Fiscal Year 1932-33.

  For the current financial year, which ends to-morrow, this Government, when it came into office in June, 1932, found the budget already voted. Revenue was placed at $10,180,000 and expenditure at $10,150,107.28. The budget accordingly showed a surplus of $29,892.72.

  Before, however, the year had well begun, it was abundantly clear that the estimates of revenue had been framed on an optimistic scale, and that it was most unlikely that the figures laid down in the budget would be reached. For example, Customs revenue had been estimated at $7,000,000, whereas it appeared impossible that the receipts would amount to more than $6,000,000; and it is not now expected that they will reach even that figure. Again, receipts from Income Tax had been placed at $1,000,000, while actual receipts are not likely to exceed $700,000.

  It appeared, similarly that in the case of a number of important items, essential expenditure had been under-estimated. In particular the sum of the year, while in the preceding year, as I have said, no less than $1,170,000 had been spent under this heading; and, in addition, accounts were still owing which exceeded by a very large amount the provision made in the Estimates.

  In these circumstances there was only one course which could be followed. The budget for the year had brought into effect considerable increases in taxation; and it was evident that any further increases would impose an improper restriction upon industry and trade. It was necessary, therefore, to cut down budgetary expenditure, and to do so in the most drastic manner. Certain economies were carried out immediately upon the Government entering office, that is to say, in July; and in September, after the Imperial Conference in Ottawa had come to an end, a comprehensive programme of economies was undertaken as the only practicable means by which it could be hoped that a balanced budget would be maintained.

  I give in detail the principal of these economies, which were as follows:--

Annual Saving.         
        Salaries and Pensions ...........................       $90,000
        War Pensions .........................................       100,000
        Education ...............................................       200,000
        Post Office ..............................................       120,000
        Public Welfare ........................................         20,000
        Public Health ..........................................         30,000

  In addition, a number of minor economies were effected; for example, on the vote for Public Works, on the staff of the Customs Department and on Lighthouse staff, and on many other miscellaneous items.

  I feel that I must repeat here the tribute which I have already paid to the patriotism with which these reduction, all of them of a very far-reaching character, and many of them producing considerable hardship, have been accepted. It was particularly repugnant to me to introduce a programme decreasing the payments for our Education Service which had already been so severely cut down in the budget for the year; and to make a still further reduction in the salaries and pensions of the Civil Service. There was, however, in the view of the Government, no proper alternative to the course which was adopted, to cutting expenditure down to the bone, and indeed in some cases into the bone; in order that the Dominion might show its good faith in the sacrifices which it was determined to make with the object of maintaining its public finances on an honourable basis.

  Even these sacrifices, however necessary as they were in the circumstances, were insufficient. Decline in revenue made Newfoundland unable to meet without assistance the payments for interest on the public debt due at the end of December, 1932. It was only possible for these payments to be discharged in full by the loan of $1,250,000 which, as the Committee will be aware, was made jointly by H.M. Government in the United Kingdom and H.M. Government in Canada. I have already expressed, and would like to express again formally to this House, the great gratitude of the Dominion and of my Government for the assistance which was given.

  During the second six months of the financial year the decline in revenue has continued. Since January, 1933, not only have our hopes of an increase sufficient to bring revenue within reasonable reach of expenditure come to nothing; but each month, from February onwards, Customs receipts have fallen seriously short both of the estimates and of the receipts obtained in the corresponding months of 1932. In spite of the measures taken for the reduction of expenditure, and of certain additional reductions carried out in recent months, it has proved a matter of impossibility to carry through the second half of the year without a deficit greater in amount than that for the first six months.

  Apart from the decline in revenue, there are, as has been shown by the Supplemental Estimates which have already been voted by the House, two special items on the expenditure side of the budget which have been responsible for a large and unavoidable outlay. The first is able-bodied relief, to which I have already made a passing reference. In the fall of 1931 far-reaching changes were made in the arrangements by which able-bodied relief had previously been administered. Formerly this relief had been confined with some strictness to cases of real and proved necessity, and expenditure had been maintained at a comparatively low level. The new arrangement, under which a network of special officers was extended throughout the country, had the effect of encouraging applications for relief in, I am afraid, numerous cases where it was not deserved, and in a great number of such cases there is no doubt that it was given. The present Government, when it came into office, was compelled to assume responsibility not merely for a large accumulation of accounts owed for relief given in the financial year of 1931-32; but, even worse, for the system itself. Its first step was to terminate the appointments of the officers to whom I have just referred; but it was not possible within any short period, and especially during the severity of winter, to bring an end to the system which had been established or even to modify it to any marked degree. During this month and last, however, steps have been taken by which expenditure on relief will be materially decreased; but that, unfortunately, is for the future only, and it has been necessary for the liabilities of the past to be met. This has greatly increased expenditure during the current financial year.

  The second item of special expenditure is upon the Railway administration. I have said that no provision was made for meeting the deficit incurred in the management of the Railway in the preceding year, that is to say, 1931-32; and this deficit was accordingly carried forward as a liability into the current year. In the past, deficits on the Railway administration had invariably been met by the raising of successive loans for the purpose, but the Government are determined that this course shall no longer be followed. Large reductions in Railway expenditure, including the closing of certain stretches of line, have been made during the current year by the Commission which is charged with Railway administration under the Act of 1926; but as in the case of the country as a whole, revenue has fallen far short of expectations. In these circumstances, on the assumption that the Railway is to continue to function as an indispensable element in the life and industry of the community, there has been no alternative to meeting the minimum charges required for operating, materials, etc.; but it has been impossible in the existing financial position to set aside any sums for depreciation or replacement. Having regard then to the revenue position, as I have outlined it, and to inevitable expenditure for which no budgetary provision was made, I anticipate that the outturn for the current financial year will be approximately as follows. Revenue may be expected to reach the figure of $8,050,000, of which $5,700,000 will consist of Customs revenue; that is to say, revenue will be more than $2,000,000 below the budget estimate of $10,180,000. Expenditure, including the interest on the public debt, will amount to $11,431,000. The deficit for the year must accordingly be placed at $3,381,000. Unfortunate as this result is, I cannot refrain from recording my view that it has been no mean achievement to reduce the deficit for this year by over $600,000 compared with that for last year in spite of the continued decline in world prices and its effect upon the earning power of our people and on our Customs return; and also of the fact that contributions to the Railway administration have in this year been included in Current Account.

  I spoke earlier of the deep appreciation felt by the Government at the aid given to us by H.M. Governments in the United Kingdom and in Canada in order that we might meet the deficit for the first half of the financial year, last December. I am happy to be able to announce that H.M. Government in the United Kingdom propose for the second time to come to our assistance so that the Government may be enabled to meet the deficit in the second half of the year, under similar arrangements for interest and security to those adopted in December. In ordinary circumstances it would not, I think, be proper for us to make any addition to our public debt; but the offer of H.M. Government in the United Kingdom and the presence of the Royal Commission in this country, with the hope that its recommendations will have the effect of placing the finances of the Dominion on a permanently stable basis, have caused the Government's acceptance, and grateful acceptance, of the assistance so placed at their disposal.

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