FINANCIAL STATEMENT.

Te Aroha News, Volume II, Issue 68, 20 September 1884, Page 6

FINANCIAL STATEMENT.

When the House met at 7.30., Sir Julius Vogel delivered the Financial Statement. He said : — The usual early Financial Statement may be somewhat curtailed in its length and depi-ived of its dry details, because of my predecessor having already related a history of the year ending the 3lst March 1 ist and its results. I will briefly epitomise tle position he described. The year ISS3 84 was commenced with a surplus of L 35,549, and it ended with a deficiency of L 152,112. The revenue and expenditure of the land fund, which, though kept in a separate account, formed part of the Consolidated Fund, shows that during the last year the payments exceeded the receipts by L 6,117., 117. The L 75.203 due on the transactions o f ISS2-S3, therefore still remains unpaid to the mini road account. On the 31st of March, 18S3, there was ? n the Public "Works Account (I quote my predecessor's for the remainder of the sentence), an unexpended balance of L 577.912, but of this L 202.454 was advances iv the hands of officers. The balance included the whole proceeds of the second milliun of the three-million loan, and also the proceeds of that odd little colonial inscribed loan of L 250,000, which was taken up by the Poet office. The public debt of the colony on 31st March, ISS4, after deducting the sinking funds accrued amounted to L 29 ,574,902, the annual charge in respect of which (including the contribution to the sinking funds) amounts to L 1,578,799., 578,799. This debt was exclusive of the deficiency bills, amounting to L 398,000, issued in aid of revenue, and remaining outstanding at the close o' the year, as also of the L 400.000 of deficiency bills issued to facilitate remittances which 1 consider a contingent, though remote, liability. Taking the date of my accession to office as the Ist of this month, the immediate financial prospects were as I am about to describe. The Consolidated Fund would be a few thousands short, notwithstanding that all the deficiency bills authorised by law were issued and" disposed of. As regards the Public Works Fund, the estimate showed that at least Ll oo, ooo would have to bs borrowed in some shape to the end of September, and that the like process would have to be gone through for meeting liabilities nntil the third million loan was negotiated next year.

INSCRIBED STOCK. The loan conversions of last year as described by Major Atkinson consisted of L 3,555,300 5-30 debentures, and L 1,832,000, 832,000 short dated debentures, but the transactions consequent on these conversions are still not completed. On the whole the annual savings on the conversions of last year nominally amounted to about L 30,000, and some L 6,000 more will be gained by the conversion of the balance of the 5 per cent. 5 30. Another effect of the conversion has been the postponement of payment of a sum of about L 50,000 for interest from a date within the present financial year to next year. It is much to be regretted that the conversion was commenced with a 5*30 instead of with the Consolidated Loan of 1867-1870, which carries with it an accumulation drawing on the sinking fund. The 5*30 could have been paid off at par at any time on six months' notice.

THE DEFICIENCY BILLS. Before proceeding further to describe the present position and future plans, I think it will be as well, whilst the subject is in the memory of the hon. members, to deal with the question of the deficiency bills. They amount, as the Committee are aware, to L 150,000 for last year's deficiency, L 450,000 for current purposes on the year's Consolidated Funds Account, and LlOO,OOO for Public Works Account. There are besides the 1400,000 contingent liability bills. My friends, I daresay, will think" that I am rather good-natured, not to say stupid, to trouble myself with working out my predecessor's difficulties. They will say, "By aiding to permanent debt so much of this floating debt as will leave you without any anxiety for the future, then you will start on a fresh career of manufacturing a new floating debt. " I shall not do anything of the kind. I am profoundly impressed with the conviction that it is intricate entanglement rather than real difficulty with which New Zealand has to contend. I believe her finances can be put in order, and that we may count from year to year on such an improvement in revenue that so much of the floating debt as does not come within the category of mere aid within the year can be discharged within a reasonable period. The L 450,000 I shall consider as strictly aid within the year, and I shall ask the Hout-e to increase the amount by another L 50,000. My predecessor stated his opinion that the L 400,000 was not sufficient, and actual experience has shown that the additional L 50,000 for which he obtained authority is still not enough, for, as I have told the Committee, there is beyond all the deficiency bills a deficiency of a few thousands in the estimates of the present month. I shall ask, then, for authority to add L 50.000 to the L.450,000 strictly for the purpose of anticipating revenue within the year. The L 150,000 for last year's deficiency I shall pay off within the next two years or so.

The LlOO,OOO for public works can either be allowed to lapse or continue to be used as means of adjusting public works revenue within the year. As to the contingent L400,0Q0, I do not like the arrangement, and shall hope to be able to do away with it shortly. Thus I am not intending to propose that most unpopular of all financial operations, the converting floating into permanent debt.

PROPOSALS FOR THE FUTURE. I have had to take the Estimates very much as I found them. The hon. member for Egniont, in his last Financial Statement, led the Committee to believe that he proposed to effect great savings in the Civil Service vote,aud also that he intended to amend the service by classification and promotion. He did not particularise his proposed reforms, and he thought it undesirable to leave a record of them behind him. The type even of the Bill said to have been prepared was broken up. As to promotion by the classification system irrespective of merit, l am not an advocate of it. It reduces officers to a dead level, and leaves little incentive to individual exertion. I have been told that in an adjacent colony at ono time under the influence of this system it was found necessary to have an army of supernumeraries outside the Civil Service regulations in order to carry on tho business efficiently. I "will proceed to state the principal alterations we propose in the Estimates. One is a reduction of the Armed Constabulary expenditure at the rate of L 29,000 a-year, but it can only come into force for the last quarter. We propose, on the other hand, to add L 5 to the capitation allowance of Volunteers. This will be for the last six months of the year at the rate of LIO yearly, at which we propose it shall continue. We shall also ask authority for appointing a commanding officer of Volunteers, and we shall place a sum on the Estimates to defray the expenses of members attending the annual competitions of those singularly meritorious and valuable bodies the volunteer fire brigades. These three items will appear on the supplementary estimates. As regards the Department of Education, we think the time has come when the large annual increase of scholars renders it unnecessary to allow the extra capitation fee of 5s a head outside of the provision made in the Act. This reduction we propose shall commenceanvith the last quarter in the year, so that it will only amount to Is 3d a head. We shall ask the House to except the schools in Westland provincial district, the funds of which are somewhat limited. There has been no time to minutely analyse the receipts and expenditure of the Railway Department. We are of opinion that closer and more intimate business inspection Mill materially aid the economy and efficiency of the management of tho railways. We design no reflection on the present manager. 1 know of many systems of railways not so large as that of New Zealand where it would be thought absurd to leave to one man the virtually responsible control, no matter what his experience and though he was receiving five times the salary of the present manager. However good a manager may be, he derives immense strength from being able to referdifficult points to the calm consideration and judgment of a board of able bu&i-ness-like men. The expense of such aid is nothing when you have to do with an undertaking running over a million a-year of revenue, and absorbing over half a million of expenditure. At the same time, the session being so much wasted, and so much remains to be done, that it is possible we may not press our proposals for local boards this year. I hope to effect a saving of expenditure, and to make beneficial reforms in connection with the present system of audit and of keeping accounts. Virtually, at present, three sets of books of accounts of the colony are kept by three independent departments. Each department, besides the Treasury and the Audit Department keeps severally its series of book?. They are not precisely the same books, but they are of an allied character, and they are kept by separate staffs. lam disposed to effect an entire change by which the Audit Department and the accounting portion of the Treasury would be abolished, and to substitute an Accountant General's Department. The altei'ation would, I believe, lead to considerable saving, but that would be its least merit. Its great advantage would be that it would assist in connecting the departments, and in reducing their separate action in the way of contracting liabilities. It would also lead to a much needed reform in facilitating the discharge of accounts. I referred on a previous occasion to the serious complaints made as to the difficulty of obtaining payment of moneys due by the Government. It ■nould lead also, I think, to making it cheaper to obtain the returns which are required for so many purposes. But all these are opinions founded on theory, and before I can give effect to them I must narrowly investigate their probable practical operation and have inquiry made into the subject. At any rate, there seems little doubt as between the Audit and Treasury the books may be kept with more economy.

TELEGRAPH ANI> POSTAL, I have, I think, been able to effect some improvement in the telegraph service, though without the expenditure of money. The use of stamps for payment of telegrams will greatly facilitate keeping the accounts of the department. The abolition of receipts for telegrams will save the receivers of these documents and tho department a wholly unnecessary trouble. Another change has not as yet been made public. I have been much impressed by the inconvenience occasioned by closing a large number of offices at the early hour of 5 o'clock. I have arranged that these offices shall be opened between seven and eight, and closed for half-an-hour in the middle of the day, between half-past one and two. These changes will take place on the Ist October. I should also call the attention of the Committee to the eerious loss the colony has suffered and is suffering through the diversion of a large part of its English correspondence to the Brindisi route. The English postal authorities have to my mind behaved most unwarrantably in the matter.

LAND REVENUE AND EXPENDITURE. The statement of receipts and expenditure on account of the Land Fund other than the revenue from leases cannot be pronounced satisfactory. It must be remembered the year is a great part gone, and I am giving the results and anticipations as we have found them. My colleague, the Minister for Lands, will probably make an exposition of his views on the subject later in the session. It will be observed from the Statement that the L 75,203 due to the main roads account under the Roads and Bridges Construction Act, is yet unpaid. It was due at the end of 1882 83, and as my predecessors left it so long unpaid, I do not see that it is of pressing importance for me to discharge it. In fact, other provision will have to be made for the purpose of the Roads and Bridges Construction Act. If it is to remain on the Statute Book, it will absorb the whole of that colonial inscribed stock loan which was authorised for the purpose of being taken up from time to time as people required it, but which waß absorbed in bulk by the Post-office.

RECEIPTS AND EXPENDITURE OF THE YEAR. I proceed with the statement of the estimated expenditure of the year, with such few alterations as I have described, and also I give a statement of the expected revenue supposing the revenue is raised on precisely the same terms as last year, including a threo farthing property tax. The estimate of revenue is moderately stated, and I believe hon.- members may count on the amounts set down boing verified. The estimated receipts and expenditure of the Consolidated Fund for the financial year ending 31st March, 1885, are :— Ordinary revenue or receipts : Customs, L 1,375,00 0; Stamps, L 527.500 ; Property Tax, L 275,00 0; Beer Duty, L 55.000 ; Railway, LI, 120, 000; Telegraphic, L 94,000; Registration and other fees, L 37,000; Marine, L 16,00 0; miscellaneous, L 35,000: total, L 3,534,500., 534,500. Territorial Revenue — depasturing licenses, rents, &c, LISS.OOO : grand total, L 3,722.500., 722. 500. Expenditure : Permanent appropriations : Civil List, L 29,750 ; Interest and Sinking Fund, L 1,559,115, 559,115 ; under special Acts of the Legislature, L 53,724 : total, L 1,642,589., 642,589. Annual appropriation, Legislative, L 67,518 ; Colonial Secretary, L 238.435 ; Colonial Treasurer, L 51.653 ; Minister of Justice, Ll 17,265 ; Post-office and Telegraph, L 259.322 ; Customs, L79,05l ; Stamps, L 27,491 ; Education, L 327.102; Native, L 17,311 ; Mines, L 21.308 ; Public Works, L 740.660 ; Defence, L-173,427 : total, L 2,132,563, 132,563 : grand total, L 3,775,152. The Committee will observe that this shows a deficiency of L 52.652. Let us now Eec what we may do in the way of converting the deficiency into a surplus.

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 stated is proposed, but I have to call the attention of the Committee to a larger item of expenditure which should, in our opinion, be relieved, and through tho instrumentality of such relief the country be saved a considerable portion of its hoavy taxation. I have freely stated that this was feasible, and have been met with incredulous smiles. The time has come for me to fully explain my meaning. 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 percentage of the yearly charges on the net indebtedness, they will be better able to follow my meaning. They will find that on a total net indebtedness of L 29 ,774,902 we aro paying annual charges for interest and Sinking Fund to the amount of L 1,578,799,, 578,799, or in other words 5.33 per cent. Although our 4 per cent., inscribed stock is quoted in London at 105 f, if wo bring our loans down as we may well do to a basis of a little over 4 per cent, we may have an annual saving of over £300,000. [The Treasurer here narrated the condition of the loans to which Sinking Funds are attached.] It is over seventeen years since I asked the then Treasurer, Sir William Fitzherhert, to dispense with the sinking funds on our loan. Sir William Fitzherbert was far too acute a financier not to recognise their evil, but he had to yield to circumstances with the 1567 loan, as I had afterwards to a smaller extent witli tho IS7I loan. We both recognised the misfortune, but were unable to get out of the deep groove into which New Zealand finance had fallen. There are members in this House who are equally aware of tho objection to sinking funds, notably the member for Auckland West (Mr Dargaville) and the member for Gladstone (Mr Sutter), who recently addressed me a letter, in which he said (and very truly) that sinking funds were condemned on every side as exploded fallacies. The member for Auckland East (Sir George Grey), I am told, during the time he was Colonial Treasurer directed his attention to the same subject, and indeed, had a Bill prepared, the nature of which I cannot describe, as I have not seen it. Again, last week the hon. member for Te Aro (Mr C Johnston) asked some questions, the inference from which wa3 that he realised the relief which was to be obtained both from the accrued Sinking Fund. The member for Waitemata, by similar questions, evidenced the same acuteness. Lastly, the hon. member for Egmont, during the three or four days he was recently in office, seemed inclined to follow in a somewhat similar direction, judging by the telegram be sent to the Agent-General which I read to the House on Friday, on which day I f>aw it for the first time. It is not, however, unfair to suppose that in one shape or another he obtained an inkliog of my views I have not talked over this subject for many years with Sir W. Fitzherbert, but I am quite certain he will bear me out in saying that 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 have refused to recognise the great dictum of Professor Hamilton, that the only trre sinking fund of acountry's national debtis the excessof 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 in consideration — when the intolerable burden of the Sinking Fund must be recognised. 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 ot the works. I speak advisedly of this splendid heiitage New Zealand is acquiring- a monopoly of railways— at a total cost less than oiler countries have paid for merely buying the land on which to construct them. Twenty-five years honce, 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 rail w ays did good work. What more logical evidence of true value is required than that supplied by the Railway Department in its last annual report with regard to the progressive increase of traffic. [Sir J. Vogel quoted figures showing the increase of traffic on the railways.]

THli SINKING FUND. The Sinking Fund during the presentyear is estimated to amount to L 244,000 — that is, during the present year we shall reduce our debt by that amount, and it increases pro gressively. I 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 three millions out of i he taxation. I contend they cannot afford to do this ; that it is placing on the colony a fearful incubus. The million paid off during the last five years has told severely on the colony. I am quite aware that our obligations as they exist must be fulfilled. Nevertheless, any time during the last five years the Government, by an Order-in-Council, with

perfect regularity and in a manner no human being could take exception to, might, under existing statute law, have saved the colony a great part of this heavy burden. My proposals are to virtually relieve the permanent charges this year to the extent of tho Sinking Fund, say £.244,000. 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. Kecently in Victoria the first railway loan, amounting to some millions, fell in for payment. ISo one conceived the idea of taxing the people to pay it off. Every penny was renewed as a matter of course. Without going into particulars I may state that of course the process under which the Sinking Fund will be lelieved, and relief alpo given to the anomalous condition of loans nearly run out, on which the yearly charges are so heavy, is through the process of convex sion in one shape or another.

CONVERSION OF LOANS. And here I must say a few words, at the risk of rendering myself amenable to the charge of egotism, concerning the means whereby the process of conversion has become so profitable. In 1875 I was in England on an official mission. Two eminent physicians whom I consulted forbade my venturing to return to the colony in my then state of health. I employed myself in endeavouring to give to colonial loans, through inscription at the Bank of England, the status and character of consols, or of 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 all the years it has not been found necessary to amend it, though made only by letters between the Bank of England and myself. Eminent counsel have pronounced that it requires no alteration. When the agreement was concluded it was, however, dis covered that an Imperial Act was necessary, not to validate it, but to enablo certain of its provisions to bo carried out. For over two j-ears I worked unceasingly to procure that Act, and at last my effoits were crowned with success. No financial measure that I know of has met with such success. The Stook Exchange share list shows that already over fifty millions of loans of vaiious colonies have been brought under its provisions. Every constitutional colony has, I believe, uBed it. By the aid of this Act it is that I propose to save the colony LHOO.OOO a-year. It cannot all be done at once, but effected it will be as the market will allow of its being done, and my proposal is to accept the debt as it at present stands, not vainly to tax the colonists to pay it off, but by conversion to approach to the result of saving L.SOO.OOOayear. 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 Inscribed Stock Act, as I have already related. The principle on which the great profit is made, apart from saving the colony the burden of the Sinking Fund, is the higher market rate of the inscribed stock. Whilst it rules now at about 3 ! t over par, bearing only 4 per cent, interest, 4^ and 5 per cent, debentures rule at not much over the same market price. It is probable also that large masses of accrued Sinking Fund w ill be set free during the process of conversion, and, subject to the control of the House, will become available for public works, in lieu of fresh borrowing. The hon. member for Egmont has again and again claimed for his Government the credit of raising the value of New Zealand Inscribed Stock from 80 to 100. This is a very disingenuous claim. The facts are simply these : in 1879 the Government found that they had brought the colony toa financial condition thatmadea loan of L 5,000,000, 000, 000 imperative. Such an amountfora colonialloan wasthen unknown. The agents, of whem I was one, were told price wasnottobar the way. Theyfoundthere was but one mode ordoing it, and that was by the agency of the Inscribed Stock Act. We were able to effect the operation by giving the option to subscribers of exchanging the scrip for debentures for inscribed stock at about 80, bearing four per cent, interest, equal to borrowing the money at five per cent. Even then we had to give an assurance that the colony would not borrow further for three years. That three years' interest — not the Government — was the secret of the use, together with the fact that all colonial stocks rose as the j robability of an eai'ly conversion of consols became apparent. Again, Sir, part of the rise was due to the popularity of the Inscribed Stock, asmay beseen byitscomparative value to which I have already alluded. It may soothe the ruffled vanity of my hon. friend if I add a few words. When I took office a few weeks since a remarkable rise in New Zealand stocks 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's operations for converting consols. All colonial securities rose. The Stock Exchange and money market are, 1 believe, quite indifferent as to whom Parliament honours w ith the charge of its finances. They rely upon the fittest person being from time to time secured.

INTEREST TO BE CAPITALISED. There ia another relief, which, if it were necessary, the colony would be fully entitled to take, to ease itself of burdensome taxation. I allude to making the interest during the construction of railways part of the capital cost. Had I deemed such relief neces&ary, I should not have hesitated to propose it. I know my not doing so will be a disappointment to my lion, friend the member for Egmont, who, from remarks he made at Hawera, had arrived at the conclu&ion that I meant to come down with such a proposal, and had fortified hiraeelf Avith a case against it. It would be a pity he should be left like Don Quixote to tilt an imaginary foe. I will enable him to use the fruits of his own industry and his carefully-arranged arguments, nor will the discussion bo wholly without meaning, for though I do not intend to make proposals in the direction indicated, it must be a comforting thought to the people of the colony that, far trom straining all methods of relief from taxation, they have left one unsued of which they would be fully entitled to take advantage. I contend that the real cost of a work ia its cost during construction with interest. So it would stand in the books of private individuals, so it should stand in the books of the Government. The only argument of any force against it is that it might be considered in London, where we borrow our money, an improper proceeding, but that idea is amply disposed of. A great effort was recently made at Home to alter the standing orders of Parliament relating to private bills to enablo interest during construction to be added to capital cost. The effort was not succeasful because of Lord Redesdale's opposition, he being a time-honoured authority on private bills, but numbers of men of high position and weight pronounced in favour of the change, and I am under the impression, though I do not say so positively, that the alteration was approved in the House of Commons. But the alteration waB not really of much consequence, because the same result is commonly brought about by arranging with the

contractors to pay to BhaTehold&rs interest during construction. Such a course does not prevent money being subscribed. I can remember quite recently the case of an English railway in which the plan was adopted, and in which the capital was written for many times over, but the arguments in favour of a Government adopting the course with works which are a great heritage to posterity are ten times stronger. Our successors will think our doing otherwise quixotic. " Why," they will say, "did our predecessors unnecessarily contract their producing powers by uncalled for taxation ? The annual burden of adding the interest to the cost during construction ' would have been a mere trifle." Let me take a case. 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 the amount, and the total would equal for three years L 60,000. This, added to the million, when the work was completed, would give an annual charge of L 42,400, instead of L 40,000. What" would such an addition matter ? But the saving during construction of L2U,000 a year would matter greatly to the taxpayers. ENCOURAGEMENT TO LOCAL INDUSTRIES. I must ask the Committee to allow me to make a diversion to another subject — that of local industries. lhe lion, 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 j Imperial Parliament. The efforts we make to promote the i - esources of the colony are likely to bear better fruit than those we devote to testing recondite social or political experiments. It is of paramount importance that full play should be given to the industries suited to the capacity of the colony. It is a mistake to suppose that the Customs are the only vehicle by which resources can bo stimulated. Wo want to produce not only for ourselves, but for export. When Canada, many years pince, was cut out of the American markets by the fiscal policy of the United States, the Imperial Government placed one of her Majesty's vessels at the command of Canadian delegates, that thoy might search for other markets in other countries. A few weeks since my old chief and friend, Sir William Fox, just as he was embarking from Queensland ior England, wrote me in that felicitous language which comes so naturally to his brilliant pen, that he was convinced 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 a great export trade is one of the objects we should keep in view. Let us see some of the obvious products we have to send away. The frozen meat industry is in its very infancy, and though now we only send it to England, do we not know that to India and to the Islands teeming with population, in the Indian Ocean and Arafura Sea, New Zealand mutton would bean infinite luxury? But King Sheep does not stop at providing food. Since I have been in New Zealand I have been struck with the singular beauty of the woollen fabrics which are being made in tho colony, and at prices which I am assured would enable those goods to be profitably exported. New Zealand should aspire to sending away wool in only its manufactured state, in the shape of labrics. Do not tell me the price of labour forbids it. Would America be what it is if the high price of labour had not stimulated the intellect of the people to discover labour - saving machinery ? I met an eminent engineer a short while back, who told me he could do work cheaper on the Pacific slope with wages at 10s a day than in India with wages at about tho same price a month. Besides, the high price of labqur brings to us the feasibility of one of the greatest elements of human progress — co-operation. Co-opera-tive woollen factories open out a great prospect of enormous work here. The labourer 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. Semi-tropical growths such as fruits, silk, tobacco, and other allied products must take firm and profitable root in this island. In the fisheries of the colony great wealth remains to be gathered. Ido not refer to mineral resources, for these we propose to make the subject of the special attention of a Minister, but we also propose that other industries should receive the closest attention. A Government at little expense may do much in the way of lending a prestige to its country's products. To give us a knowledge of what producers and manufacturers can do, and the extent of the improvements! they make, 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 excellence and economy. We propose that the first exhibition shall be held at Wellington next year when Parliament is sitting, and that it shall be followed by exhibitions in other large centres alternately in each island. But there is an industry from which I believe great results will spring, and that may be assisted indirectly by Customs. I allude to sugar from beet, and possibly from sorghum. The production of beet sugar is now so perfected that it is made economically all over Europe, even without artificial restric tions. Civilisation conquers in the end ; products of cultured labour will excel those of the savage and the slave. But this manufacture wants a stimulus by assuring it some advantage in the shape of freedom from oxcise duties for a term of years. The assurance is not much to give. None of the colonies favours heavy excise duties; fow have any at all worthy of mention. The wine in Victoria and New South Wales, and sugar in Queensland, are notable examples. Sugar has done as much for Queensland as its vast sheep and cattle lands. We propose to pass an Act declarl ing that sugar produced in the colony shalbe 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 £52,652, but if we are content not to reduce our debt this year we may recover an expenditure of 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 effect on the progress of the colony. As it is, we propose to reduce the property tax by one-half, namely, to three-eights of a penny. Eliminating the balances of 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 LGO,34S 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. I shall attempt tp doal with it without forestalling my colleague, the Minister

for Public Works. It is my task to find the money, his to spend it. I have already stated we shall want LlOO,OOO additional this month, and additional aid each succeeding month until the third million of 1882 loan is raised. My predecessor had made arrangements for the disposal of another L.160,000 of deficiency bills, for authority to issue which lie 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 it. What possible good can there be in coming to the House for driblets of LlOO,OOO, when we know the existing liabilities require five times as much for their satisfaction? Besides, legislation is unnecessary. About L 60,000 of the three million loan will havo been spent on open railways; 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 tho sueceptibilities of my hon. friend opposite by commenting on the deplorable manner in which his three million loan scheme has broken down. We cannot aftord to leave tho roads unmade, the native land purchases uncompleted, the goldfields neglected, the fragments of railways scattered over the country to rot away. We must borrow more, and the question is, What shall be the amount ?

A MILLION AND A-HALF PROPOSED. The gentlemen who have done me the honour to think, or rather, I should say, to pretend to think that my only resource is borrowing, have circulated reports that I intended to propose ten or fifteen millions ; indeed one gentleman wont as high as 25 millions, but he dwells in a lake and hilly district, where amongst the wondei's of nature, the imaginative faculty is said to be abnoi mally developed. This is, I believe, the plank on which my honourable friends ami well-wishers opposite propose to return to oilice. When they have heard what I have to state, I fear, like Edgar Poe's "Haven," they will be inclined to utter " Never more." We shall ask authority to raise an additional million and a-half, out of which we shall replace theamount abstracted from the three million loan. Honourable members who have followed the remarks I havo just made about the loan, will see that the new loan, is only partly for the current year. It is chiefly for expenditure after the end of the financial year, and if they wish to avoid future fracas they must not spend one year and borrow next, but borrow as expenditure has to be met. But it is important, in view of the operations to which 1 have referred as now pending in the London market, and further operations that will be necessary in the direction of conversion, that we should as much as possible 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 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 time 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 charges. Depend on it we have the right to look each year for large natural increases in the revenue. I present to the committee an interesting table, showing the revenue each third year over a period of twelve years. Ido not pretend that it accurately presents the natural increase, because there have been changes in rates and modes of raising the revenue, but, on the whole, it gives the idea that there is great natural increase, one on which reliance may be placed, if efforts are not made to dwarf the material progress of the colony.

FDTURE RAILWAY WORKS. Without unduly forestalling the communication my colleague will make in his Vublic Works Statement, I must call the attention of hon. members to some points which have acquired peculiar interest on account of the reference made to them in the Speech from the Throne. It is absolutely necessary that members should be reasonable in their demands for the prosecution of railways in the interests, I will not say of economy only, but of prudence and common sense. Railway works must be carried on with some regard to obtaining early returns as the work progresses. I will now say a few words concerning the railways specially mentioned in the Royal Speech. We still adhere to the opinion that tne 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, and of making them the subjects of special settlements. We still regard some of tho lines as of except tional importance — amongst them I may mention the Otago Central and the short piece that will place the Napier line in connection with Wellington northwards. We shall introduce a bill to authorise the Government to enter into an agreement with a company or syndicate for the con* struction of the line between the East and West Coasts of the Middle Island. We shall make provision in the bill for authority to enter an agreement on the same conditions, with the same or another syndicate or company, for the extension of the line from Nelson to connect with Rome point of the through East and We."* f ne, giving Nelson communicator" 1 with bith coasts. The conditions we shall propose will not be onerous on Government, but they will be sufficiently favourable to enable, in our opinion, the contractors to procure the necessary capital. In these and other future arrangements with private persons for construction of railways we shall keep in view that it is desirable all lines in the country should be worked by the Government.

LOCAL GOVERNMENT. — A ROYAL COMMISSION PROPOSED. There are several subjects indirectly bearing on finance about which I might have much to say only that I have already greatly toespassed 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 institutions and abilities of the separate localities. In order that local government should be efficient it must possess considerable freedom or means of raising revenue and inducements to exercise economy. Railways do not dispense with the necessity of roads and bridges to open up the country. On the contrary, their success depends on the energy with which arteries to feed them are made available to their use. There is more need than ever for opening up lands, promoting settlement, and for constructing means of communication in the shape of roads and bridges. For these works the colony must chiefly depend on local efforts. It may assist, and when it does assist, it should effectually. In connection with the 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 on the lands of the colony, enjoying its free institutions, and not in dread 01 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 resultof the investigation ourprivate property. They shall belong to Parliament and to whatever Government i«i in office. Upon them we hope that next session the legislation will be founded that will vastly improve the present system of local government. Under a reinstated finance and diminished expenditure the country will, we are convinced, rouse itself from apathy, and spring forward with leaps and bounds of progress. It is a mistake to suppose that borrowed money is the cause instead of a consequence of prosperity. Long before borrowed money was being spent in any quantity, after the policy of 1870 was proposed, the colony was replete with progress. With common prudence we need not have morefinancialembarrassment. We may banish from our minds the philanthropic notice of insurance against pauperism, which might more correctly be termed insurance of pauperism. We must make our railways as we are able to do so, without undue pressure. We must look forward to the time when colonists will no longer dread additions to population in the shape of suitable immigrants. The North Island trunk railway must be pushed on with every possible expedition. It will open to the colony a new world. It will be 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 satisfactory eystem 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 members with my own strong conviction that the linanoea 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 financiers, that oppressive taxation is not required, and that under good government we may safely rely on a progressive improvement of the country's resources. After the Financial Statement had been delivered, Major Atktn.son moved to report progress, with the view of adjourning. The motion for reporting progress was carried, and the House resumed.

FUTURE BUSINESS. In reply to Mr Hobbs, Mr Richardson said that it would very much depend on the nature of the debate on the Financial Statement as to when the Public Works Statement was brought down. Major Atkinson said that they could not possibly decide as to the projected loan until they heard how it was to be spent. He therefore argued that it was imperative the Public Works Statement should be brought down at an early date. Mr Dargaville and Mr Fergus also argued in support of the Public Works Statement being brought down early. Mr Stout argued that it was their duty to discuss the principle of the statement first. When the Financial Statement was discussed they would bring the Public Works Statement down, and be prepared, as they were on the Financial Statement, to stand or fall by it. In ordinary circumstances they would finish the debate in a week, when they would bring down the other statement. It would have to be discussed on its own merits. Mr Holmes contended that the Atkinson Government had followed exactly the same course now proposed to be followed by the Government. After it had been arranged that the debate should bo taken on Friday evening, so as not to interfere with private members' business, the House adjourned at five minutes past nine.