FINANCIAL STATEMENT.

Te Aroha News, Volume III, Issue 108, 27 June 1885, Page 5

FINANCIAL STATEMENT.

On the House assembling at 7o'clock on June 19th., Sir J. Vogkl delivered his Financial Statement He said :— -The year 1884-85 was commenced with a deficit of £152,112. For £150,000 of this amount deficiency bills were authorised to be issued, maturing on the 3lst. March, 1886. The balance of £2,112 was discharged out of the year's revenue. I proposed last year that the £150,000 should not be turned into a permanent debt. I still hold to the saraei view. We must pay the amount off in j two or three years. The transactions of the consolidated revenue for the year 1884 85, after discharging the deficit £2,112, and leaving outstanding the £150,000, shows a credit balance of £'9,891, or inclusive of the small deficit paid off, a surplus of £22,003 The total consolidated revenue of the year amounted to £3,569,494. There was ade ficiency in the item of stamps, principally occasioned by an expected increase of postal revenue having by accident been twice credited in the estimates.^ The railways also showed some deficiency, whilst the Customs exceeded to a small extent the estimate. T.ie total deficiency in the estimate was £22,016 The expenditure, on the other hand, was less than the amount voted by £23,852. inclusive of £5,952 expended on service un provided for, so that the result was the surplus in the year's transactions which I have already stated.

Land Fund. The Land Fund account at the close of the year 18S3 84 showed a balance of £80,447. The revenue received during the past year amounted to £160,969, of which £92 432 was for cash sales of land, and £68,537 for sales on deferred payments. The expenditure amounted to £209,485, so that at the beginning of the present financial year there was a credit balance of £31,931.

Public Works Fundf The balance of credit of the Public Works Fund at the end of March, 1884, was £488 912. The total amount placed at the credit of the Public Works Fund during the year 1884-85 was £2.327,025 The expenditure amounted to £1,336,727, leaving £990,298 at the end of March last with which to begin the year. In addition thereto we had the balance of the third instalment of the three million loan to receive, £155,000, also the new loan of £1,500,000 recently raised, amounting in all to £2,645,298, subject, however, to the redemption of deficiency bills, £100,000 ; the repayment of temporary advances, £500,000 j and the advances to be accounted for in the hands of officers, £250,000.

The Public Debt. The amount of the public debt on the 31st March, 1884, les9 the Sinking Fund Account, was £29,574,903. The amount of that debt on the 31st March, 1885, was £30,649,199. It was increased by fresh issues and conversions, the conversions from a higher to a lower rate of interest of course having a tendency to a larger principal amount, but a less annual charge. The annual charge last year was £1,570,989. whilst this year it is £1,593,692, exclusive | of interest on deficiency bills, and on the million and a-half loan. The hon. gentleman then proceeded to congratulate the House on the result of the loan operations. He said:— Early in January the third and last million of the three million loan of 1882 waa negotiated with excellent j results. The average rate obtained was j £99 103 Id for each hundred. Considering the quotation for consols and thej Bank of England rate of interest ruling at the time, the price was exceedingly satisfactory. The million and a half loon ! authorised last year has quite recently been j negotiated, at a still better figure— namely, fin average price of £100 6s 3d. As consols i fire lower in price than in January last, this result must be considered still more gratifying, and a comparison with the rates abtained for other loans enhances the gratification. Hon. members are aware that within a few days of each other three loans besides our own were placed in the market, namely, those of Victoria, Queensland, and South Australia. [ aeked the loan agents to cable me the results of the four loans, and hon. members will be pleased, while the pessimists amongst them will be surprised, to learn that the New Zealand loan fetched the highest price of all. This is the telegram received from the Agent- General : -"Net price reducing interest and discount — Victorian 10an, £99 4s 3d; Queensland, £97 3slod; New Zealand, £99 9s 2d ; Adelaide, £99 5s 6d ;" so that we were nearly a fifth per cent, better than Victoria, an eighth per cent. better than South Australia, and more than two per cent, better than Queensland. It is right, however, to say that the Victorian loan was larger in amount, and that during the few days' interim the market had somewhat improved. Still we cannot avoid seeing that we are fortunate in the judgment of our loan agents, and in that great strength of the immediate issuer of our loans, the Bank of England. The Treasurer then referred to the suspension of the Sinking Fund, and said : That the Act and the operations proposed under it did not injure our credit is shown by the negotiation of the loans to which I have already referred. That it has been a splendidly useful Act is proved by the fact that through its agency we have converted £3,642,100 of the £3,772,500 of consolidated (drawing) debentures left undrawn. This was the immediate action of the measure, for which I had to undertake an amount of personal responsibility last session, which at times almost frightened me, thoroughly convinced though I was of its value. As regards the terms of the conversion, we give for the consolidated bonds other bonds bearing 5 per cent, interest for seven years without a Sinking Fund. At the end of the seven years we give 4 per cent, inscribed stock for the 5 per cent, debentures at the rate of 107 for each hundred. Practically the result means this, the same annual charge for seven years, less the Sinking Fund, and thereafter a saving of a little over \ per cent, on the annual charge, j after taking into consideration the expense, and a sufficient annual provision to extinguish the additional capital stock. I may cay, in reference to the other financial Acts of last session, that the Wesfcland and Greymonth Harbour Acts justified my expectations. It will be recollected that I contended it would be better to gaurantee the debentures, and not to borrow for the i Boards It proved as J expected. When the Bank of England and the market asked us to undertake not to borrow further until the end of March, 1886', they had no difficulty in excepting from such engagement the guaranteed debentures of the Harbour Boards. The guaranteed debentures have realised a fair price.

Revision of the Customs Tariff. Before proceeding to discuss the proposals of the present year, there are certain broad features to be considered, to which I must ask the attention of the committee We have arrived at a period of our history when it is necessary to carefully consider the nature and effects of the taxation of the colony. The Customs revenue, which is the most important branch of the revenue,

requires to be revised, by reason o several circumstances which have conn in ordinary course to largely affec its natural growth. I need only mentioi two of those circumstances. The inorea^eo production in the colony, in which I includ< manufacturing, has the tendenoy to sensibb diminish the import duties on many articlei which have yielded increasingly larg( amounts in the past. The other ia thai alcoholic beverages, from which the heaviest Customs returns have hitherto been received are showing a diminished consumption Both these facts are eminently gratifying, the latter from a moral and social point oi view, the exceeding value of which it would be impossible to exaggerate, the formet for both utilitarian and sooial . reasons ol only less importance. To put the caae briefly, a less consumption of intoxicating drinks means increased happiness and social well-being ; and larger local pioduction means increased prosperity. It is clear that both these causes argue an increased power to pay customs duties on whatever articles it is considered desirable they should be levied. The returns of Customs duties on spirits during the last three financial years are suggestive. They are as follows :—lBB2-83,: — 1882-83, £410,517; 1883 84, £404,500; 1834 85, £377,896 ; and for the first two months of the present financial year the receipts have been at the rate of only £366,624 a year. Those persons who refuse to see in the condi tion of a new country the Rpecial circumstances which render inappropriate their ranging themselves under the old world banners of Protection or Free Trade may at least meet on this common ground that fiscal requirements are the primary objects of Customs duties. I venture to go one step turther, and say there is no taxation more fair, just, and logical. I ask protectionists to agree with me in this, although they may see in Customs duties an ulterior object, the encouragement they give to local production, and I ask free traders to render a like acquiescence, although they may argue that the remission of duties tend& to lighteu the cost of living. In short, Customs taxation is a natural and obvious ?pecies of revenue, and the freetraders who would specially diminish it, or the protectionists who would specially increase it, peek to modify natural conditions by artificial ones lam far from saying thatsuch a modification is necessaiily unwise Ifc constantly falls within the range of the duty of Parliament to special y intensify or abate the application ot recog nised principles, but I have yet to show why I claim for Customs duties the character I have assigned to them They are fair, just, and logical, because it is reasonable that the producors of other countries should not come here to enjoy all the benefits that the complicated machinery of Government affords to them without contributing to its cost. This propositien is in no way affected by the question of whether the ultimate charge falls on the consumer rather than on the producer. If it be admitted that it falls on the consumer alone, which is open to question, as at least to some extent it affects the lesser or greater profits of the producer, it is still clear that the consumer who finds itdfieirable toconsumeexotic productions should, on their behalf, contribute something to th-> cost of the Government, the operations of which enable those productions to find a market. Customs duties have in addition the two great advantages of being cheaply collected and of falling on those who in greater or lesser proportions elect to consume dutiable goods. The average cost of collecting Customs duties amounts to only il2 14s 3d per cent But it is undesirable that the whole taxation of the colony should be concealed, so as not to come home in a forcible manner to the taxpayers. Hence, together with indirect taxation, there should be taxation of an unmis takably direct character, as also some of thatingenious medium between the two that stamp duties supply. This leads me to state that, together with the revision of the tariff, it is desirable to pass under review the direct and semi-direct taxation of the_ colony I he most important point which arines from this contention is, that if there are to be Customs duties which will affect the cost of production by country producer?, they must have assistance to open up their land. The means the provinces afforded for opening up the lands by roads and bridges was the foundation of the colony's progress. We have since gone in for more ambitious arterial systems, but the time has come round when we must consider, as a complement of these systems, the opening up of the country, and especially those parts in which the present means are small. To base the aid we render on the present means of the recipients would be to give to those who have rather than to those who want. Honce I am free to confess that I recall a great deal of what I said last session about each district depending on its own taxation. Of course this should be so in a measure. We cannot refuse to enable the districts which have prospered to prosper still further, but we must go beyond this, and remember the spirit of the old provincial aid rendered to young districts -that the feeble require special sustenance. The assistance cannot be based on the means of each ; larger aid must be given in proportion to the poorer I districts. Our proposal then i?,

I ettled Subsides i extending over many years, but divided after a plan which will give greater consideration to the poorer districts. The scale will adjust itself so that as a district becomes richer its receipts, though perhaps larger, will be baaed on a lesser scale. This is not the place to fully discuss the proposition; I must refer to it to an extent little more than to elucidate our financial proposals. It is, however, necessary to explain that the long term of years to which we propose the colony should bind itself has its object to settle the finance of the looal bodies and enable them to borrow on the security of the subsidies. We are, moreover, distinctly of opinion that the local bodies should be released from tutelage. The conditions under which the subsidies should be expended should be prescribed, and the Boards be held responsible for the proper expenditure of the money, but we do not approve making the expenditure subject to the supervision of the Government. The experience of the Roads and Bridges Construction Act, and the enormous labour it has devolved on the Public Works De parttnent, show the fallacy of a system in which the responsibility is divided. We can never have a satisfactory system of local government unless the ratepayers are made to feel that they have no one but themselves on whom to depend for a wise expenditure of the corporate funde. One hears at times reproaches levelled at local bodies because of their great number, and j by the many people engaged on them. If these bodies overlap and repeat each other's work, there is of course, objection to them ; but if they do distinct work, I not only see no objection to the local government being divided amongst a great number of persons, but much advantage in it. The unequal expenditure during the last three years on roads, bridges, and analogous country works is a striking plea in favour of the more regular system we now submit, We propose to repeal the Roads and Bridges Construction Act, but to fulfil the obligations incurred under it We propone that part of the charge of the subsidies shall, for five yeari, come out of the loans, but the sum proposed from this souroe will be very

much less than we hare grown into the practice of taking for these purposes from borrowed money. The amount, of subsidies to local bodies we shall Bubrait as a sum not exceeding £300,000 per annum for 25 years, of whioh one half, for 5 years, shall be provided by loan. We propose that io this amount Bhall be contained some special subsidies to goldfield counties, and we intend still to oontinue the rating of Crown land, but the Crown's liability not to extend to yates beyond |d in the £. We shall submit a power to the Governor to arrange with local bodies for making roads specially required to open up lands newly sold, or about to be sold. I

Dwellings for Labourers. I cannot refrain from adverting to one special power which we desire to place at the optional disposal of local bodies, a power which ifl as beneficial as it is likely !to be profitable I allude to providing dwelling-houses, with small areas of land attached, for labourers, all over the country at moderate rents, or on terms of pur chase by instalments Suppose, to take an example, that a local body puts up a house at a cost of £80, on a piece of land of the value of £30 ort4o, the total eosfc would yield a good return at 4s a week, with a right to the fee simple in about fourteen years ; or, at 5s a week, a right to the fee simple in about ten years. We propose to exempt those dwellings, whilst under lease, from seizure for debt. They may be erected by hundreds all over the colony. They will give to the labourers means of comfort, the want of which has been apparent in this colony, and is painfully apparent in oldei countries. The local bodies will run no ribks ; for these properties will constantly acquire additional value, and be good security for the liability upon them. As to the properties themselves, I am supposing lands to be used in the vicinity of towns and country townships; they will become within the period mentioned of great value.

This Years Subsidies It is intended the subsidies shall only be one- half for the present year. The reason id this : It is necessary to fulfil all the engagements for roads and bridges, either promised or entered into, including those under the Roads and Budges Construction Act. The amount required for this purpose is very large, and a half-year's subsidy for the present yeai seems sufficient. The amount ot £30,000, which I have mentioned, is the maximum amount which will be allowed based on rates. It is estimated that according to the present rates it will amount to about £250,000, and for this year one-half of that will be £125,000. We submit that for this year the consolidated revenue shall contribute £75,000 of that amount, and that £50,000 shall be contributed from the Public Works Fund. The subsidies will include small contributions to towns", and larger ones to road districts and counties. This is irrespective of the treatment which we propose to adopt with charitable institutions and hospitals. We will ask hon. members to suspend their judgment on the subject until all the measures are before them. We will t> if acceptable to the House, at once bring down the Local Government and Charitable Aid measures. They are three in number. We will move the second reading, and explain the nature of each, and then adjourn the debate until all of them are before the House.

Protective Duties. We are far from saying there are not some industries which the State should foster, but these should be commanding, conspicuous industries like that of the fisheries, and the fostering should be direct in character by bonus ; but with regard to industries generally, the question with those who pursue them should be, Are they calculated, when the difficulties are overcome, to stand on their own merit, and defy competition ? Whilst having first, a regard for revenue requirement, we think it quite desirable to have a consideration for the occupation of those who may be striving to surmount the difficulties attending the earlier stages of industries. But I distinctly state theprimary objects of Customs revenue ; that the tariff should be entirely -within the control of Parliament unless (as in the case of beet sugar) a distinct contract is registered, and that Parliament, in dealing with the taiiff from time to time, should not be fettered with implied engagements of an indirect character. 1 say to manufacturers throughout the country, that they will be unwise if they invest large sums in industries under the idea that these will be continually bolstered up by tariff arrangements. They may reasonably exercise their judgment aa to the probable duration of the duties which at the outset will assist them, but their calculations should be made on the prei sumption that their industries within a reasonable period can defy competition elsewhere, and even beyond this, that there is fairly a prospect of their being able to supply outside markets, the Islands, and other countries accessible to New Zealand. Open good prospects of an extra market, and I am convinced that industries of a substantial character can be carried on in New Zealand with a reasonable prospect of defying outside competition, and of supplying in the face of competition other countries. We shall ask for a revision of the tariff because the' present one is too complicated, and has lost, besides, its elastic character.

Tariff Alterations. One word more. We believe the Government, wherever it can prudently do so, should encourage local in preference to outside production. It should do so in the first plaoe on the score of economy, that ia to say, the prospect that the local producer will be able to supply in the end much more cheaply and satisfactorily. In order to remove the misconception as to competing value which now surrounds Government imports, they shall not be free from Customs duties nor from reasonable wharfage cnarge. Without going at length ioto the nature of the tariff, I may say it is framedon the principle of revenues and on the intereatof simplicity. We have made as few distinctions as possible. The free entries are enumerated.and the articles not enumerated are subject to ten per cent. We slightly increase the duty on spirits. We put a duty on foreign coal, and an extra duty on tea, but we do not increase the duty on sugar. It is so useful for purposes of fruit preserving and making jams and preserves, that I should have been glad to reduce the duty on it. Other changes I need not now refer to. On the whole.the tariff is calculated to do no more than restore the diminished power of the alcoholic duties, and of those with which local industries have interfered. We have thus a sure guarantee that if it come upon a population ready to meet it its effect on the people will be less harsh than the tariff of 1882. The Question of

Direct and Semi Direct Taxation next calls for consideration. With regard to the latter— the stamp duties— we think they require revision for increase in one important respect, but principally with the view of surmounting the oleverness of those who, under present circumstances, manage to evade them The succession duties are altogether inadequate. They are muck less than in Great Britain, and l itcaiv not be alleged that in that country there « an undue want of consideration for the pos sessors of property. We have alio to defeal

the ingenuity of those who, with the ruling passion strong in death, pass the last days of lives they have devoted to the acquisition of wealth in marvellous devices to deprive the State of the revenue which should be payable on their decease. WUh regard to direct taxation, it is no secret that Ministers prefer a land and income tax to a property tax, and the House and country are divided in opinion on the subject. We have come to the conclusion that a compromise is neoessary and expedient. As is the oase with all systems of taxation, there is great advantage in a people having become used fco them. Thus we see in some countries the people educated to a mode of taxation which would be utterly distasteful to the denizens , of other countries. The people of New Zealand have grown accustomed to a property tax, anddf for no other reason, a great deal is to be said in favour of retaining it. We think it may be so modified as to deprive it of some of the features that are obnoxious to the views of those who prefer a different system of taxation, aid it is intended to make proposals in thin direction. The primary alterations wo wish to make are to provide for the exemption of agricultural implements up to a certain sum, also to provide for the exemption of machinery up to a certain amount. ( must not be understood to have changed my opinion on the subject of the property tax. 1 look on it as unwise in principle and undesirable in its effects. I should prefer a aimple land tax, in the assessment of which the valuation of improvements was excluded, and an income tax if the land tax required to be supplemented. But, as I have said, a great deal of heed has to be given to the fact that people become accustomed to any system of taxation after a time, be it good or bad. Again, nothing could be more objectionable than a constant change from one system to another, and it seems pro bable if some compromise be not effected, that we shall oscillate for years between the two systems of property and land tax. Again, thoughan income tax is in m> opinion a fair way of getting at the earnings of the people, it has features of an objectionable nature to which it would take years to become accustomed, and Imay say further, as far as 1 am personally concerned, that whilst I prefer a land tax to the compilation of the property tax, I am not insensible to the risk one runs in espousing a laud tax, to its being supposed he in favourable to such a tax, not for income purposes, but for destroying existing rights. lam no friend to parcelling out the land in larere estates, and I hold that as regards our future disposition of lands we are free to deal with them in the manner that is best calculated to put a numerous population on the soil ; but when I look back at times past, and remember how, from time to time, special inducements were offered to rich men to buy large estates because of the money being wanted, of how, in fact, for the sake of money, the public estate was frequently sacrificed, I can see no justification for disturbing bargains which, however impolitic, were entered into with deliberation, in the course of time some of these estates may be wanted for settlement, and when they are the State has a perfect right to take them on payment of compensation, but at present we have millions of acres, and do not require anything of the kind. I am therefore well disposed to a compromise which does in fact give a land tax, but ac companied with a tax on the capital value of personalty, instead of on the incomes of its possessors, I was also, it may be remembered, opposed to any property tax or land tax unless it was localised. Here again I have somewhat modified my views. If such a tax were localised, the town would chiefly enjoy it, and the country districts, which most require it, would get the least. For the sake of that mutuality of interest to which I alluded, it is better the State should collect the whole and arrange its distribution.

Property Tax Raised to Three-farthings. I carried last year the repeal of half the property tax, and said that I would like to do away with it all if the charitable aid could be localised. I propose now to return to the gd in the pound to cover the amount of charitable aid contributions which it is still intended the State should supplement local expenditure to meet the subsidies to local bodies, and to contribute to the increased defence expenditure. Property should surely bear its share of this burden. It will not, I think, be possible to bring into force at once the changes proposed in respect to the deductions for improvements. A fresh valuation is being taken, but it cannot be completed in time to affect this year's expenditure. The Committee are no doubt prepared to learn that provision will have to be made for increased expenditure this year. Last year a sum of £64,000, for interest on a converted loan, was saved to the year by the process of conversion. Then there is the increased interest on the third million loan, and half a year's interest on the million and a-half just issued. On the other hand, there is the reduced interest in respect of the conversion of 5 30 debentures, and the floating debt, and there will be a considerable saving this year on the item of £30,000, for exchange for paying interest in London. Still, on the whole, the permanent charges show an increase ; there ia an increase which is purely nominal. There are other items of increased expenditure, such as that for the Colonial Exhibition in London for making the triennial valuation under the Property Tax Act, the usual large increase for the education vote, and the increased expenditure for defence purposes. There is the expenditure for the direct mail service, but of course there is the revenue derived from it. The English mail service costs no less than formerly, but we have not yet doubled the postal receipts because of two mails a month. The reduction in the use of the Brindisi mail is most satisfactory, and we save a considerable amount on the cost of last year on the present San Francisco mail i Bervice.

The Civil Service. There has been no subject which has 80 much engaged the consideration of the Government during the recess as that of the Civil Service. It will be remembered that last session, or during the short previous session, my predecessor, Major Atkinson, held out hopes of large reduction in the cost of the Civil Service in connection with a system of classificatian. A committee of Civil Servants had examined into the subject, and hadmadeconfidentialrecommendations. We have examined and considered with the greatest care the observations and conclusions of the committee. To most of thereductionsmentionedwehavegiven effect For example, we have made several reduc tions in the Treasury, but adopting as far as possible the suggestions for avoiding keeping unnecessary accounts. In the I Financial Statementlast year there were also savings proposed in the Audit Department. We have decided that the general audit of the railways could be left to the Railway Department's own excellent system, and that it would be better to let the Customs Department do its own audit As to these two changes a bill will be introduced, and I shall propose to refer it to the Publ'o Accounts Committee. The pay of the civil servants in this colony is less than in any other colony, whilst the officers are certainly on the average not inferior in capacity and capability. The Civil Servants are in the unfortunate position of

being unable to defend themselves if they are attacked, and it is not a popularthingf or a Government to defend them. I have had exceptional opportunities of judging, and I am of opinion that the Civil Servants of New Zealand are subjected to heavier strain of work than is the lot of other Civil Servants. I now come to the question of classification, which in other words means placing the Civil Servants to some extent oeyond the fnfluence of caprice. I cannot see that classification is in itself an operation which directly saves expenditure. I have tested it in half a hundred different ways, and in no way do I see that it means less money, except in the inducement it holds out to the best men to continue in the service. We have come to the conclusion that a complete change is desirable, and that officers admitted in future to the service shall have the right to less retiring compensntions, whilst all officers shall have before them those more immediate advan tages which lead to spur them on to zeal and excellence. The saving in the one will, we believe, in the end compensate the temporary increase in the other. We propose there should be a right to only one month's notice, or salary if the officer has been not more than 18 months in the service and to only three months after a longer service. To make the Government independent of these considerations, which always create reluctance to dispense with an officer's service, we propose further that it shall be a condition of an officer's joining the service in tuture, no matter in what capacity, that ten per cent, of his salary shall be impounded to be invested at compound interest, and to be given to him on his leaving the service, or to his reptesenatives on his death. [The Colonial Treasurer here entered into details in respect to the classification.] The classification will not include the officers of the Legislature, nor those of the gaols or working railways, which already have their own system of classification. We estimate the cost, apart from the rises of cadets, to which they are aheady entitled, at about £6,500 this year, at about £10,000 next year, and thereafter there may be about a like rise for a year or so, and then gradual reduction On the whole, the increase will not much exceed those which, as a rule, are spasmodically made. In the end there will be considerable reduction on the spasmodic increase, and the new rules of entry into the service will greatly promote future economy.

The Land Fund. The expenditure for the current year is estimated at £208,971. This includes the usual charges under special Acts. The revenue for the year from land sales i» estimated at £163,960 ; go that, taking into account the credit balance of £31,931 at the end of last year, we shall have a deficiency, on the 31at March, 1886, of some £13,000, which is likely to be reduced by payment not being made w*th in the year.

Ordinary Expenditure of the Year. The ordinary expenditure of the year already described already amounts to £3,972,133. I have three items to add to this, viz., £6,500 for the propoped Civil Service amendments, as to which I say, if not passed in the shape proposed, some of it at least must be asked for by way of additions to salaries ; £75,000, which I estimate is about tlae amount that ■will come in for payment on account of subsidies to local bodies ; and I propose to pay £50,000 of the deficiency of 1883 84. We must either begin to pay this deficiency off or resolve to fund it, a decision I should much regret These items bring the expenditure to £4,103,633. On the other hand there is revenue £4,115,000 and the surplus of £19,8V>1 at the beginning of the year, making together £4,135,790, and leaving a surplus on the year's transactions of £32,158, which is not unlikely to be largely absorbed by supplementary estimates.

Public Works Expenditure. I have already said that, taking into account the million and a half loan, there are about two millions of money available for expenditure, subject to advance in the hands of officers to be accounted for. Without trespassing on the details which my colleague, the Minister for Public Works, will lay before you, 1 may say that we estimate there will be an actual expenditure of about £1,700.000 this year, which will include about £170,000 on harbour defences. It will be seen then that, after accounting for advances, there will be but a small sum left for expenditure after the end of March next. Out of the North Island Railway loan there will be some amount repayable for works defrayed out of other loans. As the Committee are aware, we intend proceeding with that railway as fast as possible, but the actual expenditure up to the end of March 30 is not likely to much exceed £10,000. The defence expenditure in present loans will have to be repaid. It will be apparent, therefore, that we have provision for little beyond March, and scarcely enough to carry us on until the House meets in ordinary course next year. In regard to the general question of borrowing I must say a few words. When the Minister for Public Works brought down his plans in 1882 for the three million loan he stated that if he were to stipulate for votes to complete all the works he proposed he might have to ask for ten millions more or less. We inherit these obligations together with others which have grown up since, and the plain meaning is that we shall continue year after year the construction of great works to such an extent as Parliament considers advisable.

More Borrowing. It is necessary to look the position fairly in the face, and to draw a line as to the purpose for which money should be borrowed. When we proposed the million and a-half loan last session we drew attention to the enormous proportion of it that i would be absorbed by roads and bridges. One of the objects of our policy which I have disclosed this evening is to set a limit to borrowing for indiscriminate purposes. As soon as we can end the engagements at present contracted we hope there will be little money borrowed by the colony for roads and bridges. But we recognise the great objects thege works fulfil, and we propose a sufficient finance to local bodies to carry them out. As regards railways, besides the Main Trunk lines, there are hundreds of miles for which a cry comes up from the country. We propose that, in future, there shall be three classes of railway : Forest railways, the cost of which the State forests will defray ; district railways, for which the local bodies who reoommend them shall defray one half the yearly interest in excess of receipts ; and main trunk lines, for which the colony shall be wholly liable In his Statement last year the Minister for Public Works laid down certain principles which should guide the House in relation to future borrowing. The railways have not yielded the revenue anticipated last 5 ear. The Government deemed it expedient to make some reductions in rates, believing that the tariff Bhould not be framed solely with the view of exacting the utmost possible receipts. There were other causes which led to a less revenue. These will be explained in the Public Works Statement. I take it Ithat the House means to carry out the work of defence, and that during this And the Wo succeeding years

not less than £300,000 will be re") quired for the purpose. We shall ask authority for only one million for 1886* 87, of which £250,000 will be for defence for that and tbe previous year, £50,000 for immigration, £200,000 for roads, bridges, and buildings, £100,000 for purchase of native lands, and £400,000 for railways. „

Advances to Farmers. It may be as well, whilst lam on the sub* ject of borrowing, that I should say the Government havenotadopted the idea shadowed forth during the recess of borrowing money to lend in small sums to farmers on freehold security. When I spoke on the subject I did so with reservation which I expressly made, On further examination I found that the English Government had ceased to make direct advances to land improvement, and had substituted forita system of authorising the issue of mortgage debentures, for which the State was not liable This system works excellently well in Great Britain, far better than the old one of direct advances, whilst ! the State has no liability. Bills will be i submitted to the House for giving effect to this English system. It will, I think, go some way towards satisfying the demand for cheap money for the securities of local bodies and for land improvements. The East and West Coast and Nelson Railway of the Middle Islajid demands a few wordi, The Government are of opinion that ting railway must be constructed, but they aie still averse to making it at the cost of the colony. If further assistance be necessary, they have no doubt that Parliament will consider how it may be given without increasing the grant of land. They think it right to inform the committee that they attach great importance to the construction of the line.

Summary and Conclusion. Reference has been made to so many questions that it is desirable to summariee the salient points of the subjects and proposals I have brought before the Committee this evening, as well as to make clear some details :— 1 . That the operations of last year on the ordinary revenue and expenditure account left a credit balance of £20,000. 2. The Public Works expenditure amounted last year to £1,336,000, and that taking into acoount the million and a half loan there was at the end of March last about two millions to begin this year with. Taking the advances outstanding in the hands of officers as cash. 3. That the negotiation of our loans has proved very satisfactory, and that fcr the last million and a half we Detted more than did the Governments of Victoria, Queensland, and South Australia for loans floated at about the same time. 4. That the Act of last session dealing with loan conversions and with the Sinking Fund has proved a great success, and is free from any suspicion of having adversely affected the credit of the colony j that through conversion affected under its authority we have already been able to pay off £71,000 of the debentures created the la»t year, to represent the growing accretion of the Sinking Funds. 5. That the financial machinery of the Westport and Greymouth Harbour Acts has proved successful. 6. That the Government highly appreciate the services of the loan agents and of the Bank of England. 7. That the Customs revenue requires to be revised because of the satisfactory facts that it has become affected by the diminished consumption of spirits and by the in creased local production of dutiable articles. 8. That it be adjusted on the principle that whilst the primary object is to serve fiscal purposes, and whilst we by no means commit ourselves to State protection, we should not be unmindful of the services the tarifi may render to local production. The principles which have been kept in view as far as practicable in considering the proposed alterations in the Customs tariff have been that the various articles named therein sh<- u Id be clearly and explicitly described, so as to secure absolute uniformity in the levying of the duties at the several custom houses in the colony. That moderate and revenue producing, and not prohibitory duties shall be imposed on all articles which can be produced or manufactured in the colony. That raw materials used in manufactures and special articles required for manufacturing purposes which cannot at present be produced in the colony at a moderate cost should be exempted from duty. That all free goods should be specifically enumerated, and that unenumerated goods should be liable to ad valorem duty. 9. That the successional duties be increased, but still be kept less than they are charged in Great Britain, and that the present exemptions be retained. 10. That the stamp duties be increased, more particularly that of duties on conveyance, whilst precautions should be taken to guard the revenue 11. That we cannot afford to part with popu 'ation, and must recognise that the s*veral classes of the community should help ea<^h other. 12. Thatroadand bridge construction is essential to open ing up the country, butthat we cannot continue to throw the whole cost of it on borrowed money. 13. Th*t the local bodies muat manage their own affaita and have incomes which they can depend upon ; that for this purpose the consolidated revenue shall be charged with a fixed pubsidy for 25 years. 14. That to localise the direct taxation in the districts in which it is raised would not answer the condition required to be met, as it would leave the least provided the bodies that most want help 15. That the division should be | made on a carefully considered self-adjusting scale. 16. That special assistance should be given to goldfields counties, 17. That manufactures are essential to the wealth of the country. 18. That we must attend and put to the best uses the great resources the colony possesses in its forests and fisheries 19. That we ihould introduce a moderate and gradual system of civil service classification. 20. That the property tax should be altered so as to effect a compromise between its advocates and the advocates for a land tax and income tax, and that for thia year it shall be fixed at |d. 21. That we should pay off £50,000 at least "of £150,000 deficiency of 1883-84. 22 That after that provision the provision for subsidies to local bodies, and for the increased cost of defences and education, a surplus of £32,110 will remain, which will be subject to reduction by supplementary votes. 23. That we should not allow the favour in which are loans are held in the London market to induce us to borrow more than we consider to be wise. 24. That we should endeavour to fall into ft system under which we should reduce borrowing for indiscriminate purposes. 25. That we should have three classes of railways in future— main trunk, district, and foreßt railways —the last to be charged to the State forests and half the annual charge of district railways to be borne by the districts benefited. 26. That the expenditure upon permanent defence should be charged to loan. 27. That we should authorise a

Loan for One Million to be toned Next Year, to serve up to the end of the financial year 1886-87. That £250.000 of this loan should be for defence, £50,000 for immigration, £200^000 for roads and bridges, £100,000 for the purchase of native lands, £400,000 for railways. 28. That wt , attach great importance to giving sufficient inducement to private capitalists to corii struct the East and West Coast and Nelson

railway, 29. That to meet the demand for cheaper money for land improvement and for loans to local bodies we will submit a Mortgage Debenture Bill, which will embody the system which has been found to work adrantageously in Great Britain, without entailing any liabilities on the State. The Treasurer then moved the resolutions embodying the new duties, which appear on our inside pages.