THE NEXT WAR LOAN.

Lyttelton Times, Volume CXVII, Issue 17529, 12 July 1917, Page 4

THE NEXT WAR LOAN.

Now that a second large war loan is about to be floated in New Zealand some of those people-whoso sympathies are wholly with the rich are busy suggesting terms. The Government is strongly advised by a contemporary to “ take a hint or two ” from the Mother Country, whose latest war loan was issued at 95 and bear* interest at the rato of 5 per cent. It is urged that the New Zealand Government cannot expect to raise a largo sum of money at. lower rates than the- English investor is receiving, since “ money always tends to flow to the best market." Further,' the proposition is advanced that holders of stock in the first war loan shall bo invited to exchange it for stock in the second loan at tho higher rate of interest which our contemporary fondly hopes the Government will be persuaded to pay. It will be observed that in this little scheme the investor is represented as a soulless, unpatriotic individual with no concern in life but to squeeze his country like a sponge. Me refuse to believe for a moment that tho people of New Zealand are like that. We know —we do not think, we know—that last August many citizens went to trouble and financial inconvenience in order to subscribe to the war loan. Sir Joseph Ward, if will be remembered, asked for £8,000,000 in ten days. Within that short time the subscriptions amounted to £9,3(33,000, and they subsequently reached a total well exceeding £11,000,000. The rate of interest offered was 4£- per cent free of taxation. The journal which now is clamouring for more favourable terms described the previous offering as "a handsome return on such first-class security,” ‘‘.decidedly attractive to institutions with funds to invest and to private capitalists,” and it added that “on patriotic grounds everyono who can afford to subscribe to it aught to do so.” What has happened in the meantime to make another loan on similar terms loss attractive? So far as we can discover, there is nothing to justify a request for higher intereston the next loan, involving automatically the raising of interest on the last. The financial resources of the country are greater to-day than they were prior to tho flotation of the war loan last, year. Tho margin of deposits in the banks‘over advances afid Withdrawals is more by several millions. Free deposits, earning no interest, on tho trading banks have swelled in the last twelve months from £20,542,000 to £23,380,000; fixed deposits, yielding quite a moderate return to the have advanced from £12,019,000 to £13,819,000; the credit balances of the larger accounts in the Sawings Banks have increased very largely. The ability of capitalists to subscribe a war loan is greater now than it waa at the raising of tho last loan, and the Government'has no need, and therefore no justification, to increase the load upon the taxpayer by advancing the terms on which it is goingjto borrow. Not tliat we object to taxation. On the contrary, we think that heavier taxation and reduced borrowing ought to be the Government’s policy. What we oppose is the suggestion to penalise the taxpayer and the State for tho benefit of capitalists, especially when there ia every reason to suppose that thc-y will be • glad to lend money to tho Government on the same terms as before. As to taking a hint from Britain, if the New Zealand Government docs that it- will reduce, not increase, the interest offered for war borrowings. To the Home investor, whoso income is subject to heavy taxation, the Victory War Loan gives a much smaller return than the 4-J per cent, plus exemption from tax. which is being paid on the loan raised in this country last year. But since the Government is invited to go abroad for guidance we may be permitted to suggest that Sir Joseph Ward could take a hint from America, where an appeal to. patriotism recently secured £GOO,fIOO,COO at 31 per cent. There is-,-however, no occasion to worry about other countries in this matter. Money ’"is plentiful in New Zealand, and so is patriotism. Investors will be glad to lend on the same terms as before, and thoso who say otherwise must have lost their faith in the loyalty and reasonableness of the/people. If, however, we aro wrong in this-opinion and tho investor is really desirous of bleeding his country, the remedy is simple. Instead of raising the rates, for loans the Government can take war money by taxation and save tho interest altogether.