Finance for Licensing Trusts

Press, Volume XCI, Issue 27593, 25 February 1955, Page 10

Finance for Licensing Trusts

' The Mataura and Clutha licensing districts having voted on Saturday ' in favour of trust control of liquor sales, the Government is now 1 obliged to face the implications of I the policy announced by the Minister of Justice (Mr Marshall) 1 for purposes of this poll. The present Government (with Mr Holland as Minister of Finance) changed the former system, which • allowed liquor trusts to finance their i building projects entirely by bank • overdraft It required two-thirds of the finance to be raised either by mortgage or debenture issue, subject to the consent of the Capital Issues Committee; the Government guaran- ’ teed the remaining third on approved terms for progressive ! reduction of the guarantee. This ; policy was re-emphasised during the General Election campaign by the then Minister of Justice (Mr Webb), who said that if people wanted trusts they should be prepared to find two-thirds of the money at least, after which the Government would ' come in with the final third. The 1 policy had a vital bearing on the liquor poll in the King Country, where the electors voted on both the licensing and trust control issues. The difficulties of local trusts in obtaining finance for building were known to the electors of the King Country; and government policy having been reaffirmed specifically ' for their benefit, it was not surprising that trust control was rejected ; by almost two to one. The electors ‘ of the King Country clearly voted for the system more likely to give expression to their heavy poll in favour of licensing. Though the electors of Mataura and Clutha voted in favour of licensing on General Election day, their oppori tunity to say whether the sale of liquor in their districts should be controlled by trusts did not come until last Saturday. In the meantime, and for unexplained reasons, the Government changed its policy. Replying to questions from local - bodies for information about the 1 Government’s policy, the Minister of ‘ Justice (Mr Marshall) replied that the financial assistance would be on i. the same basis as for the Ashburton • tsust, namely, finance by bank

overdraft, with a government

guarantee of a quarter of the amount advanced. This was a surprising change of front, because the wisdom of the policy in force until the General Election had not been questioned; it appeared to be confirmed after the /.General Election, when the trading batiks’ statutory minimum reserves were raised on

November 30, 1954, this expressing the judgment of the Reserve Bank that bank advances should be further Contracted. However, the change in government policy ; announced on February 2 encouraged the electors of Mataura and • Clutha to suppose that they could have trust control in their districts : by the easy method of financing by / bank overdraft. It is not surprising that they voted as they did on / Saturday.

The difficulty the Government faces now, of course, is that the problem of financing liquor trusts extends far beyond the Mataura and Clutha districts. /The last report of the Licensing Control Commission directed attention to the widespread failure of local licensing trusts established by polls to commence the construction of licensed premises. These trusts will, no doubt, press the Government for the same favourable terms granted to Mataura and Clutha. When replying recently to a suggestion from the chairman of the Mount Wellington Licensing Trust that the new policy would apply to his trust, the Minister of Finance (Mr Watts) said there was a difference between district and local trusts and that as policies on district and local trusts “have been “divergent in the past, so are they “ likely to differ in the future ”. This did not explain why government policy in Mataura and Clutha should be different from that for the King Country, which would have became a trust district had the electors so desired. The explanation is unlikely to satisfy the several local trusts that are anxious to proceed’ with building programmes but art checked by lack of capital. Without a satisfactory explanation for the change of policy in Mataura and Clutha, the conclusion is unavoidable that the government has most unwisely ‘ opened a door towards easy finance,-through which several-licensing trusts will reasonably feel they are entitled to pass. Such a I movement would make nonsense of the Government’s wider financial policy, as defined last October by the then Associate Minister of Finance <Mr Bowden), when he pointed to the need “to “ restrict the use of overdraft finance “ generally, and for hotel business in “ particular, against other claims for “more justifiable commercial and " trading needs”*.