NEW WAR LOAN

Evening Post, Volume CXXX, Issue 81, 2 October 1940, Page 8

NEW WAR LOAN

ADVERSE COMMENT

• "UNEQUAL SACRIFICE"

COMMERCIAL VIEW

The Government's war loan proposals were under fire at the monthly meeting of the Wellington Chamber of Commerce last night, members complaining that the conditions ofj the loan made it virtually an impost on one section of the community, and that the principle of equality of sacrifice was not being adhered to. Emphasis was laid on the fact that no] exception was being taken to any sacrifice that might be necessary for adequate prosecution of the war, but it was contended that those sacrifices should be spread over the whole of (the population. Adverse comment was also made on the rate of interest to be paid. The principal speaker in the debate; was Mr. F. Wilson, who said the terms j and conditions associated with the Government's proposals were far from general in application and were,- in fact, definitely sectional in their incidence. Instead of providing for universal contributions, the proposals j again imposed further burdens on the larger income groups, whilst the special exemptions granted excluded a great number of taxpayers from any j contribution whatever. "In framing the proposals, it also seems evident that little regard has been paid to the difficulties confronting business organisations and individual taxpayers in financing their | loan contributions," he continued, "and j after taking into consideration the | relative trifling final net additional cost that would be incurred by issuing a loan on more reasonable terms, one is inclined to ask whether these war loan proposals represent the; first instalment of a policy of swingj over from orthodox finance to inter-est-free doctrines about which so much has been heard in recent years from certain sections of the Labour movement. BETTER TERMS WANTED. "Had due regard been given to important essentials associated with the real economic position of the Dominion in association with the Dominion's war effort, a sounder condition would have been maintained by issuing the loan on more reasonable terms bearing interest for the full period, of the loan at. say, 3£ per cent. "The final additional net cost involved would not be excessive, and apart from substantially facilitating | the financing of loan contributions to customers where necessary by lending institutions, it would also preserve to a much greater extent the investment value of the Stock itself, thus provid- 1 ing a readily negotiable security. j "Assuming a loan issued at 3£ per cent., a brief comparison of interest costs indicates that whereas an £8,000,000 Government loan involvesa total payment of interest of £2,000,000 representing an average annual cost of £153,846 or 1.923 per cent, a 3| per cent, loan returning interest for the full period of 13 years would represent an annual cost of £280,000, an increase of £126,154, or 1.577 per cant. On this basis alone the additional cost incurred is reasonable and justified, having regard to all the circumstances, but it only discloses one phase of the position, and if regard is had to the question of income tax payable by loan investors, the case for a 3J per cent, loan is further substantiated. WHO WILL TAKE UP LOAN? "By virtue of. the exemptions granted of £70 in the case'of companies and £50 to individual taxpaj rers, it seems evident that the most substantial por-, tion of the loan will have to be taken i up by individuals and trading concerns paying maximum rates of income tax,! and it is suggested 60 per cent, of the j interest payable would incur a rate of j 10s, and the balance, 40 per cent., say, j 6s in the £. On this basis the annual average taxation return to the Government on its 2£ per cent, loan would be £64,616 and the net. annual cost of j the loan would therefore be £89,230,1 whereas on a 34 per cent, issue, the j average annual taxation return would i be £117,600 and the net annual cost of the loan £162,400. Therefore, the actual final additional cost of the 3§ per cent, issue compared with the existing 2& per cent, proposal would only be £73,170. Surely this is but trifling when measured against the essential relief action on these lines would bring to the contributors concerned." Stating that the loan proposals infringed the principle of equality of sacrifice, Mr. M. G. C. McCaul said: "I feel this is just another evidence of the pernicious system>of class legislation that has been followed since the advent of the present Government. I think it is unwise and short-sighted. Class legislation always reacts against the class most favoured and favours the class penalised, because in the end the public rebel. No one should complain about any hardship or sacrifice necessary to win the war. My complaint is that there is no universal sacrifice. We can't win the war with only one small section asked to make j sacrifices. i "We recognise that there can't be absolute equality of sacrifice. Some go to the Front and give their lives; some stay at home and give much. I feel that the Government might have seen that, for instance, hours of work could be extended and some part of the wages earned in the extended hours of work could then be taxed for war purposes. There is no reason why those who stay at home should not work harder while those who go to the Front give their lives." RECENT WAGES INCREASE. Mr. McCaul said that the Arbitration Court had recently . granted a 5 per cent, increase in wages to cover the increased cost of living caused by the war, but the Price Tribunal would not allow retailers and merchants to increase their prices to meet increased charges. One particular class was being cared for, and that was most unwise. ' Mr. W. H. Hindle said he felt that quite a number of firms would be compelled to put their loans on the market to realise on them and the market value of those loans would be very low—somewhere about £80 for £100 worth of loan. "Whatever it is it will involve a very substantial loss and at a time when firms can"t take it," said the president (Mr. R. H. Nimmo). Mr. A. R. Hislop. who was unable , to be px*esent, forwarded a letter em- j bodying his personal vifcw:* on the question. "It would be interesting to know what amount of money trading concerns have already contributed to- j wards the first compulsory loan known <. as Price Tribunal control," his letteistated. "It has been reported by members of the Government that the tribunal has.been responsible for saving the community up to this date some- i thing in the vicinity of £1,000,000. The j amount of interest involved on thci

£8.000,000 compulsory loan is in the vicinity of £200,000. This does not compare with the £1,000,0Q0 in nine months already saved at the expense of the trading concerns. At the same time that contributions have to be made to the compulsory loan. thf> amount of money being invested without profit is steadily increasing. "Has this matter been taken into consideration by Mr. Nash and have they any indication of what the ultimate outcome is going to be even when goods have increased in landed cost 50 per cent, over the figure previous to September 1. 1939? From the trading companies' point of view this matter needs very serious consideration." FINANCIAL RETURN. Mr. C. J. S. Harcourt sp.id he had looked into what the return on the j loan for a 13 years' period would bo. Actuarial tables showed that the value of. the loan would be 82 per cent, and' it would give a return of 3i per cent. 1 net over the period of 13 years. That J was a little better than the present' ! Government Stock, which showed £3 jßs per cent. i At this point the discussion lapsed.