STATE FINANCE

Dominion, Volume 12, Issue 5, 1 October 1919, Page 8

STATE FINANCE

BUDGET UNDER CRITICISM

DEBATE OPENED IN THE HOUSE

SIR JOSEPH WARD AND "MIGHT HAVE BEEN" The debate on the Financial Statement was commenced in- the House of Representatives. Inst evening. The Prime Minister moved tho opening motion that Mr. Speaker d® leave the chair. "Sir Joseph Ward (Leader of the Opposition) said that he did not propose to discuss that part of tho Budget covering operations up till March 81 for -the obvious reason that he. was. iv member of the National Government, - and Minister of Finance. He wished tit say that he had never been interfered with by the Prime Minister or any other member of the Government in any of the important proposals he had submitted from time to time. The 'country, lie said, has a right to congratulation upon the fact that in tho war period there had been a surplus of revenue of fifteen millions sterling., When ho look office -in the' National Government there was a surplus of .£72,000, and in his. (Sir Joseph Ward's) period of office the not surplus had been no less than 107,119. '

.The Financial Strain. , As to the rest of the Statement he would have some comments to make as to the ability of the country to stand the financial strain of the proposals of tho present Minister of Finance.. He would refer to those proposals in detail. On one page of tne Budget would bo found proposals for the borrowing of .£29,325,000 for- . the Expeditionary Force, for war gratuities, and f or t.' c settlement of soldiers on land. '..'here 'wero other items for public works, hydroelectric works, and cducatioa, which brought tho total up to .£30,92;.,000. Adding public works expenditure of i£2,090,000 the total would be ;'.'33,016,000. The amount of money referred to in tlie Budget as having been received for supplies of produce, somo ninety-nine millions, did not affect the financial operations of this country, as she money had not had to be found by this country in any way at all.

He wished to discuss the. proposals of the Budget impartially, because he considered it his duty to help in every possible way at this juncture. But he did not consider the proposals of the Budget were safe proposals. There was in them much to occasion uneasiness or even alarm. If there was no desire on the part of tho Government to use their advantage for electioneering purposes, then lie thought the finances of this country could be, "maintained on a safe keel." We were now in watert of peace, in a new era, but the proposals now made exceeded anything that had been made at any lime in the period of the war. -The total amount raised in Ne" Zealand in the ih years of war had been 43 millions, at the rate, of ,£Slo,floo per month, or about J29.800.000 pn' annum. He did not suggest that in every year tho average sufficed. But in the Budget the Finance Minister proposed to borrow some in'one year. Counsels of Perfection.

Andi there was missing from tho Budget any provision for housing, roads and bridges, or telegraph extensions. Of amounts named there were' .£'32,000,000.' Why had the House not been informed of the total amount required? Perhaps the' reason was that there vere inexhausted authorities, and cash in hand (the latter about <£100,000) were to be sufficient to cover the proposals. He wished to know for what other amounts the Government would ask authority during the present session. Tliey ought to be in the Budget. To thess amounts specified should bo added .£1,300,000 for pensions, and about ,£G,ooo,ooil for gratuities. In actual fact the loan authorities asked for would be ten millions less than what was asked for in tho whole of the war period. Under these circumstances it was futile for the Minister of Financo to 'ask tho country to exercise thrift. He could not find in tho Budget ono proposal in tho direction of thrift.

The amount of was asked for in connection with soldiers, but of the totals of -six, millions for gratuities and eight millions for Expeditionary Force expenses, and the treatment of sick and wounded men ho i approved , wholly. n

Delav Soldier Settlement? Bat of tlio proposal to spend some' fourteen millions for the purchase of laud for soldiers he had nothing but condemnation. It would drive this country headlong to ruin. Men were being encouraged to go on to land at a helterskelter rate; all the advantage was going to one section of the community, and the effcct of the policy would be that many of the men would In a years have to go off the land. He spoke of the district of Hawke's Bay, where there .had been in the war period a total increase in valuations of nino million pounds.' Multiplying this all over the country the figures would be staggering. Some men were going on to land at excess values. Ho did not accuso the 'Government of buying at more than the market value. The other ttay a man from Christchurch who had 6old his farm fb go to, fight had been asked to pay oil his return three times the amount for which he had sold! The man could not afford to buy at this price. In view of the. danger ho thought it unwise in the interests of tho soldiers to rush to put men on the land. There should be some effort made later to adjust tho taxation of the coun'ry to rectify appreciation in land vf.lues, and later men could bo given their opportunities to go on the land. If tho present policy of rushing men on to the land were persisted in, the men would be "murdered." "Financial Panic." He said that wo should not expend this year on the settlement of soldiers more than seven millions sterling. This country could not stand twenty-nine millions, less the amoufit of the accumulated surplus which was to be takon, being put on the local market. Financial peoi)lo would tell to-day that there was an unwillingness on the part of investors to subscribe to this loan, and if tho loan succeeded it would only be because of the compulsory clauses. The Government ought to get the money, -md people ought to subscribe. But, ho did not belicvo that the compulsory system ought to bo continued during times of peace, whatever might be right untier stress of | war. If it were continued there would ho a financial panic in this country. In these proposals of tile Minister. of Finance, lio' had heard with tho deepest rejtret of the proposal to anne.t twelve millions out of the accumulated surpluses out of taxation. That money had been accumulated for tho safety and protection of the country, possibly for war purnoses, if the war had continued longer. If the war had gone on for arother year this and much more might'have had tn be taken. Ho disagrees entirely with the statement of the Minister of Finance that it, was not possible lo borrow outside of this country. While lie was in London he had been able to borrow for the Southland League on terms as good as those on which the Briti'.ih Government borrowed. La tor he lyirrowed on the same lerms for the Ota*n League. ITe asked for the authority on which tho Finance, Minister had stated that money could not be borrowed on the London market. From his knowledge of conditions jn Loudon ho would say that good financial houses would subscribe for some of.our loans. His npinii-n was that of the total a j krrt we could borrow our moneys for public works, h.vilro-ckr'frie works, education, and land for settlement (.MOO.OftO). a gros* total of .C 5.190,000, on the London market. And if the total of soldiers' settlement moneys of EH.000,000 wore divided by two, and only half spent this year, it would not be necessary to trench on the accumulated surelus in London. The Accumulated Surpluses, Ho would liko to tio up this amount so that "110 avaricious" Minister of Finance could put his hands upon it." Tho sinking funds which ho had ostab-

■lished ho had made it impossible for any Treasurer lo touch. It was by no moans an incentive to a Finance ji mister to discommode himself and his Government by accumulating moneys in order to save tho people of the country from taxation, if the succeeding Minister ui Finance, in two months, was to'take all the accumulator surplus. Ho was likewise amazed that- tne Minister of Finance shoiuu propose that .£1,200,000 of tne sinking funds should lw taken to purchase'securities to strengthen tho {position of this country. Hidden Surplus. 110 charged tlie Milliner of Finance with having concealed an amount of at least Jt'3,ooii,ooo whicn would be available at. the end of the financial year. Ho told of his own insinuates in me war p.n'iod, in which lie had calculated with a margin of two millions. He claimed that tnis was sound poiicv in view- of possible contingencies. He challenged the -Minister to say whether ho had not from two yto three millions "up ins sleeve," by the old device of underestimating the revenue. Reduce Taxation. . Ho believed that taxation could be reduced, "but not this way." Possibly tho Minister might ;iot be here to see what the efi'ect of nis proposals was going to be. But'ho would suggest that if; was fair that when a Minister proposed to make drastic changes in tho nuaueial structure of the country, there should bo somo guarantee that lie shotiid be in office for some two or three years.. Ho did not believe that there should be such long delays in the- provision of roads and bridges and railways. . T'lio Minister proposed to provide only two millions. isotlung was lor housing at all. Possibly these proposals would come out elsewhere. Not a' word appeared in the Budget about the expenditure .of a single ' penny piece on, workers' dwellings.

Nor did the Budget disclose the financial position of the country. We were a people of 1,200,000, and we had an indebtedness of <£200,000,000, but he was of opinion that we could carry the burden. There were thoso who said that tie acme of good Government was to have the highest possible amount of taxation. But his view was that tho country with tho lightest load of taxation in the futuro would bo the Country to progress. If "fortuitous circumstances" had oermitted him to remain with the National .Government lie' would have kept this accumulated surplus intact.. It would have produced for this country .£750.000 a year. He would even have continued to increase the surplus by another five millions, in which caso we should have had a revenue from this source of a million a'year. Ways of Making Money. Some peoplo perhaps had derided his proposal for a Stato bank, possibly by the purchase of the Bank of New Zealand, already a very largely State-aided institution. From this bank, if purchased, the. State would have had a revenue of. half a million a year without trenching on the secret reserves of the bank. Mr. Payne: Why not take the whole lot of tho banks and mako it a million?. Sir Joseph AVurd said that the revenue from these two sources would have been Ji1.200,000. He had been challenged on his statement that wo could get through with all our schemes for hydro-electri-cal power in three years. We should spend eight millions on these schemes, but ho suggested that they would pay cnght per cent, or more. Cheap Coal and Profits. And as to coal mines lie had certain proposals to make. He did not agree vita all that tho miners were asking, but he dick believo that there should be another conference. If tho mines'worth purchasing wero taken over by the Slate ho was sure that a revenue of a quarter of a million could bo obtained from them. jur. Pearco: What about the State mines.' Sir Joseph Ward: The Stato mines earned 'i'3d,ooo last year. Mr. Peurcff: Lost a lot more! •Sir Joseph Ward said that there, wero people who lielioved that the State could do nothing. Uu the contrary the State Jtudi made a great success of certain ventures, such as the Post Office and the Public Trust, and fire insurance. The coal situation had been chaotic for uome years, and the situation justified Ijtalo action. • He believed that it oliouid bu possible to satisfy the workers in ( .ho mines to cheapen the price of coal, und to mako a profit of a year to tho State. With control, by one (autliority reduction of prico and increase of profit should Ire - passible, and on tne coal produced a profit of a quarter of a million represented only 2s. a too. 'the Bank of New Zealand, said Sir Joseph Ward, had accumulated important reserves, shown in the balance-sheets, in addition to secret reserves. Nobody could say that a Stato bank would not bo profitable to the Government, "Normal Conditions." The estimated balauco at the end of the financial year was not shown Mixin the Budget, continued Sir Joseph Ward. He himself had increased the land tax and income tax very greatly. The amount of the increase had l-'een over .£6,000,000 -up to March last. The new Minister for Financo not only r.eglected to make any proposal for reduction ill taxation, but he allowed a further increase in tho revenue from these sources. The increased expenditure proposed on normal items of tho Budget was over .£200,000. When was tho country going to get buck to normal if it did not get back now? lie had always looked forward to being able to adjust tho farmers' income tax within six months of the end of tho war. A return to prevar normal conditions would not take place for twenty-five or fifty years. This' tact had to br- recognised, and 1 tho man v.ho waited for "normal conditions" he. fore doing necessary tilings was living in a fool's paradise. He was in accord with the Miniver's proposal to put the supern initiation funds on a sound basis. His oivn duty during tho war had been to keep the war finance l ' on tho strongest possiblo basis, but ho had always held that tho funds should be put right in tho first yoar after tho war. In conclusion, Sir Joseph Ward said the Government's party newspapers wero dissatisfied v.'ith its proposals. There was an nneasy feetiing iu collection with tho tremendous financial proposals in tho Budget. The expenditure set forth in his programme liad not amounted to rnoro than a. year. The' main lines of railway had to be completed within three or four years. Sir William Fraser: Tt can't be done. We. have not got the labour.' Mr. Massey; Japanese labour! Sir Joseph Ward said tho completion of tho South Island trunk railway would make Wellington. It would cost probably .£BOO,OOO. Mr. Massey: 1 wish you would lake the contract to finish it for ,£BOO,OOO, You can have it to-morrow. Sir Joseph -Ward added that the settlers had a right to the completion of the lilies, yet under tho present policy of construction, a, mile here and a mile there, most of the settlers would bo dead and buried beforo tho lines wero completed. The proper policy was to bring xho labour here and complete the lines. Ho wanted to see the public works policy galvanised into life. His last appeal to the Minister of 'Financo was to abandon his proposal to collar the sinking funds. .Let him leave the fifteen millions alone as a guarantee for the iutuTO stability of tho country. ' '

THE MINISTER OF FINANCE TREATMENT OF THE SURPLUSES. .The Minister of Finance (Sir James Allen) said it was not easy to know what parts of the Liberal Leader's speech to take seriously. Sir Joseph Ward luul started with a plea for economy and a denunciation of the Budget proposals; ho had finished with proposals for vast ■expenditure at a rapid rate. It might fairly be suggested that lie had been electioneering. He had talked a good (leal about the fifteen millions of accumulated surpluses. This money had nut boon paid into a sinking fund, but apparently Sir Josoph Ward thought that it should be. The surpluses were the produco of war taxation. The extra taxation had been imposed on the people in order to enable tlio Government to meet war expenditure. New Zealand was the only country of which the Minister knew where no portion of war expenditure had been mot from revenue. Tho surpluses had accumulated, but, not

ono penny of war expenditure had been met from tho Consolidated Fund. The taxpayers of Britain, America, Australia, and Canada had paid part of their war costs from revenue, but New Zealand had dono nothing. Now the Government of this country was asked not to uso the accumulated surpluses for the purposes for which the money had been raised, but to hold them for future use. "My proposal," said Sir James Allen, "is to apply these surpluses to the purposes for which they wero raised and not to allow them to become, the prey of any Finance Minister that comes after me." (Laughter.) Ho had a lively recollection of what had happened in early years, when sinking funds had actually been "collared." Tho Government proposed that ,£12,500,000 of the accumulated surpluses should be uscil for repatriation purposes. If the money wits not taken'from this revenue fund, it must bo borrowed. The Leader ot tho Opposition had made a doleful suggestion that the people wero not responding to the appeal already made for -£10,000,000. On that point he had better wait until October !), when he would find, the Minister-thought, that the people wore still willing to support their country's war effort. What was actually proposed to be done with tho money to 1)0 taken from the surpluses? It was to bo invested in laud, and tho interest ami principal itouui conn: luck tn ijic State. Tho money was not going_ to be lost or dissipated. The surpluses, in any case, had not been built) up for sinking fund purposes. The war debt had. ; a| sinking fund which would pay it olf in forty years. There could bo no sound reason for paying off tho war debt in a shorter period. The policy advocated by the Leader of the Opposition was not a sound policy; the proposals of the Government were in the interests of the country and of the soldiers. Sir Joseph Ward's comparisons of war expenditure had been unfair. ■He had based his reckoning on the money borrowed in New Zealand and had disregarded -the money borrowed abroad. The fact was that war expenditure had grown from year to year, until it reached a very large sum in 1918, and the "washing-up" year naturally was a big year. It included the gratuities and the repatriation charges, two very big items. Public Works Expenditure, Sir Joseph Ward had suggested, continued Sir James Allen, that insufficient money was being provided for public works. He was aware, of course, that the unexhausted authorities were a bi» additional item, and that the sohool bmklinjw vote of .£500,000 -had boon taken out of the Public Works vote. The Minister of Public Works had indicated that lie was satisfied he had enough money to cover works until August 31 next. The provision for housing was to be made in a separate Bill. The House had been informed on this point already. Then reference had been made to tho Government's policy of land settlement. Sir Joseph Ward had said too much nionev was being spent, and that the Government was forcing up the price of, laud. But he himself had pointed out. in his own manifesto that land purchase for soldiers was a necessity, and that the expenditure imposed no burden on the country, since the soldiers repaid tho money with interest. The reserve fund securities undoubtedly were of great value, and he had 110 recollection of opposing the original purchase. Mr. Mossev: There was'no opposition. It went through unanimously. ■ Sir James Allen denied that lie had a.nv revenue up his sleeve. He did not know what the revenue would be. He hoped tho revenue would exceed the estimate. and that the expenditure would fall short of expectations. ..-/He would like to be able to reduce taxation. That might be possible next year if the surplus was larger than the estiinate. His own feeling was that the Dominion needed more population. It wanted labour for development purposes. Tho Government had tried to ease the coal situation bv bringing miners' from England and from Australia, but their friends here had stood in tho way. He did not know why. Mr. Scmnle (Wellington South).: Build homes for those you. have got here. Sir James Allen-said that at tho time tho proposal was made there wero empty homes at the State mines. Mr. Semple: Thai: is. not true, sir. The-Speaker: Order. An Unsound Policy. Sir James Allen said he regarded tho strengthening of the superannuation funds as essential. The funds wero now eiiort, and the money could reasonably be taken from tho accumulated surpluses. With regard to borrowing, Sii Joseph Ward had suggested that instead ' of utilising cash in 'hand for war purposes, New Zealand was to borrow on the London money market. That was *not a sound policy or ono that would commend itself to tlis people of New Zealand. What Sir Joseph Ward proposed as to the nationalisation of coal mines was not clear. What mines did he propose to buy? Iro proposal would be more satisfactory to coal-mine owners than State purchase. Mr. P. Fraser (Welungton Central)! They did not like it in England. Mr. Massey: They rusieu it. Sir James Allen warned tlie House and the country against a policy of buying coal mines. The Liberal Leader had told the House ho had intended to add five millions to the accumulated surpluses and set a million a year from the(invested sum. Where was he going to'gct the five millions? Were the taxpayers to provide it? If he borrowed it he would have to pay. The people would not get any advantage from the investment of this money in the way proposed. The debate was adjourned and the House rose at 9.40 p.m.