The Press WEDNESDAY, JULY 12, 1933. Loan Payments in London.

Press, Volume LXIX, Issue 20905, 12 July 1933, Page 8

The Press WEDNESDAY, JULY 12, 1933. Loan Payments in London.

The statement issued by the Minister for Finance and duplicated by the Prime Minister in London falls into two or three parts, which it is convenient to take separately. First, the Government deals in a comparatively simple way with issues of optional domicile lately transferred from New Zealand to London; and very few will think it either improper or unnecessary to safeguard bona fide purchasers from loss on account of the 20 per cent, statutory reduction in interest. It may not always be easy to be sure that the stocks have been genuinely transferred; i.e., that the New Zealand owner is not finding a way to escape the interest cut, as he would, eventually, on a more even exchange, and as he would at once, if his coupons were paid in sterling. But while means may be devised of safeguarding the just operation of the Local Authorities Interest Reduction Act, the fact must be accepted that a direct solution, by which a few individual schemers may profit, is better than a complicated or vexatious one, and infinitely better than none at all. In the meantime, the only safeguards announced are the essential ones by which the exemption is limited to on or before July 1 and removed on their return to New Zealand domicile. In the rest of his statement Mr Coates repeats, with greater clearness, what he said a few days ago about the service of local authority loans issued in London upon the contractual basis of a London prospectus and about others which, though not so issued, have always been served in sterling. Whether the Broken Hill judgment applies to either class of securities is not certain. It could hardly apply to the first without involving most or all of the oversea public debt; its exact application will not be known, probablv. until the Southland Power Board's action and perhaps others proceed to judgment. Mr Coates even increases the obscurity here a little by referring to the Auckland Transport Board debentures, the interest on which was recently pa'd i" N"w Zealand currency, as if they belonged to the class of securities first mentioned. But he stated the Government's view that, if there is not a legal, there is a moral responsibility on "every local body "which has issued debentures in "London in consideration of "moneys received in London pursuant to the terms of a London "prospectus" to meet its interest charges in sterling, and that, if such payment were repugnant to decisions in casa law, then the Government would introduce legislation to validate it. Further, if necessary, the Government would validate sterling payments where previous practice had "clearly indicated the "right of the holder to be paid in "sterling and the intention of local "bodies to pay in sterling in "London." Every payment in dispute or likely to be appears to be covered by this formula, and it appears to go far enough to remove every cause of doubt or distrust on the London Stock Exchange and among investors, but for one uncertainty. Mr Coates will have to make it clear whether the Government proposes merely to validate payments in sterling, where the effect of the Broken Hill or of later judgments is to legalise payment in New Zealand currency, or to enforce them. If the first, then a question of great difficulty and of much more than local concern will be left to individual local bodies, and a possible result will be differential treatment of investors oversea, with the mischievous consequences of such inequity. If the second, the Government will instantly—and with some justice—be called upon to bear the burden of extra cost imposed on ratepayers here and there in the national interest. Again, it is necessary to point out that, in a world still threatened by competitive depreciation of currencies, the Government's proposals embrace a risk, indefinite but not to be ignored. Should the Dominion's currency be further depreciated, the burden of the local authority debt affected will be increased—in common, of course, with all the rest of the oversea debt. It is perhaps enough to say that it is not worth while to worry specially about a minor problem when it is incidental to a major one; and that it would be very much worth while to accept i'r.r greater risks for the i protection of the Dominion's credit, in London.