NEW ZEALAND'S FINANCE

Sun (Auckland), Volume IV, Issue 955, 24 April 1930, Page 13

NEW ZEALAND'S FINANCE

PRIME MINISTER’S REVIEW WORK OF THE GOVERNMENT (Continued from Page 1.) "Special land tax as additional taxation was unavoidable. Last year the Government endeavoured ’ to place the additional burden equitably, and at the same time to create as little disturbance as possible in business and trade, in order that the economic progress of the Dominion should not be hindered. As it was considered that the large farming incomes had not borne their fair share of taxation in recent years, a special land tax was imposed on large rural estates with an unimproved value of over £14,000. Large farming incomes were also made assessable for income tax; but were subject to a set-off of the amount paid in land tax, in order to ensure that the special land tax should not impose undue hardship. In particular cases, provision was made in the legislation for a special Hardship Commission, to which land owners w’ere at liberty to state their case. This commission was given an entirely free hand by the Government, which has accepted its decisions in all cases. As a result, the special land tax has been wholly or partly remitted in a number of cases. In matters of taxatioil, as in many other things governed by arbitrary rates, absolute justice can never be completely attained, but the provision for appeal in the case of special land tax at least prevented unduff hardship being imposed on particular individuals. “After deducting remissions amounting to nearly £IOO,OOO. the special land tax brought about £250,000 additional revenue. The data obtained from the income tax returns of large farming incomes has not yet been fully analysed, but it is clear that the contention contained in last years Budget, that large farming incomes have not in recent years carried their fair share of taxation, w*as in accordance with the facts. This is proved by the fact that a considerable amount (definite figures not being available yet) was derived from income tax oh farming incomes, after deducting land tax, both ordinary and special. This means that previously some farming incomes were contributing less than half of their fair share of taxation. It will thus be seen that the Government was quite justified in placing part of the necessary additional taxation on this section of the community. “Additional primage duty was decided on to provide the balance of the additional revenue that was required to bridge the gap between the estimated revenue and expenditure. For last year, the primage duty on imports was increased from one to two per cent, primage, of course, is purely a revenue duty imposed upon practically all imports, whether dutiable or not, so obtaining the additional revenue through this channel meant spreading the burden equally over the. whole community. The additional impost on individual classes of goods from a retail point of view is practically negligible; hut eveu so the Government did not desire the tax to remain upon food any longer than was absolutely necessary. Accordingly, it was provided in the empowering legislation that the additional primage duty on foodstuffs and also on manures was to be lifted automatically on March 31, 1930. Accordingly, all such goods are now subject to the normal I per cent, primage, only in regard to the additional primage duty on other classes of goods it is prescribed in the Customs Amendment Act, 1929, that this may be terminated at any time now by Order-in-Council. “It Is not usual, however, between Parliamentary sessions, to make any forecast as to what will be done regarding Customs taxation, and I do not intend to make any pronouncement concerning it at this juncture. The matter will be dealt with when the whole of the financial proposals for the current year are finally under review. DEFENCE EXPENDITURE “With a view to ensuring that the financial year will close satisfactorily, and in the interests of the taxpayers, it. will be necessary for all items of expenditure to be overhauled with a view to possible curtailment. Accordingly, as already announced, it has been decided to suspend all territorial camps, pending a careful consideration by the Government of the whole system of land defence. The Government's proposals on the subject will be submitted to Parliament in due course, when the whole question will be open for discussion. In tile meantime no further camps will take place. STATE SUPERANNUATION FUNDS AND SALARIES “As indicated in my last Budget, the financial position of the State superannuation funds was found to be very unsatisfactory, due to the neglect in ihe past to give effect to the actuarial reports and certificates in respect to subsidies. The special committee of inquiry has been set up, and Is now exploring the position fully. In the meantime, I am pleased to say that I have been able to do something during the past year in the direction of increased subsidy payments, which were long overdue, an additional amount of £175,000 being paid over for this purpose. I am also glad to say that in respect to the lower-paid Pest and Telegraph employees, an improved scale of salaries has been adopted and put into operation. PUBLIC DEBT “The Public Debt on March 31 last amounted to approximately £267,380,000, the figures again being provisional and subject to audit. This is a net increase of £3,190,000 for the year. It may be explained, however, i hat this unusually small increase was due to the fact that £5,380,000 of the new loan moneys raised in the previous financial year, being parr of the £7,000,000 London loan raised in January, 1929, was really part of this year's finance. The new loan ruoueys received during 1929-30 totalled approximately £5,700,000, including £1,620,000 in London, being the last instalment of the £7,000,000 loan of January, 1929, and £4,080,000 obtained from local issues. As a partial set-off against these new issues, there were redemptions of debt during the year amounting to about £2,510,000, leaving the net increase at £3.190,000. As already stated, of the redemptions some £406.000 represented funded debt payments to the British Government and £1,160,000 under the operations of the statutory debt repayment scheme, while £260,000 came from reparations, and the balance from other accounts. The most important debt operation during the year was the satisfactory arrangements made for dealing with the balance of the 4 per cent. New Zealand Consolidated Stock, which was

due on November 1. 1929. On April 1. ! 1929, there was still £11,274,000 of 1 this stock in the hands of the public. A further conversion offer—to convert up to £5,000,000 of 4 per cent. 1929 stock into 5 per cent, stock at par, to mature July 1. 1945. with an option to the Government to redeem on or after July 1, 1935, together with a cash payment of £2 per cent, on ! November I—was made to holders of | the old stock. In September. 1929. { this offer was underwritten, and was ! taken up by the holders to the extent of £3,625,000. In view of the fact that the London money market at that ' time was seriously disturbed by the reactions from the boom on the New 1 York Stock Exchange, coupled with ! the Hatry affair and the outflow of , gold to the European market, the Do- | minion was fortunate in placing the j stock ou these terms, which were i favourably commented upon by Lon- ■ don financial papers. The remaining i £6.274,000 of 1929 stock was either j purchased before maturity, or repaid at maturity. The necessary funds for these operations were provided from New Zealand. £672,000 being provided out of debt repayment moneys, j and the balance from the proceeds of local issues in redemption. The con- j version and redemption of the £29,490,000 of 4 per cent. Consolidated Stock was the largest and most important financial operation in the Dominion’s experience, and when it is remembered that it had to be largely carried out over a period when the London money market was adversely affected by international complications, it will be realised that the Dominion is to be congratulated ou the successful termination of these large operations. It may be added that the transaction resulted in approximately £1,170,000 of the debt being repaid, and in about £6,000,000 of the debt being transferred from London to New Zealand, which fact is of considerable significance economically. While dealing with the public debt, 1 would like to refer briefly to the rise in the interest rates at which local issues are made. The rate was increased front 5 1-S per cent, to 5i per cent, on January 9, 1930, and I have received many protests against the action taken in this connection. I need hardly say that the Government is desirous of obtaining as cheaply as possible the necessary capital for carrying out its policy in connection with public works, land settlement. State advances, etc. It was found, however, that as a result of the high rates offered in Australia, and the relative scarcity of capital, the amount required by the Government could not be obtained at the rates previously offered. The local requirements of the Government were also affected by the large sums it was found advisable to provide for the redemptions of the 4 per cent. Consolidated Stock already referred to. The Government cannot control the price of money any more than it can control the price of butter or any other commodity for which there is a world-wide market. The Government, in order to carry on its programme ap proved by Parliament, thus had no option but to increase the rate of interest on debentures and inscribed stock issued in New Zealand. '“Loans railing due in New Zealand during the current financial year include the following amounts' held by the public; terest at 51 per cent, due on July 1 next; £326,900, bearing interest at 5 per cent., due on July 15 next £4,887,540, bearing interest at 41 per cent., due on September 1 next. In regard to the first two loans, I have to announce that holders of the securities will he offered a renewal for a further period from the respective maturity dates to February 15, 1937, with interest at 51 per cent, payable on August 15 and February 15. Holders of inscribed stock will shortly be communicated with direct from the Treasury, and applications for renewal of this form of security, as weH as bearer debentures on issue in respect of these loans may be made at the offices of the Treasury at Auckland, Wellington, Christchurch and Dunedin, or at any branch of the Bank of New Zealand in the Dominion. The terms to be offered to the holders of securities in the £4,887,840 41 per cent, loan will be announced later. STATE ADVANCES One of the chief plans of the Government’s policy on taking office was to provide all the capital necessary c-> enable the State Advances Office to cope with the demand for loans. When the Government took office, I found that there were several thousands of applications on hand, involving an amount of about £4,000,000. Under these circumstances, the Government gave the matter of State Advances its immediate attention, and in a few* months the accumulation of applies tions was overtaken. Since the Government assumed office on December 10, 1928, up to March 31 last, about 11,800 applications for loans totalling £13,350,000, were received. Loans authorised in this period totalled approximately £9,540,000, including £5,195,000 to 4,336 settlers, and £4,345,000 to 5,170 workers. The loans actually paid over amounted to £8,070,000, including £6,920.000 during the last financial year. This last item constitutes a record for the office. “This achievement of the Government, in addition to providing capital for the purchase and development of rural lands, enabled many farmers to rearrange their finances, and obtain the savings arising from long-term instalment mortgages, with freedom from financial worry. The assistance thus rendered has undoubtedly aided iu carrying out the Government policy of closer land settlement. Further, the expenditure of a large sum ol money in providing comfortable homes for the people has very materially assisted in solving the housing problems throughout the Dominion, and has incidentally been the means of stimulating the timber industry, and of providing work for a large number of people, including builders, carpenters, painters, plumbers, and other tradesmen. In this way, the activities of the State Advances Office have indirectly been of considerable assistance to the Government in dealing with the unemployment problem. INTERMEDIATE RURAL CREDITS Complementary to the State Ad- ' vances Office, there is the system of rural intermediate credit, which broadly was designed and constituted i to bridge the gap between the long j term instalment mortgages and the ! day-to-dav current-account facilities I offered by the bank 3. Accordingly,' the Rural Intermediate Credit Board is empowered and intended to assist | the man on the land by granting advances as cheaply as possible (the \ present rate of interest being 61 per | cent.) for clearing, fencing, draining, . buildings, and other farm improve- | ments, the purchase of implements, | stock, seeds, etc., the marketing of produce, and generally the year-to-i year finance of farming operations, j During the last session of Parliament an amending Act was passed to i make the system more workable, and

among other things the maximum amount that could be lent to a farmer was increased from £I,OOO to £2,000. Following this amendment, arrangettmnts have been made by the board to grant special credit facilities a!culated to be of particular benefit ; > sheep farmers and grain grower-. Under these special arrangement-, the board will fix the limit of advances for individual farmers, who will then be able to draw the money as they require it. interest being charged on the amount outstanding only. RELIEF OF UNEMPLOYED This is a matter which has been receiving the earnest attention of th•• Government erer since it assumed office. It was recognised from the start that a permanent solution of the problem was a matter that would take time, involving as it does the stimulation and expansion of our industries. both primary and secondary, and particularly the former. In this connection, every endeavour is being made to foster a farming spirit, to have more land brought under cultivation. to obtain closer settlement of existing farm lands, and generally to assist the farmers to increase the total production of primary produce. Pending the working-out of these far-reaching economic changes, th* l Government has not neglected the question of providing immediate work for the unfortunate members of the community who otherwise would be out of employment. Immediately thGovernment took office, arrangements were made to provide additional em ployment on public works in various parts of the Dominion. The necessary financial provision was made during the short session in December, 1925. when Parliament also authorised an increase from £309,000 to £400,000 in the total amount of subsidv which could be paid to local bodies in re spect of relief works undertaken b\ them. Later, a special committee of Cabinet was set up to organise addi tional work through the various State departments, and generally to deni with unemployment. The additions! works provided have for the mos* part been on road and main highways construction and afforestation, whilrailway trunk-lines completion, lands improvement, and irrigation works have been speeded up. These are all useful and necessary developmental works. “As most of the work was undertaken on the co-operative principle, and the men were paid by results at prices which would enable men of fair average ability, working industriously, to earn the Government standard daily rate of wage, the taxpayers have generally received value for the money expended, and the workers a reasonable reward for their labour. “Since the present Government assumed office. 26,635 men have been provided with employment through the Government labour bureaux throughout the Dominion. Of that number, 16,380 were placed on Government works, 6,109 with local bodies and 4,146 with private employers. When men are sent to Government works, they are given orders for their fares, and also meals en route, and the cost is later deducted from their earnings. It may be added that 3,700 men have refused the Government work offered to them, while 9,735 have left Government relief works of their own accord. “As is well known, in accordance with the undertaking given by the Government last year, practically every able-bodied man who was registered as unemployed at th© Government labour bureaux was provided with work in’ October and November. 1929, if he was willing to accept the same. “The Cabinet Employment Committee still holds frequent meetings, and the position regarding unemployment In the various parts of the Dominion is reviewed, and instructions are issued for the placing of additional men on Government works when other employment is not available. The expenditure by the Government in providing additional work during the last financial year, 1929-1930, amounted to approximately £1,300,000. This includes £900,000 expended by the Public Works Department, principally on roads and highways, £200,000 by the State Forest Service. in accelerating the programme of afforestation. £ISO,OOO by the Railway Department, and about £20,000 by the Lands D<*partment. In addition, subsidies to local bodies on account of relief works amounted to £112,500, so that the total cost to the State for the year was £1,412,500. “The period in which local bodies could raise relief of unemployment loans without taking a poll of ratepayers Was extended last session to June 30, 1930. During the last financial year, 18 applications from local bodies to raise such loans, totalling approximately £120,000, were sanctioned by the Local Government Loans Board. Subsidies to local bodies authorised during the year amounted to about £117,000, and the amount which was actually paid over to local bodies was £112,500. as already stated. Finally, I may say that the Special Committee set up to investigate the problem of unemployment has now submitted its final report, which is being very carefully considered by the Government. Definite proposals arising out of the work of this committee, and the investigations made by the Government itself will be submitted for the consideration of Parliament next session.