FINANCIAL STATEMENT.

Kumara Times, Issue 2573, 20 September 1884, Page 1 (Supplement)

FINANCIAL STATEMENT.

[united press association.] Wellington, September 10 In Committee of Supply last evening (Sept. 16), the Colonial Treasurer made the following statement: — The Hon. Sir Julius Yogel said —Mr Hamlin, the usual yearly Financial Statement may be somewhat curtailed in its length and deprived of its dry details because of my predecessor having already related a history of the year ending the 31st March last and its results. I .vill briefly epitomise. The position may be described thus : —The year 1883-84 was commenced with a surplus of L 35,549, and it ended with a deficiency of L 152,012. This result was represented in the Treasury at the end of March as follows :—There were outstanding deficiency bills still current amounting to L 398,000. To meet them there was—Cash, L 203,447, and imprest advances to officers of the Government, L 42,441. Taking the last as cash, it will be seen that the deficiency stood at the amount stated. The revenue and expenditure of the Land Fund, which, though kept in a separate account, form part of the Consolidated Fund, show that during the past year the payments exceeded the receipts by L 6217. The balance of L 86,564, with which the year began, and which was chargeable with a sum (L 75,203) transferable in respect of the transactions of the year 1882-83, to the main road account in the Public Works Fund, under the Roads and Bridges Construction Act, 1882, thus became L 80,447. At the close of the year, without the repayment to the Main Road Fund having been made, the L 75,303 due on the transactions of 1882 1883 therefore still remains unpaid to the main road account, as on the 31st March, 1883. There was in the public works account —(I quote my predecessor for the remainder of the sentence) “an unexpected balance of L 877,912, but of this L2U2,484 was advanced in the hands of officers ; and, as hon. members who follow the public accounts know, advances outstanding, although included in the balance in hand, are not usually available for expenditure.” The balance included the whole proceeds of the second million of the three million loan, and also the proceeds of that odd little colonial inscribed loan of L 250,000 which was taken up by the Post Office. The public debt of the colony on the 31st March, 1884, after deducting the Sinking Funds acrued, amounted to L 29,574,902 the annual charge in respect of which (including the contributions to the Sinking Fund) amounts to LI, 578,799. This debt was exclusive of the deficiency bills amounting to L 298,0000 issued in aid of revenue and remaining outstanding at close of the year, as also L 400,000 of deficiency bills issued to facilitate remittances, which I consider a contingent, though remote liability. The Colonial Treasurer (Major Atkinson) after procuring his Excellency’s assent to a dissolution, obtained temporary supplies, and in order to provide for them secured also authority to issue extra deficiency bills to the amount of L 300,000 to represent first, the deficiency of the past year amounting to L 25,000 ; second, L 500,000 additional to the L 400,000 of bills already authorised for the current wants within each year ; and, thirdly, LIOO,OOO in aid of the Public Fund, By these aids the Treasurer would carry on to the Ist September, and he was about accurate in saying so ; but after him the deluge. Taking the date of my accession to office as the first of this month, the immediate financial prospects were as I am about to describe. It must be understood that the statement is not a book-keeping one obtained from the balance of the accounts, but merely an estimate of the cash requirements of the month. The estimate showed that taking into consideration the probable incomings of the month, and the liabilities which it was known would have to be satisfied, the consolidated fund would be a few thousands short, notwithstanding that all the deficiency bills author! ed by law were issued and disposed of. There is a farther amount not estimated which has come in for payment, but about this I shall say nothing at present. As regards the Public Works Fund, the estimates showed that at least LIOO,OOO would have to be borrowed in some shape to the end of September, and that the like process would have to be gone through for meeting liabilities until the third million loan was negotiated next year. LOAN CONVERSION LAST YEAR. The loan conversions of last year, as described by Major Atkinson, consisted of L 3,558,300 5-30 debentures, and L 1,832,000 short dated debentures ; but the transactions consequent on these conversions are still not completed, A considerable quantity of the converted short-

dated debentures remains to be sold, whilst only a portion of 5-30 issue has come in. Notice has however been given to pay off so much of the balance as carries 5 per cent interest in January next. On the whole the annual savings on the conversions of last year amount to about L 33.000, and some LGOOO more will be gained by the conversion of the balance of the 5 per cent 5-30. Another effect of the conversion has been the postponement of the payment of a sum of about LSOOO for interest from a date within the present financial year to next year. It is much to be regretted that the conversion was commenced with the 5-30’s instead of with the consolidated loan of 1807-1870, which carries with it an accumulating drawing on Sinking Fund. The 5-30’s could have been paid off at par at any time on six months’ notice. This is really now what it has been found necessary to do with the principal part of the 5-30’s bearing 5 per cent interest. Only half a million of them were brought in. The bulk of the 5-30’s which came in bore per cent interest. They amounted to L 3,053,000. The profit on them was comparatively trifling after payment of expenses and premium, but they stand in the way of further operations. Because of the large mass of inscribed stock that represent them on the market, they ought to have been about the last instead of the first securities operated on. The operation in connection with the short dated debentures was more in the nature of a sale than a conversion. They had nover been placed on the English market, and the real object was to dispose of the bulk of them. The difference in the rate of interest between a floating and a funded debt can hardly be all called profit. That is why I used the word “nominally” shortly since. THE PUB . IC DEBT. Before proceeding further to describe the present position and future plans, I think it will be as well, whilst the subject is in the memory of hon. members, to deal with the question of the deficiency bills. They amount, as the committee are aware, to L 250,000 for last year’s deficiency, L 450,000 for current purposes on the year’s Consolidated Fund Account, and LIOO,OOO for the Public Works Account. There are, besides, the L 400,00 contingent liability bills. My friends, I dare say, will think that I am rather good natured, not to say stupid, to trouble myself with working out my predecessor’s difficulties “fund,” they will say, “by adding to the permanent debts so much of this floating debt as will leave you new floating debt.” I shall not do anything of the kind. lam profoundly impressed with the conviction that it is intricate entanglement rather than real difficulty with which New Zealand has to contend. I believe her finances can be put in order, and that we may count from year to year on such an improvement on revenue that so much of the present floating debt as does not come within the category of mere aid within the year can be discharged within a reasonable period. The L 450,000 I shall consider as strictly aid within the year, and I shall ask the House to increase the amount by another L 50,000. M y predecessor stated his opinion that the L 400,000 was not sufficient, and actual experience has shown that the additional L 50,000 for which he obtained authority is still not enough ; for as I have told the committee, there is beyond all the deficiency bills a deficiency of a few thousands in the estimate of the present month. I shall ask them for authority to add L 50,000 to the L 450,000 strictly for the purpose of anticipating revenue within the year. The L 150,000 for the last year’s deficiency I shall pay off within the next two years or so. The LIOO,OOO for public works can either be allowed to lapse or continue to be paid as a means of adjusting public works revenue within the year. As to the contingent L 400,000, I do not like the arrangement, and shall hope to be able to do away with it shortly. Thus I am not intending to propose that most unpopular of all financial operations, the converting of a floating into a permanent debt. THE ESTIMATES. I have had to take the estimates very much as I found them. The honorable member for Egmont in his last financial statement led the committee to believe that he proposed to effect great savings in the Civil Service votes, and also that he intended to amend the service by classification and promotion. He did not particularise his proposed reforms, and he thought it undesirable to leave a record of them behind him. The type even, of the bill said to have been prepared was broken up. As to promotion, by the classification system, irrespective of merit, I am not an advocate of it. It reduces officers to a dead level, and leaves little incentive to individual exertion. I have been told that in an adjacent colony at one time under the influence of this system it was found neces ary to have an army of supernumeraries outside the Civil Service regulations in order to carry on the business efficiently.

I will proceed to state the principal alteration we propose in the Estimates. One is the reduction of the Armed Constabulary expenditure at the rate of L 20,000 a year, though it can only come into force for the ■ last quarter. We propose on the other hand to add 5s to the capitation allowance of Volunteers. This will be for the last six months of the year, or at the rate of 10s yearly, at which we propose it shall continue. We shall also ask authority for appointing a commanding officer of the Volunteers, and we shall place a sum on the estimates to defray the expenses of members attending the annual competition of those singularly meritorius and valuable bodies, the Volunteer Fire Brigades, These three items will appear on the supplementary estimates. As regards the Department of Education, we think the time has come when the large annual increase of scholars renders it unnecessary to allow the extra capitation fee of 5d per head outside of the provision made in the Act. This reduction we propose shall commence with the last quarter in the year, so that will only amount to Is 3d a head. We shall ask the House to except from it the schools in the Westland Provincial District, the funds of which are somewhat contracted. There has been no time to minutely analyse the receipts and expenditure of the Railway Department. We are of opinion that closer and more intimate business inspection will materially aid the economy and efficiency of the management of railways. We design no reflection on the present manager. I know of many systems of railways not so large as that of New Zealand where it would be thought absurd to leave to one man the virtually irresponsible control, no matter what his experience, and though he was receiving five times the salary of the present manager. However good a manager may be, he derives immense strength from being able to refer difficult points to the calm consideration and judgment of a board of able business-like men. The expense of such aid is nothing when you have to do with an undertaking returning over a million a year of revenue and absorbing over half a million of expenditure. At the same time the session has been so much Avasted, and so much remains to be done, that it is possible we may not press our proposals for local boards this year. I hope to effect a saving of expenditure and to make beneficial reforms in connection with the present system of audit and of keeping accounts. Virtually at present three sets of books of the accounts of the colony are kept by three independent departments. ' Each department, besides the treasury and audit departments, keeps severally its sets of books. They are not precisely the same books, but they are of an allied character, and they are kept by separate staffs. I am disposed to effect an entire change by which the audit department and the accounting portion of the treasury would be abolished, and to substitute an Accountant-General’s Department. The Accountant-General would, like the Auditor-General, be a Parliamentary officer and have all the powers of controlling expenditure and receipts and reporting to Parliament that the present auditor possesses ; but he would also keep the books of the colony, and his officers would keep the books of departments, or regulate the way in which they are kept. The alteration would, I belive, lead to considerable saving ; but that would be its least merit. Its great advantage would be that it would assist in connection with the departments, and in reducing their separate action in the way of contracting liabilities. It would also lead to a much needed reform in facilitating the discharge of accounts. I referred on a previous occasion to the serious complaints made as to the difficulty of obtaining payment of moneys due by the Government. It would lead also, I think, to making it cheaper to obtain the returns which are required for so many purposes. But all these are opinions founded on theory, and before I can give effect to them I must narrowly investigate their probable practical operation. I am having enquiries made on the subject. At any rate there seems little doubt that as between the Auditors and Treasury the books may be kept with more economy. I have, I think, been able to effect some improvement in the Telegraph Service though, but without the expenditure of money. The use of stamps for payment of tele rams will greatly facilitate keeping the accounts of the department. The abolition of receipts for telegrams will save the receivers of the documents and the department wholly unnecessary trouble. Another change has not as yet been made public. I have been much troubled by the inconvenience occasioned by closing a large number of offices at the early hour of five o’clock. I have arranged that these offices shall be opened between seven and eight, and closed for half-an-hour in the middle of the day between half-past one and two o’clock.

These changes will take place on the Ist October. I should also call the attention of the Committe to the serious loss the colony has suffered and is suffering through the diversion of a large part of its English correspondence to the Brindisi route. The English postal authorities have to my mind behaved most unwarrantably in the matter. LAND REVENUE AND EXPENDITURE. The statement of the receipts and expenditure on account of the Land Fund other than the revenue from leases cannot be pronounced satisfactory. It must be remembered the year is in great part gone. lam giving the results and anticipations as we found them. My colleague the Minister for Lands will probably make an exposition of his views on the subject later in the session. It will be observed from the statement that the L 75,203 due to the main roads account under the Roads and Bridges Construction Act is yet unpaid. It, was due at the end of 1882-83, and as my predecessors left it so long unpaid I do not see that it is of pressing importance for me to discharge it. In fact other provision will have to be made for the purpose of the Roads and Bridges Act. If it is to remain on the statute book it will absorb the whole of the colonial inscribed stock loan, which was authorised for the purpose of being taken up from time to time as people required it, but which was absorbed in bulk by the Post Office receipts and expenditure of the year. I proceed with the statement of the estimated expenditure of the year, with such few alterations as I have described; and also I give a statement of the expected revenue. Supposing the revenue is raised on precisely the same terms as last year, including a three-farthing Property Tax, the estimate of revenue is moderately stated, and I believe hon. members may count on the amounts set down being verified. ESTIMATES OF RECEIPTS AND EXPENDITURE OF THE CONSOLIDATED FUND FOR THE FINANCIAL YE *R ENDING 31ST MARCH, 1885. ORDINARY REVENUE ACCOUNT—RECEIPTS. Customs £1,375,000 Stamps 527,500 Property Tax 275,000 Beer Duty 55,000 Railways 1,120,000 Telegraphic 94,000 Registration and other fees... 37,000 Marine 16,000 Miscellaneous 35,000 Total £3,534,000 TEKITORIAL REVENUE. Depasturing Licenses, Rents, &c 188,000 Total ... £3,722,500 EXPENDITURE—PERMANENT APPROPRIATIONS. Civil List ... 29,750 Interest and Sinking Fund ... 1,559,115 Under Special Acts of the Legislature... ... ... 53,724 Total £2,642,589 ANNUAL APPROPRIATION. Legisl tive 67,510 Colonial Secretary 238,435 Colonial Treasurer 51,643 Minister of Justice 117,265 Post Office and Telegraph ... 159,322 Customs ... 79,081 Stamps 27,491 Education ... ... ... 328,102 Native 18,311 Mines 21,308 Public Works ... ... 740,660 Defence 183,427 Total 2,132,563 Grand total ... ... £3,775,152 The Committee will observe that this shows a deficiency of L 52,052. Let us now see what we do in the way of converting the deficiency into a surplus. OUR LOANS AND SINKING FUNDS. I have described to the Committee the results of the present year, supposing we left it to run its course without altering the expenditure beyond what I have already stated is proposed, but I have to call the attention of the Committee to a large item of expenditure which should in our opinion be relieved ; and through the instrumentality of such relief the country be saved a considerrable portion of its heavy taxation. I have freely stated that this was feasible, and have been met with incredulous smiles. The time has come for me to fully explain my meaning. If hon. members have before them the table in relation to the public debt of the colony, which I have caused to be reprinted from the hist financial statement, together with a separate table which I have had prepared showing the percentage of the yearly charges on the nett indebtedness, they will be able to follow my meaning. They will find that on a total nett indebtedness of L 29,574,902 we are paying annual charges for interest and

sinking fund to the amount of L 1,578,799, or in other words 5 33 per cent., although our 4 per cent, inscribed stock is quoted at 103|. If we bring our loans down, as we may well do, to a basis of a little over 4 per cent., we may have an annual saving of over L 30,000. Before I discuss how this is to be done, I will invite your attention to the extraordinary condition of some of the loans—those to which Sinking Funds are attached. On the 1865 loan there is a net balance of only L 23,007, yet on this we are paying L 20,000 per annum interest. We were paying additional LIO,OOO for Sinking Fund, but the Lords of the Treasury who control the matter (as the loan is guaranted by the Imperial Government) have released us from continuing to pay the Sinking Fund. The fact however remains that we are paying interest at the rate of 8-69 per cent on the nett indebtedness, and next year there will be no indebtedness ; but we shall be continuing to pay interest on the outstanding accounts until the several instalments are paid off—lßßß, 1889, and 1894. There will then, it is true, be a large balance due to us from an excess of the Sinking Fund ; but surely we ought not to burden the people unnecessarily in the present to lay up excesses in the future. The mistaken policy of such a course is apparent by the heavier burdens on the productive power of the community An unnecessary tax therefore carries with it a loss beyond its own means. To put it in a simple form, and one which I entreat hon. members to keep before their minds, supposing we are paying £IO,OOO out of taxation this year unnecessarily, but will recover it back in five years with compound interest at English rates, will the colonists loose anything by the operation ? Most certainly they will. They will loose whatever may be the amount of the contraction of the productive capabilities. To resume. The next loan I come to is that of 1800. In this case there remains a nett indebtedness of L 937,949, with an annual charge of L 96,792, equal t 010.3 per cent. The New Zealand Consolidated Loan is yet large. On a nett indebtedness of L 5,807,607 there is an annual charge of L43G,986, equal to 7'52 per cent. I need not describe other loans of smaller amounts. Hon. members will find them in the table which will be laid before them. Suffice it that an aggregate yearly payment of L 19,859 on five loans represents respectively a percentage per annum of 13 7, 27-4, 17-8, 8-2 and 10 9. Obviously these cases call for treatment, and there are others also demanding attention, with the view of very considerably reducing our yearly charges. The chief disorganising factor, however, is the Sinking Fund. It is over seventeen years since I asked of the then Treasurer (Sir Win. Fitzherbert) to dispense with sinking funds on our loans. Sir William was far too acute a financier not to recognise their evil, but he had to yield to circumstances with the 1867 loan, as I had afterwards to a small extent with the 1870 loan. We both recognised the misfortune, but were unable to get out of the deep groove into which New Zealand finance had fallen. There are members in this House who are equally aware of the objection to Sinking Funds, notably the member for Auckland West (Mr Dargaville) and the member for Gladstone (Mr Sutter), who recently addressed me a letter, in which he said very truly that sinking funds were condemned on every side as exploded fallacies. Tbe member for Auckland East (Sir G. Grey), I am told, during the time he was Colonial Treasurer, directed his attention to the same subject, and indeed had a Bill prepared, the nature of which 1 can’t describe, as I have not seen it. Again, last week the hon. member for Te Aro asked some questions, the inference from which was that he realised the relief which was to be obtained both from the accruing and accrued sinking fund. The hon. member for Waitemata by similar questions evidenced the same acuteness. Lastly, the hon. member for Egmont during the three or four days he was recently in office seemed inclined to follow in a somewhat similar direction, j edging by the telegram he sent to the AgentGeneral, which I read to the House on Friday, on which day I saw it for the first time. It is not, however, unfair to suppose that in one shape or another he obtained an inkling of my views. I have not talked over this subject for many years with Sir William Fitzherbert, but I am quite certain he will bear pie out in saying that even when we were forced to adopt a sinking fund, we well knew that the time would come when it would be so oppressive that relief in some shape would have to be sought for it during the present century. I don’t think there have been many, if any, able financiers who have refused to recognise the great dictum of Professor Hamilton, that the only true sinking fund of a country’s national debt is the excess of revenue over expenditure. Every other sinking fund is a delusion and a snare. The time has come— I think it came some years since when the increase

of taxation was in consideration—-whei the intolerable burden of the sinking fundi must be recognized. .There ia no reasoi whatever why the colonies who are exert ing themselves to lay broad and dee| the foundation of great public works, which will be a splendid and magnificent heritage to those who come after thefh, should attempt to pay off piecemeal portions of the public debt whilst they a*« borrowing more, and whilst they are bearing the heavy burden of paying interest during the construction of the works. ■ ] speak advisedly of this splendid heritage. New Zealand ia acquiring a monopoly of railways at a total cost less than, in many old countries had to be paid formerly in buying the land on which to construct them. Twenty-five years hence, 1 com-: pared with the value of these works, the public debt will be a bagatelle—that; is' if the colony does not doze duringthe twenty? five years as it has during the last five! years ; but even though it was dozing the railways did good work. What more logical evidence of their value is required than that supplied by the railway manager in his last annual report, With regard to, the progressive increase of traffic, the following is a statement of the principal traffic in local products for the; past five years : Wool. Timber. Grain. Minet’ls. tons. tons. tons. tons. 1879- 41,895 149,429 240,144 321,060 1880- 42,387 169,695 421,142 406,266 1881- 44,681 192,905 375,725 433,659 1882- 51,703 197,231 367,428 510,090 1883- 62,066 183,449 432,223 574,312 Horses & Cattle. Sheep & Pigs. 1879- 30,393 260,816 1880- 27,230 280,683 1881- 22,511 . 319,837 1882- 37,455 449,470 1883- 35,948 656,612 THE SINKING FUND. The sinking fund during the presentyear is estimated to amount to £214,000. That is, during the present year we shall reduce our debt by that amount. It increases progressively. I have had a calculation made which shows that during the ten years next ensuing the present sinking fund will be increased by £3,002,800 ; in other words, during ten years the poeple of the colony will be paying off three millions out of taxation. I contend they cannot afford to do this—that it is placing on the colony a fearful incubus. The million paid off during the last five years has told severely on the colonists. If it had been saved to them New Zealand The sinking fund different shapes, would be in a different position this day. There is first a direct contribution ; secondly, the interest and compound interest on the accumulations of some sinking funds, and thirdly, the progressive increase of annual drawings under other sinking funds, I will not now discuss the mode by which it is proposed to save to the colony the annual payment. , I shall bring down a measure to deal with the subject. lam quite aware that our obligations as they exist must be fulfilled. Nevertheless, any time during the last live years the Government, by an order in Council, with perfect regularity, and in a manner no human being could take exception to, might under existing statute law have saved the colony a great part of this heavy burden. My proposals are to virtually relieve the permament charges this year to the extent of the sinking fund — day £244,000. I propose we should not be idiotic (I use' a strong phrase) enough to tax the people to pay off a little fragment of our debt. No other colony does it. Recently in Victoria the first railway loan, amounting to some millions, fell in for payment. No one conceived the idea of taxing the people to pay it off. Every penny was renewed as a matter of course. Without going into particulars, I may state that of course the process under which the sinking fund will be relieved, and relief also given to the anomalous condition of loans nearly run out, on which the yearly charges are so heavy, is through the process of conversion in one shape or another ; and here I must say a few words at the risk of rendering myself amenable to the charge of egotism. Concerning the means whereby the process of conversion has become so profitable. In 1875 I was in England on an official mission. Two eminent physicians whom I consulted forbade my venturing to return to the colony in my state of health. 1 employed myself in endeavoring to give to colonial loans through inscription at the Bank of England the status and character of Consuls, or of the Metropolitan Board of Works stock I first arranged an agreement with the Bank of England ; and touching that agreement it is only requisite to remind you, Sir, that through all th changes of all the years it has not yet been found necessary to amend it, though made only, by letters between the Bank of England and myself. Eminent counsel have pronounced that it requires no alteration When the agreement was concluded it was, however, discovered that an Imperial Act wis necessary—not to validate it, but to enable certain of its provisions to be car

tied out. For over two years 1 worked unBceaaingly to procure that act; and at last my efforts were crowned with success. No measure that I know of has met with such success. The Stock Exchange share list shows that already over fifty of loans of vari jus colonies have brought under its provisions. Every institutional colony has, I believe, used it. By. the aid of this act it is that I purpose to save the colony some £300,000 a year. It cannot all be done atonce. but effected it will be as the market will allow its being done, and my proposal is to accept the debt as it at present stands, not B vamly to tax colonists to pay it off, but by B conversion to approach the result of savB ing £300,000 a year. This means that without further annual charges than at B| present you may borrow seven and a half B additional millions. The late Government did something in the direction of conrerB aion under the Inscribed Stock Act, as I B have already related. The principle on B - which the great profit is to be made, apart B. from saving the colony the burden Hj of the sinking fund, is the higher H . market value of Inscribed Stock. B/ Whilst it rules now about 3| over

”, "4 www K. par, bearing only 4 per cent interest, 4|, H and 6 per cent debentures rule at not much ■ over the same market price. It is pro- ■ bable also that large masses of accrued ■ . sinkingfund will beset free during the H process of conversion, and, subject to the H sontrol of the House, will become avail- ■ ’ able for public works in lieu of fresh ■ borrowing. ■ The hon. member for Egmont has again ■ and again claimed for his Government the ■ credit of raising the value of New Zealand ■ inscribed stock from 80 to 100. This is I a very disingenuous claim. The facts are ■ simply these. In 1879 the Government found they had brought the colony to a ‘/ financial condition that made a loan of five millions imperative. Such an amount for a colonial loan was then unknown. The agents, of whom I was one, were told that the price was not to bar the way. They found there was but one mode of doing it, and that was by the agency of the Inscribed Stock Act. We were able to effect the operation by giving option to subscribers to exchange their scrip or debentures tor inscribed stock at about 80, bearing 4 per cent interest, equal to borrowing the money at 5 per cent, th 11 i_ _ *1 1 . • A

Even then we had to give an assurance that the colony would not borrow further for three years. That three years interval, not,the Government, was the secret of the rise, together with the fact that all colonial stocks rose as' the probability of an early conversion of consols became apparent. Again, Sir, part of the rise was due to the popularity of the

inscribed stock, as may be seen by its comparative value, to which I have already alluded. It may sooth the ruffled vanity of my hon. friend if I add a few words. When I took office a few weeks since a remarkable change in New Zealand securities took place. On the day the news reached London my friends were good enough to ascribe that rise to me. It was merely a coincidence. I had nothing to do with the rise. It was due

to M. Childer’s operations for converting consols. All colonial securities rose. The stock exchange and money market are, I believe, quite indifferent as to whom Parliament honors with the charge of its finances. They rely on the fittest being from time to time selected. INTEREST ON RAILWAYS DURING CONSTRUCTION. There is another relief which, if it were

necessary, the colony -would be fully entitled to take to ease itself of burdensome taxation. I allude to making interest during the construction of railways part of tiie capital cost. Had I deemed such relief necessary I should not have hesitated to propose it. I know my not doing so will be a disappointment to my hon, friend, the member for Egmont, who from remarks he made at Hawera, had arrived at the conclusion that I meant to come down with such a proposal, and fortified himself with a case against it. It would be a pity he should be left like Don Quixote, to tilt at an imaginary foe ; so I will enable him to use the prints of

- —UJ his industry with regard to his carefullj arranged arguments; nor will this discussion be wholly without meaning, foi though Ido not intend to make proposals t in the direction indicated, it must be a comforting thought to the people of the colony, that far from straining at all methods of relief from a taxation, they have left one unused of which they would be fully entitled to take advantage, I contend that the real cost of a work is its cost during construction, with interest; so it would stand in the books of a private ' individual. So it should stand in the books of the Government. The only argument of any fore against it is that it might be considered in London, where we borrow our money, an improper proceeding ; but that idea is amply disposed of. A great effort was recently made at home to alter the standing orders of Parliament relating to private Bills to enable interest during construction to be added to capital cost. The effort was not successful, because of Lord Redesdale’s opposition, he being a time-honored authority on Private Bills ; but numbers of men of high position and weight pronounced in favor of the charge ; and I am under the impression, though I do not say positively, that the alteration was approved in the House of Commons. But the alteration was not really of much consequence, because the same result is commonly brought about by arranging with the contractors to pay to the shareholders interest during construction. Such a course does not prevent

Honorable members who have followed the remarks I have just made about the loan will see that the new loan is only partly for the current year. It is chiefly for expenditure after the end of the financial year ; and if they wish to avoid future fiascos they must not spend one year and borrow the next, but borrow as the expenditure has to be met. But it is important, in view of the operations to which I have referred as now pending in the London market, and the further operations that wilt be necessary in the direction of conversion, that we should as much as possible limit our borrowing just now. We may perhaps, as I have already said, liberate a large amount of Sinking Fund, which will be available for the votes of the House. It is not feasible, however, to fix a time for this result. Conversion will have to be effected to suit the market, and the time it will take can-

not be accurately fixed. As regards further borrowing, we must in a great measure be guided by the increase in our powers of meeting our annual charges. Depend upon it we have the right to look each year for large material increases in the revenue. I present to the committee an interesting table showing the revenue eacli third year over a period of twelve years, Ido not pretend that it accurately presents the natural increase, because

there have been changes in rates and modes of raising the revenue ; but on the whole it gives a good idea that there is a great material increase, and on which reliance may be placed, if imports are not made to dwarf 'he material progress of the colony. Without unduly forestalling communications, my colleague will make'in his Public Works Statement, I must call the attention of hon. members to some points

capital being subscribed. I can remember quite recently the case of an English railway in which the plan was adopted, and in which the capital was written for many times over; but the arguments in favor of a Govemmenc adopting the course with works which are a great heritage to posterity are ten times stronger. Our successors will think our doing otherwise quixotic. “ Why,” they will say “ did our predecessors unnecessarily contract their producing powers by uncalled-for taxation. The annual burden of adding the interest, to the cost during construction would have been a mere trifle ” Let me take a case. Let me suppose a railway constructed in three years at a cost of a million of money, bearing interest at 4 per cent. The average interest during construction would be one-half the amount, and the total would equal for three years £60,000. This, added to the million when the work was completed, would give an annual charge of £42,400 instead of £40,000. What would such an addition matter ? But the saving during construction of £20,000 a year would matter greatly to the taxpayers. LOCAL INDUSTRIES. I must ask the Committee to allow me to make a diversion to another subject—that of local industries. The hon. member for Hawke’s Bay (Captain Russell) the other day made a happy remark, to the effect that this House should consider it ossessed more the character of a Board of Works than of an Imperial Parliament. The efforts we make to promote the resources of the colony are likely to bear better fruit than those we devote to testing recondite social or political experiments. It is of paramount importance that full play should be given to the industries suited to the capacity of the colony. It is a mistake to suppose that the Customs are the only vehicle by which resources are to be stimulated. We want to produce, not only for ourselves, but for export. When Canada many years since was cut out of the American markets by the fiscal policy of the United States, the Imperial Government placed one of her Majesty’s vessels at the command of the Canadian delegates, so that they might search for other markets in other countries. A few weeks since my old chief and friend, Sir William Fox, just as he was embarking from Queensland for England, wrote me in that felicitous language which comes so naturally to his brilliant pen, that he was convinced that New Zealand should make a great effort to seek out markets for its produce in the Islands of the South Seas and India. I believe with him that a great export trade is one of the objects we should keep in view. Let us see some of the obvious products

we have to send away. The frozen meat industry is in its very infancy, and though now we only send it to England, do we not know that to India and to the Islands teeming with population in the Indian Ocean and the Arafura Sea New Zealand mutton would be an infinite luxury; but King Sheep does not stop at providing food. Since I have been in New Zealand I have been struck with the singular beauty of the woollen fabrics. Do not tell me the price of labor forbids it. Would America be what it is if the hi<*h price of labor had not stimulated the intellect of the people to discover laborsaving machinery. I met an eminent engineer a short while back who told me he could do work cheaper on the Pacific Slope, with wages at 10s a day, than in

t -I . r o — ~~~ ~ wxaopix in India -with wages at about the same price a month. Besides, the high price of labor brings to us the possibility of one means of progress—co-operation. Co-operative woollen factories open out a great prospect of enormous work here. Labor which adds to comparatively small wages a share in the profits will give good service. There are other obvious industries

' -tuere are otner oovious industries that i will come to the front, wliile tropical I growths such as fruit, silk, tobacco, and > other allied products, must take firm and [ profitable root in this island. In the fisheries of the colony great wealth re- ! mains to be gathered. Ido not refer to ; mineral resources. For these we nnrnn« Q

ixuuciai icouuiwo. ui i/iujae we purpose to make the subject of the special attention of a minister, but we also propose that other industries should receive the closest attention. Government at little expense may do much in the way of lending prestige to its country’s products. To give us a knowledge of what producers and manufacturers can do, and the extent of improvements they make, we propose that an industrial exhibition shall be held every one or two years, and that two gold medals, besides others of less value, shall hfi flfivfin f.o who fin nmcf f/i

oe given to tnose wno ao most to develop tlie industries of the country by combining excellence with economy. We propose that the first exhibition shall be held at Wellington next year when Parliament is sitting, and that it shall be followed by

exhibitions in other large centres alternately in each Island. But there is an industry from which I believe great results will spring, and that may be assisted indirectly by the customs. I allude to sugar from beet, and possibly from sorghum.

The production of beet sugar is now so perfected that it is made economically all over Europe, even without artificial restrictions. Civilization conquers in the end. The products of cultured labor will excel those of the savage and the slave ; but this manufacture wants a stimulus by assuring it some advantage in the shape of freedom from excise duties for a term of years. This assurance is not

much to give. None of the colonies favor heavy excise duty; few have any at all | worthy of mention. The wine in Victoria ' and New South Wales, and sugar in (

Queensland, are notable examples. Sugar has done as much for Queensland as its vast sheep and cattle lands. We propose to pass an Act declaring that sugar produced in the colony shall be exempt from excise duty for a term of years, and the present import duty shall not be re-. duced. It may also be necessary to give a bonus for the first few hundred tons made in the colony. PROPOSALS FOR TH i YEAR. Let me now gather the thread of my remarks. We have seen that if we make no change we have a deficiency of L52,G52 ; but if we are content not to reduce our debt this year we may recover an expenditure of L 244.000, leaving as a surplus L 191,348. But that there is an understanding not to press the question this session, I should recommend a rate (not a large one) to meet the cost of charitable relief and hospitals, together with a few additions to the stamp duties, and the total abolition of the Property Tax, with its crushing effects upon the progress of the colony. As it is, we propose to reduce the Property Tax ono-half, namely—to three-eighths of a penny. Eliminating the baldness of last year, the reduction of one-half will amount to L 131,000. When we deduct this remission from the surplus of L 19.348, which I have just stated, we shall have a surplus of L 60,348 at the end of the financial year, which may be reduced by supplementary estimates. PUBLIC WORKS. I now come to the question of Public Works Funds. I shall attempt to deal with it without forestalling my colleague, the Minister for Public Works. It is my task to find the money, his to spend it. I have already stated that we shall want LIOO,OOO additional aid this month, and additional aid each succeeding month until the third million of the 1882 loan is raised. My predecessor had made arrangements for the disposal of another LIOO,OOO of deficiency bills, for authority to issue which he proposed to ask the House. I am happy to say I shall not require to trouble the House to give this additional authority. I have made arrangements to obtain half-a-million in anticipation of the million loan next next year, to be supplied to, us as we want it. Whntpossiblegood can there be in coming to the House for driblets of LIOO,OOO when we know the existing liabilities require five times as much for their satisfaction. Besides, legislation is unnecessary. About L 600,000 of the three million loan will have been spent on open railways ; about L 50,000 will have been consumed on the charges of raising the loan. In short, there will be little if any of the third million left when it is raised. I will refrain from exciting the susceptibilities of my honorable friend opposite by commenting on the deplorable manner in which his three million loan scheme has broken down. We cannot afford to leave the roads' unmade, the Native land purchases uncompleted, the goldfields neglected, the fragments of railways scattered over the country to rot away. We must borrow more, and the question is—What shall the amount be ? The gentlemen who have done me the honor to think, or rather, I should say, to pretend to think, that my only policy is borrowing, have circulated reports that I intended to propose ten or fifteen millions. Indeed, one gentlemen went so high as twenty five millions ; but then he dwells in a lake and hilly district, where amongst the wonders of nature the imaginative faculty is said to be abnormally developed. This, sir, is, I believe, the plank on which my hon. friends and well wishers opposite propose to return to office. When they have heard what I have to state I fear, like Edgar Poe’s “Raven,” they will be inclined to murmur “Nevermore.” We shall ask authority to raise an additional million and a half, out of which we shall replace the amount abstracted from the three million loan.

which have acquired peculiar interest on account of the reference made to them in the speech from the throne. It is absolutely necessary that members should be reasonable in their demands for the prosecutionof railways. In the interest of I will not say of economy only, but of produce and common sense—railway works must be earned on with some regard to obtaining early returns as the work progresses. how say a few words concernin'* the railways specially mentioned in the Royal Speech. We still adhere to the opinion that the North Island Trunk Railway is of supreme importance, and must be proceeded with as rapidly as possible. In connection with it we also recognise the necessity of obtaining large blocks of land along the subjects of special settlements. We still regard some of the lines as exceptional importance. Amongst them I may mention the Otago Central, and the short piece that will place the Napier line in connection with the line from Wellington northwards We shall introduce a bin to authorise the Government to enter into an agreement with a company or syndicate for the construction of the line between the East and West coasts of the Middle Island. We shall make provision in the bill for authority to enter into an agreement on the same conditions with the same or another syndicate or company for the extension of the line from Nelson to connect with some points of the through East and West line, thus giving Nelson communication with both coasts. The conditions we shall propose will not be onerous, but they will be sufficiently favorable to enable, in our opinion, the contractors to procure the necessary capital. In these and other future arrangements with pnvate persons for the construction of railways, we shall keep in view that it i l3 /® slra, W 0 all lines in the country should be worked by .the Government,

SUBJECTS INDIRECTLY BEARING ON FINANCE.

There are several subjects indirectly bearing on finance about which I mi<dit have much to say, only that I have already greatly trespassed on the indulgence of the Committee. I must, however, make a leference to the subject of local governraent. The Colonial Government and Parliament may do a great deal to push the colony forward, but all their efforts wdl be inco oplete if they are not seconded hy the self-governing instincts and abilities ot the separate localities. In order that local government should be efficient it must possess considerable freedom of action, a defined revenue or means of raising revenue, and inducements to exercise economy. Railways do not dispense with the necessity of roads and bridges to open up the country. On the contrary, their own success depends on the energy with which the arteries to feed them are made available to their use. There is more need than ever for opening up lands for promoting settlement, and for constructing means of communication in the shape of roads and bridges; for these works the country must chiefly depend on local efforts. Government may assist, a £ d 7 i, n ifc does assist > lt should assist eflectually. In connection with the railways, we have in view special settlements within which a great number of families should be grouped. We want to see a lanm population located on the lands of the colony, enjoying its free institutions, and not in dread of the security of property invaded. The present system of local Government falls short of what the interests of the country require. We have determined to appoint during the recess a royal commission to inquire into and report on the whole subject, vv e no {. consider the results of the investigation our private property. They shall belong to Parliament and to whatever Govern* ment is in office. Upon them we hope that next session legislation will be framed which will vastly improve the present system of local Government, Under a reinstated finance and diminished expenditure the country will, we are convinced rouse itself from apathy and spring forward with leaps and bounds in progress. It is a mistake to suppose that borrowed money is the cause instead of t.ho

„ ui tue consequenco of prosperity. Long before the borrowed money was being spent in any quantity after the policy of 1870 was proposed, the colony was replete with progress. With common prudence we need have no more financial embarrassments or vexatious taxation; we may banish from our minds the philanthropic notion of insurance against pauperism, which might more correctly be ter me d insurance of pauperism. We must make our railways, as we are able to do so, without un-

due pressure; we must look forward to the time when the colonists will no burner dread additions to the population in the shape of suitable immigration. The North Island Trunk Railway must be pushed on with every possible expedition. It will open to the colony a new world. It will be as though it was increasing by onethird its territory. Let us encourage the progress of industries, whether they be agricultural universal, pastoral, or manufacturing Still one thing remains—the system ot local government must be improved The edifice cannot be crowned without we have a satisfactory system of local self-government institutions. My task is concluded. I wish I could have discharged it with more force and ahihly , still, I shall not Wo £ vain if I have succeeded in impressing honorable members with my own stronf conviction that the finances of New land are not in a condition of difficulty • that they are suffering only from mis’