THE COUNTRY’S FINANCES

Evening Star, Issue 19804, 1 March 1928, Page 2

THE COUNTRY’S FINANCES

Large Audience Hears Minister

Unemployment and Taxation

Fair Dealing with All Classes

. “.I have tried to show you some of the great and growing difficulties of tho Government. Wo have tried to deal fairly with all classes of the community . . . and wo havo tried so lar as lay in our power to seo justice done to all sections. Tho Government has attempted to see that New Zealand’s credit remains high in the financial world, and so it has. At tho end of tho year you will hoar politics more fully discussed and will havo an opportunity of passing judgment on tho work of tho Government.” —The Minister of Finance and Customs (Hon. W. Uownio Stewart), at the Early Settlers’ Hall last night.

There was an attendance of about 50U to hear Mr Stewart, who, when ho mounted tho platform, was greeted with great applause. Tho mayor (Mr W. B. Taverner) was in tho chair. Tho Mayor said Mr Stewart needed no introduction. The Minister was present to give them a presessional address, in which tho speaker thought a member of Parliament could more adequately represent tin ideals and views of his party than in a speech during tho heat of an election campaign. Everyone was glad to see Mr Stewart looking well and able to undertake his duties. (Applause.) Mr Stewart, who was applauded on rising to speak, thanked tho electors for turning out in'such largo numbers to boar him make a speed) of a kind which it was extremely difficult to make interesting. It would deal almost entirely with finance, and problems of that sort. It was tho custom for the Minister of .Finance oneo or twice a year in different parts < f the dominion to deni with questions of finance which were under discussion. Tho Minister jocularly remarked that he understood it might bo difficult to get an audience while Daylight Saving was still in force, and expressed himself ns particularly grateful at (ho large attendance.

Mr Stewart said that at tho 1925 elections tho Government was returned to power by an overwhelming majority, it not only lost no scat of any sitting member, but gained eighteen additional seats. It placed before the electors a very extensive programme of reform, and most of that programme had been placed on tho Statute Books. But although it had carried out this legislative programme, and although it had administered the affairs of the dominion in such a way that the credit of New Zealand stood high in the financial world, it was not to he denied that tho Government had incurred some unpopularity in tho country ns a whole. It was well know'll that the political popularity of a Government rose and fell in close sympathy with the economic prosperity or adversity of tho country. However good its legislation and administration might be, bad times inevitably reflected themselves in the minds of tho electors, and the misfortunes of individuals or of classes, which w'ero affected by world-wide conditions, were laid at the door of the .Government. OPPOSITION PARTIES. There was a curious feature about political opinion in New_ ZealaiM at the present time. The criticism which the Government had incurred w r ns not apparently accompanied by a rise in the popularity of any other political party. Usually public opinion acted in see-saw fashion, and as one party lost some popularity another party gained. But if they examined New' Zealand conditions it was, in his opinion, very difficult to see how the Nationalist Party could gain ground while it changed its leader, changed its name, and changed its programme every few months. On the other hand, the Labor Party seemed to havo lost all its ideals and early enthusiasm and become a mere party of opportunism, continually recasting its platform in its endeavor to capture votes sit any cost. He well remembered that its' early leaders were filled with apostolic fervor, believing that tho nationalisation of land and industry would solve t lie problem ol poverty and all the other ills of society. But the actual experience of Labor rule in State after State in Australia had shown clearly that it could neither bring about a more equal distribution of wealth nor cure unemployment nor poverty. Indeed, some of_ these problems were far more acute in (bo Labor States of Australia than jn New Zealand. Moreover, experience showed that nationalised industries too often produced only deli cits, which meant adding to tho burdens of the taxpayer. The profits which industry earned in private hands tended to disappear under tho heavy hand of the State. Not only so, bub the worker lornui that under State ownership he has merely changed his boss, but not materially improved his status or conditions ol work, while tho capitalist who had been bought out with Government bonds enjoyed a secure and guaranteed income without the risk and anxiety ol managing private enterprise. It was not to be wondered at, then, that the Labor movement had been disillusioned. It owned that its idol of nationalisation had feet of clay, and that it was necessary to quietly discard its most treasured dreams if it desired to make political headway and if creeping paralysis was not to spread over all enterprise and development. _ Hence the constant annual revision of its land policy, the conflicting views of its members on national defence, its hesitancy on tariff questions, and its deplorable and successful attempt, for political reasons, to double our difficulties in Samoa. “I hear from time to time of

people who are inclined to try the Labor P.arty by way of a change,” said the Minister, “ but unless it be true that each country must buy its political experience at first hand 1 find it difficult to believe that the electors of New Zealand will not profit by the lessons of Labor profligacy and extravagance, with consequent high taxation and low credit, where Labor rules.” Nevertheless, tho task of Government at the present time was one of great and increasing difficulty. The manufacturers lor the most part wanted High Protection; the farmers for the most part wanted Freetradc. Tho critics wanted loan expenditure reduced; the public wanted millions more borrowed for housing advances and ■public works. The business men said the Government was too Socialistic; tho workers said the Government was not Socialistic enough. The farmers wanted tho Arbitration Court abolished; tho manufacturers wanted its powers limited; the workers wanted its powers increased. Thu North .Island complained of tho South Island wheat duties; the. South Island complained that its interests were subordinated to those of tho North Island in the matter of tourists, trade, and public expenditure.

Amid all these contending voices on these and many other questions, such as the licensing question, Samoa, and unemployment, tho task of tho'Goveiumout was not easy. And yet it was surely of some significance that almost every New Zealander who went abroad returned to declare that this country was the best governed in the world; that its credit stood high in tho financial world, and that on tho whole lie would rather live hero than anywhere else. (Applause.) During the last few years tho farming industry had been depressed, not only in New Zealand, but throughout the world. In a country kke New Zealand, so largely devoted to agricultural and pastoral pursuits, any fall in the value of our primary products quickly reacted on tho rest of tho community, and produced financial stringency, unemployment,- and slackness in trade. Although during the present season prices had improved lor wool, moat, and dairy produce, tho farmers were still in difficulties in New Zealand, as elsewhere, and tho effect of this _ was felt throughout the whole community,

UNEMPLOYMENT, Unemployment had been particularly acute during the last two winters, and oven persisted through tho summer months, notwithstanding the far-reach-ing efforts of the Government and the local bodies to cope with it. Among other steps taken by the Government to absorb the unemployed were,_ firstly, to practically suspend its immigration policy in order that an inllux of immigrants should not be competing in a depressed labor market; secondly, to maintain and extend its public works and road policy so as to absorb as many men as possible, A voice: At starvation wages. Mr Stewart: If wages were raised above what. they arc the unemployed from Australia would come, here an increase our difficulties. Tho Minister went ou to say that, thirdly, the Government authorised, by legislation, local bodies to raise loans for unemployment.; and, fourthly, to subsidise, moneys expended by local bodies, in order to assist them in coping with the problem. Tho dominion was at present employing far more men on public works than our normal programme should require, and ui his view it was impossible to maintain tho present high figure for any length of time without creating further difficulties. About ton years ago wo were employing on the public works about ;!,000 men, and this number bad gradually 7 risen year by year until last year wo employed at the peak over 12,U00. This number was .abnormally large. It was well known, that, unemployment relief works wore not econo mic and did not yield full value for the money spent. Because of this fact we have tried as far as passible to meet tho cost of unemployment out of - revenue rather than out of loan money. But it must be remembered that unemployment was a still more serious problem in Australia, and if the New Zealand Government agreed to provide employment for aft who were unemployed at the present rate of wages it was only a question of time before we would have a large influx of unemployed from Australia seeking work in New Zealand. It was also quite clear that the local bodies could rot go ou raising large loans each year to cope with unemployment. It was easy to say that the Government had plenty of railway, irrigation, and drainage works and afforestation schemes that needed development, and therefore that the Government could absorb all the unemployed by pushing ou with these schemes. It was true that as tho unemployed had to be maintained in any case they might as well ho employed in useful work. But those great public works involved great public loans. Public loans involved a largo and growing interest bill. That interest bill must be met by tho taxpayer. The Government was trustee for tho taxpayer to see that lie got value for the money spent. It was also the experience of all Governments that so long as relief works were provided to an unlimited extent it was a matter of extreme difficulty to, get the unemployed to seek private employment. There were other remedies frequently suggested—first, that the Government, should carry out a large policy of closer land settlement. That was a sound policy in normal fames, but at the present tune the. main effort was directed towards enabling the men who were at present on the land to stay there. In earlier days, when large properties were purchased and cut up and loaded, land values were steadily rising. But at tho present juncture the process of deflation of land values was still going on, and even where they had purchased and cut up land at less than the Government valuation it had been difficult to induce settlers with sufficient capital ro take up blocks and employ labor. Another remedy that was Ireqneiitly suggested was that the Government should afford much higher protection to secondary industries by menus of a high tariff. But in his view a high tariff was no remedy, for uuemploy-

merit, as could be seen m Australia and America at the present time, where unemployment was far more rampant than in New Zealand, Other critics said that if the Government reduced taxation this would stimulate industry and provide enterprise for unemployment. With this principle he agreed, but reduction in taxation did not produce immediate results, and the problem of unemployment was immediate and urgent. Moreover, unemployment relief should be paid for as far as possible out of revenue, and if the Government was to cope with unemployment and pay for it out of revenue it was difficult at the same time to give away revenue by reduction in taxation. Critics continually demanded that the Government should evolve some complete scheme which would at all times absorb all who wanted work. They said the present methods were haphazard and piecemeal and insufficient. But their experience and the experience of all other countries showed that unless relief works were kept down to a minimum, and the wage kept at a standard less attractive than normal wages in private employment, men left private work to come on public works, and their numbers tended to grow and become permanent. Those who said a change of Government would solve the problem had to explain why unemployment was far more chronic and on a much larger scale under the Labor Governments in Australia than under the Reform Government in New Zealand. PUBLIC DEBT.

' “ Speaking last year in Feilding, I dealt fully with the position of the Public Debt, and in particular with the popular fallacy which was then being iterated and reiterated in many quarters witli regard to the balance of trade,” said Mr Stewart. “ I argued then that it was quite erroneous to draw any deduction as to whether the dominion was paying its way or not, from the relative position of the exports and the' imports without making allowance for the fact that our loans raised abroad were coining in in the form of imports. The view f put forward then was generally approved by the Press of the dominion, and since thou I have heard little of the question. ,1 propose on this occasion to deal with three main questions—First, as to whether wc are borrowing too much; secondly, whether taxation is unduly burdensome in New Zealand; ami thirdly, whether there is extravagance in Government administration. “ Before dealing directly with the question of whether wo arc borrowing too much annually let me correct one misconception which I often see with reference to our Public Debt. Critics turn to our Official Year Book and soy the gross public debt of Australia is L 1.67 IGs 8d per head, and of New Zealand £l7O 19s 5d per head. _ The inference they draw from this is natural—namely, that New Zealand is more heavily indebted than Australia. But any such comparison as this is entirely erroneous unless an examination is made of the nature of tlio public debt, and how far it is dead-weight debt and how far there arc assets held against it. For example, New Zealand’s debt includes over £.30,000,000 raised for the ’ purposes of State advances, which has no counterpart in the total for Australia, where savings bank funds and other resources are used for advances. This item of over £.'10,000,000 is a genuine investment, which not only pays interest and sinking fund, but has earned a profit at present amounting to _ nearly £1,500,000. This profit is arrived _ at after allowing for all losses on realisation and for income tax and management expenses, including the superannuation subsidy to its own employees. Since the commencement ot operations in the year 1895 the total _ losses on realisation were £54,000, being a loss of 0.095 per cent., or Is lid per £IOO of the total sum advanced on mortgage. When it is remembered that t h'iVc has been advanced a total of £56,200,000 since the inception of the scheme, £22,000,000 of which has been repaid, it will be seen that this is a very remarkable record. In fact, this one item of over £30,000,000 is not only not a burden on the taxpayer, but it is a source of profit. Then, again, we have over £18,000,000 of investments, including reserve lands, Bank of New Zealand shares, and other items, the chief of which is the accumulated surplus in the Public Debt Redemption Fund of over £13,500,000. I am not speaking of railways, telegraphs, and other public works, which amount to over £72,000,000, because critics say, witli some justice, that tlm value of tlreso must be discounted owing to the growing competition of motor traffic, etc. My point is that where wo have actual investments of many millions, such as (bo Slate Advances ami other items which have no counterpart in Australia, it is fallacious and misleading to compare gross public debt without any examination of whether those debts arc a. burden on the taxpayer or not.

ARE WE BORROWING TOO MUCH ? “I am now coming to the question of whether the Government is borrowing too much,” proceeded the Minister. “ I readily agree that our annual borrowing should lie reduced, and that is our main endeavor at the present time. But no heavy or immediate reduction can be made by a stroke of the pen. It must be u gradual process for several reasons. In the first place tfiere arc large public works half completed, .such as hydro-electric, schemes, railway workshop improvements, irrigation works, and so on, and to stop any of those and leave them half completed would be to do what no business man in private enterprise would do. 1 1) the second place, if I call upon tho Public Works Department to suddenly stop any of their largo construction works they must immediately pay off hundreds of hands at a time when the labor market cannot absorb them, and ] would immediately bo called upon to find money to cope with the increased unemployment. “In the third place, as I pointed out last year, it is the established policy of New Zealand that the State should own the hydro-electric schemes, railways, and other public works, and it is impossible to develop or complete ■these without largo loan moneys. I have frequently said that if Parliament decided that the public no longer wished these undertakings to bo owned by the State, on behalf of the community as a. whole, it would be an easy matter to .stop borrowing. Four tidy, it, must bo remembered also that wo* fell behind in our public works during the war, and we have been compelled to make up some of the leeway since. The policy of tapering off in borrowing is often jeered at as the catchword of every Government. But what, we arc aiming at is, first, to borrow each year only the minimum amount necessary to carry on the heavy programme of public works wo have in band: secondly, to pay off as much as possible each year of the dead-weight war debt and thereby year by year lessen the annual increase in the public debt. The effect of this policy is shown in the fact that, whereas in 1925-26 tho public debt increased by £11,000,000. in 1926-27 it increased by under £7,000,000. For 1927-28 I hope to show that it will only increase-by £6,000,000. Thereafter, if circumstances prove favorable, each year the net increase in borrowing should tall till wo ultimately reach the point where the amount of war debt or other debt paid off will equal the now money borrowed for public works. If any of my critics can show us a better method of dealing with the situation_ without leaving largo schemes Iftdf finished and without intensifying unemployment or abandoning public ownership of natural monopolies I would like to know what they propose.

IS TAXATION HIGH ?

The increase in the debt for ordinary purposes, by which is meant public work, land settlement, etc., may be analysed as follows;

“ It will be noticed that whereas in 1904-14 a large part, nearly 40 per cent, of the borrowed capital, was devoted to other objects, the loan money during the last period was concentrated on public works. Further, it will be seen that when reduced to a comparable basis the increase in the annual borrowing for these purposes is not in excess of the increase in population. This disposes of the contention that the Government has been borrowing at a rate greatly in excess of that of prewar times, but that is not the end of the matter. As I have already pointed out, we are at present paying for the war, and we have consequently less margin to cover the cost of capital expenditure that is financially unproductive. In other words, the country is not as well off as it was, and wo must exercise greater prudence. “The expenditure on public works during the periods I am considering was as follows:

“It will be seen that compared with pre-war our average yearly expenditure on public works has nominally nearly trebled and actually about doubled. Tho average expenditure of loan money has more than doubled, for of the £22,700,000 spent in the ten years ended 1914, £6,200,000, or nearly 30 per cent, of tho money came from the surpluses of the consolidated Fund. During the war period, surpluses were held, and only £350,000 was applied to public works, and in the post-war period, 1920-27, £4,250,000 was so applied. In the latter period, of course, a large part_ of tho surplus revenue ha sheen applied to debt reduction, a development largely arising out of war and the need for making an effort to get rid of some of our dead-weight debt. This partial diversion of surplus revenues means that a greater proportion of our capital expenditure comes from loan moneys, and this is an added reason for care in such expenditure. “In considering the principal items of loan expenditure during the period of 1920-27. allowance must be made for the fact that in tho first year or two ir. was necessary to make up some of the leeway lost during the war-time restriction of operations. Nevertheless, the economic balance of the dominion will be upset, if too many men are employed for any length of time on capital works. In other words, it is not economically sound for more than a certain proportion of tho population to ho employed out of brrowed money. The annual charges on the borrowed capital have to be paid out of the production of tho dominion, either directly in the form of payment for services rendered, or indirectly through taxation. This being so, capital expenditure is clearly not economically sound unless it results in increased production.

Was New Zealand heavily taxed in comparison with other countries? Critics in the Press persistently alleged that New Zealand was one of the most highly-taxed countries in the world, and he saw an article recently purporting to show that only Great Britain and the North of Ireland had a higher burden of taxation per head. The Canterbury Chamber of Commerce, in a recent economic bulletin, quoted an elaborate series of tables to show the heavy growth of taxation in Now Zealand. But to say that taxation in New Zealand was £l2 5s 7d her head was no , indication of whether taxation was high in New Zealand or not. The real burden of taxation could only be measured by the actual rates of taxation and not by the aggregate yield of taxation divided by the population. A few illustrations would make this abundantly clear. The ‘ Year Book ’ showed that in the last fen years the Customs revenue rose from £3,500,000 to over £9.000,000. But it also showed that in the same period the value of imports rose from about £25,000,000 to £49,000,00—i.e., in a far greater ratio than the population. This did not mean, however, that CustoniSjdnties had been trebled; wo knew, as' a matter of fact, that the actual rates of taxation had been reduced. The Customs revenue went up because the imports had risen. These imports bad risen either because the purchasing'power of the people bad risen or they had become more extravagant. But if the critics, who based their attack on the principle of the rate per head of taxation and relied on the increased revenue from Customs tariff, were correct, the easiest way to show a lower rate of taxation per head in New Zealand would be to double the rates of duty under the Customs tariff and thereby shorten up the imports. So far from the high revenue per head from Customs being an evidence of increasing burdens it was only an evidence of increased wealth and spending power on the part of the public. If, therefore, they wished to

see whether the people of New Zealand were highly taxed through the Customs, the only sound'way was to compare the actual rates of duty imposed on articles imported into New Zealand with the actual rates of duty charged on articles imported into, say, Australia. We knew,- in fact, that our rates of duty were substantially lower in New Zealand, and yet the yield per head of population was equal to, if not greater than, that in Australia. It certainly seemed a paradox to allege that under these circumstances Customs taxation was higher in New Zealand, whereas, as tariffs went, New Zealand had a low tariff Nevertheless, economists and others based their charge that New Zealand was heavily taxed upon the fact that imports were high, and therefore the yield per head of the tax was high, although the actual rates of duty were low. Ho had dealt with Customs revenue because it made up over 50 per cent, of the tax revenue. But there were other items that were incorporated in order to arrive at the taxation per head in New Zealand, such as land tax, income tax, death duties, totalisator taxes, and other taxes. Taking each of these in turn, how could it be argued that the land tax in New Zealand was high when out of about 80.000 farmers over 55,000 paid no land tax at all, nor did they pay income tax. If the land tax was high it all Sell on the shoulders of a very limited number of large land owners. There, it might be high, but even this was in dispute, and if it was high it was apparently made so to prevent aggregation of land. If, then, the Customs rates of taxation weie low and the land tax was so framed that over two-thirds of th farmers escaped payment of it, jwj had not yet found the grievous burden of taxation that was continually being denounced. “This leads me to speak of the income tax.” continued Mr Stewart. “Here, again, a comparison of the rates of taxation on individuals in New Zealand with those of other countries demonstrates beyond doubt that the individual income tax payer in New Zealand gets off much more lightly than in any State in Australia, and much more lightly that the English taxpayer. One example will suffice. A man with £6OO a year in Now Zealand, and no children, would pay £lO 18s, as against:— £2O 9s 2d in New South Wales. £lB 7s Cd in Victoria. £25 9s 4d in Queensland. £23 Us Jod in South Australia. £32 8s 8d in England. “ Anyone who takes the trouble to compare income tax in New Zealand with that of other countries will see how extremely fortunate the New Zealand taxpayer is. The real fact is that an examination of the rates of taxation, as apart Tom the yield of the tax, whether it be Customs, land tax. or income tax, will show that taxation in New Zealand is low as compared with other countries. There are two exceptions I make to this; —The first is death duties, which I think are high, but which form only a small part of the total revenue—less than 10 per cent. The other and very serious burden of taxation in many districts is that of the local rates. These are often lumped together with the genera] State taxation to show the burden of the New Zealand taxpayer. They undoubtedly form part of his burden, but they are not imposed at the hands of the Government. But so onerous have the local, special, and general rates become in some districts that farmers are in danger of being called upon to pay by way of rates more than the full economic rent of the land. One of the most serious problems the Government has to face is bow to help these farmers where the special rates are so burdensome that it is impossible for them to carry on. It is no assistance for the Government to write down the value of their land as the special rates must be made to yield enough to pay the interest and sinking funds on the loans, whatever the land may he valued at. INCOME TAX REVISION. “While 1 am dealing with income tax, let me refer to the revision of the income tax schedules last year. _ This revision provoked a storm of criticism. But I have not met any fair-minded critic who, when the matter is fully explained, does not agree that the proper thing was done. The fact is that when revenue was needed during the war the income tax was raised from time to time, but not on any uniform plan.” Mr Stewart said that when, after the war, reductions were made, these reductions took the form of a general percentage reduction irrespective of how much each class had been raised when increases were made. The result was that some, classes of tax payers were actually paying a less rate of income tax than they did before the war. This meant that those classes of tax payers were making no contribution whatever towards the cost of the war, whereas other classes were paying up to 250 per cent, more than pre-war. Such a position was obviously unjust and inequitable, and .sooner or later some Government had to straighten out the schedule and see that everyone paid on a fair basis in proportion to tile size of his income. The lad, was that our income tax scale has been so ragged and the various exemptions so far reaching that the whole burclon_ of income tax was gradually concentrating itself on a few classes of tax payers. Any attempt to reduce income tax on the existing schedules would have meant still further anomalies, and where the great mass of the income in not commensurate taxation would have been collected at all. The Tax Department estimated that the extra revenue might amont to £150,00(1, but to make clear that the main object of the revision was to put taxation on a fair basis, and not to gain additional revenue, in the revision of the Customs tariff we estimated for reductions which involved an immediate loss of revenue of more than wo would gain by the income tax revision and which may result in a loss of revenue of more than twice as much, when the full effect of the tariff revision made itself felt.

It was quite true that the people who got the reductions in Customs duties might not coincide exactly with those who paid more income tax. But lie refused to believe that any taxpayer would willingly escape paying his share of the war costs. Some papers had declared that the effect of the revision was to double and treble the income tax of certain taxpayers. But that statement was grossly exaggerated, and the increase in the rate in no ease amounted to anything like double what was paid before. In most cases where a taxpayer shows a marked increase in tax it would be found that some of bis exemptions, particularly lor children, had disappeared. “I am told in some quarters that the revision of the income tax will mean my political crucifixion,” said Mr Stewart. “ In ancient days Queen Esther was told that if she approached the king w'ithout being invited to touch his sceptre, her life was in jeopardy, and she replied: ‘lf 1 perish, I perish.’ So I, in these modern days, who know the danger of touching the taxpayer’s pocket, can only reply, ‘ It I perish, 1 perish.’ But I have placed the income tax schedules on a lair and equitable basis, so that future Ministers of Finance can reduce or raise the income tax as circumstances warrant on a. basis more fair to all classes than was previously the case.” (Applause.) It was true that the company tax might discourage enterprise where the maximum tax absorbed 4s fid in the ,£. But many of those who were most insistent on t.he need for changing over to individual taxation of shareholders were the same people who denounced with unrestrained violence the modest revision of the income tax made last year. What, then, would these critics say if the company tax were done away with and each taxpayer, whether a company shareholder or not, had to submit to double his present tax up to at least incomes of £2.000 a year? Such a proposal was politically impossible, and would involve the immediate

downfall of any Government that proposed it. Even if a halfway change over was made, as one Commission suggested, the same result would ensue. As a matter of fact, the Government did afford valuable relief to companies last fear by allowing the debenture tax to be collected from individuals direct instead of from the companies. He had evidence that this change had been much appreciated. It might be possible at a later date to extend the same rule to future issues of preferential shares, which would still further assist the companies. But the change over to the individual tax must > be a gradual one, whoever attempted it. He was astounded lately to see one critic declare that there had been no reduction in taxation since the war. The fact was that between 1922 and 1926 the Government had made reductions in taxation which amounted to over £4,000,000 annually. This included reductions in land and income tax, amusement tax, Customs duties, and postal reductions. At the .sam* time, between 1922 and 1927, the Government reduced the war debt by no, less than £8,280,000. But on the general question of taxation be was satisfied that no fair critic could comedo any other conclusion but that taxation ,in New Zealand was light. In this conclusion ho was supported by an eminent economist, Dr E. P. Neale, the secretary of the Auckland Chamber of Commerce, who said that the statement that New Zealand was one of the most heavily taxed countries in the world cannot be substantiated, and his analysis of the situation Jed to much the same conclusions as the speaker’s, COST OF GOVERNMENT. Was the cost of government in New Zealand extravagant? “This charge is freely made in a general way by criticg who rarely condescend to quote any definite items of expenditure, although the information is fully recorded in the annual Estimates presented to Parliament,” commented the Minister. However, in a recent article Sir Robert Stout quoted actual figures on the cost of government in some departments, and in this respect his criticism is a welcome improvement. Moreover, Sir Robert Stout’s long experience as an Administrator leads him to recognise that there is often good reason for what may appear heavy increases in expenditure, and he is prepared to make allowance for various factors which may warrant the increase in expenditure. I suppose, therefore, to offer some reply to the figures quoted by him.

“Dealing with the High Commissioner's office, Sir Robert points out that salaries of clerks and messengers rose from £6,259 in 1914 to £12,573 in. 1919-20, and to £25,287 in 1927, “so that, notwithstanding the cessation of the war, the cost of the clerks and messengers was more than four times what it was in 1914-15, and double of that at the conclusion of the war.” Thes« figures certainly show a largo increase, but it ought to bo pointed out that the vast amount of work arising out of the war did not cease when the war ceased. In the first place, when the military staffs were demobilised the High Commissioner’s office had heavy extra burdens imposed upon it in connection with war graves, soldiers’ pensions, and gratuities and a multiplicity of inquiries on matters arising out of the war. Secondly, in addition to this the work of the League of Nations ha* imposed new duties on the High Commissioner’s office, and the development of the New Zealand Navy involves a great deal of detail work concerning pay and allotment of crews, etc. Thirdly, immigration has also led to increase in staff.

This activity had ceased during the war, and it was not only revived on a larger scale after the war, but much more care was taken in the selection of suitable immigrants, and the gen-, eral organisation had to ho much more elaborate.

“ Fourthly, organised publicity in Britain was also a practically new postwar activity, while the development of Imperial affairs provided a great deal of additional work. Fifthly, the trade and produce section had to be entirely remodelled after the war to meet the changed conditions applying to our export trade and marketing of meat, dairy produce, fruit, and honey through the newly-established central control boards. The Stores Board set up in New Zealand to systematise tire purchases of all Government departments involved further staff to manage the London end, where a large and increasing volume of material had to be handled. To sum un, the increase of £12,000 in salaries of clerks and messengers between 1919 and 1927 is made up as follows; Immigration section £5,000 Trade and produce ... ... 3,500 Publicity 700 Finance 1,200 General 1,600 Total ... £12,000 “ A special examination of the work of the High Commissioner’s Office was made in 1920 by Colonel Campbell, who was then Secretary to the Treasury, and is now Auditor and Controller-General, and Mr H. Robertson, Public Service Commissioner. In the course of_ their report they say; “Our examination of the office has shown us that the work of tlie department during the war must have been very heavy, and, while this is now much less, it does not appear that the department will bo clear of work arising out of the war for a long time. At the same time, other work is developing rapidly.’ “Dealing with the same point Sir James Allen, in one of his reports as High Commissioner, stated: ‘The increase in duties has been more than collateral with the growth of the dominion, duo to the constant succession and ever-increasing volume of important work entrusted to the department by all branches of the Government service, and a greater share taken by the dominion since the war in Empire and international affairs.’

“ Only last year a special investigation of the staff and its duties by the Secretary of the Treasury, Mr Hayes, who was then in London, reached the same conclusion. Regarding the Treasury, which was also criticised by Sr Robert Stout, much the same considerations anply to this as to the High Commissioner’s Office. During recent years a great deal of extra work has been invoiced in establishing closer _ control over expenditure and systematising the trading departments’ accounts on a business basis: but, in addition to this, the large increase in the Public Debt owing to the war and public works exoenditure which was postponed during the war has more than doubled the work of the loan department in this office. In fact, the local domiciling of a large proporton of the deßt practically established a new branch for this business. Sir Robert Stout’s query as to whether Treasury work is doubled can be answered in the affirmative.”

Mr Stew-art said there was one general consideration, however, which apnlied to all departments, and which must he taken into account when comparisons of pre-war and post-war expenditure were made—i.e., the depreciation in the value of the £. The 192627 figures must be reduced by at least one-third for comparative purposes, so that to compare the pre-war cost of clerks and messengers in the High Commissioner’s Office, £6,269 in 1914. with £25,287 in 1927, the latter figure should be reduced to about £16,800. So, in the Treasury appropriations for salaries the figure of £12,374 in 1914-15 should not he compared with £26,789 in 192728, because if they allow-ed for the fall in the value of money the latter figure should read £17.860.

Expenclilirs*; on education had _ also been criticised. But it was unfair to regard increasing cost without allowing for increasing expansion, particularly in secondary and university education, quite apart from the normal increase in primary education. Important functions had also boon undertaken which were practically non-existent twenty years ago. sue!) as technical education.

child welfare, dental and medical clinics, and physical culture.' All these developments might be more libera) and generous than the dominion could afford, but that had been insistently demanded by the electors, and it appeared as if the department furnished economically the service required by the people. What really concerned the people was the net charges on the taxpayer. He had the expenditure analysed from this point of view in the 1926 Budget, and reference to that publication would show that, apart from the direct burdens arising out of the war, there had practically been no real increase in the total per capita charge on the taxpayer since 1913-14, even’ though the expenditure on pensions, health, and hospitals and education had increased considerably. If they examined the annual appropriations for 1914-15 with those for 1926-27, and deducted from each the working expenses of both the railways and the post office, as these were more than covered by their earnings, and were not a charge on the taxpayer as such, and if in addition to this they reduced the appropriations for 1926-27 by one-third to. allow for the fall in the value of money, and adjusted certain alterations in the accounting system, it would bo found that the expenditure per head of mean imputation was £3 5s 6d in 1914-15, as against £3 7s 3d in 1926-27, which .was a very slight increase over such a long period. TARIFF WALL AND UNEMPLOYMENT. In closing, Mr Stewart said there was a growing tendency on the part of many people to be dependent on the Government. Ho was'aware that the Customs revision last year was a matter of great disappointment to many industrialists and manufacturers, but it was his duty to balance, politically and economically, the claims which were made. Ho tried to secure legitimate assistance lor any industry that was entitled to it. In respect to the argument that a high tariff wall would prevent unemployment, lie could only draw attention to what was going on in Australia at the present time. The Tariff Board there had reported time and again that every increase had been followed by increased wages, and before the board knew where it was the increases were up to the tariff wall, and imports were flowing in more freely than before. Unemployment was worse in Australia than in New Zealand, and the board had said that some of the industries were on the verge of disaster, and that it could not provide any remedy if the tariff wall was to be increased year by year. For himself, he was satisfied there was something that required investigation in connection with our industrial organisations. Cases had been brought to bis notice of manufacturers who, unable to get tariff assistance, had found that, by reorganising their methods and arranging with their workers on a piecework basis, they had been able to pay 50 per cent, more wages, to increase their production, and to compete with the imported article. There was something that required examination when it could be sbovyn that New Zealand manufacturers, with the raw material at their doors, found difficulty in competing with manufacturers from the other side of the world who bad to import the raw material from New Zealand, export tho finished product, pay a tariff here, and yet embarrass the local manufacturer. The Government had tried to deal fairly with all classes of tho community, and at the cud of the year they would be able to pass judgment on its work. (Applause.) VOTE OF CONFIDENCE. After the Minister had answered a number of questions Mr Thomas Scott moved—“ That this meeting heartily thanks Mr Stewart for his able and instructive address, and affirms continued confidence in him as representative for Dunedin West,” Mr P. L. Bitchic seconded the motion. Mr .1. Gilchrist said he wished to move an amendment. He said he had listened to Mr Stewart with great pleasure, and thanked him for his clear exposition of the Government’s policy, bob in the circumstances he did not think he was a’ fit representative for Dunedin West. The Mayor said he was not prepared to accept an amendment on those lines, as it would bo a direct negative to the mol ion. The motion was then put, to the meeting, tho Mayor stating that ho could say it was carried almost unanimously. • Air Stewart thanked the meeting for the motion. He said he always tried to do all he could for Dunedin, and would at all (imes try to remedy grievances which were Rent to him. A vote of thanks to the mayor tor presiding closed tho meeting.

1904-14 1914-20 1920-27 (10 vears). (6 years). (7 years). £ £ £ Railways 12,735.000 5,126,000 15.872,000 Telegraphs and telephones 1,616.000 1,403,000 4,593,000 Hydro-electric supply — — 5.400,000 Roads and highways 3,597,000 1,909,000 5,409,000 Buildings (including schools) 2,782,000 1,939,000 . 5,171,000 Other ... , 2,004 ,000 1,741 ,000 0,633,000 Totals 22,734.000 12,118,000 43,078,000 At approx, pre-war values 22,734,000 8.000.000 28,500.000 Yearly average at pre-war values 2,270.000 1,330,000 4,070,000

1904-1-1 1914-20 1920-27 (10 years). (6 years). (7 years). £ £ £ Land settlement 5,000,000 3,225,000 550,000 Loans to local bodies 1,327,000 — • — Defence (mostly naval) 1,850,000 50,000 — Public works 16,044,000 9,843,000 35,500,000 Other 3,099,000 1,991,000 907,000 Totals 27,320,000 15,109,000 36,957,000 Yearlv average 2,730,000 2,520,000 5,280,000 Adjusted approx, to pre-war values ... 2,730,000 1,700,000 3,500,000 Per head of average mean population £2 14 0 £19 0 £2 12 0