PAYING FOR WAR

Evening Post, Volume CXL, Issue 60, 8 September 1945, Page 9

PAYING FOR WAR

BORROWING ON FUTURE

A WRONG SYSTEM

Discussing the methods of financing war operations, the Minister of Finance (Mr. Nash) expressed' the opinion in the House of Representatives yesterday afternoon, when replying to the debate on the annual taxing measure, that it was wrong in essence to borrow on the future to pay for a current war. Such a system, he said, would mean that the young men who went away to fight would come back to help in paying for the .shots they fired.

To avoid that system it was wise to tax to the limit and get the war debt out of the way. He would like to see the war debt cleared off at the earliest possible date, because that would be the best way to help the servicemen. It had been suggested during the debate that returned servicemen should be freed from taxation. He would like to do so,-but it was impracticable. The load they carried in connection with the previous war was unfairly heavy, with its interest rates of 5 and 6 per cent. If his reading of the circumstances was correct, all the overseas expenses of the previous war were borrowed, so that the servicemen came back and, with others, had to expend a portion of their production in paying the interest and repaying the capital. But in connection with the present war, there had been no increase in overseas debt. The Leader of the Opposition (Mr. Holland): Including the £18,000,000? The Minister replied that there was £18,900,000 outstanding, but New Zealand had reduced the other debt by £12,000,000. INTEREST ON WAR LOANS. Mr. K. J. Holyoake (National, Pahiatua): How did you determine the rate of interest on war loans? The Minister replied that it was not determined on the market rate, unlike the previous war, when the Government had no power, and had to go to the banks. Mr. Holyoake: You fixed the market rate rather than followed it? Mr. Nash agreed, adding that people always found it less profitable to buy a new war security than to buy an old one, because those who, in their patriotism, provided the Government with £100 in respect to the new war loans could buy the old ones at £98. Eeplying to another question, he said that there was no "created" money except the £27,000,000 from the Reserve Bank used for housing.