The Finances of New Zealand.

For years past our ordinary expenditure has exceeded income, and of late the annual deficit has increased so rapidly that it now amounts to hundreds of thousands of pounds. The causes of this are so apparent, that hardly anyone who is not wilfully blind can fail to recognise them. With a total population not exceeding that of some of the principal towns in England, we have been cursed with the most complicated and costly series of Governments in the whole world. To gain an approximate idea of the extravagance we have been supporting let any unprejudiced man pay a visit to our Provincial Council of Otago; let him run over in his mind the list of officers and salaries that institution implies, with its Superintendent, Executive, Speaker, Clerks, Messengers, Sergeant-at-arms, and the whole paraphernalia. Let him reflect that the same deplorable exhibition of incapacity, and the same outrageous waste, go on in half-a-dozen similar assemblies; let him pass in review the limitless series of jobs that have been perpetrated here; let him look at the Post Office, costing from £35,000 to £40,000, when a building as well suited for that or any other purpose could have been erected for a tenth part of the money; let him look at the Exhibition Buildings costing £20,000 or more, and presenting the ridiculous spectacle of a permanent building put up for a temporary purpose; let him then cast his eye to the South and observe a railway constructed at a cost of £367,168, for the ordinary requirements of which a few donkey-carts might suffice; let him remark the jetty costing £40,000 at which the only ship that ever discharged was the one conveying the timber to make the approaches to it. When he has thus, perhaps, in some measure realised the folly displayed by our own Provincial Governments, let him imagine the same sort of thing going in the other Provincial Councils, whilst over all there has been a General Government outstripping every one of its subordinates in the dignified magnitude of its extravagance. When he has done this, it will cease to be a matter of surprise that our debt, as compared with population, exceeds that of every nation under heaven, and that our current expenditure should exceed income by nearly 50 per cent.

Why the people of this Colony should have allowed so pernicious a system to grow up, why they should acquiesce in a state of things so fraught with destruction, may prove hereafter an interesting question to the student of political philosophy. And it will probably be found that the true cause of this strange apathy is, that instead of additional taxes being imposed to supply the amounts wasted by Government, the annual deficits have been made good out of borrowed money. When bad or wasteful Government is brought home to the people, as it eventually page 2 must be in the shape of grinding taxation, an outcry is raised and measures adopted for enforcing economy. But in our case, instead of extravagance being associated with a vision of the stern tax collector, the systematic borrowing enables Government to present itself for a time in the shape of a beneficent fairy, with work for the unemployed, billets for the obedient, and lucrative contracts for those who may best deserve them. The strongest incentive to exercise a vigilant supervision over its proceedings is removed, and so long as the people can be persuaded that the pleasant system of artificial prosperity can be maintained, it is vain to expect them to interest themselves; for the majority of mankind care little about abstract ideas, and rarely resent bad government until it manifests itself in some tangible present grievance.

It is related of Hudson, the great railway king, that when elected chairman of directors of the Eastern Counties Railway, he issued instructions to the head of the financial department to "make things pleasant." This making things pleasant consisted simply in paying dividends out of capital, and for a time, no doubt, answered its purpose. Indeed the only objection to such a system was that it would not last for ever—otherwise it would have been perfect. But a time inexorably came, when the process, pleasant as it was, could no longer be continued, when the unlucky shareholders deprived of the customary dividend, were forced to recognise the existence of an enormous deficit.

The system adopted by the great railway king, is much the same as our Colonial politicians seem bent on following. Year after year things are made pleasant to the supporters of the Government, to our huge army of officials, to constituencies returning pliant members of Assembly, and the deficit is replaced by borrowing. Public works are started involving the expenditure of thousands, or tens of thousands, not on the ground of their being legitimately wanted, or likely to remunerate, but simply for the advantage to local traders of the expenditure of money in their immediate neighbourhood. The entire community with one voice cries out to the Government "Give, give, give. Spend money amongst us, no matter how, or for what purpose. Distribute billets, silence remonstrance, and buy off opposition as you will. All we ask is—spend, but do not tax us."

The results of adopting this system may be readily conceived. It gives possession of power to those who will use it with the least scruple. Instead of the Government being held accountable for enforcing economy or proper administration, its very tenure of office is made to depend upon the extent of its extravagance. Our practice of supplying deficits in revenue out of borrowed capital, and of incurring further debt for the reckless construction of public works, reverses the proper condition of things, and makes a government that is dragging the country to ruin, seem to the ignorant to be conducting it along the very path to prosperity.

When persons engaged in commercial avocations find themselves in a position of unexpected difficulty, when trade falls off and there is a simultaneous decline in the rate of profit, there are generally two alternatives, and the style of man may be fairly estimated by that which he selects. The page 3 one is to countermand orders, cease adding to his liabilities; and, above all, cut down expenses to the lowest possible figure. The other is to put on a bold face, launch out, order freely, and affect the appearance of doing well by disregarding every suggestion of prudence or economy. The results of the latter course are not difficult to foresee; and this is the policy to which in the crisis of our fate the Government has committed us.

The most alarming feature of the case is that the evil tends so rapidly to intensify itself. The bubble can only be kept from bursting by blowing it larger. Accustomed as our population has become to revel in false prosperity, any Government that awakened them to a sense of their true position might be reproached as the cause of misfortunes to which it only drew attention. And so we find that to grasp the nettle boldly, to inquire into, and avow, our real financial situation, requires more courage than any Colonial politician apparently possesses.

As illustrative of this we may refer to the action taken by the Stafford party during their recent but brief tenure of power. In making his ministerial statement Mr Stafford said—"The Government would strenuously endeavor to bring the ordinary expenditure within the ordinary revenue of the Colony, and thus avoid increasing the floating debt"—thereby admitting that expenditure exceeded income, and that great efforts would be requisite to establish an equilibrium. The Stafford party, however, were soon driven from office, and assuming that there was any real intention to carry out the programme laid down by their chief, few can be surprised at their speedy expulsion. But whilst giving them credit for a wish to do something towards reducing our preposterous expenditure, it is deeply to be regretted that a more determined stand was not made two years ago when the Financial Scheme was laid before the Assembly. By that means a fatal impulse was given alike to the reckless expenditure on public works and to the policy of supplementing deficits out of borrowed capital. Looking at the constitution of Assembly, at the pressure put on members by their constituencies, and on the ministry by members, it was a foregone conclusion that the money borrowed would be misapplied, and that no one could long retain the post of power without yielding to demands for which there was no justification. One or two individual members of the Opposition, it is true, spoke out boldly and nobly, and their conduct in doing so, when unsupported by the strength of their party, entitles them to the gratitude of every true friend of New Zealand.

It was at this meeting of the Assembly that the practice of defraying military and other expenses out of borrowed money was adopted us portion of our avowed policy. In the Financial Statement of that year the Colonial Treasurer remarked,—

"It is useless for us to attempt to disguise from ourselves that when in 1863 we incurred an enormous loan for war purposes—which loan has been from time to time increased by other expenditure of the same nature—we did that which put it utterly beyond the power of the Colony in the present generation to continue to pay interest upon those loans, and yet defray out of its revenue large war expenditure."

"You will not be surprised, therefore, after what I have already stated upon the subject of Defence expenditure, to hear that the Government consider that the Colony is not justified, even if it were able to do so, in regarding the item of Defence Expenditure as one to be defrayed out of the ordinary revenue."

"We therefore propose to do that which we believe a large section of the public men of the Colony regret was not done four years ago—we intend to ask for a Permanent Appropriation for Defence Purposes of £180,000 for the first year, £160,000 for the second year, and £150,000 for the three succeeding years, the money to be borrowed from time to time, if required, and as required."

This recommendation was adopted, and one of the largest items of our permanent expenditure is thus transferred from the accounts of the Consolidated Fund and charged against one maintained out of borrowed money.

In the accounts for the year ending June, 1870, the revenue appears as £1,018,360; but the expenditure, including liabilities of the preceding year amounted to over a million and a-half. The actual figures were, £1,593,182; but from this it may perhaps be fair to deduct something on account of the Reserve Account and Incidental Receipts not included in the £1,018,360 of revenue. Still the deficit was very large, necessitating the issue of £365,000 worth of Treasury Bills, as against, £53,650 redeemed, besides a sum as £132,456, entered as accruing from transfers;—that is presumably, transfers from funds arising from borrowed money.

With the apparent exception of the Telegraph, therefore, we see that every individual item showed a diminution, and the entire discrepancy between the two years amounted to no less than £111,986 14s 9d. As regards the telegraph to which it will be necessary to refer more particularly by and bye, it may be here mentioned that like the Post Office it is a losing department, and that the enhanced receipts of this particular year are more than counterbalanced by increased expenses.

After the £936,188 which is the real amount of revenue for the period we are considering, come a variety of entries by means of which the public income is apparently raised from that sum to £1,201,832, full particulars of which will be found in the detailed statement annexed hereto. I do not expect my readers to understand all these items, but some of them, I think, they will understand very clearly. For instance, they will see that £50,000 worth of Treasury Bills are put down in the same way as if that amount was derived from actual revenue. And then they may remark £53,098 18s 4d entered as transferred from Special Fund. Now this Special Fund is the proceeds of loans, so here are two instances of borrowed money being treated like permanent income.

In regard to the other entries by means of which the receipts are swollen from £936,188 to £1,201,832, it is obvious that being mixed up with the Treasury Bills and transfers from the Special Fund we find them in very suspicious company, but if it is possible for the Government to manufacture so large an amount of money without having recourse either to borrowing or taxation, it is a pity they do not enlarge their machinery and supply the whole revenue by the same means.

Extract from Public Accounts of the Government of New Zealand, 1870-71.—B. NO. 1, Page X.

Revenue for the year ending 30th June, 1871.

Customs	£745,473	7	3
Stamps	55,621	1	5
Post Office	43,086	15	0
Telegraph	22,545	16	4
Judicial Fines and Fees	31,099	18	8
Miscellaneous Fees	28,805	2	9
Incidental Receipts	9,556	4	5
	936,188	5	10
Credit in reduction of Expenditure	24,249	9	6
Treasury Bills	50,000	0	0
Sinking Fund released	5,348	0	0
Recoveries on Account of Payments made from Revenue of previous year	53,719	12	6
Recoveries from Provinces in respect of balances at debit of Accounts under "Public Revenues Act 1867"	49,483	9	0
Recoveries from Provinces in respect of balances at debit of Accounts under Payment to Provinces Act 1870"	12,560	18	4
Balance of Reserve Account 1869-70, returned to Revenue	17,184	0	7
Transfers from Special Fund, under Section 7 of "Appropriation Act 1870"	53,098	18	4
Carried foward	£1,201,832	14	1page 6
Brought forward	£1,201,832	14	1
Advances for Public Works repaid	9,073	6	7
Advances from Special Fund in London	66,295	6	6
Deficiency Bill	60,000	0	0
Treasury Bills renewed	200,000	0	0
	1,537,201	7	2
June 30, 1870—Cash on hand at commencement of year	55,720	17	3
	£1,592,922	4	5

The study of figures and statistics is proverbially so dry that it is hardly to be wondered the general reader should regard them with aversion; but, in dealing with these subjects, one occosionally meets with an amusing incident, or a mouthful of humbug of such exceptionally good quality as to afford an agreeable relief after the dreary monotony of statistical facts. Such a one is to be found in the preamble of the page 7 Appropriation Act, under which the £50,000 worth of Treasury Bills were issued, and £53,098 transferred from the fund of borrowed money to the accounts of the Consolidated Fund. The object of this Bill was to provide for the payment of large amounts of ordinary expenditure out of borrowed capital, and generally make ourselves comfortable at the expense of other people. Considering these circumstances, I think it will be admitted that the subject was led up to in a very elaborate and diplomatic manner, for the preamble ran as follows :—

"Most Gracious Sovereign—

"We, your Majesty's most dutiful and loyal subjects in the House of Representatives in New Zealand in Parliament assembled, towards making good the supply which we have cheerfully granted to your Majesty in this Session of Parliament, have resolved to grant unto your Majesty the sums hereinafter mentioned, and do therefore most humbly beseech your Majesty that it may be enacted, and be enacted, by the General Assembly of New Zealand in this present Parliament assembled, and by the authority of the same as follows."

Bearing in mind the real object of the Bill, I think we cannot but admire the versatility and grasp of mind that could conceive the idea of so happily blending loyalty and disinterested liberality towards our beloved sovereign with the more practical notion of making things pleasant to ourselves. And I have no doubt that when Hudson adopted a similar course in like circumstances, he coupled his instructions with a few moral remarks of a highly edifying character.

Further down in the list of receipts we have an entry of £66,295 6s 6d for an "Advance from Special Fund, London," and partially balanced by a similar entry on the other side of £46,000 repaid. This still leaves a balance of £20,295 6s 6d to be added to the other amounts of borrowed money tacked on to the actual revenue, and applied to purposes of general expenditure.

Then we come to Deficiency Bill £60,000, balanced by an entry on the other side of the same amount for overdraft repaid Bank of New Zealand. This apparently represents a temporary accommodation converted into a deficit. Next comes Treasury Bills renewed, £200,000, with a corresponding entry on the other side of Treasury Bills redeemed. This would appear to represent an old debt staved off for a time, indicating that when the time came to pay we found it more convenient to take an extension of credit. It seems our creditors did not object, but as these transactions, such as renewing bills and the like are rarely effected without some expense in the way of discount, commission, &c., it would be interesting to see what these amounted to in the present instance.

Passing now the accounts of disbursements we find (with the most trivial exception) that every item shows an increase, some to the extent of fifty or sixty per cent. This is a more serious affair even than the diminished revenue, for whilst that might possibly be attributed to misfortune, the increased expenditure indicates something worse. Passing by one or two accounts in which the increase has not been so great, we come to that of Public Domains and Buildings, for which we paid £2797 in 1870, and £9,300 in 1871, the increase being principally attributable to page 8 the erection of a new Government House. This figures for the sum of £4605, though that probably only represents a part of the entire cost. In this department, too, we find the salary of Colonial Architect, £700, and a sum of £43 7s 3d also paid to that gentleman far commission. Whther he gets a commission on all works he superintends, besides the £700, is not stated, but might perhaps be inferred from the entry above quoted; and here I wonder whether the Colonial Architect enjoys the same privilege as private architects—that of taking commissions from contractors? Should such be the case, what with his fixed salary of £700 a-year, commissions from the Government and commissions from the contractors, we must admit that the Colonial architect has a really good time of it. Further on, when we come to Miscellaneous Expenditure, we shall find £125 4s, or about £2 10s a week, set down as "paid to labourer engaged by Colonial Architect," though what work may be performed in return does not appear. And under Miscellaneous we also find £1568 expended in the purchase of furniture for the Government House.

Lower down we come to Public Departments costing £45,282 in 1870 as against £53,301 in 1871, an increase of £8,019.

Then there is Law and Justice, for which we paid £54,926 in 1870, and £63,753 in 1871—an increase of £8,827. Taxpayers, however, will hardly be disposed to grumble at this extra charge, bearing in mind that it is partly attributable to expenses incurred in the Barton prosecution—that is, provided they adopt the supposition of the quality of justice dispensed amongst us having been improved by that infusion.

Next on the list stand the Post Office and Telegraph Departments, costing £145,712 in 1870 and £147,765 in 1871. The revenue obtained from these combined sources for the year under consideration was only £65,632, the loss occasioned by them is £82,133 in 1871 as contrasted with £80,355 in 1870. And here it may not be out of place to remark that whilst the accounts of Post Office and Telegraph appear as separate entries in the receipts, they are muddled together in the expenditure, so that one cannot apportion with absolute accuracy the amount of loss occasioned by each.

Next we find the Customs' Department, which figures for £37,835 in 1869-70, and £45,557 for 1870-71. Now this increase is a very remarkable one, because the amount of revenue raised was smaller. In 1870, £813,025 was collected at an expense of £37,835, whilst in 1871 it appears to have cost £45,557 to collect £745,473, so that one year 4½ per cent, defrayed the cost of collection, and the next year it jumped up to 6 per cent., or in the ratio of 33 per cent, increase.

Then comes the Miscellaneous Expenditure, which here figures for £93,270 as compared with £63,823 for the previous year, showing an increase of £29,447, or nearly 50 per cent. The entries appearing under the heading of "Miscellaneous" certainly justify the selection of that name. I cannot attempt to give them in full detail, but have picked out a few, which are as follow :— page 9

	£	s.	d.
Advance to Province of Wellington—Erection of Wanganui Bridge	8882	9	1
Stationery	648	8	1
Binding	191	18	9
Furniture and Fittings, Public Offices	259	0	1
Do do, Government Houses	187	1	3
Travelling Expenses	170	9	11
Expenses Steamer Luna	44	2	0
Rent of Ministerial Residences	70	0	0
Rent of Government Offices	211	1	0
Advertising and Printing	44	7	0
Contingencies	284	4	4
Balance of Purchase Money, Luna	7000	0	0
Travelling Expenses of His Excellency the Governor and Suite	781	14	7
Stationery	7708	16	4
Binding, Ruling, &c.	3592	11	11
Printing	621	9	3
Travelling Expenses of Ministers and Officers on Public Service	943	6	9
Advertising	40	14	9
Labourer employed by Colonial Architect	125	4	0
Interest on advance to complete purchase of Luna	9	7	11
Bonus to Mr Batchelor for planting mulberry trees	100	0	0
Bonus to W. Buller for publication of Work on Birds of New Zealand on handing over his collection of birds to the Museum	300	0	0
Miscellaneous	557	10	7
Rent of Government Offices, Auckland and Wellington	505	19	2
Rent of Ministerial Residences	277	10	0
Half expenses of Steamer Luna	3535	18	3
Rent of Sir Charles Clifford's house	100	0	0
Purchase of type and material for Printing Office	45	18	0
Repairs of Government Buildings and erection of new offices	4233	7	9
Wellington Botanical Gardens	300	0	0
Bank Commission on Remittances and Payment of interest	4270	11	9
Crown Agent's Commission	651	17	0

When I first made out a comparative table of expenditure for the years 1869-70, and 1870-71, I could not help being struck by the uniform increase of almost every item. But on coming to the account of money paid as interest on loans, it startled me to observe that it showed an apparent diminution, the figures being £411,711 for 1870, and £361,315 page 10 for 1871. Now, that 1 could not but regard as most remarkable. It is sufficiently notorious that our debt is growing larger, and it did appear strange that with an increasing debt, the interest should diminish. I therefore thought it worth while to investigate the matter, and on looking up corresponding entries for each year, I came across the following details :

These figures speak for themselves. It will be observed that in the former year there were four quarterly payments for interest of about £52,000 each; but in the latter we find only three quarterly payments—the one due on the 15th July being excluded, so that the total amount set down for interest was £52,000 less than really had to be paid. In excuse for this omission, it may perhaps be pleaded that the money was not absolutely due till 15th July, 1871, whereas the financial year terminated on 30th June. But if we admitted this reasoning, we should expect to find the account commencing with the payment on 15th July 1870, because that would then fall within the financial year. We know very well there are four quarters in every year, and that if money is to be paid by quarterly instalments, there must be four of them.

In estimating, therefore, the amount of interest really chargeable to the year under consideration, we must add £52,000 to the sum put down in the published account. When this is done, the seeming saving i converted into a loss, and the interest account for 1871 like the rest turns out to exceed that of 1870.

To complete our review of disbursements we have still to consider the items of Native and Military Expenditure.

The former shows an increase of £13,282, being only £21,490 in 1870, as contrasted with £34,778 in 1871; but, as this enhanced expenditure might possibly have been occasioned by the adoption of the so-called "Sugar and Blanket Policy," I was willing to suspend my judgment as to whether it was excusable until I had ascertained the amount of Military Expenditure, which, as a matter of course, we should expect to see reduced in a corresponding proportion.

On referring to the account of disbursements from the Consolidated Fund, I found that, in 1869-70, we spent on defence £244,615, whilst in the succeeding year only £83,993 was put down under that head, giving an apparent saving of £100,622.

It can hardly be necessary to dilate upon the favourable comparison ostensibly shown by these figures. Notwithstanding every other department showing an increased expenditure, the saving here indicated would more than counterbalance them all, and although the deficit for 1871 would still exceed that of 1870, yet seeing that part of it was occasioned by falling off in revenue (which might be attributed to misfortune), it would only be fair cordially to recognise the fact of a considerable saving in expenditure. In this seeming reduction, therefore, I thought we had legitimate ground for congratulation. It was the single bright spot in the dreary prospect of our affairs, the one green oasis in the desert of deficits But when I reflected on the matter, and remembered that every other item of expense had increased—some of them enormously—when I recalled to mind the very significant omission of £52,000 from one account, my mind rather misgave me, and I resolved to investigate a little further before accepting the apparent saving as an actual fact. It happened that something caused me just then to look into what is called the Special Fund Account. This fund is maintained exclusively by loans. Nothing goes into it from the general revenue. It is supplied entirely by borrowing. The expenditure from it during the same period was of the most heterogeneous character, but we are at present concerned with one item alone. It is that of Military Expenditure, which is set down here as £171,134, in addition to the £83,993 charged against the Consolidated Fund. The entire Military Expenditure, therefore, instead of being £83,993, as anyone would infer from looking at the tabular statement of disbursements from the Consolidated Fund, is in reality £255,127, or £10,512 more than it amounted to in the year before.

When these entries have been rectified, we find, with one insignificant exception, that the table of disbursements is very brother to that of receipts—that as every source of revenue diminished, so every individual item of expenditure increased during the year under consideration.

I subjoin a comparative statement of the expenditure for the two years, indicating by a * the insertions necessary to correct the account.

Having thus reviewed the accounts of the Consolidated Fund, we have now to consider those of the Special Fund. The entries we find on the receipt side are those of sums raised by sale of Debentures, Hypothecation of debentures, Proceeds of Treasury Bills, Loans, &c. The amount of money so raised for the year under consideration was £602,587. There is £20,000 put down for Treasury Bills renewed. £15,000 as raised by Sale of Debentures, and then again another sum of £14,600 raised by Sale of Debentures. There is £214,900 put down for "Debentures issued in Conversion and Consolidation of Loans" and £273,500 as raised by "Hypothecation of Debentures."

The entries in this account are somewhat confusing for we find the same amount figuring on both sides. Thus, in addition to the above, we have £204,000 set down as "raised to defray amount advanced under Temporary Loan Act" and we have it again appearing on the credit side as applied in "part" repayment. Such items, however, we will pass over, merely remarking that they appear to indicate that the accumulating floating debt when it had assumed sufficient dimensions had to be consolidated or converted into a portion of the permanent indebtedness of the colony.

There is however one item of peculiar interest appearing on both sides of the account. Among the receipts we have £1,709 as Proceeds of Confiscated Lands, and on the other side, to set against this, we have £6,122 put down as paid for "Management and Survey of Confiscated Lands," or rather more than three times what the lands realised. Going to make up this sum we have £2,839 for salaries, £688 for extra clerical assistance, £1074 for surveys, £566 for purchase and compensation, £238 for office rent, and £131 for the inevitable travelling expenses.

As regards the £19,898 paid to Mr Busby, why was it paid? What did the Colony get in exchange for it? It is possible that this is in settlement of some antiquated land claim, but even if good value were got for the money in the shape of broad acres, it does not follow that they should be paid for with borrowed money. When a Province sells its land it deals with the proceeds as permanent income like that arising from rents or pastoral assessments, and if such receipts are credited to the current revenue it would be natural to expect payments for the purchase of land to be similarly debited against ordinary expenditure.

Then in regard to the £27,873 put down among the disbursements as "Balance due by the Province of Auckland," we can only suppose that it represents a bad debt owing by Auckland to the General Government, and instead of being defrayed out of income was met out of capital. A page 14 similar remark may perhaps apply to Taranaki and Wellington, but in the latter instance it would seem that at the very time it was necessary to write off £1180 as a bad debt, we made our bankrupt debtor a fresh advance of £15,000. Finally we have £48,823 to represent a part of what we have had to pay for the misdeeds of Southland.

The next items claiming attention are £255,392 for Provincial Loans taken over by the General Governments, £810 for interest accrued on them, and £2,760 for charges and expenses attending their conversion. Then there is £6,000 handed over to Wellington to extinguish a loan raised under the "Harbour Reserves Amendment Act" and £250 to redeem debentures of the everlasting Wanganui Bridge.

£500 of the above is charged to the Consolidated Fund, £2895 to Immigration and Public Works; but with the exception of £500 every penny is defrayed out of the loan itself.

The reader will observe that a good many of the items appearing in the disbursements of the Special Fund, we have not included in the £463,706, representing the probable deficit for the year. The omission, however, is of little consequence, for when the annual deficiency gets well into six figures a few thousand pounds more or less are not of much consequence. I mean that whatever course of action might be proper with a deficit of £500,000, would be equally advisable with a deficit of only £450,000. If it behooves us to bestir ourselves in the one case it does in the other, and if we make up our minds to look on with lazy acquiesence whatever may be our plight, we might as well spare ourselves the trouble of inquiring into the exact circumstances of our position.

The complete accounts for the succeeding year—that ending 30th June, 1872—have not yet been published, for, as a rule, it occupies fourteen or fifteen months from the termination of each financial year before the full particulars are made public. The reader will no doubt remember that, in speaking of the transactions of this year, one of our Colonial Treasurers fixed the deficit at only £33,345, whilst the other declared there was a surplus of £10,500. Until the detailed accounts make their appearance, it is of course impossible to determine by what process our enormous real deficit has in appearance been explained away; but it is obvious that neither of these gentlemen can have considered military expenditure, provided for by loan, as affecting the deficiency. Here is one item of £186,813 paid out of borrowed money—

It follows, therefore, that only £618,493 was really applied to Public Works and Immigration, and if we deduct that sum from the £1,102,472 which was added to the debt, we get £483,979 to represent the increase of debt for other purposes, and that amount may very probably stand for the actual deficiency for the year just terminated. The detail are shown below.

There are two circumstances by which the public is liable to be deceived in regard to the financial operations of the Colony. One is the term Consolidated Fund, and the other is the occasional reference to the operations of the Sinking Fund. The name of the first seems to suggest all revenue converge to it, and that it is the source from which that all expenditure is defrayed, excepting that upon reproductive works. Consequently, when the Colonial Treasurer for the time being proclaims a surplus on the transactions of the Consolidated Fund a number of people accept the assurance with thankful surprise, and comfort themselves with the belief that it is all right—that we have at last established a balance between income and expenditure—and that the Sinking Fund will gradually eat away into the principal of our loans, and in process of time, rid us of them entirely. But the seeming surplus on the Consolidated Fund as we have seen is only created by charging large items of miscellaneous expenditure against borrowed money, and, until quite recently, it has been part of our avowed policy to defray the bulk of interest and other expenses on the Public Works Loan out of the capital of the loan itself.

As regards the Sinking Fund, under the system we are pursuing, its very existence amounts to no more than a pleasant fiction. A Sinking Fund is the apparatus by which a debt is gradually paid off; and, in cases where the debt is not being paid off, but, on the contrary, goes on increasing at a enormous rate, the institution of a Sinking Fund becomes a patent absurdity. To illustrate its operation I subjoin a table, showing the relative growths of Debt and Sinking Fund for the last two years.

Here the increase of Debt is more than ten times that of the Sinking Fund. What more solemn farce can therefore be imagined than keeping up a pretence of paying off our debt, when that debt is advancing with such gigantic strides? But it is not a mere question of silliness, nor even of uselessly complicating the public accounts. These operations cost money. There are "Commissioners" of the Sinking Fund, who, we may presume, draw salaries. At all events they make voluminous reports, and occasionally suggest the advisability of special legislation for the better performance of their duties. When, therefore, our debt is not being paid off, but on the contrary is rapidly accumulating, the operations of the Sinking Fund have and can have no other effect than to deceive the public, whilst putting the country to very considerable expense.

Whenever an atten.pt is made to draw attention to the enormous amount of our debt and the rapidity with which it accumulates, two arguments are used with the view of reassuring. One is, that debt incurred for reproductive purposes is not a burden but a benefit—that if borrowed money be only judiciously applied to public Works it will yield a return equal to the annual charge for interest, thus imposing no burden on the community whilst affording increased facilities to trade and general production.

As an abstract proposition this is of course undeniable, but upon the case in hand it has not the remotest bearing. The additions to our debt are not contracted for reproductive purposes only. About half of it, or £5,000,000, has been incurred for the wretched Northern War, and so far from that expenditure having settled the question it still costs us about a quarter of a million annually to maintain what I suppose we must call "peace." As shown above, the annual deficit amounts to nearly half a million a year, which regularly goes to augment the debt. Then, as regards the sums borrowed for public works can any one in his senses imagine that we get value for them, or anything like it? What is the page 18 real worth of all the Public Works in this Province as compared with the sums expended on them? Not long ago I was conversing with an engineer of high standing and solicited his opinion on the matter Were they worth a half—a third—a quarter of what they had cost? After consideration he replied it was impossible to place so high a valuation as a quarter on them. They might perhaps be worth a fifth, but if swept away to-morrow could entirely be replaced for that fraction of their cost. Look at the Public Works of whose working we are furnished with accounts, such as the Post Office and Telegraph. The buildings and plant required for them are we may presume what would be deemed fitting objects on which to expend sums borrowed for reproductive works. And yet in what sense are these works reproductive except so far as debt tends to reproduce itself? Instead of making a profit for the Government—instead of paying interest of the capital invested in them or doing anything towards it—they involve a direct loss of about £80,000 a year. And it must be remembered there is nothing in the nature of a Post Office or Telegraph that makes it unreasonable to expect them to yield a profit, or at least pay their way. In America a vast number of letters are conveyed by private parties as a commercial undertaking. Most efficiently is the service conducted, and it shows every appearand of well remunerating the enterprising proprietors. When, therefore, we find the Government enterprises distinguished by such tremenduous loss in cases where it is possible to keep track, what must we suppose it to be in cases where we have not the means of checking it?

Sometimes we hear people admit that the money intrusted to the Government for investment in public works is certain to result in direct loss, and yet it is urged that the indirect advantages resulting therefrom will more than counterbalance it. The very term "indirect advantages" is one of that vague illusive character that do so much to confuse and mislead the unthinking. Strictly speaking there can be no such thing as an indirect advantage, for whenever a real benefit exists, it must be to the profit of some individual or individuals of whom the public is composed. And in such oases, seeing that private parties have generally a pretty keen eye to their own interests, the community at large might safely trust them to adopt measures most conducive to it.

If, however, it should be imagined that an increase to the revenue is to be included among the indirect advantages that are expected to result from our lavish expenditure, the idea may be banished at once, for it will not stand the test of experience. In 1867 our revenue culminated, and from that time to the latest period of which we possess complete and reliable accounts, it has steadily diminished. The following table shows the decrease :—

The receipts for the financial year ending June 1871, were £936,188, still showing a falling off.

If the above should not be deemed conclusive, we have the experience of other countries to guide us. In August last, a petition was presented to the House of Commons bearing the signatures of 4878 landed proprietors of Bengal and the Central Provinces of India, which represented that the proceedings of the Government had tended to worsen the condition of the country; that a loss of £2,000,000 a year on railways had to be made up by taxation; that the traffic in many places was reverting to the rivers, yet the Government designed to spend £28,000,000 on new lines of railway, and £39,000,000 on canals; that a large deficit was found almost every year in the Indian Exchequer, to meet which local taxes and cesses had been imposed in vain; and finally praying for the appointment of a commission to inquire into these grievances.

The other argument put forward in reply to the suggestions of prudence is the population theory. We are told to reassure ourselves, for immigration, by affording a wider base on which to levy taxes, will enable us to provide for the increased interest and other expenses of government.

If there were any probability of population increasing in the same ratio as our indebtedness, there might be some show of plausibility in the argument, though other countries will not tolerate the idea of allowing debt to increase at all. As compared with population, the national debt of Great Britain has largely diminished within the last fifty years. That of the United States, since the close of the war, has been enormously reduced, not merely in proportion to the population, but in actual amount. Whilst Northern Germany has practically no debt at all.

From 1857 to 1862 the debt had increased rather more than fifty percent., but the population had simultaneously increased a hundred and fifty per cent., and thus the debt, though actually greater, had relatively diminished. Here, therefore, was room for congratulation, and if our finances had subsequently been as wisely administered, we should have little reason to complain.

But whilst up to 1862 population went on increasing at a greater rate than the debt, since then the conditions have been reversed. Population has not doubled, nor nearly doubled, but the debt has increased eight fold. In 1862 the percentage chargeable to every man, woman, and child, was little over six pounds; now it is more than thirty-six. In view of these facts it is nonsense to plead the increase of population as a set off against the accummulation of debt. Such an argument can only be put forward by those who are ignorant of the truth, or who, for purposes of their own, wish to conceal it.

Thus we see that for four consecutive years the population increased, whilst the revenue with equal regularity tell off. If there existed such an exact correspondence between population and revenue as is assumed, the revenue for 1870 would have been £400,000 higher than it was. It is true enough that additions to the population have a tendency to raise the revenue, but that tendency may be neutralised by many causes—as, for instance, bad government, or the perversion of the public funds from their legitimate objects; and if we admit that, other things being equal, the revenue for the last four years would have advanced in proportion to the population, it stands to reason that adverse influences of a very prejudicial character must have been at work to counteract this tendency to such a fatal degree.

Besides, is it likely that population will be attracted to a country so deeply steeped in debt, and that tolerates its reckless increase with such indifference as we manifest? Our very reason for desiring population is enough of itself to drive it away. Whenever, it becomes known, as eventually it must, that we are sunk in a debt of such magnitude as to be unable to defray its interest, what use will it be to go to the labour market of Europe and ask people to come out and help us to pay it? A man notoriously insolvent might as well advertise for a partner with £10,000 capital.

There are people who affirm that the resources of New Zealand are such as will enable us to defray the interest of our debt even when increased to the dimensions shadowed forth in the programme of the Colonial Treasurer; but it is remarkable that those very people shrink from the idea of imposing taxes even to defray the interest on the present debt. But if we cannot pay interest on £10,000,000, how can we be expected to pay interest on £14,000,000 or £15,000,000?

The system we have been and are pursuing, cannot, in its nature, go on for ever. Some time or other our real position will become known, and then the bubble will burst. By the operation of some extraordinary delusion, English capitalists have been induced to advance millions to the New Zealand Government. Perhaps they may be under the impression that this money is only applied to reproductive works, and that we are honestly defraying current expenses out of revenue. Such infatuation can hardly be accounted for on any other hypothesis. They probably have not the means of knowing how enormously our expenditure exceeds income, and what large amounts of borrowed capital are annually applied to conceal the deficiency. The fact of such a Government as ours having carried on so long, can only be attributed to its creditors being in ignorance of our position, and the question of how long it may succeed in keeping up the game, is dependent on the success it may achieve in concealing the truth. Our financial position is like a barrel full of holes, into which people are pouring water, expecting to find it there when wanted. So long as they keep pouring in at a rate equal to the leakage, the water will maintain its level, and they may perhaps delude themselves into the belief that it is all there and available when wanted; but the moment the supply slackens the waste betrays itself. So it is with us. For years past our Government has been spending money at a rate absolutely furious, and the only reason that the increasing deficits have not forced themselves on public attention is, that capitalists in England have enabled it to proceed unchecked in its career of extravagance. At present even, it is doubtful if the country could support the weight of its burdens; but if any further additions to them are made, there will be but the alternative of repudiation, or such ruinous taxation as will dissipate for ever our dream of prosperity.

The evil is of such long standing, and seems to have worked itself so deeply into our whole system, that nothing but a united and energetic effort can suffice to throw it off. Our disease is so bad that only the most violent remedy will have any effect, and the very first step in the direction of retrenchment will necessarily be attended with disagreeable consequences. It is idle to think of accomplishing any real reform without first recognising our true position. To do that implies facing a long and severe period of adversity. The seeming prosperity that at present surrounds us is but the temporary effect of our infatuated policy of wasteful, reckless expenditure. Some time it must come to an end, and the practical question for the people of New Zealand is this—Will they put an immediate stop to the vicious system of bolstering up a rotten fabric, and resolutely face the worst that can befall them, or, for the sake of a short period of fictitious prosperity, will they consent to the ruin of their adopted country and the tenfold aggravation of the evil day when it comes?