LOANS TO LOCAL BODIES.

Taranaki Daily News, Volume LV, Issue 127, 16 October 1912, Page 6

LOANS TO LOCAL BODIES.

PARLIAMENTARY INQUIRY. By Telegraph—Press Association. Wellington, Tuesday. The inquiry by the Public Accounts Committee into the allocation of loans to local bodies, was continued to-day. My Poyntou, superintendent, produced various returns, including one showing the average amount paid over per year from February, 1010, to September '3O, 1912, under the State Guaranteed Advances Act. The figures were as follows: Borough councils, £319,030; countv councils, £104,422; road boards, £59,332; town boards, £29,094; drainage hoards, £18,604; river boards, £932; harbor boards, £18.300.

Another return was presented s'howing the approximate loss to the State on moneys lent by the Government under the various local bodies loans Acts as follows:—Amount of inscribed debt (i.e. of moneys lent to local bodies) at 4y, per cent. £1.101,329; amount at 4 per cent. £104,443; amount at 3'/ 2 per cent. £1,720,235. On each £IOO lent at 4% per cent., a, local body will pay 4y 2 per cent, for twenty-six years, when its liability ceases, both as to payment of principal and interest. The State meanwhile pays 3% per cent, on the moneys, and at the end of the twenty-six years, must continue to pay interest, and untimately the principal too. As the local body vviil for twenty-six years pay one per cent, more than the interest paid by the State, this must be allowed in calculating the loss.

Details were given by witness, who', in ' reply to Mr Allen, read the letter which ( he wrote to the Minister of Finance in 1911, in which he said that the provision that all loans should be made at the rate at which money was borrowed, was unwise. He also said in the letter that in future, applications for loans should be at 3% per cent, instead of 3y 2 per cent.; that loans for the purchase of Native lands and the opening up of land for settlement should be at 4 per cent., and that there be a limit of £SOOO. The Minister (Sir J. G. Ward) sent that letter to the secretary of the Post [ Office, who replied that 3% per cent. J was not a profitable rate of interest to I the Post Office.

Mi All ''ii asked if the correspondence <lid not show that the fact of the Treasury taking so much money from the Post Office prevented the Post Office investing funds outside at a higher rate of inter" eat?

The witness said that for years the custom liad been that investments .from the Post" Office should be offered to the .treasury first.

Mr Allen: And since that policy was pursued, has not the Post Office begun to feel the effect of it? Witness agreed that that was so. Mr Poynton also read correspondence between the department, the Post Office and the Minister, showing that the Secretary of the Post' Office expressed himlf, f as . 0* the opinion tliat an all-round ,? f 3 % I? e J cent, would be acceptable and the Minister of Finance agreed That was in January, IQI2. J„ February, the Secretary of the Post Office complained of the Treasury renewing a 3>/, percent loan at ~1/2 per cent. Witness recommended that 3% per cent, be charged on renewals, and the Minister (Sir Joseph Ward) approved. In ilarch the question arose as to whether the difference be£n 4 f ml 3 f P er CL ' nt - interest, should not be,made up out of the consolidated revenue.

-Tames Allen : When I came into office I found a large number of loans finally approved,, for which no money had been provided. ' Witness: Yes. Mr Allen: At 3% per cent' Witness: Yes. " 1

Wlmt P rovision w <is made Office? monfi ' V ' exc ept from the Post

Witness: No provision. Mr Allen: Did you think it a wise policy to commit for loans at 3% D er cent? 1

Witness: I ,think so. You have anthonsed the .purchase of land for settleable having the money avail-

Mi Allen: This is an officer of my department, making a charge against his Minister. .

Witness; It is a question of policy. if 11 e 1 P ,ent . v of author ment? m °™ 7 f ° r land for settle '

Witness: Any amount. Mr Allen: Why do y ol , make a charge' witness: I don't make a chaise " j say its a question of whether money should be kept there, awaiting invest- { ment, or engagements should be'ahead' The question of whether the board had the power to commit the country to expenditure beyond the year in which the loan was being dealt with was raised and the opinion of the Solicitor-General' read by Mr Allen. The opinion was that »uch practice was illegal and should be discontinued.