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The Pamphlet Collection of Sir Robert Stout: Personal Volume

Financial Statement

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Financial Statement.

Sir R. Stout.—I understand, Sir, that the question before the House is, that you do leave the chair in order that the House may go into Committee of Supply; but I am certain that any person listening to this debate, had he not been told, would not have believed that such was the question before the House. Sir, I do not intend to allude to anything which has been said personal to myself or even personal to gentlemen who were my colleagues; but I deeply regret that the last speaker should have cast a reflection on a friend of mine who is dead. He has been in this House now for three sessions, and had the opportunity, if he chose, of attacking the administration of the late Mr. Ballance. But his mouth was shut; and now that Mr. Ballance is no more he has the good taste to rake up transactions six years old and make a charge against a deceased man. I hope that kind of thing is not going to be popular in this House. And not only has ho made a charge against his administration, but he has ventured to say that the actions ho took in buying Native land were done for some sinister purpose. I leave the honourable gentleman there. But, if this is the kind of thing we are to have in this House, the dignity of this House cannot be maintained, nor the self-respect of its members. Then, the honourable member did another ungenerous thing. Mr. Cadman is fighting an election, and is not here to defend himself. Yet the honourable member thought it right to refer to the transaction in regard to the appointment of an Assessor, and he had not the fairness to state to this House, when dealing with the assessment, that the assessment that was made three years before by the manager of the Hon. Mr. Ormond's station—and he certainly was never accused of favouring either Mr. Smith or Mr. Cadman—amounted to £5,000, whilst the new valuer raised the valuation at least 20 per cent. Is that fair to the House? Is that the sort of conduct we are to have in this House—the casting of personal reflections? I thought when the honourable gentleman rose—he is a commercial gentleman, holding a high position in the commercial world in this colony—I really expected to have heard a commercial man dealing with the finances of the colony. What have we heard? The honourable gentleman jumped from the bot-fly to three-legged horses. And this is the way wo are to discuss the finances of the colony! Sir, I leave these personal questions, and I shall now speak about what is really before the House—that is, the finances of the colony. Sir, there has been reference made to the past. I am glad of that, because I do not believe that we can appreciate the position in which the colony stands to-day, or look forward to the future, unless we do cast our eyes to the past. Reference has been made by several honourable members to the finance of two or three Liberal Governments, and it has been sneeringly said that, so far as Liberal Governments are concerned, their finance has always been weak. Let us see what truth there is in that. Let me take the House back, if you please, to what may be termed the turning period in the financial position of this colony. The provincial I system was abolished—the provinces were ended—in 1876. In 1877 the Parliament had to prepared dealing with the colonial revenue in a way it had never been called upon to deal before. It first made the land revenue colonial revenue, and it admitted it could not deal exhaustively with the finances that session, for the colony was passing through a transition period. That was admitted by both Ministries—that in office in 1877, when the Parliament met, and that which succeeded them a month or two later; and it was left for the Parliament in 1878 to decide how the finances of the colony were to be dealt with. In what position was the colony then? There was then what was termed a land-boom. Land was selling with enormous rapidity, and the finances of the colony were in a very strong position. No one could see, then, that there was to be an end of the continued prosperity. The land revenue was then part of the ordinary Consolidated Fund, and it was thought this enormous increase of land revenue was to continue. I was Minister of Lands at the time. I dreaded this enormous sale of our waste lands, and when the Public Works Statement was made I intimated, as honourable gentlemen wilt see from Hansard, that we intended, in consequence of projected railways, to reserve large areas of land. We reserved hundreds of thousands of acres. I specially reserved all the land I thought could possibly be withdrawn from sale in Canterbury, because, unfortunately for that province, land was open for sale before survey. I have heard in this House once or twice this session statements that lands should not be sold before survey. I stood alone on the Waste Lands Committee, in 1877, in wishing to insist upon this doctrine being applied to waste lands—I stood alone, for I could get no support for such a doctrine. This land was reserved, and, through the land-boom collapsing, and also through this large reservation of land being made, our Land Fund suddenly de- page 3 creased; and honourable gentlemen will only have to give a brief glance at the amount at which the Land Fund stood in the various preceding years to see what the drop in the Land Fund meant—it being part of the consolidated revenue. We had in 1876 land sold to a value of £846,000—I leave out the shillings and pence. In 1877 the land-sales amounted to £1,314,000; in 1878 they fell ta £1,252,000; whilst in 1879 they only amounted to £146,000—£1,100,000 of a drop in the Land Fund in one year, that fund being in our Consolidated Fund. Well, Sir, what did the Grey Government, which were in office in 1878, do? They saw that it was unsafe to rest upon the Land Fund for finance, and they therefore came down with several measures to make their finance strong. They proposed a land-tax; they proposed a companies income-tax; they proposed the beer duty. But what was the attitude of the Opposition then? Why, they used every effort to spoil our finance. And what was done? Our Beer Duty Bill was killed. We found in the House that we could not carry our Companies Income-tax Bill; and in that way our finance was injured. We carried, it is true, our Land-tax Bill; but, whilst we altered our tariff, we did not imagine that there would be such a drop as there happened to be afterwards, through the failure of the Glasgow Bank and other causes, in our Land Fund Account. And what happened? Why, Sir, it is said we were extravagant. There never was a charge more groundless. I will undertake to say no Government that has ever been in office has been more saving in the ordinary departmental expenditure than we were during that year. If honourable members will turn to B.-1, page 5, Volume I., for the session of 1879, they will find the annual appropriations, and they will then see what the savings were in each individual item; and I challenge any Government that has ever been in office to show greater savings in the votes than we effected in that year. For example: In the Colonial Secretary's Department there was a saving of £25,000-odd; in Law and Justice, £1,800; in Post and Telegraph, £13,000; in Marine, £5,400: and so it went on; and the only excesses we had in the estimates were £95 in the Customs, £3,561 in the Native Department, and £2,111 in Railways. We had no less a sum than £244,000 of savings made in that year on the annual appropriations, after deducting the small excesses in the Native and Railway Departments, and leaving out other things that might be objected to—what might be called extraordinary savings, but which were practical savings in fact. That was our finance. And what happened? It has been said that we had an enormous deficit. Sir, we had no such thing. We had a deficit, but, though the Land Fund decreased, as I have said, by a drop for the year of no less a sum—compared with the twelve months of the financial year before—than £713,000, our total deficit on the 30th June, 1879, only amounted to £131,000. And you will find that from the statement that the succeeding Treasurer—Sir Harry Atkinson—made. He said this: "I should point out here that this deficit of £131,824 may be said to be fairly reducible by £50,000 of land-tax." So that, practically, our net deficit was only £81,000. Now, here comes in this: that was all our deficit for 1878-79, notwithstanding a diminution in the revenue of £714,000 on the Land Fund Account compared with the financial year 1877-78. And what is the Ministry responsible for? I submit that a Ministry is only responsible for the finance of the year which it has the opportunity of dealing with; a Ministry is never responsible for the revenue of the succeeding year, but only for the finance of the year in which it gets its estimates and finance carried by the House, and of which it has the administration. If the House chooses to supplant the Ministry in the succeeding session, then it becomes the absolute duty of the Ministry that takes office to accept responsibility for the finance of the year in which it holds office. But what happened? There was this tremendous drop in the Land Fund; and I admit at once that the Treasurer, Sir Harry Atkinson, was placed in a great difficulty. He found the Land Fund practically gone; and what was there else he had to rely upon? He introduced the property-tax. And he had—because of the Public Works Fund not having been reimbursed, as we expected, from the Land Fund, and being in debt with large liabilities on public works—to obtain a loan. I make no charge against him. I admit that the Ministry that succeeded us was placed in great difficulty. We were not responsible for it; our estimates and revenue came out in every item except the Land Fund: and, as far as our ordinary expenditure was concerned, we had reduced our expenditure as far as possible. But I do blame the succeeding Government for this: I say they led the country to believe the liabilities were much greater than they really were; and I shall prove this conclusively. We have had referred to by the honourable member for Ellesmere the statement made by the Treasurer, and I shall test it in one or two particulars. And I submit that if I show that there was exaggeration, perhaps on insufficient knowledge—I am not saying that the exaggeration was deliberate at all; I only regret that the figures have not been corrected long ere now—but, if I can show exaggeration in this statement, I think I have a right to claim that the slanders which have been constantly repeated in the House about the extravagance of the Grey Ministry should not be repeated. What did the Treasurer say? You will see in his first Statement—B.—2, page 7—delivered on Tuesday, the 14th October, 1879, he made this statement: He said there was a liability of £2,220,104, and he said, "Included in this is £200,000 for the purchase of Native lands. Of this we have spent already £36,561, and we are engaged to spend up to December next £84,500 more." And in the statement quoted by the honourable member for Ellesmere here it stands, "That the liabilities to be met up to the 31st December, 1879, were—land-purchases, £84,000; and between December and the 30th page 4 June, £80,000: making a total sum of £164,500," Was that statement correct? Sir, I am not aware that the Colony of New Zealand has over repudiated its liabilities; and, as a test of the accuracy of this statement, we will see how much money was paid on these accounts. Instead of £84,500 paid up to December, there was only £41,451, and instead of another £80,000 being paid between December and June, there was only £23,715: the total amount paid, instead of being £164,000—as appears by that statement—was only £65,166. Then, let mo take another statement that was made, and this also appears in the Public Works Statement delivered by the Hon. Mr. Oliver. There is put down as a liability for land-purchases, in Table No. 12, £1,210,802 9s. 6d. It is true the Treasurer stated in the Financial Statement that some of these purchases might be got rid of; but what happened? Was, as said, £957,177 spent on Native lands? No, Sir. There were only dribblets paid year by year; and in 1882 there was actually £600,000 of this amount written off as no liability, and not a word was said about it. And yet, I venture to say, up to this time all in this colony assume that all these liabilities appearing in the book were true liabilities, were undertaken by the colony itself, and that this colony had to find the funds to meet them. They were incorrect. They were—I will not say bogus liabilities, but—liabilities that had no existence except in imagination. And honourable gentlemen can make what they like of that, for the colony was not pledged to buy these Native lands; and Ministers should have known that. Now, see what happened. This beer duty, which had been denounced in 1878 as an improper thing, bad to be imposed in 1879; and along with that there was the property-tax, which taxed everything in addition to land. I am not going to review what happened after that year; but let me say now what next happened when a Liberal Government took office. The Atkinson Government were defeated in 1884. What was their deficit? Their deficit when we took office was £152,400; but it was not proclaimed throughout the colony that their finance was bad. The Grey Government deficit was only £81,000. The deficit when we took office was £152,000, and they stated they saw no way out of the deficit except by increased taxation. We took office, and we did not impose any fresh taxation. On the contrary, we lightened the property-tax for that year. What then happened? We took office; but we saw from the state the colony was in that its finance should be strengthened, and we proposed an increase of the Customs duties in 1885. That was denied us. The party that then supported us met, and urged us to keep in office, though they defeated our Budget. In that we did wrong; we ought to have resigned and cast the responsibility on them. Well, what happened? We had a small surplus in 1886. In 1887 we had a deficit. What was the deficit? On the Consolidated Fund it was only £92,293. That was all the deficit. We then said that the finances of the colony should be strengthened, and that we ought to have additional taxation in order to maintain the credit of the colony. And how. Sir, were we met? We asked for an increase in the Customs duties of only £186,000. We asked, so far as the property-tax was concerned, that there should be a slight graduation in it—that those having over £2,500 should pay at the rato of 1d. in the pound, and that those having under £2,500 should pay at the rate of thirteen-sixteenths of a penny in the pound. But that was denied us; and we west to the country. We proposed, in the face of the country, that there should be a loan of £2,000,000 for ten years, to expend on certain special railway-lines, and that the loan should be what is termed "earmarked"; and we wen denounced for proposing further borrowing, and we were also denounced for proposing increased taxation. What happened? The country believed the Opposition. They believed that they could do without a loan, and that they could do without increased taxation. And, Sir, this House met in 1887; and what did it do? There was no stopping at thirteen-sixteenths of a penny by way of property-tax; it was all made 1d. in the pound: but, instead of putting on increased taxation through the Customs, as should have been done, what happened? There was a loan of a million and there was a further loan amounting to half a million. And yet there was to have been no borrowing! But the Customs taxation was not imposed; and I say that the Opposition deliberately allowed the deficit to mount up to no less a sum at the end of the next financial year than £302,000 to add to the deficit of the previous year—£92,000. And then they had the audacity to say that we were to blame for this new deficit. The only deficit that we were responsible for was £92,000; and I say that, by deliberately resisting the imposition of taxation, and by deceiving the country into the belief that that taxation could be done without, they were to blame for that deficit mounting op as it did. But taxation had, after all, to be imposed, and it was imposed. In 1888 what was imposed? Let it be remembered that we proposed a moderate £186,000. But what did the succeeding Ministry do? It was not merely a fair increase that satisfied them. The duties they put on amounted to nearly £300,000: some say more, but we take that as the amount; and there was an additional three-sixteenths of a penny in the property-tax. What happened? This happened: that the Government which was not to borrow, and which was not to increase taxation, not only increased the taxation to just about double, but borrowed a sum of a million and a half as well. That, Sir, was the non-borrowing Government, and the Government that was to impose no additional taxation. And, then, how did they impose the taxation? They could not carry it with the aid of their own supporters; they had to get the aid of the Opposition. Aye, Sir, and the Opposition of those days thought more of their country, and thought more of making the finances of the colony strong, than of merely party triumph. Because they did page 5 not do as the previous Opposition had done. They did not join hands with the discontents of the Government party and defeat the taxation being imposed. They loyally supported the Treasurer of that day, and they supported him when there was a large section of the Government party voting against the increased taxation. And now we are told that we are to credit the present surplus to the Atkinsonian finance. I admit it, for if the additional Customs duties had not been imposed in 1888 there would have been no surplus. But who imposed them? And, then, let me ask those honourable members who now praise Sir Harry Atkinson's finance as the cause of this surplus, how did they characterize the taxation imposed in 1888 and the financial proposals of the Government then? They were denounced by one honourable member as "stunted Vogelism"; and if honourable members will take the trouble to read Hansard they will see the speech delivered by Sir Harry Atkinson, in which, I think, he was never so correct as when he characterized his own supporters in a way that I would not characterize them. That was how we came to have a surplus; it was by that imposition of taxation. And how does the finance of the colony stand now? Let us look at the new proposals: I have perhaps said enough about the past. There are various points in this Statement that I wish to deal with. There aro one or two little points—one, for example, about debentures. As it has been referred to, let me say two or three words about it. What I understand the Treasurer proposes is to repeal the law which allows a company that pays taxation on its debentures to deduct this sum from the interest paid to debenture-holders. I have been amazed to hear members of this House speak of this proposal, which was carried in 1891 and 1892 by our Land and Income Assessment Acts, as if it were a now proposal. Why, it was the proposal under the property-tax.

An Hon. Member.—No.

Sir R. Stout.—If my honourable friend here will look at the Act of 1886 ho will see that the Property Assessment Act allowed the mortgagor to pay the tax on a mortgage and to deduct it from the mortgagee. So far as these debentures are concerned, the debentures which have to pay 1d. in the pound are debentures that are secured on land: they are mortgages. If they are not secured on land they have simply to pay the income-tax. There is therefore no alteration in the law from what it was under the property-tax. We will take the case of the Manawatu Railway debentures: they are secured on the land of the company. They pay 1d. in the pound, and permission is given the company to deduct that tax from the amount paid to the debenture-holders, so that they can do as they did under the Property Assessment Act of 1886. They may not choose to do s0, but they are not compelled by law to way it themselves. Why should the law be altered? Is it to be supposed for one moment that if the debenture-holder lives in the colony he has not got to pay the tax? And are you going to strike that tax out of the statute-book simply because a man lives in London or in Tasmania? Why, the thing is ridiculous and absurd. Talk about taxing the absentees! this would be an Act to exempt the absentees from taxation. Let me come to another policy that is laid down, and that is the exemption of improvements. Sir, I disagree with that. I think that the exemption of improvements cannot be safely made. Our finances are in such a state that we ought to do all we can to conserve them and to make them strong, and I think it is dangerous for us to give up any of our finance—to give up, at a time of such a crisis in the world outside, a single penny of taxation. We ought to make our taxation and our finances as strong as possible. I have been amused at the want of memory that has been shown by some members of this House. I have heard oven to-night one honourable gentleman got up and denounce this proposal for the exemption of improvements. And he is not the only one by whom this exemption of improvements has been denounced. This gentleman to-night said he does not recognise the justice of the remission. Have those honourable members no memory? Have they forgotten what they did last year? Sir, I am perfectly amazed when I find that all those honourable members who have denounced the exemption of improvements went with the other members who fought for the exemption last year. There were only three members of the Opposition who voted against the exemption of improvements last year.

An Hon. Member.—In 1891.

Sir R. Stout.—No, last year. I am quite right. Honourable members will find that my memory is not defective. If honourable members will turn to Volume 78 of Hansard, pages 535-536, they will see there the division.

An Hon. Member.—What year?

Sir R. Stout.—1892. The division took place on Sir George Grey's motion. How does the matter stand? Why, the only three members of the Opposition who voted against the exemption of improvements were the honourable member for Waikato, the honourable member for Hawke's Bay, and the honourable member for Manukau. They were the only three members of the Opposition who voted against this exemption of improvements. I will give the names alphabetically of those who voted for the exemption and who paired for it: Bruce, Buchanan, Fish, Fisher, Grey, Hall, M. J. S. Mackenzie, Mitchelson, Newman, Rhodes, Rolleston, Shera, Swan, Harkness, Wright; Allen, Duthie, Fergus, Hamlin, G. Hutchison, Lawry, J. Mills, Richardson, Valentine, Wilson. And those honourable members have so far forgotten what they did last year that what they deemed to be a proper thing last year now becomes a very wrong and a most injudicious thing to do this year.

Mr. G. Hutchison.—You will see that I always supported the exemption of all improvements from taxation.

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Sir R. Stout.—I understood the honourable member to say this. He said, "I see written over the taxation of the Government the words 'single tax.'" What makes it a single tax? Is the graduation tax a single tax? Then, the honourable member voted for graduation. Is it the exemption of improvements that constitutes it single tax? Then, the honourable member voted for that. If it is written there, it is in letters which the honourable member has helped to write. I say, further, that I do not think it is fair to make the progressive taxation higher than it is now. I do not believe in the single tax, and I do not believe in any taxation;being so imposed that it amounts to a penalty on any of our colonists. I do not know if honourable members see what the progressive tax really amounts to at present. Do honourable members know that, if 5 per cent, on the capital value be taken as the average return from land, the tax, upon the highest graduated scale under our present land-laws, amounts to an impost of 4s. 7d. in the pound, and that if this additional tax is put on it will amount to 5s. in the pound? I say that is a thoroughly penal tax. However, I am in favour of the principle of graduation of the progressive taxation. I believe it is based on principles which can be defended economically. In 1887 I told the largo landowners what they might expect; and if honourable members choose to refer to past speeches they will see what I said. I said, If you do not choose to accept this small progressive rate of three-sixteenths of a penny in the pound on all property over £2,500,—you denounce it on the platform and in the Conservative Press,—the time may come when you will regret not having accepted such a moderate proposal." I told them the ago was in favour of this progressive taxation, and that, if they did not accept this small modicum of justice in dealing with taxation, they would get something worse. I hope they are content now. The Opposition dare not go to the country and say they are in favour of proportional as opposed to progressive taxation. I say that progressive taxation can be defended, and I say, further, that if honourable members will choose to read the writings of some of our ablest economists they will see that perhaps there are as many of our modern economists now who are in favour of progressive taxation as there are in favour of what is termed proportional taxation. In the past there have been most able men in its favour; and one of the latest books on public finance is written by Professor Bastable, of Dublin, who says this: "This system has secured the adhesion of some eminent authorities," Read also what G. Cohn, a Prussian economist, and Sax, an Austrian economist, say in defence of progressive taxation. And take Walker, an eminent American economist, and Seligman; and if you will refer back to what J. B. Say and Gamier have said you will see that all these writers defend progressive taxation. If taxation is to be founded on ability, or to be founded on equality of sacrifice, then progressive taxation is defensible, and is right and proper, and no other system of taxation is proper or is right. I therefor say that, so far as progressive taxation is concerned, it can be defended from the purest economical standpoint, as well as from what may be termed the standpoint of justice; and, if so, I feel sure this colony is not going back on that. At the same time, I see a great danger in it. People do not see, when it is put on the capital sum, what that really means on the income, and they do not see that by the slightest addition—of a farthing or the eighth of a penny—the taxation might be made so burdensome as to stop enterprise, and a portion of our colonists might fee that they were penalised. I do not think any Government should do that. But I believe it will tend to stop the accretion of large estates. It will do that undoubtedly, whilst it will not interfere with saving. And, then, I have heard it said, "Oh I but the land-settlers are being more heavily burdened by taxation than any class of the community," I deny that. I say that, practically speaking, the manufacturers are paying as much as the landed people. Let so see what a settler has to pay on his income. The small farmer has practically only to pay on his lana. All those things that go to make his income—his improvements, his stock, his cattle, his implements—are exempt, and, so far as the small farmer is to be compared with the small manufacturer, the small farmer has the best of the bargain; and I do not say it is improper. But I do not allow the notion that he is unjustly treated by this new form of taxation. The other question I come to is this: Some honourable members have asked that we should have a remission of taxation. It has been said that no State ought to impose any taxation except for the necessities of the people. I admit this. But, Sir, what are the necessities? I say the necessities of the people include, if we can, the payment of the sinking fund for our debt. And I say our colony is not sound in its finance if it does not attempt to pay some sinking fund, so that future generations should not be burdened with our debts. No doubt there is some excuse for our railway debt, because succeeding generations will have handed over to them a valuable property; bat the railways cannot be said to represent one-half our debt. Take what has been spent for roads, water-races, in war, et cetera, and there is still an enormous amount of our debt for which we can leave succeeding generations practically nothing. How is a sinking fund to be made? We have by conversion schemes abolished sinking funds. I do not say that is wrong. On the contrary, where a nation is borrowing, it is not necessary, or, perhaps, good finance, to have a sinking fund. But we ought now to begin, if we can, to have a sinking fund. How can we do so? By taking the sum that the Consolidated Fund will allow to be spent in reproductive works; and all political economists will say that is a true means of creating a sinking fund. I can refer honourable members to Professor Adams's book on Public Debts, and to various other books on public finance page 7 and political economy, in which this subject is threshed out. If this colony can afford, out of its Consolidated Fund, to set apart £100,000 or £200,000 a year for public-works expenditure, it is doing justice to future generations, by providing a sinking fund practically to enable them to pay off the debt; because you are practically creating an asset which will give them some money to pay interest on the loan, and that is as true a sinking fund as if you had the sum invested by trustees in any kind of bonds. Now, let me say one word further about what the Government has done in Liberal finance. Sir, there have been sneers cast about the increase of our public debt. What has happened? The Government has actually paid off £200,000 a year of the public debt. It paid oft £100,000 last year and the year before from revenue, and it paid £100,000 of the conversion funds, to help to wipe off our floating debt. And it has paid £230,000 into our Public Works Fund from our consolidated revenue during last year. So that honourable members will see that, practically, our debt has been reduced by no less a sum than £430,000 in two years. I say that is a handsome contribution, which no Government, I think, for the last twenty years has been able to make. Now, Sir, what are the proposals which the Opposition wish to submit to the country? Unfortunately, not two of them agree; but the only kind of definite proposal I have heard has been this; that we are to borrow a million and a half, spread it over ten years, and that of this there shall only be something like £350,000 spent on railways. £1,150,000 is to be spent on roads throughout New Zealand, and this £1,150,000, therefore, will return no interest to the Consolidated Fund. That is the proposal. Well, Sir, is that the proposal which the Opposition wish to go to the country with? What is their other proposal? They talk about a reduction of taxation; I think the colony cannot afford to reduce its taxation. Is their proposal, then, to borrow? Surely it is a peculiar proposal for the members of the Opposition to make. They got into office in 1887 on the distinct pledge of no borrowing, and they borrowed a million and a half; and now, after six years, the next proposal is to borrow another million and a half. What other proposal have they to submit to the country? Are they, as a party, going to the country without a policy and a platform? If they have a policy and platform, surely this is the time to enunciate it, in order that the people of the country may judge between the two parties when they go to a general election. Now I leave that, and go on to set forward some things that I think it will be absolutely necessary for the colony to do. Sir, I say that one of the rocks ahead of our colony at present is the question of local taxation and local finance. Our wants are increasing, and our wants will increase. We cannot stop them. If we are to have health in our cities our local taxation will increase, and as our country gets older, and as the struggle for life gets keener, we cannot expect to see our hospital and charitable-aid vote reduced. What is to happen? This methed of paying subsidies cannot always continue, for, just as the needs of the General Government increase, so will there always be an attempt by the General Government to shift the burden from the General Government on to the local bodies. We ought to have some permanent endowments to enable these local bodies to live; and in the Hospitals and Charitable Institutions Act of 1885, which I had the honour of introducing, I had a provision that there should be set apart a quarter of a million acres as a permanent endowment for these bodies. I do not claim any originality for this. In years gone by it was advocated by the Hon. Mr. Bowen and by the Hon. Mr. Stevens. At one time I was against it, because I did not think the time was ripe for setting it apart; but I believe the time is ripe now, and I believe we should set apart a million acres as an endowment for hospitals and charitable aid. I would have it on real perpetual lease, without any right of purchase whatever, and the rent adjusted every twenty-one or thirty years. I would have a Board to manage this, with the aid of the Land Boards, and I would go further and propose that all the income got from this land should be divided not according to the rates of the Boards, but according to the population in the various districts. This was a suggestion made by the honourable member for the Buller some years ago. Ho urged it very strongly. I did not agree with him then. I perfectly agree with him now, and will state my reason why. We find that, unfortunately, such is our social life that the poor congregate together; if you go to any borough you will find almost the whole of the poor living together; and therefore, if you distribute your income according to the rates raised, you practically arc aiding the rich, and not the poor. You ought, I believe, to distribute this endowment per head, and this would enormously relieve your local finance. I believe that in a few years this endowment might be made to yield £30,000 if a million acres were set aside. That would be an enormous endowment for the local bodies. And you must have some permanence in your local finance. If subsidies are to be continued the Government will have to make them larger for the outlying districts. In the case of those districts which have small rating-areas, from the fact of Crown land or Native land being there, they will have to make the subsidies double the amounts paid to well-settled districts. Now, if that scheme were adopted local finance would be strengthened, and you would have carried out further the principle that the State should get the control over, at all events, some of its lands. I deplore that this House has destroyed the system of perpetual lease. I do not believe in what is termed the eternal lease. If I had had my own way there would not have been a single acre of land sold at all. I have been called a land-nationaliser. I had the honour of being president of what was termed the Land Nationalist Association of New Zealand. And what were our objects? We did not propose to deal with land that was sold. Our objects page 8 were three, stated in our programme: First, to prevent the further alienation of the Crown lands: second, to advocate a system of leasing in lieu thereof; and third, to direct attention to the question of landtenure. Sir, from that programme I do not vary now. I do not blame the Minister of Lands for having put the Land Bill in its present state. What was said throughout the colony? The Opposition took every opportunity they could get of preaching to the country settlers that if they allowed perpetual lease it meant taking all their freeholds. They meant to set country against town, and raised such a cry that actually the small farmers were led to believe that if the perpetual-lease system were adopted they would be ruined, and their lands taken from them. But I say the small farmers will be moro injured by the land being sold than any one else. The only chance of lightening taxation, I repeat, is in the State having large reserves of land. It is only in England and in the United States that this system of wholly parting with the public estate has been adopted. It does not exist in many of the countries of Europe. In Prussia, in Austria, even in Russia, for example, the system has not been adopted. You will find that it has only been adopted in England, in the new colonies, and in the United States of America. If I might be allowed to utter a warning, I would say this: that those very people who have urged on this freehold system will, I believe, live to regret it; for, depend upon it, the time is coming when not only will there be no more freehold, but it will be impossible to prevent the State from controlling the use and holding of land. Now that I have dealt with that subject, I come to another question which I believe will have to be faced, and that is this railway question. I regret that, so far as the Financial Statement is concerned, it does not go far enough. I believe the Government ought to have the entire control of the railways, and I have no fear whatever of this bogey called "political control." It has been stated that I was in favour of the railways being managed by a Board. I deny it. The Bill which was introduced in 1887 contained no provision for preventing responsible control by Ministry and Parliament over the railways. What did that Bill provide for? It provided for Boards of Advice—one in Auckland, one in Wellington, one in Otago, and another in Canterbury. These Boards of Advice were to be elective. They were to be elected by Chambers of Commerce, elected by the counties, elected by Mayors and Municipalities; and those Boards were to meet at certain times in the year, and to advise and hear complaints, and to deal with railway matters in the form of advice. But the Minister was to be responsible to Parliament, and Parliament was to control the railways. Why should not such control be in the hands of Parliament? Why should you hand over from fifteen to twenty millions' worth of assets practically to an irresponsible Board? Why, we have in the past honoured those of our pioneers who fought for the system of Responsible Government being given to the colonies; and now having got it, we are to show ourselves incompetent to manage our own affairs, by handing over to these irresponsible Commissioners the control of our railways. It should not be admitted that the system of Responsible Government has failed. We have not entirely done that, but we have admitted that, so far as this democracy is concerned, it is unable to manage its own affairs.

Mr. Buckland,—That is quite right.

Sir R. Stout.—Well, Sir, I am exceedingly sorry that that honourable gentleman should rate himself so low. He is a member of Parliament; and can it be said that he is unable to give advice on questions of railway managment? Can it be said that ho is not able to give that advice without being unfairly biassed in dealing with railway management? I hope the honourable member has a higher opinion of his own ability and of his own integrity than to say that ho is unfit to give advice on the question. Now, let us look at this railway question. I understand the bogey is that these railways are to be subject to political control. Sir, this is a most amusing statement. Honourable members are complaining of what is happening all over the world. Do they know that the railways that belong to private people in the United States are now being controlled politically—that there is a Railway Commission appointed by the United States Government who control these private lines? Do they know what those who owned private lines desired? Why, if honourable members would refer to speeches delivered in the Senate—if they look up and read some very notable speeches made by Senator Morgan, and by the late Senator Leland Stanford in the Senate of the United States, they will see that they contended that the owners had the right to fix the rates and wages as they pleased, and that they could charge one town one rate and another another, and one manufacturer one rate and another another. And what answer is there to be to this if there is to be no political control? If honourable members will look to England they will see that the Board of Trade was for months considering the question of millions of rates—actually millions of rates. There were stated to be a hundred million rates; and the result was that their maximum was fixed. And even now the traders are calling out for what? For further control; not for less control, but for further control. So that, whilst we in New Zealand are parting with the control of our railways; in the United States, and in England also they admit that the State should control the private lines. They are controlling them as regards rates; they are controlling them in the pay of their servants; they aro controlling the hours that their servants shall work, then, this cry about political control? It is a recognised thing, so far as the railways are concerned. It has been laid down by one of the best writers on this subject; and he writes very strongly in favour of the private owners of railways—I mean Mr. Acworth. He says this:— page 9

"That the railway problem, as they call it in America, is with us at this moment in an acute form is sufficiently evident. . . . That the State will be forced to interfere moro than it has done in the past with railway management may be taken for granted."

And he says, in his new work "The Railways and the Traders," "Where reduced rates means taxation, the matter is evidently one of practical politics." And he is in favour of private ownership of railways. I go further, and I say this: that if you give them up to Commissioners you admit that the State is unfit to touch railway construction, because it is not the duty of the State to construct the railways unless it be to see that no injustice is done to any part of the colony. Now, Sir, what are we to have instead? We are to have this sort of bureaucracy set up to manage the railways. Well, this has been tried before. This system of management without the control of Parliament has been tried, and it has failed. If honourable gentlemen will only take the trouble to refer to the history of the British Constitution they will get a wonderful example of it. For example, when the first Poor-law Board was established, that was not to be under political control, and the management of that became an utter failure: and, remember, it had most able members, the late Mr. Chadwick, and the lato Sir George Lewis, perhaps the ablest officials in England. Parliament had to do this: It had to take over the control, so that there should be a Ministry responsible to Parliament for the administration. And I say we see this British form of Responsible Government in the Admiralty, we see it in military matters, we see it in connection with education, and we see it in reference to the Board of Trade. So far, therefore, as this system of Boards is concerned, a free country where you can get an example of it is Prussia, and it is acknowledged to have failed there. In a free nation you must have some one responsible to Parliament, and you must have political control. It would take too long to read the number of extracts I have here, dealing with this question. I will rather refer honourable members to Bagehot's "English Constitution," where they will see that ho points out clearly that this system of attempting to manage any Government department by bureaucracy, without a Minister responsible to Parliament, has only ended, and can only end, in failure. And I should like to know where it has ever succeeded. Can honourable members not see, so far as the railways are concerned, that they have never yet been managed by what are called experts? Take the railways of France: how were they managed? Their system did not work. They had to introduce a Board of Management of commercial men who knew practically nothing about the details of railway management. Thon, if you take the management of the railways in America you will find that the management of the private companies has not been by experts, or traffic managers, or engineers, but by businessmen. And if you have Responsible Government you get this by a change of Ministry. Wherever you get the system of bureaucracy the system is a failure. It has been said—it appears in one of the extracts I have mentioned, and which I shall read, Sir; it shows the immense advantage of a change of Ministry,—

"The immense importance of such a fresh mind is greatest in a country where business changes most. A dead, inactive, agricultural country may bo governed by an unalterable bureau for years and years, and no harm come of it. If a wise man arranged the bureau rightly in the beginning, it may run rightly a long time. But if the country be a progressive, eager, changing one, soon the bureau will either cramp improvement or be destroyed itself."

In fact, Sir, I might read extract after extract in which it has been proved conclusively that this system will fail; and, if honourable members also refer to Hearn's book on the Government of England they will see the same thing—that if you are to have Responsible Government carried on at all you must have all Government departments responsible to a Minister, who is responsible to Parliament: if you have not that, you will have bad management, and it will end in injuring the country in which they are thus managed. Further, I should like to know what it is that people see in political control. Will any honourable member venture to say that the rates on our railways are to be wholly controlled by our Commissioners? Will any one say that our railway servants are not to be politically controlled? And I may say, further, that so far as the appointment of Civil servants is concerned, I am of opinion that Civil servants should be nominated, as in the naval service in the United States, by each member of the House in turn, so that there could be no such thing as political "colour" influencing such appointments. However, the Parliament in 1886 refused to sanction that proposal, which was in my Civil Service Reform Bill of that year, but accepted the principle of competition. We can apply this latter system to cadets for employment in the Railway Department. Let us, if you please, also have a Board to which the railway servants can appeal when they consider that they have been improperly dealt with. You will, therefore, have no such thing as political interference with the railway servants. But I want to know what is the meaning of this thing called political control. I ask honourable members not to use this phrase "political" control until they can define what it means. I go further and say, and again repeat, that this system of handing over the railways to an irresponsible Board means this: that we aro afraid of ourselves; that we admit that Responsible Government has failed; and we go further and say, not only has Responsible Government failed, but the system of democratic government has failed. Now, I have dealt with all the points in the Statement that I think need referring to. I now wish, before concluding, to say a few words about what may be page 10 termed collateral matters. There has been some reference, for example, to the Cheviot Estate. Well, I cannot understand honourable members. This principle upon which the Cheviot Estate has been purchased has been in our laws for years. It has been in existence since 1879. What is the provision? Sir, it is a copy from an American Act, which provides this: that if any person rates his property too low the State shall have the right to take it over, at his valuation. Formerly it used to be with 10 per cent, added: now that 10 per cent, is abolished. The whole question turns upon this: Is the valuation to be upheld or not? I say that, if the Cheviot Estate was not to be taken over after what occurred regarding its valuation, then that provision of the Act should be wiped out. As to what is to be done with the estate when taken over, that is a different matter—it is entirely a question of finance. The Government, I understand, say that they cannot afford to have the whole land reserved for leasing. They must get some money from it, to repay the advance they have made against the land; therefore, they must sell some of it for cash: and some honourable members now admit that.

An Hon. Member.—I do not agree with that.

Sir R. Stout,—If honourable members do not agree with that, then they should have insisted in the Land Bill on certain portions of our Crown lands not being sold at all. They cannot complain of this proposal, with the present Land Act on the statute-book. I think the Ministry have acted fairly when they are willing to set aside two-thirds for leasing, and only one-third to be sold for cash. I have dealt with the general Financial Statement, and I wish now to say one or two words about two things further. A great deal of reference has been made to the platform of the Government, and particularly to what has been termed "the new Liberalism "—the labour Bills, et cetera. Well, Sir, how do we stand? What is the meaning of this cry of "new Liberalism"? I have nothing to say against the correctness of the term "new Liberalism." Liberalism was not the same fifty years ago, not the same thirty years ago, that it is now. The world has changed. We have come into what may be termed a new era, and, as has been well said, "new occasions teach new duties." The old Liberalism was a fight for individualism—for the right of the individual to do as he liked with himself and his own. It was a fight against the power of the Crown and of the Church. The Government was looked upon as the enemy of the State. That is all changed. People are now beginning to see that the State may be made to do useful work, and are beginning to see that the organization of the State can be used for the uplifting of the people. That, Sir, is the new Liberalism. The old Liberalism insisted upon maintaining the individual against the State, and upon limiting the right of the State to interfere with individual action, except to the smallest possible extent. Sir, there was a great deal to be admired in the old Liberalism; the old Liberalism did much for the individual. But we cannot ignore the spirit of the age; we cannot ignore the trend of public opinion; and I warn those who think that we ought to be content with individualism, with the doctrine of laissez faire preached of old by political economy, to just look at the political economists of the day. Read the works of the late Cliffe Leslie, of Professor Ingram, of Professor Marshall, or Professor Sidgwick. They have all come to this conclusion: that the laissez faire doctrine is defective. I believe in what the late Arnold Toynbee said,—

"We have not abandoned our old belief in liberty, justice, and self-help, but we say under certain conditions the people cannot help themselves, and then they should be helped by the State, representing the entire people. Three conditions are necessary,—
"(1.)It must be of primary social importance.
" (2.)It must be practicable.
"(3.)It must not diminish self-reliance."

But, Sir, I am not aware that any of the proposals made by the Liberals of New Zealand diminish self-reliance. Let us take this question of co-operative works. Why, Sir, instead of injuring, it will afford the strongest help to self-reliance, for this reason: The men can carry on the work themselves, seeing that they have ceased to be the servants of contractors, and that they have practically become their own masters. Surely that is teaching them sell-reliance. And, if the co-operative contracts should have defects from some points of view, I think it would be a cheap education if you can teach our men to be self-reliant, and to rise to something higher than being mere labourers for another man, because there is certainly an element of serfdom in it when a man is not his own master.

An Hon. Member.—How can he rise to this state?

Sir R. Stout.—He becomes a master himself. Under this condition he is himself a master. He is a contractor, not a mere employé; and I believe he will have more self-reliance in this condition than if he merely served a master. He becomes a contractor. Such is the beginning of government. These germs of self-reliance develop into self-control. But it is an experiment, I submit, that ought to be tried. I ask honourable members to gee whither this trends. It has been said that the propriety or not of a charge of "socialism" depends entirely on how we define the term. I assume that the term means an increase of the State's functions, which is necessary as much for the elevation of the individual himself as anything else in the world. It has been said of Nature by the poet,—

So careful of the typo she seems,
So careless of the single life.

So far as society is concerned, the whole trend is to the preservation of the individual life. It is a fight against nature. What is the meaning of education, and of the extension of our efforts for public health, but a struggle to page 11 save the weak, and to preserve the individual life, and to lift humanity as a whole to a higher life? Take one illustration: We hear a cry for the abolition of party government. That is socialism. It means that individual competition should cease, and that we are to have no longer a struggle for existence between parties-that we are to have a socialistic unity instead. These gentlemen can no longer believe in this excessive individualism. Those who advocate the abandonment of party are unconsciously falling in with this socialistic spirit of the age. How is this to be met? I appeal to the wise men of this House not to attempt to oppose this feeling by senseless resistance. It is our duty as statesmen to try to see how the spirit of the age is trending, and to direct it into the proper channels. Let them show in dealing with measures before this House that, in spite of party, they can look at them entirely for the good of the country. If they did that we should have point after point of the Financial Statement taken up and dealt with on its merits. We should have the merits dealt with without personal recriminations. I ask honourable members, and I appeal to this House, if they desire to deal with this in the spirit of the age, to rise above party, to see that we do not have any taint of political feeling or personal feeling rankling in our minds in the discussion of the various matters that we have to deal with. Let me show the other two things we should keep in view, and what, perhaps, members on this side of the House have not sufficiently considered. I say that the spirit of the age is such that you must increase your State functions. I say that we have not yet got to the limit of the State's functions, I say that the State has to do a great deal more than it has done in the past. It has got to give more education, to look more after public health, to look more after social reforms And if this be so, we must sec that we have the best available servants for our purpose, and treat them well. If we are going to extend our State functions we must have the highest talent we can get to carry on the functions of the State. We must see that our Ministers are men of the highest qualifications and character. We must see that they are properly paid, and not dealt with in a grudging spirit; and we should see that they are not overworked, like Sir Harry Atkinson and Mr. Ballance, who were worried to death and died poor. I say that is a disgrace to our democracy, and I exceedingly regret that in a former Parliament Ministers' salaries were so much reduced. I go further, and I especially appeal to the members on this sido of the House that they will have to pay their Civil servants better-to give them a good tenure of office. And, so far as the administration of justice is concerned, we must have also good subordinate Judges to deal with cases especially affecting the poor. We must attract to our Civil Service our best men; and you will have to look upon them not as men to be abused, or to have accusations continually made against them, but as men to be respected. You will have to put men in the Civil Service the best, all round, that this colony can produce, and to pay them well, and also to do your best to create a healthy public opinion in their favour. If this system of co-operative works is to extend you will have to secure the best engineers, the best inspectors; because, if you have inefficient engineers, not men of high character, and if you have not inspectors who can be trusted—for upon them the fixing of the prices depends—then your co-operative works will prove a huge failure. Unfortunately, some of us who belong to the Liberal side of the House have not sufficiently considered, or have not seen, what is involved in this extension of State functions. And now, Sir, if we keep our finance strong; if we go on carefully with our public works, and lay down some rule as to our local finance and local taxation; if we make our Civil servants a credit to us and a credit to this colony, and slowly and gradually increase our State functions, I believe there is a bright future for us. We must go forward in a hopeful spirit, and not like those who go forward imagining that some great calamity is about to fall upon them. Sir, we have a noble opportunity. We stand in many ways in the front rank of nations, and for this reason: that we are not encumbered by privileges, we are not encumbered by prejudices, and we are therefore free to make experiments. I ask the House to make these experiments. I ask the House to believe that these experiments may be made. I ask the House to think that, even if these experiments fail, still it is our duty to make them. What are we here for? We are not here merely to create a colony where there shall be wealth. Sir, we are here to build up a colony where the great body of its men and women shall be physically strong, intellectually great, and shall be of the highest moral character. What will make the name of this colony great? It will be its breed of men and women. We must use the great power of the State to accomplish these things. The honourable gentleman opposite me may sneer, and there are some honourable members who think that such is not the function of the State. I say it is known now to be the function of the State to look after the race. Are we to have the scenes that have occurred in the older countries re-enacted here? Is our race to become as the races of the old countries are in the slums of the great cities and the factory towns? Are we to see established in this colony men stunted in growth, vicious, and dying off at an enormous rate? Are we to see these things without trying to arrest them?—and you cannot do that by leaving them to individual competition. That has failed at Home, and the work is only to be accomplished by organized action. We have not only to bo careful of the type, but we must also be careful of single lives, and I believe we can do that without interfering with individual freedom. I do not wish to see that interfered with in the slightest degree, and I believe that by State action you can give more freedom, and page 12 so educate your race that it shall rise to a position as high as that of any race in the world. And how is it to be done? Not by personal re-criminations amongst ourselves; not by hunting up all sorts of small things from the past to bring them against Ministers or other members; but it is by so dealing with every measure that comes before us as to try if we cannot make it better—to look at it impartially, and see where we can do something to help forward the race-If we so conduct ourselves, and so deal with the measures that are laid before us, I hope and I believe that our social experiments in New Zealand will be beard of not only in the neighbouring colonies but through out the world, and people will learn that thaw is a vigour in our race, and a vigour in our colony, such that from us others may well take a lesson and an example.

Samuel Costall, Government Printer, Wellinllton.