LOCAL BODIES

Evening Post, Volume CXVI, Issue 131, 30 November 1933, Page 4

LOCAL BODIES

CONVERSION LOANS

HOUSE PASSES BILL

CtENEEAL APPROVAL

New Zealand local bodies have secured the approval of the Local Government. Loans Board to conversion operations involving £10,500,000. It was announced in the House of Representatives last night by the Minister of Finance (the Rt. Hon. J. G. Coates) that the approvals yesterday were represented by the sum of £3,500,000. The announcement was made during the second reading debate on the Local Authorities Interest Reduction and Loans Conversion Amendment Bill. In 'moving the second reading, the Minister said that quite a number of locafbodies had in the past issued debentures giving to the holder the option of receiving payment of interest and the, repayinenF of principal either in New Zealand or overseas. The principal Act provided that the reduction of 20 per cent, in interest should apply to such securities if .the last payment of interest was made not later than January 1, 1933. The reduction applied tjj securities held by N"ow Zealand nationals only. The Act was passed, on March 9 of this year, and the 20 per' cent, reduction came into force as from April 1,1933. Some of the securities having an optional place of payment and in respect of which, tho last payment of interest prior to January 1, 1933, had been made- in New Zealand were actually disposed o£ overseas before'tho passing of: tho Act,: in the belief that they bore tho rate of interest stated. TO STOP SPECULATION. Mr. Coates said that when it was discovered that it was jiossible to speculate in tho securities, tho London. Stock Exchange w^s approached, and it gave an undertaking that it would deal in no securities after April last. A eimilar request had been made to the banks and other institutions, and in every ease the request that the securities should not be sold had been complied with. The, primary object of the Bill was not to safeguard the New Zealand seller, but to enable the New Zealand local authorities to keep faith overseas, and thus preserve their credit on tho London market. He thought that members would recognise that it was necessary that local bodies should have the right to finance maturing loans in London, and. it would bo difficult, if not impossible, for tho local.authorities to get satisfactory, terms for renewal loans if the principal Act passed last session was not amended in the direction of exempting from the 20 per cent, reduction securities sold in London prior to the Act becoming effective. It was the local bodies which had asked for the legislation, and the matter had been completed in London when the delegates to the World Economic Conference were there. The Bill also provided for the consolidation of loans by local bodies in respect "'of separate 'areas. The present position was tfcat a number of loans had been raised in respect of different ridings within a county, and tho Bill enabled local authorities to consolidate the whole or any part of those loans. The provision was permissive. The ob» ject of the Bill was to enable local bodies to get their finances'on to a; proper basis, and to stabilise interest; at 4J per cent. It was interesting tq : note that local bodies were realising the benefitsthat were to bo obtained under the Bill, an.d schemes involving £7,000,000 had already received the approval'of the Local Government Lodns Board. , . ■ '.\ Mr. F. Langstone (Labour, Wanna-1 rino) said that the Minister was to be (congratulated on the Bill, .which would go a long way to clear up the difficulties, encountered by local bodies, especi- ( ally counties, in getting" the iuterest rate on their loans down to 4:£ per cent. However, ho was not satisfied with the clause relating to the change of doinicility of loans, as there was a suspicion that bonds which had an optional domieility had been sent to London in order that the holders might take advantage of the exchange depreciation. .] , NO SOLUTION. The Leader of the Opposition (Mr. M. J. Savage) said that tho House had been told that if wages came down other things would be all right, but they were now finding that the "other things" were not all right. The Bill was part of'a long lino of legislation in the wrong direction, and would not solve any problem.' In view of ,everythiug that.had preceded the Bill, the present measure was natural, but the other j measures had not solved any problems. Mr. K. A. Wright (Government, Wellington Suburbs) expressed the opinion that tho Bill was a corollary to the main conversion Act. The local bodies in New Zealand,- and in Wellington particularly,'had. b6rrowed;yery large sums from the citizens. Wellington proposod to repay under tho conversion scheme something like £1,500,000. How much of that money had been subscribed by small bondholders? He maintained that a, great deal had been subscribed by^cople of that class, in addition to large sums having been contributed by' large insurance companies and other institutions. When the Bill became law it would mean;that their money would be tied up, and he.contended that some,provision should be made enabling the bondholders to withdraw at least a portion of their money at thedate at which they had expected to withdraw it. .''■'■.' Mr.'B. McKeen (Labour, Wellington South). pointed out that local body securities were gilt-edged, and their, debentures were readily, saleable in any town. The Wellington City Council was converting about 57 loans to 4J_per cent., and there would bo a considerable saving. The consolidation of special rates would be a great advantage. Was it intended that the interest reduc-tion-would be extended over 1935 on all loans not converted between now and then?' Mr. 'A.;J. .Stallworthy (Independent, "Eden) sai'cl he agreed with tho Leader of the Opposition. Tho Bill was only tinkering with the position. He contended that there should be a redemption fund. • . Replying, Mr. Coates pointed out that recently.1 a local authority had raised money'in London at 3$ per cent, at 97. In reply to Mr. McKeen, ho said it would be -necessary to extend tho legislation if conversion had not taken, place by 1935. How could^it be said.that New Zealand's credit had slumped when a. local body had been able to raise money at the lowest rato for 30 years? Mr. Stallworthy: The cost of meeting: our overseas obligations was higher than it is today. Mr. Coates: It is how Now Zealand stands in Great Britain. The Minister maintained that in spite of what had been said in Parliament, the Dominion's credit was! high. Applications, from local .bodies for sums for conversion represented £10,500,000, and that showed that the 'authorities wore taking advantage of the legislation. Of that amount, application for tho conversion of £3,500,000 had been made that afternoon. The Bill was read a second time, put f.lfrough the Committee stages, and passed. , •