Classification of Debts: Division 1.—These are estimated as follows:— Agricultural Bank - £650,000 Storekeepers, etc. - £150,000 Associated Banks - £500,000 £1,300,000 and comprise all estimated debts incidental to the 1931/32 crop. Debts for 1932/33 crop and onwards, including current rents, rates and taxes, will also fall into this division.

Division 2.—After initial adjustments these are estimated at £5,450,625 and comprise:—

(a) Debts under primary security of stock and wool liens.

(b) All other debts except those in division 3 and machinery debts.

(c) Machinery debts.

Division 3.—All debts secured by mortgage over the farmer's land.

Moratorium:

A moratorium for a period not exceeding 15 years to operate in respect of each farmer whilst under the plan.

Funding and Liquidating of Debts:

After applying the proceeds of the 1931/32 harvest to registered liens for current supplies, all debts including land rent purchase shall be written down by 15 per cent. and funded over a period of 15 years, but the trustee may require as a condition precedent, either or all of the following additional adjustments:—

(a) All interest on division 1 debts written off.

(b) All compound interest written off and/or a writing down of principal on secured debts in division 2.

(c) All unpaid interest on machinery debts written off.

(d) Writing down of principal and interest on debts in division 3.

Excepting in respect of machinery debts which will carry no interest charge, debts remaining will carry interest at the rate of 4 per cent. per annum. A further revaluation of debts shall take place in the 6th and 7th years of the plan, the banks being the productive capacity of the assets. It is expected that prices will have become stable after five years. Each crop which is to stand by itself is to be charged to the trustees and debts in relation thereto are to be paid out of the proceeds, subject to the following:—

1. Registered liens covering current supplies in existence at commencement of plan to take precedence over all other debts.

2. Subject to (1) trustees shall have a charge upon all crops.

3. Debts ranking against each year's crop shall be the costs of current commodity and service supplies, also land rents, rates and taxes. Machinery instalments are dealt with under separate heading.

Sheep and wool surpluses are to be kept distinct and added to the crop proceds of the year concerned.

One year's interest on mortgages will be paid after satisfaction of (3) above.

Finance of the Plan:

Government Contribution.—The Government shall contribute approximately £150,000 per annum for 15 years towards liquidating debts in respect of trustees' administration, hire purchase machinery and interest on account of debts in division (3), estimated as — Trust Administration, per annum - £65,000

Annual instalment to liquidate machinery debt in 15 years - £63,750

Contribution towards interest on division 3 debts at 4 per cent. per annum - £21,250 £150,000

Upon payment of the annual instalments to machinery creditors, the trustees shall become the substituted creditor for a like amount and rank for dividends as a division 2 creditor in the priority list (a) in the usual course. On receipt of such dividends the trustees are to utilise same in reduction of other division 2 debts. The above contribution to be made from a tax of 1½d. in the £ on salaries and wages so that the farmer will not contribute indirectly.

Future Production.—Any funds necessary to harvest 1931/32 crop to be obtained from Government sources, which shall be an absolute first charge in priority to all existing encumbrances.

Funds for future crops to be obtained from the trading banks on the security of 4 per cent. debentures to be issued under the Finance and Development Act, 1930, and guaranteed by the State. It is estimated that 7,000 farmers will have to be provided for at £700 per man; total £4,900,000.

Release from Plan:

Provision is made in the plan to release settlers at any time subject to suitable conditions.

Marginal Producers:

Unsatisfactory settlers shall be refused admission to the Plan, but good settlers on marginal properties shall be assisted to acquire more satisfactory holdings.

Compulsory Nature of Plan:

The plan is compulsory. When a settler is admitted, the provisions of the whole plan apply and every creditor concerned is bound to submit to the decisions of trustees.

Reduction of Costs:

Part 2 of the Plan contains suggestions relative to factors in high cost of production.

COMMENT.

Scheme not recommended for the following reasons:—

1. The proposals are too drastic in their effect upon creditors, and are likely to vitally prejudice their financial standing, e.g.—

(a) They have to submit to debt cancellations—possibly a series of such, on a low market value.

(b) All interest reduced to 4 per cent.; and

(c) Moratorium up to 15 years.

2. The heavy writing down of debt would tend to dry up agricultural credit, a modicum of which is normally necessary, and force large numbers of settlers under the plan, who otherwise are quite capable of managing their own affairs.

3. Not sufficient restriction placed upon applicants. The whole farming community would be encouraged to place themselves under the Plan, which would in the course of time weaken their spirit of self-reliance.

4. The required organisation would be huge and costly (£65,000 per annum) and tend to become unwieldy.

5. The amount required to finance future production is estimated at £4,900,000 and it is doubtful if such a large sum could be raised for a plan of this character.

Moreover the action of slashing book debts in this manner could hardly be conceived as an encouragement to banks to again risk their capital to such an extent, even though the advances were guaranteed by the State.