THE PUBLIC DEBTS ACT AND ITS RESULTS.

Hawke's Bay Weekly Times, Volume 1, Issue 46, 18 November 1867, Page 284

THE PUBLIC DEBTS ACT AND ITS RESULTS.

1 ' 1 .{From the NelMtt Zionist.) •«!>* >. Repeatedly, ; four ./weeks, has, it beeh /hotlr said, aud of New, Zealand. is ./engine and m proof of the assertiori reference is made to the passing of the Public Debts* and Loan Consolidation Acts ih the Assemblji and the alleged influences brought to bear for the purpose of seen ring the passing of, these acts, with’ such provisions as should secure very large benefits to that Bank, and by consequence to its shareholders. This is not confined to the outside public, or , to the press, for, , in the House of Assembly itself, the direct, and immediate . benefit which recent legislation has effected to the shareholders of the Bank of New Zealand has been directly referred to, and in a manner indicative of an opinion that'Ministers have knowingly adopted a ; course Which largely benefits the Bank, and takes a very great sum of money out of the Colonial Treasury, This money goes directly into the pockets of the shareholders , of the Bank and of those keen speculators who, acting on a premonitory * knowledge of what was to come, have telegraphed to England for the purpose of buying up at their present low rate in the market the Provincial Debentures. These the late Act of the Legislature will, immediately on its being known in the London market, raise to a price equal to that. at. which the Colonial Debentures now stand; and that means an immediate rise of about 30 per cent, on the present market price of the Provincial Debentures. Let us hear the arguments of Dr Featherston, who, while favorable to a scheme for consolidating the debts, was yet strongly opposed to this measure, by which the Colony would be- made to pay infinitely beyond the commercial value of. the. Provincial Debentures. The lessons of experience : by which the proverb tells us even fools are taught, appear utterly lost 1 upon our politicians; and the history of the past, which offers excellent warnings for the future, is in vain appealed to “ by those who wish 'the; Ministry anil the Assembly .to avoid a repetition ol by-gone errors. It is in vain that Dr Feathers ton warned them of past •; losses by mistaken courses of a like kind in 1858, and in vain that he warned them against incurring the Iqss that is certain-to fall on the Colony by the mad-like legislation of 1867. The following are the principal portions of Dr Featherston’s speech:— .... The consolidation proposed by the pre- : sent Bill is a , consolidation almost exclu- ' sively for the benefit of the holders of provincial debentures, it gives little or no advantage—holds but the prospect of little • or no relief to the Colony. It is in short a one-sided affair destitute of every particle of justice,’ exhibiting a lamentable ignei- : ranee of finance, and entailing upon the Colony a reckless . '.waste of its resources. Sir, however unfortunate welhave hitherto . been in .the: conduct of our financial operations, I venture to predict that if this Bill passes in its present shap'ei ;the whole ' Colony will before long denounce ‘and . condemn it—will - awaken up to the consciousness that a : great .wrong has been done ; I had almost said that agreatfraud J Has been practiced, upon it. If we lost ■ in 1858, some £45,000 or £50,000,' by parting with qurhalf-million loan, (guacan- : teed by the imperial. Government) at par, .without offering, it to public I have not the slightest hesitation iii. saying. that by . effecting' the cony ersion of the provincial loans in the way, and on' the termsnow proposedi thatlwe; shall deprive Colony"ojaiprofit .oh the ; ,transaction, . .to whichfit is;- ; legitimately ;enprofifc whiqh: <;buld ah.d would he realized i without inflicting the slightest inj ustice--? • ithespiaUestlossuppnithebondholders. . i' I canhot beUeye that it is seriously con- ; tended by -ahyone that there exists *on the -'v>.;habiH^f>fpr^^^'^^yudaljfi6ah£-:> v ;‘iThe • 1 very! arthfrthe | refOsaLtoallow the pro: onithe: Stock , ian.sufficient proof tbatthe non at home; Dpndhpldersv. when they- lent their, money £ byithe

and 'that ant some instances it lias, been nlmoajbimpossible to negotiate them, except at ruirious.saorifices. ; But I : must go even furthor, say that thelendersknew perfectly -wellftliat the security; afforded by: the • Provinces was not first-elass-^that" it was .bf-.a" very precarious. nature —for they wore; wellVaWare tliht under - the' Surplus Revenue Act of; the Colony, there was [no pprfwnV'pf.yfhej'orclinai'y' rerenue"of the. Oolony peymanently secured .to‘.!the;Pfo*/ vince; i they knew perfectly well that the ■requirements of the General Government might at any: time ' absorb the! whole ordinary revenne, leaving. nothing for the Provinces.. In short, [I say, the, lenders invested: their money in provincial securities with: their eyes open ; there;was' no concealment on the part of the borrowers, and therefore if tho investment turns- out badly for them, if the speculation proves a losing concern, I for one cannot see what right the lenders have to expect the Colony:to come to their rescue, or to com*, pensate them for any loss they may sustain in the event of. a Province failing to meet its engagements. But what does this Act propose ? I will call the attention of the House to the second clause of the Act:—

The principal, interest, and sinking fund payable upon all provincial debentures issued,[or which may hereafter be issued; in accordance with the provisions of this Act, under the authority of any of the Acts or Ordinances of the Superintendent and Provincial Council of any Provineo of the Colony, specified in the schedule A. to this Act shall, from and after the passing of this Act, be charged upon and paid out of the consolidated revenue of the Colony Colony of New Zealand ; and the Colonial Treasurer shall, from and .after such day or days as shall be fixed by the Governor by proclamation, in respect of the debentures of any particular Province, pay all such interest as the same shall become due, at such times and places as such interest may be payable. , Now, vjhat is the real effect of the clause ? Does it not amount to this ? Is the Colony under that clause not giving its endorsement to all provincial loans ? Does it not to all intents and purposes convert provincial loans into colonial stock with* out the slightest necessity to exchange provincial tor colonial paper? By that clause you guarantee unconditionally the payment by the Colouy of principal, interest, and sinking fund of the provincial : debentures. I repeat, you guarantee the payment unconditionally, for you impose uo terms whatever. You do not even insist upon or require that there should be the conversion into colonial stock. What more can the bondholders possibly desire ? What possible inducement is theru to , exchange? If so, does not your whole 1 scheme,of consolidation and conversion fall ro the ground? What becomes of it? The holder of six per cent, debenture, which, he may have bought at. £3O, and . which may have become unsaleable at any price,, suddenly - finds its value raised to par or even to considerable premium, by the action of the Legislature, without his being called upon to pay a single farthing, oir even to express his thanks for such unexpected generosity, - such egregious folly.' T do not know the exact amount of provincial bonds that have been issued, but assuming that at- least two millions have been issued, and,.the average market value of them is from £BO to, £BS, you actually by. this (financial operation put into the pockets of the bondholders from .three hundred- to four hundred thousand pounds—aye, and in all probability a much larger sum than that. For if this Bill passes in it’s--present shape, I can see no reason why there should be any material difference: in the" [value of provir cial : and , colonial six per cent, bonds which by last advices : were ; quoted at £IOB. It is said —nay, it was, I think given in evidence before the Committee—that the New Zealand Bank holds some four hundred thousand pounds of Auckland debentures, which;’it is notorious could riot be sold at £8 j or at anything like that price. What do you do ? You simply by your present proposal raise the value of the bonds held by this bank by some eighty or one hundred thousand pounds; and yet for this operation the .Colony is to receive not the slightest advantage. This appears to be simply monstrous. . While I may congratulate , the holders of provincial bonds -■ upon, such good luck, I must protest ( against this House lending its sanction to : any ; such transaction., But you defeat the , whole object of the Bill—you render con- ■ solidatiou and conversion of the provincial : loans absolutely impossible ;. for .why i should the holders of, these bonds -exchange • them for, colonial bonds} bearing the same rate "of-interest for ‘a less surnthan the colonial bonds at present quoted at, viz., > six\per cent.- premiuin. The secu' ity for i both will thenceforth.:.be one arid the same. [ The proyincial bonds will henceforth be r quoted on the’StockExchahge as bonds ; guarariteed :by the Cploriy, and Becured i upon the i consolidated revenues of the , Colony. , The [ guarantee given to them will have precisely the same effectasthe ' guarantee afforded by the Imperial; Go* s y ernmerit to a pprtion' bf [ ' the colonial [' * conceive, what right this' house has to def pnye,tiie : ! ! mikht .heirealizedjHvthe .cpnyersion ;*was > ednriotrsee | Hip^e^pr|tliTOwmgl^way#fid^;p J ttttmg i mto-the pockets.of the bondholdpra some F two pr;;three _huridred . thousand pounds, | v^ibhiou^i^d^ahtuthefodlbniahcheat. I Cisioifiy.|bhly'[*givwf; after "theWndswere

; Except, pQrKsips; ia the firet great Ministerial failure in- the session, in the debate on the Otago difficulty, when the Ministry yielded the whole question to . the opposition, never did Mr Stafford e ppear to less advantage, never was./ he . more unhappy in his arguments than, ia defence of this measure, when endeavouring to reply to Dr Featherston. He declared that there were strong objections to, proceeding in any other way than that which the Bill proposed. .

We found (he said) that we were indirectly varying the security without the consent of those who had lent their money to the provinces of New Zealand, and that we were giving a decided priority for repayment of their bonds to those who migght choose to come in, while we were leaving those who did not choose to come in on srch terms as the Government sought to impose, without any security whatever. . It is impossible to avoid being struck with the unsoundness of this logic. The prices of the Provincial bonds in the market, and the- comparison of these with the prices of the General Government Debentures form a prompt and self-evident refutation to such argument. If the market price of Provincial bonds is <£Bo for each <£loo debenture, and if the General Government and the Assembly agreed to make a bargain with the holders of these debentures, (for that is the practical result which was desired), how is it possible that any injustice could have beeu done to them ? It is clear that as time went on the Provincial debentures did not improve in the market; teste, the £400,000 worth of Auckland stock which the Bank of New Zealand has held in its coffers for years, and found utterly unnegotiable unless at least 20 to 25 per cent, below par. To say, as was said in the Assembly, and has been repeated out of it, that the Colonial Government is bound in honor andjustiefe,. and for the sake of the Colonial credit, to guarantee the Provincial debentures,Ts as erroneous and is as mistaken finance as it would be to say that the Imperial Government of England is bound to recognise and guarantee Colonial debts, or that it was equally bound to guarantee payment of the debts and interest thereon undertaken by English borough and city corporations, which no reasonable man will attempt seriously to: argue. One of the Best arguments against the plan adopted, is to be found, in the circumstances attending the market value of a colonial loan guaranteed by the Imperial Government, and one not so guaranteed. In the former case we could readily borrow any amount, at a rate not exceeding 4 per cent., and then the debentures would sell at a premium; in the latter we ! could not hope to get the money at less than 6 per cent, and would be very glad to sell the debentures at 1 or 2 per cent, discount. Now, as the Imperial guarantee is to Colonial debts, so is; mutatis mutandis, the Colonial guarantee to Provincial debts. But our Ministry and the Assembly have made a .vast difference in results. Under the Imperial guarantee, the borrowing colony reaps all the advantages accruing from the excellent credit of the indorser of its bills; under the Colonial consolidation of debts scheme, neither the colony nor the provinces are one whit the better, only the shareholder is beuefitted, and, —as Dr Featherston forcibly shows* without any possible reason that is disclosed, (for, as he remarks, “ it surely cannot be for the purpose of paying increased dividends to the Bank of New- Zealand,”)—the colony is made to pay twenty-five per cent, beyond- the’•market price of the article .which as,‘ iii ordinary [ business, it was the duty bf the Government; to purchase; at the current price, instead of throwmg away' the-public: money as has been done, and advancing the' interests;[pf private speculators and, stock jobbers at.the cost ofthecolonists of:New Zealand. 1 " r ■ ’’ r;i

. What then, we ask, is, andiwhence comes*..the; influence which, has sue* ceededinipre^ through a measure so manifestly! to thiffdi&aiivMtage^ That there; is some special ahd’.powerfulivmfluehce';behmd;[; the . Ministers must .be beyond-doubt. Dr Feathersfraud; a robbery; and a swindle,” *ah(l occupants xff bench offered

Why ? Again; on" a former occasion, one of the; members.! of;the Upper Hoase declared thaf there was a “ power behind the Colonial Treasury stronger thantheColonialTreasuryitself.” What is that, power ? Frankly, is it Members of the Lower House do not hesitate/to say it is; and they tell stories of the “ lobbying ” and watchfulness of Mr Thomas Bussell, of Auckland, who, when the Auckland members were antagonistic to the Stafford Ministry, came down to Wellington, and by his talismanic presence helped to turn refractory opponents into docile Ministerialists. He used, it is narrated; to c me into the presence of the “ Commons,” entering through the Colonial Secretary’s room, and, although not a : member of the House, 'would sit beside the Speaker’s chuirikeenly watching the proceedings a»>d, some say, watching the members. He, too, one of the men most largely interested in the stock of the Bank of tfevv Zealand, was the only witness examined by the Select Committee on the Public Debts Bill; the witness being a shareholder in a concern into whose chest the act will place directly something like a hundred thousand pounds. Who the lucky telegraph senders are, referred to by Dr Featherston, no one knows; but without doubt the Bank .of New Zealand agents in London will not be the last to hear of the stroke of business that has been done aad may be done under these iniquitous aud mistaken •acts. What is the “power behind thß Colonial Secretary ?” and why should there be: such dark references, and so many outside mutterings on the subject ?

Is it seemly that, of the Ministers who have prepared and pressed on the measure; (which, aswe have repeatedly said does so much for the shareholders of the Bank of New Zealand, that is known, besides that which may be conjectured, but never known beyond some stockjobber’s office)—is it seemly that, on the published list of those shareholders, there are names of at least two of these Ministers ? Mr Stafford and Mr J. C. Richmond, are both shareholders in the Bank of New Zealand ; the one is the Colonial Secretary, the other the Commissioner of Customs. We should like to know what would have been said in England, if a Premier and Chancellor of the Exchequer, or any other Minister had, by a financial' scheme, promoted on ’Change the stock, of a concern in which they were directly interested as shareholders. There are other members of Parliament whose names are on the share list of the Bank, and also among the “ Ayes ” in the list of the division which puts so much into the; Bank treasury. What has brought all this about ? Whence, and why the influence of which everybody is talking; and which, if it has produced; this measure. has bad such a detrimental effect on the finance of the Colony ?

"We can only say this:-—lf the Bank of New Zealand is “ a powerful political engine;” if, by “ the power behind the Colonial Treasury,” the Bank of New Zealand is meant, then it is high time tbe engine should be put out,of its .political gearing,, and such *“ power behind, the Treasury ” abolished for ever. • \