THE FINANCIAL STATEMENT.

Waikato Times, Volume XIII, Issue 1156, 22 November 1879, Page 2

THE FINANCIAL STATEMENT.

The following is the Financial menfc delivered by the lion. Colonial Treasurer : — DIFFICULTIES OF THE POSITION. Mr Seymour, — The difficulties and dangers of the position into which we have permitted our finance to drift are admittedly . so great, and the time at the disposal of the Go. vernment has been so short and so broken, that I feel confident I shall have the sympathy oi hon. members when I ask the committee for as favorable a consideration, of the proposals lam about to submit us may be found compatible with careful criticism and a full discussion of their merits. Sir, I think that all those who have given any real thought to the question of oar present financial position must have come to the conclusion that it will be impossible to surmount our monetary, difficulties and escape the dangers of our position without something like a complete remodelling of our finance, both general and local,' ♦vithout careful administration by Ministers, and without the exercise oC much thrift and self-denial on the part of all classes of the cduiuiunity. WHAT MAY NO)V BE DONE. The period of the session at which we have now arrived renders it impossible to properly consider the , whole question of our finance this year. My unfitness for the responsible position I have the honor to hold would be as once manifested if I. were to pretend to be capable m the short time I have been m office | of maturing and submitting m detail so complete a financial policy as the Government believe to be practicable and necessary. I shall, however, sir, endeavour to indicate clearly the general scope and direction of that policy, and to «rive what I hope the committee will consider sufficiently full details of such parts of it as we think it is possible to deal with this session. THE FINANCIAL SITUATION. But first it will be necessary that I should recall to the mind of the committee our present financial position, a position, sir, I, venture to say, unparalleled m the history of the colony; for, with abundant natural resources, with excellent credit, and with an increasing ordinary revenue, notwithstanding great com. mercial depression, we find ourselves reduced to such a position as to cause the gravest anxiety to all true friends of the co\ony, and to necessitate important measures of financial reform, involving large additional taxation. POSITION OP THE CONSOLIDATED FUND KE-STATED. In the speech which I had the i honor to address to the House cm

the 14th of October last, I sbownd ulmt the total expenditure within, md on account of the year 1878-79, | mis £4,006,961 ; that the total ieseipts amounted to £3,875,137, in r sluclinty therein thu suiplus of 1877 78, amounting to £116,844, and th« assets of the years 1878-79, amounting to ,£6095, roalwed since 30th June, 1879; and that the' transactions of the year ended by leaving a drficit of £131,82-1. Notwithstanding the fact I have just mentioned, rlmb we began ib with a surplus of £110,844, I showed that the deficit, of £131,824 would have been £50,000 less had the land tax for the half-year been collected within the year. But I did, -not mention, as perhaps I ought, that the bills taken on account of the sale of the old Sdpreme Court site and the reclaimed land m Wellington, amounting to £82,524 8s 4d, were included m last year's revenue account. Of this amount, £33,114 15s 8d has been paid, and £49,409 12s 8d remains outstanding. I found these bills credited to revenue \ iw tho Treasury accounts, and did ' not therefore disturb the arranger ment, although 1 am clearly of. opinion that they should have been credited as it the amount had been, received, m cash of course. But for this mode of treating these transactions last year's deficit would have been £214,348 instead of £131,824. This, then, was my st.irtiug point for the current 1 year, a deficit of £131,824, to which I have added the estimated expenditure for the year 1879 - 80, amounting to £3,9X4,034, token from the Estimates left m the Treasury by the Government, and obtained £4,105,858, as tho year's estimated expenditure. From this amount I deducted the estimated revenue derivable from our present sources of income, amounting to £3193,900, and arrived at a total estimated deficit of £911,958 to be provided for m somo way this year. "i . ESTIMATED EXPENDITURE AND INCOME OF THE YEAR 1879-S0 REVISED. Su-, — Since I last addressed you upon (his subject the Government have gone carefully through the estimates of expenditure as left by our predecessors. These were necessarily imperfect, no provision having been made for several necessary services ; and the Estimates, as now presented, show an increase of £39,044, the total amount being £4,013,078, instead of £3,974,034. The total of these Estimates 13 larger by £0117 than the actual expenditure of the previous year, but it must be remembered that they include provision for interest on the new loan and deficiency bills to the extent of £118,000, as veil as the expenses attending the second meeting of Parliament within the year. We hope, moreover, by careful administration to be able, after farther experience, to effect considerable reductions, bnt upon this point it is impossible to do more than promise that we will use our beat endeavors to confine the expenditure within the narrowest limits, consistent with efficiency m the public service. , We shall also during the recess carefully examine into the present organisation of the civil service, and see how far, by the combination of necessary offices and the abolition of unnecessary ones, the expenditure can be further reduced next year. Competent and well-paid officers are. absolutely essential to good government, while a larco staff of under-paid civil servants is not only costly,' but is m its very nature fatal to efficient administration. The estimate of revenue has also been carefully reconsidered, but, with the advantage of four months' actual collections to guide me, I am unable, I regiet to say, to incicase the amount estimated. It is possible that the land fund may be under-estimated, but I. do not see any reason to expect any appreciable increase m land sales until a fall takes place m the price of money, and this canuot be hoped for until a good harvest has been successfully housed. THE DEFICIT. The problem, therefore, for solution is, how is this large estimated deficit, amounting after correction to £951,002, to be provided for this year, and what action must be taken to equalise our income and expenditure m future ? for although it is somewhat unusual, I am compelled by our peculiar circumstances to look beyond the present year, and m some measure to take counsel for the next. But before we can answer these questions satisfactorily, we must examine the nature of the deficit, and ascertain whether it is of a temporary oc permanent character, because oar mode of dealing with it will greatJy depend upon the result of that examination. Now, to enable the committee to come to a decision upon this important point, it will be necessary to examine and compare the receipts of tho consolidated fund for some time past. I propose/ to do so for the last three years, and under three heads — taxation, services rendered, and land fund. There was raised by taxation m the financial year 1876 77, £1,319,043; m the year 1877-78, £1,424,029, being an increase of £ 104,386 over the preceding year ; m the year 1878-79, £1,505,237, being an increase of £81,208 over the preceding year, and of £185,594 over the year 1876-77; and this year the estimated amount of receipts is £1,512,300, being about £7000 only more than last year, thongh largly exceeding the receipts of, the jeai-9 187G-77 an 4 i§77-?§

respectively. For services rendered (omitting for reason I will presently give receipts from railways) there was received for the yen* 1876---77 £318,250; for the year 1877---78, £366,36*; for tho year 1878-79, £421,377; and this year 'the estimated amount is £401,600. Here alaV as m the case of taxation, it will be obsor\pd that the increase had been marked and steady during the three years named, ant 1 that while the estimates of the total receipts for this year m respect of services rendered is about £200,000 less than tho actual receipts of last year, an increase of amount m some of the items of receipts is anticipated* I will not trouble the committee with remarks upon the separate items included under the two b,eads of taxation and services rendered, but I may say that an examination ot table A, which will be appended to this Statement when published, ' will show that m almost every case there has been a steady increase from year to year As I have said, I have omitted the receipts from railways. My reason for so doing is that our railway system was too incomplete, m 1876-77 to compare fairly with the receipts m 1879 ; bat, according to the comparative statement of receipts and expenditure on the railways made by the late Minister of Public Works m August last, the figures I have given under the head of .services rendered do not show as large an increase as I might'fairly claim. Tt is not, however, desirable, m any way to overstate the case. I have not thought it necessary to take the receipts of more than three years for comparison. Had I done so, however, the only deduction to be drawn from a careful consideration of the figures woald certainly not have weakened my conclusions ; on the contrary, the further back we go, the stronger would my case appear. It may then, I think, be fairly stated that our receipts from taxation are steadily increasing, and also our receipts from services rendered ; and that the slight check which the revonne (derivable from these sources) has met with during the current year is temporary ouly, and is fully acconnted for by the general depression of trade throughout the world. This fact, I submit;, gives us confidence m the future, as showing indisputably that our population is hard- working and prosperous. In the financial year 1870-77 we received from land sales £870,819 j pastoral rents, £135,030 ; total, £1,00.5.855. In the year 1877-78, land sales, £1,440,831; pastoral rents, £145,738 : total, £1,586,562. Last year land sales, £737,694; pastoral rents, £132.035 : total, £869,729; and the estimated revenue for this year is for land sales, £248,000; pastoral rents, £132,000 : total, £380,000. It will be seen that the land sales last year only reached £737,694, having fallen short of the estimate by £384,304; and that this year they are estimated to produce only £348,000. Here, then, we find the cause of our deficit, the falling off m tth Crown land sales. If last year they had reached the estimate, and could be relied upon this year to yield £1,150,000 (this*amount being about the average roseipts of the last two preceedihg years), we should this year have had a small surplus, instead of an estimated deficit of £591,002. In other words, under our present system we require from land sales, exclusive of the cost of survey and administration, something 'like £900,000 per annum iv aid of ordinary revenue. It may be, I think, fairly anticipated that, with the return of prosperity, the annual sale will again be m excess ot the estimates for the current year. With these facts, then, before you, sir, we are m a position /to affirm that, should we continue to treat land sale receipts as income, and were we content to sacrifice the future settlement of the country for the sake of temporary adjustment of finances, the deficit to which I have drawn attention would not, with our large area of unsold lands, be for some years to come of a permanent nature. So long, however, as we do so treat these receipts we cannot disguise from ourselves that m years of depression we shall be subject to large deficits, which it will be difficult to provide for without adding from time to tim? to our permanent indebtedness. In other words, we shall have an uncertain and therefore an unsatisfactory finance, and shall be continuing the objectionable practice of relying upon what . is really capital for ordinary expenditure, instead of providing, for such expenditure as ought to be done, out of oar legitimate income. If on the other hand we should determine that the receipts from land sales are not inoome, and shall not m future be so treated, then it is clear that there is a permanent deficit of from £800,000 to £900,000 a-year upon our present expenditure and income. So much, then, sir, for the nature of the deficiency with which we have to deal. Before, however, I answer the question as to how the Government propose to meet the estimated deficiency of this year and to obviate deficiencies m the future, it will be convenient that I should call the attention of the committee to the state of our public debt and the condition of the public, works account. PUBLIC DEBT. Our public debt on the 30th June amounted to £23,222,311. Treating the guaranteed debentures as practically issued, and including Treasury j bills outstanding, of which £^2,QQ')

mature on the first of March next m. London, and will have 10 be reissued, the annual charge for interest and sinking fund m respect of this debt was £1,232,119. Since then wp. have issued deficiency bills to the amount of £600,000, and when the loan of 4- 5,000,000 is raised our total gKws debt will amount to £28,822,311, or, deducting- the accumulated sinking tunds. our net public debt will be £27,113,340,, subject to an annual charge of about £1,400,000 for interest and £116,175 for sinking fond, making together £1,516,196, an annual burden requiring our most watchful attention, and one which can only be borne if on? taxation is properly adjusted and onr financial affairs managed with discretion. It may be grattfying to the committee to learn, though the amount is Bmall, that last year wo redeemed out of accrued sinking funds debentures amounting to L 71,000. Of these £58,030 represented the whole of the outstanding debentures issued nnder the Wellington Debts Act Amendment Act, 1876, and L 13.000 represented a portion of tliose issued under the North Otago District Public Works Act, 1872. . PUBLIC WORKS FUND. I showed m my speech on the 14th, October last that we began, the year ending- 30th Jjine, 1879, with a credit balance of L 2,056,940, including advances outstanding amounting to L 146,260, and this year with a nominal credit balance of L506 ; 205, but that of this* sum L 298,543 consisted of advances outstanding, which as hon. members are aware, are m fact moneys spent but nob yet brought to account,- so (hat we really begin the year with only L 207,662. This includes as cash on the credit side the whole of the loans (including the guaranteed debentures) authorised to date, except the L 5,000,000 loan. I farther showed that we had spent m the first quarter of the year, that is, up to the 30th September last, some £504,733 of th e/ £0,00p,00 loan, and that we had. entered into contracts and engagements which would necessitate our finding £733,553 more by 31st December next, and ,£921,818 between that date and SOth Junei-1880 ; m other words, that the late Government had m various ways anticipated the new loan to the extent. of" £2,220, 104, including £140,000 for contingent defence, and £200,000 for the purchase of native lands, but, exclusive of the cost of raising the loan, and that, m addition to this larg-e suoii which is payable by the 30tli June next, there will be liabilities outstanding at that date ol a further sum ot £957,177 for land purchase, and of £128,815 for contracts entered into before the present Government took office. These figures were disputed at the time T spoke by the late Minister of Public Works, but I regret to say that, after a most jareful re-examination of the whole subject, I find that the figures I then gave were strictly accurate. My hon. colleague the Hon. Minister of Public Works, m consultation with the EngineerrinChief, has been endeavoring to arrange an extension of the period during which these payments will have to be made, and he will shortly inform this House of his success m. that direction, but he warns mo thac much practical relief is not likely to follow his exertions. The committee will, therefore see that unless we can abandon some of our lanl purchase bargains, for I fear none of the other engagements can be got rid of, the new loan is anticipated to the extent of about . £3,300,000, without including tho sum of £154,791 payable to Canterbury and Otago on account of impounded land revenue or making any provision f or the redemption of the guaranteed debentnres, and also without taking into account the cost of raising the loan. When we remember that the public works scheme of 1878 was to take fire years to complete; that the expenditure from loans was only to be at the rats of some £900,000 | a-year; and. that, by a> special provision of the Loan Act,* 1879, no money raised under it was to be spßnt without the appropriation of Parliament- we shall, I fear, have to come to the conclusion that Parliament has not been treated with franknees m this matter, and that its authority has been disregarded. . The Government, sir, have reason to believe that no more than £3,000,000 of the £5,000,000 loan can be floated this year, and that it will be twelve months before we can place the other £2,000,000, and * that we cannot go upon the London market for two years afterwards. These facts will render the exercise of the utmost prudence necessary m the expenditure of the ballance of the loan yet available for appropriation byP arliament. This question will be fully treated by my hon. colleague the Ministop of Public Works when he makes his Public statement. I need only say here that I hope hon. members on both sides of the House will insist upon all expenditure being confined to . necessary and profitable works, and that the expenditure of the balance of the loan shall be extended over a period of not leas than three years. Sir, as I have many times pointed out, our only safety is m limiting our expenditure from loans and upon public works to a reasonable annual sum, •* till our whole railway system is completed, and certainly m my judgment £1,000,000 a-year is not a reasonable sum ; it is, m fact, about double what we ought to spend, or indeed possibly can spend, considering our revenue, uud liability,

PROPOSALS FOR EQUALISING EXPENDITUBE AND INCOMK IN FOTTTBE. And this, sir, brings me to that part of my statement for which hon. members are no doubt losUingf with some . impatience. I hope, however, I have euccoeded so far m fixing m their minds what our financial position is, " and upon that hangs all that I am about to propose. The first point for decision is, are, the receipts from the land sales to be retained m tho consolidated fund, and spent as ordinary revenue. . ' . Sir, the Government think that from the falling off m the land salos there is a very important lesaon to be learnt, and that is, that the system of finance which wo have been pursuing sinco the land fund was generilised m 1877, namely, that of relying upon the receipts from the land sales as one of the chief items of our consolidated revenue is thoroughly unsound m and should, sir, be abandoned at $he earliest possible date, that date being not later than the end of March next. The receipts from land sales should^ m the opinion of the GovernI mettt, b 9 chargeable with the expenses of the land, and. the balance scrupulously applied to public works,* local and general, and to immigration. By this means it is clear that a real, and not an imaginary fund would be created to aid m carrying out our public works, local and general, and we should get rid of that vicious habit into whiqh we have fallen ol late, of treating as ordinary revenue that which is really capital, and spending it upon the ordinary services qf the State. It will be generally admitted when the large amount of our public debt is remembered, and the absolute necessity of continuing to borrow moderately until the public works are complete, is taken into account, that it is our duty not only to, placie our consolidated fund upon a sound footing, but also to show the London capitalists unmistakably' that we are not availing ourselves of the expenditure of borrowed ■ money to sell our public lands, and at the same time applying the proceeds to the maintenance of services properly chargeable on actual income. I submit, sir, that we have no more effective means of showing the soundness of our financial position and of the resources of the colony than by resolutely setting aside the receipts from our land sales for public works and immigration. Tho beat mode of dealing with this fund, should the House' determine to create it, I do not now propose to consider ; this will be one of the questions for decision next session. A great work will have been accomplished if it should be determined to create the fund. Sir, the Government entirely disapprove of sacrificing the public estate to make up either a temporary or permanent deficiency m the revenue, or of selling land for any other purpose than that of settlement and occupation. Proceeding, therefore upon the assumption that land sales receipts are no lbnger to form part of the ordinary revenue of the colony, I eliminate them, retaining, however, the pastoral rents, which are really revenue, and find th it the estimated revonue for the year is £2,945,900. Deducting from the total estimated expenditure of £4,013,078, the services included therein amounting to £247,509, which are properly chargeable against the revenue from land sales, ,viz., the cost of administration and surveys, and the 20 per cent, of receipts, &c , payable to local bodies, we get £3,765,569 as the estimated expenditure of the year; and if from the estimated expenditure we take the estimated revenue, we get £819,669 as the deficit" for which, we have to provide for the future. I will now, s*ir, with the permission of the committee, deal m . the first place with the deficit of £819,669, leaving for the present the question of deficiency to be provided for this year. Some exception may be taken to calling this a permanent deficit, as it will be said, and said truly, that our receipts from taxation, services rendered, and railways are increasing, yearly, and this incroass no doubt will afford relief to some extent, but I have thought it pru.dent to put against this the increased interest we shall have to pay upon the new loan, and upon fresh, borrowing, which must certainly occur, and- also the increase upon our ordinary expenditure, which is sure to take place. There is no reason to suppose, judging from present circumstances, that, the expenditure or revenue will differ materially next year^from that above stated. I shall, therefore, take as, suffipiently accurate for all practical purposes, the above estimate of expenditure and revenue, to show tne probable effect of the financial policy the Government are proposing for adoption. I will first ask the co;nmitteo to turn for a moment to the table of the estimated, expenditure (table E), which, upon examination, will be seen to contain one very large item of £275,620 for subsidies to lecal bodies. Many hon. members think this contribution m aid of rates wrong m principle. Many more think that, considering our present financial condition, payment of it should cease at the cud of the year. I am one of those who think it fair and reasonable that the State, as tho State, should contribute towards the cost of keeping open and improving the means of communication throughout the country, and that it is altogether a mistake to suppose that by striking this item out of the Estimates, the people of the colony will' be relieved to that extent f■ om taxation. To all those who have given any attention to looal subject.-, it is well known that an amount equal to this large sum mxvii be raised for local works. Striking this item out of the Estimates will, therefore, afford no real relief to the country at large, nor will it leave more money m the pockets of the settlers. But the question as to the best and easiest means by which the necessary amount can be raisad is no doubt open to discussion, and is well worthy of the serious attention of this House. The Government, however, have come to the conclusion, after, careful I consideration, that a better means than the present of raising this money can be devised, and they will therefore recommend that the subsidies next year should be discontinued. Should the House determine to continue them taxation will have to be proportionately increased. The important question of looal finance is far too large to go into this session, therefore 1 will say no more upon the subject now, except, sir, that the Government fully recognise the fact that it is their duty to submit to this House, upon its first meeting next session, a scheme which shall place lpcal finance on a satisfactory and something like a permanent basis ; and by "satisfactory" the Government understand placing local bodies m such a position as will enable them to obtain, as far as ia possible, sufficient funds for ail necessary works, while drawing a broad and distinct line between local and general finance, and such a scheme the Government "will endeavour to mature before the next meeting of Parliament. Hon. members will bear m mind that I am now speaking of what I may call the permanent deficit ; that is, lam speaking of the probable position we should find ourselves m at the end of next year if the receipts from land sales and the expenditure on land are eliminated from both sides ef the account, and I am. not now making provision to .meet the estimated deficiency of the current year. I therefore deducted the subsidies, £275,620 from the deficit of £820,569, already mentioned, and find that there remains to be provided foe £544,949 ; and this, sir, tho (government propose to meet by the imposition of a property tax, the increase of the Customs and stamp duties, and the release of the sinking funds and. interest, by bringing the Consolidated Stock Act into operation. That our difficulties might be tided o,ver, uuwh. more pleasantly for afewys&rg "

by the sale of land, to make good the deficiency of our ordinary revenue — a course not altogether unknown m some parts of the colony m years gone by, is true ; but, Bir, the preaeut Government, and allthe merabors of it,, are and always havo been opposed to such a policy, and feel confident that wo shall receive the hearty sup>ort of the House and of the country m giving effect to our proposals to sell land only for settlements, and to make our ordinary revenue equal our ordinary expenditure by the imposition of the neoessary taxation after all possible reductions have been made m the expenditure. PEOPBBTY TAX. Sir, no taxation is plesant, and a n<sw tax is especially unpalatable, the more so if direct m its form. But it will, I think, be generally admitted that we have now reached a stage at which a property tax m some shape is unavoidable. The prinoi« pie of a land tax has already been affirmed by this House, and there is much to be said for the policy of specially taxing unused ,land held for speculative purposes. If it were practicable I should certainly advocate the special taxation of unused land, but m my opinion it is not practicable; and taking the ordinary holdings of improved land, I am unable to see upon what principle of justice or expediency it is held that this is the only form of property Which 1 should be taxed. Why, I wish to ( know, should the farm of the hard-working pioneer settler, or the frontage of the struggling city tradesman be taxed, while bank shares, mortgages, and other such property are allowed tS^jp free ? And I shall therefore ask the Houp* to impose a property tax upon the American model, excluding incomes, and thereby to affirm the principle — that realised wealth, m whatever form, shall bear ita fair share, of the burden of the State. The Government, after considerable consideration, hare come to the conclusion that an income tax ia not applicable under the existing circumstances of the colony. It is inquisitorial and unavoidably open to great inequalities. The machinery, too, for raising such a tax, must be elaborate and expensive, and far out of proportion to revenue to be derived from it. T"or these reasons, and many othera with which I will not trouble the committee, but which can be fully discussed upon the second reading of the Property Tax Bill, the Government have, as I have said, decided not to include income m the proposed tax. Sir, the Government will ask Parliament to merge the land tax m the property tax which we intend to intro duce, thus including land m the Bame category as all other, property, making it equally but riot specially liable to general taxation. Parliament has already approved of this principle by directing, m the case of intestate estates, that real shall be treated as personal property, for the purpose of succession, and for taxation on succession. It would, hardly be convenient that I should upon the present occasion, describe fhe policy of a land tax, but the committee will 1 perhaps permit me to say a few words upon the subject, as it is one of great importance. The land tax was, I presume, imposed— first for the purpose of revenue ; and secondly, to check the growth of large landed estates ; and thirdly, to prevent land being held for speculative purposes ; or fourthly, for all these reasons together. With tegard to the first, I would say that as we have some twenty million acres of land for solo, some five millions of which are classed as agricultural, and as the one object which we all desire most is the settlement of people upon the land, it is surely unwise, and will tend to defeat the object we have m view, if wp imposs special burdens' for revenue purposes upon capital invested m land. I would ask, upon the second and third reasons, what justice or wisdom is there m specially taxing that class whose growth is essential to the advancement of the colony, m order to prevent a partial abuse m the acquisition of large quantities of land or unfair profits by a few individuals ; and m reply to the fourth reason, I would say such a combination is unjustifiable when it resuits m the special taxation of classes possessing no privileges. Sir, I entirely disapprove of land being held m large blooka to the injury of settlement. I desire to see the pountry m possesion of a population cultivating their own freeholds, and the legislation proposed by the Government is conceived m this spirit. That there are some large estates which I should be glsd to see occupied by sirall freeholders is true ; bnt, sir, I have satisfied myself that the tendency is towards disintegration rather than accumulation of large properties, and that speculation m land to an injurious extent does not exist m such a form as to be removed by legislation, and most certainly will not be remied by a land tax on all land. Sir, it is a Dery significant fact that m hardly any country m the world is the proportion of properties to the population so great as m New Zealand. I may state for instance, that m Prance, which is usually cited as a favorable instance of the sub-division of laud, the proportion is 1 property to 7*l people ; and m Belgium, where property is probably more sub-divided than m any other European country, the proportion ia 1 one property to 4-71 people; while m New Zealand there is 1 property to 5 people ; and when it is remembered that 90,000 persons out of a total population of 414,000 have been brought out as assisted . or free immigrants within the List few years, our case appears much stronger. This, sir, is no reason for relaxing' our endeavors to improve our land laws m the direction of encouraging settlement, but it should, I think, reassure those who imagine that the tendency of past legislation has been to favor the acquisition of large properties. 1 say, sir, it is a great satisfaction to know that so large a proportion of our population has a direct interest m the soil of the country, and to this fact may m a great measure be attributed, I think, the rapid advancement of the colony and the general prosperity o£ the people. The principle of tho American property tax is to tax everything a manpossesses, even his income, after deducting all his outstanding liabilities. The proposal of the Government is to tax all a man possesses, after deducting m each case his just debts, and also a sum of £300 as exempt from taxation, but, as I have said beforo, to exclude all incomes. It is very difficult, with the data at my oommand, to estimate what such a tax will produce. We know, however, the valuation under the Land Tax Act gives £90,500,000 as the improved value of real property. It is estimated that the total personal property owned m tho colony ia not less than £18,700,000, making a gross total of taxable property of £18,200,000 ; deducting from this £5,000,000 on account of the £300 exemptions, we get £113,200,000 as the net taxable amount, as far as it dan now be estimated. I give this statement with some diffidence, but I think I have rather under than overstated th& sum which will be liable to taxation. 'Taking therefore £113,200,000 to be the sum subject to taxation, this, at Id m the £, the amount the Government >ropose to ask for, will give £470,000 as the product of the property tax. I have said, sir, that the Government propose to raise additional Customs duties. With respect to the encouragement of local industries, I have had many communioations with gentlemen interested m the promotion of local manufacture, and a committee of this Home has still the subject under its consideration. But tho time a,t the disposal of the Government has been quite inadequate to deal, m a comprehensive manner, with so important a subject, they, therefore, propose to appoint a Royal Commission during the reoess to examine and report upon the whole subject of threat, mod.©, of fos^r.

ing and promoting local industries. In | tho meantime the Government propose to admit many articles duty f roe, so as to assist local manufacturers as muoh as possible. But, sir, before making any remarks with respect to artiolea upon which new or increased duty is to be charged, it will be better to say a few words upon a question which has been muoh discussed — the duties upon tea and suga*\ Upon those articles we do not propose to re-im-pose the duties rbmittod last year, but it jnay be necossuy to re-impose them next year upon upon a general revision of taxation. THE NKW DUTIES. The articles upon whioh we propose to increase or impose duties, are : — Almonds, nuts, ohaff, corks, dried fruits, fish, fruits (others than oranges and lemons), windowglasß, grain and flour, malt, split peas, hops, iron fencing, tanks, matches and vestas, preserved milk, nails, perfumery, patent medicinesi timber, salt, stearine, spirits, tobacco and cigars, wine, and all goods at present charged with ad valorem* duty. The particulars of the duties proposed to be levied on these articles will be. ■ found m a table The total amount estimated to be produced is about £300,000. W,e propose, aq tvill be seen to re-impose the duties on timber and grain. We think experience has shown that their repeal has very injuriously affected the local shipping trade, arid also the timber industry, which was a growing and important one, and which wo are certainly not justified m seriously crippling without some compensatory advantage to the but wnioh wn altogether fail to £see has followed the repeal of these duties. We propose to increase the duties on spirits and on tobacca. With regard to spirits we shall ask for an*increased duty of 2s per gallon, granting at the same time an allowance for such as are under-proof, the same as is now charged for spirits over-proof. This mode of levying the duty is, T believe,, the custom m almost every other country, To make up the loss to the revenue which will, result from this allowance for spirits underproof will require an addition of at least . 6d.a gallon, so that the proposed increase is really Is 6d per gallon, or m the whole £47,000, giving a total on spirits, wines, &c, of £56,000. We propose to increase the tobacco duty by Js per pound, to authorise its manufacture m bond, granting encouragement to its local manufacture by a bonus for the next two years of only Cd m the pound upon the quantity of tobacco Manufactured and duty paid m the colony. The inoreasg on this item is estimated at £50,000. Prom spirits, wines, &0., and tobacco, including cigars and snuff, I hope then to obtain £106,000. I am aware that m increasing these duties aome risk is rihi of inducing illicit distillation and smuggling. There is always, as everyone is' aware, a danger and possibility,of this when duties are increased, and the Government are by no means certain that m consequence of increased duties the revenue may not be detrauded m the manner mentioned *,t but they do not think this will occur to any large extent, and they believe, looking at our requirements, that upon no articles included m the tariff would Parliament approve of increased duties so readily as upon spirits and tobacco. Nothing but our own experience will tell us when we have reached the maximum which these articles will bear without loss of reverue. But before proceeding to state what further burdens it is necessary to impose, it will be convenient here to state what relief can be afforded m the .way of HEJHBBIONS OP DUTIES. «. It is proposed to remit the duties on : — Carriage-makers' and saddlers' ironmongery, carnage-makers' leather, buggy shafts, bent carriage timber, hickory, hatters' material, fine wire for brushmaking, sheet zinc, plain, galvanised and fiheet iron, sulphate of soda, almonds (such as are used m confectionery), phosphorus, and oil of rhodium. The remissions amount to £15,000, and it is hoped , that with these alterations and by aid of further reductions which are m contemplation, local industries will be placed m a more advantageous position than those at present. The Government also propose to •» abolish all light dues for vessels employed m the coasting trade. This; it is also' ' hoped will give material assistance to that important branch of our industries— the local shipping trade. I hope, sir, the time is not far distant when we shall bo able to extend remission still further m this'direction. The loss to the revenue by this remieoion will be i'-0000. STAMP DUTIES. Theso might be increased m several cases, but looking at tho fact that these duties are levied mainly on transfers of property, and that it is proposed to put a special tax on property, the Government have determined not to ask for any m,- , creaae of stamp duties oxoopt those upon. successicJn. It is generally admitted that on the occasion of a succession to large property the State may demand, without any unfairness to anyone, a contribution having some relation to the amount of the estate. The principle f of a graduated tax upon succession has been, accepted as right, and the Government propose, therefore, to revise the existing duties m the direction of making large accumulations contribute to the. public exchequer m greater proportion than they have hitLetto done. It is estimated that these additional duties will produce £16,000 at present, and will be constantly increasing. CONSOLIDATED STOCK. It is, sir, a matter for great regret, looking at our finanoial position, .that no real effort has been made to bring the Consolidated Stock Act of 1877 into practicable operation. We are now paying £116,176 per annum as sinking fund proper ou our loans. We shall also pay this year interest amounting to £43,065 on. bonds of the consolidated loan, drawn and cancelled; interest which increases m amount every year, and is being applied annually to the further redemption and cancellation of bands, and is m reality a sinking fund. Then, we invest the accretions of the sinking funds of other loans m our bonds and interest. We are now paying on those latter bonds the amount of £40,041 per annum, so that m the present year we shall actually pay no leas a sum than £199,382 toward the redemption of our public debt. By this it will be seen that we, on the one hand, are repay- I ing our debt at' the rate of nearly £200,000 per annum ; while, on the other,, we are borrowing largely to complete our railway system. This, upon the face of it, does not appear a very wise arrangement, and I need hardly say that the Government will lose no time m giving effect to the will of Parliament m this matter, expressed by an Act more than two years ago. Sir, the consolidation <is necessarily a work of time, but I trust, under the management of persons desirous of givinsr effect to the Act of 1877, considerable relief will be afforded to our revenue, if not next year at any rate the year after. The annual amount of sinking fund, and interest thereon, to be released by consolidation, being dependent on the success which may attend the operations of agents appointed under the Act, we cannot rely on obtaining much relief for this current year. I muist, however, ask the committee to bear this m mind as a certain means of diminishing our expenditure m the near future, and to oonsider whether it may not be advisable to make some temporary provision, it • necessary, until this relief is obtained. With regard to the general question of the expediency of a sinking fund, I think it very unwise m us, with our railways 'incomplete, to attempt to maintain one, especially when it is remembered that m no Qaao do we cftpiteltee the interest up w

I these works as is done m the case of railwAy companies until the -works are complete, but that the whole ' interest on money used upon works m course of construction as well as that spent on completed works is charged upon and paid out of consolidated revenue. SUMMAET OP PROPOSALS. Summarising then my proposals they will stand thus :— To be raised by property tax,> L4r70,000 ; by Customs, L 300,00 0; by stamps, L 16,00 0; mailing a groas inorease to the revenue of L 756,000, from which, however, must be. deducted the remissions stated above amounting to JL20,000, together with the land tax, L 147.300, which it is proposed to merge into the general property tax next year, thus giving a net increase of L 618,700. Honorable members will observe that I have not taken credit for any saving 1 for interest or sinking fund, which may be released by the inscription of stock. "We may obtain some relief from this Bource next year, but the uncertainty of.this is so great that it would not be prudent to calculate upon it. I hope, however, when such relief comes, we shall be enabled to considerably reduce taxation, and, as I have said bofore, I think we may look for this reliof at an early dale. It is proposed then by these means .to raise JL618.000 additional revenue. If this be added to the revenue from present sources, estimated to amount (exclusive of 'land sales) to L2,945,900,we get L 3,564,000 as" th§ total revenue for the year. The estimated revenue I have taken as probably L 3,489,949, and if we deduct this sum from the revenue we arrive at an estimated surplus of L 74.651. From these figures I think hon. membbrs will see that the proposals of the Government; if they should meet with the approval of the House, will without any reasonable doubt equalise our expenditure and income.' HOW DEFICIENCY FOB CTOBENT YEAH IS TO BE HGT. Sir, it now only remains for me to deal with the deficiency for the current year. The question of the advisability of changing the time when the financial year shall end has been raised from time to time m Parliamant, but for various reasons has never been favorably entertained. r Jhe Government, sir, have come to the conclusion that the change might now. be effected with advantage to public service and with general approval of hon members. *I shall, therefore, propose that the financial year shall, m future,' end on the j3lst March. The first and obvious 1 advantage which will follow this dhange id, that it will shorten the period during which our present estimated disparity between income and expenditure will run, and will enable us to begin a new finan* cial year by ihe time our increased taxation has become fairly m force. The period of ihe year, too, when Parliament will, meet, namely, about the middle, of May, will, I have reason to believe, better suit the convenience of hon. members than <the time at which the House now sits. Sir, I have-already said that the deficiency for the year will probably amount to £951,002, but should the House sanction the, proposed change m the financial year our current financial perio^will terminate on the 31st March next, and the deficit to be immediately provided against) will be proportinately diminished. I estimate that the expeniture for the nine months for the same period, include ing the receipts from the new taxation, will be £2,445,'i00, leaving a deficit of at the closa of last ,year, and arrived at £796,886 as the amount of deficiency provided. Sir, it js now the middle of November; five months, therefiore, of the financial year have practically gone, and we have already issued and absorbed a deficiency bill to the amount of £600,000. It is not, m the opinion of the Government, either possible or wise to attempt under present . circum- ' stances, wholy to meet this difficulty by taxation. We are," I hope, about to take a> new departure m. finance. The propo^ sals of the' Government, if given effect to, ensure m the future an equilibrium beta een expenditure and income j but to secure this result, taxation of a very onerous character will have to be imposed, and the committee, will, I think agree with me m the opinion that to impose special taxation for the purpose of current period would be impossible. The Government will therefore, ask authority to provide by loans for such. deficiency as may be found to exist on 31st March next. It will include, of course, the deficiency bills already issued to redeem these, and to cover the ballanco I shall asu the House for authority to issue Treasury "bills, These latter the Government propose to have inscribed rs soon as possible, under the authority of the Consolidated Stock Act, 1877. I make this proposition with great regret, but I think i will bo admitted on all sides that ifc ia impossible now this year, and that to hamper ourselves continuously with a floating debt of that amount, would be impolitic and unwisej I have said by ending the financial year on 3 1st 'March, it would enable the' House to meet abont the. middle of May* which, I think, is the earliest month that will suit the general convenience of hon. members*, I should ', sir, have proposed to terminate the financal year m .April -as more generally convenient, but doing this would have broken up the quarters as well as the year, thereby rendering comparisons with former years almost impossible. By retaining the quarters unbroken, cemparison can be made without much difficulty. I hope the committee will agree with me m taking this as a sufficient reason for ending the financial year m March instead of April., Should the House agree to the proposed change, I shall ask, sir, authority to continue the expenditure during the June quarter, upon the scale of the Estimates voted for this year. This seems to be a better plan than carrying on the Government by means of unauthorised expenditure and Impressed Supply Bills upon Estimates which have never been seen by the House. ! The plan will operate^in this way : The financial Jyear ending on the 31s March, the Treasury will have plenty of time to get the estimates ozd Financial Statement and the accounts of the year, m as much detail as may be desired ready before the House meets. Immediately upon the House meeting votes for the several classes could be taken on account, as m England, and the House would then know for what purpose their money was voted, and the proposed scale of expenditure for the year. I shall al«o propose that m future the cash reoeived within the year shall be the receipts of the year, and the expenditure made with the year. The only objection I know to .this proposal is, that; a Government may hold back payments for political purposes, and so make the expenditure appear less m one yeare and more m another, I shall propose to obviate this by causing each department to send to the Audits Office returns showing its outstanding liabilities on the 31st March, within forty days of the end of the year, duly certified by. the Under-Secretary of each department; and the Audit Office should place the returns before Parliament s within ten days of its opening, if ifc open after the 10th day of t May, and if before that <ime, then within fifteen days from 31st March. Sir, my task is nearly done, and I have to thank the committee fur the kind and patient hearing ie as given me, and to . say m conclusion that I am fully sensible of the prave responsibility resting upon the Government and the House at the preßent time. The Government, sir, have endeavored .to grasp the financial position of the Colony as a whole, and our present proposals are submitted as

part of a general soheme. We feel, Bit, that we '.should be utterly unworthy of the truck reposed m U9 if we had only resorted to the tempoiary expedients at such a crisis." The time, air. for tempo* rary measures has passed away We have endeavored to go to the root of the matter, and at once by a resort to fresh taxation and other important reforms, to place oar finance on what we believe (o be a sound and enduring basis. Sir, the imposition of fresh tarat ton to Buoh' an extent as I have proposed to-night, and at such" a time .as this, can only be justified by the necessities of the case. The position is one that admits of no hesitation. We might attempt to extricate ourselves from the present difficulty by forcing the sale of land at a price and upon terms which would involve large saorifioeß m the future settlement of the colony. Both oar credits and our capital would ultimately suffer by such a course, even if it were temporarily BUoceesfull On the other hand by the adoption of our proposals for increased taxation, for placing the bnlk of that taxation upon those most able to bear it, and for entering on a course of careful administration, we shall permanently strengthen the one and conserve the other. |We make these proposals with a firm belief m the ample resources and rallying powers of the colony, and m entire confidence that the good sensw of the colonists will prefer present self -denial to any sacrifice of the permanent interests of the country. Sir, m whichever way one's plans may be dealt with, this, at any rate, is certain, that the country will be satisfied with no temporary expedients, will submit to no makeshift, but will insist upon our finances being placed upom a well-defined, solid, and lasting foundation. The Colonial Treasurer conoluded,by moving the following resolutions :~(lst) " That m lieu of the Customs now charged upon the undermentioned ( articles, the following duties of Customs shall, on and after the 18th day of November 1 , 1879, be charged thereon on importation into New Zealand, or on being' cleared from any warehouse for home consumption— namely, almonds (m. the shell) and nuts of all kinds, except coccanuts, 2d per lb ; chaff, 10s per ton.; corks, (bottling), 15 per cent, ad valorem , fruits (dried), 2d per lb; fruits (fresh) other than oranges, lemons, bananas, and pine-apples, 15 per cent, ad valorem ; glass (crown, sheet, and common window), 2d per 100 feet (superficial) ; grain and pulse of .every kind not otherwise enumerated, 9d per lOOlbs ; grain, whon ground, or m any way manufactured, Is per lOOlbs: malt, 2s per bushel ; peas, split, Is per cwt. ; hops, 6d per lb ; iron fencing, wire staples, and standards, 20s per ton; iron galvanised corrugated sheets, guttering, riding-, and spouting, washers, screws, nails, and wire netting, 40s per . ton ; iron tanks, ss ; matches of all kinds, 25 per cent, ad valorem ; s milk, preserved,' 15 per cent, ad valorem ; nails, 3s per cwt ; perfumery and toilet requisites, not otherwise enumerated, 25' per cent, ad valorem ; proprietary medicines, commonly called ' . patent medicine, or any medicine or preparation of which the recipe is kept secret, recommended by advertisement, bill, or label for the relief of any disorder 'or ailment, 25 per cent, ad valorem ; timber, sawn rough, 2s per 300 feet superficial ; timber, sawn' dressed, 4s per 100 feet superficial ; timber, shingles and laths, 2s per 100 ; timber, palings, 2s per 100 ; timber, posts, 8s per 100; salt, 20s per tori; spirits, or strong waters, noc being sweetened or mixed with any article, so that degrees of strength thereof cannot be ascertained by hydrometer. For every gallon of tha strength of proof by such hydrometer, \ and so m proportion for any greater or less strength than the strength of proof , and for any greater or less quantity than a gallon, 14s per proof gallon. Other spirits, being sweetened or mixed, the degree of strength of which cannot be ascertained as aforesaid, 14s per gallon. Spirits, liquors, and cordials, 14s per gallon ; perfumed spirits and cologne, 21s per gallon; stearine, Id per lb: tobacco, 3s 6d per lb ; cigars and cigarettes, 6s per lb ; wine, other, than sparkling • and Australian, 5s per gallon. articles not otherwise enumerated, which are now chargeable with duty at 10 per cent ad valorem, 15 per cent, ad valorem ; and'that the duties of Customs chargeafile upon the goods, wares, and merchandise hereinafter mentioned, imported into New Zealand, shall cease and determine — viz., almonds (barbary, bitter, and other) for con-, foctionery : bolts and nute, carriage Mfcs and nuts, firebolts, shackles, holders, and i other iron fitttings for carriages, morocco, I roan, japanned leather, and tanned and dressed sealskins and goat skins, "buggy shafts, bent wheel rims and other bent carriage timber, hickory (unwrought), hatters' galloons, and hatters' calicoes, fine iron, brass, and copper -wire for use 1 m brushmaking, phosphorus, and oil of rhodium, sulphate of soda, saddlers' ironmongery, grindery, sheet zinc, plain sheet galvanised iron." - After the delivery /of the Financial . Statement, on the resolution to temporarily collect the new duties, MrMacandrew said that, m agreeing to the resolution, it was not to be understood that they were m any way committingthpmselves to the proposals contained m the statement, He regretted the imputations made against the late Government, and denied that any contracts had been •entered into by that Government, unless some very trifling amounts, more than covered by the unauthorised expenditure. Had the Treasurer boldly announced that the deficiency was the result of the extravagance of successive Governments, aggravated perhaps by general depression m trade, he would have been much nearer the truth than he was. He (Mr Macandrew) was not prepared for the enormous taxation proposed, still he would not on that occasion offer any 'more active opposition. Sir George Grey and Mr Reader Wood spoke, and both condemned the Government proposals. Mr Moss designated the Statement as one of the most cold-blooded ones he had ever listened to. It proposed a burden of 30s per head at the very time when it was hard and difficult to live. The motion was then put and carried. The resolution was reported and agreed to ; and at 1 1 .30 p.m. the House adiourned.