§ Order for Second Reading read.
§ The FINANCIAL SECRETARY to the TREASURY (Mr. Arthur Michael Samuel)
I beg to move, "That the Bill be now read a Second time."
I need not put the House to the trouble of listening to a speech from me, as this is a Bill that is well known to hon. Members. The Public Works Loan Bill is a Bill that authorises the issue of money by the National Debt Commissioners to the Public Works Loan Commissioners for the purpose of making loans out of the local loans fund. Hon. Members see these Bills year after year. We had one in March, 1927, for£40,000,000, and another in December last for£25,000,000. The present Bill authorises the issue of£35,000,000 to cover the period until the next Act is passed.
§ Mr. NOEL BUXTON
This Bill may appear to be a matter of routine, but it 2157 arises out of events of very great importance in the agricultural world, and it ought not to pass without attention from the House, because matters of high policy are connected with it. It arose from the situation which we remember so well in 1923, a situation in which a large number of farmers who had bought their farms found themselves the victims of what I think has been quite fairly called an unparalleled swindle. The facts are beyond dispute, but it is just as well, as the importance of the matter is so great, to recall that situation. The Report on Agricultural Credit in 1923 put it in this way:Farmers were urged to increase their acreage under the plough and were promised security against resultant losses. These promises were confirmed by legislation firstly and temporarily in 1917 and finally, as a feature of permanent agricultural policy, in December, 1920. When the Corn Production Act of 1917 was before the House of Commons farmers were assured that whatever befalls, agriculture will never again be neglected by any Government.' In October, 1919, a speech delivered by the late Prime Minister at the Caxton Hall, Westminster, gave farmers reasonable assurance that the prices of the staple products of their farms would he maintained at a level which, if markets fell, would at least safeguard them against serious loss. It was in accordance with this spirit that the Agricultural Act of 1920 was placed upon the Statute Book. In the case of wheat and oats, the Act established, for a period of at least five years, guaranteed minimum prices on a sliding scale based on the 1919 costs of production.It was on the basis of those promises—promises made, as one privately knows, in spite of the advice of some of the colleagues of the hon. Gentleman—that farmers bought the farms at prices which gave rise to the Bill of to-day. The owners got out of an immense number of farms at the expense of their tenants, and got out very well. In 1923, shortly after the repeal of the Act of 1920, it was very natural that the Government were uneasy on this question. They had it, I hope, on their consciences that something had to be done for those unfortunate victims. A Bill was brought in dressed up with considerable ornaments as a Bill on cooperative credit because half of the Bill purposed to assist the formation of credit societies. Its real object was—and in the result emphatically the effect has been—to lend money to those who purchased their farms during a certain period of 2158 time. Before this Bill passes the dangers of the proceedings for which the Bill provides in seeking to remedy bad debts arising from this cause ought to be realised. In the first place, in such a system you are, of course, involved in the risk of loss because of State money being loaned to men on a rather narrow margin. It is heads that the owner gains and tails that the State loses. Here we have set out three cases in which it was tails.
The larger point is also raised. The general question of lending money, through the agency of the State, on land with a view to increased ownership is a matter of policy discussed throughout the world and adopted in some States. The act of the Government in 1923 was a conspicuous act in the international agricultural world, so much so that the Canadian Government in a Report of their Commission of the following year gave a great deal of attention to it. They said some interesting things, of which I may remind the House. They pointed out thatthe fall in prices further produced generally a condition with regard to the farmers in England that was brought about by the fall of prices in both Canada and the United States. A great deal of the money used in the purchase of lands had been borrowed from the banks by means of overdrafts and, as the banks wore not allowed to take mortgages, the position of both banks and farmers was considered precarious.About£46,000,000 on loans had been advanced to the farmers from the banks, and of this£26,000,000 had been advanced for the purchase of land and£20,000,000 for normal current production. They went on to deal very fully with the action of the British Government in this very special case. Although it was a special case and not a case of the adoption of a general policy of lending money on land, as was the Act of last Session, it still was a policy for bolstering up a system of multiplying ownership, and is therefore relevant to the general question of agricultural policy. That policy involves the promotion of ownership, and that again involves an attack on the rival policy of State acquisition and ownership of land. I want to point out that a particular danger is involved in a policy of this kind. It was alluded to by the English Committee on Credit in 1923. It is interesting when you think of what we have just done in relation to the Agricul- 2159 tural Credits Act of this year. The Committee said:A Committee under the Chairmanship of Lord Haversham enquired in 1911 into the position of tenant farmers on the occasion of any change in the ownership of their holdings. This Committee recommended the establishment of a State-assisted Land Bank or Institution to lend money to the farmer to enable him to purchase his holding. We are unable to go as far as that Committee in recommending State assistance for land purchase generally. Not only are the relative advantages of ownership and tenancy still a highly controversial subject, but it would appear that the effect of lending money on easy terms may lead to the tenant paying a higher price than he would otherwise do.It is fitting to remind the Government, which in general is the same Government as legislated in 1923, of the dangers attaching to this policy of artificially promoting the multiplication of ownership. We on this side of the House pointed out last Session that the farmers are very likely to suffer from that very increase of prices alluded to by this Departmental Committee resulting from the system of easy loans.
There is one other point which I want to make. The Bill of 1923 provided very liberal financial aid to farmers of all kinds. But the grievance with which it sought to deal was a grievance not of every kind of farmer but of the farmer who grew corn, particularly wheat and oats. I recall moving an Amendment to make the proposal applicable to corn growing land and not to grazing land which had been quite unaffected by the Corn Production Act.
§ Mr. SPEAKER
The right hon. Gentleman is going over a very wide field of discussion. I do not know whether he realises that the scope of this Bill is an extremely narrow one and concerns an item of less than£1,200.
§ Mr. BUXTON
Yes, but I think that you, Mr. Speaker, will probably agree that the cases associated with this loss are not irrelevant for brief mention. It arises in one particular case from losses on a farm in Cheshire which presumably is a grass farm. It illustrates the dangers of this kind of financial policy because here you have the State making good a bad debt on a mortgage of a farm which had in no way suffered from the injustices connected with the Corn Production Act. 2160 Let me pass at your behest, Mr. Speaker, to the general question. I want to ask the hon. Gentleman in charge of this Bill if he will tell us a little about the way the valuations were arrived at. We know that the conditions of the Bill were stretched to enable the loan to be as large as possible. I remember that some hon. Members urged that the mortgage ought to be based upon the price that the unfortunate farmer had to give. That, of course, had to be ruled out. The assistance was made as liberal as possible, but I submit that it was no real help, in the long run, to a great many of these men, because it encouraged them to incur expenditure and outlay which they had better not have undertaken. Were the valuers in these cases official valuers? Are they the same valuers as act under the Land Acquisition Act, or are they valuers from private firms, chosen from a panel designed for the department? It may be that the sale of this land being unsuccessful was due to the fact that it was not as well conducted as it might have been. Is there a panel of auctioneers who act in certain cases? I do not know, and I think the House would be interested to know. Will the Financial Secretary give information on this point as fully as he can, and can he tell us whether this is the end of the losses or does he think that there may be further losses in the future?
§ Sir H. CAUTLEY
As one who took a very active part in the passing of the Agricultural Credits Act, 1923, I should like a little information before giving final assent to this Bill. I differ from the right hon. Gentleman opposite, because in my experience of the Act of 1923 the loans made thereunder have given a great deal of assistance to those unfortunate farmers, and it is limited to them, who did buy their farms prior to the passing of the Act of 1923, but after the passing of the Corn Production Act. I was under the impression that a better bargain with regard to the rate of interest charged by the Public Works Loan Commissioners might have been made and that the charge might have been at least one-quarter per cent, less to the farmers who obtained these loans. I remember the provision being made that the amount of the loan was to be two-thirds of the existing value of the farm 2161 at the time the loan was made, in the case of trustees lending money on mortgage.
I should like to know whether these three loans are the only loans on which the Commissioners have made a loss or are there any others cutstanding. I notice that the loss on these loans is only about 9 per cent. after all the expenses have been incurred in winding up the whole business and in meeting the official expenses of the lawyers, auctioneers, etc. That does not seem to me a very serious matter. If, on the ether hand, there is likely to be a number of other losses, it may become a serious charge on the taxpayers. I should also like to know whether on these loans from t he beginning, on the£4,000,000 or£5,000,000 that have been invested, the Public Works Loan Commissioners have not made a profit out of the interest charged. Have they not borrowed money from the Treasury at certain rates and charged 'a higher rate to the borrowers who borrowed under this security? If so, seeing that these loans are being paid off by steady instalments of principal and interest, the security on the outstanding loans is becoming better, and as each year passes the profit that is being made on the difference between the interest charged by the Commissioners and the interest at which the Commissioners get the money is steadily mounting up, and it may well, be that this will more than offset any loss that has been incurred or is likely to be incurred.
This is a matter of great interest to those who take some part in agricultural politics. I am particularly interested, because, differing entirely from the right hon. Gentleman opposite, I have regarded and still regard the provision of loans by the Government at the cheapest rate a very great facility for the furtherance of agricultural interests. It is just as much an advantage to the State that we have these credit facilities for the tenant farmers, as it is that we have such facilities for the small-holders.
§ Mr. T. WILLIAMS
The information sought by the hon. Member for East Grinstead (Sir H. Cautley) will be very interesting to hon. Members. Can the Financial Secretary say whether on the 2162 whole of the transactions a profit has been made? I should like to know who were the valuers who undertook this work on behalf of the Department in connection with the making of the loans. While the total sum to be disposed of is only£1,215, the figures shown in the forepart of the Bill seem very extraordinary. I understand that the maximum loans permissible under the terms of the Act of 1923 were to the amount of 75 per cent. of the valuation. In the first case the valuer valued a holding at£5,100, and two years later when the same farm was sold it only realised£4,150, or approximately 20 per cent. less than the valuation of two years previously. Can the Financial Secretary say whether he thinks that that was a good valuation, or whether through some abnormal reason which has not yet been explained there was a depreciation in the value of land after two years' time equivalent to 20 per cent? In the second case, the circumstances seem to be worse. The valuation arrived at was£4,360, and when the farm was available for sale the price obtained by the Department was only£2,575, so there was, approximately, a reduction of 30 per cent. in the value of the farm as determined by the valuer two years before. That seems extraordinary. Perhaps the Financial Secretary will tell us why, while the valuation exceeded the selling price by 30 per cent., the loan in this particular case exceeded the selling price by£695. Therefore, it was not a case of granting the loan on 75 per cent. of the value of the land, but the loan was well over 100 per cent. of the selling price of the land. Perhaps the Financial Secretary will tell us how it comes about that there is this great difference after two years between the original valuation and the selling price, and the amount of the loan that was granted.
In the third ease the valuation was£9,000, but in two years time the selling price was reduced to£7,000. Obviously there is something wrong either in the original valuation or in the methods of disposal to bring about these results. In this case the loan was almost 100 per cent. more than the price realised. I think we are entitled to know the names of the valuers and what they have to say with regard to their valuation. I 2163 regret that the Minister of Agriculture is not present this afternoon. After all, his Department is involved. There may be justifiable reasons for his absence, and I should not like to say anything unpleasant in his absence, but I think he ought to have been here. When the State places its resources at the disposal of agriculturists we ought to know whether some effort is being made on the part of the beneficiaries to respond to the efforts made by the State.
During, three consecutive days of this week we have had instances of the State handing over services to private enterprise. There is the case of the beam wireless service, the Overseas Trade Department, and now we get agricultural credit facilities. The State places its resources at the disposal of agriculture, and after a partial success has been made it is proposed to hand the scheme over to private enterprise. The question I want to ask is whether after loans have been granted to farmers for the purchase of their holdings or machinery, the State Department makes any inquiries as to the conditions on any farm. Do they merely grant the loan and wait for events to bring in a return, or have they any means of overlooking the conditions on these farms upon which sums ranging from£4,000 to£7,000 have been advanced? Is anything done to keep the Department in touch with the property on which a loan has been advanced in order to prevent any individual depreciating the value of the land, with the result that the State is called upon to meet the loss. If the Socialist party were involved in a business of this description in which losses were accruing to the State and the State was called upon to meet the obligations without a full reply being submitted, I am afraid the Financial Secretary, and the Home Secretary in particular, would be amongst the most virile critics of the Labour Government, and I hope they will satisfy us that the farmers have done their best to safeguard the interests of the nation.
§ Mr. SAMUEL
I can only speak again by leave of the House. I do not know whether I shall be able to satisfy hon. Members, but I will do my best, and I will take the points as they have been put before me by the hon. and learned 2164 Member for East Grinstead (Sir H. Cautley), the right hon. Member for Norfolk Northern (Mr. Buxton), and the hon. Member for the Don Valley (Mr. T. Williams). In each case the valuations are made by the Inland Revenue as the hon. Member for the Don Valley will find set out in the Financial Memorandum attached to the Bill. The Public Works Loan Commissioners are the sole judges as to whether the money shall be loaned or not, and in the Public Works Loans Act he will find a list of the gentlemen who are good enough to act as Public Works Loan Commissioners. I do not think I need trouble the House by reading their names. They are men of out standing ability and more than competent to know whether a security is a good one or not. The rate of interest charged is only enough to cover the cost of the money raised for the purpose and costs of administration. In any case the total loss to the State cannot be known until all the loans have run off, because there is always the contingency that some loss may take place. If the hon. and learned Member for East Grinstead will refer to page 7 of the 53rd Annual Report of the Public Works Loan Board he will see—and this is the point which I desire to impress upon the House—The Board desire to draw attention to the fact that in spite of the very careful valuations made on a conservative basis 10.26 per cent, of the number of loans advanced and 13.12 per cent. of the grants advanced were in arrear on the 31st March, 1928, as compared with percentages of 5.28 and 6.99 respectively on the 31st March, 1927.That means that these losses of£1,200 do not include prospective losses: there are other losses which must be expected. After all a total of nearly£5,000,000 of money has been lent and it is to be expected that there will be more losses. The hon. Member for the Don Valley asked whether the Department examine the mortgaged properties from time to time. I cannot say off-hand whether they do so or not but I should think it would be very unpleasant to the occupier for officials of the Department to go poking about on these properties after the money has been lent. That, I think, would be most harassing and most unreasonable. I do not think the Department concerned can be expected to go overlooking in that way the properties on which money has 2165 been lent in order to find out whether everything is in proper order. That is hardly a thing which this House would desire. The hon. Member also referred to the absence of the Minister of Agriculture and regretted that he was not present. I do not know why he referred to my right hon. Friend because I must point out that when these loans were made the right hon. Gentleman opposite was Minister of Agriculture in the last administration, and instead of asking for my right hon. Friend the Minister of Agriculture the hon. Member for the Don Valley should make inquiries of the right hon. Gentleman opposite, who knows as much about it as my right hon. Friend the Minister of Agriculture.
§ Mr. T. WILLIAMS
Surely, if the Financial Secretary will look at the first loan he will see that it was made after the right hon. Member for Norfolk, Northern (Mr. Buxton) was turned out of office.
§ Mr. SAMUEL
No. I do not think the hon. Gentleman must take that line. The date of the loan is 10th November, 1924, and one may assume that the negotiations were in progress for some weeks. Another date is 20th August, 1924.
§ Sir H. CAUTLEY
Would those loans come before either of the right hon. Gentlemen who were Ministers of Agriculture?
§ Mr. SAMUEL
I do not think they would, but when the hon. Member for the Don Valley complains that the Minister of Agriculture is not present, he should direct his remarks to the right hon. Member for North Norfolk (Mr. Buxton).
§ Mr. WILLIAMS
The Financial Secretary has in no way attempted to reply to the main point. Here was land valued at£5,100 and two years later it was sold to the best buyer for£4,100. Will the hon. Gentleman explain the difference between the valuation in 1924 and the selling price in 1926–27? Will he also state whether instructions will be issued to valuers that where loans are granted they are not to over-value agricultural land or any other land?
§ Mr. SAMUEL
If I knew when land was to go up or down in value, in the way that the hon. Gentleman would like 2166 us to know, I would make a fortune in a very short time.
§ Question put, and agreed to.
§ Bill read a Second time.
§ Bill committed to a Committee of the. Whole House for Monday next—[Mr. A. M. Samuel.]