PUBLIC DEBTS BILL. HOUSE OF REPRESENTATIVES. MONDAY, SEPTEMBER 30. [Continued from October 18.]

Daily Southern Cross, Volume XXIII, Issue 3208, 28 October 1867, Page 4

PUBLIC DEBTS BILL. HOUSE OF REPRESENTATIVES. MONDAY, SEPTEMBER 30. [Continued from October 18.]

Mr. Stafford : I must confess, sir, that I have been quite taken by surprise by the speech of the honourable gentleman Who has ju? t ? at down. I had the honour to be a member of that select committee, of which he alio was a member j and although he did on one or two occasions make some objections — very alight objections as they appeared to me — to the proceedings of that committee, I must say that I left the committee in the belief that he agreed to the report upon those bills. Dr. Fbatheroton : Perhaps the honourable gentleman will allow me to say that, while that second clause was under discussion, I protested against it ; and when it was carried against me I insisted on my rote being recorded in the minute, for I had all along declared that it was giving away between two and three hundred thousand pounds. Mr. Stafford : I do not dispute what the honourable gentleman fays, but I was ignorant of the fact j I was absent, and was not aware of it; but I on say at all events what was the feeling of the majority of the committee. I went into that committee with as ■trong a desire as the honourable gentleman the member for Wellington felt to effeot a conversion as favourable for the colony as it was possible to effeot. But the more the committee considered the question, the more we found that tihere were strong and valid objections against the manner in which the Legislature was asking it to be done, and that if we should not shape our bills in a way to meet those objections a very great difficulty would arise. We found that we were indirectly varying the security without the consent of those who had lent" their money to the provinces of New Zealand, and that we were giving a decided priority over the revenue of the colony to those who might choose to come in, while we were leaving those who did not choose to come in on such terms as the Government sought to impose, without any leourity whatever. It is undisputed that the giving priority to those who came in on the terms of the Government, left those who did not accept those terms without any remedy. Dr. Fkathirston : That clause was not the consolidation clause. Mr. Stafford : Nevertheless that was the result which we found would take place. We did not believe that that would be in honour or good faith to the lenders of money to the colony, but that if we made any such attempt we must have been successfully opposed in more than one direction, because it was not impossible that the bondholders might be influential enough to prevent her Majesty's assent being given, ai happened to the action which was taken in the previous year in regard to debentures of the province of W ellington, the same kind of influence which nearly defeated one or two Acts in 1858, and suspended for twelve months her Majesty's assent to them. I was in London at the time, and the whole of those objections were diaeutsed at the ColoDial Office. As they varied the security, Gladsfcose's House very nearly succeededin defeating the obtaining the Queen's assent to the Waste Lands Act. Dr. JTeatherstoh : Gladstone's House protested against the separation of the province of Wellington from Bawke'H Bay, and that it was which made their security less. Mr. Stafford : I beg the honourable gentleman s pardon. We felt that a formidable opposition would be got up by the bondholders, and with good reason, for no one single bond could be converted. There would, therefore, have been a possible and a probable ground for opposition, unless by a certain day they were all to signify their assent that no one bond should be conveited. There was not the slightest doubt they would have been placed in an unfair position. It might happen that the bondholders under that loan might absolutely find that the whole disposable revenues of Otago under the Public Revenues Act were pledged to loans that did not mature for twenty-five or thirty years, while they had absolutely no security whatever. This is an instance of what might have occurred. That, and other reasons in the same direction, weighed so forcibly with a large majority of the committee that they believed there was no alternative but that of declaring that they should all come in; and there is little, absolutely nothing, in this bill which says at .what price the bonds shall be exchanged. It is true the interest on the bonds is guaranteed ; but the sinking fund is not guaranteed— a very important item: the bill is entirely silent as to the price of the conversion, Reference had been made by the honourable gentleman to an offer that was made by a gentleman representing parties who hold these bonds to the extent of from £400 to £500. I have read with great attention all the propositions and all the suggestions made by that gentleman, but I failed to perceive that he ever made an offer. He proposed that provided the provincial bonds were taken at par, which is some 20 per cent, over what they are now saleable at in the London market, it might be fair for the General Government to charge five per cent, for converting them into colonial stock; but I ask the House is there any chance that these bonds would ever be recognised as being at par, except under the immediate process of conversion ? That gentleman made no offer whatever to give £105 for every £100 which they represent ; he made a proposition that you should go upon the London market, a very different thine, and says, " We will value our bonds at par if you will give us a. cheque of £105 for £100." It is altogether a different thing, looked at in the light of bringing money into the Colonial Treasury, from making a distinct offer. If it had been made it would have been one which the Legislature would have been mad to refuse ; if any offer had been made by ' any holders of provincial bonds immediately or within a reasonable time to pay into the Colonial Treasury £105 for every £100, the Government and the Legislature would have been mad to have refused it. But the proposal was simply as I have stated it, that the Government should have declared upon the Stock Exchange that if any holders of provincial bonds gave £105 for a oolonial bond they would give one in exchange. That was an entire experiment ; it is possible a few persons may have expeoted that, but it is only within the last six or seven weeks that we have heard that our own bonds have risen to £105, for they are not at £108, and they have not been, for the last five years, but the 6 per cent, bonds were at £100, and have only lately been quoted above that, but for a long time they were below that. Then it is assumed that the addition of three millions to the colonial debt ia a large operation j compared to the present debt it would not have affected the Stock Exchange : what is the amount ? It is only something like two millions, because there is a million guaranteed by the Imperial Government, which has never been upon the Stock, Exchange, and is never quoted at all. Then again, we have not at the present moment issued, after deducting that million, more than two millions at six per cent., and yet it is expected that we should offer upwards of three millions more at six per cent., and that there should be no depression of stock ; that is a calculation we have no precedent' for assuming correct, I believe that the issue of placing on the Stock Exchange more than two millions would drive it below par, instead of leaving it at its preaent quotation. I assure the honourable gentleman, and I believe I represent a large portion of the oommittee, that my views were fctrongly sympathetic with his, and it was only upon the consideration of the question that I came to the conclusion that for the credit of the colony, and holding'in view that we were about to make a larger operation, and to propose the consolidation of the whole debt of the colony and to take a borrowing power of aev en millions, it appeared to be a most inopportune time that we should alienate any of the holders of securities by saying, "If you do not accept these terms the security is absolutely abrogated ; it is better to take the terms or you will have nothing to fall back upon." I have heard the hon. gentleman say that the Assembly could have repealed the Surplus Revenue Act— so could they have repealed the Charter of the Bank of England— so could they have repealed the English Loan Act under which the Imperial Government went into themarket,but it ooulduever have been guilty of such an act of dishonour. The effect would be to drive the unfortunate bondholders into such terms as we chose to offer. I could never be a member of a Government,andl trust not of a Legislature, that could act in that manner. The, Surplus Revenue Act was repealed, because it was in the power of the Colonial Parliament to doap, and not to offer at least equal securities 1 I must say I was very muoh surprised to hear such a proposition from an hon. gentleman holding such a deservedly high position, that it was quite open to us to have repealed and swept away the security upon which he and the other Superintendents have invited persons to lend their money. Mr. Stkvxrs said it appeared to him that the questionswhichthecommitteeandtheHouie had to consider were, first, what wai the security which was to be held for provincial bonds ? secondly, how "?▼»>« proposed to alter or dertroy any portion of that security ? On referring to the Surplus Revenue Act, he found by clause 6 that the surplus ordinary revenue payable to each of the province* of the colony should be the balance after taking the amount io to

be credited t. esch of the provinces, and such revenue shall be paid by the Colonial Treasurer. He thought it was perfectly clear to "7 <>™ who read that Act in a fair mind, that there could not possibly be any security for money existing under it. He could nob . conceive that any man could have lei i a farthing under it, and that any person could have allowed it to enter into hi 8 calculation ia lending money to »?y P™vmce of New Zealand. It W»» so fluctuating that it afforded n.»tbiug of » permanent character, and the House might have at any time voted an amount which would have absoibod the whole of the ordinary revenue of the colony. The territorial revenue might be undoubtedly by some taken to be varied, but he wished to urge that a large number of the provincial loans had Leen raised without any territorial revenue entering into the question of security at all. He thought in the case of the province of Auckland it was not even pretended to give any security over the land fund, and yet it was now said we offered security on provincial debts. And it might be said, and with some degree of justice to the Southern provinces, when that security was given, that there would be some degree of variation under these proposals; but the territorial revenue had been taken by the Colonial Treasurer and appropriated for the ultimate advantage of the province, and amounts were only taken to supplement charges against the provinces. Still, it might be said there was an entirely fresh security to the outside creditor if he took a colonial debenture. But he (Mr. Stevens) argued that this debiting of the province was a mere domestic arrangement, to use an expression of the Colonial Treasurer's. He did not hold that there had been any variation of the security, for, if he did, he could not support the amendment of the honourable member for the city of Wellington, but it did appear to him that abundant sufficient and unvarying security would remain for the bondholder. , . . . ... Mr. Vogbl had already expressed an opinion in this House, which must have convinced hon. membersthat the principle of these bills was endorsed by him ; but he had expressed an opinion that the plao proposed of dividing the liability between the provinces and the colony would be found to be not carrying out the obligations of the colony, and subsequent investigation had confirmed him in that view. The assumption of making the convention voluntary, when examined into, was not borne out. The moment the colony undertook to buy up provincial loans, if it did not become liable for the whole, it placed at a disadvantage those bondholders who did not choose to* accept the terms. If a limit of time was fixed, there was a pressure on the bondholder by the threat that his security would be weakened. There was no half measure possible ; either the colony must leave them as they were or accept the liability for the whole of the provincial loans. Muoh had been said about the value of provincial loans as compared with colonial; but that did not arise from any doubt that the provinces at the time they borrowed were perfectly able to assume the liability. There was abundant evidence given ; the General Government saw that each province waß in a position to repay its loans ; but in the case of Southland, which he would refer to separately, an oversight was made, and the General Government stepped in and assumed the liability. What then was the weak point of the security ? It was, that it was perfectly possible for the Assembly to absorb thoie revenues on which the security rested j and he did not for one moment mean to deny that what the honourable member for Wellington said was perfectly true — that the Assembly could repeal the Surplus Revenues Act, and take away all the revenues and make the bondholders glad to accept ten per cent. His knowledge of that showed how entirely they were at the mercy of the Assembly. This House had recognised these liabilities as colonial. But it had also said that the terms offered must be accepted. And the moment the Government passed the Public Seventies Bill, which absorbed the provincial revenues, it hecame necessary to say what course should be pursued with the provincial debts. When Southland was in difficulties and an execution was put in on its property, it beoame a question in courts of law whether the property could be taken in execution ; and the Judges differed, and the matter was left open to the Privy Council ; but the Assembly, instead of leaving the question open, passed a declaratory Act, saying that there was no power to effect a seizure, and that on its part it would see that twenty shillings in the pound was paid to the oreditors. After that was it to be Baid that a different measure was to be given to other provinces ? In 1864. when a large amount df the Otago debentures could not be negotiated, Mr. Harris went up specially to the Minister of the day, in Auckland, and obtained a guarantee from him. He had an advertisement in the Times in which the letter of Mr. Fox guaranteeing the loan was referred to. The loan was sold to the Bank of Australia, and they sent an advertisement, in which was said that it had the colonial guarantee. There was other evidence of a similar kind. He would refer to the proceedings of a committee of the House of Commons, which examined into the question of giving a guarantee in 1856. Mr. Sewell was examined, and Mr. Robert Lowe, who was on the committee, said, "Are the Ordinances assented to by the Government?" And Mr. Sewell said, "The Governor assents to these loans, and he is bound to see that the colony meets its debts. " He thought the maobinery was perfect by which the liability of the colony could be brought to bear. He gave hia assent at the recommendation of his responsible Ministers, who were the embodiment of the Assembly, and there was therefore a direct chain of evidence to prove that the colony was liable, and hethought it Would bepositively dishonest on the part of the Assembly to repudiate any of these debts. It only rested with tha Atsembly to see that the provinces had not exceeded their borrowing powers, and they had not exceeded those powers, nor had they come up to them. It was therefore only a matter of common honesty to see that these liabilities were provided for. He would refer to the letter of the Colonial Secretary sent home with Mr. Crosbie Ward, and which could only be construed into a positive instruction to tell the provincial bondholders that their bonds were as good in every respect as colonial bonds, and had as good security, or, as the hon. member for Wellington had put it, that they were substantially colonial bonds. Probably that intimation has assisted to place provincial debentures on a firmer footing in the money market; although he could not possibly say it would have the effect of making the provincial debentures as valuable as those of the colony, or even getting them admitted to quotation on the Stock Exchange. He was really surprised to hear the hon. member arguing from the fact of the provincial securities not being admitted on the Exchange— for it was notorious that there was no more capricious body in existence than the Stock Exchange Committee, and it was one from which there was no appeal,— he was astonished to hear it used aa an argument that because that body did not recognise provincial securities the colooy was at liberty' to repudiate its liability. The consolidation proposed was not, he was glad to say, based on their being able to force the bondholders to accept any price they might choose to give. The provinces had borrowed for years past at an extravagant rate ; and by substituting shortdated bonds, they would relieve the colony from the heavy liability which was now pressing on their shoulders— that of the sinking fund. The colony was not in a position to pay its debts now, and did. not desire to do so ; and if the present proposal was skilfully negotiated, there would be no sinking fund required, and the burden of £100,000 a year would be taken off their shoulders for a term of years. With a short-dated loan, if the credit of the colony improved, as they bad a right to expect it would improve, they might, as the term of the bonds approached a conclusion, be able to renegotiate them at a lower rate of interest; and if they afterwards did that at five per cent , an absolute -aving of one per cent, would be effected, m addition to the burden of sinking fund being taken off their shoulders for the present. If the Government had sent home last year and bought up a large amount of provincial loans with the view of consolidation, a larger profit might possibly have been made; but the repeal of the Surplus Revenues Act to hwwwd clearly meant that the colony declared its liabibty for provincial loans. It was well understood that that must be done some day, that no province could be permitted to be in default, and that the colony was bound to see that no province was so. The hon member for Wei]ington£ad talked wildly, very wiHl*about making a profit of £100,000, £200,000, or £400 000, and he seemed,to imagine that it was perfectly justifiable of the Government to buy up provincial loans at any discount to,which, they could first force them, and by 'a certain course it would be very eaiy to force them down very low before buying them up. No doubt if a clever Provincial Treasurer liked to play a sharp trick, and neglected for a single year to send home the interest and sinking fund, the Colonial Treasurer could easily purchase that loan at nity or sixty, and the colony make a, very large sum out of the transaction. The honourable member, however, was in error as to the probable amount : it would not be nearly so large as he thought, for the total amount of provincial bonds in circulation was pnly £1,979,000, while that of the colony Waß only about £1,590,000. Now ten per dent, on these sums did not amount to £300,000 0r .£400,000, unlesixtmeant that they were not to bring up the bonds at th« market price, now about ninety-five, but to first

f . rce them down them down very much lower. To 'tell the Home that Buch a thing was politic, was to tell them that honesty was Dot the best policy, ana purely on the question ■ f policy— putting aside an about morality— it woul i I); a wretched move to play suoh a sharp triok. Hereafter the colony would want money for other purposes ; and if such •trick j we. c played they would find great difficulty in obtaining it in the English money market. A profit migbt be made in the first instance, but the los* would ultimately be far greater than that profit could compensate, for, because when hereafter, as -would; certainly be the case, they required a further loan, they would find the English money market tabooed to them. The hon. member bad taken the case of tne Bank of New Zealand, and stated that debentures could be procured from them at £80. He was prepared to accept the instance, but if the bank bad purchased in good faith it would be unworthy of the colony to force on it a loss of 20 per cent. The bank had negotiated some of the loan at 103, and they had held the balance in the belief that the security was good, and. he did not think it honest to affect that security by legislative action, so that the colony could get their bonds at a discount of 20 per cent., or any other price they liked, llie very instance selected showed the monstrous— the honourable member waa fond of the term— the monBtrous morality of the transaction in forcing on the bondholders a loss of 20 per cent, by tampering with the holders' security. He thought it would not pay, though they made another million of money by it, and he thought they should place the matter at once oh a stable footing and meet these difficulties oprahr. Nothing short of undertaking to tee the debt satisfied could do this, and that they were bound to do on all grounds of morality and policy. He might hare further remarks to make upon that subject on a future occasion, but the hour being very late he would not trespass upon the patience of the House further. It was unnecessary for him to state that id the course he had taken in this matter he was not allied with the Government ; he came down; independently to Btate his opinions without consulting any one. He had stated his opinion, when the proposal was made, that the Government could not do anything but accept the liability. The Government bad shown that there was no medium course between acting with a proper observation of the responsibility due to the colony, and committing what would be looked upon as a gross net of repudiation. He had no hope of making any farther money out of the money-holders. The honourable member for Wellington had spoken in terms of great regret at not getting the sum expected. Nothing short of what was propotsed could possibly be effected, except leaving the matter precisely where it was. Ajs far as that course is concerned, we have the evidence before us that the House determined to deal with the question, and very wisely so, too, in the present state of the money market. The House had only to do what it had proposed to do. He did not give much for the argument that it could have squeezed £5 out of a gentleman holding a large number of bonds. It did not follow, because he offered £5, that he ought to give it. His evidence was entirely in the opposite direotion, as he considered it unfair that the bondholders should have been obliged to pay that money. ,Mr. Moobhotise desired to record bis entire approval of the scheme the Government had brought before the House. As one of the committee who sat upon the question as to the consolidation of loan?, and preliminary to which was the opinion of the committee on the condition of the liability of the colony, he took particular interest in that question, on account of the circumstances in which the province of Canterbury stood in regard to those loans. It was with considerable anxiety he went into the inquiry before the committee. He was wellacquainted with the opinions held by the Government on that question, and he had heard the reasons why the change should be made. He concurred with what had been said by the Colonial Secretary, that whatever benefit might be gained would not be a profit to the colony, but damage their interests. He believed in the policy of tbemeasure under consideration. They should endeavour to preserve the high morality which a new country with a good prospect before it should seek to- establish, be trusted the arguments of the * honourable member for Wellington would not have that effect which perhaps his eloquence might have secured for him. He did not believe in the policy advised by him, as it would be calculated to damage the credit of the colony in the ! English money market, and he hoped the bill would go through the House without any alteration whatever. Mr. Fitzheebeet, in reply, said there were many points in which he could show that the arguments against the bill could not hold water. He merely rose to say that the decision had been arrived at not only by himself, but he believed by a majority of the members of committee, having entered that committee-room with entirely different views. It was right that' they should acknowledge their liability, and that they should take care to pay it. There was one remark of the honourable member for Wellington which he could not pass over : it was a remarkable admission. He said, "It is admitted on all sides that whilst yon have varied you have materially improved the security of the provincial debt." He was glad the honourable member had recognised in so public a manner the justice done by the Government in providing for tho provinces. He quoted it, not for the argument, but for the truth now acknowledged by the whole House. If not passed the second reading that night, it and another money bill could not poßSibly be considered in committee next day, and at that late period of. the session it would be extremely inconvenient. Thejbill was read a second time, and ordered to be committed next sitting-day.

TUESDAY, OCTOBER 1. ' The Public Debts BUI was considered in committee. In clause 2, " Provincial loans charged on consolidated revenue," *n ame.ndm.ent was moved that in the second line the words " already issued or be omitted, which was negatived on a division by a majority of 24 votes. It was then proposed that clause 7 be postponed, with the object of introducing a 'provision to enable the province of Otago to rais.e a loan of £100,000, but the motion wa& lost on a division, there being a majority of 10 votes against it. The amendments made in the bill were agreed to the standing orders having been suspended for that purpose. On the motion for the third reading of the Dr. Fbatherston said :' Sir, - I rise to protest against the third reading of tbis bilj. Themore maturely I consider it, the more unprincipled, the more disastrous to the best iaterests of the colony, it awpoara to me. It professes to be a bdl for the consolidation and conversion of proviuci*l loans, but I 'venture to predict that under this scheme, as at present proposed, no consolidation, no conversion is possible. -It ia not a scheme for the consolidation or conversion of loans for the benefit of the colony, tjnt ifc! is a consolidation for the benefit of persons who are holders pf provincial securities, for the benefit of shareholders of tbe Bank of New, Zealand, for the benefit of those who have already sent private telegrams to their agents at home, to buy up the deben-. tqres at a discount, with the object of making a large profit put of the transaction. I object to the scheme because ifc is simply meant to -affix -to provincial* securities the guarantee of the colony,- and.to give its endorsement to provincial paper. I object to it for two other reasons ; 6r«t, because the Government will have enhanced the value of paper in the hands of private individuals without giving any equivalent tD the colony ; and secondly, that if it passes it will still have left that variety of paper in tbe market which perplexes the capitalist, and raises in his mind that sort of doubt which is represented by so much ■per cent. For these reasons 1 object to '.the third reading of tbis bill, and I feel that these reasons will have considerable weight with the House, when I say they are precisely the same as were- urged against the present scheme by my hon. friend the Colonial Treasurer in his financial statement.' . I say for the last time I protest against this bill, as committing a robbery— as robbing the colony of two, three, or four hundred thousand pounds-r-as committing upon it a gross fraud and a gigantic swindle. , The third reading was carried on a division, the votes being— Ayes, 37; noes, 12; majority, 25. All the Auokland members voted with, the majority. The bill was then read a third time and passed.

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