PUBLIC WORKS LOANS BILL.

HC Deb 24 June 1932 vol 267 cc1405-24

Order for Second Reading read.

The FINANCIAL SECRETARY to the TREASURY (Major Elliot)

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

This Bill is, of course, an annual production and the House is well acquainted with the general principles underlying it. It may be interesting, however, to new Members of the House if I explain briefly that these Public Works Loans Bills provide facilities for the smaller local authorities to borrow from a fund which is under the supervision of the Public Works Loans Commissioners. These Commissioners are unpaid and are men of considerable standing. Their Chairman is Lord Hunsdon, and they are men of great financial experience. Advances are made only in respect of works which have been fully justified from every financial and actuarial standpoint. It is true, of course, that accidents will happen in the best regulated families, and that a certain number of these loans prove unfruitful and have to be written off. A very complete account of each transaction will be found in the Financial Memorandum and the particulars attached to the Bill. For the further security of the public funds the amounts which are being written off are merely written off from the point of view of the Local Loans Fund, and if any money can eventually be recovered on account of them it will not be lost. It will go into the General Exchequer Fund and not into the Local Loans Fund.

I have now dealt, I think, with practically all the points of general principle which arise on the Bill. Coming to the actual particulars of the Bill, the House may desire to know the amount which we are here authorising the National Debt Commissioners to issue for the purposes of these local loans. It is a sum of £18,000,000 sterling and that sum is, of course, entirely within the discretion of the Public Works Loans Commissioners to advance or withhold, and they take full responsibility on purely financial grounds. This amount, on the broad average, is equivalent to the sums which have been advanced in recent years by the Public Works Loans Commissioners and it will run, we hope, for about a year. The period, however, is not fixed, and if the sums advanced by the Commissioners were to exhaust this amount at an earlier date, it would be quite possible to come to the House again and to ask for authority once more to put the Commissioners in funds. I think, however, there is little prospect of that eventuality. The amount which was voted last September will run, as far as we can foresee, until about next September. It has not been drawn upon at any unusual rate and there is still unexpended £7,081,000 of the amount which the House then authorised the Commissioners to advance. Of course, it would be inconvenient if the amount available were to run out in September of this year when the House was not in Session, and the provision made under the Bill may save the smaller local authorities a certain amount of difficulty on that account.

The only further point which may interest the House is as to whether or not this Measure affords an opportunity for checking expenditure by local authorities. I think I may assure the House that, that issue is not raised on this Bill. In the first place, it is merely a permissive Bill, and permits the smaller local authorities to come before this exceptionally authoritative body which I have already described to the House. Secondly, the larger local authorities do not usually come before the Commissioners at all and, whether or not it would be desirable for greater control to be exercised over local authorities, it is clear that such control would need to affect the larger and not only the smaller local authorities. Furthermore, whatever financial control was exercised, it would be difficult to find a more efficient and unprejudiced body than the body which supervises the loans to these smaller local authorities under the Bill. There is, finally, the question of principle as to whether the real control exercised over local authorities should not be more control of policy than of finance, but, as I say, it would be out of Order to discuss the subject on this Measure. Consequently, I hope that the House will find it possible to give the Bill a Second Reading, and if there are any points of detail which it is desired to raise, they can be raised during the Committee stage.

Mr. T. WILLIAMS

I quite agree with the right hon. and gallant Gentleman that this Bill is a hardy annual, and, as far as one can see, it contains no great debatable principle. We do not intend to oppose the Measure, but one or two questions to the Financial Secretary will not be out of place. I notice that the amount which is to be authorised on this occasion is £2,000,000 less than the amount borrowed last year. Last year the right hon. and gallant Gentleman informed the House that the Fund then contained some £10,000,000 unexpended or unborrowed and authority was sought to issue a further £20,000,000. The right hon. and gallant Gentleman tells us this morning that a sum of £7,000,000 at present remains unborrowed, and he seeks a further £18,000,000 under the terms of this Bill.

Are we to take this from the Financial Secretary as a general indication that there must be a slowing down of local government activities in all forms of work? Are we to understand that the chairman of this impartial body—who, only two days ago, in another place, moved a Motion demanding greater economies so that Income Tax could be reduced—has been the inspiration in reducing the sum from £20,000,000 to £18,000,000? There seems to be at least some connection, and I would remind hon. Members that, although the policy of local authorities cannot be determined by the Public Works Loans Commissioners, those Commissioners have, by implication, tremendous powers for imposing their will upon many local authorities. We want to see money spent wisely on really useful schemes and, rather than contract the sum which is available for local schemes, we would prefer to encourage local authorities to take in hand useful and necessary work which would provide employment for some of the poor unfortunate wretches who have been unemployed for so long.

By way of illustration, the question of drainage may very well be dealt with by the Public Works Loans Board, and the Ministry of Agriculture has discouraged work of that kind. We think it ought to be encouraged, and if catchment boards were disposed to undertake such schemes, presumably this is the authority to which they would apply for funds. We should regard that as a very sound investment, not wasteful or extravagant,, since land would be brought back under the plough, providing employment for a large number of people, and removing anxiety from a large number of the population. Do we understand that the reduction from £20,000,000 to £18,000,000 is intended to discourage local authorities from undertaking such schemes? If so, we should regard that as very undesirable.

A few days ago the Lord President of the Council invited people who could afford it to spend wisely. We think that was good advice, but it applies also to the local authorities and the State, where they can undertake any scheme that will find useful work and improve the social amenities in their areas. From that point of view, we are slightly disturbed at the suggestion of a less sum being made available for these local authorities, and particularly are we disturbed at the Chairman's suggestion in another place that economy must be practised all round, so that an equivalent reduction in the Income Tax may take place forthwith. That is quite contradictory to the suggestion of the Lord President of the Council, and I hope that the right hon. and gallant Gentleman will tell us whether the Lord President of the Council is the inspiration of the Government or whether Lord Hunsdon has now become their inspiration. I understand that the Noble Lord has done valuable work in the past, and for that we are very grateful. We do not think, however, no matter how capable and intelligent the Noble Lord may be, having reached a very great age,, that the present generation, a new world, as the Lord President of the Council has said, ought to be directed by the Chairman of the Public Works Loans Board.

I want to ask a question about the rates of interest charged to local authorities by the Board. It seems to me that 14 years after the war, with the price levels by no means comparable with what they were, say, from 1920 to 1923, there ought to have been some alleviation to local authorities which were really visionary and which did their best, not only to improve their districts, but to provide work for the unemployed. There are many local authorities which have been real housing enthusiasts and have provided a large number of houses for their people, and there are many people who are living in their existing houses only because they are compelled to do so, as they work there; in many districts, where more houses have been erected than in other districts, it is because people must live there to attend to their daily work.

We are led to believe that a difference of 1 per cent. in the rate of interest on loans for normal working class dwellings means anywhere between 1s. 6d. and 2s. a week on the rent, and I want to ask what instructions, if any, the Government have given to the Public Works Loans Board to consider the advisability of reducing the rates of interest that are charged on money borrowed for carrying out any one of the numerous schemes undertaken by the local authorities. It is obvious that if local authorities find themselves in a position in which the wages of their residents are so small that they find it impossible to meet the normal rent of a council house, those authorities will hesitate before building. If, therefore, the mere process, although it involves more than that, of course, of reducing the rate of interest to one which is more consistent with present-day price levels, by 1 per cent. or 1½ per cent., will encourage local authorities to erect decent dwellings, so that their workers could have homes of their own and could meet the weekly rent without incurring large arrears, they would be much more happy and contented than many of them are to-day, when they have to live two families in one house and hold fast to miserable hovels which, by no stretch of imagination, could one call houses, because they are unable to pay the rent of a really modern, up-to-date house.

Whether it be a question of building new houses, of taking off nasty, dangerous corners, or of improving districts generally, a reduction of 1 or 1½ per cent. in the rate of interest on loans borrowed from the Public Works Loans Board would make all the difference in the world between sensible progress and the inactivity that is obvious in all parts of the country to-day. The right hon. Gentleman the Minister of Labour yesterday, in. reply to a question, said that there were 104,000 persons employed on Govern- ment schemes in October of last year, and that since then every month the number so employed has been reduced, so that by May of this year something slightly in excess of 80,000 persons were so employed. That is a reduction of 20,000 odd, and the Minister said that indirectly there would be an equivalent number unemployed, which means a fall on these schemes of approximately 40,000 in the past few months. I know that many hon. and right hon. Gentlemen sitting on the Government benches are deeply concerned about the interest on the National Debt. Some of them, less than a fortnight ago, had Questions on the Order Paper asking the Chancellor of the Exchequer whether he would consider reducing the interest on the National Debt to 3 per cent. That may be desirable, but it is equally desirable that the Public Works Loans Board and the Government, if they have any influence or responsibility, should also consider what can be done towards reducing interest charges to local authorities.

With regard to Clauses 2 and 3 of the Bill, dealing with the remission of sums which have been lent to fanners, they form a very painful chapter. It is true that only eight farms are involved in this remission of £5,148, but in all these cases the farmers, presumably good farmers, who borrowed sums ranging from some hundreds to £3,900 from the Public Works Loans Board, found themselves in the bankruptcy court in the end. All their farms were sold, some of them at less than one-third the actual valuation by Inland Revenue officers when the loan was granted. That indicates, first of all, that there must have been a colossal reduction in the value of farms and, secondly, that when the sums of money were lent they were loaned without the Public Works Loans Board or anybody responsible insisting upon such farmers indulging in some form of co-operative activity which would make their prosperity much more certain than the individualism that characterises industry from beginning to end at the present time.

It so happens that one of these poor farmers who borrowed a few thousand pounds from the Board was, and is, a resident in my own division, and instead of being a very prosperous farmer, he is now a farm labourer, having lost a farm originally worth some £2,400, since 1924. Hon. Gentlemen will not imagine that I am very happy about that. We regret to see a farmer go through the hoop just as we do to see a colliery proprietor, a steel manufacturer or anybody else. Therefore, we welcome the remission of these bad debts. We regret very much the loss that these farmers have sustained, but we suggest to the Public Works Loan Board that when they are advancing money—and we stand for credit facilities being provided for farmers on reasonable terms—they ought to use all the influence they have to see that combinations of farmers are formed, and that, instead of lending to individuals, they should lend to corporate bodies. The remission of these sums of money to farmers involves the question of the rate of interest charged to farmers. It is one thing to provide credit facilities to farmers to enable them to carry on their work, and it is another thing to impose an interest charge which it is almost impossible for the farmers to carry.

Therefore, while we are concerned about local authorities and such schemes as they undertake, we are also concerned about the rate of interest charged to farmers when they feel obliged to call for a loan from the Public Works Loan Board. We invite the right hon. and gallant Gentleman to consider the question of interest to farmers when they seek a loan so as to be able to carry on their work. If the right hon. and gallant Gentleman will do that, at least the Members who sit on these benches will be very pleased, for we want to see agriculture succeed as much as the right hon. Gentleman himself does. We see no reason why we should oppose this Bill which, as he stated, is a hardy annual. We want to be sure, however, that the Chairman of the Public Works Loan Board has not been responsible for reducing the sum available from £20,000,000 to £18,000,000. We want to know that it is not Government policy that cutting down in every conceivable way shall be the order. If that is to be the case, we want to know what the Lord President of the Council meant the other day when he said that wise spending should really be the ideal, instead of false economy. We want to know whether it is possible for the Public Works Loan Board to reduce the rates of interest charged to local authorities so as to encourage house building, the draining of land, and such other schemes as can be taken in hand. We also want them to consider lightening the burden of the farmer who feels disposed to call upon the Board for a loan to help him to carry on with his work.

Sir ARTHUR MICHAEL SAMUEL

I should like to follow up two points which were raised by the hon. Member for Don Valley (Mr. T. Williams). The first was that in making advances to farmers, the Public Works Loan Board should persuade farmers who are borrowing to indulge in a co-operative system, and that the Board should make that a sine qua non when money is granted. I do not want to press the point too much, but the hon. Gentleman must remember that there is a wealthy and well-organised institution in this country—the Co-operative movement —with an immense amount of money behind it, which has a great deal of skill and knowledge, and has no Schedule U taxes to pay. For years they were farmers, but they have given up farming because they found that what the hon. Gentleman has advocated—co-operation in farming—is not profitable. There is, therefore, nothing in his point, because it has been tried and found wanting by people most competent to try it. Hon. Members opposite advocate the blessed word "co-operation," just as the words Abacadabra and Mesopotamia have been advocated, in other directions, as a method of solving the difficulties of agriculture, one of the most difficult and highly skilled of occupations.

11.30 a.m.

Then the hon. Gentleman said that it is necessary for local authorities to have their money at a lower rate of interest. As one who has been connected with municipal work for a good number of years, it does not seem to me that he has grasped how the money is obtained. The money is obtained by the smaller municipal authorities for whatever purpose may be authorised, from the National Debt Commissioners, and it is not within their power to let local authorities have the money at a lower rate of interest than that governed by Government credit. The rate of interest to local authorities is dependent upon the rate at which the Government can borrow it, plus administration expenses. If the National Debt Commissioners cannot borrow it cheaply, they cannot lend it cheaply. It would not be a bad thing if the hon. Gentleman's speech were reproduced and circulated not only among his own followers, but among some of ours. When hon. Members attack the National Debt or talk about a conversion without the permission of those who have lent the money, they are themselves preventing the borrowing of money by the Government at a cheap rate. Every time an attack is made on the National Debt, it frightens people and renders it more difficult for the Government to convert and more difficult for the National Debt Commissioners to raise local loans at a cheaper rate of interest so that they can lend money more cheaply. At the present moment the value of 3 per cent. Local Loans is 75; I have seen them down to about 50. The more the price of Local Loans rises, the cheaper the Commissioners can borrow money, and the cheaper they can lend it to public authorities. Every attack on holders of the National Debt injures credit. The whole crux of the matter is how cheaply the National Debt Commissioners can borrow; for if they can borrow cheaply, they can lend cheaply to the local authorities.

This is not, as Labour Members know, a contentious Bill, although we had a Homeric struggle in one year when hon. Members opposite threw their colleague, Mr. Pethick-Lawrence, sprawling on the floor. As on one or two occasions I was responsible for these Bills, I would like to deal with a point raised opposite about the losses on the loans to farmers. My right hon. and gallant Friend said that there are losses in the best regulated families, but I maintain that a large amount of these losses ought to have been avoided. Will hon. Members look at page iii of the Financial Memorandum to the Bill under the heading "Loans by the Public Works Loan Commissioners under the Agricultural Credits Act, 1923"? I am aware that that Act has been discontinued as it has been found that it is not in the public interest to carry it on. Will the House bear with me while I explain why I feel apprehension about the way the money has been lost? These loans have been made in the last five or six years, and none are older than seven years. Take the first case, that of Mr. George Baber and Mrs. Elizabeth Aitkens. The property was valued in 1924 at £3,860. The loan was made for very much less, namely, £2,895. The loan was, therefore, £1,000 less than the valuation put upon it by the Inland Revenue authorities.

Mr. MACQUISTEN

They are valuers for probate.

Sir A. M. SAMUEL

I will deal with the point of the hon. Gentleman. I am astonished to see that no less than £2,000 of the loan was lost. Only £894 was repaid. Have the Inland Revenue been asleep? The hon. and learned Member for Argyllshire (Mr. Macquisten) said that the property was valued for probate. That is a different thing. Probate valuations are not valuations that are suitable for long-term conditions. When you value for probate you value property at what it will fetch in the market at the moment and as high as you can. In valuing agricultural land for a loan and not for taxation one must adopt the long view, and take into consideration all the possibilities of a rise or fall in values over a long period, because the money is not likely to be paid back in two or three or even 10 years. It appears to me that valuers for probate are not suitable to make these valuations. What the probate valuers have to consider is the selling value of to-day. But as the value for a loan may be wholly different five or 10 years hence we find that we are, as here, landed with a loss of £2,000 on a property which was seven years ago valued at £3,860. We made a loan of £2,895, and all we have got back is £894.

On page iv we find the same thing happening—the valuation was £5,600, the loan was £3,975, and there is a loss of £553. There is another case where the valuation was £1,800, a loan of £1,350 was granted, and there is a loss of £139. An even worse case still is one where the property was valued at £400, an advance of £300 was made upon it and the loss amounts to £206. What were the valuers thinking about? There is still another case: the valuation was £2,400, the loan was £1,800 and there is a loss of £567. The amount realised did not come within miles of the amount of the loan, let alone the valuation. These loans provide a series of proofs that values which could not be justified were placed on these properties.

Yesterday I went into the Library and turned up the earlier Bills, as I remembered that when I introduced a similar Bill in 1928–29, I drew notice to the fact that there were considerable losses shown in the Schedule—there were at least three valuations which showed loss. Then there was the Bill introduced by Mr. Pethick-Lawrence in 1929–30, and though I do not attach any blame to him I would draw the attention of the House to this case of his Bill. A valuation of £10,800, a loan of £8,100, and a loss amounting to £2,050. In another case the valuation was £12,500, the advance on mortgage was £9,375, and no less than £3,673 was lost. There must be something wrong with such valuations, and I think the time has come when the Public Accounts Committee might have this matter brought before them and the loan valuation system looked into. The Financial Secretary to the Treasury can review the existing loans to find out whether the revenue authorities who made the valuations are really competent to undertake valuations for loans to be granted over a long period. They are quite competent to undertake probate valuations for taxation assessments, but I think they have proved themselves to be out of touch with valuations in which they should take cognisance of all sorts of future possibilities—of inflation and deflation, the rise and fall of markets, and various deferred and unforeseen contingencies. It does not do for the country to see valuations made by revenue authorities falling short of accuracy in the way disclosed by this Schedule. It makes the taxpayers who are interested in probate taxation valuations wonder whether they are being treated fairly. For that reason I ask my right hon. and gallant Friend, the Financial Secretary to get the authorities of the Revenue Department to inquire whether these valuations are being made in a proper way and by the right type of professional skill, and then I think he ought at the proper time, to lay the information before the Public Accounts Committee.

Mr. MACQUISTEN

When I interrupted my hon. Friend a few moments ago to say that these were valuers for probate, what I meant was this: that valuers for probate are valuing a property with the idea of the Government taking as much as possible from the wreck of a deceased man's estate; they are going to impoverish those who succeed him as far as they can. That is one of the reasons why those valuers put the valuation as high as possible; but totally different considerations arise when it is a question of advancing money, and in those cases the valuation ought to be on a much more conservative basis. In practice, if they were to take a long-term valuation there would be the greatest possible difficulty in arriving at a figure. Looking at the value of land over a century—and these farmers would have taken a century to pay back these loans—it will be seen that it goes up and down, depending on the market and on the value of money. There are instances where an estate has made something like £100,000 in the market, and when it has been sold a few years later the price has dropped to £30,000 or £40,000. It all depends on the state of the market. I do not think these loans have been wisely granted.

The hon. Member for Don Valley (Mr. T. Williams), referred to the Lord President of the Council having advocated wise spending. Of course, there is such a thing as wise spending, but we do not find out whether it has been wise or not until after the event. It is all very well to come in a long time afterwards and say that it was foolish. There is one axiomatic rule which ought to be remembered —that if one man provides the money and another has the spending of it for his own behoof, it is to be suspected prima facie that it will not be wisely spent. The same thing happens when we have the State providing money for local autho- rities; we may be quite sure that the local authorities will not spend it with the same care and wisdom as they would if they were spending their own money and had to account for it to their own ratepayers. On page iii of the Bill a loss is explained by saying that Owing to the failure of the borrowers to cultivate and manage the farm in a proper and husbandlike manner in accordance with their covenant in the mortgage deed, the Board were compelled to take possession of the property. I have no doubt that if the farmer had tried to raise the money from a local lender instead of from the Government, he would not have got the money, because his reputation as a farmer would have been known; but this is State money and the fact that people have to come to the State for money is prima facie evidence that they are not the best farmers. We find very much the same thing running through all these cases. I am interested to note that the name of one of the borrowers is Riches, a rather ominous name for a gentleman who comes to borrow. He got an advance of £3,300 on a property known as Folly Farm. That, in itself, ought to have been a warning to the Government. In the end they lost about £1,500 on that transaction. There has been a terrific fall in agricultural values, as in all other businesses, and therefore it may possibly be that the authorities are not altogether to blame. They went in during a boom time, and they got the backwash when the slump came. I remember a wealthy man telling me once that he hoped he would die in a slump, because if he died in a boom he would be ruined whereas if he died in a slump there was a chance of those who succeeded him making money. He was on the point of going abroad, because he said that while he could afford to live in this country he could not possibly afford to die here—it was far too expensive.

I am very pleased indeed to hear that there has been a restriction of these advances. I take the very opposite view from the hon. Member for Don Valley, who regretted that the amount of the advances had been reduced. We need to restore confidence in the country, and we shall only get confidence by reducing taxation. Why is it that we hear about all these flights of capital chasing round the world? It is because people are looking for security. It is because people who have capital are unwilling to leave it at the disposal of predatory Socialist Governments whether called Conservative or Socialist. So long as there is not to be confidence you will have a redistribution of wealth. That is the reaction. That is going back to barter. It is what happens in a hen-yard. One hen scrapes up a worm, and another rushes up to take it from her. As long as you have those who think that, because a person is working, all the products that come from the working belong to them, so long will you have people whose economic knowledge does not get beyond that of the dairymaid, who insisted that all the milk that came from the cow belonged to her because she milked it. That seems to be the economic mentality of the Socialist party opposite, and we will have trouble and unemployment, and difficulty in getting back to prosperity—

Mr. SPEAKER

I think the hon. Member is getting a long way from the subject of the Bill, and I suggest that he should get back to it.

Mr. MACQUISTEN

I will be very glad to do so. I am glad to hear that there has been a restriction put upon loans and I hope, after these painful examples as to what has happened with the money that we have left—because it is perfectly obvious that we have not had suitable borrowers— that there will be a much more careful scrutiny. I suggest that if we are to make valuations, and if we are going to get money, a Government official or a person connected with a Government Department is not the man to make it, for the simple reason that as soon as a man has been any reasonable period in the employment, even of a municipality—and perhaps even less in that case—or of a Government, his ordinary business sense is more or less dulled. He has not got the mentality for it. He gets the consciousness of having this enormous steam-roller force behind him. A certain element of what you might almost call frivolity creeps into his commercial experience. There is this feeling that the Government are frivolous in their operations, and that is what is causing the want of prosperity, the want of confidence and the difficulty of getting a trade revival. As long as you have this Socialistic influence in the Department, so will we not get a revival of trade. Until we get down the expenditure of Government, whether local or imperial, we shall not get a restoration of trade, or get rid of the menace of unemployment or get prosperity.

Mr. ATTLEE

I would like to support the point made by the hon. and learned Member as to the very great care that should be taken in the making of loans and the necessity of having thoroughly experienced people to get hold of borrowers. If one examines the work of these Commissioners, one finds that their losses are not so great as those that are made by the gentlemen who take charge of the people's savings. I commend to the hon. and learned Gentleman that he should read the Macmillan Report. He will find that the percentage of savings of the people that were invested and that were entirely lost was very much greater. If he will read that, he will get some knowledge upon the subject of economics, and he will get his ideas closer to reality. He will realise that we represent the cow, and the hon. and learned Gentleman and his friends the capitalist milkers.

Mr. LEWIS

Before we give a Second Reading to this Bill, we are entitled to ask the Financial Secretary to the Treasury for further information with regard to some of these items which it has been proposed to write off. I would like to draw the particular attention of hon. Members to a case that has already been touched upon by the hon. Member for Farnham (Sir A. M. Samuel). That is a case where—it is quoted on page iii of the Financial Memorandum—under the Agricultural Credits Act, a sum of money advanced to a Mr. Baber and Mrs. Aitkens. One of the very remarkable features of this transaction was, in the first place, as has already been pointed out, that the property was valued by the Commissioners of Inland Revenue in December, 1924, at £3,860, and that it was valued in February, 1931, some six years later, at £850. I would like to ask the Financial Secretary to the Treasury whether, in the view of the Treasury, that is merely a typical drop in value of agricultural land and buildings between those two dates, and therefore could not have been foreseen by the valuers? If so, it is a most lamentable illustration of what is happening to the agricultural community, and should act as a very sharp spur to the Government to do much more than they have yet done to assist agriculture.

If the Financial Secretary says that, in the view of the Treasury, that is not fairly typical, then there are some exceptional circumstances to account for this astounding difference in the valuation made over a period of six years by the same valuers, and the House might fairly ask that the Financial Secretary should briefly tell us what those special circumstances are. Not only is this the same farm that was valued on two dates only a short period away, but the sum of £2,895 had been advanced to those tenants. Surely some part of that sum has been put into improving the value of the farm, which makes the drop in value even more remarkable than it appears in the comparison of the valuations. That is not all in this case, by any means. We are told, on pages 3 and 4, that owing to the failure of the borrowers to cultivate and manage the land "in a proper and husbandlike manner in accordance with their covenants", the Board were compelled to take possession of the farm. It is a very remarkable state of affairs.

Will the Financial Secretary to the Treasury tell us whether these tenants to whom money was advanced had been farming on that farm long before the money was advanced? If so, it would not have been difficult to ascertain whether they were competent farmers. If they were strangers, we would like to know what steps were taken to find out whether they were people who could and would farm properly, and make the best use of that public money. It seems to me on the face of it, without further information than we have yet had, to be a lamentable failure that, at a time when there are hundreds of deserving and hardworking farmers willing and competent to make good use of public money, money should be lent to persons of this description who make such ill use of it that the Board are compelled to resume possession of the property and lose the great bulk of the money that they have advanced. I think we may fairly ask the Financial Secretary to throw some light on that question.

In view of the fact that all these advances under the Agricultural Credits Act have resulted in losses of varying amounts, I should like to ask the Financial Secretary if he can give the House some general idea as to what is the position with regard to the much greater number of cases in which money has been advanced but which for the moment do not come under this Bill. I do not know whether it would be in order for me to make a general observation of this kind, but we have here certain isolated cases, and it would be interesting to know whether they are exceptional and remarkable cases, or whether they are fairly typical of other oases with which we shall be asked to deal at a later date.

With regard to the speech of the hon. Member for Don Valley (Mr. T. Williams), the burden of his argument, as I understood it, was that it is desirable that local authorities should be encouraged to borrow. In my view, the direct opposite is the case. We are suffering at this moment up and down the country from grossly excessive borrowing in the past by local authorities, and anything that these Commissioners, or the Treasury, or anyone else can do to check and reduce the amount of borrowing by local authorities during the coming years will be for the ultimate benefit and prosperity of all concerned.

12 n.

Major MILLS

As a landowner, I should like, to put in a good word for the Valuation Department, which has been criticised this morning. I feel that it would have been perfectly impossible six or seven years ago to forsee the slump in land values that has taken place. I have land which five or six years ago would have been valued at £30 or £40 an acre, but, if I had to sell it now, I should be very lucky if I got £10 an acre for it. That explains, to my mind, the unhappy losses which we see recorded here, and the only thing that I marvel at is that more losses are not incurred in this way, because, wherever an estate is wound up, these losses are realised and are inevitable, whether the money is private money or public money. I would suggest that, it one looks a little deeper into the observation which my hon. Friend the Member for Colchester (Mr. Lewis) quoted from the Schedule, one-may come to the conclusion that probably the true facts in that case are that so much money was taken out of the estate for Estate Duty that the unfortunate Mr. Baber and Mrs. Aitkens had not enough capital left with which to run their farm properly, so that it got into a bad state, and, when it had to be realised, made even less money than it would have made under the ordinary slump conditions. The hon. Member for Don Valley (Mr. T. Williams) asked why the advances amounted to only £18,000,000 instead of £20,000,000. It occurs to me that a reasonable explanation of this is that, when the Public Works Loans Commissioners are making advances under the Agricultural Credits Act in the coming year, if it is still in force, they will advance much less money, because the values of agricultural property are so much less that they will not be required to lend so much, and, accordingly, the proportion will be smaller. My only criticism of these loans is that I think that perhaps it is a little optimistic to lend so high a proportion as 75 per cent. of the nominal value, which I think is the proportion in the case of Mr. Baber and Mrs. Aitkens.

Major ELLIOT

Perhaps it would be convenient if, with the leave of the House, I answer the criticisms which have been brought forward, although it is true that most of them are more applicable to the Committee stage of the Bill. As to the general points raised by the hon. Member for Don Valley (Mr. T. Williams), I think it is true to say that there has not been any general cutting down of expenditure. The actual amounts that have been lent by the Board in each financial year are as follow:

1929–30	…	…	…	£21,433,606
1930–31	…	…	…	£18,348,855
1931–32	…	…	…	£19,981,867

The drop from £20,000,000 to £18,000,000 this year is simply a matter of accountancy and book-keeping. There has been a general contraction in the price level, and it is reasonable to suppose that that will be reflected in a correspondingly less amount required for advances in the coming year.

The criticisms of particular items in the Schedule are more appropriate for the Committee stage of the Bill. Some rather pointed remarks were made by my hon. Friend the Member for Colchester (Mr. Lewis), to which I shall have pleasure in replying at that stage if he still desires it. I would only say now that his criticisms are four years too late; no advances whatever have been made since 1928 under the Agricultural Credits Act, all these powers having expired long ago. Consequently, I do not think it would be desirable for the House again to hold inquests upon these past loans. As to whether the case of Mr. Baber is typical, I should say that it is not. This money is lent on character, and there is no doubt that there are cases in which the estimate of character formed is mistaken. A certain percentage of such mistakes will occur in all circumstances. Something like 1,214 of these loans have been made, and I think there have only been 69 in which any default has taken place. Out of £4,766,000 which has been advanced, the total sum involved in defaults—of which, of course, no great proportion has been lost—is less than £300,000, namely, £268,000. Therefore, I think that reasonable precaution has been exercised by the Commissioners in this matter. As for the accusations of frivolity brought against the Board by my hon. and learned Friend the Member for Argyllshire (Mr. Macquisten), I would only say that this is the first time I have heard that accusation brought against Lord Hunsdon, and no doubt it will be the last.

Sir A. M. SAMUEL

Has the Act of 1923 lapsed?

Major ELLIOT

The powers under the Act of 1923 lapsed in 1928, and no further advances have been made since that date. I think I have dealt with the points of general principle which have been raised, and I hope that it may now be possible for the House to give the Bill a Second Reading.

Question put, and agreed to.

Bill read a Second time.

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