STATE TRADING

Sun (Auckland), Volume IV, Issue 1002, 19 June 1930, Page 12

STATE TRADING

KEEPING PROFITS OUT OF THE BUDGET BUILDING UP RESERVES WELLINGTON. Wednesday. whose transactions are excluded from the ordinarv Budget was made today - Forbes, in reply to a suggestion that it of 1928oceurrod it the profits ol the Rost Office had been transferred to the* Budget. Mr. Forbes said that by legislation in 1927 th< Post and T* U gr; pi finances had been separated from tl • ordinary revenue account of the «’ons< idated Fund, and provision had been made for the Post Office accounts to be kept on a commercial basis with adequate depreciation and renewal reserves. That change was made by statute and could not have been varied without fresh legislation. "It is true that the ordinary revenue account of the Consolidated Fund received less revenue from the Post Offi« «. in 1928-29 than it did in the previous years/* said Air. Forbes. “The additional receipts into th< Budget earlier years, which were used for general expenditure purposeo. ictualiy represented Post Office depreciation reserves which, according to the procedure adopted in ordinary commercial practice, should have been retained intact until they were required for the renewal of telephone and telegraph lines and apparatus, all of which arc comparatively short-lived. BUILDING UP RESERVES ‘Capital expenditure of this type * asset has been very heavy in the last few years, and if the change had not been made to enable depreciation funds to be created, and the excess of Rost Office receipts had been used to relieve th« taxpayer. it would have meant that within a comparatively short period when renewals become necessary, the taxpayer would hav* been called upon t * find en bloc a considerable sum which should have accrued over a period of years.” Illustrating this point, the Prime Minister remarked that a statement prepared in 1926, the year before the amending Act was passed, shows that in 1940 it is estimated that no less than £1,250,000 will ho required for renewals alone. The only alternative to setting up reserves for this purpose would be t-- resort to the unsound practice of capitalising sucli expenditure out of loan funds to replace assets worn out in a period very much shorter than that provided in the legislation governing the repayment of the public debt. The Prime Minister added that a suggestion had been made that the profits of all Government trading departments should be handed over to the Treasury.

“Whether, for example, the Government Life Insurance Department, the funds of which belong to the policyholders, is included in this recommendation is not clear,” Mr. Forbes remarked, “but in any case, a reference to that department serves to illustrate the value of such a casual suggestion. The fact that legislation was passed last year to provide for half the profits in the Public Trust Office being paid to the Treasury is also quoted, but that criticism entirely overlooks the fact that for a number of years that department retained the whole of its profits, which were used to build up fairly substantial reserves. When that stage has been reached in the Post Office finance, it will be time to talk about allocating profits to other sources. In all th© circumstances, the setting aside of surplus Post Office revenue, after meeting working expenses and interest charges, was the right and proper thing to do, notwithstanding temporary inconvenience to the Consolidated Fund. Hence the suggestions made by the critics merely amount to advocating tjpe adoption by the Government of unsound financial methods, which suggestions it is not my intention to adopt.”