The Southland Times. PUBLISHED EVERY MORNING. “Luceo Non Uro.” MONDAY, JUNE 1, 1936. Costs, Rates and Prices

Southland Times, Issue 22904, 1 June 1936, Page 6

The Southland Times. PUBLISHED EVERY MORNING. “Luceo Non Uro.” MONDAY, JUNE 1, 1936. Costs, Rates and Prices

The effects of the new industrial legislation upon costs are being more fully realized and more widely recognized. The chairman of the Southland County Council at the annual meeting of that body last Wednesday said that the 40hour week would almost certainly mean an increase in the rates; the Town Clerk has stated that the new legislation will involve the City Council in a considerable increase in expenditure; the delegates to the Southland provincial conference of the New Zealand Farmers’ Union have passed a resolution objecting to farm labour being brought under the jurisdiction of the Arbitration Court, because of “the proposed fixation of a minimum wage and reduced working hours for dairying and perhaps eventually for other sections of the farming industry.” Very little reflection is required to appreciate the effects of recent industrial legislation on local bodies. A city council or a county council levies rates to pay for such services as roads, bridges and drainage. Ten pounds of rates is really ten pounds’ worth of these services; and the purchase price is fixed after the council has made an estimate of the cost of providing the services. Undei’ the new legislation that cost must inevitably increase. Cause and effect may not be so readily discernible in industry, but the same principle applies. Local bodies such as city and county councils are not proprietary concerns. They are not expected to pay dividends; they obtain capital by borrowing at a fixed rate of interest; they do not have to build up reserve funds. When costs increase councils cannot turn to profits and reserve funds as can proprietary concerns. The’ choice lies between reducing the programme of works and increasing the rates. But a closer analysis of the relationship between local body administration and industry shows that the dissimilarity is more apparent than real. If the payment of interest by local bodies is a legal duty, trading companies are at least morally bound to pay the equivalent of interest if profits are being made. And the right of industry to make sufficient profit to pay reasonable dividends cannot be questioned. Nor should there be disapproval of the practice of building up adequate 'reserves, which is in accordance with the principles of sound trading. To draw on reserves to meet advancing costs would be to undermine the stability of a company. There are probably some businesses in New Zealand which are making such big profits that they could afford to meet increased costs without raising the selfing price of the goods they manufacture. But they are very much the exception. Companies which have been able to pay only a small dividend or which have had to draw on reserves to keep afloat will under the new legislation either have to increase the selling price of their goods or go into liquidation. County councils and city councils can reduce their costs by restricting their output, but this a business cannot do without reducing its income from sales. The primary industries are affected along with the secondary industries. There is only one logical answer to increased costs—and that is increased selling price. The Government’s desire to protect the worker from being exploited by an unjustifiable rise in the cost of living may readily be understood and even appreciated; but Cabinet must face the fact that the cost of the “social advancement” represented by the new legislation is a charge upon the community.