FARMERS’ FINANCE

Otago Daily Times, Issue 20323, 3 February 1928, Page 10

FARMERS’ FINANCE

RURAL INTERMEDIATE CREDITS MR W. J. POISON’S CRITICISM. REPLY BY PRIME . MINISTER. (Special to Daily Times.) WELLINGTON, February 2. The Prime Minister (Mr J. G. Coates) stated to-day that his attention Lad been called to a report appearing in this morning's paper containing the substance of the remarks made by Mr W. J. Poison at a meeting of the Dominion executive of the New Zealand Farmers’ Union when referring to the recent rural intermediate credit legislation. The substance of Mr Poison’s complaint, said Mr Coates, appeared to bo that the findings of the Royal Commission of 1925, which investigated the systems of rural finance operative in several countries, on the Continent of Europe, and also in North and South America, had not been fully embodied in the Rural Intermediate Credit Act of last session, and implying that the legislation embodied a principle against which the commission had been expressly warned. The further statement was made by Mr Poison that the Prime Minister had brought down legislation which had destroyed the Commission’s findings. It is clear from Mr Poison’s statements that the portion of the new legislation which is objected to by him is that which provides for the granting of advances to individual farmers supported by satisfactory guarantees. The report of the Royal Commission contained no such proposal, but it provided that advances to farmers should be made through the formation of rural intermediate credits associations consisting of not fewer than 20 members, each of whom is required to subscribe for shares to a total value of one-tenth of any loan obtained by him from the ast elation, with a minimum of 25 £1 shares. The object of the proposed legislation was thus to encourage and promote the formation of co-operative limited liability companies with the object of obtaining finance for their farmer shareholders, the funds being provided from moneys to be raised by the Rural Intermediate Credit Board and advance to the associations for the purpose of making loans to their members. The essential feature of this system is, of course, the supervision which can be exercised by members of the association over the financing and mode of working adopted by those farmers who have obtained loans from the association, and also the provision of the share capital of the association to meet any possible deficiency on the loans.

As is well known, the Royal Commission’s recommendations were embodied in a Bill which was brought before Parliament last session, and was referred, on the Prime Minister's motion, to a special committee consisting of members of all parties, and having amongst itc numbers several members who were directly connected with farming interests and with farmers’ finance. As a result of the consideration given by this committee to the proposals in the Bill and the cvidec.ce tendered before the committee by representatives of various farming and other interests, it was established to the satisfaction of the committee that some method was desirable to supplement the system of rural intermediate credit associations, the committee being satisfied that in a small country like New Zealand, with a comparatively scattered population, difficulty would be experienced in finding a sufficient number ot farmers in any one district to form an association, so nullifying the desire of the Government to assist the farming industry with ready finance. The committee accordingly arranged for a new part to be added to the Act, and the Bill was returned to the House of Representatives with the new portion included. This provided for advances to individual farmers on the security of their stock apd chattels supported by a guarantee signed by one or more approved sureties and guaranteeing the repayment of at least 20 per cent, of any loan granted. It was the opinion of the committee that such a provision was necessary to meet the needs of the farmer, who had a good security to offer, and who was desirous of availing himself of a loan from the board, but who had no opportunity of forming or joining an association. - Euil provision, however, was made in the dill for associations to be formed as recommended by the commission, and giving them the necessary powers to function. In the regulations already issued under the Act full and complete provision was made to enable these associations to operate as contemplated by the commission. The guarantee required is, of ocurse, an equivalent under the system of direct loans to the security afforded by the share capital where the loans are made through the medium of associations. Mr Poison’s remarks appear to imply that by the inclusion of the additional provisions the co-operative principle has been defeated; but it cannot be too strongly emphasised that the fullest provision lias been made under the Act for the formation of associations exactly on the lines contemplated in the Royal Commission s report, and the fullest opportunity is afforded for the formation of such associations. As proof of the fact that the provisions are fully effective, and are known to members of the farming community it may be mentioned that the Prime Minister has been already approached from more than one source by persons who have intimated their intention of forming associations. If -dr Poison’s view that the co-operative system is the soundest and most beneficial commends itself generally to the farming community there will be every opportunity for the farmers to combine and form rural intermediate credit associations as contemplated by the Act, and every assistance and encouragement is being given to that end. It will thus be seen that Mr Poison’s contention that the inclusion of the additional provisions has had the effect of nullifying the cooperative system is not well based. Mr Poison argues that the new portion of the Act added by the committee not only militates against the co-operative principle, but will in itself lead to unsound financing and refers to a provision which will enable 11 stock and station firms and others to guarantee 20 per cent. ■ of the loan, and push their clients on to the board.” I think it can bo taken for granted that the commissioner and his supervisors, together with the district boards and the central board to be set up under the Act, can safely be relied on to see that any moneys advanced are advanced only on good securities, and any investors in rural credit bonds are fully protected. This assumption is certainly justified by the experience of the State Advances and other lending boards established bv the Government during the last 30 years, and is contrary to the reflection which Mr Poison gratuituously casts upon a board, the personnel of which he is m ignorance. As an alternative, Mr Poison suggests that the financing will be done on such a conservative basis as to be v valueless to the farmer. In this connection it should ho made clear that the success of the scheme will he practically dependent upon the extent to which the rural credit bonds commend themselves to investors, and for this reason it will be essential that ordinary business prudence shall be exercised in the granting of loans; but the Government can be relied on to see that such a board is appointed to administer the Act as will give the fullest consideration to the claims of farmers and will see that they gain the fullest benefit from the working of the Act consistent with the maintenance of confidence on the part of investors. It is true, as is implied by Mr Poison, that the bonds are not guaranteed by the State, but the Government has given substantial assistance to the scheme by making the sum of £400,000

available without interest for the period of 10 years and has postponed its claim to repayment of this amount in favour of investors in the bonds, who will obtain priority to the Government’s claim in this respect. In this connection it is interesting to remember that the Royal Commission recommended an amount of £250,000 instead of the £400,000 which the Government proposes to advance. Mr Poison’s reference to the evidence he tendered before the Select Committee is not understood. The practice in operation in connection with the reporting of evidence is for a transcript of the shorthand notes to be furnished to each witness, who has the fullest opportunity and right to revise such report and make any corrections or additions which he may deem necessary to make his evidence complete. It is presumed that Mr Poison had ample opportunity to revise the report of his evidence, thus following the same course ns other witnesses, and this being so, Mr Poison’s reference to inadequate reporting is inexplicable. Regarding Mr Poison’s remarks con-, ccrning the chairman of the commission (Colonel Esson), it is quite correct, as 1 stated in the House, that the amended scheme in. the Bill, with the additional alternative objected to by Mr Poison, was concurred in by Colonel Esson. The third member of the commission was not available to give his opinion, having died prior to the introduction of the Bill. In conclusion, it should he remembered that the legislation of last session is complementary to that passed in 1926, and the two enactments give comprehensive effect to the recommendations of the commission. Mr Poison’s comments reveal his own individual opinions. I disagree with him, and very definitely. The legislation has been designed in the interests of the small primary producers, and the president of the New -Zealand Farmers’ Union should immediately fall into line and help those who are striving to assist New Zealand’s staple industry. Unity will help. Dissension and captious criticism can only result in putting back the clock.