ECONOMIES.

Auckland Star, Volume LXIII, Issue 98, 27 April 1932, Page 7

ECONOMIES.

LOCAL BODIES' PROBLEM

OVERSEAS INTEREST.

"EXTENSION OF TIME SHOULD

BE SOUGHT."

STATEMENT BY MR. ALLUM.

"In view of the fact that there is a general demand for economy in administration, what does that now involve, as far as local bodies are concerned generally, with particular application to the Auckland Transport Board?" This query was put by Mr. J. A. C. Ailum, chairman of the board, this morning, and the reply was, "Obviously a reduction in .expenditure."

"This may be interpreted by some people to imply the cutting down of wasteful expenditure," said Mr. Allum,

"but a little consideration will show that this idea is erroneous. It would be absurd for anyone to claim that any concern is 100 per cent efficient, but, speaking in broad- terms, it can be claimed that there is very little unnecessary expenditure on the part of local bodies. The hard times are not of today's creation. They have obtained for the last few years, with the result that any expenditure which might be considered a 'frill' has long since been cut out.

"Reductions in expenditure that have recently taken place have been achieved by reductions in wages and salaries, reductions in staffs, and reductions in the purchase of stores. This means that there has been less work and consequently loss wages paid to smaller staffs. It is true that a great deal of money lias been spent in relief works and under this heading the Transport Board has since 1926 spent £ISG,OOO, the Government contributing £31,000. I mention this expenditure because as chairman of t the board I am familiar with the position. I know that many other local bodies have spent large sums of money in materials and supervision to relieve unemployment, the Government of course making the payments for unskilled labour. Capital Charges. "Economies so far have been, generally speaking, at the expense of the worker, and the time has now arrived when it is necessary to decide whether the economies shall continue in that one direction or whether they shall be applied to capital charges as well. I have no hesitation in expressing the opinion that to continue to reduce wages and dismiss workers as the only remedy will not only be inhuman, but will spell a policy of ultimate ruin to the country. We must honour our obligations in all directions and I will not be a party to any suggestions of repudiation of local body indebtedness; but I am equally satisfied that the time has arrived when economies must be effected in capital charges. The Government has decided that interest rates on debentures lmiai be reduced by 10 per cent, but the public does not realise that this reduction applies only to interest payable within the Dominion.. Many local bodies have raised a large proportion of their loans in England, with the result that they will obtain very little benefit from the new legislation. ...

"The British lender has found it necessary to make concessions in connection with loans to foreign countries, and surely it is reasonable to expect that an approach from the Dominion for some relief in interest during the present crisis would be favourably received and responded to. No doubt it shows a fine spirit to say we will pay our debts —and I reiterate that our debts must be paid — but after all we must, sec to it that we do not first pay our debts and then find ourselves in the position that we have insufficient money to run the country. What I have in mind, and I want to make it clear, is only an extension of time in which to meet our liabilities, and I make no suggestion of not meeting them. Representations should be made from the proper quarter to the British investors with this end in view." Review of Sinking Funds. Asked his opinion in respect to a general review of all local body sinking funds, Mr. Allum said in his opinion each case should be considered separately and the time had arrived for this to be done. "Until recent years," he said, "it was not quite clear how sinking rates were determined. Bates have since been fixed to provide sufficient funds to redeem the debentures at maturity and the terms of a loan coincide approximately at the time of the raising of the money with the estimated life of the asset. This, at any rate, has been the theory, and in normal times it would be considered a wise policy. "Examination shows, however, that in many eases relief could be given at the present time without injury to anyone. I have in mind particularly the trading departments of local bodies, and local bodies whose only function is to trade. Many loans have been raised to carry on these undertakings, and some have a currency of twenty years with a sinking fund of 3 per cent. The point often overlooked, however, is that while the sinking fund is provided to redeem the debentures at maturity—or, in other words, to repay the capital—the undertaking is at the same time being maintained so that when the debentures are redeemed the asset is still intact. This must necessarily be so in many cases, otherwise the undertakings could not function. On the other hand, when roads wear out they have to be completely renewed, which, of course, means that the sinking fund payments must be reviewed in a different light. More Employment. "All the relief that local bodies can obtain in respect to the reduction in capital charges, including interest and sinking fund payments, means so much money available to keep works going and people in employment, and I feel we have to face up to this problem as a national duty, as it is incumbent upon all of us to provide the maximum of employment. I have been pressed on a number of occasions to give my views on this question, and I do so now with reluctance, because it is a problem that is receiving attention. Therefore I can only now speak in general terms." In reply to further questions, Mr. Allum said sinking funds could either be suspended for several years, or the annual appropriations reduced, thus spreading the terms of repayment over a longer period..