CARRYING ON

Evening Star, Issue 18048, 16 August 1922, Page 4

CARRYING ON

HOW LOANS WERE AVOIDED. TREASURY BILLS AND SALE OP LOAN STOCK. HALF A MILLION SAVED. HIGH EATING OF DOMINION SECURITY. Dr introducing the Budget into the House last night the Prime Minister said : The promotion andi active operation of public works in the -past year called for unremitting attention to our financial resources. The necessity for keeping our works going so as to ensure as much employment as possible when in other directions staffs were king reduced became a national duty* and the fact that wo were able to finance the year and maintain the high expenditure of £5,286,687 on public works speaks for the efforts' made by the Government to cany on through a difficult period. Towards the end of the financial year our requirements could be met only by using our Treasury bill powers, selling securities, or borrowing outright. I recognised, however, that the postponement of borrowing until after the close of the year would enhance - our prospects of better terras, on what I anticipated would! bo an improved market, and I therefore used the expedient of Treasury bills, the sale of British war loan stock, and the transfer of cash from ordinary rovenuo_ to Public Works Fund, in order to avoid Lond'on borrowing. The result has, I am pleased to say, quite justified my action. If I bad borrowed two or three months earlier the permanent annual charges would have been Increased for the,term of the loan! by about £26,000. which over twentythree years represents an amount of £598,000. TEE FIRST LOAN. Irv April inquiries went to show that, as I expected, the prospects of floating a loan were much improved, and I was able to authorise the issue of £5.000,000 at par—■ rate, 5 per cent.; term, 1935-45, repayable on July 1/ 1945, with option to repay on or after July 1, 1935, on three months’ notice. 'The iseue was a shade above Imperial stock value at that time, thus affording the unusual spectacle of a_ colonial security rated higher than Imperial stock. The advices to hand at time of writing indicate,that. the net return was £97 11s 05d, after allowing for underwriting, loss of interest, brokers’ commissions, etc. Tho cost with redemption at twenty-three years cornea out at £5 5s 9d per cent., and without redemption at £5 2» 6d per cent, Tho expenses do not include any charge for compound stamp duty, it having been considered desirable, in view of tno present high rate, to meet the duty as it arises. In this connection, however, I am pleased to state that my representations in regard to Imperial stamp duty on dominion loans have since resulted in a. reduction in rates by the Home Government. The exclusion of the last loan from the then high rates will therefore mean l a considerable'economy, which, together with the reduced underwriters’ commission, will .amount to not less than £23,000. ,

Arrangements have been completed for the transfer to the Now Zealand registers kept at the Treasury, of New Zealand Consolidated stock domiciled in London and registered in the hooks of the Bank of England. This has relieved stockholders resident in New Zealand from the necessity of drawing their interest in London, where it was subject to heavy deductions for Imperial income tax and to exchange charges on remittance to New Zealand. When once the transfer has been effected, interest and principal become payable in New Zealand. Up to tho present,, transfers of stock amounting to £10,057 have been made. lam at present negotiating for a reduction .in bank management charges in London which will probably result in a considerable saving. Inscribed stock amounting in the aggregate to £1,848,200 was issued under the authority of the War Loans (£1,524,530) ami Discharged Soldiers Settlement (£323,570) Acts, with the condition that in tho event of the death of the holder it would be available for the payment of death duties. Of this amount £279,760 has been presented in payment of death duties, the stork having been taken over by various Government'accounts. With tho object of automatically reducing the public debt and the annual charges, as well as diminishing the volume of free income tax securities, I am applying a portion of tho caipital repayments of the loan accounts concerned to the redemption of this stock when tendered in payment of death duties, and propose to repurchase for cancellation as provided for in section 24 of the Finance Act, 1921. Tho annual saving in interest and sinking fund already effected amounts to £15.000.'

Free of income tax securities to the value of £51,733,405 were issued in connection with our war loans, but by a process of renewals and redemptions I have ■been able to reduce this amount by £2,535,960. leaving a reducible balance of £49,147,445, which sum includes investments hold by various Stale departments totalling £8,000,000, as well ns a largo sum held by numerous investors who are not subject to income tax. , In addition to the proposals I have already outlined I am arranging a conversion scheme under which a continued n.nd substantial reduction in the volume of free of income tax securities is anticipated. PUBLIC DPIBT. £219,054,385.

The gross public debt as at March 31, 1922' was £219,054,385, held as follow's: Annual interest Held in charge. Sj £ New Zealand ... 110,847,786 6,032.887 Australia 2,287,440 110,514 London 105,919,159 4,461,192

219,054,585 9,604,593 t The Sinking Fund charge is £1,270,792, making total charges of £10,875,185.

PER CAPITA INDEBTEDNESS, OUR OWN CREDITORS.

The gross debt, including the State advances debt of £12,619,950, is'equal to an indebtedness per head of the European population of £175 9s lOd. The accumulated sinking funds at March 31, 1922, amounted to -£10,655,394, including ,£1,663,557 on account of State advances. The net debt amounted to £208,398,991, including £10,956,413 net State advances debt, or a net indebtedness per head of £166 19s 2d.

One feature of the public debt from a.n economic standpoint is of particular interest, and_that is the change in the incidence of the debt as held in the dominion and elsewhere. Ten years ago 18.78 per cent, of the debt was held in Now Zealand, and 81.22 per cent, overseas, whereas to-day the percentages are 50.60 per cent, in the dominion and 49.40 per cent, elsewhere; and, further, the propoHion, of interest payable in New Zealand on the increased debt is 52.40 per cent, of the total, so that, whatever sacrifices were necessary in subscribing our loans, wo have the satisfaction of knowing that the money and its earnings are circulating in our own country. If tire present total 1 debt had maintained its old proportions held'in Great Britain it can readily be seen how much * greater our difficulties would have been during the last few years with an unfavorable trade balance in process of adjustment. REDEMPTION MEASURES. The question of placing the debt on an improved basis has engaged my attention for some time past, and I am now pleaeod to announce that an arrangement satisfactory to New Zealand has been nfade. it has been decided to fund £27,632,164 on a 6 per cent, annuity basis, which will have the effect of automatically discharging, this sum from the public debt of Now Zealand in about thirty-seven years; this leaves aside £2,090,909 State advance debt redemption,, as that office has ’its own provision for sinking fund. The conditions include the concession that the whole or part of the funded debt may be redeemed at any time, thus enabling advantage to bo taken of ■ any future reduction in interest rales.

Tho transaction will relieve the annual permanent charges by £55,000, and there is the further advantage that the portion of' tho accumulated sinking funds relating to this debt now vested in the Public Trustee will he available for reduction ■of tho public debt. Tho loans hilling duo during tho seven years ending with tho year 1929 are as follow:-

£13,041,600 1,490,250 51,920,565 66,452,415 In connection with tho largo amount which matures during tho current year I am pleased' to state that I have been able to make satisfactory arrangements for redemption or renewal without materially increasing the annual charge for interest.

to •s A ,2 i % S *5 3 £ O (H

£ £ £ £ . 1923 55,300 639,450 8,207,606 8,902,358 1924 1,747,200 3,300 7,798,365 9,548,865 12,200 11.210,247 11,560,547 1925 ■ 338,100 1926 — 15,494,557 15,494,557 1927 1,000 735,300 3,606,220 4,342,620 1928 1,000,000 100,000 2,578,260 3,678,260 1929 9,900,000 — 3,025,310 12,925,310