The Press. WEDNESDAY, JUNE 12, 1867.

Press, Volume XI, Issue 1433, 12 June 1867, Page 2

The Press. WEDNESDAY, JUNE 12, 1867.

The consolidation of all the existing loans of New Zealand, General and Provincial, which has been the subject of some correspondence between the General Government and the Provincial Government of Canterbury, to be presently laid before the Provincial Council, is a subject which, though its details have to be discussed and arranged not by the Provincial but by the Colonial Legislature, is of such immediate importance to the province that it properly found a place in the Superintendent's opening address. Whether any practical steps will be taken in the matter during the next session of tho Assembly remains to be seen. This will be the third consecutive session in which it has been referred to by his Excellency's address on opening Parliament, but nothing has yet been done. The question is one that can only be satisfactorily dealt with by a Government whose tenure of office is secure enough ! to place them above the necessity of a | constant struggle for bare existence, and a House not excited by the frequent recurrence of a Ministerial crisis, and that it should have been neglected so long is another instance of how grievously the financial interests of the colony have suffered from repeated changes in the Administration. j The proposed consolidation is to be effected by raising a new loan of six millions, or whatever amount is sufficient to cover the total indebtedness of the colony, and calling in the whole of the provincial loans and converting them into the new stock. The gain to the colony from this process would be threefold. Firstly, a transaction of this magnitude might probably be taken up by one of the leading financiers, and the loan raised on the security of the entire colony, unembarrassed by simultaneous and competing offers from its several parts, would be negotiated on much better terms than an interminable series of smaller loans raised by the provinces on security ample enough perhaps in itself,but unintelligible and therefore unsafe to the majority of the capitalists at home, and forced upon the market to suit' the exigencies of the Provincial Governments. Secondly, many of the debentures of the provinces might be bought up by the colony on advantageous terms. Thirdly, the sinking fund attached to most of the existing loans might be dispensed with, involving an annual gain to the colony of upwards of £100,000. We need hardly say that the new arrangement would put an end to the borrowing of money by the provinces altogether. If at any future time a fresh loan should be needed for any large public works—if Canterbury or Nelson, for example, wished to construct a railway to the West Coast, or Auckland a railway to the Waikato —and if upon full enquiry it were shown to the satisfaction of the Assembly that there was sufficient prospect of the work proving remunerative to justify an increase of the general debt, a further issue of stock to the requisite amount would be ordered. But the money would be borrowed in the name and on the security, not of the province, but of colony at large. As between the colony and the province it would be so arranged that the annual interest on the debt incurred for its special benefit should be made a first charge on the provincial revenue —just as portions of the £500,000 loan of 1856 are now locally charged—but with that the borrower would have no concern. He would look to the colony for payment of interest and principal ; how the colony chose to apportion the liability among its subdivisions would be a matter of indifference. The security would remain the same. It is clear that a system which imparts to the provinces the credit of the whole colony, and saves them from the position of having to borrow on what is after all only a second mortgage, must bo a decided change for the better. It may bo objected, however, that the advantage is unequal j that the provinces whose credit is bad will be all the better for being thrown into

partnership with their neighbours, but that the provinces whose credit is good will be so much the worse. This argument was often used during the discussions that took place two years ago on the propriety of seeking a colonial guarantee for provincial loans. Provinces like Canterbury and Otago, it was urged, which are wealthy and populous, and which, above all, still have a land fund, will do best by managing their own business for themselves, and will only impair their position by association with others whose resources are so much inferior. This might be true if such isolation were practicable, but it iB not. Every province which borrows money creates a liability on the colony, because if it does not meet its engagements, the colony must come forward and take them on itself. Southland is a case in point. There we have a province unable to fulfil its obligations and the General Government obliged to transfer them to the colony and pledge the colonial revenues to the redemption of the provincial debt. The credit of all the provinces would be so irretrievably shattered by the utter bankruptcy of a single one, that if one ia unable to meet its engagements with its creditors, the others, for their own protection, have no choice left but to come to its assistance. In point of fact therefore, even as matters stand now, every province that contracts a loan virtually pledges the revenues of all. Moreover it may reasonably be doubted whether under any circumstances the provinces will find themselves able to borrow as freely as they have hitherto. Lenders are getting shy of them. No province, we should imagine, is better known at home than Canterbury or stands higher in public estimation, yet the attempt to dispose of the remaining Canterbury debentures was an ignominious failure. And the failure arose, not from a disbelief in the value of the security offered, but from a dislike that has grown up to this whole class of loans. The Times, commenting on t lie transaction ascribes the result to this cause, and condemns " the impolicy of the course pursued by the small local Governments of the colony in pressing their loans individually on the London market, instead of conducting all their financial arrangements, so far as loans in this country are concerned, through and under the sanction of the General Government of New Zealand." There seems also a disposition at home to check applications for 1 money otherwise than from headquarters ; thus the Times, in the article quoted from, continues:— '•' The sooner the system [of provincial loans] is brought to an end the better, since, if it be encouraged, there will be similar applications whenever money is overabundant here from every little colonial district or municipality that may feel the temptation of speculative borrowing." It would seem then that if there were no other reason for putting a stop to the borrowing powers of the provinces, and making the General Government the medium for negotiating all future loans, Provincial as well as General, the adverse feeling in the English money market to provincial securities would render such a course necessary. The consolidation of the loans already existing follows the same principle but gives it a retrospective effect, and thus secures as far as possible the advantages that would have ensued had it been followed from the first.