§ Motion made, and Question proposed, That the Clause stand part of the Bill.
§ Mr. Fletcher
I really do not think that we ought to part with this Clause without a word of explanation from the Government, because I think it will be agreed that everybody who has been trying to take an interest in this very extraordinary Finance Bill has been particularly intrigued by the complicated introduction to this Clause dealing with the redemption of the Ottoman Guaranteed Loan of 1855. I really do not think that we should be doing our duty in this Committee if we allowed this important Clause to go by without making some attempt to understand what it is all about.
The Chancellor skated over it, I thought, very gracefully in his Second Reading speech, but he lifted a slight part of the veil of mystery which surrounds this subject. As I read the Clause it will cost this country £200,000; 560 if I am not mistaken it will be very much more. The Chancellor said:This loan has had a long and chequered career".—[OFFICIAL REPORT, 4th May, 1961; Vol. 639, c. 1629.]It has certainly had a long career since it has been knocking about since 1855, which is just over a hundred years ago. It remains a mystery, to me at any rate, why it is only now, in 1961, that we are going to do something about this long-outstanding guaranteed loan.
The Chancellor pointed out, quite rightly, that when this guarantee was given in 1855 there was a "remarkable coalition" against it, embracing not only Mr. Disraeli and Mr. Gladstone but Mr. Cobden as well. It may interest those who are interested in the Ottoman Bank that Mr. Gladstone in 1855 made no fewer than fourteen speeches in this Chamber opposing this guaranteed loan. He was against it. I am not proposing to quote any of those fourteen speeches—[HON. MEMBERS: "Why not?"]—but anybody interested in what Mr. Gladstone said in 1855 will be interested to know that he spent most of his time, as far as I can see, in 1855 opposing 561 this guaranteed loan, and, I think, for very good reasons.
§ 10.0 p.m.
§ Mr. Fletcher
At that time we were engaged in a great European war against Russia. It is very significant that in all other subsequent European wars Russia has been on our side. At that time we were proposing to guarantee Turkey, then called the Ottoman Empire. Our relations with Turkey have undergone a good many transformations in the last hundred years. She was against us in the 1914–18 war but in the last war she was on our side, though only at a belated stage.
What happened in 1855 was that for some reason, long disputed by Mr. Gladstone, Mr. Disraeli, and Mr. Cobden, the House of Commons eventually agreed to authorise Her Majesty's Government to guarantee a loan of £5 million to be raised for the benefit of the Ottoman Empire, which we now call Turkey. Not only did we guarantee it but France also guaranteed it. It is not clear to me but no doubt the Minister will be able to explain what happened to the interest on the loan the service of which we guaranteed, because for a long period between 1855 and the early part of this century, when of course there was not a vigilant Labour Opposition, nothing was done about it.
The matter was resuscitated in 1929 when questions on the subject were addressed to the right hon. Gentleman the Member for Woodford (Sir W. Churchill), who was then Chancellor of the Exchequer, and who is, so far as I can discover, the only survivor of the 1929 Parliament who is still a Member of this House. The right hon. Gentleman had a good deal to say about it. He was interrogated as Chancellor of the Exchequer by the then Colonel Wedgwood to know what was really happening about the interest on this loan, whether the British Government had been called upon to pay, whether the French Government as co-guarantors were fulfilling their obligations and whether, as Mr. Disraeli, Mr. Gladstone and Mr. Cobden thought in 1855 when they opposed the Bill, we found that we were not only the guarantors but we were involved in considerable financial 562 liability because of default not only by the Turkish Government but also by the French Government and the Egyptian Government. In December, 1929, the right hon. Member for Woodford had said that he would do something about it and that he was engaged in communication with the French Government to know whether they would pay up their liability as to one-half of the expenditure involved.
As the Chancellor of the Exchequer said on the Second Reading of this Bill, the right hon. Member for Woodford, then Chancellor of the Exchequer, gave in 1929 certain undertakings to do something about it. Thirty-two years have elapsed since then, and I am not quite clear about two things. The first is why nothing has been done for thirty-two years. The second is why it is necessary in this Finance Bill to make the extraordinary provision proposed in the Clause. I do not think that we ought to part from the Clause without some explanation.
Could the Economic Secretary tell us in the first place, as a matter of history, what has been the cost to this country of this loan made to Turkey in 1855 and Which we guaranteed? Could he tell us how much of our responsibility as guarantors we have been called upon to pay and how far has France, the other guarantor, contributed her share? How far has the agreement made in 1929 with the Egyptian Government resulted in any contribution by the Egyptian Government? Finally, what precisely is the meaning of the provisions in the Clause which appear to suggest that if we take the step now proposed by the Government it will cost the country a payment of up to £200,000 out of the Consolidated Fund?
If we adopt the suggestions of the Chancellor, can we be assured that we shall still be able to exercise whatever rights of recovery we may have preserved both against our co-guarantors, the French Government, and against the Turkish Government or the Egyptian Government, as the original and principal debtors?
§ Mr. Barber
The whole Committee will feel that it is really rather sad that a representative of the Liberal Party is not present this evening to support the ending of this loan which was opposed originally 563 by Mr. Gladstone. I hope that, unlike Mr. Gladstone, it will not be necessary for me to speak fourteen times. I hope that it will be sufficient to speak once, twice or thrice to satisfy the hon. Member for Islington, Fast (Mr. Fletcher). When my right hon. and learned Friend answered, at considerable length, a Written Question on the matter on 17th April, I wondered whether it was really a wise thing to do, because it gave all the references which the hon. Gentleman has used. But I will say no more about that.
Perhaps the most helpful thing I can do at the outset is briefly to give a resume of the chequered career of the loan. There is a good deal of information available, but I will keep it as brief as I can.
The loan was originally made under an Act of 1855, and it was guaranteed by Her Majesty's Government. That guarantee was limited to the payment of interest at 4 per cent. Payment was also to be made into a sinking fund, to be serviced by the Ottoman Government, which would have finally redeemed the loan by 1900. The interest and the sinking fund payments were charged on the whole revenues of the Ottoman Empire. The Ottoman Government defaulted on the sinking fund payments in 1876, when only just over £1 million of the loan had been redeemed, and on the interest in 1880.
The British Government had control over sufficient Ottoman revenues from Egypt and Cyprus to meet the payments of interest, but not fully to meet those to the sinking fund due under the terms of the loan. Payments from Cyprus for the service of the loan equivalent to the amount of the tribute formerly due to the Ottoman Government were continued after 1914 until the granting of independence in August, 1960. From the outset, the Cypriot payments, which amounted to £92,800 a year, were grant-aided, and from 1927 onwards payments from Colonial Office Votes covered the full amount of the Cypriot contribution.
The next occurrence which bears upon the matter was the Treaty of Lausanne, in 1923. By that Treaty, Turkey was released from all the obligations in respect of the loan. This is, of course, not a matter for which I can take responsibility, but I felt that I 564 should mention it. The Egyptian liability was subsequently discharged by a capital payment under the Anglo-Egyptian financial agreement of 17th March, 1929, and the future arrangements for serving and ultimately redeeming the loan were, as the hon. Gentleman has said, announced by the then Chancellor of the Exchequer, my right hon. Friend the Member for Woodford (Sir W. Churchill), on 21st March, 1929.
The hon. Gentleman has referred to the statement by my right hon. Friend the Member for Woodford. I think that all I need say is that these arrangements which were announced by him, whereby, in effect, the interest was paid and a sinking fund built up from Colonial Office Votes, continued until the granting of independence to Cyprus last year.
The interest payment on 1st February this year was made from the Consolidated Fund under the terms of the original guarantee, but, in the absence at any statutory authority, no contribution was made to the sinking fund. That, of course, resulted from the grant of independence to Cyprus. This change in the status of Cyprus consequently had the effect of reducing by roughly two-thirds the Exchequer contribution to the servicing of the loan.
It is, however, the intention of Her Majesty's Government finally to redeem the loan at the date which would have resulted from the arrangements which were set out in the statement of my right hon. Friend the Member for Woodford, and consequently to fulfil the undertaking which he gave on that occasion. Accordingly, it is proposed that six months' notice to redeem the loan should be giving on the first interest date when the sinking fund would have been full if the annual payments of £92,800 from the Colonial Office Votes via Cyprus had continued. Until the full redemption, interest payments will continue to be made from the Consolidated Fund under the guarantee. A once-and-for-all payment will be made from the Consolidated Fund at the time of the redemption to meet any deficiency in the sinking fund.
There are only two other points which I should make; the first concerns the date at which final redemption may take place, and the second the cost to the 565 Exchequer. The exact date when the fund would have been full, and when, in fact, notice will be given, will depend on the future price of the stock held in the sinking fund, but, on the basis of the April prices, it could be expected to be 1st August next year.
I am told that the price of the stock held in the sinking fund is now a little below what it was in April. That, of course may tend to defer the redemption date slightly, but it may easily turn the other way. Consequently, the date of notice coud be either earlier or later. But since it might be as early as 1st February next year, obviously the matter could not be left over until next year.
As the hon. Member for Islington, East has said, in the proviso to subsection (1) it is stated that the sum to be issued out of the Consolidated Fund shall not exceed £200,000. The amount which will be necessary will depend upon the price of the stock held in the sinking fund. It may well be that the amount which is required will be much less than £200,000, but we thought that we had better take provision for up to that amount so that we would be able to honour the undertaking which was given by my right hon. Friend the Member for Woodford in 1929.
What it amounts to is that a guarantee was given by Lord Palmerston in 1855; Turkey was released from her obligations by Lord Curzon in 1923; an undertaking for ultimate redemption was given by my right hon. Friend the Member for Woodford in 1929; the Cyprus aspect came to an end as a result of the agreement with Archbishop Makarios last year; this year, my right hon. and learned Friend is seeking powers finally to redeem the debt, probably next year.
§ Mr. F. H. Hayman (Falmouth and Camborne)
I feel that we have had a lecture on the history of the British Empire and on certain outstanding people who have created it, such as Lord Palmerston and the right hon. Member for Woodford (Sir W. Churchill). Who owns this stock now? Is it the British Government? Will the £200,000 be paid back to the British Government out of the Consolidated Fund? What is the total amount paid out of the Colonial Vote, presumably to ourselves, during the period? We are entitled to something rather more than the vague phrase, "up to £200,000".
§ 10.15 p.m.
§ Mr. Barber
Unfortunately, I cannot tell the hon. Gentleman who owns the stock. We think that it is owned in the main by United Kingdom residents, but this is a bearer security and, consequently, until the final redemption it is difficult to know who will get the benefit of this.
As regards the amounts which have been paid on Colonial Office Votes via Cyprus to replace the tribute which was payable by Cyprus to Turkey originally, I can do no more than draw the attention of the hon. Gentleman to the figure which I gave of £92,800 a year, which is the figure which has been paid in recent years. I cannot, without notice, give the hon. Gentleman the total amount involved.
I ask the Committee to bear in mind that the maximum amount involved in the powers which my right hon. and learned Friend is now seeking is £200,000. There is a very good chance that it will be considerably less than that and, after all, we are merely carrying out an undertaking given by my right hon. Friend the Member for Woodford.
§ Mr. J. T. Price (Westhoughton)
Before we part with this fascinating topic and all the historical references which have been made to it, with large gaps in the story, may I put a more direct question to the hon. Gentleman? It is the sort of question which the Committee is entitled to ask when faced with a highly technical and devious undertaking of this character. Has the Treasury done its homework on this matter? There is some suggestion that it has not, because the hon. Gentleman failed to give a direct answer to the question asked by my hon. Friend. My question, with the greatest good will and courtesy, is how much has this transaction cost the British taxpayer since Lord Palmerston made his famous declaration? Surely the people who are doing the bookkeeping and making these historical researches can produce a simple set of figures in answer to that question?
I know that it is getting late, and that hon. Members wish to depart. Nevertheless, this brings us up against what may be a minor aspect of colonial policy, but one which has considerable significance in the setting of our present state. 567 When this matter was raised by my hon. Friend, I knew that somewhere at the bottom of the woodpile there was the nigger of Cyprus, if I may use that word in its best sense and not in its derogatory sense.
Obviously so long as we had sovereignty over Cyprus as security for our loans and disbursements year after year, nothing was done, but, once the sovereignty of Cyprus was conceded to Archbishop Makarios and the new Republic, something had to be done to clean up the untidy lines of this transaction. I therefore ask the Minister how much this transaction cost the British taxpayer on the current account, and what it cost going back over the years when we were holding the baby not only for our responsibility for contracts made with the Ottoman Government of those days, but on behalf of other Powers such as the late Egyptian Government and the French Government? It seems that in this world of international probity so many Powers walk out of their obligations and leave poor old John Bull to pay off the account at the end of the day. Having said that—and I hope that I have not been vindictive or malicious—perhaps the Minister will give us a better explanation.
§ Mr. Diamond
I want to raise a serious point which concerns the question of probity to which my hon. Friend referred. I understand that a number of bearer bonds are being redeemed, presumably by notice. I understand that according to the terms of subsection (5), the Act which makes the Government guarantor ceases to have effect immediately after notice of redemption and that, therefore, the British Government will cease to be liable. The assurance that I am seeking is that any bearer bonds which are not presented for payment on the given date will be repaid if they are presented later. All my hon. Friends are with me on this, as ever. If one is making a one-sided renunciation of indebtedness one wants to be absolutely sure that no one is prejudiced as a result.
§ Mr. Barber
I have made inquiries with regard to the point made by the 568 hon. Member for Westhoughton (Mr. J. T. Price) following up the remarks of the hon. Member for Islington, East (Mr. Fletcher) about the cost to the United Kingdom of this series of transactions so far, and I hope that, as the matter has been going on now for more than a century, they will be reasonably well satisfied if I inform the Committee that the sum is about £5 million. That is the nominal amount. I will look into the matter further, and if it is possible to provide more information without undue trouble to the officials I will write to the two hon. Members and let them have that information.
§ Mr. Fletcher
Can the hon. Member satisfy the Committee that we have exhausted all our remedies against the French Government, as co-guarantor?
§ Mr. Barber
I can only say that it is now many years since agreement was reached with the French, since which, under an arrangement made with them, they have made no contribution. They do not enter into the matter at all now. This is past history. I do not know why it happened, or under which Government it was, but I know that latterly they have made no contribution. We are now the sole guarantor. In accordance with the undertaking given it is for the United Kingdom Government to wind up this loan.
I now turn to the other point—a very important one, which may affect individuals—made by the hon. Member for Gloucester (Mr. Diamond). The position is covered by subsection (2) which provides that subsections (2) to (10) of Section 5 of the 1955 Act shall apply to this loan as they apply to Government stock, and they deal with provisions for the treatment of unclaimed moneys due on Government stock. The answer to the hon. Member's question is, "Yes".
§ Question put and agreed to.
§ Clause ordered to stand part of the Bill.
§ Clause 33 ordered to stand part of the Bill.