FINANCIAL STATEMENT.

Gisborne Standard and Cook County Gazette, Volume V, Issue 622, 18 June 1891, Page 2

FINANCIAL STATEMENT.

THE GOVERNMENT’S POLICY. Wellington, Tuesday night. This afternoon the Colonial Treasurer (Hon. Mt Ballance) delivered the Financial Statement, of which the following is a condensation :— In the ordinary revenue account the estimated expenditure for the year 189091, including the civil list and other permanent charges, amounted to £4,125,502 ; the actual expenditure was £4,175,108Under Special Accounts there is an excess of £19,150, arising out of the cost of two meetings of the General Assembly, and the extra amount of compensation paid in carrying out the retrenchment proposals of the present Government. There was also an excess of £14,659 in the amount paid to local bodies by way of subsidy on rates, claims being more prompt y sent n be ore the close of the year than was anticipated In the Colonial Secretary’s Department there is an excess of £11,167, chiefly for discount of drafts, which was not provided in the appropriation of the year; this large item was no doubt partly caused by the high average of interest ruling in London. In the working of railways the excess is £27,892—fr0m the necessity of employing additional hands, from the rise in the cost of fuel and stocks at the time of the recent strike, and by the increased traffic. The Defence expenditure exceeded the votes by £15,712; £7.000 was taken off these votes in Supply, but no saving

was effected on the excess; £3OOO has accrue 1 through the labor troubles ot last year, and other increases principally arise from tbe payment for arms and ammunition insufficiently provided for in tbe voter. Services not provided for amounted to £lO,llO, a large amount being compensation and compassionate allowances granted to officers and widows of men of the Defence and Police Departments.

The revenue was £4,282,504, or £l5l 004 in excess of the revised estimate. With the exception of revenue derived from depasturing lieenr.ra all heads of revenue have been exceeded. The estimated expenditure on land fund account was £195 680, and the expenditure was £428 in excess of the estimate. The estimated revenue was £96,600; the receipts were £67,670 in excess. Large quantities of land in the Canterbury district were sold far cash, but the lands available for dbposal in this way have been nearly exhausted.

The net Public Debt on March 31 was £37,359,157. [Full particulars of the different transactions were given.) The balance at credit of the first account of Public Works Fund, March 31, 1890, waa £233,675. It became necessary to iaeue £24 000 of debentures. The expenditure amounted to £128,810, leaving at close of the year an available balance of £110,645. The outstanding liabilities are returned at £96,608. In the second part of the AccountNorth Island Main Trunk Railway Loan—the balance to commence the year was £386,985 /expenditure £30,878, leaving an unexpended balance of £356,108, subject to £44,902 for outstanding liabilities. In part 3 of the Account at the beginning of the year, balance was £426 805; expenditure £175,562, balance £251 313, and outstanding liabili'ies £98.875. There will be a balance of £230,000 available for Public Works appropriation this year. There was £300,000 borrowed ap to 31st March far making loans to local bodies, and £25,000 for transfer to the Works Fund. Under the Roads and Bridges Construction Act, up to the March 31, 1890, £258,200 had been paid to local bodies; daring the past year £47,164 had been further advanced—there being a balance of £4,636 available. Tbe engagements of tbe Treasury in respect ot the loan amounted on Slat March to £411,018, and further applications had been received for £36.588, which had been granted provisionally. I have determined that one per cent, per annum, including arrears from Ist February, 1888, shall be set aside for the purpose of providing a sinking fund to comply with tbe terms of tbe Roads and Bridges Act, and I have accordingly placed on tbe estimates a sum sufficient to cover arreare and for the current year. Consolidated Fund — In the Ordinary

Revenue Account, the expenditure, as proposed for the year, will amount to £4,155,105. In Interest and Sinking Fnnd there is an increase of £35,687. A new item of £8,866 has been provided for Sinking Fnnd on the amount borrowed under the Government loans to Local Bodies Act. For the first time we have had to provide a sum of £22,000, contribution towards the maintenance of the Australian naval squadron. An increased sum of £B,OOO has been taken for compensation under the Civil Service Act, while £B,OOO has also been added for the payment of subsidies. Coming to the annual appropriations, excluding working railways, very substantial reductions have been effected in the ordinary department of expenditure. Provision, however, has bad to be made for exceptional services, such as census £12,500, for triennial Property Tax Assessment £13,000, and for discount on our remittances to London £3,500. The estimate of expenditure for 1891-92 is £45,393 less than the expenditure of the previous year. I have entered into arrangements with the Bank under which bills at 90 days, instead of 120, will be issued at par on London. The effect of this arrangement, if it had been in operation on our finances last year, would have been a saving of upwards of £5,000, and if other things are equal there will be a similar saving thia year. In the Land Fund Account, although the present estimated expenditure slightly exceeds the amount voted last year (ariring out of the necessity for employing additional surveyors and the charging of salaries heretofore paid out of the loans), a very considerable saving has been effected by the amalgamation of separate departments I have not thought It prudent to estimate the revenue for the current year at more than £92,700. I estimate the ordinary revenue received for 1891-92 would amount tn £3,906,500. £8,004 less than the actual receipts of last year. In addition to the above there will be issued in aid of revenue £282.300 for sinking fund increases as against £288,000 issued during the past year. Of the Stamp revenue L 65.700, which has heretofore been decided as revenue, will now be treated as a recovery in reduction of expenditure in connection with the ’Frisco and direct mail services. I have deemed it prudent to estimate the railway revenue at £9322 less than was received last year. I see no reason whv there ehnnld not be aq increase under the heads of Customs and Beer Duty, and I have therefore made a slight addition over last year’s receipts to both these items. I expect a general acceptance of our land settlement proposals will cause an augmentation of £22,918 over the reoiipts 0! last yea< derived from depasturing licenses, rents, etc. I estimate there will be a surplus of £257,660 at the end of the present financial year. The question will now suggest itself, in which way can this surpiua be beat disposed of? It must have been recognised that the tendency of tbe age is to increase the postal facilities of the world, and to reduce ths cost of carrying letters. The time is not far distant, we believe, when there will be an Imperial penny postage—probably within the next thee year*, Ths loss estimated by the English authorities is not expected to exceed £75 000 a year. Of this amount a number ot persons in England have offered a guarantee of £50,000, and public opinion ia rapidly growing in the direction of adopting a minimum rate of

postage as a means of conao’idating cr federating the various parts of the Empire. The postage at present with Australia is S I a letter, and that to Gre 4 Britain 2}d, while to the suburbs of our cities and other parts ot the colony the charge is 2d. So manifest an anomaly suggests a change in the direction of our proposal. The time hsa therefore arrived, the Government believe, wh n a penny poet should be established iq New Zealand. The cost or reduction in the present year is estimated at not more than £50,000, and from calculations, and comparisons with the colony off Victoria, where the penny postage is already an accomplished fact, it is estimated that within three years from the present time, through Increase in the number of letters sent, tbe loss In revenue will ba more than cohered. It is also intended to ask for power to establish a penny post with the Australian Colonies, and negotiations to this end are now being oonduoted. If this extension of the penny post be adopted the immediate loss to the Colony in revenue will be about £1,200 a year. Thia is not a formidable sum to secure so great an advantage as an intercolonial penny post. The postage on newspapers to the other Colonies, now a penny, It te proposed shall in future bo IJd, and it is anticipated the increased number posted will prevent an” matei ial loss of revenue. It is also proposed to reduce the telephone charges to a uniform rale of £5 a year, which we believe will not entail any material lota to the revenue. Tbe nueslion of settling tbe land and carrying on lhe work of Colonisation, in making roads to open up lands for settlement, win have, we think, to be borne in future to some extent by the Consolidated Fund. Whether this can be done will depend of course on the progress of tbe colony in the way of yielding an increasing revenue, but it will be reeognieed that the connection Is intimate between a growing revenue and extension ot settlement. We propose, therefore, in the present year, to apply a sum of L 30.000 out of revenue for the work of opening np land for settlement, This amount will probably have to be supplemented from the Public Works fund. We propose to remit Native Lands duty on leases, amounting on an average to about 1.6000 a year. There appears to Government to be no justificatioo Ot imposing an exceptional duty Upon aliens” tion of Native Lande tor sellknient, a Worn

that ought to ba encouraged rather than restricted by the ftnposition of a duty which is irritating and at the same time difficult to collect. There is an estimated deficit in the present year in Land Fund, through the probable decline in cash sales, of £21,820, which I propose to meet by transferring a similar amount from the ordinary revenue account, which will come out of the estimated surplus.

My predecessor made a proposal in 1887 to pay out of the Sinking Fund account, to the amount of £40,000 a year, the deficit of the year 1888, amounting to £400,000. It was also proposed that any credit balance of ordinary revenue from year to year should be devoted to the same, purpose. Shortdated debentures will be issued to cover the deficiency. The debt still remains, the arrangement to extinguish it not having been put in force. We now propose to apply £lOO,OOO, of the surplus of the year to the reduction of the debt. I propose to place a tax of 2| per cent, on money passing through the totalisator, which will amount to about £lO,OOO a year, and for the remainder of the present year to about £5,000.

The total of these various amounts mentioned is £197,820. Deducting thia from the estimated surplus of £257,660, we have a net surplus available to carry forward of £59,840. To these has to be added the tax on the totalizator, amounting to £5OOO, bringing up the suiplus for the current year to £64,840, which will be an ample margin to provide for supplementary estimates and possible contingencies. It will be impossible to depend in the future on the increased consumption of alcoholic liquor to strengthen the Consolidated Fund. This fact is gratifying from a temperance view, and I only point it out in order that it may guard against undue re liance on what is termed the elasticity of the custom revenue. Stamps will, as greater wealth is diffused among the community, continue to give a yearly increase, and must be considered as one of the pillars of our financial system. The railways can never, I think, be relied on for revenue purposes. If they pay interest on the cost of construction, they will do all that need be expected, as any excess ought to go in the .way of reducing the cost of production, in lower rates of carriage. Direct taxation in the way of Land and Income Tax must remain, with the development of cur industries, a fruitful source of income, and an equivalent of the amount obtained from the present Property Tax may for some time be a necessity. When the nature of our obligations will permit it, we are of opinion that relief should be given on the necessaries of life now paying duties through the customs, but we must be certain, while the great object is being reached, tbst we shall have sufficient revenue to meet the growing demands on the Consolidated Fund,. arising through the cessation of borrowing large amounts of money in the English market, for it we are to maintain our credit and financial independence borrowing in that market must cease, while any local borrowing is likely to be confined to the absolute necessity of carrying on those essential works of colonisation, such as the settlement of people on the land, on which depends directly the prosperity Of the community. On the other hand if the machinery of government could be simplified and retrenchment carried out properly, the expenditure side of the account might still be Considerably reduced, but we are strongly of opinion that any material reduction mu Come from a more direct and simple form of administration, directed to the attainment of practical ends, and it will be necessary to see that our measures of legislation do not include liabilities which will render this form of economy impossible. The amount of the floating debt incurred to meet past deficits is L 550.000 ; this will be reduced to L 450.000 by the appropriation of LlOO 000 out of surplus of the year. Can this floating debt be further reduced ? The Government thinks that though by law the released sinking funds in connection with loans undergoing conversion pass into the Public Works Fund, a portion of them should be used to pay off debt which was incurred to aid the revenue, and it is proposed to transfer from the Public Works Account £lOO 000 of the Sinking Fund set free, thus in' the present year reducing the floating debt bv £200,000; adding £128,605 paid off mainly by |he primage duty, we shall have effected a reduction of £328,605 in floating debt About £179.000 will be available through the Conversion operations to redeem debentures in the present year, in addition to the Sinking Fund released from the drawing loan of 1867 amounting to £146,600. By the complicated and ingenious operations under the Consolidated Stock Act ISS-t while we are taxing debentures in aid of revenue in anticipa'ion of sinking fund fall jng in, we are at the same time paying off debentures already issued. In the present year we issue £282,300, and shall nav off about £325,500. py The Government recognise that vigorous measures are required to p’ace the Civil Service of the Colony on a satisfactory footing. They have discovered that departments have been over-manned and did their work Imperfectly, and they have had to apply the pruning knife of retrenchment. The operation is always to be regretted, for very often hardships result. The task of reducing the Service at the risk of depriving families of their means of sustenance, is one from which moat shrink, but it has to be done The justificatiqu is that the welfare of the whole community demands most rigid economy in the administration of its affairs To be economically administered, the service must be under one administrative body At least the lower grades of officers must be interchangeable in the different departments Retrenchment to be effective mnst go on continually. Thue when an officer dies or retires the question should always be asked, has an Opportunity occurred for securing greater economy and efficiency ? Every promotion should mean both, for economy does not mean Cheeseparing in salaries, but getting the right men into the right places. Is it impossible to have a Civil service in which the country £?1 11 .T. The Government believe that the Civil Service Bill which will be shortly introduced has in it such elements Of sound reform as will enable this question to be answered in the affimatve. Great reductions can still be made, but they ought to be made in the way I have mentioned. The welfare of the Colony demands a highly organised, intelligent, and patriotic Civil Service. To attain this end it is the duty of all parties to combine. During the recess I have made inquiry into the management of the Government Insurance Department, and I have come to the conclusion that the institution is conducted with skill and success. Economies have been effected during the year which represent a total of between £4OOO and £5OOO on the actual expenditure, and the work of judicious retrenchment is still proceeding. During the last few months an agreement has been entered into between the different Life Insurance Companies doing business in the Colony, not to interfere with each other’s operations, and B higher standard will thus be obtained in carrying on canvassing work. The quinquennial accounts have been completed and Submitted to the actuaries in London, and policy-holders may expect to be in possession at no distant date, of most gratifying and I convincing assurance of the vitality of the institution. In order io cover any SMCund investments, a reserve of £25,000 fess been Kt.aide. This amount is not included in the accounts forming the basis Of the actuarial investigation, and here I may observe that there seems no reason to conceal the fact that during the period when the Government Insurance business was tmdrj; ibp mapagement of the Board some bad investments were made from which losses are likely to acerue. The probable gxtent of these losses, however, are amply covered by the reserve mentioned, and the institution remains sound and prosperous. he Royal Commission apponted to inquire into the working of ihe Public Trust department has made a thorough investigation and many reforms in its administration will no doubt be suggested. It would be nothing Short of a national calamity were public confidence destroyed in the institution, but publicity even to the extent of exposing grave defects is rather calculated to reassure the timid than to permanently weaken public faith. There is no reason why the Public Trust Office should not be as wall administered) M Im instance the Post Office.

The limited quantity, of public estates still available for settlement suggests the necessity of providing that in future the bona fide settler shall be considered before the speculator and monopoliser. The remainder (says the Surveyor-General), of the agricultural land is eo interspersed with the country fit only for grazing stock that it seems fair to class both as one, for the low grazing bush lands of the North Island especially can ba profitably occupied in conjunction with the small areas of purely agricultral land within them. On this basis the lowlying pastoral and agricultural land fit for settlement is about 2,850,000 acres. When upwards of sixteen million acres of the best land have already been alienated in fees simple from the Crown, there is some reason why the remaining available estate, of less than three million acres, should be administered in the interests of the whole people of the colony. The time, it is believed, has arrived when suitable areas will have to be purchased by the Crown for small farms. In many parts of the colony the Crown lands available for this purpose have already disappeared, and if the population is to be retained the wants of intending settlers will have to be met. A bill will be introduced, hedged round wi'.h the necessary safeguards, to establish a satisfactory system of purchase. If borrowing in the English market is to be discontinued the means will have to be provided for canying on the work of settling the the waste land. We think that if money advanced under the Act for opening up land for settlement were made, a first charge on the proceeds of the land there would be ample security. We propose to procure an estimate by the Surveyor-General of the half of a block of land when surveyed and placed in the market, with an estimate of the cost of roads to open it up, whereupon the Minister would be placed in possession of the funds to the limit of one half the estimated value of the land when it was ready for disposal. The funds borrowed for this purpose to be repaid out of the proceeds of the land. The necessity of providing for the extension of settlement by the purchase of Native Lands will be seen from the limited quantity of Crown Lands still available and a vote will be submitted for the purpose, but while reserving to the Crown the right of purchase the Government are of opinion that the time has arrived for an amendment of the law to enable the Natives to lease their land, either direct to the Crown in perpetuity, or through a Board in which they will have confidence, under the land laws of the Colony, to the settlers who are tn occupy. Whatever is done therein by the natives under the treaty, in accordance with the principle of Justice, must be strictly maintained. It will remain to reconcile by law the interests of the native race and of the Colony, so that the beneficial occupation of native territory may be hastened and finally secured. The Native Minister will introduce a Bill for the consideration of the Legislature, with the object of consolidating the numerous and complex Native Land laws into one concise and intelligible measure, and allow of simplifying and reducing the cost of the ascertainment of title and other procedure of the Native Laed Court. The effect of this will, it is hoped, enable more rapid and satisfactory settlement of the surplus lands now lying unproductive in the possession of the natives, INCIDENCE OF TAXATION.

We advance just as far towards the ideal tax (a tax on the value of land less improvements) as the condition of a sound finance will permit us, and if we stop short of what some might desire it must be remembered that the history of financial reforms and changes show that the ends sought to be attained were seldom, if ever reached, at a single effort. We propose to introduce a bid to abolish the property tax, and to provide for a land and income tax, and in respect of the land tax to grant an exemp‘ion on improvements up to the value of £3OOO for each owner, and also to impose a graduated tax upon all persons and Companies the value of whose land, less the £3OOO of improvements, shall amount to £5OOO. It is estimated that the deduction of improvements will cause a loss of revenue of about £60,000, and the graduated tax will bring in an increased revenue of £61,890 The payment of the additional sum of £61,890 will form an important extra tribute to the revenue by the holders of large estates, and it will be paid by less than 3,000 owners. In addition to the deduction for improvements there will be the exemption of £5OO from owners of land, and it is not proposed to grant the exemption when an owner’s land, less deduction may claim, will exceed £1,500. Thus if a farmer has land worth £BOO, the improvements on which are valued at £3OO, the exemption would make him not taxable, and with land worth £l2OO, and improvements £4OO, the taxable balance would be £3OO. In the assessment of the tax an owner will be allowed to deduct the amount of any mortgages, and the mortgagee will pay tax on thegtotal of his mortgage at the same rate as tie owner on his land—that is Id in the £, but the graduated tax will fall entirely on the owner, and he will pay through on the full value, lees the allowance for improvements for the purposes of the tax. It is considered that the mortgagee is a part owner of the land, and that therefore he should ehare with the owner tho responsibility in the matter of the tax, to which principle, however, we make the graduated system an exception. An owner will not be asked to pay land tax on the value of the interest of any tenant who holds a lease in which he has a marketable goodwill. The tenant will be assessed with the value of his interest. We propose to graduate the tax on the following scale On a total taxable value of LSQOO to Llo,ooo—lls 8d LlO,OOO to L20.000-12s 8d L 20.000 to L50.000—13s 84 L 50.000 to Lloo.ooo—l4s 8d LlOO.OOO to over- 15s 8d

The result of an all round tax of Id on the land of persons as distinguished from companies has been estimated by the property tax department at L 177.596, and the graduated division of the tax on persona at L 46 567. The all-round tax on the land of companies at Id amounts t0L27,361, and the graduated at L15.323—a total of L 266.847. More than £25,000 will be paid as graduated tax in respect of the land of owners each of whom has a greater value than £lOO,OOO. These owners are less than fifty in number, I will endeavor to show the amount of tax paid through the Customs respectively by an artisan and a laborer, each having a family of five, the former receiving 53s a week or £137 per year, and the latter 39s a week or LlOl per year. The artisan would pay in duty Ll2 10s, while the laborer would pay Lil Is sd, This allows for no broken time, periods of sickness, or nonemployment, during which the earnings might cease while the paying of duty at least to some extent would continue. Let us now see what owners of land worth LlOO.OOO would pay in a graduated land tax. Deducting L3OOO for improvements a 15s 8d tax would amount to L 690, or about 9| per cent on an assumed income of L 7.350. In addition he might pay 3 per cent, on his income, to the Customs. The result, then, illustrates how inequitable has been the system of tax prevailing in this country, and exhibits one efficient cause of the tendency of wealth to I accumulate rapidly in the hands of a few. Assessments will be made of both the improved and unimproved values. For the present obnoxious foim of taxation we intend to substitute an Income Tax of a shilling in the pound, There will be an exemption of Ll5O, and a deduction by way of abatement of like amount from incomes which do not exceed LBOO. Companies will be subject to the same rate of Income Tax. Income Tax will not be levied on profits derived from land which is reached by the Land Tax. ‘'Companies" include joint stock corporations, banks, shipping, Are and marine, insurance, and gold mining companies, There will not be any exemplion in the case of companies. The revenue derived will not be so largo as at present, but the incidence of the tax will be more equitable. We propose to only charge life assurance companies an income tax of Is in the £ on income derived from personal property in the colony. Income tax will not be levied on any income derived from land or from money lent on mortgage. Such property will be subject to land tax only. In charging a tax on incomes derived from professions and from occupations in which a profit is not made from capital) and on salaries, we proposers exempt all incomes

of £3OO and under, and to deduct £3OO from all incomes above this amount. An income of £5OO will therefore pay on £2OO, and an income of £lOOO on £7OO, with a rate of 3d in the pound on the first £2OO over the exemption, of 6d in the pound above that amount. A person in possession of £5OO income will pay under this proposal £2 10s per annum ; in possession of L6OO, L 5 per annum ; of L7OO, L 7 10s per annum, and so on. I fail to discover any reason why the assessment for an Income Tax should be more vexatious to the taxpayers than for Property Tax purppses, and I am convinced that it will be possible to adjust the mode of collecting bo as not to increase the inconvenience of taxpayers. The Treasurer went iato further details, showing the proposed alteration in the incidence of taxation would encourage thrift, instead cf at present making industry bear additional burdens, CONCLUSION. The Treasurer concluded by referring to the exodus from the colony, and said that by the establishment of labor bureaus they ] hoped to ascertain the cause. What productive works could be put in baud would be given out, and they hoped to avoid the vicious system of the past and try and give persons employed on public works a chance to settle in the colony. After alluding to the relations between the masses and the wealth-owners in other countries, the Minister concluded by stating that they believed the safety of the people to be the highest law, demanding the first consideration of the State.