THE FINANCIAL STATEMENT.

Kumara Times, Issue 2987, 31 May 1886, Page 1 (Supplement)

THE FINANCIAL STATEMENT.

In Committee of Supply, 25th May, 1886, by the Colonial Treasurer. The Hon. Sir Julius Vogel said : Mr Hamlin—lt will be my endeavor this evening to occupy the attention of the Committee as briefly as is consistent with the important duty I have to perform. I venture to ask from hon. members the consideration which on nine previous occasions, for this is my tenth budget, they have been kind enough to give me. . REVENUE AND EXPENDITURE OP 1885-86. The last financial year commenced with a surplus of L 19,891, and it closed with a surplus of L 37,859. The result has already been shown in the published receipts and expenditure, a table of which will be appended to the statement I am now making. It is arrived at thus—simply the balance of cash and of advances in the hands of officers at the end of the year, L 112,859, and there were L 75,000 of deficiency bills outstanding. Deducting one from the other, you have the surplus I have mentioned. When I made the supplementary statement last year the surplus estimated was L 19,000, but increased supplementary votes and an over estimate of L 58,000 of the accretions of the Sinking Fund, dissipated the surplus and left, according to the estimate of expenditure and revenue, a deficiency of L 62. The estimated revenue has proved less than was anticipated by L 1954, and the expenditure less by L 39,875. Deducting the L 62 and the L 1954 from the saved expenditure, you have the same result of a surplus of L 37.859. It is always well to prove figures by arriving at them in two ways. The double view I have given you shows the actual results, and also those results compared with the estimate formed of them last year. The. principal reduction on .the estimated expenditure was in the item of subsidies for local bodies. A great deal of it, however, will come in for payment during the present year. There was a saving in defence expenditure of L 16,446, and various reductions in other departments bring the total savings up to L 100,240; but on the other hand there were excess of expenditure amounting in all to L 60,365. The principal items contributing to this amount were—lnterest and Sinking Fund, under-estimated, L 21,473 j charitable aid, L 13,984; printing and stationery, L 1662 ; property tax, on account of triennial valuation, L 2545 ; postal and telegraph, L 2278 for repairs ; and L 4742 for bonuses earned by mail steamers in excess of estimate ; and services not provided for, L 9235. The revenue, as I have said, falls short of the estimate by L 1954. The customs duties were L 15,176 short; the stamps, L 489 1; the railways, L 5695 ; the marine, L 1876 ; and the depasturing licenses, L 13,166. On the other hand there was an excess on the item registration fees of LI6OO, and L 37,819 on the item miscellaneous. Of the latter increase L25,G00 is due to Sinking Fund released under the ••Public Debts Sinking Fund Act, 1868" ; on account of excessive accumulation; and L 19,000 to interest received on public money. The total amount of revenue under the estimate is L 41,539, and over the estimate L 39,585. The difference between the two gives the net under estimate of revenue, L 1954, to which reference has before been made. I have explained the transactions of the year on the ordinary revenue and expenditure accounts as much at length as the Committee will desire.. There is one circumstance I should mention, and that is that of the debentures created for the accretions of the Sinking Fund, L 106.900 were paid off out of the receipts from converted bonds of the 1867 loan drawn for payment. This amount was in addition to L 72,400 paid off on account of the drawing in 1885. I have to give an explicit denial to the statement that liabilities were unusually held over to swell the surplus. The liabilities at the close of the year are not more than ordinarily is the case, whilst the advances have been more closely brought to charge than in previous years. LAND FUND. The Land Fund account had a balance at tha commencement of the year of L 39,141, and at the end of the year there was a deficit of L 20,384. This evidently unsatisfactory result is but the consummation of a series of diminished receipts, not compensated sufficiently by reduced expenditure. Naturally I have felt myself called on to make a close analysis of the fund. I find that besides the crown lands departmentmental and survey expenditure charged in the Land Fund, there is debited to it the amounts paid for crown and native land rates. Increase of these rates and delays in the receipt of amounts falling due under the deferred payment system have decreased the revenue of and increased the charges in the Land Fund. It was from this fund that the Roads and Bridges Construction Act was to be supplied with means, and it seems to me the act fell through when all chance of money being available for its purposes from the Land Fund ceased to be possible. The item of natives rates charged to the fund is a very disturbing one. These payments are made on account of native owners, and are recoverable as the land is sold. To make them a charge on the current revenue is neither in spirit nor letter consistent with the principles to which effect is designed to be given. The best remedy I can propose is that' the total amount of these payments shall be treated as advances from the Public Works Fund, reduceable by receipts from time to time recovered from the Natives, and that item, that may fairly be recovered, is the cost of survey and expenses attending the Bale of land put apart for the Little River and Akaroa railway. Undoubtedly {it never was contemplated that the proceeds of the reserves should be freed from the ordinary payments of surreys and the expenses of disposing the land. PUBLIC WORKS FUND, 1885-86.

There have not been any new loans negotiated since the House was last in session, but an instalment of the third million of the three million loan, and the proceeds of the million and a-half loan, have passed to credit of the fund since the end of the financial year of 1884-85. In-cludinerthe-balance at. the.end of that.

was L 128,786 ; this and the other two amounts mentioned," froin which shillings and pence have been eliminated, deducted from the total will leave a balance to credit at the end of March last of L 768,780, which includes advances in the hands of imprestees. As pointed out on a previous occasion, there is always, because of these advances, less money really available for expenditure than appears from the gross balance. The obligations which remain to be fulfilled make it necessary that the means should be promptly provided. At present the only other means existent is the North Island Trunk Railway loan. The law Tunwisely, as I think, allows this loan to be used for any purpose authorised by Parliament to be provided for out of the Public Works Fund. Thus, if the loan were negotiated and the proceeds would be available for defraying the expenditure authorised by the usual Imprest Acts, the Government have been desirous to avoid enabling the money to be diverted from the purpose for which it was unquestionably intended. At some risk, therefoie, I have avoided negotiating it. The early meeting of Parliament will enable a decision to be more promptly arrived at regarding a new loan. I should like to send Home the necessary authorities for raising such loan in time to enable them to be used at an early date. The nominal effect only which is given to the purposes for which money is borrowed is mischievous to the colony and unfair to the lenders. To Bhow the extent of the diversion, I may mention that there were certain purposes set forth in the schedule to the Three Million Loan Act. That loan has been expended, besides which there Hve been raised two loans, one for a quarter of a million, the other for a million and a-half. Deducting the balance on the 31st March last, there was at that time about four millions of borrowed money expended since the authorisation of the three million loan. Nevertheless there then remained unexpended on the objects provided by the schedule to the Three Million Loan Act, no less a sum than L 673,000. The Government think that the proceeds of future loans and the loan for the North Island trunk railway should be tied down for the purpose for which they are borrowed, and provision to give effect to this restriction will be proposed to the Assembly. At present the moneys borrowed are free to be voted as Parliament decides. It is quite clear that any provision which the Legislature makes may be varied by fresh legislation, but express repeal may be made necessary, and if that be done the money could not be voted for other purposes without freeing it first by special legislation from its existing obligation. Members will recognise the wide difference between borrowed money being available for any vote which may be passed and the necessity before it can be so available of first deliberately decreeing that the funds shall not be applied to the objects for whioh they were borrowed., For sake of convenience I have gone into this point at the present stage : later on I will submit to the committee the nature and extent of the fresh loan for which the Government will ask authority. Hon. members will understand that it is proposed to tie down the money to the purpose mentioned in the Loan Act; this will not, however, deprive Parliament of the power of controlling its expenditure ; it will be placed to a separate fund and be usable only for its designed objects, but within those objects it will be competent to Parliament to decide the amount to be expended each year. THE PUBLIC DEBT AND LOAN CONVERSION The amount of the public debt on the 31st March was as nearly as can be estimated without any exact analysis of the late conversions £34,965,222. The amount of the accrued Sinking Fund was .£3,276,873 and the net debt was therefore £31,688,349. It is to be remembered that the tendency of the conversions which have been going on so largely is to increase the nominal amount of the debt, but to decrease the amount charged. The conversions of bonds liable to be drawn for payment introduces the complication that whilst those bonds are otherwise dead they are liable to interest. For the purpose of augmenting the yearly drawing _ fund, any bonds the Government hold which are drawn for payment are presented to the crown agents and the money received is employed in paying off the debentures created here under "the Consolidated Stock Act 1884." Thus of the debentures created we have paid off £72,400 on account of the year 1884-85, and £106,900 at the end of the last financial year. These amounts fairly represent the reduction of I annual charges consequent on the conversion so far as it relates to the Sinking Fund. As interest is debited to the permanent charges, the drawn bonds may be fully credited to them. To show the I net \ result—conversion operations have I proceeded on a large, scale. Since the meeting of Parliament bonds to the amount of £10,053,600, for which terms of conversion were offered, £4,137,700 have been brought in. A description of the operations appears in a table which will be presented to hon. members with this statement. The Agen; has cabled to me the actuarial estimate of the results as follows :—Firstly, augmentation of debt, £164,381 ; secondly, the annual reduction of charges for the first six years, £42,229, and afterwards an annual reduction of £46,842; thirdly, Jtotal reduction of charges, .£620,179. The results, are I think, very gratifying. "We are rapidly bringing out securities into carrying a lower rate of interest. Soon there will be no part of the debt bearing interest at more than 4 per cent, and the grateful task will fall on a future Treasurer, I venture to predict, of converting the 4 per cents into 3 or 3i per cents. It is again my pleasant duty to express the Government's recognition of the ability and untiring zeal with which the loan agents have conducted the loan conversions, and all other operations of which they have had charge. The settlement of . the details of the several conversions required the most anxious consideration and the keenest judgment. THE DEFICIT OF 1883-84. The House last session did not appear to have any desire to see the deficit of 1883-84 speedily extinguished out of current revenue._^iewmeLJJbja_JKesen^

They can be taken up and extinguished as circumstances justify such a course. FINANCE OF LOCAL BODIES. It is essentially necessary that I should explain to the Committee the views of the Government on the finance of local bodies. The subject is most difficult to deal with, for two reasons : firstly, there exists a wide difference of circumstances and conditions in the country districts of the colony; secondly, besides the preference consequent on the difference of conditions, usage and custom have intensified feelings in favor of this or that plan of finance. A solution of the matter that would satisfy all local bodies is, therefore, very difficult of attainment. In anticipation of the repeal of the Roads and Bridges Construction Act, we proposed last year a plan of finance based on fixed annual subsidies extending over a long period of years. When the increase of customs duties was refused the Government signified at once that they would withdraw the proposal to fix the subsidies for a term of years, and they merely sought for the subsidy for the year at the rate of one-half the amounts indicated by the schedules to the bill. This plan received the assent of Parliament, and the Roads and Bridges Construction Act was repealed. Provision was made for redeeming the liabilities continuing under this act, and as these were very large it was not immediately necessary to make further provision for local works j but the Government were not unaware that a substitute for the repealed act required to be found. I wish to touch on controversial points as little as possible, but it is clear that as the surplus of the Land Fund (on which the conception of the Act was based) had ceased to exist, the Act must have ceased to remain inoperative, unless, as was the case, it became merely a borrowing act. The principal points of the Act were— (1.) A division of local works into "main" and "district." (2.) The borrowing by the colony to enable both works to be carried on, that borrowing being part of the railway loan. (3.) The supervision of the Public Works Department over the Natives, and the carrying out of their works. (4.) The approval of the main roads by Parliament. (5 ) The charging of the local bodies one quarter only of the cost of main roads, and lending them that quarter. (6.) The lending to local bodies the full amounts for district works by terminable annuities of nine per cent, for 15 years. The present Government approve of none of these points. They doubt the necessity or expediency of drawing so broad a line between main and district works. They think it unwise to provide funds for local bodies out of loans raised for colonial purposes. They disapprove of the responsibility cast on the Public Works Department, or of requiring Parliament to determine the main roads. They do not see sufficient reason for applying to the two classes of works different plans of obtaining money ; they think a system of finance of a more liberal character should be accorded to the local bodies. Shortly, their proposal is that on the ratepayers shall depend the responsibility of determining and accepting or of refusing works, and that when the ratepayers approve, money should be provided to the local bodies on very liberal terms. These terms are a payment of 5 per cent per annum for twenty-six years, secured on special rates, the. colony to be responsible for the payment of the principal sum, and to meet it by setting aside yearly a sinking fund of 2 per cent to redeem the debenture at maturity. I need not now enter into details nor explain how in the measure, the 2 per cent will be reduced by a part of the interest being available. Even were it not so, the Government hold that it will be advantageous to the colony to contribute L2OOO yearly for every LIOO,OOO expended on local works, with the guarantee for their usefulness afforded by the willingness of the ratepayers to pay for a term of years the interest on their cost. Nor need I now explain why the machinery designed will free the proposed sinking fund from the evil inherent to the system of payment. I may, however, observe that it is proposed that Parliament should determine from year to year the limits of the amount to be available to the local bodies; but that in the absence of any other provision the amount will stand authorised at not exceeding L 200,000 annually. It is intended that these loans "shall only be for country districts, and that the storage of water for irrigating and mining purposes shall be amongst the objects that local bodies may carry out. I have just explained to you the substitute for the Roads and Bridges Construction Act. It will involve in the course of time a considerable charge on the consolidated revenue, but the charge will be well repaid in kind by the increased value of property throughout the colony. It is evident, however, that with this prospective charge the Government cannot recommend the subsidies proposed last year, which, in a large part, were meant to provide a substitute for the repealed Act; but they are reluctant to do away with the subsidies altogether. It was in a measure on the strength of them that the Charitable Aid Act was passed. With regard to that Act, I must interpolate a few words. The object of the Act was not so much to save the colonial government from expenditure as to relieve it from duties it could ill discharge, and to cast them on the local bodies and private individuals who were well able to fulfil them. The Act has answered on the whole. The management of all the institutions will be improved, whilst a great many have attained to the highest condition of development in the shape of separate incorporation. The feature least satisfactory is the disposition to raise special rates instead of leaning on voluntary donations. Reluctantly the Government yielded to the pressure exerted to give the same amount of subsidy on account of money raised by rates as on account of voluntary donations. They will propose now to slightly increase the subsidy on voluntary donations to arrest tne tendency to which I have referred of raising by special votes the money required to return now to the subsidies. The Government proposo to limit the annual sum to L 150,000, of which half

only three-quarters to be payable within the financial year, and the fourth quarter during the three following months. LOANS 10 FARMERS ON MORTGAGE. The Government have *iot overlooked the report of the Select Committee last year on the subject of reducing the rates of interest farmers have to pay for loans on mortgage. Interesting information relating to the censure of the procedure in some European countries will be presented to Parliament. I regret to say I am not able to make proposals on the subject. If the Government were to enter the field as a lender of money, it must obtain that money somewhere in European countries. Where Governments do this sort of business there is a sufficient market for tha securities that provide the money ; but in the colony there is not at present—though I do not think that it will long be so— any sale for 4 per cent, securities at even large discounts, and 5 por cent, bonds hardly command par in small quantities, whilst considerable quantities could not be placed to lend. By giving to the borrower debentures which ho would have to sell at a discount, would mean to give him less money than the loan purports. Take an example. Suppose that a person on a property worth L2OOO borrowed LISOO, and that he is paid by debentures current in the colony only. I take debentures of this kind, because if they are negotiable in Great Britain they would come under remarks I shall presently make. I need only now say parenthetically that if payment were made in English debentures it would be better in every way that the Government should negotiate them in bulk and pay in money. To return to local debentures: supposing they bore 5 per cent, interest and were current for 15 years, as proposed by the Select Committee, I am sure they would not realise as much as L9O per LIOO, and that they would be only saleable in small parcels ; whilst if they bore 5 per cent, interest they would not realise much if anything over L 95 per LIOO. A longer currency might make the 5 per cents, more valuable, but it would make the 4 per cents, less so. Now, if we paid the farmer the money he borrows in debentures he would have to sell them at the discounts I first mentioned, and besides that he would be paying the same interest on the smaller sum he received as would be payable on the nominal amount of the debentures. He would have at the end of the five or seven years for which he borrowed to make up the discount. Say that he borrowed for five years and sold the debentures for L 95, he would be paying L 5 interest for each L 95, and at the end of five years have to make up the L 5 deficiency, equal in all to over 6 per cent. Even at these rates much could not be done, because there is no large local market for securities at present; but there are some who say you can make these debentures worth par by legislation. You can insist on their being in the shape of bank notes and legal tender for the amount they represent. It is quite true that you can by legislation decree that a pound written on a piece of paper is to mean a pound for all purposes of payment within the colony. You can declare that as such it will be receivable as revenue, and that for future debts contracted within the colonies shall be deemed the mode of payment; but those persons who sell goods or lend money may make their own bargains and add whatever margins they please. What they ask a pound fqr_in gold they can demand thirty shillings for in paper. The Government revenue, unless it increased, would enormously suffer ; but no legislation could compel anyone to give a golden sovereign for a paper pound. Therefore it is that legialation can no more make a paper pound that is not redeemable in gold on demand worth a golden pound than it could make one hvndred pounds of sugar weigh one hundrei and twelve. The law might make the term hundredweight to represent lOOOlbs. instead of 1121b5., but the value of one hundredweight would be proportionally reduced. There remains the j alternative I have already mentioned of the Government borrowing money in England, and lending it out here. This would be quite possible if it were deemed expedient, and recognised as a legitimate function of the State. I was once inclined to see it tried, but I am compelled to say that I do not consider it would be desirable at present. It would overstrain the colony's credit. It might be said, and with justice, that the colony was entering into a well understood business in competing with numerous other parties, and that it must pay for the money it wanted for such purposes more than for ordinary Government requirements. The time will come—in my opinion it is not far distant—when colonial loans will be in such demand that the present rate of interest will be lower, and larger amounts be obtainable ; but there will simultaneously be a reduction in interest on, and larger demand for, mortgage investments. During the last twenty years the rate of interest in England on Colonial Government securities have fallen from G to 4 per cent., but there has been a far greater fall in the rate of interest payable in New Zealand for loans on mortgage within the last two years. Only there has been a fall all round in the rate of such interest of about 2 per cent., and that fall is continuing. Doubtless it may not be felt so much by borrowers rjf small amounts, and were the Governro'ent to do anything they should confine 'their operations to small loans ; but eve T a then they are not likely to be able s'afely to much improve on what private, competition will be able to do; and their entry into the field would driv^ away private competition to an 'chat might ultimately prove more injurious to borrowers than would be repaired by any temporary advantage they gained. The stand the Government no w tpJke is that at present the colony's cvedit would suffer by their entering into the business, and they are hopeful that private enterprise will give such relief. \ 0 the small farmers as will render Governr/ Je nt interference unnecessary. They recognise, however, that the subject shou.'id be watched, and further consideration given to it. ESTIMATED EXPENDITURE, 1886-87. The estimated expenditure during the present financial year amounts to L 4,070,208, which is L 49,155 in excess

been already explained. The third is consequent upon the larger mileage being worked. The purchased district railways now appear in the estimates on both sides. The increase in expenditure is compensated by the larger revenue expected. The net profit on railways is estimated at L 38,471 in excess of last year. When the increases, which I have explained on the three items are deducted, the balance of the estimates show a less total of anticipated expenditure during the year than the actual one of last year of L 38,540. 1 wish emphatically to state that Government have reviewed the estimates carefully and reduced expenditure wherever they considered it could be done with advantage to the public service. I do not mean to say that a less expenditure could not be adopted. There are dozens of branches of the public service in the way of post offices, mail contracts, schools, telegraph offices, Resident Magistrates' courts, offices for registration of various kinds, the volunteer and defence (which is an insurance against disasters in case of war), and other items which the public have grown used to, and the supply of which greatly encourages settlement far from the large towns. The people will have these conveniences, and very properly too ; and if Parliament were to excise them extra expenditure would be the consequence, for they would be demanded back again ; and in the meanwhile there would be heavy payments for oompensation. There have been the usual additions to salaries under Ll2O. The proposed increases of salaries above that amount are very few. Each case of the kind has been most carefully considered by the Government, and they are prepared with the necessary explanations. I entreat hon. members not to do old and tried officers the injustice of coming to a decision before hearing the reason for each ot the few increases submitted. I confidently ask all the gentlemen who within the last few years have held office to look into the additions and say if they consider them undeserved. As I have stated, there are very few real increases. Some of those seeming ones are consequent on the removal of officers from one part of the country to another, and others are merely due to the promotion of officers to fill the place of those retiring from the service. In these instances we invariably endeavor to refrain from bringing in new officers. We save part of the money, give other officers promotion, and end with the appointment of a cadet. Thus, although the operation is slow, the officers rise, and the expenditure is kept down. No Government could be more anxious to reduce expenditure when t they see it can safely be done. Whenever there is an opportunity of amalgamating offices we are glad to seize it, and no effort has been or shall be wanting on our part to take advantage of it. This process is also slow, but on it depends the best hope of reduced expenditure. I will now refer to some of the departments separately. The Colonial Secretary's shows a large reduction, but it is chiefly occasioned by the charitable aid vote being transferred to the charge of the permanent account. The geological branch has also been transferred to the Mining Department. The census occasions a large addition to the vote of the Registrar General's Department. The Treasury shows a less sum than last year. There Is a reduction in the amount of property tax, but the vote is still large, as considerable expenditure had to- be defrayed after the end of the financial year on account of the costly trienial valuation. The Industrial Exhibition will require LSOO, but the expenditure of last year's vote was considerably exceeded. The exhibition has cost LB6OO net, a much larger amount than, was anticipated. I attribute the chief increase of expenditure to- the pleasing fact that the exhibition had to be made more extensive than was expected, because of the liberal response made to the invitation for exhibits. Some of the additional cost is attributable to the exhibition being opened every night instead of three nights a week, as first intended. The Government consider the exhibition did most valuable service in the encouragement it gave to local industries, and the knowledge it imparted to those interested in them. It is proposed that the next exhibition shall take place in Dunedin or Christchurch about the end of 1887, in time to forward the exhibits, if it be so decided, to the Centennial Celebration Exhibition to be held in Sydney in 1888. The Government are of opinion that an International and Intercolonial Exhibition should be held in Auckland about 1890 to celebrate the opening of the through railway. The Colonial and Indian Exhibition absorbes a large vote. There are lew members who will not recognise that this colony should be adequately represented on an occasion so momentous to all her Majesty's dominions. New Zealand was called on to assert the strength of the recources in friendly competition wtfch other colonies. The post office shows a reduction chiefly occasioned by the noai-renewal of the LSOOQ for cable subsidy. The total amorrnt for salaries in the department is larger. Hon. members will not feel surprised at that when they remember that T aew post, telegraph, aud telephone offices are constantly being established which entail additional votes on the estimates. In most cases, especially with respect to telephones, the expenditure is more than covered by incresed revenue. Owing to new boilers being required for the Hinemoa, the customs estimates, which otherwise would show a reduction, are somewhat swelled. As regards the defence force expenditure, only charging L 15.500 to peunanent defence under the I Public Works Fund instead of L 20,000 I charged last year. Other branches of the f expenditure will be explained by the ministers in charge of them when occasion serves. I have reserved for the last reference to the expenditure on interest and sinking fund. The estimated amount required for these items is L 1,654,600, showing a reduction of L 34,846 on the sum actually expended last year. Besides that, the estimate includes some L 46.000 more than last year for interest on loans newly raised or to be raised. Hon. members hear a great deal about the saving effected by conversion,.apd Jdoubt-

other; also, the payment to the Bank of England for managing the loans; and 1 take no account of the debentures issued on behalf of the sinking fund accretions, as these are merely anticipations ; but I do take account of the receipts for drawn bonds, as these represent actual results. With this explanation, the table will, 1 think, be readily understood; and it shows, after deducting interest on new loans, that the permanent charges have been reduced each year as compared with 1883-84 as follows : In 1884-85, L 115,339; in 1885-86, L 143,161; and estimated in 1886-87 L 240,524, or for the three years at a total of L 499,024, which again, I say, is the saving as compared with the loan charges of 1883-84. I should explain that the figures do not give the exact savings within each year, as there is a liability when conversions take place of broken perioda of interest being carried forward to the following year from 1884-85. L 64,000 was thrown forward to the succeeding year from 1885-86, L 64,000 to the present year, and from this year about L 45,000 to the next year. This sum is L 45,000 fairly deductable from the total saving of the three years, which I have mentioned, and leaves a net saving of L 454,024. I now give in a tabular form the proposed expenditure for the year opposite the estimated and actual expenditure last year. I should perhaps explain that the actual expenditure does not include unauthorised expenditure. It has not been the custom. Why Ido not give the unauthorised expenditure in connection with a comparison of the next year's expenditure ; but though I do not state it in the table I have taken it into the account. In all the figures I have given, in which the expenditure of last year was concerned, its amount was L 9239. SUMMARY OF SERVICES CHARGEABLE ON THE COVSOLIDATED FUND, 1886-87. Permanent appropriations, civil list, L 29,750, voted ,1885-86, L 29.750 ; expended, L 28,070; interest and sinking fund 1886-87, LI, 645,500 ; voted 1885-86, L 1,667,873 ; expended, L 1,689,347. Under special acts of the Legislature, 86-67, L 231.054 ; total, L 1,915,304 ; voted, L 177,484 ; expended, L 146.109. Total voted, L 1,875,007 ; expended total, L 1,863,535 ; annual appropriations, 86-87, L 17,390 ; voted, 85-86, L 17,870 ; expended, L 17,551. Class 2.—Colonial Secretary, 86-87, L 155,725 ; voted, 85-86, L 221,797 ; expended, L 233,385„ Class 3.—-Colonial Treasurer, 86-87, L 48,054 ; voted, 85-86, L 58,912 ; expended, L 59,736. Class 4.—Minister of Justice, 86-87, L 117,194 ; voted, 85-86, L 117,763 ; expended, L 113,666. Class s.—Postmaster General and Commissioner of Telegraphs, 1886-87, L 273,717 ; voted, 85-86, L 280,133 ; expended, L 287,524. Class 6. —Commissioner of Customs, 1886-87, L 88,197 ; voted, 1885-86, L 88,434; expended, L 78,896. Class 7. —Commissioner of Stamps, 188687, L 30,506 ; voted, 1885-86, L 30,571 ; expended, L 28,212. Class B.—Minister of Education, 188687, L 382,914 ; voted, 1885-86, L 361,936 ; expended, L 357,896. Class 9. —Minister for Native Affairs, 86-87, L 20,104; voted 85-86, L 20.222 ; expenditure, L 22,243. Class 10.—Minister of Mines, 86-87, L 31,713; voted, 85-86, L 33.102; jexpended, L 22.730. Class 11. —Minister for Public Works, 1886-87, L 799,560; voted, 85-86, L 737,634; expended, L 726.576. Class 12—Minister of Defence, 86-87, L 19,030 ; total, L 2,154,984 ; voted, 85-86, L 177,552 ; total, L 2,145,946 ; expended, L 161,107; total, L 2,108,404. Total expenditure on ordinary revenue account, 1886-87, L 4,070,208; voted, 85-86, L 4,021,055; expended, L 3,971,939. LAND FUND, 1886-87. The expenditure for the current year is estimated at L 168,752. This includes the usual charges under special acts, such as the third of the sales of land on deferred payments, New Plymouth Harbor Board Endowment, and other charges, also, the Land and Survey Departments, and rates on Crown Lands. The revenue for the year from land sales is estimated at L 148,800. The recoveries, which I have already explained, it is proposed to make on account of Native rates, will leave the fund about balanced at the end of the year. FUTURE REVENUE. The customs revenue shows a deficiency on the estimates, as I have said, of L 15,175. The estimate last year was a low one, amounting to about L 19,000 only in excess of frhe actual receipts of the previous year. Hon. gentlemen will recollect that Parliament authorised last session a considerable increase in the duties chargeable on wines and spirits. Notwithstanding those increased duties, the whole customs revenue only exceeded the revenue of the previous year by L 3,723. Judging from the first month's returns, and from the continued operation of the chief causes that tend to reduce the customs receipts, I do not feel myself justified in estimating s© large a customs revenue as that of last year by about LSOOO. If there had been no exceptional increases to keep down the customs revenue, it should by natural increases* during the last few years yield more than L 1,500,000 per annum ; whereas I am unable to estimate at more than L 1,400,000 for the current year. The prevailing depression and lessened scale of expenditure have undoubtedly something to do with reduction, but there are other patent causes at work in the less use of alcoholic drink, and the fall in the value of goods of which ad valorem duties are levied. There are a large number of persons in the colony who aim at the total abolition of the use of wines and spirits. When asked what would be the effect on the revenue, they answer The Treasurer will easily find a substitute, as the people who Bave the enormous cost of the drinking bill are well ! able to make up the loss. It is manifestly ! unfair, when the Treasurer seeks to per-, | form this duty, to accuse him of increasing, I the .taxation, when.; in fact.he, is seekingj

•ably increased, last year on sj was a falling off of the reve tern of L 17,000. Somewhat marks may be applied to the duties. It is true the actu from these duties were LI; than the previous year, b value of imports subject duty was larger, but as goo< to fall in value the duty on * becomes reduced, besides the : its coat exclusive of its duty. you an example, and find tha ports during 1885 subject to ai duty of 15 per cent, had been c the values ruling in 1880, the would have been L 320,000 mo of 1885, and the duty at 15 per have been L 48,000 more. S importers and consumers in r< particular goods in question sa^ them in consequence of the L 320,000 in cost and L 48,00( But this is only the savi imports liable to 15 per cent saving on the whole imports o paring them with the value 1880, amounted to no less than Think of this vast sum saved a little extra duty on the ; would have been burdensom the vendors or consumers of nor would it have increased amount of duty paid on 1 separately. The same goods i as I have shown, L 48,000 le: would have been chargeable 1880. Each article therefor duty. I have made the com the 15 per cent duties witl the usual amount of 10 per invoice rates. Had I done s would have been even larger have shown. The Governmei for revenue purposes it is ri tain the customs duties. T have always been the princi the colonial reveue, and these a gross income concurrently crease of population and the of the people. The diminish tion of spirits and the dimir of goods both leave the peoplt to keep up the gross yield < and financially the Governm it unwise to allow this gre revenue to lose its elasticity. tion, however' last year of the increase the customs duties nature to induce the Governn submit similar proposals to suit, and with great regrc themselves debarred from whilst the peculiar circumstar vail make the burden of cu fall with comparative light population. The reduced vali is injuring to a disastrous production, and the employm Again, the owners of propei real or personal, are sufferi lower values of produce, an earning. The tax on farming falls therefore with exceptio on the taxpayers, the more es the House refused the mode tions upon machinery and agr provements proposed to it la reduction of the rate of prop a small increase of customs cl benefit every class and every the colony, for the commun: knit together, and the illogics of one kind of taxation and another must be felt by everyt not say that additional taxat: sary this year, for it is not. trary, I can do with less, and take off l-16th of a penny of t tax, making it 13-16ths this of This is equal to ai L 24,000, or over 7 per cent of tl yield, of the tax. I should h take off more, and I am con every way the colony would b< House were to sanction redut perty tax to f ths and substitn increase of duty on articles sugar and tea and such like ne life) that can well bear the t say I shall be told, as I was in the moderate reduction prop worth making, but the prop meant to be adjusted year by 3 revenue wants. Some people 1 that the reduction of an eig was no advantage, because the creased two-eighths in 1885. one side the fact that the i year was not a necessary con the decrease the previous yes point out that the taxpayers obtaining for a year the ui money. It was true the joint two years averaged three-fc penny each year ; but the sma] was sufficient for 1884-85, fo surplus at the end of the 3 larger tax last year was conseqi refusal !to increase the tariff. proposal then made been ac should, I think, have bee do with fths of a penny this 5 dening property when produce a mistake, as witness th of the financial authorities w the fiscal policy of Great B France. I may add that the re House to grant the exemptions chinery and agricultural im] strengthens the argument in : ducing the property tax at le present. ESTIMATED REVENtTE OF THE YEi The estimated revenue of th< the reduction of the property t have described is as follow nue estimated, 1886-87. C L 1,410,000 ; estimated 85-86, ] actual 1885-86, L 1,414,825. i eluding Post and Telegraph casl 1886-87, L 617,500; estimated L 611,900; ,actual, 1885-86,] Property tax. Estimated, L 312.000; estimated, 1885-86, actual, 1885-86, L 326.276. B Estimated, 1886-87, L 55,000; 1885-86, L 55,000; actual, L 55,165. Railways.—Estimate Ll,500,000; estimated, 1885-86,: actual, 1885-86, L 1,044,305. I and other fees. Estimated L 36,000; estimated, 1885-86 actual, 1885-86, L 35,600. Estimated, 1886-87, H 3.000 ; 1835-86, L 14,000; actual, 1885-? Miscellaneous. —Ebtimtd, ,1886 estimated,': 188\86,;£xIi3;S0ll

>ther two l shillings deducted >alance to 1 last of ices in the d out on a 3, because 3y really i appears bligations j it necespromptly oly other nd Trunk ely, as I i for any ant to be c Works Legotiated liable for orised by rernment bling the irpoae for ntended. i avoided seting of on to be ng a new [ome the mch loan ed at an dy which h money te colony how the mention et forth on Loan Jed, bescd two ion, the sdncting it, there lions of ice the n loan. I unexby the i Loan 73,000. j the e loan railway >ose for ovisloD will be Hpresent voted H;e clear Hislature Halation, Hsessary, could withHetween |Bor any necesfirst Hs shall which conat the to of the will the the its H will the the esti|Kf the H The was is ■I The ac ~ of as of ■■the a e *

They can be taken up and extinguished as circumstances justify such a course. FINANCE OF LOCAL BODIES. It is essentially necessary that I should explain to the Committee the views of the Government on the finance of local bodies. The subject is most difficult to deal with, for two reasons: firstly, there exists a wide difference of circumstances and conditions in the country districts of the colony; secondly, besides the preference consequent on the difference of conditions, usage and custom have intensified feelings in favor of this or that plan of finance. __ A solution of the matter that would satisfy all local bodies is, therefore, very difficult of attainment. In anticipation of the repeal of the Roads and Bridges Construction Act, we proposed last year a plan of finance based on fixed annual subsidies extending over a long period of years. "When the increase of customs duties was refused the Government signified at once that they would withdraw the proposal to fix the subsidies for a term of years, and they merely sought for the subsidy for the year at the rate of one-half the amounts indicated by the schedules to the bill. This plan received the assent of Parliament, and the Roads and Bridges Construction Act was repealed. Provision was made for redeeming the liabilities continuing under this act, and as these were very large it was not immediately necessary to make further provision for local works; but the Government were not unaware that a substitute for the repealed act required to be found. I wish to touch on controversial points as little as possible, but it is clear that as the surplus of the Land Fund (on which the conception of the Act was based) had ceased to exist, the Act must have ceased to remain inoperative, unless, as was the case, it became merely a borrowing act. The principal points of the Act were— (1.) A division of local works into "main" and "district." (2.) The borrowing by the colony to enable both works to be carried on, that borrowing being part of the railway loan. (3.) The supervision of the Public Works Department over the Natives, and the carrying out of their works. (4.) The approval of the main roads by Parliament. (5) The charging of the local bodies one quarter only of the cost of main roads, and lending them that quarter. (6.) The lending to local bodies the full amounts for district -works by j terminable annuities of nine per cent, for 15 years.

The present Government approve of none of these points. They doubt the necessity or expediency of drawing so broad a line between main and district works. They think it unwise to provide funds for local bodies out of loans raised for colonial purposes. They disapprove of the responsibility cast on the Public Works Department, or of requiring. Parliament to determine the main roads. They do not see sufficient reason for applying to the two classes of works different plans of obtaining money ; they think a system of finance of a more liberal character should be accorded to the local bodies. Shortly, their proposal is that on the ratepayers shall depend the responsibility of determining and accepting or of refusing works, and that when the ratepayers approve, money should be provided to the local bodies on very liberal terms. These terms are a payment of 5 per cent per annum for twenty-six years, secured on special rates, the. colony to be responsible for the payment of the principal sum, and to meet it by setting aside yearly a sinking fund of 2 per cent to redeem the debenture at maturity. I need not now enter into details nor explain how in the measure, the 2 per cent will be reduced by a part of the interest being available. Even were it not so, the Government hold that it will be advantageous to the colony to contribute L2OOO yearly for every LIOO,OOO expended on local works, with the guarantee for their usefulness afforded by the willingness of the ratepayers to pay for a term of years the interest on their cost. Nor need I now explain why the machinery designed will free the proposed sinking fund from the evil inherent to the system of payment. I may, however, observe that it is proposed that Parliament should determine from year to year the limits of the amount to be available to the local bodies ; but that in the absence of any other provision the amount will stand authorised at not exceeding L 200.000 annually. It is intended that these loans "shall only be for country districts, and that the storage of water for irrigating and mining purposes shall be amongst the objects that local bodies may carry out. I have just explained to you the substitute for the Roads and Bridges Construction Act. It will involve in the course of time a considerable charge on the consolidated revenue, but the charge will be well repaid in kind by the increased value of property throughout the colony. „It is evident, however, that with this prospective charge the Government cannot recommend the subsidies proposed last year, which, in a large part, were meant to provide a substitute for the repealed Act; but they are reluctant to do away with the subsidies altogether. It was in a measure on the strength of them that the Charitable Aid Act was passed. With regard to that Act, I must interpolate a few words. The object of the Act was not so much to save the colonial government from expenditure as to relieve it from duties it could ill discharge, and to cast them on the local bodies and private individuals who were well able to fulfil them. The Act has answered on the whole. The management of all the institutions will be improved, whilst a great many have attained to the highest condition of development in the shape of separate incorporation. The feature least satisfactory is the disposition to raise special rates instead of leaning on voluntary donations. Reluctantly the Government yielded to the pressure exerted to give the same amount of subsidy on account of money raised by rates as on account of voluntary donations. They will propose now to slightly increase the subsidy on voluntary donations to arrest t'ne tendency, to which I have referred of raising by special votes the money required to return now to the subsidies. The Government propose to limit the I annual.»nnvto.lilßQ.QOfl »* »i.ui.~i^mJ

only three-quarters to be payable within the financial year, and the fourth quarter | during the three following months. LOANS TO FARMERS ON MORTGAGE. The Government have *iot overlooked the report of the Select Committee last year on the subject of reducing the rates of interest farmers have to pay for loans on mortgage. Interesting information relating to the censure of the procedure in some European countries will be presented to Parliament. I regret to say I am not able to make proposals on the subject. If the Government were to enter the field as a lender of money, it must obtain that money somewhere in European countries. Where Governments do this sort of business there is a sufficient market for tha securities that provide the money ; but in the colony there is not at present—though I do not think that it will long be so— any sale for 4 per cent, securities at even large discounts, and 5 per cent, bonds hardly command par in small quantities, whilst considerable quantities could not be placed to lend. By giving to the borrower debentures which he would have to sell at a discount, would mean to give him less money than the loan purports. Take an example. Suppose that a person on a property worth L2OOO borrowed LISOO, and that he is paid by debentures current In the colony only. I take debentures of this kind, because if they are negotiable in Great Britain they would come under remarks I shall presently make. I need only now say parenthetically that if payment were made in English debentures it would be better in every way that the Government should negotiate them in bulk and pay in money. To return to local debentures: supposing they bore 5 per cent, interest and were current for 15 years, as proposed by the Select Committee, I am sure they would not realise as much as L9O per LIOO, and that they would be only saleable in small parcels ; whilst if they bore 5 per cent, interest they would not realise much if anything over L9sperLloo. A longer currency might make the 5 per cents, more valuable, but it would make the 4 per cents, less so. Now, if we paid the farmer the money he borrows in debentures he would have to sell them at the discounts I first mentioned, and besides that he would be paying the same interest on the smaller sum he received aB would be payable on the nominal amount of the debentures. He would have at the end of the five or seven years for which he borrowed to make up the discount. Say that he borrowed for five years and sold the debentures for L 95, he would be paying L 5 interest for each L 95, and at the end of five years have to make up the L 5 deficiency, equal in all to over 6 per cent. Even at these rates much could not be done, because there is no large local market for securities at present; but there are some who say you can make these debentures worth par by legislation. You can insist on their being in the shape of bank notes and legal tender for the amount they represent. It is quite true that you can by legislation decree that a pound written on a piece of paper is to mean a pound for all purposes of payment within the colony. You can declare that as such it will be receivable as revenue, and that for future debts contracted within the colonies shall be deemed the mode of payment; but those persons who sell goods or lend money may make their own bargains and add whatever margins they please. What they ask a pound gold they can demand thirty shillings for in paper. The Government revenue, unless it increased, would enormously suffer ; but no legislation could compel anyone to give a golden sovereign for a paper pound. Therefore it is that legialation can no more make a paper pound that is not redeemable in gold on demand worth a golden pound than it could make one hvndred pounds of sugar weigh one hundrei and twelve. The law might make the term hundredweight to represent lOOOlbs. instead of 1121b5., but the value of ©ne hundredweight would be proportionally reduced. There remains the alternative I have already mentioned of the Government borrowing money in England, and lending it out here. This would be quite possible if it were deemed expedient, and recognised as a legitimate function of the State. I was once inclined to see it tried, but I am compelled to say that I do not consider it would be desirable at present. It would overstrain the colony's credit. It might be said, and with justice, that the colony was entering into a well understood business in competing with numerous other parties, and that it must pay for the money it wanted for such purposes more than for ordinary Government requirements. The time will come—in my opinion it is not far distant—when colonial loans will be in such demand that the present rate of interest will be lower, and larger amounts be obtainable ; but there will simultaneously be a reduction in interest on, and larger demand for, mortgage investments. During the last twenty years the rate of inteiest in England on Colonial Government securities have fallen from 6 to 4 per cent., but there has been a far greater fall in the rate of interest payable in New Zealand for loans on mortgage within the last two years. Only there has been a fall all round in the rate of such interest of about 2 per cent., and that fall is continuing. Doubtless it may not be felt so much by borrowers fjf small amounts, and were the Govemro'ent to do anything they should confine 'their operations to small loans ; but eve'j then they are not likely to be able s'afely to much improve on what private, competition will be able to do ; and 'their entry into the field would driv<i)' awa y private competition to an might ultimately prove more injurious to borrowers than would be repaired by any temporary advantage they gained. The stand the Government no«r t?ike is that at present the colony's credit would suffer by their entering into the "business, and they are hopeful that; private enterprise will give such relief,, to the small farmers as will render interference unnecessary. They recognise, however, that the subject shovjd be watched, and further consideration given to it. ESTIMATED EXPENDITURE, 1886-87. The estimated expenditure during the . present financial year amounts to

been already explained. The third is consequent upon the larger mileage being worked. The purchased district railways now appear in the estimates on both sides. The increase in expenditure is compensated" by the larger revenue expected. The net profit on railways i 3 estimated at L 38,471 in excess of last year. When the increases, which I have explained on the three items are deducted, the balance of the estimates show a less total of anticipated expenditure during the year than the actual one of last year of L 88,540. 1 wish emphatically to state that Government have reviewed the estimates carefully and reduced expenditure wherever they considered it could be done with advantage to the public service. Ido not mean to say that a less expenditure could not be adopted. There are dozens of branches of the public service in the way of post offices, mail contracts, schools, telegraph offices, Resident Magistrates' courts, offices for registration of various kinds, the volunteer and defence (which is an insurance against disasters in case of war), and other items which the public have grown used to, and the supply of which greatly encourages settlement far from the large towns. The people will have these conveniences, and very properly too ; and if Parliament were to excise them extra expenditure would be the consequence, for they would be demanded back again ; and in the meanwhile there would be heavy payments for oompensation. There have been the usual additions to salaries under Ll2O. The proposed increases of salaries above that amount are very few. Each case of the kind has been most carefully considered by the Government, and they are prepared with the necessary explanations. I entreat hon. members not to do old and tried officers the injustice of coming to a decision before hearing the reason for each ot the few increases submitted. I confidently ask all the gentlemen who within the last few years have held office to look into the additions and say if they consider them undeserved. As I have stated, there are very few real increases. Some of those seeming ones are consequent on the removal of officers from one part of the country to another, and others are merely due to the promotion of officers to fill the place of those retiring from the service. In these instances we invariably endeavor to refrain from bringing in new officers. We save part of the money, give other officers promotion, and end with the appointment of a cadet. Thus, although the operation is slow, the officers rise, and the expenditure is kept down. No Government could be more anxious to reduce expenditure when ; they see it can safely be done. Whenever , there is an opportunity of amalgamating offices we are glad to seize it, and no effort has been or shall be wanting on our part to take advantage of it. This process is also slow, but on it depends the best hope of reduced expenditure. I will now refer to some of the departments separately. The Colonial Secretary's shows a large reduction, but it is chiefly occasioned by the charitable aid vote being transferred to the charge of the permanent account. The geological branch has also been transferred to the Mining Department. The census occasions a large addition to the vote of the Registrar General's Department. The Treasury shows a less sum than last year. There is a reduction in the amount of property tax, but the vote is still large, as considerable expenditure had to- be defrayed after the end of the financial year on account of the costly trienial valuation. The Industrial Exhibition will require LSOO, but the expenditure of last year's vote was considerably exceeded. The exhibition has cost LB6OO net, a much larger amount than was anticipated. I attribute the chief increase of expenditure to the pleasing fact that the exhibition had to be made more extensive than was expected, because of the liberal response made to the invitation for exhibits. Some of the additional cost is attributable to the exhibition being opened every night instead of three nights a -week, as first intended. The Government consider the exhibition did most valuable service in the encouragement it gave to local industries, and the knowledge it imparted to those interested in them. It is proposed that the next exhibition shall take place in Dunedin or Christchurch about the end of 1887, in time to forward the exhibits, if it be so decided, to the Centennial Celebration Exhibition to be held in Sydney in 1888. Tne Government are of opinion that an International and Intercolonial Exhibition should be held in Auckland about 1890 to celebrate the opening of the through railway. The Colonial and Indian Exhibition absorbes a large vote. There are few members who will not recognise that this colony should be adequately represented on an occasion so momentous to ' all her Majesty's dominions. New Zealand was called on to assert the strength of the recources in friendly competition with other colonies. The post office shows a reduction chiefly occasioned by the non-renewal of the LSOOQ for cable subsidy. The total amorrnt for salaries in the department is larger. Hon. members will not feel surprised at that when they remember that r aew post, telegraph, aud telephone offices are constantly being established which entail additional votes on the estimates. In most cases, especially with respect to telephones, the expenditure is more than covered by Incresed revenue. Owing to new boilers being required for the Hinemoa, the customs estimates, which otherwise would show a reduction, are somewhat swelled. As regards the defence force expenditure, only charging L 15,500 to petmanent defence under the Public Worts Fund instead of L 20,000 charged last year. Other branches of the expenditure will be explained by the ministers in charge of them when occasion serves.

I have reserved for the last reference to the expenditure on interest and sinking fund. The estimated amount required for these items is L 1,654,500, showing a reduction of L 34,846 on the sum actually expended last year. Besides that, the estimate includes some L 46.000 more than last year for interest on loans newly raised or to be raised. Hon - members hear a great deal .about.the.

other ; also, the payment to the Bank of England for managing the loans; and 1 take no account of the debentures issued on behalf of the sinking fund accretions, as these are merely anticipations ; but I do take account of the receipts for drawn bonds, as these represent actual results. With this explanation, the table will, 1 think, be readily understood ; and it shows, after deducting interest on new loans, that the permanent charges have been reduced each year as compared with 1883-84 as follows : In 1884-85, L 115,339 ; in 1885-86, L 143,161; and estimated in 1886-87 L 240,524, or for the three years at a total of L 499,024, which again, I say, is the saving as compared with the loan charges of 1883-84. I should explain that the figures do not give the exact savings within each year, as there is a liability when conversions take place of broken periods of interest being carried forward to the following year fromlßß4-85. L 64,000 was thrown forward to the succeeding year from 1885-86, L 64,000 to the present year, and from this year about L 45,000 to the next year. This sum is L 45,000 fairly deductable from the total saving of the three years, which I have mentioned, and leaves a net saving of L 454.024.

I now give in a tabular form the proposed expenditure for the year opposite the estimated and actual expenditure last year. I should perhaps explain that the actual expenditure does not include unauthorised expenditure. It has not been the custom. Why I do not give the unauthorised expenditure in connection with a comparison of the next year's expenditure ; but though I do not state it in the table I have taken it into the account. In all the figures I have given, in which the expenditure of last year was concerned, its amount was L 9239. SUMMARY OF SERVICES CHARGEABLE ON THE COVSOLIDATED FUND, 1886-87. Permanent appropriations, civil list, L 29,750, voted ,1885-86, L 29,750 ; expended, L 28,070 ; Interest and sinking fund 1886-87, L 1,645,500 ; voted 1885-86, L 1,667,873 ; expended, L 1,689,347. Under special acts of the Legislature, 86-67, L 231,054 ; total, L 1,915,304 ; voted, L 177.484 ; expended, L 146,109. Total voted, L 1,875,007 ; expended total, L 1,863,535 ; annual appropriations, 86-87, L 17,390 ; voted, 85-86, L 17,870 ; expended, L 17,551. Class 2.—Colonial Secretary, 86-87, L 155,725 ; voted, 85-86, L 221,797 ; expended, L 233,385. Class 3.—-Colonial Treasurer, 86-87, L 48,054 ; voted, 85-86, L 58,912 ; expended, L 59,736. Class 4.—Minister of Justice, 86-87, L 117,194 ; voted, 85-86, L 117,763 ; expended, L 113,666. Class s.—Postmaster General and Commissioner of Telegraphs, 1886-87, L 273,717 ; voted, 85-86, L 280,133 ; expended, L 287,524. Class 6. —Commissioner of Customs, 1886-87, L 88,197 j voted, 1885-86, L 88,434; expended, L 78,896. Class 7. —Commissioner of Stamps, 188687, L 30,506; voted, 1885-86, L 30,571 ; expended, L 28,212. Class 8. —Minister of Education, 188687, L 382,914 ; voted, 1885-86, L 361.936 ; expended, L 357,896. Class 9.—Minister for Native Affairs, 86-87, L 20,104; voted 85-86, L 20,222 ; expenditure, L 22,243. Class 10. —Minister of Mines, 86-87, L 31,713; voted, 85-86, L 33,102; |expended, L 22,730. Class 11. —Minister for Public Works, 1886-87, L 799,560; voted, 85-86, L 737,634 ; expended, L 726,576. Class 12 —Minister of Defence, 86-87, L 19,030 ; total, L 2,154,984 ; voted, 85-86, L 177,552 ; total, L 2,145,946 ; expended, L 161,107; total, L 2,108,404. Total expenditure on ordinary revenue account, 1886-87, L 4,070,208; voted, 85-86, L 4,021,055 ; expended, L 3,971,939. LAND FUND, 1886-87. The expenditure for the current year is estimated at L 168,752. This includes the usual charges under special acts, such as the third of the sales of land on deferred payments, New Plymouth Harbor Board Endowment, and other charges, also, the Land and Survey Departments, and rates on Crown Lands. The revenue for the year from land sales is estimated at L 148,800. The recoveries, which I have already explained, it is proposed to make on account of Native rates, will leave the fund about balanced at the end of the year. FUTURE REVENUE. The customs revenue shows a deficiency on the estimates, as I have said, of L 15,175. The estimate last year was a low one, amounting to about L 19,000 only in excess of Vhe actual receipts of the previous year. Hon. gentlemen will recollect that Parliament authorised last session a considerable increase in the duties chargeable on wines and spirits. Notwithstanding those increased duties, the whole customs revenue only exceeded the revenue of the previous year by L 3,723. Judging from the first month's returns, and from the continued operation of the chief causes that tend to reduce the customs receipts, I do not feel myself justified in estimating so large a customs revenue as that of last year by about LSOOO. If there had been no exceptional increases to keep down the customs revenue, it should by natural increasesduring the last few years yield more than LI, 500,000 per annum ; whereas I am unable to estimate at more than L 1,400,000 for the current year. The prevailing depression and lessened scale of expenditure have undoubtedly something to do with reduction, but there are other patent causes at work in the less use of alcoholic drink, and the fall in the value of goods of which ad valorem duties are levied. There are a large number of persons in the colony who aim at the total abolition of the use of wines and spirits. When asked what would be the effect on the revenue, they answer The Treasurer will easily find a substitute, as the people who save the enormous cost of the drinking bill are well able to make up the loss. It is manifestly unfair, when the Treasurer seeks to per-

ably increased, last year on spirits, there was a falling off of the revenue on this tetn of L 17,000. Somewhat similar remarks may be applied to the ad valorem duties. It is true the actual receipts from these duties were L 15,000 more ! than the previous year, because the value of imports subject to this duty was larger, but as goods continue to fall in value the duty on each article becomes reduced, besides the reduction of its cost exclusive of its duty. I will give you an example, and find that if the imports during 1885 subject to an ad valorem duty of 15 per cent, had been estimated at the values ruling in 1880, the total value would have been L 320,000 more than that of 1885, and the duty at 15 per cent would have been L 48,000 more. So that the importers and consumers in regard to the particular goods in question saved between them in consequence of the fall in value L 320,000 in cost and L 48,000 in duties. But this is only the saving on the imports liable to 15 per cent duties ; the saving on the whole imports of 1885, comparing them with the values ruling in 1880, amounted to no less than L 1,050,000. Think of this vast sum saved, and say if a little extra duty on the 1885 values would have been burdensome to either the vendors or consumers of the imports, nor would it have increased the actual amount of duty paid on the articles separately. The same goods in 1885 paid, as I have shown, L 48,000 less duty than would have been chargeable on them in 1880. Each article therefore paid less duty. I have made the computations of the 15 per cent duties without adding the usual amount of 10 per cent to the invoice rates. Had I done so the result would have been even larger than those I have shown. The Government think that for revenue purposes it is right to maintain the customs duties. These duties have always been the principle items of the colonial reveue, and these should yield a gross income concurrently with the increase of population and the larger wants of the people. The diminished consumption of spirits and the diminished value of goods both leave the people better able to keep up the gross yield of the duties, and financially the Government consider it unwise to allow this great branch of revenue to lose its elasticity. The reception, however' last year of the proposals to increase the customs duties was not of a nature to induce the Government to again submit similar proposals to the samo result, and with great regret they feel themselves debarred from doing so; whilst the peculiar circumstances that prevail make the burden of customs duties fall with comparative lightness on the population. The reduced value of imports is injuring to a disastrous extent local production, and the employment of labor. Again, the owners of property, whether real or personal, are suffering from the lower values of produce, and from less earning. The tax on farming production falls therefore with exceptional severity on the taxpayers, the more especially that the House refused the moderate exemptions upon machinery and agricultural improvements proposed to it last year. A reduction of the rate of property tax and a small increase of customs duties would benefit every class and every interest in the colony, for the community is closely knit together, and the illogical reductions of one kind of taxation and increase of another must be felt by everyone. I cannot say that additional taxation is necessary this year, for it is not. On the contrary, I can do with less, and I propose to take off l-16th of a penny of the property tax, making it 13-16ths this year instead of £ths. This is equal to a reduction of L 24,000, or over 7 per cent of the estimated yield of the tax. I should have liked to take off more, and lam convinced that every way the colony would benefit if the House were to sanction reduction of property tax to £ths and substitute moderate increase of duty on articles (other than sugar and tea and such like necessaries of life) that can well bear the tax. I dare say I shall be told, as I was in 1884, that the moderate reduction proposed is not worth making, but the property tax is meant to be adjusted year by year to meet revenue wants. Some people have argued that the reduction of an eighth in 1884 was no advantage, because the tax was increased two-eighths in 1885. Putting on one side the fact that the increase last year was not a necessary consequence of the decrease the previous year, I would point out that the taxpayers gained by obtaining for a year the use of their mqney. It was true the joint rates of the two years averaged three-fourths of a penny each year ; but the smaller amount was sufficient for 1884-85, for it left a surplus at the end of the year. The larger tax last year was consequent on the refusal [to increase the tariff. Had the proposal then made been accepted we should, T think, have been well to do with % ths of a penny this year. Burdening property when produce is so low is a mistake, as witness the opinion cf the financial authorities who control the fiscal policy of Great Britian and France. I may add that the refusal of the House to grant the exemptions upon machinery and agricultural improvements strengthens the argument in favor of reducing the property tax at least for the present. ESTIMATED REVENUE OF THE YEAR 1886-87. The estimated revenue of the year, with the reduction of the property tax which I have described is as follows :—Revenue estimated, 1886-87. Customs. L 1,410,000 ; estimated 85-86, Ll,420,000; actual 1885-86, L 1,414,825. Stamps, including Post and Telegraph cash, estimated 1886-87, L 617,500; estimated, 1885-86, L 611,900; actual, 1885-86, L 607,000. Property tax. Estimated, 1886-87, L 312.000; estimated, 1885-86, L 327,000 ; actual, 1885-86, L 326,276. Beer duty.— Estimated, 1886-87, L 55,000 ; estimated, 1885-86, L 55.000; actual, 1885-86, L 55.165. Railways.—Estimated, 1886-87, LI, 500,000; estimated, 1885-86,1.1,050,000; actual, 1885-86, L 1,044,305. Registration and other fees. Estimated, 1886-87, L 36,000; estimated, 1885-86, L 34,000 ; actual, 1885-86, L 35.600. Marine.— Estimated, 1886-87, L 13,000 ; estimated, 1885-86, L 14.000; actual, 1885-86, L 12,113. Mißcfillaneous. Estimtd. 1886-87, L 4,400;,,

L 4,074,920 ; estimtd, 1885-86, L4,006,900' actual, 1885-86, L 3,999,046. The expenditure i 3 L 4,070,208, and the estimated revenue, L 4,074,920. To the latter has to be added the surplus of L 37,853. At the commencement of the year together, these amount to 1i4,112,779, and leave a surplus of L 42,571, which will be reducible by any supplementary estimates that may be appropriated. To myself, personally, I may be allowed to say that at last my conception of a thorough trunk system of railways for both islands seem fairly in the way of completion. The separation of Nelson from Marlborough—the West Coast from the railway system of the Middle Island, has always been a subject of great regret to me. Pleased as lam at the advantages Canterbury will reap from the railway, believe me I am fully as much pleased in feeling that to some extent, however humble, I have been instrumental in paying to Nelson, Marlborough, and Westland a long delayed obligation. It is only necessary that means should be provided for connecting Blenheim with Tophouse, and for extending the Auckland railway further north to complete provision for the trunk system of the islands. Government have determined to make their railway proposals extend over a short period instead of a loug one. First, I may say that it_ is not ' inconsistent with the great object of rapidly pushing forward the works which demand the most consideration. Again it will keep the control of the expenditure more within the grasp of Parliament, an object of which they readily admit the value, so long as due faith is kept in the matter of using the loans for the purpose for which they are borrowed. Lastly, they have reason to think that the detraction to which New Zoaland has been subjected, is such that its resources are not Efficiently appreciated in London and that the market there will be more satisfied with authority being taken for a small loan. This will also meet the views of the market better. A LOAN OF A MILLION AND A HALF To be devoted exclusively on railway purposes. It is proposed that the North Island Trunk Railway loan shall be made unalienable from the object for which it was intended, and as it is negotiated there will be restored to the public works fund amounts previously spent on that line from other loans ; there will then remain the balance in that fund by repayments I have just referred to. Taking the amount from the 31st of March last, it will leave over LBOO,OOO to be voted as the House pleaseß on other purposes than railways, such as buildings, purchase of native lands, roads, and other works on goldfields, &c. We look to it yielding at least two years' provision, as also that the railway loan will do the same. Indeed, some of the items of that loan will not be expended for years. Railway construction will thus be vigorously carried out by the Government, whilst it will also be proceeding on the part of the Midland Railway Company. OTHER RAILWAYS. They propose to proceed with moderate speed with the extension of the lines to the north of Auckland. They propose also to push on the lines to connect Auckland with Rotorua ; Te Aroha with Thames; Mauriceville with Woodville, and Woodville with Palmerston. They propose to leave to the syndicate that have the Taurangi and Rotorua line in hand alone for carrying out their plans themselves. Of the Midland Company it will be rendered more easy to ask of those who have charge of this line. The Government regret that they are not able now to propose a line to connect New Plymouth with the Trunk Railway ; they recognise that this line will have to be considered at an early date. To turn to MIDDLE ISLAND LINES. Besides the construction of the Midland Line by the company, the Government propose that provision Bhall be made for connecting Blenheim with Tophouse, and Westport with Inangahua. As to these two works, it is not proposed to commence them for at least a year, in fact till the Midland is well started. Seeing what an exhaustive system they will connect, there can be no doubt of their proving payable. The Marlborough-Top-house line will open to Wellington the road to the West Coast In a few hours. The Grey and Hokitika line will be proceeded with vigorously. That also must prove a payable line. The Otago Central will be continued rapidly, and pushed on with energy. The railways from Blenheim to Awatere will be completed separately. It is proposed, besides a vote for roads to open up Crown lands, to set apart a sum to be devoted to clearing land and making it ready for the use of settlers ; the provision enables land suitable for settlement to be resumed and cut up into reserves for separate treatment. EXPENDITURE ON RAILWAYS. I now read to the committee a list of the railways to which it is proposed to devote the million and a-half loan:— Extension north of Auckland £70,000 For doubling railway line out of Auckland southwards ... 33,000 Thames-Te Aroha 80,000 Auckland-Rotorua 120,000 Napier-Palmerston 100,000 Mauriceville-Woodville ... 125,000 Blenheim-Awatere ... ... 50,000 Hokitika-Grey 100,000 Livingstone branch 150,000 Catlin river 50,000 Seawards bußh extension ... 30,000 Edendale, towards Portrose ... 40,000 Mosßburn 50,000 Riversdale-Switzers 40,000 Otago Central 200 '5°j! Mount Somers, Alford Forest U'jJiJj Blenheim-Tophouse ... ... Westport-Inangahua 75,000 Open lines f.. 200,000 Raising loan and contingencies 63,000 Total £1,500,000 I hope that I have made clear several interesting points which It has been my duty to bring before the committee. I have ill-succeeded in my task if I have not shown to hon. members that the finances of-the colony are in a sound and satisfactory condition Parliament ia fullsl.