HC Deb 30 June 1932 vol 267 cc2042-51
Mr. LEWIS

I beg to move, in page 1, line 18, to leave out the words "and Part II."

The two other Amendments which appear on the Paper are consequential upon this Amendment. If hon. Members examine the Schedule to the Bill they will find that Part II is concerned with loans by the Public Works Loan Commissioners under the Agricultural Credits Act of 1923 and the object of the Amendment is to gives the Financial Secretary to the Treasury an opportunity of affording the Committee some further information concerning the losses referred to in that part of the Schedule. I would be glad if he would deal particularly with the loss incurred in the first case. That is the case of a loan of £2,895 in favour of Mr. Baber and Mrs. Aitkens, of which no less than £2,000 has to be written off. On page 3, of the Financial Memorandum attached to the Bill, will be found certain rather remarkable facts regarding this case, and I should like the Financial Secretary to deal with this case under three separate heads.

In the first place, we are told that the farm in question was valued twice by the Valuation Department of the Inland Revenue. In December, 1924, it was valued at £3,860. At the beginning of 1931 it was valued at about £850, plus a small amount in respect of tenant rights. Are we to understand that in the opinion of the Valuation Department of the Inland Revenue the value of farms in this country at the end of 1930, was rather less than one-quarter of their value six years previously? If that be not the general position taken up by the Valuation Department then, in this case, there must be some special circumstances accounting for the remarkable difference between these two valuations. If such special circumstances exist, perhaps the Financial Secretary will tell us briefly what they are? The second point to which I direct the attention of the Financial Secretary is this. On the strength of the first valuation a sum of £2,895 was advanced. It would be interesting to know what became of all that money. If it was spent on improving the farm, that makes the difference between these two valuations even more remarkable than appears on the face of it. The third question which I would put to the right hon. and gallant Gentleman is, What are the circumstances in which that mortgage was foreclosed? We are told in the Financial Memorandum: Owing to the failure of the borrowers to cultivate and manage the farm in a proper and husbandlike manner in accordance with their covenant the Board were compelled to take possession. That seems a very remarkable and unfortunate state of affairs. When this matter was raised on the Second Reading of the Bill the Financial Secretary said that this money was lent on character. No doubt the character of persons to whom money is lent, is always taken into consideration by the lender of the money, but one would imagine that in a case such as this other considerations would be taken into account—for example, whether the person who sought to borrow the money could show that they were competent and practical farmers who would be likely to make good use of the money. Will the Financial Secretary tell us whether the authorities had any reason to suppose that these persons were competent practical farmers, apart from being people of good character? There is only one other remark which I wish to make on this Amendment. On the occasion of the Second Reading I mentioned some of these points and the Financial Secretary referred to them in his reply. He opened by saying: The criticisms of particular items in the Schedule are more appropriate for the Committee stage of the Bill. I took that merely to be another way of saying that the right hon. and gallant Gentleman had not then any answers to the questions raised, but that he could inform himself upon them if they were raised again on the Committee stage. He went on to make a remarkable statement. Referring to my remarks, he said: 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 he desirable for the House again to hold inquests upon these past loans."—[OFFICIAL REPORT, 24th June, 1932; col. 1427, Vol. 267.] That seems a curious argument. This money has been lost. The Valuation Department of the Inland Revenue which bears the principal responsibility because it was on its valuation that the money was lent, is still in existence. For aught I know to the contrary, all the gentlemen concerned in this transaction on the Government side are still in Government employ, and I fail to see the reasonableness of the argument that because powers under a particular Act have lapsed, therefore it does not in the least matter how much money has been lost under those powers while they were in operation. It is said that large majorities tend to make Ministers autocratic. I should not have thought that anyone, so urbane and reasonable as the Financial Secretary would so soon have assumed that autocratic air. I assure him that the back benchers in this Parliament are quite capable of selecting for themselves those subjects on which they desire information. For my own part, where it is evident that a large sum has been lost and where the facts put before us do not, by any stretch of the imagination, explain how the money has been lost, that, in my judgment is a proper subject for inquiry by this Committee. I hope that the Financial Secretary having had full notice that these questions would be raised, will be able to give us the information for which I have asked.

4.30 p.m.

Sir ARTHUR MICHAEL SAMUEL

I will, if I may, support what has been said by my hon. Friend the Member for Colchester (Mr. Lewis). We have in the last three years repeatedly seen these Bills brought in regarding losses that have been made in respect of mortgages which could not have been granted earlier than 1923, and were probably granted in 1924 and later. The Financial Secretary has told us that the Act expired in 1928, and therefore the loans, which amounted to £2,000,000 or £3,000,000, could not cover a period longer than from 1924–28. We have not finished with these losses, there must be a very considerable number of mortgages still outstanding, and I fear that the next two or three years will make this plain, as other Public Works Loans Bills come before the House. I think we misunderstood the Financial Secretary's remark that we must not look for inquests on these losses, which are now dead by about four years. What he meant must have been that the mischief was done and no good could be done now by digging up the trouble, and that we must be content to face the loss. We are all human and we all make mistakes, but I do not think we ought to let these losses pass. I add my protest to what has been said by my hon. Friend, and I think the Financial Secretary should overhaul the system by which the valuations were made. I have no fault to find with the valuers. They do their best, but it is evident that they were not fit for the job.

Valuers for Inland Revenue make the valuation as high as possible, so that the State may take as much taxation as possible, but when you lend money you make the valuation as low as possible. The mentality is quite different. The valuer's point of view is how low can he put the valuation so as to prevent his employer losing money in case anything goes wrong. That is not what has been done here. The valuer has put on these properties a value which they were not worth. I go further. The Financial Secretary has said that this is only a small loss, but if an insurance company had been lending £2,000,000 or £3,000,000, and within three or four years had found losses at the rate we are now making these losses, I am certain the insurance company would be unable to meet its engagements. That is not the way to do business. I think it would not be a bad thing if we had before the Public Accounts Committee—and here I am speaking only for myself—the methods by which these valuations have been carried out, to see if we can learn something for the future, especially as one of the Ministers introduced not many days ago a new Bill which I believe will empower certain Departments to advance new money on agricultural property. If I am right in that, before we go any further, and in order that we may not have these losses under the new Act, I think the whole system by which these valuations are made should be overhauled. I do not want to press the Financial Secretary too much, but I should like to lend a little force to what has been said by my hon. Friend.

The FINANCIAL SECRETARY to the TREASURY (Major Elliot)

I think this is an appropriate moment at which the accounts should be reviewed, My hon. Friend the Member for Colchester (Mr. Lewis) seemed to be making a very fine-drawn point in stating that when the Minister said that the appropriate time for the examination of the details was on the Clauses and not on Second Reading, that meant that the Minister would inform himself between Second Reading and Committee stage. I make no apology for that. That is the purpose of having an interval between Second Reading and Committee stage. There is nothing to apologise for in having said that, these questions having been raised in general terms on Second Reading, we should proceed to examine them in more detail in Committee. I make no apology for having informed myself more fully between Second Reading and the Committee stage on the arguments which he brought forward and his request for information.

Although he did not give me warning that he was about to raise these specific points, yet I took pains to inform myself on all the points which had been raised on the Second Reading of the Bill, both by the hon. Member for Don Valley (Mr. T. Williams) and by the hon. Member for Colchester. He raised a few specific-criticisms to which I hope to be able to give answers. He desired to refer particularly to the case of Aitkens. The Committee will see that the name is given as Mr. George Baber and Mrs. Elizabeth Mabel Ida Aitkens. Both these persons are called Aitkens. They are husband and wife, the surname having been put in for the second of the two names, as is customary in these documents. I was asked, firstly, as to the difference in the valuations that had been made, the first valuation of £3,600 and the second of £800, and what were the special circumstances which accounted for that; secondly, was the money spent on the farm; and, thirdly, why was it subsequently found that this property had not been cultivated in accordance with the rules of good husbandry. The property mortgaged was owned by the wife and farmed by her husband, and they were both conjointly made liable for the covenant.

The Board was advised when the loan was contracted that the farm was in a fair state of cultivation, the ditches and fences in fair order, and from local inquiries that were made it was found that it was considered in the district that Mr. Aitkens was a hard-working man and understood his business, and that Mrs. Aitkens was a keen business woman. Payments were made punctually until October, 1930, when the Board were in-formed that the borrowers could not make any further payment owing to the low price of corn, and the gap between the valuations arose because, owing to the lack of necessary means, the borrowers ceased to cultivate the farm. The Board, therefore, were faced with the necessity of getting back the property for cultivation, or disposing of it for what it would fetch in its uncultivated state. Hon. Members will realise at once that that, with the drop in prices, would account very completely for the difference in valuation between £3,600 and £800. The money had been spent on the farm, but owing to the great agricultural slump and to the ill-fortune of the cultivators, the money was lost. I do not think we may take a fall of that extent as typical of the general decline in the value of landed property in Great Britain, but I should say that this exceptional case does illustrate the enormous collapse in agricultural values in recent years, to prices which it would have been impossible for any valuers to anticipate.

Mr. DENMAN

In certain districts.

Major ELLIOT

Yes, in certain districts. I think that deals with the main points raised by the hon. Member for Colchester in regard to the property.

Mr. LEWIS

There is only the other point, with regard to the character of the people.

Major ELLIOT

As I have said, we made inquiries locally, and the Board were informed that the man's local reputation was that of a hard-working man who understood his business, and that his wife was a keen business woman. Some mistakes are bound to be made when loans are granted, but, even so, there are many instances, of keen business men and hard-working women joined together in the management of farms who, for all that, have gone under owing to the exceptional circumstances of the last few years. The hon. Member for Colchester (Mr. Lewis) took exception to one or two remarks of mine and charged me with an autocratic manner—I think a little unjustly. My hon. Friend the Member for Farnham (Sir A. M. Samuel) was willing to make more allowance for me. What I meant in saying that the criticisms were four years too late was this: The Public Works Loans Board itself, without this House having drawn their attention to the risks of these transactions, was dubious about the sums that they were being asked to advance; and that the lessons which these losses teach had been learnt by them as long ago as 1928, when these loans were discontinued. I meant not that it is too late for us to make criticisms. The hon. Member for Farnham bears a slight official responsibility for certain advances, which were in fact made during his term of office, and for the moment I am guiltless in that matter.

Sir A. M. SAMUEL

I am quite willing to accept my share of the responsibility. I do not blame my right hon. Friend or the valuer. I think we were wrong in employing that type of valuer.

Major ELLIOT

We now come to the fact whether the valuations were wrong, and I think it would be totally wrong for the Committee to accept that impression. The sums lent reach some £4,750,000, the amounts here under review, of which only a fraction has been lost, to under £300,000, and the actual losses here being discussed to under £13,000. I specifically asked the Public Works Loans Board, who, as I have said, had uneasiness as to the character of these investments, if they could give any statement as to the accuracy of the valuation which had been made, and they say they would like to put on record that the assistance they have received from the Valuation Department of the Inland Revenue, both as regards valuation and the detailed information as to local conditions placed at their disposal, has been of great value. Hon. Members may say that in spite of that, losses have been made, but still that is a testimony from a body of men who are the keenest business men that it is possible for any Chancellor to select as his advisers—business men of a firm, rigid type of financial purity which has from time to time drawn upon them the criticism of hon. Members in other quarters of the House.

What is it, then, that has been at fault here? I think the fault has been that it was impossible to foresee the catastrophic fall in prices. Yet in the future more than in the past I think that my hon. Friend the Member for Farnham will agree, we shall have to invest more in this country and perhaps less oversea. If we do that we shall undoubtedly make losses. If we invest oversea or at home, a percentage of wastage will be sure to occur. In the past we have applied a more rigid standard to investments made at home, and they have been scrutinised more closely than investments abroad. Tens and scores of millions of pounds have been invested abroad and lost with little comment. If £l,000, £2,000 or £3,000 is lost at home, the whole weight and power of the House of Commons is fixed on the loss. The people who have made the losses are pilloried and their names are paraded about to be printed and condemned in the local papers. If we are to restore prosperity at home we must extend to our own home producers some of the leniency which we have extended to oversea producers in previous years. Let us beware of unduly harrying those who make losses among our own producers, because we have in the past, on the whole, as investors, received far better treatment from our people at home than we have received from people to whom we have lent money oversea.

Mr. ATTLEE

At one time I thought that I should have to challenge the hon. Member for Farnham (Sir A. M. Samuel), because I gathered from the tone of his speech that somehow or other the Financial Secretary had been very remiss in this matter. It was not until the hon. Gentleman gracefully donned the white sheet himself that I realised that these transactions had to some extent taken place while he was in charge. I had intended to ask what the Financial Secretary ought to have done, or what he had left undone that he ought to have done. I gathered that he ought to have been more active, and that he had allowed the matter to run on too long, but I gather now that this is a very small loss indeed when we consider the magnitude of the transactions and the trend of agricultural prices. It would be useful if anyone who has had the experience would state the number of failures that there have been among tenants generally during this time of crisis, as compared with the number of failures in the instances where advances have been made on mortgage. It seems to me that this work has been done very carefully. I should have thought that the hon. Member for Farnham and others would have welcomed the situation as it is exposed in this Bill, because it only represents what Sir Josiah Stamp calls "these healthy bankruptcies." The capitalist system cannot go on without them—

Sir A. M. SAMUEL

I went a little further than that. The Legislature has to make the public feel perfectly certain that it is safe in the hands of the Revenue authorities; and it does not do for the public to see the Revenue valuer so much at fault, so much out of correctitude in valuations as is the case here. Suppose that later on these valuations were used for probate, and it was found that they were all wrong and that a great deal of loss had been made. The people who were paying duties upon these valuations would feel that they had not had the treatment to which they were entitled. I am not blaming anybody, but it does not do to have valuations so far removed from what are actualities in view of the fact that Death Duties bear very hardly on the people who have to pay them. The one thing that we must do in imposing taxation is to make the people who are paying the taxation feel that they are paying on valuations which are very nearly correct.

Mr. ATTLEE

At this time in the world's history it is difficult to bring out valuations correctly after a period of years. Values fluctuate and the whole thing gets upset. I only wish that all prophecies as to values which I have received turned out correctly. When I am advised to do something, it usually turns out that I lose, although I have had the very best advice, and most of us have had the same experience. I know that some of my constituents always take the best advice in making investments just before the flat-racing season, but more often than not they seem to have more losses than winnings. The hon. Member for Farnham is expecting too much when he expects that valuations of agricultural land made six, seven or eight years ago would not be falsified when we have had such a heavy fall in world prices. The extent of these losses shows that the valuations have been done extremely carefully and well, and, considering world conditions, the State has got off very lightly.

Amendment negatived.

Clauses 3 (Remission of arrears of principal and interest in respect of Eye-mouth Harbour loan); 4 (Remission of balance of principal and interest in respect of certain local loans) and 5 (Short Title), ordered to stand part of the Bill.

Schedule agreed to.

Bill reported, without Amendment; read the Third time, and passed.