THE NEW WAR LOAN

Taranaki Daily News, 27 September 1940, Page 6

THE NEW WAR LOAN

Compulsion is never popular in a free cornmunity, least of all when it is applied to individual rights and possessions. It can be taken for granted therefore that the Government's decision to issue a cpmpulsory war loan in New Zealand has been "dictated by necessity, The need for borrowing for war purposes was foreshadowed by the Minister of Finance when the Budget was introduced, but the unpopularity of the compulsory nature of the loan may account for the decision to issue it under wartime regulations rather than by legislation that would have to run the gauntlet of Parliamentary criticism. The method of issue may also be explained as in keeping with the Government's avowed intention of conscripting all the resources of the Dominion, including manpower, for the prosecution of the war. Leaving aside for the moment factors that have increased the Government's dependence upon loan money for that purpose, it will be seen from Mr. Nash's statement that it is hoped to raise £8,000,000 by the compulsory loan. In his Budget speech the Minister estimated that £3,650,000 loan money would be required to meet wartime expenditure in the Dominion during the current year. It seerns apparent therefore that at least half of the £8,000,000 hoped for will be used for war payments overseas. But since ability to pur_hase or spend overseas depends entirely on the credit margin betwenn receip.ts for exports and payments for imports, how does Mr. Nash propose- to apply over £4,000,000 of New Zealand currency to the purchase of goods overseas?

* # * * Admitting that the need for raising a loan exists, there were three methods by which the required funds could have been sought, namely, by an ordinary loan bearing a low rate of interest during its currency, by a compulsory loan, by borrowing from the Reserve Bank through the issue of Treasury bills or in less orthodc : ways of raising funds against "the credit of the Dominion." It can be said that the Government's choice of the compulsory loan method has at least the merit of being less inflationary in its eflects than experiments in the use of the credit of the Dominion. The terms of the loan give it no attraction as an investment. It will be interestfree for three years, and for its remajning 10 years will bear interest at i\ per cent. Over the whole period, therefore, the average rate of interest will be slightly under two per cent. Voluntary gifts and interest-free loans have already placed ov r £2,000,000 at the disposal of the Government for war purpces, and apparently this has been considered an indication that a compulsory extension of interestfree loans will not strain unduly the financial structure of the Dominion. # # # # Lefore resorting to compulsory lending it seems regrettable that the Government has not followed the example of Great Britain by the issue of special war savings certificates of small denominations. They have proved a success in the United Kingdom and have brought many millions of pounds to the war chest and the lack of a campaign in support of the issue of war savings certificates is more regrettable when the compulsory terms of the proposed loan are considered. Quite rightly they are designed to place the burden on those who can bear it best. The effect is to exempt the great majority of wage-earners from any obligation to support the loan, whereas Britain's experience has shown it is from the wage-earners that great support has been obtained for the \var savings certificates. The support has served a double purpose. It has provided money for war efforts and it has limited spending and thus had some effect in preventing a threatened enormous rise in the cost of living. The compulsory terms of the loan may press harshly upon individuals and organisations. Demands are to be based on incomes earned for the year ending March, 1939. Many incomes have been reduced since then by the application of the Government's policy of import restriction. It is not clear whether there is to be a right of appeal in the case of hardship. Even if there is, the prospects for appellants are not good when there is an imperative demand for war funds. # * # # Acceptance of the Minister's assurance that the procceds of the loan will be used solely for war purposes does not remove the uncomfortable knowledge that the financial position need not have been as unpromising as it is. In its internal administration the Government persists in maintaining an industrial and financial policy which seems almost to disregard the fact that New Zealand is at war. It is sound policy to pay for the war "as we go" as far as is possible. Economy in internal

t j expenditure and more production | are two essentials to the success of j that policy. Were the Government to give a lead in economy the response to Mr. Nash's appeal for voluntary support of the new war loan would be more likely to receive the response he desires.