THE FINANCIAL STATEMENT Wellington, May 29.

Te Aroha News, Volume V, Issue 269, 2 June 1888, Page 3

THE FINANCIAL STATEMENT Wellington, May 29.

In Committee of Supply in the House of Representatives to - night, the Hon. the Colonial Treasurer delivctcd his Financial Statement afc tollows :—: — Mr Hamlin : The rece^ which has ju«t ended has been so short, only about onohalf the ordinal v length ot our Parliamentary recc^. and the woik imposed upon theUoveinment.-omuch greater than usual, that with e\er\ effort on tny part 1 have been unable until to-day to submit to the consideration of the Committee the Budget proposal- of the (.'overnment. The^e proposals* nece^aiilv depended to a lai' r e extent upon the leduction of expenditure rendered possible through the reorganisation of theCiwl Service, and ltuas nJt until within the la-t few days that that work had &ufliciently advanced to enable me to summarise the results for the infoiraation ot the Committee. It will be in the recollection of hon. member that when the Government took office in October hust the financial position and pro.»pects of the colony were such as to require the immediate and earnest attention of the C^ernment and of Pailiament. So far as time pei mitred important changes were introduced during the se-^ion. smoothers promised ov foie&hadowed. The UoNernment undertook to lamely i educe the loan expenditure upon public works. Lhih has been done, and still fuither reduction* are now both possible and desirable. \\ c also undertook to make lat^e reductions ot the eNpenditure chained against the consolidated fund, and although the sum leducedhasnot reached the amount we had hoped, -we shall, I lmeno doubt, be able to siti&fy theCommittei- that the reduction ? \\ c ha\e made and a) c making are very Mibstantial in amount, and ot a good and permanent character. We further undei took to charge aeainst the ordinary re\enue certain works and services, the funds for which had hitherto been provided fiom loan. This also has been done, and hon. members? will tind in the current ordinan estimates provision made for these services. These military changes have not only been immediately and directly beneficial, but h.nealso been indirectly of gi eat advantage to un in their effect outside the colony. It is much to be regretted that

Our Credit in London and elsewhere has been and -ti 11 is greatly injured by hostile an" unfair criticism. No one denies that there are very obviou.- points in our past tinance fairly open to adverse criticism : that for so small a community we ha\e become largely indebted ; that in the past we not only boVrowed largely, but sometime;spent unwisely. But these things onlytouch one side* of the case. If we want to see their real present significance, their bearing upon our financial position and prospects, not one, but two aspects have to be viewed. We must obviously in the first place, and before we can strike a balance, look at the othei side of the account, and consider the character of our population, its energy, industry, and skill," and the great resources developed and undeveloped — the wealth actual and potential— which hereeMfts. It has been said that Kew Zealand colonists are heavily taxed. Let us, without stopping 1 to consider the actual fact*, as>ume this to be true, and then look at it fiom another fide. Where i^ a community of some 600,000 people, who in a time of long-continued, almoet unexampled commercial depression, with -nine of their main -tiple.- very low in market \dlue, > can yet laise a public levenuc of say £3,500,000 a >eai ? That is the s-ura i they annualh contiibute to the State, mainly, if not wholly, out of the.r earnings, and it may be fairly inferred that these earnings, and the wealth they repiesent, bear no unfavourable comparison with those of other people. Yet in spite of this \ery large contribution— l hope I may even say partly in consequence of it — there is. I believe, no community in the world of the same number and spread over so large a surface where, on the whole, and allowing for inevitable exceptions, the material conditions of life are more favourable, or possessed by the people in greater abund- j ance. In the second place it is not less necesbary to bear in mind the important and

Salutary Financial Changes already referred to. These change? ai e not only important in themselv es> as involving a long and immediate economy in administration and in public works, but still moie i so a» showing emphatically that we both mean to live within our mean", and have approved and are adopting the steps necessary to insure this most desirable result. The misrepresentations I have spoken of are to be greatly regretted for their effect upon our credit in London, and still more so because owing to the extraordinary ignorance of the great mas& of the English peopleof all things, relating to the colonies, they tend mohfc materially to turn from our shores that class of settlers whom we most need, and who would do best here, men with borne capital who would make profitable use of our waste lands, whether agricultural, pastoral, 01 mineral. It has very often been baid, yet I would again repeat it, that the introduction and settling upon our unoccupied land of this clas^ of settlers is one of the most important functions of the Legislature and Government of the colony.

The Financial Policy of the Government. It may be convenient) that I should state briefly at starting what in the opinion of the Government is the chief financial work urbich requires to be done this session. Firstly, to gee that our ordinary expenditure is reduced to the lowest practical point; and, this being done, secondly, to devise a means to raise sufficient revenue to prevent the recurrence of a deficit ; and in doing this we must as far as can be done without loss to the community at large, assist our local industries and manufacturers ; and lastly, we have to reduce the expenditure of borrowed money on our public works to a much greater extent than was proposed last session. The general course of action 1 have here indicated will, I am sure, meet with the cordial approval of the Committee, jfc is not, and cannot be, the work of any one party, No doubt hon. members may object to this or that proposal of the Government for accomplishing what is aimed at, but the difference will be only as to the means to be used, and not as to the result to be achieved. With these preliminary remarks, I pass to the consideration of the financial tiansactionß of Jast year.

Revenue and Expenditure, 1887-1888. Ib will be remembered that when the Financial Statement was made last November, I was blamed by a high financial authority for having predicted a much larger deficit than was likely to accrue. I regret to nay that the result of the year has been less favourable than I anticipated. Upon the proposals then submitted, particulars of which will be found on table No. 9, appended to last year's Statement, it was estimated that the deficit on the year's transactions would probably be £250,505 on the ordinary revenue account and land tund account conjoined. Thift estimate was subsequently increased to £312,653, by the dipallowance

of some of our proposed reductions, by the late period at which the session ended delaying the application of our proposals for retrenchment, and by the supplementary estimate of expenditure givon in table No. 9 refeired to. The estimate £4,275,050 was ariived at after the passing of the Appropriation Act, but this increased amount did not in- | elude any estimate ol the sum required for compensation for loss of oth'ce, which in laso years Financial Statement was tieated as a matter outside the ordinary estimates of expendituie. 1 .shall presently refer to this question of compensation morefulh. .My estimate la-it session tell short of the actual expenditure of the year by £382.047 as against £312,653 anticipated, being t" 59. 394 in excess ot the estimated deficit for 1877 8, ordeduoting£2'2,lo4 paid tor compensation for loss ot otliee, deducted for the )en ion just mentioned, ihe excess was £47,290. Before explaining how the estimated deficit came to be exceeded it may he well to state what it actually was at 31«5t March last. As 1 have just, said, the expenditure exceeded the ieeeip*s of the \ear by £382,047, but if we add the deficit left o\ei from the preceding year, £146,556, wo y;et <i total of £528,603 for the two years. The liabilities outstanding at the close of the year were in respect of the J ordinary levenue account £126,184, and of the land fund account £13.772, making together £144,956, being about £60,500 less than they wore at the 31sr Mai eh, 1887. I shall now as briefly a-- possible explain to the Committee how the actual deficit at 31?t M.ueh la 1 -!, exceeded our anticipations. In the lir-t pla^e therevenue as a whole did not realise the amount estimated bv i' 105,356 ; the i.ul- j wav leceipts did not reach the estimate by j £68,175, nor did the land sales by £29.503. j The revenue derived from depasturing I licenses rents, and other al«<o fell shott by £7,239, but Custom* duties and stamps weie both slightl\ in excess of the estimate. lam intouned by the railway j authorities that the falling short of the estimated railway receipts is in some measure due to the late harvest, and also to the low price of wheat, which caused the tanners to delaj threshing and delivering their giain, in the hope that ;i rise in price might soon take place. That the smaller quantity of grain conveyed before the 31st March does not arise from a less quantity grown and ultimately needing conveyance, is shown b) the fact that 25,000 tons more grain are stated to have been carried over our railways during thi- month than in the same period in the pre\ious year. The expenditure, as a whole, na> le-<s than the estimate by £33,942, or, including compen c ation paid foi loss of othce( £22,104), it was £56,046 less than estimated : which sum, deducted from the revenue -holt received, £103.336, gives the excess deficit of £47,290 for the yeai, the amount 1 ha\e already named to the Committee as exceeding ouranticipation*. I should, howe\ei , in lorm the Committee that, excluding interest and sinking fund and other chaiges under permanent Acts, which aie not so diieetlj under the contiol of Minister^, and also compensation for lo^s of of lice not paid under the Civil Service Act, the amount expended last year was within the a otes of Parliament by £36,688. Included in this I sum is £19,882, the unexpended balance of the amount AOted for the General Post Office, Wellington The total expenditure out of the consolidated fund undei tinAppropriation Act, including service- not pro\ided for, was £2,168,723 foi the year 1887-8, including the whole charge foi defence services, as against £2,249,523 for 1886 7, with €12,500 added for defence services charged to loan, being a reduction of £85,000 in favour of last ymi. I ha\e stated to the Committee thai the transactions foil he yeai ot the oidinaiv revenue and land fund account conjoined resulted in a deficit of £382,047 Separately the accounts nood thus . ordinaty le venue account, £302,960 : laud fund 'account. £79,037. To the«e sums we ha\e to add the deficit with which the \ ear began. There >\ as, therefore, for the two years a deficit of £395,253 in the one account, and £133,350 in the other, making a total of £528,603. But Parliament having last session, in anticipation of a huge deficit at the cose of the >ear 1887-8, made provisions for £400,000, 1 ha\e to-day to sug gest only the mean 4 of meeting the much smaller sum of £128,603. This I shall do presently, but I may as w ell at. once say that I shall not propose to add the amount to the permanent debt ot the colony.

The Public Debt. The total gross debt at the 31>t March, 1888, was £36,758,437. Deducting the sinking funds accrued, t'1, 222,056, the net public debt at that ".late was therefore £35,536,381, as against £34,314,4~>4 at the 31s-t March, 1887. There is also a contin gent liability, which should, perhaps, be mentioned under the headitig public debt, although a very remote one. The Government have guaranteed £47,000 Kaihu. Valley Railway ."> per cent, debentures, and albo £100,000 of the Greymouth Harbour Board debentures, £150,000 of the We^tport Harbour Board 4 per cent, debentures. The security is in each case, I believe, ample to insure the Government in any event from loss.

Public Works Fund. Hon. members will recollect that in consequence of the ear-marking of the North Inland Main Trunk Kailway Loan, and the loan authorised in 1886 for specific purposes, it became necessary to establish three distinct accounts in the Public Works funds, No. 1 being an account of the balance of the loans raised befoie 1886, No. 2 the account of the Noifch I&land Main Trunk Railway Loan, and No. 3 the account of the loan authorised in 1886. No. 1 account : The balance at credit of No. 1 account on the 31st March, 1887, was £491,245, of which there was expended during the year £440,854, leaving a balance of £50,391. I shall not here give any details of the expenditure of the public works fund. Some further information will be found in the table appended, but fully particulars will be supplied when my hon. colleague, the Minister for Public Works, makes his statement. It will be remembered that the Loan Act, 1887, which authorised the borrowing of one million, piovided that one half of the amount should be carried to the credit of No. 1 account, and one-half to the credit of No. 3 account. During the year it became necessary, in consequence of the "ear-making" already referred to to create debenture? under the Loan Act, 1887, for £300,000, which were taken up out of the funds to the credit of No. 3 account (I need scarcely say this transaction doe? not affect the amount of the public debt), whereupon £150,000 was carried to the credit of No. 1 account. This sum, together with the £50,391 already mentioned at the balance of the old loans, made £200.391, the amount which stood at the credit of No. 1 account on the 31st March, 1888. The liabilities outstanding at that date chargeable upon this account were £205,303. No. 2 account : Up to 31st March, 1887, there bad been expended in anticipation of raising the North Island Main Trunk Railway Loan of £1,000,000, £325,685. During the past year a further sum of £15*2,335 has been expended, making in all £478,000, and leaving a balance of £522,000 unexpended. As hon. members are aware, this loan has not yet been placed upon the market, but in order to provide

I funds to cover tho expenditure, both made and in progress, it became necessary to obi tain teinpotary advances to tho extent of half-a-million upon short-dated debentures, ponding the raiding of the loan. The habili- | tics outstanding at the 31st of Maich, 1888, ' I chargoablo upon bho balance of £5'J2,000, ■unount to C 75.904. IS'o. 4 account : The unexpended balance at tho 31st of March, ■ 1887, of the loan of 1886, including 0391,300, balance ot the loan, and sub|ect to deduction of 1142,800, district railway money?, not belonging tv this a< count, war U7C)9.23*1. Tho expenditure during the year amounted to L' 375,290, le. r t\ ing an unexpended balance of £196,244, oi, adding the moiety »J the £200,000 debentures eie.it i\l under the Act of last sexton, lo which 1 have .'ilieady leferred, the balance ;it ciedit of "No 4 account at 31.-1 March, 1888, wan L'546,'244, Mibicet tv liabilities amounting to C 190,467. The actu«d balance at the eiedit of the Public Work-, fund as a whole on 31st March, ISB7, wa.s 1'786,2<)4 14.- 9d, subject to a deduction oi C 142 ,800 for distiiet laihvays debentures sold with the loan of ISB6. but. nottomung pait of the Public \\ oi k tund The balance at the beginning of the year for public work expendituie wns thcicfore onl\ C 543.494 13- 9d. During the year ■\ve lecehod a balance at the loan of 1886. i:391,:?00. and an ad \ a nee olo l £500,000, borrowed by the late (io\ernment upon the North Inland Main Tnmk Hallway Lo.m. Tliese sums make together U 1,434, 79 1 13s 9cl, ot which tlieie was expended duiing the \i>;ir L' 966,159 12.- 6d, leavmy an uncx ponded balance at 31st of Maieh, 1888, ot i' 468.635 Is 3d ; consisting of cash in public account, 1.408,7 1 5 8s lid , Imprn.'il guarantee dcl)ent\ues, L' 5,000, 000 9- 9d ; advances m the hands ot otheois ol the OomtiiiiuiH. £54,919 12s 4d • total. C 465.635 is 3d. The loan*, authorised, but umaised, amount, to £I,soo,ooo— boins L' 500,000 ot the I^ortli Island Main Trunk Railway loan and the i' 1,000,000, 000,000 ie-authorised this .session (the balance on hand at the 3lst ot Matvh last, and the loans authorised but uniaised, make together £1,968,635 Is 3d), subject to liabilities .it 31sb of Maich last ot €471,695 6s oil.

Government Loans to Local Bodies Cp to 31st ot March, 1887, that- had been boi rowed under the piovisions of the (Government Loans to Local Dodies Ad, 1886, foi the pm pose oi making loans (o local authorities, the sum of £50,000, and there hud been lent L#1."),270,L # l."),270, leawng L' 34,730 in hand. Last year there was bonowed a turthci sum of 175,000. and lent C 93.571. .so that the total amount botiowcd to 31st Maich. 1888, wa- U 125.000, ot which thete has- been handed o\er to local auihouties £108,041, leawng a balance of £16,059 unissued. Ar the same date the liabilities oui^tutuhnti uniuuntod to L"29,224, j consisting paitly ot balances ot loans not i fully taken up, certain local authoutiesj haung elected to t.ike tlu u loans b> in-tal incuts. The applications iecei\edin le^pon-e to the notice published in the "(Jn/ette ' i on the 19th January last, under section 16 of the Act, amount to £78,331, of winch L"6,980 are tor second yeaf.s loans. N<\u 1\ all ot these applications ha\e been pioMtionally gt anted : and should the local authoiities complete the steps nece^-ary to give the seeuiity lequned, a fun he; sum of about 190,000 will ha\e to l>e b<n rowed to enable the Treasury to make the loans, which will btinp the toUl amount bon on ed on this account up to C 205.000 The (iovertunent Loans to Local Bodies Act provideb that the Tiuasurer ma> «j;iant loanb to local bodies to .such an amount a.s shall he appropriated b\ Parliament foi the purpose, hut m the event ot no sum being appropiiated the Act authoiif-es the Treasurer to make loans up to £200,000 in each year. In the hist year no appropriation was made ; last year £100,000 \\a- appropiiated, and .is these two sums aie lai«>cl) in e\ccta of theti'talamount of loans applied for to date and planted it is not intended to ask Parliament, to appropnareany money for tins purpose in the jne-ent session. The scheme of these loans to local bodies contemplated an annual payment of ti\e pei cent, per annum for twenty--L\ jeais, the colony to be lespoir-ible tor the payment of tiie principal bum, and to meet it by setting aside yeaily a sinking fund of 2 per cent, to redeem the ilebent ures at matutit} . It was thought the money could be bouowed at 1 pei cent less than the rate at which it was to be lent to ihe local bodies, and that a eontiibution of 1 per cent, fiom the con sohdated fund would make up the sinking fund of 2 per cent. As, howevei, the rate of interest being paid by the Government is 5 per cent , it is probable that with respect to futiue loans the amount payable by local bodies may ha\e to be mci eased, and 1 .shall dunng the piesent session make a proposal to the House upon the sub]ect.

Retrenchment. I will now ask the attention of the Committee to the important subject of the reductions propo-ed last year to be made in the public expenditui c. J t was pi oposed in the Financial {Statement uf Novimber, 1887, to i educe the public expenditure by | £300,000, particulars of which were given in Table No. 10 attached to that Statement : but the House disallowed the pioposal to raise the school age to six years, which was estimated to efleet a saving of £30,000, so that the proposed total i eductions, according to table 10 a* amended by the House, wa,s £270,000. But besides the sum 1 ha\e named there was an errormtheitemofpublic bui'dings of €8,000, thatamounthavingbeen deducted twice fiom the estimated expenditure for the year. This item further leduces the possible saving under table No. 10 to C 262,000. The actual saving so far made is £233,092. Hon. members will recollect that in table No. 10 the proposed reductions in the several departments were shown, and that there was an undistributed amount ol €74,050 to be saved from (hose departments on which no reductions were shown, from travelling allowances and from reduction in the number of persons in the public service who are receiving salaries of £150 and under, or are paid a daily rate. The total salaries and pay of this class amount to £638,519 ; the salaries of all other persons in the service of the colony, except police, military forces, and country postmasters, amount to £365.754. I have had a table piepared showing the saving thus far made, and also for the sake of easy comparison. T have had table No 10 re-printed. These tables will be attached to this Statement when published, and by a glance ab them hon. members will see that in every depurtmenfc under the annual appropriations, except Defence, moi c than the promised reductions have been made ; and thatof the £74,050 undistributed, £53,730 has also been saved. The saying, although not so much as the(iovernraent had hoped to make, will, J trust, be consideied by the Committee aa a not unreasonable approximation to our undertaking of last session as modified and approved by the House. The saving upon the defence expenditure is £42,434. We had estimated to save £46,000, but my colleague found, I upon going very carefully into the question, it would nob be prudent, for the present, to make further reductions than have been made. It is not desirable bhat I should hero go ab any length into an explanation of the principles which have guided us in reducing the numbers or salaries of the Civil servants. That will bo more conveniently done when the Civil Service Bill which bhe (Government have prepared, and propose bringing in shortly,

is before fche House. J may, however, hero state that we propose bo classify the whole ot the Civil rferviec, and strictly learn the numbers of each elouss by October, from ; which no deviation will be allowed without the appioval of Parliament. 1 may alpo briefly mention other impoi tant change* in the direction of simplicity and economy without the .sacrifice of efficiency, and therefore such as will, I am sine, meet with the approval ot tho Committee. Wo propose- to amalgamate the Native Do partment with that of the Colonial Secretary's, making it a branch of that department. Our intention is before the end of the year to abolish the Public Woiks Depaitment. Wo shall propo-e lo cuntifiue : tlie const! notion of such of the iail >• ays as aie to be pioeeedod with under tho stall of the constructed lailways, and to Iwui.i over the whole of the road, woiks to the Survey ! Depni tniont, which ip already chared witli al.urje part of that work, oinployiny; local hodios wheic possible in eariynifj them out. A laij;e saving wdl be cllected by thisauangement, and it will, we doubt not, be »t ronji and satisfaotoi y evidence ' to the people ol the colony and the outhide "\\ orld i hat we are ioall\ biinuin^ oui i.upc bonouin^ policy to an end, w hen ! the department which has been, if I may f-ay so, its origin and symbol, iinally disapprais. ] nia^ say that the i eduction oi t'le Native Depaitment to a suboidinate position, and its amalgamation with tho l)ej)artment of tho Colonial Setictaiy, has been made possible and de&nable by the fact that the natives are desnous of takinjr a larger sluue in the management of their own atlaiis, >o .1^ to umlik c <_ r ieatl> the work of the ISativo Ollice, and this de-.ne the (Jo\einment think it ritrht to oiu'oura«je and as^i^L.

Pensions and Retiring Allov/ances. We propose te» }>t in^r in -t M'jMi'iiti; Hill, Mipplementai > to ihe Civ'l St-i \n c Kill, pioMcliut; tot the payment of .ill hiuuc portions and lutii nit;' allow ano< - to Civil serwint 1 - nut now enUlJcd In a icLning allowance, vui ol ;i ttmd which will be kept up by monthly conti ibution iioni all the mcmbtMh of tho sc i r\ke who arc not now entitled to the ptmle<je ot the Civil Sei\icei\etat piesent mfotc, with perhaps a Miiall eonttibiition from I lie State The piiMUpli? will, wo have no doubt, prove a sound one, and it-* operation-- beneficial to all concerned.

Estimated Expenditure lor the Year 188S 8^ : Ordinary Revenue Account. This In ines me to the pioposed c\pendi (me for (ho yeai 1888-89. The estimated otdmaiy c\[)cndiLiuc i-> £3,953,593, full par t,>cuLus of w Inch appear in the estimates, which will be in the hands ot hon. membeis at the eai lie-4 po^ible moment. Tlie estim.ilid .imouiil of iuteiest which will bo paid duiiiiii the > uo.t i& XI 558,539, Ijemjj 172,872 mote than the interest paid clurin" the }eai 1887-88 The chief item-- comprised in this increa-e of £72,872 aie £13,500 foi about -i\ monChs' mteiest paid at the bepnnin<x of tins jear on the 1500,000 bonowed teinpoiai ily by the late (iovcnunctit in Octobci h\A ; L' 20,000 nun e^t on the t400,000 i^>ued toccnerin p.ut the delicieiK'N of the past two year-, .mil al)out '■ix months?' intuu-xt on the i' 2.000,000. 000,000 about to lie lai-ed. \\'i» h legaul to the latter J iua> .sji\ thai while the full amount estimated to be payable appeal* in the ("-timatcs ot e\ponditui c, a 1 u <xc <-a\ mp; will l>e t'HcLh'd l»v in\e^tin<x m our own or othui seeuuties the balance o! thn iosinjs not immediately lequired foi u\j endifurc.

Laud Fuud. The estimated expenditure chargeable ajrain^t the land fund is £ L 00 ,245, made up ot £18,800 for payment to local bodiesunder peimanunt Acts, £'24,000 rates on Crow n land-, and t"8b,045 ior Crown landtandbimey- I.a-t o.u Llic total expenditure \\a- 11 5 8,474, C 16,501 beinf; ioi payment undci pcinianent Act?, L'^0,724 for late-, and i 101,249 for Crown lands and -urve\^, on which latter item there i^ for tin -3 year a i eduction of U 15.403. Hates on Crown lands, it is not intended to continue tint year except in spoti d e.i'M**., wheie tights ha\e ari&enThe total e-tiinated oxpendituic i>> therefoie 01,060,838 In inn • 3.9-">3,59u against oidindi\ rext'iuie and C11)7,245 against the land fund , but no pro\ ision l 1l 1 - m.idem the^e otimatf- tor •>< hool or othei public buildin<_j-, and foi stib-idie- to ]>üblu* bodicfe. J'jopo-a^ for the^e L will submit presently.

Estimated Revenue for the Year 1883 8 ( ) The estimated uuhnuij leu'ime foi the year 1888-b9, on the bn*i& ot the present taxation, including the Mini ot 1!263,200 to be rcccned a-, proceed? of the of what aie known as the sinking funds debentures, i-> U 3,897,400. The climated ie<enne fiom land i> fili»,000. Our total estimated levenue is therefore fiom all souices C 4,016,400,, 016,400, and the estimated e\))cnditnre beinjr t!4,06N,83f>, leaver a deficit of 144, 438 on the whole ie\enne ; but al-thea 1 - the land fund is estimated to rri\e a small surplus of £11,755, and a-* we do not mm use any .sui plus land fund a a oidinaiy levenue, we ha\e piovided a sum of 156.193 to make our ordinary expenditure and re\enue balance. In addition to the amount required foi school and other public buildings, and foi subsidies to local bodies, the amount which the (U^ eminent estimate will be requued for expenditure on public building fiom ro\enue foi the year is £60,000, bein£ 130,000 foi building-, C 17,000 foi the (Jetioral I'o"L and T.lcjriaph Oiliee, C 13,000 tm other buildjtmt>, [>aitieulai- ot which will lie gi\en by ni) colleague, the JM mister toi I'ublie W'oi ks, in his annual statement This, added to fchc estimated deficit of the ordinary revenue, and including 1 30,000 snb-idies to local bodies, to be lefeired to piesently, makes the total amount to be jpro\ ided 0146,193, if no furthei icduetions are thought prudent. Upon tl>at suppohi- \ tion we ha\e now to consider how the large mini 1 have named is to be raised ; for we are all agreed that sufficient revenue must be raised to meet our expenditure. But, before i show how the Government think this amount should be raised, I must bring under the notice ot the Committee the question of

Subsidies to Local Bodies. I last year expressed the opinion of the (Jovernment that, if subsidies to local bodies were to continue, one-half of the amount should no longer be paid from loan, as is the ease at present ; but that the whole amount, whatever it might be, should bo provided for from revenue —that is to say,' by taxation. The (Government, after careful consideration, have come to the conclusion that the payment of subsidies must be continued, or the work of the local bodies, will be practically paralysed, causing serious incorvenience throughout the country districts, but they think that the colony should clearly understand that continued payment means additional taxation. The C4overnment fire also of opinion that if the payment is to be continued a special tax or portion of a tax should be set apart ior subhid iCwS, and that the amount raised should J be divided amongst the local bodies on the same plan at> is now in force. It ib also desirable thai the tax set apart should be one which will increase with the increase of population. They therefore propose that, the tax on tea should be increased by 2d per lb, and that one-half of the whole duty received from tea shall be set aside and devoted to the payment 'of these subsidies. Through speculative

clearances, and two months of the year having already passed, the estimated produce of the tax tor this year, with the additional duty added, will only be £114,000. One-half of this will be £57,000. This amount will bo enough to pay a subsidy of 5s in the pound for the current year. I shall therefore ask authority to provide the amount, if deiicient, from general revenue for the year 1088-89 ; but next year and afterwards, when there will be no disturbing cause in the collection of tho tax, 1 propose that one-half the tea duty should be set apai t tor the subsidy, and that that amount, whatever il may be, whether more or lees than the proportional payment no »v made of 5s in tho £, should be all the aid that will be {.-hen fiom the general revenue, that is by the colony at largo, to the local bodies. This, if adopted, will cause a loss for the present year to the general revenue of about L"3(),000, which ib will be necessary to make I good from general Customs duties.

Property Tax. it is not proposed to make any alteration iti the rate of property tax this year, but L shall a^k the "House to agree bo remissions to a. certain amount on borne classes of machinery. The loss to the revenue if if these remissions are agreed to will probably be about £4,000

Tariff. I now como to the question as to how t-.he €146,193, which J haveshmvn to be wanting, ciin best be raided. After much careful deliberation jho Government have decided to a-k authoi ity to raise the amount required by an increase in the Customs duties, as being on the whole the best course in the goncial interest oi thecommunity. But then arises the fuither important question, whether the increase should be general over a huge number of articles included in the tarifl, orwhethertheumountiequhedshould be raised fiom the two aiticles — tea and sugar. With icgard to the first of these, I have already expressed the opinion of the Government, that to furnish the subsidies to local bodies, an additional duty of twopence a pound should be put. on tea. which is as much as we think it should bear. There remains the question of an additional tax on sugar, and the Government are fully alive to all that can be said in favour of tlii« ; nevertheless the GoNernment do not propose to put any additional duty on sugar. The reasons which led them to this determination are briefly these : Suirar may fairly be called a necessary article of food— the most widely and largely used of any food imported ; it is extensively used in our manufactures, and it will always be available if a f . some future time, and upon some unforeseen contingence, a need for some additional revenue should ause, and it will, moreover, be available with the leas*; disturbance of trade. We therefore think that the sum lequired should be raised by an increase of a general character. T have given the subject of the tariff much anxious thought during the lecoss. The very numerous suggestions from manufacturers, and the many conflicting interests concerned of both producers and consumers, have received careful consideration. TheGoveinmenthaveendeavoured in the duties proposed to adjust fairly between the conflicting interests the buidens to be borne llecognising the fact that a free-trade taiifTand prohibitive tariff cue equally incompatible with the amount which we must raise, and admitting what must be admitted, that the imposition of hea\y Customs duties necessarily aflects the course of trade and industry, we hay« endeavoured, while making revenue our first object, so to adjust the proposed duties as to assist our local manufactures without any more pressure, as we believe, upon the consumer than is inevitable if we are to raise by Customs duties a yearly sum of not le.-v^ than f 1.450, 000 for the purposes ot oidinaiy revenue, and it does not seem to me that we can prudently reckon to do witti less than that sum from the Customs for some years to come, when we look at the total amount of revenue which must be raised from the other sources of revenue open to us. 1 have said that cueful attention has been given to the details of our proposals, but I can hardly hope , in so complicated a matter as a complete revision of the tariff, wheie so many conflicting interests have to be dealt with, and as far as possible reconciled, and where it is impei ati\e, as in this case, to raise a large revenue, I say I can scarcely hope that cuors and anomalies will not be found. I ti ust, however, that if any such there are, they will, with the assistance ot the Committee" be amended or removed. I will a-k hon. members, both free traders and protectionists, in approaching the consideration of the question of the particular duties proposed, to keep very prominently before their minds the one inexorable condition of ttic pioblem, the necessity we are under of rai-inir a laige revenue by means of these duties. ]f this essential point is given its duo weight, a great deal of the difficulty which would otherwise attend the detailed di'-eusMon upon the tariff will, I am sure, be removed. 1 will not here give hon. members, the details of the pioposed mci eases* and alteiations. because in a few minutes they will have to be read out in the form of a resolution for theapprovalof the Committee. I may, however, say that it is proposed to raise a large number of articles from 15 per cent, to 20 per cent, ad valorem, and some t0 25 percent. , and to increase specific duties in many cases pioportionately, due regard being given in both classes to the requirements of the colony, and the conflicting interests involved. iSnme articles ha\e been added to the free list, and some removed which experience has taught should not be free. The total amount which these duties will laise is estimated, at £193,000, but I can only give this as approximate, as under the circumstances, for reasons which will be obvious to honourable members, it is impossible to estimate with anything like accuracy the results of the considerable change we are proposing. I may heie point out that £25,000 of this taxation would not be necessary if Parliament saw fit to raise the school age at which capitation is payable to six years, instead of live as at present, and to abolish the Education Boards. The Government do not intend to propose the alteration this year, in deference to what they believe to be the | wish of Parliament as expressed in the last session, but I feel it my duty to pom out to the Committee where another £25,000 a year could be saved without any injury whatever to our educational system, and I would ask bon. members again to consider whether the colony can at present afford so laiye a sum to provide what is little more than nursery accommodation.

Redemption of D Ventures laauod to Fay Off Deficiency. It will be in the recollection of the committee that last session I pointed out thai the consolidated fund \* as actually benefitting to the extent ot about £40,000 a year by the creation of debentures for the full amount of the accretions of the sinking fund, and that 1 proposed to set this sum aside yearly to pay off the £400,000 4 per cent, debentures ifcsued last year to pay off the deficiency. From the facts I have already stated, I think hon. members will agree that, to do so this year, would be putting too great a strain upon the taxpayers. But there is a sum of -£70,000, known as the assurance fund, under the Land Transfer Act, which the Government think may wisely bo applied bo the payment of a part

lof the £400,000 just referred to. The real r guarantee fund under the Land Transfer Act is the consolidated fund, which is responsible for the orrors of the Land Transfer Office. The public using the office pay an insurance fee for such guarantee, and the Government are of opinion that these feesshould be paid in as revenue, letting any claims which arise come before Parliament as unauthorised expenditure. It is practically useless to feet aside a fund which may be too large or too small for its nominal purpose, and which requires investment and all the annual labour and expenditure which that entails, and which, when invested, as it already has been, gives those with a right upon it only the same security as they would have without it, the security ot the colony.

Unraised Loans. The error which occurred in the 19bh section of the Loan Act of last session rendered it impossible to float that loan in London until the Act was amended. It also raised some doubt of the wisdom of placing the North Island Trunk upon that market until after the amendment had been made. The Government had therefore to consider whether sufficient funds were available for carrying on the public works, and for other necessary purposes, without floating these loans, until Parliament should meet at the usual time. If funds had not been available Parliament must have been called together about the end of February. I found, bovrever, that a satisfactory arrangement could be made, and so avoided the great public inconvenience of holding a session before the Government had had time to prepare any of the w«>rk they had undertaken to submit to Parliamentatits nextmeeting. Thearrangements made were— firstly, an agreement wifch the Colonial Bank of New Zealand for an advance of £400,000 at five per cent, for three years, upon the security of the €400,000 of 5 per cent, debentures issued under the Public Revenue Act of New Zealand of last session, to cover the estimated deficit. Of this sum, £300,000 was paid into our public account in London, and £100,000 was taken in the form of a draft at 90 days' sight, also payable in London. No commission of any kind or exchange was paid. Secondly, the advance obtained by the late Government from the Bank ot New Zealand of £400,000 upon the security of 1500,000 of the North Island Trunk Loan short-dated debentures, which fell due in April last, was renewed till tho 31st July next at the same rate of interest, and as was charged on the original advance, namely, 5 per cent, for £400,000, and 6 per cent, for £100,000. We have received no other advances except advances obtained by the AgentGeneral on the Imperial guaranteed debentures, and the usual ones upon deficiency bills in anticipation of revenue. The only large payments we have to meet in Lonaon shortly are £200,000, repayment of deficiency bills due in July, and the £500,000 short-dated debentures of the North Island Trunk Loan due on 31st July next. My reasons for asking Parliament to correct tho erior which had occurred in the Loan Act of last year before the delivery of the Financial Statement were that the error to be corrected was an admitted oversight, hardly more than a clerical error ; that the policy in\olved in the Act had been very fully discussed last session and carried by large majorities- ; that by the advice of our agent it was important to ha\e the loan ready fur floating in this present month now just ending, that in the event of any gieat disturbance of the London market at by a European wat occurring before the loan was raised serious loss would result to the colony in uii&ing it: that delay in passing tho Act would ha\e caused embanassmene and loss in making necessary fin ther temporal y aiiiingements for meeting engagements, these temporary expedients being the \ery thing 1 had tried with much trouble to avoid ; and that a serious delay must have resulted if the amended Act which has been passed had been postponed until after the delivery ot this btatemeni. And now let me say a few words as to the expendituie ot loan money for the year. We think that no further contracts should be let on the North Island Trunk Railway, and very little, it any, work be done on the other lines named in the schedule of the loan Acts for the piesent year : but it may be naturally objected if we are going to spend so little why should we not have borrowed less ? 1 think, Mr Hamlin, the reply to that is sufficient. We arc now about to go upon the London market for the last time, for three years at least. Whatever, theiefore, may be wanted within that period must be provided now, and having to look forward so far, and considering the large works unfinished, some of which must be continued as our means and the other ciicumsrances ot the colony will allow, whilst others, of little comparative magnitude, but of immediate necessity, have to be undertaken, it would be eminently unwise not to allow ourselves some reasonable margin. But I certainly need not recapitulate here the aigruments which last session induced the Legislature, whilst insisting on great retrenchment, to sanction the loan as involving true economy, and though we are now proposing to expend the loan even more slowly than was then contemplated, the colony will not be put to the least additional expense by reason of the whole of the loan being immediately raised. Such part of the proceeds of the loan as lequire investment can be at once invested in redeeming the Imuerial guaranteed debentures and others, if those should not prove enough.

Post Office Savings Bank. The committee will remember that, la&t year I promised that I would, us &oon as possible, invest some of the Post Office Savings Bank deposits in Imperial guaranteed debentures. This has been done to the extent of 4:200,000. The Government arc desirous of increasing 1 the amount invested on easily saleable security, butthedifficulUes are great, if the present rate of interest which ii payable to the depositors is con tinued, and this seems desirable as long as it can be done without loss to the colony. It is very gratifying to find that the deposits and number of depositors continue boincrease, and that even duringthefirstthree monthsof this year the increase in deposits has been £60,000 over the withdrawals, and the increase of the depositors 1,781. The amount of deposits on credit in the Post Office Savings Bank on the 31st March, 1888, was £1,861,337 ; and in the other savings banks, which are all guaranteed by the colony, £600,967, making a grand total of not less than £2,462,304 amongst 99,277 depositors. These figures, and the fact they disclose, that a large part at least of our industrial classes are üble to put by and invest such very considerable sums from their earnings, afford satisfactory evidence of the substantial propperity of this most important class of our community.

Provision for the Deficit •( 1887-88. I have nou, Mr Hamlin, to state how it is proposed to meet the £128,603 standing to our debit on the 31st March. We are, I assume, all agreed that it must be paid ott, and not made part of the permanent debt. This benpr so, and there being nothing in hand to pay it with, the question arises as to what form the necessary taxation shall take. It is clear to the Government that we must not let the paying oft' of this debt depend upon the occasion of a sufficient surplus at some future time, and we

think a special tax should be imposed and set apart for the purpose. Our proposal, if somewhat novel, will, I hope, meet with the approval of the committee It is that a primage duty of 1 per cent, be levied upon all goods imported into the colony, whether free or dutiable, for two years, and that the proceeds be applied to the payment of the £128,000. This duty, it is estimated, will yield about £58,000 a year, and the small balance over may be safely left to be met from the ordinary revenue.

The Crown and Native Lands Rating Act. This Act, as I stated last year, it is the intention of the Government to ask Parliament to repeal, reserving any rights chat have been created under it, and the local bodies interested have received notice not to expect any further payment under the Act. I much regret the necessity for repealing this Act, for there is no doubt the repeal will feverely affect some of the local bodies.

General Summary. To&ummarise, then, for the convenience of honourable members the result of my pro posals, wefindjthat after the 1 eduction of our ordinary expenditure by £233,000, the expenditure which we deem necessary is some £70,000 for the year more than our income from our present source of revenue ; that to provide schools and public buildings from revenue an additional £60,000 is required : that to continue the subsidies to local bodies and to pay them all from revenue a& mu^t be done if they are to be paid at all, another £64,000 is necessary ; and that to pay the balance of last year's deficit of £128,000, a sum of » 58,000 must be provided this year, and the balance in the succeeding year. Adding, then, these several amounts together, we find there i& lequired to balance revenue and expenditure £56,000, to provide for school and public buildings £60,000, to piovide for the subsidies £64,000; total, £180,000, and £58,000 for two years on account of last year's deficit of £128,000. To provide this sum of £190,000 I have proposed additional Customs duties, estimated to yield £207,000. If the tstimate should prove correct, we shall have a surplus of £17,000, so that the margin allowed is not too much. The Committee will remember that last year the property tax was increased by £65,000, but no alterations were made in the Customs duties. I would desire here to call particular attention to the fact that of this £180,000 now proposed to be raised by additional taxation, £107,000 has hitherto been provided from loan, namely, £60,000 for buildings, £52,000 for subsidies, and £15,000 for defence. Honourable members will no doubt feel with the Government that the proposed additions to our taxation arc large, but if after deduction it is founJ necessary to continue the services named it is clear the money must be found. My endeavour has been to place clearly before the Committeewhat our real wants are, to point out v, hat service* are rendering the increased taxation necessary, and to show how the required funds can, in our opinion, be best provided. The matter i& now in the hands of the Committee. I have laid before it the matetial facts relating to the financial position of the colony clearly, as fully, and as fairly as I could. If the task has not been the pleasant one it would ha c been if, instead ot piouding for a deficit, we had hart to dispose of a handsome surplus, we have the satisfaction of knowing that .seai clung examination of the colony's accounts reveals nothing to make us doubt for a moment its financial soundness, just as 1 believe a similar examination of the material circumstances of th-i colony would, in spite ot adverse facts, show beyond doubt its substantial prosperity ; and lam sure the Committee will agree in the opinion, which 1 hold that one ot the suiest means, or at least the necessary condition of increasing that pi o&peritv, i" by adverting finally, at whatever present inconvenience, to the sober financial policy of last session. [A resolution setting forth the list of new duties, and authorising their immediate imposition, was then put and adopted. As the list, with a comparative statement of the former duties, appears in another column, it is nnnecessary to repeat them here.]