STATE CONTROL

New Zealand Herald, Volume LXXV, Issue 22984, 11 March 1938, Page 11

STATE CONTROL

DANGERS OF POLICY

HEAVY LOSSES PROBABLE

REVIEW BY MR. COATES

[llY TELEGRAPH —SPECIAL REPORTER] WELLINGTON, Thursday The dangers inherent in Stato control of a huge manufacturing industry were pointed to by tho Rt. Hon. J. G. Coates (Opposition—Kaipara) during tho second reading debate on the Iron and Steel Industry Bill in tho House of Representatives to-day. He suggested that the industry could best bo conducted by complete co-operation between the Stato and private enterprise. " The Government is apparently determined to socialise this industry," said Mr. Coates. " Much has been made of the fact that supporters of tho old Liberal Party advocated the development of the industry as a Stato enterprise. They had ample opportunity to socialise the industry, but they did not do it. They knew it would not pay."

Mr. J. A. Lee (Government —Grey Lynn): You socialised electricity. Mr. Coates: There is no comparison. One is a service and the other is a commodity which has to meet competitive prices. Industry Not Economic " Private enterprise in the iron and steel industry in the Dominion has never had the opportunity which the State proposes to give itself," Mr. Coates continued. "Government members state that private enterprise has failed to establish tho industry, but it should bo obvious that it could not establish the industry without Government assistance because the industry itself will not bo economic.

" The projects put before the present Government by Pacific Steel and outlined by tho Minister of Finance wero definitely unacceptable. However, the impression which many people have gained from the Minister's remarks is that the present Government merely continued negotiations with Pacific Steel and Mr. Watson, which had been inaugurated by the previous Government. That impression is entirely wrong. The company was assisted financially in obtaining a report from experts, but its proposals were not placed before the last Government."

The Minister of Industries and Commerce, the Hon. D. G. Sullivan: It put a proposal before the Unemployment Board in 1935.

Mr. Coates: If a proposal came before the Unemployment Board it would have come before the Government. No such proposal was ever considered. Proposal Rightly Rejected

The proposals of Pacific Steol to float a £3,000,000 company with £300,000 of share capital were discussed by Mr. Coates, who said that according to Mr. Nash the company was asking for laboux- subsidies and production bonuses. The Minister was quite right in rejecting that proposal. It would have been rejected by the last Government if it had been made.

" The policy of the last Government," said Mr. Coates, " was to assist the industry actively if it could be proved that it was necessary and desirable. The assistance would have been given either by capital subscription or by a guarantee of interest payments and on a company basis the Government would have had representation satisfactory to the Crown. That method, I suggest, is a far better approach to the problem than a decision to make the whole thing an absolute State monopoly." Mr. Coates said he would like to hear a careful summary of the economic grounds o:n which the industry was to be established. One of tho tests was how much' locally-produced iron ana steel would cost compared with the imported article. 'Mr. Sullivan: We are proceeding at the moment on the basis that it is an economic industry. The Real Question

"Can figures be produced to establish that fact?" asked Mr. Coates. "The Minister of Finance said the industry would have to be established because it is a basic industry, but that is pot sufficient as a determining factor. The question is whether prices will be competitive. "The question ot the £0,000,000 of capital does not worry me very much, Mr. Coates added. *Mhe Government has spent larger stuns on other projects. What does concern me is the possibility of heavy annual losses Jhe taxpayers will probably be asked lor large sums every year to make good deficiencies."