The committee recommended the grants, etc. of land, as follows: Grant, for Church purposes, at Hlobo. Nqamakwe; grant for Church and school purposes, Fort Beaufort; grant, for school purposes, at Delport’s Hope; lease, to A. J. Goodman, of farm “Chepstowe,” Maclear district; lease, to C. S. van Heer den, of farm “Hoek Plants,” division of Victoria West; exchange of land, Malmesbury; lease, to M. C. Laubscher and D. L. Ehlers, of foreshore of sub-division of farm “Brandhuis,” Malmesbury; lease, to J. A. Melck and J. V. Duckitt respectively, of foreshore of farms “Ganze Kraal” and “Modder Rivier,” Malmesbury; exchange of land at Port Elizabeth; letting of farms under section 6 of Act No. 26 of 1891 (Cape); letting of Government lands and buildings under section 6 of Act No. 26 of 1891 (Cape); exchange of land, division of Prince Albert; grant, for school purposes, at Amalinda, East London; grant, to Village Management Board, Rooigrond, division of Mafeking; lease of fishing sites on farm “Otterdam,” Lambert’s Bay; excision from list of demarcated forest areas of Orange River Islands between Kenhardt and Gordonia; reservation, for Church land school purposes, in Pelandaba Location, Herschel; grant, for Church purposes, on Embokotwa Commonage; rescission of grant, for Church purpose tat Colosa, district of Idutywa; reservation, for fishery purposes, at North Ray, Saldanba Bay; lease, to W. Calvelly, at Mdumbi Mouth, Ngqeleni; lease, to H. Macminn, at Mtentu River Mouth, Lusikisiki; reservation, for Church and school purposes, in Nombeu’s Location, division of Herschel; grant of public cemetery, at Mount Ayliff; reservation, for Church purposes, in Mgubo’s Location, division of Herschel; lease of fishing sites, at Elands Ray, division of Piquetberg; reservation, for recreation ground, at Mqanduli.

It was agreed that the report be considered in committee on Thursday.

As will have been noticed, there was great diversity of practice in the four Colonies in regard to the keeping of Public Accounts, and the Finance Accounts, to which I have just referred, while most complete and comprehensive, in so far as concerned the respective Colonies to which they related, necessarily failed to convey any clear appreciation of the combined financial position under Union. For this reason it seemed to me to be necessary to have the four sets of Finance Accounts abstracted and the results embodied in convenient form in a finaneia1 White-book.

Copies of this White-book are in the hands of honourable members: it gives a mass of information regarding the balances on revenue, loan and other accounts, with which the Union commenced its existence. I venture to think that it will be of the greatest value in enabling honourable members to see clearly how we stood on the 31st, May last.

In addition to this White-book, a detailed statement has been laid on the table of the Public Debt of the Union at 31st May, 1910. I should like to say that the figures given in these returns have not been audited. I have little doubt as to their accuracy, but it is essential, of course, that they should be audited. If the Select Committee on Public Accounts, to which the Financial White-book has been referred, is satisfied, after considering the report of the Controller and Auditor-General, that it accurately and correctly sets out the position of the Union’s finances at 31st May, I presume that the House will be prepared to accept the figures included therein as the foundation of the Union’s accounts. It does not seem necessary for me, at this stage, to take the House step by step through the mass of figures set out in the financial White-book. The examination of the figures may appropriately be left to the Public Accounts Committee. But I would ask the indulgence of honourable members while I touch briefly upon the principal features. I shall confine myself to round figures. It will be perceived from the tabular statement on page 13 of the White-book that the total balances bequeathed to the Union by the four Colonies aggregated £23,529,000: made up of investments, £17,916,000; and cash, £5,613,000. This large amount comprised Revenue balances, Loan balances, and the balances on Trust and Deposit Accounts and in Sinking Funds. In a speech which I delivered in this House in November last, J gave certain tentative figures in respect of the Revenue and Loan balances brought into Union. The figures now put before honourable members differ somewhat from those previously given by me, and it is perhaps desirable that I should explain the cause of the differences. According to the White-book, the revenue balances brought into Union amounted to £1,478,000; whereas in my November speech I gave them as £2,161,000; a difference of £683,000. Now, Sir, when I mentioned these figures on the last occasion, I dealt with them in the same manner as that in which they appeared in the accounts of the several Colonies; that is to say, I included in them certain advances which had been made from the various Consolidated Revenue Funds. In the figures which are given in the Whitebook, these balances are treated differently: only actual cash is taken into account, and the amounts represented by the advances are deducted from the Consolidated Revenue balances. I am sure, Sir, that the House will agree that this is the proper way of showing the true position. Under the old method of treatment the balances in the Consolidated Revenue Funds were unduly inflated. The principal items which have now been dealt with in this way are—

In Natal Accounts

In Transvaal Accounts.

In Free State Accounts.

The balance of £239,000 is represented by a variety of other adjustments in the accounts of the four Colonies that, on a closer examination of these accounts, seemed to me to be necessary.

Turning now to Loan Balances—according to the White-book the balances on Loan Account brought into the Union at 31st May amounted to £2,923,000; whereas in my last Budget Statement I put the figure at £2,630,000. The difference of £293,900 is almost entirely accounted for by the inclusion in the White-book Statement of Cash balances, destined for Loan Services, amounting to £203,000, which, on 31st May last, were shown in the Transvaal Accounts as being in the hands of Accounting Officers.

Now, Sir, with regard to the disposal of these Revenue and Loan balances, I think it necessary to offer a few words of explanation.

From the discussions that took place during the first part of the session, it appeared that some honourable members experienced considerable difficulty in, understanding what was the position of affairs.

Well, Sir, taking first of all Revenue balances—the amount of £1,478,000—this sum is available far appropriation as Parliament may direct.

It has been suggested in some quarters that the money which each Colony bequeathed should have been specially earmarked and applied towards satisfying the commitments in respect of building and other “works” services respectively entered into by the various Governments prior to the Union: in other words, that whatever balances any Colony brought into Union should be applied only to services in that particular Colony. This is a policy which I could not endorse. It would involve an infringement of the letter and spirit of the South Africa Act, which contemplates that on the establishment of Union all Revenue balances shall become the property of the Union to be used in the general public interest; moreover, it would necessitate keeping a number of separate accounts and the continuation of the Provincial idea.

Another suggestion is that the Revenue balances brought into Union should be utilised in meeting current expenditure, and that a corresponding reduction should be made in the taxation of the country. I venture to think that this suggestion would not find any considerable support in this House, and it hardly seems necessary to explain why. It must be obvious that financial methods of this nature could not fail to bring discredit upon the country, since they would involve violent fluctuations in taxation, which would be most harmful to all sections of the community. What we want to see is stability and confidence, and the development of the Union, gradually, upon sound and economic lines.

The course which the Government favours is to apply these Revenue balances towards the reduction of the floating debt of the Union. This seems to be the most desirable, the most simple and the soundest policy from whatever point of view it be regarded. The benefit will be secured to the community as a whole, through the proportionate reduction in the public debt charges; the stability of the fiscal system will be preserved, and the credit of the Union will be improved in the eyes of the investor.

The legislative sanction that will be necessary for this step is being provided for in a Bill which I propose to bring forward at an early date, and with the provisions of which I shall deal later on.

Turning now to the question of the disposal of the Loan balances brought into Union—the sum of £2,923,000 specified in the White-book—it only requires a very few wards to explain the position. On page 24 and the succeeding pages of the White-book will be found tables showing that these moneys are all assigned to definite loan services, and, under section 121 of the South Africa Act, they are deemed to have been appropriated for the purposes for which they were raised. There is no question, therefore, as to the purposes to which the Loan balances should be devoted.

I now come to the balances of Trust and Deposit Accounts brought into Union on 31st May. They amounted in the aggregate to the vary large sum of £14,508,000. of which approximately 131/2 millions were invested, the balance being held in cash. In the White-book reference is made to the haphazard manner in which these Trust and Deposit moneys have been had ministered in the past. From every point of view it is desirable that the control of these funds should be vested in a central authority, and, with this object in view, the Public Debt Commissioners Bill has been introduced into the House, which I venture to think offers a simple and effectual means of disposing of these balances on a sound and satisfactory basis.

The balances on Sinking Fund Accounts— amounting to £4,620,000—do not seem to call far special remark at the present time. The machinery erected for dealing with these funds is still in operation, and any alteration that it may seem necessary to make therein will be subject to Parliamentary approval. I have already called attention to the fact that the balances brought into Union on 31st May last, under all heads, comprising Revenue Accounts, Loan Accounts, Trust and Deposit Accounts, and Sinking Funds, aggregated £23,529,000. of which £17,916,000 were invested, and £5,613,000 were represented by cash. This cash balance, however, was greatly in excess of current requirements, and I therefore deemed it undesirable to allow the money to remain idle.

The most profitable way of temporarily employing the cash was to redeem Treasury Bills and other floating debt, and so to relieve the interest charges upon the Exchequer. The amount of Treasury Bills and other floating debt redeemed in this way at the close of last month was £3,161,000, involving a direct saving in interest for the ten months’ period of £25,000.

I should like it to be dearly understood that this method of employing these cash balances is only a temporary expedient, dictated by the ordinary requirements of public finance. Except in so far as Parliament may agree to appropriate, in reduction of floating debt, the surplus Revenue balances brought into Union on 31st May, the amount of loan moneys temporarily redeemed, in this way, will have to be restored to Loan. Account by means of fresh borrowings. Upon this point I shall deal at greater length when I come to the loan position. There are many other points in connection with the balances brought into Union on 31st May that I should very much like to touch upon, but I hesitate to occupy the time of the House when so much that must be explained on other subjects is still to come. So, with honourable members’ permission, I will proceed to deal with the finances of the ten months’ period which comes to an end on the 31st instant.

It should be borne in mind that the remarks I am about to make will not refer to the Railway and Harbour finances, which will be dealt with by my honourable friend the Minister of Railways and Harbours when be introduces his Estimates.

It will be remembered that, including the contribution from the Railway and Harbour Fund and the extra yield from the Mining Profits Tax, I budgeted for a total Revenue of £13,811,000. I was criticised somewhat sharply at the time by some of my financial friends, who told me that my Estimate of Revenue for the ten months was altogether too optimistic, and that my expectations would not be realised. Well, Sir, I am glad to say that, so far as can be judged from the latest available returns, my Estimate will be more than realised, thus showing that the charges mad against me of being over-sanguine were groundless. My revised Estimate of the Revenue for the ten months’ period, including the Railway and Harbour contribution, is £14,014,000 an increase over my Budget figure, which was £13,811,000 of £203,000.

I venture to think that this is a gratifying result for the first financial period under Union.

It is desirable to examine the figures briefly in order to see what are the principal variations as compared with the Budget figures.

Increases.—Substantial increases are shown under the heads Customs (£30,000) and Post Office (£78,000). Now, it is undoubtedly very encouraging to find that the yield from Customs and Postal revenues is being so well maintained, since these sources of revenue may be regarded as fairly reliable barometers of the country’s progress. But I am far from saying that this large yield, more particularly from Customs, can continue to be reckoned upon; indeed, I am satisfied that the conditions during the past year have been abnormal, and that we should observe the greatest caution in fixing a figure for our Customs revenue for next year. However, J propose to deal with this subject at greater length when I come to present the Revenue Estimates for 1911-12. The increase of £78,000 in the revenue of the Post Office is due mainly to the development of telephone business. From the last monthly return published by the Treasury, it will be seen that the receipts of telephone revenue for the eight months to January 31 already equalled the estimate for the full ten months period. There is another head of Revenue which shows a substantial increase over the estimates, and that is Miscellaneous Revenue, which falls to be increased by £132,000. This increase is almost entirely due to repayments to Revenue, during the financial year, of certain of the Consolidated Revenue Fund advances (made by the late Colonial Governments) to which I referred earlier in the afternoon as having been excluded from the Union Revenue balances at May 31.

Decreases.—Turning now to the heads of Revenue which have failed to come up to expectations, the most important is the head Mining Revenue, the yield under which will most probaly fall short of the estimate by £65,000. This shortfall is due to the fact that expectations have been upset in regard to the amount of revenue to be contributed by the Premier Mine.

I come now to the Expenditure side of the account. Although some months must elapse before the true expenditure figures for the period can be obtained, I think a fairly accurate estimate can be framed of our position, and upon a conservative basis I expect the 31st March will show that the expenditure of the ten months has been considerably less than the estimate.

But it has always been my experience that accounting officers are inclined to err on the side of estimating their outgoings at too high a figure, and I should not be a bit surprised if this estimated saving of £271,000 prove to be under the mark.

An examination of the items which go to make up the figures of £271,000 shows that savings are anticipated on three-fourths of the votes included in the Estimates—from which it would appear that there was a general tendency on the part of accounting officers, at the beginning of the year, to over-estimate their requirements. But, Sir, I do not think these officers can be blamed for this; the circumstances were abnormal, and in many cases heads of departments had insufficient opportunities of studying carefully the needs of their respective administrations.

The principal savings are under the votes

It should be noticed, however, in regard to the last item—Buildings, £61,000—that this does not represent an actual saving: what it means is that the building contracts of the Public Works Department have advanced less quickly than was expected, and that the liability is only postponed.

The votes that show excesses are few in number and unimportant in amount, so I need not refer to them.

But I hasten to add a word of warning lest a false sense of security may be created by the appearance of such a substantial balance at credit of our Revenue Account. Hon. members should not for a moment forget how this surplus is obtained, and that, in reality, our position is not nearly so favourable. This surplus of £478,000 is only arrived at after taking credit for the full amount of the contribution of £1,220,000 from the Railway and Harbour Fund. In other words, if we had relied only on our own sources of revenue, and had not received this substantial contribution from the railways, we should have had a balance on the other side of the account of £742,000.

With regard to the disposal of the 1910-11 surplus of £478,000, I propose to defer dealing with this point until I have concluded my remarks upon the Estimates of the approaching twelve months.

But, Sir, before launching out upon an explanation of the 1911-12 Estimates, I would ask the indulgence of the House while I explain the views of the Government in regard to the future financial policy of the Union. When I made my last statement some of our critics insisted that the Government should then and there have made a declaration of their financial policy; they seemed to think that it was the duty of the Government, within a few months after the establishment of Union, to come down to this House and to propound a comprehensive scheme for the immediate organisation of the whole of the Union finances on a permanent basis. If these critics thought they were justified then in demanding such a declaration of policy, it is reasonable to assume that they will, unless reflection has cooled their ardour, make the same criticism again. It is perhaps as well, therefore, that I should anticipate those criticisms. I have very strong doubts whether many people in South Africa have closely and seriously examined and considered what important and far-reaching alterations are essential in the fiscal laws and financial arrangements of the several Provinces before the full spirit and intention of the Act of Union can be given effect to. The Legislative Union which was established created, in effect, a fiscal revolution. It is true that, so far, the revolution has, to some extent, been only on paper, but it is, of course, quite impossible to put off the practical questions indefinitely. It is quite clear that the fiscal inequalities that exist at present cannot be allowed to continue indefinitely (cheers)—but it is only when one comes to deal with these matters in a practical manner that the difficulties can be fully appreciated.

It seems to me that the fiscal revolution to which I have referred necessitates three things. In the first place it involves a gradual but complete revision and repeal of the different systems of taxation which now exist in the several Provinces, and the substitution in the place thereof of an uniform system of taxation.

In the next place it involves a complete revision and alteration of the differing principles upon which the Central Government—at present continuing the varying systems practised in the several colonies prior to Union—gives financial support to each Province for certain public services.

And, in the third place, it involves a radical change in the methods of operating the railways and harbours, and of dealing with the revenues from these services. I am sure the House will not take it amiss if I deal for a few moments with some of the changes which will have to be effected under the three heads just mentioned.

Under the first bead, namely, the inequalities in taxation, we have already had some evidence during this session of Parliament that the public will not submit for any length of time to a continuation of the existing anomalies in taxation, and that some of them already demand that steps shall be taken without delay to bring about equality in taxation. The most striking of these inequalities are found under the following heads: In native taxation there is in the Transvaal a poll tax of £2 (rising in some cases to £3) per head, as against a hut tax of varying rate in the Cape; a poll tax of 20s. per head in the Orange Free State; and, in Natal, a poll tax of 20s., and also a hut tax of 14s. The 950,000 natives in the Transvaal contribute about £390,000 per annum in respect of poll tax (exclusive of pass fees amounting to about £340,000), whereas approximately 11/2 millions of natives in the Cape contribute some £120,000 by way of hut tax. In Natal, the European population, as well as the native, is liable to poll tax, but no similar tax on Europeans exists in the other Provinces. The Government has decided to abolish the poll tax in Natal—(cheers)—and after the present calendar year that tax will not be continued. But the remission of the poll tax in the case of Europeans and natives in Natal will be counterbalanced by the extension to that Province of such new and uniform methods of taxation as may be applied respectively to the white and native races throughout the Union.

In the Transvaal there is a scientific system of death duties. Only nominal duties exist in the Free State; and, in Natal and the Cape, a system of succession duty is in operation. These duties will also have to be made uniform, and a common scale of duty made applicable to the whole of the Union in place of the varying provisions which exist at present. The Government has such a scheme in preparation, but it will require careful consideration both by the Government and by this House. At the same time we will endeavour to come to a satisfactory arrangement with the Imperial Government with regard to the payment of double duties. Turning now to the question of

—(cheers)—the inequalities in transfer duty are brought home to the taxpayers almost daily. (Cheers.) The duty in the Transvaal is 11/4 per cent., in the Cape 4 per cent., in Natal 3 per cent., and in the Free State 4 per cent. In the Transvaal the duty covers a Bar wider range than in the other Provinces, and embraces mining titles and long leases, with the result that the estimated average yield for the year 1911-12 from the 11/4 per cent. transfer duty in the Transvaal is £135,000, whereas from the 4 per cent, duty which is in force in the Cape Province the estimated yield is only £175,000 for the same period.

on trades and professions also vary very considerably in the several Provinces. Some trades and professions are subject to a licence in one Province and are free from such licence in another Province. Again, the scales of licences vary very considerably, and these will also have to be made uniform.

What I have said with regard to licences applies equally to Stamp Duties, and proposals are already before this House for obtaining legislative sanction to a uniform system of Stamp Duties.

The State’s interest in precious stones and precious minerals varies very largely in each Province. In the Transvaal, in diamond properties the State claims 60 per cent, of the profits, and in the Orange Free State 40 per cent. In the Transvaal, upon discoveries of gold or precious metals upon a private farm, the private owner is entitled to a mining lease of 20 per cent of the area proclaimed, and the rest is at the disposal of the State. In the other Provinces, the State has no such participation in the mineral wealth. These varying systems of treatment will also have to be adjusted. (Cheers.)

The Excise laws in the four Provinces are similarly productive of striking anomalies. In the Cape the following duties are levied: On wine brandy, 3s. per gallon; on spirits distilled from other produce of the vine, 6s. per gallon; on spirits distilled from other material, 10s. per gallon. In Natal there is a uniform duty on spirits of 9s. per gallon. In the Transvaal the Excise on spirits distilled from the produce of the vine is 9s. per gallon. In the Orange Free State the duty on all spirits is 9s. per gallon. The Beer Excise in Natal, the Transvaal, and Orange Free State is the same, viz.: 4d. per gallon. In the Cape it varies from 11/2d. to 3d. per gallon, according to strength.

I come mow to the second set of anomalies mentioned by me as having been brought prominently to notice by Union, the unequal system of giving State aid to certain public services administered by the Provincial Councils. What I have said with regard to the first head applies here also, namely, that the public will expect and demand that before long there shall be similarity (la) in the treatment of subsidies for education, and (b) in the method of providing the funds necessary for the erection of school buildings, and for the construction and maintenance of roads and bridges. (Cheers.)

It is, however, under the third head—the application of section 127 of the South Africa Act—that the most striking change of all will have to be given effect to—a change which will have the most far reaching effect upon the economic and fiscal affairs of the Union. Prior to the 31st May last, those Colonies whose railways showed a surplus of revenue over expenditure applied this surplus either towards meeting deficits on their Consolidated Revenue Funds, or in supplementing their general revenues. Those railway surpluses were especially large in the two inland Provinces—so large that for a number of years they were sufficient to meet, not only the interest and sinking fund charges on the whole of the railway capital, but also the interest and sinking fund on the rest of the debt of the two Colonies. The Act of Union has declared that this system of applying railway surpluses to supplement the general revenues shall cease—(cheers)—and that, within four years from the date of Union, the railway tariffs shall be so arranged that the earnings will approximate to the expenditure— in other words, that the railways shall not be used as a machine for raising revenue. This means, therefore, that unless the existing general revenues expand to such an extent as will enable them to meet the gap caused by the discontinuance of railway contributions, new sources of revenue will have to be opened up to meet the general expenditure. But this is not the only financial gap which will have to be bridged. A very fruitful source of general revenue has disappeared by the lapsing of the income tax law of the Cape. It is true that the income tax has been partially replaced by the Taxation of Mining Profits Act, but, even so, the discontinuance of the Cape income tax has meant a substantial shrinkage in the revenues yielded by the Province. It will be remembered that the income tax was rendered necessary in the Cape to balance expenditure, and that, even then, equilibrium was only obtained by suspending the sinking fund payments. The sinking fund payments have now been resumed, but these two items alone impose a considerable additional burden upon the Union. If the Union had not come about it is difficult to perceive how the Cape could have dome without the proceeds of its income tax. I think I have said enough by way of illustrating the extraordinary differences that exist in the fiscal laws of the late Colonial Parliaments. It will be manifest to all, I think, that no light task is involved in removing these anomalies— on the contrary, that it will require the expenditure of much time and labour to evolve scientific schemes of taxation to replace the present laws, as regard must be had, not alone to the co-ordination of the four different sets of laws in the case of each head of revenue, but also to the general fiscal requirements of the Government, and to the need for remedying the defects in administrative machinery, which experience has shown to exist, even in the best of these various measures.

One thing seems to emerge, and that is that we shall have to be extremely cautious in remitting or reducing the sources of taxation which at present contribute to the general revenues. Not only will we have to be cautious about remitting general taxation, but I think it will probably be necessary to open up new sources of taxation (probably a general income tax throughout the Union) to meet the gap which will be created when the railway cease to make any contributions to the general revenues. No alarm need, however, be felt at the prospect of any such new taxation, because it merely means a readjustment in the incidence of taxation. It means on the one hand that railway taxation to the extent of probably one million, or one and a half millions, will have to be remitted, and, on the other hand, that the sources of general taxation will have to be increased to make good the shortage on our Consolidated Revenue Fund, due to the surrender of railway revenue. Well, Sir, the view has been expressed in some quarters that all these anomalies should be removed without delay—that uniformity of taxation should be at once introduced throughout the Union. But I am afraid it would be quite impossible to have all the necessary measures prepared at the same time, and, even if they could be prepared, it would be too much to expect that they could all be put through Parliament during one session. But a more serious factor than either of these would be the upheaval that would be created in the economic situation. Finance, trade, and commerce would be shaken to their foundations. The only practicable course, in my opinion, is to proceed gradually, so that the country may accustom itself by degrees to the changed order of things—a batch of connected measures being taken each year until the whole programme is worked off. The preparation of such a scheme, involving, as it necessarily must, the removal of all the anomalies and inequalities to which I have referred, is, of course, no easy task, and I am sure that every reasonable person who has thought about the matter will agree that it is impossible to expect that any Government would be able in the course of a few months to prepare and submit a comprehensive programme for dealing with all these thorny and intricate problems. For the reasons, I think the House will agree that the Government is following a wise and prudent course in refraining from hurrying forward and deailing in this first session with any large scheme of financial reorganisation.

With these preliminary remarks, I would now ask honourable members to consider the Estimates of the year upon which we are about to enter.

Looking at the Budgets in the several South African Colonies over the last seven or eight years, it is rather remarkable to find how frequently the various Treasurers have been found to be out in their Estimates of Revenue; but I know from my own experience that, in a young country, it is a most difficult matter to make an accurate forecast of revenue. Trade fluctuates so suddenly that the most carefully prepared Estimates have frequently been upset. The only specific rule that can be laid down is this—be cautious, and don’t budget for a high revenue, unless you can do so with certainty, because high Revenue Estimates mean a correspondingly high expenditure, and once expenditure on new services is commenced it is most difficult to stop or reduce it. In framing my Revenue Estimates for the coming year I have borne this rule in mind, and I have also been mindful of some other considerations: (1) One consideration that I have kept in mind is that there has been a great expansion in trade and in imports and exports during the past year, not only in South Africa but elsewhere, and. I think it would be unwise to assume that this abnormal expansion can continue indefinitely. Although I do not think we have reached the limit of the present era of abnormal expansion, still I think it prudent to provide against a set-back. There has been evidence of some fluctuations already (not very great) in the returns of Railway and Customs receipts of the past few months. (2) Another point I have remembered is the warning given to us a few months ago, by some of the representatives in this House of the gold industry, that the expansion on the Rand during the last twelve months has been abnormal. (3) There has also been the warning recently issued by the President of the Johannesburg Chamber of Commerce to merchants. In his opinion, merohants have been on the crest of the wave, and he told them they must beware of a falling-off in business. I submit, Sir, that these are warnings which we cannot afford to disregard, and therefore I think we should be cautious in our expectations, more particularly in regard to Railway Receipts and Oustoms Revenue.

At the same time, there is strong evidence that the purchasing capacity of the people generally has increased. The farming population are in a better position today than they have been for many years— (cries of “No, no ”)—and their prosperity is generally reflected on the rest of the community, because the bulk of the money which comes to them from their produce remains and is spent in this country, which is not the case with the profits derived from the mining industry.

I have taken all these factors into consideration, in placing my Estimate of Revenue for the coming year at £14,859,000.

It is desirable that I should offer a short review of the principal heads of Revenue and of the yield estimated to be received therefrom.

The Oustoms Revenue I have placed at £4,302,000, which is upwards of £200,000 less than the yield for the preceding twelve months. It may be thought that I have been too modest in my estimate, but I have already indicated my reasons for thinking that the rate of importation of dutiable goods is not likely to be maintained at the same high level as during the past year. Recent events have impressed me with the need for caution. There is also to be borne in mind that the consumption of locally manufactured articles is increasing, particularly tobacco and spirits, and that dutiable importations must be displaced to a proportionate extent. In all the circumstances, I am satisfied that it would not be safe to place the Customs Revenue at more than £4,302,000.

Before passing on from the subject of Customs, it will be of interest if I give a few statistics of the imports and exports for the year 1910, as compared with the preceding year.

The value of the gross imports of merchandise into the Union of South Africa during 1910 (exclusive of diamonds in transit, raw gold in transit, articles for South African Governments and specie) shows an increase of over 73/4 millions as compared with the previous year, equivalent to 29.7 per cent, advance. The value of articles for South African. Governments increased from £1,135,000 to £2,720,000, and specie from £1,507,000 to £2,213,000; the grand totals being £28,863,000 and £38,941,000 for 1909 and 1910 respectively — an increase of £10,078,000, or nearly 35 per cent.

The increases are very general, but are most noticeable in the following articles: Apparel and slops, cotton manufactures, electrical cables and fittings, haberdashery and millinery, hardware and cutlery, iron and steel manufactures, leather goods, including boots and shoes, machinery, oils, stationery and books, vehicles, including bicycles and motor cars, wood and timber and woollen manufactures.

On the other hand, with the exception of rice, the decreases consist entirely of articles manufactured or produced in South Africa, viz., blasting compounds, candles, butter, wheat, eggs, oatmeal, lard, and sugar.

The value of the exports of South African produce for 1910 shows an increase of nearly £4,000,000, or about 8 per cent.

The following articles show substantial increases in value: Bark, coal, diamonds, ostrich feathers, fodder and forage, maize, raw gold, Angora hair, hides and skins, tin ore, wool, sugar, and whale oil. In all these oases, with the exception of ostrich feathers, Angora hair, and wool the increases in value are accompanied by increases in quantities.

Copper ore shows a decrease of £52,000, owing, I believe, more to irregular shipments than to diminishing output; and oats a decrease of £67,000.

There is a further point that I should touch upon before leaving the question of import Duties. I refer to the question of a revision of the Tariff. The Government are alive to the need that exists for a thorough overhauling of the present Tariff, which, unquestionably, is defective in many respects. But it would be inadvisable to take any active steps in the matter until the Government are in possession of the recommendations of the Customs and Industries Commission, which is conducting exhaustive inquiries into Customs and allied matters at the present time,

The figure of £1,385,000, at which I have put my estimate of Postal Revenue, is believed to be a most conservative estimate, The expansion in every branch of Post Office activities during the past year has been most marked; and nowhere more noticeable than in the case of telephones, The receipts from this class of business show extraordinary elasticity and give promise of continued expansion. In other directions the developments have also been remarkable, and there is no reason to anticipate that the estimate will not be realised. The revenues of the Post Office for the past waive months will amount, according to the Department’s latest returns, to £1,407,000—from which hon. members will see that my estimate for 1911-12 is lower by £22,000 than the collections for the past year. The expansion that has already taken place in South Africa is strikingly illustrated by a comparison of the following figures, indicating the Post Office business during the calendar years 1910 and 1909:

The total amount of revenue earned by the Post Office in 1910 amounted to £1,410,000. This is an increase of £108,000 over the combined earnings of the four separate Colonies for the calendar year 1909. All branches of Post Office business contributed to this increase.

The increase in the value of money orders issued during the year was £167,000. The payment of money orders also shows an increase of £84,000.

The popularity of the Postal Order shows no abatement. During the last calendar year there was an increase of £300,000 in the value of orders issued. The value of postal orders paid shows an increase of £309,000.

As a further indication of the prosperity of the country and the people generally, the Savings Banks’ figures afford convincing proof. In 1910 the increased value of deposits amounted to £546,000, exclusive of Savings Bank Certificates in the Cape, which increased by £48,000. The balance standing to the credit of depositors on the 31st December last, including the value of Savings Bank Certificates in the Cape Province, amounted to £6,054,000, showing an increase as compared with the balances on the 31st December, 1909, of £864,000. The depositors in the Savings Banks throughout the Union now number 218,617, being 20,399 greater than at the end of the previous year (1909). The average amount standing to the credit of each depositor is £28.

The number of telegrams increased by 283,000, and the telegraph revenue by £31,000.

As compared with the telephone connections on the 31st December, 1909, there was an increase of 2,750 on the 31st December, 1910. The total mileage of wire added during the year was 2,650. So much for Post Office Revenues.

I come now to the head Mining Revenue, which is put at £2,243,000, as compared with £1,750,000 for the preceding twelve months—an increase of £403,000. This increase is made up as follows:

It must be admitted that the elasticity in Mining Revenue affords a striking proof of the value and vigour of the industry. Nor must the fact be overlooked that my forecast takes account of the reduced profits of the Premier Mine, as disclosed by the recently published accounts of the company. In this connection I may direct the attention of the House to the question of the State’s share in Diamond Mines. As the House knows, under the Transvaal law the State shares to the extent of 60 per cent, in the profits made in diamond mining; that law was passed in 1903, shortly after the discovery of the Premier Mine. At that time the yield from the Premier Mine was about. 1.3 carats par load, and the value of the diamonds was about 27s. 9d. per carat. There can be little doubt that one of the factors (if not the main factor) which influenced the Transvaal Legislature in fixing the State’s share at the high rate of 60 per cent. was the high rate of profit which it was estimated the mine would yield. The latest returns from the mine show that the yield has fallen from 1.3. carats per load to 23 per load, and that the value per carat has fallen by nearly one-half. I mention these facts because they are matters which Parliament will, no doubt, have to take into consideration when the time comes for introducing uniformity of legislation in the matter of the State’s share in the profits of diamond mines.

A fact that is often overlooked in connection with Mining Revenue is that the direot taxation forms only a portion of the receipts derived by the Treasury from this vast industry. The indirect Revenue, in the form of Customs Dues, cannot, unfortunately, be closely estimated, but the amount must be very large; in addition to this, the Railways derive an enormous revenue from the mining activities of the country.

A few figures showing the output of and labour employed on the mines may serve to give an indication of the relative importance of this industry in the body politic. During the year ended 30th June, 1009, the output of the principal minerals, as far as ascertainable, was as follows:

The production: of this output gave direct employment to nearly 33,000 whites and 282,0 coloured persons. The mineral industry in the Union may, if the labour supply be not deficient, be expected to show some further expansion: during the coming financial year. On the Witwatersrand two large new producers have just commenced crushing operations. One of these, with a battery of 600 stamps, is carrying on work on a section of reef from which hitherto no gold has been produced. On the far eastern Rand, two new large producers will commence crushing during the coming year. This eastern, section of the Rand at present contains the largest number of developing mines, and most of them may be expected to become considerable producers in the not very distant future. Among others, a large area of 2,600 claims, leased by the Transvaal Government, should, in time, add a considerable quota to the output. Under the terms of the lease, the Government will share in the profits of the company to a large extent, and we may expect therefrom, in time, a handsome contribution to the general Revenue. While new producers are thus coining forward to augment the output, some of the older mines are approaching the exhaustion of their payable ore, and this will tend to balance accounts somewhat. We have, however, not arrived at the stage when the gold mining industry of the Rand may he expected to show a gradual decline, and the Union may look forward generally to a slight further increase in the production of gold. When it is realised that, in the twenty-five years of its existence, the Rand has produced rather less than 300 million rounds worth of gold, and that its further production may be estimated at 2,000 millions, the importance of this enormous asset in the future progress and development of the Union may be to some extent realised. As far as can be seen, the output of precious metal from the rest of the Union, while not likely to show any decrease, cannot be expected to make any considerable advance during the coming year.

As hon, members are aware Stamp Duties are the subject of consideration at the present time, with a view to the consolidation of the laws of the Union. But although the proposed tariff differs materially from the tariffs now in existence, it is not designed to bring in any increased revenue. My estimate of revenue from this source for the coming year has, therefore, been placed at £496,000, as compared with £480,000 for the previous twelve months. The increase of £16,000 in the estimated yield is expected as a consequence of the policy of centralising the administration of these stamp duties in one department. In the past, owing to the responsibility for collection of stamp duties being distributed among various Government Departments, it is to be feared that there was considerable loss of revenue.

The only other head of Revenue of which special mention need be made at the pre sent time is Interest, £2,806,000. This item includes a sum, of £2,554,000 recoverable from the Railway and Harbour Administration in respect of the interest, on their capital, as prescribed in the South Africa Act. I would explain that the amount in question is provisional and is liable to alteration, as the actual amount of the Railways and Harbours capital upon which interest is payable has not been finally agreed upon between the Administration and the Treasury. It is unlikely however, that the Administration’s liability to the Treasury will be less than the sum included in the Estimates.

The yield of interest for the preceding twelve months is put at £2,946,000, so it will be seen that I am budgeting for a decrease of £140,000 from this source. This decrease is due partly to the fact that the 1910-11 figures included a special payment and partly to the fact that our balances are very much reduced. It is unnecessary to say more at the present time on the subject of the Revenues of the coming year.

Turning now to the Expenditure of the approaching financial year, the first point to which I would call attention is the form of the Estimates. From the debate on my November Budget, it was apparent that hon. members felt themselves handicapped in criticising the Government’s proposals by the fact that the figures included therein covered only a ten months period, both in regard to the 1910-11 column, and the preceding year’s column of comparison. As explained by me at the time, this imperlection was unavoidable in the peculiar circumstances. In the draft Estimates now before us, the 1910-11 column of comparative figures represents the Estimates for that ten months period, with an addition of one-fifth, except that, in the case of certain special services, such as Public Debt, where it would be manifestly incorrect land misleading to follow such a course, the actual twelve months’ expenditure figures are given. The cases in which the actual twelve months’ figures are given in the comparative column are indicated by means of a footnote. This method was approved by the Public Accounts Committee. The Estimates have also been much improved in the matter of fuller detail. The information now given is considerably greater than in the current year’s Estimates, and in addition, thirty-three pages of appendices have been added, giving a quantity of information which I believe will prove useful.

A schedule has been laid on the table explaining the variations between establishments shown in the Estimates, 1910-11 and 1911-12 respectively, and also a detailed schedule of all pensions chargeable against the Pensions Vote. The latter should furnish a most useful guide to hon. members when the Pensions Vote comes under consideration of the House. With these remarks, loan proceed to deal with the Expenditure Estimates, 1911-12. The Government’s proposals for the new year’s expenditure are contained in 40 votes, as compared with 41 votes in the current Estimates. The vote that has dropped out is that for Union celebrations.

The total sum provided for in these 40 votes is £16,166,000. The total of the estimated expenditure for the preceding year, as shown in the general abstract, as amended (pages 3 and 4 of the Estimates) is £16,796,000. The estimated expenditure for the year 1911-12, therefore, shows a decrease upon the Estimates of the previous year of £630,000.

Upon three votes only are substantial increases of expenditure observable; they are:

The Interior increase of £83,000 is due entirely to the cost of the census and the registration of voters—increases of £76,000 and £7,000, respectively, being shown under these sub-heads of the vote. This, of course, represents expenditure necessitated by Parliamentary enactments.

The mines increase of £66,000 arises mainly on two heads. In the first place there is a transfer from the Provincial Estimates of a sum of £30,000 for the construction of mine roads. This, it will be observed, is not an actual increase of expenditure, but merely an adjustment between the Mines and the Provincial Administrations Vote. The other item that contributes to the increase is the provision of £25,000 to form the nucleus of a Miners’ Phthisis Fund.

The Post Office increase of £44,000 is largely attributable to increased establishments necessitated, partly by the general expansion in the business of this Department to which I have already alluded, and partly to the fact that new post offices and telephone offices have been opened throughout the Union, which naturally have to be staffed. This demand for increased assistance supports the view which is being more land more impressed upon me that retrenchment in the Post Office was carried to inordinate lengths by the various Colonial Governments. Insufficient confidence in the future of the country has resulted in large numbers of trained and experienced public servants being placed on pension. The consequences are that the State has been deprived of the services of many qualified men, whose assistance would be invaluable at the present time, and that the pension charges on the Treasury have been enormously swollen. I venture these observations in order to sound a note of warning, because I see a disposition in many quarters to ignore the lessons of the past, and to repeat the costly errors of recent years. It is, indeed, false economy to hustle men on to the pension roll when, by the exercise of a little foresight, their services may be made full use of in filling vacancies caused by the country’s expanding requirements. To pass on to a more pleasing aspect of the

it should be noted that the estimated cost of this administration is £1,485,000. On the other hand, the estimated earnings total £1,385,000, showing a shortfall of £100,000. But there must be set against this the value of the free services performed by the Post Office for Government Departments, £191,000. So that the Administration is actually working at a profit.

The reduction of £101,000 on the amount provided under the Public Debt Vote is due entirely to the reduction in the floating debt of the Union. I have already explained that the floating debt has been temporarily reduced by a very considerable amount—by utilising for this purpose the available Cash balances in the Treasury. It will thus be perceived that the consolidation of balances brought about by Union has had the immediate result of providing a means of reducing very considerably the current debt charges of the Union.

But, notwithstanding this reduction in the Public Debt Vote, the total burden upon the Treasury for loan charges is a very heavy one and calls for serious consideration. If we examine the various subheads of the vote, we cannot fail to be struck by the large provision made under Sub-head C., Redemption, for Sinking Funds—a sum of £722,000 being provided for this purpose. The point to which I wish to draw attention is this—that there is good reason for thinking that this provision of £722,000 is largely in excess of the actual needs of the case, bearing in mind that out of the Union’s total loan liability of, roughly, 1161/2 millions, no less an amount than 751/4 millions are invested in railways and harbours, or nearly 65 per cent of the whole. The South Africa Act provides for the maintentance of the railways land harbours of the Union up to standard out of the revenues of the Administration, and, therefore, it cannot reasonably be argued that, in addition to keeping this valuable asset up to standard, the State should accumulate a sinking fund for the redemption of the loan capital. That is surely an unjustifiable burden to impose upon the taxpayer. However, I shall deal further with this point when I come to the debt position.

The Pension Vote reduction of £35,000 is due mainly to the fact that the apportionment of the awards made to persons in the Transvaal by the War Casualties and Injuries Commission (appointed by the late Transvaal Government) has been practically completed. These awards consisted mainly of non-recurrent gratuities.

It is fitting that I should here mention that the Government hope, during next Session of Parliament, to bring forward a Bill establishing the pension rights of officers of the Union Public Service. Of course, under the Act of Union, the rights of men in the late Colonial Government Services are preserved to them, but it is necessary to consolidate the various laws as far as possible, and also to provide for the rights of new entrants into the Union Public Service. Passing on to the next vote that shows a large reduction—

—on which the provision for 1911-12 is less by £347,000 than the provision for the preceding twelve months, prints of the draft Estimates of Natal and the Orange Free State were laid on the table earlier in the afternoon. I expect that the Estimates of the other two Provinces will be available very shortly. The reduction of £347,000 in the Union Vote for Provincial Administrations arises mainly under the head “Roads and Local Works” in the Provincial Estimates. The sums provided for under this head are far below the amounts which have been requisitioned by the Provincial Administrations;, and are also, in my opinion, far less than is needed to meet the ordinary requirements of the various Provinces. I will revert to this subject again presently.

It will be noticed from the footnote to the Provincial Administrations Vote that it is proposed to issue to the Provinces the full subsidies granted in respect of the year, notwithstanding that there may be a balance unexpended alt the end of March. It is proposed also to adopt this practice in regard to the current fiscal period. It will appeal to hon. members, I think, that any other course would be fraught with innumerable difficulties and would tend to complicate enormously both the financial operations of the Provinces land the estimates and accounts of the Union. I need only point to the fact that the final expenditure of the Provinces can only be determined months after the close of the financial year—land only then could it be stated what would be the unexpended balance to be surrendered to the Treasury, and what sums would have to be provided in the Union Estimates to cover re-votes on Provincial works. The only practical course is to regard the subsidies as lump sum grants—maintaining, of course, the obligation imposed upon the Provincial Administrations by the South Africa Act to obtain the Governor-General’s approval to any variations in their approved Estimates.

While on the subject of this vote, I think it desirable to allude to the criticisms which have been passed in this House and in the press regarding the subsidies to the Provinces. Comparisons have been made between the various grants contributed by the Central Government, mostly to the effect that the Transvaal has been unduly favoured. I do not think that these criticisms are fair or just, and they certainly will not stand examination. It is ridiculous to judge of these subsidies merely by the size of the Province or the number of its inhabitants. One is bound, also, to take into account the amount of revenue derived by the Central Government from the respective Provinces, and not only that, but also the different systems of granting State aid which have been established in the various colonies in the past. If we examine the question of these subsidies from the point of view of the relative contributions to the Union revenues, it will at once be seen that the Transvaal is by no means the favoured Province that it is supposed to be. The surplus revenues from railways contributed by the Transvaal far exceed the surpluses of the other Provinces; even its Customs receipts were considerably in excess of those of the Cape, notwithstanding the fact that the latter has a much larger population; and out of the 51/2 millions of inland revenue, estimated for the coming year, the Transvaal’s contribution will be over three millions. The percentages of inland revenue are:

These figures should be studied and re membered by the impetuous critic. But to proceed with my remarks upon the votes in the 1911-12 Estimates, which show reductions as compared with the previous year’s figures. The remaining vote, which shows a Large decrease, is

and is largely explained by the fact that the heavy programme of works in hand in certain of the Colonies at May 31 last has been overtaken during the past ten months, and that we are, therefore, approaching a more normal state of affairs. Being mindful, also, of the criticisms passed upon me regarding expenditure upon works during the last Budget discussion, I have applied the pruning knife most vigorously to the demands of all departments of the public service—so vigorously that I am afraid that I have gone too far and have cut out services which are essential to the welfare of the State. I will revert again to this point presently.

Let me now recapitulate the figures for the approaching financial year:

and I shall proceed to explain how I propose to make up the shortfall. There is, first of all, the Railway and Harbour contribution, to which it is again necessary to have recourse. Last November I stated that my demands upon the Railway and Harbour Fund would be diminished by equal stages during each of the four years allowed by the South Africa Act, calculated to wipe out the contribution within the prescribed period. The contribution for the current ten months’ period is £1,220,000—or at the rate of £1,464,000 per annum. Following out the policy I indicated earlier in the session, this anuual rate of contribution falls to be reduced from £1,464,000 to £1,159,000, and that is the sum I propose to claim from my hon. friend the Minister of Railways and Harbours in aid of the coming year’s revenues.

which is not very formidable, and might be faced with equanimity even if no further reduction therein were practicable. It is my intention, however, to put forward proposals, during the present session, providing for the removal of two of the minor anomalies in the fiscal laws of the Union and, on balance, these proposals, if adopted, should reduce somewhat the estimated deficit for the year.

The first of these schemes involves the extension to the whole Union of the cigarette tax—(cheers)—hitherto in force only in the Cape. This is a source of revenue that seems to me to be a perfectly fair one, and one that has a great deal to be said in its favour. I may say, however, that I do not favour the method of collection in force in the Cape, which seems to be clumsy and ineffective and capable of easy evasion. The proper system, in my opinion, is to lay upon the importer, or manufacturer—(cheers)-—and not upon the retailer—the responsibility of paying the tax. The extension of this tax to the whole Union, coupled with the introduction of a more effective system of collection, would, it is estimated, give an additional revenue of about £65,000 per annum. But it will be necessary, of course, to allow some time to elapse to get the machinery into fid, working order. Accordingly, it would not be safe to reckon upon an additional yield from this source, during the ensuing financial year, of more than £45,000.

The other proposal which I intend to put forward is that the patent medicines tax in the Cape Province should be repealed. (Cheers.) The yield from this tax is unimportant—only Some £11,000 per annum— and in view of this, and of the irritation which it creates, and the great difficulty experienced by the Revenue officers in administering the law on the subject, I have come to the conclusion that it would be much better to remove the impost from the Statute-book altogether. (Cheers.) Setting the gain (£45,000) on the cigarette tax, under these proposals, against the loss of the patent medicines tax (£11,000), there remains a balance of £34,000, which would bring the shortfall for the year (£148,000) within measurable distance of £100,000.

And, if Parliament agrees to the proposals, which I shall make presently, for the reduction of the annual provision for debt redemption, the result should be a useful surplus: a satisfactory state of affairs, I venture to think, when we remember that it will have been accomplished (a) notwithstanding the reduction of our demands upon the Railway and Harbour Fund in respect of the new financial year by £305,000, and (b) the remission of the patent medicines tax. So much for the financial position on Revenue Account at 31st March, 1912. I must now ask hon. members to return with me to the figures of the fiscal period expiring at the end of the present month.

They will recollect that I gave, as the revised results of this ten months’ period, an excess of revenue over the expenditure of the period off £478,000. Parliament must decide as to the purposes to which this surplus should be applied. In the Public Debt Commissioners Bill, now before the House, provision is made for the surplus revenues of any financial year being handed over to the Public Debt Commissioners, but, in so far as concerns the excess revenue of the current fiscal period, I consider that this clause in the Bill should not apply—that its operation should only take effect in respect of the accounts of the ensuing financial year.

My reasons for coming to this conclusion are that it is idle to regard this sum of £478,000 as a surplus, when it is a matter of common knowledge that the country is crying out for public works of various descriptions to meet the most ordinary public requirements. In the matter of schools, post offices, and Government buildings, the country is most inadequately equipped, and it is impossible to ignore any longer the reasonable demands, not alone in regard to Union services, but also in respect to Provincial works. In the Provincial Administrations Vote for the coming year, practically no provision has been made for new public works to be carried out in the four Provinces. The Government cut out of the draft Provincial Estimates 1911-12 practically al the new works for which provision was sought by the four Executive Committees. It was recognised at the time that this was an arbitrary proceeding, as many of the works thus deleted were clearly of a most urgent character. And I was obliged to give to the Administrators an assurance that if, when we neared the end of the year, it was seen that something could be done for them, the Government would submit to Parliament a Supplementary Estimate of Provincial Public Works for the new financial year. The only alternative is to borrow money to carry out the works in question, and, as I have explained to the House on previous occasions, I am most strongly opposed to borrowing money for the erection of the smaller descriptions of public buildings, even when the aggregate cost of such buildings runs into a comparatively largo figure. The obligation upon a State to provide for its normal requirements in the way of schools and other district building requirements is as much an ordinary and recurrent liability as the responsibility for meeting its public debt charges, or the cost of its clerical establishments, since the gradual growth of population and expansion of the country must obviously run hand in hand with a demandi for schools and other building equipment—at no time in the history of a virile country can its equipment in these respects be regarded as completed. Consequently, if we in South Africa dip too deeply into the coffers of the money market for funds to meet services of this description, we shall be pledging our assets to meet our current liabilities, creating a heavy burden of debt for our children to meet (if they can) and abusing the trust reposed in us to safeguard the interests of those who come after us as zealously as we would our own.

I propose, therefore, to lay before Parliament in a few days’ time, a Supplementary Estimate of Expenditure out of Revenue upon Public Works for Union and Provincial services. Nor will this list be limited to the amount of our surplus of £478,000 for the current ten months period, because my hon. friend the Minister of Railways and Harbours informs me that he is in the happy position, if Parliament so decides, of being able to make to the Treasury a special grant of £300,000 out of his surplus earnings for the current period— (cheers) that is to say, in addition to the sum of £1,220,000 for which I budgeted some months ago.

These two sums—our own surplus of £478,000 and my hon. friend’s additional grant of £300,000—together amount to £778,000, and I propose to round off this figure to £750,000, and to ask Parliament to consider a Supplementary Public Works Programme of that amount. In this programme of three-quarters of a million I propose to provide, among other services, for the school buildings so urgently required in the Cape Province. (Cheers.) In the earlier part of the present session, I stated that the Government were alive to the need for making provision for these urgent requirements, and, at that time, as there was no certainty that we could meet the situation without having recourse to borrowing, and as it was quite clear that the provision must be made somehow, I indicated that the service might be included in a Loan Bill. Fortunately, this most objectionable alternative need not be resorted to if my present proposals are approved. But I hasten to say that the fact of our providing out of revenue for these Cape school loans must not be taken as implying that the moneys will be granted as a free gift; the conditions laid down by law whereby the beneficiaries undertake partial liability for paying interest and repaying capital will be strictly adhered to— (cheers)—notwithstanding the fact that the Government propose to find the money out of revenue. The source from which the Government finds the money will make no difference whatever to the terms and conditions of the loans. This, Sir, concludes my remarks with regard to the Revenue portion of our finances. The substance of these remarks is that, as regards the present period of ten months, our accounts, when we get final figures, should show an excess of Revenue over

As regards the Estimates for the new year 1911-1912—if my proposals, in regard to the Cigarette Duty, the Patent Medicines lax, and the revision of the Sinking Fund Contributions are adopted, we should establish an equilibrium between Revenue and Expenditure. I submit that it is a matter for congratulation that this House and the country at large should have such a satisfactory financial statement to consider at the present time, but I would again utter a note of warning as to the uncertainty of the future, lest the financial success that Union has, so far, experienced, should induce a spirit of extravagance in our national expenditure.

But this does not, unfortunately, finish my story—because there still remains a chapter dealing with our loan position and the Government’s proposals in regard there to. I trust that hon. members will bear with me a little longer while I explain this most important division of our finances.

In addition to the Estimates of Expenditure out of Revenue now before Parliament, I propose, in a few days’ time, to submit for the consideration of the House Estimates of Expenditure from Loan moneys, and it is necessary that I should explain the nature of the loan expenditure and the sources from which it will be met. Before proceeding to do this, however, I propose to make some allusions to the public debt of the Union and the arrangements made by the late Colonies for its redemption, and I propose also to state the future policy of the Government in regard to these matters.

The total public debt which the Union inherited from the four Colonies was £116,500,000.

Of this amount,

All these figures will be found conveniently set out in the Public Debt Statement.

One of the first points which presented itself to the Government in considering the position of the debt was the question of converting into one new consolidated stock of the Union the amount of the “funded” debt.

This consisted, in round figures, of

and

Now it is fair to assume that any issue of stock for consolidation purposes would carry not more than 31/2 per cent, interest, and, therefore, the conversions to be effected would be restricted generally speaking to the holders of those existing securities carying interest in excess of 3½ per cent.—amounting to £25,102,000. The main block of stocks issued by the late Colonies is at 3 per cent., but there is an amount of £27,126,000 in 31/2 per cents., and it is probable that holders of some of these, which mature at comparatively early dates, will be desirous of exchanging them for a stock of larger issue and a longer life, and the same reason will, no doubt, prompt holders of the stocks carrying a higher rate of interest to take advantage of conversion terms which may be offered to them. I do not, of course, anticipate that the whole of the existing loans of 31/2 per cent, or a higher rate would be converted, but the object of such conversions as might be undertaken would be to lighten the interest charges upon the Union, and to enhance our national credit by placing upon the money market one large uniform issue in place of the many existing denominations of stock. The process of any conversion scheme must necessarily be slow, and as the Government is under obligation not to redeem the greater portion of existing securities before specified dates, there must be negotiation and agreement with the holders, There must also he consultation with financial advisers in London, in order that opportune time and other favourable conditions may be taken proper advantage of. With such a conversion scheme in view, a Bill has been prepared, and will be presented to Parliament for its sanction in the present session.

Turning now to the floating debt of £9,700,000 (which consists of Treasury bills, and debentures which mature at various dates between May, 1910, and July, 1912, and of bank advances obtained in anticipation of the raising of loans), the necessity for redeeming this debt or for placing it upon a new footing is becoming a matter of some urgency. I have already explained that the securities for a portion of this floating debt, which have matured since the date of Union, have been retired out of Treasury balances—the amount involved being £3,161,000 at the end of last month; but this has been a temporary arrangement, because those balances must be restored to their proper places, and it does not affect the necessity for providing for the redemption or otherwise of the £9,700,000. In the Financial White-Book it is shown that the balances brought into the Union by the four Colonies on their revenue accounts amounted to £1,478,000, and, as I have already foreshadowed, the Government considers it right and proper that this sum should be devoted to the reduction of the temporary or floating debts also brought into Union by those Colonies. This policy will, no doubt, have the cordial support of the House. When this money has been so applied, the amount of floating debt to be dealt with will be reduced to £8,222,000. It will be apparent that our resources will not admit of redemption of so large a sum as £8,222,000 for some years to come, and it must be borne in mind that the greater part of this floating debt was incurred by the late Colonies as a temporary means of raising money required for new capital expenditure ordinarily chargeable to loan funds. It is, therefore, proposed to issue consolidated stock for the redemption of this balance of floating debt (£8,222,000), but pending a favourable opportunity for making such an issue, it may be necessary to issue new Treasury Bills for limited periods to replace the existing securities as and when they mature. The proposals which I have just outlined for dealing with the “floating” debt are also embodied in a Bill which will be presented to Parliament during the present session.

Before passing to another subject I may here allude to a point which will be of some importance when conversion of existing securities into consolidated stock takes place. The various trust and deposit funds placed with the Government were, at 30th May, 1910, invested in securities of the late Colonies to the extent of £7,682,000 in stock and debentures, and, £3,216,000 in Treasury Bills; total, £10,898,000. The conversion of these securities into new stock would be one of the first steps to be taken, and would tend largely to simplification in the administration of the Union’s finance.

The third division of the existing debt to which I have made reference in my opening remarks on the Loan position, viz., the advances from the Natal Sinking Fund, is unimportant. The Sinking Fund was established by Natal for the purpose of retarding the increase of, as well as extinguishing, its debt, and the amount advanced was used in accordance with that principle for capital expenditure ordinarily chargeable to loan funds.

Having indicated the policy of the Government in regard to placing the “funded” and “floating” debt upon a satisfactory footing, the next point connected with the debt which claims our attention is its redemption. The South Africa Act has introduced al principle which differs widely from the principles upon which the four Colonies’ redemption arrangements were based. In all the Colonies, the revenues were charged annually with large contributions to form sinking funds for the redemption of the whole public debt, including that incurred in respect of Railways and Harbours. The operation of those sinking funds, established in the two inland Colonies, and in Natal would have extinguished the Colonies’ debts within a period of about 40 years in the former and 60 years in: the latter case; and in the Cape of Good Hope the provision for sinking fund was of considerable magnitude. The South Africa Act relieves the Railways and Harbours of any contributions to sinking fund on account of capital expenditure, but requires that the assets of the Administration shall be maintained at full value and in full working order out of its revenues. Now, of the total debt of the Union, £116,500,000, no less than £75,234,000 represents capital expenditure upon railways and harbours, and it requires no argument to convince my hearers that the provisions which were made by the four Colonies, and which were considered adequate, for the redemption of the debt ot £116,500,000 are far more than sufficient for the redemption of the £41,266,000, which is now the general Government’s share. But the Act of Union also provides that the Sinking Funds constituted at the date of Union shall continue to form a charge upon general revenues, and it is, of course, the intention of the Government to observe that provision. The contributions to these Sinking Funds in 1910-1911 were as follows, and the amounts are those which are annually payable:

An annual contribution of this amount, is sufficient to redeem the genera! Government’s share of the debt (£41,266,000) in about 36 years, and if the reduction proposed to be effected by means of revenue balances brought into the Union is taken into consideration, the redemption will be completed in a slightly shorter period, The provision seems to the Government, and I have no doubt that it will appeal to the House, as being ample for its purpose, in the altered conditions in which we are now placed.

It is, therefore, the Government’s intention to ask Parliament to limit the provision for debt redemption to these annual contributions, and to approve of the repeal of certain enactments of the late Colonies of the Cape of Good Hope, Natal, and the Transvaal, under which certain classes of receipts, such as proceeds of sales of Crown lands, unclaimed moneys in the Savings Bank and other funds, and other miscellaneous items, were diverted from revenue to the redemption of debt. The approximate annual amount of the receipts so diverted in the past has been:

There is, however, in the case of Natal, further provision, made for redemption. By the Consolidated Loans Fund Act of 1904, a sinking fund was established, the contributions to which were calculated at a rate sufficient to redeem the whole public debt of the Colony, including railways and harbours, within a period of 60 years. The machinery set up by the Act is complicated, and its provisions ere entirely unsuitable to the present conditions. The Government, therefore propose to Parliament the repeal of this Act, also.

The policy of the Government in regard to the redemption of debt, as I have thus briefly stated it, is embodied in the fresh legislation which Parliament is being asked to consider during the present session, and, if sanctioned, the result will be that an annual charge of £578,000 will be made upon the Union revenues for the redemption of £41,266,000 debt. The redemption will, of course, be accelerated by the devotion there to of surplus revenues brought into the Union and of the surplus revenues of future years. The Government considers, and, no doubt, this House will agree, that this is a wise and proper method of disposing of such surpluses.

I will now for a few minutes claim hon. members’ attention whilst I refer to the proposals for the expenditure of loan moneys. The expenditure contemplated upon all works and services chargeable to loan funds is being embodied in Estimates, which will be laid before the House for its approval at an early date. The presentation of such Estimates marks a departure from the former practice of dealing with loan money, at any rate so far as three out of the four parts of the Union are concerned. After consideration of the subject, the Government has formed the opinion that it will tend to secure to Parliament and to the Government a greater measure of control over the expenditure of loan moneys if, in the future, Loan Acts convey only the authority of Parliament to borrow money for purposes broadly defined in the Acts. The authority to spend the money will then be sought from Parliament annually, as in the case of other expenditure. Not only will there thus be greater control over the issue of money for loan services, but its expenditure in each year will be brought under the purview of the Public Accounts Committee and of Parliament in the annual appropriation accounts of the Votes.

The Estimates of loan expenditure which will shortly be laid before the House embody all capital expenditure which the Government considers it necessary to undertake, including practically the whole of the works and services which were contemplated by the four Colonies before Union from loan moneys which they had raised or had power to raise. The Estimates include the provision required for the period from the date of Union up to the 31st March, 1912, in order that the principle of voting loan expenditure may have effect from the commencement. In future years, of course, such Estimates will make provision for the requirements of only one financial year. Turning now to the Estimates themselves, I propose to mention some particulars of the expenditure, and must ask the indulgence of hon. members for the absence of the printed copies, which will, however, be in their hands in a day or two, and from which the fullest information will be obtainable.

The programme of new works put forward by the Railways and Harbours Administration involves the expenditure of a total sum, of £8,234,000 from Loan Funds— £2,516,000 of which will be expended in 1910-12, and the balance in succeeding years. I wish it to be clearly understood: hat these figures of Railways and Harbours expenditure are purely provisional; they are based upon a programme of new works which is still under the consideration of the Administration, and which has yet to be considered by the Government, and in due course submitted for the approval of Parliament. Full particulars of the programme will be submitted to the House in the Estimates of capital expenditure which my honourable friend, the Minister of Railways and Harbours, will lay upon the table at an early date, and I will, therefore, leave to him the explanation of the programme, and proceed myself to touch upon the proposed expenditure of other departments.

Under the vote for Public Works and Buildings are included the larger works and buildings to which the Colonies were committed before Union. Amongst them are the Law Courts and Houses of Parliament in Cape Town, new Law Courts at Johannesburg and Durban, University Colleges at Pietermaritzburg and Pretoria, and the much-discussed Union Buildings.

A sum of £800,000 is estimated to be required for telegraph and telephone works throughout the Union. Of this sum Parliament will he asked to vote £549,000 to meet the cost of such works up to the 31st March, 1912, leaving £251,000 to be provided thereafter. In my remarks at an earlier stage, I referred to the increased earnings of the Post Office, and in particular to the increase in the receipts from telephones. The programme of new works now submitted is designed to increase telephone and telegraph facilities in country districts of the Union; to make adequate provision for the expansion of the business of the Post Office in those branches of its activities; and to strengthen and support existing lines of communication which are now, and have been for some time past, much over-weighted.

Under the heading of Agriculture, provision is made principally for carrying out, upon a somewhat larger scale, the works which were commenced by the late Colonies as a means of preventing the spread of disease amongst cattle. The sum required for the period 1010-1912 is £154,000, and it is estimated that £100,000 will he required after the 31st March, 1912, to continue the works referred to, which are chiefly fencing and dipping tanks.

Under the head of Lands is included £188,000 for the period ending on 31st March, 1912 for land settlement in the Union.

For the various irrigation works commenced before Union, a sum of £359,000 is now required to be voted, and this sum will practically complete the works mentioned. We may properly regard Agriculture, Lands, and Irrigation as services undertaken for the benefit of the agricultural community, and the expenditure which the Government proposes under these heads, although not so large perhaps as we could desire in the interests of development of the country’s resources, is still a considerable item. The estimated expenditure under the three heads to the 31st March, 1912, is £701,000, and a further £100,000 after that date. Then, in addition, there is provision for Land Banks for the benefit of the agricultural community, to which I shall refer presently.

Under certain Acts of the Cape of Good Hope, the funds required for capital expenditure by local authorities and school boards were provided by the Government under specified conditions as to repayment, etc. The amount required from loan funds for such purposes in the period up to 31st March. 1912, is £103,000, and it is estimated that £50,000 will be required after that date. As regards loans for school buildings in the Cape I have already stated that it will be the policy of the Government in respect of the new year to provide these from ordinary revenue upon the same conditions as have hitherto been observed.

Provision is made under the head of Land Banks for the sums required by existing Land and Agricultural Loan Funds in 1910-12. viz.:

A further sum of £261,000 will be required by Natal in the years after March, 1912, to complete its authorised capital of half a million, and the amount now asked for in the Orange Free State will complete its capital of the same amount. I may add that the capital of two millions for the Transvaal Land Bank had all been issued by the Treasury before the date of Union. The question of increasing the facilities afforded by land banks in the Union has engaged the attention of the Government, but it is considered that owing to the congestion of work in this House action must be deferred for the present. (An HON. MEMBER: Oh!)

is required in 1910-12, leaving to be defrayed after the 31st March, 1912. It has now to be seen how this large amount of loan expenditure is to be financed. The unexpended cash balance of loan moneys brought into the Union by the four Colonies amounted to £2,923,000, which is short of the amount required to meet the expenditure of £5,744,000 in the period 1910-12 by £2,821,000. Moreover, the expenditure estimated to be required after the 31st March, 1912, amounting to £7,086,000, has also to be provided for; so that there will be a total expenditure of £9,907,000, for which funds much be found. To meet this expenditure, if it be approved by Parliament, it is porposed to re-enact the borrowing powers granted by the late Colonial Parliaments, but not exercised by the Governments, amounting to £4,530,000, and to obtain fresh borrowing powers for the balance of the money required, namely, £5,377,000. These proposals are embodied in the Bill which I mentioned a little while ago as having been prepared for the consideration of Parliament in connection with the Government’s proposals for dealing with the floating debt. I have just said that, in addition to the balances of loan moneys brought into the Union, a further sum of £2,821,000 will be required to meet the estimated loan expenditure in the period from 31st May, 1910, to 31st March, 1912. It will therefore be necessary to borrow that amount under the authority of the Bill to which I have alluded, but I do not anticipate that a public issue of stock will require to be made to provide the money. If the Public Debt Commissioners Bill which is now before the House becomes law any issue of stock to provide the money could, I think, be taken up by the Commissioners as investments for the funds placed in their charge. In these circumstances I do not anticipate, even though the large programme of capital expenditure be adopted, that it will be necessary to go to the market for money during the ensuing financial year. That, Sir, Concludes what I have to say on the present occasion, and I only desire to add a word of sincere thanks for the indulgence extended to me by hon. members, and for the patient way they have heard me. I now lay on the table a print of the Estimates of Revenue for the year ending 31st March, 1912. (Cheers.)

The House resumed business at 8 p.m.

On clause 15,