LOANS TO LOCAL BODIES

New Zealand Herald, Volume XLIX, Issue 15125, 16 October 1912, Page 8

LOANS TO LOCAL BODIES

PAST METHODS CHALLENGED. COMMITMENTS AHEAD. DECLARED TO BE ILLEGAL. LOW . INTEREST LOANS FROM POST OFFICE. [BY TELEGRAPH. —I'EESS ASSOCIATION.] Wellington-, Tuesday. The Public Accounts Committee continued to-day's inquiry regarding alleged political influence in connection with the Advances Department. Mr. J. W. Poynton, Superintendent, of the Department, in the course of his evidence, said the secretary to the post office had urged that 3£ per cent, was not a pro- ' fitable rate of interest to the post office. on. J. Alien asked if it was not the case that the correspondence that. took ] place showed that the fact of the Trea- j sury talcing so much money from the post office prevented the post office from investing its funds outside at a higher rato of interest. Witness agreed that the post office had felt the effect of the Treasury getting the first offer of its-money. He added that since the correspondence all loans approved at. 5g per cent, were either finally granted., lapsed, or paid over. There were now no 3/; per cent, loans not finally approved. Mr. Allen: I am very glad to hear it. Witness added that in February of this year the secretary to the post office complained of the Treasury renewing a 3£ per cent, loan at 3£ per cent.,, which he regarded as a breach of the agreement that had been entered into. Witness recommended that 32 per cent, bo charged on tbo renewals, and the Minister (Sir Joseph Ward) approved of the recommendation In March the question arose as to whether the difference between 3% per cent, and 3J per cent, interest should not be made up out of the Consolidated Fund. Mr. Allen: When I came, into office I fcund a large number of loans finally approved, for which no money had been provided. Witness: Yes. Sir. Allen: At 5£ per cent? Witness: Yes. Mr. Allen: What provision was made to get that money except from the post office? Witness: No provision. Mr. Allen: What assurance had you that the post office would lend the money at 3£ per cent, ? Witness: It all depended on the post office being able to find the money. In June this year, added the 'witness, the post office intimated to the then Minister (Mr. Myers) that it would _ let the Department have £2,000,000 this year. Later it stated that only a £1,500,000 was available. \ Mr. Allen: Did vou think it a wise policy to commit for loans at 3£ pier cent.? Witness: I think so. You have authorised the purchase of land for settlement without having the money available. Mr. Allen: This is an officer of •my Department making a charge against his Minister.

Witness : It is a question of policy"Mr. Allen: Have I plenty of authority for the money for land for settlements? Witness: Any amount. Mr. Allen: Why do you make the charge? Witness: I don't make a charge. I say it is a question whether the money should be kept there, awaiting investment or whether engagements should be made ahead....... ...

Mr. Allen : Isn't' there power to make investments temporarily? Witness: Yes. ; But- you can't always do it. '

Mr. Allen -. Did you borrow all you could borrow each : year. ! ' Witness: No. Wo borrowed as much as the post office could give us. Mr. Allen: Have you in any one year borrowed the full amount you were an-' thorieed to borrow? Witness: I couldn't say. Wo haven't borrowed all the money we had "authority to borrow, because we couldn't get it. ■ Mr. Poynton added in answer to another question that since October, 1911, loans to county councils had been, refused because there was no money available. The boroughs applied earlier and got the money they required. ' Mr. Allen : Did you consider it ' good policy to commit two or three years ahead at 34 per cent. ? Witness : I don't know whether it was' good or bad. We couldn't keep the money there uninvested.

Mr. Allen : Did you ever consider the legality of it? Witness:: lam pretty sure it is legal. I wouldn't have done it if I bad thought it illegal. ° Mr. Allen: I put in the on in ion of the Solicitor-General I found f was in considerable difficulties, and I took the opinion of the Solicitor-General. The clerk then read the opinion, which was based on an inquiry -from the Minister as to whether the Board had power to commit the country to expenditure beyond the year in which a loan was being dealt with.. . The Solicitor-General said ho was of opinion that such a practice was illegal and considered that it should be discontinued. Ho was further of opinion that contracts already made by the Board were valid and enforceable by the local authorities. _ The disregard by the Board of the provisions of the Act would' not deprive the local authorities of the right to enforce those contracts. Witness added that it was rather Jato for the Grown law office to raise that point as it had issued regulations which enabled the Board to spread payments over four year?.