THE FINANCES OF NEW ZEALAND.

Globe, Volume III, Issue 253, 3 April 1875, Page 4

THE FINANCES OF NEW ZEALAND.

The following letter by the Hon Julius Vogel, in reply to an article by Mr Charles Fellows, appears in Frazer's Magazine for February;— Sir, —In your last month’s number an article appeared, signed “ Charles Fellows,” in which the writer, to the best of his ability, said everything he could against the financial position and the Government of New Zealand, past, present, and future. In eccentric fashion he grouped a great variety of statements—some being merely his own assertions, others supported by scraps of speeches, and others, again, by reported conversations with persons whose names were not mentioned. Were the article to appear in New Zealand, with Mr Fellows’s signature, very little, if any, notice would be taken of it; for he is known there as a person who (nnder the now de plume of “ Master Humphrey”) wrote, for an Opposition newspaper, letters attacking the Government. Those letters at first excited surprise ; then their extravagance caused amusement; and at length people became weary of them. Mr Fellows left New Zealand ; and I have heard that in Sydney he published a pamphlet attacking the New Zealand Government, but I have not seen it. He has now chosen a larger theatre ; and his statements become of importance since they appear in your influential magazine. I crave permission to expose the misrepresentations, and the false deductions therefrom, in Mr Fellows’s article. Some of the statements are wholly at variance with fact; whilst others, with some substratum of truth, are twisted and distorted to serve the writer’s'purpose of disparaging the financial condition of New Zealand. The statement on which the writer mainly relies, and round which he makes his other statements gyrate, is that the colony yearly manufactures surpluses by spending borrowed money on purposes which should be provided for out of ordinary revenue. He says that—- “ A large proportion of the sums borrowed and being borrowed is applied to maintain the regular establishment of Government, meet the interest of the already enormous debt, and provide for matters of ordinary expenditure properly chargeable against taxes only.” The writer explains how, as he says, this was and is done : “ Some years ago, when financial affairs were well nigh desperate, and year after year the most enormous deficits had to be acknowledged, an expedient was devised for preventing their reappearance. Up to that time, current expenditure had been defrayed out of the Consolidated Fund, which, as its name implies, was the reservoir into which all taxes converged. But by the new system there was called into existence what was termed the Special Fund, to be maintained exclusively out of borrowed money; and to this Special Fund was transferred the bulk of military expenditure, besidespther charges for miscellaneous purposes.” Mr Fellows then makes a short extract from the Colonial Treasurer’s Budget speech in 1870, in which speech it was explained why it was proposed to charge the D> fence expenditure to loan; but he artfully omits the reasons given for such a course, commencing his quotation thus: — “You will not be surprised, therefore, after what I have already stated on the subject of Defence expenditure, to hear that the Government consider that the colony is not justified, even if it were able to do so, in regarding the item of Defence expenditure as one to be defrayed out of ordinary revenue.” Mr Fellows goes on to say ; “ This proposal being carried into effect, a loan was issued for ‘ Defence and other purposes,’ and, as might naturally be expected, this resource, when once called into existence, was freely utilised for the * other purposes,’ as well as to provide for the military establishment.” I will state the facts, leaving your readers to realise how Mr Fellows has distorted them or given to them false meanings. Some time before the Defence and Other Purposes Loan Act was passed, and quite independently of it, the New Zealand Legislature devised elaborate machinery for auditing and controlling the public expenditure. From time to time this legislation has been amended, as experience has shown the points which could be improved ; and there is now a thorough system of control and pre-audit. Part of the original plan, and which part Still continues, was the division of the public funds into four branches, viz:—The Consolidated Revenue, the Land Revenue, the Special Fund, and the Trust Fund. The division was made to enable each fund to be separately kept. The Special Fund included all borrowed money. The object was to keep it distinct from the ordinary (or, as it was termed Consolidated) Revenue, and secure its devotion to the purposes for which it was borrowed. To insinuate, as Mr Fellows does, that the Special Fund was formed in order to facilitate the improper expenditure of borrowed money, is unfounded misrepresentation. That fund was devised for the purpose of preventing any misapplication, intentional or unintentional, of such money. The system was not, in my opinion, very effectual at first ; but year by year it has been improved; and I believe it to be now impossible that money can be otherwise than legally expended. Now, as to deficits. There can be no question that until the last two years, the finance of New Zealand was very embarrassed. The expenditure for native and defence forces was enormous, and quite beyond the power of a small population like that of New Zealand to bear out of current revenue. I will presently supply a statement showing the strain on the revenue and on borrowed funds, which was caused by the expenditure for native and defence purposes —in other words, purposes for which the neighbouring Australian colonies have not had to provide. In 1863, a war loan of £3,000,000 was authorised, and, in addition, up to 1868, some £228,000 of Treasury bills were issued in aid of ordinary revenue. For the purposes of the years 1868 and 1869, Treasury bills to the amount of £300,000 were issued. If Mr Fellows had stated that in years past JNew Zealand had to contend with great financial difficulties, he would have stated a truth—but a truth of which everyone with a knowledge of the colony is aware. Not the least injurious part of his disingenuousness is, the creation of an impression that the difficulties of the past are not only difficulties of to-day, but that they are the consequences of the very measures taken to remedy them. In 1869, the Imperial Government determined to take away the troops from New gealand. The colony was then in a most

depressed state. The condition of native affairs caused great anxiety. A powerful section of the natives was in open hostility The colony had a considerable force of ■friendly natives, but to maintain it a heavy expenditure was necessary. It was generally ft-lt that the removal of Imperial troops was a grave and risky step, and one entailing on the colony serious responsibilities. Although opposed to the removal, the Colonial Government determined to do their best, not to realise their own doubts, but to justify the prudence of the action decided on by the Imperial Government. It is, perhaps, a greater triumph to the Colonial Ministry to feel that they tided over the difficulties they feared, than it would have been could they have pointed to results as having justified such fears. When the Parliament, or, as it is called, the Assembly, met in 1870, and it was felt to be certain that, despite all remonstrances, the colony was to be deprived of Imperial troops, so that it was necessary to provide for defence expenditure during several years, it would have been worse than folly to have continued to nominally bear on the consolidated revenue charges which it could not support, and to provide for those charges by the issue of Treasury bills. If the Assembly had failed to make definite and legal provision for defence charges, it would not have loyally met the responsibilities which the sovereign pleasure of the Imperial Government devolved upon it. I may here mention that at the end of four years the consolidated revenue had sufficiently increased to allow the Assembly to relieve the loan expenditure by a contribution, from that revenue, of half the year’s cost for defence purposes. If you will indulge me by publishing the two following tables, I believe that no one who who studies them will question that the colony has done as much as it possibly could in the direction of defraying defence expenditure out of ordinary revenue. The tables were prepared in the Colonial Treasury, and their accuracy may be depended upon. The first shows the expenditure, year by year, out of revenue for native and defence purposes; and also the expenditure during the same years, for the same purposes, out of loan. I believe that, under the head of expenditure for native purposes out of loan, there are included sums spent for the extinguishment of native title to lands. It may be argued that such expenditure is of a productive character ; but, on the other hand, it is fairly to be stated as expenditure for which the neigboring colonies have not had to provide. The purchase of lands from natives is, no doubt, a more or less profitable operation ; but the other colonies have acquired the waste lands of the Crown without purchasing them. However, the amount is not very large. The second table shows the same items as the first, but including, in the charge on revenue, cumulative interest, at five per cent, on the amount expended out of loan. It will be seen from the tables that native and defence affairs have involved an expenditure of £4,208,000 out of loans, and £1,761,000 out of revenue; or that adding five per cent, for cumulative interest on the former amount, the charge for those purposes on ordinary revenue amounts to £3,528.000. When the small population of the colony is remembered, I would ask your impartial readers to judge whether New Zealand has not done the best it could be expected to do under the great burdens it has had to bear ? Later on, I shall ask you whether an examination of the present condition of affairs does not show that the colony’s efforts to relieve itself have been successful ? Mr Fellows insinuates that the “ other purposes,” for which part of the “ Defence and Other Purposes Loan,” 1870, was authorised, were a convenient device for enabling the Government to apply borrowed moneys for objects which ought to have been provided for out of ordinary revenue. Indeed, he conveys the impression that the “other purposes” were not specified, and that, therefore, the money was open to general application. The Act authorised the raising of £1,000,000. The provisions made for defence were that an expenditure of £IBO,OOO was authorised during the first year, £160,000 during the second year, afld £ 150,000 during each of the next three years. As to the provisions for other purposes, 1 give the words of the second schedule to the Act : “ To provide for a payment to be made by the province of Auckland to James Busby, Esq., and for a payment to be made to the New Zealand Government under The Loan Allocation Act Repeal Act, 1867, a sum not exceeding £60,000. (Province to be charged, Auckland.) “ To provide for a payment to be made by the province of Taranaki to the New Zealand Government under The Loan Allocation Repeal Act, 1867, a sum not exceeding £6OOO. (Province to be charged, Taranaki.) “ To provide for a payment to be made by the province of Wellington to the New Zealand Government under* The Loan Allocation Act, Repeal Act, 1867, and for sums advanced for the erection of the Wanganui bridge, a sum not exceeding £17,000. (Province to be charged, Wellington.) “ To provide for a payment to be made by the province of Otago to the New Zealand Government on account of the late province of Southland, and for other debts due by that province, a sum not exceeding £50,000, and for the repayment of money borrowed under the Otago Dock Trust Ordinance, 1866, a sum not exceeding £50,000. (Province to be charged, United Province of Ocago and Southland.” The charge that borrowed money “ is applied to maintain the regular establishment of Government” is quite untrue, unless by it is meant a reference to the fact that the cost of a considerable portion of the staff engaged in Public Works Department is defrayed out of the loan. I presume, however, that it cannot be disputed that the cost of engineers, surveyors, draftsmen, and other officers engaged in labors connected with the construction of works authorised to be paid for out of loan, is fairly includable as part of the cost of such worl s. The salaries of officers of the Public Works Department who are engaged in what may be called ordinary duties—such as those in charge of railways already constructed—are not charged to loan. The statement that borrowed money is used to pay interest on the public debt, is a scandalous perversion of fact. The only ground for it is, that authority was given by the Legislature to charge to borrowed money interest on the cost of railways during the course of construction. The legitimacy of including in the capital cost of a railway interest on the money expended during the time it is being constructed, does not, it seems to me, admit of question. A sum of £300,000 in all has been authorised

for the purpose—not a very large amount to cover interest on works to cost eight millions. But the revenue of the colony has so improved, that it was provided by the Assembly last year that loans should be relieved of the interest on the cost of the railways and works during construction, and the charge was devolved on the ordinary revenue. The statement that interest on the cost of immigration, or on any other part of the loan funds (except as before explained), is or has been paid out of borrowed money, is wholly untrne. Mr Fellows asserts that one-half the immigrants who receive assisted or free passages to New Zealand leave the colony. He bases that conclusion upon an extract from a newspaper, the name of which he does not mention. In that extract it is stated that during 1872 10,725 persons arrived in the colony, and 5752 left it. The newspaper writer, however, expressly guards against the supposition that he was dealing only with immigrants, in the sense in which the term is used by Mr Fellows ; for the writer, after applying to the 10,725 the words “ persons were introduced,” corrects himself by adding, “ or, perhaps, more properly speaking arrived by sea.” It is not possible therefore, that Mr Fellows could otherwise than wilfully have assumed that the arrivals and departures spoken of in the newspaper extracts were all of Government immigrants. The deduction he makes from the extract—and which he several times repeats —that one of every two immigrants introduced by the Government leaves the colony, is a false deduction, and it is difficult to see how he could be ignorant that it was so. During the year 1872, there were 4808 immigrants introduced into the colony : therefore, adopting the figures given in the newspaper extract, the balance of arrivals over departures shows that there was a slight excess in favor of the colony, over and above the total number of introduced immigrants, instead of one-half of the introduced immigrants having again left the colony—as Mr Fellows, without the shadow of a reason, states these figures to prove. Mr Fellows impugns the legitimacy of expending borrowed money on immigration. His views will not be shared by many who have an acquaintance with the colonies ; for those who have such acquaintance know that population is the one great want. In the United States, I believe, every immigrant is held to be worth £2OO. It is generally considered in New Zealand that this is the reverse of an excessive estimate; Large as is the number already introduced into the colony, my latest advices urge the demand for more. I do not wish it to be understood that every immigrant is successful, or is pleased that he has gone out: but the instances of dissatisfaction are rare; the opportunities enjoyed by laboring men of earning money, of establishing comfortable homes, and. above all, of educating their children, are out of all comparison with what the same men have enjoyed in their former homes. The success of the New Zealand immigration is attested by the evident way in which the immigrants arriving create, by their own wants, the demand for others to follow them. In the neighboring colonies, intelligent men look with envy on the comprehensivenesss of the New Zealand immigration plan. Charging the cost of that plan against borrowed money is in reality leaving to the immigrants to repay to the State, in the course of time, the cost to which they have subjected it, I will now ask you to allow me to explain the Immigration and Public Works policy. I have already stated that when it was proposed to remove the troops, the colony was in a very depressed condition. Works necessary for opening up the country, such as roads, bridges and railways, were being carried on very sparingly in the Middle Island, and still more in the North Island. The public lands were in little demand, private property was much depreciated in value; it was considered throughout the Middle Island that the North Island was ruining the colony, and, indeed, it was so, more or less, for colonisation was suspended in that island; a mere fringe of it only was accessible to Europeans; the greatest uncertainty prevailed as to the movements of the hostile natives, and, as I have before said, the determination to remove the troops excited great apprehension. The finance of the colony was very embarrassed, and large aids to revenue had to be sought in the issue of Treasury bills. Stagnation, if not retrogression, prevailed; and stagnation in a new country is infinitely worse than stagnation in an old country. During the session of 1869, the feeling became general that) something must be done—that the colony could not afford to continue spending money on war, and neglecting all means of developing the country’s resources. The unproductive burden could only be lessened by enlarging the productive resources. The North Island, a mere theatre of war, was a frightful drag on the colony ; but, on the other hand, the North Island settled would become able to bear its share of the misfortunes of the past, and to aid the progress of the future. Much to the credit of the Middle Island members, amidst all thedifficulties which prevailed and in which their own island shared, they at once recognised the vital necessity of opening up the North Island, and making it a reproductive estate, instead of one constantly draining the resources of the whole colony. Before the session of 1869 was closed, Parliament voted £30,000 for making roads in the North Island. An anxious recess followed; for on the Government devolved the necessity of submitting to the Assembly, in the next session, comprehensive plans for the future. Ministers were at no loss to understand that war expenditure must be discouraged, that the population must be increased, and that public works must be undertaken, so as to open the country for settlement. The difficulty of proposing a plan which would find acceptance was much increased by the mode in which New Zealand had been colonised. As many of your readers know, New Zealand was divided into provinces, each representing a separate area of colonisation, each having distinct interests, and each naturally disinclined to support any plans in the benefits resulting from which it was not to share. I do not condemn the diffusion of settlement which was a consequence of the provincial system. If it has added occasionally to the difficulty of colonial legislation, it has been the means of largely increasing the settlement of the country. But it made it necessary that, in propounding a colonial system of public works, regard should be had to all the provinces; and a plan applicable to the whole country had to be submitted. Such a plan was submitted ; and during the same session of 1870, it acquired the force of law. From the “"Official Hand-book of New Zealand,"

which has just been published, I submit an extract, showing briefly the nature of the policy adopted, and the operation of the Public Works Department:— “ Immigration and public works from|lßsß, when the present constitution was first estab lished, to nearly the end of 1870, exclusively devolved on the several provinces, and it may be said that, except to a limited extent in the provinces of Otago and Canterbury, they had, from various causes, almost ceased to exist for a number of years previous to the latter date. Even if the provinces had generally been able to administer these two great departments of colonisation, it became evident that an administration conducted by independent local authorities, with distinct local interests and functions, would necessarily be disjointed, and wanting in system and comprehensiveness. The term ‘ Public Works’ is used here in relation to works of a colonial character, and in which more than one province is concerned. “In 1870, the Immigration and Public Works Act and cognate Acts were passed, and the policy contained in them may be shortly described as follows : “ The colony was to incur a liability, spread over a course of years, amounting altogether, territorially and pecuniarily, to about nine millions, which were to be expended in specified proportions on the undermentioned objects: “ 1. Immigration. “2. Main railways throughout each island. “3. Roads through the interior of the North Island, “ 4. The purchase of native land in the North Island. “ 5. The supply of water on goldfields. “ 6. The extension of telegraph works. “ The administration of these services was vested in the General Government, and the responsibility, subject to some exceptions in which its action depended on the previous concurrence of provincial authorities, devolved on the General Government. These exceptions have been abolished by subsequent legislation. “ As soon as the session of 1870 closed it became necessary to organise a department to undertake the special duties, and this department was supervised, as required by the Act, by a Minister of Public Works. At first, while the organisation was in progress, and the practical work was in its early stage, the Colonial Secretary acted as Minister of Immigration and Public Works; but in the course of a year, when adequate fuuds were raised, and important works and immigration on a large scale had been begun throughout the whole colony, a special Minister was appointed, and shortly afterwards there was one for each island; but in the latter part of 1872 the whole department was divided into two, namely, Public Works and Immigration, and each was placed separately in the charge of a Minister. This arrangement is still adhered to, and the large increase of the duties of each service, and consequently of the department in charge of that service, and the great importance of those duties, render such a division at present absolutely requisite. “ Since its organisation, the department has constructed in the North Island roads of various descriptions to the extent of 1,150 miles, a large proportion being good traversable dray roads; also about 500 miles of bush tracks, which, although only at present available for horse traffic, have been selected with great care as suitable routes for dray-roads hereafter. The expenditure on these roads and tracks has been about £300,000. There are now being constructed several hundred more miles of similar roads, which will be the means of opening up nearly all parts of the North Island for settlement. “ In the South Island, similar roads have been completed on the west coast, to the extent of over sixty miles, and about the same length is now under contract or surveyed ready for contract. They have been laid out with the view of enabling the golddigging community to get about with ease, and of opening up that part of the country for settlement. “ It may here be remarked that before the creation of the Public Works Department of the General Government, many thousands of miles of good and substantial roads had been constructed by the various Provincial Governments throughout the colony. “ The construction of railways has been very vigorously proceeded with. The department has contracted for the completion of over 550 miles of railway throughout the country. In addition to this, Parliament has sanctioned a further length of 360 miles, for which surveys and plans are rapidly being prepared. The whole of the above railways are to cost, when completed with their equipments, about £5,500,000. It is estimated that there are now between 3000 and 4000 men constantly employed, and that a still greater number will be required during the next two years to complete the lines abovementioned as having been sanctioned by Parliament. “ In addition to the lines under contract, 40 miles of railway constructed by the department are now open and in full working order, as well as a further length of 70 miles constructed by the Provincial Governments of Canterbury and Otago, making a total throughout the colony of 1020 miles of railway either open or in various stages of progress. “ The department has likewise taken the construction of several large water-races on the gold diggings, which, _ when completed, are calculated to provide remunerative work for several thousand miners and others over a period of many years. For these races Parliament has voted £300,000. “ There are also several large coal-fields now in progress of rapid development. When these mines are in full work, they will afford permanent employment for many thousand persons of all classes.” ( To be continued.'),