The Press THURSDAY, JUNE 2, 1955. Controls on Capital Expenditure

Press, Volume XCI, Issue 27674, 2 June 1955, Page 12

The Press THURSDAY, JUNE 2, 1955. Controls on Capital Expenditure

The Government must regret the need, as it sees it, to apply more stringently existing controls on capi- | tai expenditure. A government comI mitted to a private enterprise I economy cannot be happy about extending the area of control in the ‘nation’s economy. But since it ’rejects raising of interest rates !and currency control as desirable I methods of directing limited supplies jof capital and labour into the most necessary channels, the Government has been forced by circumstances into applying methods that are contrary to its political philosophy. I The Government believes that State | capital works—electricity-generating I stations, schools, hospitals, etc.— I should not, in the immediate and I longer-term interests of the nation, be curtailed unduly. No-one will quarrel with that—provided that State capital works are reduced to essentials, that waste is eliminated from development programmes, and that the Government properly exploits methods that are available

to it to advance its capital development programme. These methods include raising funds overseas and obtaining labour by a vigorous policy of immigration. The extended curbs on capital spending announced by the Minister of Finance are designed to safeguard a proper share of the available capital and labour to government works, and to allocate the remainder (the greater share) among competitors in the private enterprise field. Building and construction will suffer a tightening of the existing controls, and capital for buildings (and for machinery and plant to put into buildings) will experience additional control by the Capital Issues Control Committee. Housing construction is to have priority. Though few would question the priority of housing, the sensible view is to strike a reasonable balance between houses and industrial buildings. It seems to be cumbersome that applicants must satisfy the more exacting demands of two separate forms ;of control—building control and capital issues control. Co-ordination of the two is obviously necessary. The controllers of capital issues will decide to what purposes capital and labour will be allocated. Consequently, the Capital Issues Control Committee’s responsibility for avoiding waste of resources will be very great. The finest judgment will be necessary in giving preference to cases “ where a sub- “ stantial increase of exports or “ saving of imports would result, “ either directly or indirectly In present conditions over-full employment, establishment or expansion of an industry to “ save “imports” is not necessarily desirable. To make in New Zealand what could be imported could be wasteful of both capital and labour. A third controlling body, the Board of Trade, has interests which intrude here; its advice would be useful when the Capital Issues Control Committee has to consider industrial concerns whose claim for capital is that they would “ save imports As controls extend and multiply, it is difficult to see the “ private enter- “ prise ” and “ capitalistic govern“ment” systems that the Prime Minister was lauding in Christchurch working freely in the expansion of the New Zealand economy. The Government must surely be

searching anxiously for ways to end this latest extension of controls as soon as possible.