STATE ADVANCES

Evening Post, Volume CVI, Issue 5, 6 July 1928, Page 10

STATE ADVANCES

THE RATE OF INTEREST REASON FOR INCREASE THE HOUSING POSITION The proposition that the State ' should be in the position of meeting all demands for housing was challenged by the Minister of Finance (the Hon. W. Downic Stewart) in the House of Representatives yesterday when replying to the attack of tho Leader of the Opposition regarding the increase in the rate of interest on State Advances. The Minister said that the veal reason the rate of interest on State Advances was raised was because it was impossible to go on as they were going without in future years showing substantial losses. That was a matter the Labour Party did not worry about. The Labour.Party would not worry whether the money was lent at less the i cost. Mr. J. M'Combs (Lyttelton): "What was tho average cost of money in the Advances Department?" Mr. Stewart: "There was an actual loss being made when the matter was dealt with.?' In 1925, the workers' branch had made actual losses, which were accumulating. That was due to the fact that the branch was started later than the other branch —the jettlers —and had very little cheap capital to go into it. Sc far as the othei branch was concerned, although no loss was disclosed, the course of operations showed what was going to happen if they went on lending money in the way they were doing. On 31st March, 1922, the loan capital in the State Advances was £9,250,000, and in 1925 it was £13,250,000. The profit per cent, earned in 1922 was 7s Bd, and in 1925 it had dropped to 3s sd. Of tho total capital of £13,250,000 in 1925, £4,000,----000 was raised at from 3 to 3J per cent., approximately £2,500,000 at 4 per cent., and £6,750,000 at 4} per cent. Assuming that the loans were renewed in 1920 at 5J per cent., tho interest charges would increase by nearly £29,000, which was more than the profit earned by the Department in 1924-25. Had the money continued to be loaned at 4J per cent, heavy losses must have occurred sooner or later. TWO DIFFERENT THINGS. Mr. Holland had said that the banks raised the rate of interest on overdrafts after the interest on State Advances loans had been increased. That was not so, and there was no connection between the two matters. The overdraft was one thing, and the interest rate on mortgages another. Mr. Holland: "One conditions the other." ' '■■■ . Mr. Stewart: "Not necessarily." The overdraft rate was affected by trade, but-the mortgage rate by other considerations. "The banks manage t"heir business," said Mr. Stewart, "and we manage ours." The Govsrnment had been accused of curtailing advances to settlers and workers in the last year or more, but he reminded Labour members that some of them had been accusing the Government of increasing the Public Debt. A very substantial part of that borrowing had been for the purpose of State Advances. He wanted: to'ask whether it was not a proper action to reduce tho war debt —the dead-weight;debt—and to borrow for. hydro-electric works and State Advances,' which earned their own interest. If the Government was to borrow what was necessary to cope with; the enormous demand for loans, then it was unreasonable for the Labour Party to, denounce the Government for borrowing too much and to tell the electors that the borrowing by the Government was beyond all reason. They could not have it both ways. The country was reaching the position where the shortage of houses which previously existed was not now in evidence. He had been advised'that it would be extremely unsound at the present time, when there were so many vacant houses, to go in for a policy of house building. The Leader of the Opposition (Mr. H. E. Holland): "It" depends on the locality." ■"'■'.-■• Mr. R. M'Keen (Wellington South): "There are no vacant houses in Wellington." Mr. D. G. Sullivan (Avon): "There are houses in Christchuich at rentals of from £3 10s to £4 per week, which the workers cannot pay." AJ IMPBTJDENT POLICY. Mr. Stewart said that this might be so, but the fact remained that it would be imprudent to pour out millions on house building while there was an in-' creasing number of vacant houses in many towns. It would be tremendously unwise to go in for.house building while that state of affairs existed. Mr. J. M'Combs (Lyttelton): "Is it the policy of the Government to check house building, then?" The Minister: "No. But the Government is not going to borrow unlimited millions in order to cope with the avalanche of applications which pour in every time we announce that we intend to raise a loan for housing." The more the Government provided, the less would private individuals. He did not agree .that the Government should be universal house builders. Mr. Stewart said that during the last three years £15,250,000 bad been paid over by the State Advances Office, and, including rural advances, the total was over £16,000,000. If that was not enough for this Dominion to spend in1 three years for housing and loans to settlers he did not know how much the Labour Party wanted spent. If the Labour Party was going to say that when it got into power it was going to cope with every application for a house that came before it, then he did not think that the taxpayers would approve of its policy. At the present time they were about eighteen months behind with applications for workers' houses. The Minister repeated what he had said before about vacant houses. Mr. V. H. Potter (Boskill): "The people are going into flats." Mr. Holland: "No. The unemployment is driving three and four families into one house —that is the trouble. Mr. Holland's references to the State Advances Office appear in the report of tho no-confidence debate on page 6.