HITCH IN THE LOAN ACT.

Evening Star, Issue 7432, 30 January 1888, Page 2

HITCH IN THE LOAN ACT.

Our Parliamentary reporter interviewed Mr Downie Stewart, the member for Dunedin West, this morning in with the hitch alleged to have occurred in the wording of clause 19, which affects the raising of certain loans. The clause reads as follows

Subject to the proviso to this clause, no loan of which the principal of interest shall be payable in the United Kingdom shall be issued by the General Government of New Zealand before the 31st March, 1891: Provided always that this enactment shall not prohibit the issue of any loan or loans authorised by the North Island Main Trunk Railway Loan Act, 1884, or the Greymonth Harbor Board Act, 1884, or the Westport Harbor Act, 1884, or the Public Revenues Act, 1887, or any loan issued for the purpose of providing for the payment or extinction of any loan now outstanding. Every prospectus, notice, or advertisement inviting applications for any loan issued before 31st March, 1891, shall contain particulars of this clause.

Mr Stewart said that after looking into the matter carefully he was quite satisfied that the language of this section neutralised the other provisions of the Bill till 31st March, 1891. Technically, there was nothing to prevent the North Island Main Trunk Railway loan from being raised; but from the way in which section 19 was worded he thought that if this loan were raised the advertisement would require to state that no further loan, such as the million, would be raised till after March, 1891. He felt satisfied that upon the interpretation of the clause the Government would be bound, if they raised the North Island Trunk loan before amended legislation was obtained, to pledge themselves not to raise any further loan (including the million loan authorised last session), for a period of three years. Reporter: Your opinion differs materially from that of the Attorney-General. He is reported to have said that according to the terms of the clause there was nothing to prevent the floating of the North Island Trunk Railway loan at once, whilst the million loan can be raised temporarily in the colonies if the Government are anxious to borrow before 1891.

Mr Stewart: The last paragraph of section 19 refers to any loan, Ido not think that, as the Act stands. Government would, be justified in raising the North Island Railway loan unless they practically committed themselves not to raise any further loan (including the million loon) before 1891. What I mean is that the last paragraph of section 19 applies to the North Island Railway loan as well as to any other loan. Of course the error can be amended by special Act next session, or the entire Bill can be repealed. Reporter: You say that clause 19 is loosely worded, and that bad yon seen it before it was placed on the Statute-book you would have discovered the hitch regarding the raising of the million loan. If I remember aright, the clause was inserted after the Loan Act had been read a second time, in consequence of Mr Macarthur and other Government supporters wishing to pledge the Colony not to borrow further for a period of five years. Mr Stewart; The section is transparently badly expressed. I did not see the clause till the end of last week, nor can I remember how it was that it appeared in the Act—l mean under what circumstances it was inserted. Probably the clause and proviso were inserted just towards the close of the session or by Governor’s Message, as the Council could not deal with such a subject. Reporter: What is your feeling with respect to raising moneys in the Colony under the Public Revenues Act of last session for wiping off the deficiency bills in circulation ?

Mr Stewart: I was under the impression that the money had to be raised within the Colony, but I find that the Act authorises it to be raised “in Great Britain or elsewhere,” Deficiency bills are in circulation to the extent of about L 400,000, and the rate of interest was specially fixed at 5 per cent., on the assumption that the amount would be raised within the Colony. Reporter: I assume from your answer that you would prefer seeing this L 400,000 raised within the Colony ? Mr Stewart: I say that the money should be raised within the Colony, and I have no doubt it can be so raised at a slight advance over what we could get in England. Indirectly, however, the Colony would be the gainer, as such a step would inspire the confidence of lenders at Home to a very great extent, for they would know that we were lending to ourselves. I stated during the session that I would like to see this money raised in the Colony. _My mind was so charged with the probability of this L 400,000 being raised only in New Zealand that I never thought of doubting that Government would attempt to float

that loan within the Colony. Raising the money here would bo the very best advertisement towards borrowing money if required on favorable terms at Home because, as I have said, the English money-lenders would see that we were able and willing to lend to ourselves. In the present state of the money market I have no doubt that Government would be able to float this L 400,000 within a comparatively short time in the Colony. There is a large amount of trust and other funds lying idle on deposit at the savings banks and elsewhere. These moneys would be available at even less than 5 per cent., because at present the value of property is so uncertain and fluctuates so much that trustees and persons dependent on a certain income are very averse to running any risk in reference to the capital, even where the principal is considered fairly good. They prefer taking a smaller interest and lending on security which is free from any reasonable doubt, and I look on Government debentures as undoubted. Dr Fitchett, the member for Dunedin Central, stated in answer to our inquiries that he was of opinion that in the event of Government electing to place the North

Island Trunk Railway lino on the market at once, tl)cy \yould bo debarred from Boating the million loan within the United, Kingdom for, a period of three years. Ho p.oints out that though it was the intention of the Legislature to allow both the North Island Trunk and million loans to be floated before any guarantee of non-borrowing was given, the letter of the Act docs not carry out the spirit of Parliament. He considers that floating the L 400.000 authorised by the Public Revenues Act of last session within the Colony would work evil. While doing so would absorb a lot of money that is at present awaiting investment, he thinks that so soon as colonial investments offer the bonds would be thrown on tHc loci)l market and be parted with at a heavy discount. It would not tend to reassure Homo lenders to see our bonds depreciated in our midst. While it was true that there was a good deal of money lying idle just now, he is of opinion that it is only waiting investment, and that investment will offer with the first revival. For these reasons Dr Fitchett differs from the member for Dunedin West as to raising the L 400,000 in the colonial market.

Sir Robert Stout has not looked into the matter, but Mr John Davie, whose opinion, as an ex-Provincial Treasurer, on financial matters, may be worth citing, thinks that raising the L 400.000 under the Public Revenues Act within New Zealand would be the salvation of the Colony,