HC Deb 30 April 1931 vol 251 cc1869-83

Order for Second Reading read.

The UNDER-SECRETARY of STATE for the COLONIES (Dr. Drummond Shiels)

I beg to move, "That the Bill be now read a Second time."

5.0 p.m.

The special objects of this Bill were indicated in the White Paper which was circulated when the Financial Resolution was moved last week by my hon. Friend the Financial Secretary to the Treasury. The point at issue is rather a technical one. Briefly, it is that under the Palestine and East Africa Loans Act, 1926, a loan raised by one of the East African Dependencies can only be guaranteed by the Treasury if the interest and sinking fund are charged on the revenues and assets of the Dependency, with priority over all charges not existing at the date when the Act was passed. In 1926, it was contemplated that most of the East African Dependencies would make use of the facilities provided by the Act, but since then certain of them have decided to borrow on their own credit in the open market, and their withdrawal has made it possible for those remaining to raise further loans. This has created a difficulty. The Government of Tanganyika proposes to raise such a further loan, but as it has already raised one loan of over £2,070,000 under the Act, which was duly made a first charge on the revenue's, any further loan cannot be a first charge with the same priority, as this would constitute a breach of contract with the stockholders of the first loan; and, for the same reason, it cannot rank equally with the first loan. On the other hand, if it ranks after the 1928 loan, it has nut the priority required by the Act, as at present worded, as a condition of guarantee.

The Bill, therefore, amends the Act of 1926 so as to give power to the Treasury to give a guarantee to a loan which has not the priority required by that Act, provided that the charges which prevent it having that priority are themselves guaranteed under the Act. The new loan will be issued by the Government of Tanganyika itself, and no liability will fall on the Exchequer beyond the contingent liability already existing under the Act of 1926 to guarantee loans raised by the East African Governments up to a maximum of £10,000,000. This maximum, of course, could not be increased without the express authority of Parliament. The difficulty dealt with in the Bill is one which could hardly have been foreseen at the time the Act of 1926 was drafted, but it is, nevertheless, a very real one, which stands at present in the way of Tanganyika raising money to meet charges already incurred in connection with its development programme. The Bill will enable new money to be raised under the Act of 1926 to meet these charges, and also to meet the cost of further development already in contemplation, which must be delayed unless the necessary finance is assured.

The House will wish me to give some information as to the development projects in Tanganyika for which money is to be borrowed. Before doing so, I would like to deal with one or two points which were raised in the Debate on the Financial Resolution. In the first place the hon. Baronet the Member for Rushcliffe (Sir H. Betterton) inquired why certain territories had decided not to raise loans under the Act of 1926 but to borrow under their own credit and without guarantee. The answer is that by taking this course they will be in a position to raise further loans, it necessity arises in the future, without such loans ranking after loans under the Guaranteed Loans Act, which must under the terms of that Act have priority over all subsequent loans. Also, a loan under the Act can only be applied to certain specified purposes, whereas money raised by the Colonies on their own credit can be devoted to wider purposes. It is, however, largely a matter in which the Territories concerned must determine which course they will adopt.

The action of the territories concerned, Kenya, Uganda and Northern Rhodesia, in choosing to borrow on their own credit has benefited Tanganyika and Nyasaland by enabling them to make fuller use of the Act of 1926. The Noble Lord the Member for Hastings (Lord E. Percy) referred to the fact that the only loan, so far as East Africa is concerned, which has been raised under the Act of 1926 is one of £2,070,000 raised by Tanganyika in 1928, before the present Government came into power. That is true as a statement of fact, but in addition, between the 1928 loan and the amending clauses of the Colonial Development Act, the Treasury had undertaken to guarantee further schemes in Tanganyika to the amount of £1,813,721. Further, as my hon. Friend the Financial Secretary to the Treasury informed the Noble Lord in answer to a question on 28th April, since the Act of 1926 was amended in 1929 by the Colonial Development Act the Treasury have agreed, subject to the fulfilment of the statutory conditions, that guarantees will be given in due course in respect of loans to be raised for schemes, including the Zambesi Bridge and associated schemes, totalling over £4,500,000. The total projects, therefore, recommended to date by the Advisory Committee appointed under the Act of 1926 now amount to £8,563,139. Of the work represented by this figure, which provides substantial employment in this country, practically the whole has been sanctioned and is in process of being carried out. Pending the actual issue of the loans, the money is being provided by temporary borrowings through the Crown Agents for the Colonies, and these will be repaid from the loans which will be issued at convenient times, as they become necessary, by the Territories concerned. These loans will largely exhaust the £10,000,000 available for East Africa under the Guaranteed Loans Act.

The Noble Lord, in the discussion on the Financial Resolution, dwelt at some length on the statement made by the Dominions Secretary, when Lord Privy Seal, in the Debate on the Address in 1929, that there was £1,000,000 worth of schemes which could be got on with right away by an alteration in the Guaranteed Loans Act so as to allow of interest charges during the period of construction being paid out of the loan itself. The Colonial Development Act, in Section 4 (a) did, in fact, amend the Palestine and East African Loans Act in this way. It also provided, however, in Section 1(i) (n), for free grants to be made for the same purpose out of the Colonial Development Fund; and the Colonial Development Advisory Committee have, so far, felt justified in recommending that this provision should be utilised in connection with a number of the schemes in which assistance from the Fund has been sought. This has given Colonial Governments greater freedom to undertake at once works which they would have had to postpone if they had been obliged to add to their loan commitments the ultimate liability for the payment of interest daring the earlier years. The Noble Lord will have gathered from another answer by the Financial Secretary that of the total amount of £4,679,418 accepted for guarantee in respect of Tanganyika and Nyasaland since the Colonial Development Act became law, no less than £4,142,440 represents schemes which have been made possible by the alternative section of the Colonial Development Act to which I have already referred. These schemes cover projects in Nyasaland as well as in Tanganyika, to which the Noble Lord referred as the "one ewe lamb."

The Nyasaland scheme is a very important one, the Zambesi. Bridge and the connected works, for which over £3,000,000 will be raised by a guaranteed loan with the assistance afforded by the Colonial Development Fund. In addition to the sum I have mentioned in connection with Tanganyika and Nyasaland, the Government of Northern Rhodesia has been enabled, through the payment of interest from the Colonial Development Fund in the early years, to include amongst its capital works additional schemes to the value of £425,375. Quite recently it has been decided that the money for these Northern Rhodesia schemes should be raised not under the Guaranteed Loans Act but by a loan on the Protectorate's own credit, but the fact remains that those schemes have all been expedited through the additional facilities afforded by the Act of 1929.

The total value of the schemes which have thus been expedited by the special provisions of the Act of 1929 is, therefore, £4,567,815. This is well above the figure of £1,000,000 which the then Lord Privy Seal had in mind at the time of the Debate on the Address in 1929. It can fairly be stated that the only fault of his speech, as it has been the greatest fault of this Government, is that it was too modest, since more than four times what he promised has actually been accomplished. I hope, therefore, that the Noble Lord, who was mildly humorous about the promise of the Secretary of State for the Dominions, will be willing to admit that that promise has been amply fulfilled, and that the Government has, in fact, provided opportunities for these East African territories to develop their resources which were not theirs previously.

As requested, I will give a brief indication of the objects for which Tanganyika now desires to raise a loan. In the first place, of the loan of £2,000,000 odd raised in 1928, £1,736,000 was spent on railways, including the completion of a branch line from Tabora to Mwanza on Lake Victoria, the extension of the Moshi line to Arusha, and general improvements to the main line. A further £100,000 was spent on port and harbour construction and improvements at Dar-es-Salaam and Mwanza, and £75,000 on roads. As my hon. Friend the Financial Secretary explained the other evening, the Tanganyika Government has now passed a Loan Ordinance authorising the raising of a further £2,850,000. I should like to make it clear to hon. Members, however, that this sum does not represent the limit of Tanganyika's development programme, but that other projects are in contemplation for which further borrowings will be necessary at the appropriate time.

There is another point about these borrowings under the Act of 1926 which I should like to emphasise, and that is that every scheme has to be thoroughly examined by an advisory committee of business men appointed under the Act before it can be accepted as an item in a loan which is to receive a guarantee. The personnel of this Committee is the same as that of the Colonial Development Advisory Committee. As in the case of the earlier loan, the schemes represented in the total of £2,850,000 authorised in the recent Tanganyika Ordinance have all received the approval of that committee, and they are all, in fact, in process of being carried out, the money having been provided pending the floating of a loan by temporary borrowing. The sum of £1,870,991 is being spent on railways, the chief items being the construction of a branch from Manyoni on the central line to Kinyangiri, which will tap productive native areas, from which it is expected that the export of grain and ghee and other products will be largely increased on the completion of the line.

Another line which is being built will run from the Moshi-Arusha line to Engare-Nairobi, on the western slope of Mount Kilimanjaro, and will tap a fertile area in which coffee, sisal, maize and wheat show signs of promise. Provision is also made for new rolling stock, new stations, etc., and for an extensive realignment of the central railway, which is necessitated by the fact that the original German line was built across the bed of a dry lake, and was last year almost entirely washed away at that point owing to floods. A sum of £388,528 is included for ports, harbours and shipping services. This covers the purchase of a new steamer for Lake Tanganyika, wharf extensions and improvements at Dar-es-Salaam, Tanga, and Mwanza, and also the purchase of tugs and moorings. A sum of £153,417 is included for various Public Works, including water supply schemes, and £247,878 for roads and bridges. A copy of the local Ordinance showing the details of all these services has been placed in the Library of the House.

I mentioned just now that other projects are already in contemplation for which further borrowings will in due course be necessary. In this connection the hon. Member for Windsor (Mr. A. A. Somerville) referred in the course of the previous Debate to the recommendation of the recent Henn Railway Commission as to railway construction in Southern Tanganyika. The immediate recommendation of this Commission was that a line about 124 miles long should be constructed from Kilosa to Ifakara, and two parties are at present undertaking the technical survey of this route and an economic survey is being begun. The Governor has stated that if it is shown by the economic survey that this line is likely to pay at the end of five years, and if a free grant of interest can be obtained for that period from the Colonial Development Fund, he agrees that the line should be begun at once.

The Railway Commission also suggested that the Governments of Northern Rhodesia and Nyasaland should be approached at an early date regarding further projects for railway development in Southern Tanganyika, which are of interest to all three Territories. On this point the Secretary of State is awaiting the views of the Governor of Northern Rhodesia which are now in the post, and the Government will then consider what statement of policy can be made. The Commission also made recommendations for effecting a junction between the central line and the Tanga Railway, and the Governor has stated that a Survey Party will examine the route from Kilosa to Korogwe which they advocated. An economic survey will also be made as soon as that of the Kilosa-Ifakara line has been completed.

The House will see that if all these proposals are to be carried out considerable further borrowing by Tanganyika will be necessary at some date; a fact which emphasises the desirability of removing as is proposed in the present Bill, an obstacle which at present stands in the way of such borrowing. I hope I have satisfied the House that a very great amount of work is being undertaken under the Guaranteed Loan Act in these dependencies. We hear a great deal from the other side of the House as to the importance of developing our Imperial heritage, and I can assure hon. Members that the present Government yield to no one in their desire to see the resources of these territories utilised to the fullest possible advantage, and in their anxiety to promote the welfare of all sections of the inhabitants. At the same time our efforts to expedite this development have created substantial employment in this country, and I invite the House to assist the Government in this work by agreeing to the removal of an unforeseen technical difficulty which has arisen in providing the necessary finance.


I am sure the House will be only too willing to grant the hon. Gentleman his Bill. I merely confine myself to dealing with some of the points which he raised with reference to the discussion we had the other night. The hon. Member has given figures to show that the plan of 1925 has produced good results, and that schemes are being prepared and promises have been made by the Treasury under the Colonial Development Act, 1929, that when that work eventuates they will be prepared to act. On all these points I never had any doubts. The other night I was addressing myself to the particular point which, I think, is of some interest, as to whether the Palestine and East Africa Loans Act, as amended by the Colonial Development Act, was a method which produced the results anticipated either by the late Government or by the present Government., and in this matter from what the Dominion Secretary said in 1929 I should like to remind the hon. Member that he made the same distinction in 1929 as the Under-Secretary has made this afternoon. It is a perfectly correct distinction in respect of two things; first, that the interest might be paid out of capital; and, secondly, that the period of the loan might be extended from 40 to 60 years. The Dominions Secretary drew a clear distinction between that Amendment and the provision to which the Under-Secretary referred, in the Colonial Development Act in making grants out of the Colonial Development Fund in aid of the payment of interest during the construction period. He made that distinction in the Debate on the Address on 3rd July, 1929, by saying: 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 Africa Loans Act. The first object of altering that Act is because there is £1,000,000 worth of schemes that can be got on with right away by allowing us to pay the interest on capital during the construction period …. Secondly, we are altering the period of loans to 60 years; but in addition to that, we shall be taking power that in the Budget each year, as a charge not to be raided, there will be set aside a sum of £1,000,000 annually to be used to make grants of interest for a limited period on loans raised for Colonial development."—[OFFICIAL REPORT, 3rd July, 1929; cols. 107–3, Vol. 229.] That is the distinction between the two things. On 12th July, 1929, the Dominion Secretary said: We are altering the Act, so that during the period of construction the interest charges can be paid out of capital. That, again, is something that the Colonial Office has been pressing for years."—[OFFICIAL REPORT, 12th July, 1929; col. 1261, Vol. 229.] It was in respect of the Amendment of the Palestine and East Africa Loans Act that the Dominion Secretary said that £1,000,000 of schemes could be got on with right away. What are the facts? Instead of £1,0100,000 in the year and three-quarters which have passed since then, instead of the Colonial Office clamouring for this Amendment so that loans might be raised, not one loan has been raised under that Act in that time, but instead, until Tanganyika comes along again, every Colonial Government concerned is prepared to borrow on its own credit in the open market. Why? The Under-Secretary has given one obvious reason, that the trouble about this kind of Act is that it will be used by a Colonial Government only in extremis. It will be used only when it cannot raise the money in any other way, because it will make it so much more difficult for the Colonial Government to raise money subsequently, as the guaranteed loan would be a first charge and, therefore, their credit would be so much worse. That is the first reason.

The second reason is that the Colonial Government have no cause to love the Treasury. They know the sort of conditions and trouble any Colonial Government has, whatever the Government in power, in dealing with the Treasury. It is that niggardly and over-cautious attitude on the part of the Treasury in little matters which is holding up development. I want to point out that it is not in the interest of any party in the State, but simply in the interest of getting on with the job, that up to the present the Palestine and East Africa Loans Act has been very little utilised for the actual borrowing of money, and it has not been speeded up since this Government came into power. The Amendment which this Government made under the Act has, in a large measure, completely failed. If we want to speed up development under guaranteed loans, it is far more important to adopt more energetic methods of administration, and to avoid the risk of those small difficulties which Treasuries are always inclined to raise. Energetic administrative action is far more important than all these Amendments of the original Act in small points.

From that point, which is a serious one, I should like to pass to the other point made by the Under-Secretary, that, although it is true that no loans have yet been raised under this Act, various promises have been given, and the Treasury have agreed that, when the time comes for raising the Zambesi loan, they will be prepared to give a guarantee. That, however, has been going on, as the Under-Secretary pointed out, ever since the passage of the Act of 1926, when schemes of this kind, including the Zambesi scheme, were being considered and approved by the East African Guaranteed Loan Committee, which is now merged in the Colonial Development Fund. I would only point out that all these approved projects were lumped together by the Dominions Secretary, in the debate in 1929, under the general statement that he had found schemes held up for months and years—schemes that would give employment, schemes that were necessary, schemes that would develop and benefit our Colonies. For a hundred and one reasons they were all in the pigeon-holes, that is to say, they had only been considered and approved, and exploration was still in progress—the same kind of exploration and preliminary work which the Under-Secretary has detailed here.


I should like to point out that, in the case of the amounts to which I referred, the work is actually going on, with the approval of the Treasury. The loan has not actually been floated, but is awaiting a suitable time, and the work is actually proceeding under the contemplated borrowing.


That does not apply to all of the cases mentioned by the hon. Gentleman. For instance, there is one railway scheme in regard to which only a preliminary survey is being carried out, and, so far as it does apply to these schemes, it includes that very large body of schemes—considerably over £4,000,000, in addition to the £2,000,000 for Tanganyika—which has been approved by the East African Loan Committee before 1929. The fact of the matter is that most of this work, of which we are very glad to hear, is still in a preliminary stage.

Now I come to the other provisions of the Colonial Development Act, which enable grants to be paid out of the Colonial Development Fund to defray interests during the construction period. The hon. Gentleman has told us that promises have been made that interest will be defrayed when eventually the loans are borrowed, but up to date, as the Financial Secretary very kindly informed me in reply to a question, in the last year and nine months the total sum of money that has been paid out of the Colonial Development Fund to defray interest during the construction period is £11,777. I point this out to the House because the truth of the matter is that this Colonial development, so far as the actual getting to grips with it is concerned, is proceeding at, a leisurely pace. It may be that it cannot be proceeded with more quickly; it may be that it is proceeding at a slightly quicker rate than in the three years between 1926 and 1929.

There is no doubt that the Government are entitled to take credit for having asked the House for larger expenditure. The Colonial Development Fund has been used, and I do not underrate the effects of its existence in encouraging Colonial Governments to get on with their work long before any actual liability falls upon the Fund; but, taking all that into account, these development schemes are not proceeding at anything like the rate that the Dominions Secretary led the House to expect when he came before it a year and nine months ago, and, in particular, the Palestine and East Africa Loans Act has produced nothing at all in that year and nine months. If we had never amended the Palestine and East Africa Loans Act in that respect, the amount of money borrowed would have been precisely the same, and, in that respect at any rate, our expectations have been deplorably disappointed.

I do not wish it to be thought that I make these remarks in any carping spirit, but I think it is desirable that the House should know that all this tremendous burgeoning and blossoming of schemes all over the country, which we were led to expect as the result of a few little things like the Colonial Development Fund and amendments of the Palestine and East Africa Loans Act, is out of the picture, that it is not so, and that the only Colonial development we are getting is a slow and steady and growing volume, I admit, but still not one that is likely to bring any material assistance to the unemployment situation in this country.


The proposal which the Under-Secretary has brought before the House seems to me to be extremely reasonable, and I think it will help to develop at any rate our Colonies in East Africa. My Noble Friend has spoken of the doubts on this side of the House as to the reality of the wish of the Government and their supporters to develop the Colonies and the Empire generally. I can assure the hon. Gentleman that those of us on this side, and there are many of them, who know his work and the earnestness with which he is carrying it out, have no doubts with regard to him; but one has some little doubt with regard to the amount of work that the development, is bringing to our factories, and I would ask the hon. Gentleman, in his earnestness in the cause of native development, not to forget our factories in this country, but to do his best to increase the amount of exports from this country to the Colonies and to the Empire generally.

It was very interesting to hear the hon. Gentleman speak of the proposed railway in Tanganyika, from Kilosa or some neighbouring point on the central railway round the Southern Highlands. I am very glad to hear that the survey is being concluded, and that there is a possibility of that railway being constructed shortly. That will lead to a very large development, in the fertile area of the Kilombero Valley, and will also develp the Southern Highlands. The question of white settlement in the Southern Highlands is, of course, to a certain extent a matter of controversy, or at any rate of discussion, but, as far as one can judge from one's small personal knowledge, there is a considerable possibility of white settlement in the Southern Highlands, where the native population is extremely sparse and the climate is very suitable for white settlement. The construction of that railway would undoubtedly tend to favour such settlement.

It was very interesting also to hear the hon. Gentleman speak of an additional steamer on Lake Tanganyika. There is at present on the Lake a steamer which was originally German, and which is now plying up and down the Lake, and to hear that a second steamer is required seems to indicate that trade is being developed in that district. The story of the steamer that now exists is rather curious. When it was obvious that our Forces were going to occupy Kigoma during the War, the Germans, who thought they were sure to return, took this steamer some three or four miles out of the harbour of Kigoma, carefully oiled and greased the machinery, and sank her. Later the Belgians raised the steamer and brought her hack into Kigoma harbour, and there was great rejoicing on their part at having salved the steamer. During the rejoicings, however, one of the Belgians looked out of a window and said, "Where is the ship?" She had sunk again in the harbour. Then, later, we raised her, and she is now plying up and down the Lake. It is very satisfactory to hear that trade is being developed there.

With regard to the Zambesi bridge, to which reference was made by my Noble Friend, that bridge is being constructed in order to develop the trade of Northern Rhodesia and Nyasaland, but it is being constructed on Portuguese territory. Undoubtedly, the Portuguese district on both sides of the bridge will benefit very greatly, and our money is being used for the purpose of developing Portuguese territory. I would ask the hon. Gentleman, what control have we over the railway running on both sides of the Zambesi bridge? I understand that the bridge is being constructed with materials from this country, and one hopes that both our Colonies and this country will get a full return for the outlay that we are making on this bridge. I congratulate the hon. Gentleman on introducing a useful Measure, and hope that its effect will be successful.

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

This subject is a very important one, but it is also very complicated and technical in its details, and I am sure that those Members of the House who are interested in its details recognise that on both sides of the House there is a desire to prosecute the work and to get forward as much as possible with the development in which we are all interested. I do not think that there is very much interest in the House in any slight difference of opinion that there may have been between the Noble Lord the Member for Hastings (Lord E. Percy) and myself on a previous occasion, and, therefore, I only propose to say one or two words in answer to his speech; and those will not be words of an unfriendly character, but rather an attempt to settle the slight difference between us in an amicable fashion.

If it is any satisfaction to the Noble Lord I will give him this, that on a literal, meticulous and narrow interpretation of the words of the former Lord Privy Seal, the exact point that he was making has not been carried out exactly in the way that he anticipated. But, having said that, I think it is necessary to add that really there is not a great deal of substance in the distinction. The former Lord Privy Seal was not speaking, on the occasion to which the Noble Lord referred, in a Debate on a Bill, but in the Debate on the Address, and, therefore, I think his words ought to be construed in a somewhat wider way. He was talking about an alteration and extension of the Palestine and East Africa. Loans Act, and it is quite true that, when he made his remarks, he was envisaging two things—first of all, something that was technically an Amendment of the Act, and also something that was an extension of the principle lying behind the Act, that the British Treasury should assist in Colonial development.

There were those two methods. When it came to the Colonial Development Act, those were embodied in different Sections of the new Act. What has actually happened since the Lord Privy Seal's speech is this: At the time he made his speech, he thought, and it was the intention of the Colonial Office, that the Zambesi Bridge scheme would be financed through the Palestine and East Africa Loans Act, and that an Amendment of that Act would enable the work to be got under way. There is every reason to think that that would have been the case but for the fact that the scheme had to be extended and a greater loan had to be raised than had been anticipated. In consequence of that, the assistance was transferred from the one name to the other, and the Government, instead of proceeding through Section 5 of the Act, has proceeded through the other part.


Am I right in saying that the loan is to be raised under the Palestine and East Africa Loans Act?


It is being provided under the Act, but the additional assistance that the Government are giving is not taking the shape that is implied in Section 5 of the Colonial Development Act, but is taking the more generous shape that is implied by the earlier Sections of the Act. The scheme, although no money has yet been issued from the Treasury, is already under way. There is a distinction which the Noble Lord does not fully appreciate between the scheme being proceeded with in general and further particulars being discussed with regard to it, and a scheme which has actually started and with regard to which men are actually being employed in this country. I think the Noble Lord has been a little misled by the fact that no money has actually been paid, but the position is that there is a considerable time-lag, just as there is with regard to development schemes at home. The money that we are called upon to pay is interest, and it is not until that interest is called from us that any disbursement takes place from the British Treasury. But a great deal of money has already been expended and work has already been given out to workmen in this country, and employment thereby created, even though actual sums have not been forthcoming from the British Treasury.

Bill committed to a Committee of the Whole House for Monday next.—[Dr. Shiels.]