SUBSIDY REJECTED

New Zealand Herald, Volume LXXI, Issue 21935, 19 October 1934, Page 14

SUBSIDY REJECTED

OBJECTIONS TOO SERIOUS METHOD OF EXPEDIENCY BONUS TO UNDESERVING t PROTECTING THE TAXPAYER [BY. TELEGRAPH SPECIAL REPORTER] WELLINGTON, Thursday Reasons why it is undesirable that assistance should be given to farmers by way of gift subsidy, loan subsidy or guaranteed prices are set forth in i detail by the Dairy Industry Commission. "Assuming that the necessary sum could be found, the payment to farmers of any agreed amount per pound of butter-fat would immediately ease their present difficulties," tho commission says, "but the objections to the proposal are too weighty to justify the making of any recommendation in its favour. Any method of relief which is general and which therefore makes no distinction between farmers able to pay and thoso not able to pay is inequitable both to tho recipients and to the taxpayers who are called upon to provide the necessary funds. Tho causes of financial embarrassment as well as the degree of it vary so much J from case to case that a 'blanket' subi sidy inevitably provides more assistance than some require or deserve and less assistance than others require or deserve, and it confers a bonus on those who need no assistance at all. Premium on Inefficiency "It is impossible, also, to apply a subsidy according to the particular needs of claimants without undertaking an elaborate investigation into individual cases and setting up costly machinery for the purpose. Inevitably decisions would need to be arbitrary in nature, and unfairness and injustice could not bo avoided. Thus some cases would prove necessitous through sheer inefficiency, but nevertheless would bo eligible for assistance that would be denied to a man who had kept himself above the bread-line through efficiency or possibly by overworking himself and his family. The effect would be to place a premium on inefficiency and a penalty on thrift and hard endeavour. "More important economically is the fact that no subsidy scheme could provide effective control over the farmer's < use of the funds received or over the efficiency of his farm-management without becoming administratively topheavy. If the subsidy were used for consumptive or personal purposes only, as might be the case, it would contribute nothing toward the reduction of farmers' mortgage liability and would therefore be valueless in hastening the desired escape from the prevailing state of debt-suspension. A subsidy from taxpayers, without any machinery of supervision, could have no assured effect in increasing efficiency of production, and might therefore prove valueless as a permanent contribution to the farmer's economic improvement. The general effect, we suggest, would be to impose an unfair burden on taxpayers to provide no .more than a temporary amelioration of tjie farmer's financial difficulties. Other Assistance Available "The commission attaches great importance to the need for assisting farmers in financial difficulties not only by monetary means, but also by way of helpful "advice and budgetary supervision directed 1 toward greater farm efficiency; but it is impressed also with the need of protecting the taxpayer from tax charges which serve no sound purpose." Concerning a suggestion that the subsidy could be granted by way of a loan secured on the general assets of tho dairy interest as a whole and repayable when prices rise, the commission says it is impossible to predict the future course of prices, and it is therefore impossible to be sure when the loan-.could be repaid or if it ever could be repaid. On the present production level, a subsidy of 2d a pound butter-fat, the figure most persistently advocated, would mean an annual charge of £3,500,000. Any fall in prices would mean a corresponding increase in the sum -to be provided. The commission also argues that New Zealand's abstention from subsidy proposals gives the Dominion a bargaining power which may prove of great value when new trade agreements are being made. "The risk involved in abandoning at this date our policy of unsubsidised exports is too serious to be undertaken on behalf of a proposal which has no outstanding merits of its own," the report says. Guaranteed Price Proposal As to the guaranteed price proposals, the commission says the initiation of such a scheme at present would involve the immediate payment of a subsidy and therefore is open to the objections already cited. "On general principles," the report says, "we consider that equalisation schemes of this sort cannot successfully be launched unless an 'insurance' fund has already been accumulated. The proper time to make the experiment would therefore appear to be in a period of high or rising prices when farmers have % surpluses available for disposal. Whether administered by the industry or by the community, the scheme has a special and probably insurmountable difficulty. The basis of the scheme is found in the contention that at present prices gross income does not cover gross expenses. This, however, is true only of farms where costs of production are relatively high. Where ccsts are relatively low and other conditions favourable, farmers can cover gross expenses even at present butter-fat prices. "The commiss on considers that proposals of this kind, however attractive they may appear on the surface, are inherentfy unsound and hedged round with serious administrative difficulties, and that any experimentation with them cannot be recommended."