LOCAL BODY BORROWING

Dominion, Volume 30, Issue 131, 27 February 1937, Page 10

LOCAL BODY BORROWING

Unless they have special permission from the Government, local bodies may not pay more than three and a half per cent, on new loans. Some of "them are finding difficulty in getting money at that figure, which fact no doubt prompted the Prime Minister’s remark at Oamaru that the time was coming when the function of providing such money would be assumed by the Government. Under the present system, said Mr. Savage, local bodies were at the mercy of those who lent money at rates of interest higher than should be paid. That is one way "of stating the position. Another, substituting fact for opinion, is that the security of some of the smaller local bodies is not substantial enough to attract money at gilt-edged rates. It is a question not of borrowers being at the mercy of lenders, but of supply and demand. If the State is able to borrow more cheaply than local authorities, that will be because of the State’s better security and bigger requirements. The proposal that the State’s superior buying power in the money market should be used to assist local bodies has something to commend it, but its application would give the general Government a lien on the assets of local authorities, and that might result in a weakening of the spirit of responsibility and independence which is the very backbone of our system of local government.