The Dominion SATURDAY, APRIL 9, 1932. REDUCTION OF INTEREST

Dominion, Volume 25, Issue 166, 9 April 1932, Page 10

The Dominion SATURDAY, APRIL 9, 1932. REDUCTION OF INTEREST

In his Financial Statement the Minister of Finance devotes more space to the consideration of the interest question than to anyother ifsue. That may be taken to indicate the ba® ng nature o the subject which bristles with difficulties, although in that respect i not singular. Yet it is the business of national leaders'to overcome obstacles so that the people may be enabled to proceed on as clear path as can be prepared. Regretfully it must be admitted that . A. . Downie Stewart’s discourse on fixed charges does not tend to clar y the position, although the action which the Government proposes to -'take in spite of his reservations should forward the end m view. Nevertheless, by leaving the statement of its intentions to so hesitating and unwilling a witness as Mr. Stewart, the Government has prejudiced a great opportunity of rallying the whole -country o its standard, inscribed with the policy motto of “Reduction of Cos s by Equal Sacrifices." All informed opinion in New Zealand is agreed that economic health cannot be restored except by an all-round reduction in costs and in affirming the principle of equality of sacrifice. Those fundamentals of policy have been applied in most directions and are now to be extended to fixed charges, of which interest and rent represent a major item. As we have previously remarked, it would undoubtedly be preferable if a general reduction in interest could be brought about voluntarily or by individual settlements through the Adjustment Courts. To break contracts is a and disquieting step, only justified by necessity in extreme emergency. Unfortunately voluntary conversions and legal machinery are both slow and costly, and time is the essence of this business. It is urgently necessary to give immediate and general relief: hardships and anomalies can be adjusted later. That, in fact, was the procedure adopted in the Public Service and with workers tinder awards a year ago. To effect immediate savings a general order was issued in both cases and provision made for appeal. It wpuld have been better in these cases as in that of interest to settle each claim on its merits, but the overriding motive then, as now, was necessity. , In weighing the Government’s proposals it must constantly be borne in mind that it. is the compulsion of necessity that has forced Cabinet into paths which under normal conditions could not be defended. Those who, like Mr. Downie Stewart, baulk at a general reduction of interest rates should not blind themselves to dangerous possibilities involved in any alternative course. It is strange, moreover, that there should be this stiffening on the inviolability of contracts now, since the Finance Minister surrendered the whole position six months ago in his Supplementary Budget. He provided then that all tax-free income should be included in income tax assessments for the purpose of fixing the rate and the general exemption. At the time there was very little protest raised; Mr,,Stewart was even widely applauded for his stand on the general interest question. Yet by this provision the principle of the sanctity of contracts was clearly and openly violated. Are we to understand that a small breach can be overlooked but that a large one is unthinkable? If so, what becomes of all the lofty declarations about principle? Mr. 'Stewart objects now to placing a stamp duty on "tax-free” bonds, but six short months ago he did not prevent the inclusion of income from them for the purpose of assessing tax. While these inconsistencies are interesting, they are nevertheless beside the point. New Zealand’s chief concern to-day is the urgent necessity to reduce costs in conformity with the shrinkage in income. The reduction, if it is to be effective in preventing economic collapse, must be universal, immediate and, to accord with equity, as evenly distributed as possible over the whole community. Interest and rent’ are a/ major item in costs and, whether the motive be necessity or social justice, cannot, in the conditions which prevail, be exempted from the general order.