B.—4a.

227. As to the basis of assessment of rent, the net return on leases arranged prior to 1929 and subsequently is shown hereunder— Prior to .1929. Since 1929. £ s. d. £ s. d. Gross interest charge .. .. .. .. .. ..400 500 Less rebate .. .. .. .. .. ..080 0100 3 12 0 4 10 0 Less local-body " thirds " for first fifteen years of leases (say) ..168 113 4 2 5 4 2 16 8 Less Administration expenses 5 per cent. .. .. ..039 046 Net return .. . . .. .. ..£217 £2 12 2 228. As with all Government land accounts, the assessment of rental presupposes that the lessee will always pay, and no reserve is provided to cover losses arising from the following : — (a) Where land is not immediately taken up. (.b) Where values are reduced owing to non-selection. (c) Revaluations after selection. (d) Remissions and reductions. (e) Expenses of renewing loans. (/) Direct expenses of administration, &c. (g) Local-body " thirds," &c. Thus even on a 5 per centum rental basis there is an annual loss on leased lands of approximately £2 7s. lOd. per centum, assuming that interest on loan capital does not exceed 5 per centum. The majority of the leased areas are, however, upon a 4 per centum basis, upon which the annual loss is approximately £2 18s. sd. per centum. 229. In regard to unleased lands, which are shown in the balance-sheet at a total value of £1,726,000, it should be stated that these lands include the Urewera Block and other similar blocks, settlement of which is improbable, but every year during which this land is non-revenue-producing the Consolidated Fund is called upon to meet interest on the capital cost. There are blocks of Native land which were purchased many years ago which have not been settled, and it appears that there will be a substantial capital loss in respect of these lands now on hand. 230. An undesirable feature in regard to the purchase of Native land is that there is usually some delay in completing the acquisition of compact blocks, and this policy results in land being overcapitalized when it is handed over to the Lands Department for settlement. This is due to the addition of interest on the purchase price from the date of purchase until the land is actually handed over, and the Department is thus expected to dispose of the land at the original cost, plus accumulated interest charges. Also, these interest charges are a drain on the Consolidated Fund, as the interest recouped from the Native Land Settlement Account approximates the actual return from Native lands. In other words, it is not the practice to pay interest out of capital. 231. A further factor which has contributed to the already large loss in the account is the reductions which have been necessary to effect settlement of some, at least, of the lands which have already been leased, and while conditions remain as they are there will be continual applications by lessees for revaluation. This mast result in further charges against general taxation. We are of opinion that further purchases of Native lands, except for the purpose of consolidating areas suitable for immediate settlement, should cease until— (1) Economic conditions are such that successful land-settlement is possible : (2) The law is amended to provide for a rental return at least equal to the interest payable on borrowed money : (3) The purchase and settlement of Native land is controlled by one competent authority. 232. We are also of opinion that there is no justification for a special account funded from loan-money for the purchase of Native land, nor is there any necessity for the continued existence of the Native Land Purchase Board. Under the Land for Settlements Act, 1925, the Dominion Land Purchase Board is set up for the purpose of negotiating for the acquisition of European land for closer settlement. The functions of this Board are analogous to the functions of the Native Land Purchase Board, and there seems to be no necessity for both. The Land for Settlements Account, also funded partly from loan-money, is established under the Land for Settlements Act, 1925, for the purpose of providing funds for the acquisition of European lands. Thus there are two special organizations purchasing land and two special accounts providing funds for the acquisition of different classes of land. We recommend — (1) That the Native Land Purchase Board be abolished, and that the Dominion Land Purchase Board established under the Land for Settlements Act, 1925, be charged with the duty of considering the purchase and conducting negotiations for the purchase of Native Land. (2) That the Native Land Settlement Account be abolished, and that the funds required for the acquisition of Native land be provided from the Land for Settlements Account : (3) That the balance remaining in the Native Land Settlement Account be transferred to the Loans Redemption Account, to be used for the redemption of securities :

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