BANK OF NEW ZEALAND

Dominion, Volume 6, Issue 1845, 3 September 1913, Page 4

BANK OF NEW ZEALAND

THE GOVERNMENT PROPOSALS. | GUARANTEE TO BE RENEWED. PREMIUM ON SHARES. The Bank of Now Zealand Bill was introduced by Governor's aicssage. The Hon. JAS. ALLEN said that tho Bill 'practically embodied the recommendations of tho Board of Directors. It was proposed to make no alteration in tho directorate. The Government's guarantee of stock to ,t.he amount of £1,000,000 would be continued. it was also proposed that provision should bo. mado for tho redemption of that stock in twenty years by establishing a sinking fund. Tho proportion of shares as between tho ; Government and tho shareholders was to bo retained. If the number of shares held by tho shareholders was increased tlio Government's shares would bo increased in a similar ratio. "A" preference shares already existed. It was proposed to crcato ■"11" preference shares, upon which tho dividend that might be earned by tho Government would not be limited to ten per cent. Tho reason for the insertion of this provision was that these shares and tho now shares to bo issued to shareholders wero to bo issued at a premium, and it would not bo fair to limit tho Stato only to a dividend of ten per cent, upon tho value of their shares less tho premium. It was piopcoed to allow tho bank to increase its capital. Sir Joseph Ward: AVliat is the amount of premium upon those shares? air. Allen: That is not definitely fixed in the Bill, but by agreement with tho directors tho premium has been fixed at fifty per cent.. Ho continued that it was proposed that the bank should bo allowed .to increase its capital. The maximum amount-of increase as provided in tho Bill was £3,000,000, but it was not suggested that tho wholo amount should be issued at onco. The aiinister for Financo was to bo consulted before any issuo of fresh capital took place. The idea was that, from timo to time, as tho necessity arose, there should be an issue of fresh shares to increase the capital of the bank. Tho capital would not bo raised by tho wholo of tho three millions for many years to come. Tho sum of three millions was named in order to avert tho necessity of the

Bank having to como to the House of Representatives every time it wanted to increase its capital. Power was given to tho Crown to purchase its "B" preference shares. If the Crown did not tako them ui> the ordinary shareholders would be allowed to take them up. These "B" preference .shares carried the same dividend as the ordinary shareholders' shares carried. They gave the Crown no riirht to vote. Tlio right of veto by the Crown would remain as at present. The directors remained as they" were, tho Government having four directors and the shareholders two. For the rest the Bill contained certain technical amendments of no material importance. motors, Sir JOSEPH WARD (Awarua) said that in view of the fact that everybody knew that thero had been considerable diversity of opinion between the Government directors and the shareholders' directors, tho lion, gentleman should say whether they had agreed to differ or whether tho diversity of opinion remained. In view of the friction that had arisen the Houso should be told whether the two sections of directors wero agreed upon tho proposal contained in tho Bill. The million guaranteed by tho Government should bo guaranteed at the ordinary rato of interest. To a question by Sir Joseph Ward, the Hon. Jas. Allen interjected that- it was proposed to refer flic Bill to the Public Accounts Committee. Sir Joseph .Wai'd oontiaued that ho

thought tho shareholders were entitled to a premium of fifty per cent, upon tlio new shares issued. In his opinion it was a very important question for tho House, in view of the assistance lent to the bank by tho State, whether tho Government of the country should pay a premium of fifty per cent, upon tho shares that would bo allocated to tho country if these proposals wero carried into effect. As to tho authority to increase capital it seemed to him that it would be better that tho bank should como to Parliament from time to timo for authority to increase its capital instead of being granted authority for a long timo ahead. It was very gratifying that -not a shilling had been lost by this country directly or indirectly owing to its connection with the bank. He was anxious to do all in his power to placo this great institution in a- position that would enable it to meet tho expanding business which the progress and development of this country brought upon it. Desirable Partnership. air. T. M. WILFORD (Hutt) said that tho Government had coino to tho aid of the bank when its affairs wero in a very disastrous condition. Latterly largo dividends had been paid by tho bank, and considerable sums had been paid into a fund intended to liquidate a large standing debt. As this liability would not bo recurrent, the bank would have opportunities of largely extending its operations in tho future. The prira tho bank wero paying for deposits and tho rates charged on overdrafts ought to be seriously looked into. (Hear, hear.) Unless the rate for overdrafts were reduced and the rato for deposits increased the dividends must increase. He believed that tho State should keep control of tho bank, to see that these rates were made more reasonable, and to prevent tho great body of tho peoplo being done an injustice. Ho hoped that this Government and no other Government would allow the bank to shako off tho very desirable partnership between the State and the bank. air. J. PAYNE (Grey Lynn) said that if the Bill was passed it would be "a standing disgraco" to the Government of New Zealand. air. A. ai. aiYERS (Auckland East) said that those who associated tho Stato with tho bank in 1894 had every right to be gratified at the results of tho bold action they then took. He was a shareholder in the bahk, and he did not proposo to vote on tho Bill. Ho thought, however, that tho proposals in tho Bill were more equitable than those put forward by the shareholders, which wero not fair to tho State. Ho did not think, in view of all the circumstances, that the shareholders should be allowed to increase the capital of the bank without approaching Parliament. Whose is the Bank? Tlio Hon. J. A. aiILLAR said tho Government wero going back on the original arrangement. Tho Bill did not embody tho directors' proposal, but quito another one. The Stato owned half the .capital in tho bank. When tho Government camo to tho assistance of tho bank tho capital of tho institution was all gone, and the Government found half of the new capital, whilo the shareholders paid the other half. A great deal had been said about tho reserve fund belonging to tho (shareholders. Whose money created that reserve fund ? Was it tho half a million of the shareholders' money, or tho two and a half millions of tho State's money? Under this Bill tho Government were taking one-third—or at least tho Bill says "may take up"—of tho new capital. Tho Government should at least havo two-thirds, and Parliament should not leave "may" in the Bill. The Government should bo compolled to take up tho shares, and not to pay 100 per cent premium on them. Tho Government

ircro virtually handing tlw bank over to the shareholders, a gift to which the.v iroie- not entitled,, and he would oppose tho Bill tooth and nail. Presently, if 'tho Government did not take care thero would be a repetition of what took placo in 18W under private control in tho hank. Tho Government stood now in tlio position of a senior partner threatened with being kicked out, and it uoiild bo a poor sort of Government which would allow itself- to bo kicked out.

Mr. W. A. VEITCH (Wangimui), whilo admitting that justieo must bo dono to tho shareholders, held that tho Government's first duty was to the public. There was a banking ring in New Zealand, and our only means of breaking down that monopoly was through the Bank of New Zealand. He was very doubtful whether this Bill would havo that effect. Tlio enormous profits mado by tho banks convinced him that the profits made wero unwarrantably large, and the Government should tako powers to break up this rapacious banking monopoly. He would do his best to havo tho Bill amended to mako it a. bettor Bill for tho people, and he hoped the Bill would not bo mado a party question. Jlr. J. Allen: Hear, hear. air. Veitcli said ho believed it would bo wise to increase tho reserve hold by tho bank. air. Allen: That will be done under the Bill. air. Veitch said the Stato were now doing all tho bank's hazardous business, lending money on land, the very operation which brought down tho bank before. All tlio profitablo work of banking was still left with the private banks. And ho would urgo that if it wero safo or wise for tho Government to enter upon the risky section of banking the Stato could safely enter upon the less hazardous and more profitable banking business. - air. H. G. ELL (Christ-church South) said he was glad to hear the measure was not to be mado a party one. Ho did not think that the partnership between tho bank.and the State should bo

dissolved, nor did ho think it would_ bo in the interests of the shareholders that thOs should bo dono. THE MINISTER REPLIES. The Hon. J. ALLEN said it was tho intention of the Government to refer the Bill to the Public Accounts Committee, and the second reading would bo moved pro forma to enablo this to bo done. The creation of ono million of new capital was to enable tho bank to repay tho existing million of guarantee. It was not intended that tho three millions should ho raised now. When capital was to bo raised was left to the directors . and the aiinister for Finance, and also they would determine what amount woukl be raised at any ono time. Tho fixing of tho premium was left to tho directors and the Financo aiinister also, because it was impossible to fix a rato now for an issue that might bo mado 10 years hence. . . . air. aiyors: AVhy not submit it to Parliament? air. Allen said the reason was that it was not Wiso to have the affairs of the bank discussed in Parliament very often. He thought it was: much better to authoriso a fairly substantial increase in capital, rather than to have the hank appealing to Parliament for an increase every few years. He could not agreo with' air. Millar that the Stato owned half the capital in the bank. Tlie State owned half a million, naid-up capital, and tho shareholders ta-M half a million of paid-up capital, but they were also liable for half a million not paid up. TW : s extra half-million was all issued, and could be called up. He held, therefore, that the proportion of the State s interest to that of tho shareholders was as one to two. That ratio was being preserved. A point had been made of the words, "may take up." The Government intended, however, to take up its share of capital. Tlie member for Wanganui was anxious to _ see the Government increase its. interest in the bank. He (Mr. Allen) was not prepared now to discuss Stato Bank or anything of that sort, and bo did not think it was wise to raise tho question in connection with tho Bunk of New Zealand, It was not in thn iaterost of

tlio bunk. If a Government in the future were to establish a State UaJilc they should do so apart from the Dank of New Zealand. Ho did not think tho original shareholders could with fairness to the State and tlio other -shareholders bo allowed to acquiro their new capital at par. Nor did ho think the State should got its shares at par unless tlio shareholders also got their shares at par. The Bill fras road a first time, and the Hon. J. Allen gave notico of his intention to move tlio second reading . pro forma. INCOME TAX. AMENDMENTS TO THE SCHEDULE. ; Amendments to tho Land Tax and Income Tax Bill were introduced by Governor's Message. The Hon. J. ALLEN said tho schedulo to tho Jiill now beforo the Houso had been found to show certain, anomalies as compared with tho existing law. It was scientifically accurate, but unfortunately tho existing schedulo was not scientific, and comparison between tho new and tho old revealed certain apparent anomalies. Tho Government had thereforo introduced a second schedulo. It was not claimed that it was more equitablo than tlio former schedulo, but to avoid the apparent anomalies tile Government had submitted two gradations inrtead of 0110. Mr. Wilford: How did you get mto that muddle? * Mr. Allen said he had not mado the muddle. Tho muddle was in tho old schedulo. , , SIR JOSEPH WARD (Awarua) asked what difference iu the revenue tho Minister estimated would bo received from this alteration. Mr. J. PAYNE (Grey Lynn) accused tho Government of chicanery in favour of tho recipients of big incomes. Mr. G. LAUREN SON (Lyttclton) urged that moro of tlio taxation ought to bo raised directly instead of indirectly. Ho suggosted that tho income tax ou bachelors ought to bo doubled, and that more taxation should bo levied on big incomes. Mr. H. 6. ELIi (Christclrarch South) also thought tlio man with a small income ought to be relieved from taxation as much as possible. The amendments were roferred to tlio committee on tho Bill. PENSIONS BILL. SOME PARTY WARFARE. Tlio Hon. F. M. B. FISHER moved that tho amendments in the Pensions Bill bo agreod to. Tlio amendments were agreed to. Oil tlio motion that tho Bill bo read a third time, Mr. G. V. PEARCE (Patca) said he wished to refer to the mado in tho election campaign that if the R-eform party we.ro returned to power they would repeal tho Old Age Pensions Act. Tho Government had not only not repealed the Act. but mado it moro liberal, especially in regard to the grant of a of £36 a year to old Maori war veterans irrospeotivo of whether they owned property or not. Theso old men had been left unrewarded too long. Another good amendment was that which gave the pension to women at a less age than men. Ho was also surprised at the action of tho so-called Liborals in moving a motion in Committee which meant Killing the Bill. . Mr. Ell: You are only wasting time, because wc shall havo to roply to this. Mr. Pearce: I think you will have to reply to it pretty often between now and next election. Mr. G. WITTY (Riccarton) said the Opposition had simply moved to report progress at a late hour in order that t'/io Bill couli) bo postponed until a Inter day when all tho members could approncii tho Bill Jresh. !tle dwAsvvcd. (amid orics of dissent from tho Government benches) that tho Government would repeal tho pensions legislation if they dared. Mr. 1L G. ELL (Cliristchurch South) accused certain members of tlio Government, and especially the Hon. F. M. B. Fisher, of having advocated a contributory system of pensions. Ho also indignantly repudiated the implied chargo tliat tho Opposition had fought 1 to kill tho'Pensions Bill. Mr. J. H. BRADNEY (Auckland West) denied having advocated a contributory scheme of pensions, but a universal system of pensions. Ho believed that the next Pensions Bill would embody a proposal .for universal i pensions. . , i Mr. L. M. ISITT (Christclrarch. ' North) said' tho Government- did not really beliovo that the Opposition were i not in favour of the principles of the ■ Pensions Bill. ' Mr. W. H. D. BELL (Wellington ' Suburbs) said it was quite clear from i tho specchcs of certain members of the ■ Opposition that they did not understand the Bill. Mr. G. LATJRENSON (Lyttclton) I said tlio proposal to grant a universal ' pension was absurd, for the reason that it would cost about 1} millions a year. ' It could only bo supposed that, the advocacy of a universal pension was to kill tho pensions scheme entirely. Mr. J. A. YOUNG (Waikato) declared ' that tho resentment of the Opposition party was bccauso they woro envious, ■ green with envy, at tho success of the Government in carrying through Ijc.ic-

ficeiit social legislation. Mr.'A. E. Glover (Auckland Central) and Mr. T. H. Davey (Christcliurch East), neither of whom had spoken on the- second reading of the Bill, both commended tho measure, and supported it. , Tho debate was carried oil by Mr. 'J. Payne (Grey Lynn), Mr. J. V. Both (Napier), Mr. A. Harris (Waitcmata), Mr. T. IC. Sidey (Dunedin South), Mr. W. D. S. Macdonald (Bay of Plenty), Mr. H. Poland (Ohinenvuri), Mr. T. W. Rhodes (Thames), and Mr. H. J. H. Okoy (Taranaki). Minister Replies. The Hon. I\ M. B. FISHER, in reply, said tho passage of tho Bill reminded him of tho late Cecil Rhodes, ivho 011 his deathbed had said, "So littlo done, so much to do." He (Mr. Fisher) felt that they had made a contribution -towards a class of legislation that must be recognised in this country by parties in the future as national legislation, and national policy to which both sides of the Houso must subscribe. When he listened to talk of what took place in tho earlier stages of tlio 'irst Pensions Bill, although he did not feet bound to raise tho party issue, he not a member in the House who voted against tho Old Ago Pensions Bill except members on tho other side of tho House. Not one single member of tho present Government party voted against the original Old Age Pensions Bill. If t'iio party disagreed it was nil open question as to whether tlioy disagreed upon the objoct to bo obtained or in tho fundamentals of tho schcme._ His own opinion was that if the advico of some of -those who voted against tho Bill had been listened to, much sounder pcaision legislation would have bpen passed. There would not liavo been a pensions scheme, for instance, which penalised thrift a3 our legislation had dor.e for years. The Bill before the' Houso was not a consolidating Bill, as tho member for Wairau hati said. _ In actual fact it embodied a very considerable- liberal extension of the scheme m the Bill put on the Statute Book last year. He was very glad to have had tlio opportunity of introducing a Bill which, when it was placed on tlio Sraluto Book, would bo an effective reply to much of the criticism levelled at tho party before it camo into office. The third reading was agreed to on the voices as a matter of course, and the Houso rose at 0.50 a.m.

Woodei' Groat Peppermint Curo. For Ccuglia oud yoldfl, aovor foilr* la- M» ,