The Financial Statement.

Thames Star, Volume VII, Issue 2051, 31 July 1875, Page 2

The Financial Statement.

[BY TELEGRAPH.]

WELLINGTON,

Friday night, The Hon. Major Atkinson delivered tho Financial Statement this evening. He said that he did so under strong sense of responsibility. There had been so many positive statements and intangible rumours, discrediting to the financial position of the colony, that he desired at the outset to give them an official refutation. He thought a plain, unvarnished statement of the true condition of our monetary position would be the best possible answer to the scurrilous and slanderous attacks, while it would enable honest doubters, to ascertain for themselves the truth or falsehood of what they had read and heard. His subject naturally divided itself Into two parts, LOANS AND SEVENTIES. •Witti regard to the raising of the four million loan, it must be remembered

the .Immigration and Public Works scheme, when originally submitted by Sir Julius Vogel was intended to extend over a long period, but it had been impossible to resist the pressure to hurry, on works. In obedience to. the desire of the Assembly, immigration and public works were both pushed on vigorously, and as a necessary consequence loans had to be raised more rapidly than at first proposed. Out of the seven and three-quarter millions authorised between June, 1870 and June, 1874, it was not generally understood that nearly two millions still remained unraised. This fact had an important bearing on the. action lately taken by Sir J. Vogel in placing the whole four millions on the market at one time. The expenditure out of loans duriDg the four years 1870 to 1874, was £4,289,875, and it was last year estimated that during 1874 and 1876 £3,300,000 would be required. In addition to the above there was the expenditure for the current financial year to provide for, say £2,250,000. Out of this total expenditure of £9,839,077 to be* provided for, "only £5,795,209 had been f raised, and it became necessary, ther«* fore, to provide the balance of £4,044,6/7.. The Government decided to sell the whole four millions, if possible, and appointed Sir J. Vogel, Sir P. G. Julyan, Dr FeatherstoneT, and Mr Sargeant, agents for the purpose. Grave difference of opinion arose between Sir J. Vogel and his co-agents. The former wished to sell the whole amount at once through the .Rothschilds, while Messrs Julyan, Featherstone, and Sarjjoimt I"ilibugUL' 'JT\tM«.«... price could be obtained if the requirements of the Government permitted the loan being sold by two instalments. They ultimately agreed, however, to adopt Sir J. Vogel's plan. The loan was to be raised by Rothschild at ninety-four, out of which Rothschild's receive a commission of two per cent., they taking up three millions immediately, and the remaining one million within a year. The net prpceeds received by the colony is £90 19s Id. By this arrangement the colony was to obtain the necessary means to carry on public works and immigration, whether RethschUd floated the loan or not. This fact is particularly commended for consideration. The report, received from Sir J. Vogel, and that from the other three agents, although differing materially in opinion on some points, concur in the result as. successful. Dr Featherstone, and the Crown agents write, " That considering its magnitude the terms, upon which this transaction, has been carried put appear to us. exceptionally favorable." With these facts ' before them, the Government ' are decidedly of opinion that - the course pursued was the right one, that the operation was marvellously good, and that to Sir J. Vogel is due the successful termination of the. negotiations. Rochschild's placed the whole loan . and £3,167,571 had been paid4o the credit of the public account at the date of the last advices (31st May). On comparing the loans, the average annual rate of interests of the previous loans since 1870 is £4"19s 6d per cent. The last is £5 2s per cent, and the average of the whole £5 Os 7d per cent, which is very satisfactory when it is remembered that in the original estimate, introducing the Immigration and Public Works policy, it was calculated the. money! .might, be obtained at 5% per cent. The balance at the Bank of JVewZeaUnd.-LoHidbn, on the 31sfc May had been partly reduced by » repayment to the Bank of England of the £600,000 that had been borrowed on the £800,000 of Imperial guaranteed debentures, to £2,056,716, against which drafts have been discounted by the bank in the colony up to the-30th June of £1,050,000. The Bank of New Zealand now pays interest at the rate of f per cent, beiow current Bank of England rates,' instead of 1 per cent, as formerly. The probable average balance for the year is estimated by Sir J. Vogel at £1,500,000, and he proposes to invest any sum in excess of that amountin exchequer bills! The" history of the loans raised prior to 1870, and the unproductive nature of at least three millions of the amount, are too well known to require explanation. Only the loans raised under the Acts of 1870,1873, and 1874 are revised. Out of the £790,000 authorised by "The Defence Loan, 1870," to be spent within five 1 years, for purely defence purposes* only £681,003 has been spent. There is also a balance out of the £210,000 authorised by the same Act for other purposes". Out of the total of one million authorised, . there is still an available balance of £125,315, less the expense of raising. The unraised portion of this loan amounts to £179,000, of which £52,000, has been | hypothecated to the Bank of New Zea- , land for a nominal advance of £50,000, Before remarking on the operations exhibited by the table showing the expenditure on " The General Purposes Loan, 1873,' reference is made to the extraordinary misapprehension which appears to exist even among well-informed people with regard to the extent to which interest is paid out of borrowed money. This misapprehension arises probably from two causes, viz , from payments made in London apparently taken from loan, and frotnik the item of £30,000 voted uuder- the^* Loan Act for " Repayment to the Immigration and Public Works Loan for interest and sinking fund paid, or to be paid therefrom." As this is a question closely affecting the credit of the colony, an explanation is given, showing as regards the first-mentioned cause, that out of the consolidated revenue raised in the colony, there are charges payable in London for interest and sinking fund, while on the other hand there are large sums raised by loans at the credit of the colony in London, of which a considerable amount is required to be expended in the colony. The practice is to pay in London such portion of the interest and sinking fund chargeable on revenue as it is required to be paid there out the funds there raised by loan, and on the receipt of the Crown Agents account in the colony charge. the interest and sinking fund so paid to the consolidated revenue. The wholo transaction is merely a convenient mode of avoiding the payment of exchange, and nothing more. With regard to the second cause of misapprehension, the total sum ever asked.for or granted for this purpose was the £300,000 above mentioned. Of this only. £218,500 has been expended, and as no more interest will be paid out of loans, the balance of . £8l,50i» will be otherwise appropriated, but against this payment of interest out of loans, there has been contributed to the public works a sum 6f £179,408 out of. stamp duties, and the contribution will be increased by the end of the year to £211,800, so that there will be con- , tributed out of revenue towards loan purposes £23,300 over and above all interest paid out of the loan, which

contributed will be further augmented year by year. The absurdity of the assertion that the Government had been paying interest out of the loan is shown by the fact of no less; a sum than £2,384,942 having been paid from the revenue since 1870 for interest on loans. Last year all interest was paid out of the revenue, and this yearthe same course will be followed, notwithstanding that provision has to be made for interest upon the additional four millions raised. Out of the General Purposes Loan, 1873, for £750,000, a sum of £463,000 is yet unraised, but the Bank of New Zealand holds hypothecated debentures to the value of £210,500. The available balance on this loan/less the charges of raising is, £106,500. In explanation of hypothecation for the above advance of £200,030 and of the £50,000 undex the Defence Loan, it is stated it was proposed to sell in Sydnay. £200,000 of General Purposes, loans bonds at par, but only about £50,000 have been sold, and the remainder withdrawn. The

hypothecated debentures have thus been $ unredeemed, for although the colony has ,-Jarge funds at its disposal, the wholesome ■ exists which forbids the ways and means provided by Parliament for one service from, being applied to another. The liability for interest, however, has been annulled by depositing with the bank £150,000 of the Immigration and Public Works loan, being same rate of interest as the .allowances. The three " Immigration and Public Works loans of 1870, .1873, and 1874". are .for the sake _^a£_aLyaj!n©Bs.T^^late(i.- ! tp another, with, the following results': — Authorised, £10,000,000; expended to 30th June, 1875, £6,447,695 ; liabilities, £3,095,992; available balance, £429,313. The items of expenditure will be explained in full by the various Ministers in the departmental statements shortly to be made. The summary of the loan tables shows as follows \— Authorised £11,750,000; expended to 30th June, 1875, £7,739,413; liabilities, £2,513,923; available balance yet to be raised, £1,954,800. The public debt on 30th June was £17.671,106, less accrued sinking fund, £1,074,647* The annual charge for interest £835,150, and the sinking fund £110,635. Of this debt the Colony has a balance in hand of £2,167,896, being cash raised but not yet expended, although subject; of course to outstanding liabilities. Besides this the accumulated sinking fund, £1,074,647, really represents the extinction of so much indebtedness. /When the amount still, to- '' be raised is obtained the total.indebtedness will be £19,380,906, *ari*"*he total annual charge thereon £1,031,775. ■. But before this prospective debt is reached the whole of the balance now available, plus the proceeds of the portions of loans yet to be raised, in all £3,877,6 JS, will have to be expended. Assuming this to be two years," the accumulated sinking fund will by that time have practically reduced the debt to £17,980,906. Some of the loans forming this debt are specially secured on the proceeds of land, which will accrue at intervals. Turning now to the revenue question, the estimate formed has been exceeded by £108,402, the revenue received being £1,605,000, or £184,785 in excess of the previous year. Under every head there'has been an increase over the revenue of the year previously, and only on two items have the estimates fallen short by the small account of £2,441. The total "consolidated revenue" for the last year, including £96,358, assets yet to.be realised, and £205,500, surplus from the previous year,, amounted to £1,906,860, and the expenditure to £1,786,414, leaving a surplus of £120,446. Of the £500,000 " Treasury bills " outstanding last year, £100,000 has been paid, and the power to borrow £80,000 tor advances to provinces has not been used, the advances having been provided out of revenue, as well as an advance of £20,000 to the trust fund against Treasury bills held by that fund. The total amount of Treasury bills now current is £400,000, which have been renewed during the year at more favourable interest. This amount is less by £310,000 than the amount outstanding in 1872. The total receipts from "confiscated lands " for the two years ended 30th June last amounted to £80,826 and the expenditure to £94,779. The time has arrived when these lands should become subject to the -ordinary land laws, and a proposition will be submitted thereon for approval. The • " ordinary land fund" has amounted to £773,265, showing a considerable falling off from the previous year, owing probably to the purchases in 1874 having been in excess of requirements. The Government are anxious that the public estate should bo conserved, and in their opinion it has becomo the duty of the Legislature to consider carefully the matter, and insist that the public estate shall not be sacrificed or > dissipated or the proceeds misapplied. The " Savings Bank" returns show for the first time a decreased balance, the withdrawals being £40,791 in excess of deposits. This • does not arise from a diminution of the saving power of the colony, but to the high rates given by the hanks,-the principal amounts withdrawn being for large sums. As the banks have resorted to more moderate rates, the f deposits will properly again considerably increase. Thus;.far the Statement has been a narrative of the facts of the financial position to June last.