J. W. POYNTON.I

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average balance available for investment through the Treasury. The information was duly forwarded, and, so far as I know, the Post Office has not failed to provide the sum anticipated. The whole trouble is that 3£ per cent, is not a profitable rate to the Post Office. I agree with Mr. Poynton that future loans obtained from the Post Office should bear a higher rate of interest than at present. As we at present pay 3 per cent, and 3J per cent, on the deposits made in the Savings-bank, it is necessary that some margin should be provided if we are to pay that rate of interest and provide for working-expenses as well. In the past we had a certain proportion of money invested in securities bearing a higher rate than that usually paid by the Treasury, but for some reason the Treasury has gradually managed to withdraw the bulk of these securities and substituted in their place. It is quite true that the Savings-bank is to a large extent crippled by the large sum, approximately 2J million pounds, invested in 3-per-cent. Consols; but this scarcely affects the main pomt —namely, that the ruling rate of interest on loans is at present higher than per cent. If all future loans made by the Post Office bear a rate of 3f or 4 per cent, the position will be fully met, and I would recommend that the Treasury be instructed accordingly. If this is done, and there is no delay on the part of the Treasury in finding investments, there will be no objection to the Post Office not considering any investments offered from outside. As the case stands at present, however, it is absolutely necessary that we should have at least a proportion of our money invested at as high a - rate as possible consistent with safety. " D. Robertson." " Sec. Treasury.—For your remarks.—J.G.W., 27/12/11." 4. Hon. Mr. Allen.] Does that correspondence lead to this conclusion : that the Post Office had been lending outside the Government Departments at comparatively high rates of interest, and that the Treasury stopped that?— Yes. It was not myself. The thing had been over several years. The custom was that the investment should be offered to the Treasury first. Ido not know how long ago, but I know it is several years back. That was the rule. 5. And as soon as those investments outside at higher rates of interest stopped the Post Office began to feel the effect of it?—lt was stopped some time before this. 6. Were they not proposing to lend when the Treasury stopped them at that time?—No, it was carried through—the £50,000 to the Harbour Board. 7. But you were gradually stopping them? —That was the effect. My contention was that the investments were being offered outside, and the Treasury wanted the money. The rule had been laid down in Mr. Heywood's time that the Post Office had to offer to the Treasury first. 8. Did the Treasury gradually stop the Post Office from lending the money outside and tell the Post Office that they wanted all the money themselves? —The rule was not introduced in my time : it was before my time. 9. Then the Post Office found they could not lend to the Department profitably at 3J per cent.? —Yes. The Minister then minuted the letter on to me for remarks, and I replied, "The Right Hon. the Minister of Finance. —I recommend that in future all loans from the Post Office raised by the Treasury be at the rate of 3f per cent. Loans for lands for settlement and opening up Native lands raised by the State-guaranteed Advances Office should pay the Post Office 4 per cent, interest. Since my previous memo, the Advances Board has given preference to loans of £5,000 and under, the rate, being 3| per cent. A sufficient amount will have to be obtained from the Post Office at 3 \ per cent, to satisfy those loans already granted at per cent., but future loans to local authorities will be entertained at not less than 3f per cent. —J. W. Poynton." 10. What is the date of that minute?— The 29th December, 1911. 11. And what is the previous memo, you referred to? —I do not know the date —it was stamped as 30th October. 12. Since the 30th October, 1911, the Advances Board had given preference to loans of £5,000 and under at 3f per cent. I —Yes. 13. And there have been no loans since that date at 3| per cent.? —No. On the 14th November the question of the shortage of money was discussed by the Board, and after that date no loans were entertained at Z\ per cent. 14. I want the date of that previous memo, fixed? —I did not get that back from the Minister until the Minister minuted it back to me on the 27th December. 15. Did you prior to the 31st October advise that it was unwise to lend over £5,000 in one amount at less than 3? per cent. ?—Yes, it was on the 30th October. 16. And is that the memo, you refer to as the " previous memo."? —Yes. 17. And that is the date on which you suggested no more loans should be granted?—lt was brought before the Board at the first meeting in November. We discussed it then, and then on the 14th November we. granted the first loans at 3f per cent. 18. And all loans since have been at 3| per cent. ?—Yes, and not more than £5,000. 19. The previous memo, you referred to is the 30th October, is it? —Yes. Ihen the Minister referred it to the Secretary of the Post Office for his views, and the minute from the Secretary of the Post Office on the 3rd January, 1912. is as follows : " The Hon. the Postmaster-General. — The proposals made by the Treasury will be quite acceptable to this Department. I should be glad if the matter could be arranged as early as possible, as the rate of interest we are at present receiving from the Treasury is too low. The policy of Government appears to be involved in the question of loans for lands for settlement. This Department would be quite content with 3| per cent, all round. —D. Robertson." 20. Did you write on the 29th December as follows : " A sufficient amount will have to be obtained from the Post Office at 3A- per cent, to satisfy those loans already granted "1 —Yes. 21. Are those for loans provisionally approved or already granted—is there any clear distinction between the two?— Yes. The Office has always recognized that when a loan is provisionally approved and people have received tenders for the works and completed their proposal, we have no right to refuse it. and we do not think it advisable to do so.

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