EXPENDITURE

Nelson Evening Mail, Volume LXIII, 2 August 1929, Page 5

EXPENDITURE

The net expenditure out of the Ordinarv Revenue Account for 1928-29 amounted to £24,176,928, an increase of £1,529,082 compared with the previous year after the Post and Telegraph expenditure has been deducted from the 1927-28 figure. It must be explained, however, that this increase includes £877,243 on account of the transfer to .Main Highways Account and local bodies of the special taxation ear-marked for highways purposes. As previously explained, the large increase under this heading is due to the fact that these items for 1927 28 represented only about three months' revenue. Tho net increase on other items was thus £651,839, of which £487,976 was under permanent

appropriations and £163,863 under annual votes. The principal items responsible for these increases are as follows: — / , £ Under permanent appropriationsInterest • 278,147 Debt-repayment qi'vw Pensions .' • ••• ?i'™ Family allowances •. I'SS9 Samoan Military Police) 27,374 Under annual appropriations— Electoral Department 80,046 Agriculture 86,316 Education : 92,681 These last three items with certain other smaller increases are partly offset by decreases under other votes. Concerning the increase in interest pavments it may be explained that £156,393 of the increase is duo to a change in interest dates, arising out of the recent conversion operations in London, which entailed the payment of interest for a broken period of four* months. In the ordinary course this interest would not have beeri payable until this financial year. The balance of the increase in interest charges comes from the increase in the public debt. The increase in debt-repayment charges is consequent upon the operation of the Funded De'bt Agreement with the British Government and thei general debt-repayment system. Apart from the effect of the increase in the aggregate of the public debt, the increasing charges are offset by the saving in interest on the debt redeemed, and therefore impose no additional burdens on the taxpayers. Concerning pensions, it will be seen that old-age and widows' pensions together increased by £59,622. Such pensions bear a fairly definite relationship to population, and increases are to be expected accordingly. War pensions might be expected to decrease, but such is not the case, the increase for the year being £31,691. The reason for this is that many of tbe men are only now' feeling the full effect of their war injuries. Family allowances have shown a substantial increase, which is due to the fact that many who were eligible for allowances did not at once take advantage of the provisions of the Act. The charge for the Samoan Military Police is an entirely new item arising out of«the unrest in Samoa. The large- increase in the expenditure of the Electoral Department was the result of the general elections held last year, while the increase under the heading of "Agriculture" was principally due to a new item of £25,810 for bonus on export of pork and an increase of £34,791 in the subsidy on the railage of fertilisers for farmers. Expenditure under vote "Education showed an increase of £92,681. For the most part this is the result of the normal increase in the number of children attending school, added' to which there was an increased cost for conveyance of children to school and for boarding out children placed in the care of the State. Before "leaving the question of expenditure out of the Consolidated Fund I would like to review briefly the/ position that has now been reached and the effect on taxation. A s I have pointed out, the revenue as shown in the accounts includes £5,763,442 derived from inter-est-earning assets and sundry departmental receipts apart from taxation, and in order'to demonstrate to honourable members where the taxpayers' money goes I have had this revenue other than from taxation deducted from the relative items of expenditure as far as is possible, and I propose now to deal with the net cost figures thus obtained. Further although over £16.000,000 out of a total expenditure) of £24,000,000 is practically fixed by contract— eg., interest, or bv Act of Parliament, such as pensions', for instance, all of which are paid under what are known as permanent appropriations, 1 propose for this purpose to ignore such distinctions and deal solely with services as such. TAXATION ACCOUNT Proceeding on these lines, we arrive at what might he. described as a taxation account, as follows: —

Dealing with the expenditure, the first item, wliich exceeds the total receipts from botli land and income tax, contains no administrative charges, but represents the dead-weight costs of the. war, which costs are practically rigid in the meantime, and will only be reduced with the effluxion of time and the repayment of the war debt. There can be no question of economy under this heading. The next item, "Other debt charges" is also fixed. The total dent charges apart from war debt amounted last year to £8,724,742, but the greater pari of this is recovered from interest-earning assets, leaving £2,226,416 tiv be defrayed out ot taxation, representing the charges on that proportion of tho ordinary debt which is not directly or fully productive.

Then we come to "Social services," the largest item of all. It includes £3,224,fci>8 on account of education, £1,209,571 for health, and £1,858,391 lor pensions and superannuation. 1 do not suppose that any one advocates a reduction of expenditure on education, about 90 per cent, of tho money for wliich goes in grants to the Boards and other local governing authorities to cover the cost ot teachers' salaries and administration expenses of such' local authorities. As to tho health expenditure, this comprises hospital subsidies, £673,689: maintenance of our mental hospitals, £302,737; and £233,145 tci cover the ' various activities of the Health Department. The charge on taxation for old-age, widows', and other pensions, which cost, with administration, £1,628,737, is an item that I am sure none would wisli to) see curtailed. Superannuation, with the subsidy and expenses of tho National Provident Fund, cost the taxpayer £229,763. As to superannuation, I shall have more to say about the position of the State funds presently. In the meantime I just wish to point out that the expenditure on these items cannot be curtailed. It will be noticed that the first three items of the taxation account to which 1 am referring absorbed 74 per cent., practically three-quarters, of the revenue Irom taxation last year, and the charges are either quite rigid or such that very little, if'anything, in the way of reduction is feasible. DEFENCE NECESSARY Following on with the charges on taxation, the next items are—"Defence," absorbing 5.7 per cent., and "Justice, law, and order," 3 per cent. The Police Force and the Courts are,, of course, essential, and while there are perhaps some who will say that the expenditure of over £1,000,000 a year on defence is unnecessary, the fact remains that war has not ye't been completely' ruled out, and there must be some preparation for the defence of our country in case the need should arise. In other words, the 5.7 per cent, of taxation spent on defence must be regarded as an insurance against external aggression. \ The promotion of agriculture cost the taxpayer last year £464,533, about half of which goes in grants and direct subsidies of various kinds. The cost of roads and highways has increased greatly in the last few years, and last year, including the petrol-tax specially imposed for roading purposes, absorbed 8.3 per cent, of the taxation. This is only the direct cost, and does not include the interest charges on the millions of capital expenditure out of tho Public Works Fund. Altogether the item is a heavy one, but to meet the demands of modern transport the roads must be kept in good order, and there is little, if any, scope at present for curtailment. The remaining item under the heading of "General and other administration charges" covers tiie cost of the Legislature, the maintenance of public buildings, the expenses of the revenue Departments, and of Lands, Labour, Internal Affairs, and all the other departments of State not covered in the other items I have mentioned. There are also included numerous small grants and subsidies and other items of a miscellaneous nature. To sum up, it will be seen .that the existin'g charges on the taxpayer are, as 1 have said, largely of a rigid nature, and the scope for administrative economy is very much smaller than is popularly supposed. Every effort will he made" to obtain the utmost economy lit administration, but I am satisfied, after an examination of the detailed estimates for the current year, that enough cannot be saved in this way to offset the automatic increases in such items as interest, pensions, education, etc., let alone make good the deficit for last year. So far as interest is concerned, in addition to the increases arising out of loan expenditure for such purposes ias schools, public buildings, and other items that are not interest-earning wholly or in part, we must expect increases from the renewal' at higher rates of some of the old loans. For instance, by the time the operations are completed it is calculated that the conversion of the £29,000,000 4-per-cent 1929 Consolidated Stock will increase interest costs by about £220,000 a year. Thus it is clear that the deficit cannot be jnade good by administrative economy, and, as a matter of fact, the only alternative left is either to reduce the services rendered by the State (and by services I mean not only work done by the 'Departments, but financial assistance given, wliich is the larger item), or to obtain more revenue. That is the position in a nutshell. The services rendered by the State have been greatly increased over the last decade, and, generally speaking, it would appear that we have reached a stage when it is advisable, as far as possible, to stabilise the position for a year or two, to enable the increasing population and wealth of the Dominion to lighten the relative burden on the taxpayer. Another important point that should not be overlooked is that the whole trade position of the Dominion is largely governed by the world prices for our staple exports, over which prices we have no control. For this reason our public finances should not be cut too fine when times are, good. To reduce taxation in a prosperous period is easv, but the benefit SO' derived does not in any way compensate for having to increase it again when times are, bad. Further, it is highly desirable that a certain amount of tho money for public works should he provided from revenue, and the surpluses from the exceptional revenue, of good years should be utilised for this purpose. TAXATION All will agree on the desirability of keeping rates of taxation as low as possible, but I am not at all sure that the reductions granted in recent years were .not greater than were warranted I in view of the progressive increases in . expenditure on account of extended services. Anyway, the revenue from taxation last year proved insufficient to provide, for the, existing services, and the year closed with a deficit of £577,000. That is the position which the Government is called upon to deal , with. Having once received all the existing services from the State, the people generally do not want to lose them, so, as it is essential that the national accounts for the current year should he balanced it appears that the j Government has no option now but to adjust the taxation to obtain more, revenue. The increased rates of taxation will, I hope, only lie temporary, as I am sure that when"the Government has had time to deal with the seat of the trouble the resulting increase ill prosperity will be. permanently reflected in increased receipts and reductions in I the rates of taxation on a stable basis will be possible. In the meantime immediate action is necessary to rectify

the position. I wijl deal with tho Government's proposals in this connection shortly.

Revenue £ 7,954,252 Beer duly 611,404 Stamp arid death duties . 3,575,720 1,140,324 3,310,877 Motor-vehicles (petrol and tire, tax, etc.) . 1,243,577 N.on-taxation receipts (not apportionable) 7,180 Deficit for vear 577,252 £18,420,666 Expenditure C. °L War pensions and war debt charges 5,023,755 27.2 Other debt charges 2,226,416 12.1 Social services 6.292,930 34.2 Defence—Land, sea and 1.043,622 5.7 •Tustice. law, and order 544.976 3.0 Agriculture 464.533 2.5 Roads and highways •■• 1,536,517 8.3 General and other administration charges 1,287,917 7.0 £18,420,666 100.0