Mr. SPEAKER announced that the Committtee on Standing Rules and Orders had appointed the following members to serve on the select committees mentioned, viz

I wish to commence by dealing with the revenue and expenditure position of 1925-’26. Some of the figures which I gave to the House about two months ago when I dealt with the additional estimates have in the meantime naturally undergone some modification. The original estimate of revenue, allowing for the adjustments of taxation effected last session, was £26,092,000. The original estimate of expenditure including the supplementary estimates that were tabled was £26,547,000, giving on these figures an anticipated deficit at the time of £455,000. As hon. members will remember the additional estimates totalled £274,000, and when I introduced them I informed the House that that additional expenditure would probably be met by savings on the original estimates, and would not increase the main estimates of expenditure submitted for the year. I am glad to be able to inform the House that this expectation has been more than fulfilled, and the final position in regard to expenditure is considerably better than that which I forecasted about two months ago ; as it is now expected that the expenditure for the year will, ultimately and after audit, not exceed £26,400,000. On the latest available information the revenue for the year will be in the neighbourhood of £26,900,000, so that there will be a surplus of about £500,000. It will not be for some days that we shall know the total collections of revenue for this month, and some weeks will have to elapse before the collections have been completely allocated to the various heads of revenue. The latest available estimate puts the revenue at £26,900,000, or £808,000 above the original estimate. I wish to give to the House the principle variations in the estimates of revenue. Customs duties are £142,000 above the estimate, and I am sure the House will agree that this is a very satisfactory position, seeing that the import trade of the country was during a certain portion of the year affected to a considerable extent by the shipping strike. The customs duties for the month of September fell short of 1/12th of the estimate of receipts for the year by £122,000, but the position was very soon righted, because during the two following months the imports increased to such an extent that by November and December the position was fully restored. These figures in regard to customs duty also disclose a remarkably accurate estimate, having regard to the fact that we had to deal with a totally new and revised tariff of customs duties. Excise duties are £144,000 over the estimate ; increases are recorded under the heads: spirits £40,000—hon. members will know that for several years we have had a consistent decrease in the receipts from this head, but this year they show a considerable increase ; beer £20,000, and cigarettes £93,000 over the estimate. I think it can be said that these increases are in the main due to the increased spending power of the community consequent on the increased production which we have had during the past year. Posts, Telegraphs and Telephones are £159,000 over the estimate, postal revenue being £90,000 up ; telegraphs £33,000 and telephones £34,000. These increases are due to a general expansion of postal and telegraph business and to the extensive development of the telephone system throughout the country. The increase in the telegraph revenue is particularly interesting in view of the fact that it has been steadily on the downgrade now for a number of years, and telegraph traffic has always been considered a fairly accurate barometer of the trade position of the country. This figure of £463,000 is still a long way below the record of £530,000 for the year 1920-’21, so we can confidently look forward to making up the shortfall under the able administration of my hon. friend. I hope he will not disappoint the Treasury. In referring to the restoration of the penny postage last year I estimated that the cost would be £400,000 per annum, and the results so far confirm the substantial accuracy of that estimate. In regard to mining revenue, the receipts from the Premier Mine under the head Government ownership were £45,000 up, and the diamond export duty yielded £20,000 over the estimate. Here I am indebted to the hon. member for Kimberley (Sir Ernest Oppenheimer) for the very accurate information he gave me last year in preparing my estimates. We are very glad to be able to find that these increases are due mainly to the increased demand and the higher prices ruling for diamonds. Stamp duties have produced £30£00 over the estimate, and I think that can be taken as reflecting an improved trade position and an increase in stock exchange business.

Income tax and super tax together have yielded £6,463,000 or £96,000 over the estimate. Regarding the details of this head of revenue, the income tax from gold mines yielded £1,062,000, or £178,000 less than the estimate. This reduction was due to two causes, firstly, as to £71,000 to an over-estimate, the profits of the gold mines having been less than was anticipated a year ago owing to shortage of native labour, increased charges in respect of miners’ phthisis and other causes, and, secondly, as to £107,000 of this shortfall, to the fact that under the Income Tax Act of last year, which, as hon. members know, abolished the dividend tax and doubled the normal tax on mining companies, dividend tax already paid in respect of dividends paid out of profits for the tax year —(from the 1st July, 1924, to 30th June, 1925)—was allowed to be set off against the tax payable for the tax year. In this way £107,000, which was received during 1924-’25 was set off against the 1925 tax. But for this adjustment, the companies would have been taxed twice on a portion of their profits. This is merely due to the fact that our tax year does not correspond with the financial year, and dividends received during the year had to be adjusted to the tax year. The same causes brought about a shortfall in the income tax derived from diamond mining companies, which was £75,000 less than the estimate, and here again £62,000 of dividend tax paid in 1924-’25 was adjusted against the 1925 tax, and £13,000 was due to an over-estimate. The amount credited to this head of revenue, that is income tax, in respect of gold mining leases was £384,000, or £54,000 in excess of the estimate, the yield from the lease areas having been £1,728,000, of which £1,344,000 is credited to loan account, and £384,000 to revenue account. This was against the estimate I gave last year of £1,625,000. Under the general head of income tax we find it has produced £115,000 more than the estimate, and super tax has yielded £175,000 more than the estimate. Here again my anticipations were realized when I said that the farmers would not leave me in the lurch, and they have been paying me more income tax than before, because the receipts show a marked improvement! When the estimates were framed, complete data as to the 1924 tax were not available. The yield of that tax was under-estimated, particularly in regard to the super tax. This under-estimate had the effect not only of increasing the carry-over into 1925-’26 beyond what was anticipated, but also caused the 1925 tax to be under estimated.

Regarding super-tax, the increase in the yield from two years ago has been remarkable. In 1922 and 1923 the taxes yielded £772,000 and £773,000 respectively; the 1924 tax has yielded £1,025,000 and the 1925 tax is estimated to yield £1,125,000. The big increase is due in the main to the disappearance of losses carried forward from previous years in consequence of the improvement in the trade position generally.

Death duties have yielded £50,000 more than the estimate. This is due to the more rapid disposal of estates, to the recovery of outstanding duties, and to the fact that several large estates fell in for assessment during the year. The concessions made last session have not been in force long enough to affect the receipts from this tax.

The increases to which I have referred will account for £684,000 of the total increase of £808,000, the remainder of those increases being spread over a number of heads which do not call for any special comment.

The expenditure was dealt with fairly fully by me when the additional estimates for 1925-’26 were introduced, and they need not again be discussed.

It remains only to deal with the disposal of the surplus of approximately £500,000, of which I informed the House just now.

Last year I dealt with the working of our pension funds which disclosed rather serious deficits, of which I informed the House, and I provided that, as far as one of the funds was concerned, viz., the Cape Fund, we would pay £128,000 a year for 26 years, and this amount was voted on the estimates last year to put the fund on a sound and solvent basis. The other fund was the Natal Police Fund, and this year we intend to provide rather substantial funds in the neighbourhood of £59,000 for 1926-'27. During the recess I have had under consideration the Transvaal Administrative and Clerical Pension Fund. The actuarial report on the position of the Transvaal Administrative and Clerical Pension Fund at 31st March which was laid on the table on 15th of July, 1925, brought out a deficit of £560,000 on the assumption that 75 per cent, of the members would retire at the earliest retiring age, that is 55 years, and that only 25 per cent, would retire at 60 years, and that the rate of interest earned by the fund would be 4½ per cent. The previous actuarial report on this fund on the position at 31st March. 1919, brought out a deficiency of £250,000 which was made good out of revenue in 1919-’20. I may say that this report was drawn up before the new increased scales of civil servants’ salaries were brought into force in October, 1919, and although it made some allowance for the introduction of higher scales, this allowance was insufficient. It also assumed a higher average retiring age than the later report, and a higher rate of mortality at advanced ages. The retiring age during the last quinquennium has probably been unduly low owing to the process of reorganization and retrenchment which has been going on, and it is hoped that in future the average age of retirement may be substantially increased. The retiring age is a very important factor. It is calculated that if all the members retired at 55 the liability on the fund would be £458,000 more than it would be if they all retired at 60. So that when public servants retire at an earlier age it has a very important bearing on the fund.

The remainder of the surplus, expected to be in the neighbourhood of £250,000, will be paid over to the Public Debt Commissioners in redemption of debt in terms of section 5 of the Public Debt Commissioners Act of 1911.

I think the general question of debt redemption may conveniently be discussed here. As hon. members are probably aware, the only statutory provisions regarding redemption of debt are those laid down in the Transvaal Acts relating to the guaranteed loans of £40,000,000, under which an annual contribution of one per cent, on that amount is prescribed, and in the Public Debt Commissioners Act, 1911, under which the surplus revenue over expenditure is applied to the redemption of debt. This latter provision which—in the ordinary course of events—would be the only one remaining when the Transvaal guaranteed loans have been paid off has not been very effectual. Against surpluses of £5,157,000 applied to debt redemption a deficit of £2,012,000 has in the past been definitely charged to loan account and, but for the adjustment effected last year, whereby the remaining £1,110,000 of the deficit accumulated in 1920-’21 to 1922-’23 was written off against the surplus on the account of the Custodian of Enemy Property, we should still have been carrying a deficit of over half a million pounds—financed from borrowed money—after absorbing the surplus which was available for debt redemption during the year now expiring. The result would be, therefore, that while since Union £5,157,000 of surplus revenue has been applied to redemption of debt we should have incurred fresh debt through deficiencies of revenue amounting to over two and a half millions giving a net provision for debt redemption over sixteen years of a little over £2,500,000 or an average of not much more than £150,000 per annum, and but for the contribution of £3,179,000 from the Railway and Harbour Fund during the first three years of Union, the balance would have been well on the wrong side. It may, therefore, be taken that in normal times the application of surplus revenue towards debt redemption is quite ineffective as a means of reducing debt.

Now as regards the sinking funds attached to particular loans, we inherited from the colonies which came into Union, besides the Transvaal guaranteed loans, several other loans repayable by means of sinking funds. All but one of these loans have now been repaid leaving only the sinking funds of the Transvaal loans, the sinking funds established last year and a sinking fund held for a small Natal loan of £39,000 which matures this year. By the operation of these sinking funds £5,300,000 of debt has been paid off since Union without reborrowing and during the same period the sinking funds for the Transvaal loans have been increased by contributions and interest on in, vestments by nearly £12,000,000 to £16,200,000. That is, if the stock held by the Public Debt Commissioners is taken at face value, and in discussing the national debt, it is, of course, necessary to take the sinking funds into consideration, and when their investments consist of Union stocks to take these stocks at face value, for the Union stocks so held naturally figure as part of the debt. As hon. members know in addition to this sinking fund in connection with Transvaal guaranteed loans we have established a sinking fund of one per cent, on a small local loan which I raised last year ; another in respect of the adjustments of the custodians accounts provided for by the Financial Adjustments Act of last year which amounts at the present date to £800,000, and if hon. members will turn to the Public Debt Vote for 1926-’27 before them they will see that provision is made during this year of £524,000 towards redemption in the coming year. It is worth noting that in addition to the direct contribution for redemption some half a million of the amount provided for interest on next year’s Public Debt Vote is payable into the sinking funds in respect of interest on the Union Government securities which the Public Debt Commissioners hold as investments. Then a sinking fund of one per cent, will be attached to the new local loan for which subscriptions are now being asked in the country for the purpose of converting the existing six per cent, loan which is maturing next year. That provision of one per cent, will not be brought into operation until 1927 when the reduction in the interest charges through conversion of the existing loan will be available for redemption purposes. Another practice which has practically the same effect as a sinking fund is the appropriation of the proceeds of land sales and mining leases to the loan account for capital purposes. By this means capital expenditure is made without borrowing for it, and the debt position is safeguarded. Credits to the loan account of this nature (including £1,200,000 obtained from the excess profits duty) have amounted since Union to over millions. Well, I think enough has been said to show that though the appropriation of surplus revenues to debt redemption has achieved in the past comparatively little. I think we can safely say that a great deal has been achieved since Union and is also being done to-day to protect our debt position. This question of debt redemption has been considered by the Public Accounts Committee during this session, and in their first report they have recommended—

This proposal will be seen from the figures I have quoted to constitute a substantial advance on what has been done in the way of debt redemption during the last few years. It substitutes a fixed annual charge of £250,000 more than the annual charge during recent years for the indefinite and problematical charge dependent on an excess of revenue over expenditure and, in view of the very substantial annual contribution to the loan account from mining leases, the provision suggested appears to be adequate.

The expenditure of £12,836,000 has been financed in the following way: There was a balance to credit of the loan account at the commencement of the year of £2,487,000. The surrenders of issues in respect of 1924-'25 votes were £335,000. Loan receipts other than loans raised, i.e., proceeds of mining leases, land sales, etc., and recoveries of advances produced £2,230,000. The principal item in this group is, of course, the revenue from mining leases and bewaarplaatsen, which produced £1,425,000. The loans raised total £35,231,000 less loans repaid (£26,216,000 and costs of raising £201,000), £26,417,000 leaving a balance available for loan expenditure of £8,814,000. The total receipts and opening balance were £13,866,000, and the expenditure £12,836,000, giving a closing balance at the credit of loan account of £1,030,000.

Now I wish to say a few words in regard to the position of the public debt, which, at the commencement of this financial year, was £214,332,000, and comprised stock and debentures £195,332,000 and temporary loans £19,000,000. The debt in respect of stock and debentures has been increased during the year by £14,047,000, and that in respect of temporary loans has been reduced by £6,946,000. Two issues of 5 per cent, stock redeemable in 1945-’75 of £4,000,000 each were made in London, and £3,000,000 4½ per cent, debentures, which matured in 1925, were repaid. The increase of our debt in London was therefore £5,000,000. The two loans were raised on the London market on very favourable terms, they being made at 99½, and the result shows that our credit is still very good in London. The results show that we have obtained If not better, at least as good, terms as any of the other dominions.

The temporary debt has been reduced during the year by £6,446,000 to £12,554,000, which figure includes £4,280,000 representing Union Loan certificates. In view of the fact that a large number of certificates reached their first date of maturity at the expiration of five years from the date of issue during the year, it is satisfactory to record a net increase of £164,000 during the year, representing an addition of 205,000 certificates. This satisfactory result and the coincident increase of savings bank deposits is attributable in no small degree to the good work of the National Thrift Committee. Which I desire to acknowledge have? The reduction of the temporary debt is, of course, due in the main to the adjustment of Custodian’s certificates of credit to which I have referred.

The present position is accordingly that the debt of the Union has increased during the year by £7,600,000 to £221,933,000, comprising £209,379,000 stock and debentures and £12,554,000 temporary loans. Of the stock and debentures £65,223,000 are registered in the Union and £144,156,000 in London. The whole of the temporary loans are domiciled here. Against this debt we have £1,000,000 cash in the loan account and £17,000,000 Union Government securities held by the sinking funds, taking them at their nominal value. The net debt of the Union at this date is, therefore, under £204,000,000.

During the year the Government has received various small payments in respect of reparations under the peace treaty. The amount received from the German Government in this respect to date has amounted to £52,000 and this money is being held for the time being by the Custodian of Enemy Property in virtue of his appointment as agent for the Union Government in regard to matters arising out of the peace treaty. I intend that it shall be applied to meet war claims by Union citizens after-these have been investigated by a commission or committee which I propose to appoint very shortly. It is proposed that only claims that are made by British subjects who before the war were domiciled in the Union or naturalized in any part of the territories forming the Union should be dealt with and that no compensation shall be paid in respect of:

1. (a) Loss of civilian lives (but not children or dependents) ;
2. (b) Permanent injury or ill-health caused by enemy action at sea, or as the result of internment or forced labour, etc., in enemy territory;
3. (c) Loss of personal effects ;
4. (d) Damage sustained in the Cape Province as the result of invasion by German forces;
5. (e) Loss of merchandise in transit (but no compensation to be paid to claimants who were liable for excess profits duty during the period of the war or in respect of shipments after the outbreak of war where merchants and importers failed or neglected to insure against war risks or in cases where they recouped themselves by passing their losses on to the consumer) ;
6. (f) Damage to or confiscation of property in enemy territory (but not for depreciation of investments or similar losses).
   Claims in respect of remote damages such as loss of wages consequent on internment, time unemployed, depreciation of assets in Germany, etc., will not be entertained.

The statistics in regard to production and trade in 1925 reveal some very interesting features and I desire to call attention to the most important of these figures. The value of all minerals (excluding quarry products) produced in 1925 was £54,369,000, or £3,802,000 less than in 1924. This reduction, however, is more than fully accounted for by the disappearance of the gold premium, which added just over £4,000,000 to the value of the gold produced in 1924. The production of gold in 1925 exceeded the record production of 1924 by a small margin—22,552 ounces, value £95,796. But for the shortage of native labour during the latter half of the year the increase over 1924 would have been considerable. The total value of the gold produced was £3,971,000 less than the value of the somewhat smaller quantity produced in 1924, owing to the disappearance of the gold premium, and the dividends paid by the gold mines were about £1,400,000 less than in 1924. During the year the number of white persons employed on the Witwatersrand gold mines increased by 321 and the number of natives employed fell by 10,417. The number of whites employed on those mines in December, 1924, was 18,835 and coloured 181,120. While in December, 1925, the number of whites employed was 19,156 and coloured 170,703. The ratio of white to coloured employees on the Witwatersrand gold mines improved from 1 to 9.6 at the end of 1924, to 1 to 8.9 at the end of 1925.

In regard to diamonds, the production of mine stones was higher by 38,028 carats weight and £408,474 value, while the production of alluvial stones was 48,298 carats less in quantity and £243,755 less in value. There was therefore a reduction in the total production of 10,270 carats but the value was £164,722 more than in 1924. The value of both mine and alluvial stones increased materially during the year, and the sales for 1925 exceeded those for 1924 by a large amount. The sales of mine stones were 605,575 carats greater in quantity and £2,156,135 in value, while the sales of alluvial stones corresponded approximately with the reduced production, so that the net sales were 557,381 carats and £1,912,725 value more than in 1924. The number of whites employed on the diamond diggings increased by 1,122 during the year.

The production of coal was again a record both in tonnage and value. The increase was 515,000 tons in quantity and £56,000 in value, the pit’s mouth value per ton being slightly lower. The Transvaal collieries increased their output by about 600,000 tons, but the output of the Natal collieries was about 85,000 tons less than in the preceding year.

Other minerals: The values of the tin, copper, lead and silver produced were all lower than in 1924 ; on the other hand osmiridium, asbestos and chrome all show remarkable increases. None of the platinum mines reached the producing stage in 1925, but production has commenced on a small scale within the last few weeks, and one may look for gradually increasing production of platinum during the year.

In regard to the Union trade in 1925, the exports of merchandise for the year were £79,794,000, but to get a true picture of the position one must add exports of £5,871,000, gold specie coined in the Union, because to that extent the gold was exported in the coin state instead of wholly in the form of bullion as in previous years. The gold export for 1925 was 8,089,761 fine ounces, valued at £34,363,000 (standard value, and £5,871,000 in coin, total value £40,234,000, against 9,463,734 fine ounces of the standard value of £40,199,000 in 1924. The exports must therefore be taken at £85,665,000, or approximately 7$ millions more than in 1924.

The increase in tonnage is about a million. The most notable article of export in 1925 was maize, of which there was shipped 929,820 tons of the grain and 132,450 tons of meal of the value of £6,489,000, as compared with 71,948 tons of grain and 57,176 tons of meal of the value of £879,000 in 1924, the increased value of the 1925 shipments being therefore £5,610,000.

Sugar amounting to 60,000 tons of a value of £767,000 was exported against shipments of under 10,000 tons, value £178,000, for the previous year.

Grease wool to the amount of 220,668,000 lbs. weight and £13,888,000 value was exported in 1925 as compared with 166,041,000 lbs. weight and £14,229,000 value in 1924, and scoured wool of 7,947,000 lbs. weight and £1,207,000 value was exported in 1925 against 8,554,000 lbs. weight and £1,535,000 value in 1924. Owing to the fall in prices the value of the exports of grease wool fell by £341,000 though the quantity shipped was 54,000,000 lbs. greater.

The value of scoured wool fell by £328,000, but in this case 607,000 lbs. weight less was shipped. The average value of grease wool shipped fell from a shade over 1s. 8½d. per lb. to a shade over 1s. 3d. per lb.

Sheep skins naturally followed the same course ; the quantity shipped, 25,740,000 lbs. being 3,587,000 lbs. less, and the value £1,452,000 being £405,000 less than in 1924.

On the other hand, goat skins improved in price as 7,062,000 lbs. were shipped of a value of £343,000 against 7,734,000 lbs. of a value of £329,000 in 1924.

Mohair: 11,560,000 lbs. valued at £836,328 were exported in 1925 compared with 13,666,000 lbs. valued at £1,142,000 in 1924, a falling off of 2,106,000 lbs., or 15 per cent, in quantity and £306,000, or 27 per cent, in value.

Cotton: In spite of the very wet season in most cotton areas, the shipments in 1925 were more than double those in 1924, being 6,981,000 lbs. weight and £350,000 value against 3,299,000 lbs. weight and £171,000 value in 1924. In spite of the dry season this year it is expected that the production of cotton will show a considerable increase.

Fruit: 751,814 boxes of citrus of the value of £351,000 were exported against 475,000 boxes of the value of £221,000 in 1924, and 1,248,208 boxes of deciduous fruit of the value of £268,000 against 1,016,000 boxes of a value of £200,000.

The export of dried fruit on the other hand shows decrease.

Fish: The export of crayfish shows a further improvement, though the price is not maintained, France being still the principal purchaser. The amount exported was £235,000 value against £226,000 value in 1924.

The exports of wattle bark and extract showed an increase of £270,000 over 1924, and the export of diamonds increased by roughly one and a half millions.

The export trade of the year may be summarized as metals and minerals £52,000,000 ; agricultural products £30,000,000; manufactured goods £3,000,000.

The value of merchandise imported was £63,000,000 against £60,661,000 in 1924, an increase of £2,339,000. Imports from oversea increased by over £2,500,000, while those from neighbouring territories fell by £350,000. The tonnage landed was 2,480,856, as against 2,368,318 in 1924. The imports may be summarized as follows: Agricultural products and manufactures £9,000,000; manufactured articles, textiles, apparel, and so on, £19,000,000: metals, manufactured machinery and vehicles £17,000,000; other manufactures, £17,000,000: materials for industrial purposes, £1,000,000. In the first group, i.e., agricultural products and manufactures, the principal items are: Wheat, 140,500 tons, value £1,652,000; the figures for 1924 being 172,000 tons, value £1,549,000; flour and meal 27,700 tons, value £433,000 ; the figures for 1924 being 26,000 tons, value £520,000; coffee £959,000 ; tea £704,000; rice £607,000; milk £294,000. There is a chance for a local industry.

Wool and mohair prices, despite the reduction of about 20 per cent, in the beginning of 1925 are still fair. It was hardly to be hoped that the boom prices of 1924 could be maintained ; in fact, it is not good for an industry to have an unstable market with prices fluctuating between very wide limits. It is to be hoped that the present market is stabilized, but this must depend in the main on the political situation in Europe.

The wine industry seems to have recovered under the operation of the Wine Control Act. For the first time in its history steps have been taken to mature wine on a large scale for the oversea market. It is, however, the export trade which has to be looked to for any permanent improvement in the industry, and it is only by the manufacture of large quantities of uniform type that success in the European markets can be achieved. The export trade in beef is improving. From under 5,000 quarters in 1922 and 1923, shipments have risen to 105,000 quarters in 1924 and 182,000 in 1925. Our meat appears to suit the Italian market, which has taken most of the meat exported, but shipments have also gone recently to France and Belgium, and it is hoped that it may also get a footing in those countries as well.

The fresh fruit export is expanding so rapidly that it is necessary to extend the market to the Continent of Europe if prices are to be maintained at a payable level. All interested in the trade are alive to the situation, and the Government is affording all the help it can in that direction. The quality of our dried fruit, like that of our fresh fruit, is undoubted, and has secured for itself, one believes, a permanent footing on the London market. Hitherto sundrying methods have been employed, but the quantity of fruit available for drying and conditions in the west will necessitate resort to dehydration. With this in view, the Government is taking steps to experiment in dehydration under our climatic conditions.

The feather market to which my hon. friend referred just now is still very depressed. Efforts are being made in Europe by a special committee appointed by the trade with Government representation thereon to bring about a revival by interesting those who control the fashions, but I am afraid with very little success so far. In this connection, I may also say that farmers have recently succeeded in organizing themselves into a co-operative company with a view to controlling the marketing of the product. Well, I believe, this is a step in the right direction, and I think the hon. member for Beaconsfield (Col. Sir David Harris) will agree that this method is pre-eminently successful in connection with another article of luxury —but it cannot be said that the outlook for the industry is very encouraging. Dairying is another industry which is not in a very healthy condition. Overhead costs of factory production are high, and the yield of milk is, generally speaking, low. The Board of Trade and Industries have been asked to operate with the Department of Agriculture in a thorough investigation, especially from the factory side.

The growing egg export trade has, unfortunately, had a serious set-back owing to the contamination of the eggs by fruit apparently while in cold storage. The Government immediately appointed a commission of enquiry, whose report, as hon. members know, has been laid on the table of the House. As regards industrial production, the customs tariff Act of last year afforded direct assistance by way of increased duties to some 30 industries.

Industrial development is a slow growth, and is subject to many complex influences besides those exerted by customs tariffs alone. The Government is satisfied, however, that a new tariff has tended towards increased activity in old-established industries, and the opening up of new enterprises with increased employment of labour. A recent survey of the labour returns of 291 firms who received assistance directly or indirectly through the tariff shows that between July and November of last year the total labour force has increased by over 4 per cent., and the European and coloured employees by over 3 per cent. It is confidently anticipated that when the industrial census returns are available they will show a steady forward movement in the employment value of our industries generally. It is significant that, during the period from August to January last, 100 firms which previously did not appear on the books of the customs authorities as approved manufacturers under the Factories Act, applied for and were granted registration as manufacturers entitled to the free admission of certain materials for use in their industries.

The progress of the boot and shoe and tanning industries at Port Elizabeth has been particularly noticeable. New factories have been established and existing ones have been modernized. The success of these industries in this centre has attracted other forms of industrial enterprise, and Port Elizabeth is now regarded as one of the centres best situated for the manufacture and distribution of goods. We know that recently several large concerns have devoted themselves to the constituency of my hon. friend, and we are going to have the general motors people coming there in connection with the assembling of their motor-cars. The number of new factories established during the year was 343. The purchasing in this country of Government supplies is being steadily extended. For the first time for a good many years, Post Office Savings Bank deposits and advances increased during the year. The Post Office Savings Bank deposits exceeded withdrawals in 1925 by £170,000, and the depositors numbered 327,000—the highest number recorded in the history of the bank. A recital of the financial transactions of the year would be incomplete without a reference to the most important economic reform effected for a long time—the restoration of the gold standard.

The restoration of the gold standard by Great Britain, Holland, Australia and New Zealand just before we made the change, though not before we had decided to make it, naturally contributed to the ease with which the change was effected. It is idle to speculate on the results which might have followed on the Union taking this step alone. It is sufficient to say that the change was made without any disturbance of the price levels in the Union, and resulted at once in the disappearance of the difficulty previously experienced of transferring funds from London to South Africa. The change was, therefore, of immediate benefit to Union exporters generally. The gold certificates which had been issued subsequently to 1920 as receipts for the gold coin impounded by the Treasury, have been redeemed during the year practically in their entirety (there were £10,358,568 outstanding at the beginning of April, 1925, and only £20,484 outstanding on the 20.th March, 1926). The return to a gold currency has evidently been appreciated by the public of the Union, as very large quantities of coin have gone into circulation in place of notes. (The notes outstanding were £11,122,481 on 4th April, 1925, and only £7,217,000 on 20th March, 1926.) In a good year as this has been the note circulation would have increased but for the replacement of notes by gold.

The estimates of expenditure from revenue for 1926-’27 total £26,952,000, that is roughly £550,000 more than the actual expenditure for the current year, after allowing for savings and surrenders on this year’s votes. Allowing for savings and surrenders on next year’s votes, the increase may be taken at about £400,000, that is to say, the same figure as the increase on this year’s original estimates. The variations between next year’s and this year’s estimates are fully dealt with in my memorandum prefacing the estimates, and I need not explain them now, except to say that the principal increases are, as usual, inevitable, such as the increased provision for interest on loans consequent upon increased capital expenditure, increased subsidies to the provinces and increased provision for pensions. In regard to revenue for 1926-’27 the bad season which is being experienced in many parts of the country, and the consequent reduction of agricultural production make it necessary to approach the task of estimating the receipts for the new financial year with some measure of caution. So far as customs duties are concerned, the receipts for the year closing are expected to be £8,160,000. A number of tariff alterations are proposed, and these will be referred to later. The receipts for this year may be taken as the basis for next year’s estimates and, after careful consideration, I have decided to reduce them by £460,000, bringing out a figure of £7,700,000 for next year. There are no indications that recent importations have been excessive, or that stocks held in the country of imported goods are abnormal, so I think that the reduction allowed for should be adequate.

Excise duties have vielded £1,830,000 in the current year. I allow for reductions of £40,000 in respect of spirits and beer and for small increases on cigarettes, sugar and matches, making a nett reduction of £28,000.

Postal revenue is put at £1,674,000 against receipts of £1,871,000 for this year, which allows for the loss of revenue through the return to the penny postage being set off to a considerable extent by increased business, and the receipt of a substantial sum of non-recurrent revenue representing arrear payments by the United Kingdom and foreign countries in respect of oversea mail business for 1924 and 1925.

Telegraph revenue is put at £480,000 or £17,000 more than the receipts for this year, as the increase in telegraph business, we hope, will be maintained.

Telephone revenue is put up by £90,000 in view of the extension of the telephone system which has taken place.

In regard to mining revenue, the income tax on gold mines is estimated to produce £1,100,000 against receipts of £1,062,000 for this year. I have already explained that the receipts for this year were reduced by £107,000 owing to deductions from the 1925 tax on dividend tax in respect of the same tax year paid in 1924-’25. But for this adjustment, we should have received £1,169,000 this year. The estimate for 1926-’27, therefore, falls short of the receipts this year as adjusted by £69,000. This reduced estimate is necessary to correspond with reduced profits due to reduced production arising from shortage of native labour, to increased charges for miners’ phthisis and in the case of some of the mines to other causes. Income tax on leased mines is put at £400,000 against £384,000 received in the current year. This is the proportion of the lease consideration which would be paid by way of tax in cases where tax is not specifically payable, but is merged in the lease consideration. In addition it is expected that nearly £1,600,000 will accrue to the loan account from the leased areas. A total sum of £3,100,000 is, therefore, expected to accrue to the revenue of the country from the gold mines in 1926-’27. As regards the diamond mines, fortunately the prospects continue to be good, though a reduction in the price of the inferior stones may probably cause a reduction to the profits of the Premier Mine and in the Government’s share thereof. Under Government ownership accordingly £450,000 is put down for the next year against receipts in this year of £480,000. I am allowing for probable increased receipts in the Government share of ownership profits of the Premier Mine. Under export duty £900,000, against £870,000 and under income tax £490,000 against £305,000. The reason for this large increase is due to the fact that this year’s receipts were reduced by £62,000 on account of the adjustment of dividend tax, which I have explained. This reduction is restored in next year’s receipts and the profits of some of the companies are improving and will yield a larger quota of tax. The total receivable from diamonds in 1926-’27 is accordingly £1,840,000. It may be mentioned that the re-arrangement of the system of taxing companies effected last year, namely, the abolition of the dividend tax and the doubling of the normal income tax, produces almost exactly the same revenue as the old system. The income tax, apart from that received from mining companies, will, I anticipate, produce £3,650,000 or £175,000 more than the receipts for the current year. Not only is the carry-over larger than it was a year ago, but it is reasonable to suppose that the tax year ending June 30th. 1926, will be a considerably better year than the preceding one. In the case of super tax, I expect to receive £1,100,000 or £25,000 less than this year’s receipts, as the falling off of the mining dividends will affect the receipts under this head.

Other heads of the revenue estimates showing considerable variation on this year’s collections include interest which is £285,000 up ; of this increase £150,000 is the normal increase arising through the increased amount of Government moneys advanced to the Land Bank, Provinces, Electricity Commission, etc., and £135,000 is transferred to this head from Railway and Harbour interest in respect of interest on the cost of the Colenso station, which will become a liability of the Electricity Commission on their taking over the station.

Miscellaneous revenue is £80,000 up. This is due to the inclusion of receipts from the mint in excess of expenditure. Previously, these have gone to the loan account, and as that account has already received some £80,000 in excess of the capital cost of the mint, there does not seem to be any need to continue this arrangement. Any deficiencies in connection with the mint are paid from revenue. We have now paid off the full amount of the capital cost of the mint and, in future, the receipts will not be large, as we are not minting the same amount of silver coinage. The receipts from the mint will now go to ordinary revenue.

Quitrents and farm tax revenue is reduced by £40,000 ; the amount which is surrendered to the Native Development Fund under last year’s Act and death duties are reduced by £25,000. In other respects the revenue estimates, which I shall lay on the table this afternoon, do not call for any special comment. The revenue for 1926-’27 is estimated to produce £27,019,000.

I shall table this afternoon the usual resolution covering proposed alterations to the tariff. As was to be expected nine months’ experience of working a completely new tariff has shown a large number of adjustments to be necessary. In addition to these adjustments the Board of Trade and Industries have recommended a number of alterations of duties as the result of investigation conducted since last session with the object of assisting local industries.

The principal alterations which the Government propose to accept on the recommendations of the Board are as follows: It is proposed to remove the existing dumping duty on Australian flour, which averages about 7d. per 100 lbs., but in order to retain the protection so afforded to the wheat farmer and the miller, it is proposed to increase the existing duties on flour from 2s. 11d. to 3s. 4d. per 100 lbs., minimum rates, and from 3s. 3d. to 3s. 8d. maximum rates. This nominal increase is, in fact, a reduction by 2d. per 100 lbs., in the combined duties now levied on Australian flour, which constitutes 80 per cent, of Union imports, and the taxation on this article will remain unaltered in the aggregate and no extra burden will be thrown on the consumer.

I now come to my next proposal which I am sure will find general support. Even if some hon. members think it is not really very sound. I am sure their sense of patriotism and disinterestedness will force them to support me. Here, again, I give the assurance that it need not necessarily increase the cost of living. I refer to the duties on potable spirits, i.e., whisky, brandy and gin. The duty will be increased from 37s. 6d. to 45s. per proof gallon, an increase of 12s. 6d. per case, or roughly 1s. per bottle.

Then I come to men’s ready-made clothing. The duty will be increased from 15 per cent, to 20 per cent, ad valorem in the interests of the local industry. This does not apply to overcoats or underclothing, and is a reversion to the duty existing for many years prior to 1920.

Then I come to another important alteration, steam wagons. Instead of being admitted free, as at present, these will be dutiable at 10 per cent, ad valorem, in order to put them on the same footing as motor trucks.

Then I come to sugar. A suspended duty is proposed which will be brought into effect only on fulfilment of certain conditions relative to a maximum retail price for sugar, the revision of the existing agreement between planters and millers and an agreement as to the price of sugar to be charged to manufacturers of confectionery, etc.

By way of giving some relief to smaller income taxpayers, I propose to increase the primary abatement from £300 to £400 in the case of married taxpayers, including in that term those widowed persons with young children who have always been treated for income tax purposes as falling within that class. I do not propose to extend the relief to unmarried persons. To do so would cost an additional £100,000, which we can ill afford, and it would also be giving relief where it is not required. The single person gets the primary allowance of £300 and the allowances for insurance and dependants, and though those allowances slide off rapidly, they are sufficient to give immunity to all cases which really require consideration. The cost of the relief for married persons is estimated at about £205,000, and it will have the effect of eliminating from the tax roll a large number of the smaller taxpayers. Some 10,000 taxpayers with taxable incomes between £300 and £400 will be eliminated entirely. Of the 15,000 in the next class, that is those with taxable incomes between £400 and £500, a very large proportion will also disappear, together with a certain number in the other classes. I have been urged to increase the primary abatement to £500 in the case of married taxpayers. This proposal I have been unable to accept for two reasons. In the first place, it would cost an additional £165,000 and that is more than I can afford to surrender. In the second place, having regard to the liberal abatements granted for children, insurance and the like, it would place the exemption from tax at an altogether unwarrantable figure. For it would mean that a man with two children would not pay a shilling of income tax, unless his income exceeded £650 a year. Such a man can, I think, rightly be regarded as in a position to pay his quota of direct taxation to the State and to exempt him would, therefore, be to reduce his sense of responsibility for the economical management of the State and to violate the fundamental principle of taxation that taxes should be paid in proportion to the respective abilities of the subjects.

Then in accordance with the recommendation of the Select Committee on Public Accounts in 1924, I have decided to increase the rate of interest paid to minors who have deposits in the Guardians Fund from 4 per cent, to per cent. This will involve a surrender of revenue to the amount of £15,000.

In this budget, therefore, the revenue surrendered in 1926-’27, which really means a reduction of the existing burdens of taxation, will be the following: First in regard to penny postage, which was introduced on the 1st January, 1926, at an estimated cost per annum of £400,000. The loss of one-quarter, that is, £100,000 was allowed for in last year’s budget. The additional surrender of revenue in 1926-’27 will accordingly be £300,000. Then we get the Transvaal employers’ tax. The Provincial Subsidies Act of last year abolished this tax, but allowed for its collection by the province for the year ended June 30th, 1925, and provided that the subsidy to the province should be abated to the extent of the amount received from the mines. In effect, therefore, the Union received the tax paid by the mines in 1925-’26. This amounted to £180,000, and is surrendered in 1926-’27. In addition, other employers in the Transvaal are relieved of the tax paid by them which was £45,000 for 1925-’26. Income tax: The increase of the income tax abatement involves a surrender of revenue amounting to £205,000, making the total revenue surrendered in this budget £700,000.

The Estimates of Expenditure from Loan Funds have not yet been completed. It may be stated, however, that the expenditure is not likely to be much less than it was last year, that is in the neighbourhood of £13,000,000, of which at least half will be accounted for by Railways and Harbours Capital Expenditure. It will be necessary to make some additional provision on the Estimates of Capital Expenditure for next and subsequent years to give the provinces the means of putting the hospital accommodation on a proper footing, also for purposes of the new local loans fund for which we are now legislating. Towards meeting this expenditure we have, at the close of this year, a balance of £1,000,000 to credit of the Loan Account, and the receipts to Loan Account for next year for mining leases, etc., estimated at nearly £2,500,000. I have endeavoured to give to the House a true and honest statement of the country’s finances as I see them. I think there is ample justification for the statement that our finances are again in a sound and healthy position. The accumulated deficits for the last few years no longer stare us in the face. We have returned to a normal state of balanced budgets without resorting to unsound financial expedients. We have taken steps which will guarantee the restoration of the pension funds ; the important question of debt redemption is also satisfactorily tackled, and last, but not least, I submit that we have made a good beginning in regard to the reduction of taxation and reducing the existing burden on the people. South Africa is, however, a country which is subject to violent economic fluctuations. The prospects as the result of the absence of rain over large areas certainly gives cause for anxiety as to the immediate future, but I think a general lack of confidence is not warranted. The country actually and potentially possesses such wealth and resources that the future cannot be denied, and I think we are entitled to look to the future with confidence. Nevertheless, the prudent management of our affairs is essential ; without that our manifold advantages will mean nothing. In order, therefore, to stimulate production and increased prosperity, I trust the country will give the Treasury its support in endeavouring to restrict the expenditure as much as possible, and also ultimately to reduce taxation. We do not want to stop or curtail legitimate development commensurate with our resources, but the demands on the Treasury are constantly increasing, and the country must realize that it is impossible to meet every demand. What the country needs most is not an aggravation of expenditure, but the reduction of the already heavy burden. Ever since I took office, I have done my best to curtail the growth of expenditure in directions that could not be justified. I hope I shall have the assistance of the country in this direction. It is for the House to judge what measures of success I have achieved. What is absolutely necessary is a public opinion. Nothing can be achieved if everyone is clamouring for increased expenditure in all sorts of directions and services.

I want to give notice that on Wednesday, 28th of April, I will move that the House goes into Committee on Ways and Means.

Leave was granted to the Minister of Defence to introduce the Board of Trade and Industries Acts Amendment Bill.

Bill brought up and read a first time ; second reading on 14th April.

First Order read: Third reading, Kopjes Township Bill.

Bill read a third time.

Second Order read: Adjourned debate on consideration of second report of Select Committee on Railways and Harbours, to be resumed.

[Debate, adjourned on 29th March, resumed.]

Railways and Harbours Unauthorized Expenditure (1924-’25) Bill was read a first time ; second reading to-morrow.

Third Order read: Special report of Select Committee on Architects and Quantity Surveyors (Private) Bill to be considered.

Report considered.

Fourth Order read: Second reading, Irrigation Commission Bill.

Seventh Order read: Second reading, British Nationality in the Union and Naturalization and Status of Aliens Bill.