The Press FRIDAY, OCTOBER 9. 1936. Wider Borrowing Power

Press, Volume LXXII, Issue 21909, 9 October 1936, Page 10

The Press FRIDAY, OCTOBER 9. 1936. Wider Borrowing Power

The explanation offered by the Minister for Finance of the more important provisions of the latest Finance Bill cannot be regarded as adequate. Though, as we point out elsewhere, the wording of the measure is deplorably obscure, its general import is depressingly clear; it is an extension of the borrojving powers of the Government, of several State departments, land of local authorities. Part one authorises the Minister for Finance to borrow £6,000,000 for public works, £2,000,000 for the construction of main highways, and £5,000,000 for housing—a total of £ 13,000,000. is still no information as to how this money is to be borrowed; but in view of Mr Nash’s assurance that there will be no public loan issue and his hint about the possibility of borrowing from State departments, considerable interest attaches to section 19 of the present bill. Part of this section authorises the Public Trustee to make advances from the common fund of his department “by way of mortgage on the “ security of any bonds, stock, debentures, or “ other securities issued by any Government or “by any local authority or public body . . . .” Such advances are not to exceed nine-tenths of the nominal value of the security. If, then, the present Government desired to borrow £ 1,000,000 from the Public Trust Office, it could create by a stroke of the pen securities to the nominal value of £1,111,112, hand the document to the Public Trustee, and receive in return £1,000,000. Whether the Government intends to do anything of the sort we do not know; but we would welcome some indication of why this change in the Public Trustee’s powers should be considered necessary. There is a further extension of the borrowing powers of the State in section 25, which is quoted in full elsewhere and which constitutes an important change in the powers of the Reserve Bank. Broadly speaking, the Government can raise money from the Reserve Bank either by advances in anticipation of revenue or by sell- • ing securities to the bank. The Reserve Bank 'Amendment Act of I?s6 provides that accommodation of the first type is not to exceed the total of estimated revenue. One of the purposes of section 25 of this bill is to make it clear that this limit has no reference to advances which may have been made against securities. The other purpose of section 25 is to enable local bodies and incorporated departments of State to borrow from the Reserve Bank in anticipation of revenue. It would be interesting to know how much of the revenue of these departments is included in general government revenue. Part two of the bill deals with the borrowing powers of local authorities. Henceforth all local bodies will be able to borrow for unemployment or relief works without taking a poll of ratepayers; and a similar liberty has been granted to power boards wishing to raise additional loans for reticulation purposes. It is also provided, however, that, if 5 per cent, of the ratepayers petition to that effect, a poll must be held. Not much exception can be taken to these provisions. As a means of regulating expenditure, polls of ratepayers have never been of much use; and they have the disadvantage of being expensive and inconvenient. The best check on local body borrowing is the Local Government Loans Board; and as far as can be gathered this bill does not weaken the board’s powers,