FINANCING THE WAR.

Auckland Star, Volume XLVI, Issue 147, 22 June 1915, Page 5

FINANCING THE WAR.

BRITAIN TO RAISE AN UNLIMITED LOAN. f DEFICIT OF £513,000,000 TO BE MET. (Received 10.10 a.m.) LOXDOX, June 21. Mr. Reginald McKenna (Chancellor of the Exchequer), speaking in the House of Commons today, said that a deficit of £.'>IS.OOO.OOO had to be made good by receipts other than revenue. The expenditure was nearly JZ.'t.OOO.OQO daily and was rising. A loan at 4j per cent at par repayable ls)4.i. with fiovcrnment option to repay in 102.">. was to be made. The Uovernnient was not asking for any definite amount, and the lists would be open till July 10. It was proposed that holders j of the November war loan should be allowed to convert their holdings into the new war loan stork, ami also holders of Consols and _'4 ami -2$ annuities. £75 of Consols would bo convertible into £50 of the new loan, and the annuities will be exchangeable in the proportion of £7S and £07 respectively to £50. Subscribers to the loan would be entitled to any higher rate of interest that might be fixed for future loans. It was proposed to provide for the sale of £"> to £i> bonus through the post office. War loan vouchers for 5/- or multiples would be on sale at the post offices, trade unions, and other offices, with ~i per cent interest for every I complete month until the total reached £5, when the vouchers would V"? exchanged for a bond. Mr. McKenna appealed to the patriotism of the country to use its gigantic financial resources to enable us anil our allies to carry on the war to n successful issue. In the earlier st:iccs <>f the war the Bunk of England, with the Coveriiment guarantee, made advances to accepting houses and uthers to enable them to meet bills and liabilities. This amounted t,j £120,000.000. but the liability was now reduced well under £50.000.000. He now proposed to pay o/T the bank from the surplus of the £80.000.000 it had in hand, and thus leave the bank free to watch over exchanges and protect the country's gold reserves. Mr. McKenna added that we had already issued £2.}-'> .000.000 in Treasury bills. There were two objections to the indefinite issue of bills. Firstly, they had a habit of falling due when it might b< - inconvenient to find the money: secondly, although the distinction might be tine, we borrowed the banker's, not the public's money. We wanted money in a way that did not oblige us to repay during the course of the war. A loan would give UiH advantage, and also had the effect of assisting the foreign exchange. Consols bad depreciated almost to the point of unsalability, and the Government was bound to afford relief in the interests of the commercial community. A sudden drop in Consols would entail ruin and bankruptcy to many, and the State was bound to avert this possibility.