FINANCE FOR FARMERS

Taranaki Daily News, 10 December 1934, Page 14

FINANCE FOR FARMERS

RELIEF AN URGENT NEED MORTGAGE CORPORATION PLANS. VITAL PRINCIPLES DISCUSSED. “That it is vital to the success of any plan for mortgage readjustment that it should be co-operative or State-control-led, that the rate of interest should not be higher than 3| per cent., that all Government lending institutions should be included in its scope and not merely some of them, and that it should provide for a sound system of appraisal and a stabilisation of land values.” This resolution was. unanimously passed at a largely attended meeting of members of the Urenui branch of the Farmers' Union on Friday night after hearing an address by Mr. W. J. Polson, M.P., Dominion President of the Farmers’ Union. ■ In the absence of Mr. J. F. Phillips, president of the branch, who was ill, Mr. W. J. Freeth was elected chairman and extended a welcome to the speaker. Mr. Polson said that the question of legislation with regard to farmers’ finance was vital to the farming industry. It might re-establish the farmer or it might break him, according to the manner in which it was placed on the Statute Book. He considered that in the interests •of the dairy industry the proposed mortgage . corporation enunciated by Mr. Coates was open to considerable objection, and as the matter would be before the House next February he Wanted it thoroughly discussed by farmers. Regarding the legislation that had already been passed Mr. Polson said there was a misconception in some quarters. It had been stated that the legislation placed the primary producer under the heel of the dictator. Indeed, the Auckland section of the Farmers’ Union had attacked the proposals, though three or four years ago it had advocated a similar scheme. He made it clear that the whole plan of the direction of primary exports had been forced by international happenings. HIGH EXCHANGE. There was a very strong attack in the cities and the towns in favour of the abolition of exchange, and some farmers who had given the matter considerable thought also favoured its abolition. New Zealand introduced higher exchange because all its competitors already had the advantage of exchange. It had definitely been shown, by the Meat Board in its evidence before the Tariff Commission, that the farmer benefited directly by exchange to the extent of 33 1-3 per cent, on everything he produced, and paid out only 25 per cent, more on 10 per cent, of the goods that he used which were imported. Even with the advantage of exchange the New Zealand dairy farmer could not carry on at the present prices of primary produce. Owing to the fact that New Zealand could produce more- cheaply than any other country he thought the Dominion producer would ultimately win out, but it would be some years, probably, before other countries would decide to give up uneconomic production. The New Zealand dairy farmer required immediate assistance if the industry was to succeed. The Dairy Commission made no plan for immediate relief. Indeed, if its' recommendations were carried out it would tend to make the dairy farmer a bondsman. The Mortgage Corporation proposed by Mr. Coates would need very careful consideration as it was competitive more than co-operative, and he considered that its competitive aspect would vitiate its value. He held that the Reserve Bank should have been under state control, whereas in five years; it would tie under joint stock control, as the shareholders would elect the majority of the directors. He'opposed political control, but the Reserve Bank should be under the control of a board, which should have a full-time job. A reserve bank should look after the interests of the people and handle credits and currency, and it should be used to save the primary industry. He did not favour giving the dairy industry a subsidy, as every languishing industry would then demand one. He considered the industry strong enough to stand on its own feet. His plan would be to give the industry a repayable advance to enable the farmer to receive lOd per pound butterfat (the Dairy Commission’s figure), and when the price of primary produce rose above lOd a pound butterfat the farmer could begin to pay back. 1 ®MONEY WITHOUT INTEREST. The country had already given the fruit industry a guaranteed price, so that there was nothing novel about the proposal. He, however, proposed that the money should be advanced to the farmer without interest and that, of course, raised considerable opposition. The farmer could not pay interest, and he considered the Reserve Bank should be used to provide the necessary money. That would not mean inflation. He did not think the proposal would mean an increase in butterfat production. There were two essential things. First the farmer must be given a payable price and secondly his costs must be so reduced as to make a low price payable. It had been suggested that the banks should not be interfered with, but there had not been a crisis anywhere in which the banks had not been interfered with. He held that there would be no objection in England to such assistance, as the British Government was itself providing over £9,000,000 to subsidise its own dairy farmers. The Mortgage Corporation was most important, as the present Mortgagors Relief Act, which had assisted numerous farmers, must end sooner or later, and some transition to the Mortgage Corporation must be provided. The proposed Mortgage Corporation legislation, however, he believed would fail as under the proposed constitution it would be to the interest of those in charge to help interest rates up instead of reducing them to the lowest possible level. There was therefore a danger that the farmer instead of getting the necessary relief would be tied to high finance. They must get money rates down to the actual value.

They had failed to have the Reserve ■Rank placed under State control, but he noticed that Mr. Coates now proposed that the Mortgage Corporation should have a majority of its directors appointed by the State. That was certainly an improvement, but Mr. Polson said that he was opposed to any joint stock directors being on the board. The proposed legislation did not make provision whereby the personal covenant could be eliminated. New Zealand would have to do some writing down of overseas debts before all the difficulties could be overcome. When England went off the gold standard she had practically written down some debts.

MJr. Polson doubted whether 70 per cent, on present values was sufficient inducement to entice mortgagees to drop their present mortgages and take bondsinstead. He also opposed the proposal to charge the farmer 1 per cent, more interest than it paid to the bondholder. An extra half per cent, should be ample. Moreover, the provision that the farmer should put aside 2 per cent, for a reserve fund was, he considered, an tinnecessary handicap to the farmer.

Mr. Polson said that so far the legislation had not been made public, but if he had been given the opportunity he could have shown the Government how to raise the money as was done in America. He would also have liked to have seen provision made whereby at some time in the future the second mortgagee should also be able to secure some benefit from any rise in value that occurred, but not that his opportunity should continue indefinitely. After all it would hardly be fair to base values for all time on the low values now ruling. ~ , As far as Mr. Polson could see from the information disclosed, it appeared that the proposed legislation would place such handicaps that the farmer would not get much benefit. The State already had £75,000,000 invested in mortgages on freehold security, so it was greatly interested. The State must recognise that it had to write these down considerably, so it could hardly expect a private corporation to take over mortgages at face value. The community, he thought, would insist on the State standing up to its own obligations. It was extraordinary that it was proposed to include urban as well as rural' mortgages as it must be recognised that the former would require heavier amortisation repayments and therefore would heavily load the rural mortgages.

ESSENTIAL FEATURES. Summed up a mortgage corporation was essential. It must, however, be cooperative, provide cheap money, at not more than per cent., include all Government lending departments, ana. provide a sound system of appraising with a view to stabilising land values. Not only was interest too high, concluded Mr. Polson, but the rates paid were too heavy a burden also. The Farmers’ Union had strongly advocated derating. That, however, had been opposed, and as the result of conference with the Counties’ Association it had been suggested that a £ for £ subsidy from the petrol tax should be given on all by-roads. That would reduce the rates by probably 40 per cent, and would certainly give great relief. . There was nothing more unfair than the system of hospital rating. At present the rural ratepayer was paying twice as much as did the town ratepayer and was sending fewer patients to the hospital. That was a survival of the idea that all rates should come from the land. It was now proposed that half the money required should come from tax on salaries and incomes and the balance from a tax like the present unemployment tax. That would give ratepayers considerable relief. Mr. Polson said that even if he had to take drastic action he intended to fight hard to obtain relief for the farmers in such a way that the .machinery would not tie them for all time to the wheels of high finance. Replying to Mr. Tate Mr. Polson said that any repayable advance would be a charge on the land. The resolution quoted above was then carried on the motion of Messrs. R. Weeden and J. Mooney. ~ , ' TT The chairman stated that the Urenui branch of the union had drawn attention to the heavy loss entailed on hospital boards due to motor accidents. It had suggested that with every motor vehicle sold on time-payment it should be compulsory to issue an accident insurance policy. That, however, had been defeated by interested sections. Mr. Polson was accorded an enthusiastic vote of thanks.