HC Deb 21 April 1931 vol 251 cc913-22

Considered in Committee under Standing Order No. 71A.

[Sir ROBERT YOUNG in the Chair.]

Motion made, and Question proposed, That it is expedient to amend Subsection (2) of Section one of the Palestine and East Africa Loans Act 1926, by inserting after the words passing of this Act,' in paragraph (c) of the said Sub-section, the words other than charges in respect of loans previously guaranteed under this Act.'"—(King's Recommendation signified.)—[Mr. Pethick-Lawrence.]

10.0 p.m.

The FINANCIAL SECRETARY to the TREASURY (Mr. Pethick-Lawrence)

I feel sure that very few words will suffice to recommend the Motion to the Committee. The necessity for it, and of the Bill which will be founded upon it, arises from a small technical flaw in the Act of 1926, in which provision was not made for the case where one of the territories desires to raise more than a single loan. In consequence of that contingency not having been foreseen, the Act was drawn up on the basis that the charge of the loan must be prior to all other charges except those that existed before 1926. As long as only a single loan was in contemplation, that was a perfectly reasonable position, but where, as has actually been the case in Tanganyika, a second loan is desirable over and above the first, it will be found that that provision works unfortunately, because, when it comes to floating a second loan, the terms of the Act cannot be adequately complied with. If a second loan was given priority over all other charges except those that existed in 1926, it would necessarily be given priority over the previous loan. If, on the other hand, the first loan was given priority over the second, the conditions would not be complied with so far as the second loan is concerned.

You get a, kind of Alice-in-Wonderland position where you cannot satisfy the conditions of the Act so far as one loan is concerned without breaking them so far as the other is concerned. For that reason, it is necessary to make a very slight modification, and this Resolution provides the way out. So far as the second loan is concerned, it is proposed to give its charge priority over everything except those that existed before 1926 and, so far as the first loan is concerned, by making that very small alteration this technical flaw is done away with, and we can enable Tanganyika to raise a second loan for the purpose of development as the Colony desires. I trust that with that brief explanation I have made it clear what the difficulty was and the way in which it is proposed to deal with it, and I hope the Committee will see fit to agree to the Resolution.

Sir HENRY BETTERTON

If I understood a rather technical question correctly, it is this: Tanganyika desires to raise a loan. The loan cannot be a first charge under the Act of 1926 because there is a first charge already in existence, and for the same reason the loan for which it now requires a guarantee cannot rank pari passu with a first charge already existing. The new loan, therefore, must be a second charge. A second charge is ultra, vires the Act of 1926 as it stands at present, and therefore this small technical alteration in the Act of 1926 is intended to make legal and authorise what is in effect a second charge; but the second charge, if created, involves the Treasury in no fresh liability, and it follows that any subsequent unguaranteed loans which may be raised do not rank either equally with or in priority to the loans which I have described. If that is the proposition, we on this side raise no objection to the Resolution.

I would, however, like to take this opportunity of asking a few questions, to which I think the Committee would like to have the answers, because they are of interest in connection with Tanganyika and are very relevant to the question of this loan. The Act of 1926, which I have before me, provides that a sum not exceeding £10,000,000 may be raised by five Governments and may be guaranteed by the Imperial Government, and of these five Governments Tanganyika is one. The first question that I want to ask is this: How much of this £10,000,000 authorised by the Act of 1926 has already been raised, and how much is outstanding? The Schedule to the Act states that the purposes to which the proceeds of these loans may be devoted are threefold—first, railways; secondly, harbour construction and port improvements; and, thirdly, roads and other works development. The next question, therefore, that I want to ask is: To what purposes, in fact, has the sum already guaranteed been devoted? Has it been devoted to railways, or public buildings, or harbours, or all three? If all three, I should like to know quite generally what proportion has been devoted to each of them. Next, what is the amount which Tanganyika now proposes to raise? The hon. Gentleman did not tell us that. He simply said, as explained in the White Paper, that Tanganyika is now in a position to raise a further loan, but he did not tell us the amount which Tanganyika actually proposes to raise under Treasury guarantee.

The next question that I would like to ask—and this is rather important—is this: Has the money, or any part of it, which it is now proposed to guarantee, already been spent, or is it desired in respect of new expenditure which has not yet been undertaken? I believe, although I speak without very deep knowledge of the matter, that it is customary sometimes for Colonial Governments to raise money, it may he, from the Crown Agents or other sources, and afterwards to repay it by the proceeds of loans such as that which we are now considering. Therefore, I want to ask how much of this money, if any, has already been spent, or is it all to be used for new purposes? My last question is this: There is rather a curious statement, which I think requires some little explanation, in the fourth paragraph of the White Paper, which reads as follows: Subsequently to 1928, however, certain territories mentioned in the 1926 Act decided not to raise loans under that Act but to-borrow on their own credit without guarantee. The territories mentioned in the Act are Kenya, Uganda, Northern Rhodesia, Nyasaland, and Tanganyika. Which of those five territories so mentioned in the Act have decided not to raise loans but to borrow on their own credit without guarantee? I would like to know why it is that those territories have decided that the guarantee of the British Government is not presumably either desirable or necessary? It cannot, of course, be that their own credit is better than that of the British Government, but if that is not the explanation, what is it? Is it that they have abandoned their claim to the guarantee of the British Government in consequence of restrictions that have been placed upon them by the British Government? If so, I would like to ask what those restrictions are. I hope the hon. Gentleman will be good enough to give me answers to all these questions, which I think are relevant to a Resolution of this kind, which, after all, involves a very considerable sum of money, and I think it is information which the Committee as a whole would desire to have.

Mr. ANNESLEY SOMERVILLE

We are told in the memorandum, and the hon. Gentleman has also explained, that Tanganyika has a further issue in contemplation. Can he tell us whether Tanganyika has a specific object in this issue? I gather, from the absence of the Under-Secretary of State, that no explanation is contemplated of the purpose to which this issue is to be put, but I submit that this is an opportunity to obtain information with regard to these matters. In particular, I wish to ask whether part of this issue at any rate is to be devoted to southern railway development in Tanganyika. We have had a report from the Commission, which went out last year, and that Commission recommended strongly, as was recommended by the Ormsby-Gore Commission of 1924, that a southern railway should be constructed from some point on the Central Railway near Kilosa. It is interesting to see a reference to this, in the "Times" report this morning of the evidence given before the Royal Commission by the representatives of the Tanganyika settlers.

The question I want to ask is, is there in contemplation the use of at least part of this new issue to construct this railway, or is this railway going to be constructed by a grant under the Colonial Development Act? This railway has been recommended repeatedly, and undoubtedly the effect of its construction would be not only to develop Southern Tanganyika, and in particular to give an opportunity for white settlement in the Southern Highlands, but also to create a demand for railways and other material in this country. I am glad to see the return of the Under-Secretary of State, and it would be extremely interesting if he could give an explanation upon that point.

Mr. PETHICK-LAWRENCE

Perhaps I can explain the matter on behalf of my hon. Friend. As this was largely a financial matter, he asked me to deal with it, and I propose to answer the questions which have been put as far as possible. The right hon. Gentleman, first of all, asked me how much of the £10,000,000 which we were prepared to guarantee had already been taken up as far as loans were concerned? The answer is, that the only loan so far is one of £2,070,000 to Tanganyika. No other loans have been taken up. He then asked me upon what the money has been spent. It has mainly been spent upon railways—the completion of the Moshi-Arusha railway, of the railway from Manyoni to Kinyangiri, of the Engare-Nairobi Railway, and realignments. [An HON. MEMBER: "What about the Zambesi Bridge"?] The Zambesi Bridge is not included in this territory. He then asked me what was the amount it was now proposed to raise for Tanganyika in the second loan, and the answer is, that the recent loan ordinance authorises the raising of £2,850,000. I understand that it is all in respect of Northern Tanganyika. About £1,900,000 will be spent on railways, £400,000 on harbours and ports, also including the steamer on Lake Tanganyika, £250,000 on roads and £250,000 on other public works. If it is found desirable to raise a loan on behalf of Southern Tanganyika, it will have to form the subject of another loan.

I was next asked whether any part of this money has already been expended by borrowing from another source. £1,000,000 has been borrowed from the Crown agents in the way which the right hon. Gentleman suggested might be possible, and it will be repaid out of the loan when it is floated. With reference to paragraph 4 in the White Paper, in regard to other territories which have decided not to make use of the procedure involved in the Act of 1926, he asked what were the grounds on which they had taken that line. He asked whether there were restrictions which had induced them to prefer to borrow on their own credit. I understand that no restrictions were put forward, but that they preferred to do it in that way. Kenya, Northern Rhodesia and Uganda are territories where they do not propose to make use of the Government guarantee. I hope, after this explanation, that the Committee will now see their way to pass the Resolution.

Lord E. PERCY

I took some part in connection with the Colonial Development Act nearly two years ago, and I am afraid that this Resolution is another of the deep sea fruit which the Government have offered us in the way of unemployment policy. I should like to recall the attention of the House to what we were told two years ago about the operation of this Palestine and East African Loans Act. I am not going to refer to the other aspect of the Colonial Development Act. I shall confine myself to the Amendment made in the Palestine and East African Act. The present Secretary of State for Dominion Affairs, who was then Lord Privy Seal, speaking in the Debate on the Address in 1929, said: I am announcing to the House that I shall be asking power in this Parliament in this Session, before July ends, to alter and amend the Palestine and East African Loans Act. The first object of altering that Act is because there is a million pounds' worth of schemes that can be got on with right away by allowing us to pay the interest and capital during the construction period."—[OFFICIAL REPORT, 3rd July, 1929; col. 107, Vol. 229.] When we came to the discussion on the Bill, he said: Our experience is that many of the Colonies are unable at this moment to go on with any work, because in the period in which they are unremunerative, the period of construction, they are unable to meet the burden. We are altering the Act so that during the period of construction the interest charges may be paid out of capital."—[OFFICIAL REPORT, 12th July, 1929; col. 1261, Vol. 229.] We now discover that, in spite of all this energy and all these glittering promises, so far from £1,000,000 being spent right away, the Government having amended the Act have been dangling the bait, in front of the Colonies for two mortal years, without getting a single bite. The one loan raised under the Palestine and East African Loans Act was in 1928, and nothing has been raised as a consequence of this much heralded amendment of the Act in 1926. Now, we are asked to make an alteration in the Act for the one ewe lamb, Tanganyika, which is the only Colony that we could get to take advantage of all our offers. Is not that a most extraordinary situation? Does it not show how we wasted our time discussing the Colonial Development Bill, with all the parade of paraphernalia and with great hopes and great promises, when, two years afterwards, we find that we might just as well never have discussed it at all? It has not had one single effect.

I should like to ask the Under-Secretary of State for the Colonies what has happened to the £1,000,000 worth of schemes which were to be got on with right away. Does it fall into the same category as the seven famous ships which the right hon. Gentleman the present Dominions Secretary paraded when he came back from Canada, or the Liverpool Street extension of another hon. Member? We are entitled to some explanation. This is the second occasion this week when the general professions of the Government of a great development policy have been disproved by the detailed measures they have brought before the House of Commons; and it must be remembered that this particular development problem is not one which has been contested by any party in the House. We have always been willing to spend money, and we have voted £10,000,000 in 1926, which has not yet been used. What has happened to all the promises the Government have made?

Mr. PETHICK-LAWRENCE

The speech of the Noble Lord, made with the air of superior authority which he adopts, is entirely beside the point. The £1,000,000 of which he has spoken is entirely separate, and a great deal of it has been spent. It does not conic into the question we are considering to-day. It is an entirely different matter, and on the appropriate occasion we shall be able to go into it.

Lord E. PERCY

If we are going to adopt the tone which seems to be peculiar to Members of the Treasury Bench let me read again the quotation from the Lord Privy Seal. He said: Having examined those schemes in conjunction with all the Departments, I am announcing to the House that I shall he asking power in this Parliament, in this Session, before July ends, to alter and amend the Palestine and East Africa Loans Act. The first, object of altering that Act is bcause there is a million pounds' worth of schemes that can be got on with right away by allowing us to pay the interest on capital during the construction period."—[OFFICIAL REPORT, 3rd July, 1929; col. 107, Vol. 229.] Now the Financial Secretary to the Treasury says that the million pounds' worth has nothing whatever to do with the East Africa Loans Act or with the payment of interest on capital during the construction period. Who are we to believe in this Government? The man who speaks to-day or the man who spoke the day before yesterday? Perhaps we may have an answer which addresses itself to the facts and not merely to the personal prejudices and personal characteristics of hon. Members on this side.

Major LLEWELLIN

I am not at all satisfied with the explanation that has been given by the Financial Secretary. He gave us a full account of what has been spent in these Colonies in answer to my hon. Friend, but now it appears that that account, which presumably was a full statement, was not a full statement because there are other accounts which he was, so to speak, keeping up his sleeve until the Noble Lord put his question. And now the Financial Secretary has ridden off with what is not a satisfactory answer. The loans about which the Lord Privy Seal in 1929 was talking at the time when he brought in the Colonial Development Act must have referred to the loans under the 1926 Act and, therefore, it is very material to have further information in regard to this matter, and I hope we shall receive that further information from the Financial Secretary. I hope that the House will not pass this Resolution as it has been left by the Financial Secretary to the Treasury. If no more satisfactory answer is given, I hope we shall divide against the Resolution.

Sir K. WOOD

I intervene in the hope that the Financial Secretary will be able to give some further reply.

Mr. PETHICK-LAWRENCE

Certainly. I was perfectly correct in my statement and so was my right hon. Friend. The Colonial Development Act was for the expenditure of £1,000,000. It is no good the Noble Lord shaking his head. Part of that £1,000,000 could be used, and has been used, for paying the interest on the loans under the Act of 1926, and in so far as that is the case it did amend the Act of 1926. Part of it will be used for paying interest on this loan to Tanganyika. But it has also been used for a great many other purposes which are independent of this Act. When the Noble Lord imagines that no money has been spent out of the million because I said that the Tanganyika loan was the only one that arose under the Act, he is under an entire misapprehension.

The money provided by the Colonial Development Act has been used in a great many ways in furthering the activities of a number of colonies. That is quite distinct from the Act which we are considering to-day, and which this Resolution proposes to take a short step towards amending. So it is correct, in the first place, what the then Lord Privy Seal said, that the Colonial Development Act was an amendment of the Act of 1926; and, secondly, it is perfectly correct that there was a large amount of that money that was going to be spent and has been spent. I was perfectly correct in saying that part of the money that had been spent under the Colonial Development Act was independent of the 1926 Act, and it was untrue to suggest that the money was confined to Tanganyika.

Lord E. PERCY

We must get to the bottom of this question of fact. I think that if the Financial Secretary will refresh his memory about the terms of the Act he will see that his explanation does not fit the facts at all. The only amendment of the Palestine and East Africa Loans Act of 1926 made by the Colonial Development Act of 1929 was that the loan guarantee under that Act by His Majesty's Government might be applied during a period of five years to defray interest on a loan. There was no question of making grants out of the Colonial Development Fund for that. The amendment of the Act had nothing whatever to do with the Colonial Development Fund. Therefore, it is really vain to say that, when the then Lord Privy Seal said that he was amending the East Africa Loans Act for the purpose of getting £1,000,000 worth of work under way, he was thinking of grants out of the Colonial Development Fund. He was not; he could not have been. The Amendment of the East Africa Loans Act had nothing whatever to do with such grants. I am afraid that the Financial Secretary is still confusing the £1,000,000 which the Lord Privy Seal said could be spent at once by the Colonial Government out of the loan, and the £1,000,000 which the Colonial Development Act professed to place at the disposal of the colonies every year, although £1,000,000 has not been placed at their disposal. I think that the Financial Secretary has completely confused himself, but we shall have an opportunity of discussing this question again on the Second Reading of the Bill, and I can only ask the hon. Gentleman to go into this matter in order that we may deal with it on that occasion.

Resolution to be reported To-morrow.