STATE ADVANCES

New Zealand Herald, Volume LXX, Issue 21617, 9 October 1933, Page 8

STATE ADVANCES

The Superintendent of the State Advances Office, in his annual report, says "The ultimate losses of the department, due to the prolonged economic depression, will not be ascertained until prices and wages are stabilised. Unless the pricelevels of primary produce substantially increase, the losses will be considerable. To provide against this contingency provision is made in the year's accounts." This is a serious admission, the first of its kind to be made. It confirms the view often expressed, since depression and the adjustments incidental to.it fell upon the country, that the power of this department to make ends meet had become very doubtful. The circumstance arises partly because of the very narrow margin between the rate of interest paid on borrowed capital and the rate the department charges on the advances it makes, and partly because cf the past practice, in the Workers' Branch, of lending up to 95 per cent, of the value of the property securing the loan. Even with conservative valuations the margin thus left for depreciation is grotesquely inadequate according to the standard commonly required by other institutions and by private lenders. In addition to these weak points, the interest-reducing legislation of (lie immediate past was certain to affect the securities the department holds. Neither the report nor the accounts accompanying it reflect the true position of the department's finances. This is openly admitted. Yet a glimpse can be obtained. In the Settlers' Branch, for instance, the profit and loss ac-

count for 1932-33 shows a loss of £101,781, compared with a profit of <£'227B in 1931-32; the Rural Advances Branch a loss of £68,812, compared with a profit of £6177; and the Workers' Brarich a loss of £72,276, compared with a profit of £11,743. In the last Budget a sum of £250,000 was provided under the heading "Reimbursement of State Advances and other funds of amount of reduction in mortgage interest under the National Expenditure Adjustment Act." Of t'his sum some £221,690 appears in the accounts of the department, with apportionments exactly balancing the losses in the Settlers' and Workers' Branches. Since the Consolidated Fund is thus being drawn upon in this fashion, a plain and detailed statement of the present position and the prospects of the department should be made. Certainly more information than the report and accounts give should be vouchsafed.