THE HOUSE

Dominion, Volume 11, Issue 20, 18 October 1917, Page 6

THE HOUSE

T,he House of Representatives met at 2.30 p.m. The Hon. W. H. HERRIES (Minister of Native Affairs) save notice of the Native Land Claims Adjustment Bill.

WAR LOAN HUGE BORROWINGS DETAILED STATEMENT BY FINANCE MIN- - ISTER. SIR JOSEPH WARD (Minister of Finance) moved the second reading of ,{he War Purposes Loan Bill at 8.45 p.m. He said that the Bill was to give effect to the intimation already made to the House of the necessity for borrowing .£4,0(10,000 additional for war purposes. The Bill provided for this, and for {his only. Ho proposed to take the opportunity of telling the House what moneys had been borrowed since 1911 for war purposes. The total amount borrowed under this head was In the year 1914 there was a loan of ,£2,000,000; in 1915 a loan of .£10,000,000; in 1916, ,£16.000,000, all for war purposes; for the purposes of the Discharged Soldiers Settlement Act, .£500,000; under the Land Laws Amendment Act, ,£500,000; and under the War Purposes Loan Act of 1917, ,£24,000,000; a total, as he had said, of £41,681,284. And thero were amounts of £3,080,880 which had been authorised on account of transaotions for which the entries had not passed through the Treasury. The total he had quoted was irrespective of the £4,000,000 contained in the Bill, for which authority was now being asked. In addition to these loan authorities since 1914 thero had been other loans authorised to the amount of £6,077,500. This amount, added to what he had already indicated, gave an amouut borrowed, .with', loan authorities still unexhausted, without the £4,000,000 in the Bill before the House, of £17,761,984. In these other items, which were not moneys raised for war purposes, were included the following-Aid to Public Works, £3,000,000; for the kauri gum industry, £50,000; for public works, £2,000,000; under the Railways Improvement Authorisation Act, £3,000,000 ; for Eangitaiki land drainage, £55,060; tor State forests, £55,000; for swamp drainage, £75,000; under the Mines Act (annual), £25,000; for public works, £1,000,000; in 1917, for Hungitaiki land ilraiiiuge, £40,000; for public works, £8oO,000; for soldiers' employment account, £1,000,000; for tho I'ruit Preserving Industry Act, £40,000. This gavo a total of £6,077,700, and a great deal of tins money except that required for this year had been expended for the purpose lor which it was raised. Honourable members would see also that the total °om» ? authorities since I'M were not £47,000,000 as he had stated, 1 but £63,000,000, with what was borrowed, and what was to be borrowed. He gavo this information for the purpose of enabling honourable members to see what a war meant. None of the incidental loans which had been raised not directly for war purposes were unnecessary. Some of them had been expended' for purposes closely associated with the war. If it were not necessary now to obtain authority "for £4,000,000 more, tho Houso would not be asked to give it. But it was necessary to have proper provision made tor carrying on the war until the end of July, when the House could, with later and fuller knowledge of the war review the financial position. Personally he recognised very fully tho responsibility upon every member of the House in regard to the financial position. This expenditure, huge as it ■ was, had to be provided for. ' Rates of Interest. The Hon. i>. IuiDUV Uvaiapoi) said that he cud not supjjose the ituuse would rinse uny objection to the loan. Ho was certain the money would be subscribed, although auotner dram on the resourced of the financial institutions''of-the country might lead to increase in the rates of interest. There would be a demand for higher interest it' the loan were to- be put on tho market at once. He would urge that the floating of tlie loan should be delayed as long us possible, in irder that there should be as little disturbance of the money market as possible. He know, of course, that there would be disturbance of tho market. That- was inevitable.

Mr. J. PAYNE (Grey Lynn) said ho wished to know whether the loan would be raised on the (free-of-inlerest principle. He bad no doubt that it would. Ho was sorry this country had not a more truly patriotic Finance Minister. The present policy would reduce tho people of this country to a condition of intorest-paying serfdom for many years to come. Sotno Questions. "Mr. G. V. I'BAIiCB (Patea) said the Bill was merely an addition to tho original War Loan (sill, Did tho increase in the amount to be raised mean that tho provisons for compulsory subscriptions would have to be enforced? Ho would like to know how the subscriptions to the last loan had been made up. Dγ A. K. NEWMAN (Wellington iiastj said he believed a State bank would be a very successful institution. It would bring in very large revenues and help the finances in many ways. War of a new kind was being cn'rried'on now under the old style finance. Tho on!>- objection to a Slate bank was, that a weak Government might play clucks and drakes witli it. He still thought that it would have been a good thing if the Government had bought all tho produce at the beginning of the war, and paid for New Zealand s share of the war out of the profits on export prices. Ho would like to know how much, money tlio Minister of Finance proposed to raise in March next, and also whether there- wns «ny idea of issuing premium bonds. Ho hoped no bonds of tho kind would bo issued. There should be more definite information at the disposal of the public regarding the financial proposals of the Government. Dr. Newman suggested that the Government should set up an independent commission lo examine Defence expenditure. There would be very useful work for such ,i commission to do. Dr. Newman lidded that Ice believed Defence expenditure could be reduced, and that there should be a more effective check upon it. There was a feeling throughout the country that some check should be applied. Nobody knew how the enormous loans for war purposes were going (o be repaid, and the general financial position demanded the close attention of the House. He believed tlio Treasurer could got a largo amount of money by soiling annuities nnd accepting deposits at call. A substantial saving would be effected by the suspension of payments to the sinking funds. Thero was still a great deal of money in New Zcnlnud, nnd he did not think that the price of money need rise very high. The House would support the Government ''in introducing new methods into the financial system.

Mr. H. G. ELL (Christehurch South)

discussed ttio State bank idea, of which Mr. Payno and Dr. Nowinan had epoken, and sought to attack tho notion that a, State bank would provide all tlio mouoys required by tue couatry. He agreed that thero should be more careful supervision of Defence expenditure. Mr. E. P. LEE (Onmaru) said that up till the end of July next tho amount that the war would have cost us would bo ,£71,000,000. It had been suggested that there was some mystery about tho necessity for tiiis loan. This was not so. Elimination of tho Budget figures showed that the money would bo necessary to carry on expenditure until tho end of ,Tuly. Hβ also advocated closer supervision of Defence expenditure. Mr. A. HARRIS (Waitemata) asked the Minister of Finance to raise some of his money by premium bonds.

Dangerous Experiments. SIB JOSEPH WARD, replying, said that he could jiot afford at such a time as this to risk a echemo such as that proposed by the member for Waitemata. Similarly, ns it was necessary to work with tho great financial institutions, it would not be desirable to establish a State bank. He took strong exception to the euggestion that a mistake hud boen made in the of Defence expenditure. This was untair, and improper, as well as being wrong. It was not possible to foretell what expenditure would be incurred for munitions and other supplies for the Army at the front. Sir Joseph Ward proceeded to give a revised account of tho figures he liud given in opening. He -said that the total amount'borrowed for war purposes was The total loan authorities was ,£10,335,000, making a grand total of and then thero was this last amount of .£4,000,000, making the total Out of all these loan authorities raised for war purposes and for general purnosos there vrere unexhausted authorities for ,£20,488,000, eo that there was a total of £16,847,000 borrowed, in some form or other. up till September 30. Since then about ,£3,800,000 had been added to this. Out of the balance of authorities available ho hoped to bo able to get the British Government to accept some of our stock in part pavment of those amounts disbursed by tlfc British Treasury for the maintenance of our troops at the front, and so to avow solng on the market for it here. '. Mr. Pearce: At what rato of interest will they take it up? Sir Joseph Ward anid that ho did not anticipate that tho rate would be more than 4J per cent. If to could only pet .£4,000,000 in this way,' wo would have to raise the balance here. The. amount to be raised here would depend on tho amount' of stock the British Treasury would accept.

t ■ Compulsory Clauses. Sir Joseph. Ward eaid there was no necessity to put into operation tlio compulsory claused of tho Act with regard to the last loan. The public hu-i subscribed nearly all tao niuuoy. C'no of' the State 1/epartuieuts hM piovided and two other JJ'epartmeiifa had subscribed suiauer sums, 'lho amount 10ceived lor the loan up to tuo pioseut time, including the advances f-oia tiio Departments, was 0;12/iW),0()u. 'liiat was quite as much as the Govornmeut wanted just now. The bibks had andeiwritten but it had not bwn HecissUry to take that ii.;«ne.y,'at cha pitsent time. A sum of XTOO.Oflfl had cime in since the dato of tlie dosing of the- loan, and he did not propose to iciuse auy money, -though it was not accepted through brokers. He could tell the Huuse that when raising the first- portion of the loan he had a clear understanding as to a large amount of nionev v ior the next portion of the loan. Hβ could not say more without 11 breach of confidence. His impression was that it would not be necessary to raise moro than ,£12,000,000 for tho second portion of the loan, but the ac* tual amount depended upon circumstances. Hβ did , not expect it would bo necessary to raise any morn money before the beginning of March. Hβ would leave as much time as possible between the two portions of tho loan. Ho could not say yet whether the compulsory clauses would bo necessary or not. Ho would not announce prior to the raising of the next portion of the loan whether tho compulsory clauses were to bo applied or not, because that would bo holding a pistol to tho head of willing subscribers. But after tho next loan there would bo a review of those who had not done their duty.

The Next Loan. It might interest the House to know that the- 5* per cent, bonds issued through the Post Office had amounted to ■£1,271,000. The, great bulk of tile loan had been subscribed in the li per cent, -stock. Tho war certificates sold had amounted to ovar ,£900,0G0. The loan undoubtedly had been a great success. Ihe date of the next loan would depend on whether he could arrange to have fl portion of Ndw Zealand stock accepted by the Imperial authorities in payment of money duo by the Dominion, to Britain in connection with the New Zealand troops. Rates of Interest, Referring to rates of interest, Sir Joseph Ward said that there was no doubt money was tight in 6ome quarters. But thei Government had power under legislation passed last year' to regulate rates of interest for advances and mortgages. There would bo bo interterence with the ordinary course or business so long as rates were uot ruieed to the people. He did not regard six pin' cent as an unduly high rate during the war period. Hβ could say definitely that the Government would not allow rates of interest to run up to unreasonable figures, and the full powers of tho State would be exercised to prevent anything in the nature of over-charging in rates of interest. The Government had power to fix rates of deposit, and was ready to exercise those powers in order to keep down rates. Tne banks had co-operated with tlie. Government good-heartecUy. He df3 noC approve of tho suggested suspension of payments to sinking funds. He would not agree to that or to any breaking into the reserves. New Zealand had to look forward to great changes after the war, and he believed the Dominion would attract population. The finances must be kept on a sound basis. High taxation would have to be expected for many years, but if the war ended within the next eighteen months, and if duo caution were observed, a great reduction on present taxation could bo anticipated. The Bill was put through Committco and passed. The House rose at 11.15 p.m.