Australasian Democracy

IV
THE LAND POLICY OF NEW ZEALAND

Differences of conditions between Australia and New Zealand—The Public Works policy—Taxation on land—The Land Act of 1892—The Land for Settlements Acts—The Government Advances to Settlers Acts—The encouragement of settlement—The co-operative construction of Public Works—The unemployed—Continuity of policy.

The Constitution of 1852, under which New Zealand obtained responsible government, differed from those granted to the Australian Provinces in the creation of Provincial as well as Central Authorities. Owing to the mountainous character of many parts of both islands, and in the absence of railways and other facilities for internal transit, communication had been carried on principally by sea, and settlement, instead of radiating from one point, as in New South Wales, Victoria, and South Australia, had been diffused at Auckland, Wellington, Christchurch, Dunedin, and other places of secondary importance. Under these circumstances, while it was deemed advisable to create a Central Government at Auckland, which was transferred to Wellington in 1865, six elective Provincial Councils were established, which, though their legislative and executive powers were confined within specified limits, promoted the continuance of the separate development of the several portions of the Colony. In 1876 the Provincial Legislatures, which had in the meanwhile been increased by a division of territories to ten, were abolished by the Central Government, principally because they impeded the execution of the national policy of the construction of public works. The effects of the system, however, are still seen, especially in the demands made in the House of Representatives that the different districts shall share in the benefits of any proposed expenditure of public funds.

Another feature which served to differentiate New Zealand from Australia was the existence of a warlike native race in the North Island, which opposed the colonisation of the early settlers. From the outset, ignorance of each other's language and habits of thought led to misunderstandings in regard to the disposal of land, which was complicated by the communal tenure of the Maoris. The appreciation of this difficulty led to the insertion in the Treaty of 1840, in which the chiefs purported to cede the sovereignty of New Zealand, of a provision which reserved to the Crown the right of pre-emption over all native lands. But the dissatisfaction was not allayed; the natives, conscious of the steady advances of the settlers and urged to sell by agents of the Crown, feared that they would gradually be dispossessed of their territory. A conflict which arose in regard to some land, and led to fatal results, increased the state of tension, which culminated, after a struggle in the extreme north, in the prolonged conflicts of 1860 to 1870. After the pacification the reciprocal relations began to improve, and are now excellent. The Maoris are universally respected, have four members in the House of Representatives, and two in the Legislative Council, and are represented in the Executive Council by a Minister, who is himself a half-caste. Numerous attempts have also been made to settle the land question, notably by the resumption of the right of pre-emption, which had been waived for a time, and by the constitution, by an Act of 1893, of a Validation Court for the purpose of considering and finally settling the titles to lands obtained by Europeans from the natives. In view of their pre-emptive right, the Government have been bound, in justice to the Maoris, to make provision for the purchase of such lands as may be offered to them, though they have not herein initiated a new policy. From the establishment of Imperial sovereignty to 1870, successive Governments acquired six million acres in the North Island, the whole of the Middle Island, with the exception of reserves for the original owners who were few in number, and Stewart Island. From that date until 1895, another six million acres had been acquired at an outlay of a million and a half pounds, and subsequent purchases, from a large area still under negotiation, amount to about 550,000 acres. New Zealand has thus disbursed, and is still disbursing, large sums of money in the purchase of native lands, while Australia and Tasmania recognised no right of possession on the part of the few degraded aboriginals; and New Zealand alone is burdened with the payment of interest upon loans raised to cover the charges of prolonged military campaigns.

During the wars, settlement was necessarily checked in the North Island, but proceeded in the Middle Island without intermission. At their conclusion, in 1870, Mr. (now Sir Julius) Vogel, the Colonial Treasurer, placed before Parliament a comprehensive scheme of public works, which aimed at the general improvement of means of communication, a matter of particular importance in the North Island as being likely to hasten its final pacification. "The leading features of the policy were: to raise a loan of ten millions, and to spend it over a course of years in systematic immigration, in the construction of a main trunk railway throughout the length of each island, in the employment of immigrants on the railway work, and in their ultimate settlement within large blocks of land reserved near the lines of railway, in the construction of main roads, in the purchase of native lands in the North Island, in the supply of water-power on the goldfields, and in the extension of the telegraph. The plan, with some modifications, was authorised by the Legislature. These modifications mostly related to the amount to be borrowed and to its expenditure; but there was one alteration which crippled the whole policy. The reservation of large tracts of Crown land through which the railways were intended to be made, with a view to the use of that land for settlement thereon, and as the means of recouping to the Colony a great part of the railway expenditure, was withdrawn by the Government from fear of losing the whole scheme. That fear was not unfounded, inasmuch as provincial opposition to the reservation in question, combined with the opposition of those who disliked the whole scheme, would have seriously endangered its existence."⁵ The provincial opposition was due to the fact that, though the disposal of the Crown lands and the appropriation of the Land Fund were vested by the Constitution Act in the Central Legislature, each province had in practice been allowed to frame the regulations for the alienation of land within its district, and had received the proceeds of sale for its own use. But the omission of the proposed reservation "has necessitated the frequent recurrence of borrowing large sums in order to continue work which had been begun and was useless while it was unfinished, instead of making, as would have been the case under a proper system of land reservation, the work itself to a great extent, if not altogether, self-supporting and self-extending; and that deplorable omission has also frustrated the anticipated conduct of progressive colonisation concurrently with the progress of the railways. The result of not insisting on this fundamental condition has been what should have been foreseen and obviated. The Provincial Governments sold land in the vicinity of the intended railways, and expended the proceeds for provincial purposes; and, as a rule, speculative capitalists absorbed the land and the profits which should have been devoted to colonisation and to the railway fund."⁶ As the proposed railways would pass through private as well as Crown lands, Sir Julius Vogel also sought the power to levy a special rate, in certain circumstances, upon the persons in the vicinity of the railways who would be benefited by their construction. He believed that he would thereby prevent "indiscriminate scrambling for railways," but was equally unable to induce Parliament to accept his views. The aggregation of large estates was promoted by the low price, 10s. or even 5s. an acre, at which the land was for many years sold. 262 freeholders, including companies, owned in 1891, 7,840,000 acres of land in estates of 10,000 acres and upwards. The Province has, since its foundation, sold or finally disposed of more than 21 million acres, and has at present nearly three million acres open for selection. The remaining lands, exclusive of those in the hands of the Maoris, amount to 16-½ million acres, but comprise large tracts of barren mountainous country in the Middle Island, and of valueless pumice sand in the North Island. In most directions, according to the Premier, settlement is already in advance of the roading operations.

The policy initiated by Sir Julius Vogel in 1870 was carried on by successive Ministers until 1888, during which time more than 27 millions were borrowed and devoted, for the most part, to the construction of railways and other public undertakings. Subsequently, Sir Harry Atkinson and his successor, Mr. John Ballance, realised the danger of constant reliance upon loans, and greatly reduced the expenditure, which had become extravagant in the abundance of borrowed money. Mr. Ballance also reformed the system of direct taxation and gave an impetus to legislation dealing with the settlement of the land and the protection of workmen in industrial pursuits.

The existing property tax, at the rate of one penny in the £ on all property, subject to an exemption of £500, was replaced by a graduated tax on incomes and land values, the principle of graduation having already been recognised in the case of succession duty. The former impost was naturally upheld by large owners of property and by all classes of professional men who had escaped taxation upon their incomes; while it was distasteful to shopkeepers, who might be taxed on unsaleable merchandise, and to cultivators of the soil, who found that their taxes rose in proportion to the improvements which they effected upon their estates. The Government had little difficulty in passing their measure, which, subject to slight modifications, is in force at the present time. Incomes below £300 are not taxed; between £300 and £1,300 they pay 6d. in the £, above £1,300 a shilling; but the sum of £300 is deducted from the total income in the assessment of the tax. For instance, an income of £2,000 pays £60, at the rate of £25 upon £1,000, and £35 upon £700. The ordinary land-tax is a penny in the £ on all freehold properties of which the unimproved value exceeds £500; between £500 and £1,500 exemption is allowed on £500; between £1,500 and £2,500 the exemption decreases by £1 for every £2 of increased value, being extinguished at the latter amount. Should the value exceed £5,000, a graduated land-tax is also levied, which rises progressively from half a farthing, until it reaches twopence upon estates of the unimproved value of £210,000 and upwards. All improvements are excluded from the assessment of the taxable amount: they are defined to include "houses and buildings, fencing, planting, draining of land, clearing from timber, scrub or fern, laying down in grass or pasture, and any other improvement whatsoever, the benefit of which is unexhausted at the time of valuation." Under this provision rural owners have every encouragement to improve their properties, as the more they do so, the smaller becomes the proportion of the total value of their estates on which they are liable for taxation. Owners are allowed, for the purposes of the ordinary, but not of the graduated land-tax, to deduct from the unimproved value of their land the amount of registered mortgages secured upon it; and mortgagees pay one penny in the £ upon the sum total of their mortgages, but are not subject to the graduated tax. A return, published under the assessment of 1891, shows, however, that rural owners are obtaining less benefit from the exemption of improvements than the owners of urban lands. The figures are as follows:—

It thus appears that land is taxed, on an average, at 49 per cent. of its actual value inclusive of improvements in boroughs, and at 67-½ per cent. in counties; but it must be remembered that, as the urban population is not concentrated in one centre, land values have not been inflated to any great extent, and that much of the rural land has either recently been settled or is held in large blocks in a comparatively unimproved condition. The improvement or sale of such properties would, the Government believed, be promoted by the imposition of the tax. The Minister of Labour (the Hon. W. P. Reeves) expressed this view in the clearest terms: "The graduated tax is a finger of warning held up to remind them that the Colony does not want these large estates. I think that, whether partly or almost entirely unimproved, they are a social pest, an industrial obstacle, and a bar to progress." Similar feelings are, apparently, entertained towards the absentee owner, who, if he has been absent from or resident out of the Province for at least three years prior to the passing of the annual Act imposing the tax, is required to pay an additional 20 per cent. upon the amount of graduated land-tax to which he would otherwise be liable. The income and land taxes produce a revenue about equal to that formerly derived from the property tax, and are collected from far fewer taxpayers, the respective numbers being 15,808 and 26,327 in a population of some 700,000 persons. The benefits have been felt principally by tradesmen, miners, mechanics, labourers, and small farmers. Of 91,500 owners of land, 76,400 escape payment of the land-tax. It may be noted, incidentally, that a permissive Act of 1896 authorises such local bodies as adopt it to levy rates on the basis of the unimproved value of land. Much anxiety has been felt by large landowners and owners of urban property throughout Australasia at the successive adoption of a tax on unimproved values by South Australia, New Zealand, and New South Wales. They fear that it is the first step towards the national absorption of land values advocated by Henry George, but forget that the Governments of New South Wales and New Zealand, in respect of exemptions, and of New Zealand and South Australia, in respect of graduation, have introduced features in their systems of taxation which cause them to be fundamentally distinct from his proposals. The Bill passed through the Victorian Assembly in 1894, but rejected by the Council, also provided for exemptions.

But how, it may be asked, has an equitable assessment of the land been secured for the purposes of the tax? Any owner who is not satisfied with the value placed upon his land on the assessment roll, may require the Commissioner to reduce the assessment to the amount specified on the owner's return, or to purchase the land at the sum mentioned on the owner's return of its actual value inclusive of improvements. The Commissioner is bound to make the reduction unless the Government approve of the acquisition of the land. A reasonable balance is thus struck: the Government are unwilling to have a large amount of land thrown on their hands, while the owner does not take the risk of the resumption of the land at an inadequate valuation. Disputes between the Commissioner and owners have, in most cases, been adjusted satisfactorily; but the Government decided to buy the Cheviot Estate of 85,000 acres, which lies close to the sea in the Middle Island. Upon its purchase they at first let the pastoral lands temporarily at the rate of £8,862 a year, while their surveyors laid out the country and supervised the construction of roads. The results of the transaction were, in 1896, eminently satisfactory; the capital value of the estate then stood at £271,700, and the annual rental at £14,300; and the few inhabitants engaged in pastoral pursuits had been replaced by 216 settlers and their families, who were reported to be of a good class and to have done a large amount of work in the improvement of their lands.

The principal Act dealing with the alienation of Crown Lands is that of 1892, which consolidates and amends former legislation. Crown Lands are divided into urban, suburban, and village lands, which are sold by auction at an upset price, and rural lands, which are again subdivided according to their adaptability for cultivation or pasturage. When townships are being laid out on Crown Lands, one-tenth of the superficial area is to be reserved for purposes of recreation, and a similar extent as a nucleus of municipal property, to be vested subsequently as an endowment in the local authority in addition to the reserves necessary for all public purposes. At the option of the applicant, lands may be purchased for cash, or be selected for occupation with the right of purchase, or on lease in perpetuity. Selectors are limited to 640 acres of first-class land, or 2,000 acres of second-class land, the maximum being inclusive of any lands which they may already hold. The object of this provision is to prevent existing landowners from aggregating large estates by the purchase of Crown Lands. Cash sales are effected at a price of not less than 20s. and 5s. per acre, respectively, for first-class and second-class land, and entitle the selector to a free-hold title upon the expenditure of a prescribed amount on improvements. Land selected under occupation with the right of purchase is subject to a rental of 5 per cent. upon the cash price, under lease in perpetuity, which is for 999 years, to a rental of 4 per cent.; and strict conditions of residence and improvement are, in both cases, attached and rigidly enforced. At the expiration of ten years, a licensee under the former tenure may, upon payment of the upset price, acquire the freehold or may change the license for a lease in perpetuity. The latter is the perpetual lease of the previous Acts, denuded of the option of purchase and of the periodical revaluation of the rent, and is, in the latter respect, reactionary, as the State gives up its right to take advantage of any unearned increment. Subsidies amounting to one-third of the rent of land taken up under any of the above tenures and one-fourth of the rent of small grazing-runs are paid to local authorities for the construction of roads, but must be expended for the benefit of the selectors from whose lands such moneys are derived. The Act of 1892 also authorises the Governor to reserve blocks of country, as special settlements or village settlements, for persons who may desire to take up adjacent lands. The Village Settlements have been successful when they have been formed in localities in which there was a demand for labour; the Special Settlements comparative failures, because many of the members of the associations had neither the requisite means nor knowledge of rural pursuits. Pastoral land is let by auction in areas capable of carrying not more than 20,000 sheep or 4,000 head of cattle; or in small grazing-runs not exceeding, according to the quality of the soil, 5,000 or 20,000 acres in area. The dominant feature in the Act, in its application to pastoral as well as agricultural land, is the strict limitation of the area which may be held by any one person; rightly or wrongly, the Government are determined that the Crown Lands shall not pass into the hands of large holders. The principal transactions of the last three years are thus summarised, the figures for 1894 covering the period from April, 1893, to March, 1894, and so for the other years:

In regard to the numerical superiority of leases in perpetuity, it must be pointed out that, not only the special blocks, but the improved farms and lands offered under the Land for Settlements Acts, to which I shall have occasion to refer, are disposed of solely under that tenure; but it appears to be attractive in itself: as most of the Crown Lands require considerable outlay before they become productive, a selector can expend any capital that he may possess more advantageously upon the development of the capabilities of the soil than upon the acquisition of the freehold. The Government also are benefited by a policy which renders the land revenue a permanent asset in the finances. The receipts for the financial year 1895-6 amounted to nearly £300,000.

In 1892 an attempt was also made to deal with the problem of the scarcity of available land in settled districts which was caused by the prevalence of large estates. It was thought that the labourers employed upon them, and the sons of farmers who might wish to settle near their parents, should have an opportunity of acquiring land. The Government, accordingly, passed the first of a series of Land for Settlements Acts, which authorised the repurchase or exchange of lands and their subdivision for purposes of close settlement. Upon the recommendation of a Board of Land Purchase Commissioners, some of whom represent local interests, that a certain estate is suitable for settlement, and should be purchased at a certain price, the Government may enter into negotiations with the owner with a view to a voluntary transaction, and, upon his refusal, take the land compulsorily at a valuation fixed by a Compensation Court. Owners are so far safeguarded that they cannot be dispossessed of estates of less than 640 acres of first-class, or 2,000 acres of second-class land, that they can claim to retain the above area, and that they can require the Government to take the whole of their estates. The maximum annual expenditure was limited at first to £50,000, but has been raised to £250,000. At the end of March of last year twenty-eight estates, containing 87,000 acres, had been acquired, in one case compulsorily, and made available for settlement by surveys and the construction of roads at a total expenditure of nearly £390,000. Nineteen of these had already been subdivided into farms of various sizes, and were bringing in rentals amounting to 4.76 per cent. upon the outlay which they had involved. The Land Purchase Inspector was able to report that the lands, which had been the object of eager competition, had, in most cases, been greatly improved and were in good condition, and he is likely to find even better results in the future, as the Amending Act of 1896 provided that applications for land should not be entertained unless the applicants were able to prove their ability properly to cultivate the soil and to fulfil the stipulations of the leases. This provision is of great importance, as much of the land has been cultivated by its former owners, and would deteriorate rapidly under incapable management. The Governments of South Australia, Queensland, and Western Australia have legislated in a similar direction, and that of New South Wales introduced a Bill which failed to become law. As far as New Zealand is concerned, which has conducted its operations on the largest scale, the system has not been sufficiently long in existence to enable an estimate to be formed of its probable financial results.

A similar uncertainty prevails in regard to the more recent attempts to place cheap money within the reach of settlers. The first step in that direction was taken in 1886, when regulations were made for the establishment of Village Settlements, the members of which might receive loans for the construction of their houses and for other purposes. These settlements were not, as in some of the Australian Provinces, formed on a co-operative or a semi-communistic basis. The success of this experiment doubtless encouraged the Government to widen the scope of the advances. In 1895, 4,560 persons, divided among 144 settlements, had occupied 33,800 acres of land; they had received £25,800 in advances, had paid £17,600 in rent and interest, and had carried out improvements of the value of £92,800. These improvements, consequently, form an ample security for the repayment of the loans. The necessity of a general scheme of advances was based upon the difficulty experienced by small settlers, however good might be the security, in obtaining loans except at prohibitive rates. Authority was, accordingly, obtained through the Government Advances to Settlers Acts of 1894-6 to borrow three millions with a view to loans ranging from £25 to £3,000, upon first mortgages, to owners of freehold land and occupiers of Crown Lands, the advances not to exceed three-fifths of the value of the former and one-half of the value of the lessee's interest in the latter. Advances may not be made on town lands, nor on suburban lands which are held for residential or manufacturing purposes. The valuation of every security is to be carried out by or on behalf of a superintendent appointed ad hoc., and is to be submitted for the consideration of a General Board consisting of the Colonial Treasurer, the Superintendent, the Public Trustee, the Commissioner of Taxes, and a nominee of the Governor in Council. The advances on freehold land may be either for a fixed period at 5 per cent., or for 36-½ years at 6 per cent., of which 5 per cent. is reckoned as interest and 1 per cent. towards the gradual repayment of the principal; on leasehold lands, in the latter form alone. As the loan of a million and a half raised as the source of advances was floated at 3 per cent., and realised nearly £1,400,000, the margin between the percentage due by the Government and that received from the settlers should be sufficient to enable one-tenth of the interest to be paid, as provided, into an Assurance Fund against possible losses, and a residue to be available which will cover the general expenses of administration. But it is obvious that the result of the experiment will depend greatly upon the prevalent rate of interest and the price of produce. Hitherto, two-thirds of the advances have been used by settlers to enable them to rid themselves of former and less advantageous mortgages; in some cases, mortgagees, in order to retain their mortgages, have voluntarily lowered the rate of interest to 5 per cent. The tabular statement on the following page of the financial position is the latest that has been issued, and does not purport to be more than approximately correct. Advances may also be made towards the construction of dwelling-houses to those who have obtained selections under the Land for Settlements Acts; but they may not exceed twenty pounds nor the amount already spent by the applicant upon his holding.

Another measure which may affect the well-being of settlers is the Family Home Protection Act, 1895. Any owner of land may settle as a family home the land, not exceeding, with all improvements, £1,500 in value, on which he resides and has his home, provided that at the time the land is unencumbered and he is able to pay all his debts without the land in question. As a precaution against the concealment of liabilities, he is obliged to make an application to a District Land Registrar, who must thereupon give public notice of the intended registration. Should any creditor put in a claim within twelve months, the case is to be tried before a Judge of the Supreme Court, and if the owner of the land is vindicated, the Registrar is to issue a certificate which will exempt the family home from seizure under ordinary processes of law, but not in one or two contingencies, of which the principal is the failure to meet current liabilities in respect of rates or taxes. The registration is to continue until the death of the owner or the majority or death under the age of twenty-one of all his children, and is not to precede the last of these events. Upon its cessation it may be renewed at the option of the persons then holding the estate, who must be relations of the deceased. Little effect has been given to the Act owing, probably, to the unavoidable publicity of the proceedings. It appears to have been based upon a South Australian Act of 1891, which enables holders of workmen's blocks, by the endorsement of their leases, to secure for their properties somewhat similar exemptions from seizure. Their failure to avail themselves, to any considerable extent, of this privilege is attributed to the unwillingness of working men to take any trouble in a matter of which the advantages are merely contingent.

So far I have discussed the legislation of New Zealand which affects freeholders and those who are, or desire to become, tenants of the Crown; but before proceeding to deal with matters of common import to most settlers, I must point out that tenants holding from private landlords have also engaged the paternal attention of the Government. The Minister of Lands introduced last session, but failed to pass, a Fair Rent Bill, which would have established a system of Land Courts under the presidency of Stipendiary Magistrates. Landlords and tenants would have had an equal right to apply for the determination of the fair rent which, upon the decision of the Court, whether it were higher or lower than the reserved rent, would have been deemed, until a further revision, to be the rent payable under the lease. The Government displayed great inconsistency in the introduction of the measure; having shown, in the system of lease in perpetuity, that they objected to the periodical revaluation of the rents payable upon Crown Lands, they proposed, through the Fair Rent Bill, to enable the Crown, as landlord, to take steps to increase the rents of its tenants.

As regards the general interests of producers, the Government have, through reductions amounting to £50,000 a year in railway rates, made a concession to them at the expense of the general taxpayer, as the railways, after payment of working expenses, return only 2.8 per cent., a sum insufficient to meet the interest upon their cost of construction. Again, they have appointed experts in butter-making, fruit-growing, &c., who travel about the country and give technical instruction by means of lectures; and they distribute, among farmers and others, pamphlets containing practical advice upon various aspects of cultivation. But, except that butter is received, graded and frozen free of charge, they have not followed the example of Victoria and South Australia in the direct encouragement of exports. Finally, while the State acts as landlord, banker, and carrier, it also carries on a department of life insurance and annuities, accepts the position of trustee under wills, and, if the programme of the Government is accepted by Parliament, will undertake the business of fire insurance and grant a small allowance to all who are aged and indigent and have resided for a long term of years in the Colony. The development of the resources of the country, under the assistance of the State, has also proceeded in other directions. More than £500,000 had been spent up to March, 1896, in the construction of water-races on goldfields for the benefit of alluvial miners and public companies; and in that year the Premier, in view of the large amount of foreign and native capital that was flowing into the industry, obtained the authorisation of Parliament to the expenditure of a further sum of £200,000 in the conservation of water by means of large reservoirs, the construction of water-races, the extension of prospecting throughout the Colony, and the construction of roads and tracks for the general development of the goldfields. The physical attractions and health resorts of the country, many of which are reached with difficulty, are also being opened up by the expenditure of public funds.