IMPERIAL FINANCE.

Dominion, Volume 6, Issue 1695, 11 March 1913, Page 3

IMPERIAL FINANCE.

DEVELOPMENT LOANS DISCUSSED. BY MR. HAROLD BEAUCHAMP. AN EMPIRE BOARD. SECURITY EVEN ABOVE CONSOLS." Giving evidence before the Dominions Hoyal Commission yesterday, Mr. Harold Beauchamp, acting-chairman of the Bank of New Zealand, suggested a method by which he thought British dependencies might be I able to borrow on advantageous terms. "Everyone," he said, "is agreed, in principle, on the advantages of Imperial cooperation in matters of common interest, but to far no practical scheme has been evolved. If, however, it is possible to start a practical scheme by which am existing want could be satisfied, there would very likely follow a great extension of. the principle of Imperial co-operation. The problem is not cosy of solution, but there is one aspect of it that has hitherto escaped the notice of the Dominions' Governments. and also of the Government of the United Kingdom. It is a point that might be developed to great advantage— namely, the principle ot a joint Imperial guarantee in connection with loans lor defensive and for improved communications (shipping, harbours, cables) between the different parts of the Empire, and other matters of Imperial importance. All *these have an intimate bearing upon the protection and development of the trade and commerce of the Empire. The full development of our principal harbours j the desirability—if not the necessity—for an absolutely all-British cable route; and the cheapening of cable communication generally, are matters ol greater importance than they ever were, and the funds for such enterprises could be procured more cheaply under a joint Imperial guarantee than under the sole guarantee of individual partners in ; the imperial concern. j \ Principle Already Established.

"One step forward in this direction has already been made in connection with the Pacific cable, and, in the caso of one of our own important public works, namely, tho construction o£ the Auckland graving dock, wo have an instance of a public work that is of Imperial importance, but which could scarcely have been accomplished without the generous assistance afforded by the British Admiralty. It ( is true that "in this instance the work was made possible by means of a grant in aid, and not by : an Imperial guarantee; but | the principle of joint expenditure - and partnership was established. i'rom the point of view of the British Government, it can hardly be questioned that' a guarantee, .with Jittle or no fear of recourse, is in all ways preferable to direct and immediate payment in aid. "The interest now payable on Dominions''loans is, roughly, 4i to ii-per cent. Thus, New Zealand's new 4 per cent, loan lias just been placed at about 1 3-8 per 'Cent.—a rate more advantageous to tho Dominion than that at which foreign nations in the stage of development can obtain funds, owing to the Imperial feeling of the London money market, but much more costly than the rate which a joint Imperial guarantee would ensure. If loans could be raised atjjie cheaper rate tinder a joint guarantee of the Imperial and Dominions' Governments, the result would be an immediate economy and aii obvious service to Imperial organisation. Empire Development Board. "With this, object in view, it is desirable that an Umpire Development Board should Ire created, whose functions would be the examination of schemes brought forward for the'purposes-stated, such purposes being reoognised as of Imperial value. If approved, the service of the loans issued for the special works, 'duly specified' and duly limited, would be guaranteed by the Mother Country and the Dominion Governments. "Loans under joint guarantee are not. without precedent. There is the case of the guaranteed Egyptian three per cent, loan of 1885, the issue of which was the .turning-point in the restoration of Egyptian finance. This ,loan, issued by . the Egyptian Government, and secured upon purely' Egyptian revenues, was guaranteed joiutlyand severally by the six great European Powers. Therd is also the case of the Turkish guaranteed four per cent, lean of 1855, which was guaranteed, a? to interest, by the British Government jointly with France. Our own' Maori War loan, namely, the New Zealand four per cent, loan of 1870, was guaranteed by the ■Imperial Government; and there are instances of other colonial Governments that have been similarly assisted in the ' raisins of loaiis by the guarantee of tho British, Government.

"The borrowing Dominion, working in file way suggested with the support of the Empire Development Board, would lie able, in ordinary times, to raise the funds required at, suy, three and a quarter per cent., aiid the advantage would, of course, be the difference between that rate and the four and a quarter per cent., or more, which it might have'to pay if it attempted to raise the money on its own security alone. The borrowing Dominion would be primarily responsible for the interest and principal of the lean, the guarantee of the Mother Country aild the other Dominions being called upon only in the event of the Dominion's default, which, under efficient supervision, would be most unlikely. The share of each guarantor -would bo determined by agreement, the precedent of previous issues of similar character being, as far,as may be, followed. The service of the proposed loan would be a first charge on the revenues of the borrowing colony. Development Loans Justified, "Exception may be taken—indeed, is certain to be taken—to this idea, as objections have been through all time raised against new ideas of the kind. Thoso of us. who have been engaged in the development of new ideas in this, t.lift outer■ most part of the Empire, know that the strongest objections were raised to Governmental financial schemes that have been of proved utility and of enormous advantage to tfie country from their very inception. For instance, strong objection was raised to the Governmental loans I'oi the acquisition and greater development of private landed estate; similarly, objection was taken to> Government loans for advances to soltleia engaged in developing j the lands of the colony, and to the sys- I tem of Government loans to local bodies, : but to-day, there are few, if any, sane business men prepared to advance such criticism so long as the moneys, are judiciously borrowed and loaned for developmental work of a truly national character. "An Empire Development Board of high status would not only add to the stability of the secufilies, but would be an adequate and perhaps necessary, check upon 'v;ild-cat' or linremunerative schemes that or? neither in the true interest of an individual country nor of the Empire as a whole, while, at the same time, it would have n practical and not a purely sentimental binding influence in so fains the Mother Countrv and the outer Emniro are concerned. It must by this timo have become to the Commission, from visual observation as well as from the formal evidence tendered, that the potentialities of this country are very great, and that it can only be develop»d by judicious eXDenditure of capital. By such means- only can stroiia nations be built un in the new lands, and any scheme that will produce specified portions of the necessary capital at a cheap .Tate must therefore be in the interest of the new lands reouiring it, in the interest of the Mother Country whose trade with the outer Empire is so great, and in tli" interest of the Empire' a- a whole. T resnectfully submit that this able Commission should give the ic'ea its serious consideration, and endeavour to develop it on,its march through the self-governing Dominions. The Scheme in Practice; To Mr.' Tatlow: He thought this scheme would l:e an entirely, practical one. To Mr. Campbell: If the board were asked to consider, as it would be, very widelv different projects, they could consult the best available exiwrts. If this were done, ono hoard ought to be suffi-

cient to consider all questions of guar antee.

To Jlr. S-nclair: The board would not have the actual spending of money, but only statutory authority to sanction the Imperial guarantee being Riven to any particular loan. I'ir.st of all the Parliament of the country interested would nave to sauction the raising of money. Sir Itider Haggard: I suppose you know that this is a most extraordinarily tarreaching proposal ? . Mr. Beauchamp: I consider it is of paramount importance, sir. Sir Eider Haggard: The idea I gather is that it would result in two things in the constituent parts of the Empire obtaining money at much more reasonable rates, and in tying the Kmpiro together bv a strong bond of mutual interest. Jlr. Beauchamp: I think it would forui a strong link in the Imperial chain. . . . One hears a good deaf of the crimson thread of kinship. "I believe a great deaj in the crimson thread of kins,iip» but l think this would have a more far-reacn-ing effect. Sir Rider Haggard: If such a board wero formed and put into action would it not be an enormous advantage to the Dominions which wished to obtain tuiids, and also to be of assistance to the hmnire ? jlr. Beauchamp: Exactly. There may be overseas Dominions anxious to assist the Empire which are now deterred from it because they can't raise money on satisfactory terms. "Premier Security of the World."

Sir Rider Haggard: Would money so raised not become the premier security of the world? Mr. Beauchamp: Undoubtedly, even above Consols, in my opinion. Sir Rider Haggard: Do you suggest that the objects that might be laid before such a Ward should be confined to defeasive purposes and communications? Jlr. Beauchanip: That must be left very largely to the board. Sir Eider Haggard: You would not shut the door to the cognisance of other mattors? Mr. Beauchamp: No; conditions change so rapidly that the scope of the jxiard s powers cannot be exactly defined now. No Parliament (he added) need_ lose any part of its dignity by tho setting up or a board. It was no more than a tarreaching scheme for the mutual advantage of the Great British Empire as a whole. To Sir Alfred Bateman: A board ought to be able to determine what matters were of Imperial interest. He did not think that it would bo necessary to have a limited order of reference, such as, say, defence, cables, and communication, and liarbours. He thought that New Zea and should be called upon to pay its share for the improvement of 'harbours within the United Kingdom. Tile Dominions must assist the Home Government, as they expected the Home Government to assist them. „„ . To Sir Edgar Vincent: This was merelj a device to assist, the colonies to borrow at hotter rates. The borrowing powers of colonics would reniPiin intact. The liegoiations for the Pacific Cable lasted several years; under this scheme such proposals could be put through with greater celerity. To Mr. Lorimer: Loans raised under a guarantee would have a first preference on the revenues of tho borrowing countij, but not to. the exclusion of existing obligations.

What of the Governments? • To Mr. Campbell: No Government represented on the board by a delegate would have power to veto any guarantee of which they did riot approve. No Government would liavo nny rignt ol withdrawal from any guarantee if the l»ard as a whole approved of it. To Sir Edgar Vincent: It might possibly be necessary to refer back individual proposals, to the several Parliaments. Lven this method of procedure, though cumbersome, would be preferable to_tlie method of procedure followed in the Pacific Cable negotiations. ' , Air. Garnett suggested that it was extremely unlikely, having regard to the iealousv.of British peopleto con sen eto the popular House of Parliament the complete control of the purse, tliat Pailiamcnts would agree to P«sS t over this nower almost absolutely. For they would, lie urged, be passing over power to incur liabilities which might mean the lmposihMr.°Beauchamp replied that this objection was scarcely well founded, for the advantages would far outwwgh all pioblematical disadvantages. The real liability which might be incurred by country was not very great, for it would never be operative unless any part of the Empire made default.