§ [SECOND READING.]
§ Order of the Day for the Second Reading read.
§ LORD WENLOCK
My Lords, in rising to move the Second Reading of this Bill I would ask the indulgence of your Lordships for a few minutes while I endeavour to explain its objects. The purpose of the measure is to give power to establish co-operative credit societies. This particular form of banking has been so successful in other countries that I am rather surprised that a measure of this kind should have been so long delayed in this country. It has also been found in other countries to afford the most excellent foundation for other forms of agricultural co-operation; and as we now hear so much about the necessity for agriculturists combining to protect their interests, I hope the Bill will commend itself to your Lordships as a good means of bringing about that result.
Such societies as exist in this country are not registered as friendly societies, but are specially authorised societies under the Friendly Societies Act. This has been found extremely inconvenient in practice, and it is sought by the Bill now before your Lordships to get over the difficulties by the establishment of these banks under their own Act of Parliament. What is sought for under this Bill on behalf of these societies is not sought for on behalf of those societies which are now registered under the Friendly Societies Act, and it does not in any way interfere with them. This Bill also takes power for the incorporation of these societies. This has been found to be not only extremely desirable, but absolutely necessary, because without it the societies cannot administer their own funds and cannot sue or be sued except through their trustees; and this is found to be extremely inconvenient in the working of credit societies.
Power is also taken in the Bill for establishing combination with central 689 banks, a method of dealing with rural societies which has been adopted elsewhere, and has worked admirably. It is found that the abundance of one particular branch will supply the deficiencies of another, and the central authority can borrow in the open market, for it is recognised as a strong and well-managed institution. It can, therefore, do its business on thoroughly satisfactory lines. It is not sought in the Bill to ask the State to come forward with money, nor is any appeal made to philanthropists. It is intended that the whole matter should be dealt with on thoroughly sound business lines, and it is hoped that if such a Bill as this is passed the difficulties that have been encountered by societies in the past will be removed. Through the union with the central banks strict and uniform inspection can be carried out and audit properly maintained.
Another important part of the Bill is the provision by which it is sought to establish trading for the benefit of the various members of the societies, which is not possible under the present Act. In Germany rural credit societies have proved the foundation upon which the magnificent fabric of agricultural cooperative societies has been built up, and through them the humble folk in the rural parts of the country have been enormously benefited. They have been able to get their goods cheaper and on more reasonable terms, and experience has shown that prices generally for the members of these societies have been reduced by at least 10 per cent. Such societies, where established, have also been found to have an extremely valuable educational effect. Committees of management have taken care to exclude all bad characters, and I am told that in Italy, and even in Servia, where these societies are in existence, the moral character of the inhabitants has improved considerably. Men have in many cases taught themselves to write; they have given up their bad habits of drinking in order to obtain the benefits of these societies; and clergymen, magistrates, and judges have all testified to the extraordinary influence for good which these societies have had in the rural districts of the countries to which I have alluded.
690 Owing to the want of assured support it has been found difficult to start co-operative stores and credit societies, but where the two are started together it has been found that they can be run very easily, and there is no difficulty whatever in bringing them into existence. The Bill does not propose that the members of the societies should participate in any of the profits derived from the working of the various institutions, or that any payment should be made to officials. In point of fact, the whole system is to run these societies on the simplest and safest lines, and this is made possible by the measure which I have the honour of laying before your Lordships. In Germany and in India these organisations have been found extremely valuable; and as I have alluded to the fact that Raffeisen societies have been started in other countries I would like to lay before your Lordships a few figures to show the progress of this movement in different parts of the world.
In Germany there are no fewer than 22,000 societies under this system, all started since 1875, when the Government appointed a Royal Commission to inquire into the matter. Fifteen thousand of them are rural credit societies, and they have 1,500,000 members, reserve funds amounting to £1,500,000, and savings deposits amounting to £56,000,000. Their turnover for last year was £140,000,000; but the figure is so large that I believe it must represent both sides of the account. In Cyprus twenty-two of these village banks had been started in 1907, in Finland 205 with 6,000 members, and in Hungary 1,956 with close upon 500,000 members. They had lent £3,000,000 out in loans in Hungary in 1906, and had £2,000,000 of savings deposits.
I now come to Ireland, where I believe the Bill will prove exceedingly valuable. There are now 273 credit societies, their creation being, as noble Lords are aware, almost entirely due to the energy of Sir Horace Plunkett. I have had an opportunity myself of seeing the good work that Sir Horace Plunkett has done in Ireland, as I once made a tour of inspection of the various creameries in the south and west of Ireland, and I was 691 astonished to see the progress that had been made in this particular matter. Sir Horace Plunkett has put on record this statement—If I could put the clock back twenty years and start the agricultural organisation movement in Ireland over again, I would begin with banks of the Raffeisen type in the poorest districts, believing that not only is this the most elevating form of co-operation, but that its adoption does more in teaching the principles of organised self-help than any other mode of introducing co-operation among agriculturists.I have in my hand a memorandum from the Irish Agricultural Organisation Society, in which they say that the draft of this Bill contains matter of great importance to the agricultural banks and credit societies working in Ireland. They go on to say—With the objects of this Bill we are in entire agreement. The trading powers which the Bill would bestow on Irish agricultural banks is a matter which the Irish Agricultural Organisation Society has been agitating for several years, and the Bill, if it became law, would treble the usefulness of such societies in Ireland. The granting of trading powers to banks becomes year by year more urgent as the credit societies grow in number and take root in Ireland. At present they find their usefulness hampered by the restrictions imposed by the Friendly Societies Act, which was drafted originally without the slightest idea that any of its provisions would be extended to agricultural banks or credit societies. Rural credit societies are sufficiently important to demand an Act to themselves. At present a few crumbs of clauses of an Act devised for different purposes are thrown at them by the Treasury, and they are starved and rendered less efficient by the inadequate provision made for their extension.Then they set forth the various reasons which have actuated them in arriving at this conclusion. I hope I have made it clear that, as far as Ireland is concerned, those who are entrusted with the work of extending agricultural combination and organisation in that country look to this Bill as a means of enabling their work to be doubled, and, possibly, trebled. Further, in Italy there are 1,461 Raffeisen banks, with savings deposits of £1,300,000, and loans have been made to members of £1,388,000.
I now come to India. When I first went to India, some seventeen years ago, the first thing that struck me was the extraordinary difficulty which the peasant cultivators had in obtaining credit or money to carry on their trade obligations; and I placed on special duty to inquire 692 into this particular matter one of our most eminent officials, who had displayed great interest in the question. He visited all these various institutions on the Continent of Europe, and on his return published a valuable report, upon which the Government of India have acted. The result is that in India there has been an Act of this kind in force for three years. The record of the last year shows that there are now 744 societies in that country, with 55,000 members. The year before there were only 237 societies, with 20,970 members. They have lent out to members nearly 12 lakhs of rupees, they have 2¼ lakhs on deposit, and their reserve fund amounts to 39,000 rupees. I think this clearly shows that this movement has had most valuable results in India. I am told that in many instances the unfortunate ryots who had got into the hands of moneylenders considered that the debt would hang around their necks to the end of their lives, but by means of these societies they are able to pay off their indebtedness within a reasonable time, and hope is now taking the place of despair in their hearts.
The Bill as it now appears is the outcome of the most careful preparation and consideration brought to bear upon it by Mr. Wolff, the greatest authority in this country on this particular subject; and Sir Horace Plunkett has taken the greatest interest in it. Sir Horace Plunkett asked me if I would take charge of the Bill in your Lordships' House, and I need hardly say that, having such sympathy with its object, it has been a great pleasure to me to do so. I hope I have shown that this is a sound Bill, that it is drawn up on properly prepared lines, and that it is likely to bring about most valuable results if passed into law. I commend it with confidence to your Lordships' attention and I hope His Majesty's Government will be good enough to give it their most careful consideration.
I think His Majesty's Government will recognise that it is in some ways a thoroughly democratic Bill. It will enable humble folk in our rural districts to become themselves in time capitalists. It is brought in for the purpose of bringing to those who cannot obtain ordinary banking facilities the resources of capital, so that the small 693 men may improve their position in life; and I hope that in time these societies will be extended through all the villages in the country. I do not see the noble Earl the President of the Board of Agriculture in his place, but I think it is already clear that the one thing which is going to prevent a large number of the applicants availing themselves of the benefits of the Small Holdings Act is that their capital is too small. I believe that under such a Bill as this these small agriculturists will be able to get the capital they so sadly need, and that in course of time the formation of these thrift and credit banks will be looked upon by agriculturists as one of the greatest boons ever sanctioned by Parliament for their benefit.
§ Moved, That the Bill be now read 2a.—(Lord Wenlock.)
§ LORD LEITH OF FYVIE
My Lords, having taken considerable interest in cooperation, especially in its relation to agriculture, I have the greatest pleasure, in associating myself with every word that the noble Lord has said in moving the Second Reading of this Bill. The matter could not have been put clearer, and there is only one thing to which I desire to call the attention of your Lordships. We are all more or less interested in agriculture, and we know how constant is the farmer's requirement of cash. In practice it is hard to get people to understand what co-operation is. This Bill puts into legal shape the possibility and also the probability of a general introduction of co-operative agricultural society banks, which will enable people engaged in farming to put their savings into these small banks to assist each other and in this way develop self-help, which is what co-operation is based upon. I feel sure that if this Bill meets with the approval of His Majesty's Government and becomes law, it will prove of the greatest possible benefit in the development of small holdings. As has been said by Lord Wenlock, something of this kind is of necessity in the case of small holdings, and the smaller the holding the more necessary it is that the capital should be in the plant. It is of the greatest benefit to these people to be able to use their money in assisting one another, and, when it is necessary to borrow, to be able to borrow at a rate 694 much lower than the current rates. The current rates are based upon the Bank of England rate, and that is ruled by so many commercial reasons that it is unfair that it should influence and increase the rate to agriculturists. In Ireland during the last two years since agricultural banks have been established the rate has been one or two per cent. less than that of the ordinary banks. I think it of the greatest importance that the Bill should be read a second time and be approved of by His Majesty's Government.
§ THE MARQUESS OF LONDONDERRY
My Lords, I cannot but think, after the clear statement with which my noble friend has moved the Second Reading of the Bill, that we can regard it as entirely non-controversial in character. We are all actuated with the desire to benefit agriculture as much as possible, and we recognise that the Bill must go far to extend that system of co-operative trading which is of such enormous advantage, especially to the small farmer. The principle involved in the Bill is by no means novel, and has worked extremely well in England and Wales on what is known as the voluntary system; but there is a strong feeling on the part of the chief promoters of the system of thrift and credit banks that their position would be strengthened by a Statute. The provisions in the second clause contain ample safeguards, and I particularly view with approbation the security for loans being used for work of a reproductive character. That is, to my mind, one of the principal points in the Bill, and one which must commend itself to His Majesty's Government.
I am particularly struck with the great advantage the Bill will be to small holders of landed property. As my noble friend Lord Wenlock said, this Bill may be truly described as a democratic measure; it will help the small men, while I do not see why it should not also help larger owners. I think the formation of these societies will be of enormous advantage to those men who, under the Act of last year, are acquiring small holdings. Indeed, I cannot but think that it is a natural and wise corollary to the Small Holdings Act passed by the House last year. My noble friend dealt fully and clearly with the great advantages that have accrued to 695 Ireland as a result of this system of cooperation, and in its application to Ireland the Bill will be on the lines of the great work done by Sir Horace Plunkett, than whom no man has done more to promote the agricultural welfare of Ireland. My noble friend stated to the House that through the efforts of Sir Horace Plunkett there were now in Ireland 270 of these credit societies.
§ THE MARQUESS OF LONDONDERRY
The loans in 1906 had reached nearly £50,000. The societies have a membership of 15,000, a capital of £40,000, and a reserve fund of £3,000; and taking into account all the societies of this nature which have been established under the guidance of Sir Horace Plunkett, the total is 925, with a membership of 90,000, a capital of between £500,000 and £600,000 and an annual turnover of £2,000,000. I think that speaks volumes for what Sir Horace Plunkett has done for the agricultural community. I would commend to the House the strong recommendation in favour of the Bill of the Irish Agricultural Organisation Society, who can speak with an authority second to none with regard to agriculture in Ireland. This society states that the granting of trading powers to banks becomes year by year more urgent as the credit societies grow in number.
At present these banks find their usefulness hampered by the restrictions imposed by the Friendly Societies Act, which, as the society points out, in the extract read by Lord Wenlock, was drafted originally without the slightest idea that any of its provisions would be extended to agricultural banks or credit societies. Under the present arrangement a credit bank has to be registered under the Friendly Societies Act, and a trading society under the Industrial and Provident Societies Act. The result is that in the agricultural districts where this movement is in operation there have to be two distinct organisations—one the bank and the other the trading society. Under this Bill there would be one society only, and that society on a sound and sufficiently secure basis. I do not think, after the clear explanation of the Bill that have been given, I need trespass 696 at greater length upon your Lordships' time; but, in conclusion, I desire to repeat that I give the measure my most hearty support and I trust it will find its way to the Statute Book.
THE EARL OF SHAFTESBURY
My Lords, after what has been said I do not think it is really necessary to add anything further in support of this Bill. My experience in Ireland as a member of the Congested Districts Board, which has for some time supported these agricultural banks, has led me to desire for a long period some measure of this kind for agricultural districts in England, where it is needed for development of land or business. During the time that these agricultural banks have been in existence in Ireland the Congested Districts Board has often been approached with a view of granting loans to such banks, and in every instance in which we have done so we have found that the bank has been a great boon to the poor people who live in the congested parts of Ireland. In most instances the bank has proved to be sound and has enabled the trades or agricultural business of the locality to be carried on. I do not think that in any instance has a bank of this kind been proved to be a real failure. I, therefore, feel sure that if a measure of this kind were passed it would undoubtedly prove a great boon to all interested in agriculture in the poorest districts of England as well as Ireland. I, therefore, give the Bill my hearty support.
§ LORD REAY
My Lords, I wish to corroborate what has been said by my noble friend in charge of the Bill with regard to the great importance of these banks in India. Like him, when I was in India I made inquiries as to the possibility of starting agricultural banks, and obtained a very valuable report. Since then, as my noble friend has pointed out, these institutions have been introduced in India with very great success. I can also corroborate what has been said as to the great success of this movement in Germany and Italy, and I think that ought to induce us to follow their example, or, at all events, to remove the difficulties which now stand in the way of the formation of such banks. My noble friend has also alluded to the moral effect of these thrift banks, and the moral 697 aspect ought certainly not to be overlooked. They also have an educational influence, for those who participate in them naturally take a greater interest in their agricultural pursuits. I trust that His Majesty's Government will allow the Bill to be read a second time, and I am quite sure that, if it is passed, agriculturists generally will feel very much indebted to my noble friend Lord Wenlock.
§ THE SECRETARY OF STATE FOR THE COLONIES (The Earl of CREWE)
My Lords, this measure has received an almost complete degree of commendation from those who have spoken in this brief debate. Therefore, your Lordships, I am sure, will not be surprised to hear that we certainly do not propose to offer any objection to the Second Reading. But there is one point to which I think it is necessary to draw the attention of the House.
Every noble Lord who has spoken has regarded this as a purely agricultural question. I think we are all agreed that these agricultural credit banks are admirable institutions. They have been worked, as two noble Lords well acquainted with India have pointed out, with great success in that country. In several Continental countries they are also carried on on a very large scale, and equally with the most marked success. The noble Marquess opposite has spoken, and I can confirm everything he said on that point so far as my knowledge goes, of the success with which the principle of co-operation and the use of mutual credit has been introduced into Ireland. So far I think we are all in agreement. But the noble Lord has brought in this Bill as a general measure, and therefore it is important to consider what is its bearing upon the Friendly Societies Acts as a whole.
I do not propose to go into any detail on that point, but merely to remind the House that when the Bill goes into Committee there will be various points to be considered as to what the effect of this general amendment of the Friendly Societies Acts, because that is to what it amounts, may be on some of the great friendly societies. The Friendly Societies Act, as your Lordships are aware, provides that a society registered under that 698 Act may, out of a separate loan fund to be formed by contributions or deposits of its members, make loans to its members under certain pretty close restrictions. For instance, a member shall not be entitled to hold an interest in the loan fund exceeding £200. Further than that, by a special authority granted by the Treasury under the Act in 1876 and amended, in the form in which it is now familiar, in 1903, the formation of credit societies was authorised pursuant to the Friendly Societies Act. This, of course, is outside the usual power of friendly societies, but still I believe a considerable number of credit societies have been formed, and have done useful work under this provision.
Then, again, the Industrial and Provident Societies Act, 1893, provides for the registration and incorporation of societies for carrying on any industry, business, or trade, and under this Act there is a limit which provides that no member shall have any interest in the shares of the society exceeding £200. It may be perfectly true that for the purpose of agricultural banks it may be desirable to dispense with these limitations and restrictions, but it does not necessarily follow that it is desirable to do so in the case of all these other friendly societies, and that is a point which will have to be considered in Committee. Then there is the question of incorporation. Clause XL provides that—The following provision as to incorporation shall apply to societies registered or about to be registered under this Act:—(i) In lieu of a certificate of registry as hereinbefore provided, the chief registrar may, in case a society applies to be registered in pursuance of this Act as an incorporated body and if he deems it expedient so to do, give to the society a certificate of incorporation.Well, all the great friendly societies are registered but not incorporated, and it will become a serious question whether other than for the purpose immediately contemplated by my noble friend it would be desirable to give the power of incorporation to friendly societies as such. You would be creating a different and a parallel order of friendly societies, and I am not at all sure that that would be desirable in view of the fact that these great organisations have so far been content with registration. These are not 699 criticisms of principle, as my noble friend, I think, will admit. We quite agree as to the great benefits which may accrue from the formation of credit banks for agricultural purposes such as those favoured by my noble friend, and therefore we cordially assent to the Second Reading, while reserving such criticisms as we think necessary for the Committee stage.
§ LORD BELPER
My Lords, before the Bill is read a second time I should like to call the attention of my noble friend Lord Wenlock to subsection (1) of Clause 5—A thrift and credit bank may, if the rules of the society so permit, keep money on deposit with, or borrow money from, any county council or other public body or any central institution being a company registered under the Companies Acts, 1862 to 1900, with limited liability, or a society registered under the Industrial and Provident Societies Act, 1893, having for its object the creation of funds to be lent out to thrift and credit banks, and having a board of management elected wholly or in part by the bank or by the bank jointly with other similar banks.I am bound to say I do not understand what the intention of this subsection is. I believe it is the case that under the Small Holdings Act, power was given to county councils to advance money to cooperative societies for purposes connected with the acquiring of small holdings; but, even if that is the case, the provision in this clause goes very much further than that. To begin with, it suggests that a bank may keep money on deposit with county councils. I do not think a county council can take money on deposit, whether the bank wishes to keep its money on deposit with the county council or not. Nor do I think county councils have any power to lend money for any such purpose. This is, of course, a matter for Committee, but I thought it would be convenient that I should call the attention of my noble friend to it at this stage, so that he might be able to move an Amendment himself or explain the object of the clause, and how far it is proposed that the powers under it should go.
§ On Question, agreed to.
§ Bill read 2a accordingly, and committed to a Committee of the Whole House.
§ House adjourned at ten minutes past Five o'clock, till Tomorrow, half-past Ten o'clock.