The Gisborne Herald. WITH WHICH IS INCORPORATED “THE TIMES.” WEDNESDAY, SEPTEMBER 27, 1939. DOMINION WAR FINANCE

Gisborne Herald, Volume LXVI, Issue 20053, 27 September 1939, Page 4

The Gisborne Herald. WITH WHICH IS INCORPORATED “THE TIMES.” WEDNESDAY, SEPTEMBER 27, 1939. DOMINION WAR FINANCE

The measures inirodueed in Parliament last evening provide the first instalment of New Zealand's bill i'or

financing its contribution to the war. Having regard to all the circum-

stances, the additional taxation imposed is modest almost in the extreme, but it is necessary that it should be accepted as an augury of what is to

come rather than as a true indication of the fresh burdens that must be borne by the public. Expenditure for this purpose permits of no criticism, because, as Mr. Nash said last night, “whatever it costs we must find the

money to go on with the war to the end.” Frank and ready acceptance of the necessities of the situation, however, does not imply that there should be no criticism of details of the Government’s financial proposals and the Minister would probably be the last to suggest that on issues so vitally affecting the whole community comment should be stifled. This first instalment of war finance, however, requires little comment and less criticism for the additional financial needs appear to have been met with reasonable equity. It is important, however, that it should be realised that the amount required for the balance of the present financial year is only a fraction of what will be needed in future if the war continues, and it is for this possible contingency that the public must be fully prepared.

The decision to open a “war expenses account” is entirely commendable, as this procedure will enable a separation of ordinary and extraordinary expenditure. For the next six months war expenditure will amount to £9,750,000, exclusive of anything that might be required overseas. Towards this amount, £3,200,000 is already provided under public defence votes, £2,408,000 is to be obtained from new taxation and the balance of £4,142,000 is to be obtained by way of loan. The new taxes are divided into three categories. The duty on beer, wines and spirits, and tobacco is to be increased by from 15 to 25 per cent, and the Government is to take 75 per cent of the increment resulting from the increased price of gold. Income tax is to be increased by 15 per cent and death duties by one-third. Finally, the postage rate on letters is to be doubled. Since the additional excise duties fall almost exclusively on luxury items they can hardly be criticised, while the higher postal charges will be distributed over the whole community. In regard to the other increases it is pertinent to point out that the maximum tax on incomes will now exceed 14s in the pound, while maximum death duties will amount to about 40 per cent and, on the average, will absorb 25 per cent of the estates of deceased per-

sons. The high limits which have been reached in direct taxation serve to illustrate the difficult task which confronted the Government. This point may be better understood by a comparison of the total taxation and total State expenditure this year compared with only four years ago. In 1935-36, taxation amounted to £25,000,000, whereas this year provision had already been made for the collection of £40,000,000 The total appropriated by the Government in 1935-36 was less than £40,000,000, but for the current year no less than £76,000,000 had been required before any provision was made for war expenditure. Since the total value of all production in the Dominion is little more than £130,000,000 a year it will be realised that the State had already appropriated a large proportion of the whole and that the margin upon which it could further encroach to meet the present emergency was extremely limited. In these circumstances, the Minister has done well to meet his needs without imposing still heavier burdens on the public, but it must be remembered that the new taxes now levied will only provide £3,726,000 in a full year, whereas it. is estimated that the war expenditure will be between £20,000,000 and £30,000,000. These facts explain why it has been necessary to rely so largely upon borrowed money for war purposes, and it is here that the utmost caution will require to be exercised and the closest watch maintained.

A fortnight ago, Mr. Nash stated that the war expenditure account would be financed as far as possible from revenue and he sounded a note of warning against indiscriminate use of Reserve Bank credit io ensure that it “does not result simply in inflation of currency with its harmful results," Already the Reserve Bank has expanded credit to the extent of more than £15,000,000 and to exploit this system much further would have serious results on the whole community and would impose what one member of Parliament aptly described as the heaviest tax of all. The alternative is to provide as much as possible from revenue and then, as Mr. Nash phrased it, to borrow what has been saved. This may be the harder course but t.o the extent that it is followed the Dominion will emerge the sounder from the task that now confronts it. In effect, the people of New Zealand are now called upon to husband their resources for war purposes; they must be prepared to meet heavier taxation and to contribute their savings towards the successful prosecution of the war. There will

inevitably need fo be a general tightening of belts and both State and private expenditure on things other than necessities will have to be rigidly curtailed. “The major objective,” said Mr. Nash last night, “is to use all

our resources for Hie prosecution of the war.” That one sentence sums up the whole position and if the Government itself subordinates all else to the attainment of that objective it may be taken for granted that the public will willingly follow its lead.