DEFICIT IN DAIRY ACCOUNT

Press, Volume XCVIII, Issue 28893, 13 May 1959, Page 16

DEFICIT IN DAIRY ACCOUNT

“Government Will Insist On Repayment” • (New Zealand Press Association) WELLINGTON, May 12. The Government had acted in a “very fair and reasonable way” towards the dairy industry, the Minister of Agriculture (Mr Skinner) said tonight. He was replying to recent statements on the guaranteed price procedure made by members of the Dairy Board. Mr Skinner said the Government was primarily concerned to ensure that, wherever possible, provision was made for repayment of advances made by the Reserve Bank to the dairy industry. “The present deficit in the Dairy Industry Reserve Account is approximately £7.25 million. This is the loss on the sale of butter and cheese during the 1957-58 trading year. “The legal position, in terms of the Dairy Products Marketing Commission Amendment Act, 1956, stated very simply, is that there is no obligation on the dairy industry to repay this amount unless it wants to,” Mr Skinner said.

“The 1956 Act provides that if there is a trading profit this year or in any future year, this profit, unless the Dairy Board otherwise agrees, shall be distributed to suppliers up to the cost of production figure as fixed for the season by the Dairy Products Prices Authority. “After that level has been reached, any remaining profit shall be used in a manner to be agreed upon by the Dairy Products Prices Authority after consultation with the Dairy Board. “It is quite clear that should there be a trading profit, there is no legal obligation on the industry to repay any of its current deficit But in fairness to the New Zealand taxpayer, the Government must take action to ensure that at least part of any future trading profit is used to reduce the industry’s debt at the Reserve Bank. “Not only is this necessary from the taxpayers’ point of view, but there is also the fact that, unless provision is made for repayment, we become vulnerable to charges of subsidisation of our dairy industry, similar to those which we have repeatedly levelled on other countries in an effort to ehsure fair trading conditions on the United Kingdom market. Two Choices “Accordingly, in the course of recent discussions, the Government gave the Dairy Board the . choice of two courses of action. “First, we said that to avoid amendment to the present legislation, the Government would ■ accept an exchange of letters with the board to provide that one-third of any annual trading surplus be distributed to suppliers and the remaining twothirds be applied to the reduction of deficits, or in the event of all advances having been paid, to build up reserves against future deficits. “Alternatively, if the industry could not agree to this proposition, it would be necessary for the Government to amend the 1956 Act to provide that any annual surplus shall be applied, first, to repay advances and secondly, in the event of all advances having been repaid, to build up reserves against future deficits.” “In addition, the board was informed that if the act .was to be amended in this way, the Government would take the opportunity also of amending section 16a (9) to provide that if the Dairy Industry Account is in debit, or if it appears to the Dairy Products Prices Authority that the account is likely to disclose a debit at any time within the next succeeding 12 months, then before the authority fixes any prices, it shall obtain the consent of the Minister to such prices. “Under the existing legislation, the authority in these circumstances is obliged only to consult with the Minister before fixing prices," Mr Skinner said. Government’s Preference Mr Skinner said it was made clear to the board, both at the discussions and subsequently by letter, that the Government would prefer the first alternative —the exchange of letters—as this would look after the situation for the coming year and allow time for the industry to work out its ideas for the future. “It will be recalled that an industry inquiry committee is at present sitting in examination of the whole of the guaranteed price procedure and the Government would want to hear any recommendations that the board might make from the committee’s findings before considering legislation of a permanent nature.

“The Government’s proposition to the board was, I think, a very fair and reasonable one but, unfortunately, the board regards it as unacceptable, primarily because of the inclusion in the repayment formula of the 1957-58 season’s deficit of approximately £7.25 million,’’ Mr Skinner added. “In our discussions with the board, the chairman and others claimed that this loss was a Government, rather than industry responsibility. In the board’s subsequent letter to the Government, it was prepared to agree to the exchange of letters only if the liability for the £7.25 million was set aside for future discussion. “The Government’s view was that it would be misleading the dairy industry if it did anything to suggest that the £7.25 million might eventually be written off after further discussion, as we could not agree to this course of action under any circumstances. Dairy Board’s Claims “In short, the Dairy Board claims that the loss which it suffered in the 1957-58 trading season is the New Zealand Government’s responsibility for the following reasons which were submitted by the board. “(a) That the dairy industry lost £15.5 million of its reserves in the same season. “(b) That the United Kingdom Government clearly indicated that the loss had occurred through dumping and that the New Zealand dairy industry had suffered damage accordingly. “(c) That the New Zealand Government had pressed a claim for a compensation payment to recover this loss, and “(d) That the New Zealand Government decided the timing and conditions of the protest dealing with dumping, and, although the dairy industry had pressed for a case to be subi mitted much earlier, no action was taken until early 1958. Part of the loss might have been avoidable had earlier action been taken. “The Government interprets this to mean that because the United Kingdom Government allowed dumping to continue during the 1957- season, the New Zealand Government should accept responsibility for the losses occasioned the New Zealand dairy industry’s claim with the United Kingdom Government. “I am completely unable to understand the board’s reasoning in this respect,” said Mr Skinner. Preparation Of Protest “Regarding the timing and conditions of the protest which was made to the United Kingdom Government, I am able to speak only for the action which this Government took after it assumed office in mid-October, 1957. “We immediately assembled the facts, many /of which had to be secured from our offices in the United Kingdom, and prepared a long case very quickly. “After discussion with dairy industry representatives, this case was submitted to the United Kingdom Government on February 17, 1958 within two months of the Government assuming office. “Taking into account the amount of work involved, and the other problems with which the Government was faced immediately it assumed office, and the Christmas break, I think it is safe to say that it would have been impossible to have acted and completed this action more quickly,” Mr Skinner said. “In all circumstances, I feel the Government has acted in a very fair and reasonable way towards the dairy industry. The way is still open for the industry to accept the exchange of letters which I referred to, and I sincerely hope this will eventuate.”