PAYMENT FOR PUBLIC WORKS

Press, Volume LXXIV, Issue 22367, 2 April 1938, Page 22

PAYMENT FOR PUBLIC WORKS

TO THE EDITOR OF TOT PRE»*. Sir, —Your correspondent, “Unwilling Victim,” purposely left out interest on borrowed money. I would suggest that if interest was entirely eliminated there would be very little objection to borrowing. Take his house building proposition with interest at 5 per cent., leaving out instalment payments and compound interest, and say that this man has other securities so that he can borrow the £IOOO and build right away. The interest will cost" him £SO a year, and as he is saving £IOO a year, he will be setting aside £SO a year as purchase money. At this rate it will take 20 years before the house is free. By that time it 'Will have cost Vivm £Cor double the actual building cost), and this man deprives himself and family of luxuries for 20 years instead of 10, and if he wants to sell the house he will either have to sell at a loss or the purchaser will have to pay a fancy price for Your correspondent refers to the early development of New Zealand. Why go back as far as that. Take, for instance, the number of farmers who purchased farms with the assistance of borrowed money, and then count the months (or is it years?) that the Adjustment Court will be at work dealing with the unwilling victims. Had, these farms changed hands on a cash basis, the price of land would not have soared sky high and the farmers would have been able to live within their income. The difference between carrying on public works out of taxation or out of borrowed money is this: that when carried on out of taxation and the tax gets too hot, the works can be stopped and the tax stops with it; but when they are carried on with borrowed money and taxation becomes a burden stopping the work brings nO relief from taxation. Our public works are paid for at the time of completion, noth labour and material being paid for; but if borrowed money is used there remains the interest bill, which, in other vmrds, is equal to a kind of superannuation to the lender without stopping his activities. The lender evidently has more than he needs, otherwise he would have none to lend, so the more we borrow, the greater our superannuation bill. Which country would be more attractive for people to reside in—one free from debt or one burdened with debt?— Yours, etc., W. weld: April 1, 1938.