THE Wairarapa Age MORNING DAILY. FRIDAY, MARCH 11, 1927. CONTROL OF BORROWING.

Wairarapa Age, 11 March 1927, Page 4

THE Wairarapa Age MORNING DAILY. FRIDAY, MARCH 11, 1927. CONTROL OF BORROWING.

A'.body of recent creation that may have a troubled career ahead of it is the Local Government Loans Board set up under an Act of last session to control local body borrowing. The board held its first meeting the other day, and will, begin to exercise its powers at the beginning of next month. Objections are nearly always raised in this country to anything that savours of interference with the autonomy of local bodies, and there is not likely to be any exception to the rule where tho control of local borrowing by a central authority is concerned. It is plainly very desirable, however, that local body borrowing should be brought in some way under systematic control. Figures recently made public by the Government Statistician show that the total gross debt of local governing bodies has much more than doubled in the last ten years. It is indeed not far short of having doubled in the last five years. During the period last mentioned, the gross debt of local bodies has been increasing at the rate of very nearly £5,500,000 per annum and on March 31, 1926, it amounted to £60,194,000. Some details of the position are arresting, notably the fact that while the gross debt of counties (exclusive of loans from the Government) increased from £1,328,000 in 1922 to £3,054,131 in 1926, the corresponding debt of cities and boroughs increased in the same period from £16,282,000 to £25,607,000. Eleetrio power boards have in these five years increased their debt from £1,480,000 to £8,745,000, but the works on which this money has been spent are, of course, distributed over town and country.

Looking at the broad divisions of local body debt and its increase, some people consider that the obvious line of reform is to impose the narrowest possible limits on municipal borrowing. In support of this view, it is urged that municipal debt is incurred largely for the extension, of amenities, which may be classed as luxuries, whereas counties borrow chiefly for works that will aid production. In any attempt it makes to limit municipal borrowing, however, the new control board will have no easy or simple task in hand. Of the present municipal debt, all but ai iacor biddable part was incurred to meet the cost of works in four main categories; drainage and water supply; streets, footways and bridges; electric supply; and tramways and other passenger and carrying services. Expenditure on drainage and water supply accounts for nearly one third of the total municipal debt. No one can doubt that plausible reasons will continue to appear for making big annual additions to the municipal debt, as well as to other forms of local body indebtedness. , Thefe are several directions, however, in which it should be open to tho control board to do good work. This body, if its are developed as they should be, may be able to exercise a powerful influence in tho direction of ensuring that works undertaken by local bodies are better and more wisely planned than some of them have been in the past, and in particular that such works are planned and carried out in accordance with first-class engineering advice. The operations of the board in dealing with this aspect of its duties will be followed with great interest. Several important questions arise also in connection with the purely financial aspects of local borrowing. Approximately two-thirds of the local body debt has been raised in the Dominion, and the present ruling rate of interest at which local body loans are raised is appreciably higher than the rate paid by the Government on loans raised in London. The effect on the supply of capital to primary and secondary industry, and on interest rates, of the heavy borrowing of local authori-

ties evidently must be very considerable. There are arguments for and against enabling these bodies to group their borrowing requirements and raise the money abroad, but the whole question obviously is worth going into methodically. Here and in other directions there is good scope for useful work by the Local Government Loans Board.