DEBT REDUCTION PLAN.

New Zealand Herald, Volume LXII, Issue 19124, 16 September 1925, Page 14

DEBT REDUCTION PLAN.

PROVISIONS OF NEW BILL. THE SINKING FUND MONEYS. MINISTER ON THE PROPOSALS. [by telegraph.—press association.] WELLINGTON. Tuesday. The explanation of the Reduction of the Public Debt Bill given by tho Minister for Finance, Hon. W. Nosworthy, in the House to-day was made principally from a written statement. Tho Minister said:— "In reviewing the present arrangements for tho debt reduction in New Zealand attention is principally directed to the Public Debt Extinction Act, 1910, which is undoubtedly effective to the extent that undo- its provisions a sinking fund equal to the debt would be accumulated in about 75 years from tho date of the inception of the loan. Similarly the special sinking fund for war loans would provide the funds to repay the borrowed capital in about 40 years dating from the establishment of the fund in 1918. "Tho weakness of all such sinking funds however is that the huge assets gradually piled up could not be realised when required without financial chaos. The new bill adopts tho latest principals of immediate application of sinking fund instalments to debt reduction. Tho loss of compound interest will be made good by further annual payments from the Consolidated Fund. This will not increase the burden on that fund however, for it will be more than offset by the reduction in interest charges due to redemption. Under tho provisions of the bill the repayment period is 60 years as compared with 75 years under the Public Dobt Extinction Act. Reducing Repayment Period. "The Public Debt Extinction Act, 1910, has been in operation for 15 years and another 60 years must elapse before complete provision has been made for the debt as it stood in 1910. This bill, however, will provide for the repayment of the greatly increased debt of 1925 in abpnt the same period—that is 60 years. "If it is thought desirable the repayment moneys can first be utilised to wipe out the war debt. If this plan were adopted it is estimated that the entire war debt could be repaid in about 30 to 32 years. As the present war loan sinking fund has still some 33 years to run it is evident that this liability can be extinguished as quickly under the provisions of tho bill as under the present war loans sinking fund. Position of Investors.

"It is estimated that the adoption of the schema covered by this bill will result in a saving to the consolidated fund, and consequently' the' taxpayer, of over £300,000 a year. The position of investors will be in no way impaired for not only will loans be repaid in a shorter feriod than would otherwise bo the caso ut the system of gradual repurchase will keep the market alive and enable inves tors to find a ready sale for their securities at anv time.

"A paragraph giving notice of the changes in the scheme for debt reduction covered by this bill appeared in the 1924 issue of the Stock Exchange Year Book. London, and apparently was well re ceived by investors there. It must be clearly understood moreover that this bill will in no way prevent the application of surplus moneys or other special receipts to the reduction of debt. Quito apart from the provisions of this bill, snould such course be deemed desirable, such moneys could as at present be transferred direct to the loans redemption account. Exclusion From Provisions.

"Section 2 of the bill definitely excludes the following from the operations of the measure:—Treasury bills, money borrowed for State advances, money borrowed in respect of State coal mines, electric supply, Nauru and Ocean Islands, Westport harbour, money borrowed under the New Zealand Loans Act, 1863, the funded debt to the British Government, and money borrowed under section 26 of the Finance Act, 1921-22, for the purpose of making advances to the Samoan Treasury." DISCUSSION ON BILL. CRITICISM BY LABOUR. TAX ON CAPITAL WANTED. AN EYE ON PRIVATE WEALTH. *. [BY TELEGRAPH. —PRESS ASSOCIATION.] WELLINGTON, Tuesday. In the House this afternoon the Hon. W. Nosworthy, Minister for Finance, moved that the Repayment of Public Debt Bill be committed. Mr. G. W. Forbes, Leader of the Opposition, said the measure was no doubt an important one and took the place of that introduced by Sir Joseph Ward in 1910. He understood the money accumulated under that Act now amounted to £11,000,000 or £12,000,000. It had been claimed that the debt would be redeemed under 60 years, but that would depend entirely on whether or not securities were bought up. Regarding the bill generally he thought it was a good one, but in order that it might be of full value its provisions should be tightened up to tho greatest possible extent.

Mr. F. G. Rolleston (Timaru) said the Public Accounts Committee had gone very carefully into the provisions of the bill. They had reviewed every point of objection and came to the conclusion that the bill was thoroughly sound in principle. If the bill did not prove satisfactory it rould be reviewed next session.

Mr. M, J. Savage 1 - (Auckland West) said the principle of the bill was good in :ts way but it did not go far enough. To reduce the period in which the debt would be paid from 75 to 60 years was only playing with the position. Sir James Parr said it was wrong to suppose that the debt would not be paid off until tho end of 60 years. The debt would be reduced to some extent every year and the balance would be paid off m 60 years. Tho bill did not endanger sinking funds, but it altered the method of dealing with them. It turned them from a lifeless thing into a mobile quantity which could be operated as required. He, however, agreed with the view of those who maintained that _ the future borrowing of the Dominion must be conducted with great care. The Hon. J. A. Hanan (Invercargill) said the House was deprived of a great deal of financial information which it should have, but they did know there was a great deal of squandering going on. Mr. H. T. Armstrong (ChristchurchEast) declared that the Government was evidently nut of its depth when dealing with this bill. Although they derided the Labour Party's supposed want of knowledge of high finance it was nevertheless a fact that no party could have made a greater mess of the country's finances than had been done by tho present Government.

In the evening the Leader of the Labour Party, Mr. 11. E. Holland, continued the debate. He said the reduction of the public debt was in itself a good thing, but what was the good of that if we reduced tho debt with one hand and increased it with the other. If this country could only subsist on the British "pawn shop" then we were in a poor way indeed. Anyone who took cognisance of the accumulated private wealth of the country could easily see that, properly organised, we could pay our way, but tho fact was that in the past four years a sum of £14,000,000 had been given away in taxation concessions to those who did

not need them. With ■ regard to tho war debt he said emphatically that if there had been efficient and competent administration in this country during the- war there would not have been a penny of that debt owing now. The one sensible method to meet loans as they fell duo would bo to strike a tax on capital for the purpose of getting rid of that liability. They would then be able to reduce taxation to that extent. ■

Mr. L. M. Isitt (Christchurch North) said Mr. Holland had urged the late Prime Minister to reduce the interest paid on loans. That was to break a solemn contract entered into by the Government with those who lent us the money. Why did ho not have the courage of his convictions and again suggest this policy ? The Hon. A. D. McLeod said the British Labour Party had an opportunity of carrying out tho policy enunciated by membors of tho New Zealand Labour Party, but had not attempted to do it. Their talk was simply "fudge and political eye-wash." If it meant anything at all it meant a straight out capital levy.

Sir. F. Langstone (Waimarinol said instead of wasting the time of the House in passing a trifling bill of this character which might reduce the debt by a few hundred thousand pounds a year we could, if the Government was courageous enough, reduce tho public indebtedness by millions per annum, but the trouble was the Government was afraid of offending their friends. Tho Hon. G. J. Anderson said tho money borrowed by the Government had "been well spent and had not been squandered. Replying to the discussion, tho Hon. W. Nosworthy stated that he wished to make it clear that the position of tho sinking fund in regard to State advances was quite satisfactory. They had already about two millions as a sinking fund. ( In regard to the statement that 14 millions had been given back to the wealthy by means of remissions in income tax this was quite incorrect. The bill had nothing at all to do with the position at the next general election, but was merely a business measure. The bill was then put through tho Committee stago and passed. INTERLUDE IN HOUSE. MEMBER AND MINISTER. SIR JAMES PARR UNPERTURBED. [by telegraph.—special reporter.] WELLINGTON, Tuesday. While the Hon. J. A. Hanan was busily castigating the Government in tho House of Representatives this afternoon for reckless extravagance he was interrupted by a voice from tho Government benches. " Clap-trap," it said. Mr.. Hanan turned in the direction of tho sound and traced it to a newspaper elevated behind a desk in tho front row. " There's a dignified Minister for Education for you, he exclaimed, with a wave of the arm. " Sergeant Buzfuz," retorted Sir James Parr, lowering the paper. " Tho same old stunt." i " It quite applies to the hon. gentleman," rejoined Mr. Hanan. " The policy of the present Minister for Education is to go on borrowing." " Rubbish," commented Sir James. Mr. Hanan: Tho Minister himself has not enjoyed the highest reputation for some things in this country. The Speaker: Order. Sit James was still enjoying tho inci- i dent when Mr. Hanan resumed his speech.