Mr Rule and Gentlemen,—In times of election excitement, one naturally looks for a good bunch of promises from all who venture to speak in public, whether as candidates for election, or as "free-lances " like myself. Long years ago, a gentleman commonly known as Jack Cade, promised the Working Men's Political Association of his day, that he would so arrange the Liquor Bill as to enable them to squeeze a quart of beer into a pint pot, and I should very much like to hold out hopes of being able to get an extra bushel of wheat into each of your corn sacks, when the thresher pays its next visit to your district; for I have no doubt that you would quickly avail [yourselves of the chance of getting the better of the Railway Department before and another change in the grain tariff prevented your getting the extra bushel carried over the line for nothing. But, although I cannot increase your harvest, I think I can show you how you may obtain greater profit; from the yields with which you may be favoured, and this -without any injustice to those with whom you may be in commercial alliance at present. Before going into the details connected with Mortgage Interest, I cannot, let us hope, do much harm by reminding you that there is every likelihood of

A Change of Taxation.

As your position in relation to your property may be materially altered by any fresh arrangements that may be made by the State for revenue purposes, I would respectfully urge upon you the necessity of watching the tendency of any legislation towards an increase in the taxation of your land, not, as you will understand, for the purpose of evading fair liabilities, but that you may prevent the advocates for a Land tax from shifting their share of the burdens of the country on to your shoulders.

Such a course would injure the country as much as it would impede your advancement, for inequality of taxation is as dangerous to a State as is a badly trimmed cargo to a vessel.

The Non-Existence of a Guiding Rule

for the adjustment of town and country taxes, especially in relation to railways and other great public works, has resulted in the choice of a Land-tax by the citizens, and in the advocacy of a Property-tax by the rural population of New Zealand, where

Protection

has many disciples at the present time; but I think they are mainly residents of the towns, such articles as butter, cheese, chaff, provisions, fresh fruit and potatoes being admitted into our ports free of duty, while saddlery, woolpacks and kerosene, which are chiefly used in the country districts, are liable to duty. Last year £18,500 were collected as duty for kerosene, which, outside of the towns, has not the rivalry of gas to contend against; and coal and gas pipes are allowed free entrance into the Colony. I only mention these items to draw your attention to the advisability of scrutinising very carefully the coming changes in our tariff. No doubt some of you have seen an old lady, fond of page 4 her "bawbees," buying calico or some such material. She first prods her thumbs into the stuff, as if she were going to knead dough, then she gives her hands a sudden jerk apart, as if she thought she held a "bonbon;" and, lastly, after trying to stare out of window through the calico, she gives a sniff, and says she'll call again. You can't go far wrong if you inquire with equal diligence and suspicion into the merits of the new tariff.

A few months ago Dobbin's Ford put itself to its best use by inducing travellers between Christchurch and Ashburton to enter into conversation. After an exchange of newspapers and a preliminary cough, the great riddle was asked—" What do you think of Dobbin's Ford?" Now it is—"Do you think we shall get the

Unearned Increment?"

The question is one that, as Dundreary would say, "no fellah can understand," for no two persons will give similar meanings to the expression. In its relation to farm property, it seems to imply that the wages of the farmer and his family which have been lent to the property at compound interest, are to be taken by the State because of the folly displayed in not drawing and spending the wages, like the impecunious agitators who keep up the cry of get the "unearned increment." Now, the land on which we are at present has not, I believe, been in the hands of the farming community more than eight years. As I am rather anxious to get mv share of the great "unearned," I will suppose that eight years ago a farmer, with his wife and young family, came on to these plains to break in his 500 acres of tussock land, bought at £2 per acre. He has been working as hard as the best farm hand he could get for 25s a week and "tucker," and his wife has during the whole time done her fair share of the "breaking in." The pay earned each year by the couple amounts to say £100. Their food and the barest necessities being scantily supplied from the proceeds of the sale of the crops and produce generally, every available shilling being put upon the farm in fencing, planting, and building. Of course, I am not mean enough to debit the farmer with the few toys bought for Tommy, or the doll brought home for Dora, when father returns .after selling his wheat During the eighth year two of the boys earn a good 5s a week each; and as the "old man" has just told his "old woman" that he has been offered £5 10s an acre for his compact little freehold, let us see how they come out of the farm and what "unearned increment" there is, as I want some of it In the first place let us reckon that the family get 5 per cent per annum interest for the money they put into the undertaking either as capital or wages. Having done this we find that they are entitled to a sum of £2157, and, as the price just accepted for the property amounts to £2750, the unearned increment is £293, or 11s 8½d per acre. As the rate of interest upon which the above calculation is made is much below what the farmer would have to pay as a borrower, we will make a fresh one, and will lend the farmer's capital and the wages of himself and family to the property at 7½ per cent per annum. We now find that to pay the debts due to those who lent the money, the farm should be sold for not less than £2853 2s 3d, and by altering the selling value of the farm to £5 5s per acre, we find that when sold the property has proved to be a loss to the man who broke it in to the extent of £228 2s 3d. Would the Government Collector of the unearned increment make good the loss in this case? From the above examples yon can infer that the position of the farmer who has been working on the capital of others borrowed at the last-named rate, will not be an enviable one, and the whole drift of my letters to the Times and of the suggestion made two months since at Mr Wason's meeting at Chertsey, has been to get the present

High Rates of Mortgage-Interest Reduced.

The original proposal, that the Government should assist in, and share the profit of, raising loans to lift existing mortgages, has gradually been adopted, in forms more or less original, by numerous candidates for Parliamentary honours. Mr John Holmes said, when criticising the Financial Statement, that the Government should have assisted farmers, and at Springfield, page 5 Mr C. Fraser spoke strongly in its favour. Captain Tosswill, Mr Ivess, Mr Sutter and several others have promised their support to a Bill having for its object the lowering of the prevailing rate of mortgage-interest. I must refer you to the printed letters on the subject for fuller information as to the general scope of my proposals, which are now only briefly alluded to for the purpose of stating my firm conviction that a

Strong Combination of Farmers

could raise money, on landed security, on much wore even terms than they do at present. You all know the advantages which wholesale buyers have over small dealers in ordinary commerce. To a very great extent the large borrower occupies a similar relative position to the seeker after a small loan; and as you can get coal at a cheaper rate purchasing by the ton instead of in single bags, and at separate femes, so you may expect to get the loan required for a hundred mortgages on better terms than the mortgagors could hope for as individual applicants for monetary help. By combining, the farming community may obtain the

Help of a Strong Bank.

in raising loans, gradually to take up expiring mortgages on improved agreements. If the Government would take the matter up, as they have such subjects as Railways and Government Life Assurance, it would be a grand thing for this colony, as it would mean a lowering of what is practically the farmers' rent by from 20 to 50 per cent. But I think that the only safe way in which the State can take entire control of such an arrangement is by a gradual payment of the principal on a plan to which I shall presently allude.; But, unless this plan be adopted, I now think that

Government Need not Interfere

on behalf of farmers except by assisting them to get a Bill passed so that they may be able to combine successfully to help themselves; and I certainly do not advocatate that the Government should grant small loans to farmers, except to lift mortgages, because those who have their property mortgaged will not be able to offer adequate security, while those who are fortunate enough to be free can usually get sufficient credit without requiring a loan. In my opinion, you must strike at the root of the evil, and join together in raising the money necessary to pay off the mortgagees as their claims mature.

It might possibly happen that "cheap money" would drive out some very dear capital, in which case the grief of those benefited by the change would resemble in mildness that of the middle-aged Celestial, who saw signs of his mother's "breaking-up" in the lessening vigour of her whippings.

The Government can now borrow in England at 4 per cent, and I have no doubt that, for 1 per cent more the farming community could raise all the loans needed to gradually "lift" existing mortgages if the assistance of the New Zealand loan agents could be obtained.

You will naturally enough ask what position this would cause the Government to occupy to the

Colonial Land Association,

under which name the farmers will, I hope, combine to treat with the outside world. A young and rising merchant in London was suddenly forced to ask for the assistance of his banker to a considerable extent, and he was going into the Bank to learn his fate, for there was a "crisis" at the time, when he ran against Baron Kothschild, who, being then in a good humour, said a few words to the merchant, with whom he was slightly acquainted, and, after shaking hands, passed on. The merchant was amazed and overjoyed to get the banker's reply to the effect that he might command the resources of the establishment. The manager, from his window, had seen the king of the money market shake hands with the bank's client, and it had the same effect as if the Baron had backed the merchant's bill. Now, I think that if the Government will just shake hands in a friendly way with the proposed Association, by giving reasonable assistance to a Bill in Parliament, the New Zealand farmers will be able to draw on the resources of the London money market to any extent they may reasonably page 6 require. I would therefore advise all farmers to join in forming an Association, in which all shareholders, with the sanction of a strong Directory, will be entitled to raise a sum not exceeding the value of their land as rated by the present Property tax, or the amount for which their property may be at present mortgaged. The Association should borrow upon the combined security in the possession of its members, and should be legally liable for the total amount of annual interest agreed to be paid for loans raised in England to pay off present mortgages. The Postmaster-General, the Commissioner of the Government Insurance Department, and the Public Trustee might be authorised to invest moneys with the Association, just as the Court of Chancery permits its Trust Funds to be invested in 3 per cent Consols, Indian Government 4 per cent Stocks, Canadian 4 per cent Guaranteed Loan, and a few other "safe" things. I may remark here that the better the security offered the lower will be the rate of interest demanded, and I have no doubt that the countenance of the Government to the scheme, and the due protection of the holders of Association stock, would enable farmers to divide a profit of from a half to three-quarters of a million annually, supposing £20,000,000 to be at present invested in rural mortgages, for Mr Holmes recently stated that interest up to 8, 0, or 10 per cent is frequently paid by farmers. I have heard tell of a merchant, in the habit of "accommodating" country cousins, who actually paid 15 per cent for a considerable sum of money. By the time that loan reached the farmer the rate must have risen considerably. Now the answer to this agitation is that it should be left, as at present, to

Private Enterprise.

But it will be found upon enquiry that private enterprise has, hitherto, only meant that the merchant or lawyer has been, too often an Old Man of the Sea upon the back of poor Sinbad turned farmer. Indeed, a farmer in a large way may be said, not infrequently, to carry a merchant or his chief clerk on his back; even the despised "cockatoo" is a bird not too small for crushing in the folds of the boa-constrictor, as I will show by a typical case. By hard work a certain small farmer was able to take up and partly pay for a block of land containing about 200 acres, which was mortgaged to a merchant at about £4 an acre. The farmer was forced to transact his business, under very inconvenient terms, through his mortgagee, who, when he found that his client had a small pention of land unmortgaged, tried his "little best," which was no small thing in meanness, to get the poor "cockie" well in his folds. When the interest was a little over due, and the grain was either in stook or in the stack, the merchant said he would have to charge 5½% commission for the overdue interest, but when the meek farmer objected, consented to put at the bottom of the agreement that the commission should be deducted if the debtor sold his grain to his creditor. The merchant took all the grain but the barley, with which he would have nothing to do, but when the farmer made arrangements to ship it to Melbourne through another firm, the personification of the advantages of private enterprise bounced his client into giving him an order to get half the barley, the other having been put on shipboard. Both lots were of equal quality, and sold in the same market, but, when the farmer got the account sale he found to his cost that the mortgagee's charges made him a loser to the extent of some pounds by the division of the barley, j besides the loss of one bag, which went astray. Seeing that a prolonged acquaintance with the steady-going merchant would cause the loss of both the mortgaged and the free land, the farmer by a lucky arrangement was able to effect a fresh mortgage and pay off the merchant instead of being sent off his land. When he tried to square up accounts, he found that the merchant would not entertain his claim for the refund of the 5½ per cent commission, and threatened to have the man locked up because he would not let the memo, out of his hands. I dare say some of you can estimate the amount of "side" that a big grain merchant can occasionally put on. Well, I must finish my tale which is worth the time it has page 7 occupied, as it is a fair type of many j farmers' experiences. Having obtained a lawyer's advice to take out a summons for the refund of the commission, in due course the

Farmer and the Merchant

appear in court and the latter, after trying for a short adjournment, obtains the postponement of the case for a week, when the farmer again, and at considerable expense, makes his bow before the Magistrate, who, after hearing his evidence and recording "no appearance" of the defendant, gives judgment for the amount claimed. Those who find the subject dry may take out their pocket pistols, while they give a thankful thought at the triumph of bucolic virtue over urban vice. But, unfortunately for our hero, he finds, on smilingly pre seating himself before the clerk to lift the spoil, that the merchant has just persuaded the magistrate to grant a re-hearing on the plea that he was away in the country, and could not reach the court in time to defend the case. The farmer's lawyer puts ft a question in such a way to his client as to make it appear that he did not offer the barley to the merchant, "Oh, that alters the case altogether," judgment is reversed, and the virtuous farmer returns like Cincinnatus to his plough. Now, if that farmer is correct in his statement that the lawyer who took his retainer had the merchant for a permanent client, we must unite in thinking that private enterprise does not at present sufficiently protect agricultural interests.

Sir Walter Scott is accused of having destroyed the memory of a nervous boy, in his class at school, by cutting off a particular trouper button which his opponent invariably fondled when he successfully answered any question that had mastered Master Walter. If you will kindly imagine the nervous boy to be your mortgagee, while you occupy the place of Scott, and the button represents the excessive rate of interest, you are at present paying, you may be indulgent while I perform the dry task of showing how I propose to cut the button off in a

Sketch of the Special Features

of the suggested Company.

The Colonial Land Association

Should be formed like any ordinary Company, although, as the land would represent the paid-up capital of the Company—each man's estate going into the hotch-pot for general security, the entrance fee of £1 would be all the individual capital required.

The Directors

should be elected in the usual way, and the Articles of Association should contain, besides the customary provisions, clauses for the special management of the loan arrangements of all shareholders, who should, before the time for paying off current mortgages, give a reasonable notice to the Board of Directors, whose Head Office in the Colony should be where the majority of the shareholders can get at them.

The application for or payment of a share should imply a distinct understanding that where the Articles of Association warrant it, the Board and the Shareholder bind themselves mutually to work for the best interests of the whole body, and with the chief object of reducing the cost of mortgage loans.

When the Directors have received what they deem a sufficient number of applications for mortgage loans, arrangements should be made for going into the money-market.

To reduce the first expenses that must follow the raising of the first loan the debentures should be offered at a rate of interest that will bring about £102 for every £100 bond, the 2 per cent surplus capital being used to defray loan expenses which would be thus capitalised.

Arrangements should be made to get the Association's debentures or stock quoted on the London Stock Exchange, so that capital lent on colonial mortgages would be more readily bought and sold than is the case at present. It would not lock the mortgage money up as is now the case.

In making an application for a loan in London, the total acreage and value of the mortgaged land should be distinctly stated, and each shareholder making an application for a transfer of his mortgage to the Association ought to consent to his securities being amalgamated with those of other mortgagors.

As the aim of the Association is to cheapen mortgage money to the greatest possible ex- page 8 tent, the deed transferring mortgages to the Association should contain a provision that such a course will be followed, and that the maximum interest to be paid shall not exceed (say) 6 per cent., including all charges, without the express sanction of a general meeting of shareholders.

The transfer deed should be as simple as possible, and to all intents and purposes ought to be an equitable mortgage, having all the privileges of Mortgage Transfers under the "Transfer Act."

If the Association could be brought under the Friendly Societies' Act, the stamp duties would not be very heavy.

The Association should so manage its arrangements that after payment of annual working expenses, ½ per cent, of the mortgage capital is charged in the form of interest to each mortgagor for whom the Association may act.

This ½ per cent, should go to a Sinking Fund, to be available at short notice in case of need, to assist backward shareholders who may be unable for one or two half-years to pay the interest agreed upon. Such accommodation should only be paid for by a barely remunerative interest.

In the event of a mortgagor falling irretrievably behind, the Association should have the same rights as an ordinary mortgagee, but no estate should be sold without the express sanction of a majority of the Directors. Where possible the owner of the property should have an opportunity of recovering it, where it has not left the hands of the Association.

The Sinking Fund should be kept as a distinct account, and the Association's Auditors should be at liberty to examine all books and securities in connection with it by giving twenty-four hours' notice.

In return for the advantages given by the Association all property should be held liable to pay an annual tax of not more than one penny in the pound according to Government valuation. Such a tax should only be levied after an explanation from the Board of Directors at a general meeting of shareholders, and should only be used to make up a deficiency in mortgage interest caused by the failure of any considerable body of the mortgagors, and the depreciation of the sureties obtained from them. The Sinking Fund should be exhausted before having recourse to the tax.

For the safety of the whole Association Local Boards might be elected in each county or other division by the mortgagors in such locality. The members might be cither seven or five in number, and they might meet for 1 the transaction of business on the first Saturday of each month. They might act as a local Board of Advice for the Board of Directors, and might receive applications for loans from landowners in their county.

As their district would be liable for any loss arising through the acceptance of a weak security, while on the other hand their own property would be improved in value if a good security were added to the general stock, the Local Board might be required to makes favourable or adverse recommendation to the Directors on the receipt of any application for a mortgage loan from a neighbouring land-owner.

The failure of one county to meet its interest should not fall upon other counties until the local share of the Sinking Fund, and if necessary, the locally raised tax of one penny in the pound, had been found unequal to the payment of the deficiency in that county.

The money to be advanced upon any property should in no ease exceed the Government valuation, and the Association's charge for interest should gradually be higher as the loan asked for approached the Government valuation.

Although the Board of Directors should have authority to act on their own responsibility, their neglect to carry out the recommendation of the Local Board should relieve I the particular county of special liability.

Members of Local Boards should act with, out remuneration, but any expenses to which members might be put in travelling to value a property should be paid by the applicant for a loan.

To provide for incidental expenses the Chairman of each Local Board should receive a portion (say one-half) of the Association's entrance fees.

On the requisition of members the: Chairman of the Local Board should be em- page 9 powered to call a special meeting at some suitable place in his county, and the Board of Directors should follow a similar course at the request of Chairmen of Local Boards.

Interest should be paid half-yearly as determined by the Board of Directors.

The mortgage transfer ought to give the mortgagor a right of redemption at any time, like what they call at Home a Welsh Mortgage.

Of course the "lifting" of any mortgage would relieve the property of all liability in connection with the Association.

A small fine for dilatoriness in paying the interest might be inflicted, possibly from 1/10 to ? per cent, per week.

Possession of mortgage should be deemed sufficient proof that the Association has advanced money and holds claims to any estate, to the amount named in the Transfer Deed.

No business unconnected with the mortgage or sale of land should be undertaken until the first General Annual Meeting of the Association.

The Board of Directors should use every possible effort to bring before the mortgagors the benefits of the Terminal Annuities Branch of the scheme, and should make arrangements for enabling clients to pay off their mortgage debt in a certain number of years, as may be agreed upon. Provision might be made for receiving money at any time, both in England and the Colony, for investment in this way.

Any person who may agree to pay off a mortgage in this way should not lose his right to the benefits of any back payments through inability to pay the annual sum arranged for daring any particular year, but the Board of Directors might allow the interest to be paid for him, and might if necessary debit his account with the money paid.

Any person who has paid off 25 per cent, of his mortgage debt, by the above system, should be accommodated by the Board of Directors with a second mortgage at a reasonable rate.

The principal received annually for Terminal Annuities might be used to take up fresh mortgages.

All moneys not used in defraying working expenses should go to the Sinking Fund, but money might be voted for any particular purpose before placing balance in the Sinking Fund.

For the purpose of adding to the general security in the eyes of the Home investors, the support of the Government should be sought, so that loans, required to carry out the objects alluded to, might be raised on the most favourable terms.

The Government should be asked to bring in a Bill to give effect to the suggestions made, and the Loan Agents should be empowered on behalf of the Association, to offer such a rate of interest as will, in the opinion of the Agents, obtain for the mortgagors interested, all the money required to shift their mortgage debt from the present mortgagees to the Association. The Government might be authorised by Parliament (should the Legislature approve of the scheme) to guarantee any rate of interest that would enable the Association to obtain money on the most favourable terms possible. In which case the State would be empowered to secure itself against loss by taking all the securities held by the Association in the event of the interest not being forthcoming.

All Trust Funds should be considered eligible for investment with the Association.

The Board of Directors should be authorised to make any agreement with the Government or with a corporate body for the benefit of shareholders, who should sanction or annul such arrangement at a general meeting.

A Mortgage Transfer Form should be submitted with the proposed Bill, and should be subject to alteration only with the consent of the Minister of Lands and the Board of Directors.

Notices gazetted by similar agreement might have the force of law until altered by Parliament.

Interest should be paid in London either through the Agent-General's Office or the Bank of England.

If possible, the Inscribed Stock Act should be made use of, and the Governor might be empowered to settle any disputed question arising between the Government and the Board of Directors. His decision should be final until sitting of Parliament.

page 10

For the protection of its own interests, and those of the foreign mortgagee, the Government should have power to examine the books of the Association at convenient periods.

It will be for those interested to consider the value of the suggestions I have offered for the protection of the Government, the English capitalist, and the Colonial borrower.

If farmers will form an Association to deal with the matters to which I have alluded, I feel sure that a small subscription per head will suffice to meet all incidental expenses, including the drafting of a Bill for the consideration of Parliament, and, without inconvenience to themselves, they will soon be in a position to judge of the merits of a scheme such as I have sketched. They can then learn if there is any chance of doing something even more important than lowering the present high rates of interest on mortgage, namely, get rid of the debt itself, which, I maintain can be done by substituting, for the present interest

Terminal Annuities;

Or a system of payments somewhat higher than the interest agreed upon, and continued for a definite number of years, from 10 to 25, according to the amount of principal paid off yearly, would in the long run be the cheapest policy that the farmer could adopt. You probably noticed that Sir Julius Vogel, at his Ash burton meeting, was asked if a farmer would be able to free his farm in 25 years, supposing him to be able to raise money at 5 per cent, and to pay annually the sum of £7 1s 11d. Now, although this question in several simple forms has been put at other election meetings, Sir Julius was the only politician to give a really honest and favourable reply; he considered that the subject of terminal annuities (as implied by the question) should engage the attention of farmers, more especially if the interest they were at present paying could be used to discharge the debt incurred while performing its present office; which means that it would be a grand thing for the farmer if, after paying his present rate of interest for 25 years, he could call his land entirely his own, and not, as at present, be no nearer freeing his property, when his mortgage expires, than he was when he signed the deed. A scheme which enables the borrower to pay off annually a portion of the principal every time he makes a payment of interest should have peculiar attractions for Colonial farmers, as the strong point of the system is that he is credited with the amount of principal he pays annually, and ceases to be charged interest except on the principal actually owing at the beginning! of a fresh financial year. So that each payment adds fresh inducements to the continuance and completion of a transaction, having for its object the freedom of the land from debt within a given period.

I have thought the subject of terminal annuities so important, that I have made series of rather tedious calculations, which you can verify for yourselves.

Now 5 per cent per annum is a popular rate, and one more easily worked than some others, and on the supposition that a man borrows £100 at 5 per cent, he will clear off all his liability in a time that varies according to the amount of the payments made.

At 4½ per cent, paying £7 10s per annum—20yrs.

At 4 per cent, paying £8 per annum—15½yrs.

At 4½ per cent, paying, per annum—16yrs, and 9s 8½d owing.

At 4½ per cent—paying 5 per cent first year, with ½ per cent increase annually till the debt is wiped off in 17 years, paying last year 13 per cent—he will owe less than £1 10s. for every £100 borrowed.

page 11

Now, I will try to make the advantages of the system clear to all of you. Property is mortgaged in New Zealand to the extent of £30,016,461, slightly over a half being foreign capital. If we estimate the average rate of interest at 8½ per cent per annum, which I own is high enough, we find that in 25 years, and without in any way reducing the debt, a total amount of £63,785,000 is, in round numbers, paid as interest on mortgage. But by paying off principal and interest in the same period, supposing the interest to be 5 per cent, the payments come to something like £53,248,000. I think that this will make apparent that the Terminal Annuities system, on the above basis, will give the farmer free land, besides saving the Colony about £10,537,000 in a quarter of a century, or over £421,000 each year. As you are probably aware, the above statement was contained in the Lyttelton Times of July 7, and I have not noticed any published attempt to undermine it.

Gentlemen, if I were to speak upon this subject for another hour, I could not do more than express my conviction that the remedy for present ills lies mainly in the hands of farmers themselves.

I now beg to move, Sir—"That a Committee, composed of Messrs Bruce, Parsons, Vucetich, Lambie, Rule, Strachan, and the mover, with power to add to their number, be appointed to examine into the merits of the scheme made public by Mr Newlyn, for the reduction of the rates of mortgage interest."

Seconded by Mr Parsons, and carried.

Proposed by Mr Newlyn, and seconded by Mr Mangham, junr., and earned—"That the Committee just appointed be requested to call a meeting within one month, and at such place as may be found convenient, to report progress."