M. MIEBS.]

31

1.—16.

14. Hon. Mr. McKenzie.] In framing this contract the Government would be the controlling authority? —Certainly. If the terms of the contract could not be agreed upon—that is to say, if the Government imposed some conditions which the company thought unreasonable —then the Government could say, " Very well, the contract cannot be entered into." 15. Mr. Blow.] Would you not then move the Supreme Court for a mandamus requiring the Government to enter into the contract?—No, because the whole Bill is empowering. There is nothing to compel the Government under this Bill to enter into any contract at all. " Authority is hereby given to the Minister." 1 have thought from the first that there has been, in the minds of the officers of the Department, and perhaps of members of the Committee, some misconception of the terms of this Bill, and I am glad to have the opportunity of explaining the position. I think members of the Committee will see that under this Bill the Government is amply protected. I was submitting to the Committee that the whole risk is with the company. If the company are able to carry on this business with profit, well and good. If they cannot carry on the business with profit, then the works would no doubt be closed down, and in that case the company, I apprehend, could not very well ask that the subsidy should be paid —indeed, it could not under the provisions of the Bill. So that if the business is a successful one all sorts of advantages will accrue to this country. If the business is unsuccessful the only people who will be injured will be the shareholders and debenture-holders of the company, because they will lose their money 7 , and they cannot go on with this undertaking unless it turns out to be a profitable one for them. The Government will only pay this £32,500 per annum so long as the works are being carried on, and so long as there is not less than a certain output. The moment those conditions cease to exist, the subsidy will no longer be payable, and the only people who will lose their money will be the shareholders and debenture-holders of the company. Very well then. lam going to show that under the Bill of 1911 the financial advantages to the company would really have been greater than the advantages under the present Bill. In the first place, certain bonuses would have been payable under the Bill of 1911. But there was more than that: there was a provision in that Bill that if a contract were entered into between the Government and a company, the contract would contain an undertaking by the Minister that if the lessees would supply rails, girders, iron or steel bars, or other articles of good quality made from iron-ores in New Zealand which might be required by the Government, the Government would purchase such from the lessees at wholesale London prices, plus the charges for freight from London to the Dominion. Therefore, under that Bill, in addition to the bonus which would have been payable, there would have been a very large profit earned by the company in consequence of that undertaking by the Minister. The present Bill, however, contains quite different proposals, and it contains no such undertaking; it is quite optional for the Government to take their supplies from the company or not, just as they like. lam informed— I think, there has been some evidence on the point before the Committee —that at the present time the total quantity of all kinds of iron and steel imported by the Government, or used by the Government, in New Zealand amounts to something like 20,000 tons a year. We have it in evidence that the freight on pig iron is about £1 Is. 3d. per ton, and the freight on bar iron and steel and so on is a few shillings more per ton. The result would be that at the present time the company would derive under that undertaking a profit of some £25,000 a year at least. We may reasonably assume that from year to year the quantity of iron required by the Government of this country will increase. Supposing that it goes up to 40,000 tons during the next ten or fifteen years; that would mean that under the Bill of 1911 the company would make an annual profit, through this undertaking by the Minister, of, say, up to £40,000 or £50,000 a year. I make these observations to show that, as a matter of fact, last year's Bill would probably have been a better one in some respects for the company than the Bill which contains the present proposals, but it would not have suited the company. It is quite plain—and we have no desire to be other than frank in the matter—why the company want these provisions. Let us try to think what we like, we know it is not an easy thing to bring British capital into this country for investment in industrial concerns. We know that. The Ethelburga people naturally, if they are going to take over this business, want to be able to present to the British public a proposition which will be attractive. They have first of all to make up their minds that they can make this business a payable proposition. Assuming that they can make it a reasonably payable proposition, then under this Bill they know that they are getting 5 per cent, upon their debenture capital, of which 4 per cent, would be available—still assuming that the business is a fairly profitable one, or is earning expenses—to pay in the way of interest, and 1 per cent, as a sinking fund to pay back the capital at the end of forty years. They may make a profit or they may not; as I have already pointed out, the risk is all theirs. On the other hand, the Government, first of all, have not to find at any time a very large sum of money for the purpose of acquiring these works and this business. Under the Parapara lease—l do not know the provisions of the Onakaka lease—if these works were commenced and the business turned out to be a profitable one, and it became desirable that the Government should acquire the business, the Government would have to find an enormous sum of money, and they would have to find it all at once. Under the proposal made by the Ethelburga Syndicate, the Government have simply to provide the comparatively small sum of £32,500 a year for forty years, and that sum is all the time going towards the purchase-money of the whole of this undertaking by the Government. In addition to that, the Government would be entitled to obtain all their iron and steel at cost price, plus 5 per cent. What does that mean? We must assume that the price would not be more than the wholesale cost price in England, because if the cost price of the manufactured product in New Zealand is going to be more than the manufactured cost price in England, then the company would have to close down its works at once, because it could not compete.