WAR FINANCE

Wairarapa Times-Age, 16 September 1939, Page 9

WAR FINANCE

MEETING EXTRAORDINARY OUTLAY FROM REVENUE AS FAR AS POSSIBLE. HON. W. NASH'S FORECAST. (By Telegraph—Press Association.) WELLINGTON, This Day. “The outbreak of the war will upset the Budget estimates in various ways,” said the Minister of Finance, Mr Nash, in a statement in the House of Representatives yesterday. “The restrictions upon the consumption of petrol will involve a decrease in the customs duty on that commodity. Customs revenue will also inevitably be affected by the inability to obtain, imports in the same quantities as would otherwise have been the case. Indirectly, sales-tax and other items of revenue will also be affected, but at this stage it is not possible to measure the contraction in the Budget revenue as a whole. “On the expenditure side, provision was made in the Budget for a considerable expansion of expenditure upon defence, and additional taxation was imposed on that account,” Mr Nash said. “However, for ,the Dominion to play a worthy part in the war will involve expenditure far beyond that provided for in the three votes in the Consolidated Fund and the vote in the Public Works Fund. Furthermore, it will be appreciated that it is not possible to estimate for 12 months ahead, even approximately, how much will be spent or to prepare detailed estimates of the items of expenditure. Thus it becomes necessary to depart from the usual procedure and to adopt special measures. A SPECIAL ACCOUNT. . “Accordingly legislation will be introduced empowering the opening of a War Expenses Account out of which all necessary costs for defence or the conduct of the war can be pajd.' Provision will be made for the present defence votes in the Consolidated Fund to be closed and the unexpended portions thereof transferred to War Expenses Account. The vote “Defence” in the Public Works Fund will also’ be closed and any expenditure already charged to that vote will be transferred to War Expenses Account. Thus all expenditure on the war will be pooled in the one account. The War Expenses Account will be financed as far as possible from revenue, and additional taxation proposals will be submitted next week. All must share in the war effort, some by personal service in the armed forces and the remainder by paying the maintenance of those forces. “While additional taxation will reduce the spending power \of the people, it may be pointed out that in the circumstances existing the standard of living generally depends upon the goods available for consumption. Recruiting men for the armed force lessens the labour supply on the one hand and on the other hand sets up an abr normal demand for goods for the maintenance of that force. Greater efforts in the productive field can offset this abnormal demand to some extent, but otherwise it is inevitable that less goods will .be available for consumption by the civilian population. MONEY & PRODUCTION. “In such circumstances mere maintenance of money incomes cannot maintain the standard of living. We must marshal our forces and direct all the available labour in channels best calculated to assist the war effort and maintain production of consumable commodities. As men are withdrawn for military service,- public works and other works that do not immediately assist production will be curtailed. “While the desire of the Government is to meet the cost of the war out of revenue as it proceeds, it may be possible to do so, and it will’in any case be necessary to make provision for a loan authority which will be submitted for the approval of the House. “Within the maximum contribution to the United Kingdom, our resources should be conserved as much as possible and the country should not be overburdened with a huge dead weight war debt,” Mr Nash said. “For these reasons the loan authority will be used as sparingly as possible. Reserve Bank credit will be used where necessary, but care will be taken that the use of this credit does not result simply in inflation of currency with its harmful results.

“To sum up the whole problem, a huge and continuous supply of goods and services will be required for war purposes, and these can be obtained only by more efficient and consistent work and better organisation, each man in his own job to increase his output with lower ' production costs, and by saving through economy of consumption in other directions,. Everyone is in duty bound to do his best in these directions. “Amendments to the Land and Income Tax Act will be introduced to carry out the proposals mentioned in the Budget and to prevent evasion of payments and also to remove some anomalies and hardships of the existing law.” —