B.—l [Pt. ll].

XII

while loans to the amount of £453,250 were converted or replaced, £5,266,476 were renewed, and £24,286,565 were redeemed, in each case by the issue of securities of an equal nominal amount. The large amount of redemptions by the issue of fresh securities is accounted for by the fact that securities held by the Post Office to the amount of over £15,000,000, bearing interest at 4| per cent, and 5 per cent., were cancelled before maturity, in terms of section 24 of the Finance Act, 1921-22, and securities of an equal nominal value bearing interest at 4 per cent, were issued in their place. Consolidated Stock Loans not allocated to Accounts. During the year the attention of the Treasury was called to the large amount of the public debt represented by consolidated stock the liability for which had not been allocated to the appropriate accounts in the statement of the public debt (8.-l, Part III). In the absence of such an allocation it was impossible to ascertain whether the whole liability had been taken into account in the various departmental balance-sheets, and for this reason the Audit Office drew attention to the importance of making an allocation, if possibleIt is understood that the Treasury has arrived at an allocation of this stock, but such allocation has not yet been referred to the Audit Office, nor has it been incorporated in the Debt Accounts. The amount unallocated at the 31st March, 1926, was £55,671,995, and will be found under the heading of " Miscellaneous " on page 58 of 8.-l, Part 111. Debt Repayment. . Consequent on the passing of the Repayment of the Public Debt Act, 1925, certain old sinking funds have ceased to exist as such, and, together with the £13,500,000 which was transferred in previous years from the Consolidated Fund to the Discharged Soldiers Settlement Account, have become capital moneys of the Public Debt Redemption Fund constituted by the above Act. The £13,500,000, however, is subject to reductions arising from the revaluation of discharged soldiers' properties by the Dominion Revaluation Board. At the 31st March, 1926, the amount of such capital moneys was as follows :— Public Debt Redemption Fund : — £ Held by the Public Trustee .. .. .. .. .. 7,966,689 Held by the State Advances Office .. .. .. .. 3,258,956 Held by the Discharged Soldiers Settlement Account .. .. 13,500,000 £24,725,64-5 These moneys are not applied directly to the redemption of the debt, but the Act makes a fixed charge on the Consolidated Fund for that purpose, equal to | per cent, of the debt coming within the provisions of the Act, together with 3J- per cent, of the debt redeemed in terms of the Act, and the interest on the Public Debt Redemption Fund is credited to the Consolidated Fund as a set-off against such charge. The wisdom of this course is evident, as it ensures that any reduction in the amount of the Redemption Fund will not have the effect of reducing the amount applied to debt repayments, which will remain unaffected, and gradually increase year by year. This provision for debt repayment is estimated to extinguish the debt in about sixty years from the date it comes under the operation of the Act, and embraces the whole of the debt with the exception of the following loans, for which special sinking funds or other provision for repayment exist: — Amount of Sinking Amount of Loan Fund at at 31st March, 31st March, 1926. 1926. Loans with special sinking funds: — £ £ Electric-supply loans .. .. .. .. 17,391 4,809,248 Nauru and Ocean Islands loans .. .. .. 19 539,850 Samoan loans .. .. .. .. .. 4,747 110,000 State coal-mines loans .. .. .. .. 48,199 227,601 Westport Harbour loans .. .. .. .. 186,558 700,100 State Advances loans .. .. .. .. 2,017,348 27,771,153 Total .. .. .. .. £2,274,262 34,157,952 Debt funded with Imperial Government:— Public-works loans' !! \ S? 1 <«'•■»»« *° the loon i„.j 183 ;„ 21 War loans .. ..J " Total debt not subject to Repayment of the Public Debt Act, 1925 .. £60,414,974 The Repayment of the Public Debt Act provides for an actual annual repayment of debt, increasing in amount from year to year, and, as compared with the system of an invested sinking fund, which it displaces, has the outstanding advantages —firstly, that it ensures an immediate repayment of debt; secondly, that it overcomes the difficulty inherent in realizing large amounts of investments as and when required. In addition to these advantages it ensures a saving to the Consolidated Fund of the interest oil redeemed loans in excess of 3|- per cent., the amount of which saving will in course of time become very large, and could if thought desirable be applied to the further reduction of the public debt.