THE £70,000,000 LOAN SCHEME

Nelson Evening Mail, Volume LXI, 13 November 1928, Page 4

THE £70,000,000 LOAN SCHEME

SIR JOSEPH WARD'S PLAN CRITICISED MUST INVOLVE ADDITIONAL TAXATION In a recent .issue the "New Zealand Herald," reviewing the position that would be created were tho central plank of the United Party's policy carried into effect, pointel out that the £70,000,000 proposed to be borrowed is exclusive of the further, millions to complete hydroelectric, undertakings, etc. (as was also emphasised by "The Mail"). The parly, the "Herald'' says, protests that by borrowing £13,000,000 in tho last two years for all purposes the Government has' exceeded the limits of sanity and safety, but it advocates borrowing at the rate of £8,000,000 or £10,000,000 a, year for railway construction and State Advances only, leaving provision also to be made, for electricity schemes, roading, telegraphs and telephones, public buildings, irrigation, and other public works, including the, completion of the programme for the improvement of existing 'railways, its £70,000,000 programme has been worked out to tin; point of deciding how much the money will cost and at what rate £60,000,000 can bo ma-do available for State Advances. Successive loans are to be issued in 4J,- per cent, bonds at 95, and the proceeds are to bo advanced to settlers and workers at 4J per cent. An emphatic assurance has been given that the scheme will be self-supporting —it will not cost tho taxpayers one penny by way of either direct oi' indirect taxation. Leaving other con-' siderntions out of account, it may be .suggested that even if tho London market were, prepared to lend £60,000,000 on the terms proposed, the actual cost of tho money would make the proposed 4| per cent, rate impossible. Flotation expenses exceed 2 per cent,, so that allowing for redemption of the discount and expenses over a period of 33 years, a conservative basis, the actual cost to the State would be £4 18s 8d per cent.—the last New- Zealand loan cost £5 3s 5d per cent. The annual cost of £60,000,000 would therefore be at least £2,960,000. The proceeds actually available for investment in advances would bo £55,800,000, and as allowance must be made for tho cost of administration—3s 1d per cent, last rear—the revenue in interest would be only £2,557,000. Hence, instead of being self-supporting, the scheme as outlined would involve a loss of over £400.000 a year —equivalent to more than one-third of the present yield of income-tax, and over the full period of 32£ years proposed as the basis for advances, a loss to be borne bv taxpayers of £13,000,000. Tn respect of its central proposal, at least, the United Party is promising more than it can perform.