LOCAL BODY LOANS

Poverty Bay Herald, Volume LX, Issue 18264, 6 December 1933, Page 7

LOCAL BODY LOANS

OVERSEAS INTERESTS PAYMENT IN STERLING IMPORTANT LEGISLATION (Parliamentary Reporter.) WELLINGTON, this day. Iu accordance with the established policy of tile Government to preserve mtact New Zealand’s credit overseas, legislation was introduced iu the House last night providing for the payment in sterling of interest ou such external indebtedness of the Dominion local authorities as was incurred in London. As the measure will have a retrospective effect to April 1 last, it wih serve to validate the last- sterling payment of the Auckland Transport Board, and, in addition, it will enable the Crown to recoup itself for its payment of the difference between sterling and New Zealand currency in the case of the Southland Power Board's State-guaran-teed loan. The bill lays it down that where payment in sterling is directed under the legislation, the amount is to be computed as if it were expressly stipulated in the relevant debenture or security that payment was to be made in sterling in the first place. LIABILITY TO- CROWN Tlie measure gives local bodies which are lawfully required by the debenture holders to pay interest in the United Kingdom permissive authority to pay in sterling if (1) the debenture was issued in the United Kingdom in terms of a prospectus issued there, or (2) in any other case if the Finance Minister authorises payment to be made in sterling. Before giving that authority, however, the Minister has to be satisfied that it was the intention of the issuing local authority that any payment to be made in the United Kingdom to the holder entitled him to require it to be made there in sterling, and also that the holder so situated is further equitably entitled to require a sterling payment. For this purpose, any intention to pay in sterling may be gathered from the terms of the security, from the practice of the local authority, or otherwise howsoever.

The bill next provides machinery for dealing with local authorities who fail, or are about to fail, to exercise the power to pay in sterling. If, in the opinion of the Minister, it is in the general public interest that payment should be made in sterling, he may direct a local authority to do so, and this direction will be legally binding. A Ministerial certificate is to he conclusive evidence that the direction lias been given, and is entitled to command judicial notice.

Further provisions are required to deal with disobedience of such directions in tho case of State-guaranteed loans. Rulings with respect to such loans will be binding on the issuing local body and the Government as if the obligation to pay in sterling bad been expressed in the debentures, and in the Order-in-Council guaranteeing the loan. If default is made in complying with the direction, moneys paid by the Minister as a consequence will constitute a debt payable to the Crown by the defaulting local authority. RETROSPECTIVE EFFECT It is further provided that a creditor local authority will be able to recover from a debtor local body the amount of any additional liability imposed on, or incurred by, it through the sterling-pay-ment. In the event of disputes over the amount recoverable, the matter is to be referred to the Controller and AuditorGeneral, whose decision is final. Additional sums so payable by a debtor local body may be paid out of moneys available for the payment of the amount of its original liability to the creditor local body.

All of the provisions recited above are deemed to have come into operation on April 1 last. In reply to a question by (lie Leader of the Opposition, Mr. M. J. Savage, the Minister of Finance, the lit. lion, J. O. Coates, said that the provisions of the bill for the most part did not affect the Government policy, although there was one portion of the hill which affected the payment of interest on local body loans abroad. This provision gave the Government a measure of control over local body payments abroad, and had been asked for by most of the local 'bodies in the Dominion. “Will the Southland Power Board bo compelled, under this bill, to pay London interest in sterling?” asked Mr. F. Jones (Lab., Dunedin South).

“I am not prepared to answer in those terms at all,” replied Mr. Coates. “All I say is that the New Zealand Government is making certain that liabilities in London for borrowed money are being paid in sterling, and the general taxpayer at the moment is making up the difference between New Zealand currency and sterling. We believe, and hope, that the Southland Power Board will, without any difficulty, pay in sterling. There are negotiations in hand.” NO SUGAR-COATING There had been exaggerated ideas in London concerning the bona tides of certain local bodies, and the Government was anxious to get the Act passed to control the situation and assist those local bodies who wished to convert loans and have full advantage of the security which would be offered by the passage of the bill. Mr. C. Carr (Lab., Timaru) : Is the Minister not sugar-coating the bill? Is it not virtually compelling the local bodies involved to reimburse the Government for the balance it is paying between New Zealand currency and sterling, “The lion, gentleman s surmise is wrong,” replied the Minister of Finance. “1 am not sugar-coating at all. It is a perfectly reasonable proposal in the interests of, and at the reqnost of, the local bodies themselves.”

Mr. Carr repeated his question, with the result that Mr. Coates stated that the bill, at the request of local bodies, gave the Government- power to control the situation and make certain that their credit in London would not be affected.

“Euphemism ! Diplomatic language !” declared Mr. Carr. “Has the Government paid over any amounts vet?” asked Mr. F. Langstone (Lab., Waimarino). “The bill,” replied Mr. Coates, “will enable the Government to see that if the debentures say that interest is due in sterling in London, it must be. paid.” He assured another questioner that local bodies would have time to review the measure.