LABOUR'S PLAN.

Auckland Star, Volume LXVI, Issue 234, 3 October 1935, Page 10

LABOUR'S PLAN.

COST ASSESSED.

GUARANTEED PRICES.

LIABILITY £200,000,000.

1-INANCE MITTISTEH'S REPLY,

(By Telegraph —Parliamentary Reporter.) WELLINGTON, Wednesday.

Almost an hour of the Finance Minister's time in replying to the Financial debate in the House this afternoon was occupied in examining the Labour party's alternative to high exchange. In default of clear explanations from the advocates of guaranteed prices as to what the scheme really means, and how it would be financed, Mr. Coates had made a careful survey of their speeches, from which ho had extracted his own idea of the plan, adding his views as to how it coiild be financed. Mr. Coates conceded that if there was a feasible scheme as an alternative to what the Government had done, there was no reason why another party should not adopt it, though it was fair to the electors to ask that it should be explained, so th.it they could see whether or hot it was practicable. One of the Labour party's candidates, a Air. Ben Roberts, in dealing with 'guaranteed prices at Pahiatua, was asked if under such a scheme the farmers would be allowed "an open slather" in production. He replied that this was a sound question,' and he could not imagine that farmers would' be allowed an open slather. Immediately' prices were guaranteed, said' the candidate,- it would be essential to have stabilised quantities. Then' there was the originator of the scheme, Mr. Langstone, who described it in the famous pink pamphlet, now no longer in print. Mr. H. T. Armstrong (Labour, Christchurch East): I will give you a dozen. Pamphlet Quoted. . . Mr. Coates: I would be 'satisfied if I could get one. It cannot be bought in this town, the demand is 'so great.Ife proceeded to quote front " the pamphlet to show that if there were a guaranteed price of 1/3 for butter, and the actual price was 6d, to guarantee the farmer would mean issuing notes or credit. To ship butter which fetched £250 in London looked like a loss of £375, according to the pink pamphlet, but Mr. Langstone asked his readers to remember that we could only buy back from London to the extent to which we sold, so only £250' worth would be exported to New Zealand. However, the pamphlet explained, these goods would be listed at £025 in New Zealand to meet our own .price-level. "We thus balance our accounts," added the Minister. (Laughter.) Mr. Coates said the pamphlet asked • where the money was to come from, and the author's answer was: "Why, we will create it—manufacture it. It will, of course, be necessary for the State to take control of banking, credit and currency." Mr. Coates said he had noticed that the member for Duneclin South, speaking at Invercargill .in July, said that if a loss were sustained overseas it would be met (a) by a tax levied and graduated according to means, and (b) the issue of credit. Another Labour candidate, Mr. Ormond Wilson, of Rartgftikei, also asked where .the money was to come from to pay the guaranteed price, and he declared that it would come from th'e same source as all the money came from, eventually from the organisation which controls the monopoly ot credit of the country, the banking system'. Mr. W. E. Parry (Labour, Auckland Central)> What's wrong with that?

Mystery Banking. Mr. C'oates: It is. just interesting, to see that the .people have to pay for it. It is to come from the mysterious bank: ing system, or the manufacture of money, but Mr. Wilson says,";' That's all right; Inevitably if comes out of the pockets of tho people," He. went on to say that since the taxation last yqar was £20-,000,000 and ahdtMei' £19,000,000 would be required for guaranteed prices, it would be necessary to consider whether it was advisable to double pfeseitt taxation, though Jio , remembered • that the Leader of the Opposition had -expressed himself that taSfttiort tfai high enough now. Sir,'. Seniple, speaking' at Dunedin, had explained; that guaranteed prices were nothing more or less tha,n a repayable advance to tho farmer. * Mr. R. Semple (Labour, Wellington East) i I said the overseas cOMSUfllef would pay the advance." V Mr. W. ,T. Poison (Government, Stratford): How many'plans'so far? (Laughter). 'I he Minister : Our, difficulty- has been to get a proposal that is agreed to by all the Opposition;. because- there& a variation. (tAhour, Grey Lynn): Would you liko to sot up a board? The Minister \Vent on to say that, in face of the disastrous- fall In -export prices, on which, the Dominion depended for its national income, the Government as an immediate measure raised the rate of exchange from ll'O to 125, which in some measure adjusted costs in relation to prices. The next portion of its policy was to reduce costs in every form which could be applied in a-practical manner, and the Budget revealed the success of the plan of bridging the gao between costs tttld. incomes. This process of restoring equilibrium Was painful, but it was a matter of pride to realise how all,, good- New Zealanders had stood up to the test, and had seen it through. Now wc had a firm foundation on which to , build, economic stability had been largely regained, and the beneficial rtsUlts were seen in the general recovery in trade and industry now evident In, every; direction. A pretty pood job had been done. Mr. Parry: And 70,000 unemployed.

Central Idea. ■, riie Minister went on to suggest that the central idea of tlio critics was that the depression could hnvo bdeil provented from reaching our shores, by maintaining wages, salaries and incomes at prc-slump level. It was not a question of what produce would realise in this country but the returns overseas, and he would like to examine the question of how mtlcli would have been involved to maintain during the seasons 1020-30 till 1034-35 the average prices ruling for butter, cheese, mutton, lamb and wool for the three seasons 1020-27 till 1.028.-20 inclusive. To do! this, the aggregate value of these commodities for the six seasons would have had to be £130.00,0.000 "greater than was actually the case, notwithstanding the raising of the exchange, rate to 110 in ,!anuarj\ 1031, and to 125 in January. 1033. If they took the- present season into account, it would raise the cost

Ito probably £200,000,000. How could 1 such an enormous amount be secured? Ihe Government raised the exchange rate as part of its' plan, and' that proved beneficial, but to have relied on that factor, alone would have meant that by 1932-33, when export prices were less than half of those of 1029-29, the exchange rate would have had to lie up to 200., Mr. \Y. E. Barnard (Labour, Napier): How does he explain how he arrives at 200 millions? It sounds like a flight of the imagination. Second Alternative. The Minister repeated his explanation, and went on to suggest that the sccond alternative for raising the money by taxation would be practically impossible. Another possibility was borrowing, which more nearly approached the system Mr. Semple evidently had in mind. But could anybody seriously suggest that in the last four or five years we could have borrowed £130,000,000 to keep prices up? Mr. Semple: You borrowed it during the war. The Minister retorted that this was during a period of high prices. The fourth method of raising money was by direct inflation,, when the first thing to happen would be complete loss of confidence in. our currency, followed by complete collapse. And, what was worse, the very section for which the Opposition seemed so concerned, the wage earners, Would have suffered seriously by loss of purchasing power. Prices would rise, wages would follow, and in the end the whole mass would fall. Mr. W. Nash (Labour, Hutt): You are talking nonsense. The. Minister: How does he call it nonsense if it is to bo inflation to the extent of 130 millions to bring prices up to guaranteed point? That has been the bogy. Mr. Nash: Your 1/3 could not look at 13G millions. . No Nonsense. The Minister: The honourable gentleman must not only look at the dairy farmer. There is no nonsense about these figures. He assured the House that the calculations were made on the basis of average prices for a pre-slump period and during the slump years and on the comparison, it showed a difference of £200,000,000, or, allowing for exchange, £136,000,000. Of all the methods suggested by Labour speakers, he was. bound'to say that currency inflation was likely to be the most disastrous. To utilise that system to maintain prices at the 1929 level would create- stiefr a volume of export that it would not be possible to l maintain sufficient exchange- in London to- meet - our charges. Mr, Lee: Guaranteed prices would be good for trade with Britain. The Minister: It is a practical difficulty lam pointing out. You could not borrow sufficient funds in four years to pay the prices. You could not raise it by taxation, while currency inflation would lead to a greater disaster. Then if prices were fixed, quantities would have to be regulated and that is a thing the farmer does not want.