The Press FRIDAY, JUNE 4, 1943. The Budget

Press, Volume LXXIX, Issue 23965, 4 June 1943, Page 4

The Press FRIDAY, JUNE 4, 1943. The Budget

The Financial Statement, presented to the House of Representatives last night by the Hon. W. Nash, shows that the 1943-44 Budget provides for an expenditure out of the Consolidated Fund, Social Security Fund, and War Expenses Account totalling £207,000,000, or £7,000,000 more than last year. In addition, £6,500,000, derived from departmental funds, will be applied to national development. The statement reviews revenue and expenditure under all headings in great detail and with a lucidity upon which the Minister deserves to be complimented. There is particular reason to be grateful to him for some analyses, and retrospective summaries, which do not usually accompany the Budget. But the elabofate statement and the huge structure of the Budget rest upon a very simple basis. Expenditure from the Consolidated Fund and the Social Security Fund, showing no great change, will be sustained without new taxes; and the prospective deficit of £50,000,000 in the War Expenses Account will be wholly met by borrowing—£lo,ooo,ooo from departmental sources, £35,000,000 from the War Loan now open, and £5,000,000 from stock purchases and savings later in the year. No means have been found—perhaps none has, been very diligently searched for—to reduce expenditure from the Consolidated Fund, the estimate for which, up by £3,000,000, is the highest on record. Most of the increase is due to debt charges; but the country has no assurance whatever that opportunities to economise rationally have been pursued. The need for an overhauling body such as the House of Commons Select Committee on National Expenditure, constantly at work, has been too long neglected; and though the field of war expenditure would give it its greatest scope, it cannot be assumed that domestic expenditure would give it none. The Social Security Fund, apart from year-to-year increases, will carry new burdens in the form of certain pension increases, military and other, which are unchallengeable, and of an increase, from 6s to 9s a day, in the rate of hospital ■ benefit. Offset by a reduction in the maintenance subsidy payable from the Consolidated Fund, this will give public hospitals a net revenue increase of 'SL 250,000. The Consolidated Fund transfer to the Social Security Fund is raised frcm £3,800.000 to £4,100,000; otherwise, the fund will meet increased demands upon unchanged revenue from its available balances. The War Expenses Account, of course, represents three parts of the whole, or nearly. Its chief points of interest, in comparison with last year, are as follows. The expenditure estimate for last year, at the' startling figufe"tof £133,000,000, was £11,000,000 short. It would have been short of the mark by a much greater figure, if Mr Fraser’s estimate of £46,000,000 for oversea costs had been reached. Mr Nash, when in London, however, reached an agreement with the British Government under which New Zealand’s liability was limited to-the initial capital cost of equipping the New Zealand Division in the Middle East—the cost of re-equipping after Libya, Greece, and Crete being assumed by the British Government —and to a monthly maintenance charge of £400,000. In the result, £15,000,000 was charged against New Zealand under the Memorandum of Security last year, instead of (perhaps) three times that sum: and the prospective obligation for this year falls to £ 12,000,000. It is unfortunate that the significance and advantage of the new agreement are slightly acknowledged in the statement. Second, the budgetary position this year is the resultant chiefly of a large fall in the Army figure (from £89,000,000 to £68,000,000), of advances in naval, air, and civil expenditure, and of the movement of lease-lend figures on both sides of the ledger. In brief, expenditure at £148,000,000 is slightly up; tax revenue at £46,000,000, advances by the British Government at £12,000,000, and lease-lend at £40,000,000 account for £98,000,000; and the crucial point of the Budget emerges in the deficit of £50,000,000. Mr Nash’s statement, accordingly, resolves itself into a powerful appeal for support of the loan to cover it and a powerful argument for the borrowing principle (a) as an instrument of war finance, as such, and (b) as an economic stabilising factor. What Mr Nash had to say about the War Loan was well weighted in every respect. First, of the three ways of financing a war, by taxation, by borrowing, and by credit creation, taxation cannot be pressed with advantage beyond the point at which capacity to pay, and continue paying, is fully exploited. Second, as between credit creation and borrowing, as sources of finance, there is no real choice. New Zealand’s problem is not a shortage of money: there is already a huge excess of spending power over goods and services available—£loo,ooo,ooo, in the estimate of the Reserve Bank. In fact [said Mr Nash] what is wanted is the syphoning off of any excess purchasing power for investment in war loans in order that the diversion of productive effort to war may be matched by a similar diversion of purchasing power. Only by those means can we remove the pressure that threatens to upset our economic stability. Inflationary pressure, that is, which, operating against the price structure destroys its stability and “ takes “ away by unseen means the value “ of work done and savings made.” That is why, third, investment in the War Loan is specially emphasised by Mr Nash as a “ part of the “ people’s war effort,” demanding much wider and more numerous individual contributions than have yet been offered. 1 The people’s

smallest to the greatest, are indispensable, not only as a weapon in the war effort, but as a guarantee of present and future economic safety. Mr Nash’s words were not rhetorical flourishes. They were a plain warning and a plain appeal. They should be heeded. Much more I than the balance of a Budget is at j stake.