FINANCIAL STATMENT.

Wanganui Chronicle, Volume XXX, Issue 11629, 2 November 1887, Page 2

FINANCIAL STATMENT.

(BY TELEGRAPH.) BY THE COLONIAL TREASURER, HON. MAJOR ATKINSON. (Delivered in the House of Representatives, November lot, 1887.) Mr Hamlin : I have on several similar i occasions bad the honour of addressing you and your predeoessorß in that ohair, but I need hardly Bay that on no prei rious occasion have I felt a greater ! sense of responsibility and of the diffi- j oulties which lie before us ; yet I will ] ! add that never previously have I felt mote confident that these difficulties oan and will ba overcome, Bines th» colony aud I believe this Committee — 1 reflecting as it doea the noind of the colony— have determined that oar difficulties shall be met and dealt with ia the right spirit. It wbb in I ! May last that the country began in i earnest to recognise the fact that a serious financial problem had to be faoed. Parliament was then told by the Hon the Colonial Treasurer, Sir Julius Yogel, that every possible eoonomy having, been practised in the publio i expenditure, additional taxation to the | extent of £250,000 per annum, must ba imposed. Parliament, however, though as fully resolved as'the Government not to let the ourrent expenditure exoeed the ourreut revenue, emphatically re* fused the proposed additional taxation, I in the belief that further large raduotions were possible, and could be made iv the expenditure before imposing further burdens, so that these latter, if really needed, might at all events be reduoedto a minimum. In consequence of this refusal, an appeal was made to the electors, but they fully oonfirmed the decision of the last Parliament, and I am- here io«night to propose the first step toward giving that deoision effeot. ,1 take therefore as my starting point ' this firm determination of the country, which, under the still continued depression of trade, and the low prices of some of our mam staples, to one oan say in not reasonable. The Government at all events are .among those who folly believe in the reasonableness of this determination, and they also believe that the country ia prepared for the necessary self "Sacrifices which it involves. To bo me extent I hope that retrenchment may beeffected by greater oare in administration ; but there is no doubt . that, speaking generally, re» trenohment means self -sacrifice in some shape on the part of the community at large; Honourable members will, I trust, excuse me if I ask them io bear this very obvious but very important truth in mind— not only in looking at the Government proposals as a whole, but when they oome to deal with them in detail. It will not be necessary to refer at any leDgtb. to the transactions of last year, as they have been dealt with by the late Colonial Treasurer in his Statement of May last ; but I desire here, to call your attention to the great difference there w*z in that year be* tween the recurrent revenue and the expenditure. The defioit— as given by feho late Colonial Treasurer for the year 1886-87 — was £92,293, but if we omit from the revenue two considerable items, which will not reour this year— namely, the surplus of £37,859 with whioh the year 1888-87 ' began, and the windfall of £104,749 of zeleased Sinking Fund, we find that what I have called the recurrent revenue fell short of the expenditure by £234,901. Bearing this fact in mind, honourable members will be better able to understand how the late' Government, after making all the reductions iv expenditure they thought possible and expedient, felt constrained to propose no lesa a sum than a quarter oi a million of taxation over that of the year ending March 31st la.sfc. It is desirable before going further that I should briefly refer to tbe position of the Land Fund Acoount. It must be remembered that, although the land Fund has been kept in a separate account since 1879*80, and V9ry wisely so, it is in law a part of the Consolidated Fund; and while a surplus should be üB9( j — n ot in aid of tb.9 consolidated revenue, but on toads and bridges, to give facilities for settlement —any deficiency in tbe Land Fund ia properly a defioienoy of the Consolidated Fund, and should be so treated. On the 3 let of March, 1887, the Land Fund wag in debt to the amount of £54,263, so that if to the £92,293 we add, as we should, this £54,263, the defioit of the Consolidated Fund at the close of the year, whioh had to be provided for, inoluding the Land Fund, was 4)146,556, and as a matter of fact it is included in the deficiency bills outstanding. I shall now proceed to state to the Committee what would be the probable deficit of the Consolidated Fund Account at tbe close of the present year, on the twofold supposition— rfiratl p.thatthe expenditure oontinuss at the rate prevailing when the present Government took office; and secondly, that no additional taxation is imposed. CONSOLIDATED FUND EXPBNDITURE. (Ordinary Kevenue Accouut for the Year 1887-88.) The estimates for the ourrent financial year, as laid before Parliament by the late Government, having been reoon^ sidered in the light of the cix months' actual experience, with the view on the one hand of showing the probable savings which, under ordinary circumstances, would have aoorued on the votes at the end of the year,' and on the other hand of adding to the original estimates the cost of additional services for whioh no provision had been made, but which, so far as they did not relate to tbe services under permanent acts, would have had to be brought down and voted in the Supplementary Estimates, it now appears that the probable expenditure for the current year would amount to J84,118,395, as against the total of £4,088,804 appearing in the estimates of the late Government. It is hardly neoessary that 1 should enter into any explanation of the differences between these two estimates. There are savings atid excesses in various directions, and ho a members will find them set out with euffioient fullness in a table whioh will be- appended to this statement. I may remark, however, that the so-called savings on votes whioh we ordmarily expeofc to find at the close of the year will not prove so large as usual, because the Estimates appear to have been framed with little margin over the sums proposed to be actually spent. Amongst the cervices either not appparing ou the Estimates or insufficiently provided for, are the following ; Interest on advances rex osntly obtained from tha Bank of New Zebliod cinapensa'.ion for loes of office paid to officers whose services were dispensed with by the late Government; expenses attending a second session of Parliament within the y 9!l r ; expenses of a geneja 1 election ; stock department in3uffic'e itly provided for liabi i in respect of the Indian and Colonial Exhibition ; additional exchange on renr ttancea to London' In arriving at the above estimated total of £4,118,395 I have not allowed for the percentage of reduction of salaries, estimated <o amount to £20,000, proposed by the late Oovermneut, but wbicu had not bn.eu acted oa whon we took office.

OtCINABY BBVENUB SOK YEAR 1887-88. The revenue proper received for the six months ending on the SOrh Sept last was This was £16,844 les3 than was received during the same period of tha financial year 1883-86. The Customs yielded £29,446 lees ; tbe Railw&yß £18,433 more than the previous year. To this muat be added the proceeds of debentures, amounting to £258,184, issued last year, in April, under "The Consolidated Stock Act, 1884," on account of the Sinking Fund to accrue during the financial year I 1887-88. But Ido not add the proceeds of deficiency bills sold, because my ! objeot is to show what the deficiency will be at the end of the year. The actual reoeipts were therefore, exclusive iof the proceeds of deficiency billa, £1,769,047. Xn estimating the revenue for the remainder of the financial year, Ido so upon the assumption that taxation, including the property tax, is not; | altered from lant year. I may remind I hon members that no property tax has ; been collected, the annual bill not having yet been passed. Wifch regard to the other items of revenue, I have adopted the Estimates of nay predecessors, exoept as regards Stampuiand Bailways. The experience of the last six months leads to the probability that Stamps will not reach the estimate by £32,600 and Railways by £50,000- Taking ih»Bs circumstances into consideration, I estimate that the revenue for the six months ending 31st March, 1888, will amount to £2,019,460, making a total of £3,788,507 .for the year, as agaiuat as estimated by tbe late j Colonial Treasurer, which included the | proposed additional taxation. i THE LAND BUND, I have already informed the Committee that on the 81st March last there was a balanoe of £54,263 at debit of fcha Land Fund account. On the 31st of March, 1884, there was a bulanoa of £80,447 at the credit of tha Land Fund. The expenditure has therefore during the past three years exceeded the re* oeipts by an average of; £44,900 a year. Last year the expenditure exceeded the reoeipts by £33,879. It is expected that the reoeipts for the current year, esti* mated by the late Govarnmant at £108,890, will be realized, and a revision of the expendifcure.eatimatad at £170,907 result in a probable decrease of £2600. Thus the expenditure of the year would have exceeded the revenue by .£59,4:17. I may say that this excess of expenditure is exclusive of the outlay, amounting to £168,266, which has been made up from loan during the laet three years, on opening up land before sale, and of liabilities -879,908 sinoa incurred oil the same account. It is also exclusive of £1891 expended on village settlements to 31s, t March last, with liabilities of £67,885, sino& incurred 5 but this latter expenditure ia to ba oapitalised, and interest obtained for it in the shape of rent if possible. Money however has yet to be provided either from loan or the Consolidated Fund, no provision having been made for it by Parliament, RBSUI/fS, The revised estimates of expenditure of the ordinary revenue account being, as I have stated, £4.118,395, and the revenue being £8,788,507, the expenditure will exceed the revenue by£329,888 on the ordinary revenue account, and if we add the excessive expenditure of the Land Fund, £59,417, we gat a total of £389,805.. The. late Government pro.* posed to meet tha deficit they antioi*. pated on the ordinary revenue account by additional taxation amounting to 4*250,000, and by a percentage reduotioa of £20,000 from salaries. With regard to (he Land Fund, they proposed ,' ( That for a term of years, until the increasing revenue will percqit, the defioienoy between the JancTrevetfue and the land expenditure should b<? made up by oharges on the land supplemented • by suoh local borrowing as may be required." How the present Government propose to deal with tha deficiency of the Consolidated Fund aa a whole and prevent its recurrence, I will shortly state. But first 1 must ask your attention to the public debt and to the Publio Works Fund Aooonnt. yija public debt. With the view of showiug the effect upon the publio debt of the operation during the last three years, of the provisions of " The Consolidated Stook Aot, 1877," and more espeoially " The Consolidated Stock Act, 1884," I have had a table prepared to accompany this Statement. The gross publio debt on the 3ist March 1884, as set forth in that table was £31,071,582, exclusive o£ £398,000 for deficiency bills. At 31st March 1887 it was £35,741,653, exolusive of deficiency bills for L 279,100 then outstanding. Sinoo that date further deficiency bills to the amount of L 715.900 have been iafiued, the total of these now outstanding being L 995,000, in addition to the debentures for i L 258,184 issued in April last for increases of Sinking Fund for the current: year. The amount at the 81st Maroh 1884 in the Üble to whioh I have referred, differs from the total given by the late Ooloniil Treasurer in his Financial Statement of the 16th September 1884. It ia unnecessary to mention the items constituting the difference, except in one particular, because the table prepared in 188 1 was to a certain, extenl an approximate statement. The exoep. tion to whioh I refer ia the exclusion from the table of the amount of the bonds issued under "Tha Consolidated Loan Aob 1867," drawn, redeemed, and cancelled pcior to the 31st March 1884. It IB true that the scheme of that loan required that the annual oharge for Interest and (Sinking Fund in respect of the total amount of debentures issued should remain the same until the whole, loan was repaid, snd that after paying therefrom the interest on the outstanding portion of the debt, the growing balanoe should be applied to annual drawings ; but although the interest oontinues to be paid on the drawn bonds to the trustees of the Sinking Fund, there is in faot no liability in respect of the prinoipal of such bonds, which are actually cancelled from time to time and sent out of the colony. The inter* est so paid is in reality a contribution of Sinking Fund from the consolidated revenue, and goes to swell the amount available at each annual drawing of bonds. It is right therefore to inolude in the debt only the amount of principal for which tha colony is j liable. It will be observed from the table that during the three yeara ended the 31st Maroh 1887, bonds for L 9,796,800 were converted uuder the I two acts to whioh I have referred into othar secureties, of the nominal value of L 9.995.884. Prior to that date bonds for L 5,390,800 had beßa converted, and t-.V* now represented by a debt of L 5,499,571. Complete aocounts of all these conversions, and the expenses attending the same, have not yet been received, and until they are, an exact account of the saving effected cannot be made. I now come to consider the effect of these provisions of " The Oon> solidated Stock Act 1884," whioh empower the Colonial Treasurer to issue debentures in each financial year to an amount equal to the accretions of the Sinking Fund for the year. The total amount of these accretions for the three years 1884-87 was L 742,728, of which the C 'naoiidated Fund contributed L 597.236, the balance of Ll-*5.49<a being the produce during the ssacw c periods of investments made by the tj.usfce.es, partly iv bo.ud.3, of this colony

and partly in securities of other oolonies. The mnounfc contributed out of the Consolidated Fund represents in the oase of each loan, exoept the Consolidated loan of 1867, merely one or two per cent, as the case may, on the amount of the outstanding debentures. In tbe case of the consolidated, or "drawing" loan of 1867, as it is sometimes oallad, the amount contributed is one per cent on the amount of the original debt of £7,283,100, together with five per oent on the amount of the bonds drawn and cancelled, which inoreases year by year, and is now £1,982,100, inclusive of the j drawing iv March last. lam desirous j that the Committee should appreciate I the marked distinction ia the accretions of the Sinking Fund between the amouufc whioh the oolony contributes direc* from the revenue and the interest roceived by the trußtees on their investments. I wish the distinotion to be thoroughly understood, beoause I think that some considerable misapprehension exists with regard to the operations of the aot. When, in his Financial Statement of 1884, the late Colonial Treasurer brought the position of the Sinking Funds under the notice of Parliament, he did so with tLe object of propounding a scheme which would have the effect of relieving the Consolidated Fund of a heavy burden. He said: "I propose that wo should not be Idiotic enough to tax the people to pay off a little fragment of our debt ; no other colony does it." Now it is claimed that tho maintenance of the contributions of the Sinking Fund direct from the revenue was an unneoeaeary tax upon the people — a tax, in view of our continuing to borrow, that should, without breaking faith with the bondholders, be removed (whether or not that is <* right viaw to take, I ohfl.ll not discuss) ; but the increases derived from past investments of these contributions stand upon on entirely different footing ; they constitute no burden upon the people, and to the extent, namely, £14(5,492, to which during tbe past three years ending 31st Maroh last, tho Consolidated Fund has been aided by borrowed money equal in amount to the accumulations of interest in these years by the trustees we have, I venture to submit, exceeded the avowed purpose of simply raakiag good to the revenue the amount we paid out of it in reduction of our debt. I find that it is not generally understood that sucfc haß really been the effect oi tbe operation. I should, however, add that what has been done has been within the provisions of the aot of 1834, which gave power to the Colonial Treasurer to issue deben« tures for the increases of the Sinking Fund from all sources, and that the result, as it was stated would be the ease, has been that as regards loam outstanding on Match 31, 1834, the net public debt bas practically remained stationary, PUBLIC WOBKB POND ACCOUNT. This acoount is now divided into three separate accounts, a separation rendered necessary by the legislation of the 1886 session, which had the effect of what has been termed "earmarking the North Island Main Trunk Bail way Loan and the loan authorised i ; i 1886 for the specific purposes set forth in the two Loan Acts. No. 1 Aooount. This ia an acoount of the balance of the loans rawed before. 1886. The credit balanqa in this account was on the Slat of Maroh last £491,245, subject to liabilities amounting to £335,774. On the 30th of September last there was a credit bslauoe of £247,292, subject to liabilities amounting to £280,495: Against this fund is charged all miscellaneous works, such. as harbour defences, roa.de, bridges,*«chool build* togs, pucohasq of native l^nds, and telegraph expenditure. Honourabls members will therefore see that without further borrowing neither can our liabilities bo met, nor can necessary works of the above * description be undertaken, if we adhere to the wholesome restrictive principle of the acts of 1886, Np. 2 •' po ount. This is the account of the North Island Main Trunk Bail way Loan. The unexpended btlanoe on the 81*t Maroh, 18.87, was £674,314, subject to liabilities amounting to £187.981. On the 30fch September last the unexpended balanoe was £616,258, with liabilities amounting to £137,474. There is therefore a sum of £477,784 still available in thia account! subject, however, to the oost and oharges of raising tho whole of the loan, which has yet; to be done. No. 3 Aooount. This is an account of the loan of 1886, being the amount authorised in 1886 to be raised for railway construction, £1,325,000, together with £242,800, representing certain district railway deben | tures sold on behalf of the Post Office in conjunction with that loan. The j credit balance on the 3 1st March, 1887, was £1,012,034, oonsisting of £620,734 in hand, and £391,300 balanoe of the loan to be roceived. The liabilities, exoluaive of the proceeds of the £242,800 district railway debentures, since tjaid over to the Post Offioe, were £326,651. On the 30th of September last the credit balance was L 556.644, and the liabilities L 304.004. There is therefore still available 1/252.640 in thi3 account. The credit balanoes, however, of these three acoounts jointly are, as I have shown, only ia part represented by cash, and the power of spending depends upon our realising tho securities held to their' credit, and floating the & orth Island Main Trunk Bail way Loan. The total cash available on September 30th last was L 140.549, in addition to which we had L 120.387 imprest advances in tho hands cf officers of the Govern m en t. The securities consisted of deficiency bills, L 19.200,* District Bail way and other debentures, L 139.058; and the North Island Main Trunk Bmilway Loan, LI ,000,OCO. The total credit balanoea of the three accounts amount t0L1.419,1944 against whioh there were liabilities amounting to L 721,973. GOVERNMENT LOANS To LOCAi BODIES. Up to 30th September last we had borrowed £100,000 under the provisions o! " The Government Loans to Local Bodies Aot, 1886," for the purpose of making loans to local authorities. Of that amount £71,686 had been disbursed at that date, leaving » balanoe of £28,314 in hand, with liabilities amounting to £99,181, to meet which a further sum of about £100,000 will be required, consisting of balances of loans to local authorities, whioh had eleoted to take their loans by instalments; £38,580 and £60,601 for loans provisionally granted in the first year of t the aot, but awaiting completion of j the steps necessary to give the security required. In connection with the adj ministration of •« The Government Loans to Local Bodies Aot, 1886," I may further inform the Committee that under seotions 27 to 30 of that aot debentures for about £105,000 given by local authorities under the provisions of "The R-ads and Bridges Construction Aot, 1882," have up to tho 30rh September last been converted into liabilities under the former acfc, which (section 31) pro* vides for the payment into the publio works futad of all euonegu arising" from such oonveraions. It is the intention of the Government to ask Parliament to appropnat«a sum of £100,000 for the purposes of the act for the current year. Under section 45 of the act provision is to be joa&ie fur the creation of a sinking

fund for the redemption of the deben* titrea, but as tbe transactions of the consolidated fund will end' in a deficit at the end of this year, the Government do not intend to propose to Parliament to appropriate a sum for this purpose. Provision will, however, be made for it in tha Estimates of next year, Before proceeding to speak of the other pro* posals of the Government, with reference to equalising revenue and expenditure, , and of the proposals as to public works, 1 1 desire briefly to call attention to the following subjects— Maori Lands and the Tariff. MAORI LANDS, The apparently insoluble problem of dealing with the native lands in a fair and equitable way in the interest of the Maoris and of the settlement of the country has occupied probably more of the time of tbe Government aud Legis» lature of the colony than almost any other question. I do not propose, on the present occasion, to go any length into the question. I shall only indicate the broad lines which Government propose to follow in . legislation ou the subject, In the opinion of the Govern* meat, there are large distriots in the oolony, within which many Maoris are living, where the same laws can be applied with advantage to natives and Europeans alike. We Bhall, therefore, in repealing, as we propose to repeal, tbe Crown and Native Lands Bating Act, ask for authority to declare dia* tricts in -which the law will apply equally to individuals of both races. The Maori on tha one hand will be liable to pay rates and taxes as his fallow subjects of the European race is, and on the other he will be permitted to deal with his lands as freely as a European, after the Crown title haß been obtaiued, except to this extent that he will be compelled to retain a sufficient amount of land for the maintenance o! himself and his family, and of all those possessing large tracts of oountry it will be required that land shall be sold in blocks only of a moderate size. In all other distriots of the colony which are not proclaimed, and therefore not subject to taxation, the Maoris will not be permitted to part with their lands to anyone but the Crown, except under more stringent conditions. Before, however; proposing final legislation on these subjects, we shall in the recess consult with the natives on the several points, but we intend at once to introduce a bill to remedy certain pressing evils, THE TA.BIF]?. The revision of the tariff is a question which haß occupied a good deal of attention throughout the colony, and is one undoubtedly requiring the early attention of the Legislature. Until this ques* don is settled with some sort of permanence, the trade of the oolony will, iv addition to iti present unavoidable difficulties, continue to. be disturbed and irritated by what can, and ought to be avoided, the uncertainty from year to year — I might s*y, for a portion of the year, from month to month — as to what our tariff is to be, and no honourable member, I am. sure,, will doubt that damage to trade means losa to the whole community. The Government during tha short time at their disposal have had this matter under their care* ful consideration, and have come to the conclusion that the question should not be dealt with during the presont session, because it is impossible to deal with jt completely . The Government are strongly of opinion that it should not be touched until it can be dealt with so as not to need further serious revision for a considerable time to come. We hava within the past two years had two serious but unsuccessful attempts to largely alter the tariff, resulting, in great, derangement of trade, with all the loss which that bjdnga, and without tb(.> smallest compensating gain: and, the causes which led the House einphatioally to, reject those attempts still exist, and at all events the general commercial depression may fairly be con* aiderßd, at least in its p.-oaenfc severity, abnormal and temporary, Moreover, we cannot at present look so far forward in our finance as to fix what we shall require from the Customs, even for the near future, fur on the one hand the changes the Government propose, and such further ' eoonomiea as they hope to make, will correspondingly lessen the need for revenue; on the other hand, they recognise that it will be ngceasary to oharge against revenue many works which are now charged against loan— suoh as public buildings, school buildings, and telegraph extension— so that with these uncertain elements at work, and looking at the faot that the time at our disposal is praotioally very short, and that" we have work now before us whioh if satisfactorily done will oar- i tainly mark thia as an epooh in our hiss tory, it seems to the Government i clearly right that no attempt should be ' made to revise the tariff this session. PROPOSALS TO EQUALISE SEVBNtTE AND EXPENDITURE, I have now, Mr Hamlin, to answer a very important question, a question ia which this Committee and the oounfry are &t present most deeply interested, How, if possible without further taxation i are the revenue and expenditure to be balanced ? I have already shown that the excess of expenditure during the current year over receipts of Con* aolidated Fund, inoluding Land Fund, will probably amount to £389,305, on the supposition that the expenditure continues aa at present, and that no additional raveuue is raised by taxation. It must be evident to anyone acquainted with the conditions of the oolor-y that something more is now needed to restore eonfidenoe than mere trivial economies Our chief difficulties hava undoubtedly arisen in a great measure from too lavish expenditure, more espeoially of borrowed money; that must be stopped, and out first duty, therefore, is to apply the piuniog knifo with au unsparing hand, but that is only our first, not our only du<y. Thera is another not less I important. We inu-t indeed take all possible means to prevent waste, both of our ordinary revenue and of money borrowed for pubHc works, bufc we must also promote the settlement and occupation of the lands of the oolony by rendering them attractive to persons willing and able to cultivate them, and to develope their many and varied resources with their own skill and capital, and we must also, co far as practicable, encourage all our other industries by all reasonable means in our power; that is t ) say, we must encourage euoh industries, and by such means as will in out judgment, npan a general and careful review of a difficult and complicated subject, really and in tbe long run increase the wealth and prosperity of the oolony. Xv these ways we i shall in due course raise an increased revenue without an increase of taxation I oi conversely the same revenue with less taxation. The results, no doubt, i concern the future, but a future not, I trust, by any means far distant. There is no surer way of lifting the country out of its present difficulties than by the introdiotion of considerable numbers of persons possessed of sufficient means and knowledge to cultivate the land profitably, not only as ordiutiry farmers, bufc as frnil growers nud growers of plants suitable for tnamifiio* tnre, or to supply other industrioa. I Our eil'orts at retrenchment will bt» < comparatively unavailing (o r<»stu«v j prosperity uulees we can obtain • «mv~

siderable aeoeaßion to our population of i persons in a position to employ labour | We think the time for this very favour. *Kl' * nd if fche Houßa B}xo *W approve of the oouree w« shall propose to it upon this subject we hope to Bee at no distant period a considerable accession to our population of persons of tbe class above referred to. The time also apparently is very favourable to the wtablishment of pensioner settlements. Muoh interest is being taken in this subject by leading men in the United Kingdom, and » good deal of thought and attention has boen given to the details of a sohetne by a gentleman in Auckland who has de. voted £a large amount of time and energy to tbe matter. The Government «re of opinion that every effort should be made to induce a considerable im* migration of this class of peraons to the colony as an essential means towards accomplishing the above important objectp, and indeed the settlement of the country generally. The Government propose to amend and simplify the land lawp, and as far as possible make them uniform throughout the solony ; to allow seleotors fall freedom of choioe as to tenure; and above all, and as the dominant idea, to enable the bona fide settler to get possession and a title to hiß land with the least possible delay a»d expense, and it ia perhaps dsßirable here to declare that Government fully recognise the wisdom of the prinoiple which has been invariably acted on sinoe 1879-80, namely, that the proceeds of the sale and disposal of Crown lands should be treatedj not as ordinary revenue, but as a speoial fund for openiog up oountrv and promoting settlement. It would not be appropriate to speak here at length of the Mining Industry, though of great importance; I may, however, point to two hopeful signs for the future, one is that the yield of gold from quartz appears to be Bteadily in* creasing, and the other ia the large, steady, and increased output from the Coal Mines. Shere can be no doubt that when the harbours on the "West Ooast are completed the latter industry will assume still larger proportions. The Government fully reoognise the importance of developing the mineral wealth of the oolony, and for that pur* pose are desirous of affording all facilities in their power foi promoting legitimate enterprise ; and they hope that by the spread of wider and more exact knowledge of minerals and mineral processes and methods, by a more complete technical eduoation, a good deal of waste may be avoided, and lades and ores may ' be found and worked with profit whioh now are either passed by or are not thought payable. The Government will be willing to assist in matters of technical education so far as they are able, and so far as they can do so with real effect. The managemenfe of our Uailways from the first has never given satisfaction to the public. It would be a waste of time on my part to endeavour to explain the reasons for the publio dissatisf action ; the fact, probably, is suf&dent for us that the publio have long been greatly dis« satisfied with what ia called mismanagement of our railways. Ido not share in this disaatisfaotion myself, so far as the management goes, believing as I do that our offioera on the whole have been effioient, and that it is the inherent detects of fche system, and not mismanagement of onr railways, which are at the bottom of the dissatisfaction prevailing. The question of placing Bailways under what is oalled a Nonpolitioal Board of Management has been before the public for some years, and the introduction of that plan iito Victoria has enabled ua iv .New Zealand bo watdh the praotioai working of the system. It is now admitted, I believe, by all those qualified to judge iv Victoria, - that the system - haa proved itself to be a great suooeßa. The board has now been at work nearly four years, and I think it may be fairly said that the scheme has passed far beyond the range of experiment*. Looking therefore to the dissatisfaction existing in .New Zaaland with our present system, and the satisfaction which the board has given in Victoria, my colleague, the Minister for Publio Works, will ask for leave to introduce an. act thiß session into Parliament to constitute a non-political Board of Management -for tbe tfew Zealand Railways, Tbo Government believe they are fully justified in anticipating from this ohange a large increase ia net profits from railways, Ia the meantime we have to deal with the serious present deficiencies its our revenue which I have stated. JJfow it is obvious that without an inore&se in the number of taxpayers there are only three way? ia which a deficiency of revenue e*n be met, or rather ifca continuance and recurrence avoided. The first — t»xatioa may ba imposed for the whole atneuut required ', second, the expenditure may bo reduced to tha whole extent necessary, if that bs possible ; third, the reduction of expenditure may be made and additional taxation may be imposed, whioh together shall make up tbe required sum, PROPOSED KEDUOTIONB IN SBRVIOBB. j It is hardly necessary for ma to aay that it will be impracticable to cover the deficiency of the current year by a' reduction of the expenditure. Seven months of tbe financial year have passed, and it is impossible for two or three months to come to obtain muoli if any effect from the reductions. Tbe proposals, however, which I shall enbrait will, I hope, provs to be of a sufficiently comprehensive charaoter to satiafy the most thorough reformer. There ia an impression in the publio mind that sufficient . reciuoiion3 can be made in the public expenditure by a reduction ia the number and salaries of Civil Servants, but I ne .d hardly point out to the hon members that it will be altogether impossible to effect the whole of the necessay saving ia that direction alone ; it will be neoessary, also, to ourtail conveniences and aids which are tow being enjoyed by the public &ud the local bodies. I will now state to the Committee what our proposed reductions in tha aervioes are. ~ In the first plaoe, we propose to begin with the highest ofiloe in t c colony, that of his Excellency the Governor, I need hardly remind the Committee that this reduction cannot take effect until the appointment of a new Governor. It haa been said that the colony is likely to lose standing and credit in iSnglaud by reduoing the salary of the Governor, but we have no fear, after careful consideration of the subject, that ill effects will follow this reduot'on. We have no fear but that we shall still obtain the services of officers of the Bams high standing ns heretofore, and as to oar credit WiJ have the fulestoonfi'lenoa tb.it tho nulnciions and other economies wo are proposing will prove the existence of that t»r.-»f ivuditiou of commercial GoniMtutoa. a determination to pay our w»y. Wo propose thafc tho Gvjvoi'iut's saiav.r sba'l reuitim at £5000, but tli»t ibw shall include tho ootJt of his «i»tT. sivd all «U lowauooa. This will l>* » (.'fa! ia.Uio« tiou of A'V.M'O uvm *h<» ammiut at present paiiU W*> «i-.U4, .ha smn I have muutul hK'v* sh>n',Ui *vy«v tho total doat of th*» U^vvvtu-.r H» ihp 00-lony. In the wM y***>* l with the j itfiji;s}:»{«*v> .»'.-. : : VvvAHUXVtf KiWOhnS Of , «\vft U.'ViV'.'.'.u^. Mv.t U*«> Ccumnittee l«'.l!.i* "-••>■ ,- v ' -■'■ - v - -i fafeti ths

gard to the salaries of Ministers, that the Premier Bhall receive £1000 instead of £1720 now paid, and that the otheK Ministers shall receive .£BOO instead of £1250 at present paid, and wo propose to reduce the number of paid Ministers from seven to six, simultaneously with the reduotion in number oi members of the House oi BepreeentativQß, which I shall shortly mention, Aa to travelling allowances, it is obviously impor* | tant that Ministers should travel so as .< io make themselves personally acquainted with the wanti and oiroumBtanoes of the several districts, but allowances Bbonld be arranged so as merely to recoup necessary outlay, and we propose to allow £1 10 a a day while actually travelling on publio service, and limit the total to bo paid to the whole Ministry to £1000 in any one financial year. The average amount paid to each Minister for the last three years has been £190. With regard to the expenses of offioial reridehdea oi Ministers, we think that' Ur*e rector* tions could be made. We think that S e J? 1 ?, 6 J DOW , n , aB "**»«kori Boad North should be sold, bb being too large and expensive. Of the obhers we propose one Bhould be retained as & residonoe for the Premiar, the ooßt oi maintenance of all but the houno itself being defrayed by the ocoHpant instead of from the publio funds as heretofore. With regard to other Ministers, looking to the difficulty upon short notice of finding suitable bouee accommodation, we think it desirable that this should be provided for some at least of them, if it can be done with proper 'safeguard against exceeding reasonable limits of expense, and that those not obtaining a house should reoeive a house allows anoo, but upon ;thia subjeot wewill shortly make more specific propofaiffi I now come to the Legislative expe&cli- : 5 ture. This is undoubtedly' a qdwKoii of some difficulty, but in ow opinion a considerable reduction in Legislative expenditure ougbHo be mUde, and that if made it and the" other reduction 'ol Mmißters' salaries will 'tend.mose than any argument to produce in the minds of the people of colony, not only o conviction of our sincerity in! thi« "question O f retrenchment, bjit also ?of "the t - necessity for retrenchment generally. The Government will favite the Legls-r ■ lative Council to express fty^solntioji ' its opinion, that the honorarium paid to its members should not exceed £100, and we shall ask this House to reduce the honorarium paid, to its dwn memo bars to £100, wif h an allowance of £&d in consideration of the; additional expenses necessarily incurred by them. We think that no payment should be made to the Chairmen of the Beleaj^ Committees of either Houses, and t4at|\ all officers of ! Parliament , whbsi^salaries , are provided ' , for by *" ?$&, * ', should not reoeive" more thaa r thta '"o ; statutory pay at present providedifiil^r. extra amounts annually voted ibetirau stmok off, and the salaried of "the othefc* ioffioers.of tha House being reasonably reduoed. I may here take the oppor- ' tuai&y of informing the Committees 6l some proposals of the Gbveniminjk* :, which, as involving economy] ' IStdH properly mentioned here, btiiti wbidh are of considerable political importtirioe-— ' namely, that the Government intend this session to introduce a bill to roduba ; the number of members of the House of ! ; « Representatives to 70, inoiuuve ofti|f>- : ; Maori members, though . this oharige cannot take effect until tEe end of the present Parliament, and njext session* k : " they will submit a bill to the Houw altering the mode of election, with other -. reforms of the eleotoral laws. They: will also during the present session- r iavite the Legislative Council to devise < a plan by which their number ctvri Mtfr reduced to 31— one half of th& number of members proposed for this House, anii thereafter limited to that nnmberi JSowV let ua consider what reductions are : possible in the Oivil Servioei The total number of persons in the pay of tha colony, including tho Governor Ministers, Judgea, and others, bn%: • exclusive of police, military forces, and 1 country postmasters, is 7163, and tfre amount they receive in salaries, pay* and wages is £1,004,273. Of these 5862 are reoeiving weekly wages; pay,, or salaries not exceeding £150 a year, the total amount paid to this olaas being £638,619. The Government do not propose to make any substantial alteration in ' the paymenta made to these persons. It is probable, howaverj that thete numbers may be reduced, but at present the eg has been no tims to go into this question. It follows, therefore; that the amount of JG365.754 paid to persons in receipt of salaries over £1500 a year is the principal amount upon whioh it is possible to make reductions at present. The redactions proposed in the departments generally I do not propose here to refer to in detail. Thess will be dealt with in Committee by the several Ministers in oharge of the departments, but I will say a few words upon our Education system, in regard to whioh, while admitting that it has given great satisfaction from the purely educational point of view, specialists agree that relatively to population aud revenue the system if too costly. They differ only as to the means by whioh reductions may be belt effected. The proposals to be submitted by Government will show where moderate savings may be made without weakening the system. Our prinoipsl proposal will be to limit the capitation grant to the statutory amount of £3 15s a head, which, we think, under the oir» cumatances of the colony, is ample for necessary purposes, and not to pay oapitation upon aaj*»., child under six years old, but we shall make provision so that no country school shall be dosed in consequence of this ohange. The * saving on the education vote estimate at about £60,000 per annum. I have had to consider carefully how to submit clearly to the Houbb the reduo* - tions that the Government propose, and have thought it best in view of the short time at the disposal of the Government to bring down a schedule, in which will be shown in one column the total amount o£ each class of expenditure as proposed in the estimates introduced by the late Government in May last with supplementary estimates added for services either inadequately or not at all provided for. Iv the next column will ba found the reduced amount whioh the Government propose for tho current year, seven months of wbioh hava already passed, and two more of whioh will, at least, pass before ifc will bo possible for the reductions to take effect. The third column will show what is tho amount of the reductions, on tho Eativ mates for the twelve months, whioh the Government already see their way to mako, and whioh will take effeot in proportion as our proposals have time to oferato. Wo propose to teke one vot.. ior oaoh of the classes and snnia umr.;out»d in the second ooluwri of the schedule, under the head of "annual i-uproprititions," it>Btead of followioir tho nsu»U course of taking V ote 3 for I the Sbvtual servioes, or eaoh dags. Hon members will reoogni 6e that it could not b« possible for the present Govern* incut, in so short a time, to bring down a revision of the estiaates of tbe late. Goverumant, showing in detail the re* duotiois we propose to make, and that there is no other course open in the circumstances than to take a vote for each olaea of expenditure only. With regard to tbe reduction of a sum 0 $ " •fci&MJOU,. which haa sot been a!faejse,(l

to any class — but which, when given •ffeofc.to, will be distributed over all of them in such manner as the Government may determine— a clause will be inserted in the Appropriation Act which will limit the power of expending under the votes to the total amount of the classes, less the nuna of i> 16,000. Before leaving this part of my subjept I wislrto say that the Government, in making reductions, desire to use all "- possible consideration for the persons *■' directly affeoted, so far as their duty to publio will allow, more particularly the as regards those of special oooupations, uuoh as Postal and Telegraph offioers, and those now entitled to pensions and Allowances. The Government will do their .utmost to make the reductions and other changes press with as little hardship as possible, subject only to their paramount duty to the public. Our proposals, if assented to by Parliament, .will reduoe the total 'amount of departmental appropriations out of the Consolidated Fund, for a full year, by £251,600. The reductions comprised in this amount have been made upon probable expenditure for the same services, during the current financial fear, under the Estimates of the late Government. I may in passing inform the Committee that before making them (reductions), all services of a nonreourreht Character, so far as they could readily be traced, were first eliminated from the .Estimates for the current year—such as expenses of a general election.— and the same course was pursued with reference to payments under permanent aots, such as allowances to members of the General Assembly attending a seoond session of Parliament. If in determining the amounts of these reductions any non-reourrent items have been overlooked the omission will probably' tie adjusted by the occurrence of other 'items. of a like nature, In the Estimates, for the next financial year we already* see bur way to effect depart* mental reductions to the amount of " £251,600, abd we believe we can make Btill further, and, we hope, substantial reductions, by means oi a more perfectly organised system;, and amalgamation of officers compatible with each other. It is blear, that sufficient time must be given to any Government undertaking the. reorganisation of a service,' and full power must ba given to that Government if the wotk^is to be done successfully, but when the work we are now proposing to do has been done to the of the House, if it is not to be again undone, it will be necessary that far greater restrictions should be placed upon ■, the Government of the day than is the oase at present. Vigorous retrenchment is effooted by one Governnient in the time of depres* oion ; they are replaced by another Go* vernment, and much of the work' they : p»iave done, if times are a little more - prosperous, ' or if a ■ more sanguine view of a the: prospect is taken, is undone by their successors. I may give an inßtanQe{oX^what J. mean: In the year 1880 there were seventeen Inspectors of Police, r, After oareful consideration it was determined • that eleven inspectors could perform the work, and reductions were made accordingly. Eleven inspectors satisfactorily performed the, work up to 1884, Fat a cost of L43OD, having 445 men of all ranks under them. There are now no less than 18 inspectors, $t an annual ocst to the colony of L6OOO, 'the total number of police beigg 502. r I pimply give this as an instance, as showing' how it . will \tend to economy if the number of offioers of the several grades in the service is limited by aofc of Parliament. CLASSIFICATION" OF OTtll' SERVICE AND IJ@IirAISON ; OF : MEMBEBS. The Government are of opinion that if the reforms now being, instituted are to be permitted, it will be necessary to classify the Civil Service, limiting the number of each' ■olass> ; and it necessary tosreporl^toV Parliament .- the employment of. jany:? extra or ,outßide> assistance. The Government have a bill in preparation,: i but it "would be premature 1 to introduce* .' it' during the present stssion,' We propose to make the main: changes, and to see that they work well before asking Parliament to legislate. "I may say, however, that a leading provision in the bill will be the appointment of a Civil Service Board, through whom all appointments and promotions will be made. If we; are to : have a really effioient Bervice he ttenure of the offioers must be reasonably secure. A cadet must be able to look forward to the service he enters as a profession, and one in whioh his advancement will depend upon his capacity, character, and attention to his duties', and oot upon the favour of "the Minister of the day," This, under a well considered act, can be done at a minimum cost to the country. Before leaving the subjeot of departmental expenditure, I would say there appears to be a considerable waste of money in travelling, I have not yet bad time to look as fully into the matter as I should have wished, but the Committee > will probably be surprised to learn that the amount expended upon travelling during the year from the Ist October 1886 to the 30th September was L 56.417. I do not mention this as exceptionally large, but as an example. ; This inoludes the expenses of Ministers, but does not include the commuted travelling allowance, which is granted-to many officers, There is, however, some portion ,of it returned to the colony .in the way of railway fares, but it is impossible to ascertain the amount to which the railway revenues are benefited. ' The Government are of opinion that -very considerable reductions should andean be made in this item. The leading principle to be kept in view being that the, allowance is merely to 'recoup legitimate expenses actually incurred. •'.■ PROPOSED BJSDTJOTIONS IN GRANTS IN AID I now come, Bir, to to the consideration of grants to local -bodies, and however painful it may be, we must recognise the faot that if the assistance now being given to them is to continue our taxation must, be increased to a proportionate amount. „ ; THE CROWN AND NATIVE LANDS BATING ACT- 1882. (Kepeal of Crown and Native Lands Bating Aot from March next.) In the first place- let me ask your attention to tbe Grown and Native Land Bating Aot. When this sot was passed' it waß estimated -that- there would be a sufficient surplus in the Land Fund to pay rates on ,the Crown lands. That estimate has, however, proved incorrect. As a matter of fact the Land Fund is insufficient by more . than the amount paid for the rates on Crown lands to meet the charges as voted by Parliament. It must be also admitted that the advantages oonferred by this aot have operated very unequally in various parts of the colony. It is with much regret that the Government propose that it should be repealed from Maich next, with the usual reservations as to securities given under the act. For nothing can be fairer than the principle that all lands, by whosoever owned, should contribute to the maintenance of the roach of the district in which they are situated; but as money must be found for opening up new lands for fresh settlements, anc yre cannot always continue borrowing largely for that purpose, it seems to mi getter in the internets of the colony t< use the Land I?und at onr disposal thai ifc> apply it as it has been applied sine < **""*3»u.e passing of the Crown aed Kativi £g&34 A.Qb to &c celist oi kqal taxA.Uo.ii

By the repeal of this aot a very large question is opened np ; The queition of Maoris paying rates upon their lands in settled distriots, as their fellow settlers of the European race are doing ; and it seems to the Government that the time has arrived when the Maoris should be placed on an equal footing in this and other respects with European subjeots in those distriots which may he properly oalled settled distriots. I have already referred to the oorelative rights which it is proposed should be oonferred upon the natives to compensate them for being oalled upon to perform this duty. If the act, whioh we are now considering, is repealed, there will be a saving to the consolidated revenue through the Land Fund of £84,000 per annum, and a further saving of the expenditure of the money now borrowed to pay the native rates of jBIO.OOO per annum, for although this money is recoverable it will be some years before it will be repaid. There has been recovered up to 30th September, and there is at present outstanding on this aoconnt whioh haa been borrowed from the Publio Works Fund. SUBSIDIES. TO LOCAL BODIES. (Continuation of subsidies for present year at the rate proposed by the laic Government.) These subsidies under existing arrangements have always been regarded by everyone acquainted with our real financial position as a most precarious source of revenue to the local bodies, and the late Government, no doubt with much regret, proposed to Parliament to reduce the amount of the subsidies paid last year by one half for the current year, and I, sir, also with much regret, have now to make a similar proposal on behalf of the present Government, and we hope to be in a position to continue them at the same rate next year if Parliament shall see fit. But we are of ppinion that after the present year these subsidies should be charged wholly upon revenue, and not as now — one halt upon loan, and farther that they should be separated from our ordinary finance and not only fixed for a definite time but be paid from a definite source, as. for instance, by appropriating to the purpose a given fraofcion of the property tax for the present. There is no doubt that the looal bodies are hardly pressed to provide funds to oarry on their necessary works, and we regret that we can do no more. I do not, however, wish. the Committee to understand me' as representing that Government ceasing to pay rates on Crown Lands and the subsidies are effecting a saving to that amount in the publio expenditure, using that term in a popular sense. We, are .indeed relieving the consolidated revenue to the full amount, as is our first duty, bat we are throwing upon localities whatever amount out of these sums, is absolutely required for carrying on a necessary service, and so far as the change induces local eoonomy there is an absolute saving in all senses, and it is clear that. if we are to restore our finances to a satisfactory condition, and if we are to recover oar credit in London, it can be done only by making a. very firm stand against all expenditure which can be possibly avoided* It may np doubt be said that not only these grants, about whioh we' are now speaking, but also muoh larger sums of money could be profitably spent by the local bodies, and I do not propose to dispute that assertion. The answer seems to me to be that we have not the money to spend, and that we have been spending fa*, too freely j and that we must now stay our hand for some time, even from looal works, or raise funds for them locally. STJMMABIES OF SEDUOTIONB. (Amount of proposed reductions for a year) Adding together then' the whole of our proposed reductions, we find that when complete effect ia given to them the expenditure chargeable for a year upon the revenue of tbe colony will be re* ducedfcy J 300,000. yl shall for the convenience of members briefly recapitulate the leading items, of which this large sum is com" posed, sir ; — Salaries of Ministers £3450. Allowances to members of the General Assembly . Departmental appropriations £252,550, including reductions in respect of Ministers'. , residences, travelling allowances, &c. Bates on Grown lands £34.000, making a total of £300,C00 for a full financial year. The amount we shall probably beg able to obtain by these reductions within the current financial year will be about £71,000, particulars of which will he found in a table appended to this statement. PROPOSALS RELATING TO THE CUBBENT YEAB. I have already informed the Oom» mittee that it is estimated the expend** tare of the Consolidated Foud during the year, ending 31st March, 1888, ! would exceed the revenue by L 389,305, ! if the expenditure proceeded at the old rate, and farther taxation be not imposed This sum will, however, be lessened by the savings during the remainder of the year arising from the reductions we shall be able to give effect to, estimated at L7I OOO, and we propose to still further reduce it by increasing' the property tax :rom thirteen-sixteenths of a penny to one penny, hence the reductions will leav.e a sum of about L 235.000 expeaded in excess of deficit of last year, amounting to L 92,293 ou the ordinary revenue acc©unt at 31st March, 1887; and 154,263 on the Land Fund account makes a total of about L 399,600, for which provision has to made. It will also be necessary to meet the account to be paid as compensation for loss of office. This will probably be a considerable sum indeed, large in proportion, as the ultimate saving is large ; but it is impossible to state the amount even approximately at present, or until the Government have determined upon the specific reductions and amalgamations, which will have to be made if Parliament should see fit, as we trust it will, to rate £y our proposals, and limit the total cost of the respective services. Now, I must ask honourable members to bear in mind that, as I shall hereafter explain, we are proposing to reduce greatly the rate of our Public Works expenditure, and also so to shape our ordinary finance as gradually to enable . the Consolidated Fund to bear mauy . obarges for works now borne by loan. If we succeed in doing this, as I think we must, it will entail a heavy burden upon the revenue and, render it imposBible for it to meet the' large amount to which I have referred to otherwise than gradually. The Government, therefore, propose that the proceeds of the debentures issued undrr "The Consolidated Stock Act, 1884," for the interest on the investments of the Sinking fund, to which I have referred in my remarks upon the public debt, amounting now to about L 40.000 a year, but whioh is in- [ creasing daily, and which for four : years, including the present year, have | been paid into the Consolidated Fund, ' and used as revenue, should from March . next be applied to redeem yearly a like ; amount Of this defioit, until the debt is } finally extinguished. We propose blbo t that any credit balance of ordinary revenue from year to year shall be devoted to the same purpose, instead of being carried forward to the next account ; and in tha meantime we propose thit short -dated debentures, payable only in tUe colony, shall be issued tQ cover the

PUBLIC •WORKS PROPOSALS. The Committee will naturally be anxious to know what Government propose about public works and further borrowing. It will undoubtedly be necessary to place the North laland Main Trunk Railway Loan upon the Lou don market early next year. The late Government had contemplated issuing this loan about the end of this month, but owing, I suppose, to the result of the elections, the matter was allowed to stand over ; but in order to obtain the neoessary funds, the Colonial Treasurer made arrangements with the Bank of New Zealand here to advance 1*500,000, repayable in London in April next, on the securities of this loan. The Government therefore propose te place this loan upon the London market on the first favourable opportunity, and the question will now naturally be asked by honourable members, How long will it be possible to oontinue neoessary publio works with the amounts at our disposal in the several aooounta of the Puplio Works Fund? In order to answer this question, let me again call the attention of the Committee to the state of the three aooounta in this fund. No. 1 Account. This account, which contains the balances of the loans released prior to 1886, is really exhausted. There was to the credit of the aeoount on the 30th of September last L 247.292, with liabilities amounting to L 280.495, of which at least will ootne in for payment by March next, leaving only £85,292 for expenditure next year, with outstanding liabilities of LU8,495. It is therefore evident that no new votes oan be taken against this aeoount, and yet my colleague, the Minister of Public Works, assures me, and he will show when he makes bis Statement, new works to the amount of at least L 150.000, whioh it will be impossible to avoid executing, as they are absolutely necessary complements to undertakings already entered into, and they must therefore be authorised this session. They oonsist principally of roads to open up Orown lands before sale, publio buildings, school buildings, purchase of native lands, telegraph extension, and harbour defences. In point of fact, the L 150,000 is a liability, though not brought to bock ; almost as much as the liabilities whioh have been brought to book, and must therefore be provided for. No. 2 Acooun*. In No 2 Account, the North Islmd Main Trunk Railway loan, there are ample funds to continue the work for three years at least. No. 3 Account. The funds for several important works which mußt be completed are practically exhausted, and contracts must be done on either the Manawatu Gorge line or the Otago Central— even up to Middlemarch, which ia the least distance to whioh it will be carried to be of any practical use at all. There are three courses open to Parliament. I—We1 — We may stop those works for which the funds are exhausted 2— We may use some of the cash to the credit of the unex« hausted items either in No 2 or No 3 Acs count to continue the work of the exhausted items { or, 3— We may determine to realise another loan. The choice thus forced upon us is not a pleasant one, and yet it must be made. With regard to the first olause, the Government; is of opinion that all works, the stopping of whioh will not materially retard the progress of the colony, should be stopped ; or present inoonvenience must not be considered ; but to go further than this would, they think, be a very unwise and shortsighted policy. The Government cannot therefore recommend the adoption of the first course. We will now consider the second course : Shall we use the money allocated to one work temporarily or pnrmanently upon another P If the House should so determine, it will be possible with the money at our disposal t > find the funds to carry on . neoessary works to a moderate extent by borrowing from one account 'in aid of. the funds exhausted in another. And by doing this and limiting oar public works expenditure to an average of £70,000 a month for the next fifteen' months, which I am informed it oan be gradually worked down to, as oompared with an average of £97,000 a month, which it has been during the last 12 mon he, from the end of September, 188S, to tha end of September, 1887* ib will be poauble to find the means of carrying on our pnblio works until the end of December, iBBB. Difficulties would, however, probably arise if we postponed takiDg authority to borrow until next cession in the event of any serious disturbance of the English money market, for by balances as above suggested we shall have run very close with t'io public works fund, and it wou'd then be necessary either to cease a'tog tiicr to undertake anya thing further or else to obtain a loan upon the best-terms we could. In order to understand our roil position, in fact, it is neces« sary that the Committee and the country should recognise that by the cad of December, 1888, in the absence of any further loan and even of transfers from one fund to another are authorised the total oash to the credit of all the loan accounts will be only about £370,000, and we should have Jia* bilities already incurred and rapidly accruing to about an equal amount, ani besides the works in hand would bs coiroely any of them complete or in a profitable state, as the borrowing from one fund to the othe in order to keep things going would necessarily leave everything abort for the purpose for which, it was originally intended. The second of our alternative courses is therefore an impossible one if Parliament sees fit to adopt it, though after much consideration the Government do not feel justified ia recommending it, because while broaking down the safeguards which the House have Bet up against spending the «^oney provided for one work upon another work it would nevertheless fail to place us in a satisfactory position in other respects. The Government are strongly of opinion that the oolony does not want such a policy, if it can be called a policy, as ia involved in merely saying " that we will not borrow th : a year, let us wuit for a jear," What in our opinion the colony wants, and wants imperatively, is a tatal change of policy us to ben owing altogether. We want so to shape our public wcrks expenditure as to be able to cease bojrowing entirely at an early t date. We want fitsb and at ones to rjduce this expenditure, to reduce it largely, to reduce at a constantly increasing rate, so as praoticolly and wifcbia a ebort time to reach the vanishing point. vV"e think it quit < I possible to reach this desirable end, but n.t by the second of the proposed course?. I The third course consequently in our opinion seems to be by far the most prudent, and the Government therefore, though with great reluct wee, recommend that authority should be granted for a loan during the present session of £1,000,000, to be rawed at such time as under all ciroumstances the Government deem most favourable. If Parliament agrees to this we shall aek that the purpose of this loan shall be distinctly defined, that no new undertaking shall be put in hand, and further that we shall give a distinct pledge that no more borrowing will take place for three yeara from March, 1883. We must in any case, as I have shown, place the North Island Trunk Bailway Loan on the market early next year, and as it is inadvisable to make repeated applications to London for money, the Government think it important to be in a position to place both loans on the market ac the earae time if they should be to advi cd. We have ooma to this conclusion, as I have said, with extreme reluctance, but it J8 we believe in the interests of true economy. Ihi Committee, I trußt, has ample evidence before it that the Government ia entirely in earresh in its intention to retrench, to stop al 1 superfluous expenditure, to see— in homely linguage—thatthe colony lives within its meins, and we should fcave teen glad to avoid what t j a hasty judgment may look like inconsistency in retrenching largely our ordinary expenditur« wMle proposing to borrow further f..r }„ibn"o works ; but you cannot bang such a syateia ■ of j}ub.fe we^e.. a^ Qitfß. to. a^ E?ttdse.n, ejad.

without absolute disaster, We believe, and I think the Committee will agree "with us, that if we at once or shortly stopped the large and important works now on hand and unfinished and comparatively useless we should be losing far more than we should save, in other words, practising extravagance in the name of economy. My honourable friend the Minister for Public Works will, I think, be able to show in his Statement that with the expenditure we propose our principal works can be brought to what may be called a state of interim completion, where we may cease without serious loss, and the Committee will observe the safeguards we propose, and the essential condition we annex that no further borrowing shall take place at all events for three years from March, 1888. If honourable members -will add the amount of the proposed loan to the available balanoe left of previous loans and divide the total by the three years and a half over which it has fco be spread they will find that it amounts to £690,913 a year, whioh will be available for publio works of all classes, and if they -will further oompare this with the actual expenditure from loan on publio works for the last three years, , which has been at the rate of £1,381,866 a year, they will see that the expenditure ite propose is at a rate less by exaotly 50 per cent. In a word, our policy is at once to reduce this expenditure largely, and as rapidly aB possible, and, as I have said, at a constantly increasing rate, so that by the time 1 he proposed loan ia expended we may be absolutely relieved of the necessity of borrowing further. Ifc is therefor* a praotioal application of fchafc policy of " tapering off" which has met with general approval in the colony, and will now I trust receive 1 the approval of this Committee. If that approval should be given it will enable our public works to b» carried on without any sudden break, but at a greatly reduced rate of expenditure, for the next three years and a half, by whioh time we hope to have transferred to the Consolidated Fund a large number of works hitherto charged upon loan, and to reduce to very narrow limits our expenditure on other works which are rightly charged on loan. THB MIDiiND RAILWAY. There is one large and important work, the Midland Kailway, whioh I have, not mentioned, and wkioh I shall hero but briefly refer to, as the Government intend to deal with the question immediately in another way. The importance of the work in a colonial sense hat been . repeatedly recognised by the Legislature, but the Committee will have seen from the papers laid on the table that the negotiations with the company are still incomplete in important particulars. The Government, however j hope,. with the further aid of the Legislature, to bring these negotiation! to a successful conclusion. OONOIUSIOK. Kefore I conclude, honourable members no doubt desire to be made acquainted with the probable effect of our proposals upon the podition of the Consolidated Fund next year, and what prospect there is of our being able to equalise revenue and expenditure without renortiug to additional taxation, except for the purposes of relieving loan of certain charges whioh I have already indicated Bhould be borne upon revenue. I have no doubt they will be pleasad to hear that, on the assumption that the ordinary revenue for 1888-89 comes up to the amount now estimated for the current year, and after making provision not only for half a year's intsreab, £20,000, on the North Island Main Trunk Bail way Loan proposed to be raised in April next, but providing for the extinction pf »ay £40,000 of the defioit at the end of this year in . the manner already stated to the Committee, we hope to be able, as nearly as can .be now foreseenj and it will be out- earnest endeavour in 1887-89 to c»>ry on the ; eervi6as of ihe colony chargeable upon the ordinary reve« nuo without being under the necessity of proposing additional taxation. With re» gard to the Land l?uad,\ it oui proposals with respect to it are agreed, to, we "have evory reason to hope that the revenue will be quite equal, to, 'the expenditure without sacrificing tne public estate. And now, Sir, I have completed, my task. I have laid before the Committee aB clear and complete au account as I could frame of the financial position of tha colony snd of the measures whioh in the opinion of the Grovernmerib ao beat oaloulated ta relieve it of its present difficulties, and to prevent as far as it is possible their recurrence in the future. The account I" have given neither conceals nor ' exaggerates those difficulties, While it shows that it is entirely witbia our own power to overcome tueai. It needs but will to do it, and the measures I have proposed — embody ing aa they do three tribe but vital economic principles — of foregoing such things as we can more easily spare than pay for, of making such money a? we spend produce the best possible result, an I of increasing and encouraging the wealth producers of the colony; and embodying also, last but not least, a whohaoma self reliance. Th<ae measures will I trust comouond themselves to this Committee, as £ believe they will to this country at large.