HAS RURAL CREDIT SCHEME FAILED ?

Star (Christchurch), Issue 18548, 23 August 1928, Page 15

HAS RURAL CREDIT SCHEME FAILED ?

FINANCIAL DEBATE CONCLUDES IN HOUSE.

(Special to the “ Star. *’) WELLINGTON, August 22. Machinery had been provided for fanners’ finance, the Government had given the scheme a start and there had been no breakdown in the machinery. This was the assertion of the Minister uf Finance in concluding the financial debate in the House to-day. If there had been any breakdown, he added, then it must be due to some other factor.

It was significant, said Mr Stewart, that the main topics in the debate had been those of the farming interest, and this was to be expected. It was alleged by critics that the finance provided for farmers by the Government was inadequate, but was this the case? In the Advances to Settlers branch applications came to under £1,000,000, and his experience was that during the rifting process about one-third of them could not reasonably be considered. In the Rural Advances branch the Government had done all that it had been asked to do. It provided the machinery, floated a bond issue, dealt with all the loan applications to date, and there was no breakdown due to lack of funds. Mr H. E. Holland: llow much more money has been available? The Minister: We have paid out over a million sterling, and the sale of bonds irp to the present is between £600,000 and £700,000. The Minister continued that, as the Government had carried out its share of the' contract. he suggested that it was not lack of system which constituted any problem. If the bonds were not going to be popular in New Zealand, owing to the criticism raised that they were not part of the public debt, he could still sell them at any time in Australia or England, where no question of that kind would be raised. While the bonds were specifically ex eluded from the public debt, he had frankly admitted that if an emergency arose the Government would see them through. Interest and principal were paid through the Consolidated Fund, which had the right to recover from the Rural Advances branch. That was all the investor was concerned about. He would get payment from the Con solidated Fund, and knew his interest was safe. WHAT THE BANK BOUGHT. Mr Savage: Is that why the bonds were rushed ? The Minister; No. They were not rushed, though that is what we were told would be done. Before it was known whether the issue would be a success or not he made an arrangement with the BaAk of New Zealand for underwriting. The bonds were issued on February 23. They did not sell freely. and on March 27 the bank applied tor an investment m the loan in the usual form. It received bonds on the terms stated in the prospectus. viz., ■194 10e, and as it was underwriting it did not get the commission which other brokers got. If there was to be any difficulty in getting the New Zealand investor to take up these bonds he would have no difficulty in obtaining the money, though he assumed that it was the wish of the farmers, expressed when the scheme was advocated, that thev should be popularised in the Dominion, because that was the whole basis of the scheme. It was thought that farmers would buy them at a discount and use them for repayment purposes. The term fixed was Twenty years, but he was wondering whether a shorter term would make the issue more popular. He proposed this session to take steps to make it clear that the bonds were not to be treated as part of the public debt. AMPLE FUNDS FOR MORTGAGORS.

Mr Ransom: What is the amount subscribed by the public? The Minister: The bank took between £350,000 and £400,000, and the public took the rest. lie pointed out that in addition to the rural credit scheme many Government Departments were lending money freely, when security existed. The Public Trustee informed him that he had lent on mortgage last year between three and three and a half millions: but he was unable at short notice to separate country from city mortgages. Mr Forbes: He lends to local bodies, not farmers.

The Minister: Three millions lent on mortgages last year, and no mortgages are turned down where there is security. The Government Insurance Department was also lending, and there were trust companies and lawyers with ample funds. "It is not in lack of funds where the hold-up occurs,” concluded the Minister. "Whether it is a fact that the margin is too tight I do not know, but that difficulty must be a North Island difficulty, as there is no such trouble in the South Island. If the hold-up is due to the margin I do not know how you can remedy it by legislation, because the valuer will immediately undervalue to safeguard himself in the other direction-"