THE PUBLIC DEBT

Evening Post, Volume CXII, Issue 1, 1 July 1926, Page 12

THE PUBLIC DEBT

REPUDIATION OUT OF THE QUESTION

AN INSTRUCTIVE ADDRESS.

"The Public Debt and its Effect j on Industry and Commerce" was the subject of a lecture delivered at a meeting of the Accountant Students' Society last evening by Br. B. P. Neale. The burden of the National Debt, said Dr. Neale, had been exaggerated by those who tiraded against it. The National Debt of New Zealand at 31st March, 1925, stood at £227,000,----000, and in addition to that there was g. local body debt of £5-1,000. These sums were "not to be added together, as included in local body debt were sums which were included in the National Debt. There was an inclination on the part of some people to regard, the debt as staggering, but a groat deal of attention had to be paid to the reasons for the indebtedness before comparisons with other countries could be made. Probably no country had gone in for State undertakings to such an extent as New Zealand, and nearly one-fifth of the Government indebtedness was incurred for the purpose of constructing a railways system, which was remunerative. Under such circumstances a National Debt was not burdensome. There was a great difference between productive and unproductive debt. The result of- the war had l)een to increase the amount of unproductive debt. In 1914, 22 per cent, of the New Zealand debt was unproductive, but" after the war it had gone up to 44* per cent. New Zealand in the past had spent considerable money on bringing immigrants out to New Zealand, and they had made that expenditure out of capital, not out of revenue. Ho thought the time was past when New Zealand was' justified in finding money for immigration out of capital. A Government always had its taxing power behind it to meet a deficiency, and that no doubt was a reason why a Government was able to raise funds on bettor terms than private concerns. A Government very seldom had to pledge its assets. At various times it had been possible for the General Government to raise funds at such a rate of interest that it _ was able to hand the money on to private individuals and, in some cases, local bodies at,a lower rate of interest than it would have been possible for the individual or the local body to secure on the open market. The speaker cited instances where the Government and local bodies had incurred considerable expenditure and indebtedness on what had proved to be "white elephant" works. It was essential, therefore, that money should not be expended on public works unless it was assured that the results would bring in a sufficient ' return to pay interest on capital. In the last six or seven yoars the indebtedness of local governing bodies had doubled, a fact that was due largely to expenditure on hydro-elec-tric works and harbour works. THE WAR DEBT. At the end of March, 1925, New Zealand's war indebtedness stood 'at 76J millions, and the interest on the war debt alone amounted to one million quarterly. There was also an annual pension charge of one and a third million per annum (which was likely to diminish as beneficiaries died),, and there was also a necessity of putting aside a certain amount each year towards the ultimate redemption of the debt. It was little wonder that under such circumstances it had been necessary for the Government to increase taxation. In recent years there had been a tendency to reduce the income tax burden by making remissions, and Customs revenue was relied on. Wars came under the heading of temporary necessity, and it was justifiable to raise sums to meet the resultant expenditure. New Zealand could not raise all the money she required on the London market, and certain sums wer eraised locally. In order to meet the debt *t had acquired as a result of borrowing abroad, New Zealand had to increase her production. Repudiation of our Public Debt was out of the question altogether, for any repudiation would have a disastrous effect on our credit. There had been talk of an indemnity from tho vanquished, but in claiming an indemnity a country often struck a blow at itself. Conversion was another suggestion which had been advanced, but that system had not proved satisfactory. The striking of a capital levy had also been suggested, and this had many advantages. There was one outstanding weakness, however. It would be necessary for sales of property to be effected in order to meet the levy, and this would mean that everybody would be a seller. A capital levy would also fall very heavily on those who had saved during the war, whereas those who had not been thrifty- would escape. In any case, the speaker stated, the time had passed for the making of a capital levy. Qui^e a number of ■ countries had completely wiped off their war debts by inflating the currency. The speaker went on to deal with various forms of taxation on income. Referring to the provision made during last session for paying off the war debt in sixty years, the speaker ,' expressed doubt if it was wise to spread the repayment over such a i lengthy period. It was a question i whether a future generation should bo I saddled with such a debt.