EXPLANATION TO PRODUCERS

Southland Times, Issue 25670, 12 May 1945, Page 6

EXPLANATION TO PRODUCERS

Lump Sum Payments STATEMENT BY DAIRY BOARD CHAIRMAN A full explanation of the findings of the joint committee of the Meat and Dairy Boards on the lump sum payments made by the British Government to the New Zealand Government was given by the chairman of the Dairy Board (Mr W. E. Hale) at the board’s ward conference at Invercargill yesterday. Mr Hale said that after long discussions with the Economic Stabilization Commission, complete agreement had been reached on this issue.

After the reading of the record of agreement between the joint committee and the Government, Mr Hale discussed it in detail. “Why were these lump sums paid, and who do they belong to?” asked Mr Hale. “In other words, are they part of the price paid for our produce by the United Kingdom? That was the major job which the board’s Dominion conference asked us to decide.” The committee had found this to be a very involved issue, he continued, and it was only after a complete examination of all the State documents that they had satisfied themselves on ■the point. It had been necessary to divide the lump sum payments into two sections, the £12,000,000 payable before August 1, 1944, on the one hand, and the four annual payments of £4,000,000 on the other. “Definite proof was given to us that the £12,000,000 was not a payment for produce sold by us to the United Kingdom,” continued Mr Hale, “but was paid partly towards meeting general stabilization costs in New Zealand, and partly towards strengthening sterling funds. In other words, the United Kingdom Government recognized that the New Zealand Government’s policy of stabilization, through the payment of subsidies, had prevented certain costs from rising. This in turn meant that the price which the United Kingdom paid us for produce was lower than if no subsidies had been paid in New Zealand and costs had been allowed to rise freely.” BENEFIT TO UNITED KINGDOM The fact that this had directly benefited the United Kingdom had been emphasized by Sir John Anderson, Chancellor of the Exchequer, who, in a carefully worded statement in the House of Commons, made it clear that the £4,000,000 annual payments were made because of the benefit that the United Kingdom received from the New Zealand price stabilization policy. He had not been so clear on the £12,000,000, and so the joint committee took special care to examine all State documents on the latter payment. As a result,” said Mr Hale, “the committee are satisfied that it was paid for a twofold purpose —namely, partly to strengthen the sterling position (upset by the disparity in import-export price levels), and partly to meet actual general stabilization costs. “The position was much clearer about the four annual payments of £4,000,000, and in the opinion of the committee these were clearly paid towards meeting the annual costs of general stabilization in New Zealand. The committee also examined the subsidies being charged against these payments of £4,000,000 and were satisfied that, in the four year period, these general stabilization subsidies will more than equal the £4,000,000 payments. “If the committee had not been satisfied on this point we would have maintained that producers, were entitled to say that part of the lump sums was being paid for produce sold. Great concern has been expressed already in many quarters about this method of lump sum payment. We are of opinion that 'it cannot be justified under normal trade conditions. The agreement with the United Kingdom deals with a situation which is quite abnormal' and under present arrangements —where part of our costs under stabilization is carried by the State — this lump sum method of payment cannot be avoided.” AGREEMENT REACHED Discussing in detail the agreement reached, Mr Hale said that the resolution from the board’s Dominion conference, under which the joint committee had been set up, asked that the whole of the price increase on the sale of produce should be credited to the Dairy Industry Stabilization Account. This had been agreed to by the Government.

The principle on which debits could be made to the respective Industry Stabilization Account was contained in the Farmers’ Federation Stabilization Agreement, and the findingsgreached were in line with that agreement. “The joint committee made it clear to the Government,” said Mr Hale, “that any break away from stabilization in New Zealand would send costs spiralling, and could easily wipe out any credits in the industry’s stabilization account. The basis of agreement with the Government, therefore, provides that increases in costs arising before March 1, 1945, and above the level existing on December 15, 1942, can be charged to the Dairy Industry Stabilization Account, but with certain limited exceptions the Government cannot debit the industry with increased costs arising from any present action in allowing wage increases in New Zealand. “The most important point about the agreement, is that increases which occur after March 1, 1945, will be strictly limited to a few specific exceptions which were debitable. These would have been incurred if there had been no break in the plan to hold costs and prices under stabilization. In other words, the increases in wages, which are now being granted or which may be granted in the future as a result of the change in Government policy and the recent statement by the Arbitration Court, will not be carried by the Dairy Industry Stabilization Account. This is a very real protection to the industry.”