DEBT AND TAXATION.

New Zealand Herald, Volume LXVI, Issue 20332, 13 August 1929, Page 8

DEBT AND TAXATION.

One of the principal objections advanced during the election campaign against >Sir Joseph Ward's policy of borrowing many millions was that the maturity of ,€'29,490,000 of 4 per cent, debt would impose a severe strain on the Budget, so that the interests of taxpayers demanded a curtailment of new borrowing to the minimum. The Prime Minister's determination to proceed with his "extended borrowing" and the development of adverse circumstances, which he has virtually defied, have aggravated the injurious effects that were foreseen by his critics. The principal factor was the issue of the double loan in January. The first instalment of (he conversion operation was effected in May, 1928, immediately j after payment of interest on the old I stock, so that the 1928-29 Budget j had to carry only half the additional j annual interest. Had it been possible to delay the second operation until May, and to carry out the third just before the maturity of the debt on November 1, this year's Budget would have had to provide 1-2 months' additional interest on £5,000,000 and six months' increase on £12,000,000, the remainder being added to the 19150-31 Budget. Only £ 17,502 was added to last year's account; this year the addition would have been £77,125; while the full increase of £220,000 would have been reached in the following Budget. That will be the position of the 1930-31 and subsequent Budgets —the conversion of the 1929 consols will add £220,000 to the deadweight burden of taxpayers. So far as the last and the present Budgets arc concerned, the conversion of £11,750,000 in January has cost almost £200,000, the whole of which has been charged to current revenue. Instead of only £17,502 of additional interest in respect of the 1928 conversion, last year's accounts had also to provide £159,303, representing four months' interest on the second block of converted stock, which will not produce any relief until the debt is actually paid off, if that is evei dot.o. This arose through the moving of the dividend dates from May and November to March and September. Moreover, as two dividends have to be paid during this financial year on the new stock, the present Budget has to find £ 110,000 of additional interest instead of the £77,000 that v .vould have been due had the normal course been followed of issuing the loan in May. The total charge on the two Budgets therefore amounts to £293,000 instead of less than £95,000. This unfortunate result was probably unavoidable, since no Government, in the face of ominous conditions in the money market, would have left nearly £20,000,000 to be renewed- on I the eve of its maturity. But the heavy cost of ensuring conversion should have compelled the Government to review its new borrowing proposals, and to have relieved the Budget by borrowing as little as possible in London and drawing upon the abundant domestic resources to meet subsequent needs. It has, in fact, borrowed many millions locally, and now lias £2,000,000 lying idle in the State Advances office, a burden on the slender profits of that department. Circumstances dictated the January conversion, inflating last year's deficit and straining this year's Budget. But the (government alone is wholly responsible for the reckless mistake of borrowing as much as £7,000,000 of new money and adding about £315,000 to the already overburdened Budget. In December Mr. Stewart estimated the year's increase in debt at £5,400,000; by April'*2 the. actual increase was £14,416,620, and ou the whole of that amount a full year's interest has to be paid from the present Budget, partly by recoveries from subsidiary accounts, chiefly by additional taxation,

AIR JOURNEY TO INDIA. To travel by air between Great Britain and India is no novelty. Regular mail and passenger services have been in operation for several months now. At the beginning passages were eagerly booked by Indian officials who, with precious hours of leave to guard, seized the opportunity of cutting down the time of travel. No doubt they remain consistent patrons of the service. When the saving of lime is in question, the wonderful achievement of a private party challenges notice. The Duchess of Bedford, with pilot and mechanic, has flown to India and back in seven and a-half days, cutting the previous record exactly in half. At the beginning of flights of this length, the prospect of reaching India in a week seemed almost too marvellous to grasp. How rapidly progress is made in aviation is proved by this completion of the double journey in but a few hours more than that time. It does not follow that regular trips to India in three days and a-half have thereby been made immediately feasible. There is a vast difference between making the journey under the conditions experienced by the Duchess and party, and contracting to carry any of the public who contemplate the trip in such brief time. It is nevertheless true of many flying routes, that to India in particular, that what has been done for the first time as a special achievement has speedily been proved practicable, in a modified form, as part of the regular routine of travel. When unofficial pioneers do such things as that just recorded, it can be expected that the official flying time for the contract services will be drastically shortened before long. Great feats have been performed in the air by people of many nationalities, but it can be said quite definitely that the British achievements on the road to India stand alone as an example of longdistance travel regularly organised. It is of peculiar importance to (he British people, since it shortens the distance between component parts of the Empire so remarkably. The outstanding feature is that if India and Britain have been brought- so close together in point of time, the turn of Australia and New Zealand should not be far away.