The Waipawa Mail. Published Tuesdays, Thursdays & Saturdays. Tuesday, July 31, 1894.

Waipawa Mail, Volume XVIII, Issue 3106, 31 July 1894, Page 2

The Waipawa Mail. Published Tuesdays, Thursdays & Saturdays. Tuesday, July 31, 1894.

A WANTON PROPOSAL. So far not a single newspaper in the colony has touched upon one of the most alarming aspects of tlio financial proposals of the Government. It has been shown that the scheme for borrowing money on the guarantee of the State to re-lend it on freehold security is unsound and dangerous in itself, but its most obvious corollary has apparently been overlooked. That is the more or less complete crippling of the Government Insurance Department and the enforced spoliation of its policyholders. Those who have given the slightest thought to the rationale of life insurance know that it is based upon the fructifying power of money lent out at interest. If the giving and receiving of interest for the use of money could be abolished, not only would thrift itself be converted into mere hoarding, and the springs of industry be dried up at their source, but those phases of it which manifest themselves in the form of building societies and insurance companies would be rendered impossible except under conditions that would render them practically useless. To consider tho far-reaching effects of the Government’s proposals upon all forms of voluntary thrift would occupy too much time and space, and we shall therefore confine our remarks to the Government Insurance Department with the exception of a passing reference to tho Public Trust Office. Both those departments exist as moneylending institutions, the latter lending out the money of tho dead as trustees for legatees, and the former trading with the money of the living in order to be able to fulfil specific contracts made with them. By using the guarantee of the State to assist them to enter into business as money lenders to gain political support, the Government, where they will clash with the Public Trust Office, will be acting the part of spoilers of the widow and the fatherless, and where they will clash with tho Government Insurance Department they must of necessity make it more difficult to provide for that time when the breadwinner must die. No person with anything like a clear idea of what renders life insurance possible can miss these conclusions. Let us take an instance. The Government Insurance Department lends its funds —or did till the present Government got their hands on them—on freehold security. It demands a fifty per cent margin on all securities, and it charges for the use of its loans from G per cent to 7 per cent, according to the amount borrowed, small sums being charged tho higher rate because of greater proportionate clerical and other expenses. Tho average rate charged may bo put down at G| per cent on all loans, which is a trifle lower than the current market rate except with regard to very large loans which private institutions make special arrangements for. The Government propose to pledge the credit of the colony to obtain money at such rates as will enable them to lend to landowners at from 5 per cent to 5.j per cent, and to lend up to two-thirds at the valuation of the property taken as security. Obviously, this will at once begin to make it difficult for the Government Life Insurance Department to place

its funds so profitably as at present, and the end will be, if the Government succeed in getting the House to endorse their proposals, that the only safe investment for the insurance funds will be the purchase of the 4 per cent consols which the Government propose to create. Thus every farthing of the money paid as premiums, instead of being able to find profitable investment at current market rates, will be delivered into the Government’s hands for spending. Consequently the Department must face a loss of close upon 2 per cent upon all its capital except that at present on loan, and upon all prospective capital, including all now lent aB it comes back in tho shape of repaid loans. Losses have a persistent knack of falling upon somebody. In the case under discussion the Department cannot raise the payments due under existing policies, but it will have to raise its rates to all future insurers or else give less in the way of bonuses—if, indeed, bonuses of any kind will be possible unless rates aro raised. Thus it appears that the scheme of the Government for lending to freeholders at 5 per cent really means, when examined robbing the thousands of policyholders in the Government office, with whom contracts have been made promising certain benefits. Those benefits could bo given if the Department were left alone to fulfil its promises honestly, as it desires to fulfil them, but cannot be given if the Government are allowed to have their way. And to this direct injury will be added insult, for by driving the Insurance Department to use its funds in purchasing Government debentures at 4 per cent, (as will be done by using the credit of the State to prevent more profitable investments being made), the Government will be able to invest that money under its own proposals at from 5 per cent, to 5* per cent. Thus the policy-holders, while smarting under the losses that have been thrust upon them, will have the further chagrin of knowing that the difference between 4 per cent, paid on Government debentures and the 5|- per cent, obtained by tho Government, will be so much taken out of their pockets as directly as if the spoliation were the work of a footpad. Should the Department lose money on its business, as it must at all events do on new policies unless rates are raised, the loss will fall upon the country at large. 11 follows, thorefore, that even that section of freeholders who are promised benefits under the Government proposals will only at the best have money put in one pocket that is taken out of the other. For this class of settlers consists largely of policyholders, and when they are face to face with the loss of bonuses, and with increased rates for future insuring, and with liability to taxation to make good any losses on the Government Life Office generally, they will bitterly rue the day when they were led to believo that twice two could under any circumstances make five. It may be objected that insurance rates will not bo raised because of tho competition of other offices that the Government cannot control, and that if existing policy-holders lose promised benefits they must put up with it. But this view, besides being based upon a dishonest complacency in losses forced upon others to do good to ourselves, has the further misfortune of being incorrect. The Government, apparently conscious of the manner in which policyholders are to bo injured by their wild cat proposals, have seemingly decided to squeeze private offices also. The provision by which all so-called “ foreign ” insurance offices are compelled to deposit with tho Government a percentage of their incomes—as “security” forsooth together with the increased difficulty these companies will experience in finding investments for their funds in New Zealand in the teeth of Government competition at lower rates, and on unsafe margins, will hamper them also. As their businesses suffer they must raise their rates. The mad scheme of tho Government, thorefore, is an all round attack upon thrift. They may not have the clearness of perception to see this—they probably have not, their every action proving them to possess an utter lack of financial capacity—but the evil effects that follow will be none tho less bitter because the result of ignorance and rashness-