HL Deb 08 November 1921 vol 47 cc202-10

Order of the Day for the House to be put into Committee read.

Moved, That the House do now resolve itself into Committee—(Viscount Peel)

On Question, Motion agreed to.

House in Committee accordingly.

[The EARL of DONOUGHMORE in the Chair.]

Clause 1:

Power of Treasury to guarantee loans

1 —(1) If the Treasury, after consultation with an advisory committee nominated by the Treasury for the purposes of this section, are satisfied that the proceeds of any loan proposed to be raised, whether within or without the United Kingdom, by any government, any public authority, or any-corporation or other body of persons, are to be applied towards or in connection with the carrying out of any capital undertaking, or in, or in connection with, the purchase of articles other than munitions of war, manufactured or produced in the United Kingdom required for the purposes of any such undertaking, and that the application of the loan in the manner proposed is calculated to promote employment in the United Kingdom, the Treasury may, subject to the provisions of this section, guarantee in such manner and form and on such terms and conditions as they think proper the payment of the interest and principal of the loan or of either interest or principal:

Provided that the aggregate capital amount of the loans the principal or interest of which is guaranteed under this section shall not exceed the sum of twenty-five million pounds

LORD BUCKMASTER moved, in the proviso to subsection (1), to substitute "five million pounds" for "twenty-five million pounds." The noble and learned Lord said: A public engagement of no slight importance prevented me from being present when this Bill was read a second time. I had, indeed, attempted to arrange the meeting on such a day as to secure myself liberty for attendance at this House, but owing to the zeal of the Government in pursuing this measure on Friday, my good intentions were frustrated. I do not mention this specially for the purpose of complaining of the Government's proceeding with their work on Friday without any notice, nor for the purpose of warning you that I propose now to make the speech with which I certainly should have committed trespass upon both your time and your patience had I been here when this Bill was under discussion. I do it only for the purpose of explaining why I have put down such an Amendment as that which stands in my name without having prefaced it by a discussion at an earlier stage of the Bill.

The Amendment that I propose is to limit the liabilities that the Government can incur under the guarantees in this Bill to £5,000,000, and I have no doubt I shall be told that the effect of this is to destroy the whole value of the guarantee. That may be so. I beg your Lordships, however, to see what it is that this guarantee is intended to support. It is intended to support schemes which, so far as I can see from Clause 1, have no recommendation whatever excepting a recommendation by an Advisory Committee, which says that the loan which is to be guaranteed is to be applied either in carrying out a capital undertaking or in connection with the purchase of articles other than munitions of war. The only thing that is left out, so far as I can see, is cannon and shells; for the rest, any article that the local authority desires to buy in connection with the capital undertaking, whatever that may be, may be purchased, and the only condition that is imposed upon them is that the article in question must be made in the United Kingdom.

It makes no difference whatever that it might be that the article which they need is an article which could be much better obtained elsewhere. If they attempted, in the interests of economy, to do anything like that—if, for example, in building a bridge they obtained girders cheaply from Belgium—in no circumstances whatever could they then obtain the security of this guarantee. They must buy the article here; and if they do so, then that is the only condition precedent, so far as I can see, that need be satisfied before the guarantee attaches.

It will be found that this guarantee, when once it has attached, has got to be satisfied "out of the Consolidated Fund of the United Kingdom or the growing produce thereof." Before this Bill passes, with its twenty-five millions charged under the Consolidated Fund, "or the growing produce thereof," I should really be glad to know what it means. As I understand the Consolidated Fund, it is the Fund that is raised by Taxes. What "the growing produce thereof" is, I really have not a notion. There cannot be much doubt that the growing produces of Taxes in the future will be a growth in the nature of a deficit. However, this money is to be charged on that. But if it is meant in this Bill that it has got to be paid out of the Revenue of the year, I do ask your Lordships to consider what an intolerable burden this Bill may place upon the taxpayers of this country, for it would in those circumstances certainly mean that an Income Tax up to an extra 6d., or it might be even more—

VISCOUNT PEEL

Up to 6d?

LORD BUCKMASTER

Why not?

VISCOUNT PEEL

The total amount is only £25,000,000.

LORD BUCKMASTER

Does not Id. in the £ produce between four and five millions? Four to five millions is a very liberal estimate, and six times that is twenty-four. I do not think I am very far wrong in saying that this is going to be found out of the Revenue of this country. Your Lordships will have the pleasure of paying another 6d in the £ Income Tax. From what source you arc going to pay it, I have not the least idea.

Everybody knows that at the present moment Income Tax in this country is pressing with such h grave and increasing burden upon people whose livelihood is derived from the possession of land that their difficulties in making both ends meet are far graver than the public at large recognises. It is not merely that they have been stripped to the skin; they have been stripped to the bone; and I believe that at this very moment considerable sums of Super-Tax remain unpaid, simply because the Inland Revenue authorities know perfectly well that, although these persons have been duly assessed and all the necessary demands made for payment, it is perfectly impossible that the demands can be met. If I am right in thinking that the Consolidated Fund or the growing produce thereof does, in fact, mean Revenue raised by direct taxation in this country, or any other form of taxation, because it comes to be direct taxation sooner or later, then I beg your Lordships not to allow this Bill to pass in its present form, but to reduce the liability which you will have to bear from £25,000,000 to £5,000,000.

Amendment moved—

Clause 1, page 2, line 3, leave out ("twenty- ") —(Lord Buckmaster)

THE CHANCELLOR OF THE DUCHY OF LANCASTER (VISCOUNT PEEL)

I must express my regret that the noble Lord was not present on Friday. He says it was due to the anxiety of the Government to press on with its business. I hope he acquits me of any desire to press it on unduly—

LORD BUCKMASTER

I thought I did say that. I rather appreciated the zeal of the noble Viscount.

VISCOUNT PEEL

1 was not quite certain, and I wanted to elicit that compliment in rather more explicit language. I really did not know until very recently that this Amendment was on the Paper, or I would have been prepared to answer more fully the general question of the noble and learned Lord on the financial situation itself. I will, however, do my best to answer the specific point and complaint of the noble and learned Lord, first of all, as to the sum to be guaranteed being so large as £25,000,000, and secondly, as to the method by which it was to be done.

He complained, I think, that this guarantee had to be given in the case of loans whose produce was to be expended in purchasing either carriages or railways or bridges, whatever it might be, to he made in this country, and he seemed to complain that it was not to be used for purchasing similar articles made in Belgium or elsewhere. I think it a rather strong order to ask the Government of this country to guarantee loans in other countries, the produce of which was to be spent in purchasing articles in those other countries, and therefore I do not think the noble and learned Lord must complain that the produce of these loans is to be confined to purchasing articles produced in this country. In fact, it is not quite solely in this country, because some of the work of construction might be done in other countries, and money might be spent on the necessary labour of erecting those works in other countries.

He complained also that this was to be charged on the Consolidated Fund, and "the growing produce thereof." 1 was rather surprised that he made such a difficulty about that phrase, "the growing produce thereof," because it is, of course, a common phrase, to be found in all Bills. 1 do not think you ever hear of the Consolidated Fund without also hearing of the growing produce thereof The reason is very simple. The accounts are made up each quarter, and it is desired that they shall also include the amounts coming in from the Taxes during the ensuing quarter, and that is why in all cases you use the phrase "growing produce thereof.''

The noble and learned Lord did not, I think, give us a very great deal of argument as to the reason why we should confine these particular loans to £5,000,000, or why he thinks that £5,000,000 would be an adequate sum. I will deal, first of all, with his financial criticism, and then say a word as to the reasons why I think the sum should be £25,000,000. The criticisms that I have heard upon this Bill are in an entirely different direction from that of the noble and learned Lord. It is said that; with so much capital money required for the starting of these new businesses and their development, it is really only child's play to deal with so small a sum. I am prepared to defend the Bill against that criticism, but now T have to defend it against the criticism that, in the opinion of the noble and learned Lord, far too large a capital sum is to be guaranteed by the Government. He tried to alarm us by saying that there would have to be an Income Tax of 6din the £ in order to pay this sum of £25,000,000, assuming that a penny produces between £4,000,000 and £5,000,000.

I think the noble and learned Lord has really misconceived this guarantee altogether. This sum of £25,000,000 is the largest total of loans which the Government is entitled under this Bill to guarantee. The noble and learned Lord apparently assumes that this money is to be lent within one year, and then to fall to be repaid within that year, so that the whole charge would fall upon the Consolidated Fund and the growing produce thereof within that year. Of course, that would be impossible, and could not happen, because these loans would be made for a certain period, ten or fifteen years, whatever might be the period, and there would probably be a sinking fund in most cases to replace them, and the whole liability could not therefore fall upon the State in the course of one year. Moreover, why should we assume that the whole liability will fall upon the State at all S The Government will act in these cases upon the advice of a Committee of very competent business men, and one could hardly call them competent business men if they are going to guarantee loans of £25,000,000, every penny of which will have to be repaid by the guaranteeing Government. The whole idea that that will happen is incredible.

I have one or two figures which might interest your Lordships, and the noble and learned Lord, as to the possible extent to which liability might fall upon the Consolidated Fund. I am assuming, of course, what is really ridiculous—namely, that the whole of the money is lost and none repaid. If we assume that £25,000,000 is borrowed at 6¼ percent and repaid by sinking fund in twenty years the maximum liability on the State would be £2,207,000 per annum. If the period were thirty years, of course it would be less, owing to the sinking fund being less for the longer period, and the liability would be about £1,855,000. If you take the interest at 6½ percent the figures would be: for twenty years, £2,251,000, and for thirty years, £1,901,000. Obviously, the charge would be spread over the Consolidated Fund by some such method as this, but those figures, as I have said, assume that the whole of that money is lost (which, as I have already pointed out, is an absurdity) and that not one single penny is paid back by those to whom the money has been loaned.

With regard to reducing the£25,000,000, I am afraid that that would be equivalent to destroying any value that the clause possesses, because a guarantee of £5,000,000 would be so small a matter that it would hardly be worth doing. Moreover, these loans might be raised either in England or in other countries or in the Colonies or Dominions. I understand that the Dominions and Colonies are to have the preference. If you were to limit the amount to £5,000,000 you might just as well say that you limited it to certain of the Dominions or Colonies, because the idea of putting in the suggestion that it should be raised in other countries would be really absurd were the sum so small as £5,000,000. I hope, therefore, that the noble and learned Lord will not press his Amendment. Perhaps he will be satisfied with the care the Government have taken in limiting the amount of the guarantee at so comparatively small a sum as £25,000,000, conscious as they are of the danger that there might be in risking larger sums in the present state of taxation and the present state of trade.

LORD BUCKMASTER

I understand a good deal of what the noble Viscount has said, but I think he has overlooked this, that this is not a Bill merely for guaranteeing long loans such as those to which he referred. This is a Bill to guarantee the loan of any corporation or body of persons, whoever they may be. It may be a joint stock company or a private firm, and they do not raise loans at 6¼ per Cent with fifteen years for repayment—their loans have to be paid very promptly; and there is nothing in this clause to protect you against this money being used for the purpose of securing the repayment of short loans. The one thing that is certain is that the guarantee is to be given to protect the security which, without the guarantee, would not be adequate to raise the money, or otherwise there is no need of giving the guarantee. In other words, the risk involved in this clause cannot be overlooked. Nor do I think that the calculations which the noble Viscount has placed before us can be relied upon as showing the way in which this money is to be raised and repaid

LORD VERNON

Could not the Government by some means make this a prior charge on these enterprises? And is there any provision in the Bill which says where the charge stands relative to other debts which the companies may have?

VISCOUNT PEEL

Two points have been raised. First of all, the noble and learned Lord (Lord Buckmaster), has, I think, taken rather too sharp an alternative. He said the guarantee would be applied in cases where, without 1-he guarantee, a. loan could not be raised at all. I think he is going rather too far. It might quite conceivably, indeed very probably, be applied in cases where the company or Government, or whatever it was, might be able to raise the loan, but raise it at such a price time it would not be worth while for it to go on with the enterprise any further; and the Government guarantee— we are, of course, very familiar with this sort of transaction— would enable the money to be raised at a better price and a lower rate of interest. It may very well be that that difference between the two prices would be sufficient to make a profit a possibility, and to enable the enterprise to go forward, because so many firms and businesses are hanging back now in the hope that things will be better. The object of the Government is to give a little push to trade, and to try and start operations of this kind with the assistance of the Government guarantee.

The noble Lord, Lord Vernon, asked, I think, whether the charge would be made a first charge on some of those enterprises whose securities were guaranteed. That, of course, is a matter which will be dealt with by this Committee of business men which will be set up, because they are going to advise the Treasury, and the Treasury will in most cases, I understand, act upon their advice. Therefore those questions of prior charge, and so on, will be among the questions which will be considered by this particular Committee.

LORD VERNON

Can the noble Viscount say whether the question of what is a prior charge rests with the Committee?

VISCOUNT PEEL

It rests with the Committee, subject, of course, to the overriding responsibility of the Treasury. But the noble Lord will understand that in cases of this kind, where there may be suggestions of political influence, it is much better that they, should generally accept the decision or advice of an impartial business Committee.

LORD SYDENHAM

not the whole point of this Bill that the Government is prepared to undertake risks which no banker would feel justified in running?

On Question, Amendment negatived

Clause 1 agreed to.

Remaining clauses agreed to.

Schedule agreed to.