COST TO STATE

Evening Post, Issue 126, 29 May 1936, Page 6

COST TO STATE

.PURCHASE OP /SHAKES

ABOUT £281,000

'• In moving the second reading of the Bill, the Minister of Finance (the Hon. , W. Nash) said that in changing the ./. name of the Corporation they were ''; linking up with one of the finest names that had been recorded in tho history of New Zealand—the name of State ... Advances. It was a name that would . live in New Zealand and elsewhere - for many years. Under the proposal .•-.to take over the existing shares, the , shareholders would receive exactly ... the same amount of interest and divi- .;.: dend as they would have done if the shares had not been taken over by the ;. Government For instance, the person ..•■ who had subscribed £100 would re- ., ceive £4 10s, and if he chose to be "•' repaid in stock he would receive £112 • - 10s worth of stock for every £ 100 he - had subscribed. The cost to the Govern- . ment in buying out the shares would be about £281,000. He thought that the treatment that was being meted out to the shareholders was generous, •■' but the objective of the Government ; right through had been to place those who subscribed the money at least in : an equal position to that in which V they would have been had the Government not taken over the shares. There were certain shareholders who ' had purchased their shares at 7s, and they would not receive more than the other shareholders—lls 3d—but if they ■;■ purchased the shares for a legitimate purpose they would get exactly the same net return for their investment ':' as anybody else. . ; TRIBUTE TO SIR AY. D. HUNT. -"- Referring to the reconstitution of' •: the board, the Minister said it was due - to him and to the Government that •■■■ some mention should be made of the '■■ chairman of the present board (Sir William Hunt). It could not be suggested that Sir. William had given any- , thing but excellent service since he J had been chairman of the board, and , the two managing directors and the Treasury director had advised him that Sir William's knowledge and ex- ; ' perience of the mortgages position and '; of the land question was probably un- ■ equalled by any other person in the I Dominion, and certainly not surpassed. .At the same time he felt that the position that had been taken up by the Labour Party when the original Act 7 was before Parliament was the cor- ;: rect one, and that it was impossible . for Sir William Hunt to serve the A.M.P., probably the largest lending • institution in the Dominion, Wright, Stephenson, Ltd., and the Mortgage ; Corporation. There was no reflection .. on his integrity, but it was inevitable that a time must arrive when there would be a conflict of interests. He wanted to make it clear that at no time had the Government doubted Sir ... William's integrity or his ability, ho . matter how they might differ from him .in politics. The other directors he had . met only twice, but he had no doubt' that they had served the. Corporation . : well. The two managing directors were ' particularly able men. Mr. Park was ~ , well known as the last Secretary to . the Treasury, and Mr. Smallwood, as j , i - manager of the Auckland Savings Bank, had a very fine knowledge of . mortgage work and had proved very ~ helpful to the Corporation. The feel- , ing of the Government was such that it had been decided that Mr. Park and _■ Mr. Smallwood should continue to act < ; as managing directors.. So far as the ~ rest of the board was concerned, the " line the Government would' take had not been finally determined. ; DIRECTING THE POLICY. ■■•'. The Government would direct the " policy of the Corporation through the S Minister of Finance, continued • Mr. ■•-■ Nash. It would be the Government's policy that would be carried out all the time. The Government would be responsible for the acts of the Corpora- „ tion, but the board would do the ad- ,., ministrative work. The Minister would" ' not interfere with the board, but the , Minister would be in control. At the ; point at which the Government felt that its policy was not being given effect to the .Minister would interfere. :. ; The Government- looked upon the 66 '.;.■ 2-3 per cent, margin for loans as a reasonable commercial basis. If the Government desired to advance more than 66 2-3 per cent, of the security ;,. the Government would stand any loss ~" that .might result. The guarantees would be mainly in connection with , the rehabilitation of farmers and the building of homes. The whole scheme would be on a much sounder basis than in the past because guaranteed prices „ would enable the earning capacity of land to be gauged. Mr. H. S. S. Kyle (National, Riccarton): Only on dairy land. Mr. Nash: Only on dairy land for the time being. The Minister went on to say that when other farmers saw the advantages to be grained from guaranteed prices they would want the same element o£ stability1 so far as their income was con- ; cemed. ■" : The Hon. Sir Alfred Ransom (Na- . tional, Pahiatua) asked if advances beyond 66 2-3 per cent, would apply in the case of rural mortgages. ~. _ The Minister said the answer was in the affirmative. Wherever the farmer could legitimately make out a case for a larger advance then the „ farmer would get the larger sum required. • , RELIEF FROM HEAVY PAYMENTS. The object of the amendment in regard to table mortgages, said the Mm,- , ister, was to enable householders to get relief from the heavy payments that were occasioned by the "compulsory procedure under which they had, ' under the existing law, to make *; seventy-three payments of an equal sum/to enable them to purchase their homes within that period. Under the proposal in the Bill the householder would be able to follow the old procedure if he liked, or he could, as an ,; alternative, get one half of the loan on a table basis and the other half on' a flat basis. If a borrower negotiated, g loan for £1000,- one half would be

on a table basis, but the interest would be paid on the full amount. At the •end 61 the table period there would be a new loan of £500. The provision for taking out a life insurance policy was mainly associated with houses but also to a certain extent with rural mortgages. The object of the provision was to ensure that if anything happened to the mortgagor the liability on his property could be met and the property would be safely secured for his wife and family. Sir Alfred Ransom: What about the man who cannot pass the doctor? Mr. Nash: In those circumstances there would not be any life insurance attached to the mortgage. The Minister, referring to maintenance payments, said- that during the last two years difficulty had been experienced by mortgagors in putting anything aside for insurance and maintenance charges. Under the Bill the Corporation would require a mortgagor to make weekly or fortnightly payments to the Corporation sufficient to enable these charges to be met. RATES ON STATE HOUSES. Referring to the payment of rates on properties that had reverted to the Corporation, the Minister said that the procedure the Government proposed to follow was not, provided for in the Bill, but the Government had decided that the rates should be paid to local authorities when the houses were let. During the present year there had been grants of £8000 for this.purpose. It was the object of the Government to control interest rates. They had been largely controlled by the Corporation advancing: money at comparatively low rates of interest. The British Government had largely succeeded in its endeavour to keep down interest rates, and he felt that the New Zealand Government could do even better. The housing provisions of the Bill were next dealt with by Mr. Nash, who said that a little later either a Bill or an appropriation would be placed before Parliament in connection with a housing plan under which the Government would build houses to overcome some of the extraordinary shortage that was evident now. ADVANCES TO INDUSTRY. It was not to be thought, the Minister continued, that under, the proposal to advance money to industries anybody would be able to go to the Government for accommodation. The Bureau of Industries would probably investigate projects for the establishment of new industries in the Dominion. It might be that those industries would not be completely economic at their initial period. The Bureau would report to Cabinet and Cabinet would decide the amount that should be made available. When the loan had been made the State Advances Corporation would administer the, loan for the State by collecting any dividends or by holding any shares. Under the Bill the Corporation would still have the right to issue bonds. It would have the right to issue bonds at a rate of interest similar to that paid by the Post Office Savings Bank. They would be for a long term and they would be absolutely gilt-edged. The. purpose was to make the bonds State-guaranteed. The State would have power to take up any of the bonds issued by the Corporation and to determine the interest. ■ CRYING NEED FOR HOUSES. The object of the Bill was to give exactly the same advantage to those who were working the land in rural areas as to those desiring to build homes in fee urban areas. He did not think that even members of the House realised the tragic nature of the shortage of houses in New Zealand. He did not think they realised how a. tremendous number of people had suffered as a result. During the past four years the construction of houses in the .Dominion had been 75 per cent below what it should have been. If they were to house the people properly today they would need between 5000 and 6000 new houses every year There was no doubt that New Zealand was short of houses to the extent of between 16,000 and 20,000, and that meant ,that there was that number of families not properly housed. ! _ Mr. Nash went on to say that the introduction of the Advances to Setlers Bill by the late Sir Joseph Ward was the greatest single event from a monetary point of view that had taken place in New Zealand. No legislation had given greater advantages to the people, had built more homes, or allowed of greater development of the S aoll s °1 New Zealand than that one Act of Ward's in 1894. Mr. Nash quoted figures showing the transactions of the State Advances Department since its inception, and asked if any other concern had made a greater contribution to the welfare of the Dominion. The high interest rates ruling in 1894 had been brought down to 4J per cent. If his examination of the position was the right one the Department had saved the people from 1J per cent, to 2 per cent, right through the years not only on money advanced by the State Advances Department but on all moneys *ya * were advanced in the Dominion it that was so then the saving over the years exceeded £20,000,000. THE 95 PER CENT. ADVANCE. , Next to the credit teat Sir Joseph was entitled to came the credit that was due to the late William Ferguson Massey He did a thing that had been criticised more than anything else—he decided to advance up to 95 per cent <* ttyecunty- He certainly created difficulties during the recent slump, but he built homes. Thousands of people living m homes today would have, been living in rooms today if it had not been for the 95 per cent, advance There was still a shortage of houses' said Mr. Nash. If they reverted to the 95 per cent, advance or went even further, they would have to see to it that the advantage did not go to the land agent and the land grabber. There were also those who provided the raw materials to build the houses and they would want their share. It would be necessary to find a way to stop that sort of thing. Those people who were thinking of the welfare of the country would realise that in the long run they would be better: off by keeping land values on :a normal basis. If they did not realise that steps would have to be taken. He did not know what steps it would be possible to take, but

whatever was necessary would be done. Mr. Kyle: The usehold. Mr. Nash: I don't know a better way than that. I don't know of anything better than the usehold in the general sense of the term and we will encourage it. PURPOSE OF THE BILL. The whole purpose of the Bill, said the Minister, was to provide homes and to enable the farmers to develop their land. The provision of homes would do more towards the stability and progress of the Dominion than any other single event he knew. There were people being evicted now because they were unable to pay increased rentals, and it was the Government's task to alter that as soon as possible. The job was not an easy one, but in so far as the Bill would allow them to do it the Government would do it. The farmers, too, were looking forward to tho legislation as a way out of the diDficullies they were experiencing. Month after month and year after yearthe load of the farmer was growing with no earthly chance of getting it down. The Bill was the third step along the road the Government was travelling. First they took control of the credit and currency, then they guaranteed the dairy farmer a livelihood, and now they proposed to provide the farmer with sufficient money to enable him to carry on.