REFORM FINANCE

Hokitika Guardian, 6 September 1923, Page 4

REFORM FINANCE

(Lyttelton Times). 111 June, 192 L, Mr Massey, who was then in London, raised a loan of five million pounds, bearing interest at the rate of 6 per cent, and issued at the price of £96. On August 31st, 1923, wo received from the Government Printing Office an extract from a fetter from tho High Commissioner giving “particulars of the charges and expenses in connection with the raising” ol this loan. We do not know why it should have taken nearly two and a quarter years for this information to reach 11s. Tho Parliamentary Paper is dated 1922, and ought to have been laid on the table of the House last year. Since however, it has only just made its leisurely way to the “Lyttelton Times” office, we assume that the document is new to members of Parliament and the public. Possibly the fact that an election was pending may have influenced the Government in with-holding the report a year ago, for it certainly contains information reflecting little credit upon those in charge of the country's finances. The High Commissioner, writing on November 16th., 1921, has “the hoiioni to transmit herewith the loan agents’ account.” Hero we arc inclined to ask why the Dominion should have to employ “loan agents” when it lias a High Commissioner in London to look after its affairs, and, as it happens, an ex-Minister of Finance, who might at least be expected to perform the work of loan agency, whatever that may be. However, let us examine the account.

Many people may not know that when a loan is floated the custom is to sell sufficient stock to provide the full amount of the loan plus cost of flotation. Tll this case the expenses, in eluding the discount of 4 per cent., amounted to £384,692, or rather more than 7 per cent.—a figure which we think excessive. In order to reinforce tho ways and means of the Dominion i-v five millions, a total of just under £5,385,000 was added to the public: debt. The net return on the total loan is given by the “loan agents,” through the High Commissioner, as £92 17s 2d per £IOO of debt incurred, and the annual cost to tho taxpayers, including redemption—that is, allowing for the fact that £385,000 more lias to be repaid than was received—works out at £0 10s Kiel per annum. That is the price the people of New Zealand arcpaying,’ through taxation, for the loan raised by Mr Massey when lie was last, in London.

This was. and is, very clear money. Much of it was borrowed for railway purposes, both construction and equipment, and for tho financial year during which capital was found for the railways at a cost of £6 10s LOd per annum—for 15 to 30 years—the railways earned a trifle over 1 per cent, on capital invested, with no allowance lor interest. But that is by the way. We think we can show that it was not at all necessary to borrow anything like as much as five millions when the market was as unfavourable as the cost of the loan proves. The purposes of the loan were: Public, works, 2) millions ; electric supply, l] millions ; railways improvement (1111 dor the Railways Improvement Authorisation Act, 1914, known as “the Hiloy scheme”), 1 million. The public accounts show that it was absolutely 1111necossary to Ikiitow in 1921 for the “Hiloy scheme” or for electric supply, because there were ample funds in hand at the time. At the dose of the financial year in March, 1922, the Railwavs Improvement Account was in eredit to the tune of £1,904.166, and the Electric Supply Account showed a credit balance of £2,171,117. These two accounts had ways and means available at that date amounting to i£l ,075,283 —nntl mi two and threequarter millions of tfiis money. tliis huge amount of surplus credits, ol funds provided but not used, and therefore not needed, tin- taxpayers have been paying over 01 per cent, interest for two years and are pledged by Mr Massey to keep on doing so for possibly a further 29 years. . . Probably we shall be told that this is the best that Mr Massey and his friends could do, and that may be true enough, tut it does not make the facts less unpleasant or loss expensive to the unfortunate taxpayers who are tin- victims of tho inefficiency of the Ministry of Finance.