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STATE DEBTS.
EP. HARPER'S MEMORANDUM.
\
SCHEME FOR CONTROLLING STATES'
. . EXPENDITURE.
MELBOURNE, August 3.
Rp. Harper's memorandum on the finan
cial relations of the Commonwealth and
State*, presented to the House of Repre
sentatives, is Jin interesting document. Rp.
Harper regards the taking over of the debts
as impossible, except to a limited extent
to convert the obligations of the States.
It -would be undesirable to renew them, and
unnecessary to consolidate them, because
if the debts were to be assumed the Com
monwealth, would have to provide the
money for them as they matured by the
creation of stock for which it would be
responsible, and the Commonwealth would
henceforward become the creditor of the
States. No immediate large saving is, he
considers, possible by the immediate trans
ference of States' debts to the Common
wealth. The States' debts must be left
till the time of maturity. Rp. Harper does
not agree that any amendment of the Con
stitution is necessary to enable the Com
monwealth to deal with debts incurred by
the States since the establishment of the
Constitution. Parliament is empowered !jy
section 9G of the Constitution to render
financial assis anee to the States on terms
that Parliament thinks lit.
The proposals made by Sir George
Turner to take over part of the debts of
each State on a per capita system are re
ferred to by Rp. Harper, lie considers,
however, that the partial assumption of
debts is undesirable, as it would continue
the financial entanglement between the
Commonwealth *and the States. For this
reason the whole of the debts should be
taken over, not at once, but as they fall
due, and in the meantime the Common
wealth should arrange for payment of inte
rest on the whole of the debts of the
States and also to take over the whole of
the loans maturing in 1907. The Common
wealth should provide also, in such way ns
?would be most advantageous, tor the estab
lishment of a 3 per cent, permanent Aus
tralian stock, terminable only at the option
of the Commonwealth on six months' notice
at a time after, say, 20 years of its emission.
To manage these debts it is suggested that
commissioners should be appointed as part
of the administration of the Treasurer's
Department. This board would consist of
three or five members, of which the Trea
surer of the day should be one, with two or
other members of financial experience and
knowledge. This body would act as a trus
tee, needful in cases where trusts were
needed. An absolutely necessary part of
the arrangement would be the appoint
ment of a High Commissioner in London
to carry out the financial arrangements
deemed necessary.
''Insistence by Premiers at their various
conferences upon the maintenance 6f the
Braddon clause,' Rp. Harper adds, 'is
justifiable only so long as the States are
left responsible for their debts and inte
rest. With this liability removed the
re;iiion for opposition is removed. Com
plaints have been frequently made of
alleged extravagance of Federal Parlia
ments, but in this ponncetion it is inte
resting to note that m four complete years
since (he passing of the uniform tariff
Parliament has returned to the States
£3,883,156 more than it was constitution
ally bound to return. That fact should
set. at rest once and for all the erroneous
allegations which have been made. Un
fortunately this considerate action on the
pait of the Commonwealth has led on the
part of the States to demands not only for
the return of three-fourths of the revenue
from the customs and excise, but to their
claiming as much more as they could pos
sibly get. The result is that Federal ii
riance, which should be independent and
free, is criticised and found ? fault? with in
the interests of what are eorisidered'tq be
the States' obligations. These expectations
and claims tend to complicate settlement
on equitable terms of the future financial
relations of .the States to the Common
wealth.
'The total interest payable on the debts
of all the States amounts to £8,383,574, to
which lias to be added £74,000 payable
under agreement with banks for inscrip
tion of loans and expenses in connection
?with management. Taking the year 1905 0
just closed, the amount paid l-y the Com
monwealth to the States was £7,3S5,720.
which is £977.835 short of the interest
charge, Four States had, however, for pay
ment of interest to find out of other sources
of income £1,408.393 in addition to sums
they received from the Commonwealth;
nnd two States, Victoria and Western
Australia, had to balance from their re
ceipts from the Commonwealth after pay
ment of interest Imlaniccs amounting to
£430.563. Had the Commonwealth in 1905-6
returned to the States only what they were
strictly entitled to, the position would have
been: — Total interest paid by the States,
£8,3G2.56M; total returned to the States by
the Commonwealth, £6,550,780; total,
£1,806,775. In. those circumstances the,
States would have had to pro
vide , for this amount, apart from
what * the Couimomvealth returned to
thorn. Five cf the States would;
have had to contribute £2.03C,ll-S, while
one of the States — Western Australia
would have had an excess of £220,393. The
Commonwealth should pay the whole of the
interest, and until the expiry of the Hrad
rlon clause the amounts to -winch the States
will be entitled to be credited by the Com
monwealth, ns against the payment of each
State's interest, shall be three-fourths of
the customs and excise revenue, reckoned
on an average of the last four years, and
amounting annually to £6.356,779. This
would involve the payment by the fitites
to* the Commonwealth from other sources
of revenue of the following amounts:— New
South Wales. £459,310; Victoria, £173,006;
Queensland, £736,250; South Australia,
£572,061; Tasmania, '£95,541. This ar
rangement would have the advantage of
bearing but lightly,, on the three States
whose peculiar Icirouinstances render ad
justment particularly difficult.. After the
espirv of the Braddon clause the Common
wealth could rebate over a peric4 of 20
years contributions payable by the States
under this arrangement by cumulative
reductions at the rate of 5 per cent, per
annum. In like manner payment by the
Commonwealth to Western Australia of its
excess should be reduced. That would have
the effect of entirely throwing, npon the
Commonwealth by 1930 obligation for the
whole £1,806,770 per annum., (balance sit
present payable by the States out of their
own resources). That arrangement would
give 'the Commonwealth £800,000_ per an
num for purposes connected with tlie Com
monwealth in addition to that which it
spent last year. Such a sum would not
be more thin adequate to meet its growing
requirements during the next three yeais.'
No suggestion is made to take over the
railways, as objections by the States to
that course are deemed to be well founded.
With resird to future outside borrowing
by the States, Rp. Harper thinks it should
be limited to reproductive works, such as
railways, waterworks^ and docks. It would
be the duty of the Commonwealth to pro
vide money and to api-oint trustees to ad
minister tie works on behalf of the States
concerned. The Skiies should be free to
borrow money within the Commonwealth
for non-reproductive or temporary pur
poses.
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