Evening Post. WEDNESDAY, JULY 15, 1936. THE COST OF GUARANTEES

Evening Post, Volume CXXII, Issue 13, 15 July 1936, Page 10

Evening Post. WEDNESDAY, JULY 15, 1936. THE COST OF GUARANTEES

In considering ihe Prime Minis ter's outline of the Government's pro posals for mortgage adjustment on the basis of guaranteed prices, due allowance must be made for the fact that the statement presents merely an outline. The details will be filled in when the legislation appears. Nevertheless, we cannot share Mr. Savage's confidence in the Government's ability to devise an equitable and acceptable method of applying the general principles stated. The Prime Minister's aim of social justice is admirable; but in translating that aim into practical legal form new injustices may be created as great as those the plan is designed to remove. Admittedly the guaran-teed-price plan cannot be left where it is, with the probability of a subsidy being capitalised and made the stake in new speculative dealings in land. The Government recognises this, and hopes to guard against the danger. But unless it is preI pared to go much further than the farmers wish and limit the title to farm lands, its scheme will be unjust to other parties. Farmers' equities may be restored and new inequities created. Mr. Savage is confident, but his statement is too vague to inspire confidence. He says that, with guaranteed prices, the farmer will have no need to worry about overseas market fluctuations during the course of a season.

The other point to be considered is] a proper balance between production prices and land values. In the past, land values have risen with production prices, but they have not fallen in sympathy, with the result that when prices are low the farmer has to struggle against high capital'costs. . . . If we base mortgages on the guaranteed price, the result generally will be justice to all parties. Occasional anomalies may arise, but they can be 'attended to in due course.

This disposes of the difficulty very quickly and easily—too easily for practical operation. In the first place, there is a guaranteed price I only for dairy produce. The Government has made no statement of its intention to extend the guarantee immediately to other products. How, then, can mortgages on sheep lands be adjusted on a guaranteed-price basis? Also Mr. Savage speaks now of the fanner being relieved of worry over market fluctuations "during the course of, a season." This suggests that the stabilised price may not be maintained unchanged from season to season. '■ Then what of the effect on land values of the difference between one season and the next? If the guaranteed price is, say, 112s this season and 150s next, are mortgages to be written down to the 112s value this year and written up next year? Or will the farmer retain the difference, or be required to surrender it to the Government?

The principle to be applied in "paying a guaranteed price to assist the man who worked his land, not the man who sold his land purely for the sake of selling it," is one i which requires-much more elucidation. The method of prevention also is vague and uncertain; and we cannot see how it can operate otherwise than vaguely and uncertainly, or else arbitrarily and unjustly. All the light the Prime Minister has given so far is dim indeed.

The only way to cope with the position, he states, would be through legislation imposing a higher charge on the transfer of farming land. There, too, anomalies might arise and details of any possible Government action could hardly be discussed at the moment.

We can see endless anomalies. The man who has to sell his land is not to be penalised, but how is the distinction to be made with fairness? The straight-out speculator may be checked but there is a fine line, hard to draw, between the owner who, having to sell for health or similar urgent reasons, is allowed to capitalise the Government guarantee, the owner who farms for a while and then takes the added capital value, and the owner who takes his profit at once to make sure of it. But all of them are alike in this: they pass the farm on at an added value and] the incoming owner loses the benefit of the Government grant. We do not see how this can be avoided by imposing a land transfer tax. Nor can it be avoided by anything much short of, the old Labour "usehold" policy which laid it down that land should not be sold or transferred except to the State.

The proposed mortgage adjustment, moreover, means that • the farmer will receive not only p. benefit provided by the State in general (all the people), but relief at the expense of some of the people (the mortgagees) . Mr. Savage admits that occasional anomalies may arise and says they can be attended to in due course. Much more care than is yet in evidence will be needed to prevent the multiplication of anomalies. Relative justice is difficult to assure when contracts are set at naught. For example, where is the justice in granting a rebate, on the mortgage to an owner who has, perhaps, inherited the estate, if the grant is at the expense of a mortgagee who is dependent upon the income? The standard of living of the farmer may be raised (until land selling lowers it again) but the standard of some prudent and thrifty investor will be lowered. The Government must face these difficulties, but we are doubtful whether it will solve lh«m. Bsgimvipg i»

guaranteed prices it has set in train a complicated reorganisation scheme which may give temporary benefit, but lead ultimately to greater trouble. Farmers (though they rejected the scheme abefore the election) have apparently been prepared since to see what would come of it. Two dairy conferences refrained from passing judgment and even the Farmers' Union Conference added to its *adverse judgment a demand for some- ! thing more— the "compensated price." But will the farmers accept everything that goes with the guaranteed price? It is late now for the Government to turn back; but at least the farmers and the Government should see that the pace is so regulated that a check can be applied. Dairy produce prices have improved. If Mr. Savage applies to dairy produce the argument he used respecting, the extension of the scheme to meat and wool (that it would be time to consider extension when the producers were in difficulties), there is a case now for reconsideration of the dairy produce scheme. At least, this should cause the Government to approach ' the mortgage adjustment part of the plan with the great-est-caution and to consider whether relative justice and necessity now warrant the far-reaching intervention which is evidently contemplated.