The Government have been much disappointed that the discussions which took place at the Ottawa Conference concerning the utilization of Wabana iron ore in the United Kingdom have, so far, had no practical result. It is true that an informal arrangement was made during the Conference that the Treaty with the United Kingdom as a whole would not necessarily come into effect unless a satisfactory agreement with the United Kingdom iron importers as regards the use of iron ore from Newfoundland in the United Kingdom could be concluded. After careful consideration, however, it has appeared to the Government expedient that the Agreement should be ratified nevertheless; but close negotiations are being continued with the view to the export of Wabana iron ore to the United Kingdom, and I am still hopeful that they may come to a successful issue.

  Apart from the Ottawa Agreement, there are certain other matters pertaining to Customs administration which I propose to pass in very brief review. In January last an Order in Council was issued giving authority to the Department of Customs to collect a special duty in the case of goods of which the value was expressed in depreciated currencies, together with the right to value goods at a figure equal to the value of similar goods manufactured in the British Empire. This course was necessary owing to the large depreciation in the value of certain currencies, with the result that foreign goods were being imported at very cheap rates, revenue was correspondingly affected and the United Kingdom and Canada and the West Indies were placed at a disadvantage. The Customs Act and the Revenue Act have been amended in accordance with this Order in Council, so that the Order to-day becomes law and retroactive to January 9th last. I ought to add that as a result of the Ottawa Agreement, this special duty is not applicable to depreciated currencies within the Empire.

  In connection with the question of valuation, it is relevant to say that the Government are taking special steps for an improvement in the existing methods of appraisement at such settlements as Grand Falls, Bishop's Falls, Buchans, and Corner Brook.

  New measures are also being taken to increase the efficiency of the Preventive Service. I would prefer not to go into details on this subject; but I expect, as the result of these measures, an increase in revenue which will be by no means negligible.

  I said a few moments ago that the Government had gone very carefully into the figures of prospective revenue with a view to any over-estimation being avoided. I think it is reasonable to estimate receipts from Customs duties at $6,400,000 for the year 1933-34 as compared with the sum of $5,700,000 expected in the year now current. At the present time it happens that we in this Dominion are living in a state of some uncertainty not merely concerning the general prospective economic situation, but as to conditions which, it may be thought, are liable to affect the future of this country in particular. This double uncertainty has had the effect of diminishing for the time the volume of imports, and the resulting amount of Customs revenue. I think, however, that I have good reason to anticipate that this uncertainty will be only of a temporary nature; and that it may reasonably be expected that in the coming year we shall obtain sufficient receipts from Customs duties to reach the figure of $6,400,000 which I have estimated. Indeed, it is not impossible that this figure may be exceeded. This estimate is, of course, exclusive of the minimum sum of $300,000 which the Dominion will receive from the Imperial Oil Company under the provisions of the Act passed last year.

  In regard to Income Tax, as I said earlier in this statement, the estimate of receipts from this source for the current year was placed at $1,000,000; while the actual receipts will amount to some $700,000. During this year it was necessary for business enterprises in Newfoundland to operate with a reduction of $3,500,000 in earnings, together with losses amounting to $1,500,000, this being reflected in a reduction in personal incomes of some $2,000,000. For the present the Government propose to make no change in the Income Tax Act, except to correct an anomaly relating to capital profits and losses. Hitherto, losses on stocks and capital have been taken into consideration in the calculation of tax payable. From now onwards both profits and losses will be excluded from consideration. I believe that Newfoundland is the only country which has continued to recognize such losses, which are manifestly not primarily losses of income; and I think it is reasonable that the State should no longer shoulder a burden which it is ill able to afford by taking over from the individual a portion of such losses by way of relief from taxation. As to the estimated receipts from Income Tax for the coming year, I propose to take what I think is a conservative estimate of $680,000.

  Similarly, in the case of other receipts, the Government have worked upon a conservative basis, and have not in general considered it desirable in their Estimates for the coming year to diverge materially from the expected receipts for the current year; comparative tables will be given in the printed Budget. I think, or at any rate I hope, that the Committee will commend the spirit of caution in which the Estimates, both of revenue and expenditure, for 1933-34 have been prepared.

  I have estimated expenditure for the coming year at $10,964,605, a total which includes sums such as prospective contributions from the Exchequer to the Railway administration, which in former years were reckoned as belonging to Capital Account and financed by means of loans. It appears to me impossible for this total to be reduced if the administration of the country is to continue, even at a minimum level of subsistence. We must await more fortunate times before the total can be increased.

  As against this figure of $10,964,605 for expenditure, the revenue expected to be available is $8,819,338--a difference of $2,145,267. I would repeat that, in the same way as each item of expenditure has been examined most carefully with view to possible reduction, receipts from every source have been subjected to strict scrutiny in order to ensure that the maximum yield is obtained. It need hardly be said, I think, that in the past few months the Government have given anxious consideration to the question whether any increases in taxation could reasonably, and profitably, be imposed. They are convinced, however, that, just as I have to say with regret that in existing circumstances no reduction in taxation would be justifiable upon trade and industry, and without such a burden upon all classes of the community, that the object in view would be defeated.

  I forecast, therefore, a deficit of $2,145,267 for the year 1933-34, as compared with the deficit of $3,381,000 estimated for the current year and the deficit of $4,029,339 for the year 1931-32. I think it will be understood that, especially in the existing economic position, it is impossible to transform, as it were by some process of magic, the large deficits of past years into a surplus, or even into a balance between revenue and expenditure, at least if the budget is to be presented with a due regard to the realities of the situation.

  Nevertheless, although we are suffering to-day from the folly of previous administrations in wasteful and reckless expenditure, it seems to me that we may approach the coming year with some measure of confidence.

  Since they came into office the Government have received no little encouragement in the efforts which they have made to correct the extravagance of the past and to place the finances of the Dominion on a basis which would give no ground for reproach, and would deserve the commendation of the Empire of which it forms a part. In the immediate future, we await the recommendations of the Royal Commission, certain that they will have given the most careful thought to the problems with which we have to deal, and will apply to them the expert knowledge, and full understanding of our situation, which they possess. I think, therefore, it will be both proper, and acceptable to the Committee, that I should defer the proposals of the Government for reaching a balance between revenue and expenditure in the coming year until the Commission have come to their conclusions, which we may expect to be available before the fiscal year is well advanced. If we look a little further ahead than this, we cannot do otherwise than look forward to a time, which I hope and believe is not far distant, when revived commercial confidence and credit, an increase in world prices, and a stable market for the commodities which we produce, will make possible the renewal of Newfoundland's prosperity.