BUILDING SUBSIDY

Ashburton Guardian, Volume 54, Issue 94, 31 January 1934, Page 7

BUILDING SUBSIDY

UNUSUAL PROCEDURE. DEFENCE BY THE MINISTER. (Special to the "Guardian.") WELLINGTON, January 30. "There appears at the present time to he a fairly general demand for fuller and more detailed information in regard to the operations of the Unemployment Board's No. 10 (building subsidy) scheme," said the Hon. A. Hamilton to-day. "Already very full details have been supplied to the public as to the total value of works approved, of the anticipated cost to the board by the way of subsidies, and of the value to the industry from an employment point of yiew as the work proceeds. "The board cannot, nor has it any desire to object to criticism being levelled against the practice of paying subsidies to the building industry. It is an unusual procedure and any thoughtful examination is helpful. . "It is not very clever criticism, however, to make the 'bare statement, as though it were a fact, that all buildings being subsidised would have gone on whether they had been subsidised or not; whilst to suggest that

money expended in this direction would have been available for increased relief payments indicates very loose thinking. Before the Scheme. "It is-useful just now, in view of recent criticism levelled against the scheme, to look, back and observe the unemployment position as it was at the early 'part, of last year when the scheme was re-introduced. The building industry—the largest of our secondary industries from the point, of view of employment —■ was practically at a standstill. In selecting the building industry for special consideration, the Unemployment Board realised that practically no other industry offered the same need or facilities for stimulations by way of a subsidy. The total value of permits in the larger towns where statistics are collected for the month of April reached the zero figure of £76,000. This was the lowest monthly value of permits since the collection of building statistics was begun in 1922. The Unemployment Board had the position to face and decided to reintroduce the No. 10 scheme. By making the scheme wider in its application than was the case when it was attempted the previous year and by providing for a shorter working week on subsidised work, the board set out to stimulate the building industry and, if at all possible, to counteract the abnormal increase in unemployment figures.

Unemployment Chocked, "It is a significant fact that when the scheme had operated for a month only the steady and abnormal rise which was taking place in unemployment figures Was arrested. The following analysis of registration figures will enable a proper appreciation of the effects of this scheme on the unemployment position: The registration figures for May, 1933, or the month preceding the operation of Scheme No. 10, increased by 1336 oyer the previous month, against a corresponding increase for the same period . in 1932 of 799. During the month of June, 1933, the first month of operation for Scheme 10, the increase of registration figures was 356 only, corresponding with an increase of 1495 in June, 1932. In JuJy, with the scheme scarcely under way, the effects of the scheme were beginning to be felt. Whereas in 1932 during the month of July the registrations at Labour Bureaux increased by 495, in 1933 they decreased by 419.. Taking another month for comparison when the scheme might be said to be properly under way—the month of October—the registrations decreased by 4599 as against a decrease of 1764 for the corresponding month of 1932; and, at the end of December, 1933, the figures of registered unemployed remaining on the books at the employment bureaux were less than at December 31, 1932, by 4189,, and despite the fact that the 1933 year began with the registrations at 7000 above those of January, 1932. Effect on No. 5 Scheme. "To allege that the using of funds for subsidies under the No. 10 scheme has resulted in a necessity for cutting allocations under Scheme No, 5 is not correct. It would appear more likely that had it not been foi- the operation of the No. 10 scheme it may have been necessary to further reduce present allocations or to increase taxation. To give one illustration typical of others showing- how Scheme' 10 operates should suffice to dispose of the idea that subsidies on buildings have reduced the money available for Scheme •5. Take a city building, subsidised under the scheme which gave employment to forty men, 'all of whom were previously on relief under Scheme 5. The cost of subsidy for these men was £SO a week and the wages -bill for the same men was round about £l5O a week. The weekly overall expenditure on this building, 'including the wages paid averaged £450. Of this latter amount it is reliably estimated that, in addition to the direct wages paid, £2OO a week was paid in indirect in "this illustration, being an actual case, that the subsidy amounted to slightly less than would have been required to pay . relief rates under Scheme 5 to the same men. By expending the money in this way the forty men, instead of getting relief rates of pay, were in receipt of standard rates. In addition, they created employment for other workers at standard rates and more important still, all the men were employed in their normal undertakings. That illustration indicates clearly the advantages of the No. 10 scheme. The Unemployment Board is'convinced that no other expenditure of the board's funds has been so productive of advantages to the employment -position as the expenditure under No. 10 scheme." The total -value of application,-* approved, the Minister continued, was

£5,494,000; the maximum subsidy on theso works, assuming they were all gone on with and that all estimates as to cost proved reliable, would involve £500,000 in subsidies from the fund, but direct and indirect employment involving oyer £4,000,000 in wages, whilst the tax from these wages would amount to £200,000. Such an arrangement as this, if at variance with usual economic practice, was well in keeping with the responsibility imposed on the board in Section 17 of the Act. which set out as a function of the board—"To take such steps as in accordance with this Act it considers necessary to promote the growth of primary and secondary industries in -New Zealand, so that an increasing number of workers will be required for the efficient carrying on of sucli industries." It should not be' assumed that the whole of this increased building activity applied to large commercial undertakings, said Mr Hamilton.. The subsidy was made particularly attractive in reference to private dwellings of less than £650 total value. The effect of this, was evidenced by the fact that the November returns showed 264 permits granted for private dwellings of a total value of £178,646.

"It may be argued that people with money should build without subsidy," the Minister .concluded. " 1 agree; but the simple fact is that they were not doing so. This scheme has rendered liquid much capital that was, for lack of confidence, frozen and useless from a community point of view."