I.—lla.

4

[j. W. POYNTON.

The files containing these various documents are produoed. None of them can possibly be considered as an attempt to influence the Department in the granting of a loan. As it is very desirable to remove the impression which undoubtedly exists that loans by the Department have been grauted for political purposes, and with a view to influencing the last general election, I would respectfully ask that all the members of the Board be called by the Committee and examined on this point. To prove that no political considerations on the coiningelection weighed with the Board, it may be pointed out that the rate of interest on loans was raised to 3J per cent, and the limit to £5,000 fixed on the 13th November—three weeks before the election. Ministerial Control.—As long as plenty of funds were available and all applications for necessary works could be granted, there was no necessity for any personal intervention by the Minister in charge of the Office. No one had any grievance. Now, however, when it is found that there is not sufficient to go around there will be trouble, and discrimination must be made, and the Minister, who will be blamed for everything, should take over the administration of this branch of the Office as far as possible. There is a great difference between this and the other branches of the Office. It is not right that a Minister should interfere in the granting of loans to workers or settlers. These are individual and private affairs. But in loans to local bodies different considerations arise. Local bodies are States within States. Their proceedings are public. They look to the Government of the day to help them financially either by loans or subsidies. The Minister travels around the country; the Board does not. He knows the requirements of the different bodies. He meets deputations, officials of local bodies, and members of Parliament, and discusses these subjects in all their aspects. The Board is hardly necessary except to see that papers are in order and the security sufficient. He has to raise money to satisfy demands, and knows better than, any one else how much he can spare for this purpose. There will be some objection to this on the ground that favouritism and political influence will be exercised. No matter what system of granting loans is in force this objection will be urged by many. From 1887 to 1910 the Minister alone granted the Government loans to local authorities without any Board intervening. Loans amounting to over £2,000,000 were thus distributed amongst various local bodies. The best proof that political influence or favouritism was absent, or nearly so, is that so many are in favour of a return to the old system, and no accusation of undue preference in granting loans has been made against former Ministers. The resumption of control by the Minister will not require an amendment of the Act. An alteration in procedure will be sufficient. Amendments necessary.—Experience in the working of the Act shows that further important amendments are urgently needed. These are : — (a.) Extra remuneration should be given to the Office for carrying out the work. Losses in future will not be anything like what they have been during the first two years. The losses were entirely due to having funds uninvested. The moneys could not be got out fast enough, and so interest paid to the Post Office on uninvested moneys was dead loss to the Local Authorities Branch of the Advances Office. A difference of, say, one-eighth of 1 per cent, between the rate paid on the moneys after allowing for costs of raising the loan and that received from the local body would nearly pay the cost of administration. When the Act was passed it was, of course, assumed that all moneys required would be obtained at par, and free of commissions and other charges, from the Post Office. As money may have to be borrowed elsewhere to help local bodies, fees, commissions, and discounts should be provided for. (b.) When a loan has been provisionally or even finally granted, and the money cannot be obtained at the expected rate, provision should be made for binding the body to pay the increased rate. At present, in order not to disappoint the local body which has proceeded on the assumption that its loan will be granted at a certain rate of interest, moneys have either to be kept in hand uninvested and losses thereby incurred or engagements entered into for some time ahead, and when money has to be raised to meet these engagements it may not all be obtainable at the agreed-upon rate. If £1,000,000 is promised at 3| per cent., the present rate, and all of it has to be raised at 4 per cent., this will mean a loss of £2,500 annually. Of course, if the million were borrowed and kept on hand to meet the instalments of loans already granted or applications to come in in future, the loss would be greater through loss of interest. It is a choice of evils at present. The amendment would be most beneficial. Local bodies cannot complain if they get the money at the same rate (or with the addition of one-eighth of 1 per cent, here suggested) at which the State obtains it, when they are ready to receive it. (c.) Discrimination should be allowed amongst local authorities when there is not enough money to satisfy all requirements. Even amongst local authorities of the same kind there should be power to discriminate. There is no resemblance between, say, a county in Canterbury with its roads made by the Provincial Government, perfect roads everywhere, metal within a few inches of the surface, no hills, no bush, dry climate, and few or no bridges, and nominal rates, and a similar body in the North Island with no metal whatever, wet clay soil, bush to clear, hills to cut down, few settlers, heavy rates, and numerous bridges to construct. Classification would be better done by regulation than by statute. Power should be given to issue such regulations. (d.) Special provision should be made to meet the necessities of the poorer and more remote country bodies. This is a matter of policy, and I therefore do not care to proffer suggestions. (c.) A limit as to "the amount to be lent to any one body should be fixed by statute. The limitations under the old system were unduly complicated, but a reasonable restriction is necessary, otherwise every large loan will be viewed with suspicion and be the subject of criticism. (/.) If the full amount authorized to be borrowed by the Minister is not raised during one financial year, the difference between the amount raised and that authorized should be allowed to be raised during the next year. This is permitted in the borrowing of money for settlers, workers, and land for settlements.