HC Deb 06 July 1885 vol 298 cc1776-90

Order for Committee read.

Motion made, and Question proposed, "That Mr. Speaker do now leave the Chair."


said, he hoped that before the Speaker left the Chair they would hear some general statement, at least, with regard to the use to which the borrowed money was to be put by the Indian Government. It was now a considerable time since the Bill was last before the House. A good deal of information had come from India, and a good deal had happened since that time. If he was not mistaken, it had not been made very clear to what purpose the borrowed money was to be devoted. He understood that at present there was considerable borrowing power in the hands of the Indian Government; that the £10,000,000 for which this Bill provided was in addition to £4,000,000 or £5,000,000 which the Indian Government had power under previous Acts to borrow. There were a great many matters to which it might be necessary to apply the whole or part of the money. Of course, he could not expect the noble Lord the Secretary of State for India (Lord Randolph Churchill) to pledge himself in detail as to the use to which those funds would be put; but he hoped the noble Lord was in a position to tell them in very general terms to what it was necessary to devote the borrowed money. He (Sir George Campbell) believed the primary object of those borrowing powers was to make railways of a commercial and profitable character. He was somewhat afraid that in consequence of the construction placed upon the Report of the Committee which sat on this subject, some railways of a non-paying character might be made under the guise of commercial railways. He hoped the noble Lord would see that the money was spent on paying, and not on non-paying, railways. It was well known that in consequence of recent circumstances a good many non-paying railways were to be on the frontier. Perhaps they might learn that the noble Lord was prepared to adopt, in a great degree, the plan of the late Government; and it might be that the noble Lord was in a position to give them some fresh information with regard to the probable expenditure upon the frontier railways. In "another place" the country had been informed that night that Her Majesty's Government intended to take the most decided measures to put the frontier of India in a proper defensive state. Such measures were very expensive, and he thought it very probable that a considerable part of this loan would be devoted to the meeting of the expenses of the works contemplated. He hoped the noble Lord would be able to tell the House to what extent he thought it likely the Government would be committed with regard to the expenses of the proposed defences. A large sum of money had been spent by the Indian Government, and also by the British Government, in consequence of the unhappy differences which lately arose with Russia. A considerable time had now passed, and he hoped the noble Lord would be able to tell them something more than was told them when last this Bill was before the House with regard to the probable cost of the recent extraordinary military preparations. They were at one time led to hope that the original estimate, which he thought was somewhere about £.3,000,000, might be diminished on account of savings of one kind or another. He was sorry to see a paragraph in the Indian papers to the effect that the preparations would cost as much as £4,000,000. He hoped the noble Lord would tell them whether that estimate was justified or not. There was another very important view of the matter on which the late Under Secretary of State for India (Mr. Cross) was not able to enlighten them, and on which he did not know whether the noble Lord could give them any information—namely, how the money was to be got. On a former occasion he expressed the hope that the Government would think it their duty to provide the means whereby the Indian Revenue would be able in a few years to pay off the extraordinary expenses which had been and were being incurred upon defensive projects. He noticed in the Indian papers a good deal about the reduction of expenditure. He was always in favour of economy, and he should like to see a reduction of expenditure. But there was one moans of reducing expenditure, which ho did not think was at all wise and prudent, and that was the stopping of public works. He thought the permanent military expenditure must be increased; but he should regret if it were to be met by the stoppage of public works. To carry on public works at a great pace one year, and to stop them another year, was anything but an economical proceeding. He hoped the noble Lord would be able to tell the House that the Government of India hoped to meet the extraordinary military preparations in some other way than by the stoppage of public works.


said, he was one of those who did not approve of this Bill being brought in by the late Government. He looked upon the proposal contained in the Bill as one of the most serious proposals affecting the finance of India which had ever come before the House of Commons. He assured the noble Lord the Secretary of State (Lord Randolph Churchill) that the more he looked into Indian finance, as left by his Predecessor, the less he would like it, for he would find that it presented almost insuperable difficulties. What were the circumstances under which the late Government brought this Kill before the House? It would be in the recollection of hon. Members that Sir Auckland Colvin, in his Budget Statement, estimated that there would be a small surplus on the Indian Revenue. Since that time much had happened. Within the space of three months £4,000,000 had been spent on military preparations, and it was necessary the House should know how that sum of money was to be met. How was India to recoup itself for this enormous additional expenditure? Was the noble Lord prepared to tell them that night that out of the £10,000,000 which it was proposed to raise in this country the ordinary Revenue of India was to be recouped to the extent of £4,000,000? Was any of that amount to be repaid by extra taxation, or by means of the diminution of expenditure, or was the whole of it to come out of money to be raised by this Bill? During the present financial year India had raised £3,500,000 for extraordinary public works. As a matter of fact, the House was now asked to sanction a loan of £10,000,000, all of which, if this Bill was passed, would be raised during the present financial year. He could not imagine a worse state of finance for India than this—that they could not pay their ordinary ways and means, but were obliged to go into the Money Market to enable them to do so. And it must be remembered that owing to the policy of the late Government a considerable permanent additional charge would be put on the Revenues of India. Let them hope that it would not be so much as £4,000,000 a-year; but, considering the effect of their policy in India, the augmentation of the Army and development of the defences of the country, which would be to impose a large permanent additional charge upon the Native taxpayer, he would ask how it was to be met? He had seen it stated that the extraordinary military and fortification expenses would amount to about £2,000,000 a-year. That was an enormous burden, and how, he asked, was it to be met? There was one method of retrenchment which would enable them to meet increased expenditure—they might refrain from going on so fast with their public works and railways. That seemed to him the only solution for the difficulty. Some such measure would have to be adopted, for they clearly could not go on, year after year, in the present way with their Indian finance. Then the policy of Russia, at the present moment, was to make a railway to Sarakhs, and the more she pushed towards the frontier of Afghanistan the greater would be our expenditure in India. This whole question would have to be thoroughly considered; in fact, one of the first things the noble Lord (Lord Randolph Churchill) should do was to go thoroughly into the finances of India and into the question of the Home Charges. If, owing to the policy of Russia, increased expenditure was from time to time imperatively necessary in India, they could not go on, year by year, borrowing enormous sums of money. In 1869 there was a particular clause put into a Bill to the effect that the money to be raised was only to be for railways, military and commercial. There was no clause at all to that effect in the present Bill, and it appeared to him that the whole of the £10,000,000 asked for by the Indian Government was to meet the ordinary ways and means of its finance. If the noble Lord could state that the money was to be spent in developing the railway system, and on the defences of the country, it would be more satisfactory; but he (Mr. Onslow) believed that the money was not to be expended in that way at all, but was to defray ordinary military charges which, he contended, ought to be met out of the ordinary taxation, and come out of the ways and means of Indian finance. They must remember that Indian finance was in a very precarious position indeed. If anything was to happen to Abdurrahman—and it was reported that his health was not in a very sound state—there would very probably be a revolution in Afghanistan, and Russia might claim a voice in the nomination of the future Ruler of that country. That claim England would probably be disposed to resist, and the result might be that fresh burdens would have to be thrown upon the Indian Exchequer. What he wished to point out to the noble Lord and the Committee and to emphasize was this—that it was impossible for them to go on expending large sums of borrowed money on public works in India—on the development of extensive systems of commercial and military railways, and on great irrigation schemes—and, at the same time, goon paying large sums of money in the shape of interest on money borrowed for fortifications and frontier defence. That would be asking India to do a great deal too much, for her finances would never bear the enormous strain. How long was India to go on borrowing money in that way? They might have another Bill next year to enable India to borrow another £10,000,000 at 3 or 4 per cent. How much would be spent in the current year, and would the money be spent to meet the ordinary charges of the year, or on what he might call extraordinary military operations; or were those military operations to be paid for out of the general taxation? It was said by hon. Gentlemen opposite that the Viceroy had sent round to all the Local Governments of India urging them to curtail as much as possible their expenditure. He was aware that that had been done—such a step had been taken on a previous occasion. The Local Governments had been implored to curtail their expenditure on public works, their civil expenditure, and so on. No doubt, some little good might be effected by that means; but it was not possible for the Local Governments to curtail their expenditure to any appreciable extent. He did not blame the Viceroy for the action ho had taken; but after all, if the Local Governments saved as much as they could, it would only be a few thousands of pounds, and what was that when they had to deal with millions? Lid the Viceroy intend to ask the people of India for additional taxation in order to meet additional expenditure, or was the House of Commons to be asked to pass this sum as a loan to India, knowing that subsequent extraordinary requirements would have to be met in the same way'? He (Mr. Onslow) could assure the noble Lord he had never spoken in regard to Indian matters in any Party spirit; but he did say that Indian finance at the present time was in a very precarious position indeed, and that it would be soon seen that it I was impossible to raise the increasing Revenue rendered necessary by such Bills as the present by extra taxation. When the British public came to see that every farthing of these loans would have to be borrowed in this country his firm belief was that they would cease to have confidence in such investments, and that India would consequently be unable to borrow any money at all. The question was important not only to India, but to this country; and he sincerely trusted that the noble Lord would take into consideration the precise state of Indian finance, which he could assure the noble Lord—knowing some little about Indian affairs—was in about as bad a condition as it was possible for it to be in.


said, he had not expected the Bill to come on, and, therefore, was not prepared to say all he might have wished. He only desired now to observe that as the noble Lord (Lord Randolph Churchill) became intimate with the affairs of the India Office he would see a great deal that it was desirable to reform in many ways. While desirous of saying nothing against the Indian Council, he could not help thinking that in its case the proverb held good that "too many cooks spoil the broth." No doubt, the Indian Council was composed of men of high character and high standing in regard to commercial matters as well as personally. He thought, however, that the noble Lord would find in connection with these matters a great deal capable of improvement. With regard to the loan which had been recently issued, he believed it had been issued at too low a rate. It was difficult to understand why it had been issued at 85, whilst corresponding transactions were quoted at 89, and 90. The loan had been issued at a rate much below the ordinary credit of India. He could well for the moment venture to criticize these matters in connection with the administration of the noble Lord, seeing that he had so recently taken Office, and that it was impossible for one to make himself familiar with these important operations in such a short time. The late Government had had an offer of 93½ for the first £3,000,000 of Three per Cents. The loan, however, had been sold at something like 94½. The condition of things changed in the India Office as in every other Office, and the India Office must guide themselves by the circumstances of the hour. He was of opinion that it would have been better to have deferred the issue of the loan; but that was a matter he would not enter into. He might say, however, with reference not only to the India Office, but to all the Departments of the Government, that the authorities who had the control of them did not very often act as private individuals or private houses would act in reference to these transactions. It had been stated—he did not know on what authority—that this last issue, part of the £10,000,000, would be sufficient to meet all the requirements arising out of the Report of the Select Committee, and that no more would be required next year. He did not know whether the noble Lord would be able to say whether or not that was so. The Committee had had in view the expenditure of this £ 10,000,000 on the building of railways, which were so important to the interests of India. He knew that £10,000,000 could not be expended in a moment; but he should like to ask if the statement had been put forward on authority that no more than the amount issued would be required for some time, to come? He hoped that was not correct, for he was of opinion that the more rapidly money was spent in India, as elsewhere, the better it would be for the country. He hoped the noble Lord would be able to give them some information on these subjects.


said, be should confine himself to the details of the Bill itself, and should not mix them up with what properly belonged to the Financial Statement of the year, as he had been rather invited to do by the hon. Member for Kirkcaldy (Sir George Campbell) and the hon. Member for Guildford (Mr. Onslow). He should like to refer to the remarks of the hon. Member for Devonport Mr. Puleston) with regard to the loan which had been put before the public a short time ago. The hon. Member complained that the loan was issued at 8.5, and that the price of the Stock—Three per Cent Stock—was somewhat higher. His (Lord Randolph Churchill's) own belief was that the ordinary Stock was at 88 at the time the loan was issued; but on that point he could only say, in the first place, that 85 was the minimum at which the loan was issued, and that it did not follow that it would not be taken up on much better terms. The whole of the details of the loan were the subject of very anxious consideration by the authorities on Indian finance, in consultation with the highest authorities in the City; and their determination—the result of their consultation—had been the fixing of the minimum price of the new loan at 85. That being so, he thought that in all probability the course the financial authorities had adopted was a prudent one; and he did not think the Secretary of State would be justified in departing from their advice, guiding himself, of course, by suggestions which might be made by hon. Members in Committee of that House. That loan having been alluded to, it would be, perhaps, better to state exactly what the loan was. He believed that if it had not been for the change of Government causing great delay in the transaction of Public Business, this loan, in all probability, would not have been issued until the East India Loan Bill had passed the House; but, at the same time, it was not necessarily connected with that Bill. Of that loan it was intended, under the Financial Statement of the year, to devote to public works out of borrowed money 350 lakhs of rupees; but the Government of India had in hand, or available from various sources, to the extent of 08 lakhs, so that it was only necessary at that time to borrow 282 lakhs. That loan, owing to the circumstances of the time, could not have been raised in India, and it was thought proper to call on the Secretary of State to reduce his drawings by borrowing in London a sum equivalent to 282 lakhs of rupees. That had been the intention; but, as hon. Members knew, subsequently there came the great complications on the frontier, complications which were recognized as so serious by the Government of the day in that House and by the Government of the day in India that very large military expenditure was resolved upon. That being so, having payments to make for military purposes, such as the accumulation of stores at Quetta, the drawings of the Secretary of State were still further reduced by two crores of rupees, and that made the sum required £3,800,000. That was the sum it would have been necessary to borrow in London if it had not been that the Budget had provided large balances to be at the disposal of the Government in March, 1886, in order that the Tour per Cent Transfer Loan might be paid off. The Government thought that in order that they might not have to borrow £3,800,000 they might postpone the provision for paying off that loan and utilize the balances, contenting themselves with borrowing £3,500,000. As to the rate of interest, the question was whether the loan should be issued at 3½ per cent or 3 per cent. That question was considered by the late Government and their financial Advisers; and it was thought better in the first place, for the credit of India, as the Indian Government had already borrowed money at 3 per cent, to continue to borrow at that rate, though, perhaps, the actual rate of issue was not quite so favourable as ok would have been. It was supposed that the Three per Cent India Stock being now on the Market in very small quantities it might be advisable to increase the quantity of that Stock. Very few transactions had taken place in it, and it was thought desirable to increase the quantity, so that more transactions in it might take place. It had not been a very popular Stock, and the Indian Government had very properly decided that it would be well to endeavour to make it so. The loan would be applied, in the first place, as to about £2,500,000, to railway purposes—purposes which were undoubtedly contemplated under the East India Loan Bill—and, as to about £1,000,000, to other public works, such as Army charges and the exigencies of local government. The Secretary of State had the power of borrowing £7,000,000 in London without coming to Parliament at all; but that should properly be described as a kind of reserve power of borrowing in order to provide for any sudden emergency, such as war or famine, or circumstances which it was difficult to define, which might arise, and necessitate an immediate demand on a public fund. This loan now issued would undoubtedly obviate the necessity for any further sum being raised this year under the East India Loan Bill; but, at the same time, it was desirable that the Secretary of State should have power to borrow £7,000,000 for sudden emergencies. It was not advisable that the power of the Secretary of State in Council to borrow should be limited to £3,800,000; that, in the opinion of the best authorities, was rather too low a balance of borrowing power. The Government, therefore, proposed to press this Bill upon the attention of the House, because it was a measure based upon a settled and deliberate policy which had been recommended home by the Government of India, and looked upon rather shyly by the India Office, and in consequence referred to a Select Committee of the House. That Committee undoubtedly approved of the main lines of the proposal, and they recommended that the construction of railways might be advantageously pursued with greater activity than in the past, and that money for the construction should, under certain circumstances, be borrowed, whether in London or in India. The Select Committee recommended that the Secretary of State should be made the responsible judge of the amounts that should be borrowed, and as to whether they should be borrowed in India or in London. Thus, in pressing the Bill forward, the Government were acting on the deliberate recommendation of the Select Committee which had considered and reported on the question placed before it—namely, the scheme of the Government of India to construct something like 4,000 miles of railways. He would not weary the House with details; in fact, he should not have gone into the subject so fully if it had not been for the speeches of the hon. Members for Kirkcaldy and Guildford, for the hon. Member for Bolton (Mr. J. K. Cross) had gone into it with the utmost clearness the other day. If the hon. Member for Kirkcaldy would be satisfied, he would strongly advise him, without prolonging this discussion, to turn to The Times report of the 22nd of May, where he would find the whole of the arguments in support of this Bill set out in a speech of the hon. Member for Bolton in such a manner as he was sure would convince him of the soundness of the policy of the Indian Government. However, he (Lord Randolph Churchill) would just point out that, under this Bill, the scheme of the Indian Government to construct 4,000 miles of railways was practically ratified, power being given for the borrowing of the amount of money necessary for the work. But there was a further scheme included within the Bill, and one which was not before the Select Committee, but which was recommended by the Indian Government just about the time that the Report of the Select Committee came out—namely, the scheme for the construction of frontier lines which it was universally admitted were necessary for the security of their Indian Empire. Power was taken to borrow £5,000,000 for the construction of those lines. The Secretary of State would not be justified in assenting to large schemes of railway construction, the progress of which must occupy some years, unless he was reasonably assured that those schemes would be completed with fair rapidity. It was necessary that there should be some guarantee that the means would be at hand for the diligent execution of the works, and that was why the Secretary of State had asked for power to spend a sum of £10,000,000 over a period of four years. Well, he did not know that he could give any further information to the House in regard to the contents of the Bill; but he might, perhaps, allude to one or two remarks which had fallen from the hon. Member for Kirkcaldy (Sir George Campbell), who had asked for further information as to what had been done since the Bill was first introduced. He could not give any figures on that point that would satisfy the hon. Member, for to attempt to do so would be to anticipate the figures of the Indian Budget, and would be somewhat misleading. He thought from what he had seen that day that considerable economies had been effected in several Departments of the Local Government of India, he thought something like £200,000 since the recent military necessities came upon them; but he did not know that there had been any attempt at curtailment in the direction of public works. Well, the hon. Member for Guildford (Mr. Onslow) took a very gloomy view of the finances of India, and warned them that those large expenditures could not go on from year to year, and that the finances of India were in a very precarious condition. He could not at the present moment say whether the hon. Member was right or wrong; but he was inclined to think that when a country could put a large loan of £10,000,000 at 3 per cent upon the Market with a very fair prospect of negotiating it, it did not look as if its finances were in a precarious state. The hon. Member had also said that they might go on, year after year, passing £10,000,000 Loan Bills; but he would point out that that sum was asked for now in order to avoid the necessity of coming to Parliament again next year. He thought that if the House passed this Bill they would not come before them again next year. None of this money would be spent this year. In all probability none of the money raised under this Bill would be drawn until next year. He trusted that if he had not satisfied the House by the explanations he had given that they would grant him their indulgence in view of the very short time he had been in the India Office.


said, there was one subject which he would like to mention to the House, and which had not been mentioned by the noble Lord in the course of the very able exposition of the Bill which he had put forward. There appeared to be some little misapprehension with regard to this Bill, and he desired to point out that it would not have been necessary for the Indian Government to come to the House of Commons for permission to borrow money if it had been determined that this loan, as former loans, should be raised in India. Had this plan been followed, this Bill would never have come before the House of Commons at all. It was only because it was recommended by the Select Committee of the House of Commons as being more economical to borrow in England that the Secretary of State had thought it advisable to adopt that course, and it was only in consequence of that that it was necessary to come to that House. The hon. Member for Guildford (Mr. Onslow) appeared greatly alarmed at the state of the Indian finances, and referred to constant deficits; but if he looked at the accounts for the last 13 years he would find that although there had been two wars, three famines, and a large sum spent in public works, there had been an excess of Revenue over Expenditure of £828,000, besides £4,500,000 being laid aside as an insurance against famine. During those 13 years there had been expended on account of famine, exchange, and war, £58,800,000; on the construction of railway and irrigation works, £9,400,000, and on assignment to provincial balances of £1,600,000, making a total expenditure, from Revenue, of an exceptional character, if they could call exchange exceptional expenditure, of £69,800,000. If they took the figures for the four years ending 1884. they would find that there had been expended on railways £14,450,000, and on irrigation works £4,660,000, making a total of £19,110,000. Of this sum £11,130,000 had been borrowed, so that that proved that they had spent no less a sum than £7,980,000 out of Revenue and balances in four years. Therefore he thought the hon. Member for Guildford (Mr. Onslow) would not have much need for fear about the finances of India at the present time. He did not think, with regard to the Loan Bill, the second reading of which was moved by himself, that it was necessary for him to give any further explanation. The Loan Bill of £10,000,000, to which the hon. Member for Guildford referred, was, as the noble Lord had pointed out, intended to extend over three years at least, and it was also intended that not more than £3,500,000 should be borrowed annually in England, and that would be expended almost entirely on public works. He was very much obliged to his hon. Friend the Member for Devonport (Mr. Puleston) for pointing out that 85 would be a very low figure at which to issue the loan. But 85 was not the figure at which it was to be issued; that was only the minimum at which it could be issued. The hon. Member knew very well that in such cases when the loan was issued more than the minimum was often obtained.


contended that putting the minimum so low had the effect of bringing down the Market to a much lower figure than it would be if the minimum were higher.


said, that was a matter of opinion, and was not agreed to by some of the very highest financial authorities in the country. He had tried to explain the circumstances under which the loan was determined upon, and he did not think that further explanation was necessary.

Question put, and agreed to.

Bill considered in Committee. (In the Committee.)

Clauses 1 to 3, inclusive, agreed to.

Clause 4 (As to payment of principal and interest on debentures).


said he would like to ask one question. In this clause there was not a provision in regard to the Secretary of State in Council exercising a discretionary power in respect to the rate of interest on debentures, while in Clause 6 such a discretionary power was expressly provided for?


understood that Clause 4 was copied from a clause in the Act of 1879, which had been very carefully considered by the House at the time. Clause 6 was also copied, word for word, from the Act of 1879. He presumed that the point raised by the hon. and learned Member had been fully considered on that occasion, and it was thought best to put the matter as it stood now.

Clause agreed to.

Clauses 5 to 14, inclusive, agreed to.

On Motion of Lord RANDOLPH CHURCHILL, Clause 15 omitted.

Bill reported; as amended, to be considered To-morrow.