LONDON LOANS

New Zealand Herald, Volume LXXI, Issue 21879, 15 August 1934, Page 14

LONDON LOANS

COST TO LOCAL BODIES THE NEED FOR RELIEF TRANSPORT BOARD BURDEN . INTEREST AND EXCHANGE "If we do not get relief from our interest bill we shall definitely bo in a serious position," said the chairman of tho Auckland Transport Board, Mr. J. A. C. Allum, at a meeting of the board yesterday, when a statement on the cost of tho exchange rate on remittance of interest and principal of loans domiciled in London was received from tho secretary, Mr. W. St. J. Clarke. It was stated that th? Finance Bill recently placed before Parliament legislated for tho repeal of section 25 of the Finance Act (No. 2), 1932, which provided that loans maturing in London could be renewed and the sinking funds in hand in respect of such loans might be held in New Zealand for the purposes of such renewal loans, provided the sanction of tho Local Government Loans Board was obtained. Tho effect of tho section in the present bill was that such sinking-funds had to be remitted when the loans matured, and this would necessitate payment of exchange on the sum remitted. Cost Nearly £400,000 The effect of this on the board's finances was set out in a statement which showed that loans maturing up to 1945 totalled £1,156,500. The cost of the exchange to the hoard on the remittance of interest, and of the principal on maturity, would total £388,883 above the English face value of tho payments. The exchange had been taken at £25 per cent, but, subsequently, a small reduction had occurred, making the actual rate £24 10s per cent. "For this £400,000 the board and tho people it represents have had no equivalent," said Mr. W- H. Naglo. '"That should explain why we cannot consider lowering fares. It is just like a man going into a business and finding himself forced to pay for two shops, while using one. Anything that places a burden on tho people without any equivalent will disrupt our whole economic system. This statement of,our position should strengthen the board's hands in its endeavours to reduce our English indebtedness, whether by conversion or any other means."

Mr. Nagle also expressed, the opiniou that there should have been a reciprocal agreement long ago between thd various parts of tho Empire concerning currencies and inter-related responsibdities. When the more important countries cut their • own interest rates they should have gone further and helped the smaller countries. Mr. Allum: They helped Newfoundland —they put the brokers, in. , " Cannot Go On Indefinitely "

Mr. E. H. Potter said that i!f the board proceeded with its conversion scheme it would save more than it lost, on exchange. "The figures emphasise that we cannot go on - indefinitely as at present with overseas payments; we have no - compensation at all for the exchange rate," said Mr. H. G. R. Mason, M.P. "Some relief will have to be afforded in the near future. Otherwise we shall collapse and that will not help 'the delicate structure of New Zealand credit,' as the Government has put it." ' . " - .

The opinion that the question of currency inflation should be seen as separate from the question of reduction in interest rates was expressed by Mr. Allum. "Our revenue was falling before the exchange rate was raised, and , it has at least ceased to fall," he said. 1 "I think wi are beginning to see some benefit from -.it, but it is the cities which have to bear the burden under the present position for the country as a whole. "It is the question of interest rates only that matters at present, however. No one can reasonably defend the payment of 5 or 6 per cent in London, on securities Buch as we have, in the present position of the money market. "When one realises that, in addition to this absurdly high rate of interest, we have to pay the huge extra sums referred to in the statement, it can be seen that it is time the authorities let us put our pride in our pockets and say that we cannot pay. Conference in Wellington

"Our position is quite sound and, if to were a private trading company, we would simply explain that under present conditions it was impossible to maintain dividends and a normal agreement with the 'gentlemen in London' could easily be reached without all the talk about endangering Neiv Zealand's' credit." Mr. Allum added that it was time the board considered the position of the employees with a view to restoring half the iO per cent "cut" in wages. He said their actual reductions had been far njore than the simple 10 per cent, because overtime and other conditions had also been amended. Further discussion of the whole matter, however, would have to be held over until after the conference with other local bodies in Wellington next Wednesday.