FINANCIAL STATEMENT.

Poverty Bay Standard, Volume I, Issue 238, 18 September 1884, Page 2

FINANCIAL STATEMENT.

In Committee of Supply, Tuesday, 16th September. 1881, by the Colonial Treasurer, thic Hon. Sir J. Vogel. (Concluded.) OUR LOANS AND SINKING FUNDS. I have described to the Committee the results of the present year, supposing we left it to run its course without altering the expenditure beyond what I have already slated is propose!, but I have to call the attention of the Committee to a large item of expenditure which should, in our opinion, be relieved, and through the instrumentality of such relief the country be saved a considerable portion of its heavy taxation. I have freely staled that this was feasible, and have been met with incredulous smiles. The time has come for me to fully explain my meaning to hon. members here. If hon. members have before them the table relating to the public

debt of the colony, which I have caused to be reprinted from the last Financial Statement, together with a separate table which I have had prepared, showing the per eentage of the y-’arlv ’■ - geson the nett indebtedness t.hn, wi 1 ’ . « bio to follow my meaning. They F ■’* i. on the total nett indebt- di.—f -’9. 4,902 we are paying annual charges for hi I erest and Sinking Fund to the amount of L 1,578,799 or, in other words, 1 533 per cent ; although our 4 per cent, in- j scribe-i stock is quoted in. London at 103$. If wc bring our loans down, as we may well , du to a basis of a lit/ 1 ■ over 4 per cent., we ■ my bavt, an annual saving of over L. 100,030. Before I discuss how this is to be Jone, will invite your attention lO the extraordinary c/Midilion of some of the loans—these to which sinking funds are attached. On the 1856 loan there is a nett balance of only £23,007 ; yet in this we are paying £2,010 per annum interest. We wore paying an additional £lO,OOO for Sinking fund, but the Lords of the Treasury who control the matter as the loan is guaranteed by the Imperial Government, has released us from continuing to pay the Sinking Fund. The fact, however remains that we are paying interest at the rate 86-9 per cent, on the nett indebtedness, and next year there will be no indebtedness, but we shall be continuing to pay interest on the outstanding amounts until the several instalments arc paid off in 1888, 1889 and 1894. There will then, it is true, be a large balance to us fro n excess of the Sinking Fund, but surely we ought not to burden the people unnecessatily in the present to lay up excesses in the future. The mistaken policy of such a course is apparent. The heavier the burden, the less productive the power of the community. An unnecessary tax, therefore, carries with it la loss beyond its own measure. The next oan I come to is that of 1860. In this case there remains a net it debiedne-s of L 14.094, with an annual charge of L 7.448, equal to 52.8 per cent. I now come to a large loan—that of 1863. There remains in this case a net indebtedness of L 938.949, with an annual charge of L 96,792, equal to 10 per cent. The New Zealand Consolidated Loan is yet larger. On a net indebtedness of L 5,807,607 there is an annual charge of L436, ( J86, equal to 7.52 percent. There is an aggregate yearly pavment of L 19.859 on five loans, representing respectively percentages per annum of 13.7, 27.4, 17.8, 8.2, and 10.9. THE SINKING FUND. 'The chief disorganising factor, however, is the Sinking Fund. When we were forced to adopt a Sinking Fund, we well knew that the time would come when it would be so oppressive that relief, in some shape, would have to be sought from it during the present century. I do not think there have been many, if any, able financiers who refuse to recognise the great dictum of Professor Hamilton, that the only true sinking funduf a country’s national debt is the excess of revenue over expenditure. Every other sinking fund is a delusion and a snare. The time has come—l think it came some years since, when the increase of taxation was under consideration—when the intolerable burdens of the Sinking Fund must be recognised. ‘A MAGNIFICENT HERITAGE. There is no reason whatever why the colonists, who are exerting themselves to lay broad and deep the foundations of great public works, which will be a splendid and magnificent heritage to those who come after them, should attempt to pay off piecemeal portions of the public debt whilst they are borrowing more, and whilst they are bearing the heavy burden of paying interest during the construction of works. I speak advisedly of this splendid heritage. New Zealand is acquiring a monopoly of railways al a total cost less than in older countries has to be paid for merely buying the land on which to construct them. Twenty-five years hence, compared with the value of these works, the public debt will be a bagatelle—that is, if the colony does not doze during the twenty-five years, as it has during the last five years; but even though it was dozing, the railways did good work. The Sinking Fund during the present year is estimated to amount to L 241,000. We shall reduce our debt by that amount if it increases progressively. 1 have had a calculation made which shows that during the ten years next ensuing the present Sinking Fund will be increased by L 3,022,800. In other words, during ten years the people of the colony will be paying off L 3,000,000 out of taxation. I contend they cannot afford to do this. That would be placing on the colony a feaiful incubus. The L 1,000,000 paid off during the last five years has told severely on the colonists. If it had been saved to them, New Zealand would be in a different position this day. My proposals are to relieve the permanent charges this year to the extent of the Sinking Fund—say, L 24.000. I propose we should not be idiotic (I use a strong phrase) enough to tax the people to pay off a little fragment of our debt. No other colony does it. Recently in Victoria, the first railway loan, amounting to some millions, fell in for payment. Noone conceived the idea of taxing the people to pay it off. Every penny was renewed, as a matter of course. The process under which the Sinking Fund will be relieved and relief also given to the anomalous condition of loans nearly run out, on which the yearly charges are so heavy, is through the process of conversion in one shape or another.

INSCRIPTION OF STOCK. In 1875 I was in England on an official mission. Two eminent physicians forbade my returning to the colony in my then state of health. I employed myself in endeavoring to give to colonial loans, through inscription at the Bank of England, and status and character of Consols, or the Metropolitan Board,of Works stock. I first arranged an agreement with the Bank of England, and touching that agreement it is only requisite, to remark that, through all the changes of these years, it has not been found necessary -o amend it, though made only by letters between the Bank of England and myself. Eminent counsel have pronounced that it requires no alteration. I procured an Imperial Act to enable its provisions to be carried out. No financial measure that I know of has met with such success. The Stock Exchange share-list shows that already over L 50,000,000 of loans of various colonies have been brought under its provisions. Every constitutional colony has, I believe, used it. By the aid of this Act it is that I propose to save the colony some L 300.000 a year. This means that, without further annual charges than at present, you may borrow seven and a half additional millions. The late Government did something in the direction of conversion under the Inset ibed Stock Act, as I have already related. The principle on which the great profit is to be made, apart from saving the colony the burden of lhe sinking fund, is the higher market value of the inscribed stock. Whilst it rules now at about 3:J over par, bearing only 4 per cent, interest, 4| and 5 per cent, debentures rule at not much over the same market price. MAJOR ATKINSON’S ASSERTIONS. In 1879 lhe Government found that they had brought the colony to a financial condition that made a loan of L 5,000,000 imperative. The Crown Agents were able to effect the operation by giving the option to subscribeis to exchange their scrip on debentures for inscribed stock at about 80, bearing 4 per cent, interest, equal to bon owing lhe money at 5 per cent. Even then we had to give an assurance that the colony would not boirow further for three years. That three years interval is not yet up. That was the secret of the rise, together with the fact that all colonial stocks rose as the probability of an early conversion of Consols became apparent. Again, Sir, part of the rise was due to the popularity of the inscribed stock, as may be seen by its comparative value, to which I have already alluded. When I took office a few weeks since a remarkable rise in New Zealand sciu-ilies took place on the day the news reached London. My friends were good enough to ascribe that rise to me. It was merely a coincidence. I had nothing to do with the rise. It was due to Mr. Childers’ operations for converting Consols. All colonial securities rose. The Stock Exchange and the money market are, I believe, quite indifferent as to whom Parliament honors with the charge of its finances. They rely on the fittest person being from time to time secured. IN IE BEST ON RAILWAYS. During the conversion, there is anoJier relief which, if it were necessary, the colony would be fully.entil led to take, and ease itself of burthensome taxation. I allude to making the interest during the construction of rail- I

ways part of the capital necessary. I contend that the real cost cf a work is its cost during construction, with interest. A great effmt was recently made at Home to alter the Standing Orders of Parliament relating to piivate Bills to enable interest during con* stiuction to be added to capital cost. The

effort was not successful, because of Lord Redesdale’s opposition, he being a timehonored authority on private Bills. But numbers of men of high position and weight pronounced in favor of the change - , ■' and I am under the impression, though I do n* t say so po c i'iv«dy, (hat the alteration was approved <>f in the House of Commons. But the alter al ion was not really of much consequence, b’Cai'Se the st e result is Commonly brought about uy arr.u. ;ing with the contractors to pay the sharebolder interest during construction. Such a course doesnot prevent capital being subscribed. Let me suppose a railway constructed in three years at a cost of a million of money, bearing interest at 4 per cent. The average interest during construction would be one-half lhe amount, and the total would equal for three years L 60,000. This, added to the million when the work was compl eled, would give an annual charge of L '2,400, instead of L 40,000. What would such an addition ma.ter? But the saving during construction—L2o.ooo a year—would matter greatly to the taxpayers. LOCAL INDUSTRIES. I must ask the Commitee to allow me to make a diversion to another subject—that of local industries. The hon. member for Hawke’s Bay (Captain Russell) the other day made a happy remark, to the effect that this House should consider it possessed more the character of a Board of Works than of an Imperial Parliament. The efforts we make to promote the resources of the colony are likely to bear better fruit than those we devote to testing recondite social and political experiments. It is a mistake to suppose that the Customs are the only vehicle by which resources can be stimulated. We want to produce not only for ourselves, but for export. A few weeks since my old chief and friend, Sir William Fox, wrote me that he was convinced that New Zealand should make a great effort to seek out markets for its produce in the islands of the South Seas and in India. I believe with him that ft great export trade is one of the objects wa should keep in view. The frozen meat industry is in its very infancy. Since I have been in New Zealand I have been struck with the singular beauty of the woollen fabrics which aie being made in the colony, and at prices which I am assured would enable these goods to be profitably exported. New Zealand should aspire to sending away wool in only its manufactured state in the shape of fabrics. Do not tell me the price of labor forbids it. Would America be what it is, if lhe high price of labor had not stimulated the intellect of the people to discover labor-saving machinery ? I met an eminent engineer a short time back, who told me he could do work cheaper on the Pacific Slope, with wages at ten shillings a day, than in India, with wages at about the same price a month. Besides, the high price of labor brings to us the feasibility of one of the greatest elements of human progress co operation. Co-operative woollen factories open out a great prospect of enormous work here. The laborer who adds to comparatively small wages a share in the profits will give good service. There are other obvious industries that will come to the front. Semitropical growths, such as fruit, silk, tobacco, and other allied products, must take firm and profi.ableroot in this island. In the fisheries of the colony great wealth remains to be gathered. I do not refer to mineral resources, for we propose to make that the subject of the special attention of a Minister. But we also propose that other industries should receive the closest attention. We propose that an Industrial Exhibition shall be held every one or two years, and that two gold medals, besides others of less value, shall be given to those who do most to develop the industries of the country by combining excel* lence with economy. We propose that the first exhibition shall be held at Wellington next year, when Parliament is sitting, and that it shall bo followed by exhibitions in other large centres, alternatively in each Island. But there is an industry from which, I believe, great results will spring, and that may be assisted indirectly by the Customs—l allude to sugar from beet, and possibly from sorghum. But this manufacture wants a stimulus, by assuring it some advantage in the shape of freedom from Excise duties for ateim of years. Sugar has done as much for Queenslan I as its vast sheep and cattle lands. We propose to pass an Act declaring that sugar produced in the colony shall be exempt from Excise duty for a term of years, and that the present import duty shall not be reduced. It may also be necessary to give a bonus for the first few hundred tons made in the colony. PROPOSALS FOR THE YEAR.

Let me now gather up the thread of my remarks. We have seen that if we make no change we have a deficiency of L 52.652 ; but if we are content not to reduce our debts next year, we may recover an expenditure cf L 244.000, leaving us a surplus of L 191.348. But that there is an understanding not to press the question this session, I should recommend a rate—not a large one—to meet the cost of Charitable Relief and Hospitals, together with a few additions to the Stamp duties, and the total abolition of the Property Tax, with its crushing effects upon the progress of the colony. As it is, we propose to ieduce the Property Tax by one-half—namely to three-eighths of a penny. Eliminating the balance at last year, the reduction of one* half will amount to L 131,000. When we deduct this remission from the surplus of L 191.348, which I have just stated, we shall have a surplus of L 63.348 at the end of the financial year, which may be reduced by supplementary estimates. PUBLIC WORKS. I now come to the question of Public Works funds. It shall attempt to deal with it without forestalling my colleague, the Minister for Public Works. It is ray task to find the money : he spends it. I have already stated that we shall want LIOO,OOO additional aid this month, and additional aid each succeeding month, until the third million of the 1882 loan is raised. My predecessor had made arrangements for the disposal of another LIOO,OOO of deficiency bills, for authority to issue which he proposed to ask the House. I am happy to say I shall not require to trouble the House to give this additional authority. I have made arrangements to obtain half a million in anticipation of the million loan next year, to be supplied to us as we want. What possible good can there be in coming to the House for driblets of LIOO,OOO, when we know the existing liabilities require five times as much for taeir satisfaction ? Besides, legislation is unnecessary. About L 600,000 of the 3,000,000 loan will have been spent on open railways : aad about L 50,000 will have been consumed on the charges of raising the loan. In short, there will be little, if any, of the third million left when it is raised. I will refrain from exciting <the susceptibilities of my hon. friend opposite by commenting on the deplorable manner in which his L 3,000,000 loan scheme has broken down. We cannot afford to leave the roads unmade, the Native land purchases uncompleted, the gold fields neglected, or the f agments of railways scattered over the country to rot away. We must borrow more, and the question is, what shall be the amount? We shall ask authority to raise an additional L 1.500,000, out of which we shall replace the amount abstracted from the L 3,000,000. It is important in view of the operations to which I have icferred as now pending in the London maiket, and further operations that will be necessary in the direction of conversion, that we should, as much as possble, limit our borrowing just now. We may, perhaps, as I have already said, liberate a large amount of Sinking Fund, which will be available for the votes of the House. It is not feasible, however, to fix a time for this result. Conversion will have to be effected to suit the market, and the lime it will take cannot be accurately fixed. As regards further borrowing, we must, in a great measure, be guided by the increase in our power of meeting the annual charge*. We have the right to look each year for a large natural increase in the revenue. I present to the Committee an inleresting table, showing the revenue each third year over a peiiod of 12 years. I do not pretend that it accurately represents the natural increase, because there have been changes in rates and modes of raising the icvenue, but on the whole it gives a good idea that there is a great natural increase on which reliance may be placed, if efforts are

I ide to dwarf the material progress of the . It is absolutely necessary that memhould be reasonable in their demands b prosecution of railways. In the in- , I will not say of economy only, prudence and common sense, railway must be carried out with some regard iaining early returns as the work sses. I will now say a few words con- ? the railways specially mentioned in »yal Speech. We still adhere to the opinion that the North Island Trunk Railway is of supreme importance, and must be proceeded with as rapidly as possible. In connection with it, we also recognise the necessity of obtaining large blocks of land along the line of route, with the view of making them the subjects of special settlement. We still regard some of the lines as of exceptional importance. Amongst them I may mention the Otago Central and the short piece that will place the Napier line in connection with the line from Wellington northwards. We shall introduce a Bill to authorise the Government to enter into an agreement with a company or syndicate for the construction of the line between the East and West Coasts of the Middle Island. We shall make provision in the Bill for authority to enter into an agreement on the same conditions with the same or another syndicate or company for an extension of theljlinejfrom Nelson, to connect with some point of the through East and West Coast line, thus giving Nelson communication with both coasts. The conditions we shall propose will not be onerous on the Government, but they will be sufficiently favorable to enable, in our opinion, the contractors to procure the necessary capital. In these and other future arrangements with private persons for the construction of railways, we shall keep in view that it is desirable all lines in the country should be Worked by the Government. There are several subjects indirectly bearing on FINANCE About which I might have much to say, only that I have already greatly trespassed on the indulgence of the Committee. I must, however, make a reference to the subject of Local Government. The Colonial Government and Parliament may do a great deal to push the colony forward, but all their efforts will be incomplete if they are not seconded by the self-governing instincts and abilities of the separate localities. In order that Local Government should be efficient, it must possess -considerable freedom of action, a defined revenue, or means of raising revenue, and inducements to exercise economy. Railways do no way dispense with the necessity of roads and bridges to open up the country; on the contrary, their own success depends on the energy with which the arteries to feed them are made available to their use. i There is more need than ever for opening up lands, for promoting settlement, and for the construction of the means of communication, in the shape of roads and bridges. For these works the country must chiefly depend on local iff-nt . It may assist, and when it does assist it should effectually. In connection with railways, we have in view special settlements, within which a great number of families should be grouped. We want to see a large population located in the lands of the colony, enjoying its free institutions, and not in dread of the security of property being invaded. The present system of local government falls short of what the interests of the country require. We have determined to appoint during the recess a Royal Commission to inquire into and report on the whole subject. We will not consider the results of the investigation as our private property. They shall belong to Parliament, and to whoever is in office. Upon them we hope that next session legislation will be founded, which will vastly improve the present system of local government. Under a reinstated finance and diminished expenditure, we are convinced the country will rouse itself from apathy, and spring forward with leaps and bounds of progress. With common prudence we need have no more financial embarrassment or vexatious taxation. We may banish from our minds the philanthropic notion of insurance against pauperism, which might more correctly be terme l insurance of pauperism. We must make our railways, as we are able to do, without undue pressure. We must look forward to the time when colonists will no longer dread additions to population in the shape of suitable immigration. The North Island Trunk Railway must be pushed on with every possible expedition. It will open to the Colony a new world. It will bo as though it was increasing by one-third its territory. Let us encourage the progress of industries, whether they be agricultural, mineral, pastoral, or manufacturing. Still one thing remains. The system of local government must be improved. The edifice cannot be crowned without we have a satis-fa-iory system of local self-governing institutions. My task is concluded. I wish I could have discharged it with more force and ability. Still I shall not have striven in vain if I have succeeded in impressing hon. members with my own strong convictions that the finances of New Zealand are not in a condition of difficulty ; that they are suffering only from mismanagement; that they are elastic and buoyant enough to satisfy the most exacting financier; that oppressive taxation is not required; and that, under good Government, we may safely rely on a progressive improvement of the counti y and its resources.