8.—6 [Suep.].

have been taken to curtail expenditure on this basis. For the remaining months of the year it is expected that the result should be a saving of about £400,000. In view of the extent to which the Departments have previously been combed, these further economies must mainly be effected by curtailment of services. Some of the proposals will, no doubt, be strongly resisted, but it is useless to disguise the fact that unless the public is prepared to support these steps it will have to submit to higher taxation or allow a heavier drift to take place in our finances, and this would seriously affect our credit. The details of these economies will be furnished to the House in due course. RESERVES. Towards the balance I hope to obtain £350,000 by drawing still further upon reserves. As no doubt honourable members are. aware, a large part of the accumulated surpluses of the Consolidated Fund from the war and post-war years was invested in discharged-soldiers-settlement mortgages, repayable by instalments over a long period. These investments were constituted part of the Public Debt Redemption Fund, the interest on which goes to the Consolidated Fund as a set-off against the expenditure provided for under the Repayment of the Public Debt Act. The £350,000 which it is proposed to take represents the repayments of principal by the mortgagors that it is estimated will be available during this financial year. I may add that, in view of the uncertainty of the whole revenue yield, I propose to ask the House for legislation empowering me to obtain further assistance from the Discharged Soldiers Settlement Account. This may necessitate making special arrangements by hypothecation or otherwise for liquidating any amount that may be required over and above the £350,000 estimated to be available from the capital repayments. With this special provision in reserve, I am hopeful that budgetary stability can be maintained. TAXATION. These proposals leave about £470,000 to be provided for by additional taxation over and above the amount proposed in the main Budget. The first question is as to where this can be imposed with the least hardship. As regards Customs taxation, the tariff rates are already so high that the law of diminishing returns is operating over many of the items. I propose, however, to move a resolution to-night with regard to two classes of imports which I think will provide about £240,000 towards the amount required. For the rest I am driven to review the position and the possibilities of further direct taxation through the income-tax. Income-tax is always less palatable to the taxpayer than indirect taxation ; but in the present emergency we have no option. The payers of income-tax will view with strong disfavour further burdens being imposed upon them. I take it, however, that these taxpayers would prefer to shoulder further burdens rather than see reductions made in the old-age pensions, soldiers' pensions, and pensions for the blind. They would equally resent any suggestion that the State should default in its interest payments. A reduction in pensions may at any time become an imperative necessity if the world's pricelevels remain low, but for purposes of my present computations I have laid this on one side. Dealing now with the income-tax, it is well known that the company-tax in New Zealand is the heaviest in the British Empire, if not in the world, while individual income-tax is the lowest in the British Empire. Ido not therefore consider it expedient or just to add anything more to the company-tax than was imposed by the main Budget. More particularly is this the case in view of the fact that a large proportion of the companies engaged in business in New Zealand are engaged in financing or assisting the primary producer, and any further tax burdens imposed upon companies is liable to reflect itself in a restriction of advances to farmers or withdrawal of other forms of assistance. I therefore exclude the companies from consideration in reviewing the prospect of further revenue from direct taxation. INDIVIDUAL INCOME-TAX PAYER. Having already stated that the imposition of further taxation on companies is not justifiable, I now come to the position of the individual taxpayer. At present his contribution by way of income-tax is the lowest in the Empire, by reason of the low minimum rate at which our Act starts and the liberal exemptions he enjoys. I am not forgetting the fact that the main Budget increased his surtax from 10 per cent, to 30 per cent., but I have pointed out that the receiver of gilt-edged income is called upon in these troubled times to bear his share of the burden. He is more concerned than any one else to see that the State remains solvent. European

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