THE WAR DEBT.

New Zealand Herald, Volume LVII, Issue 17596, 8 October 1920, Page 4

THE WAR DEBT.

The statement of the Dominion's war debt, furnished by the Prime Minister in the House of Representatives this week, supplies important information lacking in the Budget review of the position, and corrects a misleading impression created by the departmental system of accountancy. As the Herald has previously demonstrated, the very large increase in the public debt during the last financial year was mainly due to the investment of the accumulated surpluses from the Consolidated Fund in works of reconstruction. Although these are public moneys derived from taxation and contributing earned interest to the relief of the public revenues, the amount invested has been included in the public debt. Mr. Massey agrees that this is not rightthat it is misleading. Indeed, it is detrimental to the reputation of the Dominion, as it results in an exaggeration of the public debt. That this is so is evident from the fact that had the whole proceeds of taxation been expended on war purposes as they were received, the war debt would have been so much less. The cost of settlement must, however, be added to the direct war expenditure, to ascertain the total war debt, since it would have involved additional loans had the accumulated balances not been available. With this adjustment, the net public debt at March 31 was £182,000,000, instead of £194,000,000, as shown in the Budget. The position in regard to the war debt at August 31 may be summarised as follows — War expenditure £81,266,000 Settlement -of soldiers . . . . 16,118,300 Total war debt £97,384,300 Investments asd cash. . £18,794,000 Sinking funds . . . . 1,620,000 20,414.000 Net war debt £76,970,300 This statement presents the war debt in a very different light. It shows that only 83 per cent, of the expenditure involves charges for interest and sinking fund, and that there are investments and cash assets offsetting nearly 21 per cent, of the whole expenditure, and contributing to the interest charges on the deadweight debt. To be complete, the account should include the cost of war pensions. Having gone so far to elucidate the position, Mr. Massey might well consider the advisability of publishing an annual balancesheet of the war debt in which assets would be shown as clearly as liabilities, and all transactions affecting the capital position intelligibly presented. With this might be associated a statement of the payments in interest and sinking fund charges and for war pensions; against them the receipts from investments,' the [ balance representing the actual charge on current taxation. ' A similar revision of the accounts of the ordinary public debt would be equally valuable. A further point of interest in Mr. Massev's speech was the forecast of an increase to £20,000,000 in the assets against the war debt by the end of the financial year. This means a surplus for the year of £2,500,000 at least.