CLAUSE 1.—(Power of Treasury to enter into and make payments under an agreement.) (Hansard, 11 May 1936)

§ Mr. MABANE
On a point of Order. May I ask whether it would not be more convenient if I dealt with both of my Amendments together?

§ The CHAIRMAN
Quite clearly the two Amendments are dependent upon one another, and may both be discussed as one when the hon. Member moves the first of them.

§ Mr. MABANE
I beg to move, in page 2, line 11, to leave out "written."
I agree with the general purpose of the Bill to lend small amounts of capital to start businesses, but I am by no means sure that the Bill is the best way of achieving that purpose. The effect of my Amendments would be to substitute the consent of Parliament for the written consent of the Treasury in the event of the capital of the company being increased. It may surprise hon. Members to know that the capital of the proposed company can be increased. Those who have followed the Debates on the Bill will appreciate that there is a great difference between the popular estimate of what the Bill does, and what is in the Bill. The popular idea is that the Bill empowers the Government, through the agency of the Treasury, to establish a company with a capital of £1,000,000 and that the company shall, for an experimental period of 10 years, lend money to those who desire to set up businesses in the depressed areas but otherwise would be unable to obtain the capital. Hon. Members who have read the Bill know that the Bill does something a great deal more than that, and that it is a very obscure Bill.

§ Sir ARTHUR MICHAEL SAMUEL
Those figures are not in the Bill.

§ Mr. MABANE
The hon. Member will appreciate that that is exactly the point I am making. I am pointing out that the Chancellor of the Exchequer has been conveying to the House that the Bill is for an experimental period of 10 years and that the capital is £1,000,000. Apparently the hon. Member has not yet read the Bill, or he would appreciate that there is nothing about that in the Bill.

§ Sir A. M. SAMUEL
I agree.

§ Mr. MABANE
It is a very difficult Bill to understand. In his explanation, the Chancellor himself concurred that the Bill was extremely difficult.

§ The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)
I did not say the whole Bill.

§ Mr. MABANE
Not the whole Bill, but the right hon. Gentleman particularly referred to paragraph 4 of the Schedule. Hon. Members who have read it will find it is extremely difficult to understand. I presented it, together with pencil and paper, to at least half a dozen Members of this House and asked them to explain what it meant, but not one of them has been able to do so. The Chancellor has explained what it means, and we must take his explanation as being perfectly good. In the first Debate on the Financial Resolution, the hon. Member for Seaham (Mr. Shinwell) interpreted what is now paragraph 4 of the Schedule in the way in which I myself did, but the Chancellor said he was wrong and that it meant something quite different from what I must have imagined up to that time.
If we take the explanation which the Chancellor has given, there is no doubt that the Bill commits the Treasury to an ultimate total liability of £1,000,000. That was a point that occasioned some discussion in the Debate on the Financial Resolution, and that was the point on which the hon. Member for Seaham fell. He interpreted the Bill as committing the Treasury to a liability of only £250,000, and he interrupted the Chancellor to ask if that were not so. The Chancellor said that the hon. Member for Seaham was wrong, and that the total liability was £1,000,000. It is important that the Committee should appreciate that at no point 43 in the Bill is £1,000,000 or 10 years mentioned. The Bill commits the Treasury not merely to the liability which, we have been told by the Chancellor, is £1,000,000, although that is not stated in the Bill, but it may commit the Treasury and the State to an unlimited liability of £100,000,000, or any other figure that we may care to mention. In the Debate on the Report stage of the Financial Resolution, the Chancellor of the Exchequer said: But if the company started with £1,000,000 capital proves to be a success there is no reason why its operations should not be extended in the future."—[OFFICIAL REPORT, 28th April, 1936; col. 874, Vol. 331.] On the Second Reading he went further, and said: I might mention, in further comment on one observation which I made on a previous occasion, namely, that the losses of the State through the guarantee which it gives could not exceed £1,000,000—that that, of course, remains true as long as the capital of the company is limited to £1,000,000, but if the capital were to be increased then of course that would also increase the possible losses on the part of the State."—[OFFICIAL, REPORT, 7th May, 1936; cols. 1904–5, Vol. 311.] Therefore, I think we may take it, from the Chancellor's statement on the Second Reading, that, if the capital of the company is increased, the liability of the State will increase with that increase of capital; and that increase of capital beyond £1,000,000 may be sanctioned by the Treasury at any time without the intervention of this House. That is to say, if the company started with a capital of £1,000,000, as indicated by the Chancellor of the Exchequer, and if, having succeeded reasonably well, it desired that its capital should be increased to £50,000,000, the Treasury, by a Ministerial edict, could do that without asking this House, and the liability of the State could be increased to £50,000,000 without any sort of consent being asked. The first words of Sub-section (2) of Clause 1 are: In the event of the capital of the company being increased with the written consent of the Treasury. That implies that the Treasury may at any time increase the capital of the company. No doubt many Members of the House would not have the slightest objection to placing such powers in the hands of 44 the Chancellor of the Exchequer or the Financial Secretary to the Treasury, but I think the House must recollect that it is not legislating for one Parliament, but for all time. There may come a time when, unfortunately, hon. Members opposite may be on the Treasury Bench, and, if this Bill were on the Statute Book, there would be little need for the hon. and learned Member for East Bristol (Sir S. Cripps) to demand his Emergency Powers Bill, because he would have them virtually in this Measure. It is clear that, if the Labour party were on this side of the House, they could by a Ministerial edict increase the capital of the company, and at the same time increase the liability of the State, to an unlimited amount, and the House ought to be very chary of putting such powers into the hands of the Treasury. Indeed, I think it would be dangerous even for Parliament to assume to itself such powers, but I certainly do not think they ought to be placed in the hands of the Treasury. The Labour party, if they were on this side, could, by increasing the capital of the company, engage in what would be virtually State banking, and I think that the Committee ought to press the Chancellor to accept this Amendment, so that, in the event of its being desired to increase the capital of the company beyond the figure which the Chancellor of the Exchequer first proposed, he would have to come to the House and ask permission for that increase of capital, rather than that the House should find that the capital had been increased by a Ministerial edict, and that the House had committed itself to an expenditure far in excess of that which it had originally in mind.

§ Sir A. M. SAMUEL
I approach these Amendments with the same friendly feeling as that with which I approached the Financial Resolution, but at the same time I find it very difficult to understand the Bill. It is a highly technical Measure, and I have not been able to find in it any statement of a term of years, though a term of 10 years has been mentioned. I agree with the spirit of the Bill, but I think that, as the hon. Member for Huddersfield (Mr. Mabane) has said, we want some further elucidation of the way in which the Bill will operate. The hon. Member has indicated what is in his mind 45 and is largely in my own mind. Unless we have some assurance that the Bill contains some precautionary provision which we do not at the moment understand or detect, it seems to me that this company might take deposits of £1,000,000, £10,000,000 or £50,000,000, and convert itself into a banking undertaking, without any apparent transgression of the terms of the Bill, and we might find that, as the hon. Member for Huddersfield has said, we had sponsored a Bill which would provide that, while the company would have a capital of £1,000,000, which might be used as a reserve against losses, as in the case of a bank, it might seek, like any bank, to get deposits from private persons, and sooner or later might develop into a national banking institution. That is a point which ought to be dealt with, and, if the Chancellor would show us where we are in the dark and where the necessary precautions are taken, it would make us feel much more satisfied.

§ Mr. GARRO-JONES
If the hon. Member for Huddersfield (Mr. Mabane) had not been so obsessed by the prospect, however remote, that we on these benches might occupy the benches opposite, he could have found much more ingenious and practical reasons in favour of his Amendments than those which he has brought forward. It is strange that, when a Bill of this kind is brought forward with the avowed object of assisting the people in the depressed areas, both the hon. Member for Huddersfield and the hon. Member for Farnham (Sir A. M. Samuel) should forget all about the objects of the Bill, and express their fear and alarm lest it might damage some vested interest in the form of banking or other powerful interests.

§ Sir A. M. SAMUEL
I must protest against that statement. I do not know whether the hon. Member was here when the Financial Resolution was being debated, but on that occasion I was brave enough to run the risk of boring the House for half an hour in order to try to help with such views as I have as to the way in which the Bill could be made to work. I was completely in favour of it, and made some suggestions which I thought might be helpful. Therefore, I must protest against the hon. Member's observation.

§ Mr. GARRO-JONES
I completely absolve the hon. Member from any erroneous motive; I was referring to his whole outlook on questions of this kind. He is alarmed at the possibility of this company taking deposits, but it is much more likely to take doubtful overdrafts which the banks have had on their books for a considerable time, and which they will take the opportunity offered by the Bill to transfer to the company. I notice that the hon. Member for Huddersfield is looking surprised, but this company is going to be entitled to consider applications for money, and, if a bank has on its books a £10,000 overdraft which has been causing the manager considerable anxiety for a number of years, he can refuse to renew it, and there is nothing in the Bill to prevent the banks from unloading their dubious securities upon this company, whose losses the Treasury will guarantee. The Chancellor of the Exchequer has been singularly secretive about the operation of the company. We have had no information at all about how the board of directors is going to operate the Bill. I am extremely interested in this matter, as are other Members on this side of the House. We are not enamoured of the Bill, but we do not oppose it, because we hope it will be a useful experiment; but cannot the Chancellor of the Exchequer give us some information as to what a person who is going to get an overdraft—

§ The CHAIRMAN
It is perfectly true that these Amendments together cover a wide scope, but I cannot allow the hon. Member to go into details which are certainly outside the Amendments before the Committee.

§ Mr. GARRO-JONES
With great respect, is it not generally the practice on the first Amendment to a Clause to allow a more general discussion on the Clause than would normally be given?

§ The CHAIRMAN
That may be, but it is certainly the rule and one which I try to enforce, that in no circumstances are we to have a Second Reading Debate on a Bill that is in Committee.

§ Mr. GARRO-JONES
I, of course, bow to your Ruling, and will content myself with having stated the reason why I consider that the House of Commons should have an opportunity of watching 47 how this company is operated, and that the consent of the House should be given before the capital of the company is increased. I hope that in order to allay the anxiety that is felt on that score the Chancellor of the Exchequer will be so good as to give us some information as to the kind of applicant who is to get overdrafts under the Bill.

§ Mr. MABANE
Has the hon. Member authority to speak for his party?

§ Mr. GARRO-JONES
I have not consulted my party on the point at all, and I have no authority to speak for anyone, any more than the hon. Gentleman. I am giving my opinion, and I hope that the Chancellor will be so good as to tell us the kind of applicant who is to get overdrafts under this Bill, in particular we do not want to find big businesses conducting their experiments through some nominee and merely shifting part of their losses on to the State. It is absolutely vital that we should have some information as to how this board of directors is to operate in the consideration of applications for overdrafts.

§ Mr. SHINWELL
I am not certain whether to express satisfaction or sorrow at finding myself in such excellent company this afternoon, particularly the company of the hon. Member for Farnham (Sir A. M. Samuel) who, as everyone knows, is a prominent financial expert.

§ Sir A. M. SAMUEL
I am nothing of the sort.

§ Mr. SHINWELL
The hon. Member is an ex-Financial Secretary to the Treasury, and if he did not gain any financial information when he occupied that honourable post, it is a very poor outlook for the present holder of that office. At all events I am extremely encouraged to find myself in such company during the Committee stage of this Bill, and I was more particularly encouraged when I listened to the speech of the hon. Member for Huddersfield (Mr. Mabane). I ventured to suggest, during the Debate on the Financial Resolution, that the Bill was one of some complexity and certainly obscure. Now I find that that obscurity was not peculiar to myself but is common to all Members. When the hon. Member 48 for Huddersfield suggested that the Bill might allow an increase of the capital to £100,000,000, I was more than ever encouraged, because that is precisely the kind of Bill that we on these benches desire. Our complaint against the Bill throughout has been that it is of a very limited character. On the Financial Resolution I expressed doubts as to whether the £1,000,000 was actually to be raised, and I am not quite clear now as to whether that amount will be reached. The hon. Member for Huddersfield, on the other hand, takes the view that the amount that may be raised will be much in excess of £1,000,000, and may reach £100,000,000. If there is any likelihood of the company that is to be set up increasing the capital from £1,000,000 to a larger sum, then we on these benches will be more encouraged to support the Bill.
Moreover, if it is to be understood that the capital may be increased without any unnecessary delay, without unnecessary obstacles being placed in the path, then clearly it is a Bill that is well worth supporting. We shall not oppose the provision that the Treasury may agree with the company to increase the capital. If the matter is to be left to Parliament, with consequent Parliamentary discussions and many obstacles being placed in the way, then clearly that will be of little advantage to the company in raising capital and will be of less advantage to those in the depressed areas who have made demands on the Chancellor for submission of a scheme of this kind. What I cannot understand in the speech of the hon. Member for Huddersfield is that he should impute sinister motives to the Chancellor. He seemed to suggest that the obscurity in the Bill would provide the Chancellor with an opportunity for permitting the company to raise large sums, and he accused hon. Members on the Labour benches of seeking to use their opportunities, if and when they found themselves on the Government side of the House, to proceed along those lines. Surely the hon. Member does not seriously suggest that the Chancellor would assist hon. Members on this side to commit misdemeanours, as he described them, of that sort?

§ Mr. MABANE
I gathered from the earlier part of the hon Member's speech that I was entirely supported by him in my view. I gathered that it was part 49 of the policy of the Labour party to provide as large sums as possible for this particular purpose, and that it might be quite proper for the Labour party, when in office, to raise such large sums.

§ Mr. SHINWELL
Exactly. That is my reason for asking the hon. Member why he imputed sinister motives to the Chancellor of the Exchequer. If the hon. Member suggests that through the medium of this limited Bill we could raise these huge sums of money for the purpose of meeting the difficulties that present themselves in the distressed areas, then I say I am more encouraged to support the Bill and to withdraw much of the opposition that I expressed in a previous Debate. But I have my doubts.

§ Mr. MABANE
I can only suggest that the Chancellor may perhaps incorrectly have supposed that the National Government will always be in office. If that were not so—

§ Mr. SHINWELL
That is an assumption which is ill-founded, in my opinion. One of these days we shall occupy the Government benches, and when that time comes we shall not come forward with what I ventured to describe previously as a very piffling and trifling Measure; we shall come forward with something very much more substantial, if the problem of the distressed areas is as acute then as it is now. On the Financial Resolution I expressed the opinion that no limit was prescribed in the Bill for the operations of the company. I never could understand why the Chancellor spoke of "10 years" as the period of the company's operations, without making any reference to that period being contained in the Bill or in the Schedule. Surely there ought to be some reference in the Bill or the Schedule to the period of the operations of the company. Reference is made in the Bill to the company being wound up at some future date. If it is to be wound up when is it to be wound up? Is it to be wound up when huge losses have been sustained and the company can no longer meet the difficulty that presents itself, or is the time of winding-up to be left in the hands of the Treasury or the Chancellor? On these points we are entitled to some enlightenment.
As regards the amount to be raised, as the hon. Member for Huddersfield said, there is considerable obscurity regarding 50 the power of the company to raise capital. It may be recalled that during the Debate on the Second Reading the Chancellor said, in reply to questions, that the sums to be raised by the company could be relent from time to time. He seemed to suggest that if in the first 12 months those who had obtained loans from the company were able to repay those loans, the money could be re-lent to other business undertakings. In the Bill I can see nothing that lends any colour to that view. Perhaps on that point, which is one of substance, the Chancellor may enlighten us.

§ Sir GEOFFREY ELLIS
I hope that the Chancellor of the Exchequer may be induced to give us some explanation on a question of principle. I do not go quite as far as my hon. Friend who moved the Amendment. A good deal of misconception seems to have arisen on the Bill in the last quarter of an hour. I was very much amused at the way in which the hon. Member who has just spoken said, in effect, "Here we are; we are going to have lots of money for nothing."

§ Mr. SHINWELL
Can the hon. Member produce any evidence in support of that statement? Is it not true that hon. Members on the Labour benches have all along declared that it was very doubtful whether the money would in fact be raised?

§ Sir G. ELLIS
The point to my mind is whether the guarantee of the Treasury is to be given without coming back to Parliament. If the money were raised a further guarantee might be asked for a capital increase. All that we say in the Amendment is that if guarantees are to be given by the Executive in future the amount of those guarantees should not be indefinite. That is the first thing. Secondly, it is not unreasonable to ask the Chancellor to give some indication of the kind of amount that is in his mind, of the guarantee that may be required under the Bill. We do not ask any more than that. We have a very definite fear that the principle expressed in the Bill seems to allow an indefinite guarantee by the Treasury to the company that is to be formed, and to permit that without Parliament being consulted.

§ Mr. KINGSLEY GRIFFITH
I must apologise to the hon. Member for 51 Huddersfield (Mr. Mabane) for addressing the Committee on this Amendment without having heard his speech. I do not personally share the alarm that is being expressed. My fears are entirely the other way. I am not afraid that this is going to grow into something which the House will have to check. I am afraid it is not going to do enough. This is strictly limited in one way. It is limited to certain areas. I am rather sorry that it is so strictly limited. The areas are—

§ The CHAIRMAN
I do not think we can discuss the areas defined by the Act on this Amendment.

§ Mr. GRIFFITH
I was only addressing myself to the argument that the demands on the company might grow to a very great extent and, if the area in which they can operate is limited, I was giving that as a reason why these fears are not likely to be justified.

§ The CHAIRMAN
That is the exact point at which I must stop the hon. Member.

§ Mr. GRIFFITH
It has been suggested that the Treasury control is going to be insufficient. I do not see why that should be so. I am, with reluctance, bound to admit that the Treasury control must be either in the hands which at present hold it or in those of the party above the Gangway. They seem at the moment the most likely two alternatives. I hope soon that it will be possible to provide another. I do not think that, as regards spending money on the depressed areas, anyone will accuse the present administration of having been reckless and extravagant. The hon. Member for Huddersfield was rather envisaging that the party above the Gangway might have control, but, whatever I may have thought about the possible extravagance of the Labour party, it has never taken that form. I have never supposed that they would pour out large sums of money recklessly in guarantees to private enterprise. I do not think that is part of their political philosophy at all. I think they will be more inclined to take an entirely different method. Whether the administration remains as at present or whether the two Front Benches change, I cannot see that there is any reason for the fears that have been expressed. What leaps to the eye 52 is that by passing this Amendment we should be placing, I think, unnecessary obstacles in the way of an expansion which I should be very glad to see. Therefore, as I want the Measure to operate smoothly and rapidly, I prefer the form in which the Bill stands at present.

§ Mr. BENSON
I was rather astonished at the speech of the hon. Member for Huddersfield (Mr. Mabane), and also at the support he got from the hon. Baronet the Member for Farnham (Sir A. M. Samuel). I do not know whether they realise it, but they have, in effect paid a tremendous compliment to the financial stability of any future Labour Government. The hon. Member suggested that there is a possibility that Parliament's responsibility under this Bill might in the case of a later Labour Government grow to at least £100,000,000. That means that there would have to be a capital of £400,000,000.

§ Mr. MABANE
No, £100,000,000.

§ Mr. BENSON
Does the hon. Gentleman suggest that the guarantee is 100 per cent?

§ Mr. MABANE
Yes. Ask the hon. Gentleman in front of you.

§ Mr. BENSON
In Clause 4 the guarantee is definitely limited to 25 per cent. [Interruption.] I am not concerned with the hon. Member's opinion. I am arguing about the Bill.

§ Mr. MABANE
If the hon. Member had followed the Debate, he would realise that the hon. Member for Seaham (Mr. Shinwell) put the very question to the Chancellor of the Exchequer at an earlier stage of the proceedings, and the Chancellor definitely assured the hon. Gentleman that he was wrong in placing the interpretation he put upon it that the the hon. Member is now putting upon it.

§ Mr. BENSON
I am under the impression that my hon. Friend raised the question of the maximum liability of the Government. Speaking from memory, the Money Resolution gives a figure of £1,000,000, which allows a maximum capital of £4,000,000. It is clear that the limit of the liability of the Government is 25 per cent, of the amount of the loan. However, we will leave that point to be dealt with by the Chancellor. The hon. 53 Member suggested that we shall be able to raise £100,000,000 from private subscribers at a very cut rate of interest with only 25 per cent. guaranteed. I doubt whether any Government could raise money on the terms offered in this Bill to the extent of £100,000,000. We have far less confidence in the financial stability of the Government, because we are convinced that they will have very grave difficulties, on the terms they have offered, in raising any adequate sum of money. Our main objection to the Bill is that the Government are relying on private generosity. They are not going to solve the problem of the distressed areas by raising money on the basis of private generosity. They are going back 30 or 40 years in their methods. If they want to deal with the distressed areas, let them tackle the business on a sound basis and not drag in private generosity, which is bound to fail in any scheme of adequate size.

§ Mr. PETHERICK
I think the hon. Member for Huddersfield (Mr. Mabane) was justified in the misgivings that he expressed. Hon. Members opposite on the Second Reading complained that it was a very small Bill which did not go nearly far enough, and urged that the guarantee should be larger. To-day they say they hope they will be able to stretch it a bit further than it appears to go, but they do not think they can. The only Member who has come out hot and strong and thinks he can stretch it further is the hon. Member for West Middlesbrough (Mr. K. Griffith). He said that, while the Treasury is in its present hands, there is no fear of improper uses and, if hon. Members above the Gangway are returned, he thinks they will go on a different basis. Therefore, the only danger that appears likely to come is from the bench below the Gangway.
It seems to me that there is a case to be answered here on the part of the Government. As I understand it, the liability under the Bill as it stands would be £1,000,000, to which of course are to be added various other items for reserves, winding-up expenses and so on. It is already a pretty large sum, but by the agreement between the Treasury and the company the amount guaranteed may grow to a large extent. I will not follow hon. Members opposite in the astro- 54 nomical suggestions of £100,000,000 which they have put forward, but it seems to me that there is a little doubt, reading the Bill in conjunction with what the right hon. Gentleman said on the Second Reading, that the amount to be guaranteed can be stretched to a very considerable figure if the Treasury takes advantage of the powers that are being granted to it. I do not believe anyone on this side of the House would like to grant money to the Government, even in the form of a guarantee, without the very strict control of Parliament. Sometimes we sit up all night haggling about a few pounds being granted for Supply, and Members get extremely agitated on this question. It seems to me equally important that the House of Commons should be exercised in its mind when it is a question of granting money, not right out, but in the form of a guarantee which the Government may be called upon to fulfil. I hope that the Chancellor will make it clear that our fears are groundless or, alternatively, that he will take such steps as to make those fears impossible of realisation.

§ Mr. CHAMBERLAIN
I am sorry that the Bill, which admittedly contains some technical provisions, should have caused so much doubt and anxiety, but if hon. Members find it obscure in its terms, I do not think there can be any obscurity about the purpose of the Bill. I think the Committee realises what is the object of bringing forward this proposal, namely, to try to get started in the Special Areas small industries which it is alleged could be started to-day if only they could obtain finance, but which cannot obtain finance because the risks incident to their starting are greater than the ordinary financial sources are willing to undertake. That being so, I listened with some surprise to the suggestion of the hon. Member for Huddersfield (Mr. Mabane) that there is a serious danger of some extension of an indefinite amount in the operations of the company which we are proposing to set up. I have been criticised several times by hon. Members opposite for taking too moderate or pessimistic a view of the operations of the company, but, I am bound to say I think anyone who has any idea of it raising £50,000,000, and finding opportunities of utilising it, is living in a world of illusion.
55 The operations of the company, as I conceive them, are not likely ever to be on a gigantic scale. The thing is an experiment for small businesses and I am not expecting that the Bill, even if it is as successful as the most sanguine anticipate it will be, is going to set the Thames on fire or provide any great revolution in the affairs of the depressed areas. We have been told by the Special Commissioners that the problem of the Special Areas cannot be solved by any single remedy. You have to employ a great number of different remedies, all perhaps individually of comparatively small extent, but the cumulative effect of which will, it is hoped, make an impression on the problem as time goes on. This is one of those steps.
The hon. Member is alarmed because it is provided in the Bill that the capital of the company may be further increased, provided it has the consent of the Treasury, without coming back to the House of Commons. Of course, the reason why the Bill is drafted in this form is that, if the operations of the company proved that there was a real demand for finance which could be met by a company with these powers, it was not desirable to be hampering or delaying its operations by having to come to Parliament for fresh legislation, but that the Treasury might be relied upon, with the safeguards in the Bill, and. with the well-known characteristics of the Treasury, to see that no dangerous or revolutionary experiments were tried.
Let the Committee understand what the effect of this Amendment would be if it were carried. It would not be possible to increase the capital of the company without further legislation. My hon. Friend says that he has confidence in my hon. and learned Friend the Financial Secretary and myself; but he fears what might happen if another Government had control of the Treasury. It appears to me that I should be under a security which I should have thought would be foreign to his nature. What is the proposal? How is this capital to be raised, if it is to be increased? Is it to be a grant by Parliament for really the arguments which have been adduced have almost been upon that basis. But that is not so. The new capital will have to be raised from the public. The hon. Mem- 56 ber for Chesterfield (Mr. Benson) has criticised my statement about the terms upon which the original capital is to be raised, and says that it will be so unattractive that he does not believe that we shall get the money at all. Does the hon. Member for Huddersfield think that because the Treasury are to guarantee losses, the public will rush in in order to take over their share of the losses? Is not my hon. Friend's fear of any dangerous increase in the liability of the Treasury really met by the fact that, before the guarantee of the Treasury comes into operation at all, you have to persuade the public that it is worth their while to run the risk of loss as well?

§ Mr. MABANE
Will the right hon. Gentleman clear up the point which was raised by the hon. Member for Chesterfield (Mr. Benson) and myself, and which is disturbing many of us, namely, whether the Treasury guarantee is for £1,000,000 in the case of the £1,000,000 company, or £250,000. The Chancellor of the Exchequer said that as the company continued to function the losses would accumulate, but that they could not exceed the total amount of the capital. Does the limitation of the amount of loss exceed that sustained on the whole process? The hon. Member for Seaham (Mr. Shinwell) said very definitely that the liability was one of £1,000,000, and not £250,000. I ask for information on the point, because many of us are rather disturbed about the matter.

§ Mr. CHAMBERLAIN
I was about to give some information on the subject, as there seems to be some differences of opinion and doubts, which I wish, before I say anything about that, to point out to the hon. Member, that it is really not relevant to the argument I was just then putting. Whether the Treasury's ultimate liability amounts to the total amount of the capital or to four times the capital, the fact still remains that losses may have to be found not only by the Treasury, but also by the public. The public are not going to supply the money if they think that they are going to lose it. I agree that, if the public thought that the party opposite were likely to be in power, it would still further increase the risk.

§ Mr. GARRO-J0NES
My anxiety on this Bill would have been considerably lessened from one point of view if it 57 really had been the public who were to put up the money, but we know that the Chancellor of the Exchequer has had conversations with certain banking circles, probably with the Governor of the Bank of England, and that the money would not be scrutinised by the public but by the banking interests, and the same considerations would not apply.

§ Mr. CHAMBERLAIN
The hon. Member evidently knows a lot more than I do. I was not aware of that, and, in my opinion, the bulk of the money will be put up by the public.
To return once more to the point as to what the ultimate liability of the Treasury can be, of course, the liability of the Treasury cannot be more than the capital of the company for the time being. If the capital of the company is £1,000,000, then the Treasury cannot lose more than £1,000,000. I am speaking of the effects of the guarantee, and not of the £20,000 a year for administrative expenses or the £100,000 contribution to reserve. But, according to the guarantee of the losses of a concern, the liability cannot be more than the original amount of the capital. The hon. Member opposite does not quite appreciate that the capital can be lent over again as it is repaid. That which has been lost cannot be loaned over again, and the total amount cannot be more than the total amount of the original capital. Therefore, if the capital is increased, the amount that can be loaned is increased, and the amount of liability will be increased pari passu. The possible liability of the Treasury in that case would be the amount of the increased capital.

§ Mr. SHINWELL
This is the point which troubles the hon. Gentleman the Member for Huddersfield (Mr. Mabane) and myself. If the total capital to be raised by the company, irrespective of any question of re-lending, is £1,000,000, and the guarantee provided by the Government is 25 per cent. of the total capital to be raised, surely, the liability' of the Government is then £250,000. Is that not so? Why does the right hon. Gentleman say that if the total capital to be raised is £1,000,000, the liability of the Treasury is £1,000,000?

§ Mr. CHAMBERLAIN
It is a recurring credit. It recurs a second time.

§ Mr. SHINWELL
If the business undertakings who borrow money from the company and set up their various establishments repay the loans, then the company can use those repayments for the purpose of assisting other business undertakings to establish other industries. That is true? Even if that is so, the total capital at any given moment, in spite of the repayments, can only be £1,000,000. Surely that is so?

§ Mr. CHAMBERLAIN
The nominal capital can only be £1,000,000. It is a revolving credit over and over again. Losses may be made the second time it is loaned or the third time it is loaned.

§ Mr. SHINWELL
But if the amount of capital, even in spite of the re-loaning and repaying processes, remains £1,000,000, the guarantee of the Government, which is 25 per cent. must be a fixed figure of £250,000. I cannot understand it.

§ Mr. CHAMBERLAIN
I am sorry, but perhaps the hon. Member will have another go. If I draw his attention to the last words of paragraph 4 in the Schedule he will see that it reads: in respect of the company's first loans and the sum so payable in respect of the company's additional loans shall neither of them exceed one quarter of the amount of the loans. If you loan £1,000,000 four times, you have loaned altogether £4,000,000, and a quarter of £4,000,000 is £1,000,000. Does that make it clear?

§ Mr. SHINWELL
If you loan £1,000,000 four times, you clearly would have loaned £4,000,000, but if the capital of the company is, as the Chancellor of the Exchequer says, £1,000,000, how do you loan £1,000,000, which is the capital of the company, four times?

§ Mr. BENSON
The Chancellor of the Exchequer can loan £1,000,000 four times, but paragraph 4 of the Schedule provides the first £1,000,000 loan and the second, and there is a 25 per cent. guarantee in respect of the loss on each. If you have your £1,000,000 paid back, there are no losses on that sum, but you cannot re-loan the £1,000,000 until the first loans have been paid back. Surely that automatically wipes out any guarantee in respect of that particular £1,000,000, and the guarantee on the second loan is a second guarantee.

§ Mr. CHAMBERLAIN
The hon. Member for Chesterfield takes a technical interest in these questions, but the first £1,000,000 is expressly provided as a transaction in itself. But there is not the same distinction made between the second, third, fourth or any other subsequent £1,000,000.

§ Mr. EDE
Surely the £1,000,000 used is borrowed from the public and the guarantee is to the public. What happens to the £1,000,000, or how it revolves is no concern of the public until they want to get back their share of it which they have loaned. That is how I understand it. If at the end of all these transactions the whole of the £1,000,000 has been lost, are we to understand that the £1,000,000 is guaranteed to the public or even at the end of the transactions, when it has revolved a great many times and the loans may have totalled more than £4,000,000, will the public be entitled to more than £250,000, the 25 per cent. on the first £1,000,000?

§ Mr. ALBERY
May I make an effort to see whether I can understand this conundrum. Suppose that £250,000 were lost as the result of the first £1,000,000 which had been loaned. There would then remain £750,000 to be re-loaned. Suppose that sum of £750,000 were loaned and that 25 per cent. of it was lost. I think that the hon. Member for Seaham (Mr. Shinwell) will see that we should have already lost over £250,000, although never more than £1,000,000 had been loaned.

§ Mr. CHAMBERLAIN
Perhaps I may be allowed to finish my observations after this conversation. I am obliged to my hon. Friend, and perhaps it is clear from the examples which he has given how this is going to work. The only other observation I want to make is that it has been commented upon that there is no mention in the Bill of the 10 years' life of the company, which I mentioned when moving the Second Reading. Some hon. Members thought that either I ought not to mention it, or if I did mention it, it ought to be in the Bill. It was not put into the Bill, but I thought that it was advisable to mention it because it was necessary in the Memorandum of Association that there should be a provision limiting the life of the company, and that the company should be wound up not later than a certain date. Although, as 60 I explained, there would be a limit to the life of the company, if the company were very successful it would be possible to come again, not to the Treasury this time, but to this House to obtain further legislation to prolong the life of the company. It is put in t there in order that there should be some guarantee to shareholders and that the Treasury should not be under liability.

§ Mr. MABANE
It is difficult for many of us to understand this matter, but I wish to put a point which is troubling so many of us, and which may quite alter our attitude to the Amendment. Is it possible for those who subscribe the capital to this company to lose 75 per cent. of their money, or are they quite certain that they will not lose any of it? That, in a nutshell, is the position which is troubling us.

§ Mr. CHAMBERLAIN
It is possible for them to lose 75 per cent.

§ Mr. EDE
I am really amazed at the inartistic approach of the Treasury to this matter. This seems to me to be the position. If the Treasury want to guarantee a further loan they may do so whether this House wants them to do it or not. It would then be administered by the Treasury, and the only way to deal with it would be to move to reduce the salary of the Chancellor of the Exchequer of that day. If, on the other hand, the Treasury do not want to give a fresh guarantee, but Parliament wants to do it, then, under the point raised by the hon. Member for Huddersfield (Mr. Mabane), if the Treasury say, "We are not going to do it," the only way to deal with the matter would be to promote a fresh Bill and go through all the various stages that we are going through with this Bill. It is really giving statutory recognition to the position which the Treasury occupied when Lord Snowden was Chancellor of the Exchequer, and which some of us had to put up with in supporting him when we sat on the benches opposite. I imagine that we had quite enough of it in those days, and I for one do not welcome this way of re-stating it.
I am not convinced by the answer which the right hon. Gentleman has given to the hon. Member for Huddersfield. May I put to him again the question that 61 I addressed to him before? I understand that this money is to be raised from the general public. The right hon. Gentleman assured us that he believed that it could be raised from the public, and he has repeated that assurance this afternoon. Say the public are willing to lend the company up to £1,000,000. Then the company, I suppose, will go away and trade with it, like the servants in the parable. When the public return to demand their talents back, they will find that their talents have been wrapped in a Parliamentary napkin and that they will be handed back to them whole—or will they only be guaranteed one in four of them?
We appear to have had from the Chancellor of the Exchequer, who is usually so devastatingly clear, two contradictory answers. Sometimes he appears to say that they will get the whole £1,000,000 back, and at other times he says that they will lose £750,000. The example given by the hon. Member for Gravesend (Mr. Albery) did not really help us very much, because it is no great concern of the public how many times their £1,000,000 is loaned out by the company. They will have lent their £1,000,000, and what they will be interested in, and what we are interested to know, is whether the lenders of the original £1,000,000 are to be guaranteed £250,000 or are they to be guaranteed the full £1,000,000? On the money they lend they are to get interest and they are to have a guarantee of repayment. Are they guaranteed full repayment, or are they only guaranteed -one-fourth? If they are guaranteed the whole, where does their prospective loss of £750,000 come in?

§ Mr. BENSON
Is it possible that under this Bill the lenders will lose nothing and get the whole of their capital back, while the Treasury will have to find a guarantee of 1,000,000? I think that is the point that has been raised. The question is whether the lenders will get their whole £1,000,000 back and the Treasury in certain circumstances will find themselves having to provide £1,000,000.

§ Mr. SILVERMAN
The House seems to have been left rather more confused than it was before. It may be that the Chancellor of the Exchequer could say, in the words of Dr. Johnson, that he can 62 give his interlocutor arguments but not the intelligence to understand them. Whether it be lack of intelligence on the part of the Committee or lack of lucidity in the Chancellor of the Exchequer's explanation, or in the proposals, it is a fact that we are more confused than when we began. Some of us are beginning to wonder in what circumstances the Government can lose any money at all, except in proportion as the whole scheme completely fails. Apparently, what is to happen is that the company is to raise £1,000,000 of capital from the public, and it will use that money in order to finance in the special areas small industries, which, ex hypothesi, have not been able to get advances in the ordinary way because of the additional risk involved. If it should turn out that those small businesses succeed and there is no loss, in those circumstances the Government will not be called upon for its guarantee, and its expenditure is limited to the administration expenses from year to year and the winding-up expenses in due course. But suppose those small businesses should fail, then the Government will provide 25 per cent. of the money that is lost.
Therefore, what the Government are really saying, in the final analysis, is that some attempt ought to be made to finance small businesses in areas which, ex hypothesi, are not likely to succeed in getting the money on their own resources, and provided the general public will contribute 75 per cent. of any losses that may be made the Treasury will contribute 25 per cent. If that is really the proposal that the Government are making, then, although I have no right to speak for my colleagues, and I speak only for myself, it seems that we shall have to consider even the amount of support that we have given to the Measure so far.

§ Mr. LEWIS
I listened with care to the explanation given by the Chancellor of the Exchequer as to the maximum liability of the Treasury and, with the greatest diffidence, I feel bound to say that it appears to me that the right hon. Gentleman does not really understand the working of the Bill. Take the £1,000,000 lent in the first instance. Suppose nothing is lost and the £1,000,000 which is loaned out comes back. That process can be repeated indefinitely and there will be no loss to the Treasury. Take the other 63 eventuality. You lend the £1,000,000, and you lose, say, £100,000. The loss to the Treasury in that instance will be £25,000. The company will now have £900,000 left, and they lend that again. Suppose they lose another £100,000. Again, the Treasury will lose £25,000, and so on until ultimately the whole sum is lost. Ten times £25,000 is £250,000. I cannot see how any other possible explanation can be given of the effect of the arrangement as stated in the Bill. In paragraph 4 of the Schedule, there is a limit of the liability of the Treasury to a total amount of £250,000; it may be less, but it cannot be more. It does not matter whether the capital is lent once or 20 times over.

§ Mr. MAINWARING
The hon. Member opposite has been trying to elucidate the matter, but it seems to me that each hon. Member who contributes to the Debate contributes something to the confusion. I am not certain whether I shall avoid doing that myself. As I understand paragraph 4, it lays a responsibility upon the Treasury to meet losses of capital which exceed the amount of reserves, with a limit as to the responsibilities of the Treasury not exceeding one-fourth of the amount of the loan. One-fourth, therefore, is the maximum to which the Treasury is committed. If on the first turnover of the £1,000,000 one-fourth of the capital is lost, there will be no reserves available to meet that. The company will have received nothing, and they will have lost one-fourth of the capital. Who is to meet that loss? Presumably, the Treasury. If the Treasury make good the loss, then the £1,000,000 is once more intact and ready for its second turnover for lending purposes. How long could this procedure go on? The Chancellor of the Exchequer suggested that the final obligation of the Treasury is £1,000,000. Therefore, I presume it could only turn over four times, but it seems to me that it could go on so long as the wheel was there.

§ Mr. GARRO-JONES
My hon. Friend has brought forward a very relevant point. The question at issue is the Treasury safeguard as regards capital raised and the Treasury liability as to the amount of money lent or lost. It, 64 therefore, becomes necessary to ascertain how much money this company can actually lend, and I should like to know from the Chancellor of the Exchequer whether the company is to have powers to borrow. If they are to have powers to borrow, then they can lend the amount of their capital not once nor twice but seven or eight times, and in proportion to the amount of capital lost by these loans, perhaps, £10,000,000, the Treasury would be liable to repay 25 per cent. of those losses. Much of the confusion which is arising is not due to the stupidity or obtuseness of hon. Members, but to the fact that the Bill is drafted in an extremely vague way and that we have not before us the memorandum or articles of association of the company which is to operate the Bill. It would have been a splendid thing if we could have had the memorandum and articles of association laid before us. Unless we know whether the company is to be able to borrow or not we do not know how much they will be able to turn over their capital in the way of losses.
The Chancellor of the Exchequer in reply to me said that it was not the banks who would put up the money, but the public. There, again, there was some confusion of thought in the right hon. Gentleman's reply, because everybody knows that what will happen will be that the banks will underwrite the capital and the public will then be asked to subscribe it. The underwriters' responsibility is only to satisfy themselves that the, money is going to be subscribed. Once the money is subscribed the underwriters are discharged from all their liabilities and in many cases also from their interests in the company. It will be then for the people who have subscribed the money to supervise the operations of the company. The scrutiny of the underwriters in guaranteeing the subscription of the money will be no safeguard against malpractices in the administration of the company. We have no safeguards whatever on that score.
That brings me back to the remarks that I previously made, which were intended to register the fact that the Chancellor of the Exchequer has given us no information as to how this company wilt operate. We do not know what type of applicant there will be, nor how much public money the company can loan, and 65 we do not know to what liability the Treasury is committed. We ought to have some fuller explanation before we proceed to any further discussion.

§ Mr. CHAMBERLAIN
There seems to be only one thing on which everybody is agreed, and that is that the Chancellor of the Exchequer does not understand the Bill and could not explain it if he did. It is rather discouraging. One difficulty, I think, which has arisen is that hon. Members do not altogether realise that the 25 per cent. which is the limit on the liability of the Treasury is not 25 per cent. on losses but 25 per cent. on loans. It is not quite the same thing and it makes a difference in understanding what are the prospects. The hon. Member for South Shields (Mr. Ede) said, I think, that I had given contradictory replies. The replies I gave were different, it is true, but they were in reply to different questions. The answer to any question as to what is the ultimate liability of the Treasury depends upon the assumption made in the question. If you alter the premises you must also alter the answers, and it does not mean that the answers are contradictory.
My hon. Friend the Member for Colchester (Mr. Lewis), who seemed to have some doubt as to my understanding of the Bill, said it was quite clear to him that the Treasury could not possibly lose more than £250,000, because if they lost £25,000 a year for ten years that would make £250,000. That is quite true on the assumption that they are going to lose £25,000 a year. If they did lose £25,000, and lost the same amount ten times, it is quite true by mathematical calculations that you arrive at a loss of £250,000. But how does he know they would only lose £25,000 in one year? Suppose they lost £100,000. If you make these assumptions you can work out all kinds of different results. The ultimate respective liabilities or losses of the Treasury and the shareholders will depend upon the number of times that the capital is lent and the losses upon that capital. The hon. Member for Chesterfield (Mr. Benson) put a question which I think I can answer so that anybody can understand. He asked whether it would be possible that the Treasury in the end might have lost the whole £1,000,000 and 66 the shareholders might have got the whole £1,000,000. My answer is that that is possible. It is conceivable.
Suppose, for example, the first £1,000,000 is lent and no loss is made upon it. That is a single transaction and not a transaction to be aggregated with any other. That £1,000,000 may be lent again twice or thrice or four times. Let us suppose that the £1,000,000 had all been repaid without loss. It is lent again a second time and again repaid without loss. It is lent a third time and again repaid without loss. Then it is lent a fourth time and the whole of it is lost. The total amount of the loans, not the losses, leaving out the first transaction, will be £4,000,000, and 25 per cent. of the loans is £1,000,000. That constitutes the amount which the Treasury can lose. In that case the Treasury would have lost the whole £1,000,000 and the shareholders would have their £1,000,000 still in hand. I do not think that is very likely to take place. That is not how it is going to work out in practice. Hon. Members will see that there may be every kind of variation between that and other kinds of losses. All I can say is that this is the maximum amount the Treasury can lose—£1,000,000£unless the capital is increased. Short of that the losses may be divided between the Treasury and the shareholders in almost any conceivable number of proportions.

§ Mr. PETHERICK
I am sorry to trouble the House again but a very ingenious red herring is drawn by the hon. Member for Seaham (Mr. Shinwell). The point is not whether more than £1,000,000 can be lent or whether the Treasury is going to lose 25 per cent. The point of the Amendment is this: Suppose the Treasury wish to increase the capital still further; then we think the Treasury should come to the House of Commons and ask for further guarantees. I do not wish to labour the point but it is a question of principle. We should not allow the Treasury to grant further guarantees without knowing how far they will go. The guarantees might be subject to political control in the future by a Chancellor of the Exchequer who might have large ideas and try to stretch the provisions of the Bill to the maximum possible. May I ask the Chancellor of the Exchequer one question? We know 67 that guarantees can be granted by the Treasury on behalf of the company in respect of loans to Dominions and Colonies and in respect of local loans and loans of that nature. Is there in fact any precedent for giving the Treasury full power to grant guarantees to a private company or a public utility company which is to lend out the money again to various small people? Is there a precedent for anything of that nature?

§ Mr. CHAMBERLAIN
As far as I know there is no precedent for it; it is a new thing altogether.

§ Mr. SHINWELL
In view of the very lucid explanation furnished by the right hon. Gentleman it appears to me that it might be desirable for the hon. Member for Huddersfield (Mr. Mabane) to withdraw the Amendment. Before it is withdrawn, however, as the hon. Gentleman who has just spoken has attributed to me a responsibility for raising a red herring, may I say that if he refers to the Debate on the Financial Resolution he will find that I postulated the precise point that has now been cleared up by the right hon. Gentleman I pointed out that it was likely, if the Treasury provided a guarantee of 25 per cent., that the total amount of capital raised throughout the operations of this proposed company would be £4,000,000. If the right hon. Gentleman on that statement had given a clear and unequivocal reply we might have been saved all this confusion.

§ Mr. LEWIS
I would like to apologise to the Chancellor of the Exchequer for having cast doubt on his apprehension of the Clause. He has shown the Committee quite clearly that, as we thought, the maximum liability might in fact go up to £1,000,000. What I do not understand is why it stops at £1,000,000. He said the money could be lent four times over. If it was lent eight times over the liability would be £1,750,000.

§ Mr. MABANE
I beg to move, in page 2, line 18, at the end, to insert: but in any case no consent to an increase of capital shall be given or any modifications of an agreement made that would have 68 the effect of increasing the total liability of the Treasury beyond the sum of two million pounds. I want to ask the Chancellor of the Exchequer to give Parliament a right to determine whether or not there shall be an increase in the capital of the company. May I ask whether he regards any more favourably than before the suggestion to limit the increase in capital, so that in no case shall the total liability of the Treasury go beyond the sum of £22,000,000? If he is not prepared to accept the sum of £2,000,000 would he be prepared to accept any limit whatsoever? Capital might be increased carrying with it a potential liability for the Treasury, and I think we should be careful, before parting with the Bill, to see that it does not give the possibility of the liability of the Treasury being increased to an unlimited amount.

§ Mr. PETHERICK
I hope the Chancellor of the Exchequer will consider whether he can accept this Amendment. It would go far to remove some of our misgivings. Indeed I think the insertion of a specific amount in the Bill would remove our remaining fears altogether. What we are afraid of is that at some future date a Chancellor of the Exchequer may decide on a certain line of policy and may decide to extend the amount of this guarantee. If the amount of £2,000,000 is specified we shall know that the Bill when it becomes an Act will be carried out as Parliament at present intends it to be carried out and that it could not be stretched.

§ Mr. ALBERY
The Chancellor of the Exchequer has just stated that there is no precedent for the manner in which this Bill is drawn and we have always understood that the whole thing is an experiment. It seems to me that it is only reasonable that Parliament itself should have the right to decide, after a certain amount of experience, whether the experiment has been successful or not.

§ Mr. K. GRIFFITH
I hope the Amendment will not be accepted. I really think there is no reason for hon. Members' fears. After all if, as this experiment goes on, it is found that the money gets lost and that there is no success, it would try up by itself. The public would not find the money. If it is a success and the 69 money can be placed out to good advantage, why should we restrict it? If it is going to be a success—and I should very much like to see that—then the more we can encourage these industries the better. If there is any loss it will correct itself. There is no reason for trying to put constraint on the scheme before it has even had a chance to start.

§ Mr. SHINWELL
It seems to me that no limit should be placed on possible expansion. As has been said, expansion depends almost wholly on the success of the undertaking. If success is achieved no hon. Member in this House would seek to place any limitation on the company's operation. My own view, for what it is worth, is that it is extremely unlikely that the liability which will fall upon the Treasury will reach anything like the amount suggested in the Amendment. In view of that I think the Amendment should be accepted.

§ Sir A. M. SAMUEL
I do not know whether some of this money is going into buildings or if money is to be issued in financing month to month production, and purchases and sales. If a large proportion of the £1,000,000 goes into buildings or into machinery or stock you would come to the limit of the amount and you would require expansion. I do not take exception to the Bill in any shape or form, but when hon. Members talk about limit and expansion we come to question what the limit is and what that expansion is for. In the Preamble to the Bill it says: To obtain financial facilities from banks or financial institutions. Those who have to deal with commercial questions know the difference between providing fixed capital and short-credit; that is to say whether capital or the credit is required as fixed capital or for current trading facilities. A new business starting in a depressed area may say that it wants money for buildings and machinery, or that it only wants money to keep production and sales financially liquid, so that it is able to find money to produce and while its goods are being turned again into money by the retailer; or it may need both types of help. We ought to know what the Chancellor of the Exchequer has in mind; whether 70 the money is to go into buildings and machinery or is to be used to provide financial facilities for these businesses; whether it is going to be used as fixed capital or for revolving credits of a few months. Then we should know how to interpret the expressions used by the hon. Member for Seaham (Mr. Shinwell).

§ Sir G. ELLIS
In any case payment to the Treasury must be on the winding-up of a company. The fund may last for 10 years, that is the extreme limit, and unless the company has used its resources we may be without any information as to what liabilities the Government have incurred up to that time. We may not be able to find out the liabilities of the Government until we come to the winding-up of the company.

§ Mr. BENSON
I hope the Chancellor of the Exchequer will elucidate the reference to the 10 years. The liability of the Treasury seems to depend on the number of times the capital is lent and repaid.

§ Mr. CHAMBERLAIN
And the amount of the losses.

§ Mr. BENSON
Yes. The limit is set by the number of times the capital is repaid. If the company is to be wound up in 10 years it means that the money will only be lent once or that it will be lent over short periods. If we desire to start new businesses in distressed areas the idea that the capital must be repaid rapidly over a short period is going to militate very strongly against firms asking for help. The knowledge that they will have to repay the capital rapidly will prevent businesss being started where, if capital was found over a considerable period, they might be started. I hope the Chancellor will not accept the limit of £2,000,000. It would mean that there could be no increase of capital by the company of more than another £1,000,000 over and above the first £1,000,000, and if the Bill it to be a success—of that I am sceptical—it will be a grave mistake to limit its operations to £2,000,000.

§ Mr. LEWIS
The hon. Member for Huddersfield (Mr. Mabane) is not wedded to the figure of £2,000,000. Like many of us, he thinks that there is something to be said for a limit. This House in the past has objected to giving an 71 unlimited authority to the Government to spend money on any particular object, and as a matter of principle, a limit should be put in the Bill. I hope the Chancellor of the Exchequer will reconsider this matter and at a later stage put some limit in the Bill. If the right hon. Gentleman visualises circumstances in which £2,000,000 can be used he can put his limit as high as £5,000,000, but I think he should put some limit in, as Parliament does not like to give a blank cheque to the Government for any particular purpose. The suggestion has been made that if the experiment is a failure and money is lost it will automatically prevent other money coming forward. That does not quite cover all the possibilities. The thing may at first run on a small scale and money may go out and come back, but if it were suddenly to expand on a large scale the money might be lost. Many small companies have been carried on successfully for years, and then when they have been greatly extended great losses have been incurred. Such circumstances might arise in this occasion, and I hope the Chancellor of the Exchequer will put in some limit in order to satisfy the principle.

§ Mr. CHAMBERLAIN
There is a practical difficulty which makes it impossible for me to accept the Amendment, but even if it did not exist I should not feel disposed to recommend the Committee to accept the Amendment. It is not necessary, for the reasons I have already given to the Committee at some length. In the speech of the hon. Member for Colchester (Mr. Lewis) I detected a feeling that the Committee is being asked to guarantee that the Treasury will find money for an indefinite amount in the future without having the specific authority of the House for so doing. This is not a parallel case to one in which commitments are being undertaken on behalf of the Government. When you place contracts for armaments over a period of years you have a guarantee behind you. Here the public have to supply the money, the public will run considerable risks for practically no reward, and you may be quite certain that they are not going to run these risks indefinitely unless the prospects of the work to be done by this 72 company become much more rosy than I reckon them to be at this stage. I think it would be objectionable to put in a high limit because it would encourage people to think that £5,000,000 is all that we are aiming at.
I do not want to prophesy about the future. Let us try the experiment on the limited scale we are suggesting to the Committee and see sow it works. It will then be time enough to extend it. The hon. Member for Ecclesall (Sir G. Ellis) said that there will be no opportunity for the House for 10 years to find out what is going on. He has forgotten the point, and the hon. Member for Huddersfield (Mr. Mabane) has forgotten it, that the liability of the Treasury is not confined to the 25 per cent. losses on loans. There are other contributions by the Treasury. There is a contribution to reserve and also an annual contribution to the expenses, and as this annual contribution will have to be voted there will be an opportunity every year for the House to revise what is being done and ascertain the position of affairs. What this annual contribution will ultimately be we cannot say. It is impossible to say that the capital of the company shall be such as will limit the liability of the Treasury to a given amount. The £20,000 annually has to be taken into account and the ultimate obligation of the Treasury is impossible to foresee.

§ Mr. MABANE
I thank the Chancellor of the Exchequer for his explanation and I quite recognise that I had forgotten the £20,000 to be paid yearly, which might come to a very substantial sum over a number of years. If we can alter the Amendment to avoid that difficulty and provide that the increase of liability should refer only to an increase of capital, would it be more acceptable to the Chancellor of the Exchequer?

§ Mr. CHAMBERLAIN
I thought I had made it clear that although there was a difficulty in this matter that even if the difficulty did not exist I should not be able to accept the Amendment for the other reasons I have given.

§ Mr. MABANE
I beg to move, in page 2, line 21, at the end, to insert: 73 and such agreement or agreements shall have effect if no resolution to the contrary is passed by Parliament within a period of twenty-eight days. I continue my endeavours to secure for Parliament a little more control over the operations and procedure of this company. Sub-section (3) of the Clause reads: The Treasury shall, as soon as may be, lay before Parliament a copy of the said agreement and of any further agreement by which it is modified. If this House does not approve of the agreement or any particular term in the agreement, it would have to proceed by way of Prayer, and that is a difficult procedure for which time has to be found. I am suggesting in the Amendment to add the words: that any such agreement shall have effect if no resolution to the contrary is passed by Parliament within a period of 28 days. That is a negative way of giving effect to the agreement. There will be some matters in the agreement, when it is finally made, that Parliament should be able to discuss. It is a very modest proposal, and I hope that the Chancellor of the Exchequer, having resisted my previous efforts to secure a greater degree of control to this House, will make this small concession, so that Parliament may have an opportunity of discussing the terms of the agreement entered into between the Treasury and the proposed company. As the hon. Member for Ecclesall (Sir G. Ellis) has said, it is important that the House should know the annual position as between the company and the Treasury. Many hon. Members, I am sure, will like to make it a condition of the agreement that the company should reveal at the end of each year the liability of the Treasury at the moment of the compilation of the account. Would it not be a good thing if Parliament had the chance to suggest, or indeed, to exercise pressure to see that a condition such as that is included in the agreement? I hope that the Chancellor will be a little more yielding on this Amendment.

§ Mr. SHINWELL
We on these benches have expressed criticism of this Bill, although at the same time we have intimated our decision to accept it; but if it is to be passed by this House eventually, we desire that no restrictions 74 be placed in the way of the company's operations. The company must be given a fair chance to show what it can do. Therefore, in our submission, if Parliament is from time to time to have the opportunity of raising issues relating to the operations of the company, it may have the effect of restricting the company's activities and may also have an injurious effect so far as the raising of capital is concerned. For that reason we do not intend to support the Amendment.
On this head I would like to ask the right hon. Gentleman whether he could furnish the Committee with some information. May we take it from him that, as regards the original memorandum of association which relates to the agreement entered into between the Treasury and the company to be formed, the House will have an opportunity of voicing its opinion on the matter? From the speech of the hon. Member for Huddersfield (Mr. Mabane), I gathered that he desires that any subsequent modifications of the original agreement should, if necessary, be discussed by this House. That may be desirable, but it seems to me that the right hon. Gentleman's reply on the previous Amendment covered that point, because if there is to be an annual opportunity of discussing the operations of the company and the question of administrative expenses, that may be sufficient for the purpose which the hon. Member for Huddersfield has in mind. Every year we shall have the opportunity, I take it, of asking questions with regard to the company's liabilities and its future operations and all other matters relating thereto. I venture to ask the right hon. Gentleman whether, as regards the original agreement about to be entered into, the House will at any time have an opportunity of expressing its opinion on the matter?

§ Mr. PETHERICK
The hon. Member for Seaham Harbour (Mr. Shinwell) has made a plea that the company when constituted shall be free to carry on its work without being hampered at all. I think there is a great deal to be said for that. At the same time, Parliament is voting that a guarantee shall be given in respect of the debts of the company, and it is also voting that a guarantee shall be given for unspecified debts which the 75 company may incur later on. Consequently, I think Parliament is also entitled to have some check on the further commitments which the Treasury may enter into on behalf of the country in this respect. On the previous Amendment the Chancellor of the Exchequer took up the general defence of the Bill on two lines. He said, on the one hand—no doubt in order to try to allay the fears of hon. Members, such as the hon. Member for Huddersfield (Mr. Mabane) and myself—that it is only a little Bill, and he said, on the other hand, that the Treasury are such Shylocks that they will not disgorge more money than they can help. If that be the case, it is simply a guarantee of the fact that the administration of the scheme will be carefully gone into. Nevertheless, I think that Parliament as well as the Treasury ought to know exactly what happens. Therefore, if further agreements are entered into with the company, I think it is only reasonable that they should come before Parliament.

§ Mr. K. GRIFFITH
I opposed the other Amendments moved by the hon. Member for Huddersfield (Mr. Mabane), but I think there is a good deal to be said for the present Amendment. It is not a very big Amendment, for the reason that the agreement is one which this Committee will have had its part in shaping. It deals with the Schedule, and in the Schedule there are laid down the matters to be provided for in the original agreement, and other matters which may arise in subsequent agreements. To-day we are laying down the main structure. All the Amendment seeks to do is to ensure that the House will have an opportunity of saying whether it thinks that the actual agreement has fully carried out the intentions laid down in the Schedule. The Schedule refers to the main matters, but there is nothing to prevent there being other matters in the agreement beyond those referred to in the Schedule. Subject to what the Chancellor of the Exchequer may say, I should have thought this is an Amendment which ought to be accepted.

§ The FINANCIAL SECRETARY to the TREASURY (Mr. W. S. Morrison)
Like the previous Amendment, this Amend- 76 ment combines a technical reason, with general reasons, which renders its acceptance inadvisable. The technical difficulty is that the intention of the hon. Member is to prevent this agreement having the effect of law until it has been before Parliament for 28 days, but the Amendment does not in so many words negative the ordinary consequence of an agreement being signed between the Treasury and the company. Therefore, it would not carry out the object which the hon. Member has in view, because even if the Treasury went so far as to state that the agreement would not be valid until laid before Parliament, the ordinary operation of the law would make the agreement valid.
I gather that what the hon. Member really wants is that Parliament should be able to scrutinise the agreement and make certain that it carries out its desires to promote a measure of special assistance to the Special Areas. I would draw the attention of the hon. Member and that of the Committee to the fact that the two previous Amendments, which dealt with the important matters of the money involved, were negatived, and I would therefore ask the Committee to allow this agreement in its technical details to be negotiated by the Treasury. I would point out that the Treasury is bound by the Bill to give effect to what is in the Schedules, and in the Schedules the House lays down the main features of the original agreement. Now is the time for the House to say whether the agreement in all its important characteristics is what it desires. The Committee will observe that in the case of any modification of the agreement that may subsequently be made, under Clause 1, Sub-section (3), the Treasury are under the obligation to: lay before Parliament a copy of the said agreement and of any further agreement by which it is modified. It should always be borne in mind that in this particular Bill, as regards the annual sum which is is to be paid under paragraph 2 of the Schedule, namely the contribution towards administrative expenses, it is specifically provided in Clause 1, Sub-section (4) of the Bill that: Any sums required by the Treasury for making the annual payments specified in paragraph 2 of the said Schedule shall be defrayed out of moneys provided by Parliament. 77 The intention and the effect of those words is to make that particular sum connected with the administrative expenses of the company matter to be discussed by Parliament in the ordinary way. The Committee must bear in mind three things: first, there is to be an annual opportunity for discussing the administration of the company under that provision; secondly, the Bill makes provision for the original agreement and any subsequent agreement, before it is modified—

§ Mr. MABANE
If I may interrupt, I would point out that I am disturbed by the fact that future modifications in the original agreement may be modifications outside the terms of the Schedule as it exists at present.

§ Mr. MORRISON
Only with regard to paragraphs 5 and 6. With regard to those paragraphs, the Treasury is not bound by the Schedule, because they are paragraphs of very limited scope dealing with only one contingency, namely, the provision of fresh capital. Their object is to enable certain priorities to be given to shareholders. That is a very minor matter and one of no importance at all. I repeat that in this Bill there is provision for an annual opportunity for discussing the administration of the company. There is also a provision to the effect that the original agreement and agreements modifying it shall be laid before Parliament. There is no withholding of any information on the point to which this Amendment is directed. That being the case, and the Committee having negatived previous Amendments on more important matters of money, I think the Treasury should be left to regulate the details of the scheme, which are bound to be in accordance with the Schedule which is actually in the Bill.

§ Mr. PETHERICK
The hon. and learned Gentleman said that every year there will be an opportunity for discussing this grant. Supposing, however, the company in any given year, before the Estimates come to be discussed, enters into an arrangement with the Treasury increasing the guarantee which the taxpayer may eventually be called upon to make good, it seems to me that we in this House would only have the opportunity of debating the arrangement, but would not be able to stop it in any way.

§ Mr. MORRISON
I understand that the substance of the two Amendments which have just been negatived concerned the liability of the Treasury; but I would put it to the hon. Member that, in view of the fact that he and all other hon. Members will be given full information on any agreement made by the Treasury or any modification of that agreement, it will not be difficult for him to find an opportunity of calling into question anything of which he disapproves. I would further point out that the Amendment of the hon. Member for Huddersfield (Mr. Mabane) would not prevent such an agreement having effect. Therefore, I ask the Committee not to accept the Amendment.

§ Mr. SHINWELL
In regard to Subsection (3), relating to laying before Parliament copies of agreements, I presume that that means copies of the original agreements. I take it that an opportunity is open to the House at any time if it cares to raise these matters and question these agreements.

§ Mr. MORRISON
As to that, I should not like the hon. Member to be under any misapprehension. My reading of the matter is that it is merely an informative proposal; it merely gives the House the opportunity of seeing what is in the agreement. As to the opportunity which might be taken for questioning the agreement, while there are the ordinary opportunities which are open to any Member of this House to ask questions, to raise the matter on the Adjournment, and so on, I frankly tell the hon. Member that I think the effect of Sub-section (3) of this Clause is merely to lay a document before Parliament and for hon Members to take such action as may be open to them under the ordinary procedure of the House.