MONEY TALKS

Southland Times, Issue 20641, 13 November 1928, Page 4

MONEY TALKS

If Sir Joseph Ward had not referred to us and given us further material for the disclosure of the unsoundness of his big loan scheme, we would have been compelled to deal with the matter, since a correspondent has put a question to us to which an answer is desirable. Sir Joseph Ward last night, in an effort to remove the effect of the comparison between taxation in New Zealand, in Australia and in the Old Country, committed himself to the statement that no comparison could be made because the Old Country did not enjoy the benefit of the revenue from State railways. Such a statement might have been sound twenty years ago; but it is not sound to-day. The railway revenue is not included in the taxation, because it is shown in a separate account, and because it has to meet all the charges which properly should be set off against that revenue. The breadwinner method of getting round the comparison last night took the audience nowhere but into a fog. The complaint that his answer to Mr Macalister’s questions, issued as a challenge, had not been telegraphed away by the Press Association is hardly generous because Sir Joseph Ward never answered the questions. At one stage in his speech in the theatre he declared that there was no sinking fund to his loan to pay off the £60,000,000 loan, but he made no specific answer to those questions. Sir Joseph Ward, replying to the Southland Times, repeats the statement that the sinking fund has not been dropped overboard and that it was never intended that it should redeem the £60,000,000 loan. All we can say is that Sir Joseph Ward has forgotten the statement issued in his own name and advertised in most of the newspapers in the month of October. That advertisement declared in specific terms—we will give him the date it appeared if he

requires it—that a sinking fund of one per cent, would be used to redeem the bonds of this loan. Last night Sir Joseph Ward waxed merry over our failure to realize that the Debt Extinction Act would look after the repayment of the loan. Unfortunately for Sir Joseph Ward he is caught again, for he has also said in the clearest terms possible that the loan would not cost the taxpayer a penny either directly or indirectly. Now, if any general Debt Extinction Fund is to redeem this loan, the annual payments into that fund must be increased by a sum equal to what would be required to redeem it, and those payments will come, if not from the loan, from the taxpayers, through the Consolidated Fund. We ask Sir Joseph to deny that the Unitea Party’s manifesto said that the one per cent, sinking fund would automatically redeem the bonds in 324 years. The correspondent to whom we referred at an earlier stage has asked us what the sinking fund under this loan scheme will provide for redemption purposes in 324 years and at what figure the funds must be invested to extinguish the £60,000,000 in that period. We propose to set out the figures in a form that can be readily understood. The plan is to raise £60,000,000 in 44 per cent. Government Bonds issued at 95. and to lend the money at 45 per cent. Sir Joseph Ward admits a brokerage of one per cent., and, as Mr Downie Stewart suggests, omits some other charges he must meet; but we will accept the one per cent, as the full coSt of selling the bonds. The Government therefore receives £56,400,000. The interest position is as follows: N.Z. Govt, pays Annual Interest. £60,000,000 at 44 p.c .. £2,700,000 N.Z. Govt, receives £56.400,000 at 4$ p.c. £2,579,000 Less admin, cost at 1/6 per £lOO 37,300 £2,541,700 Annual deficit £158,000 In 324 years this deficit amounts to £5,044,750 The annual payments of £564,000 received from settlers and workers, if invested at 5 per cent, will in 34 years provide £47,977,765, which is short of £60,000,000 required for redemption by £12,000,000. If it is invested at 6 per cent., the total sum at the end of 34 years is £58,759,633, so that to provide £60,000,000 in 324 years, the annual repayments of £564,000 must be invested at more than 6 per cent. That answers our correspondent’s questions. Now Sir Joseph Ward speaks of the £19,500,000 he is going to obtain from the farmers and workers as “profits,” but the repayment of capital is not profit and never cap be. No amount of .word juggling will make it so. Mr Downie Stewart last night let some light in on this matter when he said that the profits of Advances Department of something over a million in over thirty years and on operations involving £35,000,000, were gained because there was a good margin between the cost of the money raised by the Government and interest charged to the settlers and workers to whom it was advanced. That margin was in the neighbourhood of one-half of one per cent., but Sir Joseph Ward in his scheme has less than one-quarter of one per cent, as a margin, in fact he has hardly any margin at all. Mr Macalister’s lizard story hits the position off very well. The loan proposal has changed very much since it first appeared, but at every change the public has grown more and more to distrust it. And the latest effort that the Debt Extinction Fund will look after the redemption of the £60,000,000 without costing the taxpayer anything directly or indirectly is the capping piece . . . unless Sir Joseph Ward can think of another one to-day.