RENEWAL OF LOANS

Evening Post, Volume CXV, Issue 31, 7 February 1933, Page 8

RENEWAL OF LOANS

THE EXCHANGE BURDEN

PROPOSAL FROM SOUTHLAND

A letter was read at last night's meeting of the City Council from the secretary of the Southland Electric Power Board asking the council's view of the board's proposal to the Prime Minister that local authorities should be permitted to raise loans in London to obviate the serious'loss in exchange in the remission of interest.

The letter stated that the board's London interest amounted to £82,625 for the year, hence tho exchange rate at 25 per cent, would cost the board £20,625, and would result in a substantial increase in rates.

The secretary of the board quoted from a letter to the Prime Minister as follows:— ,

' 'To obviate the serious cost of exchange in remission of the interest moneys to London the. board respectfully requests that authority be given to the board, subject to such terms and conditions as you think fit, to retain the interest in a fund and raise loans in the United Kingdom for the purpose of paying the interest and the co^ts of raising the loans. "A_ precedent is established by the provisions of section 25 of the Finance Act (No. 2) 1932, in relation to the retention of accumulated sinking funds. You will remember that, in order to avoid exchange on the remission of sinking funds to London, local bodies are authorised to raise the full amount of matnring loans by way of a revenue loan and to carry forward the existing sinking funds towards the redemption of the renewal loans." The secretary stated that the board would appreciate very much if the1 council would advise wheth-.- it was taking any steps in connection with the position created by the enforcement of the increased exchange, or whether it felt that public bodies should act in any concerted\manner to try to avoid the increase. TOWN CLERK'S REPORT. The Mayor, Mr. T. C. A. Eislop,' said that the Town Clerk, Mr. E. P. Norman, had made a brief report upon the question as follows:1 — "No doubt the local bodies which have been hard hit by the increased exchange rates should endeavour to obtain some relief, but I can see several disadvantages in the proposal now made. .To mention only three: (1) There would be a considerable number of small loans required, which the London Stock Exchange would not countenance; (2) exchange may rise still further after the proposed loans have been raised; (3) the cost of raising loans in London is very heavy, even for small loans." Mr. Hislop said that several questions concerning .loan moneys would have to be considered later, and he thought that it would "be premature to rush into the matter at present. He moved that no action should be taken in the meantime, and to this the council agreed.