DOMINION’S PUBLIC DEBT

Taranaki Daily News, 5 December 1927, Page 11

DOMINION’S PUBLIC DEBT

DEFENCE BY THE MINISTER ’severe CRITICISM ANSWERED. NEED FOR CARE IN EXPENDITURE. (By Wire—Special Reporter.) Wellington, Dec. 3. Strong exception was taken by the Minister of finance, the Hon. W. Downie Stewart, in the House last night to a remark made earlier in the afternoon by Sir Joseph Ward that the finances of New Zealand “were rotten.” “I think that is a serious statement to make,” said Mr. Stewart. “Such a statement coming from Sir Joseph is likely to go abroad, and everybody knows that no Dominion’s credit is higher than that of New Zealand. I .think it is unfortunate that such a criticism should come from a member with reference to the finances of New Zealand.” Mr. Stewart said he agreed with Sir Joseph Ward that the loan expenditure was heavy and should As quickly as possible be contracted, and that loans should as far as possible be devoted to revenue-producing purposes. He also agreed that every year something should be done to reduce the deadweight debt, but to curtail borrowing suddenly or to cut it in half would not result satisfactorily to the Dominion. So far as the growth of the public 'debt was concerned, the Minister said that because the Finance Bill contained authority to borrow £7,000,000 in the aggregate it was not to be assumed that it would all be raised in one year. When the loan authorities of any particular department -became exhausted it became necessary to provide fresh authorities.

On the general question of the growth of the public debt he could only say that so long as the public expected the Government to continue to expend large sums of money on hydro-electric schemes, which in other countries were owned and operated by private companies, and as long as money for railway development was called for, then it was imperative that money must be borrowed. The main thing should be to see that it was spent so far as was reasonably possible for productive purposes. It was true that some loan expenditures were not reproductive, 'but if the public decided that the public debt should no longer increase it would be quite easy for the Government to realise on all those enormous assets which involve such a large public debt and. to reduce the debt by at least two-thirds. BIG SCHEMES MUST GO ON. The Minister asked whether the big schemes of railway improvement and hydro-electric works should be stopped in the middle of their completion. The best thing to do was to complete these commitments and make them revenueearning. He thought the’ best thing to do was to contract the debt steadily each year and pay off as much as they eould of the- deadweight debt, such as the war debt, which was the real burden on the taxpayer, and to see that any further expenditure of loan moneys was, as far as it was feasible and practicable, confined to works which had a reasonable prospect of earning interest on their cost of construction.

Mr. Stewart said he admitted the question whether railways were a wise ' method of public expenditure was a problem that was becoming increasingly open to critidism, because the indications in New Zealand, Australia, England and elsewhere seemed to show that it was questionable whether railways were not going- to be out of date as a method of transport. He agreed that the further they extended the rail'ways the more they increased the burden on the taxpayers. So far as some railway lines were concerned, every mile meant an increased interest bill and the running charges showed an extra loss above the interest .From an economical point of view it would be : better in the case of some railway lines to close them down and pay interest on their construction rather than pay .heavy operating costs. The indications were that the position of the railways was becoming increasingly difficult, and the whole policy of railway extension and construction should be considered very exhaustively 'and critically before any very expensive programme of railway construction was carried out. It was said that the interest bill was too high, but when they analysed the amount of £19,900,000 and deducted the amount attributable to interest on the war debt, the bill was reduced to £7,000,000 odd. Deducting from that the portion of the interest payment which came not from the taxpayer but from those who had borrowed money from the State Advances Department, the net burden to the taxpayer would be between £2,009,000 and £2,500,000; Th e public debt was reproductive and self-contained to the extent of over 70 per cent. Regarding remissions in taxation the Minister stated that between 1921 and 1925 over £4,000,000 was remitted.