SPENDING OF LOANS

Sun (Auckland), Volume I, Issue 127, 19 August 1927, Page 9

SPENDING OF LOANS

GOVERNMENT MUST BE UNTRAMMELED MR. COATES DEFENDS POLICY (THE SUN’S Parliamentary Reporter.) WELLINGTON, Thursday. Dealing with the Government’s administration of loan moneys, the Prime Minister, in his reply to the Budget debate, said that he would never consent to a board supervising public works expenditure, but he did not object to criticism. The allocation of the public works fund was purely a matter of Government policy. “Our public works policy is one that can be attacked by anyone who is interested in the finance of the country, and any criticism upon our expenditure of loan money is welcomed,” continued Mr.. Coates. “None is more anxious than the Government to know whether its expenditure is giving satisfaction or not. I would point out, however, that a great change in local body borrowing has taken place during the past few years. . . . At one time it was looked upon more or less as a lottery as to how much a county council would get in subsidy, but now the engineers are taken into the confidence of the Government before the estimates are finalised, so that they can get an idea of what their finances are going to be. This links up clo'sely with the Public Works Department the local authorities that are to do the work. NO INDEPENDENT BOARD “To suggest an independent board to deal with the public works expenditLire of the Government I cannot agree to. It is Government policy and we have to put up with the criticism we get over it. As for the Lo’cal Government Loans Board, I think it should have been introduced 20 years ago. Much expenditure would have been saved. Certainly there has been money spent that would have been better unspent.” The Prime Minister replied to the Leader of the Opposition on the subject of internal financial reorganisation, and said that public works such as hydro-electric works, telegraph lines and railways should be constructed from money borrowed overseas. The internal wealth of the country should be used for the benefit of the people themselves within the country. It would not be fair to construct these works on the betterment plan and ask country people to pay on this system for the eeretion of a telephone line while his city colleague had years before had one erected for him, ano was paying for it in general use. “INKPOT FINANCE” The Prime Alinister touched upon Air. McCombs’s reference in the House to the Government’s policy of “inkpot finance,” and said that the goods for the schools mentioned by Air. McCombs had certainly been purchased from loan money, but he claimed that this was perfectly legitimate if when the goods were worn out they were replaced with modern substitutes out of revenue. Air. McCombs: You will not allow local bodies to do this with loan money. The Minister of Finance, the Hon. W. Downie Stewart, traversed the criticism levelled against the Government by Air. AicCombs, contending that his statements were wide of the mark and were calculated to disparage the position of the Dominion. DEBT-REDEMPTION

Reviewing the provisions for tlie redemption of the public debt, Air. Stewart explained that the Public Debt Extinction Act, 1910, established a scheme of sinking fund which had to accumulate at compound interest for 75 years. That scheme meant that a huge sinking fund was accumulating which would all fall due at a specified date and involve a vast scheme of realisation. Aloreover, apart from surplus revenue, there was no money available to redeem loans that matured in the interim, so that loans had to be renewed, although there were sinking funds in existence to redeem them. The Repayment of the Public Debt Act, 1925, was designed to overcome those difficulties and to obviate the weaknesses of the 1910 Act. Under this scheme the sinking fund is used to repurchase loans on the market and the stock is then cancelled, hut interest on the cancelled stock was continued at fixed rates and paid into the sinking fund to represent the interest that would have accrued had no reduction taken place. Under the present system, debt would be redeemed in GO years from its inception instead of at the expiry of 75 years under the old The motion moved Try the Alinister of Finance at the opening of die debate, “That the House do go into Committee of Supply,” was then put and carried.