§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. McBride.]
§ 10.11 p.m.
§ Mr. Patrick Wall (Haltemprice)There is no need for me to emphasise Malta's long association with our country. I would, however, remind the House that the Maltese people voluntarily placed themselves under the Crown of this country about 160 years ago and in 1964 the Sovereign of this country became the Sovereign of the independent Commonwealth State of Malta. During those 160 years, Malta has been an important British base and her economy has been wholly geared to defence, and the world knows of the courage and the loyalty displayed by the Maltese people during the Second World War.
The whole question of British aid to Malta is related to the rundown of the British military forces in the island and to the subsequent industrialisation of the island of which the dockyard forms the most important factor. I shall, therefore, deal with the rundown and the dockyard before going on to the present dispute about the level of aid given by Britain to Malta.
777 In the late 'fifties it became clear that British defence commitments in the Mediterranean would have to be cut. As a result, the first five-year development plan, starting in 1959 and ending in 1964, was designed to convert the naval dockyard to commercial use and to attract both industry and tourism to the island. Under this five-year plan Britain provided £million in aid, which included £7½ million for the dockyard, two-thirds of it being in the form of a grant.
I move on to 1964, the year when Malta became independent. Immediately after independence the Maltese Government signed defence and financial agreements with Britain. These were linked agreements and were part of a package deal. Under the financial agreement we agreed to provide £51 million to Malta in the following 10 years. This was designed to continue the industrialisation of the island and, in return, the Maltese asked for no payment for the defence facilities of the Island, which they freely offered to the forces of this country.
Of the £51 million, £18.8 million was to be spent in the first three years and the balance in the seven years commencing April, 1967. It was agreed that 75 per cent. of this sum would be grants and 25 per cent. loans. This amounted to £18 per head of the population. I accept that it was a large sum, but the House agreed to it because of the indebtedness of this country to the Maltese people and because of our responsibility for pushing the economy of the island solely into the defence ambit and then altering it at a rate which the island could not absorb—the island being grossly overpopulated; indeed being one of the most populated parts of the world.
I come to 1966 and the period for which the present Administration are responsible. After the Defence White Paper of that year, it became clear that the rundown was to be accelerated. The Maltese were not consulted about this. They were told that, for example, Her Majesty's ships would be withdrawn, that one Royal Air Force squadron would be disbanded, that Britain would no longer have financial responsibility for the Royal Malta Artillery and that the two British battalions stationed in Malta would be withdrawn by 1970. The total 778 effect of this accelerated rundown meant that British defence expenditure in Malta would be cut from about £12½ million a year to under £6 million by the early 'seventies.
I will not go in detail into the ensuing row, but hon. Members will recall that there were demonstrations in Malta led not by the Maltese, but by British nationals. There was considerable discussion and a major debate took place in this House. As a result of all that fuss, Her Majesty's Government agreed to extend the rundown period from two to four years. They also agreed to joint discussions on industrialisation.
Later that year, in July, 1966, the Report of the Joint Mission for Malta, the Robens Report, was printed. That comprehensive document, in suggesting how the island could be fully industrialised by 1972, took as its target the provision of 15,000 new jobs to absorb the 6,500 people who would lose their employment as a result of the withdrawal of British defence forces. That proposal was estimated to cost about £44.3 million.
I have spoken of the military rundown, but there is a further background subject to which I must refer before coming to the question of the present dispute with the Maltese Government, and that is the issue of the dry docks, which are the major employer in Malta and which are vitally important for the economy of the island, no only for the ships that are repaired or produced but for the industrial training of apprentices for both dockyard and other industrial purposes.
During recent years the dry docks have had a chequered history. In 1959, they were leased to Messrs. Bailey by Her Majesty's Government for 99 years. This did not work out very well and, in 1963, Her Majesty's Government put the yard in the charge of the Council of Administration; and in 1968 the Maltese Government nationalised the yard.
During this period while the yard was in the charge of the Council of Administration, Messrs. Swan Hunter acted as managing agents and did a remarkably good job. However, that company faced two difficult problems which it could not overcome. First, the yard was overmanned by about 1,000 people; this had occurred for political reasons and it was a problem which Messrs. Bailey had had 779 to face previously. This made it difficult for the yard to be competitive with yards in, for example, Italy and Greece.
Secondly, the closing of the Suez Canal meant that Malta was no longer on the tanker route through the Mediterranean. This meant a great deal of trade in repairing and cleaning tankers being lost. Indeed, it meant that last year the yard lost about £1¼ million.
The litigation between the Government and Messrs. Bailey started about the time when the yard was taken from that firm—in 1963—and is, I understand, still continuing. If that is so I cannot go into it in any detail, but I should like confirmation that the litigation is continuing. Can the Minister say how long it is likely to last? I recall that when the dispute started, when my right hon. and hon. Friends were in charge, I advised them that it would be far cheaper to pay what Messrs. Bailey asked rather than enter into a litigation which could go on for years. It seems that I was a correct prophet. As long as litigation continues foreign firms will not put their money into the dockyard, and it will be impossible to form an international consortium to lease the dry docks.
Further, there is now very little direct workers' financial participation in the yard, and that encourages political strikes, which have been affecting the yards during recent years. Under Messrs. Bailey, the workers had a direct financial interest through Bailey Trust (Bermuda) Ltd., but this Trust was dissolved when the yard was nationalised, the funds being frozen in Bermuda. The Trust can, I understand, be restored only by agreement between Messrs. Bailey and the two Governments concerned. This uncertainty about the future of the yard is very important to the future of Malta, and if it can be cleared up the Maltese economy will greatly benefit.
The Robens Report makes three recommendations about the dockyard. Briefly, it said that both Governments must settle the ownership problem. That cannot be done until the litigation is over. Secondly, it recommended that after the settlement the Maltese Government should take over the yard. This they had already theoretically done in 1968, when they nationalised the yard. Thirdly, the report said that the dock- 780 yard must be brought up to date so that it can compete commercially with foreign yards. The report was made more than two years ago—how far have we got towards meeting those three recommendations?
The third five-year plan was due to start on April 1st of this year. The British contribution to this the second part of the 10-year plan announced in 1964, was to be £21.7 million, including £3 million for the dockyard, but not the £1 million for the repair of historic buildings which had been agreed as a grant in the financial agreement of 1964. I understand that what has happened since then is that the Maltese Government proposed that during the second five-year plan they should receive the whole sum as a 100 per cent. grant, and that the British Government suggested a 50 per cent. grant., and that this should include the £3 million allocated to the dockyard in previous years and the £1 million for historic buildings, which really means that they were suggesting a 40 per cent. grant and a 60 per cent. loan.
The Maltese Government turned down this proposal, and I suggest that they were right, because they were affording free defence facilities to this country and acceptance of such proposals would have meant that the Robens plan would have had to be financed virtually on loans, though at the time of the dispute over the run down there had been a clear commitment to make available adequate financial assistance.
Further, the period of repayment was 25 years, so that it could not be argued that that would affect our present economic position. Interest charges of about £1 million now would rise to about £2 million by 1974, and as the total Maltese budget is only just over £31 million that would be a very high commitment. It is against the suggestion of the United Nations and that made recently by the Lester Pearson Committee that the money should be provided by grant rather than by loans. For all these reasons the British Government have not got all that good a case. I do not blame the Ministry of Overseas Development—as usual, we have to go to the Treasury to allocate the blame.
Quite apart from our historic and wartime obligations Britain has a written as well as a moral obligation to assist 781 Malta to diversify her economy. Yet, because of an argument over whether from £1 million to £2 million a year should be a grant or a 25-year loan, all aid has been stopped. For nine months Malta has received no aid from Her Majesty's Government. It is rather hypocritical to say, as the Government said in an Answer to a Question on 27th November, that they were glad that this nine months' withholding of aid had not held up Malta's development plan.
I believe that the right answer is to continue the terms of the first five-year development plan—75 per cent. grant and 25 per cent. loan, excluding the £1 million for historic buildings under the 1964 Financial Agreement. I believe, also, that events in Libya and elsewhere should now enable us to use the excellent facilities in Malta for our troops and that our two infantry battalions should remain in Malta for the 'seventies and so assist their economy.
I was in Malta in June when the Budget was presented to Parliament. I was much impressed by the able way in which the Government presented their Budget, not knowing whether or not they were to receive the promised aid from Britain. I was heartily ashamed of the Government of my country who, because of a technical argument, were prepared to stop all promised aid to a friend and ally. This action is surely unprecedented and can only bring grave discredit on this country. I hope that the Parliamentary Secretary will be able to assure us tonight that this unhappy story will not be continued into 1970.
§ 10.26 p.m.
§ Mr. Nigel Fisher (Surbiton)I am glad that the Parliamentary Secretary has allowed me to come into this debate for one minute. I am also glad to see him in his present office in the Ministry of Overseas Development, because I know of his great and genuine interest in these matters.
I emphasise what was said by my hon. Friend the Member for Haltemprice (Mr. Wall) about our long friendship with Malta and our very considerable moral and actual obligations towards Malta in peace and war. I was in the old Colonial Office under my right hon. Friend the Member for Streatham (Mr. Sandys) at the time when the 10-year agreement was made. I was very embarrassed when 782 the last defence rundown broke the spirit and indeed the letter of the independence arrangements concluded by my right hon. Friend and myself in 1964, and also by the way in which it was done.
Like my hon. Friend the Member for Haltemprice, I feel embarrassed again, now, that a British Government have taken nine months to negotiate an agreement which could have been concluded in nine weeks. I hope that the Parliamentary Secretary will be able at least to end this very long-drawn-out argument tonight and to tell us that agreement has at length been reached.
§ 10.28 p.m.
§ The Parliamentary Secretary to the Ministry of Overseas Development (Mr. Ben Whitaker)I am extremely grateful to the hon. Member for Surbiton (Mr. Fisher) for the kind words he said about me. I am sure that the whole House was sorry to hear that the hon. Member for Haltemprice (Mr. Wall) was ill when he wished to raise this matter previously and that we are all glad that he is now restored to health. I am grateful to both hon. Members for their interest in this subject.
I wish that we were in a position to announce an agreement, but notwithstanding that I am still confident that our traditional friendship with Malta and her people and our common interest will bring about a fair and amicable settlement. Many hon. Members, like myself, have visited and know and like Malta and we are glad of her present prosperous position. We are all conscious of the shared history in wartime when we stood shoulder to shoulder.
I am grateful to the hon. Member for Haltemprice for giving me notice that he wished to be informed about the position over the dockyard. As he stated, the British Government have said that they would make support available to convert the dockyard to civilian use and so far over £10 million has been made available for this purpose. As to the case concerning Messrs. Bailey's, I have investigated and found that litigation is still pending both in the Maltese courts and United Kingdom courts. Therefore, the matter is sub judice and there is nothing further I can say on it. As to how long any law case might last, as a barrister I would not hazard a guess.
783 Early in 1963 the firm of Swan Hunters was put in as managing agents and it is now responsible to a public board appointed by the Malta Government. More recently, early in 1969 consultants were appointed for the dockyard. These were paid for from the Technical Assistance Vote and are to advise the Malta Government. The Malta Government are at present considering the recommendations of the consultants to see what action they would wish taken on them. In spite of the difficulties which the hon. Member outlined, anyone who has visited Malta is aware that Malta now has a well-equipped civil dockyard which turns out good work, and we all hope that this will have an extremely prosperous future.
Coming to the main subject of the debate, we accept that we have an obligation to assist Malta in her economic development within the limits of our own financial circumstances. We have been most concerned lest the present dispute should be protracted to the point that Malta's current development programme would thereby be impeded. It was very much with this in mind that the British Government offered as an interim short-term arrangement to resume the cash flow to Malta on a 50–50 basis of grant and loan for the two years ending 31st March, 1971.
We understand, meanwhile, that Malta has been able to finance current development by resort to local government and commercial sources. This does not lessen our anxiety to reach as quickly as possible full agreement satisfactory to both parties which would enable us to resume the flow of British aid to Malta in accordance with the Financial Agreement entered into in 1964.
There is no question of the British Government's going back on their obligations under this agreement. The agreement, drawn up in the circumstances to which the hon. Member for Surbiton referred, requires the direction of our aid and the grant/loan proportion, which is presently the main matter of contention between the two Governments, to be reviewed in discussion with the Malta Government after the first five years.
In considering what the terms should be in the second period of five years, the British Government have rightly taken 784 account of the economic circumstances now obtaining in Malta. There has, I am glad to say—I am sure that we all appreciate this—been a radical improvement in the Maltese economy since the Financial Agreement came into effect, partly because of the British aid, amounting to £27.8 million so far, which has been disbursed, and also because of the private investment in industry and tourism which this aid has helped to attract.
During the past nine years Malta has received £45 million from the United Kingdom. Malta's foreign exchange reserves are now among the highest per capita in the entire world and are equal to about three years of imports, compared with eight months in the United States and two or three months in this country. She has three times per capita Germany's foreign exchange reserves and ten times per capita the United Kingdom's foreign exchange reserves.
§ Mr. WallThe Parliamentary Secretarytary will recognise that this boom is due largely to a great deal of building, particularly hotels, which cannot be repeated for very many years.
§ Mr. WhitakerNo, but we hope that the hotels will continue to be full in the Maltese sunshine with many people whom we all know. I will not go into a great deal of figures. The projections on which Malta's Development Plan were made have been amply over-fulfilled. We are all glad that, for example, per capita income has risen by 27 per cent.
It is interesting to note that the special privileges for immigration to this country have needed to be resorted to by Maltese people less and less. They were given a special annual quota of 1,000 people since 1965. Both the number of employment vouchers issued and the number arriving here with vouchers has fallen successively in each of the last five years. This performance is due in no small measure to the efforts of the Maltese people themselves and is all the more impressive viewed against the background of the rundown of the Service establishments in Malta.
In these circumstances, the British Government do not regard our offer to provide the balance of £23 million equally by way of grant and loan over the period 785 1969–74 as being ungenerous. Indeed, the economic criteria normally applied to the use of our overseas development funds would by themselves have led to a much less favourable result. We recognised, however, that there were special circumstances to be considered, and these were fully taken into account in arriving at our 50–50 offer, which, in fact, is more generous than our original contention, which was one of 75 per cent. loan and 25 per cent. grant. In an effort 10 have a settlement reached more easily, we made this more generous offer earlier this year.
Malta's per capita income is many hundreds per cent. above that in many other countries which look to us for aid, including many which also fought at our side during the last war. Hon. Members realise, too, that Britain herself has had to take massive loans and has not received grant herself recently.
Other areas of the Commonwealth are affected by the changes in the United Kingdom's defence policies. It has also not escaped the notice of some British people, who have written to the Government, that Malta's tax position compares extremely favourably with Britain's, and that its percentage of gross national product going to tax is 26 per cent., compared with the United Kingdom's 38 per cent.
One of the ingredients which have to be considered is the matter of the £3 million far the dockyard and the £1 million for historic buildings. But, once again, we do not believe that our attitude on this point involves any injustice or breach of faith. Both those sums are comprehended within the balance remaining available under the terms of the Financial Agreement and thus fall to be treated in accordance with Article 5(b) 786 of the agreement, which, I am sure, the hon. Member for Surbiton recalls.
As I say, the only real bone of contention is the proportion of grant and loan to be applied over this period. There is no disagreement in principle about the annual maxima to be issued or the sectors of development to which aid should be directed. I am sure that we all agree that such discussions and negotiations must take place with the Malta Government rather than across the Floor of the House. Therefore, with great respect, I do not think that it would be helpful if I went into the current differences on both sides in much greater detail.
Malta now has a degree of prosperity which inspires confidence in her future, and we all earnestly want an amicable solution as early as possible. We are very grateful to Lord Robens for his personal efforts to achieve an initiative. His interest derives from having been Chairman of the Joint Steering Committee. He has been working ceaselessly and travelling a great deal between London and Malta in order to achieve a settlement. He is, however, acting independently, and I am not free to discuss his proposals in detail. I can say, however, that he brought back new proposals for an interim settlement 48 hours ago, and these are now being studied urgently.
I have taken careful note of all the points which both hon. Gentlemen have made. I am sorry that I do not consider that it would be helpful if I said any more, and I am sure that no hon. Member would wish to say or do anything which would prejudice what we all earnestly desire, that is, a satisfactory solution at the first possible moment.
§ Question put and agreed to.
§ Adjourned accordingly at twenty-two minutes to Eleven o'clock.