I.—lla.

24

[j. W. POYNTON.

Tuesday, 15th October, 1912. Joseph William Poynton further examined. (No. 3.) 1. The Chairman.] 1 understand, Mr. Poynton, that you have some returns to put before the Committee ?—Yes. 1 produce a return showing amount granted since February, 1910, to the 30th September, 1912, to local bodies under the Local Bodies' Loans Act, 1908, and its amendment, 1910. [Return put in—Exhibit D.] I produce another return showing the average amount per year granted from 1887 to 1910 by the Government to local bodies. Particulars of each body are given. [Return put in—Exhibit E.| 1 produce a return showing average amount paid over per year from February, 1910, to the 30th September, 1912, under the New Zealand State-guaranteed Advances Act, 1909. [Return put in—Exhibit F.] I also produce return showing approximate loss to the State on moneys lent by the Government under the various Local Bodies' Loans Acts. [Return put in—Exhibit G.J I also produce return showing amounts, giving dates, rates, and balances of loans finally granted, but not yet paid over, also balances of amounts finally granted and partly paid over, at 3| per cent, and 3f per cent. [Return put in— Exhibit H.] In regard to the return showing the loss to the State, it is only approximate, because at different times during the course of lending the rates were altered, and until 1 get the exact amount lent at the higher rates the exact loss cannot be ascertained, but the approximate loss is given in the return. 2. Hon. Mr. Allen.] We were dealing with the Post Office lending money to the Local Authorities Branch when we adjourned, and did I understand } 7 ou to say, Mr. Poynton, that the Post Office had agreed to advance at 3J>- per cent, for loans provisionally agreed to? —Well, it was not agreed to, but it was an arrangement. In regard to loans provisionally agreed to and those finally approved, I think there is a certain amount of confusion about it. The files containing the minutes are here, and it would be better to refer to them than to have any verbal evidence about them. I will just guide the Committee through them as far as possible. The minutes run over a good time, and are here tagged, and the exact arrangement can be seen. 3. Bight Hon. Sir J. G. Ward.] Can you state what they are?— The question arose in this way : the Post Office was lending or proposing to lend to other bodies, and the arrangement previously had been that any surplus funds would first be offered to the Treasury. Well, on looking at the large demands by the local bodies, it was considered that it would not be wise to let the money go outside the Treasury, as it would all be required for loans to local bodies. The question cropped up in October last, and I wrote a memorandum to the Minister of Finance. There is no date on the memo., but it is stamped by the Post Office on the 30th October, 1911. It was a proposal to lend to the Wellington Harbour Board. In the memorandum I said, — " The Right Hon. the Minister of Finance. " Treasury, Wellington. " Post Office Loan of £50,000 to Wellington Harbour Board. " You will see from the memorandum hereunder that the Post Office is not notifying the Treasury of intended investments. This one has been submitted for your approval without reference to the Treasury. (See my minute to you of 30/8/11, letter to the Secretary, General Post Office, of 1/9/11, and his reply hereunder on this matter.) " Relying on getting sufficient money from the Post Office for advances to local authorities, the Advances Beard has approved and granted applications for loans for a large amount, and unless it is to get the surplus funds of the Post Office for this purpose of meeting these engagements inconvenience and losses will result. " B}' law the money has to be lent by the Advances Office at the same rate at which it is borrowed —an unwise provision, in my opinion. If the Advances Office has to borrow outside the Post Office money at, say, £3 155., money wdiich it has agreed to lend at £3 10s. it will mean a loss of £2,500 per year on each million, in addition to the costs of raising the loans. If the Post Office is permitted to invest without first offering its money to the Advances Office through the Treasury, loans to local authorities will have to be reduced or the rate of interest increased. At the same time I am convinced that the rate of 3J per cent, is too low. No local authorities anywhere in the world except New Zealand can get loans at this rate. The Post Office should get more than, this rate for its funds when lent to local authorities. " I would suggest —(1) That all. future applications for loans from local bodies be entertained at 3| per cent, instead of per cent, as hitherto; (2) that only sufficient of the Post Office funds as may be required to satisfy present loans granted at 3| per cent, be borrowed from it at that late; (3) that future loans for opening up Native land, purchasing land for settlements, &c, got from the Post Office be at 4 per cent.; (4) that in loans to local authorities preference be given to applications for loans from small bodies and under £5,000 in amount. " Large public bodies can go abroad for money and can get it at a low rate of interest outside the Department. They are getting too much of the Department's funds, and some such limit is needed. " If these suggestions are approved—(l) Not so much money would be required for loans as in the past; (2) the Post Office would get a better rate of interest than at present, and there would not be the necessity for it to take up securities other than loans through the Treasury to the Advances Office. "J. W. Poynton, Secretary to the Treasury." "Mr. Robertson.—For your views.—J.G.W., 30/10/11." " Memorandum for the Hon. the Postmaster-General. " Bth November, 1911. "Subject: Investment of Post Office Savings-bank Funds. " Referring to the attached letter from the Secretary to the Treasury, I beg to point out that the Secretary to the Treasury asked this Department some time ago what would be the probable