STATE FINANCE

Evening Star, Issue 15915, 22 September 1915, Page 2

STATE FINANCE

THE DOMINION LOAN. NO LIMIT TO DEBENTURES. STATEMENTBYTHETREASURER IFbou Otm Pakuamextaey Reporteb.] • WELLINGTON, September 22, . An ameildmSh't to the New Zealand Loan Bill, whick provides for the raising Of a loan of £200,000 in the Dominion for public works, was introduced in the House of Representatives by Governor's Message. The Right Hon. Sir J. G. Ward (Minister of Finance) explained that the original Bill limited the amount of a, debenture to £I,OOO. Since the Bill •was passed, however, he had had an inquiry for a much larger sum in one debenture. He proposed, therefore, to strike out the limit altogether, so that an investor in the loan could get any amount in one debenture. Mr T. K. Sidey again urged that debentures in the loan should be made payable for payment of death duties. The Finance Minister had said that this could not be done, because the loan was being raised for public works. This would not really affect the position. The State would lose nothing by the adoption of his proposal. The State got the cash when the debentures were purchased. It would only be later that the debentures would be paid in for death duties. The Minister seemed to be under a misapprehension. Mr Hine advocated that the State Lending Departments should be prevented from subscribing to the loan, as already there was a sharpening in the business of these departments. Mr Wilkinson asked the Minister to consider the advisability of making the issue a popular one. The Savings Banks should be enabled to accept small amounts towards the_ purchase of debentures. It peemed as if the application for large sums was being encouraged. This was a wrong policy. Mr Payne urged the institution of a State note issue in lieu of a domestic loan. He criticised the manner in which banks make huge profits, and said it was time it was recognised that banking institutions were highwaymen at the throat of the farmer and the "importer. Mr Young argued that no differentiation should be made between the contributors to this loan and the purchasers of local bodies' debentures in the matter of paying Income Tax on the interest. Persons who subscribed to the State loan were not obliged to, pay Income Tax on the interest, whereas holders of local bodies' debentures have to pay the tax. As the money in both cases was raised for the development of the country, tliere should be no advantage given in favor of the State loan. THE TREASURER'S REPLY. Sir Joseph Ward said, in reply to Mr Sidey, that under the Death Duties' Act the revenue from that source went into ■ the Consolidated Fund. An increase had had to be made, for instance, in the death duties to provide for the extinction on the Dreadnought and for Defence purposes. The present loan was for public works' purposes only, and no portion of it, if raised from premature death duties, could be afterwards devoted to repaying those death duties. Where would "the Treasurer be next year or in subsequent years when the money from death duties was not forthcoming to meet the commitments of the Consolidated Fund? It wouid disorganise the revenue of the country to do as suggested by the member for Dunedin South.

Mr Sidey : "I was emoting Australia." Sir Joseph Ward : "1 don't agree with what Australia has done in this respect." He repeated that it would be bad finance to absorb the_death duties, to which he had to" look in the ordinary course of things. It would not make-"things easy for the Treasurer; quite the reverse. He. had followed what Australia had done, and it had to be remembered that although the Commonwealth Government had great responsibilities they were in a different position to the Government of this country. The Commonwealth Government had not to provide for requirements of development. State advances, railways, etc. With the exception of trio transcontinental railway, all these responsibilities were undertaken by th«» state Governments; therefore, when money was wanted the Commonwealth uithorities had a very much more limited field than we to draw noon. If we had i limited area such as they had it would be easier for the Treasurer here to take advantage of such means as they had. The Treasurer" here had to rely upon the. death duties coming into the Consolidated Revenue, and it would be wrongful financing for him to allow that monev to be diverted. In any case, it would probablv tnean special taxing subsequently to make np the absence of that monev if" diverted. It might be possible to have a limited scheme for a fund for persons over, say, 70 years of age in the direction indicated, but generally the proposal could not bo entertained. The Post Offices would be used for the issue of debentures where they combined money-order offices. The amounts would be £5 and over in multiples of £5. He had contemplated issues of £l, but had found difficulties in the way. In the prospectus would be full information, and the wav would be made easy for the transfer of Savings Bank deposits to the purposes of investment in debentures. The Treasurer said he did not want to go into the matter of note issue, except to sav that at the present juncture there were the strongest arguments against it. The responsibilities of the Government were too creat to permit anything of the sort, and there was also a great deal to be said against the arguments advanced by Mr Payne, \vho had advocated the principle. When Mr Payne said there was no possibility of the value of the State note falling ho was absolutely wrong: and in regard to an issue of two million sterling in State notes as a substitute for the" domestic loan, they had to consider whether the notes would be taken tip. Under normal conditions the _ note circulation was £170,000, and in the present abnormal times the people could only absorb two millions. How could they" be made to take up the additional two millions? What the British Government had done was a very different matter. If England had gone in for a note issue without a gold reserve behind it she would be in the position that most people believed Germany was in. Sir Joseph pointed out that England was able, when America made demands in connection-with'finan-cial' requirements, to threaten to send gold-in payment for necessary war munitions, and as a result they came to terms. Germany,; it was believed, had . issued paper money to an enormous extent, and the odds were that at the end of the war there would be enormous financial distress all'over-the country.--Mr Payne : But if she won ? Sir Joseph. Ward : She would make Other countries pay ■ indemnity.-" Mr Payne :.That is what.we would do •with her.. Sir Joseph Ward continued that- the British financiers were safeguarding the future, and when the* war Was over the country that would feel it least would be, he felt sure, .England, because of the wisdom of her finance. .This country nould net undertake anything ifi the way Df a State note issue at present. In - reply- to •Mr J." Young ■( Waikato), who asked if the local bodies' debenlike 'the proposed loan debentures. Could not also be exempt from .Sir Joseph , Ward said it would be an Impossible course. If it were done extra taxation would have to be imposed to make ;np .the "deficiency. He would only idVise generally; that .'local, bodies should only provide for reasonably important workiC-sotheTwise, if-they came heavily on the market at once," it would only raise.the rate of interest. : ' ''We all hope for the best, : amj that the 'war will be over in 12; month's;" concluded the Treasurer. .-" ,/-*'" " ""'