The financing of government expenditure in New South Wales, 1856-1900

Abstract

In its simplest terms, the argument developed in this thesis is as follows. Ostensibly, government policy was directed to the promotion of private economic activity. Limited use of taxation was regarded as important for the achievement of this aim. But, in practice, the Government was subjected to difficult-to-resist pressures for increased spending, generally on grounds of fostering private enterprise. As a consequence, the Government was forced to exploit alternatives to taxation in order to meet expenditure commitments. Short-term - essentially political - considerations in the selection of alternatives frequently led to action which ran counter to the expressed intention of promoting private activity. In the long-run, the methods of financing expenditure may be seen as contributing to the expansion of the public sector at the expense of the private sector. Therein may be seen the rationale of the chapter arrangement. Chapter One represents the basic information on trends in total expenditure and the main components, together with pointers to the pressures underlying those trends. Restrictions on the Government’s use of its taxing powers are investigated in Chapter Two. Following chapters examine the alternatives to taxation in order to meet expenditure commitments. Chapter Three concentrates on borrowing. Budgetary aspects of the land laws are studied in Chapter Four. Chapter Five considers other sources of funds, primarily the railways. The final chapter examines the nature and significance of changes in the Government’s cash balances, the problems of the Treasury and its relations with the banking system. This arrangement of material has both advantages and disadvantages. But a compromise has had to be found between the need for relating all aspects of the finances and the necessity of tracing long-run changes in the various elements. Inevitably, some repetition cannot be avoided, for each chapter has to take into account basic structural changes in the public finances as a whole. Relationships between various sources of funds and expenditure trends, in short, are approached from different angles in successive chapters. Cross-referencing is designed to eliminate unnecessary repetition. This procedure facilitates examination of such issues as the relations between the N.S.W. Government and the London capital market, the basis of tariff policy, the purposes of land legislation, and so on. These issues are all subsidiary to the main problem of how the Government financed its expenditure but are related in terms of the underlying argument briefly outlined above.