8.—2

XII

they incur in. placing before the Committee their answer to this question. They recognize clearly the principle that, before the public debt is increased, the gain to the colony shall be seen to be more than commensurate with the increased liability; and they believe that a case within this rule has now arisen. They think that our ordinary finance being restored to a satisfactory condition, and our main trunk lines of railway being still incomplete, it is now prudent to raise a fresh loan for the purpose of completing these railways, or carrying them a stage nearer to completion, and for certain other definite and important public works. In this opinion the Government are strengthened by the fact that the railways already made are now paying practically 4 per cent, annually on the amount expended in their construction, an d that they are steadily improving in this respect. The Government, therefore, Sir, recommend that a loan should be raised, but only if the money can be borrowed at a reasonable rate of interest; and authority of Parliament will be asked to empower the Government, if necessary, by postponing works, so to arrange the expenditure as to enable them to wait for a favourable market. We have now to consider what amount should be raised; and this must be decided by two considerations : (1) the amount which can be profitably expended on necessary or directly reproductive public works; (2) the amount upon which we can afford to pay interest without placing undue burdens upon the people of the colony. Now, I am afraid that there are so many necessary or directly reproductive public works only waiting to be done for the want of cash to do them that we shall find no practical limit in that direction : and in this fact lies no doubt the cause of our far too lavish expenditure in the past. From the past we should take warning, and proceed at a very much more moderate pace than we have been doing, upon the average, for the last ten years. We must confine ourselves for the future, in the expenditure of borrowed money, to works of necessity, or to works which are directly reproductive, and strictly limit the amount spent yearly upon such works by our capacity to pay the interest with tolerable ease. It is, in the opinion of the Government, of great importance that the colony should steadily pursue a progressive policy, and that our main trunk lines should be pushed on as vigorously as is compatible with the means at our disposal. The Government, then, taking into consideration all the circumstances of the colony, and acting upon the principles which I have just laid down, have determined, Sir, to propose to Parliament a loan of £3,000,000, to be raised and expended at a rate not exceeding £1,000,000 per annum. My honorable colleague the Minister for Public Works, when he makes the Public Works Statement, will inform the Committee in detail of the items of the proposed expenditure, and of the mode by which we hope to confine the expenditure to specific works determined upon by Parliament before the money is borrowed. The Government attach great importance to this provision of the proposal. It is, I think, clear, looking at the experience of the past, that, if our future borrowing is to be governed by that pradence which is essential, we must carefully consider what works we are justified in constructing, at what rate of speed they should be constructed, and at what cost to the State. When we have determined these conditions we are then in a position to decide upon the amount to be borrowed. "Upon these rules of conduct in this matter, which, I am sure, will meet with the hearty approval of the Committee, the Government have acted in arriving at the amount which they propose shall be borrowed. And now, Mr. Hamlin, I have done. The Committee, lam sure, will not be disappointed at the shortness of my Statement when it remembers that this is the natural and appropriate result of the simplicity in keeping the colonial accounts which we have been enabled to adopt. I will only add one word. In 1879 I stated to the Committee fully and fairly the position of the colony, neither concealing nor exaggerating the grave difficulties which had then to be met; and I pointed out the obvious remedies. That statement has often been characterized, especially by those who had taken least trouble to master it, as too darkly shaded, as giving too gloomy a view of things; though it has never been attempted to disprove the facts and the figures which I then adduced. Sir, I venture to say that, except so far as the gloom was in the facts themselves, it never had any existence : it certainly was not of my im-