The Pahiatua Herald. with which is incorporated THE PAHIATUA STAR. Published Mondays, Wednesdays, and Fridays. WEDNESDAY, AUGUST 1, 1894. FINANCIAL AID TO SETTLERS.

Pahiatua Herald, Volume II, Issue 803, 1 August 1894, Page 2

The Pahiatua Herald. with which is incorporated THE PAHIATUA STAR. Published Mondays, Wednesdays, and Fridays. WEDNESDAY, AUGUST 1, 1894. FINANCIAL AID TO SETTLERS.

Ix our reference* to the budget in last Friday’s issue we made it clear that we were not in sympathy with the proposals of the Government in the cheap money scheme. We shall now endeavor to show the dangers of the scheme and point out how it can be bettered by certain omissions and additions. The Colonial Treasurer proposes that authority la- given for raising in London .£1,500,000 at HA per cent, to be advanced to settlers in this colony on freehold security at 5 per cent. The sum named is to be raised by the issue of inscribed stock from time to time as the money may he required. This proposal converts the State into a moneylending institution as much as any loan company now in existence, for the scheme means that the Government borrows from A in Loudon on the security that tho whole community can offer, and lends the money so obtained to B on the security of his freehold property. The New Zealand Loan and Mercantile Agency Company, prior to ifs reconstruction, the National .Mortgage and Agent, Company of New Zealand, and he New Zealand and River Piate Land Mortgage Company have worked on somewhat similar lines. These eompani h i borrowed in London giving as security tho uncalled capital of us sharehouh rs, and the money thus raised has been loaned to settlers here and elsewhere on mortgage and as advances against produce. What has one,, the result ? One eompany has reconstructed and the other —tho New Zealand and HivPlate Land Mortgage Company—has under consideration a scheme ot re, instruction. Banking institutions follow similar lines, and lend the money obtained from depositors to trader and others at high rates of interest. The Lending Boar ’ to ho set up under the Government s6h< me v. iil i.e e.,ual to

Directorial Boards of Companies, and to the average mind this will not inspire aontideuce, the rascality and villainy of directors being history of too recent date tc, be forgotten. To make this Lending Board an i ffective

and useful body the members composing it must be placed in such a position as to be above lending themselves to jobbery and corruption. They must

be well paid for their scrviei s or the consequences may be very serious for tin colony, for it is the invariable rule that under-paid responsibility terminates in corruption. But what is to be the system of valuation ? Are we to have the incooe ■ ptoJuuny value of land or its prospective or xpiCtilttfivv value? Tho former should b 1 the only basis ot valuation, for land l;!;p

most other thing* has a value in pro portion to what it will return. The custom with pros, nt day valuers is in anotheriliroction altogether A good deal depends whether the valuation is intended as a oasis for taxation ; in that case the valuation is invariably a I >w 1 ono consistent with the rest of the) valuations. If the valuation is for! taxation purposes and tho owner of ! the land gives u hint that the valuation : will materially affect the amount lit' inti nds to borrow, the astute valuator readily finds some reason for assigning to the property a higher value as compared with that adjoining it, upon which no mortgage loan is to hi' raised. Some valuers in their reports give what is termed a 1 sale value 1 of property and its ordinary value. The difference j between tho two sums generally exceeds I 14n per cent., ami it would bo difficult j to give any definite reason for this I disparity in values, unless we presume that by “sale value" is meant tho price that would bo paid by a practical farmer, and the “ ordinary value” the price that could In obtained from a well foatlicred goose. In any scheme that may bo adopted by the Government thegn atest care will ho necessary in tho selection of valuers, who, if they I are not men of experience, probity, anil high-salaried will assuredly bleed both j lender and borrower. The work of the i valuer in tile Australasian colonies he resulted in disaster to borrower and lender. What caused the failure of so 1 many lending institutions in ; hese ! colonies, but the ridiculously high values set on property, values that could not ho maintained and that ex

oeedod tie l real value by fully AOperrent, High land values can never In, nnintaimeil in New Zealand for Hu reason that, we are at too great adistanon from the chief markets of tho world, and are obliged to compete with more favourably situated countries. Wheat atone time was the mainstay of the colony ; it Inis had to succumb to compction . ' wool keeps low for he -. m. i. ason ; ! frozen meat is gradually going hack, j and we are certain a lower price will' tale i s fat 'took net t y, ti been, the case this. The dairying in- 1 diistrv will always he subject m tie oompotitiou of not oniy other colonics,

but also foreign countries. Wi th these faots before us it would be idle to state high land values will be maintained. The Colonial Treasurer in his budget throws out a strong hint for prospective values, which is dangerous. Again to lend up to two-thirds of the value of a property is to court disaster. H ilf the value would be safe, threefif.hs would he risky, but two-thirds is quite unsafe. Those who invest trust moneys invariably stipulate for 50 per cent margin. Then why should the trust money of the people be lent at a less margin of safety ? We should not, however, object to money being b-iit up to three fifths of the value of land. The Colonial Treasurer maintains that “a margin of 1J- per cent, will more than cover ordinary exp uses, and will provide the basis of a ll assurance fund.” The necessity of providing an assurance fund umnistakeably points to the fact that under the scheme proposed loss must be expvoted, and the existence of an assurance fund will provide the valuer with another good reason for returning a high or fictitious value. We do not think State guarantee is at all necessary for the success of the scheme. I' is a well-known fact that large sums of money are lying idle in London for the reason that the owners do not know where to find an investment. If the Government set up a competent

Lending Board with capable valuators to do the work required of them, plenty of money eould be obtained for the settlers without the public credit being impressed into service. Let the Government lend up to, say threefifths of the value of approved securities, obtaining the money temporarily by the issue of Treasury Bills, and each month transmit to the AgentGeneral in London the mortgages so obtained for sale, charging say half per cent, commission and accepting if - desired the responsibility of collecting and transmitting the interest, but guaranteeing neither principal nor Fix very fact of gaga having passed the Government test will be sufficient warranty for its safety, and we have not the least doubt Investors in the Mother Country will readily snap them up. The cheap money scheme is a delicate piece of business, and it is better to approach it tentatively than to rush at it with the risk of falling. We need to take every cart and every precaution so as not to reduce these mortgages to the level of the much despised ccdulas of the Argentine Republic. We are against the Government proposal because it involves yearly accretions to the public debt, lecause it paves the way for jobbery aiul corruption, and because we believe the Stat Guarantee is not essential to the succi ss of the scheme. Au Italian proverb has it . that “ Public money is like holy water ; everybody help, hits:self to it.” The | Government cheap money schi me tends ■in this direction, and tb. rtfori we i