STATE AND MUNICIPAL TRADING.

Hokitika Guardian, 7 March 1922, Page 4

STATE AND MUNICIPAL TRADING.

WHAT IT MEANS

inefficiency and waste

“Certain State services have hitherto, been conducted at. aU annual loss which has to be met by the general taxpayers instead of by the users. These services should be self-supporting and should !>«>■ conducted upon a proper: business basis.”

The above statement was made by. the Prime Minister in the Budget sub-, m'itted to tbo House of Representatives ’in Nov embed, last. Of its accuracy I there can be no doubt and of its significance little question. Mr Massey was speaking with a full knowledge of the facts, and with an earnest desire we may be sure, to remedy a state of affairs which conduces neither towards. national efficiency nor towards 'national economy. Faced by cessity of maintaining the financial stability of the country under conditions 'of unparalleled difficulty he was driven ’,to admit that State and municipal trading uadertolnngs were not only competing unfairly against private undertakings of a similar nature, bu 'were also failing to realise the benefieient objects for the attainment of which the v were promoted. With so' much conceded, it may he • reasonably assumed that in the near I future the Prime Minister will apply i himself to the restoration of the sound conditions' of trading which, provide ! |v„- cquplitv of opportunity and stimulate enterprise and efficient service. I Meanwhile', however, it will not he ! amiss to mention some aspects of the j question with which the public may J not be familiar. . j ]u the. remark with’which Mr - !,s----i S e v emphasised the need for placing the various State, enterprises upon : ;i , roper business basis and making j them self-supporting he merely indicated! what m-ght be attempted to I improve the existing position witho.it j entering upon any radical reform. His j suggestion, in short was rather a paljli tive than a cure. “With this object.” he said, “expenditure has been j educed in several cases, whilst in

j others a re-arrangement of certain fees i and charges is being made which will t i ;l ,-relv reduce the charges at present i me by the Consolidated Fund.” Tins | implies that the activities of certain | cciiiilining Shato trading departments i hare Ix'cn restricted and that the fees J and charge* of others have been in- | creased. If these steps are effective ! from the financial point of view, the j result win be contrary to the oxpw.taj tion and experience of most business ! men. Lessened services and higher i (•I'arges are not calculated to attract j additional patronage and in a State | trading concern the greatest good to i the greatest number surely is a l nc * i tor to be taken into account.

1 It is quite true that State trading. in the imagination of sanguine and not ! ver v observant people, may develop a i glamour which makes ill a very attrncj live proposition. Nor need it be dej nipd that there hie great national uni dertakings, such as railways, post and i telegraph offices and so forth } which i properly remain in the hands of the j State. These are so vital to the dei vclopment of the country and to the * well being of its people that it would | 1,., impolitic to commit them to the : custody of private enterprise main- ■ taint'd for the sake of profits. But i State coal mines, State tourist resort* | State house-building, State saw-mills, I State fisheries and State steamer serj vices, like municipal milk supplies j fish distribution, tram services, eleej trie lighting and gas works, stand in j quite a different category. ! State railways and State post and | telegraph services, though notoriously ; lacking in the “proper business basis” ; which tbe Prime Minister declares to be necessary to ensure the- best results from such undertakings are essentially monoplies that could not be removed from Government control in existing circumstances. Rut, speaking generally, the other undertakings mentioned, both State and municipal serve . merely sections of the community and 1 are neither so economical nor so effi- ! c ient a.s are the private undertakings j against which, they compete. Though provided with ample funds at a low rate of interest and relieved of Income Tax, Land Tax, and in the case of State undertakings, of Customs duties, Harbour dues and municipal rates, in no comparison that has been made has a State undertaking been shown to be a» economically and efficiently conducted as are private undertakings of Hie same nature.

A BURDEN TO THE TAXPAYERS.

'‘Government operation of economic. undertakings, whether Federal, State or Municipal, is characterised by extreme delay nnd inertia, vacillation, hesitancy and inconsistency in matters of policy, wasteful outlays in response to sectional demands, insufficient provision of funds when needed for necessary purposes, absence of close and harmonious co-operation between the legislative directorate and the executive officials, insecurity of tenure in the higher plac e s and lack of self interest as an incentive, frequent changes of higher officials whereby such officials are not often properly qualified by expert knowledge, previous training, experience or proved capacity.”

This is the main clause of a lengthy resolution adopted by a special committee of the Merchants’ Association of New York set up to report upon tlie question of Government ownership and operation of public utilities in America. The committee took an enormous amount of evidence which disclosed a very similar state of affairs in the United States to the one prevailing in Now Zealand at the present time, with political influence even more rampant than it is here and with % large proportion of office seekers. But in New Zealand it is not necessary to traverse the whole of the ground that was covered by the American committee. The objection here to State and municipal trading is not that it competes against pnvate trading, but that it competes on unfair terms and inequitable conditions. Supplied with cheap money and exempted from the hulk of the taxation uppn the great body of taxpayers without cjonf erring upon tnore than a mere

fraction of them even the semblance ,of a.n advantage i'n return. Those simple people who cherish t]ie illnsion tha State and Municipal trading must be a good thing for the country, because it enjoys such exceptional' privileges in carrying on its ofieiations, lose sight of the fact that until , we, rpadh the Socialist’.. B lniHeniuni, when there will be no money and no private ownership, and when existence will depend upon a return to the primitive system of barter, we must [have revenue from some source or other to carry ou public services which are not revenue producing, such, for instance, as the preservation of public health, the protection of. life and property and the administration of justice. This revenue has to be obtained by taxation in one form or another and every fresh State and municipal undertaking which interferes with legitimate private, enterprise is limiting the scope of necessary taxation to a narrower and still more narrow field, as well as deploying thy community

of essentiul and convenient services. If the theory of economics which nc--Bepts State and municipal trading as the saviour of the race is sound, why should this panacea for all the ills from which the human race ha s been suffering through the generations be confined to an odd enterprise here and there? Why should it not be extended to groceries, drapery, ironmongery, tailoring, refreshments, toilet services, doctoring, legal advice, and the hundred and one other necessaries and luxuries trades and professions, which now provide by way of taxation the revenue required for carrying on the business .of tlie country ? Why allow doctors, lawyers, architects, clergymen, engineers or even journalists to pursuo their occupations for private profit when such talents as they possess might be employed by the State at a strictly moderate figure? Their ‘‘nationalisation” might break the spirit, and ruin the initiative of some of them; but it would enable the State to barter their services at rates which would not include the taxation these men pay in their private capacities. But let nothing written in jest weaken the case for fair and equitable treatment. Unless all industries, whether privately or publicly owned, are placed on the same basis for. trading taxation becomes s e ctional instead of general and anomalies exist which are flagrantly insuitable. Private enterprise, looking at its own interest alone, would have nothing to fear from State and municipal trading concerns, as they are known in this country, were they allowed to stand on their own merits in .all the qualities that go to command success it stands supreme. But the bolstering up of State and municipal trading undertakings by exemption from taxation and other unsound devices, in addition to being a menace to the independent trader, is a constant burden upon the finances of the country and a crying injustice to 1)0 per cent of the population. At the moment of writing when Lenin (the only socialist of note having a free hand to practice his gospel) has engineered his nationalistic adventures into chaos, and publicly recanted over the ijesulting ruin, it is astonishing to find anyone having the courage to plead the nationalising of any commercial enterprise.

LOSS OF INCENTIVE AND ACHIEVEMENT;

“The less Governments interfered with trade the better it was for trade and Governments too.”

These ore the words into which the cable agent condensed Mr Lloyd George’s remarks at the National Liberal Conference in London last month, renouncing his former faith in State trading. The great democratic leader in the strenuous years of war and reconstrucion has learned the lessons which have been brought homo to us all in tliis Country. It is to the producers, the manufacturers and the traders all Governments must turn for help and support in times of financial stress. The fact that of the revenue collected as income tnv in New Zealand lost year no less than 62 per cent, was* obtained from producing, manufacturing and trading; companies makes tin’s truth abundantly plain. Yet these are the very enterprises that are being continually attacked by State and municipal trading undertakings. To come from the general to the particular, the case of the Wellington corporation may he taken. Years ago a private concern installed in the city an electric system and another concern in stalled a, gas system. Both these concerns paid State and municipal taxation. Later on the municipality purchased the electrical concern, but left the gas company to operate privately. Those two systems remain in opposition, as they always have been, lint one escapes all State and Municipal taxation, with thd exception of Customs duties, while the other pays every form of taxa tion that ~xists ip this country. A still more startling example is furnished by the Christchurch Corporation, which is in opposition to the gas company in the southern city. Not only does this corporation furnish electrical energy as is done in Wellington, hut it also carries out house-wiring and the sale of all kinds of electrical apparatus, holds agencies, manufactures and even trades outside its own boundaries in competition with private concerns which «ro handicapped with all the taxation the Munieipa 1 ity escapes.

Take again the State coal department nmj compare its position with that, say of the Westport Coal Company. Last year the Coal Company paid to tfie Government in mining royalties and land and income taxes £62,929. It paid municipal and county rates amount ing to £4,428 and Custom duties amounting to £B6l. The State coal department paid none of those charges, and lygt it shows by its own; records a profit of only £6,912, while the Westport Coal Company by superior management f|ue to whait the Prime Minister has called “a proper business basis,” was able to pay a; dividend of If) per cent, to its shareholders, and at the. same time to furnish through taxation its share towards the government of the country, including its amount required to make up the loss on the State trading departments.

Of course, no sensible person objects sto the Government controlling absolute' monopolies. Such departments as Post and Telegraph- Laqd, forestry, Police, Health pustoms, Jufitjce, Defence and similar services \yhjch pro essential to the well-being of flip whole community should ho in the harads of the State.

But even those departments should be required to prepare in proper business form statements of accounts and balance sheets shewing the .amount of capital employed and the receipts and expenditure, including charges for depreciatipp ajuJ interest. Probably the public is not aware that the Post and Tele- , graph Depanjient, which formerly j claimed to be a. small profit, till recently pfii/J. no rent for the buildings , it occupied and ma.de no payments for many services it received from other State departments. Government activities, it may be laid: down as a. sound and equitable principle, should be restrioted to those monopolies which affect every member of the community, and whose services are available to every member of the community. If any State department or public body enters into competition with private concerns it at least should be compelled to operate on, equal terms and to bear an equal 1 share of taxation and trading responi sibilitiqs.