MAJOR CHANGE.

Auckland Star, Volume LXIV, Issue 259, 3 November 1933, Page 9

MAJOR CHANGE.

CONTROL OF BANK. CONCESSION BY MR. COATES. TRIUMPH FOB, 'STUDY CIRCLE' (By Telegraph.—'Parliamentary Reporter.) WELLINGTON, this day.

In deference to an organised movement by a section of the Coalition to invest the Reserve Bank of New Zealand with a greater measure of State control, the Minister of Finance made an important concession in the Hotise last night for the appointment of the governor and his deputy. As finally approved by the House, the provision is that, on the expiration of the term of the first officials, the appointments will be made by the Government, on the recommendation of the board of directors, instead of by election by the shareholders. An undertaking was given by the Minister to ensure that, in the event of a disagreement, the final authority will rest with the Government.

This result is regarded in political circles as a triumph for "the body of members known as the "study circle," since, unquestionably, the Government would have risked defeat on a division had the Minister not announced his compromise. The influence of the group has extended beyond the scope of the original half-dozen who formed its nucleus. They comprise Messrs. Lye, Hargest, Broadfoot, Ansejl, Jull and Holyoake, and they had the support on tho banking measure of at least four others. It is an open secret that this group has been responsible, not only for the modification of the directorate along the lines of greater State influence, but for a definite limitation of the shareholding and its restriction to British subjects. A Labour amendment, proposing the life appointment by the Government of the governor and deputy-govern or, had been disposed of when the Minister made his proposal that both officials should be appointed by the Government on the recommendation of the directors of the bank. This intimation of the concession was made before the committee readied au amendment by Mr. Poison that the governor should be appointed by the State at regular intervals, and his deputy by the directors. Mr. Coates said he made his proposal in deference to views which had been independently expressed to him by several members of the Coalition.

Opposition Pleased. According to Mr. Fraser, it was quite evident there was strong Coalition feeling in favour of the State control policy advocated by the Opposition, which would welcome and assist in the movement in that direction. Mr. Lye, who has been prominent in the Coalition "study circle," said that while appreciating the offer of the Minister, he had come to the conclusion that two courses of action only were tenable. They were: (1) The governor and deputy-governor should be appointed by the Government on the recommendation of the Minister of Finance, in consultation with the directors; or (2) the governor should be appointed by the I State, and the deputy-governor by the board, in which event the latter would have no vote, and the governor would have a casting a.s well as a deliberate vote. Mr. Lye said that although the shareholders had only £500,000 capital and the State was contributing £1,000,000, the shareholders had dominating control.

Congratulations to the "study circle" were extended by Mr. Fraser, who said it represented an element which was leavening the Government benches towards a State Bank.

"The 'study circle' is obliged to Mr. Fraser for his congratulations," said Mr. Jull, who added that lie had accepted the shareholder-capital provision, always provided that the State had majority control on the board. The shareholders were simply looking on the bank as an investment, and did not appreciate its wider sphere, covering currency and credit control.

Full State Control Urged. Mr. Poison said the community would prefer the- State to have control of its own machine. The governor should be a State appointee, with a deliberate and a casting vote, to say what policy should be laid down. After all, the governor would be the expert, and the responsibility should be placed on his shoulders, where it rightly belonged.

In the opinion of Mr. Savage, nothing would be set on fire if the State had five members on the directorate, and the Minister should be able to provide something to give the State that majority. "Boiled down, the governor and his deputy should be appointed by the Government," said Mr. Broadfoot. "The wliolo modern tendency is for the State to take control of the Currency and credit system." Mr. Hargest said he was glad the Minister was altering the clause, but he considered the appointments should remain in the hands of the State.

Mr. Coates said that while some members did not think his suggestion went far enough, it was half way between the clause in the bill, and what they themselves advocated. His proposal would work out smoothly in practice. It was the normal method, and in this instance would remove the objection that politics were playing any part in running the institution.

Opinion Outside House. Mr. Coates said the Committee should pay attention to the views held on the subject by the newspapers. It seemed to ignore the fact that there was, a strong opinion outside the House. Mr. Samuel: Against the bill. Mr. Coates: Some of it, but I would not call it strong. It may be strong in your electorate. Mr. Samuel: In your electorate also. I am not singular in that respect. ■ Mr. Coates: It may have been in my electorate, but I have been able to struggle through notwithstanding the currency "cranks." ' Mr. Samuel: So far. The Hon. J. A. Young: It is tumbling down fast. Mr. Coates: We never know what will happen at elections. We cannot boast about that. Returning to his suggestion, Mr. Coates said it would keep the bank independent, and ensure that measure of confidence which was so essential. "Why don't you say straight out that the Government should make the appointments ?" said Mr. Samuel. The situation had arisen of members on the Government side of the House holding a pistol at the head of the Minister. Members were witnessing the scene of those who had voted for the bill getting up and apologising for their action, and they now wanted a State-controlled institution. Members of the Government wanted the State to appoint thegover-

nor and the deputy-governor. There was no doubt that in the long run that was coming. He suggested that the Minister should announce that he would fall in with the unanimous wish of the House, and make the bank a State-controlled institution. , Mr. Coates' Proposal. Mr. Coates moved that the clause be amended that, on the expiration of the term of office of the first governor and deputy-governor, the appointments of the governor and deputy-governor should be made by the Government, on the recommendation of the board of directors, each such officer to hold office for seven years. Mr. Savage: Will you give the Committee an assurance that the fing.l authority will rest with you ? Mr. Coates: That is the point. If there is any difference of opinion between the Government and, the directorate the final authority will rest with the Government. In any set of circumstances whatever, said Mr. K. J. Holyoake (Coalition Reform, Motueka), making his first contribution to the debate, the Government should have an absolute majority of appointees on the board of directors. Mr. Wright Bewildered. Mr. Wright said he wondered where he was when members on the Government benches all round him were advocating State control, which was a principle that, as Reformers, they had always denounced. Mr. Coates appealed finally to the Committee to let his clause go, with the undertaking that before the bill came back from the Legislative Council he would draft a clause endeavouring to embody the expression of opinion he had heard during the debate. Mr. Sullivan: What does that mean? Mr. Coates: The general impression is that appointments should be by consultation, with the proviso that, in the event of difficulty arising between the directorate and tiie Government, finality must be reached and it should be in the hands of the Government. I admit it is not going the whole distance of appointment by the Government. The clause as amended was adopted.