THE STATE AS LENDER.

New Zealand Herald, Volume LXIV, Issue 19632, 10 May 1927, Page 11

THE STATE AS LENDER.

APPLICATIONS FOR MILLIONS. FARM LOANS THE CHIEF NEED GOVERNMENT'S MEASURES. TESTING NEW PLAN OF FINANCE. [BY telegraph —press association.] ' FEILDIXG. Monday. "Complaint is rife that applicants for loans are kept waiting for many months for their loans. That, complaint can only be remedied if the Government is prepared to borrow far more heavily than at present," said the Minister of finance in reviewing the operations of tbe State Advances system in his speech this evening. Another complaint often made by farmers was that too much money was. lent for building houses in the towns, instead of to help the fanner to develop and improve his land. To meet this objection the limit for city housing loans had been reduced from £3500 to £I2OO (or £ISOO tn special cases), because if a man wanted more than that to build a house, he was well enough off to borrow privately. It was also decided not to grant loans in city or suburbs to pay off existing loans, nOr to buy existing houses. Even with these restrictions, there were about three times as many applications from town as from country. -

Helping New Development. "But we try to see that couutry settlers get their fair share of the money available, and in recent years it has been about half and half/' said Mr. Stewart. l"We also expedited the country loans so that some time ago we were only three months in arrear, but with the tremendous pressure we have now dropped back again. But the position is not satisfactory even with regard to country loans, as far too large a proportion of the applications are to pay of! existing loans. It is surely more important that loans to develop land, to clear bush,, to apply fertilisers, should take precedence, but these applications form a small part of the total. To meet "this enormous demand for millions" to finance farmers and houses — without adding to the public debt; and incurring the criticism which folla>vs on each increase, even though such debt is no burden on the taxpayer —the Government was trying out an experiment under * ! the Rural Advances Act, which provides for the raising . ,of money on lands secured on mortgages of rural lands' instead of by Government -loan charged on the revenues of the Dominions. To inaugurate the scheme, a temporary advance of £500,000 had been made to the department, and applications for loans received by the ordinary department were being transferred to the special branch. As soon as a sufficient number of mortgages had been granted to make it worth testing the market, the Government would try a bond, issue, either in New Zealand or abroad. "I. hope that when the bond issue is made the public will readily subscribe at a price which will enable us to lend money at approximately the same rate as it is now lent by the State Advances Department," Mr. Stewart added. Finance for Housings

The Minister then proceeded to suggest an extension of the scheme to provide loans for housing in the cities, in connection with which there were also applications for loans to the extent of millions more than the department could hope to grant in any reasonable time, while in each of the large centres citizens who take an interest in housing and the prevention of slums were anxious to carry out a heavy house-building programme. "There is undoubtedly a good deal of money in each centre available for investment, and if a strong citizens' committee in each centre were to make a patriotic appeal to its own citizens to subscribe funds for housing purposes, I think the difficulty could be met without the Government raising more millions to be added to the public debt." said Mr. Stewart. "A temporary advance could be made to build houses on the understanding that' later the citizens' committee would appeal to citizens to take up bonds secured on mortgages of the houses, and if they were willing to lend their money at about per cent, the houses could be built at a cost which would emable working men to pay a reasonable rent and sinking fund. The advantage of such a scheme would be that each city would take a pride in grappling with its own problem, and the State Advances Department could be used as the channel for controlling the bonds and administering the Act without the bonds forming part of the public debt." Fresh Borrowing Only Alternative.

"If the scheme of long-term bonds does not prove satisfactory, we shall have to fill up the coffers of the State Advances again," the Minister concluded. "For it is quite clear that there are many farmers who have good security for whom the private lender has ceased to cater. The money is available but it has be collected and lent out through some State Department. I am well aware that this will arouse more hostile criticism for borrowing from farmers' unions, chambers of commerce and other organisations whose members collectively denounce the Government for borrowing on the one hand, and yet individually implore the Government to lertd them money. "In mv view this question of farm loans is one of the most urgent and important national questions of the dav. The springs of finance which formerly supplied the farmer have dried up, and if I saw any prospect of inducing them to supply the want I would urge the State to * hold back. But at present it does not appear any reduction of taxation on money invested in mortgages, or other expedients will in the near future draw out private funds on the long terms that are necessary for the farmer. All we can do is to absorb private funds into the State coffers and lend them out on the amortisation principle; otherwise they will go into other channels which are" of less importance from a national standpoint."