LACK OF LOAN MONEY

Timaru Herald, Volume CXLV, Issue 21189, 9 November 1938, Page 6

LACK OF LOAN MONEY

Power Board Expresses Concern Interest Rate Too Low Move For Increase Concern at the possibility of their line extension work being stopped because of the lack of loan j money at 3J per cent, was express- } ed by the South Canterbury Power j Board at yesterday's meeting, when • it was unanimously decided to ask the Minister of Finance (Hon. W. I Nash) for permission to make the ! investment more attractive to the ' public by offering interest at 4 per cent. “Unless money is available a good deal of local body work will be held up in South Canterbury,” said the chairman (Mr G. Dash). The Board, having exhausted all their loan sanctions, have an application in for permission to borrow £30,000, the formalities for which will be completed at the December meeting. The Board have only £BBB left in their loan account, which is i ot more than sufficient to carry them on during the period of waiting for the loan money to become available. After paying subsidies there would be £BBB in the loan account, said the chairman (Mr G. Dash). The Board would have to keep on day by day connecting people to established lines out of capital, and as had been pointed out by the General Committee it was unwise, with only that amount in hand to spend any more on extensions as they did not know when they would ■ obtain the loan money required. Replying to a question Mr Dash said that they could not go on the market until after the December meeting, by which time the formalities would be complied with. It was doubtful whether the Board would then be able to get any money. Tire Government suggested that the Board should hypothecate their debentures to the Bank, but there j was no saying if they did this, when the bank might step in and run matters. The Board were in the happy position of having their loan account squared up, said Mr F. J. Cook. In his opinion the £BBB should be kept for connections to existing lines. Will Have o Wait Mr J. R. Hart: In the meantime | extensions will have to wait? The chairman: Someone squires power for shearing, but it looks as though he will have to wait. “The position is due to no fault of ours,” said Mr Cook. “We have simply been placed in it.” Is the Board not justified in taking some risks? asked Mr K. Mackenzie. The position had been apparent since the inception of the Board and if they had taken that stand at the start, half of the present extensions would never have been done. Mr S. I. Fitch: There is no doubt that we are having great difficulty in getting our loan money. “I do not want to introduce politics into the discussion but there is no doubt that the Government do not want to raise money in the Old Country,” said the chairman. “Is there sufficient money in New Zealand for the needs of all who require it at present? he asked. Mr Mackenzie: I do not think so. Local Body Work Held Up The chairman pointed out that the Harbour Board, Hospital Boa. u and other South Canterbury local bodies wanted money and if the Government were not going to obtain it from overseas a good deal of local body work was going to be held up. If another 1 per cent. Interest could be offered the local bodies should have little diffiev’ty in obtaining the finance. Dr. P. R. Woodhouse: Don’t you think it is serious that we have to find this money for repayment in 10 years? It was very serious, replied the chairman. The sum of £15,000 had been lent by the Government, and had to be paid back at the end of 10 years. In the meantime they were paying a sinking fund that would .'Xtlngulsh the loan in 20 years. If it came to the hypothecation of debentures, said Mr Cook, the Board would not know when they wou’d have to find the money. The chairman pointed out that if the Board took £20.000 from the bank, and a financial crisis occurred, a very serious position would be ere a ed for the Board. The secretary (Mr W. Foden) explained that the banks did not like an overdraf to run on for any great length of time. The hypothecation of debentures had been suggested by the Government in order to keep interest down to 36 per cent, said the chairman. The Board had not been able to obtain money at that figure, and personally he thought that 36 per cent was not a fair return. Increased Rate Desired “Could not the Board ask the Government for permission to raise the rate of interest to 4 per cent?” asked Mr W. Scott. He moved:— “That the Board ask the Minister of Finance to secure permission for local bodies to advance 5 per cent on the 3J per cent interest which they they are permitted to pay. as loan monies from private investors are not procurable at 36 per cent. This absence of money is embarrassing to local bodies and in the case of the South Canterbury Power Board wUI bring to a standstill the extending of power lines, depriving backblock settlers of the use of electricity and adding one line gang men to the unemployed. The Board were confident that money will be made available by private Investors.” The motion was seconded by Mr A. W. Buzan, who said that there was any amount of money in the country, but the interest rate was too low. Mr A. N. Oakey: It is the policy of the Government to keep interest down, but there is no harm in us having a go at it. Mr Buzan considered that anyone sending money out of the country for

the purpose of embarrassing the Government was not playing the game. “They are not worrying about embarrassing the Government, but the safety of their money,” said Mr Fitch. It would be a very serious matter to have to close down on extensions, and the Board should leave no stone unturned to keep the work going, said Mr Hart. If the money was not made available the Board would have to dispense with gangs and close down, but If they could keep on steadily It would be better for all concerned. He thought the Board should do their utmost to help people in the backblocks, but they could not do anything without money. They had. however, more chance of getting money at 4 per cent. Mr Oakey emphasised that the danger of extensions being held up should be impressed on the Government. It was a very serious matter. The motion was carried unanimously. It was pointed out that rather than have work held up some of the applicants might be prepared to purchase debentures from the Board and thus finance the extensions. There was a danger then of differentiating between people of means and others, said Mr Oakey. Members considered that the main question was to keep the work going pending receipt of loan money. Dr. Woodhouse moved that if people were prepared to buy debentures to the amount required to do their job, the work be gone on with. An amendment by Messrs Oakey and Mackenzie, that the matter be deferred till next meeting when the Board should have a reply from the Minister of Finance, was defeated, only the mover and seconder voting in favour. Mr Oakey said that if three or four people bought debentures, and loan money became available, who would receive priority in work?" It was decided: “That pending the availability ot loan monies those applicants who are prepared to buy debentures available and sufficient to finance the extension the buyer desires shall have their extensions proceeded with In order of priority of appllcai tion and purchase."