FINANCE

Nelson Evening Mail, Volume LXI, 3 December 1927, Page 7

FINANCE

BORROWING POSITION DOMINION'S PUBLIC DEBT EXPLANATION BY MINISTER (By Telegraph) (From "The Mail's" Parliamentary Reporter). WELLINGTON, 2nd December. Strong exception was taken by the Minister of Finance (the; Hon. W. Downie Stewart) in the House of Representatives to-night, to a remark made bv.Sir Joseph Ward that the finances of New Zealand were rotten. "I think that is a serious statement to make," said Mr Stewart. "Such a state, ment coming from him is likely ..to go abroad and everybody knows that no dominion's credit is higher than that of New Zealand. I think it is unfortunate that such a.criticism should come from the right hon. gentleman. with reference to the finances of New Zealand." Mr Stewart said he agreed with Sir Joseph Ward that loan/expenditure was heavy and should as quickly as possible be contracted, and that loans should as far as possible be devoted to" revenueproducing purposes. He also agreed that every year something should be done to reduce the deadweight debt, but to curtail borrowing suddenly or to cut it in half would not result satisfactorily io~ the Dominion. So far as the growth of the Public 'Debt was concerned, the Minister said that because the Finance Bill contained authority to borrow £7,000,000 in the aggregate, it was not to be assured that that would all be raised in one year." When the loan authorities of any particular department became exhausted, it became .necessary to provide fresh authorities. '■■ PUBLIC DEBT .On the general question—the general question of the growth of the Public Debt—he could only say that so long as the public expected the Government to continue to expend large sum's of money on hydro-electric schemes, which in other countries were owned and operated by private companies, so long as mohey for railway _ development. was Called for, then it w'lis imperative that money must be borrowed. The main thing should he, to see thatitwas spent so fari as was reasonably, possible for productive: purposes. It was true that some loan 'expenditures were not reproductive, but if the public decided that the Public Debt should no longer increase it would be quite easy for the Government to realise;on all those enormous assets' which involved such a. large Public Deb.t and to, reduce the debt by at least^wo,thirds.' The; Minister asked whether the> t>ig'.schemes of railway improvement. and: hydro-electric works should be stopped in the middle of their completion? . The best, thing to do .was to complete these . commitment's and make them revenue-earning. He thought that the.best thing to do was to contract the debt steadily; each year and pay off as much as they* could of the deadweight debt such as the War Debt, which was a real burden to the taxpayer, and to see that ,any further-, .expenditure of loan moneys was,' as far as i.t- was feasible and confined to works which had a reasonable -prospect of earning.interest on-their cost.of; construction. V . »" / OUT OF DATE?" 'Mr:Stewart said he admitted.that the question whether railways were a wise method of "public expenditure was a problem that was becoming increasingly, open; to criticism because indications iii New" Zealand,"/ Australia, England and. elsewhere seemed to show that it was questionable'' whether railways were not "going to be out o" date as a method of transport: He agreed that the further they extended the railways the more they increased the burden on the taxpavers.. So'far as some railway lines were concerned every mile meant an increased interest bill, and the running charges showed an extra loss above the interest. ' From an economical point of view* it would be better in the case of 'some .-railway lines', to close them down and pay interest, oh their construction rather tlian pay. heavy operating costs. The Vindications' were" that the position of the railwavs was becoming increasingly difficult, and that the whole policy of railway extension and construction snould be ! considered very exhaustively and critically before any r very expansive programme of railway construction was earned out: > It was said that the inter-! est bill was too, high, but when they analysed tho.amount of £10,000,000 and debited the amount attributable to interest on the War Debt, the .bill was reduced, to £7,000,000 odd. After reduction, from that of the portion of the in : .terest pavment which came not from the taxpayer" but from those who had borrowed money from the .State Advances Department, the net burden to the taxnave-.- would be between £2,000,000 and £2,b00,000. The Public Debt was reproductive' iand self-sustained to the extent of over 70 per cent. .! , Regarding remissions in taxation the Minister slater] that between 1921 and 1925 over £4,000,000 was made in remissioTis. ,; v ".-' ■ ■