N.Z. FINANCE

Hokitika Guardian, 18 June 1930, Page 5

N.Z. FINANCE

PREMIER’S REPLY TO CRITICS,

(,By Telegraph—Per Press Association.)

WELINGTON, June 17. 4he Prime Minister and the Minis-

ter of Finance, Hon. G. \V. Forbes,

in an interview to-day, stated; “My attention has been drawn to remarks concerning the deficit of £577,000 in the ordinary revenue account of the Consoidated Fund for the year 192829, in which the suggestion has been made' that such deficit was “more apparent than real, and that had a change in the accounting for the Post OTee not been made, the deficit would, mainly,.- not have occurred.” , *

The deficit referred to, he said, was quite real, as was indicated by .the following figures taken from last year’s Budget: Expenditure £24,176,928 ; Revenue £23.599,676 ; deficiency £"7.252. “In public finance, as in nrivnte finance,” said Mr Forbes, “each year’s transactions are judged separately, as apart from many other year, and the State, in the same way as the individual, either lives within its income, or it does not. For the year in question, it did not, and no amount of discussion will alter that fact.”

In resect to the P. and T_. .Department, the -Prime Minister. at- P tention to tlie P. Huid IV Arfr&lflment ft* Act of 1927, which separates the P. i °nd T. finances from the ordinary revenue account of the Consolidated ,j Fund, and provides for the Post-Office accounts to be kept on a commercial basis, with provision therin for set- i‘\ ting up an adequate depreciation and ii-j renewal reserve. That change was j made *by Statute, and it could not •• have been departed ffom unless fresh P legislation had first of all been passed i'• by Parliament.' ' ItAvas true that the ordinary revenue account of the Consolidated Fund : received less revenue from the Post Office in the year 192829 than it did in the previous year, but insofar as the previous year was concerned, and other years prior thereto, the additional receipts referred to, and used for general expenditure purposes, actually represented a Post Office deprecation of reserves, which, accoding to the procedure adopted in ordinary commercial prac- ' tiee, should have been retained intact ' ) until such time as Those moneys were required for the renewal of telephone and telegraph, lines and apparatus, all of which are comparatively shortlived. The capital expenditure on this type of asset has been very hevay in the last few years, and if the change has not been made in the direction of enabling a Depreciation Fund to be created, it would merely have meant unsound finance t& use the excess of ’•eeeints to relieve‘.the taxpayer in the interim, as within a comparatively , short period, when renewals become ? ; necessary ■ the * taxpayer would hav*. been called upon to findl en bloc a 'considerable sum, which sliotilcl have accrued over a period of years. Illustrating this point, the Prime Minister remarked that a statement. prepared in 1926 (the year before the Amending Act was passed) shows that in 1940 it is estimated that no less an hmHunt than '"•£ 1 j 2500’” Will 'be 4''required for renewals alone. The , only alternative to setting up reserves for this purpose would be to resort to the unsound practice of capitalising sue]) expenditure out of loan funds to replace assets work out in a period very , ‘j much shorter than that provided in the legislation governing the repayment of the public debt.

The Prime Minister added that r further suggestion had been made that the profits of. all the Government trading departments should be handed over to the Treasury. Whether, for example, remarked Mr Forbes, the Government Life Insurance Department the funds of which belong to the poicy holders, is included in such a recommendation is not clear; hut, in any V case, a preference to that Department serves to illustrate the value of such V ; a casual suggestion. The fact that T legislation last year was passed to pro- ;f; vide for half the profits in the Public- if Trust Office being paid to the Treas- . • urv is also referred to, hut that criti - A cism surely overlooks the fact that 35 for a number of years, that Depart- S ment had retained the whole of its ..Jjprofits, which were used to build ur % fairly substantial reserves - .- When that • ••; stage has been reached in Post, Gmcc & finance, it will he time to talk about allocating the profits to other sources. Under all the circumstances, the actting aside of surplus post office revenue after meeting, working expense' and interest charges was the rigid and proper thing to do, notwithstand ing any temporary inconvenience tc the Consolidated Fund. Hence tlrsuggestion made bv the critics mere ly amounts to nothing more nor les than advocating the adoption by the methods, which suggestion it is not my - intention to adopt.