HL Deb 23 March 1926 vol 63 cc735-46

Order of the Day for the Second Reading read.

THE EARL OF PLYMOUTH

My Lords, there is no new principle involved in the Bill of which I move the Second Reading to-day. Similar Bills have been approved and supported by all Parties in the House. Briefly, this Bill affects two separate schemes—the trade facilities scheme and the export credits scheme. In so far as the trade facilities scheme is concerned the object of this Bill is, first, to increase from£70,000,000 to£75,000,000 the total loans which may be guaranteed; and, in the second place, to extend the period during which they may be guaranteed to March 31, 1927. As far as the export credits scheme is concerned the objects are to extend, first, the time before which credits and guarantees can be given from September 8, 1926, to September 8, 1929; and, secondly, the date up to which these guarantees may remain in force from September 8, 1930, to September 8, 1933. I should like to say, with regard to the trade facilities scheme, that it is expected that on March 31 of this year there will be an unused balance of£5,000,000. That, together with the extra£5,000,000 for which provision is made in this Bill, will leave£10,000,000 available for the year 1926–27.

As your Lordships know, these guarantees are granted on the advice and recommendation of an independent committee, and the principal object of the Bill is to relieve unemployment as far as possible by granting these guarantees for loans, the proceeds of which are used in creating work to give employment to people in this country. The arguments which were brought forward in favour of this Bill obtain now just as much as they did in years past—namely, that there is a very large amount of unemployment in the country at the moment, that there is very serious depression in trade, and that there is altogether a lack of industrial enterprise. I think it is generally admitted that these guarantees have served their purpose. They have been of considerable value—exactly how much is very difficult to say, but they have, up to a point, achieved their object and relieved the situation; and, in addition to that, very small losses have, up to the present, been made with regard to the trade facilities scheme. I think that the same remark and the same arguments may be applied to the export credits scheme. The guarantees under the export credits scheme have proved of very considerable value, and in that case also the losses up to the present have been very small. As far as export credits are concerned under this Bill, there is no intention of increasing the maximum of£26,000,000 which has been made available for use. I beg to move.

Moved, That the Bill be now read 2a.—(The Earl of Plymouth.)

LORD ARNOLD

My Lords, this Bill has been before you each year now for some years, and there has usually been some debate, so I desire to make a few observations to-day. First, I would say that, so far as the passage of the Bill through another place is concerned, I can scarcely remember a measure which was commended to the House by the Government of the day with less enthusiasm. In fact, I think it would be no exaggeration to say that the Bill was regarded by many of the supporters of the Government and, indeed, by the Minister in charge with an almost ill-concealed dislike. The noble Earl in your Lordships' House has treated the matter in a, somewhat different vein and I am glad of it. Why is it that this Bill is so disliked by the Conservative Party? Nobody could read what happened in another place without coming to the conclusion that it was disliked. The reason is, of course, that this Bill in its aspects is very much more in accordance with the principles of the Labour Party and the principles of Socialism than with the principles of the Government of the day. This Bill is a measure of State assistance to industry in the form of guaranteed credit and, therefore, is in principle opposed to the doctrines of laissez faire and unassisted private enterprise which the Government profess but which they are being driven more and more to abandon.

VISCOUNT PEEL

Laissez faire is a Liberal doctrine.

LORD ARNOLD

The noble Viscount says it is a Liberal doctrine, but it is one to which, as I understand, the Conservative Party fully subscribes. Indeed, the intervention of the noble Viscount does not really affect my point, because I do not think I should be wrong in saying that there were many speeches made in another place regarding this Bill—one or two at any rate I think I saw—from the Liberal side of the House, which were by no means too favourable. I say that this Bill is much more in accordance with the principles of the Labour Party than with the principles of the Government. That does not mean that we are satisfied with the Bill. We are not. This Bill does not go nearly so far as we should like, and we have asked this year as we have asked before that in return for the very valuable State credits, which are given in the last resort at the expense of the taxpayers, there should be some participation the assets created. That has been our contention. I say it is a right and reasonable contention. Indeed, there has been no adequate reply to it; but the Government have refused to accede to our views in that respect.

A good deal has been said from time to time in regard to the effect of these Acts upon the national credit and I should like to look at that point for a moment. In so far as under this Act there are created new trustee securities—and the loans made under these Acts are trustee securities—to that extent the competition with existing trustee securities may be, at certain times, and indeed looking at the matter as a whole, may be appreciable. But when we consider the question of the effect upon the national credit from the more general standpoint I do not think that any case of substance can be made out to the effect that these Acts are a serious factor in relation to the national credit.

I would say two things about that. In the first place, the total National Debt of the country now amounts to somewhere about£7,500,000,000, and as these guarantees are extended under this Bill, as the noble Earl said, to a total amount of£75,000,000 so far as trade facilities are concerned, that total amounts to 1 per cent., broadly speaking, of our whole National Debt. That is, of course, a small proportion. Moreover, it should be borne in mind that there is a very great difference between Debt created against which there are no assets and Debt created against which there are assets. If the view is taken that these Trade Facilities Acts increase the National Debt by the sum of£75,000,000—and in a sense that view may be taken—it is vitally important to bear in mind that for every penny of that money, practically speaking, there is value, because assets are created. Indeed, it may be argued, and I think it should be argued, that as new assets are brought into being through the operation of these Acts the national credit is really helped; because credit depends in the last resort upon taxable capacity, and the productive enterprises brought into being owing to these Acts all go to increase the taxable capacity of the country.

Apart from that, there are the important considerations to which the noble Earl referred, particularly the effect which these issues have had in helping unemployment. I did not hear him mention the figure and I do not bind myself to it, but I think it is correct to say that these Acts have been the means of finding employment, so at any rate it has been estimated, for about 100,000 men. That is a very considerable achievement. It is true that on the debit side regard must be had to the losses which may be incurred and which may ultimately come back upon the taxpayer. So far those losses have been extremely small; I think I am right in saying that they have not amounted to more than about£25,000. That, of course, is not a sum to be disregarded in itself; but in relation to the total operations of a. sum of£70,000,000 to£75,000,000 the amount cannot be regarded as of very great moment.

Before I sit down I should like to say a word or two about Clause 2 of the Bill. That clause relates to export credits and prolongs the period for guaranteeing export credits. I am not objecting to that; I support, it. I am not proposing to occupy your Lordships' time with any general discussion of the question of export credits, but I believe it is generally agreed that this export credit scheme has not had the success which was originally anticipated. It has not been availed of to the extent which was hoped and, indeed, which was expected. There are many reasons for that. I will not throw the whole blame upon the Government Department concerned. I do not think it would be fair to do so. But I do not think they are free from blame. Government officials are scarcely at their best in understanding the psychology of business men, particularly the business men of the North—of Lancashire and Yorkshire. These men will not submit to having too many obstacles, too many pettifogging and irritating inquiries and delays in regard to their business transactions. Rather than that they will not resort to the export credit scheme at all, and in a number of cases I am afraid that is what has happened, owing to certain experiences arising out of this scheme.

Again, I do not consider that the Overseas Trade Department, from certain knowledge which has come to me—I am not making this charge in relation to anything like the total transactions—have sufficiently realised in a number of cases that the export credit scheme cannot be worked without certain risks. It was, of course, the very genesis of the scheme that unless there was this Government assistance certain business which might be undertaken would not be undertaken. That was the whole basis of it. The whole idea was to encourage trade in the difficult conditions of post-War unsettlement. I am not suggesting for a moment that the Government should sanction business which is definitely unwise and definitely too doubtful; but, on the other hand, if the attitude is to be taken up, as I am afraid it has been taken up on certain occasions, that very little risk should be run, then the scheme is not being worked as I think it should be worked.

Let me put it like this. Even if, by the granting of these credits, there should be a somewhat higher percentage of ultimate loss than in the case of ordinary business, it could well be argued that on balance this country would be the gainer under the total transactions of the export credit scheme. I do suggest that the officials who administer this scheme ought not to take up too rigid an attitude. I am not blaming the officials for this, because I think the decision rests more, with the Government; in any case, the Government are ultimately responsible. But this is a most important matter of procedure under the Act, and I am referring to the question of export credits for Russia. The noble Viscount says he thought I should come to that. Why should I not get to it? It is a most important matter. If the noble Viscount studied the statistics of the trade that is being done by other countries with Russia—valuable trade that we are not getting—he would not be so ready to intervene in a spirit almost, it seems to me, of levity. The fact is that the economic position of Russia is improving steadily, and the trade which is being secured by some of our competitors is very considerable and very valuable.

There is a further point in this connection, and it is this. Anybody who knows anything about Russian trade in the past—and I have no reason to think that the temperament of the Russian people has changed materially in this respect—knows that they are very conservative, and that once they do trade in certain channels the tendency is for that trade to remain in those channels. We have a great opportunity to supply Russia, particularly with various kinds of textile and agricultural machinery, to a very much larger extent than we are doing now, and we are missing that owing to the prejudice and obstinate attitude of the Government. If we secured that trade it would not be merely the present trade but trade for long years to come, which would be of the greatest value to our manufacturers. That is one thing I have in mind when I say that even if it were the case in regard to some of these transactions that the percentage of loss was greater than in ordinary transactions, it might well be, taking the long view, that they would pay this country and pay it well. This matter has been discussed n another place. The Government remain in their position, as I think, of quite rigid and unfair opposition to this extension of the export credits scheme. Our trade might be increased and our unemployment might he lessened, and this is not being done owing to the attitude of the Government. Consequently our manufacturers and workers at home are suffering. In a general way, however, we on this Bench support this Bill.

LORD BANBURY OF SOUTHAM

My Lords, as far as I gathered from the speech of the noble Lord who has just sat down its whole object was to indict the Government for not lending money to certain people to enable them to trade with Russia. Russia is a country that has broken all her financial obligations and during the years that I spent in the City I was always told that it was bad business to have a bargain with somebody who had already broken his bargains with other people. Apparently the noble Lord thinks otherwise. May I ask him why the co-operative societies, who have large sums of money and are, I understand, more or less in relation with the Labour Party, do not enter into trade relations with Russia? Apparently it is because they are too wise to do so, and prefer to trade with other people.

I am sorry that the Government have introduced this Bill. I think it is based on a wrong principle. I objected to that principle when it was first introduced in another place some years ago by, if I remember rightly, Mr. Lloyd George, who was then Prime Minister and who, whatever his other qualities may be, is certainly not a financial expert. What is the object of the Bill? Its object is to say to certain people: "You desire to borrow money in order to carry on a certain trade. You do not go to your bankers; you do not go to the public and ask them to provide money; but you conic to the taxpayer and ask him to do so." If it is good business the money can be got from the public or from the banker. If it is bad business then the taxpayer does not want to do it. The only possible advantage is this, that the people who borrow money with the Government guarantee get it rather more cheaply than they would do if they borrowed it from a. bank, or went to the public and borrowed it as an ordinary company. But why should the taxpayer enable certain financial people to make a larger profit? It does not cure unemployment in the least. The money would be found whether the Government guaranteed it or not, always provided that the object was good. All that this Bill does is to enable certain people to obtain their money rather more cheaply than they otherwise would do, and consequently to make a little more for themselves.

The noble Lord who has just sat down said something respecting whether or not these trade facility loans depressed financial credit. It is perfectly clear that the more sellers you have of an article the lower the price of that article will be, and the more buyers, provided the buyers outnumber the sellers, the more the price of the article will increase. I do not absolutely pledge myself to these figures, but I think I am more or less correct when I say that within the next three years something like£1,000,000,000 of money will have to be found by the Government, and, therefore, what they ought to do is to stop all borrowing now so as to leave the market as free as possible for them when they come to renew this£1,000,000,000, or whatever the amount may be.

Instead of that I am sorry to see that they are not only extending the old£70,000,000, but they are talking about borrowing another£33,000,000 for an electricity scheme and, if the Coal Report is adopted, another£100,000,000 to buy the mining royalties. They are going on as if we were a prosperous country with any amount of money and did not know what to do with it. I hope that the noble Viscount, Lord Peel, with whom I once had the pleasure of sitting on a banking board, will endeavour to impress upon the Chancellor of the Exchequer that if he wants to save the country from bankruptcy and wants to restore prosperity, the first thing he has to do is to stop borrowing unless he is absolutely bound to borrow. The next thing is to endeavour to economise on the various Services, which, I am sorry to see, he is not doing, and so reduce the burden of taxation which is killing industry. If taxation were reduced that, to a great extent, would provide a remedy for the evils under which we are suffering.

THE FIRST COMMISSIONER OF WORKS (VISCOUNT PEEL)

My Lords, perhaps you will allow me to say one brief word in reply to the noble Lord opposite, Lord Arnold. May I first thank my noble friend Lord Banbury of Southam for again returning to the charge on the question of economy. I hope he will constantly do so and I can assure him that any suggestions he may make for a reduction of expenditure will always be listened to and most favourably considered by the Government. The noble Lord opposite, Lord Arnold, at the beginning of his speech, said there was not very much enthusiasm for this Bill in the ranks of the Conservatives in another place. He said it was very coldly received and very coldly pressed, and he seemed to think the reason for that was that it was contrary to Conservative principles and inconsistent with the general lines of laissez faire. It is rather interesting to find a great love for laissez faire attributed to the Party to which I belong, because I understood the main credit for retaining those famous words was to be attributed to the noble Earl and his friends on the Liberal Benches.

In the last few years, when I have had the honour of introducing on other occasions Bills for the safeguarding of industry, it has generally been the charge that we have not been sufficiently devoted to the principle of laissez faire rather than any undue addiction to it. But there is, of course, a much more businesslike and matter of fact reason than that why measures of this kind are disliked by the Conservative Party. It is because they are signs that trade is still bad and that there is still a very large number of unemployed, and it is because of that that the State has recourse to these—palliatives shall I call them?—trade facilities and export credits. Everybody wishes, except perhaps the noble Lord, to see this state of affairs in industry done away with, because it would be a sign of growing development of trade and of the possibility of letting trade take care of itself.

The noble Lord referred to State participation in assets created. I am not sure what particular participation he desires to see by the State, or what assets he considered were created, but the great advantage which the State gets from this, apart from the question of Income Tax on profits, is the reduction in the number of unemployed and consequently a less call on the State for provision for the unemployed. Obviously, the whole scheme fails unless the number of unemployed is reduced and unless employment is given. My noble friend behind me dealt very sensibly with the question of the effect on national credit. The noble Lord, Lord Arnold, seemed to think it did not very much matter how large were the loans issued, provided, as he said, there were some assets behind them. I do not think a general proposition of that kind would commend itself to the Chancellor of the Exchequer, who must have, as the noble Lord behind me said, in the years before us very large schemes of conversion and these schemes must be affected if any amount of trustee securities, or securities in the nature of trustee securities, giving a higher income exist in which people can invest their money.

There was another criticism, which I think was rather unfortunate, about the number of officials under the Export Credits Acts. It is precisely not officials who decide What bills shall be guaranteed. Of course, the Board of Trade must be ultimately responsible, but the business is entrusted mainly to a committee of bankers and business people who are most competent to decide when credits should be allowed. My noble friend behind me seemed to draw too sharp a distinction between what he called good and bad business. There is a sort of intermediate business, which is neither good nor bad, and my noble friend's mind rune on rather too rigid lines in that connection, because all these suggestions for raising credits and for the Government guarantee come through the banks and as they come through the banks it is pretty obvious that if they are good business, or quite good business, the banks may very likely take them up themselves. Then they are passed by this committee of business men.

I think the test really of whether they are good or bad business is what are the losses that have been incurred. As my noble friend the Earl of Plymouth said, the losses are really quite small on this export credits scheme. It is true that full advantage has not been taken of it. My noble friend is perfectly right in saying that the full value of£26,000,000 has never been taken advantage of, and as regards export credits I think they have never gone further than about£5,000,000. But it is a revolving credit and the amount of business cannot be measured by merely stating the amount outstanding at any one time. The noble Lord opposite wants to increase, I think, the amount of export credit and he wants also to increase the risk. I said some words in reference to Russia. If I may say so to the noble Lord I really did not intend him to hear them. I used them sotto voce but the noble Lord's ears are so keen that he heard. I did say that probably we should get to the question of Russia sooner or later, and I will only say one word on that. The noble Lord opposite attacked the Government most vigorously for its extraordinary stupidity and blindness when other countries were doing business with Russia and said we were losing great opportunities. We are not losing any opportunities at all. Nobody prevents anybody in this country doing business with Russia. All these great societies, whatever they may be, trade unions or co-operative societies, can invest their money in Russia if they wish.

LORD BANBURY OF SOUTHAM

They know better.

VISCOUNT PEEL

It is a very remarkable thing that they do not do it. Although politically and outside on the platforms they share the enthusiasm of the noble Lord, when as good business men they sit round a table and consider where to put their money, for some reason—whether it is due to business or political prejudice I do not know—they do not put money in Russia. There is a deeper reason arising out of the economic condition of Russia itself. The noble Lord opposite asks why not grant these credits in Russia. Perhaps it might be done if there were any traders in Russia, but there are not. The people who would get the credits would be the Russian Government because the peasants and the Centrosoyus are only another expression of the business facet as it were of the Russian Government. What you would be doing would be to grant further credits to people who have already declared that they are going to repudiate their debts. Does the noble Lord really suggest that that should be done? Does he think the business position of this country has been built up by giving credit to people who have repudiated existing debts? If he does think so, I confess I do not think the noble Lord is very deeply acquainted with the history of the successful business career of this country. However that may be, I support a Bill of this kind because, unfortunately, it is still necessary and because, unfortunately, there is still a large number of unemployed. I think it is possible that some further decrease in the number of our unemployed may be brought about through the action of this Bill, although certainly I should be glad to see the whole of the Bill swept away because that would mean a return of trade and prosperity to this country.

On Question, Bill read 2a, and committed to a Committe of the Whole House.