no costs in : volved. (c) That the duty could be purely of an emergency character, and could be lifted wholly or in part as prosperity returns. A general fall in the interest level is I vital to the revival of trade and indusi £tJ5 in ggmjnlop, gad, thg gumdgan-

tage of such a charge, particularly on a permanent basis, is that it would fail to bring about this result. The position of national finance is, however, so acute that we suggest the advisability of a charge in the nature of a special emergency stamp duty on the interest on all internal loans bearing interest at 4i per cent, or over. We are of opinion that the question of taxation is one outside the order of reference of the Commission, and we do not venture to suggest the rate of stamp duty which should be imposed. It should, however, be a rate commensurate with the sacrifice demanded of other classes of income. A Conversion Loan? Dealing now with the question u£ a conversion loan, the disadvantages are: (a) Considerable cost is involved in the process of conversion; (b) Immediate relief to the Consolidated Fund would not be possible, as probably at least three months would be required to complete negotiations; (c) it would penalise investors for the whole duration of the loans. The advantage is that conversion would give relief to the Consolidated Fund over a long period and would tend 1o reduce the general interestlevel. We believe that the Government should carefully consider the possibility of making an appeal to investors to convert their securities into loans carrying a reduced rate of interest. In effect, we recommend a combination of stamp duty and conversion, mainly because by this means immediate relief to the Consolidated Fund can be obtained. We suggest, first of all, that the Government should at once call a conference of representatives of the leading financial institutions, the Press, and representative brokers, with a view to gauging whether a conversion issue would be likely to meet with success. Nothing would be more fatal to our credit than an unsuccessful conversion scheme, and we could not suggest an immediate appeal unless the probability of success had first been gauged. As a basis for consideration of a conversion scheme, we suggest a general reduction in interest on all internal loans bearing interest at 44 per cent, or over, of 15 per cent, (that is 3s in the £1). If such an appeal be made it should be preceded by a full statement of the financial position of the Dominion, and, in particular, of the budgetary position for 1932-33, and we believe that, if properly organised, a successful termination to a conversion scheme might be anticipated. Tf a conversion scheme be decided upon, advantage should be taken of the occasion to arrange suitable maturity dates, in order to eliminate problems of redemption for some years to come. We suggest also that an option should be given to the holders of tax-free loans to convert into taxable loans at such premium or higher rate of interest as might be considered equitable. The annual gross saving in 'interest on the basis suggested above is estimated at £564,000. Loans Held by State Departments. Before passing from this phase of the subject we would refer to the large amount of the Public Debt held by | State Departments, principally the Post Office, State Fire Office, Public Trust Office, Government Life Insurance ! Office, and various Treasury accounts. The amount of the debt so held is £53,270,000. Of this, the Post Office holds of, which, however, £37,911,000 bears interest at 4 per cent, or less. The reduction suggested would, therefore, affect, only £8,135,000 of the debt so held. The loss in interest on this amount would be reflected in reduced Post Office profits (subject, how- j ever, to any saving which might be effected by a reduction in the rate of interest paid to depositors), and, as t Post Office profits are paid into the I Consolidated Fund, the reduction would, in effect, ■ be a charge on that ] fund. Any losses of interest on public debt held by the Public Trust Office, the Government Life Insurance Office, and the I State Fire Insurance Office should be borne by the respective Departments. The amount of the debt held by Treasury accounts is relatively small and need not be separately considered. Interest on Mortgages, Etc. Dealing now with the question of in--1 terest on mortgages, debentures, deposits, dividends from preference shares, etc., our view is that, as the interest charge on securities of this nature does not affect the public expenditure, the matter does not come within our order of We feel, however, we would be failing in our duty were we to make no reference whatever to the matter. Private compositions affecting both principal and interest are being arranged daily, but, in our view, a general change sueli as is contemplated cannot, be left altogether to natural economic forces to bring about, as such a policy may under present conditions be too slow in operation and may not result in an equal all-round adjustment. We feel, therefore, that it would be reasonable to widen the scope of the existing legislation in order to accelerate the. private compositions referred to. We do not feel that it is our duty to suggest. the nature and form the legislation, should take. It should, however, aim at the policy we have advocated from the outset—that is, equality of sacrifice, and a general levellingdown of costs of production. It would be necessary in drafting the legislation to make provision for a special Court of equity to consider applications by mortgagors or mortgagees, and the aim should be ttf make the process as simple and inexpensive, as possible. Mortgagees and others whose incomes are derived from fixed investments cannot hope to escape a comparable and equitable contribution to the general sacrifice which it has been suggested should be imposed on holders of public securities. To permit them to do so would be unjust and give ground for complaint that one class of investor had been penalised, and the State as a borrower would be seriously prejudiced. 1 Cognisance must be taken of the fact that the burden imposed by mortgage j charges based on inflated values is impossible. A reduction of interest, necessary as it may be in the meantime, is merely a palliative, and in many cases will prove futile. The all-important question of capital values is involved. A reduction in the rate of interest from, say, 7 to even 4 per cent, is not going to help a borrower who has amortgage of £IO,OOO on a property which to-day will not produce sufficient to enable him to pay the reduced rate on £SOOO, or even less. Finally, there is one further class of fixed income to which we must refer and that is the incomes of those who' hold local-body securities domiciled in the Dominion. There must be some adjustment in incomes of this nature, and we accordingly suggest the imposition of a special stamp duty in the meantime as a means of relieving the burden of local rates, to be followed later by a conversion scheme such as we have outlined in respect of the internal Public l)ebt. SUPERANNUATION FUNDS. Owing to the limited time at our disposal we have not been able to go into the very complicated question of superannuation to retired officers of the Public Service. We propose to deal with this subject at an early date, and will embody our findings jat orar final report, 1

THE LEGISLATIVE DEPARTMENT. The following is a comparative review of the cost of the Legislative Department, as revealed by th© annual appropriations for the years 1914-15 and 1931-32. The summary sets out salaries and wages for each of the two years referred to shown separately from other charges.

Totals

It will be observed that the total appropriation for 1931-32 exceeded that for 1914-15 by £54,920. The greatest increase is shown under the heading "General Expenses'" (item 7), where the appropriation for 1931-32 exceeds that of 1914-15 by £.46,660. It should be explained that in 1914-15 certain items of expenditure were not provided under the Legislative vote, such as printing of statutes, £10,000; railway passes, sleepers, and lounge seats to members and wives, £27,075; and refund to Post Office on members' telegrams, £I2OO. Also the Law Drafting Office was not then a section of the Legislative Department, as the work was carried out by a branch of the Solicitor-General's Office. These four items, for which no provision was made in the Legislative vote for 1914-15 total £41,375, and if this is deducted from the excess of £54,920 mentioned above, there is still an excess of £13,545 over 1914-15. Economies Suggested. The increase in salaries and wages of permanent, temporary, and sessional staff over 1914-J5 totals £14,080. A part of this increase, £2507, represents salaries for the Law Drafting Office, which brings the increase over 1914-15 down to £11,573, and some allowance must also be made for the increase in salaries under the heading "General Expenses" occasioned through additional cleaning and outside staff necessary in consequence of the larger buildings and grounds now in use. However, after taking these factors into consideration, we find that the salary burden, particularly under the headings "House of Representatives" and "Bellamy's," has increased to a greater degree than has been justified. The opinion was expressed by the Economy Committee in 1921-22, and endorsed by the Economy Committee in 1931, that both Houses are extravagantly staffed, and that the staffing arrangements would be made more efficient and could be put on a less costly basis if placed under similar control to the jest of the Public Service as regards appointments and emoluments. We endorse these views, and recommend that the appointment and control of staff be placed under the Public Service Commissioner, while for duty and discipline during sittings of Parliament they would remain under present control. .From the evidence we have taken wc consider that undoubted economies should result. We would place the economies in salaries on a conservative basis at £6OOO. We recommend reductions in the remaining items ori the vote as set out in the statement hereunder, being convinced that tHese economies can be effected by closer supervision and control. Reduction recommended. Total. Subdivision i-1. tlouhe of Representatives : £ £ Item, printing and stationery 100 I , , Telephone services . 50 Subdivision IV.—General Assembly Library : Item,* Binding books TOO , , Grant to Library Fund ISO , , Newspapers 50 —3OO Subdivision Vl.—Bellamy's: Item, Washing linen TOO Subdivision VII. —General ex- • penses: Item, Charwomen 200 | , , Fuel, light, power, Btc. 1,595 , .Furniture, etc. .. .. 1,000 , , Postages and telegrams 200 , , Uniforms for messengers 50 , , Upkeep, parliamentary grounds .. .. SO £3,645 In addition, there are other items to which we draw special attention, and in connexion with which some saving should be effected. These are— General Assembly Library. We are informed that there are approximately eight hundred holders of recess privileges who have access to the General Assembly Library. The granting of privileges must involve some cost, and we see no reason why a small charge should not be -made for such privileges. We would recommend that a charge of £1 be made to privilege holders, with a special rate of 5s to bona fide students, of whom a number use the library. This should provide the sum of £4OO in reduction of the general expenses of the library. "Hansard." The number printed during last year was 7225 copies, each of twenty-two weekly issues, or a total of 158,950 copies. Each member of Parliament is entitled to seventy-five copies, each member of the Legislative Council to forty copies, and each Minister for the Crown to ninety-five copies of each issue. We recommend that the number of copies printed should bo reduced by onehalf, and the copies allowed to members of the Legislature reduced to a similar extent. The number of subscribers amounted to only 156 last year, and the proceeds from sales totalled £lB9, as against the total cost of reporting and printing of nearly £12,000. It is difficult to state what the annual saving will be, but on last year's figures the sum of £ISOO would have been saved. Bellamy's. The total amount of the vote for Bellamy's for 1931-32 is £7950, but the total cost as.shown in the Income and Expenditure Account of the Legislative Department for 1930-31 was £10,355, exclusive of interest. Some of the staff, whose salaries are provided under this subdivision are employed during the recess on general work in the Parliamentary Buildings, and an allowance of approximately £2OOO shoufd be made on this account. We consider the expenditure in respect of Bellamy's is more than the country should be called upon to pay, as the institution is in the nature of a club. We have not been supplied with a statement of the accounts i of Bellamy's, but presume that under the present system of management the amount provided as a charge against the Consolidated Fund each_ year is neces> sary to maintain the institution. We recommend that the vote should be reduced by at least 50 per cent;, or a saving of approximately £4OOO, and that the charges should be revised to provide for a greater part of the cost being met by those who enjoy the privileges of Bellamy's. General Expenses. Passages of — Members of both Houses .. 1450 Members' wives •. -00 £1650-

This covers the expenditure on steamer passages for members Of both Houses and for members' wives. Members of the Legislature are entitled at any time to travel at the public expense between the port most convenient of access to their homes and any other port in New Zealand to enable tliem to come to and return from Wellington. We recommend that a definite limit be placed on. the number

! of trips allowable to each member, and t suggest that a limit of eight return l trips should be ample. Members are also entitled to receive tickets entitling ' them to travel by service motor-car i.f 5 there is no reasonably convenient railt way or steamer service. We recoms mend a similar limit of eighty return j trips in this instance. The wives of „ South Island members (including a re- ' lation acting as housekeeper if the* mem- ' ber has no wife) are granted six return tickets to and from Wellington. A I limit of three return tickets should bo ample. ' Against this item are also charge- ' able travelling expenses at thg rate t of 18s per day and taxi fares, etc., for J members coming to Parliament or re- , turning home after the session. Travel- , ling allowance is payable for each ! day or part of a day on which members ' are travelling to Wellington or return- [ ing to their homes. We consider that in view of modern transport facilities, the payment of the allowance should be confined to cases where the period * of travelling exceeds twenty-four hours. I and that in other cases actual and roa- . sonable expenses only should be paid. i Estimated saving, £SOO. ; Postage and Telegrams. i The expenditure chargeable against i this item is in respect of postage on I Hansard to persons nominated by mem- ■ hers, correspondence, etc., of members " during the session. The ranking pri- ■ vileges mentioned above, which are ex- > tended to members during the session,. " are in addition to the monthly supply > of stamps issued to members under the | authority of the' Public Revenues Act, 1926, and we have already recommended 1 that the latter be discontinued. We consider that with closer supervision ' this item should be reduced by £2OO. 1 Printing gf Statutes, Journals. J This covers the cost of printing of ! Bills, journals, appendices, Order Papers, etc. We consider that the appendices , should be reviewed, as it should be possible to avoid the printing of some of [ them.' We also consider that the num- • ber of Bills supplied to members should i be limited, and that the supplying of a bound copy of the Appendices should be discontinued. Estimated saving, : £3OOO. Railway Passes. £ i Railway passes and concessions i to members and ex-members of the Legislature, families, relations, etc. .. 25,500 Railway sleeping-berths for members of Parliament .. 1,250 Railway lounge-ear seats for members of Parliament .. 25 Railway sleeping-berths and lounge-car seats for members' wives .. 175 Members of the Legislature and their wives obtain free railway passes over all lines in New Zealand at an annual | cost of £92 10s each. The system of issuing free passes is an unnecessary extravagence and should be abolished. In lieu thereof a warrant system should be introduced entitling members to free railway travel on production of orders signed by themselves. We recommend that members be entitled to free tickets up to a value of not more than £SO in any one 'year. We can see no reason for the privilege of unlimited free railway travel. In regard to the privilege extended to members' wives, we are definitely of the opinion that unlimited free travel should be abolished. The privilege to members' wives, or, if a member has no wife, to some relation acting as housekeeper, should be limited to three return tickets to Wellington each year. Free railway passes are also issued to ex-members who have had ten years' , service or have served in three Parliaments. These passes are renewable on application. We recommend that this privilege to ex-members be abolished. Free railway passes are also provided for such ex-members' wives for a period of one year. This privilege shouM be abolished. Free railway passes for life have also been issued to the wives, of deceased Ministers in certain cases. We recommend that no further passes of this description be issued. Finally, half cost of railway travel to and from Wellington for families of members of the Legislature is provided. The families of the riiembers are entitled to travel to and from Wellington as often as desired, at half rates. We recommend that this privilege be abolished. Total estimated savings, £12,800. Members' Telegrams. There is a special charge of 6d for thirty-six words by telegram for members of the General Assembly, who can send unlimited telegrams at this rate. This rate was not varied when telegraph charges were generally increased. A fixed charge of £I2OO on the Legisla- . tive Department is made by the Post Office for the difference. We recommend that the charge be increased to Is for thirty-six words. Estimated saving, £6OO. Total Savings. For the sake of clarity and convenience, our recommendations in respect of the Legislative Vote are tabulated here- ■ under:— ' £ 1. Reorganisation of staff— Savings in salaries .. 6,000 2. Miscellaneous savings already tabulated .. 3,645 3. Charge for recess Library 1 privileges .. .. 400 4. Hansard Reduction in copies . • .. 1,500 •5. Bellamy's—Reduction in cost to State .... ... 4,000 General Expenses. 6. Passages—Members and wives .. .. 000 7. Postage and telegrams .. 200 8. Printing of statutes .. 3,000 9. Railway passes and concessions .. .. 12,800 10. Refund to Post Office for members' telegrams .. 600 11. Supply of publications .. 225 12. Travelling allowances and expenses 20 £32,890 NAVAL DEFENCE. We have considered the expenditure under this vote, and at the outset would draw attention to the progressive cost of naval defence to New Zealand since April Ist, 1914, as illustrated by the i following. statement* JEmbi which, th®

1 payments in respect of the Singapore Base are excluded: — & 1914 " 15 • • * • 1915-16 .. • • * 1916-17 .. • • 3 l'Ht 1917-18 .. •• 42,002 1918-19 .. • • 1919-20 .. • • 20 >°li 1920-21 .. • • 48 > 6 ?" 1921-22 .. • • 303,017 1922-23 .. •• 211,225 1923-24 .. • • 285,720 1924-25 . • • • 283,356 1925-26 .. •• 441,203 1926-27 .. •• 527,023 1927-28 .. • • 486,830 1928-29 .. 463,496 1929-30 .. •• 437,573 1930-31 .. • ■ 418,837 1961-32 (estimated; 390,000 The basis of New Zealand's contribu-. tion towards naval defence has been radically altered, in that, in place o the subsidy previously paid to his Majesty's Government in Great Britain, the New Zealand Division of the Royal Navy has now been established. The present agreement with the Admiralty provides for the formation of the New Zealand Division of the Eoyal Navy, and the Government has undertaken: — (a) To maintain a seagoing squadron of two "D" class cruisers. (b) To replace the_ above cruisers when over age, in 1935 and 1908 ie"ipectively, by two "B" class cruisers. (Note: It has now been suggested by the Imperial Government that the replacement cruisers should be "Leander" class instead of "B" class, and this would result in a considerable saving to New Zealand as against the cost of "B" class cruisers, but would exceed the cost of the present D class cruisers.) ' (c) To enlarge the Calliope dock and modernise the equipment of the Naval Base. (d) To provide personnel, stores, and equipment for mine-sweeping craft and anti-submarine craft, etc. (JSote: Beyond the personnel of the Royal Navy Volunteer Reserve, practically no provision has yet been made to fulfil this responsibility.) The evidence submitted by the Ivaval Board indicates that a vote of £400,000 is the minimum necessary if the present arrangements are to be adhered to, and we are convinced that this amount must inevitably increase substantially in the future. We believe that under Admiralty control the cost to New Zealand of maintaining the units at present stationed in New Zealand waters would be considerably lessened, but conaider that any reduction in the amount of the vote must involve a change in policy. We are of opinion -that the present divided control cannot give the best results, and that differentiation in the rates of pay in different Divisions of the Service is anomalous and expensive. We therefore recommend that negotiations be entered into with his Majesty's Government in Great Britain for the Admiralty to resume control of the New Zealand Division of the Royal Navy, without any conditions as to the number of cruisers to be stationed in New Zealand waters, in return for a fixed annual subsidy, the amount of which must be determined •by the policy adopted by Parliament. If one cruiser only were maintained in New Zealand waters, and the maintenance of the Wakakura suspended, a saving of about £200,000 a year might bo effected, but the possibility of making the saving would depend upon the policy arrangement entered into between the New Zealand Government and the Admiralty, as undoubtedly relief to New Zealand finance would be at the expense of the British taxpayer. EDUCATION. We have carefully reviewed all items of education expenditure and have earlier in this report made recommendations for the elimination of certain items which appear /under the heading of "Permanent Appropriations," but which are a part of the educational expenditure of the Dominion. We now come to vote, Education, and note that for 1931-32 the gross vote amounts to £3,125,264, less credit-in-aid of £218,536, leaving a net appropriation of £2,906,728. " • The cost of education per head of population under "kll headings has risen from £1 2s lid in 1914 to £2 8s in 1931, an increase of over 100 per cent. The cost per pupil or student has also risen very considerably, and notable among the increases is the increase in the cost of primary education. In this case the expenditure has. risen from £5 4s lid per pupil in 1914 to £lO 15s 6d per pupil in 1931. Similarly, there has been a very sharp rise in the cost of the training of teachers —namely, from £97 8s 3d per student in 1914 to £l4l 17b 9d per student in 1931. It is clear that there must be a very substantial reduction in educational expenditure, and we recommend the reductions set out hereunder. We feel assured that the system of education as a whole will not suffer unduly if our recommendations are given effect to. It appears that even for normally prosperous times the expenditure on education has been on a lavish scale. Listed hereunder are the economies which we consider should be given effect to, and our reasons, where these are necessary, are set out. In the main we have aimed at a substantial reduction in the total vote, bearing in ' mind the present and prospective position of the public revenues and the absolute necessity for effecting such economies as are possible consistent with reasonable efficiency in the education system. Training Colleges. It seems clear that during a period of financial depression it is impossible for the State to engage as many new teachers as during normal times. One reason for this is that during such a period „there- is a reduction in the number of retirements from the Service, more particularly through the non-marriage of female teachers. In addition, also, the teaching staffs are being restricted more closely to the numbers specified in the various regulations, and this lessens the demand for teachers and hence the number of trainees. Even under normal conditions it is doubtful whether the country could possibly absorb the output ■of four training colleges. All this leads to the conclusion that- a. considerable saving can be effected by the closing of two of the existing training Colleges without' loss of efficiency in the Service. We are informed that the fining, college buildings at Auckland, Christchurch are in better condition 'than those at Wellington and Dunedin, and are capable of accommodating a considerably larger number of students, -if only two training colleges are maintained it would be preferable to close the establishments at Wellington and Dunedin. It is obvious that it will not be necessary to train as many teachers as have been required in the past, and that two training colleges Will be ample-for many years to come. We therefore recommend the closing of the training colleges at Wellington and Dunedm. Estimated saving, £7OOO. . Allowances to Training College * Students. At the present time the following allowances are paid to students in the training tnllnyuw— a

T*? - Pei, Aanh B > • * Female student s .. 72 o .«' Male students • • 76 10 g Boarding allowance of £27 per . num. is paid to students living" v from home. - * The total expenditure on allowance, to training college students is in of £105,000 per annum. In Victor!? where approximately the same nnov,; of teachers is employed as in jr" Zealand, the allowance to gtuflpnt! amounted in 1930 to approximate* £39,000. There are fewer student* i„ training in Victoria and the alloiranee* are much less liberal, being £ or dential students £2O per annum nh free board valued at £45, While sh dents boarding away from the coIW receive £72 as compared with a marmum of £lO3 10s in New Zealand Those living at home receive £4O £ compared with. £76 10s for male ih! dents and £72 for female student* s. New Zealand. 1 We would here draw attention to the marked increase in the cost per Wj of trainees in 1931 as compared tritk 1914. The cost has risen from £97 s. 1 3d to £l4l 17s 9d per student. T t his expenditure cannot be justified under present conditions, and we reeom mend that the present allowances abolished and that training college hut saries be substituted therefor to th value of £26 per annum together with a boarding allowance of £26 per an num for students living away fro" home. We recommend that a limitefl number of these bursaries be awarded only to the most desirable students at for instance, degree students 'w!! further recommend that a system of allowances repayable in instalments at the conclusion of the period of trainiiw be instituted. We consider the nuJ. mum allowance should be £52 pet annum for students who can satisfy thi Department that they require assistance during the period of training. The sayings that would be effected by this change would, in the first complete year, be in excess of, £40,000, and the total savings would eventually amount to approximately per annum. We recognise that it would be imp os ; Bible to bring this system into operation +i! 'I 1 tlie date of the opening of the colleges this year, but we suggest that the change be effected from the beginning of the second term i» ' the current year. ' The saving for tl» remainder of 1932-33 would, in thi, event, be approximately £25,000. "School Journal." The total cost of printing and distribution of the "School Journal" is an ■ proximately £6500 per annum, excluding editorial and other' salaries. The "Journal" is a miscellaneous reader and is provided free to all "children in public schools. A charge of one penny per copy for this reader would be quite reasonable, and this would result in * . credit of. approximately £7OOO per annum, virtually a saving. We recommend that this' charge be made, and that it be deducted from the - capitation grants of School Commit--, tees. ... Manual-training Centres. Certain manual-training centres (situated mainly in country districts) are' being conducted at considerable expense, and pupils are being gathered* together from surrounding-schools and conveyed to the .centres at a high cost, • either by rail or road.' There are, however, a large number of country school pupils who are at present unable,.>on account of distance, to receive annual training at these centres, and in' lien thereof are given handwork,. instruction by the ordinary teachers. We consider that the expensive country manual-training., centres. might well be closed, and recommend awwdingJy. The effect would be. to require. I*## 1 *## ordinary school staff to provide iasAwork instruction aB is done in thejsuej - of the other country schools referred to. There should be little, if any, loss of efficiency if this were done. Estimated saving, £SOOO. , Conveyance of School-children. The State is at present providjpg free conveyance to pupils of primary, secondary, and technical schools, and this service is costing the Dominion " approximately £ 118,000 per. annum. This enormous expenditure is unwar-' ranted, and immediate ateps should'be taken to reduce the amount to more reasonable proportions. There is little to be said for tlyj State shouldering tlw burden of conveying children, to school unless there is an advantage to bo gained, say,, by the avoidance of- tie expense of establishing a new school of at least Grade I. We recommend:— (1) That free conveyance to all postprimary schools be discontinued. - The cost under this heading is £15,000 for children attending secondary and technical schools. We consider that parents < of children attending secondary ' aod technical schools should meet the transport cost themselves, particularly M. post-primary education is free.* , ■ (2) That boarding allowances be discontinued, and that the pupils be taught through the Department's Correspondence School. I (3) That the .conveyance allow&nM , !at present paid for primary school' I children be discontinued, except whew : a conveyance system is instituted for the express purpose of saving the expense of establishing a new school of at least Grade I. or reopening an old • one. Estimated saving on conveyance of children, £50,000. * • Closing of Smaller Primary Schools. .We have considered the possibility » of effecting economies by the closing of the smaller primary schools—that is, Grade O schools. These have an average attendance of from one .t® V eight, and they require the services of one teacher. The average cost teaching pupils in these schools is £l® per' pupil, as against £lO 15s 6d per pupil for all primary schools. Childie n attending these schools could, without detriment to themselves, 'receive a traction through the Correspondence . , School conducted by the Department. The average cost of teaching children in that school is approximately £6 per head, so that a saving of £9 per head would result. . Estimated saving by closing all Grade O schools, £ 12,600. Over-scale Salaries Paid to Teach®**By Section 79 (7) of the Education Act, 1914, a teacher's salary is maintained at over-scale rates when the *t-.. tendance at a school falls. In the case of primary school teachers the over- - scale salary is maintained in some cases indefinitely, and in other cases for fiY® years unless the teacher has been offered a transfer, in which case •.■■th® period is considerably less. The P rui " ciple of paying over-scale rates seems to be reasonable provided that payment is not unduly protracted. It should, however, be sufficient to maintain the salary for ono year only, as thi 3 should afford the teacher an opportunity of securing another position, v e .J commend that the period be -limited . to one year, and that those teachers who have drawn over-scale. salary f°r a period or one year or more be notified that the payment will henceforth W. discontinued.' Estimated saying, £3OOO.

| schools are standardised over the whole Dominion, and wo recommend that there be no alteration during the next five years. Estimated saving, £2OOO. Native School Scholarships. We recommend that no further school scholarships be granted, the ordinary facilities which exist in our primary and secondary schools should meet the need for Native children also. Estimated saving, £1750. Maintenance of School Buildings. We are assured that most of the .school buildings at present in use have been kept in very good "repair of late years, and that a considerable temporary saving could be effected in maintenance costs. We recommend that the grants for maintenance of the undermentioned buildings be reduced by the amounts stated:— £ Institutions under the Child Welfare Act, 1925 .. i ( 000 Kative schools .. .. 1000 Technical schools .. .. 1*750 Public schools .. .. 20^000 We consider that the economics recommended under this heading should not result in permanent deterioration of the buildings. Estimated saving, £23,750. Special Allowances to Teachers. Certain special allowances are paid to teachers and assistants for the performance, in some cases, of special duties. The allowances arc as follows:. (1) Allowance of £27 additional to salary of second female assistants in large schools: Annual amount involved, £2600. (2) .Special allowances to Grade 2 female assistants of secondary departments of District High Schools: Annual amount involved, £I2OO. (3) Special allowances to heads of departments and certain female assistants in secondary and technical schools: Annual amount involved, £2OOO. While the teachers to whom the above allowances arc paid have in some cases special duties to perform, we are of the opinion that those who are appointed to the higher positions at tho higher salaries should be prepared to undertake without special emolument such additional responsibilities as are attached to those positions. Estimated saving, £SBOO. Salaries of Female Teachers. It has been established in the Dominion, in so far as secondary and technical school teachers are concerned, that the ratio between the salary of a female teacher and that of a male is approxi--1 mately 4 : 5. This ratio has boon adopted in most countries where there is a differentiation between the salaries of female and male teachers. The ratio has, in fact, been used in England under what is commonly known as the "Burnliam" scale for teachers' salaries, and, for the most part, it is used in the scales adopted by the Australian States. It seems an anomaly that the differentiation should exist in the case of secondary and technical school teachers and not "in the case of primary school teachers, and we see no reason V'hy the salaries . of primary school teachers should not be brought into line, and we recommend accordingly. Estimated saving, £75,000. Minimum Age of Admission to Primary Schools. We have carefully considered the general question of whether there should be any alteration in the age of admission to primary schools, more particularly in tho light of the possibility of effecting a reduction in education costs as a Tesult of an alteration. The expenditure, particularly on salaries, is directly affected by the number of pupils, and this in turn is affected by the age at which children are admitted to the primary schools. We. are satisfied that children would not be adversely affected were the' age raised from five to six. We would here draw attention to the fact that the same question was considered by the Committee on National Expenditure set up by the British Government in 1922. That Committee reported that the evidence showed that children who had not commenced their school training until six years of age did not show any appreciable difference i in their attainments or knowledge on I reaching the school leaving age from | those who commenced at an earlier age. A reduction in the numbers of pupils attending the primary schools would be one effective means of reducing the gize of classes and also the cost of educa- ! tion, and we recommend the raising of | the age of entrance to six years, as was recommended by the Committee on National Expenditure in Great Britain in 1922. - Thp savings that would be effected during next financial year would be as follow: — £ Cauitation to Boards .. .. 2,000 Incidental expenses to School Committees «• 9J)00 £II,OOO There would eventually bo further savings due to the reduced number of trainees required. Proficiency Examination. We arc of the opinion that a fee should bo charged for tho Proficiency examination. A fee of 5s per candidate is at present charged whenever a special examination is held. Wo recommend that a fee of 2s 6d per pupil be charged as a Proficiency examination fee. Revenue from this soured would reduce the cost of this service by approximately £3OOO. Other Examination Fees. Wo h-ve also considered the general question of fees for other examinations • nd are of opinion that a further reduction of cost should bo obtained by charging fees as follow:Revenue. .' £ n") \ fee of 13s for intermediate or senior froc placo certificates ~ ,' ' (o) A fee of 10s for higher .. leaving certificates . . 100 (3) Increase of fees for teachers' certificates from £1 . to £1 Us 6(1 •• . 'i m Fee for certificates issued to teachers from abroad, £3 3s .. •• •' £I4OO We recommend according!}. Taranaki Scholarship Endowment. m /. finiku Reserve, consisting, ot 10 000 a«c vas set aside in 1808 as an 1 '? ' t for a colonial University. ondcAvmen o£ hj? cndowme „t In iju.j h i i he incomo W as set wns called "Taranaki succeeded in university Entrance merit list at tne W(J Scholarship i pc ome from the rehoW6 i U been more than sufficient to aerveshas scho i a rships required, as provide for tl ? ti ly £ew post-primary there are W e are of opinion tliT the Taranjiki candidates are that tlie mud, m ore fayplacecl nosition than University ourablo posuio other.... part ofthe Dominion in that these special!

. scholarships arc available in addition to the ordinary University scholarships. We consider that there is now no good reason why tho revenue from tho reserves, and the accumulated income which has not been used in the past, should not be paid to the Consolidated Fund as a set-off to the increasing cost of University education, including scholarships. The accumulated income amounts to approximately £28,000 and the annual income to £2200, and wo recommend that the law be amended to provide for the abolition of the reservation of the land for a .particular purpose and for the accumulated funds an J future revenue to be paid to the Consolidated Fund. Immediate benefit to Consolidated Fund, £28,000. Free Post-Primary Education. We have given careful consideration to tho extent to which the present system of free post-primary education has developed, and are of opinion that the cost of post-primary education has undoubtedly outgrown the ability of the country to pay. We recognise that free post-primary education offers many advantages, but consider that the tendency has been for the State to assume too great a responsibility in this respect. We believe that every possiblo opportunity should be afforded our young people who have the capacity and eagerness to absorb secondary education, but (•insider that they should be carefully selected upon individual merit and with due regard to any potential qualifica-, tions that they may possess. Tho viewthat all boys and girls should be encouraged to proceed from the primary to the secondary schools as a mere matter of course has prevailed to such an extent that to-day wc find that there are many pupils in our secondary schools who have not tho ability or aptitude to profit by the free but costly instruction which is being provided for them, and some who perhaps have the ability but are lacking in the desire to do so. We recommend a more rigid system of examination for both junior and senior free places and a weeding-out. of those who, after a reasonable trial, disclose that they are failing to benefit by their post-primary opportunity. At the present time a junior free place holder may have free secondary education for two years or, in some cases, for three years, but in no case beyond the year in which he reaches the age of seventeen. If, at the end of his. junior free place period, the pupil is qualified in the opinion of the Department to benefit by further education, ho is awarded a senior free place, which is tenable until the end of the term in which he reaches the age of nineteen. Wc recommend that the cumulative tenure of junior and senior free places should be reduced by two Vears, the free place terminating at the end of the year in which the pupil reaches the age of seventeen years. Tlie more promising pupils would still be able to qualify for entrance to the University. The "duration of free post-primary education 'would depend on the age at which the pupil qualifies to commence it, in othel words, the younger he was at the age of qualifying the longer would the period be. Wc da not suggest anv alteration in the period for the junior free place, and under cur recommendation it would still be necessary for the pupil to qualify for a senior free place at the end of the second year, but if the restriction of age were imposed, as recommended. the effect would be not only to lessen the number of pupils holding free places, but to decrease- the average length of the period during which such free places were held. It is difficult to estimate the savings that would result if our recommendations were given effect to. There will be little definite saving for 1932-33, but, as far as can be judged, the savings should eventually, approximate £30,000. There is another avenue of economy, or rather a reduction in cost to the State, which we consider should bo'explored. We refer to certain classes in technical schools for which fees are charged, such as accountancy and trade classes. In both the fees are low, and it would not be unreasonable to increase them. We recommend an increase of 3i! 1-3 per cent., and estimate that this would benefit the Consolidated Fund to the extent of £3OOO. Capitation for Sewing in Primary Schools. At present the sum of £3OOO is ex- ! ponded by way of capitation to enable i instruction in sewing to bo given by part-time teachers in single-teacher ccuntry schools under tho control of male teachers." This special capitation should be discontinued, and the necessary instruction given in the home,'and we recommend accordingly. Estimated saving, £3OOO. Agricultural Instruction. We have reviewed the question of agricultural instruction, and have come to the conclusion that little, if any, harm would result from the discontinuance of this class of instruction. There are twenty-two agricultural instructors, and the salaries, travelling expenses, and incidentals cost approximately £II,OOO per annum. We recommend that three months' notice of intention to discontinue the instruction bo given. The" teachers have been largely responsible for the formation of what are , known a& "agricultural clubs." These have been formed in collaboration with th,e instructors and inspectors in the Agricultural Department, and the clubs should be able to function notwithstanding the fact that the agricultural instructors are dispensed with. All teachers passing through the training colleges receive instruction in elementary agriculture, and with the assistance of inspectors of the Agriculture Department may be expected to carry on this special subject without assistance for the time being. Estimated saving, £II,OOO. Manual-Training Instruction. Instruction in woodwork and cookery is at present given to Forms I. and 1., corresponding to Standards V. and VI. Wc are of opinion that in so far as Form !•—i.e., Y.—is concerned the instruction might be discontinued, and this would save the salaries of a number of teachers and their travelling expenses. Wc estimate that the grants to Boards for salaries, travelling expenses, and incidentals would be reduced by £13,000. We have already recommended tho closing-down of expensive manual-training centres, and the present recommendation is in addition to the saving which we estimate can be effected bp the closing of those centres. We consider that the pupils of-Form" 1/ can ultimately obtain instruction in handwork and cookery when they reach Form 11., and later still when they commence their post-primary education. Estimated saving, £13,000.

abolition of boards RECOMiMENDED. We ta ve considered in detail the ad- • 'rtrative <" ost ul " tlic educational \r» Zealand as compared rtstefß 1,1 "tk the cost liu ' Austl ' :ilian States, *\ a re ff the syßtcm *furtseiit il! tllc UominL, is unci jly e.\p"ii -i > rnder tlx- Knunl -yslem in opera- * tbc rust per pupil 'fv* while the cost per pupil 111 maintained admiuisI l.v the Kdmnii'ii Department 13 * , ".'ilil uer pupil- 1,1 Ilu ' Australian AfllV I*3 ' * J ' • | ,1 II Mic cos! per I'Uj"l as follows: % South Wales, -is -Ul; Victoria, 4s; mormallv high eost in tin; Dominion is « l«r<»clv t" the system fjss* i"™"', "■ ""rr- 7* fa. to control l.v I'nmary Lducatum jS, Secondary Sehool Hoards, and JSffi£ a r School Hoards, us well as by Department. The Hoards have no for the raising of the ZLv thev spend. and practically the iiinf the expenditure on education, 'StS. . --woo Utnum, passes firM of all I uuuj, i the Motion Department and then through ji.. Boards, the expenditure being go\-. " J bv the Education Act or by reguSl,'administered l.y the DepartSJ Under the present system it is Zwtarr for the Department to overHI expenditure, ami the result is H*t the present system of administrate h one of t!u ' m " st ~ mubrous a,l(1 wk- that could be devised. We consider that the Hoard system be abolished, but that School daunittces should !<• retained. There Aeeld l>e n0 rijk oC ail - v lops of ; r ... in tho education system as a jWBlt. AS a means of maintaining hf,! interest in secondary and technical chools we suggest the formation ,f School Councils, somewhat nltin to ttitats 1 associations which have come £to be ng of recent years, and v. hicli Inn proved how successful and cffectfrt «nch voluntary organisations can It in stimulating local interest. Estimated saving, £ 50.000. Future Control. Before passing to consideration of gtltr matters affecting education exwrittme. we desire to state that, in «ur opinion, the expenditure of such a luge annual sum of money on the allidperteat national service of education ibwUlM governed entirely by principle polky, and should be removed from tie possibility of being influenced by awtivn Of political expediency. In the Jut there has been lavish expenditure m education which eould have been sroidtd without effecting the efficiency «f tlw»y*tem. With a view to providi»y * mare effective measure of control, we recommend a change in the present tyrtmby tie establishment of a Cental Adtiory Board, in which the contxolof testation in the Dominion should fee ventedL. 1 We ian recommended the abolition of tin existing Education Boards, and ctated that it should be a simple matte* to maintain local interest by means o( fcrooraiy School Committees or Coun«Ql. Vte feel that local Council* should be aMe to co-operate with a ' Centre! Aintoty Board, and that the imlt stoolil to mere economical conttrol ef the «le«tfonal system and at a* Kpdfaefficient service. flqUrtaental Staff. JbtSt k» been a consider(w* J fßnJrtion already in tlie I gut of the administrative and wHpeetatttJ. stafi of the Depmtaii* amounting in all to apt ywriantely ii 17,000. Wo consider, |*pj^sf' :, Sat by -withholding the api friMant of one senior inspector and '<W rteff iaspector, and also by postappointment of a Native iriM impector. a further saving of s|llM <sb be effected. ! Committees' Allowances. present the allowances paid wimittces havo not been rcre are of the opinion that it asonablc to reduce these alat least 10 per cent. We J that a considerable numiol. Committees are able to i year with a credit balance, i indicate that the allowat the present time arc view of present conditions of 10 per cent, would be and we recommend accovdsaving, £ 10,000. itation Allowances, t capitation allowances are rds on account of secondary strict High Schools and for •es" in secondary schools, capitation rate is 7s 6d per arc of tho opinion that a rflßWef 4b should, in view of present vHRBMM. be sufficient, and we recomIm accordingly. present conditions, the a for science classes in should be discontinued. :hiß will be that the eachers must depend on iratus, and, although may be somewhat lessy through lack of materuction, such as plantto elementary agriculccn more fully, and for ratus and material arc pconnnend that tho spclie discontinued. a Primary Schools. ?sent it has been usual ial materials for handy schools. In view of >r tho utmost economy, 1 be required to use for this work, and we :ordingly. We arc ini lias already been done r extent than formerly, that tho change will be inly teachers and ie whole community, as > inculcate habits of 1 that the present eapis of £2 to secondary or incidental expenses ed to £1 15s. If this is heavily upon the i effort should be made of economy in adminisowances paid to Techords have proved more for the purpose, and ords have succeeded in tteiderable reserves. Wo lion that the Boards to effect economies in The allowance is at int. of the salaries paid, end that it be reduced School Books. d that the supply of to to pupils in necessiteontinued. There is a •penditure under this ■se; but parents, teachCommittees could assist >ed school books which on free to the pupils Hie books in tho primary;

LIST OF ECONOMIES. The economics suggested above are listed hereunder for the sake of clarity and convenience:— . £ Closing of training colleges at Wellington and Dunedin .. 7,000 Allowances to training-college students (eventually reaching £90,000 per annum) .. 25,000 "School Journal" .. .. 7,000 Manual-training schools . ~ 5,000 Conveyance of school children 50,000 Closing of small.cr primary schools .. • • 12,600 Over-scale salaries paid to teachers .. • • 3,000 Administrative expenses: Abolition of Education Boards, etc.. • • • • 50,009 Departmental staff .. 1,150 School Committees J allowances 10,000

Capitation allowances to Boards on account of secondary, pupils in district hig i schools and for science classes in secondary schools 3,UUJ Special capitation for science ■ classes in primary schools 6,000 Material for handwork in pnmary schools .. ] > ouo Free books to primary school children in necessitous cases Capitation grants to Secondary School Boards for incidental expenses .. - J > uuj Incidental allowances to 'lech- rf . n , nicul School Boards • • Native school scholarships . • n l>' _ Maintenance of school buildings J3,7.j0 Special allowances to teachers .. o,SOO Salaries to female teachers in primary schools • • ' J jOOJ 'Minimum age of admission to primary schools, raising of J.],UU J Pioficiency examination, fees chargeable for •• 0,001 Other examinations, fees chargeable for ] > 4oo Travelling expenses of physical instructors .• ■ • Taranaki Scholarship Endowment, abolition of: Immediate benefit to Consolidated Fund .. -8,000 Free post-primar}' education (ultimate saving, £33,000) 3,00.) Special capitation for sewing in primary schools •• 3,000 Agricultural instruction • • 11,000 Manual-training instruction .. 33,000 £309,950 We have dealt at considerable length with the question of expenditure on education, but have had perforce to confine ourselves to those items of expenditure that appear to afford the greatest scope for economy. Wo propose to examine in more detail the expenditure of the Education Department, and may have further recommendations to mako in connexion therewith in our final report. In the meantime we are convinced that the Ravings enumerated above can be effected without greatly impairing the efficiency of the system. The expenditure both per head of population and per pupil lias grown at an alarming rate, and, if unchecked, will certainly continue to increase. As previously stated, however, the economies we have recommended, together with economies already brought into operation by the Government, will effect a very real saving when it is most needed, and nt the same time will not place any undue obstacles in the way of the children of the Dominion receiving adequate education. SUMMARY OP SAVINGS. . The following statement shows the effect of our recommendations on the Budgetary position for 1932-33: Estimated Saving. £■ Permanent appropriations— Civil I.ist Act, 1920—Nativo purposes . . . . . • 7,000 Debt services—Operation of Hoover ' Moratorium . . . . 150,000 Hospital and Charitable Institutions Act, 1926 —Subsidies on voluntary bequests • • .15,000 Education grants and subsidies — subsidies on voluntary bequests 6.0Q0 Subsidv, Jubilee Institute for the Blind . . . . 2,500 University bursaries . . .. !i,OOO Workers' extension lectures ■ • 1,800 Subsidies and allowances, National Provident Fund— Jt Subsidies on contributions .. . • 500 Matornity allowances to contributors . . 7,000 Maternity allowances for friendly societies 36,500 Finance Act, 1925 —General expenses, New Zealand Institute 3ao Fire Brigades Act, 1926—Subsidies 3,492 Uotorua Borough Act, 1922—Paymeat portion bath fees . . 1,170 Pensions—}'amilv Allowances Act, 1926 .. 121,000 Pensions Act, 1926 Miners' pensions . . 6,200 Miners' widows' pensions . . . • 6,000 Military pensions (Maori War) .. .. 1,225 Widows' pensions . . 95,000 Old-age pensions . . 200,000 War pensions— Economic . . . . 90,000 Dapondents' pensions 45,000 Double pensions .. 30,000 Epidemic pensions (Pensions Vote) .. 5,500 Motor taxation . . . . ' 500,000 Finance Act, 1929—Advances to Native Settlement Account for loans to natives . . 8,500 Appropriation Act, 1925—maintenance of overseas war graves 15,376 Slaughtering and Inspection Act, 1908, and Stock Act, 1908— Compensation for diseased stock . . . . 29,500 Public Revenues Act, 1926—Fire Insurance Fund . . . . 10,000 Native Land Amendment and Native Land Claims Adjustment Act. 1928 . . . . 3,610 Public Revenues Act, 1926—Postage stamps to members of both Houses . . . . 2,200 1,409,4/2 Salaries and wages— Direct saving to Consolidated I-'und . . . . 510,000 Indirect saving through Railways and Post and Telegraph Dept. 624,000 1,164,000 Annual appropriations— Legislative Department ■' ~ :"2',890 Education . . .. ,169,950 402,840 £2,976,262 There arc further contingent savings which may affect the position during 1932-33. Irheso arc : Contributions towards cost of Singapore Base . . . . 50,000 Pensions Act, 192G—Increase in duty on gold produced from quartz mines .. .. , . 5,000 Naval defence ~ .. 200,000 £25-5,000 Savings to Become Effective Lat.er. Further savings would not become wholly operative until 1933-34, and these aro listed hereunder:— . Estimated v saving. Total. X £ Pensions Act. 1926 Miners' widows' pensions (additional) , . 6,000 war pensions (economic) 90,000 r., '96,000 v ote, Education— Allowances to Training College students .. 65,000 J.ree post-primary educatlon •• .. 30,000 * £191,000 In the foregoing no. account has been taken of:— _ (a) The possible savings through the imposition of revenue stamp duty on ° n - 1C * n^erna l Public Debt. _ (b) The issue of a Voluntary conversion loan at a lower rate of interest. (e) The abolition of tho permanent appropriation for subsidy to the Unemployment Fund. Budgetary Control. We feel that a more rigid system of control of public expenditure must be maintained. We cannot help being impressed with the continued increase 111 the cost of government under practically all headings. In our view, one reason to which this increase may be ascribed is the system which has been in vogue in the past of apparently first of all estimating the -expenditure and then providing revenue to meet it, The various Departments must be told just how much money has been allocated to each, and to frame their proposals for expenditure accordingly. Wc believe it is only by strictly adhering.to such a system that continued increases in the public expenditure and corresponding increases in taxation can be avoided.

Conclusion. In the time at our disposal it lias been quite impossible for us to examine in detail the whole of the public expenditure, but wo have dealt with certain Departments, which seemed to offer scope for considerable order to become effective, many of our recommendations, both as regards permanent charges and annual votes, will involve legislation. Wo shall, in the continuation of our enquiry, further review, if necessary, those Departments we have so far dealt with, and additional economics may be recommended later in regard to those Departments. Wc do not wish to give the impression that we lmve dealt finally with any class of expenditure. In submitting these recommendations for reductions of expenditure we have proceeded on three general principles, which may bo surimarised here:— (1) The rise in the value of money in recent years makes a revision of money obligations both reasonable and necessary. (2) The existing position of the public finances makes it necessary for the State, no less than the individual, to consider seriously what it can afford, and not merely what is desirable. From this standpoint much expenditure is unwarrantable which in normal times might bo permissible. (3) The trade and industry of tli.i Dominion can be restored only by the strictest regard to economy. These were the principles adopted by the Committee on National Expenditure in Great Britain in 1931, and we cannot do better than quote hereunder an extract from the report of that Committee: — "Many of them (the recommendations) are clearly interdependent: oven the more drastic will, we think, bo accepted as fair if the whole programme be carried into effect. But if a policy of selection be adopted, it economies arc only attempted where little opposition is anticipated, il <'<'rlain classes are called upon in the national interest to suffer serious reduction of emoluments while unprofitable expenditure goes on unchecked in other fields, resentment and opposition will be aroused and the eventual result in savings will be negligible." The foregoing aptly expresses our views, and wo arc convinced that there is no reasonable alternative to the redactions wc have recommended.

INTEREST RATES. MR MACINTOSH MAKES A RESERVATION. In agreeing to that portion of the report; relating to "fixed incomes," I do so for tho sole reason that the urgent necessity to obtain relief for the Consolidated Fund demands the .jsaciificc involved, but on the question of principle I wish, however, to make my position perfectly clear. To assume that, in appending my name to this report, I approve of the principle involved in this particular form of taxation would be entirely wrong. I am decidedly opposed to such a tax —at all events to the extortionate extent of 20 per cent., or 4s in the pound, recommended by tho Economists Committee. This, if mado permanent —a not unlikely event, having regard to various forms of taxation nnpo&ed in recent years heralded as "temporary'' and still in force would prove an intolerable burden. In my view, a tax of this description must be regarded as possessing all the elements of confiscation, and is justified only—if the plea of justification can in such case be appropriately urged—by expediency and the exigencies of the situation. A tax of this nature, wrong in principle, would undoubtedly inflict lasting injury on the credit and good name of the Dominion, and would press with undue severity on many people of moderate means who have, in all good faith, invested their hardearned savings in securities issued by the State, the interest on which constitutes their main—if not their only —source of income. To this burden must be added the loss to bo incurred by depreciation of holdings, the inevitable consequence of reduced interest. Under such a staggering doubl6 blow the euphonious phrase, "equality of sacrifice," is quite out of place. Reference has been made in the main report to an alternative method of replenishing tho Treasury—viz., a voluntary conversion loan. This is equally open to objection, for various reasons. The proposal (in effect ah effort to compromise with creditors —an act ©♦bankruptcy)—postulates a unanimous response. Failure to reach this important objective must end in abandonment, or in the coercion of a-minority or conceivably a majority, as the case may be; consequently grave injury to the public credit would result. The use of the term "voluntary'' in this connexion and in such, circumstances would be merely a pretence. A. MACINTOSH. RESERVATION BY MR BEGG AND MR GRIFFIN. We desire to dissociate ourselves from this portion of the main report. "While wo are in agreement with much of what has been stated in the report under this heading, and particularly with the stated object of securing some geucral basis of adjustment applicable to all classes alike, we do not agree with all tho conclusions which have been drawn, nor do we think that the proposals set out therein will fully or speedily achieve tho object in view. We have, however, thought it preferable to embody our views in a supplementary report \rather than to express our agreement or disagreement with the different paragraphs of this section of the interim report. Seductions of Interest and Kent. The portion of. the public debt domiciled in New Zealand amounts to £115,014,738, made up as iollows:

The annual interest charge on the above debt is: ■ ' £ On securities free of income tax .. .. 1,423,999 On other securities ... 3,879,357 Total .. 5,303,356 Wo are of opinion that in view of the gravity of the present situation an appoal might well bo made to investors to convert their Government securities into loans a reduced rate of interest. Tho successful completion of a conversion loan would probably take some months, but the only alternative vfhich would provide immediate relief-

to the Consolidated Fund appears to be sonic form of special taxation of income from investments. This might perhaps take the form of a stamp duty on interest from Government securities. We see practical difficulties in the equitable application of such a tax to all classes of income from investments. Effect on General Interest Level. The imposition of 'special taxation on incomes from investments has, we think, the defect that it would fail to bring about a reduction in the general interest level. Indeed, the imposition of such additional taxation might have the reverse effect, and would, in any case, retard a general fall. In most industries interest' forms a substantial item of cost, and reduced rates would give some relief. Reduced interest rates would, moreover, bo accepted by . the community as more in keeping with reduced wages and salaries than would mere increases in taxation. We are also strongly of the opinion that special taxation on income from one particular class of investment would bo inequitable and unjust. Its only merit appears to be that in the unlikely event of a return of the price-levels of a few years ago tho tax could be removed or reduced; but, as all authorities appear to agree that such levels cannot in any case be expected for many years; the reduced rate is unlikely to become an unjust rate. A Conversion Scheme. Wc therefore recommend that an early opportunity be taken of conferring with representatives of leading financial institutions, brokers, etc., with a view to launching a conversion scheme on the basis of a reduction of interest by 20 per cent., but so that in-no case should the rate of interest be reduced below 4 per cent., in the ease of loans the income from which is subject. to taxation, or below £3 12s per cent.:— i.e., 4J per cent., less 20 per cent.- — in the case of loans the income from' which is free from income tax. We consider, also, that an option should be given to the holders of tax-free loans to convert into taxable loans at a premium or suitably increased rate of interest. If such an appeal l>e made, and-if it be preceded by a full statement of the financial position of the Dominion, and, in particular, of the budgetary position for 1932-33, we consider that a successful result may bo anticipated. Wc would add that, if a conversion scheme be decided upon, advantage should be taken of the occasion to arrange suitable maturity dates in order to eliminate problems of conversions for somo years to come. If such a conversion scheme can be brought to a successful conclusion, the annual gross saving in interest is estimated at £730,089. Losses to State Departments. * There are, however, other aspects of the problem which must be considered, particularly the question of interest on loans from State lending Departments. Any reductions which are brought about in tho interest rate paid by the Government must lead to the consideration of reductions to those who have borrowed from State lending Departments. : For the purpose of arriving at an estimate of tho probable annual net saving to the Government wc have assumed a reduction of 20 per cent, in the rate of interest payable on loantf from State ! lending Departments, with the proviso that in no case shall the resultant-Tate of interest be lower than 5 per cent. On this basis the loss to the State lending Departments is estimated to be! as follows: — '£ State Advances Office . .. 224,658 | Lands and Survey Department 31,732 256,390 In addition lossqs would be incurred by the following Departments: — Government Life Insurance Office. State Fire Insurance Office. Public Trust Office. Native Trust Office. . In our opinion, such losses should be absorbed by these Departments, and should not become a charge against'the Consolidated Fund. There aro further effects which must also be taken into account. We refer particularly to losses of interest 'which would be incurred in respect of investments of certain funds. These losses we estimate as follows: £ Public Debt Redemption Fund . 50,000 National Provident Fund .. 18,128 Teachers' Superannuation Fund 9,393 Government Railways Superannuation Fund .. 10,529 Public Service Superannuation Fund .. 22,502 110,552The interest earned by the Public Debt Redemption Fund is credited direct to the Consolidated Fund, so that any reduction in the amount must fall directly on that fund, which could ob-. tain 110 corresponding reduction in the amount of its- annual contribution for debt repayment. The estimated loss in, connexion with investments of tho National Provident Fund could not, we think, be absorbed by that fund. ' In the case of the three superannuation funds, the reports disclose that they are actuarially unsound. Any loss of interest on investments must, therefore, ultimately fall on the Consolidated Fund. Another aspect to which we should draw attention is the large amount of the public debt held by t State Departments, principally tho Post Office, State Fire . Office, Public Trust Office, Government Life Insurance Office, and various Treasury accounts. The amount of-the debt'so held is £53,270,000. Of this the Post Office holds £46,046,000, of which, however, £37,911,000 bears interest at 4 per cent, or less. The reduction suggested would, therefore, affect only £8,135,000 of the debt so held. The loss in interest on this amount would be reflected in reduced Post Office profits (subject, however, to any saving which might be effected by a roduction in the rate of interest paid to depositors), and, as Post Office profits are paid into the Consolidated Fund, the reduction would,, in effect, be a charge 011 that fund. , ; We consider that any losses of interest on public debt held by the Public Trust Office, the Government Life Insurance Office, and the State Fire Insurance Office should be absorbed by the respective Departments. Net Saving to Consolidated Fund. We estimate the net saving to the Consolidated Fund at £308,507, made up as follows: —, . > "' £ - .£ ; Gross saving as set out above 730,089 Less losses —• State Advances Office 224,658 Lands and Survey Department .. 31,372 Public Debt Redemption Fund • • 50,000 National Provident Fund .. 18,128 Teachers' Superannuation Fund .. 9,393 • Government Railways • ; "• Superannuation . - : V- - . Fund . 10,529 Public Service Super- . . animation Fund .. 22,502 Post Office .. 55.000 . Net saving .. ' .. 308,507 Against the above annual saving of £308,507 has to be. .set' the -.coskiof/jsoiL-.»

version, which would admittedly be considerable, .but which should be reduced to a minimum by an appeal to bankers, brokers, and the bondholders themselves. There would also, wo think, be some loss, difficult to estimate, in income tax. Equality of Sacrifice. It may be open to doubt whether it is strictly within our order of reference to make recommendations regarding reductions in Tntes of interest not affecting Government expenditure, but our previous recommendations havo so great a bearing on this question that we feel we should be failing in our duty were we to omit all reference to the matter. We havo iu earlier sections of the' report been compelled by the urgency of the - situation confronting us to recommend reductions in salaries and wages, and we believe that simliar reductions will be suffered by private and local body employees, in many cases the incomes of those affected directly and indirectly by the reductions recommended in the case of salaries, wages, and pensions are subject to fixed charges in the form of interest and rent. Every member of the community must be prepared to accept a share of the burden, and we deeiu it our duty to suggest that the reductions in salaries, wages, and pensions shOuld.be accompanied by reductions in interest rind rent charges. Equality of sacrifice must be aimed at as far as possible, and for this reason, if for no other, consideration might be given, concurrently with the consideration of a conversion scheme, to the possibility of effecting by legislation a reduction of, say, 20 per cent, in the rate of interest on mortgages, debentures, deposits, dividends from preference shares, and other classes of securities, including local body loans domiciled in New Zealand (unless a conversion scheme is arranged in the case the latter). Provision would require to be made not only for cases of hardship, but also for suitable minimum rates and for making allowances for- reductions which have, on account of the existing depression, been effected since say, January Ist, 1931. Wo arc aware that adjustments as between mortgagees and mortgagors are being made daily, but feel that a general reduction such as is contemplated cannot safely be left to natural economic forces to bring about. Such a policy would be too slow in operation, and would not result in an equitable all-round adjustment, j Finally, wo stress our opinion that a reduction in the effective net rate of interest received by investors in Government and local body securities, whether such reduction be effected by special taxation or otherwise, would be inequitable if unaccompanied by a similar reduction in the case of other investors.

We make these suggestions with a duo appreciation of the seriousness of further interference with contracts and of the fact that any Such interference is invariably followed by a train of anomalies. Changes in the value of money during the past fifteen years have undermined the basis of contracts. The result of these changes is that strict enforcement of the terms of contracts now involves, in many cases, far greater injustice than \vould be involved in moderate adjustments.

Permanent Appropjiations , fill? " :: Interest • • ' Sinking Fund Eepayment of public debt 1,203,298 Eeduction of funded debt 236,796 Transfer to Loans Redemption Account .. r: Payment on guaranteed loans •• / '" uu Under special Acts of the Legislature •• <,*«",7oo 17,715,888

Publicity 130,941 » Department of Justice 137,591 ,, Prison Department 91,369 „ Crown Law Office 5,266 » Police Department 424,188 Jt Pensions Department 162,849 )■> Mines Department 21,679 >> Department of Internal Affairs 197,884 ,, Audit Department 2.VI16 J? Public Service Commissioner's Office 5,859 V Printing and Stationery Department 174,779 » Mental Hospitals Department 271,S40 Department of Health 210,005 ,, Naval defence 394,045. Defenco Department 215,000 JJ Customs Department. 89,911 J) Marine Department 104,228 „ Department of Lab48,807 our » Department of Lands and Survey 181,069 Valuation Depart- . ment 40,732 <> . Electoral Department 69,21 S >> Department of 469,280 Agriculture }> Department of Edu2,906,728 cation rt Department of " Scientific and Industrial Eesearch 51,463 » Transport Depart4,757 ment 6,911,673 Total Ordinary Revenue Account • • , 24,627,561

Subsidies paid on Voluntary I3cqnests find Donations. Period. £ 1913-14 24,000 1914-15 '• "• 24,055 1915-10 .. 20,250 1916-17 .. 25,006 1917-18 .. 17,810 1918-10 .. 28,028 1919-20 .. 36,658 1920-21 .. 32,885 1921-22 .. 48,115 1922-23 .. 33,056 1923-24 .. 38,444 1924-25 .. 56,031 1925-26 .. 50,079 1926-27 .. 29,054 1927-28 .. 37,169 1928-29 .. 22,929 1929-30 !.. 39,654 .1930-31 .. 15,070 3931-32 (estimated) .. 15,000 The estimated saving is £15,000.

1925-26 .. 10,000 1926-27 .. 4,933 1927-28 .. .. l,74iJ 1928-29 .. 1,221 1929-30 .. 1,390 1930-31 987 '■ £20,273

Pensions. - 1914-15. 1920-21. 1926 2 3928-29. 1930-31. 1931.32. £ £ £ £ £'' £ Old-age .. 460,396 729,942 979,296 v 1,059,039 1 ,158,788 L,250,000 Widows' 31,610 187,100 301,080 312,963 325,998 340,000 Miners' 24,459 41,947 48,102 58,441 . 65,000 Military .! 47,607 40,198 19,445 13,673 9,101 7,350 For the blind 10,305 13,338 15,796 37,500 Family allowances 54,815 63,608 76,000 ,War pensions Civil Service Act; 1,885,663 1,122,741 1,178,646 1 ,245,499 L,285,000 1908 29,653 27,503 16,724 12,192 9,250 7,500 Other pensions Vote pensions .. 5,703 4,794 7,369 7,904 8,556 7,561 .. " 9,880 139,592 173,204 165,912 173,176 164,349 Totals . .. 584,849 3,039,233 2,672,111 2,866,584 3 ,068,213 5,220,260

Approximate Salary. Income Tax. Rate Per Cent. £ £ s. d. 300 . .. 2 0 2 0 2-3 oOO . .. 12 1) 7 -i 700 . .. 38 14 11 1000 84 3 4 Sj

RateB of Interest. Public. Departmental. Total. P.C. £ 3 ' 4,810 £ 2b 4,810 3i 4,041 n — 4 400,039 4i 30,370,127 5 1,173,600 54 2,388,260 5* 5,897,430 5i 21,476,565 6~ 29,011. 2.593,600 2.597,641 917,500 917,500 34,969,321 35,369,360 6,907,404 1,288,030 37,277,531 2,461,630 1,510,190 3,785,600 3,898,450 9,683,030 1,298,850 22,775,415 29,011

'bUCl • • 1331-32. 1914-15. Legislative Council House of Representatives Law Drafting Office Gbj;eral Assembly Library Hansard Bellamy's General expenses Salaries. £ 2,14-1 12,458 2,507 3.0SG 5,693 6,463 4,124 Other charges. £ 4WJ ] ,020 593 1,600 6,200 1,487 3-2,798 Total. £ '2,603 13,47b 3,100 . 4,636 11,895 7,950 56,922 Salaries. A' 9,23S 2,695 6,040 1,627 2,652 Other charges. £ 3,100 1.150 5,000 1,860 7,610 Total. £ 1,800 10,333 3,8<o 11,040 3,477 JO,262 Lees credit? •• •• 36,426 64,158 4,808 100,584 4,907 Totals 36,527 59,350 95,677 22,247 16,710 40,757

Rates DepartTotal. of interest. Public. mental 1 . £ £ £ 3 per cent. 4,810 — 4,810 "J per cent. 4,041 2,593,600 2,597,641 yj per cent. — 917,500 917,500 ■1 per cent. 409,039 34,91)9,321 35,369,360 ■ii per cent. 20,370,1*27 6,907,404 37,277,531 5 per cent. 1,17.1,600 1,288,030 2,461,630' 5s per cent. 2,383,260 1,510,190 3,898,450 5i per cent. 5,897,430 3,765,600 CJ per cent. 21,476,565 1,298,850 22,77q,41o G per cent 29,011 ~ 29,011 61,743,883 53,270,495 115,014,378