§ Order for Second Reading read.
§ The UNDER-SECRETARY OF STATE FOR INDIA (Earl Winterton)
I beg to move, "That the Bill be now read a Second time."
I do not propose to detain the House very long, because I have already explained, on the Committee stage of the Financial Resolution, why the Secretary of State requires Parliamentary sanction before he may borrow money in the United Kingdom on behalf of the Government of India, and we had comparatively 805 full debates on the same subject last year. I took the opportunity on the Committee stage of explaining why it was necessary, seeing it is only a little more than a year ago we came to Parliament for powers, to ask for additional powers. Further, the details of the powers for which the Secretary of State asks, and the reasons for which he asks them, are fully set out in the Memorandum to the Bill, and I shall be glad at the close of the debate to answer any questions which may be put to me. Perhaps, however, I ought to refer in only a word or so to the general financial position in India, and to the position as regards the development of railways, which, indeed, I promised to do on the Committee stage on the Financial Resolution. I do not think it is necessary to go at any great length into the financial position, as I have already explained it in great detail in the debates on the Estimates. The salient point is the very much more satisfactory state of affairs now existing as compared with a year ago. The Budget has been balanced, and the effect on Indian credit of that, as I have already pointed out, is evidenced by the great success with which the Indian Loan was recently floated and by the high prices at which Indian Stocks stand in the market. With regard to the railways, the 1923–4 Estimates allow for a net profit of 3½ crores, after taking credit for economies in the working expenses of the railways equal to those recommended by the Inchcape Committee.
Taking a conservative view of the cost of future borrowings, that Committee with whose estimate I think we may safely agree, considered that we might look forward eventually to an average net profit on the railways of 8 crores. Since last year's Bill was introduced the work of improving the railways has been very energetically proceeded with, and during the current year it is hoped to devote no less than 12 crores to the provision of rolling stock, 7 crores to the rebuilding of station yards and other works of that kind, and 3½ crores to doubling and quadrupling lines and strengthening bridges. The work of electrifying the great Indian Peninsula Railway in its suburban branches has been begun, and when it is completed it will, in conjunction with the Bombay section of the Bombay-Baroda and Central India Railway, materially relieve the congestion in 806 Bombay by enabling city workers to live further out. It will also produce additional revenue for the railways. There has been a decline, taking the railways as a whole, in the working expenses in 1922, and we expect a further decline this year.
A point was raised last year by a former hon. Member as to the provision being made for the poorer classes of passengers. I can only say that progress has been made in that direction, and that more facilities are being provided for third-class passengers. Further, the formation of central and local councils as recommended by the Acworth Committee, will, I think, bring the railway administration into closer touch with public needs and help to popularise railway development. I think this is a satisfactory record of progress which I have sketched out. I have put it to the House as briefly as possible, for it speaks for itself, and does not call for any lengthened explanation by me. There are just two other points I desire to deal with exceedingly briefly. It is quite obvious when the House is asked to sanction a proposal of this kind to permit the Government of India to borrow large sums of money in the British market that hon. Members should be entitled to inquire whether the conditions of public order in India are such as to justify any British investor in expecting as safe an investment for his money as heretofore. I should like to answer that question. In spite of what was stated in yesterday's Debate, there is a vast improvement in political affairs in India and a consequent improvement in public order. There seem to be still some hon. Members who think that things are far worse than they are. One hon. Member, in fact, used the term about the condition of the Punjab that it was one of complete anarchy.
There are critics in this country, and some in India as well, who simply regard India as a disturbed peninsula in a peaceful and prosperous continent. The exact opposite is the case. Since 1914 Asia has suffered a violent eruption scarcely less great than that in Europe. Compared with 1914 it would be difficult to imagine a greater change than that which has come over two great Empires in Asia, Russia in Asia and China. It is bound to be the case, as is the case in so many countries in Europe, that the general psychological effect of the War 807 and the general unrest on the Continent as a whole have contributed to unrest in India. I think that is obvious. Critics in this country, however, fail to take into account the immense difference in conditions in India to-day as compared with 18 months or two years ago. I do not think that either the Government of India, or its executive head, or the Secretary of State have received sufficient credit from the public for the great improvement that has been brought about. It is a delicate subject to deal with, but I say deliberately that while my Noble Friend and the Governor-General did not take over an easy legacy from their predecessor, there is nothing whatever to alarm any investor in any country about putting his money into Indian loans.
I would like to turn to a point which was raised by the hon. Member for Farnham (Mr. A. M. Samuel) on the Committee stage of the Resolution. This is a question in which the hon. Gentleman takes great interest. He raised it last year and I then gave him an answer and promised a further answer this year. He asked whether it would be suitable to remove by legislation all restrictions on the borrowing powers of the Secretary of State. That is not a very simple question to answer. I admit there is a certain anomaly in the present position, but I should like to explain as clearly as possible what that position is. In this country Indian Stocks are not guaranteed by Parliament. It may be urged that the Dominion Governments which, in some respects, and only in some respects, occupy an analogous position, do not require statutory authority for their borrowings. But India is not yet a Dominion, and what the House has to remember is that as regards India the Secretary of State, as the Member of the Government responsible for India, has a different responsibility with regard to Indian finance, from that which devolves upon the Secretary of State for the Colonies in respect of Dominions finance. The Secretary of State for India is responsible to Parliament for the sound conduct of Indian finance in all its aspects, and so long as he remains responsible there is good reason why Parliament should desire to keep closely in touch with questions so fundamental as 808 the raising of debt in this country. Further, in reply to the point raised by the hon. Member for Farnham—and I am glad to see he is now coming into the House, so that he will be able to follow my argument—of the altered condition of India to-day as compared with that prior to the Bill of 1919, I would point out that, so far as the central finances of the Government of India are concerned, the Act of 1919 did not relieve the Secretary of State for India of any part of his responsibility. Moreover, as the hon. Gentleman pointed out during the Committee stage, India Stocks "issued by the Secretary of State for India in Council under the authority of Act of Parliament and charged on the Revenue of India," are trustee securities under the Trustee Act, 1893, and I am advised that, if the authority of Parliament for the borrowings of the Secretary of State were removed, further provision would have to be made to enable these Stocks and future issues to remain in the trustee category. Looking at the matter, therefore, in all its bearings, I do into think that this House should be in any hurry to make such an alteration.
There is one further point in regard to this matter which, as I have said, is of some importance. The constitutional position of India is at present, avowedly, transitional, and I think that, if any change in the existing situation as regards these Stocks and their trustee character were proposed, it would only disturb the investing public. They would be led to think that there was some alteration which, in fact, there was not, and it would be particularly undesirable at a time when Indian securities are at a better price, when there is a demand for them, and when, as we believe, there is a very good opportunity to offer to the British lender in India, and India is likely to be a borrower on a large scale. I go further, and say that I think the only appropriate time to remove the existing restrictions on Indian Government borrowing in this country would be when, if it ever happens, it is decided, after full deliberation, to relieve the Secretary of State for India from his responsibility in regard both to Indian sterling debt and to Indian finance generally. I need hardly say that there is no intention of making that alteration so far as the Government are concerned, 809 and, further, it would have to be dealt with as part of a large constitutional scheme, and not as a part of financial legislation. I hope that I have explained all the different points of the Bill, and that the House will be prepared to give it a Second Reading.
§ Mr. A. M. SAMUEL
May I first thank my Noble Friend for having so kindly explained to me that which I did not ask about? I do not want to be funny, but that was not the point that I raised at all. It appears to me, if I may go over the ground again, that the Secretary of State comes down and asks, on behalf of the Indian Government, for permission to raise a loan in Britain. I need hardly say that I have always supported these loans, and shall do all that I can to help this one, but I do not understand why the Noble Lord comes down and asks this permission, now that the Indian Budget is entirely out of our control—
§ Earl WINTERTON
I think I must reply to what the hon. Member has just said. When he is good enough to say that I have not answered his question, he, perhaps, fails to realise that I dealt with his point before he came in.
§ Mr. SAMUEL
I beg my Noble Friend's pardon. I am sorry that I was not in the House at the time, so I will take what he said as being satisfactory. Much as I can support his views, however, there are one or two points in the Bill which, as it appears to me, require consideration. Clause 4 gives power to raise £15,000,000 for the general purposes of the Government of India. I hope that this is not for the purpose of balancing the Budget. What is it for? Is it proposed to borrow this £15,000,000 instead of raising money by taxation, or is it for purposes which are yet undisclosed? Again, Clause 7 provides that no Stamp Duties whatsoever shall be charged on the transfer of any of the capital stocks issued by the Government of India. I do not know why the Government of India, when it raises money here, should be allowed to do so without paying Stamp Duties to the English Revenue. If an English Municipal Corporation, for instance, raises money in London, it has to pay or compound for Stamp Duty to the Revenue on the transfer by inscription and the same is true in the case of any of the self-governing Colonies which raise money in England. When they do so, they have to 810 pay or compound for Stamp Duty on the transfers of their inscribed stock. I raised this point last year. There may be justification for omitting to charge to India Stamp Duties in this case, and, if there is, I am sure my Noble Friend will tell us what it is.
I am very glad that this money is going to be raised, whether it be in England or India, for the purposes of developing the prosperity of India. I only wish we could find more money for India. I only wish that the policy of developing railways and irrigation in India were carried a little further forward. My Noble Friend referred to the fact that public opinion was favourable towards these Indian loans. I wish it were even more favourable to them here, for the people of this country, during the past five or ten years, have been frightened of Indian investments. If anyone went to a stockbroker and said, "I have £1,000 to invest; I think I will buy Indian railways or Government stock," the stockbroker would often say, "Well, you know there is unrest in India; I do not know whether you are wise." During the last 20 or 30 years British money has been driven out of India to Mexico, Argentina, Brazil, into municipal and provincial bonds of South American States to the disadvantage of the popularity of Indian loans. But if people had put that money into India, I am certain that many a man would be better off at the present day than he is after investing in South and Central America, where there is unrest and often dishonesty. I can only speak as experience guides me, but I do believe in the real honesty of Indian investments, especially so far as those under the control of the Indian Government are concerned, and I say, whenever I have an opportunity of talking about the matter, that English people should be more prepared, more eager, to lend money to India, for the reason I have just pointed out, namely, that it is much safer in India than in South and Central America, and that India is the best outlet for British savings outside the British Isles. It is better and safer to lend to India than lending for the development of Mexico, Guatemala, and other States and provincial cities of South and Central America. As has often been said, we here are all Members for India, and we desire, above all, to carry out our duty 811 of helping the people of India as much as we can.
After the invention of the alphabet, the greatest factor in the advancement of civilisation is the making and extension of roads and communications, and most of this money is for the purpose of broadening out the means of communication, by canals and railways, throughout India. The hon. Member for Taunton (Mr. Simpson) said yesterday that the whole of Indian life is a gamble on the rainfall. We cannot control the supply of rain, but there is one thing that this money will do, and that is why I am eager and anxious that this Bill should go through. It is by irrigation and storage of rain, by broadening out railway communications, that we can defeat, in some degree, the ill effects of deficient rainfall, by enabling grain to be transferred from a district of plenty to a district in which there is a scarcity. There is another side to the question, namely, that most of the irrigation works have more than paid what they cost, but that is as nothing compared with the protection against famine to large tracts of country. That wonderful Ganges canal, which was put down by Sir Proby Cautley, the uncle of my hon. and learned Friend the Member for East Grinstead (Mr. Cautley), has paid for itself over and over again, and has irrigated and defied famine in a district half as big as Europe. What has been the result of these irrigation works in the Punjab, in the Chenah and Jhelum districts? It has been the disappearance of famine, it has been to enable the native to produce more raw material and more food for himself and abundant and cheaper supplies for us; and even on non-altruistic grounds it is good, because the more food and raw material produced as the result of this extension of railways and communications, the more the Indian native has, more to sell and more to spend. Now, the first thing he does when he has money to spend, is to buy machinery and cotton, and the place he comes to for that is England.
§ Mr. SAMUEL
All the hon. Member for Royton can say is that there are certain duties on cotton with which I do not 812 want to deal now, but which may operate against that—
§ Mr. SAMUEL
—which will keep the Indian native from buying cotton in Lancashire; but, granted that what the hon. Member says is correct, if you increase the trade of India, even with Japan, it would mean that Japan would have a better purchasing power to come over here and buy here what she needs. Thus is trade stimulated directly or indirectly. The mystical agency of exchange always operates somehow. If we cannot get direct payment for Lancashire for our cottons, it must be remembered that India will have greater ability to buy goods elsewhere, and those who sell the goods have an opportunity of spending their money in different parts of the world, and we profit sooner or later. I hope, after the illuminating and splendid discussion yesterday, investors of this country will pay more attention to the financial needs of India. I hope that bankers and stockbrokers will again turn a friendly eye to the investment of English money in India and advise their clients that they can do better by putting their money under the control and guidance of the Indian Government and Indian railway companies than by putting it into much less secure investments and speculations in other parts of the non-British world. I hope I have not said anything to vex the Under-Secretary. I wish the Bill well and I hope it may pass.
Major-General Sir R. HUTCHISON
I think we should do anything we can to enable India to extend her railways and improve her communications. The railways need a tremendous amount of improvement and extension. As regards the actual money this Bill is empowered to draw—£50,000,000—it seems to me that we ought to add some covering condition to allowing India to come to the best market in the world to get money. We ought to lay down that a certain percentage ought to be spent in this country. I believe it is not unknown for India to borrow money in this country and to invest it on the Continent. In the building of railway locomotives, rails and other material are required and I think the House would do well to put in a covering Clause to say 813 that at least 75 per cent. should be spent in this country.
§ Earl WINTERTON
The hon. and gallent Gentleman may like to know that 95 per cent. is spent in this country.
§ Sir R. HUTCHISON
I am very glad to hear what the Noble Lord says, and am only too glad it removes my objection. But I think something ought to be laid down in the Bill.
§ Sir F. BANBURY
Does not the hon. and gallant Gentleman think that would have the effect at once of raising prices if it were known there was an obligation to buy in England?
§ Sir R. HUTCHISON
Surely the right hon. Baronet knows that it is good for the workmen of this country if orders for locomotives, rails and such things are placed in this country instead of Belgium or elsewhere. With regard to the £15,000,000 which is empowered in Clause 4 it seems to me that we are encouraging the Government of India to balance their Budget by borrowing in this market. Whether that is the intention of the Government or not I do not know but it looks as if the Government of India might use this £15,000,000 to replace money which otherwise ought to come out of the taxpayers in India. I wish the Bill well and I only hope my fear that the £50,000,000 will not be spent in this country will be removed.
§ 12 N.
§ Sir W. SUGDEN
I know that in many quarters of the House it is generally considered, when the positions of India and Lancashire are brought together—it is usually the "wicked" Lancashire point of view, so it is considered in some quarters of the House—when Lancashire endeavours to show cause why the workpeople in Lancashire can work one week in four in order to enable certain wealthy Indians to exploit their cheap labour with cheap money from this country, that we should sit quietly and acquiescent in respect to the position that sometimes arises by this cheap money. What is the position exactly? The Government of India will come into the English money market, not for what the hon. and gallant Gentleman says, for £50,000,000, but for £65,000,000. They will come into our money market, 814 with an advanced bank rate now, which will have the inevitable effect of still lifting the price of money upon which we must exist in Lancashire, with an outlook of working one week in four for the employés. It is expected that we people who come from Lancashire to endeavour to protect the interests of the workers in Lancashire should sit quietly and acquiesce and support and applaud the position? Let us have a clear and definite understanding. We desire and wish the working-class Indians—not a few millionaire Bombay millowners—to have their opportunity in respect to the highest possible standard of life it is possible to give them, for we understand and know that the mysticism of the East is essential and necessary for the practicality of the West. We can bow and give full credence to the wonderful contribution which India has given to the West. When we understand and comprehend that we in Lancashire, as a cotton industry and a textile trade, contribute more to the taxes of this country than any other industry, and, I believe, any other county, we think we deserve some consideration as to how we should subsidise (by Governmental backing of this loan), and make more intense the competition of certain sections of these Indians to the detriment of the cotton-worker taxpayers in this country.
Something has been said about where and how India is buying, and where and how India is spending her money. Let me give a few figures in respect to the cotton trade. Of India's import of cotton yarn and twist in the nine months, April to December, 1922, amounting to 45,722,338 lbs., the United Kingdom supplied 27,633,756 lbs. and Japan 16,877,468 lbs. Japan has made marked progress in the cotton goods trade, increasing its shipments to India from a total of 9,000,000 yards in 1913–14, to 170,000,000 yards in 1920–21. This position was attained largely as a result of close co-operation between the Japanese Government, banks, merchants and manufacturers during and following the War, so that, at any rate, whilst our looms and our spindles are resting in Lancashire, India is enormously increasing her purchases from Japan and reducing them from Lancashire. We have to-day one of the most difficult times in the history of the cotton trade during the last 100 years. We in this House are going to make it even more difficult by raising the price of the 815 money we desire to run our mills in order to assist a few millionaires in India—not the workers in India, mark you, but a few, and some of them European millionaires as well, who have settled in India and are exploiting us. I shall support His Majesty's Government because, as I said the other day, the Government have helped the Lancashire cotton trade in certain ways in regard to the growth of cotton, irrigation works in the Sudan, and also in India, and by giving place for the 6d. per bale levy, but I cannot give a silent vote on this matter. Then I consider the intense competition which the extremely low-priced labour of India is causing to us in Lancashire—labour under conditions which no civilised country would allow its workers to be employed.
§ Mr. A. M. SAMUEL
Will not the increased wealth of India conduce to better trade in Lancashire? Are we to understand that we do little or no trade in cotton with India? If we do substantial trade with India, will not the increased prosperity of India mean increased prosperity for Lancashire?
§ Sir W. SUGDEN
I will now give figures showing exactly the competition of India with us in markets which were ours before we began to subsidise cheap money—via Government Trustee Stock—in India. In regard to the production of cotton piece goods by the Indian mills, the pre-war average was 854,141,000 yards of grey and bleached piece goods, and that had risen in 1921–22 to 1,284,752,000 yards, an advance of about 50 per cent. between 1914 and 1922, and passing into our markets. With regard to export of Indian coloured, printed or dyed piece goods, the prewar average was 42,384,000 yards, which had risen to 135,730,000 yards in 1921–22, or over three times as much.
§ Earl WINTERTON
On a point of Order. May I point out that this Bill has nothing whatever to do with the conditions of the cotton industry in Lancashire or in any other part of this country? The hon. Member says that we are subsidising cheap money for Indian cotton mills. This has nothing to do with any cotton mills in India. The money required to be borrowed is for general, railway, and irrigation purposes. The hon. Member's argument, as he has stated it, cannot be in order on 816 this Bill. Anxious as I am to answer it, I should not be in order in doing so.
§ Mr. SPEAKER
I have listened carefully, and I was wondering whether the speech of the hon. Member was one of those "lost leaders" that ought to have been given yesterday. It would have seemed more appropriate on yesterday's discussion. The hon. Member is quite entitled to discuss whether or not railway development and irrigation is to the detriment of Lancashire, or otherwise.
§ Sir W. SUGDEN
I accept your ruling, Mr. Speaker, and also I understand the view point of the Noble Lord. I declare that cheap money to India means dearer money to Lancashire, and cheaper transport in India means more competitive cotton prices to Lancashire. We have met the Noble Lord before in regard to these matters as well as on Import and Excise Duties. When I have dealt with the illegitimate competition which this money exercises against a hardly-pressed class in Lancashire, I shall show the uncertainty in English cotton spinning centres whereby and wherewith the Indian Government, through the competition of Import and Export Duties, in March, 1922, India threatened us with huge increases.
§ Sir W. SUGDEN
Then I will content myself by passing to the China trade, to show again how the Indians are competing with us by reason of the cheap money which we are providing, and which would not be forthcoming as cheaply except by Governmental backing and by the sweated low-priced labour in Indian cotton mills. By these moneys being provided for the railways, transport and other purposes, the product of the Indian mills is cheapened and competes with us in our own markets, for we have a higher sense of comfort for our workers, are paying heavy taxes, and sometimes facing unbending inspectors of taxes as well. We in Lancashire are being compelled to work one week in four as a result of this competition. I ask the House to listen while I give figures which will show how the Indian export trade to China has been proceeding from 1913 to 1922. Previously to 1913, we in Lancashire supplied the majority of the world's needs in these goods. In 1913–14 the export of yarn from India was one-half 817 what it is to-day. [An HON. MEMBER: "From what authority is the hon. Member quoting?"] I am quoting from the "International Cotton Bulletin," which is an accepted journal in the cotton industry.
No one can accuse me of taking a narrow or stunted point of view in regard to the progress of the daughter nations of the great British Commonwealth, but I do say that charity begins at home. We have to consider the uncertainty of the rulership in India in respect of power. It must be thoroughly understood that India to-day has enormous and very proper power, and I acquiesce in such power, provided that the electorate is of such an educated type as to be able to take that broad and honourable view which education gives to an electorate in regard to the utilisation of the powers which they possess. We Lancashire folk are contributing to the establishing of colleges to give the eastern textile workers an opportunity of textile education and instruction in the use of machinery, and we are doing that, mark you, by money from the cotton trade in Lancashire. I would ask hon. Members to realise, therefore, that it is no dog-in-the-manger policy that we are pursuing in Lancashire, but we do plead for support and practical sympathy with respect to the cheap money, low-priced and sweated labour by means of which India is taking some of the markets from Lancashire. The Government must understand that, in giving facilities for India to come into our money market in London, it is putting extra cost on the price of the money which we have to use in connection with one of the highest and most delicately financed industries in the country.
§ Mr. J. HOPE SIMPSON
I regret that I was not in time to hear the speech of the Noble Lord. The hon. Member who has just sat down has made such a provocative speech that it would ill become us on this side to sit quiet. If we followed his argument to its logical, conclusion, it would be incumbent on the Government to prevent any foreign loans being raised in the home market. He wants to keep the rate of interest low. He believes that by foreign loans competing with British loans in the home market the rate of interest rises. Therefore, logically, he would exclude foreign loans from the London market altogether. Surely it is one of the legitimate causes of triumph to ourselves, that since the War London 818 has regained its position as the money market of the world. The hon. Member did not object to a loan being raised for Austria the other day on London. Why should he object in the case of India? His argument seems to me absurd. He supports it by the suggestion that the cotton trade should have a special preference. Why should it get it any more than any other trade? There are other trades in India which compete 'with British trade. There is the nascent Indian iron and steel trade, which will be supported even more and more by loans such as we are proposing to make.
Of course it is true that the hon. Member speaks for a particular trade which he represents, but the arguments seems to be quite legitimate that if we have a prosperous India and India can borrow money more cheaply in London and spend it it is all to the good. They are going to spend a large amount of money which will mean an enormous increase in the production of wheat. They will export that, and will not want money for it, but goods which they will get from this country, so that that will be all the better for our trade. The thing seems to me perfectly simple. The railways of the Indian Government must have the money. The hon. Gentleman suggested that the Indian Government was about to build new railways to assist the Indian mills to compete with Lancashire. I do not think that that is the state of affairs. The fact is that railways in India, as elsewhere, during the War were not repaired and maintained as they ought to have been, and there are large arrears to make up. The Acworth Committee inquired into this matter, and recommended a large expenditure which is to go to the repairing of those railways, which will thereby facilitate the transport of goods from India to other markets, with the result that they will have credits to exchange for goods in our markets. It is astonishing to find, at this time of day, a member for a great constituency such as the hon. Gentleman represents, arguing in this way, and that he should think that by keeping India down we are benefiting England when quite the opposite is the case.
It is very unfortunate that I had not the opportunity of being here yesterday, but I was not sorry to hear the remarks of the hon. Member for 819 Royton (Sir W. Sugden) because they give me perhaps the opportunity of saying one word from the other point of view. Part of what I desire to say has been said already ably by the hon. Member for Taunton (Mr. Simpson), but if I may, without transgressing the ruling which you have given, I would like to say, that with a considerable knowledge of the cotton trade of India that the competition which Lancashire is going to face in future, and increasingly face, has nothing to do with raising loans in England. The fact is that so long as India progresses, and she is progressing and will progress, I feel confident that she will continue to erect mills and grow short staple cotton. She will never compete, at least not for many years to come, in the matter of cloth made from long staple cotton.
I am not suggesting that there will not be competition. I am suggesting that there will be more competition for a definite grade of cotton suitable to the Indian climate and conditions. That is a fact that Lancashire will have to face and face increasingly. The remedy appears to be very simple, that people in Lancashire should devote themselves more and more, as they are doing, to the production of cotton goods in which they will not have to meet this competition. Turning to the actual Bill, one of the main objects is to raise money for railways. In this connection I wish to draw attention to a few extracts from the Report of the Inchcape Committee, which are very pertinent at the present moment.We are of opinion that the country cannot afford to subsidise railways, and steps should be taken to curtail working expenses. We consider that with economic working it should be possible for the railways of India to earn sufficient to yield a return of at least 6½ per cent. on the total capital at charge.It is evident that the failure of the railways to use economically all the capital invested by the State is one of the main factors responsible for the present financial difficulties of the Central Government.The last extract which I shall read is the most important of all:We are informed that there are many remunerative schemes such as opening up of 820 lines for the development of mineral resources or the electrification of suburban trains. Many such schemes cannot be taken up owing to the difficulty of obtaining capital. This being so we cannot believe that it is legitimate in any circumstances to put six or seven crores of capital borrowed at a high rate of interest into lines which are already very heavily burdened as a result of their expenditure, and we recommend, except in the case of commitments already entered into, that no further capital expenditure be incurred on these lines.With the limitations which, I admit, always attach to the reading of partial extracts I think that these are very important points to be considered. The fact is that expenditure on the main lines of railways has to be cut down drastically. There are unlimited opportunities of building feeder lines in India. Capital is required from anywhere it can be got, and India can give a suitable return on all the capital which she can borrow. But, as pointed out by the Inchcape Committee, it is most important to curtail expenditure on the main lines until they are put on a proper economic basis, and this is a matter which has been before commercial opinion in that country for a considerable time. The next point is the question of raising money in India and England. There is a great deal to be said of course for raising sterling loans in England, and I have no objection to this Bill but am in favour of it. But it is also important to raise money locally.
It has been said in this House and in other parts of the world that the great difficulty in India is the hoarding of rupees and of metals. I would ask the Government of India what they have done during the last 20 years to try to do away with this inherent desire to hoard. I do not suggest that anything which they can do will put the matter right. Far from it. But perhaps the Government of India might do something more in the future than they have done in the past. The system of raising loans for the War in England by small investments was a great success. To a smaller extent the same system was carried out in India with some success, but since the War it has fallen off. Patriotic motives, which were put forward then, are not so strongly before the public now. In fact since the War Indian investments in Post Office Certificates have fallen off. That to my mind is due to the fact that the 821 methods have not been satisfactory. It has not been possible for the small investor in India to get his Post Office Certificates cashed in any post office at any time. That is one of the essential things. There is no use in burdening these offers by the Government in a place like India with all sorts of restrictions.
If the native of India is going to give up hoarding he must be induced to do so by a system by which he can invest small sums, and get payment at any post office at any time, and as he gets hard up, as he probably will, get an advance, or repayment, before due date by some system of discount. I am afraid that India has not yet advanced to the state in which we can arrange for European banking in these matters, but India has unlimited wealth hoarded up still. She wants to raise money wherever she can. I quite agree she should raise some of it in England and I am not in the least afraid of the results of her raising it here. It will do good to India and it will do good to England, but the most good will be done to India when the Government of India induce the people to invest their own money in Government securities. It can only be done gradually and slowly, but it will be the greatest security for the future industrial prosperity of India and for the future political prosperity of India. It is a pity that the movement which took root during the War did not go forward as it might have done.
A point will doubtless be raised regarding the method of raising the money, and there has been a good deal in the newspapers as to the desirability of India having direct representation in the City of London and raising the money here. I am not going into that question, but I think a half-way course will probably prove to be most satisfactory. It is not certain that the Government of India, or the representatives of India, or even the Indian banking and commercial community are necessarily the best judges as to when to raise money at home and when to raise it in India. They will require advice from England as well as India, and I suggest it is desirable that the Government of India Bank—the Imperial Bank of India—should have a considerable say in these matters. The half-way course I suggest is that of a double system of control and advice as to the 822 amount of money to be raised and as to whether it should be raised in India or England at a particular time. Though it sounds complicated, I think such a system would work quite easily, and would be of considerable benefit. I strongly agree with what has been said as to the desirability of India raising money, but there are two points which I would like the Government of India to consider. Those of us who have lived in India know that the soil of India has only been scratched. There is no limit to the possibilities of India's development. We do not really know anything about India's prospects. You could pour millions and millions into India and, in time, get a wonderful return, but there is a danger of going too fast. To many keen, intelligent and enterprising Indians it may seem that I am sounding the wrong note in saying that it is possible to go too fast, but there is such a possibility, and I think this note, sounded by the Inchcape Committee in connection with the railways, gives an indication of a particular direction in which we may go too fast without carefully considering our path. I hope also, when the Government consider the raising of these loans, they will pay special attention to the fact that for a good many years past, excluding the War years, the extremely high bank rate in India has been a great handicap to trade. I do not suggest that it could have been entirely avoided, but there is such a thing as balancing matters so as to endeavour to get a bank rate in India which would allow trade to flow freely both in and out. With these reservations or exceptions or limitations, I am entirely in agreement with this Bill. I hope the House will pass it at once, and I trust that not only this year, but in other years the Government of India will be able to raise money on sound loans, achieving better security and better credit every year and making use of London as well as India.
§ Mr. T. SHAW
I wish, as a Lancashire man, to say something upon this Bill. Like all other Lancashire men who have spent their lives in the cotton trade I am keenly interested in what India does and keenly dissatisfied with what India has already done. As a Lancashire man I feel that the Indians made a great mistake when they put duties on Lancashire cotton in a way which we regarded as highly inimical to our trade 823 and not at all necessary for India. These duties were put on the goods when Indian mills and manufacturing concerns were making huge profits and had no need whatever of protection. I draw an absolutely opposite conclusion from the facts to that drawn by another hon. Member who also represents a Lancashire constituency, the hon. Member for Royton (Sir W. Sugden). What we now require in India is the best of feeling between India and this country, and that can never be arrived at if Indians believe that Lancashire's sole desire is to advance the Lancashire cotton trade, whatever happens, as against the interests of India. That is not the way in which to secure the future of the Lancashire cotton trade in India. Good feeling is the very essence of what we require and I will ask the Under-Secretary for India to consider one or two things which have disturbed feeling in India, and I will make an appeal to him to remember those things in future, and to devote his efforts to getting a better feeling with India rather than increasing the tension which now exists.
Everybody knows that India, both from the religious and political points of view, has been extremely disturbed during the last three or four years. I am not going to argue as to the cause, but I am going to state the evident facts. A large proportion of the Moslems considered they had a great religious grievance and millions of the Hindus believed they had a great political grievance and the result was a boycott of Lancashire and other goods in the markets of India. Surely it is to Lancashire's interest to do everything possible to show that the people of this country desire, not only that their own trade should be safeguarded, but also desire fervently that the people of India should have every opportunity given them for development, that nothing should be put in their way by this country, no hindrances to their progress created, and nothing done to increase the bad feeling already existing. Taking this Bill as it stands, what are the purposes of these loans? They are for irrigation and railways. The cotton trade represents a very small proportion of the resources of India, and irrigation and railways can develop India and make wealthy precisely those people who buy 824 Lancashire cotton goods, and that seems to me to be the plainest of business propositions, apart altogether from the other argument as to assisting India to develop her agriculture, and the country generally, in the best possible way. There are other things into which one could enter, and I could pluck a political crow with the hon. Member for Royton as to why print and coloured goods are not going from Lancashire to India in the way they should, but that would raise a fiscal argument and a technical argument about which some hon. Members would understand quite as little as they understand about the long staple and the short staple.
The hon. Member complained very bitterly about Lancashire goods entering into competition with sweated Indian labour products. May I suggest to him that a better way of dealing with this matter than that which he proposes, would be to do whatever is possible to help Indian sweated labour to secure better wages and conditions? I know an organisation which will try to do it, if the hon. Member will help us along with some funds. Sympathy can often be measured by the depths to which one's hands will go into one's pocket in order to achieve an object. That is by the way. Let me sum up my arguments. As a Lancashire man I bitterly regret what has happened with regard to the Indian import duties. Whilst I feel that Lancashire trade is undergoing and has undergone for years a tremendous trial, whilst I feel, as keenly as anyone can, that Lancashire trade with India ought to be developed, yet I draw a different conclusion absolutely as to method. In my opinion the best thing to do is to make these Indians feel, not that we are trying to hold them, as it were, as a subject race, bound to purchase our goods—
§ Sir W. SUGDEN
I must interrupt the hon. Member. I challenge him to point to any single speech I have made in my short political life, in which I have spoken of compulsion or subjection to any of our organisations.
§ Mr. SHAW
I understood the hon. Gentleman to say that if India were permitted the right to raise this loan, which every other country in the world possesses, certain eventualities would arise. So I ask, if India is to be pre- 825 vented from doing what every other country can do, what conclusion can we draw except that we are treating India as a subject people, and not giving her the privileges which Czechslovakia, and Austria, and Germany, and France, and Belgium can have in the London money market? That is the position. It is the wrong way of approaching this problem. It is not only a wrong way, but it is precisely the way that will inflame the feeling that already exists in India. Our policy should be a policy of absolute friendliness to India, trying to get our interests safeguarded in India because the Indians believe that our objects are good and our intentions are sincere and honourable, helping to develop India in every possible way, because precisely that part of India which will be developed by irrigation is the part that can supply this country with the goods that we need and in which the labourers can take the goods that we produce in Lancashire. Whilst I cannot speak about the intricate details of the finance of this Bill, I am in wholehearted sympathy with its main object, which is to help India to irrigate her country and to build railways, and if there is a Division I shall certainly vote for the Bill.
§ Mr. WISE
I am not antagonistic to this Bill, but I wish to utter a few words of caution. I hope that the Noble Lord, the Under-Secretary of State, will forgive me if I criticise one or two points, but I can assure him that it will be constructive criticism. This Bill is to allow £65,000,000 to be raised for India. It is stated in the Memorandum that £16,000,000 has not been raised by the last Resolution and Bill which we passed. I understood the Noble Lord to say that the responsibility for the finances of India, anyhow in this country, lay with the Under-Secretary of State for India.
§ Earl WINTERTON
I never said anything of the sort. I said the Secretary of State. The hon. Member must not put responsibilities on my shoulders.
§ Mr. WISE
I apologise for the mistake; I thought it rested with the Noble Lord and also with the Financial Committee. I do not think that anyone who has looked into the finances of India for the last four or five years can congratulate the Financial Committee, if there be one, on what they have done. First of all, you had in 1920 the endeavour to fix the rupee, 826 an attempt which anybody who has looked into the matter will agree was rather bundled and was not good for the finances of India. We have had about four years of unbalanced Budgets. I am pleased to think that this year the Budget will be balanced. It is the immense amount of money that has been raised in the last few years, in addition to what it is proposed to raise to-day, which makes me nervous lest that country should be going too fast. I realise that India requires a great amount of money for railway development, canals, and so on, but you can develop a country, as well as an individual, too fast. What has been raised? In the last nine years the internal loan of India has increased from 146 crores to 421 crores. If you put that into sterling, in the nine years the internal loan has increased to £165,000,000 in nine years. I understand that there is a loan at present being floated in India for 24 crores. It is satisfactory news in the newspapers to-day that 16 crores was applied for on the first day. That is satisfactory from the Indian point of view, because I understand that money is cheaper in India than it is on this market. What have we floated in this country in the last 26 months? We have floated up to £60,000,000 of Government of India stock on this market. What I criticise the Secretary of State or his Committee for is the price and the unsatisfactory way in which these loans, which are external loans so far as India is concerned, have been raised in this country. There was an issue of £7,500,000 7 per cent., issued at £100, when the underwriters were relieved. That was in April 1921. In June, 1922, there was an issue of £12,500,000 5½ per cent., at £96, when the underwriters were left with 63 per cent. In October, 1922, there were £20,000,000 issued, 4½ per cent., at £85, and the under writers were left with 91 per cent. There was the loan issued in May, 1923, for a further £20,000,000, 4½ per cent., at £90, and the underwriters were left with 51 per cent. I do not think that that is quite satisfactory.
§ Mr. A. M. SAMUEL
It is due to the unwarranted crying down of these Indian loans in certain quarters. The public is discouraged against Indian securities.
§ Mr. WISE
I do not think that it is entirely that. In the last few days this last loan, which went up two premium, 827 that is to £92, has dropped to one discount, that is to £89. Why is that? Because of the Financial Resolution and the Bill before the House stating that there was a further £65,000,000 to be raised in this country on account of India. There is that overhanging the market. When you have a large sum like that overhanging the market people are bound to sell with a view to getting in at a cheaper price.
The interest on an external loan is indeed hard to pay, and I wonder if the amount which India has to pay to this country, annually, which I understand is about £30,000,000, is done on a satisfactory and cheap basis. India paying the interest on this external loan, which is floated on the London market, is just the same as this country having to pay our New York interest for the external debt which we owe to the United States of America. It is a great drain. As I said in the House only this week, what you produce you consume, with the internal loan in India, but with the external loan, that is, the London issue, what you produce you do not consume. It is very difficult for a country like India that is developing, to pay these large amounts without receiving anything in return, and I wish to impress on the Noble Lord the advisability of caution with regard to these large amounts which are being raised by India. Between 1900 and 1914 India raised loans in this country, but the average between those two dates was £6,300,000 a year, which is rather different from £60,000,000 in 26 months, and, as an hon. Member reminds me, another £65,000,000 on the top of this, and there is also, what I have not taken into account, the Floating Debt, which, I believe, is rather large. We want caution with regard to the development of a country like India, where we have the responsibility. I do not agree with all that the hon. Member for Farnham has said on the subject. I agree that India wants money, but I say, do not go too fast.
§ Sir R. ADKINS
As a Lancashire Member, I should be much too timid to intervene between the lively discharges which we have had from the hon. Member for Preston (Mr. T. Shaw) and the hon. Member for Royton (Sir W. Sugden), 828 but I hope it will not go out, either in this House or in this country or in India, that the peculiar interests of Lancashire and the genuine grievances of Lancashire impair in the least degree the desire of Lancashire, as of the country generally, to help India in every possible way. I rose for the purpose of supporting the suggestion made by the hon. and gallant Member for Kirkcaldy (Sir R. Hutchison) that it is really desirable in these loans to indicate that a certain proportion of the moneys so raised should be spent in this country.
§ Sir R. ADKINS
I have no time now to succumb to the temptation of the hon. Member's unhistorical and inaccurate memory on that point. What I desire to point out is this, that when we have borrowed money from America they have insisted that a certain proportion of it should be spent there, and when money has been borrowed in France the same stipulation has been made by the French Government. If there be anything in the argument addressed to the House by the hon. Member for Ilford (Mr. Wise), I think the statement in the loan that a certain proportion of it should be spent here would help to correct this largely artificial depreciation that Indian securities have been undergoing. The right hon. Baronet the Member for the City of London (Sir F. Banbury) pointed out that a large proportion of this loan is, or has been, spent in this country already. If so, what is the harm of having such a provision in the loan? The public, knowing that fact, would benefit by the reassurance—
§ Mr. SAMUEL
I believe there is a permission given to the Indian authorities to spend their money for goods required in India for Government purposes in the cheapest market. We pledged our word, and we cannot go back upon it.
§ Sir R. ADKINS
It may be impossible to do what we suggest, but I would prefer to take that from my Noble Friend who represents the India Office. I support my hon. Friend the Member for Kirkcaldy in his appeal, and I believe that what he asks would be of great value.
§ Earl WINTERTON
I wish to answer some of the points which have been put in this very short but interesting Debate, and I would also like to express appreciation of the support given to the Government of India and my Noble Friend the Secretary of State in all quarters of the House in regard to the proposal now before the House. I am especially grateful to my hon. Friend the Member for Farnham (Mr. A. M. Samuel), for, although we differ on one or two points, and I believe neither of us will ever be able to convince the other on those points, I am grateful for his general support. Perhaps I may be permitted to make a reference to one comparatively small matter to which he referred, and that is the question of why these stocks should enjoy the same privilege as that of British Government Stocks, of being free of Stamp Duty. My answer is that they have always been free. I admit that if we were starting afresh there might be something to be said for altering it, but they have always been so, and I think there is no very good reason for upsetting the arrangement.
§ Earl WINTERTON
Undoubtedly it is. The hon. Member for Middleton (Sir R. Adkins), the hon. Member for Farnham, and the hon. Member for Ilford (Mr. Wise) raised the general question of the need for borrowing, and the wisdom or otherwise of borrowing the large sums of money mentioned in this Bill. The hon. Member for Farnham asked why we want to borrow as much as £15,000,000. Our reserve from general powers is something like £2,750,000, and the last occasion on which we took powers to borrow for general purposes was in 1908.
§ Earl WINTERTON
No. I was going to explain that in a moment. The Government of India always have a certain reserve power. I believe I am right in saying that there is a similar power in every country, but in the case of India it is essential, because you may suddenly be faced with a failure of the monsoon, with famine, or something of that kind, and you must have a certain general reserve, even if very small. But 830 I want to explain that, in addition, it may be necessary to fund certain short-term floating debt. To turn to the speech of the hon. Member for Ilford, I listened with some surprise to it. I know that he has shown that he does not believe in Indian securities to the extent that, I think, most other financial experts on both sides of the House do. I read his speech last year, and I have listened carefully to his speech this year, and I think I am expressing the recollection of other hon. Members when I say that he has on both occasions given the impression that he is not a very great believer in, at any rate, the present system of borrowing. In fact, he said so at the commencement of his speech. I do not know whether I can convince him now, but in giving, as he did, a more or less general view of the position, I think he ought to have taken into consideration and mentioned that we have got a balance this year, and that I believe we are going to have a surplus next year.
§ Earl WINTERTON
Further, the hon. Member should have mentioned, if he did not, that the balance of trade is infinitely more favourable now than it has been for a long time in India. As regards the general policy, my Noble Friend the Secretary of State does not think the borrowing position of India generally is in any sense unsatisfactory. As has been pointed out by hon. Members on both sides, in the case of a great territory like India, with immense potential resources that require development, you must constantly carry out capital expenditure on railways, and canals, and things of that kind. I ask the hon. Member to look at the matter from that point of view, and I hope, at any rate, he will consent to this proposal, because it would be hard to find anywhere in the British Empire outside this country, a sounder system than we have in India. So much for what I have to say on that point. I must just refer to the very remarkable speech made by the hon. Member for Kirkcaldy (Sir R. Hutchison). I gather, from the side of the House he sits, that he is a Free Trader, but he 831 made a speech in which he said there should be inserted in this Bill a proviso that all the orders given should be in this country.
§ Sir R. HUTCHISON
A pecentage of the orders. Obviously, all the money cannot be spent in this country, but as much as possible ought to be spent here.
§ Earl WINTERTON
The hon Member, it is true, said he would like to see 75 per cent. spent in this country. I can complete the assurance that it is not a question of 75 per cent. Actually last year 95 per cent. of the orders for railway equipment went to this country, and that in an absolutely open market, which is a tribute to the healthy state of British trade, as I said on an earlier occasion. I doubt whether it would be in order to go into all the intricacies of the cotton question which my hon. Friend the Member for Royton (Sir W. Sugden) put with so much vigour and sincerity before the House. I think he had a very complete answer from the hon. Member for Preston (Mr. T. Shaw), but I do want to refer to one point, which, I think, should be contradicted, because it is liable to give a wrong impression. He said, as I understood, that the Indian cotton industry was competing with Lancashire, because of the cheap money this country was providing.
§ Earl WINTERTON
He used those actual words, the obvious implication of which would be, and to an uninstructed Member of the House would convey the impression that, under this Bill, it was proposed in some way to subsidise the cotton industry in India.
§ Sir W. SUGDEN
I say that the effect of the Government raising money for use in India was subsidising India in a direct fashion, in competition with Lancashire, for our trade moneys cannot be got as cheaply when backed by industrial companies.
§ Earl WINTERTON
That is practically the original statement—that the cotton industry in India is being subsidised by cheap money from this country. May I once again re-state the position? There 832 is no question of subsidising. What we seek to do in this Bill is what we have done ever since India has been connected with this country, that is, to borrow money in the British market as every other country has done.
§ Sir W. SUGDEN
But the Government gives a backing to India Loans which not every other country gets when it comes to get money from the London market.
§ 1.0 P.M.
§ Earl WINTERTON
The hon. Gentleman compels me to agree with what was said by the hon. Member for Preston, and I do not really think that speeches like the one he made are likely to help the cause we all have at heart, that is, the closest understanding and the best feeling between Lancashire and India. I can assure him there is no question of subsidising the cotton industry in this Bill. The only other matter to which I need refer was raised by the hon. Member for Kidderminster (Mr. Milne), namely, the electrification of railways and the curtailment of working expenses. As I said before, the curtailment of working expenses is being carried out gradually. I wish it had been possible to carry it out at a greater rate. Electrification, it is hoped, will soon be on a large scale in the suburban districts. As regards the question of raising money locally, every effort has been made to raise a local loan. It met with a good deal of success, but, as every hon. Member who knows India is aware, there is the greatest difficulty in inducing people in India to give up what the hon. Member describes as the habit of hoarding. He hoped that steps would be taken, but I do not think it is possible to compel people to give up bracelets.
I suggested very practical ways in which you could reduce the habit by making the system of small Government investments simpler.
§ Earl WINTERTON
I agree that the suggestion of the hon. Gentleman is worth consideration, but I am afraid that, however much you simplified, you would not be able to get over this ingrained habit of hoarding.
§ Earl WINTERTON
There was a special reason for that. As regards what the hon. Member for Ilford said about the slump in Indian securities during the last few days, I think he might also have mentioned the slump there has also been in British gilt-edged securities. For example, British Conversion Loan has slumped in the same period he gave, rather more, I believe, than India Loan. I think that fact is remarkable. I hope the House will now be prepared to give a Second Reading to this most valuable Bill. I think the suggestions and the speeches made to-day will be of benefit in India, and I hope they will also be of benefit in inducing the investing public to invest in the Loan.
§ Mr. WISE
May I, with the leave of the House, just explain that I am not antagonistic to the Bill? Indeed those were the first remarks in my speech. I said that the Budget would be balanced probably this year, and in no way did I mean to imply by my speech that it should be against the credit of India. I was only endeavouring to show the large amount of money which had been raised by India, and, as the hon. Member for Kidderminster had stated the two words "too fast," I thought it was advisable with this large Loan that precaution should be exercised.
§ Question, "That the Bill be now read a Second time," put and agreed to.
§ Bill read a Second time.
§ Ordered, That the Bill be committed to a Committee of the Whole House for Monday next, 9th July.—[Earl Winterton.]