PUBLIC DEBT

Evening Post, Volume CX, Issue 67, 16 September 1925, Page 9

PUBLIC DEBT

REPAYMENT PROPOSALS

A LABOUR ATTACK

A GOVERNMENT'S BORROWING I ■ ' POLICY.

'■■ '• •. ■ i .' '-: ■■ ■ .■■■'■■■ The policy .of the Government in regard to the floating of loans and also I.in regard to taxation came in-, for considerable criticism : at: -the :> hands o£ Labour members in the House of yesterday afternoon and evening, when r.the Eepaym6nt of the Public Debt Bill was under consideration.

' The Minister of.Finance (the Hon. W. Nosworthyj, in reviewing - the present arrangements for debt reduction in New' Zealand, said that attention was principally directed to the Public Debt Extinction Act, 1910, which' was,.undoubtedly effective to the extent that under its provisions a sinking fund equal to the' debt would be accumulated in about 75 years from the date of inception of each loan. ; Similarly, the. special sinking fund for war loans would; provide the funds |to repay the, borrowed t capital in about 40' years, dating from the establishment: of the fund' in ■; 1918. , The weakness' of all such sinking , funds, however, was that the huge assets, gradually' piled 'up, could not be realised when required without financial chaos. The ne^r Bill,* said the Minister, adqptek the latest principles of immediate ap-, plication.of sinking fund instalments. to debt. ■• reduction. , . The -loss of: compound interest would be made good by>. further annual payments ' from the. Consolidated Fund. • That would' hot increase the, burden on the fund, however, for it' would be, more' than' offset by the reduction in interest charges due to redemption under the provision of the Bill. The ; repayment period was 80 years, w compared. with 75 yea.v» under/the • 1910 Act; The 1910' Act had ,been in' operation.for fifteen years,, and another 60 years must elapse before complete /provision: had been made for the debt as it stood in 1910. The present Bijl, however, would provide, for the repayment of the great-ly-increased debt of 1925 in about the same period^-60 years. ;

WIPING OUT THE WAR DEBT

If it was thougtit desirable, said the Minister, the repayment; moneys could first be utilised to wipe ■out the War Debt. ■ If this plan were adopted, i it was intimated it was'estimated that the entire War Debt could - be: repaid . in about 30 to .32 yearsi. As the present war Joan sinking fund i had still some 33 years to run 7. it was "evident: that that liability could be extinguished as quickly under the provisions' of the present Bill as under' the, present War Loans Sinking "Fund.; It was.estimated that the adoption.of thie scheme-covered by the Bill would result in a saying'to'th» Consolidated Fund, and'consequently, to: the taxpayer, of over £300,000 per = annum. The position of investors would be in :no way' impaired, ? for not only would .loans be repaid in , a shorter periodj,than.would, otherwise • be/,the case, but the "system of gradual repurchase": would "keep: the jm^ and enable investors to find a' ready sale' for their securities.'at any time.:, A paragraph giving" notice of ths • charge* ' in" the scheme for debt reduction covered by the Bill appeared: in the 1924yissue of , the "Stock .Exchange Year Book," London, and was apparently ■ well . received by investors there. ■ It. 1 should be clearly understood,;mpreover, -that the Bill would in:no way prevent ;the application of. surplus moneys or other special : receipt's; the r|duction of /debt/ quite apart • from f the v proI visions pf the Bill should guoh. a .course be' adeemed advisable. Such moneys, could; as'jat ipresent.be, transferred 'direct to> the Loans Redemption Account. ;. Under' the present < system' the sinking funds ■would, not provide. the ■" capital, sums,-required 'unless the. i instalments werei ■ closely /invested >■ and, were left intact '; to, accumulate for the. fullLperiod.,: Consequently; > when .»inkm^- fund' was released before the completion ;. of. -the iull } period, m> many years'/ compound interest, was lost,;and the 1 fund was im- , paired, to that extent; and the period lengthened. as the funds were:: required by law to be invested in mortgages and loans to local authorities, etc., it M»uld be very difficult to Brrango'for the release of any large amount* of sinking''fund, .no matter on what f«v-; durable terms stock or debentures might' be offered to -the Treasury.: The scheme proposed in the Bill'was designed",to overcome weaknesses of ths .present systems.. ; Under ,it s money would , always be/available to take v advantage of favourable offers, the use "of the fund' for its proper pnrppse ; would, not. disturb; other financial arrangements, and the loss: of .compound '•■ interest;wouid, be ; made.good from the Consolidated;Fuiid: The Bill, was; very\ ;<similar: to the National.Debt Sinking Fund Act passed j in Australia in 1923, .while the «ime principle wata followed in Great Britain arid- in the Union of South Africa. :

BUYING BACK DEBENTURES

: The; Leader of the) Opposition '(Mr. G. W. 'Forbes) .said 'that ike, measure was a most important"one, and was taking the place 1. 1 of . theY 1910 Act, which was brought,in by Sir' Joseph Ward. :He understood \that, the money f which had. accumulated' under the 1910 Act amounted to 11 or, 12 million pounds. The Minister had stated that: the Public 1 Debt would be liquidated in ,60, years, but whether that result would be brought about or not depended on whether the securities were bought' up. The: sinking fund was a; matter which concerned the people from v^Jiom they; borrowed' the money, for they had to keep their credit good with the lenders. They... had to see that the money they were borrowing wag used for. reproductive purposes. He took it that the. sinking fund was hot to be used for repaying , back ;• the debt, but that the interest from the.sinking fund: was to. be used. He thought'that the -Bill should ;.proyide: for the use of the money accumulated under the Act for the buying back of the freo-of-interest 1 debentures. ■■:■ ■■;.•' •.'■■■••.....■.•■i". .'. ■. ■ •

: The Minister: "We are «aturally anxious to do that. We want to get rid of our free-ofrinterest loans." ■

; Mr. Forbes said that the Act should be" strictly enforced. -The Bill"was a wise one, but in order that it might be of full value the provisions should be tightened up to the greatest possible ex-' tent Mr. 1 Forbes -also" referred ■to the Auditor-General's '.'statement regarding a' sinking,'fund'for .State Advances. ..... ,'

■•.•Thet Hon. D. Buddo'(Kiiapoi) said tliat'; the 1910 Act- had made" New. Zealand's credit at Home Very sound; It .was essential that some endeavour, should be made to pay back the National Debt, and the Bill had come at an opportune time. '.'..He ''trusted ' .that none of the money would be used for any other'purr pose than the extinction of the. Debt, iind. tho purchase of the ''debentures; .. ■ ','.,.

\ Mr. TV J. Bollefiion (Tiinaru) fa/d/.that the Public.Accounts Cpiiimifteo liatV porasefl ■ the Bill very xarefully, and', had removed'•. all. possible objections after lisu'ing tho vlfliva uf SUta offic«e t yjlie

Bill was: absolutely sound in principle.. The previous »peaker» had expressed, some fear that tne money.might.not be 1 used for purchasing debentures, but the Bill .^specifically provided, that the Commissioners should apply the .money ml this direction. If the Bill did not prove satisfactory it could be reviewed ,next session. ■ ■' ' '. ' . , . •"•.■ . : •■■••■

NOT FAR ENOUGH ' ,) \

"The Bill might be all right in prin-' ciple," said Mr. M. J. Savage (Auckland ■West), "but the question is does it go far enough?" It' was stated that the Pebt would be paid off in 60 years, instead of 75 years, but that did not seem to be very much. These were the days .of- remissions .of - taxations/ If no remissions were made and. a sinking fund was built up there would be no need for such Bills as the present. The people lof New Zealand would .have to meet their! liabilities,'said . Mr. Savage. The .'country, could- not go on borrowing more money in 1 order to provide interest on money which, had already,been borrowed; ... -.'■.'..

STRENGTHENING THE SINKING ■; .;'• ■■?' ■'■;. ,:fu^d:.v.%••:■■":■■'

The ' Postmaster-General: (Sir James Parr) laid that the Bill did not mean merely that:ithe Public Debt would'be paid oS in sixty years. The Bill meant " a 'great deal more than .that. -"Every year a: considerable sum would go to the Commissioners, arid the Debt of; £174,-; 000,000 would be wiped off by,annual.in-' ■stalmento.: The Bill did not interfere with the Sinking Fund; It merely made the Sinking Fund more mobile. It made it a live thing instead of a dead weight., The last-speaker had complained of: the. borrowing policy of the Government, but he would ppmt put that money had been .'borrowed for workers'; homes, reproductive, purposes', and for. loariß ' to farmers. . The Queensland Labour Government had broken all records^ for borrowing, and he only hoped that when the. Labour Party, reached ; : the • . Treasury benches in New Zealand' they -would hot follow the example. He agfeed' very' sincerely that borrowing in ' New Zealand, had to: be watched very carefully. Tljat would be one of s,the Finance Minister's most important tasks in. the years ahead, ■ Borrowing "by the Government' and also by local bodies would have to be watched.' While the asset* .were growing and the population wai growing, the Debt wa« also growing. ;;;' . The Hon;.'Jv A. Haaan (Invercargill) ; referred to the "squandering tactics of the^present .Government. '.The policy of the Government had been to borrow, borrow, ■".borrow. 'Not, one member, of • the s House :knew howmuch: loan money was' to be. authorised this,year. ' They had. adopted the; Financial f Statement, and they, had passed,the Estimates, tbut"they did: not know how much borrowing would Ibe involved.' f '.-; '?..- ■ ■':..'•'.; -.!'- •■■■■.':,■" '■:.-■

, Mr. O. J. Hawken (Egmont) said that the Opposition, while accusing the; Government of over-borrowing^ was' continually voting for,the': expenditure;of more money. Could political hypocrisy go fur-. ■.ther? ; -. ■ <■■■;. y. u: ; h:i- ■'x-",:'■;-■.-

:'National members": "Oh, rubbisk" ' ■ Mr. Hawkisn: ''It is for the Opposition to ; defend itself—both sides: of the " Opposition." ■.."■'' .';';/;', :' ' ■■•;•/_ '■ ,'\^'.:..;;

, Mr! W V E.,Parry,(Auckland Central): "That's funny."-; . ;\:-.;'; ■' ■■'. .';:. ;. , : '■' • What was, the use. of the memj&er for Egmont talking about hypocrisy when his partjr had always been guilty of hypo-, crisy in regard to matters of finance,'-ask-ed-Mr. J. M'Combs, (Lyttelton). s v;:',He quotedispeeches;by-..Ministers .with the,; , objeciv of ishowihg that members of; the Labour Party were merely expressing the views, which were expressed from ,■', the Treasury benches in 1915.. > : .' : ' ;■■-

:;"GOING TO THE PAWNSHOPS f

:.> The Leader of: the Labour Party, ,(Mr..H.>E. Holland) said that when a Bill such ' as: the:'present; was -before the House the thoughts- of members naturally ran on .the borrowing policy of the Government and previous Governments. The present government' when 'the; official had criticised the Liberal? Government 'for its .borrowing policy,,but it was now purr suing-; an extravagant policy of .borrowing: .itself. ■ If ; the eountryl could only Texist. by. going to the pawnshop it was: time steps were taken to. xe■vise the position generally."V The country could pay its • way lif; there 'wm an effective reorganisationl of the finances and credit of the; country.•' Mr. Holland said ;: that' the Government; could; have paid the whole , of, ;New' Zealand's war debt if, it had taken the: money from the profiteers, who had : been _■ allowed '-.-: to make • enormous profits and then exploit; the ernment by '.lendingv thehj profit! ■■ at, an interest irate equivalent to 7 per cent. ; There'was only oiie;'way. out' of the: difficulty,: and that ■i i wai=;vby; means of production, to raise sufficient values which would be taken by taxation' to meet the" liability..' There, was .only one, way 'toiget rid 1 of. taxntion, and that was by reducing the national liability.': ; ' -; ' r . r „v.-.-.,

• o'.'. There is;.' nothing' more; easy, than destructive criticism, and, nothing more difficult than' .constructive; criticism,' 1: said Mr ; L. M.; Isitt (Christ-! church: North) in referring to Mr.' Holland's speech.',~ He reminded Mr. Holland '.pi; a statement'made by him to the 1 effect .that .'■'[ the, (government should' reduce .the interest -oh loans in order to meet ..the National-Debt, or, in other words, to'-break' the contract which ■it made with those' who loaned.the money. .■■■ •'•'.. -': .■' ': .'■,.:'; ■•■

"POLITICAL EYEWASH"

""The Minister of Lands (the Hpn. A. D.v M'Leod) charaisterised' the :critioism of the .members of the Labour Party as; "& lot ,of political 'eye•wash." If the criticism meanfanything at all, it meant the advocacy of a straight-out capital 'levy., -He; challenged the gameness of the; J/abour Party to ;go out into the and tell the people that] they believed in a capital levy. ■! They }. did iiot dare to do that., ';'. ■■[..■■..-'■ '■■; /■;,'■ -'v ''•;:'V.'.

Mr.; H/ T. Armstrong.(Christehurch East):; " You don't tax, capital;>you tax poverty," 1; ■/y-\:r-~.'y:"'~'---: :'.. ■ -.'.y ; :'■:

Mr.; M' Leod Bftid that it: would; be found that the great .majority of war debentures^were, held;by mutual life associations and building /societies.

The Minister of .Labour (the Hon; G-. J. Anderson) stated that the Leader ■ of the Labour 'Party had made use of a lot of >','if s'fin criticising the .Government's policy.V ':. Mr .'^Holland had attacked, the Government j for borrowing,;; but* would he object to, the manner in. which the money had been expended? :. : .■. • „ ■■•:-■; ■ [ ':-Y'^ i-". ' Eeplying to,;the discussion^ the.Minr iste'r stated: that he wanted to make it .clear,' that ; the position of the sinking fund'in regard to State Advances was quite satisfactory. They had> already about-two million as sinking fund. • I'm regard to the statement, that 14 million, pounds hadbeen given back to the 'wealthy, by income tax remissions . was quite incorrect. The Bill had nothing at all: to do with .the Government's position at the next General Election, but was • merely- a business measure. . ■ . ;

' The ■ Bill Svas then committed, put through all stages, ami passed.