FINANCIAL STATEMENT

Hokitika Guardian, 9 July 1926, Page 4

FINANCIAL STATEMENT

(Per favour of the Government). WELLINGTON, July 8. The Hon. W. Downie Stewart, (Minister of Finance) delivered the Financial Statement from which the following excerpts are taken:— ft is gratifying to find that as a result of last year’s operations the Dominion finances have been maintained in a sound and satisfactory state. The. surplus revenue iiif £1,150,000 show’ll in the Ordinary Revenue Account of the Consolidated Fund is largely due to increased Customs receipts, while the expenditure, although showing an increase on the previous year, is not more than was anticipated. For the current year it will he inadvisable to expect any increase in the gross revenue—in fact, the preparation of this statement is based on the expectation of a possible reduction. UFA ENUE. It will be observed that the net increase in the total revenue is shown as C 1,719,345, hut, £444,788 on account of ‘•lnterest on railway capital 'iabiljty” and £311,097 for “Interest on Public IX’bt Redemption Fund,” may he set aside as being only nominal increases. Deducting these two amounts totalling £759,485, there is left a real increase in revenue compared with that of the previous financial year o! £959,860. EXPEXDHTR E.

A comparison of the year’s expenditure with that of the previous year shows the net increase amounts to £1,807,466, of which £948,417 is on account of permanent appropriations. The increase in expenditure under departmental votes amounts to £859,049. The increases for Pensions and Internal Affairs Departments are largely due to taking over new liabilities on account of soldiers’ treatment and war graves.- etc., consequent on lire closing of War Expenses Account. The increase for Naval defence is owing to the fact that a. second cruiser joined (he station during Jhe year; while increased provision for military camps and trainees accounted for much of the increase in vole Defence. The increased expenditure under vote Electoral represents the cost of the general election, while tint for Education is due to the usual expansion.

SF.MAIARY OF YEAR’S OPERATIONS. A surplus of revenue over expenditure is again shown on' the operations for the year, viz.,— £ Revenue 24,725,762 Xct expenditure 23,570,05 H Leaving a surplus of £1,155,679 The transfer of £473,392 lo the Working Railways Account, in terms of th.o Government Railways Amendment Act, 1925, to provide funds tor working capital represents the balance of the excess of railway revenue paid to the Consolidated Fund from the Ist April, 1896, to the 31s*t March, 1925, after allowing the interest on Capital at the policy rates. The total excess was £1,327,649, from which were deducted moneys paid out of the Consolidated Fund for railway stores and other charges outstanding at the latter date, Totalling £854,257, leaving a balance of £473,392. The year’s revenue Ims not been charged with this non-recurring expenditure, as the excess railway revenue in past years has helped to build up the accumulated surpluses of the Consolidated Fund, and the payment lias been regarded as a refund therefrom. Of the £186,227 repa lutioii-nmney.s received from Germany, £151,824 was included in the £566,161 transferred to Loans Redemption Account and has boon, applied in reduction of the var debt. The New /calami Consols Act was repealed by section 11 of the Finance Act, 1925, and tho £475,992 shown as transferred to Ordinary Revenue Account above represents the balance of cash and investments of that account. Consols to the value of £475,492 were redeemed out of the Consolidated Fund during, the preceding financial year, and the balance of £SOO in ,192520. The result of the. year’s operations is better than ivas anticipated, las, nltjinug.h last year the indications were for an increase in Customs revenue over the previous year, it was i ot expected to. rencli the excess of £584,C!0 over the estimate. While it is a matter for satisfaction that the year's working shows a substantial surplus it has to be recognised that the bulk of it comes from sources that cannot he counted upon to persist. The cost of defence for 1925-26. includes the expense of the second cruiser which recently joined the New Zealand Station, for only part of a year, so this item will show an increase tor this financial year. The net expenditure on Naval defence for last year amounted to £111,203, in increase of £157,847 over that of the previous rear.-

fretting aside the. amount required to cover war charges and social services, which in 1920-26 absorbed £8 19s 4d out of .i total of £l2 Is 4d per bead of revenue collected, the remaining revenue for other services does not represent in 1925-20 any real increase over that required in 1913-1-1. Turning to expenditure on health, it will be seen from the accounts and particulars supplied that the subsidies under the pennl.uient appropriations for Hospital and Charitable subsidies in 1925-20 totalled £000,900, the actual amount paid being £575,777, in addition to which a special subsidy of £IB.OOO w:is paid to the Xelsofi Hospital Board. Tt is estimated Unit an appropriation of £600,090, the same as last year, will be required l'or the current year. Subsidies on capital levies increased from £72,000 in 1 92324 to £115,003 in 1925-20, but it is net anticipated that the amount will further increase this year. The net expenditure of the Department from the Consolidated Fund other than subsidy was £34,908 more than that of the previous year.

For education the net exendilurc under the vote amounted to £2.879.719, to which must be added £157,341 received under special Acts, making a total provision out of the Consolidated Fund of £3,037,060 for 1925-20, as ajiiinsi £2,949,115 for 1924-25. In addition there is also expenditure out of reserves and endowments, full particulars cf which will be found in Fable No. 19 attached to this statement. CUSTOMS AND EXCISE. *

including the tire-tax credited direct to the Main Highways Account, the Customs revenue for the financial year 1925-26 amounted to £8.573,388, while that for the preceding financial year was £7,689,192. ail increase of £884,196. *

It will be seen that for the financial year 1925-26 our imports exceeded our exports by £4.328,269. As the favourable balance (i.e.,_ excess of exports over imports) for the preceding y4or was' comparatively small, the indications ale to expect some curtailment of imports at an early date. The excise duty collected on New-Zealand-brewed beer during the year 1923-26 was £629.558 /compared with £650,384 during the preceding year). The revenue from this source during the current financial year is estimated at £630.000. CAPITA Is EXPENDITURE.

In the last financial year, including £500,000 transferred from the Consolidated Fund, a total of £6.924,520 was made available for carrying bn the

public works and general development programme of the Government. The net expenditure on capital works out of accounts to which the additional loan capital was allocated may be summarised 'as follows:

Railway construction, additions and improvement 2,780,190 Telegraphs and telephones .. 931,661 Hydro-electric supply ... 945,573 .Main highways and roads .. 949,077 1 rrigntion, swamp-drainage, and rivers improvement .. 229,569 Public buildings, including schools 849,041 Other public works 489,368 Total £-7,180,479 IMMIGRATION. There has been a slight falling-off in the number of new arrivals in 1925-26 under the immigration policy, due to the hold-up to shipping occasioned by the strike in England. The percentage ot juveniles has been well maintained, and the migration of public-school and secondary-school hoys is making good progress. The expenditure last year amounted to £107,521, compared with £136 353 for the previous year. DISCHARGED soldiers settle

MENT ACCOUNT. New loans granted during the year have, sis for some time past, been restricted mainly to T.B. and incapacitated soldiers and advances on current account for improvements to farms and purchase of stock, the total amount authorized during the year being £282,011. The advances paid over during the year, which included commitments from the previous year, totalled £725,974. The repayments and recoveries of principal amounted to £901,393.

The amount of instalments and interest in nrrear and in postponement account ns at 31st March was £633,130 being a. reduction of £121,820 on the previous year. The reduction, however. is. largely due to the operations of the Tinminion Revaluation Board by remissions of interest granted on its recommendation. Following the revaluation of discharged soldier properties under the Discharged Soldiers Amendment Act. 1923. the Dominion Revaluation Board has been giving its attention to adjusting the current amount of settlers in the manner authorized by the amending Act of 1924. As a consequence, reductions in capital of these accounts up to the 31st ALarcli totalline £49,242 were made, while a sum of £5,403 was transferred to the Suspense Account. WAR. EXPENSES ACCOUNT.

This account was closed by the Fin-nnr-c- Act of last year. Since then finality ilins been reached in the settlement of oustandiug transactions between the New Zealand Expeditionary Force and Australian Forces in Egypt, whereby the Commonwealth Government has agreed to pay the sum of £45.000 to the Dominion Government in full and final settlement. This amount, when received, will he applied towards reduction of war loans. FREE-OF-INCOME-TAX SECURITIES The conversion scheme inaugurated in September, 1922, by which the public were afforded an opportunity of converting frec-of-tax securities into inscribed stock.(not free of tax) has been availed of to the extent ol £3.128.450. This sum. together with renewals and redemptions, has accounted for a reduction of £13.426,071. the total outstanding at the 31st March, 1926. being £38,307,334. PUBLIC DEBT.

The gross public debt at the 31st .March. 1926. was £238,855,478, as compared with £227,814,617 twelve mouths previously, leaving the net increase in the gross debt at £11.040,831. Of the increased debt of £11,101,831 State advances (settlers, workers and local authorities) absorbed £6,334,973, or 57 per cent. The total borrowed for ordinary debt purposes was £6,859,563, hut by redemptions out of Ordinary Revenue Account (£445,513), from other accounts £356,071), and by the removal from the debt of debentures totalling £2.100, the increase in ordinary debt for the year was reduced to £6,055,882. The amount of £6,346.955 was borrowed last year for State advances purposes. £2,000,000 of this was included in the London loan of 1925. 1926 LOAN.

At the end of May, London advised that, the general strike having been called off. a resumption of the lending market was at hand, though the position was, in view of the continuance of the coal strike, still reported to he somewhat uncertain as to terms obtainable. It was, however, decided to proceed, and a loan of £6,000.000 was underwritten. FUNDED DEBT. Payments amounting tty £1,651,930 were made in 1925-26 in respect of £27.532.164, loans advanced by the Imperial Government, and funded in terms of the agreement dated 6th September, 1922. POST AND TELEGRAPH

DEPARTMENT. * The revenue of the Post and Telegraph Department paid over to the Consolidated Fund amounted to £1,414.081; telegrams, £371,250; toll messages, £312,120; and telephoneexchange receipts, £980,283. The tele-phone-exchange receipts show an increase over those for the previous year ol’ about £113,000. The net expenditure out of the vote Post and Telegraph Working-expenses amounted to £2,406,791. There was thus a net excess of receipts over payments of £670.913. which is available to cover the interest on the loan capital of tbo Department. The presentation of the balance-sheet will, however, show the actual results on n commercial basis.

The Post Office Savings-bank figures show an improvement over those for the previous year. There was in 192425 an excess of withdrawals over deposits of £830.712, whereas in 1925-26 the deposits amounted to £31,833,621 and tbo withdrawals to £32.602,506, an excess of withdrawals over deposits of £768.883. The position is still improving, as since the end of tlie year the amount of deposits has exceeded the amount of withdrawals. On tlie 31st March there were 758,188 depositors, and the total amount at their credit, exclusive of interest for the year, was £46.179,744.

Money-orders: and postal-notes issued totalled in value £5,907,171, and those paid £5.528,814. The first issue of Post Office investment certificates in November. 1920, matured in November, 1925, and tbo redemptions to the end of March total, led £175,254. T would have expected to find a greater use by the public of this excellent form of small investment.

STATE ADVANCES OFFICE. * During the year £6,371.375 was added to the Capital Fund of the State Advances Office, winch on the 31st March. 1926. totalled £33.148.274. The total advances current at the 31st March. 1926. were £30,296,837. being an increase on the previous year of £4.638.977. RURAL CREDITS. I The importance of improving financial conditions for primary producers, and the desirability of acquiring for ’our guidance tlie best available information on the subject, led in September last to the appointment of a Royal Commission consisting of Colonel J. J. Essoii, C.M.G., Financial Adviser to tlie Governibent, Mr P. H. Cox. an experienced banker and Mr W. ,T. Poison. a practical farmer. The Commission has visited. all the nt Ist important countries and investi- :

gated the conditions governing land mortgage and agricultural banking. I expect the report will shortly he available, and have no doubt the inquiries and findings of the Commission will be of great value in promoting the .well-being of the producers and of the country as a whole. 1926-27. , ■ln setting out before honourable members the estimated position in the current year, there are first of all several broad considerations affecting the question of taxation and revenue that

I will briefly refer to. As I have shown earlier in this Statement, the absorption of direct and indirect' taxation by social and educational services shows considerable proportionate increase as compared with pre-war conditions, while the cost of defence is rising rapidly. These items bring before us some outstanding facts directly affecting taxation. It is, of course, always a question for Government consideration, and particularly since the war, what relief can he given to the taxpayer? Further substantial relief from taxation cannot he expected so long as the wardebt services have to he borne—an unci'capable burden—which, combined with largely increasing social services, ret mil any movement in the direction of lessened taxation.

ESTIMATED REVENUE. I have given the most thorough consideration to till the expected variations or conditions likely to arise in the next twelve months, and 1 estimate the total revenue receipts into the Ordinary Revenue Account at £24,260,200. This is based on the present rates of land and income-tax and the expected reduction in Customs revenue resulting from trade-balance adjustments. The expanding business of the Post and Telegraph Department will provide increased receipts. I do not think relief from, taxation at the cost of impairing that policy is advisable. The estimated expenditure is £23,080,010. The sum is £416,533 in excess of the actual expenditure of hist year.

ESTI.MATED RESULTS. I anticipate, therefore, that the position, provided no obligations of a substantial nature due to unemployment or to new legislation fall on the Account during the present financial year, will he:— £ Revenue -4,266,200 Expenditure ' 23,980,616 Balance £279,584 This amount will, I estimate, cover supplementary estimates, but will leave very little margin; and, either way, the ultimate result will depend a great deal on the uncertain factor of imports.

Willi regard to our secondary industries, I regret to state that some of these are not in a flourishing condition. The Government is now eonsidoi ing hoiv far it may he necessary to render assistance during the present session to certain industries that arc most seriously affected, but it is not proposed to make any revision of the tariff this year.