STATE ADVANCES.

Dominion, Volume 6, Issue 1567, 10 October 1912, Page 5

STATE ADVANCES.

INQUIRY BY PUBLIC ACCOUNTS COMMITTEESECRETARY TO TREASURY EXAMINED. RE.MUERA. LOANS. SOME MINISTERIAL. TELEGRAMS. • The Public.Accounts , Committee nf the House of Representatives sat in public yesterday to conduct an inquiry into the administration of tho State Guaranteed Advances Department, tinder past Governments. There were present: Mr. J. B. Hino (chairman), the Hon. Jas. Allen (Minister for Finance), Sir Joseph Ward,. Dr. A. K. Newman, Mr. J. Hanan, and Mr. J. Craigie.' Mr. J..W. Poynton's Statement. The first witness examined was Mr. 3. W. Poyntoii, Secretary to the Treasury and Superintendent of the State Guaranteed .Advances Department. He stated, in reply to Mr. Hnnan, that no loans were granted'to local bodies by tho Advances Department before .he was appointed as Superintendent. ■" Jlr. Poynton read a type-written statement to the Committee in the course of which hu'safd that at an informal meet- , ing of the Advances Board before commencing actual business the position of local authorities and their requirements were discussed, and it was agreed: That as the indebtedness of local bodies in the Dominion, apart from that for loansi obtained from the 'Government, amounted to about ,£15,000,000, and the rates ol interest paid by tho local bodies on their loans- was. much higher than Itt per , rent the rate it which they were in future to get money from the.board, it was imperative that applications^! , moneys to pay off old'loans be.refused. That loans he granted for useful and necessary works only.

1 That applications for what might, be considered luxuries, such as electric and other trams, town halls, municipal theatre?, recreation grounds, etc., be refused. ' ■ . .

That the procedure for obtaining loans, which was troublesome and expensive, 'be simplified. ty was believed that, by confining the grants to new and necessary works, and refusing to pay the debts incurred for old oues, there 'would ba enough money to meet all requirements. No power was given, in the Act to discriminate amongst the different classes of local authorities. Had there been sufficient moneys obtainable to supply all applications there would not have been any demand for sueli preference of counties to boroughs. It is only since last November,'when.the applications were:so much in excess of what was expected, and the limit of .£SOOO was imposed, that■-ihe*'strong demand for discrimination has arisen.... •

From the commencement it was known that a loss would-be'made on the working. The" Minister was 'asked by _ the boaTd at one of its first meetings if hewould place a sum on the Estimates to recoup the ? Department for losses. He said there-would be no objection, ns every member of the House desired to help local bodies, but it would bo better to wait a couple of. years to see what the losses actually would be. ■

Political Influence Denied. Mr. Poynton described in detail the pro ccdure adopted by tlis board. Ho stated thai no Minister or member of Parliament had personally or by agent suggested that he should grant or 'refuse any application 1 for a loan, and detailed the instances in which members had written or telegraphed to him about; loans. The tiles containing these communications were produced)' and Mr. Poyaton stated that none of them couid possibly be considered as an attempt to influence the. Department in granting a loau. , Ho pointed out ihat the rate of'interest on loans was raised to 31 per cent., and Iho limit to ,£SOOO fixed on November 13—three weeks before the election.

■ Necessary Amendments. In the latter part of his statement, Mr. Poynton suggested the following amendmc'nts in tho Advances. Act, stating that they were ..urgently needed:— (a) Extra remuneration should be given to-the'office for carrying'out the work. Losses in future will not be anything like what they have been during tho first two rears.' The losses were entirely due to having funds uninvested. The moneys could not-be got out fast enoughi and so interest paid to the Post. Office on uninvested- moneys was dead loss to the local authorities branch of the.Advancfc Oluee. •\. difference of, say, one-eighth of .one per cent b?hveen the rate paid on the moneys after "allowing for posts of. raising the, loan and that received from , the. local body -would' nearly 'pay the costs of administration. ' ■'. < jb) When a loan has been provisionally or even finally granted;, arid the money cannot "be obtained, at the expected rate, provision should be made for binding tho body to pav the increased rate. At present, in order not to disappoint the local body which has proceeded on. the assumption that its loan will;be granted.at a certain rate of interest, moneys have either to be kept in hand uninvested .and losses thereby incurred, or- engagements entered into for some time ahead, and when money has.to be.raised to meet these engagements, it may not all be obtainable at th<V ugree'd-upon'ratc. (c) Discrimination , should be- allowedamongst local- authorities when there is not enough money-to satisfy, all. requirements. , Even amongst local authorities of the same kind there should "be power to discriminate. Classification would ■be batter done by regulation than by statute: Power should be given to issue such .regulations. ■ ■ ,■,,,'■ j ■ (d): Special -provision should be made to'meet the necessities of the poorer and more remote county bodies. This'is a matter of policy,, aud I therefore do not .care to proffer suggestions. (el A limit- as to the amount, to be lent to any'one body should bo faxed by statute. , . ,-, . , . , 11) If the full amount authorised to be borrowed by the Minister is not raised during one financial year, the difference between the amount raised and tiiat .authorised should be allowed to be raised during the next year.: ~,-,, ~ Sir Joseph Ward said that ho thought that all witnesses should be sworn. This was agreed to, and Mr. Poynton W To S Sir Joseph Ward, he stated, that he was superintendent of the State Advances Board.- and had been since-the inception of the Advances Act in 1909. No Minister of tho Crown had. ever asked him to make an advance to a local body It any Minister, had done so, he would have ob'jqcted in writing, and •warned thn Minister of this consequences, of such action. No member ..of Parliament had endeavoured to subject him to, political influence. Members frequently, to make inquiries about loans—Mr. Craigio had done so—but there had never bean any attempt to influence him in the course of his duties. If any Minister or member hod attemotod to influence him, it would have had no effect whatever. -Every loan wanted had been granted with the unani-mous-consent of the board. No loan had boon granted to any local bortv without proper security. In every cas» tho nmoiint; advanced had been secured .by - a special rate. There had never bren nnv squandering by Hie bwd in making a loan to a local boily. .There had never been any wisto so fur us the board knew. Tse did not snpposi. that 'so.large, a sum had ever been lent before with m> little waste. The cost, of administration had Iwri very small. In the first-ycur, when the Act. was in force for only two month l !, tllP co«t of administration vn« .£630. Tn tho following year it was- .£120!), nncl-m .1911-12 XII !t3. - .'' •

REMUERA ADVANCES. ism JOHN FINDLArS TELEGKAM. Sir .Toseph Ward directed the attention of Mr Poynton to the following extract from a T>ojiin'ion- report of proceedings in .the House on September 27:— Mr. Allen: The Borousn ot Onelninca, Jjlfl.il.ifl; the Borough of* Xcwmarket, Mr. Hino: Where's,that? . Mr. Allen: I dcm'l know. Ajk Sir John fir 'TflMph-Wwd.! CeulA you iniortnthe

any application for a loan to be granted to any public body iti tho district of Parnell, or wherever it was lie was standing for? Mr. Poynton; Sir John Findlay cent a telegram to you on November !!, and that was sent on to mo by you. Jlr. Poynton produced ami Tend Sil John i'iudlay's telegram to Sir Joseph Ward. It is dated N'oicmbcr 2, 1911, ami rends as follows.— "A deputation interviewed mo this morning in connection with tho application of the Jiemiiera lioad Hoard for a loan totalling JIS-1.000. 1 umlereljiJid that the Depytmcnt has raised sonic objection with regard to the security, which 1 think lias been anfcwered by llio Iteuiu«ra Board. If tho whole loan cannot be authorised at present, J!10,000 is urgently needed to carry on the work in hand, and that iinnisdiutcly contemplated. Tho position is aggravated by tho fact that tho men engaged in the work havo recently been on strike, and tho etriko having now been settled, they desiro to return to work. The board meets them by explaining that they have not tho means to carry on because the Government will not advance the money to enablo them to pay. for tho work and other outgoings. 1 hope you will bo able to have at least £10,000 advanced to relieve the tension of the present position. The deputation' consisted of the strike leaders and the members of the liemuern Koad Board. Kindly let me have a reply as early as yon can, which I may use. "(Signed) J. 0. FINDLAY." Minuted "Urgent." The telegram is minuted "Urgent, Mr. Poynton ,i'or. remarks. J.G.W.," and bears a second minute by Mr. Poynton: "l'eply for signature attached. 2/l'l/Jl." Tlie reply mentioned is a telegram from. Sir Joseph'.Ward to Sir J. G. Findlay at Auckland, like the telegram to which it replies, it is dated November 2, 1911. Following is the text:—

"As special rate, struck for watersupply loau is 'only sufficient security for .£42,000, instead of ,£41,000, applied for ou present valuation, this amount will bo available for expenditure alter being finally approved on Monday next. Debentures will lie posted ou Monday. ' Plan of district required, in case of drainage 10.-ms of .iMO.OOO not yet forwarded by Bond Board. Was wired for yesterday. Cannot ad- • vance ,£iO,ooo,.'but as'debentures for amount of loan authorised will bo forwarded on Monday, that should be - quite satisfactory. (Signed) ' J. G. WARD." Mr. Poynton stated that the fault was not, as Sir John Findlay had assumed, with the Department. The board hail not completed its debentures. The matter .was overlooked when, the board met on Monday, but the filo containing tho application was sent round to members for approval, subject to the debentures being cqmplelfd. Ou November 1, 1911, he received a communication frojri tho clerk of the' Remuera Road Board, asking 'that tho loans should be expedited. The loans were applied for on May 22, 1911. Payment of the amount «o far advanced was iiot made until December 10 after the election. The amounfcof .£15,000 had'not yet been paid over. The sum of .£IO,OOO mentioned by Sir John FinJlny was not paid over until December IG, because at the time of the application the procedure was not, complete. It took the Remuera Board.from November 7 to December IG to complete the debenture.?, and fend them on, so that the Department could advance the money applied for. The date of provisional approval of these tteimicra loans was May 2», 1911. • On March i, 1911, the board applied for .£60,000. Somcporlion of the loan wa> declinod. ■ The first loan of .£BSOO was 'applied for in lEcbruary,' 1910. No political representation'was made, to him by any Minister of the Crown to oxpedite'or authorise the loans to Eemuera.

Rate of Interest Raised. Further questioned, Mr. Peynton staled that the Department had made no loss upon'any.security. Losses had been ontirely^dueVlo, the non-investment of -fiuid*. It was reco?nis?d from the start that there would, be a loss on tho«lonns to local public bodies, principally fronV loss! of'interest. The applications were mucli larger after the first full year than , had been contemplated by the board. In November, 1911, the board' decided to pay • the Post Office 3? per cent, for future loans, to charge that amount to borrowers, and to Rive preference to applications for d£500l) or less. Applications for loans were dealt with in'sequence,, and no applications from counties or road boards were refused where the stipulated conditions had been observed. Under the Loans to Local Bodies Act. lending to boroughs was restricted. There were, no restrictions under the new-system.' There was a, limit on all local bodies, but particularly 111 the case ■of borouphs. He considered that local , bodies paid a lower rate of interest on loans from the Government in this conntrv than in'any other country, iho Port of London•■ pMrt about -C 3 18s. per. : ccnt., exclusive of sinking fund. Loan Authorities. To further questions by Sir Joseph AVard -ilr. Poynton stated that on September 16, 1912. -the unexhausted loan authorities to' March .11, 1913, wc-re .£825.000. Against this tlicre were commitments totalling; ,£051,310. haying loan authorities available totalline .£173.690. It would be a convenience if unexhausted loan authorities for one year could be borrowed'in the year following as was done in some of the other State lending DeJas- A 1 1« ": H,lvc T ttmi po^pr now? ' -. .' Mr. Povnton: Ivo. ~..,, -,r • Sir Joseph Ward (to the Minister): von can easily get that power from I'arlia'"to Sir Joseph Ward: Mr. Poynton said that interest would be lost if ainountsirmiired in. IMS and 1011 were borrowed this year. It would be a piece of folly to do- it.- ■ -.;■•■■■ / The Minister's Approval. Sir Joseph Ward next quostionwl Mr. Poynton regarding (ho Minister's relation to the board. He asked whether it would be right of the Minister to refuse to finally authorise a loan after it had been approved by the board. . Mr. Poynton: Ho has- ihe right to do it. He added that no doubt a Minister who refused loans would have, to face a great deal of obloquy. Sir Joseph Ward: If ho wctc to dp that would ho not be putting himself in the position of the board ' Mr. Poynton: I don't know. If the. Minister thinks that a Iran should not bo granted, he has a right to refuse it. Ihc right has never been exercised so far as I know. In reply to further question?, Mr. Poynton said that if money got short and it .became necessary to exercise discrimination, an. alteration in procedure would have to be made. Applications would have to be considered by the Minister before detailed investigation was made bv the board. "Sir Joseph Ward: You don't think there should lie any buffer between the Minister, and the local public'bodies.' ' Mr. Poynton; If (hero is not enoupli 'money to p> round the Minister will got all the blame. ' Mr. Craigie: He gets all the kudos,

Mr. Allen: AYhat does kudos mean? Put it in other word?. ~,,,, ~ Sir Joseph Ward said that: !w would not care about beiiiß a JlinWer who had to titko the responsibility ot retusinj,' '°S?r' Joseph Ward asked that thi> re--iurn, recently'furnished to the. House. ■ showing advances made by the Jknartinent since its inception, .should have added to it (he electorates m which the local public.bodies.geltina: «u- loans were located and .the .immes of their represcrihUivcs in Virlininent. lie obtainod from Mr. l'o.vnton pnvticulnrs of ft hum cranted.to (he l«fl-uimh of I'ukekobe in the electorate of the Hon. W. F. Massoy. -V loan of .£13,000. was .applied for and the sum of mSOO.was prnnted. . aiio.Mim , of -CiiOO was disallowed because it was. required for some electrical mirpose. Sir Joseph Wanl complained that some press comments had assumed Hint the. Into' Governments absolutely bought political inlluenco by granting loans. \t 1 p.m. tho' inrtuiry was adjourned until 10.30 a.m. to-day.