STATE LENDING.

Dominion, Volume 6, Issue 1818, 2 August 1913, Page 6

STATE LENDING.

OPPOSITION PROPOSE A LOAN.

FINANCE MINISTER DISSENTS,

THE GOVERNMENT'S POLICY DEFENDED. .

MONEY MARKET EASING,

Mr. W. J. DICKIE (Selwyn) asked the Minister for finance whether it was to be taken for granted that tho Advances Department was not making any loans to pay off existing mortgages. The Hon. JAMES ALLEN 6aid that to was .afraid tho Department would ,have to for the present. It was making advances at present at the rate of jSIOO.COO a month, and he saw no prospects of an alteration in regard to mortgages until financial conditions were easier.

"Ten Per Cent," . Mr. G. W. RUSSELL (Avon) said that it had been recently stated in a Tarajiaki paper that as high as ten. per cent, was being charged for second mortgages. He urged that tho Government should endeavour to use the Stato Department to steady tho rate of interest. Hon. \V. H. Herries: We are not allowed to take second mortgages. , Mr. Russell: I am not suggesting that the Government should take second mortgages, but 1 think that if necessary tho government should go. cm to the London market and borrow u couple of millions if needed, and. let it out to the farmers who are now being- charged high rates of interest. It was well known that many of the large financiers, as soon as the rates went up, called in all the money that they had at call for the purpose of obtaining the higher rates. There were many instances in which working and deserving settlers had experienced a great difficulty in obtaining a renewal of mortgages at reasonable rates. He ngreed that it was right for the Government to lay it down as a general principle that it would not lend money to pay off mortgages, and his way of looking at tho matter might be somewhat senjtimesntal, but where settlers were in danger -of being turned out of house and home it was only right that they should havo the advantage of the State Lending Department.

A Note of Caution. SIB WALTER BUCHANAN (Wairarapa) said there was not much sentiment about a rate of 8 or 10 • per cent, for money. When a settler came faco to faoe with a position of that sort there was not much room for sentiment. Statements made about a rate of 10 per cent, should be accompanied by some information about tho security. He, personally, diid not understand 10 per cent, being asked by money-lending companies or ! others, provided the eeourity was satis.factory. Since his. Nejv Zealand transactions I 'Mad"'TOme'^tiiidfei.-I'^his1 '^his notice in which loahs' had been granted at 5} to 6 per cent, on good, but not in any way exceptional, security. It surprised him that,.,in Taranaki or anywhere else—and ho did not think that Taranaki offered a worse security! than other parte of the Dominion—rates of interest like 10 per cent, were being asked for. Mr. Russell said that he had ciuo-ted a statement which originated in a Tanmaki paper. Sir Walter Buchanan: Ton can't afford to take for granted what you see in tlia papers..'

Cases In Christchurch. Mr. Isitt: We have had several cases in Christchurch. Mr. Eraser: How long ago? Mr. Russell: Within six months. Sir Walter Buchanan said that it was rather strange to. find that such high rates were asked for in some cases, while so much lower rates were asked in other oases. As to second mortgage securities, overyone know how such securities varied, and that even a ten per cent, loan might not bo a'wise ,transaction on tli o pnrt of the lender where, possibly, there had been a gross over-valuation of the security. Members ought to have good authority for statements in regard to high percentages, because such statements did not help to keep the rates for money down. ' .

A Very Important Point. The PRIME MINISTER said that the member for Wa.irarapa had mentioned.a very important point in connection with borrowing—that tho rate of interest depended to a very great extent upon tho quality of the security. They all knew thiat there had been a stringency, but they also know, or 6ught to know, that the stringency had been relieved to . a very great extent, and .that money was undoubtedly available in different parts of the country at 5.J- or 6 per cent. Mr. Buddo: On gilt-edged security only. The Primo Minister: Oh, certainly, the security must be good. He knew of various transactions in which money in large sums had been borrowed at the rates he had named. The Government had done a good, deal to relievo the stringency.

Existing Mortgages. Another point had been raised in regard to lenaing money to pay off existing mortgages. It had been laid down for several years-past that the Advances Department should not lend money to payoff existing mortgages. It was recognised that tho proper thing, to do was to lend money to the settler for further improving his land, and that nothing, was to be gained from, tho point .of view either of the individual or of the State by raising money to pay off existing mortgages. Mr. Russell: I don't think it is a castiron rule. Mr. Massey: I am given to understand by the head of tho Department that it is. Mr. Davey: That is not correct. Mr. M'Callum: It is quite incorrect. The Primo Minister: I think I had better get an official statement from the head of the Department on tho -point. He referred next to a return laid on- the table that day. It showed, he said, that during the period from July 1, 1912, to June 30, 1913, applications for loans under Advances : to Settlers numbered 3055, the amount applied for being .£1,041,405. The applications granted numbered 2032, and tho amount lent was ,£G9G,4iO. These amounts had made a very considerable difference to the market, and had gone a lon» way towards cheapening money. Uiuter Advances to Workers, applications for tho same period totalled 1549, tho amount applied-for being J!524,005. l ie applications granted numbered 1112, the amount granted being .£336,340. Tho number of workers who had obtained not less than £400 was 241. This, lie considered was a very creditable record, anu lie did not think'it would have been possible for tho present Government or any other to have done better under the circumstances. He did not know when it might bo possiblo to raise the present limit of ,£750 in tho case of Advances to Sottlers, but no one would bo better pleased than he would when it became possible to remove the limit so far as tlie Act would allo,T ' The Special Loan Proposal. As to the suggestion that a special loan should bo raised, ho considered that it would ba unwise to do so. the rwanj was apparent. Daring the last financial vear tho indebtedness of this, country had boen increased by five and a half millions. That was about as much of an increase as the credit of tho country would stand. Between now and tho end of next year, in addition to what would be required for public works and other purposes, they had to find eight or nine millions to repay short-dated dobonturos, which had boon troubling tham for ycnis post. Tlwgr pad_

to faco the raising of a loan of four or five millions in the very near i'utmre for tho purpose of repaying soino of these loans and ho did not think it would be wiso to go to London for a special loan. They had to face a loan for the redemption of short-dated debentures and the ordinary loan for public works. Tho progressive policy must bo maintained, and would be maintained, but so long as tho Government occupied the benches they would be particularly careful to maintain tlio credit of tho country.

Mr; Payne's Proposal. Mr. J. PAYNE (Grey Lynn) spoke in support of "ischemo -15," which, he said, would solve a great deal of tho trouble, lie desired a State note issue, and hoped that in the coming banking legislation sonje genuine financiers would stand out from amongst tho members in tho House, instead of sitting still with "grins on their faces." It was time the country had. its own-banking institution. The securities it placed in England would be good enough for the Dominion, and would enable money to bo secured cheaply. Mr. T. BUXTON (Temuka) agreed that securities on first-class mortgages required seven or eight per cent. The .£8,500,000 mentioned was not a new debt, and would make no difference to the country. It had only to bo renewed. If the country was to progress, money would havo to be provided. At present there was an undoubted stringency. Maladministration. Mr. G. V. PEARCE (Patea) referred to the maladministration of tho previous Governments. The Advances Board was originally designed to help tho settler, but some years after it was started an alteration was made, and at a reccnt period returns showed that settlers had 1 received ■£<(•,700,000 and workers about £2,58-1,000. A return for Wellington and its suburbs showed that in the city tho advances to settlers totalled .£-137,000, and in the suburbs the sum was .£295,000. In round figures, Wellington and its suburbs absorbed .£750,000 out of tho seven millions issued to the wholo country. This was what ho called maladministration, for if all this money had been issued to genuine settlers both the country and the city of Wellington would havo benefited far more. Ho suggested that preference should be given to leaseholders for advances as they needed the money more than did the freeholders. Tho mortgage tax was one reason why money was dear. He held that it would be bettor to do

away with it and place the tax upon incomes. Farmers In the Suburbs,

The Hon. D. BUDDO (Kaiapoi) deprecated the "town v. country" cry. After all if a farmer lived in tlio suburbs ho was no less worthy of a loan than if he lived in the country. The real cause of the stringency was that the Advances to Settlers Department had closed down upon many applications. Mr. T. M. WILFORD (Hutt) said that in tlio past the people had been taught to rely upon the State for money. Tho result was that big lending institutions went to other countries where the rate of interest was not regulated by the State. This did not matter while the State could meet tho demand, but with their departure the State was over-taxed and could not meet tho demand. In the oaso of the Sinking Fund Commissioners of Wellington tho rate of interest was G per cent, but this was speedily mopped up and there would be no more for a year. A little while ago ho made inquiries and found it impossible to raise a loan of .£20,000. Tho demand was much greater than tho supply. He would ask the Minister for Finance if he would reoommend men who wished to borrow to take short-dated or long-dated loans. Money was high and. lie-would like that' question answered. , When money was high second mortgages would not be advanced except at nigh rates. He would ask the Government if it was doing the best it could. If it believed its heart was in its work ho wouUl acquit it of responsibility. Tho Government had not striven this year to meet the demand of small borrowers. If tho heart of the Government was not in the lending of money the public would suffer becauso then the private money-lender and tho banks would reap a rich harvest, Tho greatest ring and monopoly in New Zealand was tho banking ring. Five I men ,at any time could raise the interest on the overdraft or drop tho interest on deposits. That would affect every in- j dividual in the country directly or indirectly and tho stato of affairs would get worse. A year ago ho had predicted j that- interest on first-clasg' securities would bo seven per cent. That was now I proved as correct and now was tho time for tho Minister for Financo to step in and help the people. When ho returned from England he said he had got offers in reference to loans falling due: —

Mr. Allen: I never said anything of tho kind.

W. Wilford: Very well, I will withdraw it. But I say this: You were sent for that purpose, and if you have not done it and made some arrangements or negotiatioils that is a confession of ineptitude. Mr. Wilford concluded by asking the Government to believe in its lending institutions and help the people.

Past Government Defended. Mr. W. D. S. MACDONALD (Bay of Plenty) denied that there had been aixy maladministration in the past. Tho miministration in the past would havo enabled tho present Government to advance .£1,300,000 to settlers and workers if it desired to. .Ho agreed there was a stringency throughout the country, which had been accentuated by tho woeful talcs' 6pread around by tho present Government. If the Government of the day mas not prepared to advance money _ to settiers, then it had bettor stop putting settlers away in the backblocks.

A Glaring Case. Mr. J. A. YOUNG (Waikato) said that tho Advances to Settlers Department had in some ways raised the price of money. The Hon. D. Buddo: How? Mr. Young: Here is one instance. In 1911 there was lent on a town property the sum of .£2OOO at one pop. This was at the rate of £iG per foot on n 45foot frontage. The Advances to Settlers Department was established to help the settlers, but an example like this was an abuse of the system.

The Minister for Finance. Tho Hon. 'JAS. ALLEN said that tho woeful tales were coming from the Opposition side. Tho very fact that they were crying "wolf, wolf," and "stiiilring fish" all the time, was creating tho impression throughout the country that money was dearer than it was. This was all being douo 'for party purposes. By continually crying out that money was dear and getting dearer, they were stating what was not in accordance with the facts. There was more money available in Now Zealand to-day than .there was six months ago, portly' bocaoisa tho Government had brought more money into New Zealand, and partly because trade had been good, and partly because other money ■ had been available. He knew of a local authority which had gone oil tho money market recently and got .£50,000 at 5 per cent. Mr. Riussell: You did a great deal better than that with tho Loan and Mercantile.!

Mr. Allien: Yes, I got it at par cent., anil yet tlioso hon. gentlemen ory out and grumble. If I got it at i per cent, they still grumble, and when somebody ejso giats it at 5 per cent, they grumble also. 110 (Mr. Russell) is injuring the sottler by his continually crying, "Wolf, wolf, wolf." What Remedies? "Now." said Mr. Alloin, "with regard to the euros suggested. Ono cure is a State Bank to roil off notes Mr. Russell: You arc talking nonsense. Mr. Hmdmarsli: That is tomfoolery! Mr. Russell: Who suggested it? Mr. Allen: The hon. member for Grey Lynn. Opposition members: "Oh!" and "Ah!" Mr. Allen: Yes, somehow wo are to roll off notes out of a machino and cure tho evil! The other suggestion is by Mr. Russell himself. Wo should try, ho says, upon tho London money market to borrow an extra one or two millions.

Mr. Russell: If necessary. Mr. Allen: I would suggest that the hon. member should acquiro a certain sense of responsibility. When he is trying to foTce this country upon tho London market ho should recogniso tho serious responsibility upon his shoulders.

A Case in Point. He would call the hon. gentleman's attention to information in the morning newspapers, a cablegram from London regarding the New South Wales loan of ono and a half millions. Another cablegram from Sydney stated that it was originally intended that tho amount of tho Now South' Wales loan should bo two jriiiHtrnfl tut that it jraa roduood ujjon

tho strong representations of the underwriters in Loudon, lie wanted tho lion, gentleman and others to take note of theso two paragraphs, and to say that they rellected his experience. You could not go upon tho London market and get what you wanted, 110 warned tho House and the country that if attempts were made to forco tho country to go to tho London money market for further loans those people making the attempt were not the friends of New Zealand. Within the next eighteen months, eight or nine millions would havo to Ix 3 raised to repay short-dated debentures. What ho had said was that ho had brought back proposals regarding these loans. The people who held them would not renew—they insisted'on being repaid, and, in consoquenoe, fresh loans would havo to bo •raised. Mr. Russell: la not tho Ward loan convertible ? Mr. Allen: It was convertible, but in respect of three and a half millions a fresh loan will have to be raised. Tailing into account ordinary requirements, -which would amount probably to about three millions, close upon twelve millions would havo to bo Tajsed in London during the next year. He wanted the gentlemen on tho other sido to realise that they were New Zealanders, and had responsibilities in this matter, and to realise tho seriousness of tho position. If they succeeded in forcing tho Government to Taise an additional two millions for advances it would mean raising fourteen millions in ono year. This couild not be done. What Has Been Done. During the financial year ended March 31,' 1913, the sum of .£850,300 was advanced by tho Advances to Settlers branch. This was dono during a period of stringency in which supplies from tho Post Office failed absolutely. .To workers during tho samo period, the sum of £4-49,009 was advanced, not much less than was paid over in the preceding year. Mr. Russell: You havo a million a. year coming into that Department. Mr. Allen: Wo havo not anything of tho kind. That return the hon. gentleman is quoting from is utterly misleading. Tho return includes a mortgage as a repayiuont every time it cornea in. The repayment might come in ono day and a. few days afterwards como in again and so on. This was being put right in tho Financial Statement this year. Tho Publio Trustee, the Minister remarked, was finding large sums for local authorities and others. Ho hoped the House would realise that it would bo impossible, in his opinion, to go to London, and get an additional million or. two millions for advances to 6attlera and advances to workers during the next eighteen months, because the . country would have big responsibilities to shoulder during that period. Mr. Wilford: Didn't you come back with definite proposals? Mr. Allen: I came back. with definite proposals, hot final arrangements. Mr. Wilford: What aro they? ! Mr. Allen: Tho proposals have been mado to Cabinet. They cannot be laid before tho House yet. The Minister went oh to stato that tho present Government was in no way responsible for the rulo against lending money to repay existing mortgages. It was first definitely mado on 1, 1912, in the time of the late Administration. Hon. gentlemen on the other side grumblod at tho rulo although they had made it themselves. An Opposition member: Why don't you alter it? Mr. Allen: Wo don't alter it because we believe that this money can, with tho best advantage, be lent to 6«ttlers who want to get on to tho land or to improve their holdings; Mr. Russell: It was only, a temporary, rule with us. , A Temporary Government. Mr. Allen: You were only temporary. That is the trouble! Mr. Russell: Don't bo nasty. -.Mr. Allen said that tho Government would continue to do its best to provido money for both workers and settlers for founding homes. As to tie leaseholders, he said that they,had not been neglected, although the number of leaseholders w/io received advances, last year, was .lip.fr quite so large as tho number/of' freolioldors who obtained loans. Tho total and averago amounts were greater. Tho number of leasehold borrowers wnS 9GO, and the total of'their loans .£'126,000, as against £407,000 advanced to 1030 freeholders. He therefore did not think that it could bo said that tha leaseholders had not had a fair deal. They could' not. strengthen tho Department at the expense of any other Department. Tho whDlo of the commitments, amounting to over £700,000, with which the Government was faced when it took office, had not yet been mot. They must go on making advances to local authorities. The amount available for Advances to Workers was sufficient to meot all responsibilities up to tho end of tho present financial year, but no more, and they could not get assistance there. There .was no other source of supply, unless that wMcli had failed them became productivo again. When that took placo, ho would be very giad to raiso tho limit from £750 to some higher amount. He deprecated tho attempts to make party capital out of this matter, which, he said, did a great injury to the country without in any way assisting those who needed assistance. Tho Government would continue to do its best to provido advances to settlers, workers, and local authorities. Tho exaggerated statements that were made as to the high rates of interest only tended to raiso the rates. It was impossible to conceive that the large amount that was boing lent by the Departmentover £100,000 a month—had no offect upon th© market. "It has had. an effect, t ho added, "for money is undoubtedly easier.

COPYRIGHT BILL.

THIRD READING PASSED. The Copyright Bill (tho Hon. A. L. Herdman) was put through its third reading stage without discussion.

MAGISTRATES' COURTS BILL.

AN AMENDED CLAUSE. On the report stage of tho Magistrates' Courts Amondment Bill, Mr. G. W r . RUSSELL (Avon) drew attention to the curious wording in Clause 3 which had been amended in Committee. It now provided the direct opposite of what was intended. It read: "No person shall hereafter 'bo appointed a magistrate who is not a barrister or solicitor of tho Supreme Court of not less than five years' standing, or who, being a barrister or solicitor, has been continuously employed as clerk of a Magis-' trate's Court for a period of at least ten years." The Hon. A. L. Herdman: I am going to get it put right. Mr. Russell: Well, instead of this beimr sent up to another- place with a clause that is palpably absurd it should be recommitted and rectified. hero. Mr.'HERDMAN agreed that there was soino apparent ambiguity .in the clause. He had pointed this out at. the timo the clause was amended, and said he thought it could bo put in a better way. It was only a trivial point—he believed it was perfectly clear, although it might have been put in a better way. If it wero put "or who has been, continuously employed as a clerk of tho court for at least ton years, and is a barrister and solicitor," there would bo no ambiguity about it He did not want to waste time and get the Bill into Committee again, and perhaps start a long discussion. Mr; J. A. lIANAN (Invcrcargill): If you recommit tho Bill I don t tliink theio will bo any discussion. . With this declaration other Opposition members agreed, but Mr. T. M. refused to bo bound, and Mr. Herdman refused to recommit the. Bill. The amendments made in Committee wero agreed to. ,