FIXED CHARGES

Otago Daily Times, Issue 21601, 23 March 1932, Page 8

FIXED CHARGES

SCALING DOWN OF INTEREST DIFFICULTIES OF THE POSITION (From Odr Parliamentary Reporter.) WELLINGTON, March 22. The conflicting difficulties which face the Government in dealing with the problem of fixed charges were emphasised by the Minister of Finance (Mr Dowuie Stewart) in the House this evening when he indicated that should the Government introduce a measure later in the session to reduce interest by a flat rate, safeguards would be added to ensure that the mortgagee would not be penalised, while efforts would be made to retain confidence in fixed securities.

The question had been raised, the Minister said, of the scaling down of principal as well as interest. If the burden of fixed charges proved too great it was quite obvious for the time being that the producer was the more essential clement. It was necessary to keep alive the spirit of saving and thrift and that encouragement should be given to it. The Government was between two fires in granting relief to the honest debtor wherever reasonable, and at the same time in not discouraging the investment of savings which was so important to the State, to local bodies, and to all borrowers. As far as was feasible the Government wanted to keep alive the spirit of investment saving. It was right and proper that Parliament should do so consistent with granting the relief imperative to the mortgagor and the producer. Many small investors had invested their life savings in mortgages or Government bonds and they viewed with alarm any suggestion that such investments were no longer to be regarded as gilt-edged. By limiting the time of the relief legislation it was hoped to disturb them no more than was absolutely necessary.

Many workers and others had made such investments to provide against old age and to meet family obligations. The Government had accordingly tried to frame this legislation to provide for relief only where it was absolutely necessary. He fully realised the force of the argument that interference with fixed charges would shake confidence in farm securities, but they had now reached the stage that even if there were no legislation, prices for produce were so low that rural securities offered little attraction for mortgage investment. The trouble was that the mischief appeared to have been done already and any relief granted by the court, if wisely applied, would not depreciate what attractiveness was left in such investments. The Minister added that ho was still of opinion that a flat rate cut in interest would bo apt to act very inequitably. He still had preference for the method of individual reductions in individual cases. He argued that there was a distinction between the State laying down provision for meeting difficulties ns between mortgagees and mortgagors and taking on itself a revision of its own obligations. Ho did not think the stage had been reached where the State shoiud take on itself to say it was not going to pay its debts, but developments later would determine the Government’s proposals on the question of interest.