from Ethel Annie Ward, teacher.

from M. J. Botha, teacher.

from Rev. S. O. Los, for the consistory of the Gereformeerde Kerk, Pretoria, protesting against the recent boxing matches between Van Staden and Williams in the O.F.S., and praying that similar contests be prohibited in future.

Papers relating to grants, sales, and leases of land (Nos. 61 to 63).

These were referred to the Select Committee on Waste Lands.

Agreement for exchange of money orders between Ceylon and South Africa.

Statement of loans granted in respect of irrigation schemes, with balances outstanding at 31st December, 1911.

in moving the third reading of the South Africa Defence Bill, said that the hon. member for Victoria West (Mr. Merriman) had asked him to make some statement as to the increased cost of carrying out the provisions of the measure as the result of the alterations that had been made in it since it was read a second time. The question of cost involved in the Bill was a very difficult one. In moving the second reading he said that according to their calculations the approximate additional cost would be £320,000 per annum. The question of contribution he did not speak about, as he left it purposely open, He was aware that the estimate of £320,000 was only approximate, and that the cost in the end would be much more than that sum. But the pound contribution would have produced about £150,000 per annum, and he thought that any miscalculations would be covered by the contribution in lieu of service. However, the contribution had been taken away, but several additional burdens had been cast upon the Exchequer by amendments made in the Bill. In the first place there was the additional cost involved in paying the members of the active citizen force while they were in camp; this would amount to £50,000 or £60,000 per annum. Then provision had been made for an aviation corps and school of aviation, and that would involve some considerable additional cost. The clause said that provision should be made for an aviation school if Parliament voted the necessary money, and it would be for Parliament to decide from year to year what sum it would spend in connection with these services. Further expenditure was involved in organisation and rifle associations. He thought in the end that the full cost under this Bill would amount to a fairly large sum of money, but it was very difficult to say now what the total was going to be. Another item which might lead to considerable oost was coastal defence. As years went by the Imperial ‘Government would call upon us more and more to be financially responsible for the coastal defence of South Africa, and that might involve us in a very considerable liability in the end. He thought very likely that all these items he had mentioned would amount to £150,000. Hon. members must, therefore, be prepared in the long run, after the expiration of five or six years, when the scheme was in full working order, that the cost to the country might be, not £520,000, but more nearly approximating to half-a-million a year.

asked whether he understood that £520,000 was the net cost to which £150,000 a year had to be added, because if that were so, the total cost, with other items, would, amount to something like £680,000 a year.

said he understood the Minister to say that they must consider the question of increased cost when dealing with the Bill. They were just now dealing with it, and he thought the Minister ought to give a much closer estimate than he had done. He had taken it that the £150,000 contribution was previously allowed for. When his hon. friend told them that the cost would not be £320,000 but £450,000, and that they were losing that £150,000, his hon. friend was able to give them an estimate which he says was only nearly approximate. He did not give them a clear idea. This country had to face the necessary expenditure, whether the cost was £500,000 or £600,000 a year, but they ought to know the position and the facts before they passed the Bill. The Minister had not told them whether he had consulted the Minister of Finance, and the Hon. the Minister of Finance had not made any provision, but there were several sums, of course, that could be commandeered from.

The motion was agreed to.

The Bill was read a third time.

said before the Bill was passed they ought to have some statement from the Minister.

said that when he stated that the cost would be £520,000 he had not taken into account what would be produced by the contributions. He thought this latter amendment would cover all contingencies he mentioned, but unfortunately he would have to make Parliament provide for these contingencies and that would increase the cost.

in moving the second reading of the Land Bank Bill, said its object was to repeal certain laws which at present existed in several Provinces of the Union, and to substitute in place of these Laws one law, namely, that before the House, which would in future regulate the Land Banks throughout the Union. The first question that would be asked was: “Is such a Land Bank necessary?” (HON. MEMBERS: “Yes.”) And did people in South Africa require that such a Land Bank should be established? He had not set out upon the present occasion to argue that question, because fortunately the question as to whether Land Banks were necessary was not new to South Africa, and had already been considered and definitely settled by the four separate Parliaments of the Provinces previous to Union. At present they had in active operation three Land Banks, namely, one in the Transvaal, one in Natal, and one in the Free State, which had been established in virtue of laws already passed. There was also a Land Bank Act upon the Statute-book of the Cape Province, but for various reasons that Land Bank did not come into operation. The question was, what sort of a Land Bank should be introduced into the Union? A great number of different types of Land Banks existed throughout the world. His hon. friend the member for Port Elizabeth, in making a speech in the old Cape Parliament, said that some 1,200 books had been published upon the subject of Land Banks. He did not know if his hon. friend had read all these, or whether his estimate was correct. What he had read showed him that Land Banks had a wonderful effect in other parts of the world, not only in developing the agricultural and farming interests of those countries that had adopted them, but in enormously aiding the countries generally. When people talked about Land Banks being established for the benefit of farmers they must remember that, although farmers were mainly benefited by such institutions, yet as a matter of fact the whole country benefited by such institutions.

Hear, hear.

said he thought that provision went a long way in the direction of freeing the Board from political influences. He was anxious to see the Board, so far as it was possible, free from political considerations. The Board, as far as possible, would be an independent body; it would not be under pressure from the Government. Therefore, with the provision he had incorporated in the Bill, he thought he was entitled to say that the Board would be free from political influences.

Will members of Parliament be able to borrow?

If they comply with the law, and provided they are not related to members of the Board. Proceeding, he said hon. members would see that the position of chairman and general manager of the Board was made a very important one in the Bill. He had done that deliberately. It was quite clear that the chairman and general manager would have to devote the whole of his time to the management of the affairs of the bank. The bank would be entrusted at present with the sum of £6,000,000—no doubt in years to come, if its success justified it, the capital would be very largely increased—and the very fact of the country entrusting the Board with that large sum for the purpose of making advances to farmers and agriculturists, compelled the Government and the House also to see that adequate provision was made for the management of the funds, and therefore the Government would have to be most cautious in selecting the gentleman who was to be chairman and general manager. He would have control of the affairs of the bank and have a particular say in directing the policy of the bank. Another important matter affecting the question of the control and management of the bank, and a question which might give rise to a considerable amount of discussion, was his proposal for establishing Local Boards. Hon. members would see from the terms of the Bill that he proposed, although complete control of the bank was invested in the Central Board, that the Governor-General should be enabled to appoint Local Boards in such areas in the various Provinces of the Union as he might think fit. These Local Boards would have limited authority. They would be allowed to make advances of money up to the sum of £500, and for sums beyond that amount they would act in an advisory capacity. That practically meant that the greater proportion of the advances would be made by the local authorities, but its power was reserved to the Government. He thought it was wise at present to make provision in the Bill for the establishment of these Local Boards, and he was particularly influenced by the experience gained in the other three colonies. When these banks were first established—during the first period, the first 12 months;—he was going to say thousands of applications were made, but certainly many hundreds of applications came in.

The limit was £1,500.

Oh, is that so? Continuing, the Minister said it was not the intention of the Act to encourage large farmers to come to the bank for assistance. These should go to the ordinary banks or moneylenders of the country. Again, with regard to the question of repayment, it would be seen that only one type of loan was contemplated, and repayment would extend over a fixed period of years. During the first five years, no payments were made towards the reduction of the capital, and for that period the debtor had to pay interest at the rate of 5 per cent. After that period, then 7 per cent, was charged, 5 per cent, going towards the payment of interest, and 2 per cent, to the reduction of capital. After the first five years, however, a debtor was allowed to reduce the capital by further instalments. Another principle laid down in the Bill was with regard to advances to co-operative societies upon their joint and several liability after their articles of association had been examined and admitted. It might be said that the provisions laid down in the Bill were drastic, and that no co-operative society would take them up. The whole question, however, was one of business. If the affairs of a co-operative society were placed in proper hands, then they need have no fear, but if they allowed their affairs to be mismanaged then they must take the consequences. Provision was made in the Bill for a prescribed form of mortgage, and the four schedules contained a number of covenants which were implied covenants, and were to be incorporated in every loan made by the bank. Then provision was made for the establishment of a reserve fund. The net profits which were made would be carried to the reserve fund, and provision was made that when this reached the sum of £500,000, then the reserve fund would automatically cease. Suppose it should be found that the Land Bank paid its way, and a reduction of the rate of interest was possible, it would be in the discretion of Parliament, by a resolution of both Houses, to reduce the rate of interest from 5 to 4½ or 4 per cent., as the case might be. The provision in regard to the reserve fund was taken from the Transvaal Bank. To show how useful the provision was, he would only say that during the four and a half years that the bank had been in operation the amount carried to its reserve fund, consisting of profits actually earned, was no less than £55,000. He did not think that there were any other points that he need touch upon at the present moment. The salient features of the Bill were that the bank was to be run as a purely business concern it was mainly to assist small farmers and encourage the idea of co-operation amongst farmers; it would be controlled by a Central Board of Management, who would be complete masters of the funds of the bank and the business of the bank, and then there were very stringent provisions reserving to the Board of the bank powers by which they could enforce their rights, in some cases without having recourse to law, against defaulting debtors. He felt certain that the House would give its very best attention to the provisions of this important measure, and he felt sure that, when the Bill had emerged from committee of the whole House, it would be a measure worthy of the House and an instrument by which great prosperity would be ensured for the future of South Africa. (Cheers.)

who rose amid Opposition cheers, said that, on the whole, he was in favour of the principle underlying or supposed to underlie this Bill. (Hear, hear.) He agreed, of course, that it was only under very exceptional circumstances that Parliament or the Government should interfere with the ordinary business of the people of this country. One reason why State intervention of this kind was always unsatisfactory rested upon the principle upon which they were governed, and that was the principle of responsible government. They might get a Government or set of Ministers who brought in some scheme of business enterprise. That set of Ministers commenced their scheme and commenced to carry it out. They went out of office. Another set of Ministers, came in who were out of sympathy with the scheme, and it was dropped. They had got a curious illustration of that in this very case. Some years ago, in 1907, the Government of which he had the honour to be a member introduced an Agricultural Credit Bank Bill. The Bill was adopted by Parliament.

You had no money.

It was no question of money. It was a question of sympathy with the principle. My hon. friend has been converted since. That Act was passed by Parliament in 1907. In that year: unfortunately for the country, a political crisis took place, which displaced the Ministers who were in power, and, still more unfortunately for the country, another set of Ministers came in, and they simply dropped the Bill. There was a Credit Bank Bill in the Cape Colony, and it was never put into operation. It was not a question of money. The money could easily have been raised. The right hon. the member for Victoria West is a believer in the old doctrine of laissez faire. The principle of the Land Bank was sound, but it was only sound under exceptional circumstances that the State should interfere in what they might consider business, life He agreed that in this case there was a demand for such intervention. They found that in the Cape Colony farming enterprise was being blocked by want of capital, and that the small farmers were handicapped by having to pay exorbitant rates of interest. So there was legitimate reason for the State to interfere and to say that these people were being held back, and that, while they were being held back, the whole development of the country was being arrested, and so there was justification for the State to interfere and come to the help of those people on sound business principles. That was the basis of the Cape Act. There were some points on which he differed from the Minister, and they could deal with them in committee, but he would just touch upon some of the more important. In one respect this Bill was rather different from that of the Cape, in the limit it placed upon the objects for which advances might be made. In the Cape advances could only be made for improvements. A man could not obtain an advance purely for the sake, for instance, of paying off an existing liability. In clause 19 (c) of this Bill, however, it was stated that advances might be made for “the discharge of existing liabilities on land, or, in special circumstances, any other existing liabilities.” He thought that was unsound. Then there was a clause by which advances might be made for rural industries. “Rural industries” was a very wide term. The point was that if they really did that in this Bill they might compete with the Land Settlement Bill, and they might compete with existing loan companies. That he did not mind so much, but he thought it was rather a misfortune to have two concerns set up from which farmers could obtain loans, and it emphasised the point that he had made previously when they were dealing with the borrowing under the Land Settlement Bill.

They had no security to offer.

I do not think the Hon. the Minister has studied the question of security as it has been dealt with in other countries, Australia, for instance. Proceeding, he said that in Australia the custom had been, supposing a man had a farm worth £1,000, to value the prospective value of the improvements. If it were an irrigation work, the value of the irrigation work when completed was added to the value of the farm, and the Board would then consider how much they could advance to him on the farm, plus the value of the new work. That was not an unsound principle. He did not think that that had been embodied in this Bill. As regarded trustees’ qualifications, the Cape Act prevented any man who had been a member of Parliament within one year from becoming a trustee, and he thought it might be advisable to embody a similar provision in this Bill, because it would prevent any suspicion of a member resigning in order to get a trusteeship. As regarded the clause which stated that no advances were to be made to members of Parliament, he thought that was a valuable thing, too.

Why?

Because this Board is, after all, appointed by the Government, and the Board may be under pressure from members of Parliament. We adopted that precaution in the Cape for the reason I have mentioned, and I think it would be a good thing to adopt it here. Proceeding, he said with regard to the fees to be paid to members of the Board that there was no limit. They might be paid two guineas a day for 300 days. If they went to the office every day and simply looked in they would be entitled, under the Bill, to two guineas a day. He thought that should be amended. With regard to the Local Boards he wished to know whether they would have separate staffs. It was certain they would have to have centres and offices.

Magistrates’ offices.

proceeding, said that as regarded the fees of the members of the Local Boards he did not see why they should be less than those paid to members of the Central Board at Pretoria. The members of the Local Boards would have to give up as much time and why not give them two guineas, too? The Local Boards would have a very responsible work to perform; much time would have to be given up by the members; and they would have to handle thousands and thousands of pounds, and he thought that to give them one guinea each was a very inadequate way of dealing with them. Turning to the question of the responsibility of co-operative societies for loans, he said he did not agree that all the members of a society which applied for a loan should share the responsibility if all of them did not derive benefit from the loan. If two thirds of the members of a society asked for a loan for some purpose from which the whole of the members were not going to derive benefit, then only two-thirds should be held responsible. The effect of the Bill was that a member of a society who did not approve of a particular loan must resign from the society. That was his only remedy. If he remained then he shared in the responsibility for the loan.

He does not get rid of the liability.

He does if he resigns at once before the loan is granted. If he does not resign until after the loan has been granted he is liable. That is not quite fair. Proceeding, he said he did not see why some provision should not be inserted so as to hold responsible only those who favoured a loan. The Minister stated that the audit would be carried out by the Controller and Auditor-General, and he mentioned that that was provided for in the Audit Act. Well, that Act could hardly apply to a Bill which was not in existence at the time. A great difficulty would be experienced in fixing the valuations of properties. In the Cape they made provision that the Board should have at its disposal all such valuations as existed—Municipal and Divisional Council valuations. The latter were some guide, but there were no such valuations in the Transvaal, Free State, or Natal, and, therefore, as far as these Provinces were concerned, everything should be done to obtain all the valuations available. Then, as regarded the staff, it was appointed subject to the approval of the Minister, but he took it that it did not remain under the control of the Government. In the Cape too, preference had been given to applications for loans of less than £500, and that provision should, he thought, be adopted.

was understood to reply in the negative.

concluded by stating that when the Bill got into committee, hon. members on his side of the House would have some amendments to suggest.

said the Bill applied to the future. Clause 31 was in conflict with the provisions of a Transvaal law in the matter of cooperative societies. People had joined such societies on the understanding that they could resign their membership on three months’ notice. Now the Minister proposed that those members who had borrowed money should remain responsible Until their loans had been repaid.

I shall alter that.

Well, then, I am satisfied.

said that a Land Bank did much good for a country. After the war the people of the Transvaal were ruined, and were compelled to mortgage their properties at high interest. Many farmers only wanted to borrow small sums of money, but as money-lenders did not care for small loans, they asked a high interest. When the Land Bank was created it became possible to obtain money at low interest and on reasonable conditions, and farmers were able to pay off the mortgages and save the payment of high interest. The advance in agriculture which had been made in the Transvaal was for the most part due to the Land Bank. Not only the farmers, but the whole of the public, profited by the establishment of the Land Bank, because as a consequence of its establishment money-lenders had been compelled to reduce the rate of interest charged. When the Transvaal Bank was opened, difficulties arose which made the bank unpopular, and he feared that the same thing would occur now. It was to be hoped, however, that the future Land Bank Board would not be alarmed at a little unpopularity, and that they would not abandon business principles. In some parts of the country the value of land had increased enormously, and the Board should therefore be very prudent in lending money on such ground. The hon. member for Port Elizabeth, Central, had made some remarks on the provisions relating to loans, and thought it wrong that the bank should provide money to pay off existing debts. That was precisely the provision in the Transvaal Act which did the most good. When a man was obliged to pay a big interest on a bond, then the bank helped him materially by enabling him to pay off the bond with money obtained from the bank at a low interest. If the interest due on the bond was as low as that charged by the bank, and the loan was as large as from a private institution, then money should not be advanced to pay off the old bond. In 1906 the hon. member referred to had published a little ‘book, in which it was stated that a provision such as that to which he now objected was contained in the laws of Western Australia, South Australia, New South Wales, and Queensland. It would be wrong to delete that provision. Both the Minister and the hon. member for Port Elizabeth, Central, had pointed out that the bank should be run entirely on business principles. The speaker quite agreed. If the institution were to be a success it was necessary. The Land Bank, which needed not to make a profit, nor to provide a dividend for shareholders, ought, on the other hand, to abstain from dangerous enterprises, and special care should be taken to prevent it from becoming a failure. If it failed, the whole country would suffer. Although the Bill was well drawn up, he had a few objections, and in the first place he would have something to say about the Central Board. That Board should consist of six members in addition to the chairman, so that the two big Provinces could have two members each, and the two other Provinces one member each. The payment to members was insufficient. For a man who was compelled to live entirely in Pretoria and to devote all his time to the bank, £2 2s. per sitting was quite insufficient. Capable men would be required, men who were capable not only in matters of finance, but capable also of dealing with the value of ground in the various parts of the Union. The directors of the Transvaal Land Bank obtained £400 per year, and the members of the Central Board should receive more. He hoped the Minister would amend the Bill in that respect. He could not agree to the principle of having Local Boards. It would be desirable to have Advisory Boards in different parts of the Union who could advise the Central Board, but it would be wrong to give Local Boards the right to lend money. If that provision remained, there would to all intents and purposes be six or more Land Banks in the Union, and a lack of uniform policy would be the result. The different lines of action taken by the different Boards would only lead to difficulties. As the Minister had pointed out, the Land Bank was established on behalf of the small farmer, and that appeared clearly from the figures contained in the Land Bank’s report. From the report of the Transvaal Bank for 1910-11, it appeared that during that year 647 loans were made of £500 or less, and 125 loans of over £500. Since the establishment of the bank up to 31st March, 1911, the bank made 3.676 loans of £500 and under, and 748 loans of sums in excess of £500. In the Orange Free State there were 283 loans of £500 and under, and 224 loans of over £500. There were also 580 loans on personal security, and all those loans were below £500. The Natal figures showed the same proportions. From those figures it would appear that the proposed Local Boards would deal with at least three out of every four applications, and a uniform policy would be impossible. Ordinary banks and financial institutions had branch offices, but all business was directed from the head office, and all loans were made and approved by the head office. When the Bill reached committee he would move amendments to convert the Local Boards into Advisory Boards, so that the Central Board would be able to act on their advice. The Minister had said in support of the present provision that the Central Board would have too much work to do, but the speaker was not afraid of that. Only those Cape farmers from the northern portions of the Province would apply to the Land Bank for loans, and so far as that Province was concerned there was no fear that the Central Board would get too much work. The Minister was no doubt right in saying that the other farmers in the Cane Province would continue to apply for their loans in Cape Town. The Minister had stated that the Transvaal Bank was at first unpopular because the applicants had to wait too long for their money. That, however, was not correct. The delay was often caused because the title-deeds were not in order. Moreover, the Board would not at first lend money on undivided farms, even when they were surveyed. That grievance was afterwards removed. The public were further under the impression that if the local valuator valued the ground at £5,900, and they asked for £2,500, the Board was obliged to allow them the full amount. If the Board made its own valuation and granted £1,000, dissatisfaction was the result. That was why the bank was at first unpopular, and not because the people had to wait for their money. If a man in the Transvaal obtained a loan from the Land Bank, and sold his ground two months after the last interest payment, then the buyer, who also took over the loan, was compelled to pay interest again for a period of six months, because the Land Bank was of opinion that the transaction constituted a new loan. For a portion of the period, therefore, interest had to be paid twice, which was not fair. The object of the bank should not be to make a profit, but to lend money as cheaply as possible to the farmers. He would have an amendment in committee on that point also. The Minister ought to increase the capital of the bank. The existing banks were working with a capital of £3,000,000, which would pass to the new bank, but it was really all lent out, and much more money would be required in connection with dipping tanks and fences. The hon. member for Port Elizabeth, Central, had referred to advances to co-operative societies, and if his advice were followed there would be no co-operation. If in contracting a loan the well-to-do members could withdraw from membership, then the society would obtain no loan, which was only granted on the unlimited responsibility of the society’s members. Settlers with property could always be helped by the Land Bank, but those without property would apply in vain. Farmers with property could also apply to the Land Bank, and those who only owned movable goods could obtain help by means of the co-operative societies, whilst those who possessed nothing could get help under the Crown Lands Settlement Act. He sincerely trusted the Land Bank would be a success.

said he took it that the establishment of this Land Bank was for the purpose of encouraging, improving, and developing agriculture in South Africa. They were all anxious to see agriculture encouraged and improved in South Africa, and that seemed to him the sole reason why they should lend money to the agricultural community of the country. If that were not the sole reason, then there was no reason why they should not lend money to other industries in the country. Continuing, the hon. member pointed out that the operation of these banks tended to increase the value of land in South Africa. When comparing the transactions of the various Land Banks, he did not think that they got the full value from these banks that they had a right to expect because the money was in a great measure for the paying off of existing mortgages. Of the £2,902,000 advanced, £1,081,000 had been advanced for paying off existing liabilities upon land, the major portion being for paying off existing mortgages for the reason that they could get the loan at a cheaper rate. This money had been given to people who could easily get it from other people. When the Land Bank Bill was going through the Late Cape Parliament a committee was appointed to deal with it, and one of the gentlemen examined—Mr. Steytler—was asked whether this class of farmer could receive sufficient accommodation elsewhere. His reply was that he would have no difficulty in getting it. It had certainly been the case in South Africa during the past four or five years, that people had only been too anxious to place their money out on landed property, if they could get six per cent, upon a forty per cent, margin. This bank was simply a land mortgage bank for the purpose of lending money to borrowers who could get money upon these terms without difficulty elsewhere. Of course, his hon. friend would say that this Land Bank was established simply for the small man, but the banks had a system of cashing credits, and would take a mortgage upon a man’s property and give him a credit. Even with the small man, whose average loan would be about £450, he would not have any difficulty in borrowing from other banks. Mr. Jagger (continuing) said that, to his mind, these banks were but Landlords’ banks, for the purpose of lending money to landowners—small ones, but fairly well-to-do.

There was also a recommendation in the report in favour of co-operative societies. That was not provided for; there was no machinery for lending money on personal credit. In fact, the poor man who had no personal security got absolutely nothing out of the bank in any shape or form. (Hear, hear.) To the tenant farmer, that bank was no use. In the Bank Act of the Orange Free State, a man could get an advance of £200 upon endorsement by two landowners. He found in the report that something like £80,000 had been advanced on personal credit. That was done away with so far as that bank was concerned. Mr. Jagger returned to the subject of co-operative societies, the formation of which he strongly advocated. He wanted the poor man in this country to have a chance. The co-operative system had been extensively adopted in Europe, and there was no reason since they had got the principle of co-operation that it should not be adopted here. (Hear, hear.) Let them establish societies out of the reserve fund; from a business point of view it would be good. He supported the establishment of Local Boards, and deprecated the whole thing drifting into the hands of one Central Board. The system of inspectors would be altogether unsatisfactory. The existing banks got into close touch by the system of branches, but here they were out of touch with the people and had to trust to inspectors, who could not go round more than once or twice a year. Surely the Local Boards would be much better. There was machinery for a secretary, and that official was going to be one of the most important parts of the machinery. There was altogether too much legislation in regard to the bank, too much of the Government there and too little left to the people. The Board had not the right to elect their own chairman. He did not think that full responsibility was left to the Board. Take the Cape Bill. In that Bill the Board had certainly more power than the Board had under the present Bill. They could appoint the general manager, subject to the approval of the Government, and they could draw up regulations. The impression he had got from this Bill was, as he had said, that it was simply a branch of the Treasury.

Take the matter of repayment. A debtor was allowed to repay any amount he liked. They were going to have no repayments under the Bill, because they were going to allow only 3 per cent, on money repaid. Suppose a man had a loan of £1,000. He repaid £100. He had to pay 5 per cent, on the £1,000, and he only received 3 per cent. on the £100 repaid. It was a very sound thing, he claimed, to encourage repayments when times were good. He thought they should use every possible means, so long as no loss was being incurred by the bank, to encourage debtors to repay their debts during times of prosperity. He certainly thought that 4 per cent, at least should be allowed on repayments. One great drawback to this Bill was that the methods were altogether too cast-iron. There was no elasticity about it. There was too little left to the discretion of the Board. The loans were to be for a period of 30 years. There was to be no repayment in the first five years, but after that the loan, with the interest, was to be repaid within a period of 25 years. He thought the loans should be governed by the purpose to which they were to be applied. For example, under clause 19, loans may be obtained for the purchase of stock or plant of all kinds and of agricultural requirements generally. It should not take 30 years to repay those loans. As regarded the amount of advances, the lowest advance was £50, up to £2,000, except with the special authority of the Governor-General, when it might be £5,000. He did not find an instruction in this Bill to give a preference to the small borrower, in fact there was none. Then, as regarded fencing and dipping loans, as he understood it, the bank was going to take over the management and control of all the advances for dipping and fencing purposes. He would like to ask the Minister what rate of interest was going to be charged? He would also like to ask who was going to give a notification to the Registrar of Deeds when a loan of this kind was made, so that it was noted on the title deeds? He was sorry that the irrigation loans, especially the smaller ones, were not included under this scheme. They had taken fencing loans and dipping loans out of the hands of the Agricultural Department, but they had left power to advance money to the Lands Department. He did not see, why, if they brought the loans of one department and put them into the bank, they should not put, both in. They would have two institutions advancing money to farmers. He did not see why the creamery loans should not be brought under this bank. If all these matters were brought under the control of the bank they would have the satisfaction of knowing that, at any rate, they were under strict business control. Dealing with the last chapter, he was certain that the Government had here taken very wide and drastic power. They had power to sell up a man’s property without even sending a demand, if he were three months in arrear with his interest. That was not the worst, for, if a man died, his property was liable to be sold up. The directors of the bank had the power, if a man died, although his interest may have been paid regularly, to proceed at once to sell up his property, without having recourse to the Court. Section 36 (4) gave the bank power to transfer land, “notwithstanding that it might be hypothecated or subject to a lien or charge in favour of some other person.” The Minister seemed to ignore the fact that there were such things as tacit hypothecs. It was not fair to give the bank prior rights. The Land Bank authorities must use care and judgment like other people who went into the banking business.

If the conditions were made very severe, borrowing would be discouraged. Then the bank would have a certain amount of opposition for every country attorney would be against the bank. (Ministerial cries of “No.”) In the Cape attorneys received 2½ per cent. commission for raising loans, but borrowers would go to the Land Bank direct. Some of the conditions in the Bill would have to be modified. To sum up: the bank was too much under the control of the Treasury, and it was merely a land mortgage bank, which was going to assist men who were, very largely, in a position to assist themselves. If the bank were to be made full use of, it should do other things apart from making advances on land. The Minister should take steps to encourage co-operative banking, which would do quite as much—if not more—than a Land Bank. (Hear, hear.)

agreed with the Minister that a Land Bank should be conducted on business principles. Each Province should have its own local board. The Land Bank would make no advances for dipping tanks and fences, and the local boards could best deal with that class of work, for which local knowledge was very necessary. In the Free State the Land Bank consisted of five local persons, who were well acquainted with the country, and the result was that the bank had suffered no loss. A local board could judge over local applications much better than a central board at a distance. The bank made advances to the less well-to-do persons, so long as they possessed property. Loans were made in the Free State on promissory notes. There were 208 such loans of from £150 to £200, 103 loans of from £100 to £150, 226 loans of from £50 to £100, and 43 loans below £50. He would move in committee that money be lent to poor persons on promissory notes, and felt if that were done that the bank would serve its proper purpose Co-operative societies in Denmark and Belgium could not obtain loans without the consent of all their members, but with that guarantee the loan was obtained on the responsibility of all the members. A similar provision should be inserted in the present Bill. The Land Bank ought not to make a profit. The remuneration payable to members of the Board was too small. They wanted capable, trustworthy persons on the Board, who should be better paid.

said that, while congratulating the Minister on his very lucid exposition of the principles of the measure, he must congratulate the hon. member for Cape Town (Mr. Jagger) on his masterly analysis of the defects of the Bill. (Hear, hear.) The Minister had devised nearly every possible check against misappropriation. He (Mr. Orr) was glad that the Minister of Finance had introduced the principle of Local Boards, but he would like to know the reasons that prompted the Minister to depart from the principle of leaving the three existing banks alone, and establishing a fourth bank in the Cape. With regard to the question of the appointment of officers, unless they had some explanation upon this point, he would be inclined to say that these appointments should be left as far as possible to the Public Service Board. He would like to draw a comparison between the method of repayment pursued in the Irrigation Bill and in the present measure. One would like also to have some explanation why it was thought fit to charge four per cent, interest in one case and five per cent, m the other. Having paid the interest there was provision made for the repayment of the principal, but the method in this particular Bill was to allow sums to accumulate. The principle-adopted in the Irrigation Bill was entirely different from this. In the Irrigation Bill provision was made for the immediate repayment of the principal, and he thought that was much the better system.

said mention had been made of this centralising of the organisation at Pretoria, and he thought that Local Boards should be established for the proper carrying out of the Act. It was very difficult to carry out the principles of a Bill of this kind by a central organisation, and it would be very much better if they delegated the work to Local Boards. He could not quite agree with his hon. friend the member for Cape Town, Central, when he suggested that advances might be made on personal security. They would be going upon very dangerous ground when they wanted to do that. In the Bill, there was a clause stating that loans would not be granted upon town erven, but he would ask the Minister to take into consideration the possibility of making advances upon water erven. The principle of granting loans upon 60 per cent. value he quite agreed with, but he could not understand why a man who purchased ground and came to the State to assist him, should be granted a loan up to 80 per cent., when a man who actually had the ground should only be granted a loan up to 60 per cent. Evidently the Minister of Lands was more generous than the Minister of Finance. He regretted, however, that the principle of 80 per cent, was adopted in the other Bill. He had also a little objection to the special section in clause 24, in connection with interest payable in advance. They knew it had been very largely the custom in the country, but it was a custom that should not be perpetuated by the State. If they took a half-year’s interest at once, they were not lending a man the full amount, and he did not think the State ought to put its imprimatur upon a matter of this kind.

He remarked further that the hon. Minister had said this bank should be run strictly on business lines. He agreed, but it was not running an institution on business lines to grant opportunities and privileges that no other business in the country obtained. It ceased to be businesslike when its officers were allowed to do things that officers of other banks could not do. For instance, conveyancing might be done by any clerk appointed to do it. That was not sound. Conveyancers had to study for their examinations, and were required to get a licence; and to allow a system of amateur conveyancing was to get work done which no other institution could get done in the same way, while it was hard for the professional conveyancers to have work, which they had qualified to perform, taken away from them. He was discussing the exemption from taxation in stamps or transfer duties when it was pointed out that he must stick to principles, and he resumed his seat.

congratulated the hon. Minister on the Bill that was being dealt with, which he thought was a step in the right direction and one which had long been felt in the Cape Provinces. As to the constitution of the Central Board, he agreed with the hon. member for Rustenburg that the number should be increased to six. The hon. member for Port Elizabeth had touched upon the Bill which was introduced to the Cape Parliament. He (Mr. Becker) could quite understand Why that Bill was dropped; it would never have been acceptable to the farmers of this country.

There was the question of the repayment of loans, and, as was very probable, every encouragement ought to be given in that respect. In this country there were times when farmers were prosperous and everything was going well. During these periods if they were allowed to repay their loans they would do so. Otherwise they would spend their money, and in times of want would suffer. If they could be paid interest at the same rate they would have to pay, or, if that was not possible, then at least at the rate of four per cent.

With regard to the question of one Central Board, as compared with a Central Board and a number of Local Boards, he thought if they were going to have these Local Boards for the purpose of making advances there would be no similarity. He suggested the appointment of Advisory Boards and hoped the principle of Local Boards would be departed from.

The matter was going to be an expensive one. If they were going to have Local Boards the secretary, upon whom the responsibility would devolve, would have to be an experienced man and they would have to pay for his experience. The expenditure would be very much higher than it was today, but if they were going to have small Advisory Boards it would cost the country much less than it otherwise would.

Regarding the tendency of the Government to trespass on the ’ rights of professional men, he had an amendment to make. He did not go so far as to say that the Government should appoint conveyancing outside for the service of the bank, but the least they could do was to see that the men who were to do their conveyancing inside the bank should be duly qualified men. If the Government would accept that, he did not think anybody would have any fault to find.

said he must congratulate the Ministry upon extending their Socialistic ideas to the whole Union. He would like to call the attention of the House to the importance of the credit of the State being more and more devoted to improving the condition of the population, improving their possibilities of developing the country, and not leaving it altogether dependent upon private accumulations of capital. From that point of view they entirely approved of this measure, although he must point out to the House that it was, of all pieces of legislation that had come before that House, a piece of class legislation, pure and simple. They were not quarrelling with that. He wanted to put one or two points before the House in regard to this Bill. In the first place, he did not quite understand upon what principle erven and town property were being excluded from being security. Then, as the hon. member for Cape Town, Central, had said, he thought more liberal provision should be made for co-operative societies. He should like to see the Minister take some tentative steps towards extending the scope of this Bill in regard to small mineral ventures. He failed to see why, if such credit were to be used for the purpose of helping the man who owned land, the State credit should not be used for the accommodation of small men who were helping to, develop the country by developing its mineral resources. Then, with regard to the provision for the Board, he understood from the Minister, in the course of his speech, that the members of the Board would have to give practically the whole of their time to the business of the Board. For that he made the munificent provision of two guineas a day for every day on which they were engaged on such business. He wanted to point out to hon. members that, for a matter of £400 or £500 a year, they were not going in this country to get first-rate financial men. He would also like to join the hon. member for Cape Town, Central, and the hon. member for Maritzburg, North, in asking the Minister to explain more fully than he had done what was the need for consolidating into one institution these various provincial banks. It seemed, to him, in a business of this kind, where the bank should be in fairly close touch with its-customers, that it was very doubtful indeed whether the consolidation of these banks into one bank would lead to better administration than if they had local banks. He would suggest to the Minister that he might make provision in this Bill for the purpose very tentatively of extending the scope of this policy beyond merely ministering to the wants of landowners. He thought at all events the Minister might take power to experiment in that direction.

said he did not rise so much with the idea of criticising this Bill as to ask the Minister if he would be good enough to give them a memorandum in regard to the clauses of this Bill and the clauses of the different measures under which Land Banks were now in operation in the Provinces. That would be of very great assistance in going through the committee stage on this Bill. As the hon. member for Port Elizabeth, Central, had rightly observed, he (Mr. Merriman) was an old-fashioned man, and he viewed with some apprehension the Government entering into the business of money-lending (hear, hear)—but he acknowledged that this Bill was a perfectly sound thing. But how long was it going to remain a safe Bill? They were introducing little holes to let the water out of the dam, and by and bye they would have a big flood. It was a dangerous principle. What was wanted in this Country was a Land Bank to lend email or reasonable sums on reasonable security to poor people who could not get them elsewhere. This Bill proposed to lend money on undeniable security to people who could borrow money elsewhere, who conducted their business elsewhere, and upon large sums. Whether that was good business for a Government to enter into he would not say, but the larger the man the more voting power he had, and they might raise up a body of people in this country, gentlemen who made bargains with the Government, and who would come to the Government to let them off those bargains or reduce them. They had just had a sample in the speech of his hon. friend the member for Jeppe, for he gravely proposed that the Government should advance money to prospectors to go about on mineral ventures.

“No.”

The next would be a large company, then the Stock Exchange and motor cars, and all the rest of it. He regretted that the Minister of Finance, when he applied his genius to this question, did not apply it rather to the formation of cooperative banks, to help small men. There was one way in which they could kill self help and that was by Government assistance. It was what his hon. friend (Mr. Creswell) had a cant phrase for—Socialism. It was not real Socialism. But it destroyed enterprise. To teach a man to borrow money from the Government was to teach him a bad lesson. What they wanted more than anything else in this country was work. When they came to the clauses he would point out that they could borrow money on the same terms from an institution, and with the advantage of being able to pay off whatever money they wanted.

Business was suspended at 6 p.m.

proceeding, said that when the hands of the clock cut short his remarks he had only a few more to make. He was just going to point out that he agreed with the hon. member for Cape Town (Mr. Jagger) that the Local Boards should not have the power of granting loans. An institution with which he (Mr. Merriman) was connected had Local Boards whose duty it was to receive applications for loans and to make recommendations to the Central Board, which had the power of declining to act on the recommendations of the Local Boards. He thought something of that sort would have to be adapted with regard to this institution if it were going to be carried out. If the credit of the Government were going to be pledged there should be a Central Board in close connection with the financial authorities of the Government to be the directing body of the whole thing. (Hear, hear.) The proposed institution was not really a bank. One way in which it would not carry out the valuable work of the banks was the granting of open credits. Great advantage from the system of local agricultural credit had been derived in Scotland, which had largely been built up by the system of open credits. The evil of the system proposed in the Bill—the granting of large loans—was that a man might raise £2,000, which, perhaps, was more than he wanted. Thus there always was the temptation for the man to spend the money on something else—say, on the purchase of a cart and pair of horses or a piano for, his wife. The open credit was of quite a different character, but they could not possibly start a Government bank on that system. He believed the existing banks were directing their attention to the giving of these open credits, which were of very great advantage, and whenever any of his friends asked him about getting loans he always recommended them to obtain these open credits, for then they borrow no more money than they actually wanted for a special purpose, and paid interest only on the money, they used. The bank proposed in the Bill did not really carry out what was wanted, for a poor man who had not a farm which he could pledge, although he might be an industrious man desiring only a small loan, would not be able to obtain money from the bank. The two things were entirely different, one being a mortgage institution and the other being in the nature of a co-operative bank, institutions which had done a great deal of good in Europe. The latter were built up by the people themselves.

The greatest system of Land Banks was the Raffheisen system, commenced about 80 years ago by a Prussian official, who, seeing how the peasantry were ground down by usurers, managed to get together what would seem to South Africans to be the ridiculous sum of £16—not £1,600 or £16,000—on the basis of mutual liability. The idea caught on, and last year these banks turned over two hundred millions sterling under that system in Germany. (Hear, hear.) This was a totally different thing from the one proposed in the Bill. The former not only gave the people the money they required, but also taught them to look after their own affairs, while every man was interested in the affairs of his neighbours, and was concerned in seeing that the borrowed money was spent for the purpose for which it was obtained. Say a man borrowed £10 with which to buy a cow, his neighbours saw that he bought the right sort of cow, and did not use the money to pay his bill at the village store. He did not think that the Minister of Finance would ladle out money for every wild-oat scheme, but Treasurers came and Treasurers went. They had heard from the hon. member for Port Elizabeth (Sir E. H. Walton) what a fearful calamity befel the Cape of Good Hope when it changed Treasurers. (Laughter.) That might happen again—who could tell? He was not quite so enthusiastic about this scheme as some of his friends were, but at the same time he would own that it was the wish of the public, and after all an old-fashioned person like himself could only try to improve the Bill, although one might not agree with the exact principle of the measure.

said he thought the word “bank” was entirely a misnomer, and that a better name could easily have been found, in view of the fact that institutions existed in different parts of the world under different names. In New Zealand, as far as he understood, it was simply a State department and not a bank at all. All the agricultural schemes, such as land banks, irrigation, and land settlement, should be put under one board instead of several, and so save expense. (Hear, hear.) There ought to be branches of the bank all over the country, but if that was impossible then they certainly ought to have advisory boards. He remembered very well when this system of land banks was introduced into the Transvaal there was a very great outcry against the manner in which large sums of money found their way into the hands of very wealthy people who could easily have raised them from other institutions. In clause 8 the provision was made that an officer of the bank might perform the function of a notary public or conveyancer. He thought that a wrong principle. No clerk in the bank should be allowed to take up these duties without being duly qualified. When he tabled an amendment to the Bill to the effect that only qualified persons should peform these functions he hoped he would have the support of the Minister. Then again, on clause 17—

The debate is upon the second reading of The Bill. I must ask the hon. member to confine himself to that.

said he understood that he could and should suggest and outline certain amendments he intended to move.

said that after the second reading of the Bill the hon. member could give notice of his amendments, and they would be put upon the paper.

continuing, said the Minister expounded several clauses, and it was his endeavour to expound his views as to how the Bill could be improved upon—

said only the principle of the Bill could be debated on the second reading. The clauses would be taken afterwards.

continuing, said a new principle was introduced in this Bill dealing with the law of evidence. That principle was that the minutes of the proceedings of the Central Board, when confirmed, was evidence, without further proof in legal proceedings, and thus it bound a person who was not a party to the proceedings. That was a wrong principle, and he hoped the Minister would consider that matter. The next point he would like to deal with was that sums of not less than £50 should be advanced to persons except in special cases. He did not know what special cases the Bill was intended to meet, but he thought they ought to be set out. It was an anomaly also to find such a provision in the Bill that the Minister could override the decisions of the Cabinet, whereby, though the Governor General-in-Council has decided to limit an advance to £5,000, the Minister may nevertheless authorise a larger loan. He found likewise a wrong principle—(Ministerial laughter and cries of “Another wrong principle”)—in regard to the advances to co-operative societies. It was a false basis of dealing with the monetary affairs of the country. They had been told that the advance was to be made upon 60 per cent, of the value of the property, that he submitted was too high, and again they found that the Government were empowered to levy execution without recourse to the usual channels. Surely a margin of 40 per cent, was enough to provide for the costs of execution, and the Government should get no better rights than those accorded to private individuals. “Paratie” execution was a very drastic remedy, which might result in great injustice to innocent persons. He further advocated that the General Manager should furnish an annual report to Parliament direct.

said he thought the Government deserved credit for introducing a measure which was so much in accordance with the wishes of the people. As to the allegation that this was an attempt to do business which the banks were doing, he did not know of any bank in South Africa, certainly there were none in Natal, which would be prepared to make an advance for 30 years at a low and stable rate of interest. The right hon. member for Victoria West had said that measures of this kind were apt to kill that spirit of self-help which should inspire the farming community. It did not appear to him (Mr. Clayton) that this Bill would have any such effect whatever. He wished to join issue with those who took up the attitude that the Local Boards should be merely Advisory Boards. He took exactly the opposite view. He considered it to be a great pity that the Minister had introduced a provision into this Bill whereby the powers of the Boards were limited in respect of a sum of £500. He hoped the Minister would see his way to extend their powers up to a sum of £500. He agreed that there should be a Central Board, to whom all applications for large sums of money should be referred, such as the applications from co-operative societies, but where it was simply a small loan and it was merely a question of security, the power should be left in the hands of the local Boards. Then in regard to the constitution of the Boards, they had one Board appointed in order, as the Minister said, that they might have some continuity of policy, but when they came to Local Boards, that continuity of policy disappeared altogether, for the members were only appointed for two years. More than that, he thought it was a mistake that so short a period should be set for the sitting of members on Local Boards. In reference to the administration, he considered that it was a mistake that applications had to be sent to the local magistrates for investigation. They had magistrates in this country who were certainly not qualified to value land in their districts, and he thought the best principle to go on was that the Land Bank should have its own valuators. He was of opinion also that there should be some provision m the Bill whereby not only the owner of the land but also the man who had it on leasehold should, under certain circumstances, be permitted to obtain money from this fund.

In Natal they had applications from men who had no Teal security to offer. They were sugar growers who held leases of Grown lands from the Government, and no loans could be given to them. Eventually, an amending measure was passed to make provision to meet them, which worked excellently. It provided that the Board could take into consideration permanent improvements and the recurring crops as security, and if they were satisfactory, then a loan was granted for four years, repayable in four instalments He hoped the Minister would make provision in this Bill to meet similar cases, because the men concerned were energetic, hard-working men.

I must point out that the House is now engaged on the second reading of the Bill, and that is a detail which can be discussed at a later stage.

said that the point he was dealing with was not in the Bill, and it would not come forward again. Another, thing he wanted to put into the Bill when it went into committee was the point that no advances were possible under this Bill for the purchase of Crown lands upon instalments. He hoped the Minister would be able to put in some clause that would provide for that. Also he thought there should be some uniform date for the repayment of loans, so as to avoid inconvenience.

said he wished to touch on the question of co-operative societies being granted loans under this Bill. He would like to know how the principle had worked in the Transvaal, where it had been in operation for some time. Under the Bill the Board can give an advance to a co-operative society of a sum up to £10,000 with the sanction of the Minister; and he found that the advances could be made for any one or more of the objects of the societies. In the Auditor-General’s report for March, 1911, he found there was no less than £142,000) given to these societies, and of them six had amounts of over £10,000, and two of them £20,000 each. Regarding the working of these societies, the Auditor General said he had some doubt as to their being worked. On proper lines, and the securities were found to be of an unsatisfactory nature in a large proportion of the cases. He thought it would be necessary to have very able and careful men to attend to that part of the bank’s business, otherwise they would have some of these societies going into liquidation and the Government would lose its money. He wished to draw attention to the fact that the Government and the Land Banks made themselves responsible for contracts entered into by these societies. He thought that was a risky business, and strongly deprecated anything of the sort. It seemed to him that the Bill ought to be amended to the extent that it should provide for giving advances to tea-growers and sugar growers in Natal, who were excluded at present. But the great point was that the Government, in this Bill, and generally, seemed to go in, more and more, for Socialistic legislation, on which the Government was so strong. He was afraid that before long the men in the employ of the Government would be running the country, instead of Parliament.

said he was going to support the second reading of this Bill, not because he believed it was going to do much good, but because he believed it was not going to do much harm. (Laughter.) He was rather disappointed in it, because he had thought it was going to help the small man, but it struck him that it was not going to do anything of the kind. He had thought it was going to help the farmer in the way of advances for short periods; but when he looked into the matter he found it was not going to do anything of the kind. It was going to help the man who could help himself. (Hear, hear.) That was really the size of the matter. They had heard that afternoon, and it was a fact, that the farmer in the Cape had practically two periods in the year when he got his money, and in the meantime he very often wanted an advance; and it was a fact that the outside sources from which he obtained it charged him anything from 15 to 20 per cent. interest. That had been his experience in many parts of the Gape. It was thought that this Bill would help them in that respect. He knew it would be said that they must have co-operative societies, and an hon. gentleman had something to say about the Raffheisen system in Germany. The people of the Cape had bitter experience of unlimited liability societies, and the Raffheisen system would not work in South Africa, where farmers were too far apart to be responsible for one another, so that co-operative loan societies would not be easily brought into existence. One of the reasons that justified the creation of a Land Bank was that it increased agricultural production. How many men could say that they had land upon which there was a clear bill? If they excluded the large number of men who had bought land from the Government under Act 15 of 1887, by which they mortgaged four fifths of the capital of the land, they were excluding practically all the men under the perpetual quitrent system. Whom had they got left? The only men whom they could assist were those who were perfectly able to help themselves. He hoped that in that Bill provision would have been made for the open credit system, and such provision could have been made. That Bill was going to wake up the loan investment companies, who were already advancing money, and they would advance money at 5 per cent, instead of 6 per cent. He could understand that Land Banks worked in the Transvaal and the Orange Tree State after the war, because money was scarce then. The demand for money had always been greater than the supply, and that was why the rates were 6 per cent. The result, he thought, would be that the man who ought to have benefited by that Bill would get his money from other sources at the same rates of interest. If a co-operative society was to borrow from the Government at 5 per cent., and running their institution would add another 1 per cent., they would charge the people 6 per cent. He did not see how the Bill was going to help them very much. It was a very safe Bill, and one could support it, because one knew it would not do any harm. He wished to endorse what had been said by other hon. members—he saw great danger in the Local Boards. He thought that there should be Local Advisory Boards, but to go and have Local Boards advancing money was the surest step towards making that matter a failure.

said that in the Bill every precaution was taken to ensure against loss, and one could almost say that the tendency was towards too much caution. It had been his experience, extending over a fair number of years, that the man who could not provide 1 per cent. clear margin need not go to the Land Bank, and could get assistance elsewhere. Unless the amount could be increased, he was afraid that in the Cape Province very little use would be made of the Land Bank. In the Western Province, he made bold to say, there would be very few applications, because land was very expensive, and £2,000 was a very small amount to pay. He hoped that the Treasury would see the advisability of having a good many Boards over the Union, because they had different conditions prevailing even in the Cape Province, and a Board sitting in Cape Town would not have a correct idea of the value of land in Namaqualand, Bechuanaland, or Griqualand West. He hoped that official valuators would be appointed, because the Divisional Council valuations in the Cape were so thoroughly unreliable, owing to the way their valuators were appointed—by tendering. He was sure that public opinion would gladly avail itself of these official valuators, and that their cost would be defrayed, they needed some guide like these in regard to the Land Settlement Bill, as well as the Irrigation Bill, besides the present Bill.

in replying to the debate, said that he would not reply to all the criticisms, as they could more profitably be dealt with when the House was in committee. He was glad that there had been no opposition to the principle of the Bill, except that of one learned hon. member opposite. (Laughter.) There was only one point he wanted to touch upon—the question put to him by several speakers opposite why he had brought that Bill up. The suggestion had been made that instead of passing one comprehensive Bill for the Union he should have left the three Land Banks as they were in three of the Provinces, and continued the Land Bank Act as it was in the Cape Province. He thought that hon. members who had spoken like that on that side could not have been acquainted with the details of the four existing measures, because they would have seen that now that they had Union it was quite impossible to carry on these four separate concerns. The working conditions of the banks in the four Provinces were so different that it would have been impossible to carry them out without a great deal of difficulty. For instance, he would have had to bring in a Bill to provide the Cape Land Bank with money, because the provisions of the existing law were no longer put into operation. Under the Cape Act the money for that bank could only be found from the Savings Bank, and the Pensions and Guardians’ Funds, and all these funds had been placed in the hands of the Public Debt Commissioners. Again, in the case of Natal, the funds, which were limited to £500,000, had all been invested. They could only be obtained from the Natal Sinking Fund Commissioners, who had ceased to exist. It would have led to an enormous amount of friction every year when the Minister of Finance asked the House to allocate money for each of these banks. Then each bank had an entirely different system of securities. In the Transvaal Province money could be advanced on first mortgage and to co-operative societies. There was no such provision in the Free State or Natal. In the latter, money might be advanced on leaseholds and standing crops. Would it have been right for Natal to make such advances when they could not be made in the other Provinces? To bring about uniformity he would have had to repeal these provisions of the Natal law or to extend them to the other three Provinces. Again, take the powers of the different Boards. He would have had to bring in four Bills in regard to this matter. That would have been a very stupid idea. The Free State Board consisted of the Treasurer—that was himself (Mr. Hull)—and four members, so that he would have had to go to Bloemfontein whenever there was a meeting of the Board. Then there was the question of interest. The hon. member tor Cape Town (Mr. Jagger) was always keen on getting uniformity where the Cape was concerned. The Cape would have had to pay 4 per cent, and the Transvaal 3½ per cent. That was the sort of thing that would have made the continuance of four separate banks entirely impossible. As to the point raised by the hon. member for Maritzburg (Mr. Orr), the hon. member had not noticed that the 3 per cent. interest was compound interest, and before he (Mr. Hull) could agree to modify it he must further consider the matter, and between now and the date of the committee stage he would have an opportunity of going into it.

The motion was agreed to.

The Bill was read a second time and set down for committee stage on Monday next.

moved, as an amendment, to add to sub clause (c) of paragraph 1 of the motion, the following: “Provided that (a) if the warrants for such share capital debentures or debenture stock are issued to bearer upon which any interest dividend or bonus is paid, or (b) if such share capital debentures or debenture stock are registered in the name of a company or body incorporated or registered outside the Union, then in lieu of the said fixed duty a special compensation duty of one-quarter per centum per annum in respect of the value aforesaid.” He said he was told that this amendment was not good finance, nor was it sound policy, nor was it even good grammar. (Laughter.) Under sub-section (c), provision was made for the case where a person died abroad and was possessed of shares in any company registered or carrying on business within the Union. In such case, provision was made that a fixed duty of 5 per cent. of the value of the share capital shall be imposed.

The value or the market value?

Yes, I should say the market value of the shares. Continuing, the Minister said when the House last proceeded with this question some difficulties were raised, and it was pointed out that a person might die abroad possessing shares in South Africa, and in order to escape these duties, such a person might form a company for the purpose of holding his shares. On his death the company did not die, with the result that the duty of 5 per cent, was evaded This, therefore, was a case that should be provided for, and section (b) endeavoured to provide for such contingencies. Then there was another case, which was not an evasion, but a case in which it would be impossible to collect this fixed duty of 5 per cent. from the estates of shareholders who died abroad, and that was the case of a person who held bearer shares. The question was: how were they to provide for this contingency? In the case of a person who died abroad and whose shares were registered in the country, but who had formed a company for holding these shares, or who had handed them over to a bank, the position was fairly simple. It was possible to get at these shares before they were transferred from the company that registered them in South Africa. According to the articles of association a company held a lien on these shares, and could realise them for the purpose of discharging any liability upon them. They would not be compelled therefore to get at the person abroad to collect this duty, the duty would be collectable instead from the parent company. The liability it would be seen would rest entirely upon the company here. A much more difficult case was the case of bearer shares held by anybody, and where the parent company did not know who held them. The question arose, what was to be done in such cases to collect the duty? In the case of these bearer shares it would only be possible to collect the amount if there was any interest payable. If the person abroad held shares in South Africa, then the Government could recover the duty provided there was any interest due or payable. The question remained, what was to be the duty imposed in respect of shares which had been converted into a company abroad or bearer shares? Hon. members would see from his amendment that ¼ per cent, was imposed as an annual tax.

On the value?

One-quarter per cent. on the market value of the stock is imposed. That is imposed here in lieu of the 5 per cent. fixed duty. Proceeding, he said the question arose whether this ¼ per cent, was a fair amount, in view of the 5 per cent. payable under the taxation proposals he had referred to. Of course, that was really an actuarial question—as to what was the natural life of a person from an actuarial point of view. He was told that, from an actuarial point of view, the life of an investor was 20 years. That being so, the 5 per cent, fixed duty imposed in the original motion naturally became ¼ per cent. on the annual value. He was told that the amendment was a harsh provision, but really it was not harsh. He thought rather its absence would be an injustice. He admitted that the amendment was novel in legislation, but new means were being invented from age io age to curb the ingenuity of these people. He defied ingenuity to devise any provision better than this amendment to prevent evasion of this duty.

seconded the amendment.

said that the amendment might be very ingenious, but he did not think it would be so successful as the Minister seemed to think. He would like to deal with the companies trading in South Africa. There were two classes of companies trading here. There were limited companies with directors here. These the Treasury would be able to get at easily enough. Take the case of the National Bank, whose shares were bearer shares. This tax upon the National Bank, taking the shares on the face value, £10 per share, meant that they would have to pay an income tax of 5 per cent. The proportion was higher the smaller the dividend. Then take companies trading in South Africa whose headquarters were in London. They could not get at these people, even with the present proposal. How could they compel them, when they paid the dividend, to keep back one-quarter per cent. of the value? He wanted to point out what, in his opinion, was going to be the effect of this tax, speaking generally. He held very strongly that it was a tax to retard the growth and importation of capital in South Africa. (Hear, hear.) Personally, he should very much prefer an income tax being levied.

In Great Britain the Estate Duties were having the effect of retarding capital. Under this duty, when a man died, the State stepped in automatically and became a creditor. Take the example of a man who died and left an estate of £12,000. Under this Bill his estate paid 4½ per cent., or £540, which must be paid out before the division is made.

Not necessarily.

Centainly. It must be paid out first. When the executor files the account with the Master he must show that he had paid the duty. Proceeding, the hon. gentleman said that £11,460 would then be left, and supposing that had to be divided between five children, each of them would receive £2,292 and would have to contribute £90 to the State. Then, suppose one of the children died shortly afterwards, the estate would have to pay something like £28 13s. He just quoted it to show how the estate would be reduced. It was far better to have an income tax, because an income tax came out, to a very large extent, of savings. Here the duty came directly out of capital. The Treasurer seemed to overlook the fact that South Africa was a new country and a young country which required capital. It was a borrowing country and therefore was different from Great Britain. He had in mind a message given by the Prime Minister to the Press in London. He said: “That which South Africans will need most acutely in coming years is capital, more capital, and still more capital.” That he could understand; but he could not understand that the gentleman who gave that message was the Prime Minister of a Government that was going to tax capital as heavily as it could. That was no policy. It was a policy of drift. (Ministerial laughter.) Then he would like to point out that there was no control and that the rates are heavy. In fact, if they compared the rates with those of Great Britain for over £30,000 and under £100,000 they would find the rates were much heavier. For instance, the duty in Great Britain from £20,000 to £40,000 was 5 per cent.; here it would be 5½ to 6½. The duty in Great Britain from £40,000 to £70,000 was 7 per cent.; here it was from 7 to 8 per cent. He would deal now with the Estates Duties. From £70,000 to £100,000 in Great Britain the duty was 8 per cent.; here it was 9 per cent. Also it was considerably higher than it was in the Tranvaal. Then there was the fixed rate on foreign shareholders. In the Transvaal it was 2 per cent., and here it was 6 per cent, all round. All he could say was that it was extremely foolish to levy such heavy rates in a country that was a borrowing country. The great cries here were the call for labour and the call for capital. He had been told by a bank manager that capital was becoming tight in this country owing to the rapid development and the demand for it. He (the hon. member) called this a Bill to check the growth and importation of capital into this country. The Treasurer seemed to have fixed his mind on a few individuals who had made immense fortunes in this country and gone to live elsewhere in fixing 15 per cent, tax on all shareholders in South African companies. But there was another class of man he was going to affect, and that was the small shareholder. Take a man in England who had saved £1,000 and invested it in this country. When he died his estate would have to pay £100 to the State of this country. When a man came to know that would happen he would not invest in this country.

Under that system sons and daughters, the children of the testator, were dealt with in exactly the same fashion as outsiders. The hon. member went on to read an extract from the report of the Cape Select Committee, which dealt with the matter of estate duty in 1908, of which the Minister of Native Affairs was the chairman. The hon. member added that, so far as he was aware, conditions spoken of in that report existed to-day, and if the difficulties were insuperable then, he wanted to know how they were going to overcome them now? It would have been far better to introduce an income and a property tax, which was a far better tax than that now proposed, because everybody paid on his earnings, and far less damage was done to the capital of the country—a poor country—than that estate duty would do, which was nothing else than a tax on capital.

said that the Bill would not redound to the credit of the Minister or the Government, and the criticisms which the Minister had heard would, it seemed to him, be fully justified. The Minister had skipped over the most important objections raised against the proposal, and the object of the measure was to catch the estates of rich people who died out of South Africa. The Government apparently thought that in order to catch the estates of a few rich people—and he thought that there were fewer than was imagined—it was worth while to bring in legislation, which could have only one effect—to check the influx of capital into South Africa, as his hon. friend (Mr. Jagger) had said. Whether South Africa could afford it was a matter they had to consider, and he could not see that it would be a policy which would be to the advantage of South Africa. As to bearer shares, the hon. Minister had said that a man might die in England possessing bearer shares in a South African company, and they could not get anything out of him. He tried to circumvent that; but he could not get anything out of companies doing business in South Africa but registered outside South Africa.

dissented.

In order to catch the estate of a man who died in England possessing 1,000 bearer shares in a South African company—say, the National Bank, which was registered in South Africa and issued bearer shares—he would make the National Bank pay a compensation tax, said the Minister, of 5 per cent. on the value of its own shares.

No.

It was one-quarter per cent, per annum, as the Minister of the Interior had said, and was 20 years’ purchase, which made up the equivalent of the 5 per cent. fixed annuity.

In order to tax the estate of a possible holder of a number of bearer shares in a South African company, that company was to pay a tax on the whole value of its bearer shares to the extent of ¼ per cent. on the market value. That was a perfectly ridiculous proposition. In Europe there was a large number of shareholders whose good will he would like to have, more especially the French, who preferred to have bearer shares. De Beers had decided, no doubt at considerable cost, to convert the whole of its deferred shares into bearer shares, with the object of inducing shareholders to put money into this country. As a reward they were to be penalised ¼ per cent. on the value of all bearer shares in circulation. That was to say, that on the off-chance that the Minister might tax the estates of a few people the whole of the deferred shareholders were to be fined ¼ per cent. on the whole of the deferred shares. To say that that value was a fair tax and was legitimate in order to tax the estate of a few people was perfectly ridiculous. The second part of the paragraph was even worse. The Minister proposed to catch people who, in order to evade his estate duty, might transfer their share to a company. He supposed the case of a rich, man who had a lot of shares in South African companies, and who transferred them all for a nominal consideration to a company which was to be registered outside South Africa which became the registered owner of the shares. In order to catch a few shares of that kind the Minister now proposed that every South African company should pay a tax of ¼ per cent. on the market value of any shares which were held by a company registered outside the Union, whether these shares were held by a company formed for the purpose of evading the tax or whether they were held for bona fide investment purposes. (Opposition cheers.) That was simply ridiculous. Companies were formed for the deliberate purpose of investing in different classes of securities; companies had been formed for the purpose of investing in shares of South African companies. One of these companies, for example, held, say, a million shares in a lot of companies registered in this country—mining companies or any other companies. Because the Minister wished to tax the estates of a few rich people who might try to evade the law he was going to force every company which had a proportion of its shares in South African companies to pay a tax of ¼ per cent. on the value of all such shares. It was absurd. What was worse, the Minister proposed the tax to apply whether the companies had paid a dividend or not. It was worse than in the case of bearer shares. They might take the case of a mining company which had been developing four or five years and which had never paid any dividend. A large investment company in London held a large block of shares in that company, and because of that the mining company was fined every year ¼ per cent. on the value of all shares held by investment companies registered abroad. Could anything be more absurd? When they were asked to assist the Minister to pass legislation to be of use to the country they were entitled to ask him not to establish his reputation for cleverness in catching a few rich people at the expense of the credit of this country. (Opposition cheers.) In the case of bearer shares, the proposal was to some extent an income tax, and in many cases it would be impossible for people to recover the amount as the Minister had suggested. Take the case of a company which had issued debentures carrying a fixed rate of interest, say 5 or 5½ per cent. The Minister now proposed that the company should deduct £ per cent. on the value of the bonds. The holder of these bonds would never know how much he was going to get as interest, and the only result would be that the company would have to accept the liability and make provision for it before paying its dividend. The whole position was absurd, and the only effect must be to discourage the investment of capital here. Because large corporations came forward and expressed their faith in South Africa by investing in large blocks of shares in South African companies, these companies were going to be penalised because the Minister wanted to show that he was clever in catching a few people anxious to evade the law. With regard to the justice of this ¼ per cent. tax, he (Mr. Chaplin) had been furnished with some figures which he had every reason to believe were correct, and according to them the average age of a stationary population was approximately 33 years. Consequently the annual sum to be paid in respect of bearer warrants in place of a payment of 5 per cent. on the death of the holder was equal to the present value of such an annuity payable during the lifetime of a person now aged 33, as would equal the present value of the 5 per cent. payable upon the death of a person now aged 33. This at 4 per cent, interest was approximately one-tenth per cent. Assuming that the principle was right, the proportion was wrong, and the Minister was asking annually 250 per cent. more than was required to produce the 5 per cent.

Oh, I have some other figures here.

I am much more concerned with the broad principle. (Hear, hear.) It does seem that the effect will be far other than the Minister thinks. Proceeding, Mr. Chaplin said that the Minister, by penalising the investment of capital in South Africa, was preventing the influx of capital to this country. What was more, he was going to give the investor the impression that the Government did not care about the introduction of capital. (Hear, hear.) His hon. friend (Mr. Jagger) had quoted a message sent by the Prime Minister, but he had already quoted the arguments used by the Prime Minister at the Imperial Conference in London. The right hon. gentleman objected to the Imperial Government levying a dual taxation. What was the use of the Prime Minister going to London and saying at the Imperial Conference that he objected to dual taxation, and when he came to South Africa they were faced with legislation like this. It was simply misleading, and he was sorry the right hon. gentleman did not recognise it.

said he had heard the same arguments used again and again. They were first used sixty or seventy years ago, when the succession duties were introduced in England, and none of the consequences had happened which had been prophesied. Why didn’t the hon. member produce some of the facts? The facts had been entirely against these laboured arguments. They had heard this story of frightening away the capitalists and scaring away capital again and again when measures such as the present had been proposed.

There was no parallel at all.

I am not sneaking only about the amendment, I am speaking of the general question. As regards the amendment, the objections of the hon. member (Mr. Chaplin) were solely on the ground that the Minister was likely to be successful in levying a tax on what was, after all, South African property. Continuing, the hon. member said he understood his hon. friend the member for Cape Town to say that the death duties were another form of income tax. (Mr. JAGGER: No; no.) Well, the usual way of meeting these liabilities was by the form of insurance. The hon. member (Mr. Chaplin) had referred to what the Prime Minister had said about dual taxation, and he did not appear to appreciate the Prime Minister’s remarks. The point, however, was exceedingly obvious. It was that the Imperial authorities should not tax South African assets. If the South African assets were to be taxed, let them be taxed by South African authorities and not by the Imperial. Therefore the hon. member must abandon the idea of expecting the support of the Prime Minister upon that matter. This was a question in which the hon. member for Beaconsfield had received the support of members in the old Cape Parliament and had repeatedly requested the Imperial authorities not to tax South African products. They must recognise that estate duty was increasing in popularity. The hon. member for Cape Town had raised the cry that this measure would frighten capital out of the country. He compared the proposed rates here with the rates levied in England, but he quite forgot that in addition to the estate duty there were also levied in England succession and legacy duties, and the Minister was certainly to be congratulated on having one simple estate duty instead of the three English duties. As to driving capital out of the country; he should like to ask to what country they were going to drive capital? Not England. Not France. Not Germany. Not New York.

The Sandwich Islands.

The interruption exactly impressed his point. The hon. member and his friends were trying to suggest that for fear of those moderate duties capitalists would prefer to invest in the Sandwich Islands. The hon. member (Mr. Jagger) said the exemption was too low here. He would point out that in England, if they wanted to make a comparison with England, there was a succession duty levied on estates of £100 at the same rate as the lowest rate here where there was exemption up to £500. He went on to say that all these old arguments had been brought forward for many years in different countries. This talk of a tax on capital was beside the mark. It was not a tax on the capital of the nation; it was a tax on the capital of the individual. Capitalists were quite as much frightened by income taxes, which they had to pay, as by death duties, which they might leave to their progeny to pay. He hoped hon. members opposite would let let them have some facts, instead of mere barren statements, as to the effects of the imposition of estate duties Since direct taxation had been introduced in England in 1842, property had increased so much that the yield of the income tax in England rose from £710,000 a penny in 1842 to £2,691,432 in 1909-10. In regard to the question as between the succession duty and the estate duty, it appeared to him that the sound principle was to take the estate with which alone the tax gatherer had to do. This was the general practice as regards the income tax, and there was no more reason to depart from it and inquire into private circumstances in the case of the death duties than in that of any other tax.

Another point was that after all it was not so much a question of what form the taxation was, but what the weight of it was. Hon. members on the other side had not tried to show that this was a very crushing tax. On the contrary, they had been very silent upon it. The Treasurer had published a Bill under which estates shall be exempt from transfer duty except as far as it exceeds the estate duty. He hoped he would include that principle in this Bill. Then if they took real property, in the case of lineal descendants, if the estate was £50,000 in the Cape, the estate would not pay more under this Bill than it would have to at present. He rather shared the anxieties of the right hon. member for Victoria West (Mr. J. X. Merriman) as to whether the Government would get the full amount of taxation they expected out of that. In the Free State the corresponding figure was £20,000. He had seen it stated in the Press that this tax was going to crush the farming population, and drive it off the land; but, as far as he could see, farmers were not going to pay more than they did now, unless they became extremely wealthy. The proposals in the Bill made an absolute break—that was to say, that a man would pay on £3,000 2 per cent., but the moment the amount exceeded that, he would have to pay 2½ per cent. Therefore, a man who left an estate of £3,001 would be far worse off than the man with an estate of £3,000. He hoped the Minister would look to that. The hon. member went on to refer to the case of settled estates—joint estates, in which the property was settled on the son, and the heir of the son was the father—and said he thought there would be some hardship. He hoped hon. members would read the history of the same taxation in England sixty or seventy years ago, and they would find that the arguments being used now against, it were the same as were used then, and which had been proved wrong.

hoped hon. members would not be alarmed by the proposals. They would not drive capital away. He had recently had some experience of the estate duties in Great Britain, and on some property in Edinburgh had to pay altogether 16 per cent. To a very large extent this was a new principle of taxation in this country, and that being so he hoped the Minister would be able to see his way to reducing the scale to the Transvaal measure or the Cape level. He did not think the Minister would get the revenue he expected from the companies, as they would alter the nature of their scrip. It was an injustice to levy a tax on one particular class of company and not on another class, and it would be much better to reduce the tax and levy it on all companies, which would make it also easier to collect. He felt that a tax of l-16th per cent would bring in far more money, and you would sweep the whole crowd into the net, and no one would escape. He hoped that the Minister would reduce the tax, and make the machinery run so smoothly that the tax would be easily collected. It were a reasonable tax there would be little objection to it. He supported the motion.

moved that the debate be adjourned until to-morrow.

This was agreed to.