PAYING THE BILL

Dominion, Volume 11, Issue 160, 26 March 1918, Page 6

PAYING THE BILL

MONEY FOR WAR PURPOSES INTERESTING REMARKS BY MR, H. BEAUCHAMP HOW 10 HELP THE WAR LOAN "It will .assist us to proper appreciation of our duty in thus matter if we glance for a moment at viiat has been done by other portions of the Empire in tho way of raising funds for carrying on tho war," said Mr. Harold Beauchamp, chairman of directors of the Bank of New Zetland, in the course of a speech at the Commercial Travellers' Club yesterday. Mr. Beauchamp followed the Minister of I'inance (Sir Joseph Ward), who made an appeal for publio support for the War-Loan.

"Taking Great Britain as our leading example," continued Mr. Beauchamp, "I would point out lliat in 1914, before the opening of the war, her public indebtedness was stated at X' 706,154,000. Her population, based upon the last census would be then.approximately 46,500,000, which gives an averaye public debt of <£15 3s. Hi. per head. The London "Economist' recently estimated the British Public Debt, at December 31 last, as .£5,525,000,000. The Chancellor of the Exc?iequcr stated a few days ago that tho expenditure is at the rate of i£(i,10",000 per diem, and likely to increase. If we assume as an outside estimate that £150,000,000 would be collected as revenue during tho first quarter of tho year, it means that, at least a further £100,000,000 will have been added to the Public Debt by March 31. That will make the nation's indebtedness at the end of this month £5,925,000,000, equivalent, on a present estimated tiopulation of 47,000,000, to £M Is. 3d. "per head. Yet the British nation stands in no way appalled by tho magnitude of its war liabilities. There is never a hint that tho capacity of the country lo bear, tho financial burden is approaching exhaustion.

"The example afforded by Canada's Fourth War Loan, issued in November last, is also cue to; inspire us to hopefulness and energetic effort. Canada had issued three War Loans, aggregating 350,000,000 dollars. The subscribers to the first numbered 25,000, to the second 30,000, and to the third -10,000, but a coin- j parison with the total population of the ] country showed that only' about one in every 200 of tho Canadian population had taken up bonds. With the Fourth Loan the' Finance Minister determined upon an organised effort to secure wider mid fuller subscriptions. The support of a body of bond dealers, bankers, and, other business men was enlisted. Every province of tho Dominion was divided into districts, and each district was canvassed, every possible subscriber being oalled upon. The loan offered was. for 150,000,000 dollars, repayable in 5, 10, or 20 years, at 5i per cent, interest. The Minister intimated that, if the loan was oversubscribed, the excess subscriptions would be accepted in whole or in part, lt was hoped that from 250 to 300 million dollars would be secured. The result exceeded tha most sanguine expectations. As a consequence of tlio orgauised effort, a total of 417,000,000 dollars was taken up, and the number of subscribors was increased to 807,000 (or about one in every ton of the population), tho aver-, age subscription being 51G dollars (£103) per head. A Canadian finuncial authority remarks: 'It is safe to say that such a figure as 400 .million dollars was not deemed to bo within the realm of possibility.' "It will bo useful if I refer bviefly to thiS terms upon which Britain and some of the Dominions have raised funds for war purposes. In the early stages of the war the British Government financed largely on Treasury Bills, issued by tender at rates costing from 3 to i per cent. Later, they resorted to tho issue of bills at fixed rates, and these mtes steadily increased till, in tho latter half of ltllfi, the cost was: three months' bills, 51 per cent.; six months' bills, 5} per cent.; twelve months' bills, G per cent. Short term Exchequer Bonds were also issued bearing G per cent, interest. '.Such Irish rates for money at short maturities militated against the success of tho permanent loans, and the rates.were gradually reduced. At present tho Treasury Bill rate is 31 per rent, for three and six months and i per cent, for twelve months. The 5 per cent. National War Bonds now on issue at par, with currencies of five, seven, and ten years, are redeemable at a premium of X 3, and £5 per cent, respectively, representing a cost to the borrower of about ,£5 Bs. per cent, per annum in the shortest currency, and a shade over that in the longer currencies. '• These ere subject to income tax.

"Canada's Victory Loan was in 5$ per cent, bonds at par, free of income tax, and tho Common irealth of Australia War Loan of £40,(100,000, now on the market, is alternatively at 4J per cent., free of Commonwealth and Slate taxation, or 5 per cent, subject to Commonwealth taxation, but free of State income tax. ,

"The New Zealand Loan is at 4) per cent, free of income tax, and, as a business proposition, considered altogether apart from the promptings of patriotism, it can bo strongly recommended. To a taxpayer who pays income tax on the highest scale (7s. Gd. in the £) it must appeal as an advantageous investment,, seeing that the best rates in the open' market for mortgages are at present G to S\ ner cent., the yield being subject to income tax. The action of the Minister in issuing this and previous loans free of income tax has met with adverse comment in some quarters, hut having regard to the rates ruling for money in other parts of the world, and of the rates which borrowing- Governments arepaying on the loans they are raising, I am satisfied that he has done wisely, and that to have adopted the policy recommended by his critics would have been to court disaster with his loan. "We cannot afford to run the risk of failure. . The money for war purposes must be obtained. To send our men to the front OJld Ml (o supply the money necessary to maintain them there as an effective fighting- force would be as foolish as to send a man-of-war into a navai engagement without guns or ammunition. It is for us to see that the money is provided, and no effort should be spared to that end. It will be well, I think, that some prominence should he given to the assistance which the financial institutions of the Dominion have expressed their readiness to give, in order to facilitate subscriptions to the loan. In this connection the banks of course claim first mention. "All- the banks are, I believe, willing to advance to any customer, on the security of the stock alone, up to' 90 per cent, of the face value of the stock, the rave of interest to be charged being 5J peewit annum. Any advances made are to'be reduced by instalments at a rate which will repay the loan, plus interest, within two years. Moreover, I mav say the banks are not the only iinancial institutions that are ready to ns6i?t would-be subscribers to the loan. _ "The insurance companies are also in the field, and some of them are willing to advance lo any person eligible for lie insurance who desires to subscribe to the loan the full amount necessary to take up inscribed stock cr debentures provided the subscriber takes out with the company an endowment insurance policy, payable in » certain number of ycarstho stock or debentures to be meantime I,el<l by tho ;-onipany, and to be handed over to the subscribers on maturity of the endowment policy. No interest on the advance to be charged to the subscriber, whose onlv liability will be the premiums on the endowment policy. In the ease of death, before maturity of the policy, Hie bonds or crock would bo handed over, clear of nnv liability, to the subscriber's representative, in lieu of Ihe insurance money. , ~, , >•,. • «'|' o neon's not pl".'ib|p f nr Me insurance, ndnnvs can be made on similar Win* but subieH io the condition that Hie Scribed stock or debenture* will be ban'-'l ov-'v lo th'e tnlicv-hnUlor only ,- n event of his surviving <■> Ihe end nf the period neiwl nno". StintiM lie die earlier, his renresnntafivrs would receive sfoek or df-benlnres fnr an nmnmit (final ( n the total premiums nctually paid. The insurance company in

each case would retain the inscribed stock or debentures, and receive mo interest thereon Irani year to year until the iiiTaiigem.;ut tenuinaled. "Tho iaciuties thus afforded should mako it easy for many people to subscribe who have not the necessary cash immediately available, and should encourage thrift on tho part of the public generally. Arrangements made in one or other of the ways above mentioned will establish a fund for savings, and the investor will have tho double satisfaction of feeling that he is helping to win the war, and at the samo lime accumulating an asset which will be of use to himself or his family in years to come, when tho war and all ihe difficulties attending it will be tilings of the past. "The knowledge that the advance will not be disturbed for a term of years will enable investors to base their finance on a certainly, the only condition necessary being that a sufficient amount should be reserved from income or other sources to repay the loan within the timo allowed. It has teen said that 'the best way of making men save is by placing them in debt.' There is a certainty about that kind of saving not obtainable in any other \vny. A man saves to pay off his debt, slid is not happy until lie has cleared it. It is to be hoped that large numbers of people will commit themselves to this certain method of saving by borrowing now to take up; War Loan stock.

"At present there are evidences of great extravagances on tho part of the people of tho country—a lingo expenditure is going on upon pleasure and amusements, eating and drinking, dresa, etc. T)io national bill in this respect could he curtailed by mauy hundieds of thousands a year, not only without hardship, but with, 1 think, positive benefit to the people. It is quite time to lake serious stock of the positon, and to think of making some sacrifices, and of exercising some self-control, with a view to assisting to the utmost of our ability in the winning of tho war. I believo the people of New Zealand will do this, and that the Minister of Finance will obtain the money required. It is to be Loped hat those who have so far 'shirked' their duty in the matter of War Loan subscriptions will see fit now to take a fair share in financing the expenses of the war, and that it will not be necessary in any single case for the Minister to put into operation the powers he possesses of imposing heavy penalties upon those who are able to subscribe, but neglect to do so. "Tho advantages of the method adopted in Canada with such satisfactory results, in'the case of the Canadian Victory Loan, have been recognised by the Commonwealth of Australia, and are being applied there, where the Government is making use of commercial travellers and life insurance canvassers to place War Loan debentures and stock for the Commonwealth. As .was to bo expected from men of such ability, energy, and enthusiasm, services of tho greatest value have been, and are being, rendered lo the country. Similar, steps should be taken here.

"It is not to bo expected (hat success will attend an undertaking of this kind wfttTout effort. .Very strenuous endeavours will havo to he made if the .£9,500,000, which the Minister requires, is to he raised. No one abb to contribute wlio has noil already done his duty according to his means must bo allowed to escape." • ■