The Southland Times. PUBLISHED EVERY MORNING. Luceo Non Uro. FRIDAY, MAY 30, 1930. MEETING DIFFICULTIES

Southland Times, Issue 21096, 30 May 1930, Page 6

The Southland Times. PUBLISHED EVERY MORNING. Luceo Non Uro. FRIDAY, MAY 30, 1930. MEETING DIFFICULTIES

Some hint of the seriousness of the position in connection with the railways' had been given to certain people in the community a little while ago, but for the majority of the public Mr Forbes’s statement concerning the finances will come as a heavy shock, and the effect of the blow will be increased by the recollection that only a little while • ago in declarations breathing of buoyancy the public learned of a surplus of £150,000. The explanation of the changed position is simple. Mr Forbes anticipates a fall of- about £1,000,000 in the revenue derived from the Customs, due to a diminution in imports following the fall in the return from the Dominion’s exports, and he will have to meet a loss of over £1,125,000 on the railways, to which must be added additions to the interest bill on new loans. There is nothing mysterious or surprising in these facts, and close observers expected to hear of some contraction in the revenue for the current year, though they may not have been prepared for the heavy railway loss. As Mr Forbes says, it is obvious that the railways cannot tap other financial sources immediately, and, largely because of road competition, it is facing heavy losses, but the first question that rises is in connection with the railway construction policy. We have seen and -applauded the abandonment of construction projects which did not promise savings or gains, and it is fair to ask the Government if it intends to pursue the absurdity of building the Wharanui-Par-nassus section which at best will give no adequate return for some years to come. In that project alone some £2,000,000 is involved, and the interest on that sum mustbe borne by the taxpayers until the line can earn sufficient over its working costs to meet the interest on the capital cost. At 5 per cent, that means £lOO,OOO a year as a charge on the Consolidated Fund, even if the new section of line is able to increase the railway revenue sufficiently to meet the running charges. Mr Forbes talks about the withdrawal of certain subsidies to institutions in the interests of economy, but surely this bit of railway work should bo considered at the same time. He proposes to appoint a commission to investigate the working of the railways to see what economies can be effected. Will he permit this commission to include in its order of reference an examination of all railway construction schemes in hand and projected? In spite of the demands for some authoritative inquiry into the prospects of the Wharanui-Parnassus project, the last Government went on with it, but Mr horbes now has the chance to show that he is really in earnest when he talks of a complete overhaul of the State’s expenditure so as to postpone or eliminate expenditure that is not necessary. If a co-ordination of road and rail transportation is desirable such schemes as this can be halted until the country is over this awkward period. The country is now prepared for a budget in which increased taxation will play an important part. For the fall in the Customs revenue the present Government is not to blame —no Government can be blamed for unfavourable trade conditions—but Mr Forbes knows that he will be judged by the manner in which he meets the difficulties now facing him. He will be judged or. the steps he takes to cut down his expenditure, and the methods he employs, to increase his revenue by taxation. This is not a time for hit or miss boldnesses, In the Old Country, Mr Philip Snowden has discovered that there are limits to the ext tent to which taxation can be increased, because beyond a certain point the reaction in trade is so serious that the sources of revenue'dry up. After declaring that “it is only from trade and commerce that the national revenue can be derived,” he said: I abate not one jot or tittle in my lifelong advocacy of great schemes of social reform and national reconstruction, but- * our immediate concern is to make these things ultimately possible out of revived and prosperous industry. To that we must first direct our efforts and devote what resources we can afford to that remunerative purpose .... Though, as I have said, I am imposing no new direct burdens on industry, I am fully aware of

the 'psychological effect on trade and commerce of increased taxation even when no material burden is imposed.

That was intended as a warning to his own party, as well as an assurance to industry and commerte, and its terms must be remembered in this country when additions to our taxation burdens are being considered. Additional taxation is inevitable, and the country will submit to the extra burdens if it is convinced that the distribution of the new load is equitable, but it will be for the Government to ensure that industry is not unduly weighted, and that the imposition of new taxes is not made to penalize one section of the community for the relief of another. Mr Forbes has done wisely in taking -the country into his confidence, and it will be the duty of all parties in the House to assist the Government in solving these problems, but the Government can expect help only if it recognizes that it must meet the other parties in the House frankly with the will to co-operate, not to use the political situation for a display of tactics. Mr Forbes faces grave difficulties, but he is tackling them in the right way, and we only hope the promise given by his latest utterance will be fulfilled.