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A Loan Council for Canada: The Australian Experience
Published online by Cambridge University Press: 07 November 2014
Extract
It is felt by many people that the refusal of the government of Alberta to accept the Loan Council principle, and the similar views expressed by other provincial governments, have sounded the death knell of a Loan Council in this country; and moreover, that Mr. Dunning's recently announced modifications of the plan will have little effect as a revitalizer. It is my belief that the scheme of individual provincial Loan Councils, while desirable as a means of giving the Dominion government a measure of control in situations where it has been obliged to become financially interested, is not calculated to pave the way towards a more comprehensive system of controlling government borrowing, along the lines of the Australian Loan Council. A more effective instrument for this purpose might well prove to be the National Finance Council; its evolution into a body with effective powers of control may take a period of years, but that is not necessarily an objection, since in matters of constitutional development the tortoise not infrequently defeats the hare. This, in brief, is the thesis which is developed in the following paper.
For the purpose of this paper, discussion is limited to the control of federal and provincial governmental borrowing, and no consideration is given to the control of municipal borrowing. This is not because the latter problem is lacking in importance, or is irrelevant to the whole problem, but since the municipalities are the creations of the provincial government, and because they vary so widely in size, etc. , their control presents many fresh problems, the consideration of which would more than double the length of the present paper.
- Type
- Articles
- Information
- Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 2 , Issue 3 , August 1936 , pp. 354 - 373
- Copyright
- Copyright © Canadian Political Science Association 1936
References
1 Canada, House of Commons Debates, 03 22, 1935, p. 1965 Google Scholar, unrevised.
2 Montreal Daily Star, Jan. 14, 1936.
3 Canada, House of Commons Routine Proceedings and Orders of the Day, 03 18, 1936, pp. 7–9.Google Scholar
4 Canada, House of Commons Debates, 05 1, 1936, p. 2567 Google Scholar, unrevised.
5 For a fuller account, see articles by Copland, D. B. in the Economic Journal, 09, 1924 Google Scholar, and Dec., 1927; also Warner, Kenneth O., An Introduction to Some Problems of Australian Federation (University of Washington Press, 1933)Google Scholar, and The Case for Secession of Western Australia (Perth, 1934).Google Scholar
6 States Grant Act, no. 4 of 1927.
7 The changes in detail are described in the Round Table, no. 69, Dec., 1927. pp. 181-90. The texts of the various draft proposals are published in “The Report of the Conference of Commonwealth and State Ministers in Melbourne and Sydney, June and July, 1927” (Commonwealth Sessional Paper no. 119, 1926-7).
8 Act no. 5 of 1928. The Financial Agreement formed the schedule of this Act, which is reprinted in “The Report of the Royal Commission on the Constitution, 1929” (Commonwealth Sessional Paper no. 16); in The Commonwealth Year Book, no. 25 of 1932; and in The Case for Secession of Western Australia, p. 101.
9 This sum of £7,584,912 represents the per capita payments for the year 1926-7. It is distributed among the states on the basis of the per capita payments which they would each have received during the year.
10 A sinking fund for Commonwealth loans was created by the National Debt Sinking Fund Act, no. 5 of 1923.
11 The Commonwealth Constitution Alteration (State Debts) Act, 1928. This Act is reprinted in “The Report of the Royal Commission on the Constitution, 1929”; section 105A of the Constitution is also reprinted in The Case for Secession of Western Australia, para. 213, and other sources.
12 These loans are described in Warner, Some Problems of Australian Federalism, chap. ix.
13 A description of the workings of the Loan Council during the period from 1923-7 will be found in Exley, H. J., “Australian Loan Council” (Economic Record, 05, 1926)Google Scholar; in Warner, Some Problems of Australian Federalism, chap, ix; and in the Round Table, no. 61, 12, 1925, pp. 182–5Google Scholar, and no. 69, Dec., 1927, pp. 181-90.
14 Report of a speech by the Right Hon. S. M. Bruce at a banquet of the Australian banks in London on November 16, 1926 (reported in the Financial Times, Nov. 17, 1926).
15 “Australian Solution of Taxation Problems” (Manchester Guardian Commercial, 09 15, 1927).Google Scholar
16 Commonwealth Sessional Paper no. 119, 1926-7.
17 For a description of the debates in the House of Representatives, see Warner, Some Problems of Australian Federalism, chap. ix. Warner, Mr. gives the following reference to Parliamentary Debates, House of Representatives: vol. 116, pp. 312, 314 Google Scholar; vol. 117, pp. 3178, 3184; vol. 118, pp. 3624, 3636, 3637, 3641, 3647-50, 3847, 3850, 3873, 3874, 3875. See also Round Table, no. 73, 12, 1928, pp. 186–92.Google Scholar
18 Commonwealth Sessional Paper no. 16, 1929.
19 Royal Commission on the Constitution of the Commonwealth, 1929, Proceedings and Evidence.
20 Ibid., p. 1418.
21 The following account of the events leading up to, and the operation of, the Premiers' Plan, and of the attempted default on the part of New South Wales, is given in only the briefest outline. For details, see Cowper, Norman, “The First Financial Agreement: Its effect upon the Relation between the Commonwealth and the States” (Economic Record, 12, 1932)Google Scholar; Shann, E. O. G. and Copland, D. B. (eds.) The Crisis in Australian Finance, 1929 to 1931 (Sydney, 1931)Google Scholar; Shann, E. O. G. and Copland, D. B., The Battle of the Plans (Sydney, 1931)Google Scholar; and Copland, D. B., Australia in the World Crisis, 1929-33 (Cambridge, 1934).Google Scholar
22 The correspondence between the Commonwealth Bank and the Loan Council will be found in Shann and Copland, The Battle of the Plans.
23 For details of the Premiers' Plan, see Copland, Australia in the World Crisis, 1929-33, p. 133.
24 Official statement issued by the Commonwealth government, Jan. 30, 1932, quoted in the Sydney Morning Herald, Feb. 1, 1932, and reprinted in Norman Cowper, “The First Financial Agreement”.
25 There were altogether four Financial Agreement Enforcement Acts passed during 1932, each one adding to the powers of the Commonwealth government to take action against the defaulting state and increasing the number of classes of revenue and assets of the state that the Commonwealth could seize. The first of these Acts is reprinted in The Case for Secession of Western Australia, p. 116, and the others are referred to in para. 217 of the same work.
26 Ibid., pp. 81-91.
27 Whether the establishment of the Loan Council really had for its object the co-ordination, and not the unification, of government borrowing is rather difficult to say. There is no doubt that the provision in the Financial Agreement which exempts borrowing “for temporary purposes by way of overdraft, or fixed, special, or other deposit” from regulation by the Loan Council does, for just so long as the banks are willing to lend money in this way, provide a substantial loophole for preventing the Agreement from bringing about financial unification. However, the first draft of the Financial Agreement, as presented to the Conference of Commonwealth and State Ministers at Melbourne in June, 1927 (see footnote 7), contained no provision for excluding temporary borrowings from Loan Council control. This seems to indicate that it was the original idea of the Commonwealth government that the Financial Agreement should bring about unification of borrowing, but that the objections of Messrs. Lang and Collier on the grounds that the Council would tend to curtail the development of the states forced it (the Commonwealth government) to modify its proposals.
28 The Case for Secession of Western Australia, p. 91.
29 Commonwealth Sessional Paper no. 70, 1934.
30 Ibid., pp. 38-40.
31 Ibid., pp. 23-5.
32 Ibid., p. 85.
33 See Hytten, T., “Relation of Commonwealth and State Finance” inAn Economic Survey of Australia, ed. by Copland, D. B., pp. 221–7Google Scholar (Annals of the American Academy of Political and Social Science, Nov., 1931).
34 “Report of the Conference of Commonwealth and State Ministers on Constitutional Matters, Melbourne, February, 1934” (Commonwealth Sessional Paper no. 134, pp. 27 and 38).
35 Ibid., p. 44.
36 Quoted in Copland, , Australia and the World Crisis, 1929-33, p. 78 Google Scholar, and presumably taken from a paper entitled “The First Financial Agreement” by H. S. Nicholas, read before a Conference of the Australian Institute of Politics in January, 1933.
37 See “The Report of the Royal Commission on the Constitution, 1929”, p. 229; also Gain, A. C., “Existing Provisions for Altering the Commonwealth Constitution” (Studies in the Australian Constitution, ed. by Portus, G. V., Sydney, 1933, chap. ix).Google Scholar
38 Report of the Economic Case for Tasmania Committee on the Financial Relations of the Commonwealth and the States of Australia (Hobart, 1935).Google Scholar
39 See Maxwell, J. A., “The Adjustment of Federal-Provincial Financial Relations”, infra, p. 374.Google Scholar