DEBT SYSTEM

Otago Daily Times, Issue 23883, 10 August 1939, Page 12

DEBT SYSTEM

THE CULMINATING POINT MR J. A. LEE'S CONTENTION STRAIN OF INTEREST PAYMENT DOMINION DOOMED TO SLAVERY (From Our Parliamentary Reporter) WELLINGTON. Aug. 9. "If there is one thing this Budget demonstrates," said Mr J. A. Lee (Govt., Grey Lynn) in the Financial debate in the House of Representatives tonight, " it is that we have come to a culminating period in our progression of debt. If New Zealand continues this private enterprise debt system of finance then we are all doomed to slavery in the near future." The Budget imposed taxation on all sections of the community, particularly large incomes and accumulations," because it was' the policy of the Labour Government to see that everyone shared the fruits of the country, Mr Lee said. It was also because to-day millions of pounds were taken, not to build a nation but to nay the bond-holder. Of the total Budget balance, debt services took £21,000,000. It" was obvious that if this was to continue the most enlightened Government could not possibly carry on with the system. Hindenburg Line of Liability "This country is up to its ears in debt," Mr Lee said, " and if ever we want to build anything we are immediately faced with the bogey of debt. Fifty per cent, of our electricity charges are debt charges." The national debt was £425,000,000 altogether, said Mr Lee, if the national and local body debt were combined and the contingent liability of the State Advances Department added. It was a Hindenburg line of debt, but any attempt made by the Government to break it was immediately denounced by members of the Opposition. A man would be a fool or a knave to pretend that the debt which would have to be met in London in the next five years could be met if similar conditions were imposed to those imposed in the recent agreement. "If we are to live up to those obligations," Mr Lee said, " we will have to pay out a total of £108,000,000 sterling or £136,000,000 in New Zealand currency in five years. We must provide £136,000,000 through Budget surpluses in that time. It must be done either by taxation or inflation, or by ruthless deflation such as was seen in 1931. That means we will need £27,000,000 a year in New Zealand currency, and that will leave £33,000,000 for imports. No intelligent person will believe that if the same terms as were imposed by the recent agreement are to be imposed again we can meet these obligations."

An Unconscionable Bargain

Fourpence a gallon more was put on the petrol tax to pay debt, said Mr Lee, but- if the available surplus from exports was to be reduced so much by debt it would obviously be impossible to go on spending on transport at the present rate. The Government could have maintained all services and reduced taxation had it not been that it had inherited a debt system and had had to borrow to pay interest. If the debt falling due was to be met on the same terms every business man s taxation would be doubled. " I am not blaming the Minister of Finance, but the bargain dictated to him is unconscionable," Mr Lee said. "The Government can carry this country against Shylock any time if it says it is for New Zealand first and Shylock second. We are expected, of course, to forgo our political' principles. The Montagu Normans hate a Labour Government that is pledged to free humanity from debt finance. That is why the terms were harsh." Harsh terms were what the country deserved because it was a long time since there had been any borrowing to buy goods, he continued. Money had mostly been borrowed to pay interest. Between 1901 and 1939 the debt owed in London increased by £ 133,000,000, but the interest paid in London during that time totalled £145,000,000. This demonstrated how impossible the debt system had become, and how untrue it was to say that New Zealand had got some benefit. For the lifetime of most living New Zealanders the country had been borrowing to pay interest. The " Sancity " of Interest The present conversion loan was arranged in respect of £77,000 borrowed in 1860 and £1,168,000 borrowed in 1863, Mr Lee said. New Zealand had paid out £278,000 in interest on £77,000 and £3,796,000 in interest on the larger amount, and both amounts were still owing. "Anyone who objects to that system and determines to break the line and we cannot continue the present system—is told that he is a madman or a wild man," Mr Lee added. "We can cut charwomen s wages, but £22,000,000 interest is sacred. Who wields this power? We are the trustees of the people. As trustees we gave the banks their power, and we can take it away." The debt system existed only through legislation, Mr Lee said, but radical Governments had been brought to their knees by money power. M. Blum's Government in France and the Labour Government in England were examples. " Everyone knows that the only thing that keeps this sorry system going is that we have borrowed to keep it going," he concluded. We all know that. So why humbug about it? If the Montagu Normans demand the £ 108,000,000 we owe in the next few years the nation must unite to resist that unconscionable demand." ,