PROVINCIAL LOANS.

Hawke's Bay Times, Volume III, Issue 165, 11 March 1864, Page 1 (Supplement)

PROVINCIAL LOANS.

r [From the Otago Daily Times , January 25.] In the course of the late session, the Government introduced a bill to provideforraisingProvincial Loans for railway purposes. After passing its second reading, it was referred to the select committee on provincial loans, and by them remodelled to apply to all provincial loans whether for railway or other purposes. The principle it involved was a very simple one—any province borrowing money was required to put apart, as security, land to the same value at the upset price. The proceeds of the land to be supplied by a sinking fund Commission, to the reduction of the loan, and when the latter was paid off, whatever land remained was to be released from the operation of the hypothecation. Such was the primal principle of the measure. There was a clause in which it was understood the Government did not mean to press, unless it met with approval of the House, stipulating that provinces, that had already contracted debts, should put apart land, as security, to meet them ; or, in other words, making the action of the bill retrospective. Unfortunately, the measure fell through, owing to its being brought forward too late in the session ; but Mr. Fox, in moving for its discharge from the notice paper, announced that it was the intention of the Government to see that the principle of the bill should be acted on, in any future provincial loans. It will bo made a condition of the Governor’s- assenting to any future Loan Ordinances, that the amount to be borrowed is fully secured by land set apart for the purpose. We believe it is the intention of the Government to have a model ordinance framed, so that provincial legislatures may understand the nature of the measure required, and not invalidate the ordinances they pass by informalities. Some of the ordinances already in existence are exceedingly imperfect, and it would be very desirable in future, that so important a matter as borrowing money from abroad, perfect accuracy should be observed in framing the Acts empowering the same. Of tlie fairness of demanding from the provinces security in land for the loans they contract, there can be no question. In case of any difficulties arising in meeting the provincial loans, the colony would be bound in honour, if not legally, to see that the creditors were paid Thus indirectly, provincial loans entail a heavy colonial responsibility. The course is equally fair to the provinces, and especially to the more wealthy ones, such as Otago, Canterbury, aud Southland. The exercise of the borrowing power of one province contracts the borrowing powers of other provinces so long as no specific security is given for the payment of the debt. At present, the Provincial Loan Ordinances give no security. That which they pretend to give is, in reality, .subject to the legislation of t: e Assembly and therefore beyond the disposal of the Provincial Councils. The good faith of the colony is, in fact, all that the lenders of money have to depend on in the shape of security for provincial loans already contracted ; and it follows that the more money that is borrowed the larger is the amount for which the colony is liable. It would be a very serious matter for Otago, Southland, and Canterbury, it the provinces which have not land to fall back upon, were to be permitted to continue the indiscriminate borrowing permitted last year; and those provinces, at least, have cause to congratulate themselves on the inaguration of the new system. The mere hypothecation of the land will cause them no trouble nor inconvenience. They can choose, if they please, land not immediately destined for sale, and meet the interest and sinking fund out of their annual revenues. Or if the secured land or part of it is sold, the operation will be conducted on precisely the usual syssystem prevailing in the province in which it is situated, the only difference being that the proceeds will be paid over to the sinking fund Commissioner.

It is difficult to exaggerate the importance of thus placing on a recognised basis the power of borrowing money for provincial purposes. The one difficulty in the way of opening up the Middle Island is now removed. It will be the fault of the Middle Island provinces if they do not arrange amongst themselves for borrowing the money necessary to construct a railway from end to end of the island. It is quite likely that a through railway may not at first pay its expenses and interest on capital, but here as elsewhere the maxim will apply—if the country makes the railway, the railway will make the country. Independently of the increased value that the public land would attain, what an incalculable benefit it would be to the provinces to obtain for their several productions a market, now denied to them except at great cost. What an advantage for instance it would be to Nelson, Marlborough, and Canterbury, to supply Otago with coal, animal food, and agricultural produce ; and what a boon to the community of Otago to be enabled to procure these at less than their present extravagant cost. The pressure upon our space forbids our entering more fully upon the subject at present, but we do not hesitate to say that a railway through the Middle Island is one of the most important subjects with which the Middle Island provinces have to deal.