§ The Secretary of State for the Colonies (Mr. Iain Macleod)
With permission, Sir, I will now answer Question No. 25.
I am now able to announce the changes which the Government have decided to introduce affecting the financial liabilities of the Colonial Development Corporation to the Exchequer. In framing these arrangements my right hon. and learned Friend the Chancellor of the Exchequer and I have been greatly helped by the analysis and recommendations in the Report of the Committee under the chairmanship of Lord Sinclair of Cleeve, Cmnd. 786.
Our proposals are as follows. In the past, the true financial position of the Corporation has been greatly obscured by the arrangements whereby, in recognition of the fact that some of the Corporation's projects do not immediately become revenue-bearing, it does not have to service long-term Exchequer advances during the first seven years after they are made. The accumulation of unpaid interest which has thus arisen amounts to about £11 million.
In order to ease the financial position of the Corporation, it has been decided to release it from the obligation to meet this liability when it becomes due, and to place the sum into a special account, in a way similar to that proposed by the Sinclair Committee, where interest will not be payable. We shall also place in this account the Corporation's debt—about £9 million—arising from the Exchequer advances for projects which 628 have been wholly abandoned by the Corporation.
Towards payment of both liabilities in the special account—up to a total of £20 million in all—the Corporation will pay over to the Exchequer 60 per cent. of its net annual profits in excess of £250,000. These profit-sharing arrangements are designed to relate the Corporation's payments more closely to its financial capacities from time to time. These are, however, novel arrangements, and we propose to review them in three years' time in the light of experience gained.
The terms attaching to future advances by the Exchequer will depend on whether the Corporation requires them for making loans to third parties or for investment in equity-type holdings. In the case of loan transactions, the period over which repayments to the Exchequer will be made will be such as to conform generally to that of the capital repayments which the Corporation will be receiving from third parties. In the case of investments in shares, the Corporation will generally draw long-term advances for a 40-year period, and, for this type of investment only, the seven-year grace period will continue to be applicable.
I am satisfied that these arrangements will be of real assistance to the Corporation in the important and difficult task in which it is engaged. The Corporation, for its part, would have preferred the adoption of the Sinclair Committee's recommendations, whereby a part of the Exchequer advances would have been converted into equity capital. All the same, it considers that these changes will provide a sounder, stronger and more realistic basis for its future operations. To this result, the Corporation has made its contribution by accepting a restriction of the type of project to which the seven-year grace period will now apply. I should also like to acknowledge the help and co-operation it has given me over a prolonged period of consultation.
§ Mr. G. M. Thomson
While thanking the Secretary of State for making that statement, and while welcoming the proposals to relieve the Colonial Development Corporation of the unfair burden of interest which it has been carrying from past projects, may I ask him 629 whether he is aware that he has failed to use the very long time which he has had to consider this matter to produce proposals for the future of the Colonial Development Corporation on a sufficiently imaginative scale?
Is the right hon. Gentleman aware that, in particular, there is regret on three points: first, that he has failed to agree that enterprises of risk which are important in under-developed territories should be treated as equity investment; secondly, that he has made no announcement about expanding the amount of capital available to the C.D.C., since its capital is running out; and, thirdly, and most important, that he has not chosen this opportunity to announce that the C.D.C. will be able to go on initiating new projects in newly independent territories?
§ Mr. Macleod
As hon. Members will see when they have time to study my statement, in many matters we have followed the Sinclair Report. The main Sinclair recommendation which we have not been able to follow—converting part of the advances to an equity shareholding in the C.D.C.—would, in our view, have amounted to a subsidy over which there would not have been full Government or Parliamentary control. We therefore believe that our answer is the better answer.
I was asked about the amount of money available. As we explained in a debate on this matter, I very much hope that it will be possible to make this fund, in part at least, a revolving fund.
I know that hon. Members attach great importance to the third question which the hon. Member put. I believe that the Government's attitude in this respect is right. In time, it will, inevitably, have to be reviewed, but the needs of the Colonial Territories are such at this time that I believe it right that the efforts of C.D.C.—which, after all, was set up specifically for this purpose—should be devoted to and particularly pointed at those needs.
§ Mr. Thomson
Is the right hon. Gentleman aware that today is the day on which Sierra Leone is celebrating its independence? Is not this the kind of territory in which the C.D.C. should have the opportunity to carry out new projects in the future, as one of our 630 methods of giving help to that kind of new Commonwealth country?
§ Mr. Macleod
Today is Sierra Leone's independence day and we send her all possible best wishes. We have always taken the view that when countries become independent the best way of giving them aid is either through technical aid in one form or another, or through Commonwealth assistance loans or on a Government basis. While the C.D.C. can bring to fruition projects which it may have in newly independent countries, it should put its main effort into starting new projects in the Colonies, where there is very great need.
§ Mr. Grimond
Do I understand from the right hon. Gentleman's statement that the C.D.C. will have to pay over a higher proportion of its profits than used to be the case? I think that it is to be 60 per cent. in excess of £250,000. Is it likely to hamper the amount of capital which it can accumulate for new projects?
§ Mr. Macleod
No, I do not think that this will hamper the C.D.C. This is a matter on which we have managed to reach agreement with the Treasury and the C.D.C. This is towards the repayment of the funds, which may total £20 million. Towards that the C.D.C. will pay over 60 per cent. of the net annual profit, but only in excess of £250,000.
§ Sir G. Nicholson
Will not this require legislation? If it does—indeed, in any case—will not my right hon. Friend take the opportunity to review the whole position of the newly independent territories? When he says that most of the C.D.C. work will go to the Colonies, he will no doubt bear in mind that the Colonial Empire is undergoing metamorphosis and that many of its members are coming out of the jurisdiction of the Colonial Office. Is he satisfied in his heart of hearts that there is no gap or hiatus when a territory becomes independent?
§ Mr. Macleod
I am never satisfied that the arrangements are perfect. I would repeat a point made by my hon. Friend the Financial Secretary to the Treasury on the Department of Technical Cooperation Bill, two days ago: even after the independence of Sierra Leone today there are still more than 30 Colonial Territories. I am sure that it is right 631 that the C.D.C.'s effort should be directed first to them. I admit that in view of the shrinking in the number of Colonial Territories these arrangements, which may be, and I believe are, the right arrangements for the present, will have to be reviewed in the future. I think it likely that what I have said today may mean a comparatively small legislative amendment, but I am not yet advised whether that is so.
§ Mrs. White
On what basis is the Corporation expected to finance pilot and experimental schemes, which are particularly welcome?
§ Mr. Macleod
In general, these matters are left to the Corporation's commercial judgment and its arrangements will follow the lines which were outlined in a speech which I made to the House when we debated this matter a short time ago.
§ Several Hon. Members rose—