BORROWING. CRITICISED AND DEFENDED.

Evening Post, Volume LXXIV, Issue 27, 31 July 1907, Page 2

BORROWING. CRITICISED AND DEFENDED.

GOVERNMENT LOAN PROPOSALS. DISCUSSED IS PARLIAMENT. The Million Loan Bill was considered by the House of Representatives yestorday. ' In moving its second reading, the Premier, who spoke at 4 o'clock in the afternoon, caid that with the loan pi'oposed tho Grdve"rnmeßt would hfi,va £2,115,800 available for public works 6x« pendituro, as against a total expenditure last year of £2,040,319. It was, of course, important that the House should authorise the fairing of the present loan. Tho amount obtaainod in the colony of tho loan of last year was £659,500, and tho amount obtained in Australia was £340,500.' The total amount actually recoived was £1,006,800. Regarding tho present loan, he had recoived an offer of the wholo loan at 4 per cent, at a premium of 2 per cent, and a brokerage charga of 1 per cent. — an offer which was refused. He had reason to know that they could obtain halt' a million outside the colony at 102 by paying brokerage of one-half per cent., winch ho thought would be very satisfactory. Mr. Jas. Allen thought the colony ought to bo able to secure the loan at 3£ per cent. Tho Premier : Some important colonies pay 5 per cent. Ml-. Allen said the Government h*d probably done its best, but if it could not obtain it at less than 4 per cont. outside tho colony it ought not to say too much about it. As a matter of f-ijt more than half of last year's loan was raised from the Post OiSco at from 3 to 3£ per cont. This was not tho ohly loan that Was being raised. There \vmc the loans to local bodies and tho land for settlements loans, and the dominant note of Iho Government was the land for settlements loans, on account nf which tho Government was afraid to borrow, and that was the chief reason of ■ the land legislation nnd ,the present Government. In that and other directions our loans went on increasing, but he did not think that the general loan money was expended on legitimate purposes. He had hoped to see an amendment of the Public Revenues Act to provide that ft vote on the*" Estimates should not override statute law, end that money voted for a specific purpose should not be transferred to another vote. As to the proposed loan, he did not cure whorls it was raised, but the main thing vvab to get it at the cheapest possible rate. He hoped to find that next year they would find the loan had been raised at 3£ per cent. As to tho present Bill he urged the Premier to say whether the Government was spending out of loano on additions to open lines money that ought to come out of revenue. Th<; only conclusion ho could come to was that when a light rail was replaced by a heavy one the wholo cost should be chargod to revenue, because in the colony there was no depreciation account, The policy of railway companies at tho prosent time was to charge replacements of worn-out matcrinl_ to revenue, on the ground that any material startod to doprooiato as soon as it was laid down. As to tho railways, he heard, ho said, that there was to bo a £400,000 vote for the North Island railway. Ho agreed with that, but regarding the Midland Railway and tho vote for tb- 1 Arthur's Pass tunnel (about half a million) he thought the colony should have waited a yoar or so longer before committing itself to such nn expenditure. He wont on to deprecate the slow speed at which tho Otago railways had been carried on, and then contended that the appropriation for roads and bridges, £350,000, was ' not satisfactory, as ho held that the House should do taken more into confidence as to the way in which tho money was spent. The money should be spent on new works, and now works only. Further, ho contended thai loan monc.v was spent on maintenance of telegraphs wni<"h i ought to co.'no out of revenue. The growth of tli • expenditure on contingent j defence out of public works money wnfi unormuiis of recent years. lie urged that not one penny of loan money should be spent on that object. He had hoped that that lefurui would have, innonget otheibj be£u takes ifi hand by this

Government. While congratulating the Government starting a policy of "sinking funds, he urged that a sinking fund should be established for this loan, and expressed tho belief that if that was done our credit would be very much sounder, and wo would be ablo to raise loans at a cheaper rate than at present. The Minister of Klines (Hon ,T. M'Gowan) followed. lie gave figiucs showing that during his penod of office (seven years) he had spent more in prospecting, .schools of mfnes, and goldfields development than during the previous nine years, and declared that they had never had a Minister of Mines who had had the knowledge and had kept bo strongly in view the interests of the goldfields. (Iltar, hear, and laughter.) Mr. Ilerrics heped that the Premier would give a detailed account of last year's loan. Ho objoctcd to Government investing post office funds in Government debentures. Mr. Laurenson exprerrcd surprise at Mr. Kernels statement regarding Post Office funds. Wns it not a good thing for the depositors to have their savings invested in a way that gave abboluto security? The request for more attention for the Gisbornp-Rotoruo- railway was a perfectly 'legitimate one. Ho was astonished at the potentialities of the Gisborne district. Mr. Homes osj/kinod that he had no objection to portion of the Post Office Savings Bank funds being invested in Government debentures, but what he wished to know was this : Was it a legitimate policy to pay individual holders of debentures 4 per coat, while the Post Office Savings Bank had to be content with 3£ per cent. Mr. Ross said ur.lrss tho Government canitt to tho re^cua of the backblocks settlers, the latter, to g^t along at all, would have to tax themselves more heavily. pne .'mull 6ettler informed him that in addition to ordinal y rates to local bodies he was paying 4*d in the £1 for special rates ; yet he had not a road or bridgo leading to his section. . t Mr. \V. Ifrascr Said the Opposition could very well afford to compliment the Treasurer on the success of the flotation of lost year's loan, especially in view of tho departure" from ths policy of issuing (short-dated debentures — a policy against which the Opposition had never ceased protesting. lie did not think tho colony ' could have got better terms than 4 per cent, on the Home mouey market, though he h6ped yet to see the rolonv agiin paying 3j pei* cent, for its loans. He did not object to our borrowing — it Wiis necessary for a young country, but he did not approve of our system of proclaiming to the woild that we Lnd a sufjilus, when wo spent it in j the Public Works Fund. He hoped to see tho time come when we would have a bettor fystein of local Government so that grants for local public works need not appear on tho estimnles item by item, but the Government could trust the local authorities to spend their own grant in their own way. Mr. Hogg urged that if more money were givci to road and less to railway c'onstiuctidn it Would be better. New Zenland, V.ritb. her splendid field for development, could well afford to borrow a million a yoar, though he could well beliove that *<loiug So Avould Cause the Colonial Treasurer occasional anxiety. Last year the Government had, spent £600,000 in purchasing land for settlements — result 300 settlers. This money would havo been far better spent on roads for tho benefit of existing settlers draggling fur a living. Mr. Field put in a plsa for the sug?fsled Bnlh-Gi-fiitford-Poyton varlwav. The pbrt of Foxton had to be coELioVred. Greao quantities of timber ■■ would 'be coming down from the great Wairaarino forest and tho dheapesb way to bring it to Wellington .would be by way of th-s level Tiulwa,y route ho hail referred to — from Marton ■io/Fyxton. Sir .Joseph Warfl rose to reply, shortly before 1 a-m, ' it? saW he wanted to cJea.!up onn or two dnlaiions. No one carfed for oiticism co long as it was fair. A Government Savin gn Bank in Lor. 'lon would be a ruinous oxpcrirAenfc The theory that Post Offico funds should be invest"*! at 4 pet cent, because that rate was paid to private debenture-holders was a fallacy. If t,h.3 suggestion made woe cnrriol out the Consolidated, Funa would resp the profit on a half per cent. If tho rate was raised to 4 per cent, depositors would have to be javen interest at 4 per cent., and banking and other hading institutions would have to follow in the same way. The result would pTobably bs a financial crisis. Members ought to realise thnt all money in tho Post Office Savings Bank was at call. The country Would be in an extraordinary and outrageously weak position if the theory advanced by Mr. Allen and Mr. Homes Mas given effect to. In practice the proposition put forward would bo an impossible and undesirable thing. The member for Bruc« was very unfair in fii& criticism of the financial position of the colony. If ( as had been suggested, the Government had borrowed at 3 per cent, at 86 tho colony would have lost £140 on ovary thousand, or £140,000 on a million sterling—in Otlwr words, they would only have got £860,000 in the case of a million loan. Thfe money required could not bo raised in this colony ab 3,} per cent. Already one million had bson ofi'ored iii the colony at a 2 per iont. premium, but it had been declined because ona per cent, brokerage wa» asked for. Mombeis had been urging that the publio expenditure aliould not bo allowed to fall below a certain Amount. He would like to point out that since the Ist of April last £586,000 had been paid by tho colony for Public Works. This was the. best answer that could be given to tho com< plaints advanced. Passing on to rail ways, h» said no railway service in the world could allow its rolling-stock to deteriorate. In Kew Zealand to-day th.6 railways wore much better than when they were first laid down. Regarding the Midland railway, he deprecated theory of North versus South. Who was responsible for tho Midland railway? Was it the presont Government or the one nroceding it? Tho work was commenced twenty y-aars ago. To-day the Government had reached the point whore, tho money already npent would ha-v<s been almost cntiicly useless unless the tunnel contract was proceeded with. The Government of the day was bound to give acceptance to n tender which would result in jhe completed lino balng put into operation, und the money already expendod being made thoroughly reproductive. ,H-3 deprocatcd th<* manifest display of narrow provinoialism, and concluded oy saying thnt pitper currency would bring about financial tuin and disaster. He was sorry he had no further time to deal with "the matter. Th-5 second reading of the Bill was agreed to on the voices.