168. It will be seen that, deducting debt charges and relief expenditure, the current expenditure of the Island in 1930-31 was about $7,400,000. This figure was reduced in 1931-32 to $6,000,000 and in 1932-33 to $5,200,000. The Estimates for 1933-34 provide for a slight increase to $5,400,000, but even so they are lower by $2,000,000 than the corresponding Estimates of 1930-31.

  169. This very substantial reduction in expenditure has only been realised as a result of the public-spirited efforts made by successive Governments during the last two years to eliminate all wasteful expenditure and to enforce stringent economies wherever practicable, with a view to bringing the budget as near as possible to equilibrium. We are glad of the opportunity to pay tribute to these efforts, regretting only that they have come too late to enable a balance between revenue and expenditure to be immediately achieved.

  170. Before we proceed further with an analysis of the Island's expenditure, we think it will be of interest to record here the principal economies effected during the last two years.
  Salaries of Ministers of the Crown have been reduced by 33 per cent., and those of civil servants have been reduced by cuts ranging from 25 per cent. to 27½ per cent. The salaries of Judges have been reduced by approximately 20 per cent. Civil pensions have been reduced, on a sliding scale, from 20 per cent. to 45 per cent., and war pensions have been reduced by an average of 20 per cent. The grant for Education has been brought down from $1,000,000 annually to $500,000, and expenditure on legislation has been reduced from $100,000 to less than half that amount, including reductions in the Sessional allowance of Members of the House of Assembly from $1,000 to $600. Expenditure on Public Charities, under which come the staffing and equipment of the Hospitals, Penitentiary, and similar institutions, has been reduced by 30 per cent., as has also expenditure on Marine and Fisheries, Agriculture and Mines, and Customs administration. Expenditure on Roads and Bridges has fallen to 25 per cent. of the amount spent two years ago; while expenditure on Posts and Telegraphs, which amounted to $1,491,000 in the year 1930-31, is estimated at one-half that amount for 1933-34.
  In addition, numerous economies have been made in the day-to-day administration of the Controller of the Treasury.

  171. As a result of these economies, the current expenditure of the Government has been reduced to between $400,000 and $450,000 a month, or $5,400,000 per annum. If the expenditure on the Post Office, as being an organisation whose accounts should be self-balancing, be deducted, there remains about $4,600,000. Of this sum, rather over $800,000 is expended on pensions of all descriptions: while $1,500,000 is absorbed in equal proportions by public health services, the administration of justice and educational grants. These items reduce the total to about $2,000,000. When further deductions are made for Customs administration and maintenance of public works and buildings, the sum left over for productive purposes is very small. The proportion of the total expenditure which is devoted to non-productive purposes is much larger than would normally be expected, but this has been brought about not because that expenditure has been maintained at too high a level, but because the whole expenditure estimate has been so drastically cut that the proportion between productive and non-productive expenditure has been lost.

  172. Not only are we satisfied that, owing to the enforcement of these economies and the introduction of the system of Treasury control, current expenditure has been reduced to the lowest possible level, but we feel bound to point out that in some respects it must be expected to show an increase during the next few years.

  173. In the first place, the reductions in the salaries of civil servants and Government employees, while fully justified as an emergency measure, have been on such a severe scale that it may be doubted whether they can be continued much longer without causing hardship and distress. These reductions have been accepted with good grace and we gladly pay tribute to the uncomplaining spirit in which public servants have determined to bear their full share of the sacrifices needed to restore the Island's finances. But their reserves are becoming exhausted: no margin is left to them for the renewal of clothes and other necessities and it is clear that a continuance of the reductions on the present scale must make for conditions which will detract from efficiency and so militate against the best interests of the country. On other and special grounds, the salaries of the Judges should be readjusted.

  174. Somewhat similar considerations apply also to the reductions made in war pensions. The disabled ex-service man in Newfoundland is, to some extent, liable to be placed at a disadvantage compared with his fellows in other countries owing to the scarcity of openings for the employment of men who are not physically fit; in most cases it is difficult for such men to supplement their pensions. It is true that the original pensions awarded were of a somewhat high standard; but the reductions have been large, and we recommend that as soon as circumstances permit the opportunity should be taken to restore in part at least the cuts which have been made.

  175. Moreover, reductions of a drastic nature have been made in certain services which must be regarded as essential to the Island's welfare. For instance, the grant made towards the maintenance of the Island's educational services has been halved. These services are conducted by the several denominations and the halving of the Government grant has in most instances, if not in all, resulted in halving the salaries of the teachers, who have in consequence been reduced to a condition of bare subsistence. An increase in the grant is, in our view, urgently called for.

  176. The complicated history of the Newfoundland Railway, which has more than once been the subject of acute political controversy, is recounted at some length in Chapter III. Until 1920 the Railway was operated by the Reid Newfoundland Company under the contract of 1898 as amended by that of 1901. At the end of this period the financial difficulties of the Company were such that an appeal was made to the Government for assistance, with the result that between the years 1920 and 1923 the Railway was operated by a joint Commission composed of representatives of the Government and the Company. Under an agreement confirmed by the Railway Settlement Act of 1923 the entire management of the Railway was assumed by the Government, the Reid Newfoundland Company undertaking that the Company and its subsidiary companies should retire absolutely from all transportation (including express) operations in, from and to the Colony and from the docking business in Newfoundland. In consideration of this complete retirement, the Company received from the Government the equivalent of $2,000,000 in sterling at the then rate of exchange. Since 1923, the Railway has been operated by the Government, first as the "Newfoundland Government Railway", and latterly as the "Newfoundland Railway".

  177. As will be seen from the following figures showing the annual deficit of the management of the railway since 1923, the railway has never been able to meet its working expenses during the period in which it has been under Government control. It appears, indeed, from the available figures relating to the Reid Newfoundland Company's operations that the railway has never at any time paid its way, even without provision for depreciation and renewal.

  * This year was exceptional, owing to the increased traffic brought to the Railway by the construction of the Paper Mill at Corner Brook in 1923.