The Dominion. FRIDAY, JULY 22, 1910. SINKING FUNDS.

Dominion, Volume 3, Issue 875, 22 July 1910, Page 4

The Dominion. FRIDAY, JULY 22, 1910. SINKING FUNDS.

4 By the time the Government brings down the Bill that has been responsible for the appearance of that humorous newspaper _ heading, "Jixtinction of the Public Debt," Parliament will, we hope, have grasped the fundamental points that must be insisted upon. The first ofthese is the inadequacy of the sum proposed to be set aside, and the second the unreality of the scheme outlined by the Pruie Minister. An annual payment of £150,000 will in 75 years amount, with interest accretions, to £67,294,050. During that time, if all the Prime Minister's financial methods continue in practice, new debt amounting-' to between £200.000 000 and £300,000,000 will, have been created. A scheme that aimed at a real application of the principle involved in the phrase "extinction of tlie public debt" would manifestly be so framed as to leave the country debt-free on maturity. Provision ought therefore to have been made for the building up in 75 years of a fund of just about five times the existing debt, and this can be done by making an annual payment of £750,000, which is much moro, relatively to population, than the sinking-fund charge in Great Britain. Kecently British critics were complaining because Mr. Lloi'd-George had reduced the debt charge from £28,000,000, at which figure the Balfour Government left it, to £24,500,000. If the Liberal Government had taken the per capita figure suggested by Sir Joseph Ward for this country, the charge would have been reduced, not to £24,500,000, but to about £7,000,000. But, of course, it is not necessary to stress-the inadequacy and unreality of the Government's scheme, since that is done quite emphatically enough, although .quire unintentionally, by'the Prime Minister himself, who rises into eloquence only when he comes to speak of our great future, of 'a great century of growth, and, generally, of the needlessness for any real energy in getting out of pawn. The Government's friends are industriously striking attitudes of admiration at this scheme, which is extolled in terms ranging from i high adjectives to that more delightfully humorous thing, the pro phecy of immortal fame for Sir Joseph Ward as the great debt-, extinguisher. But nobody in his heart really feels at all enthusiastic about a scheme that is so plainly leisurely and inadequate, and that, on examination, ia just as plainly bogus. . ' Although he goes to greater pains in the Budget than in his Winton speech to endeavour to show that the sinking funds cannot be annexed, the Prime Minister is as far as ever from showing that the fund will be a real one It is in vain for him to say that annexation of the funds "would be impossible, as they would always be closely invested by being lent out to hard-working settlers." In passing we cannot refrain from a word of admiration for the delightful übu of liiu term "hard-working" as a special proof of the soundness of the schemo. So long,as New Zealand is borrowing, the Government can — and this Government judged on its past '" record will—pay out of loans for something that ought to be paid for with revenue. A concrete case showing how this can be done will help to make this point clear. Supposing that in the normal course of . events £650,000 would be transferred from revenue to the Public Works Fund, and £1,G00,000 borrowed for that Fund. What would happen would be this: Only £500,000 woul.d be transferred, and £1,750,000 would be borrowed. And £150,000 would be paid from revenue into the sinking fund. The state of the "surplus" and of the Public Works Fund would be unaffected by tlio transaction, the only . real result of which would be that the sinking fund, apparently composed of revenue; would really be loan money—the little hole it made in the cash-box would have been filled by borrowed cash. And of course there are other funds and accounts that can thus be operated. For example, £150,000 less might be charged to revenue for working railways, setting free £150,000 for the "sinking fund." And the £150,000 formerly taken from revenue for the railways can be supplied by adding .8150,000't0 the loan money used for the Open Lines Account. Loan money and revenue money are so inextricably mingled in so many ways that the public will justifiably experience grave doubts when the Prime Minister opens the "sinking fund" cashbox, so to speak, and says, "Do you see that sovereign? It came out of revenue." Yet that is what he must be able to say without fear of contradiction if he wants the sinking fund to be a genuine thing. The only possible way to provide a true sinking fund in a borrowing country is to invest the annual charge in some security that is quite outside

the sphere of our own finance. The primary object of the scheme now proposed is, not the extinction of the debt, but the improvement of our credit abroad. In other words, the increasing of our facilities to borrow. So much the Prime Minister incautiously let slip in his Winton speech. Everyone would welcome the establishment of a good and real sinking fund, of a sort that would ■ not lend itself to the financial jugglery in which the Government is so expert. It is the duty of Parliament, not to reject the Prime Minister's proposal outright, but to seize the opportunity of converting a bogus and inadequate offer into a genuine and substantial enactment. If, however, the Government insists on its own scheme, the friends of sound finance and national straightforwardness will have no choice saveto throw it aside.