STATE LENDING.

Otago Witness, Issue 3100, 13 August 1913, Page 5

STATE LENDING.

OPPOSITION WANTS NEW LOAN.

FINANCE MINISTER DISSENTS

(Fitoii Our Own Correspondent.) WELLINGTON, August 1. A long discussion in regard to the rates of interest and the policy ot the State Guaranteed Advances Department took place sn the House this afternoon. Mr Dickie asked the Minister of Finance whether it was to be taken for granted that the Advances Department was not making any loans to pay off existing mortgages. . The Hon. Jas. Allen said lie was afraid that the department would have to for the present. It was making advances at present at the rate of £IOO,OOO a month, end he saw no prospect of an alteration m regard to mortgages until the financial conditions were easier. Mr Russell said it had been recently stated m a Taranaki paper that as high as » 10 per cent, was being' charged for second # mortgages. He urged that the Government should endeavour to use the State Department to’ steady the rate of interest. The Hon. W. H. Herrics; We are not allowed to take second mortgages. Mr Russell : I am not suggesting that the Government should take second mortgages, but I think that if necessary the Government should go on to the London market and borrow a couple of millions if needed and let it out to the farmers who are now being charged high rates of interest. It was well known that many of the largo financieis, as soon as the rates went up, calltCl in all tho money that they had at call for the purpose of obtaining tho higher rates. There were many in stances in which deserving settlers nnd experienced great difficulty in obtaining a renewal of mortgages at reasonable rales lie agreed that it was right for the Government, to lay it down as a general principle that it would not lend money to pay off mortgages, but where settlers were in danger of being turned out of house and home, it was only right that they should have the advantage of the State Lending Department. STATEMENTS DISCREDITED.

Sir Walter Buchanan said he did not understand 10 per cent, being asked by money lending companies or others, _ provided the security was satisfactory. 'J ransactions had recently come under his notice in which loans had been granted at 5j and 6 per cent, on good, but in no way exceptional security. Members ought to have good author.ty for statements in regard to high per ccatagcs, because such statements did not help to keep the rates for money down. 'PRIME MINISTER’S VIEWS.

Tlie Prime Minister said they all knew that there had been a stringency, but the urgency had been relieved to a very great extent, and money was available in different parts of the country at 5j or 6 per cent. Mr Buddo: Ou gilt-edged security on'y. The Prime Minister : Certainly the security

must bo good. lie knew of various transactions in which money in largo sums had * been borrowed at the rates he had named. Another point had been raised in regard to lending money to pay off existing mortgages. It had been laid down for several years past that the Advances Department should not lend money to pay oft existing mortgages. It has recognised that the proper thing to do was to lend money to the settlor for further improving his lane!, and that nothing was to be gained from the point of view either of the individual or of the State by raising money to pay off existing mortgages. Mr Russell: I don’t think it was a castiron rule. Mr Massey: lam given to understand by the head of the department that it was. Mr Davy: That is not correct. The Prime Minister: I think 1 had better get an official statement from the head of the department on the point. Ho referred next to a return laid on the table that day. It showed, he said, that during the period from July 1, 1912, to June 30. 1913, applications for loans under the Advances to Settlers Act numbered 3055, the amount applied for being £1,041,405. The applications granted numbered 2022, and the amount lent was £696.440. These amounts had made a considerable difference to the market. Under the Advances to Workers Act the applications for the same period totalled 1549, the amount applied for being £524.005. the applications granted numbered 1112. the amount granted being £556,340. Tbe number of workers who "had obtained not leas than £4OO was 241. This was a very creditable record, and he did not think it would have been possible for any Government to have done better under the circumstances. As to the suggestion that a special loan should he raised, he considered that it would be unwise to do so. During the last financial vear the indebtedness of the country had been increased by five and a-half millions. That was about as much of an increase as the credit of the country would stand. Between now and the end of next year, in addition to what would be required for public works and other purposes, they had to find eight or nine millions to repay the short-dated debentures. They had to face the raising of a loan of four or five millions in the very near future for the purpose of repaying some of these loans, and lie did not think it would be wise to go to London for a special loan. The progressive policy must be maintained, and would be maintained, but so long as the Government occupied the benches it would be particularly careful to maintain the credit of the country. “SCHEME 45” AGAIN.

Mr Payne, amidst laughter, spoke in support of scheme 45, which, he said, would solve a great deal of the trouble. It was time the country had its own banking institution. Mr Buxton agreed that securities on first-class mortgages required 7 or 8 per cent. The £8,500,000 mentioned was not a new debt, and would make no difference to the country. It had only to be renewed. ■WELLINGTON CITY’S BIG SHARE. Mr Pearce referred to the maladministration of the previous Governments. The Advances Board was originally designed to help the settler, but soma years after it was started ah alteration was made, and recent returns showed that the settlers had received £4,700,000 ami the workers about £2,584,000. A return for Wellington and its suburbs showed that in the city the advances to settlers totalled £137,00!?. and in the suburbs the sum was £295,000. In round figures Wellington and its suburbs absorbed three-quarters of a million out of

the seven millions issued to the whole country. If all this money had been issued to genuine settlors both the country and the city of Wellington would have benefited far more. He suggested that preference should be given to leaseholders for advances on incomes.

Mr Buddo deprecated tho town v. country cry. After all, if a farmer lived in the suburbs ho was no less worthy of a loan than if he lived in the country. The real cause of the stringency was that the Advances to Settlers Department had closed down on many applications. Mr Wilford said that in tho past the people had been taught to rely on the State for money, and tho result was that the big lending institutions went to other countries, where the rate of interest was not regulated by the State. When the Minister of Finance returned from England ho said at Auckland that he had got offers in reference to loans falling due.

Mr Alien : I never said anything of the kind.

Mr Wilford; Very well, I will withdraw; but 1 say that you were sent for that purpose, and if you have not done it and made some arrangements or negotiations that is a confession of ineptitude, Mr MacDonald denied that there had been any maladministration in the past. If tho Government ' was not prepared to advance money to settlers then it bad better stop putting the settlers away in tho back-blocks.

ALLEGED ABUSE OF THE SYSTEM. Mr Young said the Advances to Settlers Department had in some ways raised the price of money. Mr Buddo: How?

Mr Young: Here is one instance. In 1911 there was lent on a town property the sum of £2OOO at one pop. This was at the rate of £45 per foot on a 45ft frontage. An example like this was an abuse of the system. MR ALLEN IN REPLY. In reply', Mr Alien said the fact that the Opposition was crying "wolf, wolf” and “stinking fish” all the time was creating the impression throughout the country that money was dearer than it was. This was all very well for party purposes. There was more money' a\ ailable in New' Zealand to-day' than there was six months ago, partly because the Government brought more money into New Zealand, partly because trade had been good and partly’ because other money' had been available. He knew of a local authority which had gone on the money market recently and got £50,000 at 5 per oent. Speaking of the question of the means of cheapening money, Mr Allen lemarked that one remedy suggested was a State bank to roll off notes. Mr Russell: "Nonsense and tomfoolery. Mr Hindmarsh: That is tomfoolery. Mr Allen: Yes, somehow we are to roll off notes out of a machine and cure the evil. The other suggestion is that by Mr Russell himself. We should try, he says, on the London money market and borrow an extra one or two millions. I would eng" gest that the hon. member should acquire a certain sense of responsibility when he is trying to force this country on the Ixmdon market. He should recognise the serious responsibility on his shoulders. He referred to the cablegram from London regarding the New South Wales loan of one and a-half millions. Another cablegram from Sydney stated that it was originally intended that the amount of the New South Woles loan should be two millions, but that it was reduced upon the strong representations of the /underwriters in London. Within the ncxt/l8 months eight or nine millions would have to be raised to repay short-dated debentures What he had said at Auckland was that he had brought back proposals regarding these loans. The people who held them would not renew. They insisted on being repaid, and in consequence fresh loans would have to bo raised. Mr Russell: Is not the Ward loan convertible?

Mr Allen: It was convertible, but in respect of three and a-half millions a fresh lean will have to be raised. Taking into account ordinary requirements, which would amount probably to about three millions, close upon 12 millions would have to be raised in London during the year. If they succeeded in forcing the Government to raise an additional two millions for advances it would mean raising 14 millions in one year, and this could not he done. A SOURCE THAT FAILED.

Mr Allen said that during the last financial year the sum of £850,300 was advanced by the advances to settlors’ branch. This v.as done during the period of stringency, in which supplies from the post office failed absolutely. To workers during the same period the sum of £449,000 was advanced — not much less than was paid over in the preceding yrax. Mr Russell: You have a million a year coming into that department. Mr Allen: We have not anything of the kind. The return from which the hon. gentleman is quoting is utterly misleading. This is being put right in the Financial Statement this year. THE MINISTER’S PROPOSALS.

Mr Wilford: Did you not cotne back with definite proposals? Mr Alien: I came hack with definite proposals —not. final arrangements. Mr Wilford: What are they?

Mr Allen: The proposals have been made to the Cabinet, but they cannot be laid before Inc House yet. The Minister stated that the present Government was in no way responsible for the rule against lending money to pay existing mortgages It was iust definitely made on April 1. 1912, in the time of the late Administration.

An Opposition Member: Why don’t you alter it? Mr Allen: Wo don’t alter it because we believe that this money can, with the best advantage, be lent to settlors who want to get, on to the land or to improve their holdings.

Mr Russell: It was only' a temporary rule with us.

Mr Allen: You were only temporary; that is the trouble ! —(Laughter.)

Mr Russell: Don’t be nasty. LEASEHOLDERS’ “FAIR DEAL.”

Mr Allen went on to say that the leaseholders had not been neglected. The number of leasehold borrowers was 960. and the total of their loans was £426,030. as against £407,000 advanced to 1050 freeholders. They could not strengthen the department at the expense of any other department. The whole of the commitments, amounting to over £700,000, whioh the Government was faced when it took office had not yet been met. They must go on making advances to local authorities. 'The amount available for advances to workers was sufficient to meet all responsibilities up to the end of the present

financial yewK, iwl no mora, and they could not go there. There was lo other source of supply until that which had failed them became productive again. When that took place he would be very glad to raise the limit from £750 to some higher amount. Ho deprecated the attempts to make party capital out of this matter, which ho said did a great injury to the country without in any way assisting those who needed assistance.