DEBT REDEMPTION.

Dominion, Volume 3, Issue 830, 31 May 1910, Page 6

DEBT REDEMPTION.

THE SINKING FUND PROPOSALS. AN AUSTRALIAN VIEW. In its issue of May 26 the Sydney "Bullotin" devotes some attention to the proposal by the Prime Minister, Sir J. G. Ward, that there should be established a sinking fund for the redemption of the public debt in 75 years. / It says: "TEero is one simple way to. get a country rid of debt—(l) Leave off borrowing; md (2) pay off what you owe. So far as can bo gathered, the Treasurer doesn't propose to do anything so simple as that. .Hβ seems, at the most, to intend to provide a sinking fund for the extermination both of existing and future debts. He mentions 75 years as the sinking-fund period. The only way, of course, in which the country can get out of debt in that time, with a 75-year sinking fund, is by borrowing no more at all. But it is plain that his object in providing for a sinking fund is, not that he may get out of debt, but that he may get into debt more easily. The benefit of sinVing funds to the country's credit would be great,' he eays. . "Still, as between Sir Joseph Ward's scheme and,nothing at all, the "Bulletin' prefers Sir Joseph Ward's scheme. Tp get rid of existing debt even in 75 years is something gained. That debt can only be honestly got rid of by putting some actual surplus of revenue over expenditure into the hands of sinking fund commissioners. The bouble is that, when this goes on contemporaneously with borrowing, the sinking fund contribution may be to all intents and purposes borrowed. If a country is borrowing nothing—if it is relying wholly and solely upon itself — then every contribution to the sinking fund must bo the real thing. But if a country, is borrowing, then it may, pay out of loans for something .that ought to be paid for with revenue, and pass the amount to the sinking fund—an indirect way of providing the sinking fund out of loans. No country can be sure, then, that its sinking fund is the real thing while it also pursues a borrowing 1 , policy. "The Treasurer ' says he is prepared— and he believes tho Dominion is—to pay a. small, sinking fund contribution, not only to get rid of existing loans, but also future loans. In that oaee, why borrow? Supposing the State is prepared to pay .£IOO,OOO a year towards the now loans sinking fund. Why not invest that in works which wil} produce 4 per cent? The next year another .£IOO,OOO provided by the people and tho interest provided by the work "would give Xlftl.OOO for investment. Then the thing would go on like this:— Ist _.; 2nd ' „ 101,000 3rd 103,160 4th 112,480 sth '. ....„ 116,985 6th ..._ _ 121,065 7th 126,532 Bth 131,593 Oth _ 136,857 ' 10th 142,331 Thereafter tho figures would rush along at a breathless rate. In 50 years, if the Dominion puts up only .£200,000 a year, and invests it in works producing i per cent., and invests the interest-earnings also in the same kind of works, it will have .£30,500,000 worth of works absolutely free from debt. And of that ,£30,500,000 it will have put up in the shapo of annual instalments only .£10,000,000. By putting up .£200,000 a year and investing it in works returning 4 per cent, it can .have <£284,C62 to spend in 10 years. It can have t £i2l l £<iS to spend in 20 years. It can have .£1,366,605 to spend in 50 years. No borrowing policy will give that result."