IMPERIAL FINANCE

Press, Volume LXIII, Issue 19163, 21 November 1927, Page 10

IMPERIAL FINANCE

CONSOLIDATION OF WAR DEBTS.

BRITISH BANKER'S SCHEME. j (FEOU OCB OWV CORHESrOKDEST.) SYDNOY, November S. To discuss unofficially the great problem of Imperial finance with Australian and New Zealand financial experts is the mission of Mr J. F. Darling a director of the Midland Bank, London, So arrived in Melbourne recently Mr Darling, bringing a ripe knowledge of financial conditions, has given the closest attention to the treatment ot the National War Debt, amounting to £3 000,000,000, which will shortly iall due For seven years he has been studying a comprehensive scheme which, he feels sure, would do much to solve the many money problems Such beset the Empire and which would in practice, help to link with a strong golden chain all the peoples of the Dominions and Britain. His suggestion is the issuance of Imperial consols. , ~ . ,',, „„. The scheme m detail is as follows.— "The issue would involve the consolidation of certaiu debts of Britain and the Dominions in a unified form, and at the outset there arises the question of liability Even though it were clear y indicated that each country was only responsible for its own share yet, in. the event—however improbable—or default of any country, would not the others find it necessary to carry the additional burden? Would not the alternative be a reduction in interest on the whole issue? This difficulty could, however, be overcome by a division of Imperial consols into two classes . of stock on the principle of preference and ordinary. A pool would be formed, towards each each country would contribute its share of interest and sinking fund. Tho preference stockholders would have a prior claim on the pool, and as Britain would be much the largest contributor, they would emerge with the same security that holders of our war loans possess—the security of the British Government. On the ordinarv- shareholders would fall the risk of default. There seemed to he no valid reason why a State, any more than a company, should not issue a security enabling the holder to participate in the prosperity of the undertaking. The declared incomes of each country for income-tax purposes would be used to measure that prosperity. "Specially attractive arrangements could be made for the issue of small amounts to shopkeepers, householders, and especially to housewives, all of whom would have a direct concern in advancing the interests of the Empire. A decided impetus would thus be given to the movement to support homo rather than foreign markets. Conversion Savings. "On the basis of the proportion of war loans, the conversion requirements of Great Britain would be £3,000,000,000, or 88 per cent., and the Dominions £400,000,000, or 12 per cent. The greater part of the share of Dominions would be used for converting their loans in London at an early date, and in repayment of war advances made to them by Great Britain. For each Dominion, however, there would remain a considerable balance, which could be used for future developments. Assuming that the flotation could be made on the basis of 4 per cent, preference and a basio rate of 4$ per cent, for ordinary the savings t be effected at the outset would total more than £30,000,000, of which the share of the Dominions would be about £3,700,000. To prepare the way for the issue, cheap money is necessary, and valuable assistance could be rendered by the Dominions contributing a portion of their gold, on the 88-12 basis. Taking the Bank of Englands sto'ck of gold of £150,000,000 as representing 88 per cent., the Dominion's proportion of 12 per cent, would be £20,000,000, thus constituting what would in effect be a gold pool in the hands of, or at any rate under the control of, the Bank of England. So far at least as Australia, New Zealand, and South Africa are concerned, they could probably make their respective contributions from existing stocks of gold without interfering with the legal reserves held against their currencies. Credit could be given for the gold to the holder by the Bank of England as required." Mr Darling added that there was not any financial instability in Great Britain. On the contrary there had never been any uneasiness in that regard. However, there was no industrial stability at present, and the basic industries—coal, agriculture, cotton, iron, and steel—had not yet been adjusted to the parity of exchange brought about by the reduction of the gold standard Much had yet to be done, and it was probable that reorganisation would take place, perhaps some sort of tariff being introduced. The establishment of a project of Imperial finance would have a very beneficial effect on the industrial situation in Australia, for instance, as well as in England. There should be no need for Australia to go to the United States for loan requirements. It was merely a question of organisation and the more Great Britain and the Dominions worked together, the better would be the results.