Debt Reduction and Surpluses

Sun (Auckland), Volume I, Issue 119, 10 August 1927, Page 1

Debt Reduction and Surpluses

POLICY CRITICISED SENDING MONEY ABROAD (.THE SUN'S Parliamentary Reporter .) WELLINGTON, Tuesday. THAT the Government is placing J and undue burden on the taxpayers of to-aay by its policy of utilising surpluses to redeem loans, is the opinion of Mr. T. K. Sidey, Dunedin South, expressed in his reply to the Attorney-General, Hon. F. J. Rolleston, in the Budget debate this afternoon. Mr. Sidey said that the Minister of Finance, the Hon. W. Downie Stewart, was taking his cue from the Old Country in the matter of debt redemption, but the conditions there were very different from those in New Zealand. Great Britain was a creditor country, while we were a debtor country, requiring to borrow largely from overseas for developmental purposes. We were already sending enough money out of the country under our new debt reduction and funded debt schemes, especially during a period of an adverse trade balance. “I admit,” said Mr. Sidey. “that the object of debt-repayment schemes for a borrowing country is to maintain its credit, but our credit was just as high under the old scheme, when sinking funds were available for farmers’ and workers’ loans, for which the Minister cannot now find sufficient funds. Will the Minister say what is the deadweight debt, and what difference there is between loans for roads or bridges or education buildings and war loans, so far as the Consolidated Fund is concerned, which has to find the whole of the interest?” Mr. Sidey said that whether it paid to redeem such loans or not depended not upon their original purpose, but upon the terms upon which they were redeemed, if before maturity, and upon the rate at which we were able to borrow, and the rate that could be earned in this country by our repayment monies. It was suggested tliat the utilisation of surpluses to redeem loans was done to prevent increased taxation in future, but if the redemption of loans was for the purpose of increasing the

revenue at the disposal of the Government, it was open to question whether that method of obtaining increased funds provided as wholesome a check on Government expenditure and extravagance as the necessity to impose additional taxation. This did not apply to payments under the public debt-reduction scheme or the funded debt. Replying to Mr. Sidey, the Hon. J. A. Young, Minister of Health, said that Mr. Sidey had assumed that money was being sent out of New Zealand under reduction of debt and debt-redemption schemes, but this was not so, except for a portion of the Imperial funded debt, equal to about one-third. The money was being spent in the country, and as it was circulating in the Dominion the burden was not so severe. Loans for roads and bridges were directly and indirectly productive, but this was not the case with the war debt, which every effort should be made to reduce.