NEW CLAUSE.—(Report and accounts of finance company to be laid before Parliament.) (Hansard, 16 December 1935)

§ Mr. MORGAN JONES
I beg to move, "That the Clause be read a Second time."
The Chancellor of the Exchequer has already told us that he has spotted some old favourites among our arguments, and I am sure that he will recognise an old friend in this Clause. I move this Clause in the same spirit in which I moved similar Clauses in the preceding Parliament. As he knows, I have the honour of being a member of the Public Accounts Committee, and was Chairman of it for four years in the last Parliament, and although I have no right to speak for that Committee I am sure that the members of it will be interested in—I do not say ready to support—the principle of this new Clause. Of recent years there has been a growing tendency to create a number of public or semi-public bodies and a demand has arisen that where public money was involved—in other cases public money was actually being paid out—Parliament ought to have some sort of guarantee, through an examination of the accounts, that the money was spent for the purposes for which it was originally allocated.
This Clause refers to the Finance Company which is to be set up under this agreement. I make the admission that the Finance Company will not be in exactly the same position as some of the boards we discussed in the previous Parliament, but though there is a difference between them they still have something in common. It might happen, I do not say that it will, that the Government might be called upon to give effect to this guarantee. Let us hope that nothing of the sort will happen, but it might happen—it will depend on the wisdom or un-wisdom of the Finance Company itself; and if by some unfortunate circumstance the Finance Company should have to call upon the Government to give effect to the guarantee, obviously this Clause would 1478 take on a very real value and virtue. If public money has to be called for, it is right that the House of Commons should have a definite voice in the disbursement of that money, and that is the principle which is at stake in this new Clause.
The Finance Company should prepare an annual report of its operations. That report should be accompanied by a statement of its accounts in a form to be prescribed by the Treasury, and should be submitted to Parliament for examination. This is quite familiar ground for the Chancellor, as it is for hon. Members who were in the last Parliament. The principle remains the same wherever public money is involved; Parliament, which gives authority for the disbursement of the money, should have a guarantee that that disbursement takes place in accordance with the intentions of Parliament.

Mr. CHAMBERLAIN
Every hon. Member who was in the last Parliament knows that upon the Public Accounts Committee the hon. Member was a very vigilant guardian of the public interest, and of the principles to be observed in dealing with public money. The hon. Member will remember that in the last Parliament we dealt with a Bill which was in many respects similar to that which is now before us. I gathered that he was going to refer to a similar new Clause having been moved on that occasion, but as far as I can recollect he did not move that new Clause on that occasion. The reason was obvious, namely, that it was not necessary to have a Clause of the kind in relation to a Finance Company of the sort contemplated in the Bill. As the hon. Member said, a Finance Company is not quite the same thing as the boards which we have discussed on other occasions. The Finance Company is a public company and subject therefore to the Companies Acts. It must prepare and publish its accounts every year in a form prescribed by the Companies Acts. Therefore the whole of the financial operations of the company are bound, in the ordinary course of things, to be made public.
On the question whether the Treasury might have to implement its guarantee and whether that would be dependent upon the operations of the Finance Company, my reply is that I do not think 1479 so. The implementing of the guarantee would depend upon the railway companies' defaulting upon the payment of interest or the repayment of principal, but neither of those two things is likely to be seriously affected by anything done by the Finance Company. The Finance Company is concerned with the raising of the money and with the investment of that part of the money which is not being re-lent to the railway companies, and these are not matters which are likely to have any effect upon the defaulting or otherwise of the railway companies. I hope that what I have said will convince the hon. Member that there is no occasion for anything further affecting this Finance Company than the provisions of the Companies Acts, under which the company is bound to publish its accounts.

Mr. DAVID ADAMS
Will any detailed information be submitted to Parliament or to the community as to how the money is being extended, say over 12 months?

Mr. CHAMBERLAIN
No, Sir. It is always possible for an hon. Member to put a question to the Chancellor of the Exchequer upon any particular point upon which information is required, or the matter can be raised on the Motion for the Adjournment. The House will always have power to obtain information, if it thinks that information should be given upon any operation or activity of the company, by a way of question to the Chancellor of the Exchequer.

§ Mr. GARRO-JONES
I am sorry if I am asking a question upon information which has been previously given. Are there any general restrictions governing the fields in which this Finance Company may invest its funds, pending the advance to the railway companies?

Mr. CHAMBERLAIN
No, Sir, nothing further than is laid down in the Bill.

§ Mr. GARRO-JONES
Would the right hon. Gentleman consider that some of us are not as confident in the financial capacity of the directors of these companies as are some hon. Members on the other side? Our confidence has been shaken by events which have occurred in the City of London lately, and it is not wise of this Committee to authorise that this £28,000,000 be placed in the hands 1480 of the Finance Company, whose directors we do not know, subject to no principles or restrictions whatever, to be invested at their discretion and in a manner which, if it be faulty, will involve the State in losses. I would ask the Chancellor of the Exchequer whether he will not impose upon this company restrictions such as are imposed upon trustees?

The DEPUTY-CHAIRMAN
That cannot possibly arise on this new Clause.

§ Mr. GARRO-JONES
May I point out that the Chancellor of the Exchequer gave as one reason for not accepting this new Clause, that no question of loss would arise because the Finance Company was merely going to advance money to the railways or to invest it on some proposition within its power. We maintain that if the Finance Company is to have complete freedom to invest, that is a very good reason why we should insist upon this Clause being put in, to provide us with a report as to how the money is being invested. That may savour of locking the stable door after the horse has escaped, but it is surely a reason for advancing the Clause and urging it upon the Chancellor of the Exchequer. We ought to have some general restrictions upon the investment of this money or, failing that, this Clause should be adopted to enable us to supervise the investment.

Mr. CHAMBERLAIN
I am delighted to think that the hon. Gentleman has such a high opinion of the financial ability of this House that he would trust it to select investments which he would not entrust to the directors of the Finance Company, who are gentlemen of the highest standing in the City. He said that I had stated that the directors would have liberty to invest this money entirely at their discretion, but that is not what I said. I said that there would be no other restrictions than those which are laid down in the Bill. If the hon. Member looks at Clause 7 of the Schedule to the Bill he will see that it deals with the particular matter of investment, and that the directors are not to be allowed to invest the money without first having consulted with the Treasury. The hon. Gentleman cannot ask for any higher authority than the Treasury.

§ Mr. BELLENGER
Will the directors be Treasury nominees?

Mr. CHAMBERLAIN
No. They will be selected among men of the highest standing in the City. If the precedent of the London Passenger Transport agreement be followed, I think the hon. Gentleman will be satisfied.

§ Mr. BELLENGER
Will it be done in consultation with the Treasury?

Mr. CHAMBERLAIN
The Treasury are always consulted in these matters.

§ Mr. SILVERMAN
Who will select the directors of the Finance Company?

Mr. CHAMBERLAIN
The Bank of England. The Treasury will be consulted by the Bank of England.

§ Mr. GARRO-JONES
In spite of the somewhat airy manner in which the right hon. Gentleman dealt with my question—I am not going to press it—he has in no way disposed of it. Consultation is not an adequate guarantee. The Finance Company may consult with the Treasury six times in the week, and then proceed to invest the money as it thinks fit. If power of restriction were in the hands of the Treasury, or if their advice were mandatory, we should be quite happy about the position, but, these directors are to have £28,000,000 of State money, and have merely to call in the Treasury once in every six months.

The DEPUTY-CHAIRMAN
The hon. Member's point is not relevant to the question now before us, which deals with the presentation of a report to Parliament.

§ Mr. GARRO-JONES
Surely it is relevant to suggest that if a report be presented to Parliament that would be a safeguard. If no report is to be presented to Parliament, as the Chancellor of the Exchequer has recommended, we ought to have greater restriction upon the directors of the Finance Company. I merely point this out in case the Committee should regret its rashness, if that is not too strong a word, in allowing these directors to have carte blanche—because that is what they will get—to invest this money how and where they think fit. If they can merely say that they have asked the Treasury for some general principles in regard to their investments, they will be free from any responsibility as to where they have in- 1482 vested the money. That is not an adequate safeguard, and I trust that my hon. Friend who has proposed this Clause will press it to a Division, if we do not receive greater satisfaction.

§ Mr. MORGAN JONES
I understood the Chancellor of the Exchequer to say that the railway companies present their returns, and that this Finance Company will also present its returns every year. There is therefore some merit in what he said, and the second part of my proposed new Clause has not the merit which I thought it had. May I return to the first part, as to a report of the operations of the Finance Company? I believe that the Minister of Transport compiles from the returns of the railway companies a report dealing with their year's work. Will it be possible for the Chancellor to give us an undertaking that the Minister of Transport will set aside a special section of his report dealing with this particular expenditure, in order that the House may be in possession of information as to what has happened to this £26,500,000? Would the Chancellor of the Exchequer consider that suggection which, if it does not give us all that we ask for, would go at least half-way towards removing our objection?

§ Mr. ARTHUR HENDERSON
The Chancellor of the Exchequer is aware that any company which is registered at Somerset House has to register its memorandum and articles of association. It is true that unless the directors go outside the powers conferred upon them by their memorandum they cannot be interfered with by any outside authority. Would the Chancellor tell the Committee whether he has seen the memorandum of association of this company, and if he has, whether he can assure the House that the powers that are to be given to the Finance Company are consistent with the contents of the Schedule? If he can, we on this side of the House may be reassured.

Mr. DAVID ADAMS
In the consultation with the Treasury, will the Treasury have any power of veto? The Finance Company will have very general powers to invest this surplus money in any industrial concern whatever. If they be 1483 men of a speculative turn of mind, they will be liable to invest this public money, which directly does not concern them—

The DEPUTY-CHAIRMAN
I am afraid that that point does not arise on this new Clause. All that the new Clause suggests is that a statement of the operations of the company be laid before Parliament. The hon. Member is now asking for something which this Clause does not suggest.

§ Mr. GARRO-JONES
We are concerned with supervision of the operations of the directors of the Finance Company. Surely it is relevant to raise that point in discussing a Clause which suggests that the supervision should consist of a report presented to this House. What other argument can we advance? We are advancing arguments in favour of supervision of these investments, and that is the point to which the proposed new Clause is addressed.

The DEPUTY-CHAIRMAN
The hon. Gentleman has been absent from our deliberations some time, and perhaps has forgotten that in Committee we are kept very strictly to the wording of an Amendment. You cannot argue in Committee on various things not expressed in the Amendment itself.

§ Sir F. ACLAND
I would like to make a suggestion with regard to the new Clause. I see the point that as the company is a statutory company it would, of course, make an annual report and present its accounts in a proper way. That being so, it seems to me that the Committee would be unreasonable if it expected to have a statement of accounts as well as that which would ordinarily be made. As I also have been Chairman of the Public Accounts Committee for two or three years, it strikes me that there is some point in asking for an annual report of operations. I do not want to go into the question of what the accounts of a company contain and what, sometimes, they do not contain, but it seems to me that, apart from our right of asking questions, when we give guarantees which might possibly result in our having to pay public money we should have something in the nature of an annual report on how the body is getting on—whether they have raised half the money, and whether the money has been so spent as 1484 to do half the work, and whether, therefore, it seems as if the money to be raised will cover the works as originally contemplated. Information of that kind would enable the House of Commons to keep its eye and its hand on these matters. I would like to ask the Chancellor of the Exchequer whether he would not consider it at another stage, and whether he would not accept something like this Clause, although not in the fuller form requiring, a statement of accounts.

Mr. CHAMBERLAIN
I should be very glad to meet my hon. Friends on this point if I thought their suggestions would be valuable in achieving the object which they have in mind, but I suggest to them that a proposal for an annual report would not do what they want. If, as one hon. Member said, the House of Commons is to keep a sort of running control over the operations of this company, it must have information at much shorter intervals than those of a year, when everything will probably be done and over, and there will be no opportunity of doing more than pronouncing the epitaph. Surely hon. Members have in mind something much more periodical than that, and, as I have already pointed out, that can be obtained. The Government will be only too anxious to afford the House every information it can properly require at any time about the operations of this company, and there is no need for any special provision in the Bill to enable it to be done.
It is specified in the agreement that the company is to be formed for the purpose of raising a certain sum of money and re-lending that money to the four main line railways. That would be all it would have to do if the railways would be ready to take from it the whole of the money as soon as it was raised. It is only because we are anxious to make certain of the specially favourable conditions now prevailing in the money market, and therefore wish to raise the whole of the money at once, that the problem arises of what is to be done with the money which is not being used by the railways immediately. It is provided in the agreement that that money shall be invested and the investment is to be carried out by the directors of the Finance Company after consultation with the Treasury.
1485 Some hon. Members almost seem to think that the directors would be speculating people who might be running away and putting this money in pepper or shellac. Let me point out that the people who are to serve on the board of this Finance Company, if the previous example is to be followed, will be gentlemen who will be simply doing that work from a sense of public duty, and will not receive any fees. Who is to lose, or who is to gain by any fault on their part, or by any extra astuteness on their part? It is public money that is involved here, and it is specially laid down in the agreement that any losses that may be involved shall be borne by the railway companies. Is it suggested that speculative losses on the faulty investment of £26,500,000 will produce such a terrible result that the railway companies will default on their interest as a result of those losses.