THE FINANCIAL STATEMENT.

Waikato Times, Volume XXX, Issue 2479, 31 May 1888, Page 2

THE FINANCIAL STATEMENT.

The Hon. Colonial Treasurer delivered his Budget on Tuesday night, as follows : —Mr Ilainlin : The recess which has jual; ended has been so short, and the work imposed upon the Government so much greater than usual, that with every effort on my part I have been uuable until today to submit the Budget proposals of the Government. These proposals necessarily depended to a large extent upon the reduction of expenditure through the re-organisation of the Civil Service, and it was not until within the last few days that that work had sufficiently adraneed to enable me to summarise , the results. When the Government took office in October last the financial position and prospects of the colony were such as to require the immediate and earnest attention of the Government and of Parliament. The Government undertook to largely reduce the loan expenditure upon public works. This has been done, and still further reductions are now both possible and desirable. We also undertook to make large reductions of the expenditure charged against the Consolidated Fund. The reductions we have made and are making are very substantial in amount, and of a good and permanent character. We further undertook to charge against the ordinary revenue cer. tain works and services, the funds for which had hitherto been provided from loan, and hon. members will find in the current ordinary estimates provision made for these services. These salutary changes have been of great advantage to us in their effect outside the colony. It is much to be regretted that our credit in London and elsewhere has been and stilt is greatly injured by hostile and unfair criticism. It has been said that New Zealand colonists are heavily taxed. But where is a community of some 600,000 people, who in a time of long continued, almost unexampled commercial depression, can yet raise a public revenue of, say, £3,500,000 a year? That is the stun they annually contribute to the State, mainly, if not wholly, out of their earnings, and it may be fairly inferred that these earnings, and the wealth they represent, bear no unfavourable comparison with those of other people. Yet in spite of this very large contribution there is no community in the world of the same number and spread over so large a surface where the material conditions of life are more favourable, or possessed by the people in «re:iter abundance. Wα show we mean to live within our means, and have approved and are adopting the steps necessary to insure this most desirable result. The misrepresentations I have spoken of arc to be greatly regretted for their effect upon our credit in London, and tend most materially to turn from our shores that class of settlers whom we most need, men with some capital who would make profitable use of our waste lands, whether agricultural, pastoral, or mineral. The introduction and settling upon our unoccupied land of this class of settlers is one of the most important functions of the Legislature and Government of the colony. KIN'A NOT. Our first work is to see that our ordinary expenditure is rcducsd to the lowest practical point; to devise a means to raise sufficient revenue to prevent a deficit without loss to the community at large; assist our local industries and manufactures; and, lastly, we have to reduce the expenditure on borrowed money to a much greater extent than was proposed last session.

REVEKITK AN» KXPKKDITOKK, ISS7-18S8.

I regret to say the result of the year has been loss favourable than I anticipated. It was estimated that the deficit on the year's transactions would probably be £250,305 on the ordinary revenue account and land fund account conjoined. This estimate was subsequently increased to £312,653, by the disallowance of some of our proposed reductions. The estimate, £4,273,050, was arrived at after the passing of the Appropriation Act, but this increased amount did not include any estimate of the sum required for compensation for loss cf office. My estimate last session fell short of the actual expenditure of the vear by £382,047 as against £31*2,653 anticipated, being £00,304 in excess of the estimated deficit for 1887-8, or deducting £22,104 paid for compensation for loss of office, deducted for the reason just mentioned, the excess was £47,290. The liabilities outstanding at the close of the year were in respect of the ordinary revenue account £126,184, and of the land fund account £18,772, making together £144,956, being about £60,500 less than they were at the 31st March, 1887. Last year's revenue, as a whole, did not realise the amount estimated by £105,336; the railway receipts did not reach the estimate by £65,175, nor did the laud sales by £'29,503, but customs duties and stamps were both slightly in excess of the estimate. The falling short of the estimated railway receipts is, in some measure, due to the late harvest, and also to the low price of wheat, which caused the farmers to delay threshing and delivering their grain, in the hope that a rise in price might soon take place. The expenditure, as a whole, was less than the estimate by £33,942, or, including compensation paid for loss of office (£22,104), it was £50,046 less than estimated ; which sum, deducted from the revenue short received, £103,336, gives the excess deficit of £47,290 for the year. I should, however, inform the committee that, excluding interest the Consolidated Fund was £2,165.723 for the year 1887-8, including the whole charge for defence services, as against 62,249,523 for lSS.'i 7, with £12,500 added for defence survicus charged to loan, being a reduction of £55,000 in favour of last year. The transactions for the year of tiie ordinary revenue and land fund account conjoined resulted in a deficit of £382,047. To these sums we have to add the deficit with which the year began. There was, therefore, for the two years a deficit of £395,253 in the one account, and £133.350 in the other, makiug a total of £528,603. THE rUIILIC DEBT. The gross public debt at the 3lst of March. ISS7, as stated in detail in table No. 3 appended to my financial statement of November last was £35,741,653. The debt paid off , amounted to £342,400, and the new debt incurred to £1,359,184; the total gross debt therefore at the 31st March, ISBS, was £36,755,437. Deducting the sinking funds accrued, £1,222,056, the net public debt at that date was therefore £35,536,381, as against £34,314,454 at the 31st. March, 1887. PUBLIC WORKS FUND.

Hon. members will recollect that in consequence of the ear marking of tho North Island Main Truuk Railway Loan, and the loan authorised in 188(5 for specitic purposes, it became necessary to establish three distinct accounts iu the public works funds. The balance at credit of No. 1 account on the 3lst March, 1887, was £491,245, of which there was expended during the year £440,854, leaving a balance of £50,391. Full particulars will be supplied when my hon. colleague, the Minister for Public Works, makes his statement. It will be remembered that the Loan Act, 1837, which authorised the borrowing of one million, provided that one half of the amount should be carried to the credit of No 1 account, and oue-half to the credit of No. 3 account. The liabilities outstanding at that date chargeable upon this account were £205,303. No. 2 account: Up to 31st March, 18SS, there had been expeuded in anticipation of raising the North Island Main Trunk Railway Loan of x. 1,000,000, £325, CSS. During the past year a further sum of £152,315 has been expended, making iu all £478,000, and leaving a balance of £522,000 nnexponded. As hon. members are aware, this loan has not beeu placed upon the market, but in order to provide funds to cover the expenditure, both made aud in progress, it became necessary to obtain temporary advances to the extent of half • α-million upon short-dated debentures, pending the" raising of the loan. The liabilities outstanding at the 31st March)

188S, chargeable upon the balance of £522,000, amounted to £75,004. No. 4 account : The unexpended balance on the 31st March, 1887, of the loan of 1886, subject to deduction of £142,800, district railway moneys, not belonging to : this account, was £769,234. The balanoe at credit of No. 4 account at 31st March. 1888, was-£1546,244, subject to liabilities amounting "t6 £190,467. The actual balance at the credit of the Public Works Fund as a whole on 31st March, ISB7, was £786,294 14s Oil, subject to a deduction of £142,800 for district railways' debentures sold with the loan of 1886, but not forming part of the Public Works Fund. The balance at the beginning of the year for public works expenditure was therefore only £543,494 13s 9'l. During the year we received the

balance of the loan of ISB6, £391,300, and aii advance of £500,000, borrowed by the late Government upon the North Island. Main Trunk Railway.. Loan. These sums make together £1,434,794 13s 9d, of which there was expended during the year £966,159 12s 6d, leaving an unexpended balance at 31st March, 188S, of £468,035 Is 3d (the balance on hand at 31st March last, and the loans authorised but unraised, make together £1,968,635), subject to liabilities at 31st March lastof £471,695 6s 3d. LOANS TO LOCAL BODIES. Up to 31st of March, 1888, there had been borrowed under the provisions of the Government Loans to Local Bodies Act, 1886, the sum of ,-£125,000, of which there has been handed . over to local authorities £108,041, leaving a balance of £16,059 unissued. The applications received in response, to the notice published in the Gazette on the 19fch January last, under Section 16 of tho Act, amount to £78.331, of which £6980 are for second year's loans; and, should the local authorities complete the steps necessary to give th 1 ; security required, a further sum of about £90,000 will have to be borrowed to enable the Treasury to make the loans, which will bring the total amount borrowed on this account up to £205,000. The Government Loans to Local Bodies Act provides that the Treasurer may graut loans to local bodies to such an amount as shall be appropriated by Parliament for the purpose, but in the event of no sum being appropriated the Act authorises the Treasurer to make loans up to £200.000 in each year. It is not intended to ask Parliament to appropriate any mon»y for this purpose in the present session. The scheme of these loans to local bodies contemplated an annual payment of i5»-e per cent, per annum for twenty-six years. As, however, the rate of interest being paid by the Government is 5 per cent., it is probable that with respect to future loans the amount payable by local bodies may have to be increased, and I shall during the i present session make a proposal to the House upon the subject. REDCCTIO.N'.S EFFECTED I\ THE PUBLIC EXPENDITURE. It was proposed iu the. Financial Statement of November, 1887, to reduce the public expenditure by £300,000, but the House disallowed the proposal to raise the school age to six years, which was estimated to effect a savins,' of £30,000, so that the proposed total reductions was £270,000. The actual saving so far made is £293,092. I have had a table prepared showing the saving thus far made, and by a glance at them hon. members will Bee that in every department under the animal appropriations, except Defence, more than the promised reductions have been made. This saving, although not so much as the Government had hoped to make, will, I trust, be considered by the committee as a not unreasonable approximation to our undertaking of last session as modified and approved by tho House. The saving upon the defence expenditure is £42/134. We had estimated to save £40,000. but my colleague found upon going very carefully into the question, it would not. be prudent for the present to make further reductions than have been made I may here state that we propose to classify the whole of the Civil Service, and strictly learn the numbers or each class by October, from which no deviation will be allowed without the approval of Parliament. We propose to amalgamate tho Native Department with that of the Colonial Secretary's. Our intention

is before the end of the year to abolish the Public Works Department. We shall propose to continue the construction of such of the railways as are to be proceeded with under the staff of the constructed railways, and to hand over the whole of tlie road works to the Survey Department, which is already charged with a largo part of that work, employing local bodies where possible iu carrying

them out. A large saving will be effected by this arrangement, and be strong and satisfactory evidence to the people of the colony and the outside world that we are really bringing our large borrowing potif.y to an end, when the Department which has been, if I may say so, its origin and symbol, finally disappears. FUTURE TENSIONS AXD BtSTIKING ALLOWANCES. We propose to bring in a seperate Bill, supplementary to the Civil Service Bill, providing for the payment of all future pensious and retiring allowances, out of a fund which will be Icept up by monthly contribution from all the members of the service who are not now entitled to the privilege of the Civil Service Act at present in force, with perhaps a small contribution from the State. ESTIMATED EXPENDITURE FOR TIIK YEAR 18S8 89 : ORDINARY REVENUE ACCOUNT. The estimated ordinary expenditure is £3,953,593. The estimated amount of interest which will be paid during the year is £1,838,539. being £72,872 more than the interest paid during the year ISS7-BS. The estimated expenditure chargeable against the land fund is £100,245 made up of £18,800 for payment to local bodies under permanent Acts, £24,000 rates on Crown lands, and £86,045 for Crown lands and surveys. Last year the total expenditure was £158,474. Kates on Crown lands, it is not intended to continue this year except in special cases, where rights have arisen.. The total estimated expenditure is therefore £4,060,838, being £3,953,593 against ordinary revenue and £107,245 against the land fund ; but no provision is made in these estimates for school or other public buildings and for subsidies to public bodies. ESTIMATED REVENUE EOR THE YEAR 1888-89.

The estimated ordinary revenue for the year 1888-89, on the basis of the present taxation, is £3,897,400. Our total estimated revenue from all sources £4,016,400, and the estimated expenditure being £4,0G0,835, leave a deficit of £44,438 on the whole revenue ; The amount which the Government estimate will be required for expenditure on public buildings from revenue for the year is £60,000, being £30,000 for school buildings, £17,000 for the geueral post and telegraph ollice, £13,000 for other buildings. Tlits, added to the estimated deficit of the ordinary revenue, and including £30,000 subsidies to local bodies, to be referred to presently, makes the total amount to be provided ,£IJ6, 103, if no further reductions are thought prudent. Upon that supposition we have now to consider how the large sum I have named is to bo raised ; for we are all agreed that sufficient revenue must be raised to meet our expenditure. But, before I show how the Government thiuk this amount should be raised, I must bring under the notice of the committee the question of subsidies to local bodies. SUBSIDIES TO LOCAL HOTHIIS. The Government, after careful consideration, have come to the conclusion that the payment of subsidies must bo continued, or the work of the local bodies will be practically paralysed, causing serious inconvenience throughout the country districts, but they think that the colony should clearly understand that continued payment means additional taxation. The Government are also of opinion that if the payment js to he continued a speoial taz or portiori of a tax. should be set apart for subsidies, a,m\ that the amount

raised should bo divided amoiigat the local bodies on the same plan as is now in force. It is also desirable that the tax set apart should bo one which- will increase with the increase of population. They therefore propose that the tax on tea should be increased by 2d per lb, and that one-half of the whole duty received from tea shall be set aside and devoted to the payment of these subsidies. Through spequlative clearances, and two months of the year having already passed, the'estimated produce of the tax for this year, with the adtlitional duty added, will only ..be £114,000. Ouc-half ef this will be £57,000. This amount will be enough to pay a subsidy of 5s in the. pound for the current'year, I "shall therefore ask authority to provide the amount, if deficient, from general revenue for the year ISBS-S9, but next year 'and ' afterwards, when there will be -no distnrF ■% cause in the collection of the tax, I propose that oue-ha}f the tea duty seould be snt apart for the subsidy, and that that amount, whatever it may be, whether more or less than the proportional pay? ment now made of 5a in the £. should be all the aid that will be given from the general revenue, that is, by the colony at larjje, to the local bodies!

PROPERTY TAX, . It is not-proposed to make any alteration in the rate of properly tax thia year, but I shall a&k the House to agree to remissions to a certain amount on some classes of machinery. tariff. . After much careful deliberation the Government have decided to ask authority to raise the amount required by an increase in the Customs duties, as being on the whole the best course in the general interest of the community. I have already expressed the opinion of the Government, that to furnish the subsidies to local bodies, additional duty of twopence a pound should be put on tea, which is as much ns we think it should bear. The Government do not propose to put any additional duty on sugar. Sugar may fiirly be called a necessary article of food—the most widely and largely used of any food imported; it is extensively used in our manufactures, aud it will always be available if at some future time, and upon some unforseen contingency, a need for some additional revenue should arise, and it will, moreover, be available with the least disturbance of trade. The Government have endeavoured in the duties proposed to adjust fairly between the conflicting interests the burdens to be borne. Recognising the fact that a freetrade tariff and prohibitive tariff are equally incompatible with the

amount which we must raise, and admitting what must be admitted, that the imposition of heavy Customs duties necessarily affect the course of trade and in-

dustry, we have endeavoured, while making revenue our first object so to adjust the proposed duties as to assist our local manufactures without any more pressure as we believe upon the consumer than is inevitable if we are to raise by Customs duties a yearly sum of not less than £1,450,000 for the purposes of ordinary revenue, and it does not seem

to me that we can prudently reckon to

do with less thanthat sum from the Customs for some years to come, when

look at the total amount of revenue which must be raised from the other sources of revenue open to us. I can hardly hope in so complicated a matter as a complete revision of the tariff, where so many conflicting interests have to be dealt with, and where it is imperative to raise a

large revenue that errors and anomalies

will not be found. I will ask both freetraders and protectionists to keep very prominently before their minds the one inexorable condition of the problem, the

necessity we are under of raising a large revenue by means of these duties. It is proposed to raise a large number of articles from 15 per cent, to 20 per cent, ad valorem, and some to "25 per cent., and to increase specific duties in many cases proportionately. The total amount which these duties will raise is estimated at £103,000, I may here point out that £25,000 of this taxation would not b« necessary if Parliament saw fit to raise the school age at which capitation is payable to six years, instead of five as at present, and to abolish the Education Boards. UNRAISKD LOASS.

The error which occurred in the 19th Section of the Loan Act of last session rendered it impossible to float that loan in London until the Act was amended. It also raised some doubt of the wisdom of placing the North Islaud Trunk Loan upon that market until after the amendment, had been made. I found, that satisfactory arrangement could be made, and so avoided the great public inconvenience of ho , ding a session before the Government had had time to prepare any of the work they had undertaken to submit to Parliament at its next meeting. My reasons for asking Parliament to correct the error which had occurred in the Loan Act cf last year before the delivery of the Financial Statement were that the error to : be corrected was an admitted oversight, hardly more than a clerical error, that the policy involved in the Act had been very fully discussed last session and carried by large majorities, that by the advice of our agent it was important to have tho loan ready for floating in this present month now just ending, that in the event of any great disturbance of the London market as by a European war, occurring before the loan was raised serious loss would result to the colony iu raising it, that delay in passing the Act would hare caused embarrassment and loss in making necessary further temporary arrangements for meeting engagements, these temporary expedients being the very thing I had tried with much trouble to avoid; and that a serious delay must have resulted if the amended Act which has been passed had been postponed until after the delivery of this Statement. We think that no further contracts should be let on the North Island Trunk Railway, and very little, if any, work ba done on the other lines named in the schedule of the loan acts for the present ■ year ; but it may be naturally objected if we are going to spend so little why should we not have borrowed less. We are now about to go upon tlie London " market for the last time, for three - years at least. Whatever, therefore, may be wanted within that period must be provided now, and it would be eminently unwise not to allow ourselves "some rea> •>

sonable margin, and though we are now proposing to expend the loan even more slowly than was then contemplated, the colony will not be put to the: least additional expense by reason of the whole of the loan being immediately raised. POST OFFICE SAVINGS BANK.

The committee will remember that last year I promised that I would, as soou as possible, invest some of the Post Office '- Savings Bank deposits in Imperial guaranteed debentures. This has been done to the extent of £200,000. It is very gratifying to iind that the deposits and number of depositors continue to increase.

The amount of deposits on credit in the Post Office Savings Bank on the 31st March, 18S8, was £1,861,337 ; and in the other savings banks, which are all guaranteed by the colony, £600,967, making a grand total of not less than £2,402.;J04 amongst 99,277 depositors. These figures, and the fact they disclose, that a large part at least of our industrial classes are able to put by and invest such yery considerable sums from their earnings, afford satisfactory evidence of the substantial prosperity of this most important class of onr community. PROVISION FOR THE DEFICIT OF ISS7-BS. I have now, Mr Hamlin, to state how it is proposed to meet the £128,603 standing to our debt on the 31st Maroh, We are, I assume, all agreed that it must be paid off, and not made part of the permanent debt, and we think a special tax should be imposed and set apart for the purpose. It is that a primage duty of 1 per cent, be levied upon all goods imported into the colony, whether free or dutiable, for two years, ami that the procoods be applied to tllQ

payment of the £128,000. This duty, it is estimated, will yield about £58,000 a year. TIIK CROWN AND NATIVE LANDS RATING ACT. I much regret the necessity for repealing this Act, for there is no doubt the repeal will severely effect the local bodies. CJENBRAL SUMMARY. We find there is required to balance revenue and expenditure £56,000, to provide for school and public buildings £60,000, for the subsidies £64,000 ; total, £180,000, and £56,000 for..two years on account of last year's deficit of £128,000. To provide this'sum of £190,000, I have proposed additional Customs dutias, estimated to yield £207,000. If the estimate should prove correct, we shall have a surplus of £17,000, so that the margin allowed is not too much. I woulcT ilesire here to call particular attention to the fact that of this £180,000 now proposed to be raised by additional taxation, £107,000 has hitherto been provided from loan. Honourable members will no doubt feel with the Government that the proposed additions to our taxations are large. My endeavour has beeu to place clearly before the committee what our real works are, to point out what services are rendering the increased taxation necessary, and to show how the requited funds can, in our opinion, be best provided. The matter is now in the hands of the committee.