THE GOVERNMENT POLICY.

Otago Witness, Issue 2069, 19 October 1893, Page 19

THE GOVERNMENT POLICY.

(From Our Own Correspondent.) Wellington, October 15.

THE BEGINNING OF A ST VTE 13ANK,

The Premier is reported to have said at Feilding, on Friday evening: — "There was some talk about a State Bank, but it did not appear to be generally known that postal notes could be used as a legal tender. Therefore, if anyone paid money into a posb office and received postal notes, he could use them as money. What the farmers wanted was cheap money more than anything else. Power should be taken to give advances to lessees from the Government, who should lower the rate of interest, which would be in the interests of the people." This coming from the Premier when on the platform is in itselt' fu.l of significance, but, in conjunction with ascertained facts and various sigos that have come to me during the past few weeks, means, 1 venture to thiuk, a desire and intenti - n on the part of the Ministry, if returned to power, to associate their projected land settlement schemes with a national paper currency and a State laud mortgage bank. Strange as it will appear to your readers, the statute authority for the paper currency is already ia existence. Early in the session I drew attention to the last clauses of the Post Office Acts Amendment Act, and indicated the significance of the provision dealing with the note currency. It is illustrative of tie attention that is given by hou. members to the bills that come before them, that this measure has passed both Houses without its real meaning apparently being diicerned. As a matter of taor, it may almost fairly be styled a State bank in disguise, inasmuch as it repeals the form of the postal notes prescribed by " The Pot,t Office Act 1885," as in the schedule, and directs that it may be in such form as the Governor by Order-in-Council may from time to time prescribe. Here are the clauses ia full: "8. 'The Posb Office (Postal Notes) Act 1885' is hereby amended as follows :— (1) In section 3 thereof, the words *in the form set forth in the schedule to this act ' shall be repealed, and the words ' in such form as the Governor by Order-in-Council may from time to time prescribe ' shall be substituted in lieu thereof. (2) The schedule to that act is hereby repealed, and section 3 cf • The Post Office Act Amendment Act 1891' is hereby amended by the insertion in the second paragraph of the said section after the words • the currency of all postal notes' of the words, 'other than £1 notes and £5 notes.'" To make the meaning clear I should add that the Amendment Act of 1891 provides that the currency of all postal notes issued under that act or the act of 1885 shall be extended to 12 months from the date of issue, and said acts and all regulations made thereunder, shall be read and construed accordingly. It will thus be seen that under the sections of the act of last session, £5 and £1 notes are excepted from the limitations of currency provided by previous legislation, and that such notes may be issued " in such form as the Governor, by Order-in-Council, may from time to time prescribe." This means that the Government may issue a legal tender paper currency at any time, and profit by all the advantages of that aspect of banking business to the extent of its note circulation. As to their means of obtaining business it is obvious that the civil service and Government contracts alone present more facilities for procuring a State bank note circulation than any at the command of an ordinary banking company ; while for security it would have first the automatic gold base represented by Savings Bank deposits, and the impregnable collateral security of the State guarantee. My belief is that the Treasurer, being thoroughly alive to the sensitive nature of the banking business of the time, will be most careful to avoid any developments under his innocent-looking little bill that will have even the semblance of competition. But I am equally confident that when the present financial tension shall have passed away, assuming he is returned to power, the small beginning will expand to a policy of great magnitude and of the highest importance to the State. Meanwhile a beginning may be made, and the public gradually educated to the scope and meaning of the new project by an issue of Government bauk notes to civil servants and co-operative labourers resident in those parts of the country where the banks have not established local offices, or where they are not easily accessible. This would not directly clash with the banks, and would be a great convenience to that section of the com munif.y requiring ready money on the spot. The Hon. Mr Ward wi 1 be heard from again.

A LAND MORTGAGE 12 \NK.

The Premier's declaration at Feilding that "power should be taken to give advances to lessees from the Government, who should lower the rate of interest, which would be iv the interests of the people," is the first note, I believe, of the establishment of a land mortgage bank, the object of which will be to assist competent settlers upon conditionally acquired Crown lands to improve their holdings. It will probably be found that this is but part of a very large reform in the policy of land settlement that the Government intend to yet place before the country which could -work in this way: Given an intending settler with, say, £150 capital who can procure under lease in perpetity 200 acres of suitable land valued at £2 per acre. For this he pays £20 per annum rent to the Crown, and invests his £lsoinpertnar:entimprovfcments<, this being done, he obtains from the district land officer a certificate that his estate is permanently improved to that amount. Wiih that document he is in a position to negotiate with the State Land Mortgage Bank tor an advance by way of mortgage for two-thirds the same (£100), leaving to the mortgagee the ordinary margin of security. For this he would pay 5 per cent"., making his rent and interest charges less than 10s per week. The £100 being in turn similarly invested, he would be in a position to acquire a fuither advance of £75, and so on, ard this, while being a good security to the State as landlord, would be comparatively valueless to the ordinary investor, who would, if he considers the security at all, probably feel bound to demand a rate of interest that would be prohibitive.

THE RESUMPTION OL' PRIVATE 1:5 FATES

It is easy to see how completely these schemes can be made to dovetail with tha fixed determination of the Minister for Lands thai; the constituencies shall, above all things, be asked for their mandate to the Legislature that statutory power shall be taken to resume as required such private estates as may be deemc d necessary for the settlement of the people. Tne b'll of last session had some defects that were very lucidly indicated by Sir Robert Stout, and its fate in the Council was a foregone coaclusion. The policy that will be put before the country will, I think, be much more comprehensive than that contained in the rejected bill. It is felt that, assuming the powers of resumption are sufficiently safe-guarded against any arbitrary action by the Government of

the day to satisfy the most timid Conservative, there is behind the larger real difficulty of commanding sufficient capital to acquire suitable land with sufficient rapidity. Discussing this aspect of the question wibh a prominent Liberal leader lately, I suggested that a method might bo devised to finance such purchases outside the consolidated account, paying interest from out of the accruing rents which would be credited to that special account. I was met by the rejoinder that the experience of the past was that special accounts, no matter how safeguarded, when in credit had not been secure trom the attacks of a Treasurer with a deficit. This, too, has been \vithin my own knowledge the case in some of the other colonies ; yet I think an attempt will be made by the prpsent Ministry to grapple with it, and the last experience of the Sydney Government will furnish the example. In speaking on the Public Debt and Sinking Fund Bill, the introduction of which has been received with the greatest favour in London, Sir George Dibb3 said they would take out the working expenses and would pay the interest by placing it periodically in the hands of commissioners, to be named — men of the highest position in the old country as well as this, — who should be a buffer between the colony and the borrower, and who would be a guarantee to the lenders that their annual income would be paid with unfailing regularity during tin currency of the loan. It may then happen that the bill to be introduced by the Seddon Government, if returned to power with a sufficient majority, will contain provisions to borrow moneys as required for the special purpose through independent trustees in London — the Agent-general representing the colony at the board. Thus controlled the account would be beyond the control of the most reckless and unscrupulous Treasurer, capital could be acquired as needed, and the purchase would become a first security to the lender, who, having the "collateral" of the State guarantee, would advance at a correspondingly low rate of interest. More than this, the difference between the income from the lard at 5 per cenb and interest upon advances would form a sinking fund that would extinguish the debt and return the land to the State. I have here indicated enough of a large policy for one day. That it will be thus formulated lam not prepared to say. That it is contemplated upon some such lines I have reason to suppose, and itis of sufficient importance to deal with at some length. Whatever the sins of the Seddon Government, its mosb bitter opponents, I think, have to recognise the sincerity of the aspirations and honesty of purp -.se of the Minister for Lands in this desire to plant small men upon the land. That he is a man of large views in this direction I know, and that he will have the courage to voice them at the proper time I do not doubt.