PARLIAMENT IN SESSION

Dominion, Volume 10, Issue 3153, 3 August 1917, Page 6

PARLIAMENT IN SESSION

THE LOAN BILL : t:: " k -• ■' \ . _ INTERESTING "SECOND READING , 'DEBATE RATE OF INTEREST i FREEDOM FROM INCOME TAX CRITICISED

Tho House ■ of Representatives met at .2.50.p.m. . ■ . ■ , , „ la*answer to a.question put by Air. ~ Keed'(Bay of Islands),, the Minister of Affairs (Hon. G. W. Husseli)

: "'sauHthit /it, had been decided, to set up '.a,Royal Commission to inquire, regardof counties _in the inortL'or Auckland district, with a view -.' 'foVseaing that community of -interest was .-. observed in-the defining of; the' counties. v Mr. G. J. Anderson (Matnura): Make \it "apply^;to ! the whole .country. _ There ' Are other places that need attention. , Sir Russell said'that if members of the .. House expressed' a wish ' in 'that direction lie would consider the extension: of ■ the'scope, of the comaiisgjon U> include ■ other portions of New. Zealand. - / r- • s--' '■ ■ ■ ■ ■ / ' THE LOAN BILL SECOND READING DEBATE V - "s '• "". " 1 The War Purposes Loan Bill wafi.intro- ' duced at 2.40 p.m., and was read a first time without ai6cußsion. • SIB, JOSEPH WAED (Finance Minister) asked, that theißill.be allowed to :, proceed, as it was urgently necessary to get.the loan prospectus out as-soon as vpossible. ' , „ ~. ' '"■".Mr. T.; K. .SIDEY lOTHnedm South), whose Definition of Time Bill' was on .the'top of rthe Order Paper for second -'v. reading, protested against I.oa'n Bill v- being, introduced and, .blocking private - ' .'members' Bills'on the "only private memt.rf'fers' {day they. wero likely -to get 'this 'V' session.. - .1 ~', Mr. Hindmarsh: Is that your Daylight • >. -Savingjiill?. ' Mr. Sidey: "Yds. * I can, understand •i A' ihe Prime Minister . smiling. ' (Laugh- ' ter.) I'lie Prime Minister does not seeni to like, the';Bill. v It seemsNto me very' unfair that this course'should'be adopt-.- ■ ed on 'this occasion." .He: concluded' by/ making an offer to tlie Prime Minister; that ho• would not object to the Bill . going on if another opportunity were given him of moving, the second ieadinj* :of his Bill.' . ' . .Sir Joseph Ward .said that the ■' Bill made provision for tho authorising of 21 millions. He did not suppose'that ILi'jthe,necessity for raising the money' was -:C r going'to be debated;: A full, opportunity . V would be afforded in the 'Financial De- ' - bate for : digcussing everything about the loan. He was asking the House to facilitate the passage of the Bill, because tho - -I nee'd for it was obvious,' and .the urgency . .was great. ; ■ ' V ' r The Eight-Hon. W. P- MASSET said •'that lie hoped the' member for Duncdin . '/South did,not imagine that'.tho Govern? "i raenf had introduced the Bill - block' his Bill. Thei Loan, Bill jvas-'ur- ' ; gently .necessary, and the 'Government • ' Vwished to have it passed into law at the earliest possible moment. In order to ■■■ .'relieve the mind of the honourable mem-

ber he could give tho assurance, that another opportunity would be given for moving the second reading of tho Definiti«"" of Time Bill. ' ■ This brought to their feot three other members—Mr. Veitch,!: Mr. Hindmarsli, : and Mr. Wright—who had Bills\on the OrUer Paper. They wanted a like conces-* : sion from/flio Prime Minister. .■ Mr. Massey ,said that the reason , for 'giving a' concession regarding the De- ' firiitioh of Time Bill was. that it was at :tho top of-tlie Order Paper. Thp probability was that tho 'wh6lo of tho day .• would be 1 , occupied 'with the. Loan Bill, iri. any cas'e,;if the Definih'oa of Unto ;Bill had -come on the Mother Bills would have.'becn-'blocked, because that Bill ';never'-went through quickly. They could jlrave. their opportunity if they could get , tho Definition .of .Time. Bill. out of the way. \-;: s 'V/v;v:, vi"Mr. Sidey' .said' he'-'wished. : .to ; thank the Prime Minister for havijg promised ' him an opportunity of moving the second reading of the Definition of Timo Bill. He asked, however, that the opportunity be not post}»oned until too late -;'in the session, when all private members' ; days wouT3 be gone. .Mr. J. M'COMBS (Lyttelton) protested against the attempt'to'rush the Loan Bill '- .through before members had had a ■ chance of discussing it. V A First Instalment. Sir' ." Joseph Ward, said that, it had not been possible to . introduce the-- Bill.-until the, Financial Statement had been; delivered. A large portion "of"the money to be raised would shortly be needed, aud the tjoiernment could not Tun the risk of not having" tlis \money when it was required. This might occur if the Bill ■ was delayed. The Bill- gave authority .for the'raising \of ,£24,000,000. .. Of this .£12,000,000 would "be raised at once, and -in six, or possmiy seven months, another loan would be raised, and he hoped the sec- - ona amount would hot exceed ten millions.The loan was to be issued at a , ' rate to bo fixed by the Minister, and he • wished- -ftrtell the House that the rate "* would be 4-1 per- cent, free of income tax. There were some people who

: thought the rate should be raised to 5 per cent., but he considered that the ■raising of the rate for this loan would not be fair.to the original investors in ■ the war loan of last year issued at per. cent. Also he considered that it would not be wise for the Government "-to force up the rate of interest. It would '■ be bad policy, he. was,sure, to allow this loan to bo issued at more than 4.J per . cent. "Mr. Parr:-Can,you get the money at 41?. Sir Joseph Ward: "I am pretty well satisfied that the loyalty and patriotism of the people of this country are such that the money would be forthcoming.' He added that he . had already received intimation from two gentlemen who ha<l - a "reed to put . a large amount of money ' into the loan. 'He would bo very much surprised 'if the people would withhold ''money from .the Government even -if ''they had to borrow it in order to ■ lend, as they had done m Lngland. A Dangerous Experiment. - ~ Authority'was taken in the Bill to Taise the money beyond the country if c necessary, -but the Government had 110 intention of going out of the country. It %as the duty of the people to find the money. ' Mr. Craigie: "Why don't you take it: .You are taking men! , Sir Joseph. Ward; Wo could not get _ tho money in twelve months in the . manner tne honourable gentleman suggests. Mr. Craigie: Tho money is there. Sir Joseph Ward explained that there would be a delay of four or six or even . twelve mouths in securing the money resquired by this method. Did the honourable member suggest that the money ehould bo taken without interest? . Mr. Craigie: Tes. . .. Sir Josenh Ward: Then all I, have to say is that we are not going to be party to legislative robbery of that kind- in 'this country. (Hear, hear.) ... It would lie a blot 011 the fair fame of this ■ country if wo did anything of the sort. _ilr.'Craigie:-.Money .',is. more .dear to ■ you "than men. Sir Joseph Wnnl: I rive that statement a flat contradiction. I have two sons of - iuv own at the front. The- F.n<r?»stion is unworthy of tlie honourable member, and ; J think he ought to'get up and withdraw* it afid apologise. " Mr. irCombe: Oh, rubbish!

Sir Joseph Ward: The honourable member is the best judge of rubbish in this House. H> went on to say that lie set. a value on life higher than .011 any amount of #oney. . • ' ill'. Craigio rose to a point of order, but what he really wished to do was to riiake a personal explanation. He said that ho had intended his lemark generally, and not, as directed personally to Sir Josenh Ward. Mr. SPEAKER.wouId not allow him to proceed, as he was not raising a point of order. ■ / Known Paths the Surest. ■ Sir Joseph Ward, continuing, said that no man with responsibility on his shoulders could afford at this time to leave the beaten patli in order to experiment m other methods of raising money, Ihe amount going out,was .£1,900,000 a month, and the Govermn&it could not wait for any kind of experiment. This was one

reason why the excess profits tax was being dropped—because the Government could not i'ely on it .to produce • tlie money needed to carry on tho 1 hero was a proposal in the Bill tp continue tlie issue of certificates through the Post Office. It might be possible to get about ■as much money by giving-a higher rate of interest and charging income taxi but in the end the net result to tho "lieasury would be the eame.. For Death Duties. ' .He spoke of the amount of a million ,of -t'he subscription to be allowed_to.be used for..'payment of death The money subscribed would all go not into ordinary revenue account, l>ut. infco. tlio "War .Expenses Account. If stock \vei~o tendered 'in payment of death duties to

. the Stamp department tho Department would n-e-sell*the stock to other'people wishing to provide, for the payment or death duties, and'the cash proceeds would «o' into the ordinary Tevcnue 'account. He believed, that much" moro than a million of stock would "be applied for /foi: the payment of deatli duties, and it . was possible that the amount would have -'to be. sold bj teiuler. The annual amount of death duty was One, result of the" issue of such, a small amount for .this purpose would be. that all stock com- • ing into tho Stamp Department would -meet with ready ,sale. This proposal would he welcomed hy many people, because the use of loan stock for-deatli 1 duties would obviate the necessity which often Occurred for the realisation of pro-perty-or the. borrowing of money,lo pay stamp duties. Freedom From Income Tax. . Mr. ' lsitt asked whether the remissiou of income tax was -ilqt an enormous Bucrihce for the country to make. Sir Joseph \Vard said that ho could collect "income tax on the loan interest, but in order- to do so ho would have to give a higher rate of interest.

Jlr.M'Combs interjected jtliat the system: proposed was better for' the big man. Tiie sipall man received 41 per cent, only, whereas the big investor, the rich man, might receive, allowing tor remitted income tax, equivalent to io as. 9d. per cent. ' ( - ~ . Sir Joseph Ward said that the Bill did not propose to pay <£t> 3s. 9d. per cent. The honourable member was thinking ot the operation of the graduated income tax, but it was necessary that the prospectus should bo attractive to the people wli'o would' he ready to provide the largo sums • of money the couiitry required. One proof of the wisdom of Bfi'ermg the loan with interest free <tf izicomo tax was afforded by the experience in connection witlr~tliG Victory VVar Loan. For that loan there were two rates of issue—4 per "cent, free, of income tax and 5 per cent, not free of income tax— and four-fifths of/the'subscriptions haa ■ been\for the lower rate, free of income , tax. j Coercion to be Avoided. Sir Jooupn waiu reiemng to other features m tiie Bill, saia chat tiiero was provision jn it tor me raising oi snort-duttd loans in tngiand lor special, purposes as iue money was needed. 'l'nis, luuueu, hud oeen uone aireauy. ' yrni of wis toau wouid, ne tnoughfe, iw tSe siiine as tor tho loan oi last, yiur. 'mat twin was not m tde ifill. iieuid not thins it wouid jie wist) tor the Government to ta'ke coercive action in coy uection with me raising ot money. The (jovtmment . required, thu co-operation • and goodwill of the bauKs and'unahcial institutions, and its . aim should be to avoid" anything liKely to cause disriipTtvi oi trade,- or create a feeling of friction between the (jovernment and these institutions. And 'he could' say as a result of interviews he had had that they had shown, every desire to cooperate with the Government in''everypossible nay. 110 proposed to ask members of the, House to assist in. a campaign lor the purpose of raising this loan in, the country. The sinking fund,providedfor the repayment of tlie whole of tho was loans in just about 40 years from now. He held the opinion tliut when the war was over, and the financial 'requirements of the country were known, it ■ might bo' necessary to shorten the •period to a lesser term than ,40 years. On the other hand, it might not to overburden tho present generation when posterity would eiijoy the benefits of tho sacrifices, made by- tnis generation to keep this land: a part of the British Empire.' Failure Must Not be Risked.

He repeated that the Government could not afford to make a failure in .raising the loan, and therefore could not make changes in its methods of getting money. Mr. Keed: It\is largely arranged I. suppose? Sir Joseph Ward: It is not arranged yet, but it is in process of arrangement.'. Mr. E. Newman: Would it be possible to raise sums fromjsmall investors at per cent.? Sir Joseph Ward said that he did not think it would be possible to make any differentiation in rates. The small investors could take War Loan Certificates, and these certificates had been very successful indeed. Also, he did not think tho Government should force the rate of interest up, for it was better .for business and industry, belter for everybody, that tho rate of interest should' be kept low. Mr. Newman: The snmU'peoplo don't benefit by being free of income tax, and til? big people do. Sir Joseph Ward said that the .point was not a new one to him or to the Government. It had been very carefully considered by the Government last year, but there were difficulties in the way of having two rates of interest. Savings Bank Investments. Mr. T. M. WILFORD (Hutt) said the Bill was tho biggest loan "Sill ever seen in New Zealand, and it needed very closo consideration. He was'sure the country would respond to the call made upon it. The question for consideration was whether sound principles were being abandoned ill order To raise, the , money required to meet the necessities of the State. He believed there was 110 better investment to be had than the war bonds.' They offered such advantages that it paid a man to borrow from a bank at Gl per cent, in order to buy war Jjonds paying i\ P cr He lost 2 per cent, on the money, but veceived advantages in oilier directions, including freedom from income tax. Mr. Wilford Suggested that the Government should allow people who had deposits in the Post Office Savings Bank to from tho bank on the security oC their deposits in order to buy war bonds. It

was not to the advantage of the Government Etiat money should be withdrawn from the Savings Bank in order to pay for war bonds. 'llie war certificates were not accepted by the banks at present as security for advances. This was a weakness, and the Government ought to see that the certincates were r.iade avail-1 ablo for deposit against advances for the purchase of war bonds. .What was the value of a 1916 .£IOOO war bond free of income tax if the Government had to doublo the taxation this ; year and fl£[ain next year? 'The Imperial authorities liad shown t/ieir appreciation O'f the point underlying this question b.v encouraging investors to accept bonds which were not free from taxation. He could realise that the Finance Minister had to make the loan attractive, but the concentration of floating wealth into bonds free of income tax at tho present stage of the war was a dangerous thing. Freedom from incomc tax was a certain means of bringing in the money, because wealthy people knew that the continuance of tho war might send the income tax very high.indeed. If the concession' was essential the House must accept it. But he was not sure that the .Government was not giving away too much in view of the uncertainty regarding {lie duration of the war._ Mr. Wilford -urged the Minister to "angle for the small investor's," and said be was sure the. members of the House were ready to assist in a publicity campaign.

/ ■ - Terms Not Equitable. Mr. B. P. LEE (Oamaru) said the House and the people were prepared to supply the money needed by tho Government. But he wished to emphasise that the Bill was not equitable. Tho loan was not a 41- per cent. loan at all. A inistako had been made in freeing Uio war bonds from income tax.' The effect was to confer an advantage on the big man. The small investor got his plain -U per'cent. The largo capitalist received something over 6 per cent., sinco ho addied to the interest the saving in higher graduations of the income tax.. Why should tho large capitalist bo allowed to avoid future increases ill tho -income tax, due to the exigencies of war, by putting his money in war bonds now? It would be more equitable to fix tho interest at 5 per cent., with liability to income tax. He might be told that tho largo capitalist would' not subscribe under such conditions.. The Minister had indicated how that difficulty could be overcome when he,hinted at compulsion. The sound system would be to put all classes of investors on the. same-footing, giving fiiein a fair rate of interest, and requiring them to pay their proper share of the taxation of the country.

War Certificates. -Tho Hon. D. BUDDO (Kaiapoi) said tlie outsJantDng feature of the loan was its size,'and he felt diffident about raising any objections .that might increase the v difficulties of the . Minister of Finance.. The money had to lie raised, regardless of the effect of taking so large a sum from the banks and financial institutions of tho country. He suggested that the Government should'is■nyjir war certificates bearing interest annually. Many small investors hesitated to lock up their -money for a period of five years. Sir Joseph JVVardi 'Tho system saves all complications. The payment of annual interest 01! the small wtCt certificates would mean the employment of hundreds of clerks all over the country. . 1.

Mr. Buddo.said the French Government liad found it possible to sell inter-est-bearing Kentes to snjall investors. Ho agreed that the "free of incoiqe tax" pro■vison was a mistake. The Government would have been better advised to pay a -higher rate of interest. Mr. G. V. PKAKG'K (Patea) said lie was glad the Bill had been brought down promptly. The.people of New Zealand had been .'wasting a - gimt deal of money on luxuries, and they should be shown clearly that tfyeir duty was to invest in the War Loan. Money would not be nearly so'plentiful in tlio Dominion after.thewarasitwasattho present time. Tho arguments against the "free of income tax" clause disregarded the fact that tho income tax would not remain at its present high level after the war. He suggested that war certificates should bear interest at tho rate of !; or 5J per. cent, for small amounts, thus inducing small investors-'to economise and make some provision for posaiblo rainy days tome. v. Anjr attempt to confiscate wealth would ruin the credit of A T erc- Zealand in the London market, and so do lasting damage to the Dominion, which ill years to come would require to borrow abroiy!. ■Another Protest. , Dr. A. IC. NEWMAN (Wellington Bast) said lie agreed the loan was inequitable.. The rate of interest to wealthy people was over li per cent, this year, owing to the having of income tax. Tho advau-; tags would be increased to 7 per cell I:.' or more, if the income tax rose again next year. He hoped the Minister iwould reconsider the position. He would very gladly support the Government in providing a ineasure of, compulsion for wealthy people and concerns who lmU .r.ot subscribed. But he urged the Mb!s

ter to alter the terms. The freedom from income' tax gave so gross an advantage to big- investors that members of the House would not be able to insure the public that the terms were inequitable. It would bo very much better to liave- a 5 por cent., loan with equality of conditions for all people. The French Government, had followed the practice of the widest possible distribution if bonds, and the results' had been entirely pood. Small subscribers were able to provide an' extraordinarily iarge amount of -money if given good conditions. But they would object to an advantage being given to weaicn. The people would support the Minister in placing the loan on a flat 5 per cent, basis. Levy on Wealth. 'Mr. C. E. STATBAM (iJunedin Central) protested- against the Bill being rushed through b&uru members nad been afforded ;time to digest the Budget and 10 study the terms of the loan. The Minister liad said that all increase in the rate of interest would send up rates to investors throughout the country. But the fact was that big investors were getting about (i, per cent.- from the loan,, owing to the operation of the "free from' income tax" clause, arid they would not forget that fact when leading to private people. There was nothing particularly patriotic in the action of bank 3 and financial institutions'which lent money to the Government on such very attractive terms. The position oas, that the Government was allowing tons of millions of pounds to be locked up in State securities out of the reach of taxation, present or future. The loan, would be a success, because a big investor would be a fool not to take advantage of it. He lioped that when the Bill reached the Committee stage the interest would b? fixed at a flat rate' for all classes. Mr. Statham said the assertion that a levy on wealth would be "robbery" semed to disregard the fact of taxation. A levy on wealth by the State, according to capital value, would not be different in principle from a big income tax.

Defence Administration. Dr. THACKJiR (Cliristchurch East) 6aid tlio cost of the war was increasing all the time, and the public had rot confidence in tho Defence administration. There were too many officers moving about the country, and tbcro was too much red lapo and ceremonial. .A stocktaking was needed. Ollieers wero being appointed to jobs that could bo filled by, sergeants, and men were being sent away to the front regardless of actual requirements and of thei,r obligations here. He protested that the House was not in the confidence of the Government, mid was not in a position to tell tlio people where the money was being spoilt. Mr.' C. A. WILKINSON (Egmont) said lie dissented entirely from the suggestion that levy on wealth would bo desirable. The levy would reduce capital and hamper production, thus injuring the whole country. Ho agreed that the terms of the loan gave a substantial advantage to big investors. The principle ol' freeing a particular form of income from income tax was unsound. It .ivould bo better to pay 5 per cent, all round and let the money derived from war bonds bo subject to income tax. Sir Joseph Ward: Do you think you would get the money we need at 5 per cent.? You would not get it und'! C per cent. I can show you that is ; po. One-third of Our Capital. jfr. E. M'CALLUM (Wnirau) advised caution in regard to borrowing. Ho arBiisd +Jiat tho uoodlq of this country.

owing to the borrowing of the past, public and private, had only an eauity in their assets. He considered that wo had unencumbered assets to the value of about .£170,000,000. By tho end of, next year we-would have borrowed upwards' of fifty millions, and tho meaning of this was that wo should have handed over one-third of the capital of the country to a small number of wealthy peoplo and institutions free of all taxation. This was a very serious situation. He urged that it was not wise to issue a long-dated loan free of income tax. He did not think there was any precedent for it. Mr. 31. J. H. OIvEY (Taranakil urged tho Government to give a differential rate to investors of amounts of .£IOOO and less, because such investors would never, under any circumstances, help the income tax much. He offered some suggestions to the Government for the en--couragement of small investors. The Ruin~ of the Loan. Mr. C. J. I'AER (Eden), joined with other members in protesting against the rushing through of such an important Bill without giving menibtrs an opportunity of considering it. He confessed that he "lid not like the. idea of offering a loan to big investors free of income tax, but he had to admit that there were many precedents for the proposal. In Canada, while. he had been there,

twenty-live millions had Ij^en'raised ill a fortnight at 5 per cent, free of income tax. He admitted that the fixing of a rate of 5 per cent, paying income tax would mean the ruin of tlie losni. The big financial institutions would never take up stock in it. Tho amount of the loan was huge, but oil the othey'hand the experience of this' war was that the raising qf internal loans did not causo nearly so fiiuch dislocation of business as the older school of economists used to say would happen. Ho advocated the sotting up of some board of control or some other supervising body to look after tho expenditure of tho vast sums of money being disbursed by the Defe.ico Department. Tho rato was now nearly two millions a month, and there should be. more supervision over its expenditure tliaa existed at present.

' Supervision of Expenditure. a Air. W. H. FIELD (Utaki) strongly supported Sir. i'ariils proposal that there should be some more supervisioi'i over Defence expenditure. It would be possible to save, -with capable control, tens of thousands, or even millions of pounds; It was not lair to the country tnat all this money should bo paid out by a few nultary odicers. This country Was now absolutely under the military autocracy, because tho Defence Minister did not exercise'the control over them that tho House had a right to expect. He simply carried out tlte behests of his military officers. "I am inclined lo think," lie said, "that ono of the worst mistakes wo'have ninde in this country was tlie setting up of this National Govereumeut. (Hear, hear.)/ I was ono of tho strongest supporters of it at the time, but I tlfink now that if, we had had one party or tho other in, office, with a strong Opposition, wo would have had a better state of things than we have now." (Hear,, hear.) He did not wish to say that tlio National Government had not done good work. Ho realised that' they had done very valuable work. But he uelieved that tho majority of members agreed with him in tlie opinion that a m'istaKe "liad been mailo. •

Mr. l'olaud: You had better test that. (Laughter.) Mr* Meld said he would like to seo the Minister of Financo tako some more time to consider 'the question raised lis to whether it was wise to issue tho loan at' 4J per cent, free of income tax, Ho did not believo that it would bo any improvement to issue the loan at 5 per cent, subject to deduction for income tax. The objection to the present scheme; of issue was that it would allow tho rich man' to escape taxation. He was sure that members generally did not think tlie- jijroposal satisfactory, aiid he would urge Sir .Joseph' Ward to v givo it reconsideration. ' f Gentleness to Money-bags. Mr. L. M. ISri'T-(Christchurch North) said that lie was .unwilling to do or say anything to increase .the already heavy burden of responsibility on the shoulders of tho Minister of Finance, but he did express 'dissatisfaction with tho freedom from income tax proposal. He was not a financial expert, and would not consider his opinion of weight ay against that ol' tho Finance Minister, but if he coukt escjipe voting,for this-, remission of income tax he would be very glad. One of the gravest objections to it had been

pointed out by the member for Wairau. He believed that tho member for Lyttfeltou had done an injustice to tho Finance Minister, lie would do the right honourable gentleman tho justice of saying that if the need should come he would take bo much of the wealth of tie country as was required. Sir Joseph Ward: When the need occurs.

Mv. Isitt said that the time might come when it would be necessary to put everything we possess into the meltingpot. He, feared, however, that there was 'a tendency for the Government to be . too. gentle to money-bags. While they protested against any levy on wealth. as confiscation, it was still a fact that there was confiscation of wealth, now. Ho kuew a young man earning J2OOO a year by his own ability and effort who had been conscripted. Ho would go into camp, give up his =£2000 a year, to receive 355. a week. WAR EXPENSES. WHERE .THE MONEY GOES. The Right Hon. W. P. MASSEY (Prime Minister) said that he was not noing to find fault with the opinions expressed by honourable members, who had a right to them. But one honourable member had asked where all the money was going- to, and suggested that there must be enormous waste. Surely the answer to tho question must be obvious. There was. the cost of assembling and maintaining the men in camp, and there were always 1 10,000 men in camp. Tho cost ot' transporting men was very heavy. The Government had under charter some twelve sliips, and the cost of chartering vessels at this time was very heavy. In England men had 'to be maintained. We had rarely less than 15,000 men in England, at several camps, and in several great hospitals. There was a reserve camp at Etajjles, in France, which had to be maintained. And there was also the expense of keeping the division fighting al; .the front. Unfortunately there was waste in England, but there was no more prodigality in tho N' w Zealand expenditure than in that of other: countries. We had a cleiical staff in England of 270 men. This might seem large, but he knew of one other Dominion which had a staff of 3000 in London! The Gov-, ernment would willitiglv give all details of expenditure, although?of course some of the details would not be obtainable because the expenditure was made on the other side of tho World.

Mr. Parr: Who'buys supplies in England? Mr. Massey: General Richardson and his stalF. He explained that some of these bigger supplies were cbtained by tender. If members wished to bring .under his notice items of waste he would be glad, to linve inquiries made. A ' Levy on Capital. He referred to the demand made by a few members for a direct levy upon capital. It sounded a very easy "method of raising money, and it appealed to some members as a;fair one. It would be quite an easy matter to 'make a levy of 25 per cent, of every man's wealth, if every man kept his wealth in sover-. cigns or bank notes, but men did not keen their wealth in liquid form. •■Wealthy business men often traded on overdrafts, and farmers mostly had mortgages- He was ono of those farmers himself. It would be impossible to levy upon the wealth of theso men. They would have to go to the banks to try to borrow the money, but this would be impossible when everybody was trying to get money on advance. Mr. Alistey (laughing): They could borrow from the Government; they couldn't get money anywhere else. Mr. Massey: 't'he honournble member is beginning-to see the folly of the proposal. . - Mr. Anstcy: 1 saw it long ago. Mr. Massey said that the effect of such confiscation would be to paralyse'' industry. There would be widespread unemployment and such a depression as the country had never before knotvn. The schema was unworkable. An lion, member: It is a good election cry. The Loan Conditions. Referring to the income tax .question, ho said ho ioalis.od tho oxomptioa was

rather difficult to defend on ordinary "rounds. But the conditions were ex. ceptioual. The was trying to do the best for tho country, and it knew that if the exemption from income tax were withdrawn the rate oi lntei est would have to be over 5 per . cent., possibly as high as li - per cent., in order to draw tho money. Then tho ordinary borrower would bo required to pay 7 or 8 per ceut. It was not fair to say that the present arrangement meant a ret un of 6 per cent, to the rich investor. J.ho present high rate of income tax would not enduro. He believed, tho war would end next year, and then the income tax would be reduced gradually. A calcu aHon based upon the maintenance of the present high rates of tax would bo fault}. He felt sure that the terms proposed by the Government were to the advantage of the Dominion, and he believed tho people of New Zealand would be as enthusiastic in their response to the appeal as tno peoplo of Britain had been when they were asked to subscribe to tho thousand million Victory War Loan. The terms of the loan had to be made attractive, land he could assure tho House that (He whola subject lmd been given the most careful consideration. It w° u Ul be, humiliating if New Zealand had to go abroad for money. He did not know where the Dominion could go at the present time. Tho Imperial authorities might be able to'provide money if as*ed, but they had their own duty to perform, and New Zealand had its duty. Ho hoped that all the members of tho House would assist loyally to make the loan a I success. A Labour Protest. Mr. J; M'COMBS (Lyttciton) said the I exemption from income tax meant in elI feet that the big investor would rcceive the equivalent ot XI 6s. lid. per cent., as against the -M 10a. per cent, to be received by the small investor. He Had referred his figures to an expert accountant who had declared tlieni ito bo en-

lirety correct. The position wis 'most unfair. The .Finance Minister had said that the Government must not run any risk in connection with tho loan. Jie mount that the Government ttiust not rim any risk of not getting the money voluntarily. The terms had to ijg so attractive tnat tho big corporations would subscribe. Men could be :onscnpled, but money could not. The poveruuiciifc saiu that men must be forced to light for the country, and that later, if. they lived, tT.ey should have tho privilege cf hearing to pay back the war profits that tho big men had invested in tho war loair. Tho Goveriimeut was serving the interests of the big financial institutions. Mr. M'Combs was proceeding to say that the Government was prepared to gaol its political opponents in order to stifle criticism, when he was called to order by the Speaker.

Supporters of the Loan. Mr. "E. NEWMAN (Raugitikei) said that the fallacy in the arguments of tho member fotv Lyttelloit was that the income tax rate would not remain the same/ Alter tlio war it would bo reduced.' He was sorry that there was no .proposal in tho Bill for encouraging small investors to subscribo to the loan, but Tie recognised that this was a verydifficult proposal to arrange. Sir Joseph Ward explained that ufiller the-'War Loan certificates scheme only 125 persons had subscribed sums ot five pounds. He was sorry lo say that if wo had to depend upon tho small_inve'sfdrs for this loan wo might Jlist as well put up tlie shutters, because we could not get the money; Mr. Newman said he was well pleased that this system -should be continued, J'or it was very important from other than financial considerations that people of small means should invest in tho loan. Ho would support tho Bill, and he wished the loan success. He considered the proposal to confiscate .wealth ono of tho most pernicious and dangerj otis ever made to this country. It would mean ruin if it were attempted. Sir. H. G. ELL (Christchurch South) expressed the w.armest approval of the Bill and of tho Budget. He would, support every ono of tlio Government's proposals for linorensed taxation, exceptthat on tea. Tho. Government's' taxes for tlie past threo years had all been levied upon wealth and not upon the earnings of tho pooror people of tho country. Tho Budget was a radical cue^ Mr. A. 'HARRIS (Waitemata) expressed some <loubt as to whether the loan coilld bo procured at per cent.

Will Interest Rates Rise? Mr. J. ANSTBY (Waitaki) expressed some alarm lest the. remission of income tax on loan interest would not have tho effect of raising- rates of interest iii the open market. He had sever approved of the principle. Last year the rate of 4 per cent, free of income tax was equivalent to about 5J per cent, for private borrowing. But with the added taxation of this year the rate of 4J would be equivalent to perhaps 6} or 7 peiccnt. for private loans. This would force tho market rate up to this figure, and for this reason he would urge the reduction of the rate of issue to 1 per cent.

Mr. A.'H. HIND MARSH (Wellington South) said that tho finance Minister had brought much of the criticism upon himself. He had at the betfinningof the war scouted the idea of borrowing in New Zealand. When he found that money was likely to go out of the country for investment he very rightly decided to borrow' here. He (Mr. Hindmarsh) excused tho remission of income, tax because it was necessary to offer inducements to capital to remain here in preference to going abroad. Generally lie accused the Finance Minister of lack of a settled policy, lack of defined principles. He admitted, however, that it was n«essary in war to act, not always upon principle, but upon expediency. MINISTER IN REPLY. ' RICH MAN AGAINST POOR MAN. SIR JOSEPH WARD, replying, said that members had raised a great many supposititious objections to the Bill. The last speaker had never changed his mind. If he did he would find out that he was "a monster of the first water." Mr. Hindmarsh: Don't mix your metaphors, I've heard of a diamond of the first water, hut never of a monster of

, the first water. 1 . Sir Joseph Ward said that the Government hit never had a thought of differentiating in favour of the rich man as against the poor man. Nothing moro monstrous could have been suggested. But wo could not do what was required in- this country if the rich peoplo did not subscribe, and subscribe very heavily, to these loans. It was all very well to say that, adding'the income tax which was not charged,' a rich, investor would have a return equal to £7 6s. Cel. per cent. But if men. in similar case were to subscribe to a loan at 5 per cent, not free of income tax, the rate tho man would rcceivo would be «£3 Bs. 9d. per cent. Nobody outside of an institution, which he would not name, would think of trying to float.a loan on such terms. Tho honourable member for Wairau had very rightly referred to the assets ot New Zealand. ■ But these assets had little to clo witli the loan, and nothing to (lo with the remission of income tax. Already we had sinking fund accumulations of id,000,000 for the repayment ot loans, and. already nearly JidOO.OOO for war purposes. Againt the big accumulation of our' assets must ho placed tho rapidly accumulating sinking funds. The Goods for Sale. Against all tho complaints about tho issue of the loan, and especially those reEarding reduction of the term of tho loan ho made the reply tlwt the country must bo prepared to sell scrip under conditions upon which tho peoplo would buy it. Th® fivo yciirs' period was left oiicii all the time through the Post Oliico. Somo would not take up a loan Tor five years, somo would not go bcyonu fourteen years, and some iroulif not lend lor ii period of less than 2a years. Refcrriug to. tho suggestion that tlieio should he two rates of issue, ho said that 'the exiimrionce 111 England did not warrant a trial of it here. In HngVniil the rate of 4 per cent. fr<» of income tax was more favoured by investors than 5 per cent, less income;tax. Am 4 nor cent, free of income tax in England was better than ii In New Zealand, when times were normal m both countries. Rich people would not rush the loan as some members''had suggested. Somo strenuous effort would have to be made before tho success of tho loan could lie assured. But we must raise tho money in our own country., A Strong Position. Tho Minister said that the Dominion art present was in a very strongs financial Bosifwn, and he thought members nusM

hirvo shown some realisation of that fact in tlioir speeches. Reference had been made to tho Post Office Savings Bank. Tho money deposited m that bank bad been invested i;i order to earn interest for the depositors, and Cue Government had to face the fact that after the wax* much of that money would lie withdrawn ftr Investment in other directions, lluit was ouo reason, why , the Government must maintain a strong financial position. If it did not do so, there would be a financial /crisis in New Zealand when the war was over, and when wo depositors required their money, members had talked of a levy on wealth. The idea was that'the Government should .taiTe a portion of a man's capital without paying interest for it. He would not )iesitate to take all'-a man S property if the necessities of the State demanded it. ' But surely the legitimate 'methods of raising money should be exhausted before a form of legalised robbery was adopted. The (-oyornmeiic was taking millions of money from the wealthy peoplo by means of taxation, and ho did not believe many people would ,agree with the . ot strange and dubious schemes for raising mouey. Was the Government to abandon fixed and certain methods of laismg money and embark upon that ordinary people would turn down on the grounds of common' honesty. in® loan was large, and nobody regretted more than the. Ministers did the necessity for making so large a demand ypon tho people of New Zealand. But the necessities created by the war had to be met. The loan proposals w.ere not designed to relieve any person from taxation. They were devised with a firm belief that the terms were necessary m order to obtain the money the Dominion needed. , The Bill was read a second time, ana ( the House rose lit 10.12 p.m.