FINANCIAL STATEMENT.

Globe, Volume VI, Issue 638, 5 July 1876, Page 3

FINANCIAL STATEMENT.

We are indebted to the Government for the following telegraphic summary of the financial statement delivered last night:— The Colonial Treasurer commenced by complimenting Major Atkinson on the statement made by him last session. The singularly clear and lucid explanations then given left no information unsupplied. He would now. continue the scheme of that budget which, as the committee recognise, was to simplify all financial arrangements and to place them oh the most intelligible footing. The Government did not consider the question of abolition as undecided. They regarded it as beyond all doubt settled that the provinces should cease to exist; they recognised that abolition would impose upon the Government many difficulties, and to meet those difficulties they ask the aid of the Legislature, by passing such measures as would be necessary to give effect to the legislation of lapt session. The'financial statement was a necessary prelude to the business of the session, and in order to avoid delay, he had not waited for the complete returns of the year's transactions. The figures that would be put before the committee would therefore involye results that were partly estimated, but the totals might be relied upon as sufficiently near to what they would virtually prove to be, to be relied upon for all present purposes for discussion and consideration. Ae soon aa possible the actual figures and the Usual tableß would be laid before the House. THE CUBBENT LOANS. ' As to current loans, the Treasurer Baid : Honorable members were informed last year that it was proposed to dispose of the unsold balances of various loans, excepting the guaranteed debentures, which are used as a convenient reserve fund. In pursuance of this determination, the Agent-General and Crown Agents jointly were authorised to sell some £1,250,000 unguaranteed debenture* under various Acts. They reported a sale to be impracticable at previous rates, and instructions were then given to them to effects temporary loan on the securities. They were now negotiating for a twelve months' loan of £1,000,000, on short dated debentures, and we are led to believe the transaction will bi completed on the receipt of the advice tha 1 the necessary authority has been issued ov |bjg fide, It would probably have been com

pleted before but for tbe interruption to cable communication. The expenditure out of the Public Works account had, during the year, been £900,000 less than was authorised. When the difficulty in negotiating the balance of the loans became apparent, the Minister for Public Works was asked by the Government to retard for a time tbe operations of this department, and the only substantial excess in any item of expenditure for the year, under the Act mentioned, had been for native land purchases, a quite inadequate vote having been taken for that service. Taking into account the guaranteed deben tures, tbe remaining balances of unguaranteed debentures, the repayments of all advances to the provinces, and of those to water race companies, there would be left out of the amounts authorised out of the public works account, £1,400,000 to be expended. Of the defence loan, there was probably £40,000 available for expenditure. TOTAL PUBLIC DEBT. Respecting the total • public debt of New Zealand, including Treasury bills, the bon gentleman said " the gross public debt of the colony, when the balance of all the loans now authorised is raised, will be £19,543,194, and the annual charge thereon for interest and sinking fund £1,035,164, deducting the accrued sinking fund, £1,229,200 from the principal sum, the amount of liability is £18,343,994. These figures include the provincial indebtedness, which, irrespective of the debt for railways, amount to about three and a half millions, involving an annual charge of about £220,000. As the provincial debts are charged on the land fund of the different provinces, we have the charge on the consolidated revenue reduced by the amount named, and the result stands an annual charge of about £815,000 on the consolidated revenue, and on the land revenue. I use the word 'about' because the amount of aggregate provincial indebtedness cannot be exactly defined. It will be varied by the liabilities which will have to be met, and by the reductions consequent upon the acquirement of the railways constructed out of provincial loans." The results of the year 1875 6 had proved very nearly as his hon colleagues had anticipated last session as to the year 1875 6. Owing to certain permanent appropriations not coming to charge until the present financial year, there was a saving of about £200,000 between the amount set down for expenditure and the amount actually expended; Part of this sum however, namely that which had not been expended on account of railways, was not to be considered as a saving in the ordinary sense of the word, since a corresponding reduction in the amount of revenue indicated that portions of railways expected to be opened for traffic during the year had not been so opened. Amongst the items for expenditure was £15,000 for state forests. By some oversight £SOOO which ought to have been set apart for the year ending the 30th June, 1875 was not reserved, and he had caused it to be now added to the £15,000 for the current year. He was of opinion that we should be very unwise if we allowed any consideration to cause us to fail in reserving the money which has been appropriated for the purpose. Experience of almost a world wide character had shown the immense importance of attending to the forests of a country, and he was convinced that before many yearß »had passed, questions which now seemed to us of great moment would have sunk into insignificance compared with the interest which would be felt in the progress and maintenance of the forests of the colony. REVENUE OF 1875-6. The revenue for 1875-6, ascertained as had been before stated, was about £119,000 less than was estimated last session, but was £29,000 in excess of the actual revenue for 1874-5. After making ample provision for meeting all the liabilities of 1876-6 there was a surplus of J 672.000 with which to commence the current year 1876-7. The land revenue for 1875-6 was set down at £836,000, Respecting the trust fund, the Treasurer said " The total balance to credit of the annuities and insurance account, including the value of investments held, is £109,967 123 Id. The report of the English actuaries appointed to make the first quinquennial examination into the state of the department will be laid before the House, and I think hon members will come to the conclusion that it is exceedingly satisfactory. The surplus shown, after estimating the present value of liabilities and premiums is about £12,000, the actuaries explain, however, that they would not consider this sum devisable as profits. It should be remembered, in reading the report, that the actuaries evidently look upon the system here as based upon what is technically called «par:icipating rates,' but hon members know that it is by no means the principle upon which the Government department is conducted to charge higher rates for the purpose of affording a participation in profits. Insurance offices have commonly one rate for non-participating, and another for participators' policies ; there is some object, or some advantage, I presume, in this, but it always seemed to me that those who insure on the participating plan are asked to pay higher rates in order to constitute the profits of which they are to have a share. It has been clearly understood here from the first that the principle of our insurance system was non-participation, and the rates charged were the lowest consistent with safety. It is true, however, that the House, after the establishment of the department, generously agreed that if there should be such a profit as to justify Parliament in deciding that a certain sum could safely be taken out of the insurance account, it should not pass to the ordinary revenue of the country, but should be divided amongst the insurers. Still I repeat it has never been understood that our object was to charge high rates with tbe view of creating a fund for division. The Government proposed, however, to defer to the opinion of the actuaries, and to alter the rates to those based upon what is known aa the institute of actuaries table. Tbe estimates I Bhall submit to the House of this department will provide for more systematically dividing the country into districts for the purposes of insurance business, and for the establishment of agencies throughout the country in connection with the permanent agents in each of the four principal cities of the colony. Before the receipt of the actuaries' report, the Government had decided to discontinue the industrial branch and an Order in Council was issued for the purpose. . It will be seen that this step if (entirely in accordance with the recommendations of the actuaries. Considering that ihe first five years of the existence of an insurance establishment is its most critical

period. I think we may feel the greatest gratification at the result. Had it been necessary to come to the House for a vote to cover a small deficiency, I think hon members, in recognition of the vast benefit which the system confers on the community, would have readily passed the amount; but as it is, we have this beneficent institution flourishing amongst us without any cost to the State" Coming to the question of future financial arrangements, the Treasurer spoke as follows : FUTURE FINANCIAL ARRANGEMENTS. " Honorable members and the country are aware that the arrangements which were proposed last year require some modification. My colleague made proonsals which all the then circumstances justified, but observation during the year has shown that some changes are necessary, and others desirable. It is my duty to describe them, but I will first state the circumstances which render the changes desirable, and explain the financial conditions which we aim at establishing. Amongst reasons tha* compel changes in the proposals of last year are that the revenue has not reached the amount then estimated, and that I am not able to estimate such an increase for 1876-77 as will be needed to meet all the charges which it was then contemplated to impose. Some of those charges would be larger for this year than it was estimated they would be for the year which has expired. I allude especially to the increase in the items, subsidies to municipalities and road districts, to the cost of education, if it is all to be oharged to censolidated revenue, and to the increased loan charges. All these would be additions to the expenditure proposed last year, whilst there is not, as I have said, reason for estimating a corresponding addition to the revenue. Then the Government have come to the conclusion that there are insuperable, difficulties in the way of continuing to charge the railways to the abolished provinces, keeping an account with each, and charging varying deficiencies to the land revenue of each. Such a plan is inconsistent with theeconomical workiug of the lines. It occasions complication in the accounts, stoppages of uncertain amounts of land revenue, and disputes producing the greatest annoyance, even whilst the provinces exist; and with the provinces abolished, such evilawould be largely increased. Thesereasons make the changes necessary. The aim and the hope of the Government in the changes to be proposed are to take advantage of the information experience has supplied; The provinces have broken down because of their coming into conflict with the Colonial Government on many points, and especially on points of finance. Thetir doom was only a question of time, when it became obvious that they could not raise their own revenues; that they had to look to the General Government to supply deficiencies, and that they could not borrow without the colony becoming liable. I tried hard in 1873 to make it otherwise. I endeavored to give them a separate finance, and I thought I had devised means by which they could borrow without the colony being liable. These efforts have all failed, and now we have to build up again more soundly, knowing as we do the faults we must avoid.. It has been asked, why should a province be denied the power of borrowing given to the smallest municipality. The answer is, that municipalities can borrow without making the colony liable, and the provinces cannot. Another cause of the failure of the provinces was, that within themselves a rending rivalry was always creating distrust between the towns and country districts. Again, and not the least in importance, the colony had to perform a number of works for the provinces, some of which they ought to have performed themselves, and with others they ought not to have been charged. It thus became impossible to tell to whom belonged various duties, and even if in theory the apportionment could have been made, in practice the theory could not have been worked ont. We have arrived then at three clear aims, the interests of the towns to be kept from conflicting with those of the country districts, the interests of both to be kept from conflict with those of the colony, and a separate system of finance for each. In other words, we shall be successful with the new institutions we propose, in proportion to the distinctness of the duties and the finance with which we endow them.

" To carry out these conditions we have first to determine on having only one legislature. Clearly the rinks of conflict increase with the number of bodies empowered to make laws, whilst there can be no hope of freedom from conflict except in the symmetry and consistency of a uniform legislation. We propose then to constitute districts divorced from the towns, and not possessing powers of legislation, but endowed with clearly defined duties, revenues, and authority to augment revenue. We shall call them counties, and we aim at separating them from road districts, towns, and the colony, in regard to their duties and finance. With the finance I have chiefly to do, and the essence of our plan is that the counties, the road districts, and the towns will not be able to pledge the credit of the colony, whilst their own credit and revenue will be sufficient to enable them to perform the work assigned to them. Mr O'Rorke, I dreaded doing away with the provinces, because I thought we should have to sit hero in judgment on local works, and that gradually we 6hould find creeping upon us the demoralising system of mutual compromise called by the Americans ' log-rolling,' but we have avoided this difficulty, if our system be carried out. The name of any particular road or bridge, of any work indeed but the buildings for the Government services and the main railways of the country, should rarely be heard in this House, at least not for purposes of supplication, though it might be as the subject for congratulation at the triumph of the form of local Government that could give to the country the works it required without the necessity of parliamentary intervention. It will be seen that, in thus withdrawing from Parliament the charge of the construction of local works we depart from the system prevalent in the colonies, and approach to the Imperial system under which the principal works of Great Britain have been locally performed. We do indeed approach this system, or rather we aim at shaping into a system—the adopted rather than legalised many-sided form of local government which has grown up at home during a long period, and under circumstances entailing much discontent. That discontent is referable to the feeling that too much work is thrown on local governments, and too little revenue given to them, and that the management is not thoroughly representative. In assuming the charge ol

the police and the gaols, and in giving to local governing bodies a distinct contribution from the consolidated revenue, we think we avoid the first two of those causes of discontent, whilst our system will be thoroughly representative in its nature. "In determining the pecuniary resources of these local institutions, we must insist upon a rigid system of colonial finance, which he who runs may read. This is what we aspire to. We hope honorable members will agree to place the consolidated revenue on a footing, the permanence of which will not so much depend upon agreements or promises, as on its thorough adaptability to the requirements it has to meet. We want to draw a clear distinction between ordinary revenue and borrowed money—between ordinary expenditure and expenditure out of loans. We want to see charged on the consolidated revenue the expenditure ouly which it will bear, and we want to see that expenditure so defiued that the country may legitimately hope the increased revenue will be followed by diminished taxation. To do this we must know what is to be charged to the consolidated revenue, and we must be freed from the temptation to add to the expenditure because of increased revenue. If we make up our minds how the various services of the country are to be carried out, appointing to the General Government, the boroughs, the road districts, and counties, their several duties and several revenues, Parliament may leave to the Colonial Government the (endeavor, as they have the hope, to secure a reduction of taxation, I would much rather see the objects on which the consolidated revenue is to be depended narrowed, and the direct taxation, about which so much is said, levied by the local governing bodies, than unnecessarily, as I think, to force such taxation on the whole colony. We do desire to avoid the imposition of a property tax and income tax. We know there are those who think such taxation would be popular, and who are anxious to see it, because it would touch absentees. We are of opinion that, if necessary, the country could bear an income tax and a property tax, but that they would be serious evils, and ought, if possible, to be avoided. They would be very unpopular because very inconvenient, and they would be calculated to reduce the value of property of all kinds by more than their actual burdeu. They would not affect absentees in the manner or to the extent popularly supposed. Absentees who merely leave the colony for a while, after laboiing within it for many years, might; well bd excused from special taxation. They often do the colony much good ; they show by example, and enforce by precept, the success to which colonists may attain, and they frequently observe new industries or modes of conducting established industries, and apply their observations to enterprises in the colony. Permanent absentees are to be affected mostly by taxation on mortgages, but bythe terms of their mortgage deeds they generally protect themselves, so that the taxation, if imposed, would not fall on them, but on those to whom they have lent their money. Simple in theory as the taxation of absentees appears, it must not be forgotten that an income and property tax would much tend to discourage the future introduction of foreign capital, and I express the opinion that New Zealand has not outlived the need of outside means being introduced for application to private enterprises. If, in the opinion of the House, it is desirable to extend the scope of expenditure out of consolidated revenue beyond oar proposals, then direct taxation will be necessary, but we hope that there will be evinced a disposition to forego such extension, with the view of placing the consolidated revenue on a sound footing, without making New Zealand the first of this group of colonies to levy an iucome and property tax. We have borrowed very much during the last few years for reproductive works it is true, but attention has been directed to the fact as I have already stated, let us, if necessary, submit to some sacrifice, and show to those outside the colony as well «as to ourselvs, such a clearly defined irreproachable plan of revenue and expenditure, as to set at rest all doubts as to the safety of our position; It must be remembered that a fact is not altered by its being stated in different language, and we have not only to deal with an altered classification, but a diminished scale of expenditure. Nearly all the provinces were expending in excess of their revenue, and it is idle to suppose we can enable expenditure to be continued on the same scale. We hope for a great reduction in the provincial departmental expenditure, and as for the expenditure on public works which the provinces showed a laudable disposition to indulge in, those works will now fall to local bodies, possessing fixed current revenues, and having power to borrow for special works of importance. EDUCATION. " Assured then of the necessity of reducing the demands on the consolidated revenue, we cannot recommend to the Assembly to insist on the expenditure for education being entirely borne by that revenue. We propose to charge two-thirds of it to the land revenue, leaving the consolidated revenue to furnish one-third. Besides the cost of the inspection of primary schools throughout the country, the cost of school buildings, we propose should, in a great measure be charged to the reserves, and for that purpose we shall move for a power being given to School Boards to borrow on the security of the reserves. I speak of the reserves for primary education. " The balance of revenue from reserves, after meeting loan charges, we are willing should be devoted to lessening the contribution from the land revenue, so that in fact the reserves will pass in aid of that revenue, and not in aid of the consolidated revenue, which will continue to pay its third and the cost of inspection. After a time however we consider that the counties Bhould contribute something to education by keeping the school buildings in repair, and providing additional buildings. In order that this expenditure should not constitute a burden at the outset, we have inserted a clause in the Counties Bill postponing its operation for four years, and then only authorising it to the extent required by the Assembly. These reserves and the management of the schools we desire should continue in charge of local hands and committees, and we shall introduce a Bill to provide for such local management in the provincial districts, which will be left without local management after abolition takes place. We do not deßire to Eee special taxation for educational purposes, and will propose its abolishment wherever it exists. We think, however, the children educated at the schools should pay a mode at fee, and it is part of our plan that, whilst the revenue from the reserves shali pass in reduction "of the contribution from

land revenue, the fees shall pass in reduction of the contribution from the consolidated revenue. We do not propose to reduce the subsidies from the consolidated revenue to the -road districts and boroughs. The subsidies payable by the legislation of last year to Road Boards and counties, from consolidated revenue and land revenue, amounting to £2 to £l, we intend to equally divide between the road districts and counties; the license fees collected within their limits, we propose to give to the counties. The license fees and £1 to £1 to boroughs from the consolidated revenue we are still willing to give, only we think some dutieß should be entailed oa boroughs in return. CHARITABLE INSTITUTIONS, &C. " It seemed to us they as well as counties should contribute to the support of charitable institutions, and we propose to make this a condition of the grant. We shall submit a provision, by which outside districts using these charities may be called on to assist them. We shall not require boroughs or counties to retain the management of these institutions in their own hands. On the contrary, we should much rather see it in the hands of committees, private charity being invited in aid. Whilst they are in Government hands private charity is discouraged. The corporations and county councils by making grants to these institutions proportionate to tbe amounts privately contributed, would encourage private assistance, and save a great deal of money. We shall be willing that the consolidated revenue shall in like manner contribute 5s for every £ raised by private subscriptions. The Government of the colony will then be spared work it is not desirable they should perform, and the consolidated revenue will be relieved by not supporting these institutions beyond the rateable contributions I have mentioned, and the expense of inspecting them, so as to see that they are properly managed. In the term " Charitable institutions " I do not include lunatic asylums. The charge for these we place upon the consolidated revenue. THE LAND REVENUE. " We propose to assume the charges of, and responsibility for, the railways. There are unanswerable reasons to which I have already referred, for this step. The only question is, on what terms should it be taken. Oht proposal is, that in consideration of the colony accepting the liability for constructed and authorised railways, and for those yet required to complete the trunk lines, as nlso the liability for the cost, past and future, of immigration, a certain contribution from the land revenue should be made; we do not see how otherwise it can be done, without recourse to large direct taxation. Nor do we see how there ean be two opinions as to the fairness of the proposal, considering how the railways and immigration have raised the value of the waste lands of the Crown, and made them more saleable. The land revenue of each province should from the first have been made to bear the entire interest on railways in course of construction within the province. My colleague showed last year that it was a mistake to suppose we had paid that interest out of borrowed money; that, notwithstanding a limited power to do so had been taken, it had not been exercised to an amount that more than covered the special revenue contribution devoted to public works in the shape of onehalf of the stamp duties. In theory, paying interest out of capital whilst works are in course of construction, and considering such interest as part of the cost, is sound, and for private enterprises may be reasonable enough. But in practice the public interest rebels against such a course when pursued by a Government, and I was very glad the year before last to be able to state to the committee that the proposal of the Government was to take the whole responsibility of interest on the cost of works, finished and unfinished, upon the revenue, and not to use the power we possessed to partly charge it to loans. But whilst the colony was thus careful to refrain from charging on loans an expenditure open, as I have said, rather to an constructive than to a theoretical objection, it did not, as it might well have done, relax its previous intention not to make the provinces feel the burden of the uncompleted works. It adhered to the principle as between itself and the provinces of capitalising interest on cost during construction, and relieving them of all charge until the railways constructed, equipped, and opened for traffic, were handed over to them or worked on their account. This really amounted to the colony, from consolidated revenue lending to the provinces money on permanent loan. I have more than once said we had to submit to expenditure to induce the provinces to rest contented with our performing works so signally useful to them, as the railways with which we have liberally gifted them; for up to their completion they not only incurred no charge, but largely enhanced their revenues by sales of land, induced by the prospect of railway communication. I do not hesitate to say that in letting the consolidated revenue bear the cost of the interest on these works, whilst in course of construction, we submitted to expenditure whieh should have been charged on the land revenue of the provinces respectively interested. This plan cannot be continued if we are to place the consolidated revenue on a satisfactory footing. Wo must remember that we cannot spare part of it to relieve the land revenue from contributing to the cost of interest, whilst the works that benefit that revenue are being constructed, on the ground of saving the consolidated revenue from the burden on interest on incomplete works. A contribution from the land revenue is justified, and ia Btrictly in accordance with the conditions under which the public works policy was instituted. Indeed the original intention was to look to large assistance from the waste lands. I have referred as yet only to the burden of interest on works uncompleted, but we must also bear in mind that it is not to be expected that the railways, when completed, will at once yield in excess of working expenses sufficient to meet interest on the cost of their construction. Such a result would be scarcely desirable, for it would necessitate the adoption o( very high rates, and the utter ignoring of all questions of convenience and pro ■noting of settlement in favor of an iron inexorable rule of working the railways only ' to make them yield as much profit as possi--1 ble. There is no reason why the land revenue should not, and every reason why it should, bear a portion, if not the whole, of the cost of the difference between the interest paid and that recovered in the Bhape of profits in excess of working expenses. But then we are met with the condition that it is inexpedient to work each, line separately, and therefore that the contribution must be made an

one. We tribution from the land funsM a uniform percentage on and have enabled the fund to nMH out loss to the provincial the price of land ; but although therewH be no actual loss to the provincial distnHß such a plan would war with the sentiment which has made the compact of 1856 to be looked upon as something more than a economical arrangement. We aro led to believe that, whilst the people within any provincial districts would object to the proceeds of the land travelling beyond the boundaries of the districts, they will willingly recognise the fairnesß of contributing from the land fund a stated interest on the cost of the railways within their own boundaries. Taking into consideration the element of the interest on the uncompleted railway, making the present expenditure more unproductive, it seems to ua the contribution should be larger at first and gradually diminish. The contribution we propose from the land fund of each provinciiiljdistriot" is for three years 2 per cent, for the next three years If per cent, and for the next three years 1£ per cent on the total expenditure on railways within such district. After which time we think they should be sufficiently productive for the consolidated revenue to bear the whole responsibility. The land compact of 1856 canno; be left without further remark. Whilst, as I have said, we are willing to respect it in spirit and letter, we are not willing to condemn a large portion of the colony to an outcast existence. There are parte of the colony which at present do not enjoy a considerable land revenue. I advisedly say at present—for there are many who think that in course of time the distri its which now yield little land revenue will yield more than tbose which at present are mare fortunate. But an old adage says—That whilst nature slowly allows the herbage to grow a very useful animal may starve, and it ia not enough to point to eventualities -so satisfy tbe pressing wants of considerable portions of the colony. Their case, we are of opinion, must be met, and wb propo3e to meet it by maiing the consolidated revenue guarantee to them a sufficient revenue from the land to meet the prescribed payments. The land in to bear thus whatever we charge specifically on the land, such as cost of surveys, interest on provincial liabilities, including the interest on railways, and the one pound to pound sobsidy to road districts we propose shall be guaranteed year by year from the consolidated revenue, to be recovered without any interest from any surplus land revenue in the future. The whole country will thus enjoy certain advantages, whether or not the land revenue in any particular province is equal to the demiSS**for a particular year. The interest on provincial loans will be assured, and so also will be the cost of education and the subsidies to counties, road districts, and borougai. Some of the counties will be more fortunate than others on account of the surplun land revenue they will receive, but thay will all have the one half of the £2 to £1 subsidies, the o f .her half going to the Boad Boards, the license fees, tolls, and a power of adding to their own revenue.

(To be continued)