PARLIAMENT

Manawatu Standard, Volume LV, Issue 89, 13 March 1935, Page 9

PARLIAMENT

THE MORTGAGE CORPORATION: INTEREST RATE OF 4J PER CENT RETURN ON SHARE CAPITAL. Per Press Association. WELLINGTON, March, 12. The Mortgage Corporation Bill was recommitted in the House of Representatives this afternoon in order that the Minister of Finance might introduce an amendment. lit. Hon. J. G. Coates said the object of the amendment was in connection with the dividend to be paid on share capital. The Bill, as it left the Committee, said the dividend was to be 1 per cent above the bond rate. It was now proposed to fix the dividend at 4$ per cent. Mr R. McKeen said the dividend should be a maximum of 4} per cent. He contended that if the interest on bonds should ho reduced to 3J percent there should he a corresponding reduction in the dividend. Mr W. Nash asked why the Minister should fix the dividend at 4$ per cent while State securities were bringing in £3 6s 6d per cent. If the bonds were as good as Government stock, why should they guarantee 4$ per cent to the shareholders? The corporation could get all the money it required at 31 per cent. If the Minister paid that dividend now, he would have to ask permission to pay more when money became dearer. Mr W. A. Veitch said the Minister’s proposal was a compromise that meant nothing, and it was no compliment to the intelligence of members. The amendment was inserted after a division by 38 votes to 20. Mr M. J. Savage opposed the amendment and said it fixed the rate of interest. They could not fix the farmer anything, but they could fix the moneylender everything. Mr Stall worthy said that ultimately all charges fell on the man on the land, so that the dividend would eventually have to bo paid by the man it was designed to assist. Why should the rate of dividend bo higher than the rate of interest ruling in the country today ? , Mr W. Nasli said the Minister knew that bv fixing the rate at 4} per cent, the share capital would be two or three times oversubscribed. Why should the Minister persist in making a present of | £63,000 to those who had money, for the value of the shares would rise by that amount ? ACCUSATION WITH DRAWN. Mr Coates said it was at the request of several gentlemen inside the House, and nobody outside it, tha.t he had made the compromise. As a matter of fact, the same suggestion had come from the Labour. Party, but now they were going back on it. Mr F. Langstone: That is a deliberate lie. The Chairman of Committees (Mr J. A. Nash) asked Mr Langstone to withdraw the words, but he refused. The Speaker was sent for and the matter was reported to him. Mr Langstone then withdrew the words and apologised, the incident being closed. The amendment was carried and the House proceeded to the third reading of the Bill. LABOUR’S POLICY. Mr Savage said Labour members had opposed the Bill from the beginning because they were firmly convinced that it had been introduced by a wholly discredited Government in the dying hours of its existence for the purpose of destroying the Etate Advances Department, which had played such a. line part over many years in keeping rates of interest somewhere near an economic level. Labour was further of the opinion that there was no service that could bo rendered by the proposed Mortgage Corporation that could not be rendered by the Etate Advances Department with better results to the whole of the people, including borrowers. They argued that s-o long as the present borrowing system of finance continued the State could complete any borrowing transaction more economically than any subordinate part of the State which, in this case, was the corporation. Mr Savage also stated that as a result of more economic borrowing the State would be in the best position to carry on economic lending. In doing tlieir best to improve the Bill when they bad failed to defeat it, Mr Savage added, Labour members, with the assistance of the Independents, had voted against several clauses and moved amendments to others, but these had been defeated. Opposition members took the view tlia,t no substantial assistance could bp given the fanners and others under the present system, and until such time as the State took full control of the money system, including powers of issue, tlve problems of the Dominion would never bo solved. The member expressed the opinion that the main problem facing the people of New Zealand, in common with the rest of the world, was a shortage of purchasing power. USE OF HIGH EXCHANGE. Mr Eavage proceeded to review the attitude the Opposition had adopted to various clauses and the reasons for doing so. Coming to the rate of exchange, lie said there was no substantial reason for any variation in the rate between New Zealand and the outside world. Under the present conditions of trade a high rate of exchange might play an important part in conserving overseas credits and might be used as a temporary means of subsidising New Zealand exporters, but the high rate of exchange must also limit British imports from New Zealand. Taking New Zealand exports (excluding specie) for the two years ended December, 1934, as amounting to £BB,349,000, it would lie fair to estimate tho amount paid to date on account of the increased rate of exchange at approximately £22,000,000, and the Minister should nob forget that that amount bad to come from incomes which bad already been reduced, either directly or indirectly, by Acts of Parliament. The Minister of Defence had said that- to guarantee the dairy and wool farmers an adidtional sixpence a pound would take between sixteen and seventeen million sterling, and if cheese was to be included it w-ould require about three times the total note circulation of all the trading banks. Just wliat the note circulation had to do with the problem the Minister had not said, and lie had conveniently forgotten to mention that by the same rule of measurement the average yearly destruction of incomes by Acts of Parliament between January 1, 1930, and Juno 30, 1934, amounted to nearly five times the total note circulation. With ail air of mystery the Minister had asked where the money was to come from, and had spoken about inflation, but lie had overlooked the fact that by the wage reductions ho had played his part in destroying in the aggregate over 100 million sterling in purchasing power since January, 1930. If that 100 million had been allowed to remain part of the source of all taxation, viz., the people’s incomes, it would have gone further in meeting the farmers’ difficulties. Without attempting to quote the exact figures, it would certainly not be an exaggeration to say. continued Mr Savage, that on account of the high rate of exchange, Customs charges and sales tax the present prices of

tea, fencing wire, boots, etc., were at least 50 per cent, higher than they would have been if Labour’s policy bad been operating. Had tho Minister forgotten that from the inauguration of the sales tax in February, 1933, until December, 1934, the total revenue received from that source was £3,508,404. From Customs and excise for the years 1933 and 193-1 the total received was £16,609,843, which, with £22,000,000 added for exchange, made a grand total of £42,118,247. The alternative to raising the rate of exchange was guaranteed prices, definite trade agreements and the allocation of overseas credits for the purpose of those agreements. Control of the exchange by a national banking svstem would enable tho Government to make available to traders at par all the overseas credits required to give effect to the Dominion’s part in any trade agreement with Britain or any other country. GUARANTEED INCOMES. By what rule of thumb, asked Mr Eavage, did the Minister arrive at the conclusion that most other sections of the community should have guaranteed incomes, but that the farmer must have bis income fixed by rapidly changing external conditions? Ebould not all sections who wore giving useful service have some guarantee of minimum conditions? The farmer, he added, was entitled to the difference between the amount that he received in the markets overseas and the amount that it took to maintain the standard of living in sympathetic relationship with the aggregate of the Dominion’s production from all sources. Must the farmer, he asked, be content to carry the economic loss which resulted from producing for export which was the only means available to the whole of the people to meet their overseas obligations r Mr Savage predicted that the Government would discover it had found its way into a blind alley. The Act would have to be amended at every session of Parliament for years to come. Mr 4V. A. Veitch said there was grave anxiety throughout the country as to the effects of the present measures and other measures that were to follow. He suggested that tho Prime Minister should have stopped the Minister of Finance from proceeding with that unwise legislation. The Prime Minister should have resigned and advised the Governor-General to rea.ppoint him. As a matter of fact Mr Forbes should have resigned when Mr Downie Stewart resigned, but it was still within his power to make a stand and exercise the powers of his office and act .in the interests of the people. Undoubtedly the Minister of Finance had taken complete charge of the actions of the Government. A Minister who was not the Prime Minister had taken complete control of the policy of the Government, and Mr Veitch appealed to the Prime Minister to take the action which lie alone had power to take. Mr W. J. Jordan referred to the exemption of the corporation from the payment of rates, and sa.id the British Government paid rates on public buildings, even on the Houses of Parliament at Westminster. The House rose at midnight and the debate was adjourned. LEGISLATIVE COUNCIL. The Legislative Council met at 2.30. As there was no business on the order paper, the Council adjourned almost immediately.