MR HENRY SEWELL ON THE CONSOLIDATION SCHEME.

Wellington Independent, Volume XXII, Issue 2668, 16 April 1868, Page 4

MR HENRY SEWELL ON THE CONSOLIDATION SCHEME.

(to tiie editor of the independent.) Wellington, April 14, 1868. Sir, — The accompanying letter was sent to me by Mr Sowell with the request that I would " get ifc inserted in tho Wellington Independent." Afterwards (Dec. 22, 1867) Mr Sewoll writes to say " sinco I wrote my three former letters I have received ono from Weld, enclosing yours to him. I find from it that I havo done Stafford personally some injustice in attributing the financial measures to him. * * * I wish you therefore to forbear publishing my letter till you hear again from mo, and at all events to omit that passage which reflects personally on Stafford." Not having hoard from Mr Sewell by either of tho last mails I think it right to publish his letter with this explanation. — I am, &c, E. Pharazyn. Huntley, near Gloucester, Dec. 17, 1867. Dear Mr Pharazyn', — As my opinion is quoted, in reference to tho liability of tho colony from provincial debts, I wish my views to be clearly understood. I havo always considered the colony as \tltimately responsible for them, if not legally, at least morally. lam of opinion, afc tho samo time, that the unconditional substitution of the colonial for tho provincial socurity, without any equivalent advantage either to the colony or the provinces, is an exfcvemely improvident transaction. If lam indirectly responsible for my friend's debts, I must meet the claim on me when it arises ; but no man in his senses ever offered a mortgage on his estato to cover such a guarantee, without some advantago in the shape of reduced interest or otherwise. Improved security is a solid benefit in such transactions for which an equivalent ought to be asked and given. In the pi'esent case, the colony, by making provincial debts a charge on the colonial revenue, has added about fifteen per cent, to their value, the profit of which passes exclusively into the hands of money-jobbers and speculators in London, nor is it to be supposed that the colony suffers no loss in the transaction. Its borrowing power is its mainstay in case of need, and ought to have been guarded with the utmost jealousy. The war is not over, or rather that state of things

which is called war, but which is in truth a state of chronic disturbance arising out of unsettled relations between the settlers and natives which are • likely to bo of indefinite continuance. No one can say that another year may not bring with it fresh domanda upon your resources ; but you have exhausted your credit, and in case of new loans being required you are absolutely helpless. 'In the plan proposed by Mr Weld's Government, i concurrently witii the adoption of provincial Ha- | bilities, it was proposed to take over from the provinces, by way of indemnity, specific securities to cover the new engagements, which the colony wai to assume. The railways, harbor works, and wast* lands, were thus brought in aid of the liabilities undertaken. I see rto provision of this .kind in the present measure, nothing but a wasteful squandering of the colonial credit upon a scheme, that offers not the slightest advantage in return. I marvel at such a proposal being entertained for a moment by the Legislature, or rather,* l should have marvelled but for one circumstance. It is clear to me that Mr Fitzherbert took the right view in his original proposal. The reference of such a question to a select committee was an illustration of the weukness which has characterized the whole action of the Government throughout the session. What weighed with the Committee in recommending the abandonment of Mr Fitzherbert'a plan, was, no doubt, Mr Stafford's letter to Mr Ward, which so soon as I saw it, appeared to zne greatly to compromise the colony. * * * * 1 have a word or two to add upon the consolidation scheme. Consolidation of the colonial liabilities might, if practicable, have been attended with advantage, if the interest or capital of the consolidated debt had been thereby disunited. As a mere formal charge of security it is idle red tapery. But it seems to have been forgotten that such a scheme could only be effected with the consent of existing creditors. At present the debts of the colony stand in a certain order of priority — " Qui prior est tempora porteor est jure." Those who hold a first charge on the colonial revenues will not surrender th«ir priority gratis. Indeed, looking at the various hands into which the colonial securities have passed, a voluntary consolidation appears to me impracticable — a forcible one would be dishonest. The only way in which you can effect it', if at all, is by the offer of an adequate bonus, by way of increased interest, or addition to the capital debt, but this would be a gratuitous loss to the colony. Even as regards the provincial' liabilities the course adopted makes consolidation hopeless. The provincial debts are actually charged on the colonial revenue. What more does the provincial creditor want P Already the fact is announced in the London papers by Mr Larkworthy, the manager of the Bank of New Zealand, that " consolidated or unconsolidated," the provincial debts have been turned into colonial debts. The Stock Exchange has adopted them j many of them bear a higher rate of interest than six per cent, and it is absurd to suppose that the holders will be ready to exchange them for securities of inferior value. The provincial securities, charged as they ! now are on the colonial revenue, are in fact. a better security than ordinary colonial debentures. They have both the colonial security and also the provincial, including railways and waste lands* The Legislative Council (far wiser than the Government in the matter) proposed to make the provincial debts a charge on the colonial reveirae after they had been consolidated, but not till then. The refusal of the Government to accept the modification appears to me in the highest degree irrational. As it is, the scheme of consolidating the securities of the colony, whatever it may be worth (and I attach little value to it), must I think be set aside as hopeless. — Believe me, &c, (Signed) Henky Sbwell.