NEW WAR LOAN

Otago Daily Times, Issue 24420, 4 October 1940, Page 9

NEW WAR LOAN

INTEREST FREE FOR TWO YEARS “MINISTER FORCED BY PARTY CLAMOUR” (From Our Parliamentary Reporter! WELLINGTON, Oct. 3. “The Minister of Finance (Mr W. Nash) has been forced by party clamour to make the war lo—i interestfree for the first two years,” said Mr W. A. Bodkin (Opposition. Central Otago) during the debate on war finance in the House to-day. At every meeting of the Labour caucus, Mr Bodkin said, members embarrassed the Prime Minister by declaring that Mr J. A. Lee (Grey Lynn) was forming branches in their electorates, and was telling the public the old story of in-terest-free money on which Labour had won the elections. The Minister of Finance had been driven to the in-terest-free loan by the Left Wing. Members of the Cabinet knew that debt-free money was only eye-wash, yet they were hopelessly embarrassed when members said, “ If you don’t give us costless credit we will be torpedoed by Mr Lee.”

ALTERNATIVE METHOD SUGGESTION IN HOUSE USE OF IDLE CAPITAL (From Our Parliamentary Reporter) WELLINGTON, Oct. 3. An alternative method to that proposed by the Government for raising an internal loan of £8,000,000 for war purposes was suggested by Mr W. S. Goosman (Opposition, Waikato) during the debate on war finance in the House of Representatives to-night. Working capital, said Mr Goosman, would be taken out of production by the loan whereas an increase in production involved the use of extra capital. Mr Goosman said that much of the capital was lying in the banks and was not being used. Many people were living on capital because they could not find an outlet for their money, His proposal was that the Minister of Finance should provide an alternative for the people who were going to contribute to the loan. The Minister could undertake to borrow that money and allow the people or companies concerned, instead of contributing the capital, to pay the interest on it.

An example of how his scheme would work ,was given by Mr Goosman. He quoted the case of a person who had to contribute £IO,OOO to the loan, and assumed that the money could be borrowed for 3 per cent. Instead of such a person paying £IO,OOO, he would pay £3OO a year for the first three years, and for the 10 subsequent years the difference between 2J per cent, and the rate the Government paid for the borrowing of the money. That would mean that he would pay £SO for each of 10 years, a total of £SOO. The result would be a cash contribution in interest to the Government of £I4OO over the 13 years, and that would pay the interest on the money borrowed by the Government. COMPULSORY, PROPOSALS PRODUCTIVE INDUSTRY EXPANSION ESSENTIAL (From Our Parliamentary Reporter) WELLINGTON, Oct. 3. The compulsory loan proposals did not involve a new departure in financial policy, said Mr J. A. Lee (Democratic Labour, Grey Lynn), when speaking in the War Finance Debate in the House this evening. Whereas during the last war loans were raised compulsorily at a fairly substantial rate of interest, this time it was proposed. Mr Lee said, that there should be no interest for three years. But when it came to the question of piling up the war debt the basis was just the same. “ However much we are opposed to the present system," said Mr Lee, “ wo are not imposing this compulsory loan to engage in social revenge; we are imposing it to get the maximum quantity of goods. The war will not be won with the goods now in existence, but by productive capacity during the war. As never before, we must have expansion of the various forms of productive industry. "The bulk of our productive industry to-day is leaning on the banks which will create credit as a debt. We pretend that the loan is interest-free, but industry will pay the banks 4J or 5 per cent., for only the banks will be in a position to buy these bonds at a discount. Why should not the banks supply credit interest-free to the manufacturer for three years? Why should the manufacturing industries get no per cent, and the banks 4£ or 5 per cent?