The Guardian And Evening Star, with which is incorporated the West Coast Times. MONDAY, JANUARY 26th, 1925. PUBLIC EXPENDITURE.

Hokitika Guardian, 26 January 1925, Page 2

The Guardian And Evening Star, with which is incorporated the West Coast Times. MONDAY, JANUARY 26th, 1925. PUBLIC EXPENDITURE.

A study of the principles which should guide public expenditure is not common. A knowledge of the principles is required, for qualification for the higher pasts in the Public Service. Whether the representatives who actually sanction public expenditure, the members of Parliament, have any profound knowledge pf the principles is doubtful. They have undoubtedly a knowledge of the items of public expenditure. Among the best-known recent writers on the subject are Bastable and Plehn. The latest writer is Mr G. Findlay Shirras,' whose work is entitled the “Science of Public Finance”, and is published, notes a eomemrcial critic, by MacMillan and Company. Mr Shirras. who is a. graduate of Aljerdeen University, was formerly a professor of economics at the Dacca College in India. He was appointed for special duty in the Finance Department of India, and was director f«f the etstis-

tics with tin: Government of India. Me lias thus touched the practical work of public finance as well as considering it from the theoretical viewpoint. A discussion ot public expenditure i.s followed by a treatment of [niblie revenue. Then public debt i.s dealt with, and lastly the administration of the tin.'iiices. First in the consideration oi tlm people at the present time comes labile expenditure. So it is proposed to review the portion of Ins work discussing that subject. The importance ol the subject lias been forced on the people because this century has witnessed a public expenditure to a. degree that even in the dosing years of the last century would have been regarded as symptomatic of financial madness, and a certain collapse of world credit. Take the ease of Australia as an example. Allowing for a decreased value of the pound sterling what would the founders of the Commonwealth Constitution have done if they had known that within a quarter of a century from its institution the combined expenditure ct the Commonwealth and States from revenue would have been £147,286,210, and from loans £85,810.820. Tn discussing the characteristic of public expenditure Mr Shirras points out that it is advisable to distinguish what is meant bv tin* terms economy and retrenchment. Economy docs not mean merely the saving of money, hut rather the spending of

motley wisely, in order lli.it tin' greatest | >"ssi lile benefit may lie derived from the spending of public funds. F/omimv menus expenditure without waste, and to the host advantage. Contrasted with eeoiiomv in parsimony, which implies imprinter saving of expenditure. I! etrenehinent goes very much farther than economy, and means the lopping-olf nr removal of what is superfluous. The distinction seems hardly adequate. If there is something superfluous which sliould lie lopped of!’, surely it would not he economy to retain it. Itetrenchment in such a case would not go farther than economy. Tint all will agree with Mr Shirras in saying that there does come a time when the expenditure on existing objects requires scrutiny, atul the expenditure on these, if already reduced to a minimum, may have to he considered with a view to whether it is justifiable to continue to incur expenditure on those objects. It may ho necessary to reduce the number of objects on which expenditure is incurred. The illustration' gives a better idea of the distinction between economy and retrenchment tlia.ii does the definition. Public and private expenditure are not quite the same. Private expenditure is determined by income, and public expenditure is generally determined on liefore the revenue is considered. Hut the income of the public authorities is not infinitely elastic. The relation of the income of the state to the gross income of the nation lias to be considered in arriving at a basis of public expenditure. Mr Shirras does not favour the view that the functions of Government are mainly, if not entirely, confined to the primary functions of defence, law. order, public debt, and tlie necessities of civil administration. He argues that it is wrongly implied b,v the holders of this extreme “leave people alone” theory, that private individuals spend money better than their Government does. This, ho declares, is not always the case, and he cities twentieth century finance as showing that the State does spend money to advantage, and private expenditure is often wasteful, especially since the war. He quotes w.itli approval Huxley's trenchant, saying: “If my next door neighbour chooses to have his drains in such a state as to create a poisonous atmosphere which I breathe at the lisle of typhus and diphtheria, he restricts my freedom just as much as if he went about with a pistol threatening my life; if he is to he allowed to let liis children remain unvaccinated, he might as well he allowed to leave strychnine lozenges about in the wav of mine, and if he brings them up untaught and untrained to earn their living, he is doing his best to restrict my freedom, by increasing the burden of taxation for the support of gaols and workhouses which I have to pay.” Do not these matters refer to the extension of the police functions of the State, an extension with which all would agree. Hut the State should not take up the work of baking bread.

of raising beasts for meat, and for providing clothing, nor should it engage in the work of making clothing or any other material. With human nature as it is. the State is the best policeman we can get. We know that we would never be content with the State as the breadmaker, because the State could not provide each with the kind of bread which he desires.

the c-aiicm of surplus. Of the fust canon, the ideal is the maximum Social advantage: Ollier things being equal, pfiblie expenditure should bring with it, important social advantages, such as increased production, the preservation f the social whole against- external attack and internal disorder, and, as far as possible, a reduction in the inequality of incomes. Public funds must be spent in those directions most conducive to public interest—that is, utility is to he attained in public expenditure. The expressions ‘’’The greatest happiness of the greatest Humber," ‘which lie reminds us was uttered by an Italian writer, Beeeariiii in 176-1. is a phrase which has penetrated deep into the mind of every writer on the science of public finance. The canon of economy is frequently abused owing to weak financial ladinmiiitratifin. The same vigilance is required in public expenditure as a. person of ordinary prudence exorcises over his private expenditure. The price of economy, ns of liberty, is eternal vigilance, and there can he no assurance of effective ncfion without the resolute application of the spur of sound financial control and sound public opinion. This is ail ideal which should he recollected by every public man, and should lie aimed at by every chief of department in drawing up for his Minister the estimates of departmental expenditure. The canon of sanction is that no public expenditure should he incurred without proper authority, ajid the rules which apply are that no expenditure should lie sanctioned by an authority which at a later date is likely to involve expenditure beyond its own powers of .sanction, and loans should he spent only on those objects for which money may he so borrowed, arrangements being made for a sinking fund or other form of amortisation for the liquidation of the debts. The canon of surplus Is the avoidance of deficits in public expenditure. In arriving at a surplus or deficit the financier should he careful not- to debit- to capital what should he met from revenue and vice versa. Otherwise there will he no true surplus or no true deficit. A moderate surplus in public finance is safe and necessary, he believes, as it is in the nature of till-monev. and does not produce extravagance. Ho notes that some writers believe in moderate deficit finance, as it leads to economy, luit he points out. that the main fact is the importance in public expenditure of avoiding deficits. Public rgithorities must earn their living and pay their wav. like ordinary citizens. Mr Shirras supports his arguments and his statements with many ant illustration-' drawn from his experiences in India and from the financial reports published bv the British Government. Altogether the hook is well worth while.