1.—15.

to which reference is made, the Railways Fund which started behind scratch with a handicap of previous Government liabilities, was able at the 31st March, 1932, to show a balance carried forward of £1,454,173 ; and in that year, the worst in its history owing to forced retirements, actually increased the credit balance carried forward by over £5,000. Previous Actuary recommends " No Alterations." —A paragraph from an Actuary's report in 1910 quoted by the Commission concludes " let the Service clearly understand that the benefits will not be altered again for better or for worse." The Commission which quotes this, with approval, as part of a " prophetic warning " puts in its own report recommendations which will, if carried into effect, ignore the warning in two directions —that is, they will make the benefits better for some and worse for others. The above is quoted merely as another illustration of the remarkable inconsistency of the National Expenditure Commission's report. No Actuarial Basis intended. —In paragraph 1436 the Commission shows clearly that it knew the funds were never placed upon an actuarial basis. It therefore knows that its present action in recommending the introduction of the actuarial basis is a complete reversal of past policy, and is loading present contributors, superannuitants, and the Government with a present-day liability that they should never be asked to meet and that the circumstances of the Fund certainly do not warrant. Commission's Official Bias. —Reference is made in paragraph 1439 to the post-war rise in salaries. No concurrent reference is made to the decrease in the purchasing value of money. Nor does the paragraph refer at all to the rise in wages. This shows that the Commission has been more concerned with, the position of the salary-earner than the wage-earner, although in the case of the Railways Fund the wage-earner contributes the bulk of the money towards the Fund, and obtains, generally speaking, the lower proportion of benefits. Commission's Breach-of-contract Recommendations. —In paragraph 1440 the Commission advocates that annuities should be based on the average salary over a period of at least seven years or ten years. There is nothing to show that the Commission has actuarial authority for this recommendation, nor have any examples been supplied by which an estimate could be made of the effect this suggestion would have upon the Fund or the retiring-allowance of members. This information should be definitely given, even if, to quote the Government Actuary in regard to other figures, its preparation might be " very laborious." Without such information we would be " buying a pig in a poke." There is no question but that the proposal would make a great difference by reducing the benefits to employees and reducing the liability on the Fund. However, the proposal is for a direct breach of agreement with employees, and if carried into effect will be to the lasting discredit of those who recommended it and of the Government which legislated in that direction. It is noted that the Government proposes to make the penalty as severe as possible, choosing the ten-year period rather than the seven. Actuarial Absurdity exposed.■ —In paragraphs 1441, 1442, 1475, and 1434 the Commission refers to the alleged actuarial deficiency of £23,000,000 for the three funds. Of this, the Railways Fund is alleged to be £9,000,000 short. Supposing, as an alternative to adopting the Commission's recommendation, that the Government decided immediately to make the Fund " actuarially " sound. It would pay £9,000,000 into the Fund, which already has a credit balance of £1,454,173. This would give the Railways Fund a credit balance of £10,454,173. This capital would, at the present earning rate of the Fund, earn interest at the rate of 5-734 per cent. This would mean that from interest alone in the first year the Railways Superannuation Fund would gain £599,442. But last year's Railways liability to superannuitants was only £403,367, so that the interest from the Fund alone would have paid the whole of the year's liability and have left a credit balance for the year of £196,075 from interest alone. But the employees last year contributed £142,239, and the Working Railways contributed a total of £182,200, so that on this basis the Fund would have paid all its liabilities for the year and increased in one year its credit balance by the huge amount of £520,514. It does not require an actuary to see how fantastic these figures would grow, with interest compounding and pyramiding all the time, with accessions of over half a million annually to the Fund of ten and a half million pounds so created. It does not require a very profound knowledge of political human nature to realize, further, that such a fund, increasing vastly in the way indicated, would be an irresistible bait for the raiding instinct of some future Government. That this danger is very real has already been exemplified in England by the raiding last year of the Road Fund, and in New Zealand by the raids made upon accumulated surpluses and the pawning of soldier-settlement funds. Considerations such as these show the absurdity of the Commission's statement (paragraph 1442) that " if the present system is to continue without alteration, the only method whereby the funds can be saved from progressive insolvency is by the payment of the sum of £23,000,000 to the funds." As has already been pointed out, the Funds are not insolvent while they can pay, as they have been doing, their full annual requirements, and there is no reason, if Governments continue to carry out their obligations from year to year, why the funds should not continue to do so. It is- again clear that the Commission is wedded to the idea that the Fund must be made " actuarially " sound, and again it is necessary to repeat that this was never the intention of the Government which introduced the funds, or of the State employees who jointly agreed to their introduction. Annual Appropriations the Sound Principle.—ln view of the fact that in this country until the funds were established, and in other countries still, the State meets its liabilities directly in the matter of pensions without any superannuation funds at all, it might have occurred to the Commission that, so long as the annual payments to the Fund were sufficient to meet the annual demands upon the Fund, no other action would be necessary. Compared with other countries, the State would still have the definite advantage that members were contributing, on the average, 5 per cent, of their earnings annually in order that they might reap the benefit of a retiring-allowance of two-thirds of their annual earnings at the expiry of forty years' service. It might here be suggested that, even if the State found it necessary to reduce rather than

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