PRIME MINISTER’S STATEMENT

Hokitika Guardian, 14 February 1931, Page 2

PRIME MINISTER’S STATEMENT

(By .Telegraph—Per. favour of Govern, l '• . ment), | WELLINGTON, February 12.- / PUBLIC ACCOUNTS. | The Public Accounts for the first nine months of this financial year are being published this- week, -in a spec-' ial Gazette. It will be noticed that some .changes have been 'made, in the form of the accounts with the object, of ‘.simplifying them, and making them more informative. • ,

Formerly the gross expenditure shown on one side of the account, and the credits in aid, grouped with the receipts on the other sid.e. In. .the abstract just, issued however, the expenditure is shown in 3 columns headed, gross credits and nett respectively, so that the position of the finances can be seen at a glance In addition the Consolidated Fund expenditure under permanent- appropriations has been grouped under suitable headings that will give a much better idea of the purposes for which the expenditure has been incurred. The accounts show that the revenue of the Consolidated Fund for the first nine months of this financial year, amounted to £14,868,276 compared with £16,338,212 for the corresponding period of , last year—a decrease of £1,469,936. The main contributory cause of this decrease in revenue is the comparative decrease of £1,2 t 20j000- in the interest oil railway capital'liability. A falling off foj* the financial year of approximately £750,000,;was allowed for in the Budget, based on the fact that the accumulated losses 7 of'the past.'.having exhausted the railway reserve and the interest that could be paid this official year would have to be decreased by the.amount of the loss for the year is explained in last -year’s Budget. The prospective decrease in the interest item was much greater: than £750,000, but was reduced to this figure after a decrease had heenj made for the possibilities of - increasing, the railway revenue and decreasing- the expenditure. In recent months however, not withstanding certain increases in-freight and-fares, th© railway revenue had shown a /considerable falling off, and it is now clear that the amount of interest 'that can be paid to the Consolidated Fund this financial year will fall some hundreds of thousands, short of the Budget es- j timate.

Customs revenue for the nine months was approximately £713,000 less than for the corresponding period of last year, but the position, is not as bad as this figure would indicate, as a decrease of £367,000 was allowed, for in the Budget. Still, on a proportionate basis the receipts are nearly £350,000 short, and as imports continue to show a heavy falling off, particularly in luxury items where the duty is highest, it is not anticipated that the shortage will be made .good before the 31st March.

The large decreases referred to were partly offset by a comparative increase of £IIO,OOO under t’he heading of Stamp and Death Duties Act, but this was anticipated and allowed for in the Budget. The revenue from petrol tax, tyre and duties, and licenses on motor vehicles, shows a comparative increase of £265,000, but at present this revenue passes automatically to the Main Highways Account, and the local authorities, and thus will not affect the result in the Consolidated Fund.

On the expenditure side, the nine months’ figures show the following comparative results:

Permanent approt- 1930 1920 priaions 12,854,477 13.205,860 Decrease 351,380 Annual Appropriations 5,526,088 5,652.760 Decrease 126,672 Totals £18,380,565 18,858,620 Total Decrease £478,055 The published accounts in the new form show clearly the position in respect to the various items concerned under .permanent appropriations. There was a comparative increase of £130,000 for debt charges, but this wa s expected and was allowed for in the Estimates. Under Special Acts the expenditure showed a net decrease of £480,000, due plainly to the transfer of the charge for subsidies to local an-.

COMPREHENSIVE REVIEW o SALARIES REDUCTION; POSTAGE INCREASE SPECIAL ECONOMIES TO PRODUCE £4,500,000 TO COVER ESTIMATED DEFICIT SUBSTANTIAL WAGES REDUCTION MR FORBES’ SPIRITED APPEAL

thorities to the Main Highway Account, and the cancellation of the subsidies on branch lines of railway. Pensions show an increase of £72,00. TUe annual departmental votes as a whole, show a net comparative decrease of £127,000 for the nine months, the chief contributing votes being De-

' fence and Naval Defence,. J.ncrej'.«es are shown for Education and some other ■ votes, but generally the return indicates that the vote expenditure is being kept within the curtailed estimates for this financial year. To sum up. the position the results for The nine months clearly indicates that the revenue for the financial year is well below the Budget estimate in j regard to customs revenue. I may ■ say that the propability of a shortage in this item was disclosed when the prospects were reviewed after the close of the half-year. The Supplementary Estimates were therefore restricted to the unusually low total of £123,000, against; £246,000 allowed for then in the Budget. Steps were taken to augument the revenue as much as possible in other directions, and a close control of expenditure was instituted. These measures it wins thought .at the time would meet the situation. and enable the accounts to be balanced, but since then with almost startling siiddeiileSs there has | occurred' an unprecedented fall iil the prices obtained foi ! olif primary products, involving tile loss of many millions In the national income, and the resulting in a sharp 'contraction in business, coupled with exchange rates raised to heights previously undreamt of in this Dominion. This has led to a falling off in imports and Customs revenue beyond all expectations. Close budgeting under such abnormal conditions is very difficult and in fact almost impossible. As indicated above the sudden change in economic conditions lias also had a marked effect on railway revenue and must inevitably affect practically every item of revenue. Every effort has been made and need- j less to say will continue to be made to • reduce the net shortage t oa minimum. but with the finances already strained in an endeavour to c-ope with an expected shortage in Customs, there is no possibility of also making good the anticipated large shortage in railways interest. I

i Consequently, notwithstanding the I sacrifices the people were called upon to make and the steps taken by the Government to balance the Budget, I regret to say that the position as I now sum it up, indicates that the financial year will close with a deficit which may possibly reach threequarters of a million, without taking into consideration any expenditure which may be incurred this financial year out of the Consolidated Fund on account of the earthquake. While it is not a matter that directly concerns the Dominion, it may be added tb it most other countries affected by the slump including Great Britain, the United States and Canada appear to be suffering from similar financial troubles, and. national defic- j its are already announced for this year ] in these and many other countries. j ECONOMIC POSITION AND

OUTLOOK. ! It is now practically certain that the ! value of our exports for this financial year will show a falling off of over 20 per cent. as compared with the returns received for the previous year. It would appear that prices have now reached bottom and while apparently no one can speak with any degree of certainty as to the future course ot 1 events, there is no indication that there will be any marked recovery in prices, a 1 thought it is hoped that there will be some movement in that direct- j

ion. In fact economists in all conn- | tries seem to be in agreement that prices in the world’s markets will re- 1 main permanently alt a lower level than wo have been accustomed to in recent years. Under these circumstances we cannot count on the value of .exports being appreciably more next financial year, than for this year’s | imports. Of course they must also fall to the same extent, and generally it would appeivr that the Dominion has no option but to adjust its affairs | to a permanently lower level of prices. I That is the basic fact which has to I bo faced. It will he apparent to all that if our national income has decreas-

ed by many millions with every indication of continuing at a low level,our whole economic structure adjusted over a period of years to the former; high level, is now top-heavy and can- 1 not he maintained. That is to say the . present level of values, wages, prices and costs generally, cannot be supported on the reduced income. Everything lias to come down to the new level. There is no escape from that, and if the inevitable 'adjustments are not made now it will not be long be-j fore tile structure will be brought down by its own weight, in which cas > j the loss and suffering involved would - he greatly accentuated. On the other hand if steps are taken now to make the necessary adjustments, it is hoped , that it will not be long before the 1 economic machine will, necominocln,r.o itself to the new basis, with the reductions in costs largely offset by a , reduction in the cost of living. The Government accordingly propesto deal with the situation in a comprehensive manner, but as complete unity of action 'throughout the Dominion is essential to the carrying through what in any case will prove a difficult matter, I appeal to local authorities and public institutions and all private firms to follow the lead of the Goveminent and so hasten the process of readjustment, PROSPECTIVE BUDGETARY POSITION. So far as tile public finances are bohbernod the economic: situation will undoubtedly mean a large shrinkage in tile i’evehlle next financial year. A comparative falling off of from £20,000 to £25,000 in the value of imports, is likely to lower Customs revenue by an even greater proportion, as the falling , off is likely to be heaviest in luxury ■ items, where generally speaking, the rates of duty are highest. In view of the uncertainty as to price* and tlm i osjact effect of the slum]), and the hig'li exchanges on external trade, it is admittedly very difficult at this srtage to forecast to amount of ihe Customs revenue for the next financial * year, hut having regard to the circumstances, it is considered that a fa 11- | ing off of- about £2,096,000 is likely in ' comparison with the amount budgeted for this financial vear.

'! Ill’ regard to income tax which will he based on the trading results for the current financial year, it is obvious that a substantial decrease is to he i expected. As in the case of Customs, the extent of that decrease is a very difficult matter to gauge, but on the best information at present available,- it is estimated at about £500,000. , Then there is the item for railway in--1 terest, in respect of which the experience of the last few months clearly i indicates that the amount that can he '■ paid will be considerably less than the i £1,380,000 allowed for in the present j year’s Budget.

I Next financial year additional benefit is to he expected from the fact that the Increase in rates and fares and from the economies recently effected will operate for it full year. but against that a further falling off in the traffic if! considered to be practically inevitable under present economic conditions. It is anticipated that the comparative decrease will not be far short of £500,000. The totalisator revenue, and to a lesser extent, the amusement tax and other items of stamp revenue, are already being affected by the slump. Accordingly having regard to the present economic outlook, a comparative decline estimated at about £300,000 is to he expected under the heading of stamp and death duties next financial year.

j All the other items included in the j revenue of the Consolidated Fund have also been carefully reviewed and the prospects in regard to each weighed in the balance. Practically all of them are expected to be adversely affected, although the falling off is naturally greater in some than in others. I The total shortage, in the meantime, is set down at about £300,000. The position in regard to expenditure is still being reviewed in detail by the Economy Committee set up by the Government for this purpose. As soon as the present trend of affairs in public finance became apparent. This Committee is painstakingly investigating each Departmental vote in turn with a view to affecting all possible reductions consistent with the maintenance of sendees considered necessary for the welfare of the community. In view of the fact this financial year will end in less two months, the work of this Committee can have little effect on this year’s finances, buf it will be extremely valuable when the estimates for next financial year are being reviewed.

I In this connection I would like to j state that every effort was made this year to obtain the maximum of admin, j istrntive economy, and if further reI ductions of expenditure are to be obtained, and I think it will be generally agreed that this is essential under present conditions it can only be done by eliminating or curtailing some of the services at present supplied bv the State, either free or below cost. That is to say, some of the monetary grants at present given for work done by Departments below cost, will have to be reduced, or perhaps entirely stopped. In private life most of us in hard times have to forego many desirable things, because we cannot afford them, and the same economic laws apply to the State which of course is merely the people as a corproate body. To return to the prospective budgetary position, next financial year’s expenditure will be increased by about £200,000 under the heading of debt charges, which is a rigid item where expenditure of capital for developmental purposes is necessary. Then, provision will have to be made for the usual automatic increases in pensions, and cost of the General Election, and for a new item of about £600,000 in subsidies payable under the provisions of the Unemployment Act. Thus on

the present basis of expenditure for ( the Departmental votes, and the remainder of the items payable under special acts of Parliament, that is without making allowances for any other possible increases, hut eliminating certain non-recurring items, there would he a comparative increase , in expenditure next year of at least £900,000. To sum up the prospective Budgetary position for next financial year, all the information at present available indicates that the Government and tile country arc faced with the formidable problem of providing in one way or another before next year's Budget can he balanced by the following :—• SHRINKAGE IN REVENUE. Customs £2,000.000; Income Tax £500,000; Railway Interest £500,000; i Stamp Revenue £390.000; Other items £3oo.ooo—Total £3,600,000. INCREASES IN EXPENDITURE. | Debt charges £200,000; Unemploy--1 ment subside €600,000'; Other items ' £loo,ooo—Total £900,000. I The total shortage is £4.500.000. That is the position as far as it can be estimated at this stage, and I have ' taken the curliest, opportunity of laving the facts before the country, being confident that the people will accord the Government that measure of co-operation and support which is necessary if the position is to he mot, a lid the Budget balanced by ineans that ■ will assist rather than retard the g°ll- - oral economic recovery of the Dominion.

Pit IXC IPAI,SUXDKB LYIN G. GOVERNMENT’S ,PROPOSALS. A prospective shortage of £4,500,000 is the problem, and the amount is so large that 1 think it will lie generally recognised that drastic measures amt eonsi.-.crable sat riflees on the part of the people are necessary, before the gap can he bridged, as of course it must be. For the most part the cause of the shortage is a shrinkage in practically till the revenue resources, which fact clearly indicates that the problem is not a passing breeze due to any isolated incidents or miscalculation, hut is part- and, parcel of the wider problem of adjusting our whole economic structure to the world wide lower price level. It follows that the restoration of the budgetary equilibrium on a permanent and secure basis, is a practical impossibility untill the general economic equilibrium has been restored, and that a solution of the wider problem will automatically provide the greater pait of the remedy for the budgetary difficulties. That is to say, the two problems are largely one and must he dealt with accordingly. This is the basic principle underlying the Government’s proposals.

If a lower level of export prices is to prevail henceforth, and there appears to be little doubt about that, then our primary producers ill particular and business in general, cannot carry on unless working costs arc lowered. Accordingly what is essential is a cutting clown of overhead and also direct working expenses From another angle it will be apnareut to all logical people that if a much decreased national income has to be divided among the same number of people as heretofore, either a great many will have to go very short, and in other worls he largely unemployed, or each and every one of us must he content with less. Knowing the spirit of our people, I have not the slightest doubt that the general desire is that the burden should he shared by one and all, and the Government will do its utmost to arrange matters to this end. REDUCTIONS IN SALARIES.

As they are such, a large element in the cost of practically everything, we must face the hard fact that nominal amounts of salaries and wages must- he reduced. Accordingly the Government proposes to make a ten per cent reduction in the salaries and wages of Public Servants to operate as from the Ist. April next. The reduction will apply without exception to Cabinet Ministers. Members of -Parliament, and all classified salaries of permanent officers in all services, while corresponding reductions will be made in the wages of all temporary men, whether employed by the clay or by the hour or otherwise. The reduction will also enolv to Samoa and Cocos Island and officers overseas.

The wages on standard public works will be reduced to a basis of 12s 6d per day, except for tunnellers where the rate will be on a basis of 16s per clay. On relief works the rates of wages will be on a bask of 12s 6d per day for married men, and 9s per day for single men.

Concerning the wages for tunnellers, and the differentiation in the wages of married and single men on relief works, and other reductions to be made. I wish to point out that the amount of funds available for carrying on public works is limited, and the object of tlie Government in fixing these rates is to make the available resources go further, or in other words to spread employment as far as possible, and as long as possible. Otherwise the necessary funds will he curtailed, and this will lower the number that can be kent employed on public work's.

Our unemnloyment problem is serious enough as it is and the Government does not want to see it accentuated through the immediate discharge of large numbers of men from a public works. The reduction of the salaries and wages of the Public Service alone however apart altogether from the question of equity, would not achieve the larger object in view, that is the general lowering of costs throughout- the Dominion. Accordingly T appeal to all local and other public and semi public

authorities, and to the community in general, to follow the lead ot the Government'. 1 may say that as far r. 3 local authorities and hospital bodies are concerned, it is considered that the beneiit, or part of it, will bo reflected in a reduction of the amount of subsidies paid from taxation. AWARD HATE'S OH WAGES. END EH THE CONTROL OF THE ARBITRATION COURT. I It is proposed to bring down legislative to empower the Court to review them in the light of the present economic: conditions. It is expected that the henc.it of the 1 eductions in salaries and wages will he pasesd on to the public in one form or another. In fact 1 wish it to be clearly understood lliat t’ e Government will do its utmost and will use all its power to see that then* is no exploitation of the situation. As a precautionary step the Industries of Commerce Department is being "so instructed to keep the matter constantly under review in order to ensure that the reduction in wages and overhead costs are reflected immediately in the cost of living. In fact the Government is relying upon further bringing down tin; cost of living to offset the reduction ill Hoinilial Wages. That is why : jt is so essentia! that tile reductions should be general, and the benefits shared by all. ill this connection it is pointed out that the figures of the Government Statistician show that the cost of thing is already 'declining. The Dominion index of the retail price of foods shows that whereas the cost of food in .January, 11.29, was approximately 49 per cent above the cost in July 1911, by December last the relative increase was only .‘l7 per cent, which means a tall of 12 per cent.. ■Similarly the “All Groups” index fell during Ihe period November, If ”'*, to November, 19J0, by approximately I per cent, and a lurlher tall lias since taken place. A reduction in nominal wanes fo’.lowt d immediately by a fuitb(.r reduction m the cost of living won.' leave the standard ol real wages but little affected, and I can assure tbe workers that, the Government is most anxious that the standard of living should not be lowered. At the same time the Government is convinced that under present economic conditions it is in tin* real interests of tin* workers themselves that nominal wages should be reduced, as otherwise business generally will stagnate, and there will be little work for anybody. To balance next years Budget and towards meeting the prospective budgetarv shortage of £4,500,000, the reductions in salaries and wages as outlined above, will, it is calculated, provide. nearly £1,500,000. This amount includes the reductions in the salaries anti wages of the gehrrt.il public service, including teachers, directly dlalgeahle to the Consolidated Fund. Together with the benefit to be derived from similar reductions to be made in the railway and postal services, and also from the reduction in the amount of subsidies payable to public bodies. In addition, as a result of the work of the Economy Committee, it is anticipated that further substantial reductions can be made in the expenditure of the Consolidated Fund and railways. apart from the proposed ah round reduction in salaries and wages. Tn regard to expenditure on education 1 may say that the Government intend to set up a special committee to investigate fully the financial side of fliis important social service, which including the debt charges on the loan expenditure on buildings, is at present about £1,500,000 per annum, which is too heavy a burden on taxation under the present economic conditions. It is hoped that this committe will be able to find ways of making large savings without in any way lowering the standard of education.

As to the railways the Government has decided to give effect to one of the main recommendations of the Royal Commission of Inquiry and place this national transport system under the control of a non-political board of directors,, as a temporary measure for

one or two years. Further relief for the Consolidated Fund is to he obtained by utilising the reparation money received from Germany for debt repayment purposes, as part of the provision required under the general repayment of the public debt system < In this connection it may be explained that at present the reparation moneys as received, are applied in reduction of' the war debt, in addition to the repayment of debt efface a under the funded debt agreement with the British Government and the cumulative repayment- of the public debt system. The- proposal is that for a year or two the reparation moneys shall form part of the financial provision required for the latter, instead of being additional thereto. Another matter that will have to lie brought under review, is the present arrangements concerning highways finance. It will he remembered that last session as part of the. adjustments made in connection with the finances f-'r the current financial year, portion of the reading costs nrcviously pnvable out of general taxation was transferred to the Highwnvs Act and the petrol tax increased by 2d to cover the cost of the additional items in order that the amount made available for highwnvs expenditure should not he diminished. Kvoi so. in view of the differences or opinion about the matter and al=o m regard to the allocat'on of part- of the octroi tax to local nutboin'es, the amending legislation was made operarive until the 31st August next onlv. and an undertaking was given that the ■whol’ question inf highways finance would he investigated before that date by a Parliamentary Committee. This

undertaking will be duly given effect to, but it will be apparent to all t-hat the highways finance cannot be considered apart from the public finance generaly. At present, the whole of tfie proceeds from Customs, duties on petrol ami tyres, together with certain licenses fees and fines etc., are earmarked for roading expenditure, but circumstances have changed considerably siiuo those arrangements were made. In principle, the earmarking of any tax for a particular purpose is quite unsound, and the amount which the community can afford to spend on roads is a matter which should be determined in relation to the relative urgency of all the other calls on the public purse, and the financial position of the country generally, as it is a relief to gen aval taxation through trails faring the charge for subsidies to local bodies and sundry other items. The taxation earmarked for highways will certainly have to be continued and in addition it would appear that the serious position of the public finances generally will render it necessary to make other radical changes in the relief of general taxation. The earmarked revenues are at present more than sufficient to cover the maintenance expenditure on highways. The reduction in expenditure apart from salaries and wages, and the various adjustments that 1 have referred to, will it is estimated improve the position of the Consolidated Fund to the extent of about £1,250,099. POSTAGE TO BE INCREASED.

It is proposed to obtain further assistance towards the budgetary shortage by increasing the postal rates. The additional revenue is estimated at about £900,000 per annum to come to the Consolidated Fund. The Government recognises that the Id postage has been an incentive to business generaly, and it is with much regret- that this proposal is brought forward. At the same time it is felt that it is the lesser evil, in that it is prelVrrable to increase postage rates under present circumstances than to impose heavy increases in taxation in other directions, and thereby hinder a revival of busines to a much greater ex to nt. Some increases in general taxation vill however ee necessary to make up balance. rHE DEFICIT. Of tin* anticipated shortage of £4,•500,000, part of the additional amount required, the Government proposes to obtain from income tax which is not only the most equitable form of taxation, but the one that has the least effect upon working costs. Detailed proposals on an amended schedule of rates have not yet been worked outIn addition to income tax, it is quite probable that some increases will have to be made in indirect taxation, but the Government is anxious to keep such increases ns low ns possible in order that the Cost of living and Working costs of the primary products and Ot business generally should not thereby be. increased.

The recant disastrous earthquake in Hnwkes Bay will undoubtedly mean heavy additional expenditure on the part of the State, but until more 'definite information is available as to the losses that have been incurred and restoration plans are more advanced it will not be possible to even aproximately estimate what the cost to the State will be. Under these circumstances it is obviously not possible for me to indicate at present in what manner the State’s share in the restoration work is to be financed. In the meantime no allowance has been made for earthquake expenditure in this survey of the budgetary position for next financial year, and any requirements out or the Consolidated Fund on that account will increase the prospective shortage, and provision will be made accordingly. To sum up the Government’s proposals for balancing the next- vent’s budget, it is proposed that the anticipated shortage of £ 1,500.000 shall be provided for in the fol'owing manner:— Reductions in salaries and wages £1,500,00.

Reductions bn other expenditure and fiancial adjustments £1,250,000. Increase in postage rate £900,000. Additional taxation (direct and indirect) £850,000. Total '£4,500,000. A.s indicated earlier in tin's Statement these measures for balancing the budget have been chosen with a view to assisting also as far as possible the solution of the wider economic problem on which depends 'the maintenance of a budgetary equilibrium, The proposals are admittedly drastic but it will lie agreed that nothing but drastic measures will meet the serious position that has arisen as a result of factors entirely beyond our control. It only remains for us to face the facts resoultely, and put our house in orded. New Zealand has a great reputation for sound finance built up over a long period with balanced budgets, and though we are now beset wii-h many difficulties, it- is our bounded duty to safeguard New Zealand’s name by balancing It ho budget. In any case any temporary advantage or relief that might- be obtained by doing otherwise would have to he p: id for with compound interest- in /the future, and the not very distant future at that. The experience in other countries since the war is eloquent -testimony of that fact. In other words the State must make ends meet sooner or later, and any dolly in doing so only make the recovery increasingly difficult. Accordingly the Government gives balancing ,the budget- a paramount position in its policy, and while there may be a diversity of opinion as It.o how it should be done, I feel sure that the principle at any ra-te is heartily endorsed by the community.

FARMERS’ FINANCE. It is now a truism Unit the wholo prosperity ofi the Dominion is bound up with the welfare of the. farming section of the cominn.iii.'ty, and as part of the problem of restoring the economic equilibria., the Government is much concerned abau 1 the position of tho farmers who have been placed in a serious financial position as a results of the sudden, impdecedfnted fall in the prices of primary products. Farm .land is only worth Th.* capitalised value of wimy it will produce at current prices, and the hard lact must be faced that the many farmers who bought land when prices were higher, have now lost part or- the whole ol their equity in their farms. Jn many cases tho \ position is even worse in that the real value of the farm is not equal I to the mortgages, which means that some mortgages have lost part cf the capital invested by them. These are very disagreeable but no ventholes incapable facts, and there is nothing to be gained by refusing to face them. In some cases the losses suffered by farmers and mortgagees represent little more than the “paper ” profits arising out of the land boom which occurred in the years immediately following the end of the war. In other cases, however, tho farmer has .suffered a serious hardship in losing, through no fault of his own, .. the hard-won savings of a lifetime. : ,

Now, apart from the fact that the 'rCtvdy sympathy of the rest of the community will go out to the man who has thus suffered a heavy loss througu a world-wide fall in prices, we are all very much concerned to see that production goes on and is in fact increased. Futhermore, if the mortgagor ot land that is now over mortgaged, in tlie case of a good farmer doing ■ his best, the mortgagee cannot hope to gain anything by driving him off the land. Accordingly 1 make ail earnest appeal to mortagees to review all the circumstances in an equitable spirit, and rec ognise their losses by easing the mortgage charges or otherwise granting every rel’ef possible. This appeal a'ko extends to stock and station agents., the banks and others who have lent money on the security of the farmer's stock and chattels. With or without other collateral security many of the advances to-day are considerably in-ex-cess of the value of the stock and chattels, and in cases where the land is also heavily mortgaged, the unfortunote farmers are not in a position to meet the high rates of interest charged cn the loans, and they certainly cannot reduce the amount of their indebfcness. Under these circumstances tlie Government appeals to the stock • aiicE station agents and others concerned to review ail such cases in co-opt-ration with the mortgagees,' with a view 'to making equitable adjustments to extend the utmost, consideration to the farmer, so that he may be able to carry oil pending the readjustment of economic conditions generally, which in itself should bring a certain measure of relief.

I can assure the country that tho ,State lending institutions which hold a large percentage cf the total mortgages on rural lands and workers’ dwellings, will take this line of action and they will deal with each case on its merits in as sympathetic a manner as is practicable, with due regard to the exceptional economic conditions which prevail at present.

Further. I wish it to bo understood that the Government will not tolerate anything in the nature of exploitation of tlie extraordinary situation that has arisen. It is highly desirable that all parties concerned in each case should get togther and make- an equitable arrangement without outside assistance or interference, but to prevent and undue advantage being taken of the financial diffic-ulities and in order to asist parties to come to an agreement, it is proposed to set up an adjustment commision in various parts of the country. The Commissioners of Crown Lands will be the Adjustment Commissioners and they will be available to investigate the position in regard to any farm

and to assist the various parties to come to an equitable arrangement. The work of the Commissioners will be confidential, but reports wil be furnish- / ed to the Government as to the general position and the progress made. These reports will enable the Government to determine whether any further action, legislative or otherwise-, is necessary to cope with the situation. As a precautionary measure, it is proposed as soon as Parliament meets to obtain legislative authority to set up a special judicial body to which disputes in special eases may he referred, but it is hoped that there will not be much call for the use of this machinery. One of the most onerous items in the overhead cost of farming is rates. I lie ■ statistics show that the rates collected, by county councils and road boards and other rural local authorities, amount to approximately £2,240,000 annually. While rates mostly rural collected by Power Boards amount to about £70,000, and bv a number of the smaller harbour boards to about £IOO,000 per annum. Land tax assessments on rural lands amount to about £650,-

000 per annum, but as the majority of s* farmers owing to the exemptions allowed pay no tax at all, it is clear that rates are the real burden to the small, farmer. Now, the information available shows that apart from Power Boards and Harbour Boards, there are no less than 299 Rural local authorities, consisting of 146 loading authorities, 107 river ' and drainage hoards, and 46 rabbit boards, and that, the administration of these authorities costs about £330,000 a year, which represents 11 per cent, of" the total revenue from all sources, or alternatively nearly 15 per cent of the receipts from rates. There is no doubt that good communications and the revolutionary development of road transport, have rendered it quite unnecessary to have so many local authorities, and it is evident that considerable relief to rural ratepayers would result from a general overhaul and reorganisation of these authorities. Not only would there be a large saving in costs of administration, but larger districts would enable modern loading machinery to lie kept fully employed, which would mean of course cheaper maintenance and construction. Accordingly. as a further means of assisting the distressed farmers and the Dominion generally, the Government proposes to set up a commission to go fully into the whole question of the incidence of local bodies’ taxation, and tbe possibilities of effecting economies in the expenditure of all local authorities, including Hospital and Charitable Aid Boards. It is admitted that the whole matter bristles with difficulties, but economy in all directions is now a matter of paramount importance to the welfare of the country. The Unemployment Board in dealing with their special problem have not been unmindful of the need to assist the primary industries, and they now. have a scheme under which the unemployment funds will lie used to subsidise'tbe wages of suitable men employed on farm work. The wages to be paid in such cases is a matter to be agreed upon between the farmer and the workers. Where farmers are in a position to employ labourers. th»s provision should be of considerable assistance to them. While on the question of unemployment I would like to say that however difficult the times may be, provsision must be made to ensure that the unfortunate people of the community get sufficient food, clothing and shelter. To this end ft is proposed to organise special relief measures under the direct supervision of the Minister of Health. LOCAL BODY RATES AND TEN PER CENT PENALTY. Under the present economic depression the addition of a ten per cent penalty to rates unpaid at the expiration of six months and fourteen days from the date of the demand, has created hardship in some cases where the local bodies concerned have publicly notified that the penalty would accrue. In such cakes, there is no statutory authority to allow remission, but the Government proposes to bring down validatorv legislation so as to adjust.. any such concessions which local authorities may have given as many give in'cases of hardship in respect of this penalty. i 1 realise that this statement will not make pleasant reading, but 1 consider that the first step towards overcoming our difficulties is to place the position fairly and squarely before the people for the record of the past shows that when work and sacrifice are absolutely necessary welfare, our people have alnatipnal welfore, our people have always risen .t othe occasion, and I have not the slightest doubt that they will do so now. The Government for their part will not hesitate to do what they consider is in the host interests of the Dominion, and, given the support of all sections of the community it should not be. long before the economic machinery-, is back into good working order. Our difficulties are great, and they have recently 'been considerably accentuated by a, disastrous earthquake, hut even so, the courage and resource of New Zealanders are such that they are by no means insurmountable. It. must be realised, however, that these are extraordinary times, and that no ordinary measures would met-- the position. Still, all that is required i- u a combined effort throughout the length and breadth of the land, and 1 • confidently appeal to the other political parties gnd to the whole community for support and co-operation in carry-

through the programme that T hav*» outlined for again placing t.he Dominion o nthe high road to prosperity and 'letter times.