THE NEW BILL

Evening Star, Issue 19002, 25 July 1925, Page 3

THE NEW BILL

“My predecessor prepared and embodied in a Bill an improved method of dealing with Public Debt reduction," contibucd the Minister. “It is desirable that the change outlined in the Bill should be made in order that the State may benefit by the savings that would accrue from the actual reductions of debt. The 7 gross Public Debt at March 111, .192.5, amounted to £227,814,047, but about _ £21,400,000 was State advances, and £5,700,000 for electric power, Slate coal, Westport Harbor Board, Nauru and Ocean Islands, etc., which accounts have special sinking fund provisions. In addition £20.60(3,000, balance of the debt due to the British Government, is funded, leaving the net present debt affected by the Bill approximately £174,000,000. The present provisons for reduction of the Public Debt are briefly as follows :

1. The Public Debt Extinction Act,

1910, w-hereby an amount is set aside annually to accumulate at compound interest, so,that in seventy-five years from the inception of each loan the accumulated fund will equal the debt. This Act, however, does not relate to any debt for which special sinking funds have been instituted. 2. The War Loans Sinking Fund under the Finance Act, 1918 (No. 2), whereby a sinking fund of 1 per cent, of the outstanding war debt is paid annually out of the Consolidated Fund to the Public Trustee. If invested at 41 per cent, this sinking fund would equal the balance of the war debt in about thirty-two years from the present date. 3. The Naval Defence Act, 1909, whereby a sinking fund of 4 per cent, on the total cost of the battleship

New Zealand (£1,795,166) was paid annually to the Public Trustee. In view of the funding operations with the Imperial Government no further amounts are payable to the Public Trustee. 4. Other accounts (such as State Coal Mines, Westport Harbor Board, Electric Supply, and State Advances) have special sinking funds which are not affected by the Bill.

The funding operations concluded with the British Government dealt with £26,000,000 of the war debt; a portion of the amount borrowed under the Naval Defence Act, 1909, amounting to. £900,000; and other advances amounting to £230,000. These sums (balance outstanding is now £26,600,000) are -repayable by half-yearly instalments, and are therefore now separated from the New Zealand sinking funds, and will not be affected by the Bill.

There are other sinking funds—e.g., local bodies’ loans and old war. and Defence loans—which had accumulated with the Public Trustee up to 1910, when the . Public Debt Extinction Act was passed. No further'contributions to these sinking funds have'been made, and the interest on them has since

The Bill proposes to substitute for the long-term sinking fund system a method whereby the dominion debt-re-duction resources may bo available to purchase and cancel Government securities as the market price is advantageous, or pay them off at-maturity, and so ensure an actual reduction in the Public Debt annually. For this purpose there will be.issued anuually out of the Consolidated Fund a sum equal to J per cent, of the debt affected by the Bill (at present shown as £174,000,000). To this will bo added a sum equal to interest at 3£ per cent, per annum on the debt paid off under this scheme. By this means a portion of the savings in interest on debt paid off will be applied to further repayments of debt, and tho present debt will bo liquidated in about sixty years, while all future loans will bo liquidated within a similar period from tho date of their inception. A capital fund termed “ The Public Debt Redemption Fund ” will be created, consisting of (1) the present accumulation of sinking funds, amounting to about £11,226,000 (leaving aside tho State Advances, AVcstport Harbor Board, and other special, sinking funds); (2) the amount advanced for discharged soldiers settlement, £13,500,000, less any amounts written off as a result of tho revaluation of the properties of discharged soldiers. The capital of this fund will bo held intact. The earnings therefrom will bo credited to tho Consolidated Fund and applied towards meeting the annual charge against tho Consolidated Fund created bv the Bill. ‘The Bill will provide for an annual reduction in the amount of the Public Hebt, the amount of reduction increasing from year to year. There will be an annual saving to tho Consolidated Fund on tho amount of debt redeemed, consisting of that portion of tho interest and sinking fund in excess of 4 per cent, which would have been payable had the loans not beou redeemed under the provisions of the'Bill.