REPAYMENT OF LOANS

New Zealand Herald, Volume LXX, Issue 21577, 23 August 1933, Page 8

REPAYMENT OF LOANS

The Auckland Transport Board proposes, subject to the consent of the Local Government Loans Board, to combine with the consolidation and conversion of debt domiciled in New Zealand, a scheme for its progressive repayment. Instead of making the whole conversion loan of £402,700 fall due in 1953, it is proposed to redeem the debentures in equal annual instalments over the whole of that period, utilising for the purpose the appropriations that would otherwise be paid over each year to sinking fund commissioners to be invested against one maturity date 20 years hence. This plan, outlined by the chairman, was generally commended .by the \ board and adopted at its meeting yesterday. As a policy of debt redemption for use by local authorities, there is much to be said for it. From the broader aspect of general public policy the actual visible repayment of debt is to be commended. It should help to keep before the minds of all that debts h&ve to be paid, and it is consistent with the essential principle of their extinction during the lifetime of the assets the money was borrowed to create. More flexibility in the use of sinking funds is to be desired. The policy, followed by both the British Treasury and the New Zealand Government, of buying securities in the open market for cancellation when prices have been favourable is an application of the same principle, which may not be so suitable for smaller bodies with fewer loans of less variety. The Transport Board scheme is a useful adaptation of the same idea. It is particularly suitable for the .present occasion, when the legislation authorising the conversion makes the fixing of various maturity dates easy. Whether such an arrangement would be welcomed by the investing public if new money were being sought is another question. It would make the issue of a loan on those terms an interesting experiment. The point does not arise at present, however. The consent of the Loans Board, if forthcoming, will allow the scheme to proceed.