Controls On Capital

Press, Volume XCIX, Issue 29263, 22 July 1960, Page 12

Controls On Capital

Mr Nordmeyer has disappointed those who hoped that his Budget would end capital issues control. He has, on the one hand, eased substantially existing controls over certain types of issues, and, on the other hand, has taken steps to control interest rates on deposits with building societies, investment societies,* and trading companies. On balance, therefore, the position may not be greatly changed. Companies seeking investment capital other than by ordinary share issues, especially those seeking capital for enterprises involving risk (arid consequently higher interest rates), will still be under control. The remaining restrictions on private enterprise seeking capital for expansion are in contrast to the increased latitude Mr Nordmeyer has provided in half a dozen ways for the Government’s bid for investment funds.

Nevertheless there is a good deal to be said, from two points of view, for checking extravagant bids for deposits intended to finance hire-purchase. First, many bids for deposits at high rates of interest—some, as Mr

Nordmeyer points out, from private companies which are not required to publish accounts —involve the public in risks from which they are entitled to be protected. The proposed legislation for this is welcome. Second, it is appropriate to check excessive rates for hire-

purchase transactions at a time when television is expected to stimulate greatly the demand

for hire-purchase. Sets will be expensive enough without exposing hire-purchase buyers to excessively high interest. Mr Nordmeyer recognises in an interesting way the possibility that restrictions on money for

hire-purchase may have undesirable effects on essential industry. He proposes a restricted entry by the trading banks into the hire-purchase

business. They will be authorised to make advances to agriculture and industry for such items as agricultural tractors and machinery and for industrial and commercial equipment on hire-purchase or by term-loans not exceeding three years. The banks will not enter the hire-purchase field in consumer goods.

Mr Nordmeyer has partly

met the cogent objections to his excess profits retention tax, which was designed to prevent avoidance of his dividends tax, imposed first in 1958. Because the tax discourages the growth of industry, Mr Nordmeyer proposes that it should not be charged where the Commissioner of Inland Revenue is satisfied that income thus retained by a company is required for necessary development or expansion “ involving the ac- “ quisition of buildings, plant, “or other productive equip- “ ment Industry, of course, does not live by plant and buildings alone. Mr Nordmeyer’s concession would be improved if it applied also to such things as planning and research. However, provided the amendment is interpreted liberally it should be of considerable assistance to industry.