The Dominion. THURSDAY, MAY 11, 1911, THE PUBLIC DEBT AND FUTURE BORROWING.

Dominion, Volume 4, Issue 1124, 11 May 1911, Page 4

The Dominion. THURSDAY, MAY 11, 1911, THE PUBLIC DEBT AND FUTURE BORROWING.

The public has no doubt noted the amount of attention which the Act-ing-Minister for Finance devoted in his Duncdin speech to the debt of tha country. A very elaborate defence of tho huge burden which the Government has heaped on the people of the Dominion was put forward by Me. Millar, and we regard this as a very good sign. It is quite evident that Ministers recognise that there is a real necessity to put as good a face as possible on things and to endeavour to lull the suspicions of those who, startled by the record borrowing of last year, have grown uneasy at the liabilities being incurred in their name. It is to Mr. Millar's credit that he frankly admitted the full total of the public debt. Siir Joseph Ward has striven to minimise tho effect on the public of this enormous sum by dividing it into two parts, one of which he calls the Public Debt, the other he covers iip in a special table relating to the State Lending Department. The actual amount of the Public Debt is, as stated by Mr. Millar, £81,000,000, of which sum £6,650,000 was borrowed last year. Two points were made by the Acting-Minister for Finance in his apology for the dimensions of tho Public Debt. The first was the plea that a large proportion of it is reproductive or interest-earn-ing,; the second is in the nature of a half promise. that it will not be necessary to introduce a Loan Bill during the coming session. Before dealing with these issues we propose to quote some official figures which should cnabJo the public to grasp at once the significance of the increased rate of borrowing in recent years, especially under tho Ward Government, which has succeeded in breaking all records. The following figures, with the exception of the one year noted, arc from the official Year Book:

; J Per March Estimated Xet he-id of 31. population. debt, population. Ballanoe Government.

ihis table, which, it will bo noted, is based on the net, and not the' gross, Public Debt, is a most interesting evidence of the accelerated pace at which the country has been plunged into debt. During Hi;.' Balance's brief reign the self-reliant non-borrowing policy began to make itself felt. The additions to the total debt were almost infinitesimal and tae indebtedness per head of population began to drop. Mn. Sedd'ox, his. successor, began well, but gradually the rate of borrowing began to grow. Even so, at the end of ten years after .the advent of the Liberal Government the net indebtedness per head of population had not increased by more than £3 ss. During the next ten years, however, which includes the plunging period in which Sib Joseph Ward has controlled the finances of the country, the indebtedness has increased by something like £lo per head. In other words the Government, during the past 10 years, has increased the liabilities of each' member of the community, in the matter of the Public Debt, at about four times the rate it increased them during the preceding 10 years. And this is the "taper-' ing-off" policy we have heard so much about in the past. It may help to a clearer understanding of the position if we quote the figures for the Commonwealth of Australia for the latest year at our disposal, namely, 1909:

Xet indebted- '. ■ ness per head. '■■ . . „ •£ s. d. ' Isew Zealand •. 70 0 0 ' Commonwealth 57 G G The Acting-Minister for Finance, being forced to admit the' increase in the- Public Debt, has endeavoured to justify it by claiming that a large part of it is reproductive. No doubt this is true: part of it does pay for itself. But this docs not rid the country of the liability for the sums borrowed; and the seriousness of that liability is increased by the fact that to suit the necessities of Sir Joseph Ward's financial schemes a large portion of the money borrowed has been raised on short-dated debentures. Thus we have no settled assurance in regard to a large proportion of the money borrowed that it will continue interest-earning; for with these short-dated loans the country has to keep going on the market to get them renewed and afc any time we may find ourselves placed in a position of being unable to renew, save at a very costly rate —a higher rate than is at present being paid. How would these "reproductive" loans look then 1 During for instance, over six millions of our loans fall due and will have to be renewed. Nearly the whole of this amount is money borrowed since 1900—sdme of it as recently as 1908. What would be the country's position if on going to the London market to renew this lo,m it found that a war or some financial disturbance prevented us borrowing except at a substantial advance on previous rates? Wrfch the dangerous and costly habit of short-dated loans which Sir Joseph Ward, for some reason, is so partial to, this risk is not one to be treated lightly. There is just one other point in regard to these so-called reproductive loans. Mr. Millar quoted a table in which he showed the interest payable, tho interest earned, and the balance of the latter over the former. This last item he termsd the "profit" made out of these loans. This so-called profit he totalled up to reach last year the quite respectable sum of £2-16,574. MR. Millar must have some very curioils ideas on profit and loss. The position he takes up is analogous with that of a shopkeeper who says: "I bought £50 worth of goods and I sold them for £60 and my profit, therefore, is £10." He ignores altogether the cost'of working his busi-

ness—rent, wages, etc. Mr. Millar, unless he has mis-stated the position, ignores altogether in all cases, save that of the rail.vays (the ''profit" from which is very questionable), the cost of the varioiu Departments which are necessary to administer this borrowed money.

Unfortunately, space does not permit us to deal in any detail, on this occasion, with Mr. Millar's reference to tho possibility of being able to do without a Loan Bill this year. We are really surprised that Mr. Millar should descend to so shallow a political dodge to delude tho publie. In view of tho fact that the Government has just borrowed £6,850,000 this hint at slackening down can hardly impress anyone as a remarkable evidence of virtue. But the position is very much worse than this. Mr. Millar knew, or should have known, when he made the announcement that the Government might be able to avoid the necessity for a Loan Bill during the coming session, that the Government already has power to borrow over four million povnds' without passiiifi a Loan Bill at all. The public, no doubt, were led to believe from the Minister's statement thai there was a possibility of the year passing without any addition to the Public Debt. The position is, however, that the Government have created a situation under which they can borrow over four millions annually without consulting Parliament at all, and should they not borrow to the full extent permitted in any one year they do not lose the right to borrow the balance—it is simply carried forward. Thus, if they borrow only three millions one year, they can borrow five tho next, and so on. And in face of this state of things Mr. Millar tells the country it may not bo necessary to bring down a Loan Bill this year. "We should hone not.

£ £ s. U. 1891 ...... C26,65S 37,3-13,308 59 11 0 189!i 037,172 S7,G75,200 59 2 0 18911 656,187 38,111,070 58 2 7 Seddon Government. 1891 67G,7-!7 38,87-1,491 57 S 10 1895 G89.475 39.635.03S 57 9 9 1S9G 703,187 J2.271.SS0 «0 2 -1 1897 717,019 4-1.3G6.G18 UO 13 4 1SDS 731,713 41,031,521 GO -1 11 1899 7-16.G73 46,080,727 (il M 4 1900 758.G1G -IG.930,077 Gl 17 3 1901 "2,719 -18,557,751 G2 16 10 1902 759,994 51,837,631 fij 12 4 lilO.'i 814,8-12 53,555,780 B5 15 3 1904 ...... 8.-58,954 55,061,328 05 12 8 1805 SGJ,971 57,403,632 (Jβ 7 4 190ii 889.96S 59,670,471 67 0 U AVakd Government. 1907 913,373 01,276,5-12 G7 1 0 1905 937,537 03,521,901 67 15 1 1909 908,313 07,731,545 70 0 0 1010 977.90U 71,778,580 72 13 9 1511"-' 1,000,000 7S.4Cfl,000 7S 8 0 *t T noffl«ijI.