DISCRETION IS NEEDED

Evening Post, Volume CXX, Issue 151, 23 December 1935, Page 8

DISCRETION IS NEEDED

[ The Auckland. Transport Board's decision, announced on Saturday, to seek an authoritative ruling on its liability to pay interest in sterling may have far-reaching consequences. This is the case which caused a stir ' in July, 1933, and directed uuwel- ■ come attention, to 'New Zealand 1 financial affairs. The .Transport • Board, asserting that it was com- ! pelled to dp so by .' audit vcr 1 quirements, then, decided to pay 1 interest in New Zealand cur- > rency, though , previously pay--1 ment had been made in sterling ■ on debentures domiciled in London. >At first the Prime Minister (Mr. : Forbes)', who was. in London at the , time, disclaimed responsibility for ■' the actions of local bodies,' but it > was quickly seen that such an attitude would be damaging to Dominion credit. , Ultimately, and much to the ■ credit of Mr. Coates, the position was . clarified by a Government declara- . tion that where there was a moral : responsibility to pay in sterling this i would."be done, whether the moral , responsibility was created by previ- , ous practice or by the fact that , London s money ,was received on a London prospectus. Before this an- | nouncement was made, however, no L fewer- than ten New Zealand local issues had been removed ■ from the official list of the , London Stock Exchange,, though the local bodies concerned in irtany cases had not taken' the same line as the Auckland Transport Bpard. [ The Auckland Transport Board accepted the Government's decision i without prejudice to its previously expressed views and on the under- ] standing that there would be negotiation with its debenture holders. So far as we can ascertain negotiations have not produced any relief for1 the board, and now it is proposed to pay interest in New Zealand cur- ' rency with a" view to the case being legally tested. The announcement of the decision is brief, and may not dis- ■ close some factors of importance, but it appears to us that the procedure is open to criticism on three: points: (1) That the facts are to be placed before the Minister of ■ Finance after a decision has been made; (2) that the interest payment ■ due within a fortnight is to be made . in New Zealand currency with the : very shortest notice to debenture . holders; (3) that there is no affirmation of the board's intention to regard . a moral obligation unless it is sup- • ported by the obligation of law. This . question is not one for a local body '. alone, as the Government found in 1933. New Zealand credit is in- ■ volved, and should not be endan- , gered. The Minister of Finance , should have been consulted first, pari ticularly when political changes have . made the London market more sensi- . tive than usual; and when the chair- ; man of the local body primarily concerned is a responsible Minister of , the Crown. No matter/what domesl tic currency plans may be contemplated for the Dominion, it is yet \ essential for New Zealand to'retain London confidence and good will.