8.—6.

XXV

War Expenditure. The net expenditure from vote " War Expenses " for the past year was £914,227. This included £326,000 for the medical treatment of returned soldiers for war disabilities, £170,000 for transport claims, £46,000 war gratuities, and £406,112 for post-war equipment to replace equipment taken from New Zealand with the Expeditionary Foree —that is, after allowing for a net credit of £48,756 on account; of item '' Repatriation." The estimated net expenditure for the current year is £799,252, in which provision is made to meet liability to the Imperial Ministry of Shipping for transport charges £475,000. The War Accounts and Records staff, which on the Ist April, 1921, was 153, is now reduced to forty-six, representing an annual economy amounting to £14,137. The staff is being still further reduced as the work permits. Arrangements have been completed for the administration of medical treatment for war disabilities to lie taken over by the Pensions Department, and a considerable saving has been effected also by the transfer of military hospitals and institutions to the Health Department. At the 31st March last the cash and investments held by the War Expenses Account amounted to £3,710,439, representing unexpended loan balances, and various recoveries on account of capital expenditure, including recoupment from the sale of surplus stores. Against this is the estimated liability referred to above, including the amount due to the Imperial Government, whose final accounts have not yet been received. These accumulations properly belong to capital account, and should be applied to the reduction of the war debt. I therefore propose to transfer £3,000,000 to Loans Redemption Account, the ultimate result of which will be to effect a clear annual saving of £30,000 for sinking-fund payments alone, giving the power to remit subsequently as much taxation as is represented by that amount. NAVAL DEFENCE. The expenditure on naval defence for the financial year amounted to £418,665, under the following headings: — Permanent charges:— Naval Defence Act, 1909 (H.M.S. " New Zealand ")— £ £ Interest .. .. .. 43,341 Sinking fund .. .. .. 71,807 115,148 Annual Appropriation : — Vote—Naval defence .. .. .. 303,517 £418,665 The capital sum owing on account of H.M.S. " New Zealand " is £.1,795,166, against which accrued sinking funds amounting to £931,429 are held by the Public Trustee, to whom 4 per cent, per annum on the capital sum is paid for this purpose. Provision was made in last year's appropriations for the purchase and erection of two Army huts on the Admiralty reserve at Devonport for recreational purposes and emergency sick-quarters. One hut was erected by September, 1921, and was available for use when an outbreak of influenza occurred amongst the recruits under training. The other was not completed at the end of the financial year, and you will be asked to reissue the unexpended balance of the vote. As it w T as not found possible to take advantage of the provision made during last year for the formation of a New Zealand Naval Reserve, the relative item appears in this year's estimates. Owing to the Admiralty subsidy to the Auckland Harbour Board for the priority use of the Calliope Dock, workshops, &c, and to the courtesy of that Board,

iv—l 3. (3.