WAR FINANCE AND ECONOMY.

Wairarapa Times-Age, 16 May 1940, Page 4

WAR FINANCE AND ECONOMY.

A N intimation by the Minister of Finance (Mr Nash) that heavy increases in taxation will be unavoidable during the coming year is not at a broad view open to objection or criticism. Account of course should be taken of the fact that taxation in this country was already at an extremely high level before the war began and it has to be recognised, too, as the Minister himself observed, that there are “limiting factors to increases in taxation.” ...There is a point at which taxation depresses industry and production and so serves with diminishing effect its intended and legitimate purpose and with increasing effect tends to dry up or diminish the sources from which it is drawn.

Within due limits, however, taxation should be high when there is a war to be fought and paid for. Wisely directed, war taxation may be made a means, not only of diminishing the ultimate burden of debt, but of stabilising price levels and so limiting the need for wage and other adjustments which tend always to take the course of a vicious and inflationary spiral. The least satisfactory detail in a brief anticipatory survey of war finance made by Mr Nash in an interview in Auckland was his statement that the heavy cutting of public works would mean serious unemployment. No doubt there will be general agreement with the Minister’s implied contention that every effort should be made to avoid cutting social services or necessary assistance to primary and secondary industries. It must be hoped too, that he is seriously purposeful in his statement that: “Reserve Bank credit could not be used without restraint.”

What, however, is the meaning of Mr Nasirs contention that the heavy cutting of public works would mean serious unemployment? Of the men thus far recruited for military service, 25,747 have been passed as fit and 2,69.1 as temporarily unfit. Of those accepted, 15,864 have been sent to eamp and 7,341 are available for training. Further and probably heavy calls will be made upon the man-power of the Dominion for war service while the war continues.

If, in spite of this continuing drain, public works largely of a luxury or non-essential character cannot be cut down or cut out without causing serious unemployment, it follows that the first essentials of sound economic organisation have yet to be approached in this country. The best use that can be made of labour and of all other productive resources in time of war is in speeding the prosecution of the war to victory and in making good, as far as that may be done, shortages of useful goods and services occasioned by the war. It will be limo enough when the war is over and done with to consider undertaking or prosecuting public works of a luxury character and even many works of a useful developmental character, particularly if they offer only a delayed return. Mr Nash’s statement implies nothing less than that this country is incapable of employing in useful and necessary production labour which might easily be made available. Evidence has been adduced that it will be difficult to achieve the increased production that is desirable in.some leading branches of export industry. There surely should be good scope here, and in welljudged extensions of secondary industry, for the employment of labour very much more advantageously than it can be employed on public works.