A £16,000,000 PLAN

Evening Post, Volume CXXXV, Issue 19, 23 January 1943, Page 4

A £16,000,000 PLAN

Opening the Christchurch East byelection campaign, the Minister of Supply (Mr. Sullivan) announced that the Government was planning, as part of its rehabilitation programme, a house-building scheme with the ultimate objective of 16,000 homes yearly. With every justification, he described the plan as "the greatest enterprise that had probably ever been conceived in this country or had ever been attempted." On the face of it, the scheme is one that is calculated to make an appeal, and its presentation on the eve of an important by-election was, for election purposes, well timed. In what light does the plan appear under examination? Mr. Sullivan did not give details —these are still being worked out —but it is reasonable to assume, in the absence of any indication to the contrary, that, in its general principles, the proposal will not differ greatly from the present housing policy. That is to say, money will be borrowed from the Reserve Bank at a nominal rate of interest—in other words, new credit will be created—and houses will be erected for letting purposes. Taking the cost of construction at £1000 per house, this will mean that the Government will annually create a credit of £16,000,000. Each year this amount of money will be put

into circulation and the only com-' pensating withdrawal will be the rents paid by the tenants. And with these there will be a time lag. The housing scheme will produce not consumer goods but capital goods, and the way will be paved for post-war inflation which in its effects may prove as damaging to the country's economy as inflationary trends in time of war. These are aspects of the Minister's statement which should receive the closest examination. The urgent need for houses cannot be denied, and it will be accentuated when the war ends, but that need cannot be used as a cloak for putting into operation a plan that appears at present to be so inherently. dangerous. To impress the electors of Christchurch East, and the public generally, the Government's scheme has been announced before details have been completed. Much will depend on the manner in which those details, especially on finance, are worked out. What part, for instance, will private enterprise be allowed to play in the provision of homes for the people? Whatever the extent of the plans being made by the Government, sight should not be lost of the fact that the private builder can also make a very valuable contribution to the solution of the housing problem. But to do so he must receive encouragement and assistance. As we have previously pointed out, the State monopolisation of resources of finance, materials, and labour must hinder private enterprise from taking the part it otherwise would in meeting the housing demand. The building and ownership of houses must become more and more a State monopoly. Another aspect of the problem that must be considered is the natural desire of many people to own their own homes. To many a rented house is never a real home; it is just a place to live in. Government machinery exists at present to enable people to finance the building of homes. After the war, when labour difficulties and prohibitive costs may be expected to ease, the machinery must be given a full opportunity to operate. Otherwise there will be established a great State tenantry, which, however it might appeal to some, has many features which are scarcely in keeping with the ideas of a seh>reliant people. Unless these factors are taken into consideration, no housing policy, however grandiose it may be in its conception, can meet the real needs of the situation. It is to be hoped that the Government, before the proposals outlined ■-. by Mr. Sullivan are finally adopted, will take these points into account. / Above all, the Government should consider carefully the dangers of the plan to New Zealand's post-war economy. Before the war Mr. Savage said the trouble was not shortage of money but shortage of goods. The war has accentuated that difficulty. We have had to introduce, on top of the pre-war sterling and import restrictions, a stabilisation plan which perpetuates inequities because it would be disastrous to let things drift. At the root of this trouble and of the pre-war trouble, is the over-supply of money. If this "biggest-ever" housing scheme is launched with a "biggestever" credit creation (and housing will not be the only Government scheme for spending) we shall be heading straight for a "biggest-ever" inflation boom. By all means let us build houses. It is a good method'of absorbing labour usefully. But if it is not to create endless difficulties and distress, the scheme must be financed, not by credit-creation, but by using the real savings of the people.