NEED FOR ACTION

Evening Post, Volume CXV, Issue 38, 15 February 1933, Page 5

NEED FOR ACTION

(To the Editor.)

Sir,—After studying Mr. Buckleton's plan for the rehabilitation of the primary industries, I would ask: Does it go far enough? It appears to me that the plan merely funds the mortgage debt, leaving posterity to pay for our present troubles. Cannot the problem of inflated land values be dealt with in a businesslike way, looking facts-squarely in the face,- so that it may be cleaned up properly? I would offer for criticism a plan which has been in my mind for some time, and I shall endeavour to state as plainly as possible the advantages. Firstly, a large number of farms are mortgaged ■ well beyond the capacity of the farmers to-pay, and it does not seem possible that 'primary produce-values will ever rise sufficiently to meet the interest, let alone the principal, on these farms. Let us take a hypothetical,case and deal with it. It can be assumed that all other farms are in similar straits, more or less. "A farmer holds a farm for which he has paid in good times, say, £12,000. He puts in £2000, gives a first mortgage of £5000, a second mortgage of £3000, and a third of £2000. On present values of his produce that farm may only be worth £6000, or a. little over the first mortgage. The position is that the farmer has lost his equity, so also practically the second and third mortgagors. If the farm is gold' up the farm reverts to the first or second mortgagor who can now work it at a profit, or put someone else on the fram who can. do so. Now, I, submit: that the Government .'should .'.'provide legislation to take over that farm,at its market value. Offer in payment,to the mortgagors a settlement in the form of twenty-year bonds bearing interest of, say, .3% per cent., or alternatively, a varying scale of interest. As, the value at which the Government takes over; is only a little over half the mort-gages,-the mortgagors'would, o£ necessity, have- to accept bonds much less than the paper values they formerly held. I-would suggest settlement on the following basis: To the first mortgagor bonds to the value of £4000 (20 per cent, cut), to the second, bonds to the value of £1500: (50 per cent, cut), and to the third mortgagor bonds to the value of £500 (75 per cent, cut).' The:bonds to bear interest as suggested above,* or /alternatively the first mortgagor to receive 3% per cent., the second .4 .per cent., and the third 4% per cent. Now, ho money is required to get this far, and the Government owns the farm. '■-.-... The next step is for the Government to resell the farm to the original owner at the' true • value, in this case, £6000, payment -to be made by the farmer in the form of a rental to be paid monthly, threemonthly or ; six-monthly as suits best,, but in no case allow payments to get beyond six month; periods. The rent can be arrived at on a table mortgage basis to cover principal and interest spread over twenty years, after which the farmer owns the freehold. Adequate machinery clauses could be inested in a board to "administer the scheme to prevent the farmer.getting into another mess, should prices rise substantially. Now, there is sacrifice in this'particular case, but what does it amount to? Under present conditions the farmer is bankrupt and has lost what, cash he put in. The thud and second mortgagors have made bad investments and h«ve lost also. The first mortgagor: is the only one who has any equity, but as he advanced a larger sum on that farm in good' times than it would be prudent to advance torday, he also must have lost some of his/investment. All parties should be satisfied because" they: now have bonds of tangible value returning- an assured income and available to secure advances from banks, or they can readily be sold should the holder need the cash for other purposes. ■The losses sustained by the mortgagors, whom we can take as principally banks, stock and station agehts,. and various types' of investment houses, should not bear; over hardly.,on them, -if the respective businesses have been soundly managed over the'last three years. It would be safe . to, assume that. these concerns have written.off,.; or placed reserves against. these - doubtful .investments —if they have not, the directors and managements have not been honest to their shareholders in holding fictitious values against these advances. Again, in prosperous times when these mortgages were taken, or advances were made to farmers', profits were large and substantial reserve accounts were built up. Most balancesheets published show these reserve accounts.. They can now be brought in against the mortgage losses and dividends will not be unduly disturbed. Mr. Buckleton's suggestion to tax exports by 2% per .cent, for thenext twentyfive, years would, in effect, bring the land below its true; value, and would always be a hurdle in.competing id our overseas markets. The suggested tax of 2% per cent, on imports, is an unfair tax to load the public with for such a long period—both are unnecessary.'There is no reason why the. investor in rural property , should. have absolute' protection whereas the investor in urban property should automatically lose his all, as he is going to, and has, in thousands of cases. ' The scheme," of course,' is applicable to those .farms which are over-capitalised, and values .could'be readily .determined by a competent board. Free farmers are outside the scheme;: they do not need assistance if they own freeholds or have mortgages below the real value of the land on produce-price basis. They can farm at a .profit, and are not suffering any hardship; neither is the'country suffering on their, behalf. '■ ' •As ,Mr. BucHeton states, relief would be given-to.the.Budget and, consequently, taxation -' would-' be' less; local prices and, wages' would' not- be -. ffected; the cost of the scheme wouldnot be.great, and, above all, New,;Zealand.;farm,land, the source of our wealth-arid-livelihood,,would be so valued to enable us to compete^ at a profit, and'once profits appear in the primary industries, so we can look; for prosperity. It is only by: a definite writing down to where we were before the bubble started can we be happy and prosperous. Schemes .which merely put forward the day of: settlement will bring their own troubles. The' men and women of the future will haye their own loads to make and carry—why cripple them with the results of- our foolishness? \We have all gambled that the rainbow would.last'for ever—well, we've lost, so: let us all pay now and get-it-over, and'build afresh.— I am, etc., '. ___,„ VALUES.