FAST AND FURIOUS.

Auckland Star, Volume LVII, Issue 177, 28 July 1926, Page 13

FAST AND FURIOUS.

THE BORROWING PACE. NEW ZEALAND DEBTS. AND CAPACITY TO PAY. SIR JOSEPH'S CRITICISM. REPLY BY PRIME MINISTER. (By Telegraph. —Parliamentary Reporter.) WELLINGTON, Tuesday. Having missed his opportunity in the prematurely ended Budget debate, Sir Joseph Ward dealt with the Financial Statement in the House to-night on the Imprest Bill, and was accorded extension of time, as the half hour period ended when he was in the midst of an interesting analysis of the country's debts and its capacity to pay. "The pace we are going at is fast and furious," he declared, when he reminded the House that the country's loans total 238 millions for a population of one and a half millions. Last year's borrowing operations added eleven millions, and ho did not care how it was analysed in the Budget, which he characterised as a akeleton, because of the absence of essential details —he did not care how the Minister of Finance tried to shift the pea from under the thimble by saying some of it was reproductive — the rate at which, we were going was too fast. "We would require to be the quintessence of a fool if we swallowed this stuff, which persuades us that two milions was paid off our loans last year when the Minister borrowed over five times as much in the same time. Sinking Fund Absorbed. "What has been done with the money set aside for the redemption of the Dreadnought loan?" asked Sir Joseph. He pointed out that in 1922 the Government did away with the sinking fund system, under which New Zealand was the only country in the world which provided a system for the repayment of every loan from the early Maori war loans to the latest raised. He remembered that when he was Minister of Finance an officer wanted him to do away with the sinking fund system, so that the money saved'could be applied to purposes of the Government. He refused point blank, but a subsequent Minister of Finance adopted this change in the system. In 1922, when it was Stopped, there was a sum of £71,707 in the sinking fund for the repayment of the Dreadnought loan, and had that system heen continued one year more, in 1927 the whole of the Dreadnought loan cotild have been paid off' if the Reform Government had not interfered with the four pet cent sinking fund system. Paying Twice Over. They preferred to fund it for thirty Tears, so this country was paying again for the Dreadnought. This borrowing required to be tackled, and there would have to he a change of system. He recognised that New Zealand could not stop borrowing in a hurry. It would be ruinous. Money was needed to complete hydro-electric works, unfinished railways, roads and bridges. Recent Loan Difficulties. A former Minister oS*-Finance could, if he liked, tell of the difficulty he experienced in trying to raise five millions in New Zealand. He found he could not get it, and, had the Government gone on trying, it would have forced a crisis in which every lending institution would have put up its rates of interest to stop the withdrawal of money for the loan. He would be surprised if the former Minister contradicted his statement that financial institutions had to apply to Australia for money for this loan. The Hon. W. Nosworthy: They never did it with mv instructions. Sir Joseph Ward: They did it with your knowledge. They might have had to do it as a matter of necessity. It was common talk in financial circles that they had to go to Australia to get the balance of the loan. Taxation Reduction. It would be impossible, declared the speaker, to reduce taxation; in point of fact our expenditure had doubled since 1915. How much were we sending out of New Zealand in interest on the 128 millions borrowed in England, with thirty millions Departmental expenditure, and another five millions local body expenditure? Could anyone tell him that the latter's borrowing could be controlled by the appointment of a board? Then £800,000 was spent last year on public buildings. There must he schools, but some of the city buildings were far and away too extravagant. He had always been optimistic, but his optimism received a shock on looking at- the present position, though our credit is still good and our assets greatly exceeded the indebtedness of the National Government. The Land Boom. Sir Joseph Ward proceeded to remark that he had never had a quarrel with the late Mr. Massey, and to some degree his mouth was closed on the subject of the National Government, "but he could say that there was a disagreement when he returned from England, his colleagues wanting him to do something which he would not do. He was against the buying of land in New Zealand for cash, and he predicted that if it was done, and the Government was going into the market on those conditions, there must be a land boom. He wanted to buy the whole of the land required, as Liberal Governments had bought it under the" Land for Settlement Act. Office had no attraction for him with that responsibility on his shoulders. Possibly a mistake was made by the publication of a policy within a day or two of his going out of office, and the men on his side ought to have done him the justice of saying that it was done with their full concurrence. The Only Way Out. He recognised that the Minister of Lands had the heaviest task of any man in the present Cabinet. What was the use of talking about the amount of money we had to send out for interest if we could not get more people on the land? When a country was in a bad way the only thing which would save it was putting people on the land, giving them facilities and cheap money. But how would New Zealand get cheap money if the State Departments put up their lending rates? Would private institutions lower their rates while the Government kept them up? When there was a similar difficulty in his own time as Finance Minister he was told it was impossible to get cheaper money, but he went to the banks and said he was going to lower the rates for the Post Office Savings Bank if the other banks j would lower their own. It wae -done.

"One thing has to be done," concluded Sir Joseph Ward, "and that is to cheapen money. We 'will never get back exactly to pre-war conditions in our lifetime, but we will never improve a hit unless we make a move." Borrowing Justified. The Prime Minister made an early reply, declaring that the Government's policy in funding its loan was that adopted hy British financiers and by the British Government. He believed Australia and South Africa were followingNew Zealand's example. It might sound anomalous to say that two millions was paid off in a period when eleven millions was borrowed, but that two millions was a dead weight debt and non-pro-ductive. They must have regard to the position of the country's staple industries, then they would realise the necessity of borrowing five or six millions for settlers and workers. Some mi°ht say this was wrong. He thought it was right to give assistance at a time when the moratorium was ending. The Government had decided not to go on the British market in future for loans for settlers and workers, though this was not because it was not one of the best investments so long as the eountrv was being developed. One of the Finest Assets. In the case of hydro-eleetricitv, this country had one of the finest 'assets. He was almost afraid to say what would be the position if standard rates were maintained. He believed there would be £8,000,000 to £10,000,000 accumulated profits by 1940. Care must be used with the railways, and he would deal fully with this subject in the Railways Statement. Some of the gaps must be closed up, otherwise there would continue to be huge national waste through inability to transport stock from drought areas to places where feed was plentiful. Our highways were being improved, but people would have to pay for it, and repayments would have to be shorter. Money had been borrowed at the rate of £1,000,000 annually to catch up with telephone arrears. Mr. Sullivan: Are you going to borrow internally? , Mr. Coates: It is all a matter of cost. The Prime Minister added that development must go on, because population was increasing, and facilities must be given. Repaying Our Debts. New Zealand was repaying its debts out of revenue, cleaning things up as it went along. The [Budget showed that approximately £2,000,000 was repaid last year. He could not follow his critic in suggesting that there was any difference between the using of. accumulated surpluses or borrowing money for soldier settlement, except that it was all in favour of the surplus. Supposing £3,500,000 to £4,000,000 of that sum had to be written off, it would not he much to worry about if we had 6ucceeded in settling ten to twelve thousand soldiers on the land. No Government, knowing the temper of the people at that time, would have dared to refuse to setle these men on their return from the war.