The Daily News. WEDNESDAY, APRIL 6, 1921. HYDRO-ELECTRIC LOAN.

Taranaki Daily News, 6 April 1921, Page 4

The Daily News. WEDNESDAY, APRIL 6, 1921. HYDRO-ELECTRIC LOAN.

The position of the borough of New Plymouth with regard to financing its hydroelectric scheme is unfortunate, and the fact that other local bodies are adversely affected !by the present financial stress affords no consolation. It is quite evident that the Council’s deputation which recently went to Wellington in order to make a strong effort to find a way out of the financial barrier to progress did all in their power to solve the problem. That they did not achieve the success desired was because they could not perform a miracle. The information they obtained not only accurately reflects the position of the money market, but places the position with regard to loans in a light that must convince the ratepayers as to the impossibility of obtaining municipal loans at less than seven per cent., including the cost of flotation, at which price it was reported there was a good prospect of obtaining the money outside the Dominion. Raising the money in New Zealand is seemingly impossible, probably owing to the Government prohibiting the rate of interest on local bodies’ loans raised in this country exceeding six per cent. As the Government has first call on all the available funds its lending institutions can furnish, it can monopolise those funds to the exclusion of all other applicants. Whether this' policy is in the best interests of the country or not is open to question. For ourselves we cannot see why if we have to pay a high rate of interest outside we cannot offer similar terms to our investors. “The Government restrictions have ceased to be of any use The Government may as weM try to keep back the tides as to interfere with the natural law of supply and demand of money. ‘lf the rate of interest is kept down here then the money will flow outside, where better terms are offered. That is precisely what is taking place at the moment, and the Government goes on foolishly endeavoring to keep the rate down though allowing local bodies to go outside and pay the higher market rate. What is the real difference ? It is a queer state of affairs altogether, and does little credit to the judgment of the Govern-

ment’s financial advisers. Serious as is the present position in New Plymouth, it has to be faced. To stop work is really more disastrous than paying an extra one or one and a quarter per cent. A good deal of the work has already been completed, and interest on this and the commitments made would have to be found out of rates. Having gone so far with the work it must be finished and made revenue producing as soon as possible. Much an it goes against the grain to have to pay the increased rate of interest, the need of the money is so urgent that there is no option but to pay it. The ratepayers now know the worst, and it rests with them to demonstrate their faith and courage by doing what is required to ensure the money being raised outside New Zealand on the terms.

THE ALLIED LOANS. It is reported from Washington that Cabinet has decided that the United States will not cancel any Allied loans, which are regarded a* "a valuable asset.” In the early part of February Mr. Chamberlain, as Chancellor of the Exchequer, made the striking announcement that “at the close of the war the British Government made proposals by which the whole of the international debts of the Allied and Associated Governments would have been wiped out and the financial settlement started on a clean slate. That is to say, we should 'have remitted what was due from the Allies to us and America would have remitted. what was due from us to her.” In case anyone should object that this was a cheap generosity on Britain’s part, Mr. Chamberlain went on to explain that under this proposal “we should 'have foregone claims larger than any remitted to us.’' At that time the United States lent no encouragement to the proposal, and now apparently has rejected it absolutely. The suggestion was that Britain should remit the £1,700,000,000 due to her by her European Allies if the United States remitted the £800,000,000 due from Britain. In other words, Britain offered tc cancel twice as much debt as the United States, namely, £2 for every £1 remitted by the States. This precludes the retort that Britain made the proposal for interested motives. It was a verj fine offer that will be counted to Britain’s credit in the generations to come

In suggesting the cancelling of the debt a great sacrifice -was being asked of the United States, but on economic grounds it may have paid her many times over. Apart from other considerations, the better exchange conditions following the cancellation would have immediately increased American trade with Europe, which is now lagging. The large sum owing by Britain to America was chiefly incurred on behalf of her Allies, her own purchases from America being to a considerable extent paid for by the sale of some portion of the foreign investments she had accumulated during many years of profitable trading. The United States has missed a great opportunity of helping Europe to regain its economic feet, and at the same time to give an impetus to her own trade in a way that nothing else could have.