SIR JULIUS VOGEL'S LETTER.

Nelson Evening Mail, Volume XVI, Issue 145, 20 June 1881, Page 2

SIR JULIUS VOGEL'S LETTER.

To the Editor op the "Evening^ Mail." Sir— l had been for some time past examining the revenue and poblic works accounts and the statistics of the colony in order to satisfy my mind on the question, What can wisely be done at the present moment to complete the projects of 1870 and bind the colony together by iron bands more surely than it is now bound by bonds of indebtedness ? when the letter of Sir Julius Yogel was printed in your columns, and I now ask yon to allow me, whilst commenting on that letter, to lay my own conclusions before my neighbors. It is a pleasure to me, in common with others of his admirers who cannot call themselves his followers, to read Sir J. Vogel'a abjuration and vehement condemnation of the scheme imputed to him of handing over the lands, railways, aud debts of the colony— almost the colony itself— to a syndicate of capitalists. The report was well invented nevertheless, and it is refreshing to think that the world contains another man besides Sir Julius of boldness and ingenuity equal to such a project. The letter opens with a hazy explanation how the report may have arisen— a matter now of little interest— and then passes on to a virulent attack on the present Ministry for their "pusillanimity" in treating Beirious'y so Blight a matter as a deficit of a million in the ways and means of the colony for an annual expenditure estimated at £2,600,000 -if the legitimate appropriations of the proceeds of land sales are excluded as outside the purposes of revenue proper. Sir Julina would have put s^ood face on the deficit, treated it aa casual and transitory, restored the former tea and sugar duties, levied a beer tax, and " a few other taxes of the same character," encouraged half-a--dczen shiploads of English farmers to immigrate to New Zealand, and all would have been right. The jaunty ease of Sir Julius is unsurpassable and inimitable Cantabit vacuus ! but we who have to pay the piper shall not begin to dance until we have studied more closely than he has done where the coin is to be found for payment. Let us proceed to look the facts in the face as fully as means allow us. The taxes so gaily suggested by Sir Julius would, as the event has proved, have raised perhaps £ 150,000. The actual excess of expenditure over revenue in the year '78-79 was about £550,000 (I use round figures throughout), omitting in this calculation the proceeds of land sales and their legitimate appropriations, and also the surplus of the previous financial year, which, at the time of the present Government's accession to office, had become a deficit. The customs revenue was at the same time shrinking, andevea with the large additions to the dutieß made to meet the occasion, failed in 1879-60 to* realise the amount of the previous year,

The land sales, estimated for the new period at one third' the atrount of the shrinking sales of '78-9, failed in the following year to realise one-fourth that amount, and had the Government been disposed so to employ the fund, it would not have sensibly recruited the revenue. During the financial year last past 'Bo-81, a perceptible revival baa taken place, end the customs duties (increased by 20 per cent) have slightly surpassed the yield of the lesser duties ia '78-D. Had tbe Government, in October, 1879, acted on Sir Julius Vogel'a principles, the accumulated deficits would by this time bavrs exceeded two millions, and formed an addition to the permanent debt Wholly without visible fruits, and sufficient to make three hundred miles of railway, We have reason to be thankful the Legislature did not take such a view. Nevertheless, the Gorerntrjent. whiUt trimming the "ship tb suit, dirty Weather, never talked or thought of wreck. That danger was already weathered, and nothing can be moie amusingly and characteristically untrue than the statement that they "befouled" tha* colony with gloomy prognostications. The Treasurer then and always declared his belief that the pressure was transitory, and whatever of gloom his anticipations may have contained, has been fully verified in the course of the last two years. In justice 'to the present Government it should be borne in wind that there have been grave differences between them and Sir Julius as .to personal claims of his own which may probably have contributed to hia present bitterness. But a financial blunder such as Sir J Yogel says he himself would have committed h a trifle in the- indictment that must b» preferred against thiw letter. Since 1854 some ten or more gentlemen have filled the office of Colonial Treasurer. Errors have no doubt been committed by some of- them, but in one thing so far all have agreed i they have all, to the measure of tbtir capacities, followed the lead of the great financiers at home in striving to pnt before the legislature and the country an unvarnished account of the state of the public finances, and of all matters affecting it. The present Colouial Treasurer has dote this in a period of pressure and danger, always with the cheerful manner of a man of sanguine temperament. Had he done less — had" he concealed or misrepresented anything, he would have been unworthy of his high position, and the present healthier condition of the finances would not have been attained. The large economies of the last year would, on Sir J. Vogel'a view, have been neglected, and the present unassailable distribution of taxation would have been been deferred till some discontent among the working-classes (better founded, perhaps, th«n any Sir G. Grey seeks to awaken and foment), and a more disastrous state of finance had compelhd an effort yet more sudden and violent than we have lately seen. Absolute frankness is essential, not to say inevitable, UDder true parliamentary government, and essential to solid national credit ; and the thin disguises which Sir J Yogel recommends:. could have had but a momentary effect in bolstering up the borrowing polity of (he cotintrji A joint stock bank may plead (he interests of its clients in favor of secrecy in its proceedings, but the recent explosions of the Glasgow and West of England Banks exhibit the vice of the system, however unavoidable, and warn against its extension in the faintest degree to cases where no. necessity can be pleaded, and where mercantile honesty forbids it, A nation has no right to conduct its affairs like a speculative joint stock company, and no interest in doiDg so. Openness and honor are the only anti-septios that can preserve it from inward corruption. It is grievous to have to argue such a point, but this letter, which is in all our' hands, calls for a protest. Tbe «*ery terms in which the Government are assailed-^the very expression •♦ befouled with gloomy prognostications" — betray a confusion ia the writer's mind of the two ideas of blunder and moral wrong. Tht language ia probably inadvertent and care less, but it ia an unconscious confession of moral looseness. Turning now to the proposals for continu ing the railway system, we shall all agree with Sir Julius as to the desirability of removing the business from local political influences, and must all regret that this important end was riot cared for in 1870 and 71. If the appointment of Commissioners to be charged, under due guarantee), wi h this work, and with the administration of the railways could be practically arranged, the proposal might be Worth considering. But Sir Julius leaves this as usual with his scheme?, a mere rude sketch, anditisnotobvious how it oan be made practical — how the Legislature can abdicate its. control— or how in the absence of its control so great a trust can be secured from abuses of other sorts worse even than the log rolling at which the device under discussion is aimed. A separate permanent council, a sort of smaller Parliament of railways of which the executive Commissioners Bhould be membera might serve this purpose, but it would be costly and cumbersome. Tbe practical difficulty of the proposal is almost overwhelming and it requires a degree of self-denial in the Legislation which would render such mechanism superfluous. As a mere instrument for issuing railway debentures a Commission would have a specious value; but it would be an illusory veil, and therefore in this respect inadmissable. Divide and distinguish the loans and funds of the colony as you will they must still remain liabilities and assets of the colony, and the supreme legislature must retain power to intervene in the last resort, and, retaining^ would assuredly use the power. Sir J. Yogel has a right to speak with some authority as to the comparative favor with which loans secured on the general ctedit of tbe colony and railway debentures are likely to be regarded at home, but here too his letter is vague and fails to satisfy his readers that there is really any alternative in the case. It has been prominently put forward in all our recent borrowings eince 1870 that the proceeds are to be invested in public works, including railway?, and it has at least been left to be supposed in all cases that the revenues of tbe lines are a part of (he revenue of the colony and therefore the security of the landers. The latter must then remain preferential creditors in respect, at least, of all lines constructed at the time of the issue of the proposed railway debentures, and those lines will include the most profitable parts of the system. This preferential position may indeed be voluntarily ceded under the terms of inscription of stock. But .without such cession the honor of the- colony seems to require the 1 most liberal construction of tbe rights of the existing creditor. In considering the question of new loans for railway construction, we cannot with Sir Julias omit the broader questioa of the actual condition of New Zealand. The general revenue of the colony culminated in tbe year 1876. Since that date the population' has increased by one fifth, that is to say from. 400;000 to 480,000. The items of .taxation' have during ; the last two years been reinforced in about the same proportion. The revenue should : then/ other things being equal, have increased ; by. 56 per cent. Eliminating from the accounts tbe receipts from railways, it has in ;fact diminished by 2 per cent. There are many reasons for this. The most obvious are, (1) The decline of the goldfields and the more settled and thrifty character of their remaining inhabitants; (2) The inferior wealth of a large part of the recent immigrants; (3) The introduction of some borne manufactures under the cover of the Cus« tome tariff (4) perhaps smuggling and illicit distillation, although, as the Colonial TreaBurer in his Patea speech argues, Jhe shortcoming of tbe duties levied on heavy and (id valorem goods seems to prove the contrary; (5) And last but not least the low price of produce and compulsory economies of a large class of producers. These causes truly are not all evils, but must satisfy us of the fact that the limit of the present tax bearing powers of the people has been reached, and that the Customs tariff has been trained to a point at which consumption is diminished in a greater proportion than duties are increased. This phenomenon, deserves more consideration than Sir J. Yogel ia disposed to give to such matters. We cannot in face of it shout with him, v Let ns now say : All. experience shows that New Zealnd, was justified, in the railway; poHcy." Those wb> remembe? ttib lirigbt p'abm^ses of 1870 and compare them WP : this da'yffl facts must j[ua) if y in 80m,3 fyfgibe their excitation., The W&9 * ; ha * (hen opptesi/ediis With anxiety we were invited , \q share with co many new and prosperon

neighbours that we should dance under them. Alas the little finger of the taxgatherer of 1881 is thicker tfcat the loins of his predecessors of 1870. Mr Stafford's policy may have scourged us with whips, Sir J. Vogel's policy scourges us with scorpions. But as in the case of a patient under delirium treviens the very poison that has overthrown brain and nerve must be used to prevent collapse, so it may be with New Zaaland. Its ten, nay twenty years diet of stimulants cannot perhaps be wholly and suddenly dropped with safety, and we must continue our iaquiry to appraise as nearly aa may be the immediate future! and learn what the county can bear and do in the direction of its policy of 1870. First as to the probable growth of population; it is a Common fallacy to taik of this as if in a progressive colony it could be estimated as a regular percentage. It is a'most as far froni truth to suppose that i advances by a uniform increment in every equal period. From 1860 to 1870 the population of New Zealand triiped itself. From 70 to 80 it nearly doubled. No rule can be given for a movement which depends on causes, as numerous and various as they are uncontrollable. One of these causes alone roughly approximates to regularity. In the first of the two periods above named tbe iucrease by tho excess of births over deaths was about 50,000, or 4 per cent per annum on tbe mean population; in the second it v.a3 ; 102,000 or 3$ per cent oa the mean population. During the same periods severally the increase by immigration waa 118,000 and 130,000. Five years at Ihe rates of the latter decade would give an increase by births of about 108,000, by immigration of about 65,000. But this result must be discounted unless 'free and assisted immigration is to be renewed. The current natural rate of increase by immigration as calculated for last year was 7,000, which would give for the half decade Bff,ooo by immigration and 102,000 by birth, leaving the population at the end. of the period at about GiOfiOO. The resort to subsidised immigration is in these figures discarded for the following reasons. The accounts show during the period 70-8U an expenditure of £1,850,000 for this pur pose, The statistics of the same period give an increase of population of 130,000 by im migrants. Deducting from this an increase by unassisted immigrants 5,000 per annum we have left 80,000 immigrants as the result of our expenditure, and the cost per head appears to have exceeded £.23 These immigrants certainly include many excellent colonists, but as a whole thete is reason to believe they are not the choic p st part of the po,>ulati n, and the investment has beei. somewhat extravagant. Moreover capital acutely employed will attract labor; and ii is anomalous and almost monstrous for a state, with one hand to tax its citizens through the Customs duties for the protection of local industry, whilst with the other hind it dispenses large sums to introduce competitors in that industry. It is indeed common to defend " protection " as a necessary supplement to subsidised immigration, but it would be wisdom to let both alone it. tbe future. Taking the 620,000 above arrived at as representing the probable population in 188G, assumiog no higher yield of taxation than at present; a proportionate growth in the net railway returns; and a moderate expaneiot* of the Civil Service to meet the needs of a growing population, we arrive at the follow ing estimate, the figures representing present receipts and payments, being based on good authority:— 1881. 1886. Population 480,000 620,000 Ordinary revenue, excluding land sales and railway £ £ receipts ... 2,285,000 2,950,(00 Net railway revenue 350,000 G00,000: £3,116,000 £3,550,000 Civil Service ... 1,600,000 1,800,000 Charges of debt 1,450,000 1,500,000 Permanent appropriations ... 65,000 80.C00 Surplus ... nil 170,000 £3,115,000 £3,550,000 The calculation thus brings us to tbe con., elusion that with a faithful and economical {Continued on Third page)

adrainist ration during the next five years we may hope reasonably without artificial stimulus or organised immigatJon to arrive at a moderate surplus in our public accounts. In 1886 it would appear probable that the colony woold be capable of supporting the charges of about 3£ milllions aelelitional debt. It is now time to enquire what are the works to be undertaken to fulfil the programme of 1870 and complete the main lines of the colony. Beginning in the north we have the lines from Cambridge by Upper Waikato to Napier (170 miles) on the east, and Cambridge by Upper Mokau toTaranaki on the west (140 ' miles); between Tarannlci and Wellington: Hawera to Waitotara (35 miles), Foxtou to Wellington (C>O nvles); and between Nap'pr and Wellington: from Masterton to the Unrter Manawatu (7.5 miles); in all 480 miles. Half of these works could be nrocpeded with at once, nor is it altogether hopeless that the collapse of the avlutii of the obstructive lengue among the Upper Waikato tribes may very soon nren the cay for the two northern lines. Of this work 400 n:i!es offer reasonable prospects of boconiirg early remunerative. The rest, ine'uding tbnfc part which wmild traverse (he pumice plains of Taupo can only be c'risFerf for the present na havirip poMiicnl importance, but this it has very distinctly Looking south, the one great mi'p?ing link is that which should connect Nelson and Pinton and Blenheim with the southern trunk lir.ea nt iha Ilnruruii, in all about 200 milec, which, passiug through continuous rugeed upland country, wbere the winters fire very severe and population cannot be expected till more genial positions are filled up, must be elf s'p.ri mainly as of political value; pome 40 miles alona in the Wairau, the Hurnnm, find "Wahu-nu Valleys promising present rot nrnp. Ofthesnmo class is the line to uritD the district of Westland wi'h the esisfern trunk. which mny bo about 120 mi'es in length We have thus a total leng'b of 800 miles yet to construct, of which 440 presently re- . munorative 3GO for (he time purely political. Putting the former at £6,500 per mile; average cost (an increase of one twelfth on former average to meet t he ense of a probable revival in the ir.in frar'e at home and a rise of prices) £2,860,000 would be needed to execute this part of the work; or capitalising the interest during construction which the present state of finance mnkes imperative and adding the co«t, of negotiating debentures to the amount of £3,440,000 would represent the capital cost of the completed works in 1886. It will be noticed that the proceeds of lonrl sales have not as yet been faken into account. It would be the most legitimate use possible of this fund, which is of course capital, if after defraying departmental expenses and subsidising !he colonising works of local bodies the balances were devoted, as they accrue, wholly to what have been described as lines of political importance. Ap these will not be Immediately remunerative, it is important thit the fluctuating balance? in question should be applied only as they accrue, and never anticipated. During the last twenty years above ten millions sterlinp have been realised by land sales in thi> colony — an avernge of £500,000 per annum. The very fluctuating receipts of the 'last ten years, of which the volume of statistics for 1880 gives information, averaged £625,000 per annum, and nmorg the earlier as well hf the later years of the decade we'ire several of great depression. If the average of the twenty years should be realized in the next five years, there would be ; after defraying departmental expenses and subsidising local colonising works, fully £200,000 annually available for unremunerative trunk lines. snd an important psrt of the Picton-Nelson-Hurunui line mi?ht be completed 'without hardening the public exchequer, and within ten years the whole of this class of lincF might be thus completed. But the state of the colony has "been above described as singularly low, the barometer of the revenue returns registring duringthepapf years a depression never known before, anel some sanguine person may ask whether it is not wise under such circumstances to speculate on a rise. When things are at the worst they sometimes mend. No doubt; but it wa« not without cause that no estimate of such a chance has been here attempted. The remodelling of our taxation is even moro important than the expansion of our railway system. No colonial treasurer fit for his placo can sit down peacefully under such n tariff, like that of New Zealand, which forces the poor man to forego his luxuries, invites the rogue to fraud, and cripples the trade on which itself depends. Reviving prosperity should see the tariff gradually reduced to the dimensions of the one good tariff of the world, that of Great Britain, framed with tbe sole view of revenue, and with which no sciolist in political economy now ventures to tamper in partial efforts to foster industry whose natural soil is freedom. Spirits, wines, beer, tobacco, tea, sugar, coffee, furnish fiveeighths of the preseut customs revenue, and our aim on the return of prosperity should he to limit our tariff to these items, and this Will take some time. Two conditions of the estimates above made are .absolute. Tha' the whole borrowing of the period be limited as by the surplus to be reasonably anticipated at the end of the half decade, and that the definition of the work and appropriation of the funds applicable be included irrevocably in the Loan Act itself. It cannot be too forcibly stated that the undertaking of new enterprises will double the call for prudent and firm administrations. Without these conditions calculation is waste of time. With these, the calculations above though not pretending to exactitude, may bo relied on as substantially true, and absolutely faithful ; and I venture to think they afford a fair basis for action so soon as the delay stipulated by the negotiators of the last loan shall bare expired. I trust that on grounds of good faith as well as of economical finance the idea of pledging post dated bonds in anticipation of that date will not find favor in the country. To summarise my conclusions (1), The disordered condition of our finance was truly described by Government in Oct. 1879, and their action was taken on the only sound principles and was such as to maintain and improve the confidence of the public creditor and of capitalists generally. (2), There are signs of a revival of trade, but the strain on the country's resources forbids borrowing, except on a basis of calculation. (3), The railway commission, as proposed by Sir J. Yogel, is impracticable, and, used an an instrument for further loans, it would be n transparent veil only. (4), All borrowing on exclusively railway security must save the preferential rights of former creditors. (5), Discounted loans for completing works unquestionably remunerative are admissible in a measure. Ordinary loans out of the proceeds of which interest should be paid during the progress of works are preferable. (6). After providing for the administration of the department and provision for existing claims, the balances of land sales are properly available to construct trunk railways not likely to be early paying. (7), Capital will always draw labor, and Government immigration should not be resumed. (8), As soon as the colony is free to borrow, a loan not exceeding £3,500,000 may prudently be raised, and at the same time appropriated ti completing the North Island trunk lines, and the balances of the land fund should be wholly and at once appropriated to t^e southern trunk lines till these are completed.. In conclusion allow me to repeat that the finance of ti nation should be frank and straightforward, not availing itself of the thin and dubious distinctions"tbat may pass muster on the stock exchange, nor of the disguises, practised by bubble joint stock companies. These things must fail in the hands of the Government of a free country, and were success by such means possible.it would be fatally bought at the price of general demoralisation and loss of faith "within our own borders. — Yours, &c, M.