DEBT REPAYMENT

Evening Star, Issue 19632, 11 August 1927, Page 14

DEBT REPAYMENT

WHICH SYSTEM IS RIGHT? SIR JOSEPH WARD'S CRITICISM [From Our Parliamentary Reporter.] WELLINGTON, August 10. That the New Zealand taxpayer is unduly overburdened through the Government’s methods of public debt repayment was the point to which Sir Joseph Ward devoted the main portion of his Financial Debate speech. Ho reminded the House that under his financial methods a fund totalling £ll/245,000 was accumulated in sinking funds for the repayment of New Zealand’s debt, including Maori War loans. These sinking funds were loaned to settlors, workers, and local bodies, thus obtaining full interest. But the policy was changed, and in this year’s Bridget ho found on one page that the Minister of Finance had set aside £550,000 (and in another part of the Budget it was set down as £998,000) as being applied for the redemption of debt. The question he wished co ask Parliament was whether it was right to take these huge amounts from current revenue in a lump? Last year eleven millions were borrowed, and two millions devoted to redemption of debt. Fancy a man building a house worth £5,000. and when ho had spent £4,000, deciding to pay off £1,500. He would Icicle himself, and his friends would think he needed an examination. The House had been misled last session through the publication of an article, for which the Minister of Finance must take the responsibility, detailing the history of sinking funds, and declaring that other countries were not providing them. Dr Page, the Commonwealth Minister of Finance, not long afterwards stated that 300 millions of tho Commonwealth loans were subject to sinking funds; while the other day the Prime Minister of the Commonwealtli and the whole of the Premiers of the States met in Melbourne and passed a resolution that every loan must have a sinking fund. Yet again we were told that the Government was following the course adopted by the British Government. Tho English Chancellor of the Exchequer in his last year’s Budget described tho financial expedients by which he was enabled to evolve a surplus, enabling him raise new sinking funds of Co millions, and pay off half tho arrears into which sinking fund oa.vments had fallen. The New Zealand Government was scrupulously careful that State advances and local body loans should have sinking funds, hut it had abandoned the system under which tho whole of our public debt could bo repaid in seventy-five years on tho easy rate of I per cent, annually, except for certain portions of the War Loan, which required 1 per cent, repayment. Mr Stewart; 'Where does it say I borrowed eleven millions P

Sir Joseph Ward: In your "Budget. Mr Stewart: The net amount is seven million? Sir Joseph Ward asked if anyone in the House could deny that it was only a matter of time when necessity would compel the Government to alter its system of debt redemption, which ignored sinking funds, and as an alternative look out of the Consolidated Funds a lingo sum which the taxpayers had to find annually. CRIPPLING COMPANY TAX. Ho knew of sc/mo businesses which had sot aside such largo sums for income tax that there was nothing loft for the business. The Minister had mentioned the adjustment of income tax, and ho hoped this did not menu putting more on to companies. It was assumed by some people that these largo companies were owned by huge millionaires, but be had recently examined the share list of a big company, and was amazed to find that fourfifths of the shareholders were small men. Mr Xoswortliy: Was that a bank? Sir Joseph Ward: Yes. He wont on to declare that lie found no fault with the Financial Statement generally. He knew that provision had to be made to meet our obligations, and ho would not press the Minister of Finance to reduce taxation; but what he did criticise was the taking of huge sums from current revenue to pay off our loans. Why not allow posterity to pay off some portion, because this country was being preserved for them. “It you had not changed the sinking fund system, and had stuck to the moderate amount which was going io repay everything in seventy-five years, you would have had a surplus this year of over a million.” Mr Stewart: T did not change the sinking fund system. Sir Joseph Ward; I any dealing with the Government which did so. Mr Nosworthy: T. changed it. Sir Joseph Ward: By the Lord Harry I want to say I am not surprised. (Loud laughter.) Mr Nosworthy; I introduced Gig Public Debt Redemption Act. (More laughter.) A MINISTERIAL ANSWER. Replying to Sir Joseph Maid, Gm Minister of Agriculture said lie had examined the Australian system, and found that Now Zealand’s system was almost identical. It was copied from the British system. Mr Uawken said he was satisfied the present system was superior to that introduced by Sir Joseph W ard in 11 HU or I'Jll. Tli principal difference between the two systems was that under the present method New Zealand could buy her debts back by buying the securities back at any suitable time. Sir Joseph Ward had complained that wo wore paying our war debts off at too great a rate, but Mr Hawkeu thought a young country like New Zealand should make repayments within a reasonable time. It had been contended by Sir Joseph that he had made arrangements for the funding of £26,000,000 war debt, but so far as the speaker know no record of any such arrangement existed, so that it was left for this Government to fund the debt. It had done this by paying 6 per cent, on £26,000,000, which would wipe oh the debt in thirty-six years. Sir Joseph had also objected to the Government buying 4£ per cent, tax-tree debentures, and had contended that it could not pay the Government to do this. There was no doubt that all members •of the House were anxious that no one in New Zealand should escape tax free, and to his (Mr Uawken’s) mind it was largely a question of which system was the more profitable to the Government. As a matter of policy Mr Hawken was firmly convinced that New Zealand should have tho opportunity of buying back those debentures whenever it suited the Government, so that no one should be tax free. It. was true that taxation in New Zealand was fairly heavy, but when Sir Joseph saw the Government’s proposals regarding anomalies which had crept into taxation grading ho would (Mr Ha.wken thought) he satisfied that the whole position was being rectified.