OUR ANTECEDENT LIABILITY

Dominion, Volume 16, Issue 120, 6 February 1923, Page 6

OUR ANTECEDENT LIABILITY

THE £340,000 LOAN MISAPPREHENSION STILL EVIDENT The Mayor (Mr. It. A. Wr ; 4 -ht) says that there is still some niisapprehen«sion, or miscomprehension anent the antecedent lean of £340,000 which the City Council has raised in London through the Union Bank. “From what 1 have seen in print 1 judge tmit the real reason for raisng the loan is not thoroughly understood in some quarters.” The liability was one contracted during the latter stages of the war and soon after the armsitic-e, when there was not so much money coming in as usual, and the idea of raising a loan for capital works could not be entertained. The Alayor and City Council of the time deemed it advisable to undertake certain works even though the times were bad, and instead of doing so per medium of a loan (a method out of the question at the time) such works were carried out by overdraft from the bank. In that manner the AA’ellington City Council, like many other local bodies, “outran the constable,” and the time coming when money was easier and loans possible applications for loans hogan to pour into the Government. It was then that the Minister (the Hon. Sir Francis Bell) had his attention drawn to the condition of several local bodies in debit, and inquiry told the whole story, viz., that this trading into the bank for moneys on overdraft was practically secret borrowing. The Minister, to do him justice, at once took drastic action, laying it down bv stahite that all local bodies should adjust their bank debts by Alarch 31. 1923, and that thereafter all local bodies should live within their means, that is to say, that if a local body’s expenditure exceeds its income, the members of such body shall become personally liable for such additional ex-penditurc-*-a wise and beneficent enactment, which has already had a good effect, although it has not yet had a year’s trial. The AVellington City Council’s overdraft amounted to £340.000, on which has been paid 7 per cent., a costly transaction. But it must not be supposed that the bank wished to retain that overdraft on its books, even at those highly remunerative terms; indeed, the bank has intimated its desire to have the overdraft paid off, and, as it actually pays the city to do so, the law is being coniplied with on the one hand, and the city is effectilTg a considerable saving in interest by raising the loan as reported. The loan has been raised at 0} nor cent. nF 99. This is considerably better than the C : ty Council’s last loan raised ih London for waterworks, tramways, etc., when 5% per cent, interest was given on a loan issued at 98.