MR WESTGARTH ON HARBOR LOANS.

Poverty Bay Herald, Volume XVI, Issue 5623, 19 November 1889, Page 3

MR WESTGARTH ON HARBOR LOANS.

heavy discount on the first issues (realising a price probably a good deal under 00 per cent.) might, he thought, cause the project to be disliked by his Parliament. However, as he remarked, the subject was not one of immediate moment, as the colony was pledged not to come on the London market, again for three years."

Mr Weswautii, of whose death we were informed lately, has i» his recently published book, " Half si Century of Australian Progress," an account of a conversation he had with Sir Hurry Atkinson on t ie position of the New Plymouth harbor. Mr Westgarth was a member of one of the most prominent financial houses, and an undoubted authority on the London money market. He states : — " [ had the pleasure of a deal of talk with Sir Harry, who had his troubles with his Parliament, particularly in matters of tinancc, and still more in that crossgrained concern, the New Plymouth harbor, which threatened already to silt up, iii'd thus render nearly L' 200,000 of expanditure just so much money thrown into the sea. ' Whatever you do, or don't do, in the matter,' said I emphatically, 'don't default, even temporarily, on the New Plymouth coupon, or you will never hear the end of the matter ; and eventually, after all, you must pay it all the same, it will cost the colony, as the effect of discredit, fifty times the small annual sum now involved. "New Zealand has been most disparagingly attacked by some of the London p.ipers about her heavy Government debt from over railway making, and her übiquitous borrowing besides, in municipal, harbor, and individual interests. But the payments, in all cases of a public kind at least, had always been punctually made. Now this threatened default of the New Plymouth harbor was to start the Press once more on their raid, and with at least one good proof in hand that they had been speaking only the truth. The NewPlymouth case was this : The (Government promoted a harbor there as a colonial object, there being no other near on that exposed western coast. But Nature had rounded everything thereabout with her stormy winds and waves, and it was some«rh»t difficult to pub a spoke in the wheel of her wilful career. A pier and breakwater were, however, constructed, under the best available engineering advices. They have been built, and are found ' no good,' and it is just a question if the whole affair, on its present basis at least, must not be entirely thrown up. Well, who is to pay the piper for such an abortion of v song 1 "Sir Harry's Parliament inclined to the opinion that the Home investor accepted the risk and must stand by it. He got six per cent interest, which no one could expect from a thing free of risk ; and, besides, the bond itself said plainly that the Colonial (iovernment were in no way liable. ' And yet,' roplied I, 'you project 11 public object, put out a sort of decoy report—for that iv how it will be viewed— that the work is feasible, get the money from trusting investors at Home, and then tell them that your own engineers have unfortunately been mistaken, but none the less that these Home investors must .stand the loss. ' ' ' Sir Harry did not exactly dispute my view. When 1 advised him rather to pay the money from the Treasury and chance the consequences with his Parliament, he said he might have possibly thought of that, if New Plymouth had not been his own ground, and a place besides, whose incessant begging had long since tired the House's patience. The financial position was this : There was L 12.000 a-year interest to provide for. The present legal local rating was exhausted at LSOOO. There was practically no income, or at least no surplus over expenses from the harbor. The House had permitted one liberty and another previously for meeting tlie interest, chiefly, T think, by either selling or borrowing on some of the land endowment of the harbor ; but the House resolved now to end this illegal forestallin^ of the harbor's resources. It was expected that the LSOOO of rates, with LIOOO more, scraped up somewhere, would tide over the Ist of November coupon, but that the Ist of May (1889) must be in default, not only from total want of authorised funds, but owing to Parliament having already been prorogued till some weeks after the next coupon was due. " There is a very large land endowment in the shape, at least, of a rental charge, although not as yet yielding actual income—so large and valuable indeed, that I think everything will be. eventually made good. The more is the pity, therefore, that default should meanwhile occur. So scrupulously punctual have the colonies been heretofore, that not only the Government loans, but even the municipal and harbor, in the London market, have never been under default in any case whatever in my recollection for above a quarter of a century, with the sole exception of the city of Hamilton, Upper Canada. But so serious has been the consequence of this temporary mishap to that now large and wealthy place, that its credit, iv London at least, has never been recovered since. When the city wished to remove the stigma of its stocks continuing much lower than others in that market, this could be done only by ordering its London Bankers to buy up and return to it any of the securities still in circulation there. "When I told this to Sir Harry, and asked him ifhewoulddefault, he shrugged his shoulders, as a unite declaration that he could not help himself. Having told me that he had directed the Government agents, the Bank of New Zealand, and, to tell the bondholders that the May coupon would not be paid, I strongly advised him to telegraph cancelling that order, which, in fact, had the appearance of cruel inditferences, seeing that at least there might b*e some hope, during the six months interval, of tiding over the difficulty. ' Sufficient unto the day might be the evil thereof.' If the due payment were really impossible, it would be enough to let the unfortunate expectants know to thai disagreeable effect the mail before. " The supposed redeeming of qualifying points of the six per cent given on the bonds, I had to tell the worthy Premier, was simply a blunder, and so much money thrown away. The New Zealand harbors gfinnri'lly are in a different position from • tho municipalities. The latter are quite free under popular election ; the others are rather of Government initiation, although they may be in a special or qualified way elective. If the proposed harbor seems to be insufficient by itself as a security, it is usually supplemented or complemented by something else, usually land endowment. And then comes the question when all this intended sufficiency happens to prove insufficient, who is to blame, and who to suffer ? Obviously the I Government should have made the harbors their own security, and thus have borrowed the money at four instead of six per cent. I strongly advised the Premier to arrange a "conversion" even now;. Indeed, I had already sketched out a plan, which I sent from Hobart to my old friend Sir William Fiteherbert at Wellington, * showing that, if based on a three per cent, substitution stock, the Government might still realise a large profit. They might offer a reasonable exchange of popular and readily marketable three per cents for unpopular and unmarketable sixes. Unreasonable holders would gradually come > in by force of the convenience of the exchange. The Government might still receive from the respective Harbor Boards the original interest rate, while the considerable net difference might go to a guarantee fund which could help such \ weak-kneedbrethren as the New Plymouth over an occasional difficult stile. I advised the inclusion of the municipal stocks as well if they could do so, and, as in Queensland, prevent those also from coming directly upon the London market, with their almost countless small and unmarketable loans. "I may go over again the question of issuing in future three per cent, instead of four per cents. Sir Hairy, to do him justice, had not much objection ; only the