LENDING BY STATE

New Zealand Herald, Volume LXXIII, Issue 22431, 29 May 1936, Page 13

LENDING BY STATE

the new policy

OBJECTS OF BILL MINISTER EXPLAINS PROCEDURE FOR LOANS FAIiM LANDS AND HOUSING [BY TELEGRAPH —SPECIAL REPORTER] WELLINGTON, Thursday A detailed explanation of the pro- / visions and objects of the State Advances Corporation Bill was given by the Minister of Finance, Hon. W. Nash, in moving the second reading of the bill in the House of Representatives to-night. In changing the name of the Mortgage Corporation to that fl f the State Advances Corporation, g aid Mr- Nash, the Government was linking with the corporation one of the finest names'recorded in the history of ftew Zealand, a name that would live for many years. The cancellation of shares in the corporation, said the Minister, would take effect from June 15. The reason why that date had been selected was that shareholders, had had their shares plotted to them on June 14, and it was intended to allow exactly one year to elapse before closing down the corporation. The new board would function as from July 1The Return to Shareholders The principle adopted by the Government was to give shareholders the equivalent, cither in money or stock, which they would have received had their shares, not been taken over. The cost to the Government would bo £281,000. It would be that sum if all had paid up their calls, but something less because there were some who had not. The stock would have a currency of ten years and be redeemable any time prior to April, 194G, if the shareholders concerned so desired. Shareholders would receive £ll2 10s in stock for every £IOO invested to compensate them for a reduction of interest from 4-i per cent to 4 per cent. Whether shareholders took cash or paid-up stock, they would receive a dividend. The object of the Government was to place those people who tubscribed their money in the same position as if the Government had not taken, over their shares. The Government would direct the policy of the corporation through the Minister, and would be responsible for the acts of the corporation. The board would manage, the Minister would control, but only at the point at which He Government felt its policy was not being given 9ffect to would it interfere. Margin lor Rural Mortgages Mr. Nash said that under the existing; procedure the corporation was allowed to grant loans up to a margin of 66 2-3 per cent, but for rural mortgages the corporation was empowered with the authority of the Minister ot Finance to advance beyond that margin. That procedure had to a certain extent been changed. The 66 2-3 margin, which was exclusively a commercial basis of lending, still remained, but. if it was desired to make a greater advance, the Government would guarantee to stand any loss that might be incurred. That guarantee would be given mainly in the rehabilitation of farmers >tnd for the building of houses. loans to farmers for the development of production would be based on the earning capacity of the land, Mr. Nash continued. However, there would be a much sounder basis than formerly as the guaranteed price would definitely determine the earning capacity ol the land. Hon. A. Hamilton (Opposition— Wallace): That only applies to dairying land. Mr. Nashy That is so at present, but the procedure will bo extended later. Other branches of the farming industry will want to come under the procedure which will come into operation on August 1 for the benefit of dairy fanners. New Repayment Basis In cases where farmers could show that an advance of over 66 2-3 per cent was justified they would get the larger advance, Mr. Nash said. In addition the' table mortgage procedure *as being altered so that it could apply to half the loan instead of to the whole loan. Mortgagors could follow the old procedure if they wished or they could get half the loan on table and half on a flat basis. In a loan of £IOOO it might be that £SOO would be advanced on table mortgage, but interest would be paid on the £IOOO. At the end of the table period there would remain a loan of £SOO on mych-improved security and there would' be no difficulty for the ordinary mortgagor to refinance. 'There is provision in the bill for the taking out of life insurance policies." Mr. Nash continued. "This is associated with houses and also with rural mortgages. A mortgagor might desire to safeguard tho interests of his *ife in the event of his passing away during the period of the mortgage. Repayment would be made out of the insurance and the security would regain for his wife and children." Sir Alfred Ransom (Opposition—"al'iatua): How about the man who °°"ld not pass a doctor for life insurance ? ' Mr, Nash: He would still get his mortgage in exactly the same way, but flis wife would not have the same security. iK. J. Holyoake (Opposition—lotueka): It is really optional, then. The Problem of Rates _ Difficulty had been caused in the P® Bt i Mr. Nash said, through mortraf OrS J? einc " na ble to meet their unf o3 ) me °t their interest could f. "ream of saririg £6 or £lO a year W , n J/though the latter were p. ?? legitimate a charge as interest. snviU S!on was maf,p f° r them to make Went! P a - Vrrlcn ts to the corporation to m *° r f( ? rtl1| K ,l tl.v to enable them BI ** maintenance, rates and in,us?nce charges. on „ 6rp wa ? a ' so question of rates Por^ r °! , - ertles which reverted to the aiifl,A r^' on ' ' n r °£ ar d to which local Penal' J es - °ften been unjustly 5r ri m the past - sn . ifl the Min " in fi, W Tvas no specific provision takp„ ' ) in t the matter had been and Crown law office resnlf Department, with the a Jim. rates would be paid when »ouse wns , pt ® Kyle (Opposition—RicPast That has been done in the

otiinll. • s '' : It has not been done, 1S r w "°"'tl n °t find that b»r<^ S i £BOOO had been made to reimU P 'l' Pontics. NnuV, 0 °f the corporation, Mr. jj, ' continued, would bo to provide ra i e^. a t low rates of interest. Interest bv Kit '^ lo P as t had been controlled D °th the State Advances Depart-

ment and the corporation, which had advanced money at lower rates than was customarily charged. It was a question how far the Government could succeed in controlling interest rates through the corporation, but the British Government had largely succeeded in a similar scheme, and Mr. iNash thought that even better results could be achieved as far as New Zealand was concerned. lh° bill would provide one centralised lending department, with n competent field staff to value securities. Ihe corporation could play an important part in the development of housing, although subsequently either a bill or an appropriation would come before the House under which the Government itself would build houses to relieve the shortage which existed at present. The corporation could make loans to local authorities for housing purposes. In Britain during the last few years from £150,000,000 to £200,000,000 had been spent on housing schemes, and it was obvious that New Zealand was being left far behind. Assisting Industry In reply to an interjection, Mr. Na.sli said it was not .vet definite what rate of interest would be fixed for rural mortgages, but it would be no higher than that ruling at present. There was also provision for the corporation to assist in the development oi industry, the Minister said. The Bureau of Industries in the first place would investigate proposals and report on them to the Cabinet, which would make recommendations about any loans found to be justified. The loan would then bo administered by the corporation. A similar procedure had operated to a certain extent in Great Britain, and the Chancellor of the Exchequer, Mr. Neville Chamberlain, had recently referred to its beneficial results in re-establishing industry in the depressed areas. With regard to the issue of bonds, Mr. Nash said the proposal was that they should be issued at a low rate of interest for long terms, and on absolutely gilt-edged security. The purpose of the Government was to make them guaranteed bends. Cost of Administration The Minister said the cost of administration would perhaps be higher than 3s 2d per cent, but he was hoping that in the ultimate the people would be rehabilitated to such an extent that the loss that was apparent on paper would not be incurred. There was a shortage of houses, he said, and with the passing of the bill care would have to be taken to watch the activities of the land agents, the land grabbers and the land owners. Those who controlled the raw material from which houses were built would take their share of the advantages given to the workers by the State. " We have to find a way of stopping that," said Mr, Nash, " but all those who think of the welfare of the country and who look at the real advance toward something approximating to ' prosperity will in the long run do better by keeping land values on a normal basis. If they do not do that I don't know what steps will have to be taken, but whatever steps are necessary we will take them." The Principle of Usehold Mr. H. S. S. Kyle (Opposition— Riccarton): Usehold ? Mr. Nash: If you want to use the facilities of the State or of the community for building homes then to give the facilities to those who are going to use the homes I do not know any better way than the principle of | usehold, and we will encourage it right to the full. Mr. Nash said the Government would be told no doubt that the State could not do the job. The people who believed that would say that public ownership might be good, but public control, "No." They would say that public ownership must be linked up with business management, and that business management was not to be found in the Government. " I do not think they are right," said Mr. Nash. "I think the.real interpretation of what is best is the personnel that is behind it, and there is just as much competency for doing the right thing in Government circles as there is in commercial or business circles. I suppose our Opposition friends will say you will have to pay for the alteration you are making in the Mortgage Corporation. If the price we have to pay is the price wo paid in the past for private control the:? we are not going to pay that price anv longer Belief in Public Service " I believe we have a public service that can run a Mortgage Corporation, that can run a State Advances Corporation, that can run a Reserve Bank if you like, that can run marketing as well as any private enterprise and in the ultimate with infinitely better returns for the community as a whole." "The principles of the administration of this corporation will be generous in operation. It is necessary for the officers if they are to be competent to make sure that, the persons applying for loans are worthy of consideration. A generous principle will operate and the character of the individual will be one of the large factors in determining what he is to receive. If we lend money to someone to build a home it will be to build a home to live in. If we provide money for the development of land it will be to help the farmer to develop his farm and to get the best return from it, not to sell. "The bill is of more importance than most legislation that comes before the House. It is the third step along the road the Government is travelling. The first step was when we took control of credit and the second was when we placed the farmer in a position so that when he worked his land he would be sure of some return for his labour. Now it is proposed to find him the necessary money to enable him' to go on and to enable the best type to build homes. It is only houses that make homes possible."

"NOT ENOUGH TIME" OPPOSITION COMPLAINT CONSIDERATION OF MEASURE [BY TELEGRAPH —SPECIAL REPORTER] WELLINGTON. Thursday A complaint that the Opposition had not been given enough time to consider the State Advances Corporation Bill was made by the Hon. A. Hamilton (Opposition —Wallace). when speaking on the bill in the House tonight.

"The bill was brought down shortly before 11 o'clock Inst night and we are asked to debate on it this evening," Mr. Hamilton said. "It is, on the admission of the Minister in charge, a most important measure. It provides for setting up an institution which will be one of the most important parts of the State's operative machinery, i appreciate the action of the Minister in letting the Opposition have copies of the bill shortly after its introduction, but 1 do think that wo have not been given enough time. "We were told last night, after getting the bill, that we would have to talk for an hour on it the next evening. There is not time enough to prepare what we want to say in that neriod. The Minister has more or less lived in the atmosphere of the bill for a month or so, but we have just seen it. I would like the Prime Minister in future to give us a little longer time so that we might consult experts and consider the measure properly."