The Dominion SATURDAY, NOVEMBER 22, 1919, A RECKLESS CLAIM

Dominion, Volume 13, Issue 50, 22 November 1919, Page 6

The Dominion SATURDAY, NOVEMBER 22, 1919, A RECKLESS CLAIM

The recklessness. of some of Sir Joseph Ward's recent utterances on financial questions was discussed in a recent article, in which by way of illustration wo took his expressed belief that by nationalising tho coal mines of the Dorainon he could add to the revenue of the country, in relief . of taxation, £'250,000 a year. As was shown conclusively from the figures of the Board of Irade Report on tho working of the coal mines the feat so glibly talked of by the Leader oC the Opposition could only be accomplished on the assumption that fctate_ management would produce five times as much profit from the working of the mines as is now produced under private management, The absurdity of_ such an assumption must bo plain to anyone who gives the matter a moment's consideration. In fact if a private capitalist could succecd in doing what Sir Joseph Ward professed to bo able to do he would be hounded down as the rankest of rank profiteers. _ But, as was pointed out in discussing these extravagant assertions of the Leader of tho Opposition, a large scction of the public do not trouble to examine them at all closely, and in consequence a great deal of mischief is done through inaccurate and -misleading ideas being set in circulation. A further instance of this class of electioneering finance, which cannot be too strongly condemned in the present unsettled and inflamed state of tho public mind, is Sir Joseph AVard's reference to the profits immediately derivable through the formation of a Statesbank. The question of a State bank is one of great importance and difficulty, on which much lias been said and still remains to be said. It is_ not our intention, however, to discuss tho merits or demerits of a State bank, but 'to show the recklessly extravagant nature of Sir Joseph .AVard's estimate of what a State bank would bring in to the revenue of the country and how utterly unreliable he is at times when political considerations affect the issue. 'In order that there may be no misunderstanding wc quote from the Jlanmrd _ report of his speccff in the Financial Debate, when claiming that taxation could he reduced by gathering in revenue from other sources. Ho then said: Have they (members of the Honse of Representatives) realised that if we establish a bank in this country, and assuming that wc purchase the Bank of New Zealand or get another one, or failing cither, ono of our own—as a matter of fact the Bank of .New Zealand has been State aided—have they realised that from it we would immediately have an annual revenuo of JJ500,000 a year? The point to be hotod is that Sir Joseph Ward claimed that if we established a State bank in the Dominion-, and assuming that this was done by purchasing the. Bank of New Zealand, we would immediately have an annual revenue of about £500.000 a yeai. He added, in the course of further explanation, that this would provide relief to tho taxpayer to the amount stated, and he intimated that he had before him a copy of the balance-sheet of the ,Bank of New Zealand "in case any doubt was expressed about the basis upon which he wa,s building." If this means anything at all it means that he was basing his calculations on the earnings of the Bank of New Zealand as shown in .the balancesheet, and this simplifies the task of examining in detail his extravagantly optimistic and misleading estimate. What were the net profits of the Bank of New Zealand last year after making tho customary provision for interest on guaranteed slock and the usual and special grantsto thi staff provident fund, depreciation, bad debts, etc.? The total net profit was £385,022. Yet Sip. Joseph Ward says ho can get £500,000 out of the bank profits to relieve taxation. But let us examine tho £388,022 net profit. The State already has a big share in the hank's profits—in fact it received by reason of its sharo-holding something over 30 per cent, of the distributed profits last year. Tho private shareholders' share of the £388,022 would, therefore, be £218,333 and the State's share £139.087. This means that instead of tlie State gaining £500,000 annual! v by taking over tho bank, on fhe figures of the balance-sheet quoted ' by _ Sir Joseph Ward it would gain less than half that amount. namely, £388,022, less the £139,687 it already receives. But, of coyrse, the Oovcrnmcnt could not take over the bank without first buying out the interests of the private shareholders, and to do this at the market value of tho shares, say, £20, would cost it at least £3,000,000. The interest charge on that sum at 5 per cent, would be £150,000 a year, unci this would have to be deducted from the net profit, so that the position would then be: J3 Total net profils 388,022 Stato's present sliaro in same ISS.GB7 Balance to bo acquired ... 2-W,. r i3SAnnual interest charge on onst of acquiring abovo Balance of profit 08,335 Thus, on the current balance-sheet figures the Slate, after buying out the private shareholders' interests, instead of having a surplus from the hank's profits of £500,000 to add to the State revenuo in relief of taxation would have less than £100,000, But if it used even this mildest' £98,335 for relief of taxation it would have nothing to add to the hank's reserves. The bank, this year placed £150,000 out of the £38*,022 of profits to reserve. If

and cautious policy it would have, to place the whole of the £9S,3:ir> to reserve, and even then would fall short of the amount set aside by the present hank management, which, by the way, Sin Joseph Ward eulogises. It is therefore, cleai that the purchase of (he private interests in the Iknk of New Zealand would 011 Ihe basis of existing accounting yield no immediate, profit to the State, and Lhe reason for this is perfectly plain to the veriest tyro in financc, namely, that the. currently expected rate of profit is capitalised and added to the value of the shares' which would have to be purchased. While it is true that some extension of the activities of a State bank could be contemplated at the expense of other banks, yet there is no warrant on existing figures for stating that State banking operations would provide half a million a year or anything like that sum in relief of taxation, and Sir Joseph Wand's estimate of a £500,000 profit, after meeting all the charges involved in purchase and after allowing for the profits now drawn by the. State, is in face of the facts utterly preposterous. The ill-digested political ideas and opinions which Sir Joseph Ward has of law so recklessly committed himself to have, caused a good deal of uneasiness, and arc one of the main causes of the rapidlydiminishing confidence in the Liberal Party and its leader. The man of experience knows that something cannot be made out of nothing, and has no confidence in the got-rich-quick class of electioneering schemes based on mere uncritical assertion and at variance with the universal experience, of business men. Moreover, this is emphatically 110 time for such tactics. _ Rash and, reckless financial cmpirics were never more to be feared than at the present time. We have. arrived at a critical point in our economic; financial, and political development when it is not too much to say that the course we take in the next few years, perhaps the next few weeks, will be to a great extent determinative of our future prosperity or ■ adversity for many dccades. What the country is crying out for is not flashy sensationalism but sound, practical, progressive, and cautions _ statesmanship. Sik Joseph Wahd, in an endeavour to repeat' the time-honoured political stratagem of "dishing Labour" by seizing on such items from the Labour programme as would win back to his party the deserters to the Labour-Socialists, has thrown caution to tne winds. The country, we are sure, does not want tactics of this sort;'it is sick oi mean and miserable political devices: it wants sincerity and principle.