Evening Posit WEDNESDAY, JULY 19, 1939. £2,000,000-GIFT OR LOAN?

Evening Post, Volume CXXVIII, Issue 16, 19 July 1939, Page 10

Evening Posit WEDNESDAY, JULY 19, 1939. £2,000,000-GIFT OR LOAN?

With controversial cleverness the Prime Minister has stated the farmers' case against the guaranteed price system in his own terms and then replied to the statement. The reply would be quite effective if the statement correctly represented the attitude of the farmers. But it does mot. As we pointed out in our comment upon the Prime Minister's first; challenge to critics of the scheme, the objection in the first place was to the^ commandeer which gave the Government power to take the produce at its! own price, and, secondly, to the fact that the Government had taken the produce at a price which dairy farmers justly claimed did not assure them the standard of living (in relation to the rest of the community) which they had been promised. In his reply to Mr. Mulholland, the Prime Minister conveniently ignores this vital difference and states his own proposition, which amounts to a choice between acceptance of the scheme ,as at present operated or reversion to the old order with the scales weighted heavily against the exporter of primary produce. Such a choice is not fair. To be fair, the Government should offer the farmer the chance of organising his industry and export on a basis of costs not burdened with all the charges brought about by the Government's industrial and social betterment policy.

The farmer was promised that his price would keep pace with costs— there was the formula in the Act to prove tills. But the weakness of the Act was that the formula was not a formula at all, only a list of ingredients. Costs of production and living standards were mentioned as factors to determine the guaranteed price, but there was another factor— the returns from sales of produce— and it was hot stated which factor should be the governing one. In reducing the price recommended by the 1938-39 expert advisory committee, the Minister of Marketing (though he claimed to revise the standards of calculation adopted by experts) was evidently influenced by the prospect of a deficit. In other words, market returns decided the price. Because the Government had been unable to control costs, it went back on its promise to the farmers that their price should keep pace. This was a policy of caution, but the caution should have been shown earlier to' prevent costs rising. The same fault j was evident in the appeal by the Minister of Finance for stability, i The farmers' price was to be stabilised at a level below what itj should be—costs were not to bej brought down to assure equality. j In his address at the opening of I the Farmers' Union conference Mr. Mulholland made three special; points: (1) That the offer of the Minister of Marketing contained no offer of stability—the price might be stabilised, but costs might still rise; (2) that it was now clear that the price must be based on market prospects, not on costs and living standards; (3) that, with an overdraft piling up in a good price season and the danger of still greater deficits if market returns fell, it was necessary to know what the Government would do with the deficit. Instead of answering these specific points, the Prime Minister clouded the issue with a challenge to the farmers to revert to the "old order" —which would not be the old order at all, as costs had risen. And instead of clarifying the third and most important point—what would happen to deficits—he made it still more obscure.

Under the old system, Mr. Savage said, the farmers had to be content with the overseas prices ruling for their exports. Under the present marketing and guaranteed price system they are entitled to claim their share of the Dominion's total production from all sources. The present dairy season will probably end with the farmers getting in the aggregate about £2,000,000 more than they would have received if Mr. Mulholland had been successful with his propaganda against the Government's policy.

How are the farmers entitled to "claim their share of the Dominion's total production from all sources" if they are denied what an expert committee has certified as their due, and are asked to stay put with costs still rising against them? Also, how are the farmers "getting in the aggregate about £2,000,000" more than if the system were discontinued? Is it lent to them and are they to be liable for repayment? If so, they are not really "getting it." They and their industry are faced with the prospects of accumulating deficits which Mr. Mulholland feared. But if it is given to them, and not lent, who gives it? Is it to be extracted from the taxpayers' pockets as the first year's deficit has been? Or is it to remain indefinitely upon the books of the

Reserve Bank as a debit, perhaps chargeable with interest, but, at any rale, inflationary? The Prime Minister cannot have it both ways. Either the £2,000,000 is a loan to the dairy j industry and the farmers, after having given their thanks in the belief that it was a gift, are to be asked to pay it back, or it is a gift and taxpayers or consumers (through inflation) will have to pay it. A direct and unequivocal statement should be made on this point. If the £2,000,000 is merely lent, the farmers will have to face the problem of repayment. If it is given the community will have to make good the amount. How will this be done —by extra taxation in a Budget that already promises to be greatly overburdened, or by the issue of credit in excess of market returns, which Mr. Nash admitted would be inflation? As Mr. Mulholland stated, "the question of what the Government is going to do about the deficit is one of great moment."