HC Deb 11 July 1934 vol 292 cc335-47

Order for Second Reading read.

3.32 p.m.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

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

This Bill is a very short one. I do not think it will require many words from me to explain why it is necessary for us to bring it forward and ask that it shall receive a Second Reading to-day. Under the Colonial Stock Act, 1900, it was provided that colonies which desired to have their loans registered as trustee stocks had to conform to three conditions which were laid down by the Treasury, and, after the passing of the Act, the Treasury in fact prescribed in December, 1900, three conditions which had to be observed for this purpose. I need not trouble the House at the moment with all three conditions, but I will read the third, which is relevant to my purpose: A colonial Government shall place on record a formal expression of their opinion that any colonial legislation which appears to the Imperial Government to alter any provisions affecting the stock to the injury of the stockholder or to involve a departure from the original contract in regard to the stock can properly be disallowed. At that time this power of disallowance was a recognised constitutional right, and no colonial Government of that day would have felt any embarrassment in acknowledging that right. But after 1900 things began to change in the constitutional relations between the colonies, as they were then, and the Government of Great Britain, and colony after colony became a Dominion. Questions of constitutional rights in these Dominions were the subject of discussion and of representation from time to time. A conference was set up in 1929 which consisted of representatives of the Dominions and of this country, mostly legal representatives, to discuss the operation of Dominion legislation, and among other things they gave careful attention to this question of the right of disallowance of Dominion legislation. The result of their examination was that they expressed the opinion that this power of disallowance should no longer be exercised, and any Dominion which had the power of amending its constitution could amend it by repealing the power of disallowance. That opinion was subsequently confirmed by the Imperial Conference of 1930 and in the Statute of Westminster, which was passed in 1931, it was to all intents and purposes embodied in legal form.

But there was one exception to this principle which the Conference of 1929 laid down, and that was in regard to Colonial Trustee Stocks. They expressed the view that, where a Dominion had complied with the Treasury conditions and there was at the time outstanding trustee stock of that Dominion, the power of disallowance must remain and could properly be used in the case of the passing of any legislation which in the view of the home Government would be injurious to the interests of the stockholder. That exception has not been embodied in legislation. It was merely an understanding accepted by the Dominions and formed what is called in modern parlance a gentlemen's agreement. But, obviously, it was not an understanding which it was to the interest of any Dominion to upset, because naturally the Dominions desire to maintain the credit of their loans as high as possible in the London market, and they would naturally, therefore, hesitate long before they took any action which was likely to have a depreciatory effect upon their value.

When, therefore, the Government of the Union of South Africa last year made up their minds that they desired, in the exercise of their undoubted constitutional rights, to repeal Section 65 of the South Africa Act, 1909, which deals with this power of disallowance, they were extremely anxious that no deleterious effect should be produced upon the value of the stocks and, accordingly, they asked the Treasury to discuss the whole matter with the representatives of the Union. A discussion followed, and, as a result, a complete agreement was arrived at between the representatives of the Union 'Government and the Treasury, and the Union Government agreed to enter into an undertaking in the form which will be found in Clause 1 (1, a) of the Bill. The actual undertaking that was given by the Union Government was: The Union Government undertake that legislation which appears to the United Kingdom Government either to amend the Act of 1913 of the Union to the injury of stockholders or to involve a departure from the original contract with regard to the stock shall not be submitted for the Royal Assent except after agreement with the United Kingdom Government. Furthermore, if attention is drawn to such legislation already passed by the Union Parliament, the Union Government will take the necessary steps to ensure such amendment as may be requested by the United Kingdom Government. That undertaking was perfectly satisfactory to the Treasury, and the Bill which is now before the House is one to validate the procedure which has already been adopted by the Union Government and to provide that in future there shall he two alternatives open to a Dominion Government, namely, either to comply with the third condition laid down by the Treasury in 1900, or to give an undertaking in the form of paragraph (a) of Sub-section (1), and that undertaking is to be confirmed by the legislature of the Dominion. It has been thought desirable to draw the Clause in wide terms so that it is not confined to the particular Dominion whose action has given rise to the Bill. It therefore becomes open to any Dominion, although not obligatory upon it., to adopt the form prescribed in this. Bill in accordance with the conditions laid down by the Treasury. But, having consulted the other Dominions, Canada, Australia and New Zealand have informed us that, as far as they are concerned, they are perfectly satisfied to abide by the original condition. They do not desire to take advantage of this new method or form which is open to them, but are quite satisfied with the position as it already stands. The New Zealand Government, if I may quote their observations as an illustration of the attitude of other Dominions, say: The Government of the Dominion of New Zealand considers that stockholders in the United Kingdom cannot legally be more adequately protected than under the existing law, and it has neither the intention nor the power to impair the present adequate legal safeguards. I need hardly say that it is very gratifying to His Majesty's Government to find that with regard to these other Dominions they are perfectly satisfied to allow the present state of affairs to remain as it is and to maintain the safeguards of the interests of the stockholders which cause their trustee stocks to stand so high in the market, and that, at the same time, we have been able to agree with the Union of South Africa., which wished to change this condition, upon an alternative which, in our opinion, gives the full equivalent amount of security to the stockholders. I have only to add that, in the case of the Union of South Africa, the legislation which they have passed becomes operative on a date to be fixed by the Governor-General, and it has already been agreed that the date to be fixed by the Governor-General is the date upon which this Bill becomes an Act of Parliament. Therefore, there will be no gap between the old system and the new, and we shall pass automatically from the one to the other.

3.44 p.m.


We are not as a party naturally very vitally interested in the question of the interests of the stockholders, but we are very interested, as is the right hon. Gentleman, in the development of the Commonwealth of Nations. This step, although it may appear to be a small one, is a very important step in the gradual development which has been taking place in the transfer of the Empire into the Commonwealth of Nations. The right hon. Gentleman has stated that there was a sort of gentlemen's agreement that this area should be reserved under the old system of Empire while the rest of the area was transferred into the conception of the Commonwealth of Nations, that is, an equal brotherhood of nations without one of those equal brothers exercising any control or power over any of the others, and in the Bill, as it is brought before the House, it seems to say that there is an attempt to preserve what may become a very dangerous matter of controversy in the future. It is true that the other Governments, the Canadian, the New Zealand and the Australian, at the moment are prepared to cling to the old right of this country to disallow bills which they have passed in this particular area. That is clearly a right which is going and which has to go if we follow logically the development which has been taking place. We have in fact now entered upon an era when we have substituted agreements between equal nations for control by one nation. This Clause, which has been agreed upon with South Africa, seems to us to offer very great dangers because you are in fact not doing away with the old system but are merely giving it another form.

If the House will be good enough to look at what is in Clause 1, Sub-section (1, a)—the alternative which is proposed —they will see that the Government in the Dominion has undertaken that legislation which appears to our Government to alter any of the provisions to the injury of the stockholders or to involve departure from the original contract shall not be submitted for the Royal Assent except after agreement with His Majesty's Government, and that, if it gets through without being noted, then upon representation by His Majesty's Government, the Government of South Africa bind themselves to bring in repealing legislation. It is obvious that the two Governments may take, perfectly legitimately, a different view as to what is injury to stockholders, or as to what departure from the original contract may be. Suppose there is a scheme for conversion. It may be that some people will take the view that in fact the stockholder is doing better out of the conversion scheme, and others may take the view that in fact the stockholder is not doing so well out of the conversion scheme. There is obviously, because that is what is contemplated at the moment, liable to come a time when legislation is either proposed or passed in South Africa which the British Government say ought not to be proposed or passed. This Sub-section preserves the right of this Government to negative that legislation. What is to be the position if you have a secessionist group in South Africa, such a group as there is at the present time in the South African Parliament, a Republican group, and the British Government tells the Government of South Africa that they have to repeal an Act which they have passed? I would not envy the Minister in South Africa who had to get up in the South African Parliament and say: "I have been told by the British Government that this Act which the South African Government has passed must be repealed." It would give a glorious opening for attack to the secessionist element, and that, surely, is what we want to avoid.

We do not want to keep on a chain of this sort. When we have decided upon the development to A logical conclusion of the Commonwealth of Nations, we do not want to give opportunities for secessionist groups to come along and say: "Ah, here is a very good reason for seceding." We have come across enough difficulties of this nature on Imperial questions with regard to Ireland. I ventured to state to the House on the Second Reading of the Statute of Westminster that it was absolutely urgent and vital that an inter-Imperial arbitral tribunal should be set up immediately the Statute of Westminster was passed, because otherwise we should find ourselves involved in discussions in which there was no solution. And so it has happened with Ireland. Here is just that type of difficulty which is going to arise—I hope the right hon. Gentleman will take particular note of what I am saying, because I am saying it most sincerely and not in any sense from a party point of view—or may arise in future between a South African Government and a Government in this country who take a different point of view as regards A bit of South African legislation.

Surely, this is a very God-sent opportunity for setting up an inter-Imperial arbitral tribunal. We have the recommendation of the Imperial Conference of 1930 in some detail as to what sort of tribunal it should be and how it should operate. If this matter, instead of being left to the veto of the British Government, were left to an inter-Imperial arbitral tribunal in case of difference arising between a South African Government and a British Government—nothing can arise under this Bill unless there is a difference—the inter-Imperial arbitral tribunal will do two things. It will provide in advance 'an absolute method of solving the difficulty when it arises, and it will be a precedent for the settlement of inter-Imperial difficulties.

I regard it, as I always have regarded it ever since the Statute of Westminster was passed, as vitally important to get this principle started. We talk a great deal about the League of Nations and settling matters by arbitration, and there is the Hague Tribunal, and the rest of it, but we have not yet within our own Empire been able to set up machinery by which we can settle our internal disputes. Here is a case where internal disputes may arise in the future. Do not let us wait till the disputes arise, so that when they do arise they may be used by secessional groups within the Empire as an argument for secession. Let us initiate, while it is opportune, methods of settling these disputes, just as in regard to our own domestic matters we should decide upon some court to which we could refer the matter if dispute arose. Here, however, we are leaving the position open to the possibility of dispute between two co-equal Governments in the conception of the British Commonwealth of Nations, and not giving any methods in Advance by which they can solve their difficulties.

I would ask the right hon. Gentleman, for the sake of the development of the Commonwealth of Nations, to consider very seriously whether something cannot be put in this Bill so that if two Governments disagree as regards anything arising out of this matter, the dispute shall be referred to an inter-Imperial arbitral tribunal on the lines set out in the report of the Imperial Conference of 1930, when the Commonwealth tribunal was dealt with in detail, and that that decision shall be accepted by this country and by this House as binding and as definitive. Unless we do that it is no use having arbitration by an inter-Imperial arbitral tribunal. If we do that, it will lay down a precedent for the conduct of inter-Imperial relationships which will be of the greatest value to this country in the future. I am not sure that once one got such a tribunal constituted it might not help to solve the Irish problem.

I most sincerely beg the right hon. Gentleman to consider the opportunity that arises now for initiating this great development and to pledge himself, and to get the South African Government to pledge themselves, in the event of a dispute arising, whether it is interim or whether it is a departure from the original contract, to submit it to the inter-Imperial arbitral tribunal and to accept as final the decision of that inter-Imperial tribunal. If the right hon. Gentleman will do that I am certain that this Bill, far from being regarded as a small matter, will in future be regarded as one of the foundations of the Commonwealth of Nations.

3.55 p.m.


The Colonial Stock Act when it was put on the Statute Book was comparatively small and not a sensational piece of legislation, but I have always felt that it had an important place in the development of the Colonies and subsequently of the Dominions. It gave at a most important time in their development a definite preference, amounting to one or two per cent. to the overseas Dominions in what was the most valuable possession to them of free access to the capital market of this country. It is obvious in view of the enormous expansion of the development which has been built up upon the foundations of that Act, that anything which seeks to modify it in any way must be of wide importance not merely to stockholders and others directly interested in that way but also to all who are concerned with the future stability of the Empire and the future development of the Empire, because it is likely in the future that the developments will be no less important than those which have been built up in the past upon this Act.

There appear to me to be two points of importance in regard to the Bill which the House will wish to consider. The first is the fact that the Bill proposes to make no change in the status of security of any existing loan, or to modify the conditions under which future loans may be made. To those who have heard the statement of my right hon. Friend, coupled with the reply that he gave to the hon. Member for Gravesend (Mr. Albery) last week, and also the explicit terms of the proposals which have been passed by the Union Government of South Africa, as recorded in the OFFICIAL REPORT, there will be no apprehension that there is any intention to do anything to alter the security or status of any loan which has been made up to the present time. It is also important that there should be no question of any kind in regard to that matter in the mind of any body of investors or anybody else. The facts cannot be too widely advertised that no change is intended which will in any way act deleteriously to the developments which have taken place in the past. The other point, which is of very great substance, is that there should not be in this Bill and in this proposed alteration any seed of possible trouble between different parts of the Empire, however unlikely it may be that that seed will germinate.

The hon. and learned Member for East Bristol (Sir S. Cripps) has pointed out that there is clearly here a matter which does raise doubts in our minds. He has pointed out with very great force that it is possible a difficult situation may arise owing to the fact that a Dominion Government may not be able to persuade the Parliament of that Dominion to carry out a change which the Government itself wishes to carry out in order to give effect to what is done here. I entirely subscribe to what has been said as to the desirability of having some machinery to which, however remote the contingency may be, differences of opinion may be referred for arbitration. I should like to know whether this matter was considered in the discussions that have taken place between the Government of this country and the Union Government of South Africa, and, if not, whether the Government will see whether they cannot do something in regard to a matter which requires further attention.

3.59 p.m.


As the hon. Member for East Birkenhead (Mr. White) has said, this is a very important Bill. Having read it, I am satisfied that it amply protects the trustee holders in this country of Dominion and Colonial loans. I cannot see why it should be thought that there is anything invidious in saying that the Government of the United Kingdom should have the decision as to whether or not legislation in a Colony or Dominion affects this particular security. After all, there is no obligation on any Dominion or Colony to ask that any particular loan which that Dominion or Colony may put upon the market is to be put on the Trustee List, and, as the last speaker has pointed out, the very fact of any loan of the kind being put upon the Trustee List by the Government of the United Kingdom, means that the particular Dominion or Colony will obtain the money which they desire to have at 1 or 2 per cent, less than they would otherwise obtain it.

Surely, therefore, it is not asking anything out of the way when we say that if this great privilege, this great security is given the British Government should be entitled to tell the Dominion or Colonial Government in question if they consider that the security in which trustees have invested their money on our certificate and recommendation is affected, I certainly think it is not asking anything too much—in fact, it is shown by the agreement which the Dominions and Colonies have already expressed in this matter—that the United Kingdom should decide whether or not the security which has obtained these great privileges has been in any way interfered with.

There is only one other matter to which I desire to draw attention, and that is the statement with which the hon. and learned Member representing the Socialist Opposition commenced his speech. I took it down, and I think it is substantially accurate. It was, that he and his friends were not particularly interested in securing the rights of Colonial stockholders. I think that was an extraordinary statement to come from a leader of His Majesty's Opposition.


I said that we were more interested in preserving the Commonwealth of Nations, which apparently, the hon. Member is not.


If the hon. and learned Member will look at the OFFICIAL. REPORT to-morrow he will see that what he said was that he and his friends were not particularly interested in securing the rights of colonial stockholders, but were more interested in Colonial and Dominion development. I was going to read on, if hon. Members had not interrupted. That was exactly my point. On this side we are all interested in Colonial and Dominion development, but, at the same time, we realise our responsibilities to people who have lent money on certain securities which we have approved. It was because the electors of this country at the last election realised that they were not secure with the late administration that the present administration is here with such a great majority. I think it is of immense importance that the country should realise that the hon. and learned Member leading the Opposition to-day says that he and his friends are not particularly interested in securing the rights of Colonial stockholders. I think it is a most remarkable statement for a leader of the Opposition to have made, and I hope that the country will note it.

4.5 p.m.


I think that we can only attribute to the weather the heat which has been imparted into this Debate. It is not a. party matter, nor is it a controversial matter, and we have listened with great interest to the speech of the hon. and learned Member opposite and to the suggestion which he put forward. I would say, in the first place, that there can be no possibility of amending this Bill in any way, as it is the result of a definite and formal agreement with the Government of the Union of South Africa, who have already passed the necessary legislation. But with regard to the hon. and learned Member's interesting suggestion that we should take this opportunity of setting up an inter-Imperial arbitral tribunal, and should submit matters that might arise on differences of opinion between the home Government and the Dominion Government to that tribunal, I would remind him, in the first place, that when he suggests that that tribunal would prove in days to come useful in many ways, such as settling our differences with the Irish Free State, that we have already suggested—I think I am speaking correctly—to the Irish Free State the setting up of such a tribunal, and they have declined to appear or to put their case before it, insisting upon it being not an inter-Imperial, but an international tribunal. That really brings home the fact that we have not yet reached the stage in inter-Imperial relations when the principle of an inter-Imperial arbitral tribunal is sufficiently well-established to command that confidence and general assent which it would certainly be necessary for such a tribunal to command before we submitted questions of this sort to it.


Surely the only way to get that started is to start it in a small way with such a thing as this, so that people may get confidence in it?


I cannot agree with the hon. and learned Member. This is one of the subjects which ought not to go to such a tribunal, because it differs from every other Measure and cause of dispute which could possibly arise between the South African Government and ourselves, as it is not a question of inter-Imperial policy or, indeed, of policy at all. As my hon. Friend the Member for South Kensington (Sir W. Davison) pointed out, when a Dominion is asking for special privileges, which we never give to any foreign government, however friendly to ourselves, in return for those privileges we say that we must be the judge of the conditions under which those privileges are to be exercised. Under this system they are able to borrow money in London more easily than they otherwise would do. That plan suits them admirably. They do not wish to see it changed, and the hon. and learned Member is really more royalist than the King; he is more sensible of the interest and dignity of the Government of the South African Union than the Government of the South African Union are themselves. They are perfectly satisfied with this scheme, and when the hon. Member for East Birkenhead (Mr. White) envisaged the possibility of a dispute between that Government and ourselves—and that possibility is, of course, not beyond the range of practical politics in the future--and when people speak of a secessionist group arising on a matter of this sort, I think they are entirely wrong. The last thing' that a secessionist group would want to do would be to undermine the credit of South Africa on the London market. They would be doing so obvious a disservice to their country to begin by ruining the credit of their country in London, that that is not a real, practical danger.

The scheme is one which the South African Government have themselves worked out. The Bill now before the House is one which suits their purpose, one which they think will maintain their credit; whereas they do think, as we think, that if the whole of this stock were put in a position in which the interest were no longer guaranteed, as in the past, by His Majesty's Government, but really rested upon some dim inter-Imperial arbitral tribunal, their first reaction to such a proposal would be to say, "Well, there are other stocks in which we can invest our money with a better guarantee than this." We have heard a lot about tribunals and arbitration. Arbitration may be all very well in its way. I am sure that it is the opinion and the policy of His Majesty's Government that the more use which is made of arbitration in the future the better, and it is an ideal of His Majesty's Government that we may reach the time when all disputes are submitted to arbitration. But at the present time the ordinary bondholder would much rather have the whole guarantee of this Government behind his money than the guarantee of an inter- Imperial arbitral tribunal. That being the feeling both of His Majesty's Government here and of His Majesty's Government in the Dominion of South Africa, I think the House will be well advised to pass this Bill without further discussion.