That it is expedient to authorise the issue out of the Consolidated Fund of such further sums, not exceeding in the whole two million and fifty thousand pounds, as are required for the acquisition of share or loan capital of the Anglo-Persian Oil Company; to authorise the Treasury to borrow money by the creation of securities for the issue of such sums or the repayment thereof, the principal of and interest on any such securities to be charged on the Consolidated Fund; and to authorise this payment into the Exchequer and the application of dividends or interest on the capital acquired.
§ Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
§ The FINANCIAL SECRETARY to the TREASURY (Mr. Baldwin)
In passing the Committee stage at an early hour, I gave an undertaking that on the Report stage I would give a brief explanation of this Resolution. The Bill to be brought in on the Resolution is an Amendment of the Anglo-Persian Oil Company (Acquisition of Capital) Act of 1914, and hon. Members who are familiar with that Act will remember the circumstances in which it was passed. It was at a time when the Persian oilfield was being developed, and simultaneously with that the use of oil was rapidly passing from the experimental stage. The Admiralty were very anxious that, if possible, one of the potentially great oilfields of the world should be not only worked by British capital, but be actually controlled by the Government, holding sufficient capital in that business to give it the deciding voice in the policy. Under those circumstances a sum of £2,200,000 1759 was taken from the Old Sinking Fund. The right hon. Baronet the Member for the City (Sir F. Banbury) led the Opposition on that occasion and I had the honour of following him into the Lobby, but circumstances have changed since then. We know two things which we did not know for certain then. We know this is a great oilfield and we know that oil fuel has come to stay. The Anglo-Persian Company has been successful beyond, I should imagine, the hopes of its most ardent admirers in the old days. So much has the business developed that they have had to raise a considerable amount of fresh capital, and the question, of course, then arose was the Government to apply for enough of that new issue of capital to still maintain its controlling interest in the Company, or was it to give up the position it had held and run the risk of the shares being otherwise taken up and acquired by various people and by various interests, and that thus we should lose the position we had acquired and held? Apart from that, although I should never be one to advocate the investment of public money in a company for the sake of gain and only on the ground of policy, yet I would remind the House that there is every prospect of this Anglo-Persian investment being an extremely remunerative one. Although during the first few years of the company's existence it paid nothing on the ordinary shares, last year and this year it paid dividends of 10 per cent. free of tax, and the prospects of the company in future are, I think, very bright. I do not know that there is anything more I need say at this stage, although I shall be very pleased to answer any questions, if capable of doing so. I would remind the House that this is only the Report stage of the Finance Resolution. On the Second Reading of the Bill it will be open to discuss the question in much wider measure. Hon. Members may ask what is the urgency of getting this Bill through. I am very sorry it has had to be done in a hurry, but we gave notice to the House in answer to a question by the hon. Member for Newcastle East (Major Barnes) on the 3rd of this month of the Government's intention in this matter, and the application for the Government portion of the shares has to be sent in at once. The prospectus came out about ten days ago, I think, and I was particularly anxious not 1760 to make formal application until, at any rate, we saw -that the policy which we proposed received the assent of Parliament.
§ Sir F. BANBURY
My hon. Friend has quite rightly said that in the year 1914 there was considerable opposition to this measure, and he has also said that at that time he followed me into the Lobby. He says positions have changed. They have I remain on the Back Bench and still hold the opinion I then held. My hon. Friend has been promoted to the Front Bench, which has apparently changed his opinions. I would like the hon. Gentleman to answer certain questions. He says that this Resolution if passed will be followed by a Bill, and that it would be possible on the Second Reading to discuss the policy embodied in that Bill. Shall we have an opportunity of discussing that Bill, and, if so, will it be 5 or 6 o'clock in the morning or about 5 or 6 in the evening, because it makes a considerable difference? If the Government are going to suspend the Eleven O'clock Rule and take most of the measures on the Paper, it may be that the discussion promised by my hon. Friend will come on when the majority of the Members are in bed. That is not a very great opportunity to discuss measures of this sort, and, therefore, I hope he will give an undertaking that the Second Reading of the Bill, at any rate, shall be brought on at a time when Members are able to discuss it with all their faculties intact. My hon. Friend says that in 1914 this House decided that it was in the interests of the country to acquire a controlling position in this company. I think the present Secretary of State for War, who was at that time First Lord of the Admiralty, was principally responsible for bringing in the measure, and I believe one of the arguments was that there were to be pipes conveyed along a road of great length. We asked how the road was to be guarded, and what happened in the War I do not know, whether or not we got the oil, but, as I understand from my hon. Friend, that no dividend was paid until quite recently, it rather looks as if during the War we did not get the oil we thought we were going to get. That is an important consideration in considering this Resolution. The Resolution says thatSuch further sums, not exceeding in the whole two million and fifty thousand pounds, as are required for the acquisition of share or loan capital.1761 I have had some little experience of the City, and I have yet to learn—I may be wrong—that the holding of loan capital in a company gives you any voice in the management of that company. Therefore, I would like to know why the words "or loan" are put in? Speaking generally, it is quite a wrong thing for the Government to take shares in any company. It is quite true that years and years ago the late Lord Beaconsfield did take shares in the Suez Canal Company, and that that policy was resisted by the then Liberal Government, and especially by Mr. Gladstone, but that that resistance was wrong, that, in the first place, the acquisition of those shares was commercially a very successful operation, and secondly, it led to the control of a great country on our road to India. That was a very exceptional case, and I do not think it ought to be quoted as a precedent. This is merely a case in which the Government goes into partnership with certain very estimable people—I am sure I do not know who they are—who have invested their money in a legitimate undertaking—the discovery of oil in Persia.
I venture to say that if the Government are continually going to invest money in undertakings of this sort, the result will be that the Government will become shareholders in all kinds of companies. I do not think that is a policy to be followed. I think it is inevitable—I have often said so in this House—that when once we begin investing money in anything, or authorising the expenditure of money, we are always told at the beginning that all that is necessary is a certain sum that is going to do wonders, but after a certain number of years we are told that the sum is not sufficient, and that in order to retain our interest we must go wrong again, and invest a certain amount more. That is exactly what has happened in this case, and I should like to know whether this is the limit, or how much more money is going to be expended in the acquisition of share capital in this company?
Supposing this company is a great success, it may be that it will necessitate a very large additional expenditure of capital. Surely that ought to be a matter for private enterprise, and not for the Government. Having originally subscribed a certain amount of money which had the effect of starting the company, would it not be better to say, "Very well, we have started this company; it 1762 has paid us 10 per cent. free of Income Tax"—I do not know whether the Government pay Income Tax on their own undertakings, but it has paid 10 per cent., which is not a bad investment, although it will not bring the Government under the Profiteeripg Act—"We have started this company on the way, and have received a very fair return on our investment, and we will now leave the company." Personally, I think it would be the right course. But if my hon. Friend will give me some explanation why "loan" is included in the Resolution—because I do not think anyone in the House will question my statement when I say that the acquisition of loan capital does not give you any control over the company—if he will give me some explanation of that, and if my Noble Friend (Lord E. Talbot) will give me some undertaking that the Second Reading of this Bill will be taken at a normal hour, then possibly we may not persist in our objection at the present moment.
Sir J. D. REES
It has escaped my right hon. Friend, who is so keen a man of busines, that this is the very best investment any British Government has made. Neither has my hon. Friend, who dealt with the case in a short speech, pointed out the enormous appreciation of capital value of the £2,000,000 which the British Government invested.
§ Sir F. BANBURY
My objection is to the principle. I do not think that it makes it right for the Government to speculate because they have made a good speculation. My objection is to the Government entering into a private enterprise or mixing themselves up with a private enterprise and whether a profit or loss is made does not enter into the consideration of the question. It is a question of principle, and not of money.
Sir J. D. REES
But my right hon. Friend would prefer, if the Government made a speculation, that it should be a good speculation; and that it is. But I submit this was not a speculation. I remember what happened in 1914 very well. The question then was the supply of fuel for the Navy—a great Imperial question. It was not a money speculation, but if in the course of action taken for the British Navy, and for a great Imperial purpose, the Government also happens to make a large profit, which is extremely unlike most of the operations originating in this House, it does not 1763 seem to me to be a great additional reason for reproving the action they then took, because the British taxpayer has gained largely by this operation. I confess it is rarely that one sees in this House any operation in which the British taxpayer is exposed to any other fate than being ground down to powder and bled white. These are extremely relevant facts. There is also the fact that my right hon. Friend left entirely out of consideration that this investment gives the British Government a prepondering influence in Persia. Apart from the trade of Persia, this is a most important link between the Mother country and our Indian Empire.
The right hon. Baronet referred to the words "loan capital." I understand this simply refers to the fact of an issue of debentures as well as share capital. If the Government did not take their share of the new issue they would lose that preponderating control which they now have, to the detriment of the British taxpayer. I happen to know, as one with a lifelong interest in Persia, that there was oil got there before and during the War. The damage done to the pipe-lines by the nomadic tribes in Persia was not, I believe, an extremely serious matter. The prospective cost of putting the matter right is between £300,000 and £400,000, which will most likely be recovered from the Persian Government. The right hon. Gentleman said if this was not a success there might be a further issue of capital. There was never a greater success. The capital of the association is enormous. The interest paid now is very large. If the Government had not put up the amount with which the Resolution deals they would have lost that position they have gained in this enterprise which the British Government has never gained in any other commercial concern in the world. This is a far better investment for the British taxpayer than was that of Lord Beaconsfield in the Suez Canal. The right hon. Baronet also overlooked the fact that there is one of the most able business men in the country representing the Government upon this Board—Lord Inchcape. It is extremely improbable that the interests of the British taxpayer and of the British Government will not receive complete justice in such competent hands.
§ Colonel GRETTON
I was one of those who opposed this Resolution in 1914, because in those days the whole position was speculative in the highest degree. The 1764 situation has altered completely. The Persian oilfield, I understand, is situated on the frontier between Persia and the old Empire of Turkey, in a sort of no man's land, where neither Power held any real control over the population.
§ Colonel GRETTON
It is quite true, as the hon. Gentleman says, that this is in Persia, or on the Persian side of the frontier. But in one of the parts of the country the pipe-line of some hundreds of miles has been at the mercy of the tribes whom no power controls. The Persian oilfield ought to extend into Mesopotamia, so that one Power at any rate should have control over an oilfield of great potentiality, and quite free from the dangers existing on the Persian side of the frontier. The Government should retain British influence on the Turkish side of the oilfield. This is really a question of high policy. The British Navy may in the future depend very largely on oil fuel and clearly we must have a larger measure of control to secure a supply for the Navy. I think we might consent to pass this Resolution and afterwards examine this question more closely on the Bill.
This is an investment of over £2,000,000 and it is one which entails an insurance afterwards in the way of advances to Persia this year of £2,068,000, and therefore we have to consider this amount and take into account the sum spent in protecting those rights. This policy in Persia may lead to a vicious circle, but that question may be discussed on the Bill. I should like to know whether this measure is likely to be a preliminary to a further investment in oil interests or whether anything of this sort is contemplated?
§ Colonel P. WILLIAMS
Will the hon. Gentleman tell us whether the business has extended very considerably? Is it the same undertaking? Is the Anglo-Persian Oil Company exploring in other new fields or sticking to the undertaking which they originally acquired?
§ Mr. ACLAND
Before we pass this Resolution I must enter a caveat on one 1765 point. It does not seem quite fair that as matter of principle when we have put money into a concern for some great Imperial necessity, as was the case in 1914, to make sure of a certain supply of oil, that we should be compelled for all future time, as the company expands its capital, to acquire a larger amount in order to keep our balance of control over the operations of the company. I do not think that principle ought to be admitted.
§ Mr. BALDWIN
With reference to what the right hon. Gentleman the Member for Camborne (Mr. Acland) has just said, of course in this matter we are merely following the policy of the Government of which he was a very distinguished member, and on future occasions when the Government of the day may think it desirable in the event of further extensions of capital they will have to get the consent of Parliament just as we are getting it today. Hon. Members will see that the sum in the Resolution is strictly limited to £2,050,000. In answer to the hon. and gallant Member (Colonel Williams), and the right hon. Baronet (Sir F. Banbury), I may say that the £2,050,000 is for ordinary shares only. When any right hon. Friend asks me what is the meaning of "loan" capital in the connection in which the word is used, I must tell him that I am not a draftsman, and I never do understand draftsmen's phrases. I have no idea why the word is put in except that it occurs in the 1914 Act. If it should turn out to be unnecessary, I shall have no objection to taking it out.
§ Mr. BALDWIN
I do not think, with regard to what the hon. and gallant Member for Leyton (Lieut.-Colonel Malone) has said, that there is any connection between the investments that the Government have made in this company and the money being spent in pursuance of quite other matters. The hon. and gallant Member also asked me about amalgamations and the policy of the company. I am afraid that I have no knowledge at all on those subjects. Whatever may be contemplated at any time as regards the policy of this company it must always be remembered that we have the controlling interest and have two representatives of the British Government on the Board. The directors are Lord Inchcape and Sir Frederick Black. As to the time when the Second Reading of the Bill will be taken, I think I am in a position to give an assurance that it will be 1766 taken when most of the Members of the House are about. Probably, it will be tomorrow.
§ Mr. BALDWIN
Certainly, one stage in one day. I do express my regret that, owing to the exigencies of the situation, we have to push this Bill on, but we are near the end of the Session, and it is essential that the Royal Assent should be obtained to it.
Question put, and agreed to.
Ordered, That a Bill be brought in upon the said Resolution, and that Mr. Chancellor of the Exchequer and Mr. Baldwin do prepare and bring it in.
ANGLO-PERSIAN OIL COMPANY [CAPITAL ACQUISITION] BILL—"to amend the Anglo-Persian Oil Company (Acquisition of Capital) Act, 1914," presented accordingly, and read the first time; to be read a second time To-morrow, and to be printed. [Bill 239.]