THE OTAGO DAILY TIMES FRIDAY, August 11, 1939. REPUDIATION OR NOT?

Otago Daily Times, Issue 23884, 11 August 1939, Page 8

THE OTAGO DAILY TIMES FRIDAY, August 11, 1939. REPUDIATION OR NOT?

Both Mr Coates and Mr Semple were speakers in the House of Representatives on Wednesday evening, during a singularly interesting phase of the Budget debate. Mr Coates, in a vigorous speech, was impressively critical of the Government’s financial policy, while Mr Semple, in characteristic vein, assailed all and sundry of the Government’s critics without contributing anything of special importance toward the solution of the pressing problems which confront the Government and the country. It was left, however, to the volatile member for Grey Lynn, Mr Lee, Under-Secretary to the Minister of Finance, to claim the attention of a startled House while, ■' i a long speech, he emptied the vials of his scorn on the “ Shylocks” and “ gangsters ” of modern finance, to the tune, recognisable if still half-concealed, of repudiation of overseas national indebtedness. Mr Lee had much to say concerning the staggering accumulation of debt with which the Dominion is now burdened, and he sought to explain or excuse the policies of the Government to which he belongs in the plea that its problems of financial management were wholly due to the immense load of debt that was inherited by it. The existence of indebtedness represents a problem that is too real to permit of evasion. Nor should it be necessary to emphasise now that had more preference been shown in the past—the fairly remote past—for debt reduction instead of for the mere maintenance of debt service, the country would be in a happier position to-cay. But when Mr Lee asserts, with all the emphasis of which he is capable, that the one thing that the Budget of 1939 demonstrates is that the country has come to “ a culminating period ” in its progression of debt, he omits to attribute any of the responsibility for that position to the party that is now in power.

The Government, Mr Lee says, could have maintained all services and reduced taxation had it not been that it had inherited a debt system and had to borrow money to pay interest. Again—the Government had been forced to borrow £ 9,000,000 recently because “ certain people in our party, with the best intentions in the world ” —no doubt the Minister of Finance is included among these “certain people ” —“ did not appreciate the lengths that financial gangsterdom would go to defeat the Government.” Still again—the bargain dictated to the Minister of Finance in London was “ unconscionable the terms were harsh because “ the Montagu Normans hate a Labour Government that is pledged to free humanity from debt finance.” How, it may well be asked, did the Government set about honouring that pledge? Mr Lee’s distorted view is that the more than ample funds that were left in trust with the Labour Party in 1935 by its predecessors in office were “ raided ” by “financial gangsters,” and that when at last the members of his own party who were directly responsible awakened to the position it was too late to take preventive measures. Mr Lee, it will be noted, does not reserve all of his bolts for targets outside of his party. But, raiders and gangsters apart, what are the facts of the recent deterioration of the country’s financial condition, concerning which, at this stage, Mr Lee does not hesitate to issue the most alarming bulletins? Is it in dispute that when the Government took office there were in existence London funds to the extent of £47,000,000? Is it not a fact that for the past three years the Dominion has had a record export income? And is it not also a fact that indebtedness, instead of being reduced, as prudence in administration would have enabled, has actually been heavily increased?

The existence of an abnormal accumulation of sterling funds, co.upled with the fortuitous expansion of export income, presented the Government with a heaven-sent opportunity to commence its task of management on the precise lines that it had led the country to expect it to follow. It had an opportunity to reduce the amount of overseas indebtedness, to maintain the country’s credit externally at a high level, and thus to facilitate the task of conversion which it was clearly known would have to be undertaken this year by the Minister of Finance. Mr Lee knows—better, it may be suspected, than most people —that the main cause of the shrinkage of London balances was the drain of heavy imports, due to the persistent refusal of the Government to take account of the effect of extravagant internal spending upon imports and upon the balance of payments. He knows, too, that the outward movement of capital, in so far as it was a factor in causing the depletion of London funds, was noticeable two years or so before Labour came to power, and that its continuance should have been foreseen as a direct consequence of the Government’s own efforts to weaken, by an attack on interest rates, the hold of the internal market upon investors. Mr Lee will admit none of the Government’s responsibility for present embarrassments, because he is in duty bound to defend that policy of reckless spending and unbalanced reliance on the credit resources of the country which has gravely prejudiced New Zealand’s standing abroad and was the direct cause of the tightening of control encountered by Mr Nash in the 'course of his London negotiations. The Home authorities dislike irresponsibility in financial policy, and on this account, in Mr Lee’s extreme view, are immediately to be made the target for whatever vulgarities the rules of debate may permit. In so far as he virtually disclosed himself as an advocate, in the last extreme, of repudiation as a means of freeing New Zealand from the “morass of debt,” Mr Lee did not lack support on his own side of the House. He spoke of the abnormal extent of interest payments and Ignored the factors of debt, consolidation — effected very largely between 1889 and 1913—which made such apparent vagaries of practice possible; arid he was not concerned even to admit that money spent during the early stages of the country’s development had produced assets of peririanent value. In the light of all that was said—and the very little that was left actually unsaid —by Mr Lee, and in the light, too, of the manner in which his speech was received by others of his party, the country certainly has a right to know to what extent he was representing the views of the Government itself.