LEVY FOR EARTHQUAKE.

New Zealand Herald, Volume LXVIII, Issue 20820, 12 March 1931, Page 12

LEVY FOR EARTHQUAKE.

OPINION IN THE CITY.

PLAN CONSIDERED CRUDE.

MANY PITFALLS DISCLOSED. USEFUL EMERGENCY MEASURE. While generally in favour of some provision for meeting future earthquake losses and helping those whoso property was destroyed in the Hawke's Bay disaster, Auckland commercial men find much to ' criticise in the Government's plan of a levy of Is 6d per . cent, on the insurablo value of property. The scheme is considered to be a fairly good emergency measure so far as Hawke's Bay is concerned, but too crude as a permanent means of providing ' against earthquake i-loss. An annual levy upon owners of property insurable against destruction or damage by fire and earthquake is considered to be equitable, provided the fund so created is used only to recoup losses upon such property. If it is to be used otherwise the levy becomes a class tax. L That the Government does not intend to use the fund in the strict way mentioned is evident from the fact that out of the £1,500,000 to be niado available in Hawke's Bay, one-sixth, or £250.000, is to bo used in tho restoration of local bodies' services, although the local bodies do not possess anything like one-sixth of the insurablo property. Such assets as sowers, water mains, harbour works and concrete bridges aro outside, tho scope of insurance. It should bo conceded that tho private property-holder has a direct interest in their restoration, but so lias tho ordinary citizen. ' - Spreading the Burden.

One business man remarked that if tho intention was to build up a, fund for meeting all kinds of loss and distress arising out of earthquakes, some of tho cost should be borne by tho general taxpayer and the local ratepayer. By an adjustment of the various proportions to bo paid it should bo possible to dis*tribute the burden fairly over the people of tho Dominion according to the loss that different classes were likely to sustain in tho-event of an earthquake. This might involvo fixing higher rates of contribution for residents in regions where tho earthquake risk was appreciable than for others in districts where it was believed to bo almost negligible.

It is agreed that the collection of Is 6d per cent, .additional upon all fivo insurance cover will not bo a difficult matter for tho insurance companies, although it will involve thorn in some trouble and expense. The chief difficulty, apparently, will ariso in dealing with uninsured and under-insured property. Tho Prime Minister's statement does not indicate what is meant by "insurable value" or how it is to be ascertained. Possibly insurance companies in future years will be asked to state the limit of cover they would be prepared to allow on any risk held by them, but even this way out would involve many difficulties. "To name one instance only, the actual value of much property is uncertain and that of some kinds, such as stocks of seasonal drapery, may vary from week to week. It will bo interesting, also, to know whether tho levy will apply to floating policies or to temporary cover taken out for a few weeks only, as upon wool in store prior to a sale. , "Carrying the Improvident." In many cases of non-insurance or under-insurance the. Government will be able to get much information from the land tax returns as to tho estimated value of buildings, and from the ijicomo tax returns as to the value of stocks and plant. However, these will be of no help whatever in dealing with dwellings. The great majority of thess, by roason of mortgages, are not liable to land tax. If they were, the value of tho contents would be unknown. Household furniture and effects are seldom insured for anything like their replacement value, and usually for only a fraction of it, yet tho insurable valuo of such property throughout the Dominion must amount to many millions. Some of the business men interviewed were inclined to the belief that tho Government would not attempt to go beyond tho actual insurances upon dwellings, since the extra few shillings yearly that might bo obtainable in each case would not justify a special investigation. " It looks very much as if the provident man —the man who keeps his property well covered—will bo carrying tho improvident man on his back," said one commentator, " but after all, most of us are doing that already. Tho only tiling I can suggest is that if relief has to be given in future out of the fund, some account should be taken of whether a property has been adequately insurjd or not." Only Partial Relief. It appears to be taken for granted that tho insurance companies will be given carte blanche to pass the levy on to their clients. To expect them to find the monoy themselves might well be considered out of tho question. In the past five years the companies in Now Zealand, tho State Fire Insurance Office excluded, have made a trading loss of £300,000 on their fire business, largely owing to the robato of 12£ per cent, forced upon them by the Stato office, which is required to pay no dividends and is in a favourable position regarding income tax. It is felt that the.Prime Minister might have been more explicit about tho matter. As regards tho size of the "proposod fund, tho general opinion was that it would provido only a fraction of what was needed to restore the damage in Hawke's Bay, and could bo regarded as nothing more than a partial palliative. Tho head »of ono large concern pointed out that tho Government evidently hoped for no further earthquake loss for more than seven years, since it would take that time for tho levy to reinstate tho £1,500,000 reserve fund and recoup tho State for tho loss of, say, £75,000 a year in revenue from tho reserve fund. However, it would take less than seven years to build -up a second £1,500,000, because the money would bo earning interest instead of being debited with it.

OPPOSITION IN DUNEDIN. FLAT RATE DEEMED UNFAIR. [BY TELEGRAPH.—OWN CORRESPONDENT.] DUNEDIN, Wednesday. The Government's proposal to finance the earthquake reconstruction by means of a surtax on tho value of insurable property is opposed by insurance managers in Dunedin, who regard the imposition of a flat rate as inequitable. " While I approve of tho establishment of an earthquake insurance fund," said one manager, "I am definitely opposed to the flat rate, since it is an unfair method of raising money. Tho earthquake disaster is an unknown quantity, and reliabiiitiition is a national matter. But a (lut rate is opposed*to the fundamental principles of insurance." Another manager pointed out that owners of largo mills and factories would find the surtax of la 6d per cent, a- very heavy burden. , «