Poverty Bay Herald. PUBLISHED EVERY EVENING GISBORNE, SATURDAY, FEBRUARY 10,1894. THE GOVERNMENT AND TRUST FUNDS.

Poverty Bay Herald, Volume XXI, Issue 6899, 10 February 1894, Page 2

Poverty Bay Herald. PUBLISHED EVERY EVENING GISBORNE, SATURDAY, FEBRUARY 10, 1894. THE GOVERNMENT AND TRUST FUNDS.

The Gisborne Harbor Board has a grievance against the Government ove r the tied-up loan money and sinking fund. Some L 73,000 of the ratepayers' money i s m Treasury bills, yielding 4i per cent., while the banks are giving 5 on fixed deposits for twelve months. A sum of, m round numbers, L 60,000 was talfen out of the Union Bank, where it was earning only 4£, and invested m Government securities at 5 per cent. That transaction was most assuredly best for the trust> although the Board at the time made a splutter over the transference. Monetary affairs m Australia were approaching a crisis, and 1,60,000 was an appreciable sum for a bank to handle. There had long been an agitation against the Government for entering into competition with private institutions m colonial borrowing. The Post Office Savings Bank was giving 4£ per cent, on sums not exceeding L2OO and 4 per cent, on sums exceeding L2OO and up to LSOO. The Postal and Telegraphic report for 1892 stated that these rates and facilities were attracting a class of business never anticipated, so . the Colonial Treasurer determined to reduce the rates of interest on Savings Banks deposits of large and small sums to 3£ and 4 per cent, respectively. Whether the reduction was brought about by reason of the Govern* meut institution getting more money than it could profitably handle, or whether the authorities had merely yielded to bank pressure, is one of those things which must remain m the region of speculation. The influences which affect tho rate of interest are of a complex nature, but one thins has a bearing upon another. It is no disparagement to the banks to say that their securities aro not considered by intelligent and responsible persons as good as those of the New Zealand Government. If the State gave five per cent, with no limit on the sums, the deposits m private banks would be greatly curtailed ; that ig, assuming tho public believed that the Government affairs were being manaced with an ordinary degree of prudence. Tip to the presont the idea of State repudiation has never entered tho head of any sane colonist. Since the L 60.000 of the Gisborne Harbor loan was transferred from the Union Bank deposit to Treasury bills, the bank has raised the rate of interest from 4£ to 5 per con t., and the Government has dropped the Treasury bill rate from sto 4A per cent. If the money were now m a bank it would bring m L3OO a year more. If the choice lay between keeping the money m Government hands or again lodging it m a bank at the present higher rate of interest, the Board might well hesitate before recommending a change. But the question arises, would the risk of loss m any case be with the Board ? In the report of the finance committee at the lasb Harbor meeting, the committee stated they were unable to explain what the " guarantee " charges of L 26 mean. When the sinking fund and unexpended balance of the loan were first vested m the Public Trustee, under the then existing law, the State undertook no liability for loss on investments. If a public officer embezzled or fraudulently misappropriated tho funds, the Government would make good tho loss, and that was the extent of the responsibility. Since then an Act has been passed making the State liable for losses on investments. The charge of L 26 alluded to is for the creation of a fund to meet any such losses as may occur. For absolute security, L26is a small price to pay on £95,000. This item should not be begrudged. The charge is only about sixpence on each LIOO. The shifting of the money to a bank would not absolve the Government from responsibility. But, as may be gathered from the finance committee's report, which was adopted, the Board do not contemplate depositing the money m a monetary institution. It is thought that the bulk of it could bo let out on good freehold security at between six and seven per cent. Wo constantly hear of loans being refused by the Insurance department and the Public Trustee, although the securities offered unquestion-

ably fulfil j\U the conditions required. The truth is, that the Government are collaring every half-penny of the trust funds (hey can lay their hands on. A system of secret borrowing is pursued to keep up tho appearance of a non-borrowing policy. Money is wanted to carry on tho business of the State, uot for the purposo of reiending to small farmers or anybody else. The Government, by the wholesale use of the trust funds, has contributed to the present monetary tightness. It would be far moro honest, and better for the colony, if Ministers declared at once that they cannot get along without a loan. Surreptitious borrowing is piling on the public debt, whilst a much higher rate of interest has to be paid than if the money were raised m England. There can be only one ending to the present state of things, and that is open borrowing m the English market. As it is bound to come, the sooner it comes tho better. If the trust funds now invested m Government securities were available for advances to farmers and others, there would be a marked easing off m financial tightness.