RURAL CREDIT BONDS.

Auckland Star, Volume LIX, Issue 77, 31 March 1928, Page 7

RURAL CREDIT BONDS.

PUBLIC RESPONSE NOT GOOD. LACK OF CAHOOTO ALLEGED. NATURE OF THE SECURITY. " (By Telegraph—Own Correspondent.) WELLINGTON, this day. Judging by inquiries made locally, It appears that the public response to the Government's recent invitation to it to take up rural credit bonds to the amount of £400,000 has not been generous. The reason generally assigned l'or this ia that there was a lack of straightforwardness on the part of the Government over the issue of the bond. The prospectus stated that the loan was authorised by and with the approval of the Minister of Finance, and that the issue of bonds is authorised Ly an Act of the General Assembly, but that the bonds are not chargeable on the public revenues of New Zealand. Thev are, however, fully secured on the assets of the Rural Advances Eranch of the State Advances Office. The principal monevs and all interest accruing thereon are made payable out of the Consolidated Fund, and are recoverable from the Rural Advances Branch account of the State Advances account.

The impression left on some minds by this statement of.the security for payment of the bonds and interest on tLein is that the loan is not a Government loan, and yet the Government is behind it. Ordinary issues of Government loans are a charge upon the public revenues of the State issuing them, but these Government bonds do not appear to be go secured. Section 8 of the Rural Advances Act says that the principal and interest in respect of the bonds shall be payable out of the Consolidated Fund. The interpretation placed upon this provision by local financial authorities is that the Treasury must pav out of the public funds the principal and interest of the bonds.

"The Government knows perfect!* well, - ' said one authority, "that it intends to pay out of the public funds, and it has the uecessary authority lor doing so. therefore it should have* been open and above-board about its liabifitr, and taken the public into its confidence! L'flquestion&bly the country is responsible for the payment of the bonds and the interest."

Another opinion was implied in the question: "If the Government did not pay on these bonds, what chance would it have of floating another loan!"