PILING UP LOCAL DEBTS.

Otago Witness, Issue 3617, 10 July 1923, Page 50

PILING UP LOCAL DEBTS.

HUGE INCREASE IN TWENTY YEARS HYDRO-ELECTRIC LOANS. (From Oue Own Correspondent.) Tn , u WELLINGTON, July 2. Interesting figures are given bv the Do- " Las? in S V UiS | i T , .‘ in u‘ e ° ard to the i,ifrom #>» (wfrlrio' f J?'* 110 * 1 have increased worn £3,000,000 to £30,000,000 in 20 years. t i 3 . J s exclusive of money borrowed from me Government, which represented a furtfiei gross indebtedness of £6,939,335 at 1922, and which included *'4,6UU,000 borrowed from the State Advances Department, the balance being ini’, I,t)e d debt or debentures converted,‘ and ”, amount borrowed from the Treasury under the Local Bodies Government Loans c . Insurance and sinking fund charges amounted to no less than £2,133,764. These payments must come from the pocket of e ratepayer in the form of special rates, although differing essentially in their nature trom interest payments. REASON FOR PHENOMENAL DEBT. An analysis prepared by the Statistician snowing the rates of local indebtedness per lead of European population is a simple and effective guide to the growth of the debt In 1903 it represented £l2 2s 8d per head, and last year it was £29 16s 2d. During the same period the loan charge rose from 12s 8d to £l 14s 2d per head. V\ Jthin the last year the rate of local indebtedness increased as much as in the previous live years. The reason for this phenomenal addition is almost entirely due to the activities of electric power boards, and JS 9uite feasible, remarks the Statistician, that the next decade will witness further larger additions to the local debt.. Consideration of tile above facts raises the question of interest and sinking fund charges. Loans must be paid for, and increasing loans means increasing charges to De paid by the borrower. The increased rates of interest have since 1915 caused a corresponding further increase in the per paid rate of the annual charge. In 1900 the rate was only Us lid per head, but m 1922 this had increased to £1 14s 2d, having increased by 5s 4d during 1921-22 alone. LOCAL AND FOREIQN LOANS. Of considerable interest are some tables furnished by the Statistician showing the amount of the loans raised locally and abroad at various rates of interest of a total indebtedness other than loans from the Government of £30,266,204 as at March 31, 1922; £21,196,094 was raised in New Zealand and £9,070,110 abroad. How the locally raised loan is growing in popularity with local authorities is demonstrated by the fact that in the last four years over £6,000,000 has been raised in New Zealand as compared with £4,500,000 during the previous six years. This rapid increase in the proportion of locally raised loans is no doubt in a measure due to the statutory encouragement given to lenders to take np this form of investment. The income from debentures issued by local authorities carries a lesi rate of income tax than similar debentures issued by companies, and local authorities secure a corresponding advantage in offering their securities to the public, These advantages have been the subject of critical references during the noconfidence debate in Parliament. The average rate of interest was £5 9s lCd 30 years ago It, fell each year up to the beginning of the war period, when it was £4 9s 7d, but since that date a steady hardening has been apparent in the average rate of interest, which is now £4 16s 7d per cent. INCREASE IN LOCAL RATES. Dealing with the rates collected by local governing bodies, the Statistician points out that the rate per head 20 years ago was £1 3s Bd, and last year it was £3 5s lCd. This marked increase supplements what has been said earlier in connection with the rapid increase in the rate of indebtedness. The figures per head for 1922 are just on two and a-lialf times as great as they were in 1903. There is in general for 1921-22 a slight reduction on the cost of administration as compared with the previous year. The average earnings of all employees of local bodies in their administrative and clerical staffs increased from £163 16s 5d to £251 13s lid per head per annum since 1915. and the wages of unskilled labourers have grown from £lsl 2s 7d to £234 9s 3d in the same period.