THE FINANCIAL STATEMENT.

Globe, Volume XXI, Issue 1792, 18 November 1879, Page 3

THE FINANCIAL STATEMENT.

[By Temqbaph.] WELLINGTON, November 17. The following i 3 the Financial Statement delivered by the Colonial Treasurer : PBBLIMINABT. Mr Seymour—The difficulties and dangers of the position into which we have permitted our finance to drift are admittedly so great, and the time at the disposal of the Government has been so short and so broken, that I feel confident I shall have the sympathy of hon. members when I ask the committee for as favorable a consideration of the proposals I am about to submit as may be found compatible with careful criticism, and a full discussion of their merits. Sir, I think that all those who have given any real thought to the question of otr present financial condition must have come to the conclusion that it will be impossible to surmount our monstrous difficulties and

escape the dangers of the positien, without something like a complete remodelling of our finance, both general and local, without careful administration by Ministers, an I without the exeroise of much thrift and self-denial on the part of all classes of the community. The period of the session at whioh we have now arrived renders it impossible to properly eonaider the whole question of our finance this year. My unfitness for the responsible position I have the honour to hold would be at once manifest if I were to pretend to be capable in the short time I have been in office, of maturing and submitting in detail so complete a financial policy as the Government believe to be practical and necessary. I shall, however, sir, endeavour to indicate clearly the general soope, and to give what I hope the committee will consider sufficiently full details of such parts of it as we think it possible to deal with this session. But, firßt, it will be necessary that I should recall to the mind of the committee our present financial position, a position, sir, I venture to say, unparalleled in the history of the colony, for with abundant natural resources, with excellent credit, and with an increasing ordinary revenue notwithstanding great commercial depression, we find ourselves reduced to such a position as to cause the gravest anxiety to all true friends of the colony, and to necessitate important measures of financial reform, involving large additional taxation. POBITION OF THB CONSOLIDATED FUND EBBTATED. In the speech which I had the honor to address to the House on the 14th of Octeber last, I showed that the total expenditure within and on account of the years 1878-79 was £4,006,961, and the total receipts amounted to £3,875,137, including therein the surplus of 1877-78, amounting to £116,844, and the assets of the ,year 1878-79, amounting to £6695, realised since 30th June, 1879, and that the transactions of the year ended by leaving a deficit of £131,824. Notwithstanding the fact I have just mentioned, that we began with a surplus of £116,844, I showed that the deficit of £131,824 would have beeii £50,000 les3 had the land tax for the halfyear been collected within the year. But I did not mention, as perhaps I ought, that the bills taken on account of the sale of the old Supreme Court site and the reclaimed land in Wellington, and amounting to £82,524 8s 4d, were included in last year's revenue account. Of this amount £33,114 15s 8d has been paid, and £49,409 12s 8d remained still outstanding. I found these bills credited to revenue in the Treasury account, and did not therefore disturb the arrangement, although I am clearly of opinion that they should not have been credited aa if the amount had been received in cash. Of course, but for this mode of treating these transactions, last year's deficit would have been £214,348 instead of £131,824. This, then, was my starting point for the current year—a deficit of £131,824, to which I added the estimated expenditure for the year 1879 80, amounting to £3,974,034, taken from the estimates left in the Treasury by the late Government, and obtained £4,105,858 as the year's estimated expenditure. From this amount I deducted the estimated revenue derivable from our present sources of income, amounting to £3,193,900, and arrived at a total estimated deficit of £911,958, to be provided for in some way this year.

ESTIMATED BXPBNDITUBB AND INCOME Otf THB YBAB 1879-80 BBVISBD.

Sir, since I last addressed you upon tbis subject the Government have gone carefully through the estimates of expenditure, as left by our predecessors. These were necessarily imperfect, no provision haying been made for several necessary services, and the estimates as now presented show an increase of £39,044, the total amount being £4,013,078, instead of £3,974,034. The total of these estimates is larger by £6117 than the actual expenditure of the previous year, butitmust be remembered that they include provision for interest on the new loan, and deficiency Bills to the extent of £IIB,OOO, as well as the expenses attending the second meeting of Parliament within the year. We hope, moreover, by careful administration, to be aisle, with further experience, to effect considerable reductions ; but on this point it is impossible to do more than promise that we will use our best endeavors to confine the expenditure within the narrowest limits consistent with efficiency in the public service. We shall also during the recess oarefully examine into the present organisation of the Civil Service, and see how far, by the combination of necessary offices and the abolition of unnecessary ones, the expenditure can be further reduced next year. Competent and well-paid officers are absolutely essential to good government, while a large staff of underpaid Civil servants iB not only costly, but is in its very nature fatal to efficient administration. The estimate of revenue liaa also been carefully reconsidered, but with the advantage of four months' actual collections to guide me I am unable, I regret to say, to increase the amount estimated. It is possible that the land fund may be under-estimated, but I do not see any reason to expect an appreciable increase in land sales until a fall takes place in the price of money, and this cannot be hoped for until a good harvest has been successfully housed. The problem therefore for solution is how is this large estimated deficit, amounting after correction to £951,002, to be provided for this year, and what action must be taken to equalise our income and expenditure in future ; for although it is somewhat unusual, I am compelled by our peculiar eircumatanceß to look beyond the present year, and in some measure to take counsel for the next. But before we can answer these questions satisfactorily, we must examine the nature of the deficit and ascertain whether it is of a temporary or permanent character, because our mode of dealing with it will greatly depend upon the result of that examination. Now, to enable the committee to come to a decision upon this important point, it will be necessary to examine and compare the receipts of the consolidated fund for some time p'aat. I propose to do so for the last three yoars, and under three heads — taxation, services rendered, and land fund. There was raised by taxation in the financial year 1876 77 £1,319,643, in the year 1877-78 £1,424,029, being an increase of £104,386 over the preceding year. In the year 1878-79 £1,505,237, being an increaae of £81,208 over the preceding year, and of £185,594 over the year 1876-77, and this year the estimated amount of receipts is £1,512,300, being about £7OOO only more than last year, though largely exceeding the receipts of the years 1876 77 and 1877-78 respectively. For services rendered (omitting, for reasons I will presently give, receipts from railways) there was received for the year 1876 77 £318,250; for the year 1877-8, £366,367; for the year 1878-79, £421,377; and this year the estimated amount iB £401,600. Here, also, as in the case of taxation it wul be observed, that the increase has been marked and steady during the three years named, and that while the estimate of the total receipts for this year in respect of services rendered is about £20,000 less than the actual receipts of last year, an increase of of amount in some of the items of receipt is anticipated. I will not trouble the committee with remarks upon the separate items included under the two heads of taxation and services rendered. But I may say that the examination of table A, which will be appended to this statement when published, will show that in almost every case there has been a steady increase from year to year. As I have Baid, I have omitted the receipts from railways. My reason for so doing is that our railway system was too incomplete in 1876-77 to compare fairly with the receipts of 1878-79 ; but according to the comparative statement of receipts and expenditure on the railways made by the late Minister of Public Worka in August last, the figures I have given under the head of services rendered do not show as large an increase as I might fairly claim. It is not, however, desirable in anyway to overstate the case. I have not thought it necessary to take the receipts of more than three years for comparison. Had I done so however, the only deduction to be drawn from a careful consideration of the figures would certainly not have weakened my conclusion. On the contrary, the further back we go, the stronger would my caao appear. It may then, I think, be fairly stated that our receipts from taxation are steadily increasing, as also our receipts from services rendered, and that the slight check which the revenue derivable from these sources has met with during the current year is temporary only, and is fully accounted for by the general expression of trade throughout the world. Thiß fact should, I submit, give ns confidence in the future, as showing indisputably that our population is hard working and prosperous. In the financial year 1876-77 were received from land sales, £870,819; pastoral rents, £145,036 —total, £1,005,855. In the year 1877-78—Land sales, £1,440,824; pastoral rents, £145,738—10103, £1,586,562. Last

year—Land sales, £737,694 ; pastoral rents, £132,035 - total, £869,729. The estimated revenue for this year is—For land sales, £248,000; pastoral rents, £132,000 —total, £380,000. It will be seen that the land sales last year only reached £737,694, having fallen short of the estimate by £384,304, and that this year they are estimated to produce only £248,000. Here, then, we find the cause of our deficit—the falling off in the Crown land sales. If last year they had reached the estimate, and could be relied upon this year to yield £1,150,000 (this amount being about the average receipts of the last two preceding years, we should have this year a small surplus, instead of an estimated deficit of £951,002. In other words, under our present system we require from land sales, exclusive of the cost of survey and administration, something like £900,000 per annum in aid of ordinary revenue. It may be, I think, fairly anticipated that with the return of prosperity the annual sales will again be in excess of the estimates for the current year. With these facts, then before us, sir, we are in a position to affirm, that should we continue to treat land fund receipts as income, and were we content to sacrifice the future settlement of for the sake of a temporary adjustment of finance, the deficit, to which I have drawn attention, would, with our large area of unsold lands, be for some years to come of a permanent nature. So loDg, however, as we do so treat these receipts, we cannot disguise from ourselves that in years of depression we shall be subject to large deficits, which it will be difficult to provide for without adding from time to time to our permanent indebtedness. In other words we shall have an uncertain, and, therefore, unsatisfactory finance, and shall be continuing the objectionable practice of relying upon what is really capital for ordinary expenditure, instead of providing for such expenditure, as ought to be done, out of our legitimate income. If, on the other hand, we Bhould determine that receipts from land sales are not income, and shall not in future be so treated, then it is clear that there is a permanent deficit of from £BOO,OOO to JE900.000 a year upon our present expenditure and income. So much, then, sir, for the nature of the deficiency with which we have to deal. Before, however, I answer the question as to how the Government propose to meet the estimated deficiency of this year, and to obviate a deficiency in future, it will be convenient that I should call the attention of the committee to the state of our public debt, and the condition of the Public Works account. PTTBLIC DEBT. Our publio debt on the 30th June last amounted to £23,222,311, treating the guaranteed debentures as practically issued, and including treasury bills outstanding, of which £442,000 mature on Ist March next in London, and will have to be reissued. The annual charge for interest and sinking fund in respect of this debt was £1,232,119. Since then we have issued deficiency bills amounting to £600,000, and when the new loan of £5,000,000 is raised, our total gross debt will amount to £28,822,311, or deducting the accumulated sinking funds, our net public debt will be £27,112,304, subject to an annual charge of £1,400,000 for interest and £116,176 for sinking fund, making together £1,516,176, an annual burden requiring our most watchful attention, and one which can only be borne if our taxation is properly adjusted, and our financial affairs managed with discretion. It may be gratifying to the committee to learn, though the amount is small, that last year we redeemed out of accrued sinking funds debentures amounting to £71,000. Of these £58,000 represented the whole of the outstanding debentures issued under the Wellington Debts Act Amendment, 1876, and £13,000 represented a portion of those issued under the North Otago District Public Works Loan Act, 1872.

PUBLIC WOBKS TTJJTD. I Bhowed in my speech of the 14th October last that we began the year, 3Cth June, 1878, with a credit balance of £2,056,940, including advances outstanding amounting to £156,260, and this year with a nominal credit balance of £506,205, but that of this sum £298,543 consisted of advances outstanding, which, as hon. members are aware, are in faot moneyß spent, but not yet brought to aocount. So that we really began this year with only £207,662. This includes, as cash on the credit side, the whole of the loans (including the guaranteed debentures) authorised to date except the £5,000,000 loan. I further showed that we had spent in the first quarter of this year, that is up to the 30th September laet, some £504,733 of the £5,000,000 loan, and that we had entered into contracts and engagements which would necessitate our finding £733,553 more by 31st December next, and £921,818 between that date and 30th June, 1880. In other words, that the late Government had in various ways anticipated the new loan to the extent of £2,220,104, including £140,000 for contingent defence, and £IOO,OOO for purchase of Native lands, but exclusive of the coßt of raising the loan; and that, in addition to this large sum, which is payable by the 30th June next, there will be outstanding at that date a further sum of £957,177 for land purchase, and £128,815 for contracts entered into before the present Government took office. These figures were disputed at the time I spoke by the late Minister of Public Works; but I regret to say that, after most careful re-examination of the whole subject, I find the figures I then gave were strictly accurate. My hon. colleague the Minister of Public Works, in consultation with the Bngineer-in-Chief, has been endeavoring to arrange an extension of the period during which these payments will have to be made, and will shortly inform this House of his success in that direction. But he warns me that much practical relief is not likely to follow his exertions. The committee will therefore see that, unless we can abandon some of our land purchase bargains—for I fear none of the other engagements can be got rid of—the new loan is anticipated to the extent of about £3,300,000, without including the sum of £154,791 payable to Canterbury and Otago on account of impounded land revenue, or making any provision for the redemption of the guaranteed debentures, and also without taking into account the cost of raising the loan, When we remembar that the public works scheme of 1878 was to take five years to complete, that the expenditure from loan was only to be at the rate of some £900,000 a year, and that by a special provision of the Loan Act, 1879, no money raised under it was to be spent without the appropriation of Parliament, we shall, I fear, have to come to the conclusion that Parliament has not been treated with frankness in this matter and that its authority has been disregarded. The Government, sir, have reason to believe that not more than £3,000,000 of the £5,000,000 loan can be floated this year, that it will be twelve months before we can place the other £2,000,000, and that we cannot go upon the London market for two years afterwards. These facts will render the exercise of the utmost prudence necessary in the expenditure of the balance of the loan yet available for appropriation by Parliament. This question will be fully treated by_ my hon. colleague the Minister for Publio Worka, when he makes his Public Works Statement. I need only say here that I hope hon. members on both sides of the House will insist upon all expenditure being confined to necessary and profitable works, and that the expenditure of the balance of the loan shall be extended over a period of not less than threo years. Sir, as I have many times pointed out, our only safety lies in limiting our expenditure from loan and upon public works to a reasonable annual sum till our whole railway system is completed, and certainly in my judgment £1,600,000 a year is not a reasonable sum. It is in fact about double what we ought to spend, or indeed possibly can spend, considering our revenue, population, and liabilities. PBOPOSAI POB EQUALISING EXPENDITITBE

AND INCOME IN POIUBE. And this, eir, brings mo to that part of my statement for which hon. members are no doubt looking with some impatience. I hope, however, I have succeeded so far in fixing in their minds what our real financial position is, as upon that hangs all that I am now about to propose. Tho first point for decision is—are the receipts from land sales to be retained in the consolidated fund, and spent as ordinary revenue. Sir, tho Government think that from the falling off in the land sales there is a very important lesson to be learnt, and that is that the system of finance which we have been pursuing since the land fund was generalised in 1877, namely, that of relying upon the receipts from land Bales as one of the chief items of our consolidated revenue, is thoroughly unsound in principle, and should be abandoned at the earliest possible date, that date being not later than the ond of March. The receipts from land sales should, in the opinion of the Government, be chargeable with the expenses

of administration and survey of the land, and the balance scrupulously applied to public works, local aud general, and to immigration. By this means it is clear ths.t a real and not an imaginary fund would.be created to aid in carrying on our public works, local and general, and we should get rid of that vicious habit into which we hare fallen of late of treating as revenue that which is really capital, and spending it upon the ordinaiy st XT ices of the State. It will be generally admitted, when the large amoun of our public debt is remembered and the absolute Becessity of continuing to borrow moderately nntil the public works are complete is taken into account, that it is our duty not only to place our consolidated fund upon a sound footing, but also to show the London capitalist unmistakeably that we are not availing ourselves of the expenditure of borrowed money to sell our public lands, and at the same time applying the proceeds to the maintenance of services properly chargeable on annual income. I submit, sir, that we have no more effective means of [showing the soundness of our financial position and of the resources of the colony than by resolutely setting aside the receipts from our land sales for public works and immigration. The best mode of dealing with this fund, should the House determine to create it, I do not now propose to consider. This will be one of the questions for decision next session. A great work will have been accomplished if it should be determined to create the fund. Sir, the Government entirely disapprove of sacrificing the public estate to make up either a temporary or a permanent deficit in the revenue, or of selling land for any other purpose than for settlement and occupation.

Proceeding, therefore, upon the assumption that land sales receipts are no longer to form part of the ordinary revenue or income of the colony, I eliminate them, retaining, however, pastoral rents, which are really revenue, and find that the estimated revenue for the year is £2,945,900. Deducting from the total estimated expenditure of £4,013,078, the services included therein amounting to £247,509, which are properly chargeable against the revenue from land sales, viz., the cost of administration and surveys and the 20 per cent, of receipts, &0., payable to local bodies, we get £3,765,569 as the estimated expenditure of the year, and if from the estimated expenditure we take the estimated revenue we get £819,669 as the deficit for which we have to provide for the future. I will, Sir, now, with the permission of the committee, deal, in the first place, with the deficit of £819,669, leaving for the present the question of the deficiency to be provided for, which we have to provide for this year. Somo exception may be taken to calling this permanent deficit, as it will be said, and said truly, that our receipts from taxation, services rendered, and railways are increasing yearly, and this increase no doubt will afford relief to some extent. But I have thought it prudent to put it against the increased interest we shall have to pay upon the new loan and upon fresh borrowing which must certainly occur, and also the increase upon our ordinary expenditure, which is to take place. There is no reason to suppose, judging from present circumstances, that the expenditure or revenue will differ materially next year from that above stated. I shall therefore take, as sufficiently accurate for all practical purposes, the abore estimates of expenditure and revenue. To show the probable effect of the financial policy the Government are proposing for adoption, I will first ask the Committee to turn for a moment to the table of the estimated expenditure (table E), which, upon examination, will be seen to contain one very large item of £275,620 for subsidies to local bodies. Many hon. members think this contribution in aid of rates wrong in principle, and many more think that, considering our present financial condition, payment of it should ceaee at the end of the year. I am one of those who think it fair and reasonable that the State Bhould contribute towards the cost of keeping open and improving the means of communication throughout the country, and that it is altogether a mistake to suppose that by striking this item out of the estimates the people of the colony will be relieved to that extent from taxation. To those who have given any attention to local subjects, it is well known that an amount equal to this large sum must be raised for looal works. Striking this item out of the estimates will, therefore, be no_ real relief to the country at large, nor will it leave more money in the pockets of the settlers. But the question as to the fairest and easiest means by which the necessary amount can be raised is no doubt open to discussion, and is well worthy of the serious attention of this House. The Government, however, have come to the conclusion after care;ul consideration, that a better means than the present one of raising this money can be devised, and they will, therefore, recommend that the subsidies next year should be abolished. Should the House determine to retain them, taxation will have to be proportionately increased. The important question of local finance is far too large to go into this session. Therefore, I will say no more on the subject now, except, Sir, that the Government fully recognise the fact that it is their duty to submit to this House, upon its first meeting next session, a scheme which shall place local finance on a satisfactory and something like a permanent basis, and by " satisfactory " the Government understand placing local bodies in such a position as will enable them to obtain, as far as is possible, sufficient funds for all necessary works, while drawing a broad and distinct line between local and general finance, and such a scheme the Government will endeavor to mature before the next meeting of Parliament. Hon. members will bear in mind that I am now speaking of what I may call the permanent deficit—that is, I am speaking of the probable position we should find ourselves in at the end of next year, if tha eceipts from land sales and the expenditure ;pon land are eliminated from both sides > the account, and am not now making provision to meet the estimated deficiency of the current year. I therefore deduct the subsidies £275,620 from the deficit of £819,669 already mentioned, and find that there remains to be provided for £544,049, and this, sir, the Government propose to meet by the imposition of a property tax, the increase of customs and stamp duties, and release of sinking fund and interest by bringing the Consolidated Stock Aot into operation. That our difficulties might be tided over much more pleasantly for a few years by the sale of land to make good the deficiency of our ordinary revenue, a course not altogether unknown in somo parts of the colony in years gone by, is true. But, sir, the present Government and all the memberß of it are and always have been opposed to such a policy, and I feel confident that we shall receive the hearty support of the House and country in giving effect to our proposals to sell land only for settlement, to make our ordinary revenue equal our ordinary expenditure by the imposition of the necessary taxation, after all possible reductions have been made in the expenditure.

PBOPEHTT TAX. Sir, no taxation is pleasant, and a new tax is especially unpalatable, the more so if direct in its form. But it will, I think, generally be admitted that we have now reached a stage at whioh a property tax in gome shape is unavoidable. The principle of a land tax has already been affirmed by thiß House, and there is much to be said for the policy of specially taxing unused land hold for speculative purposes. If it were practicable I should certainly advocate the special taxation of unußed land, but in my opinion it is not practicable, and taking the ordinary holdings of improved land, I am unable to see upon what principle of justice or expediency it is held that that is the only form of prosperity which should be taxed. Why, I wish to know, should the farm of the hard-working pioneer settler, or the frontage of the struggling city tradesman bo taxed, while bank shares, mortgages, or other such property is allowed to go free ? I shall therefore ask the House to impose a property tax upon the American model, excluding incomes, and thereby to affirm the principle that realised wealth in whatever form, shall bear its fair share of the burdens of ths State. The Government, after careful consideration, have come to the conclEsion that an income tax is not applicable to the existing circumstances of tho colony. It is inquisitorial, and unavoidably open to great inequalities. The machinery, too, for levying such a tax must be elaborate and expensive, and the tax ont of proportion to the revenue to be derived from it. For these reasons, and many others with which I will not now trouble the committee, but which can be fully discussed upon the second reading of the Property Tax Bill, the Government have, bb I have said, decided not to include incomes in the proposed tax. Sir, the Government will ask Parliament to merge the land tax in the property tax, which we intend to introduce, thus including land in

the same category as other property, making it equally, but not specially, liable to general taxation. Parliament has already approved of this principle by directiug, in the case of intestate estates, that real shall be treated as personal property for the purpose of succession, and far taxing on succession. It would hardly be convenient that I should upon the present occasion discuss the policy of a land tax, but the committee will perhaps permit me to say a few words upon the subject, as it is one of great importance. The tax was, I presume, imposed either, first, for the purpose of revenue; second, to check the growth cf large landed estates ; third, to prevent land being held for speculative purposes ; or, fourth, for all these reasons together. With regard to the first I would say that as we have some twenty-six millions of acres of land for sale, some five millions of which are classed as agricultural land, and as the one object which we all desire most is the settlement of people upon the land, it is surely unwise, and will tend to defeat the object we hare in view if we impose special burdens for revenue purposes upon capital invested in land. I would aßk upon the second and third reasons what justice or wisdom there is in specially taxing that class whose growth is essential to the advancement of the colony in order to prevent a probable abuse in the acquisition of large quantities of land or profits by a few individuals. And in reply to the fourth reason I would say such a combination is unjustifiable when it results in the special taxation of a class possessing no privileges. Sir, I have satisfied myself that the tendency is towards disintegration rather than accumulation of large properties, and that speculation in land to an enormous extent does not exist in such a form as to be removable by legislation, and most certainly will not be remedied by a land tax on all lands. I may state, for instance, that in Franco, which is usually cited as a favorable instance of the sub-division of the land, the proportion is 1 property to 7.1 people, and in Belgium, where land is probably more subdivided than in any other European country, the proportion is 1 property to 4.71 people, while in New Zealand there iB 1 property to 5 people. And when it is remembered that 90,000 persons out of a total population of 414,000 have been brought out as assisted or free immigrants within the last few years, our case appears much stronger. This, sir, is no reason for relaxing our endeavor to improve our land laws in the direction of encouraging settlement, but it should, I think, reassure those who think that the tendency of past legislation has been to favor the acquisition of large properties. The principle of the American property tax is to tax everything a man possesses, including his income, after deducting all his outstanding liabilities. The proposal of the Government is to tax the property, whether real or personal, that a man possesses, after deducting in each case his just debts, and also a sum of £3OO as exempt from taxation, but as I hare said before, to exclude all incomes. It is very difficult with the data at my command to estimate accurately what such a tax will produce. We know, however, that the valuation under the Land Tax Act gives £99,500,000 as the improved value of real property. It is estimated that the total personal property owned in the colony is not less than £18,700,000, making a gross total of taxable property of £118,200,000. Deducting from this £5,000,000 on account of the £3OO exemption we get £113,200,000 as the net taxable amount, as far as it can now be estimated. I give this estimate with extreme diffidence, but I think I have rather under than overstated the sum which will be subject totaxation. Taking therefore £113,200,000 as the sum liable to taxation, this at one penny in the pound, the amount Government propcsi to ask, will give £470,000 as the product of the property tax. THE TABIFF. I have said, Sir, that the Government propose to raise additional Customs duties. With respect to the encouragement of local industries, I have had many communications with gentlemen interested in the promotion of local manufactures, and a committee of this House has still the subject under its consideration. But the time at the disposal of the Government has been quite inadequate to deal in a comprehensive manner with so important a subject. The Government, therefore, propose to appoint a Royal Commission during the recess to examine and report upon the whole subject of the best mode of fostering and promoting local industries. In the meantime the Government propose to admit many articles duty free, so as to assist local manufacturers as much as possible.] But, Sir, before making any remarks with respect to the articles upon which new or increased duty is to be charged, it will be better to say a few words upon a question which has been much discussed—the duties upon tea and sugar. Upon we do not propose to reimpose the duties remitted last year, but it may be necessary to reimpose them next year. Upon a general revision of taxation, the articles upon which we propose to increase or impose duties are:—Almonds and nuts, chaff, corks, dried fruits, fresh fruit other than oranges and lemons, window glass, grain and flour, malt, split peas, hope, iron fencing, tacks, matches and vestas, preserved milk, nails, perfumery, patent medicines, timber, salt, stearine, spirits, tobacco and cigars, wine and all goods at present charged with ad valorem duties. The particulars of the duties propoposed to be levied on these articles will be found in table G appended. The total amount they are estimated to produce is about £300,000. We propose, as will be seen, to reimpose the duties on timber and grain. We think experience has shown that their repeal has very injuriously affected local trade in shipping and also the timber industry, which was a.growing and important one, and which we are certainly not justified in seriously orippling without some compensating advantage to the State, but which we altogether fail to see has followed the repeal of these duties. We propose to increase the duties on spirits and on tobacco. With regard to spirits, we shall ask for an increased duty of 2s per gallon, granting at the same time an allowance for such as are under proof, the same as is now charged upon spirits over proof. This mode of levying the duty is, I believe, the custom in almost every other oountry. To make up the loss to the revenue which will result from this allowance for spirits under proof will require an addition of, at least, 6d gallon, so that the proposed increase is really only Is Sd per gallon, or, in the whole, £47,000, giving a total on spirits, wine, &c, of £56,000. We propose to increase the tobacco duty by Is per pound, and to authorise its manufacture in bond, granting as an encouragement to its local manufacture a bonus for the next two years only of 6d in the pound upon the quantity of tobacco manufactured and duty paid in the colony. The increase on this item is estimated at £50,000. From spirits, wines, &c, and tobacco, including cigars and snuff, I hope then to obtain £106,000. lam aware that in increasing these duties some risk is run of inducing illicit distillation and smuggling. There is always, as every one is aware, a danger and possibility of this when duties are increased, and the Government are by no means certain that, in consequence of the increased duties, the revenue may not be defrauded in the manner mentioned; but they do not think this will occur in any large extent, and they believe, looking _at our requirements, that upon no articles included in the tariff, would Parliament approve of increased duties so readily as upon spirits and tobacco. Nothing but our own experience can tell us when we have reached the maximum duty which these articles will bear without loss to the revenue.

But, sir, before proceeding to state what further burdens it is necessary to impose,_ it will be convenient here t» state what relief can be afforded in the way of remission of 'duties on carriage makers' and saddlers' ironmongery, carriage makers' leather, buggy shafts, bent carriage timber, hickory, hatters' materials, fine wire for brush-making, sheet zinc, plain galvanised sheet iron, sulphate of soda, almonds such as are used in confectionery, phosphorus and oil of rhodium. These remissions amount to £15,000, and it is hoped that with these alterations, and by tho aid of further reductions which are in contemplation, local in dustries will be placed in a more advantageous position than at present. The Government also, Bir, propose to abolish all light dues for vessels employed in the coasting trade. This it is also hoped, will give material assistance to that important branch of our industries, the _ local shipping trade. I hope, sir/ the time is not far distant when we shall be able to extend the remissions still further in this direction. The loss to the revenue by this remission will be £SOOO. STAMP DTJTIBS. These might be increased in cases, but looking at the fact that these duties are levied mainly on the transfers of property, and that it is proposed to put a special tax on property, the Government have determined

not to ask for any increase of the stamp duties except those upon successions. It is generally admitted that on the occasion of a succession to large property the State may demand without unfairness to any one, a contribution having some relation to the amount of the estate. The principle of a graduated tax upon successions has been accepted as right, and the Government propose therefore to revise the existing duties in the direction of making large accumulations contribute to the public exchequer in a greater proportion than they have hitherto done. It is estimated that these additional duties will produce £16,000 at present, and will become constantly increased. CONSOLIDATED STOCK. It is, sir, a matter for great regret, looking at our financial position, that no real effort has been made to bring the Consolidated Stock Act of 1877 into practical operation. We are now paying £116,176 per annum as sinking fund proper on our loans. We shall also pay this year interest amounting to £43,165 on bonds of the consolidated loan drawn and cancelled. Interest which increases in amount every year, being applied annually to the further redemption and cancellation of bonds, is in reality sinking fund. Then we invest the accretions of the sinking funds of other loans in our own bonds, and the interest we are now paying on (these latter bonds amounts to £40,041 per annum. So that in the present year we shall actually pay no less a sum than £199,382 towards the redemption of our public debt. By this it will be seen that we are on the one hand repaying our debt at the rate of nearly £200,000 per annum out of the revenue, while on the other hand we are borrowing largely to complete our railway system. This, upon the face of it, does not appear a very wise arrangement, and I need hardly say that the Gorernment will lose no time in giring effect to the will of Parliament in this matter, expressed by Act now more than two years ago. Sir, the operation of consolidation is necessarily a work of time, but I trust that under the management of persons desirous of giring effect to the Act of 1877, considerable relief will be afforded to our revenue, if not next year, at any rate, the year after. The annual amount of sinking fund and interest thereon to be realised by consolidation being dependent on the success which may attend the operations of the agents appointed under the Act, we cannot rely on obtaining much, if any, relief from this source during the current year. Imust.howerer, ask the committee to bear it in mind as a certain means of diminishing our expenditure in the near future, and to consider whether it may not be advisable to make some temporary provision, if necessary, until this relief is obtained.

With regard to the general question of the expediency of a sinking fund, I think it very unwise in us, with our railways incomplete, to attempt to maintain one, especially when it iB remembered that in no case do we capitalise the interest upon these works, as is done in the case of railway companies, until the works are complete, but that the whole interest on money used upon works in course of construction, as well as that spent on completed works, is charged upon and paid out of Consolidated Revenue. BUMMABY OP PBOPOSAXB. Summarising then my proposals, they will stand thus :—To be raised by Property Tax, £470,000 ; by Customs, £300,000 ; by stamps, £16,000; making a gross increase to the revenue of £786,000; from which however must be deducted the remissions stated abore, amounting to £20,000, together with the Land Tax, £147,300, which it is proposed to merge in the general property tax next year, thus giring a net increase of £618,700. Hon. members will observe that I have not taken credit for any saving for interest or sinking fund, which may be realised by Inscription of Stock. We may obtain some relief from this source during next year, but the uncertainty of this is so great that it would not be prudent to calculate upon it. I hope, however, when such relief comes, we shall be enabled to considerably reduce taxation, and as I have said before, I think we may look for this relief at an early date. It is proposed then, by these means, to raise £618,700 additional revenue. If this be added to the revenue from present sources, estimated to amount, exclusive of land sales, to £2,945,900, we get £3,564,600 as the total revenue for the year. The estimated expenditure I hare taken as probably £3,489,949, and if we deduct this sum from the revenue, we arrire at an estimated surplus of £74,651. From these figures I think hon. memberß will see that the proposals of the Government, if they should meet with the approval of the House, will, without any reasonable doubt, equalise our expenditure and inoome. HOW DEFICIENCY FOB CITBBENT YBAB IB TO BE MET. Sir, it now only remains for me to deal with the deficiency for the current year. The question of the advisability of changing the time when the financial year shall end has been raised from time to time in Parliament, but for various reasons has never yet been favorably entertained. The Gorernment, Sir, have come to the conclusion that the change might now be effected with advantage to the public service, and with the general approval of hon. members. I shall, therefore, propose that the financial year shall in future end on the 31st March. The first and obvious advantage which will follow this change is that it will shorten the period during which our present estimated disparity between income and expenditure will run, and will enable us to begin a new financial year by the time our increased taxation has come fairly into force. The period of the year too when Parliament will meet, viz., about the middle of May, will, I have reason to believe, better suit the convenience of hon. members than the time at which the House now sits. Sir, I have already said that the deficiency for the year will probably amount to £951,002, but should the House sanction the proposed change in the financial year, our current financial period will terminate on 31st March next, and the deficit to be immediately provided against will be proportionately diminished. I estimate that the expenditure for the nine months will be £3,110,262, and the revenue for the same period, including the receipts from the new taxation, will be £2,445,200, leaving a deficit of £665,062, to which I add the deficit of £131,824 at the close of last year, and arrive at £796,886 as the amount of deficiency to be provided for.

Sir, it is now the middle of November. Five months therefore of the financial year have practically gone, and we have already issued and absorbed deficiency bills to the amount of £600,000. It is not in tne opinion of the Government either possible or wise to attempt under our present circumstances wholly to meet this deficiency by taxation. We ore I hope about to take a new departure in finance. The proposals of the Governinent, if given effect to, ensuring in the future a state of equilibrium between expenditure and income. But to secure this result, taxation of a very onerous character will have to be imposed, and the committee will, I think, agree with me in the opinion that to impose a special taxation for the purpose of the current period would be impossible. The Government will therefore ask authority to provide by loan for such deficiency as may be found to exist on 31st March next. It will include, of course, the deficiency bills already issued. To redeem these and to cover the balance I shall asK the Houbo for authority to issue treasury bills. These latter the Government propose to have inscribed as soon as possible under the authority of tho Consolidated Stock Act, 1877. I make this proposition with great regret, but I think it will be admitted on all sides that it is impossible to do more this year, and that to hamper ourselves continuously with a floating debt of that amount would be impolitic and unwise. THB FINANCIAL TEAB, I have said, sir, that by ending the financial year on the 31st of March it would enable the House to meet about the middle of May, which is, I think, the earliest month that will suit the general convenience of hon. members. I should, sir, have proposed to terminate the financial year in April, as more generally convenient, but doing this would havo broken up the quarters as well as tho year, therbby rendering comparisons with former years almost impossible. By retaining the quarters unbroken, comparisons can be made without much difficulty. I hope the committee will agree with me in thinking this a sufficient reason for ending the financial year in March instead of April. Should the Houbc agree to the proposed change, I shall ask, sir, authority to continue the expenditure during the June quarter upon the scale of the estimates voted for this year. _ This seems to me a better plan than carrying on the Government by means of unauthorised expenditure and Imprest Supply Bills upon the estimates which have never been seen by the House. The plan will operate in this way . —The financial year ending on the 31st Maroh, the Treasury will have plenty of time to get the

estimates and financial statements, and the accounts of the year, in as much detail as may be desired, ready before the Houee meets. Immediately upon the House meeting votes for the several classes could be taken on account, as in England, and the House would then know for what purposes the money was voted, and the proposed scale of expenditure for the year. I shall also propose that in future the cash received within the year shall be the receipts of the year, and the expenditure made within the year shall be the expenditure of the year. The only objection that I know to this proposal is that a Government may hold back payments for political purposes, and so make the expenditure appear less in one year and more in another. I should propose to obviate this by causing each department to send to the audit office returns showing its outstanding liabilities on the 31st March, within forty days of the end of the year, duly certified by the under-secretary of each department, and the audit ofQce should place the returns before Parliament within ten days of its opening, if it opens after the tenth day of May, and if before that time then within fifty days from the 31et March. CONCLUSION. Sir, my task is now nearly done. I have to thank the committee for the kind and patient hearing it has given me, and to say in conclusion that I am fully sensible of the grave responsibility resting upon the Government and the Houee at the present time. The Government have endeavored to grasp the financial position of the colony as a whole, and our present proposals are submitted ae part of a general scheme. Wo feel, sir, that we should be utterly unworthy of the trust reposed in us if we had only resorted to temporary expedients at such a crisis. The time for temporary measures has passed away. We have endeavoured to go to the root of the matter, and at once, by a resort to freßh taxation, and other important reforms to place our finance on what we believe to be a sound and enduring basis. Sir, the imposition of fresh taxation to such an extent aB I have proposed to-night, and at such a time as this, can only be justified by the necessities of the case. The position is one which admits of no hesitation. We might attempt to extricate ourselves from a present difficulty by forcing the sale of land at a price and upon terms which would involve large sacrifices in the future settlement of the colony. Both our credit and our capital would ultimately suffer by such a course, even if it were temporarily successful. On the other hand, by the adoption of. our proposals for increased taxation, for placing the bulk of that taxation on those most able to bear it, and for entering on a course of careful administration, we shall permanently strengthen the one and conserve the other. We make these proposals with a firm belief in the ample resources and rallying power of the colony, and in entire confidence that the good sense of the colonists will prefer present self-denial to any sacrifice of the permanent interests of the country. Sir, in whatever way our plans may be dealt with, this at any rate is certain, that the country will be satisfied with no temporary expedients, will submit to no make-shifts, but will insist upon our finance being placed on a well defined, solid, and lasting foundation. The Colonial Tbeasttbeb concluded by moving the following resolution : 1. That in lieu of thj duties of Customs now charged on the undermentioned articles, the following duties of Customs shall on and after the 18th day of November, 1879, be charged thereon on importation into New Zealand, or on being cleared from any warehouse for home consumption, viz., almonds in the shell, and nuts of all descriptions (except cocoa nuts), 2d per lb: chaff, 10s per ton; corks (bottling), 15 per cent., ad valorem ; fruits (dried), 2d per lb.; fruits (fresh), other than oranges, lemons, bananas, and pice apples, 15 per cent, ad valorem ; glass crown, sheet and common window, 2s per 100 ft. superficial; grain and pulse of every kind not otherwise enumerated, 9d per 1001 b.; grain, when ground or in any way manufactured, Is per 1001 b. ; malt, 2s per bushel j peas, split, Is per cwt. ; hops, 6d per lb.; iron fencingwire staples and standards, 20a per ton ; iron, galvanised corrugated sheets, guttering, _ ridging, and spouting, washers, screws, nails, and wire netting, 40s per ton ; iron tanks, 5s each ; matches, of all kinds, 25 per cent, ad valorem j milk, preserved, 15 per cent, ad valorem ; nails, 3s per cwt. ; perfumery and toilet preparations, not otherwise enumerated, 25 per cent, ad valorem ; proprietary medicines, commonly called patent medicines or preparations of medicines, or any medicine or preparation of which the recipe is kept secret, recommended by advertisement, bill, or label, for the relief of any disorder or ailment, 25 per cent ad valorem ; timber, sawn, rough, 2s per 100 ft super.; dressed, 4s per 100 ft super.; shingles and laths, 2s per thousand; palings, 2s per hundred; posts, 8s ; rails, 4s; salt, 20s per ton ; spirits, or strong waters, not being sweetened or mixed with any article so that the degree of strength thereof cannot be ascertained by Sykes' hydrometer, for every gallon of the strength of proof by such hydrometer, and so in proportion for any greater or less strength than the strength of proof and for any greater or less quantity than a gallon, 14s per proof gallon spirits ; other spirits, beipg sweetened or mixed so that the degree of strength cannot be ascertained as aforesaid, 14s per gallon; spirits, liqueurs, and cordials, 14s per gallon j perfumed spirits and Cologne water, Sis per gallon ; stearine, Id per lb ; tobacco, 3s 6d per lb ; cigars and cigarettes, 6s per lb ; wine, other than sparkling and Australian, 5s per gallon ; all articles not otherwise enumerated, which are now chargeable with duty at 10 per cent, ad val., 15 per cent, ad val. 2. That the duties of Customs chargeable upon the goods, wares and merchandise hereinafter mentioned, imported into New Zealand, shall cease and determine, viz.;—Almonds, Barbary, bitter and other for confectionery, bolts and nuts, carriage bolts and nuts, tire bolts, shackles, holders and other iron fittings for carriages, morocco, roan, japanned and enamelled leather and tanned and dressed seal skins and goat skins, buggy shafts, bent wheels, rims and other bent carriage timber, hickory (unwrought), hatters' galoonß and hatters' calicoes, fine iron, brass and copper wire for use in brushmaking, phosphorus and oil of rhodium, sulphate of soda, saddlers' ironmongery and grindery, sheet zinc, plain sheet galvanised iron.