THE New Zealand Herald AND DAILY SOUTHERN CROSS WEDNESDAY, NOVEMBER 3, 1909. CHEAP MONEY.

New Zealand Herald, Volume XLVI, Issue 14208, 3 November 1909, Page 6

THE New Zealand Herald AND DAILY SOUTHERN CROSS WEDNESDAY, NOVEMBER 3, 1909. CHEAP MONEY.

If, the effect of the State-guaranteed Advances Bill, now before* Parliament, is to cheapen money ; without at the same ,time restricting the amount available for legitimate requirements, it will■ meet with.unanimous public approval. But there is always a danger in sweeping enactments of. this character of overlooking incidental matters which vitally affect the general question and often tend to defeat the desired purpose. We may , hope, however, that the conciliatory temper which is being displayed by both sides of the House in considering this most important measure will enable fair criticism to receive full weight and -any advisable amendments to be forthwithadopted. The function of Government displayed, in the Advances to Settlers Department and in the matter of Loans to Local Bodies has become an accepted feature of our State organisation, and there is every reason for consolidating and improving the system - under which the necessary financial provision has to be made. At the same time it must be remembered that private institutions furnish a very large pro-] pvrtidn of the money required in the country, , and that any . State action which tends to drive these institutions from the Dominion or to retard their beneficial activity must; necessarily react' disadvantageously upon the community as a whole. In the way of Advances to Settlers, what is desirable and commendable, because generally beneficial, is that small borrowers who have unassailable security to offer should be able to obtain advances at a low rate of interest upon terms which enable repayment to be made without any serious difficulty. To secure sufficient money for this operation, however, it is necessary to limit the amount which any one borrower may thus obtain. Any unduly high limit is nationally disadvantageous, for two reasons: in the first place, it tends to discourage the business of institutions which deal with large advances upon purely commercial lines; in the second place, it defeats the primary intention of helping the small borrower; by breaking the sys-' tem down - at the' very' time when small advances are most urgently and most numerously required. Obviously, it is better for the Department to cover effectively a certain range of business which, it . is peculiarly desirable to encourage than for the Department to trifle with large sums and to be an uncertain resort for small borrowers. The proposal to make certain consolidated loan arrangements in London, whereby sufficient money may be periodically procured - from outside sources. to meet the various functional requirements of the State lending Departments, makes it opportune to readjust the regulations of the Advances to Settlers Department. The maximum of £3000 could * be greatly reduced without

any real disadvantage to large borrowers, who have private • institutions to fall back upon, and with much increased security of obtaining money .to small borrowers. It is generally recognised that this step would be most likely to assist in cheapening money, and this is much more to the public advantage than any gain made by the Department in granting a few large loans at the •expense of its poVer to facilitate small loans.'

Another important feature of the new proposal is that loans required by Local Bodies are to be provided for annually by means of this consolidated borrowing, instead of being . advanced from the indefinite funds now employed for this purpose. Whenever possible, in these modern times, the Government shifts a part of its burden to local shoulders after the fashion expounded by iMr. Fowlds, when he suggested that the difficulties surrounding, schoolbuilding would be removed if it were carried on by local rates, instead of. at the national expense. In dealing with Loans to Local Bodies the Bill has the great advantage of removing the limit to which 1 these loans are now subject, but it has the great disadvantage that the Government will no longer bear a part of the burden, but will require the repayment of the whole of the loan. It must be recognised, nevertheless, that the change would simplify the process, and, in theory, would provide money for. all local purposes • for which ample "local security could be' offered. We' say "in theory" because it may possibly happen that when the scheme is put into practice difficulties may arise .in advantageously borrowing sufficient money to carry it "but in its entirety. For, even oh the London market, and even with the guarantee of this Dominion, and even for purposes of approved utility and earning-poWer, it may not always.be as easy to raise money as Sir Joseph Ward appears to think. The Prime Minister has left unsettled the question of the inclusion in the scheme of the amounts required for Lands for Settlement. We have frequently expressed the opinion that the enormous estates known as Crown and native lands ought to be broken up and settled before the State expends ( vast sums in reacquiring land already highly productive by a process which tends to .most unduly inflate land values. But, apart from this, there is sound reason why we should raise in London all money required for public purposes, leaving the very limited amount of local ..money free to be invested in the private • enterprises which are the foundation of our industrial i prosperity. Sir Joseph Ward now expresses himself as opposed to local borrowing by the Government, and we are. glad' to . know that he has thus ranged himself with the Herald on this., important phase of national finance. Upon the general principle- of the ; • Bill there , can be no possible differ-, ence of opinion upon the great superiority. of consolidated borrowing. It -is the only - business-like method: While we are strenuously opposed to increasing our public indebtedness for non-profitable . and undesirable purposes, this opposition has never been applied to loans, which are: necessary for the development of the Dominion and which are as commercial and economic in their character as any intelligent borrowing by private individuals, by public or private corporations, and by civic corporations. .. \. ■ . ,