The New Zealand Times. THURSDAY, FEBRUARY 20, 1913. THE LOAN FLOTATION

New Zealand Times, Volume XXXVII, Issue 8359, 20 February 1913, Page 6

The New Zealand Times. THURSDAY, FEBRUARY 20, 1913. THE LOAN FLOTATION

We unreservedly offer our congratulations to the Hon. James Allen upon the fact that he has succeeded in raising the three-million-and-a-half loan in London. This money was indispensable to the continuance of a progressive public works policy, it was necessary to enable the Government to fulfil its obligations, and without it the work of land settlement and other essential departments of colonisation could not be proceeded with. There are some people who argue, with a certain amount of reason, that it would be better if New Zealand failed in every future attempt to borrow in the foreign market. We must confess, however, that wo cannot endorse such a view. It may be that our liabilities are piling up, but so also are our assets in even greater proportion, and if w© are determined to open up and settle the country, and develop bur resources to the fullest extent, wo must be prepared to continue to borrow money for these purposes. It matters not what party is in power—whether Tory, Liberal or Labour—the necessity for borrowing must be recognised and provided for unless we are prepared to reconcile ourselves to a condition of inactivity and stagnation. To build railways, construct roads, and settle people oh the lauds—-to achieve the colonising destiny of a virile young nation with boundless resources of undeveloped wealth—calls for the continued expenditure of borrowed money. That is a position we must face, whatever our political convictions; and it is futile and hypocritical, with . this knowledge in our minds, to blame any Government for going on the money market in search of a loan. Therefore, as we say, we heartily congratulate the Hon. James Allen on the fact that he has raised this three millions and a half. But, at the same time, we cannot join in the transports of delight and admiration with which the Tory press professes to regard the Hon, James Allen’s first financial operation. We certainly cannot agree with the Dunedin “Star” in viewing it as a “brilliant coup.” The one fact upon which the people and the Government are to he congratulated is that the money has been raised. The terms are quite another matter altogether. There were certainly some very awkward difficulties in the Hon. James Allen’s way. One of these was a stringency in the London money market, which has existed oyer a period of several years, and which very properly restrained the Hon. Arthur Myers, when Minister of Finance, from committing the country to the payment of a comparatively high rate of interest for a longer period than two years. Another obstacle in the Hon. James Allen’s way, and one more difficult to negotiate, was the injury to our credit that had been caused, thoughtlessly, no doubt, by the Tory party before its accession to power in the pre-election campaign of abuse of the Liberal Government. It was a foregone conclusion that the London investor would hear the press and platform allegations that our previous loans had been squandered for political purposes, and that the Hon. W. F. Massey’s reckless assertion that six and a half millions of money had been spent to buy’ votes would fall unpleasantly on suspicious and inquisitive ears. However, as wo said a few days ago, it was well that Sir Joseph Ward was in London at this critical moment. To him more than most men the welfare of his country stands higher than the bias and prejudice of party, and ho answered the charges of his opponents, for their own political advantage, with disinterested and characteristic _ magnanimity. With this telling assistance, and that of the Hon. Thomas Mackenzie, whose finance Was ridiculed by the Tory party less than a year ago, the Hon. James Allen raised the money. But at what price? That is a different _ story altogether. The cable messages inform us that the Ipan was underwritten at 98, the rate of interest being 4 per cent. That is excellent as far as it goes. But the cable messages say not one single word about what was paid to the underwriters for their services in the matter and the risk they took. That this risk was considerable is shown by the fact that' the public subscribed only 20 per cent, of the loan, which included many small amounts, the underwriters being left with the significant proportion of 80 per cent. Now, it is fair to assume that the underwriters, realising - this prospective liability, compelled the Hon. James Allen to pay very heavily for their help. That is their business. TJhtil we hear what the underwriters have got, and the full bill for expenses is presented to us, it would be premature to_ give way to joyful self-con-gratulations or to throw caps in the air in celebration of what has been termed a brilliant financial coup. There is time enough for that when the whole of the tale las been told. , In the meantime, it is sufficient to point out that the interest is going to work out at much more than four per cent. While there is a loss of £2 on each £IOO in flotation, we xnust_ not overlook the further fact that six months’ interest is to he paid in August, although the payment of the first instalment of the loan is not to be made till July, so that interest for the whole of the money is to be given for the nso of only a part of it for a month and nine days. Then there are the underwriters to settle with, and their pound of flesh is certain to ho exacted to the full, to say nothing what-

ever of the other expenses and charges. When the ledger is carefully balanced, wo shall be lucky if w© get more than £92 or £93 for each £IOO debenture, while the interest and charges will not fall far short of five per cent. These are all disquieting facts, hut, in the best interests of th© country, it is just as well that they should not be paraded too ostentatiously. However, they serve two interesting purposes. In the first place, they demonstrate most convincingly, by force of comparison, th© fact that New Zealand in th© past was well served by Sir Joseph Ward in his skilful, sagacious and far-seeing financial operations that have not been equalled either before his period of administration or since. In the second place, the terms that the Hon. James Allen has been required to concede in order to obtain this loan, even from tho underwriters, and the awkward fact that the public could only be persuaded to subscribe one-fifth of it, place in a most ridiculous light the Hon. W. F. Massey’s boastful and blatant assertion at Rotorua, on the authority of someone high in financial circles, that the credit of New Zealand had gone up enormously in London since his Government had come into power. So also, wo might suggest, has tho price of our loans.