MINISTER OF FINANCE REPLIES TO CRITICISM

Hawke's Bay Herald-Tribune, Volume 81, Issue 28, 27 October 1937, Page 3

MINISTER OF FINANCE REPLIES TO CRITICISM

Our Own Correspondent.)

BUDGET DEBATE ENDS Mr Nash in Defence of High Taxation LABOUR'S PROSPERITY POLICY Government Pursues Ideal of Socialism

(From

WELLINGTON, Last Niglit. Likening tlie Budget to the first annual report of a new company with a new ohjective, the Hon. WaJter Nash, in a speech lasting nearly tivo hours, replied in the House of Representatives this evening to criticism and expounded the financial policy of the Lahour Government. The Minister considered that New Zealand was "a good little c.ountry" and that it would remain a desirable place in which to invest money. . He thought the Leader of the Opposition must ha-ve had liis tongue in liis cheek when he said the Government was taxing the community beyond its ability to pay. He condemned the practice of past Governments of borrowing money overseas, stating that the Labour administration would never adopt such a course.- He also stated that, contrary to the Opposition's contentions, the revemie from the -rent'als oi the Government 's houses would meet the outgoings. Nor did Mr Nash agree that the country^ was overtaxed and that the money spent on Public Works and social services was expended needlessly. He remarked that highly-taxed countrie,s were those with the highest standard of living, and held that the Government by collecting taxation and spending it wisely was adding to the Dominion's prosperity. A member of the Opposition had issued a warning that the Government could go too far in the provision of social services. The Minister did not think this was so. They could not go too far in providing social services, but the inference was that if the Opposition came into powtr those social services would be cufc.

There was no suck thing as a fliglii of capital from New Zealand, Mr Nash said. It was possible that some funds might be going overseas, but they were not appreciable. For one thing New Zealand was still a splendid country in which to invest money and it might even be argued that people who earne.d their living in Now Zealand could be expeeted to invest their surplus funds within the Dominion. However, if people saw that they. could obtain i per cent more by investing in Australia they were perfeetly at liberty to do so. Oversea3 Borrowiug After discussing the taxation position und pointing out that only £1,800,000 liad been obtamed from increases in tbe actual rates of land apd incomeiax, Mr Nash referred to tiio question of overseas borrowing. "The Leader of the Opposition suggested tbat it would be fairer to compare piesent L'onditions with those of a year wbich was not a slump year," ,he said. "That is a reasonable suggestion, and I will g-} back and take the years from 1925 to 1929, which were'generally regarded as boom years. They were not as good as the last two years have been because the present trovernment was not in power then. "However, during those boom years the Government of the day borrowed overseas £36,532,100. We have not borrowed any money overseas. The eomparison now is not with tho depression period but with boom years when a former Administration*raisea less by way of taxation but went and borrowed outside New Zealand. "I hope we shall never have to use overseas resourees again. 1 cannot proinise that we will not have to do so. In any case, conversion operations will mean that we will have to go on tho London market, but«as far as the need for new money is concerned I hope tho nccessity will never arise. "Mr Coatcs has referred to this as a propaganda Budget," Mr Nash said. "Of course it is. All Budgets should be propaganda, bccause they shouhl tell the people what has been douo and what it is proposed to do. I sincerely hope that we shall continue to put out the kind of propaganda that is contained in this- Budget." Members of the Opposition had . stated that 14 out of the 15 pensions now payablo had been introduced by previous Governments. Would they agree that a pension payable to a person who had been resident in New Zealand for only 20 years was a new pension, because previously persous iu that position had not received a pension. The invalidity pension was certainly a new one, as was the pension paid to deserted wives whose husbands could not be i'ound, while there was also something new about the increases that had been made in pensions. Mr Coates had agreed that pensions should be increased in prospcrous times, but he had not increased them during the boom years between 1925 and 1928 when he was Prime Minister. %

Taxable Capacity. "Mr. K. J. Holyoake (Opposition, Motueka) said that we had nearly reached the taxable capacity of the people," the Minister continued. "How would he define the taxable capacity?" Mr. Holyoake: 1 said it could not be defined. Mr. Nash: Well, how can you say we have nearly reached it? "Our taxable capacity may be considered to be about £22," the Minister added, "and we are using the money oblained from taxation iu* a way that will probably stimulate prosperity paore thag if we did not taka it, If (

some people have more than they need to build up a certain standard of life it is good for some of that to be taken away in taxation and passed ou to people who can use it." Mr. Nash said that when Mr. E. A. Wright (Independent, Wellington Suburbs) had referred to the Co-operate Wholesale Stores in England he had given the House a wrong impression by likening it to a capitalist organisation. The position was that, aftcr working expenses had been met, the balauce of the mOney accruing to the stores went back to the consumers. That was true co-operation. If Mr. Wright was anxious for co-operation to become general in New Zealand his place was on the Government benches. He Was one of the best fighters in the House, but he had wrong notion's. Mr. Wright had also complained that the Government was squeezing out the small builder, the Minister said. The fact was, however, that when the small builder could build the type of house the Government wanted at the price the Government thought fit he could get a ^ob immediately. "Best Standard of Living." "Mr S. G. Smitk (Opposition', New Plymouth) said the Government wished to build up the chain stores and squeeze out tbe small shops/' Mr Nash said. "Qur objective is to give the best standard of living possible in this country to evervone who renders useful service. We wish to take the resourees aud niaterials of this country, transform theiu iuto useful connnodifcies, and let everyone who renders useful service have liis legitimate share. If . through sickness or invalidity, they cannot render their service they will still get their share. That is Socialism, when, when propei-Jy defined, is one of the finest objectives that can be pursued." There appeared to be some diflerence of opinion on tbe Opposition benches with rogard to interest rates, the Minister said. Mr J. A. Roy (Opposition, Ciutha) had complained that the Government had done notliing to reduce interest rates, but under tbe Mortgagors and Lessees liehabilitation Act about £147,(J(J0 ' bad been written ofi by way of interest. He suggested that Mr Roy should argue the point with Mr H. G. Dickie (Opposition, Patea), who did not think it was fair tha't the. Adjustmerit .Qommissions should liave reduced the rate tb 4 1-8 per ccnt'*: Mr Ihckie: I don't tuind interest rates being as low as tbe Statc rates, but I do not tbiuk they should be any lower. Mr Nash: Vou wanb them ou equality with the 8tate rates. but you do not want them reduced. Mr Dickie: You canuob geb away with that. The State is not lending at 4 1-8 per cent. "The State Advances Gorporation,,J the Minister i'eplied, "is lending at 4 1-8 per cent., plus a contribution to a reserve fund, rnaking the rate slightly lower than 4^ per cent." Mr Dickie: But the reserve fund is never ret'urned.

Savings-Bank Deposits. A comploint that Mr Bodkin had referred to the administration ot the. Post Office Saviugs Bank tunds in a way designed to discredrb the Government was made by Mr Nash. "The member for Central Otago," be said, "made a reference to the Governrn'eut taking action which meant freezing the Post OBcfi SaYingo Bank funda. But ho

r | knows in He knows in on the evidence he gives himself, there was £42,000,000 in Post Office Savings Bank funds frozen in this way. Does he object to this freezing of the funds?" Mr Bodkin : So long as you are going to keep an adequate cash reserve, no. ■ Mr Nash : But how can we keep that if we are to use the funds, after paying 3 per cent. on them and after still paying in the 3 per cent. deposit? How much must we keep to satisfy the honorable gentleman? "The hquourable member knew very •well that his reference was used to discredit the Government in its control of the Post Office Savings Bank," added Mr N.ash. "That has been whispered all over tbe country-. There is nothing more harmful for a member of this House to try to say than that the Government is using the funds in that bank in any other way than they have always been used. The procedure that is followed is the usual one. As the funds come in the stock is issued and whatever cash is needed to meet the ■ demands is provided for. No Question About Security. "There never has been and never will be any question about the security oithe Post Offico Savings Bank deposits. It is the safest depository there is for all hinds of money. There are other places for the investment of certain money, but this bank is the soundest and safest. There is nowhere else better for obtaining an investment with assured capital relund and nominal interest to the deposits placed there. "It is pure, unadulterated humbug to say that a family oi a man, his wife and two or three children is taxed at the rate of £89 per annum on the average iu New Zealand," said Mr Nash, when referring to a comparison made by several Opposition speakers. He challenged the Opposition claim that bho figure quoted represented the average taxation hurdon for such a family in the Dominion, pointing out that in any case a man with such a family •Would not pay income tax until his income was at least £8- a week. In the Hnited States of America the per capita taxation worked out at £25. In New Zealand, the Opposition clainied themselves, the taxation per head worked out at slightly over £22. Members of the Opposition had taken the English taxation figures as their basis of comparison- right- through the debate. But in England not the Government but local authorities found the expenditure for such services as health, police and education. The local authority taxation had to be added to the national taxation figures before arjy fair basis could be arrived at for comparison. On that basis, too. the people of tlie United Kingdora paid a greater per capita tax than the people of Kew Zealand, "But that proves nothing," Mr Nash asserted, "The taxable capacity of the people or their total per capita tax figures is not. the test of a country's standing in tho world. 1b is the health the people of a country enjoy and the attention they get out of the taxation they pay that forms the standard. B.y that standard the Tlnited Kingdom, the United States and New Zealand are in all probability the highest rated. in the world. J"Not Comparable" Mr Nash added that the Opposition speakers had quoted the taxation figures in New South Wales, but in that State the Government had borrowed £18,000,000 for the relief of unemployment. That figure had to be accounted for in any comparison. Did the Opposition suggest that this system of financing unemployment relief was compavabJe with New Zealand'a decision to live within its income and pay for unemployment in the way ifc had done? The determination of the Government to pay in i'ull the interest and capital amount in respect of any money it might borrow waa emphasised by Mr Nasb. He said that a suggestion bad been made by the Hon. J. G. Cobbe (Opposition, Oroua) that the Government would default in regard to interest payments on loans. That statement was a libel. The Government had afiirmed that whatever happened tlie people trom whom tlie money was borrowed would be paid their interest and capital in iuli. Such statements were obviously made in an endeavour to tio dainage to the country. ' "The Government had paid in full every penny that lias beeu due," addej the Minister. "It affirms that if liardslii{j does come, aud we hope it does not, the first charge will be in repayment oi mouey borrowed when it is due," aud in doing that we will not let the people starve." " .^uggestions by Opposition mem bers that New Zealand had lost prestige iu London as a result of the policy of the Government w,ere also . denied by IW r Nasli.Hu was'astdnislied at such critipism Irum tlie Opposition — criticism that was likely to do damage ,to New Zealand credit abroad. After quotiiig tfie headlines from leadiug British uewspapers over artioles 011 the Budget, Mr Nash said that on Oetober 3 New Zealand stocks in London were better than most other -stocks of a like nnture, That went to show that New Zealand was going along the right track from a financial and developmental ooint of view_

Housing Policy. Replying to criticism of the Government's housing policy, Mr Nash said he wished to give every credit to the Pariiamentary Under-Secretary in Charge oi Housing, Mr J. A. Lee, for tho work he was doing. The housing figures were changing from day to day and even those given in the Budget wero now out of date. Land for houses had been bought in 53 towns, nnd arrangements had been made to purchas© land ja 22 other

towns. A total of 1268 contracts had been let in 31 towns, and 43 other contracts were under way. Tenders had been called for 1811 houses in 46 towns. There were 2000 men employed on the construction of houses, and the provision of the necessary materials gave work to 2000 more. The progress made by the Ministry of Housing was greater than that made by any such department under similar circumstances .anywhere. Nothing was more tragic than the position of the man with an income of between £4 and £5 a week who was unable to find a home for his wife and family. The Government was doing everything possible in the way of allocating houses to those people in the most necessitous circumstances. "Although the State Advances Corporation had done splendid work, the whole procedure is being reorganised so that cottage builders will be able to get finance," added Mr Nash. He said that if the Government were to announce it intended to find all the money ^equired there would be a boo~ in the value of sections, and the land owner would reap the benefit. Tlie Government was desirous- of finding a way out of that difficulty. The intention of the Government to protect the secondary industries was stressed by the Minister. The Opposition he said* was suggesting that there were three ways by which the secondary industries could be assisted — the lifting of tariffs, tho control of exchange and the lowering of costs. It was suggesting that the policy of the Government was responsible for the position of the secondary industries. Increased Production. Production figures were the best test of the prosperity of a country if the [ production weie distributed. Some of the figures he had examined were amazing. Those relating to the production of woollen mills sbowcd increases dur- . ing the past three years in the production of tweeds and cloths, blankets, shawls and rugs and yarn. During the year ended March ,31, 1935, boot and shoe inauulacturers produced 1,548,475 pairs of adult boots and shoes, jvhile ior the 1935-36 period the number was 1,612,731, and ior the 1936-37 period 1,760,253 pairs. Tlie pairs of chiidren's boots aud shoes had increased from 149,933 pairs in 1934-35 to 169,933 in 1935-36 and 241,212 pairs in 1936-37. . Last year 1,208,648 pairs of slippers were manufactured as compared with 988,605 the previous year, and 833,341 pairs the year before that. The opinion .was cxpressed by tbe Minister that the boot and s'hoe manufacturers had beeu grossly unfair to the Government. Some timo ago he had been told by oue of tlie largest retailers in Palmerston North that there would be trouble in the boot and shot industry later 011, as manufacturers were urging retailers to buy all tliey could as pnces were going up. liepresentatives of the manufacturers liad gone around to all the retailers ior orders, and in some cases so many had been obtained tliat they had advised the. retailers that they could not supply them l'or three mouths. When the retailer could not obtain his supplies from the home manufacturer he had sent to' England and Australia for supplies. As stocks niOunted up order declined. • • Mr. S. G. Holland (Opposition, Christchurch North) : Hundreds of men will lose their jobs m a few weeks. The Minister: One wise man informed me tliat the boot manufacturers sold themselves out of a job. They so pushed their wares as to make tbe retailers so stock .up that the tiine came when they could not take any more. Tliat is not to say the Government will not do ali it can to help the boot and shoe manufacturers as well as any other manufacturers. I The Picot Purchase. The circumstances surrounding the purchase by the Government of the firm of Picot Brothers for use in its scheme of internal marketing were referred to by the Minister. The purchase, he said, was made while he was absent from New Zealand. The Government had arranged for a thorough investigation to be made by a fullyqualified accountant, by tbe head of a department of State with more than ordinary knowledge of business procedure and by a leading official in the Public Works Department. These three took into consideration all the assets of the business and he personally was satisfied that the price paid was lower than the sum wliich ; the proprietors of the business would have received had they formed it into a limited liability j company.

"When- these three officers reported," said Mr. Nash, "the figures were analysed by the Treasury and ab tliat point the Government inade the purchase. The remarkable suecess achieved by Mr. Picot in organising the local marketing scheme alone justifies everything the Government has done in the matter." "The figures prove that we are helping to create more goods," added Mr. Nash. "Apart from that, tlie Government will do whatever is necessary to ensure that the legitimate sliaro of the iilterual market whicli can be supplied by .tlie New Zealand manufacturer will be reserved ior hiin.J' llemarking that tbe cost oi' administration of Government departments, proport^onate to reveuue, was less this year than last year, Mr Nash said that the Government had proved its adtuinistrative capacity. It was the aim of the Labour Party to see that the money eollected in the form of taxation was spent in such a manner that the ability of individuals and the .resourees of the country "were given the maximum opportunity to develop. v Oue of • the gravest indictments of the world to-day, eoncluded Mr Nash, was that the present prosperity was due to money being spent on" armatnents. Burely money could be spent on something else and soniething other than instruments of destruction. If it could, the Government would do it. It would use all its funds in the best posdble way without inflicting hardship wid would endeavour to place this wonleri'ul little country of ours on the road to iudividual froedom. Progress was reported at 9.25 p.m. ind the House rose until 2.3Q p.m, tonorroTF.