§ Order of the Day for the Second Reading read.
THE EARL OF STRADBROKE
My Lords, I beg to move that this Bill be now read a second time. The Bill is one of considerable importance. It has been introduced after very careful consideration by His Majesty's Government. It 1074 is not for a moment thought that it would be, and it was never intended that it should be, a cure for all the troubles which beset agriculture. But, taking a long view of the situation, I think it will be realised that the Bill will be of very great assistance in the future to farmers and that it will put the financial condition of agriculture on a much better basis and give it a much more modern form than it has at present.
The Government were pledged to find credit facilities to help agriculture and they had to consider what was the best line to adopt. On the one hand, it might be thought that a State bank or an organisation of that sort could be formed or, on the other hand, that it would be advisable to make use of existing organisations. The Government determined that the latter was the right course to adopt. The Government had no wish to form a new Department, with all the expense and all the risk of want of experience and so on, in carrying out a matter of this kind. Therefore, they looked about to find a plan by which existing organisations in this country could be made use of, and they were fortunate in receiving very sympathetic assistance from the banks of this country. The banks came forward and helped with advice and experience. This certainly is not a bankers' scheme; it is a Government scheme; but I am very glad to have this opportunity of paying a tribute to the action of the banks, who acted in the most public-spirited manner and gave the greatest possible assistance in the discussions and in the work of creating the scheme. It is a comprehensive scheme to modernise the system of agricultural finance.
The Bill is divided into two parts. Part I deals with long-term credit, which is to give a man an opportunity to borrow money for the purchase of his farm or to make permanent improvements on his land. Part II deals with short-term credit, which is to enable a farmer to borrow money and make it a first charge on his crops or his stock in hand such as cattle and so on. To carry out the long-term credit system, it is necessary to set up a company to lend money on mortgage. This would be lent on the farm or on the permanent improvements and the money so lent 1075 would be raised by way of debentures which would be a trust security. The company will be owned and managed by the great joint stock banks. We have the advantage of all their knowledge and experience in carrying out this scheme. Further than that, those who borrow the money will have the advantage of using the local branches of these banks. This, as your Lordships will realise, will be much appreciated by the farmers, who will know the local bank managers, from whom they will receive all the information they require without having to write up to headquarters, and they will also feel that they are dealing with men with whom they are acquainted, who know the circumstances of the case and with whom it will be easy for them to come to equitable terms.
The banks certainly behaved in a most disinterested way in giving these facilities for carrying out the scheme, both from the point of view of their own experience and the use of their local branches and managers. Moreover, the banks have agreed to find the initial capital required to start the company, amounting to £650,000, on which they have agreed that the interest is not to exceed 5 per cent., and that amount is not to be cumulative—that is to say, if the company has a run of bad years, and is not able to pay a dividend of 5 per cent., and then has a run of good luck, and its returns would show that it is able to pay 6 or 7 per cent., only 5 per cent. can be paid, and any money over and above the amount required to pay that 5 per cent. has to be put to reserve or to some fund with a view to reducing the interest or the charges made to farmers for the loan of the money borrowed.
This, of course, is only an initial capital of a small amount. The chief funds which will be required for financing farmers will be dealt with by issuing debentures, and these debentures will be saleable like any other stock on the Stock Exchange. The debentures will, I think, in future form a standard agricultural investment. This is quite a new departure. Perhaps your Lordships will ask: What are the Government doing on their side? The Government have agreed to advance a sum of £650,000, for sixty years free of interest. That amount might be increased to £750,000 if 1076 the banks increase their initial capital, but it must not exceed the amount of £750,000. Then the Government have agreed to procure the underwriting of the issue of debentures, not exceeding £5,000,000, and have agreed that the Treasury should be enabled, if necessary and if they thought fit, to subscribe for debentures up to the amount of £1,250,000. Further, they have agreed to pay £10,000 a year for ten years for administrative purposes.
The loans to farmers will be made for periods up to sixty years, repayable by yearly or half-yearly instalments, which will include the interest and principal charges. The amount advanced will be up to 66⅔ per cent. of the value of the property. That, as your Lordships will know, is the accepted amount on all mortgages which are dealt with as trustee securities, and it was thought far better to keep to that and not to have any complications by giving a further advance in the amount of money to be borrowed. The advantage to the farmer, it must be remembered, will be this—and it is a very considerable one—that the mortgage is granted for sixty years as a maximum or for any period up to sixty years, and it cannot be called in before the number of years has expired. Therefore the farmer knows exactly where he is, according to the terms of his agreement. Nor can the interest be increased.
I am sure your Lordships will agree that it is a great advantage to the farmer to know the exact position he is in, and not to have the fear that he may be called upon to pay off the mortgage at a very inconvenient moment. The Government's guarantee has been given with a view to increase the security of the debentures. We want it to be felt throughout the country that these debentures are a very sound and safe investment. The mortgage only goes up to 66⅔ per cent. of the value of the property and there is the Government's guarantee behind it. The guarantee fund will also be available for meeting any bad debts, if unfortunately such should arise, and the guarantee of free interest on that sum of money is further given with a view to enable the bankers to advance money to farmers at the lowest possible rate of interest. £10,000 a year towards the cost of administration may seem to some of 1077 your Lordships a large sum, but when you consider the big business that we hope it will be it is not really so very much. As time goes on we feel the business will increase, and that there will be no need for any assistance to be given, but that it will be a self-supporting company.
The Government are firmly convinced that this system of forming a company is the best way to put agricultural finance on a sound basis, and they hold strongly to the view that it would be most undesirable that agricultural credit should be administered by the State. They feel that it would be not at all a wise policy to form a new Department, and to have men who perhaps have been accustomed to administrative departments to carry on an undertaking of this sort. The Government feel that they are laying the foundation of a long-term credit system, which will be of permanent advantage to the farmers of this country. It will help to carry out the policy which the Conservative Party have always held to be right, and that is to increase the number of property and land owners in this country. In that way it will act as an antidote to Socialism, while, by making these debentures such a good investment, we feel that agriculture will benefit by having the opportunity of making use of the savings of the nation in the same way that industries do through joint stock companies. We do not for a moment overlook the position of agriculture to-day. We know it is in a very depressed condition in many parts of this country. We are suffering from seven years of falling prices and it is common knowledge that many farms are understocked and that an insufficient amount of labour is employed on some holdings. Those are the difficulties that have to be faced to-day. Therefore we feel that the Government should give substantial assistance in starting this scheme and setting it on a firm basis.
Part II of the Bill, which deals with short-term credit, we think is as important a part of the Bill as Part I. The problem is not that there is a need for forming new institutions to provide money for the farmers or for lending money. The difficulty is to organise agriculture for borrowing. As the law now stands it is very difficult for a farmer to borrow on his industry. Part II of 1078 the Bill, therefore, is intended to give to the agricultural industry the best form of short-term credit such as is available to other industries. If the farmer now wants to borrow money he has to go to the bank and deposit any title deeds he may have, or any other source of wealth, and so give security. He cannot give any effective charge on the stock, live or dead, which he has on his farm. This short-term credit scheme will enable him to create a charge through the bank which he can issue as a fixed charge on certain specified assets, or as a floating charge on any part or on the whole of his farm stock. The charge will rank after rent, rates and taxes, and the farmers will be free to sell their crops or their stock as the case may be if they so wish and when they wish, but unless their agreement provides otherwise, they must pay the money to the bank which has advanced the loan to them.
Now, in order to protect the general public or anybody who might be inclined to lend money to the farmer these charges are to be registered in the Land Registry Office. They may not be published, but any one who wishes to see if a farmer has a charge on his farm or on his stock can do so in the usual way by paying a small fee and looking at the register. That meets with the approval of the traders, auctioneers and other people who in the past have been generous friends to the farmers and who I am sure will be so in the future. I may say in passing that when this scheme was first drafted they were not altogether friendly to it, but now that they know the conditions more and realise the position more they have expressed the opinion that this Bill, if carried through, will relieve them of a great deal of responsibility.
They have for many years assisted the farmer by carrying him over bad times, but they have felt that they have done so very often at considerable risk to themselves. Of course, in order to provide the farmer, not directly with money but with the equivalent of money in stock, feeding stuffs and so on, they have themselves had to have a heavy overdraft at the bank on which they have had to pay considerable interest, as well as charging interest to the farmer for the money or the money's worth he has had 1079 from them. So we hope that by this short-term credit we shall eliminate some of these expenses, which in the end of course must fall on the farmer, and so enable him to borrow money from the banks on short-term credit at a far cheaper rate than he has had to pay in the past. With regard to publicity—I have rather gone away from that point—I think your Lordships will agree that it is very desirable from the farmer's point of view that there shall be no publicity concerning a charge on his property. It is all straightforward and above-board. Any trader can always ask for a letter to the bank with which the farmer deals, and the bank would tell him the situation. But if these charges were allowed to be, published in the newspapers it would be very nearly as bad from the farmer's point of view as if he had taken out a bill of sale, the very thing we want to avoid.
Also, under the Bill agricultural co-operative societies will be enabled to issue debentures on any agricultural produce that they may have in their stores. That is to help these agricultural co-operative societies in dealing with wool, or bacon, or cheese, as the case may be, in large quantities. In that way further help will be given to the farmers who are naturally deeply interested in these agricultural co-operative societies.
That is the scheme. I have outlined it to you, briefly, perhaps, but I hope in a way that has made clear what are the objects of the Government. It is the first of its kind that has been introduced in this country. Similar principles have been adopted in other countries and I think with success. It certainly is not an emergency measure brought in to meet the present depression. It is a Bill that has been introduced after careful and deliberate study of the problems of agricultural finance and as such I must ask you to judge it. It is intended to lay the foundation of agricultural credit in this country on a basis which will meet the legitimate needs of the industry more adequately and in a more up-to-date way than has been the case in the past.
I note that the noble Lord, Lord Strachie, has given Notice of an Amendment to reject the Bill. I am somewhat surprised that a prominent member of the Liberal Party in your Lordships' House should take this action and so 1080 try to deprive the farmers of the benefits of the credit facilities which we feel they would derive if this Bill were passed. I am still more surprised at the reason he has given for moving the rejection of the Bill. I should have thought that any Bill introducing a new principle must be considered as an experiment. I am rather surprised that a member of the Liberal Party should move the rejection on that ground. I have in mind that the Liberal Party have introduced a land policy, an agricultural policy, with a new system of land tenure, which to me, at any rate, would seem a very great experiment. If it had been my noble friend Lord Banbury who was moving the rejection I should not have been so surprised because of his known objection to any new legislation.
THE EARL OF STRADBROKE
But somehow I have never associated in my mind the policy of the Liberal Party and that of Lord Banbury in the same category. I trust your Lordships will give this Bill a Second Reading and your hearty support because I feel that, though the immediate results will not be very great, yet as the years go by it will be found that this Bill is of the very greatest advantage to agriculture and will enable farmers and those connected with agriculture in this country to get credit on far better terms than has been the case in the past.
§ Moved, That the Bill be now read 2a.—(The Earl of Stradbroke.)
§ LORD STRACHIE, who had given Notice to move, as an Amendment, That the Bill be read 2athis day six months, said: My Lords, I was rather amused to hear the noble Lord express his surprise that I, as a member of the Liberal party, should object to experiments. The noble Earl seemed to imply that he was referring to Acts of Parliament, but he could not give any examples. All he could do was to refer to the land scheme of Mr. Lloyd George, which is not a Bill and has not been introduced to Parliament, so I do not think the noble Earl was quite justified in making that observation. As regards this Bill, I was glad to notice that the noble Earl confessed at once that it could not do anything to relieve the depression of agriculture. 1081 He did not even claim that it was a palliative. I venture to think that this is unfortunately one of those Bills which attempt to do the right thing in the wrong way. That is too often the method which Governments are inclined to adopt, and I remember very well that, when I sat in another place, a Conservative Government introduced a Bill for the relief of agricultural rates, and I then pointed out, speaking on the Second Reading, that they were doing the right thing in the wrong way. I proved to be a good prophet, because a succeeding Conservative Government had to introduce another Bill to amend the effects of that Bill. I am glad to think that they are now anxious to introduce legislation in order to cure the defects of that legislation of so many years ago. I venture to prophesy once more that, If they exist very much longer, they will have to introduce legislation in another Parliament to remedy the defects of this Bill.
§ My own view is that, though this Bill in principle is a very good and useful one, it will be found to be of very little value. I will shortly suggest my reasons for thinking so. I notice that the noble Earl, no doubt very properly, said that it was very praiseworthy of the four great banks to come into the scheme which the Government were not able to carry out by themselves. It is rather curious to note that the four great banks seem to have come in under a great deal of pressure. Further, I should like to know why the greatest bank of all, the Midland Bank, refused to come in and help to promote this scheme. I think it is particularly interesting to reflect that this bank did not come in when one knows that it is presided over by that great financial authority, Mr. McKenna, who is not only a great financial authority but also a former Liberal Chancellor of the Exchequer and a distinguished statesman. Not only was he a Liberal Chancellor of the Exchequer, but the present Prime Minister wanted to have him as his own Chancellor of the Exchequer, showing that he did not feel that he had the confidence of both sides of the House. This seems to me to be a very remarkable fact, and we ought to have some explanation of the reason why this great bank considered that this scheme was unworkable and of no value. I cannot help thinking that 1082 Mr. McKenna, being a shrewd politician and a statesman, knew that it was going to be unworkable and was not going to lend his name or the reputation of his bank to it.
The noble Earl objected to my saying that this was an experiment. But that is exactly what it is and, as a matter of fact, on the Second Reading in another place the Minister of Agriculture said:—
This scheme is admittedly an experiment.
I ask your Lordships whether this is exactly the time for making experiments in this direction. I do not think that farmers will be greatly pleased or feel very much gratitude to the Government for making experiments on them to see how this scheme will work. It is interesting to note that the Government do not venture to apply this scheme to Scotland. We all know—indeed we have heard it to-day in a previous debate—that Scotsmen are very shrewd indeed. If they thought that this scheme was any good at all they would insist on being included in it. I have been given to understand that the Scottish banks would have nothing whatever to do with this scheme, which shows that there must be something very wrong about it. Otherwise Scotland would have come in, for we know that Scotsmen are very shrewd and, if there is any money in a scheme, they are ready to take it.
§ We know that the banks have come in in a very half-hearted manner. We have been told by the noble Earl that they are going to subscribe £650,000 share capital. Of course there must be some consideration for this, and the consideration is that the Government are to undertake to find a very large sum of money free of interest, which will amount to over £37,000 a year, free of Income Tax and Super-Tax. Accordingly the banks will not be in a bad position from that aspect. Again there an to be secured debentures, and the Government are to come in and help to the extent of £1;250,000. Last, but not least, there is going to be a subsidy for ten years of £10,000 a year, making a total of £100,000 free of Income Tax and Super-Tax. The banks will therefore be in a very favourable position. I do not say that they ought not to be in a favourable position, but they could earn 1083 a great deal more than 5 per cent, on this money that they are going to put out in loans.
§ Three classes of farmer are interested in this matter. There is the man who bought his farm during the War. I venture to think that this Bill is going to be of very little use to this man who bought at a very high price. Then there are the men who bought their farms relying upon the pledge of the Government that the Corn Production Act would last for a long time. Certainly these men are not in a favourable position to borrow money under this Bill. I find a rather curious statement in paragraph (c) of subsection (3) of Clause 2. The Bill provides for loans of not more than two-thirds of the estimated value of the mortgaged property. I should have thought that, when you were going to use the great banks, you might have given them some option of considering whether they would advance money al the ordinary rate. Surely they would be very careful not to endanger the money of their shareholders. They would be business men and would not advance money on more than two-thirds of the estimated value unless they had a very good reason. The Bill says that in no case shall the loan exceed two-thirds of the estimated value of the mortgaged property, which rather indicates that two-thirds is to be regarded as a maximum and not as a minimum. Very likely the banks will advance less than two-thirds and in some cases only one-half. I think it would be very interesting to know how the banks are going to estimate the value of the property. No doubt a valuer will be appointed by the banks and he will be told to be very cautious in making his estimate of the value of the land.
§ It seems to me that this provision will not enable a man to borrow sufficient money unless he is really in a position to go into the open market. To my mind it is not going to be any use to allow him to borrow only two-thirds of the value of the mortgaged property. I venture to think that the man who can produce security that the banks would consider good enough will be able to borrow more cheaply in the open market and in some cases, no doubt, from his own bank. Men who have at least a two-thirds margin are not likely to wish to borrow as provided by the Bill, at a rate of interest 1084 which, as stated in the other House, will probably be 5¾ or 6 per cent. On the other hand the man who borrows at that figure will, during the whole of the sixty years, have to continue to pay that 5¾ or 6 per cent., and he will not be able to get that interest reduced, so that he will be in a worse position than the man borrowing in the ordinary way who, if the rate of interest goes down, will be able to borrow at 4½ per cent.
§ Then again, the cost of the scheme was stated in another place I notice, by a Member of Parliament, to be £2,000,000. On the other hand, the Minister of Agriculture put it at £1,000,000, but he went on to say that if you took all the interest and piled it up it would amount to £14,000,000, showing that the State is going to be liable for a large sum of money amounting, if you pile it up with interest, to £14,000,000. If the State is going to give a subsidy (and it has been admitted by the Government in another place) to the owner or occupier, would it not be better to do it in another way? Why not at once admit that you are giving that advantage? Why should not this subsidy be used as a guarantee against loss on three quarter mortgages? We know very well that there are a great many landlords who have mortgages on estates with only a margin of three quarters. I know that in a great many cases that three-quarters rarely exists at the present moment.
§ Why should not the Government have taken their courage in both hands and said that they were going to help the men who really wanted help and who were in difficulties because of having given too much for their farms, and were going to use this subsidy for reducing interest? Why should not the banks be cut out and the agricultural committees of the county councils be used as the channel instead? It seems to me that there would be greater advantage in using the agricultural committees in this manner, because they have really local knowledge and know the value of the land much better than the banks do. I noticed that the noble Earl said there was an enormous advantage in using the banks because the great banks have branches all over the country. That is true, but, on the other hand, it is not true that the branch managers have any authority at all. I have constantly heard complaints of branch managers not being allowed to use 1085 their discretion. It is a common practice when advances are asked for to refer the application to London, and there is the greatest difficulty in getting the bank in London to agree to what would be quite a reasonable loan. Therefore, by employing the agricultural committees of the county councils you would have the advantage of local knowledge, and a precedent for that is to be found in the Small Holdings Act, the Acquisition of Land Act, and also the subsidies for housing. There, too, losses are partly borne by the county councils and partly by the Treasury. Therefore you will not be making any precedent if you say that farmers are to be assisted in the same way as the small holders by Government help.
§ I would now like to deal with Part II of the Bill, which deals with short and fixed credits, and I would like to ask the noble Earl some questions as regards these floating charges and fixed credits. Will charges created upon land under the Land Improvement Act subsequent to a corporation mortgage take precedence of the bank mortgages, or will charges under the Land Improvement Act take precedence of mortgages already in existence when the money was borrowed from the company? If so, might not the security to the banks be depredated if the improvement turned out not to be of the value it was expected to be? Then as regards Clause 5, I notice it says that it shall be lawful for a farmer to create in favour of a bank a charge on all or any of the farming stock and other agricultural assets. That applies naturally to any bank so long as it is approved of by the Ministry. Clause 5 goes on to give the various assets which a farmer may be allowed to pledge when borrowing money temporarily from the bank. He is allowed, apparently, to pledge the right to compensation under the Agricultural Holdings Act, 1923. That of course, means the tenant right. Does that mean that when a farmer who has been farming very badly goes out, and a counter claim is made by the landlord corral to or exceeding the tenant right, the effect of his having given a charge upon the tenant right will prevent the landlord from making any counter claim upon the tenant right? Further, I do not like the idea of giving a charge on damage by game. It rather encourages frivolous claims being put forward. And there is 1086 damage for disturbance. You might get frivolous claims in that respect. There are a certain number of black sheep in every community and they might take advantage of these three matters which I have mentioned.
Next, under Clause 6 (1), paragraph (a), it seems to me that you are authorising a rather drastic proceeding in conferring:—
a right, upon the happening of any event specified in the charge as being an event authorising the seizure of property subject to the charge, to take possession of any property so subject.
It does seem a very drastic proceeding indeed. Another clause only gives five days interval before proceeding to sell by auction or private treaty. That hardly seems fair to the farmer; certainly no private individual would do that. I would like some further explanation of Clause 6 subsection (3), which, it seems to me, might open the door to fraud in some cases. I only hope that the noble Earl, when we come to the Committee stage, will be prepared to consider reasonable Amendments with regard to that. As regards the Amendment which I have moved to the Second Reading, I have already said that I have done it because I think the Bill is doing the right thing in the wrong way, and I do not care about these experiments. It is very interesting to notice that in another place the Minister of Agriculture said:—
Its further development, and the amount of advantage which farmers may take of it, will depend upon factors which no one can confidently forecast.
§ That is to say, that such a large expenditure of public money is not justified as an experiment. Then again, surely the present commitments of the Government are enough. The country is groaning under heavy taxation, which the present Government, instead of trying to reduce, is rather increasing. It seems to me that it has no right to go on throwing more liabilities on the taxpayer when, in the words of the Minister of Agriculture, it is a mere experiment.
Leave out ("now") and at the end of the Motion insert ("this day six months").—(Lord Strachie.)
§ LORD PARMOOR
My Lords, I think that in considering this Bill, which has been so admirably explained for the most part by the noble Earl opposite, we have 1087 to draw a great distinction between Part I and Part II—a distinction not of terms but of real substance. As regards Part I, I do not know whether the noble Earl fully appreciated it, but it depends entirely upon the incorporation of what I may call a statutory company, because the conditions of the memorandum of association of a new company are stated in the Bill itself. Then the noble Earl has pointed out the very large guarantees given by the State in order that the stability of this new company may be beyond all question—I think I state fairly what the noble Earl's view was upon that point. On the other hand, I want to make this point: so far as any risk or liability is concerned in this proposal in Part I, it is quite obvious it would be in the first instance—and I think entirely, but, at any rate, in the first instance—a liability or risk upon the State and State funds. Various estimates have been made as regards the possible amount, but the best estimate that. I can make—it is not very different from that of the noble Lord—would be about £12,000,000, that is, taking into consideration a guarantee which may last for sixty years without interest.
What I think the noble Earl has failed to show is this. Is there any possible advantage to the industry of agriculture by this process, which enables the tenant to purchase his holding? That is what it comes to. I do not think that the Minister of Agriculture in another place suggested it, and I have read through all the proceedings there. Nor can I find any reason for supposing that the purchase of his holding by the tenant under these conditions would be any advantage whatever to the industry of agriculture. Very often in this House I have heard the predecessor of the noble Earl say that, provided that the landlord is a landlord of sufficient means, tenancy is the best system of all in the industry of agriculture, for the reason that it enables the tenant to apply all his capital to the industry, without any other lien or charge upon it at all. That is a thing, I must say, which has always appealed to me.
§ LORD PARMOOR
I do not want to put words into the noble Lord's mouth, 1088 but in the course of agricultural debates he has more than once asked me whether I was in favour of the small owner or the small tenant, and my impression is that he was in favour of the small tenancy as against small ownership. But assume that I have mistaken him. There can be no doubt that, so far as the English industry of agriculture is concerned—which is the point we are engaged upon at the present time—it is to the advantage of that industry that the farmer should be able to apply all the capital over which he has control, and whatever his resources may be, in pushing forward that industry, and not to tie up a proportion of his capital in the purchase of the property on which that industry is carried on. I think this particular case was mentioned by the noble Lord and it is a valuable point to bear in mind. I understand that the assumption here is that two-thirds of the capital should be advanced. That leaves, of course, one-third of the capital to be found by the tenant. So far as the one-third to be found by the tenant is concerned, it is capital which, if he did not invest it in ownership, would be available for the purposes of the industry of agriculture. I cannot find—and this is a question which was raised in rather a different way by Mr. Runciman in another place—any evidence or any suggestion that, so far as the agricultural industry is concerned, any advantage is likely to be derived from Part I of the Bill.
The noble Lord, Lord Strachie, referred to Scotland. The Scotch have a liking for not wasting their resources, and if the information supplied to me is correct—I am quite willing to say that it is only information and the noble Lord will tell me if I am wrong—when this Bill was brought before the Agricultural Association or whatever is the equivalent society in Scotland, it was rejected by 14 votes to 4 after considerable discussion, which, in a note given to me, is said in some respects to have been of a quite acrimonious character. When the Minister of Agriculture discussed this matter in another place he did not suggest that Part I would be of benefit to the industry of agriculture. It is merely a transference of the ownership of land from one party to another. The first point I wish to make is that I certainly 1089 know of no case merely of the transfer of property from one private owner to another in which State money has ever been provided from public funds or State risk has ever been taken in respect of a transaction of that character. Why should it be? The Minister of Agriculture said in another place something to the same effect as the noble Earl said here: "We want this as a protection against nationalisation." The noble Earl said "Socialism." Those terms sound rather terrible sometimes. But a very large quantity of land is farmed in this country at present under public or State ownership, and one has never heard the least complaint of it, nor is there likely to be a complaint of it. And such a man as Mr. Orwin, speaking merely of the economic side, has always advocated some form of State ownership as the best way of dealing with the agricultural industry, because it enables subsidies to be given which, but for State ownership, it would be impossible to suggest.
I was reading the other day and took a note of something that was said by the present Viceroy of India, who was a very notable predecessor of the present Minister of Agriculture—I was going to say of the noble Earl but the noble Earl, of course, represents the Minister of Agriculture in your Lordships' House. The Viceroy said that he did not look upon State ownership as an end but as probably the best prospect for the improvement of agriculture. If we put on one side these phrases and terms and so on and consider agriculture as an industry which, I agree with the noble Earl, is a most vital industry and one in which everyone who loves his country is naturally and immensely interested, and we ask ourselves whether the provision of a credit for the mere transfer of ownership from one man to another can in any way affect that industry, I am at a loss to see how it can. I can say positively that no suggestion was made in the debates in another place—and I read them through very carefully—that it would improve the agricultural industry. I do not want to go too wide, but that is practically what the Minister of Agriculture said. He said that it would, or might, enhance the value to the landlord because he would get a prospective solvent purchaser who otherwise could not come in so as to be a purchaser of 1090 his property. If you want to sell property and you find that your tenant is to be provided by State aid with sufficient money to be a purchaser, looking at it from the point of view of the seller, it is an advantage because it is an additional market.
Anyone conversant with compensation claims knows that an additional market, an additional solvent purchaser, tends to enhance the price or value of property. If, at the same time, when the transaction has once been completed you have what may be called the market value enhanced by State assistance, that is a very large and serious matter in connection with what I believe is not only an experiment but an absolutely new principle in the use of State finance. If the noble Earl knows of any similar case I dare say he will tell me, but I cannot call one to mind. If public interests are involved it is different. If it is a mere transfer from one private owner to another, as it appears to me to be, and nothing more, I do not think the noble Earl will find any case where such a transaction has been furthered to the advantage of the owner—that is, the landlord—by State assistance and State money.
I should like to refer your Lordships to a passage in Colonel Guinness's speech in another place. Mr. Noel Buxton, who of course was Minister of Agriculture when the Labour Party was in power, had just been speaking and Colonel Guinness said that Mr. Buxtonhas made the discovery that we have brought forward this Bill to defeat nationalisation. We have never made any secret of it.It is true, as Mr. Noel Buxton had pointed out, that it had never been put forward as an advantage to agriculture. It was hardly to be suggested that it would be of any advantage to the industry. It was put forward as an antidote to what, I think, is much too much disliked by some noble Lords opposite. It seems to evoke a certain fear and terror for which I think there is no reason whatever.
For just under twenty-five years I was Attorney-General to the Duchy of Cornwall and a member of the Council which managed the Duchy properties and I think the tenants were entirely satisfied. I have 1091 never heard that tenants of any properties of the kind have raised any objection to what might be called public ownership. I recollect that Sir Charles Dilke, more than once in another place, raised the question of the property of the Duchy of Cornwall and I often discussed it with him. Ultimately he said in another place that he must admit that after very full consideration he had no fault whatever to find and that the whole matter was admirably managed. The same is true of the Duchy of Lancaster, of the property of the Ecclesiastical Commissioners and of other large properties which are now being administered by the bodies to which Lord Strachie very properly referred, the London County Council and various other local authorities. The same is true to a large extent of company estates and the estates of various colleges at Oxford and Cambridge. But not a single argument can I find and not a single fact is brought forward to show that tenancy under some form of public ownership is a form of tenancy which is looked upon by the tenants as other than good when they understand what it really means. It is a question of fact; it is not a question of merely using large terms.
That, I think, is the effect of Part I of the Bill. I do not want to detain your Lordships unduly, but I do emphasise that Part I is more than an experiment. It is an attempt to introduce a new principle for private interests which ought not to be allowed. I say that quite frankly, having considered it as carefully as I can. Part II is a different matter. I certainly should not like to see this Bill refused a Second Reading, because I think Part II is undoubtedly of value to the industry, although there are criticisms that can be made upon it. I have argued in this House before, and I restate it now, that a system of short-term credit, as it is called, is of great advantage if it can be given to the farmer under fair business conditions. The big banks do not occupy the same position that, the local banks do. In other countries you have systems by which farmers get credit under certain conditions and no such system exists at the present time in this country.
Short-term credits for the advantage of agriculture are, I think, of very great importance, but when we come to the actual terms, of course criticisms can be 1092 made. I do not want to suggest criticisms that are merely of a carping character. I want to suggest to the noble Earl, before we come to the Committee stage, that the conditions under which the short-term credits are given are somewhat severe. Supposing a farmer has once been driven to take up a chattel mortgage, does not that in fact prevent him from getting any further credit in every direction? If I may use the expression I think it is over-safeguarding. As far as I can understand the only person who is protected really is the landlord himself. If I understand Part II aright the landlord is not affected by an agricultural charge. The landlord is not affected as regards his distress rights by the new charge on which credit has been raised. When tenants become unable to meet their liabilities and carry on their business most difficult questions always arise. I understand this does not affect the distress, but, on the other hand, any charge of any kind which is made subsequent to one of these short-term periods shuts out the whole possibility of any credit for a short or long period for the future. I think I am right in that; at any rate, that is how I read it. If I am wrong it is a matter which can be dealt with later.
There is one question worth considering. By Clause 13 a farmer cam create these credits notwithstanding any agreement to the contrary in his tenancy. He can really override, to a very large extent, the contractual relationship between himself and his landlord. I do not want to dwell upon minor matters of that kind, however. I say by all means do all we can to give what is called short-term credit to the farmer, subject to such reasonable suggestions as those I have tried to make. On the other hand, though you may fear Socialism and nationalisation, which are not very terrible when you come to the actual facts of the situation; do not allow, as between two private individuals, State credit to be used which enables a new purchaser to come in and which, as stated by the Minister of Agriculture, enhances the value to the seller, who is the landlord. I am as jealous as anyone of the position of the landlord. I am sure landlords do not want to get anything in the nature of an unfair advantage. Under the present conditions of agricultural distress no one 1093 is more interested than landlords are in meeting their tenants in every legitimate way and doing all they possibly can to help them. When the time comes I shall move the omission of Part I, but I would not, for a moment, support a proposition that the Bill should not now be read a second time.
§ LORD CRANWORTH
My Lords, probably like many members of this House, when the question of agricultural credits was first mooted as a political possibility, I received it with the mildest enthusiasm, because it seemed to me at first sight that any measure that would decrease the cost of production or increase the price of the product would be of more value than this measure, and also because, in my own experience, I thought I had known more farmers who had been ruined through too much credit than those who had been ruined by too little credit. When I examined the matter a little further, and especially when I examined more carefully this particular measure, I came to the conclusion that I had been entirely wrong in my opinion, and that at the present time there is probably no single measure that can do more to help the farming community than this.
This measure attacks two separate problems, and it attacks them in a totally distinct way. I understand the primary object of Part I is to provide capital to enable a man, and more especially a sitting tenant, to purchase his holding. The only criticism I have to make upon the measure is that I do not think that it will have much effect, because of the clause which insists that the loan shall be limited to 66⅔ per cent. I am well aware that we shall be told that that was put in in order that this company may become a trust security. I am not entirely impressed by that argument. It seems to me to be over the looked that with each year that goes on the security will increase. I admit it will increase very slightly at first, but the company is being largely helped by the Government at the outset. As the years go on the security will increase more quickly and I cannot but think that if His Majesty's Government had been firm and the great banking houses had been reasonably accommodated, these difficulties would have melted away quite easily, and we should have been able to 1094 see the same loan given in this country as has been given with such success, I believe, in other countries.
I am very much more enthusiastic about Part II than Part I. I think it must be admitted that for several centuries the land in this country has belonged to the nation, and I Think it would go on doing so. Whether it is to be, as in normal times and as it is now, a remunerative property paying rates and taxes and giving other advantages to the nation, or whether it is to be what I believe the lawyers call damnosa hereditas, as I venture to think it would inevitably be, time alone will show. But if that is so I do not think that anybody who cares about his country's prosperity and goes about various parts of the country can view without the utmost concern the depression of that country in various places. He will see in some places dilapidated buildings, gates dilapidated or gone, fences broken down, and, what is perhaps most important of all, very important land drainage falling into disrepair. The money for that used to be found at an approximate average cost of 2 per cent. by the landowners and the landlords. They can no longer do so. Legislation has been introduced by the Party to which noble Lords who sit opposite belong imposing burdens, and I am ashamed to say that the Party to which I belong has not only acquiesced in them but has even added to them. How is the capital to be replaced that has been taken away? It may be said, and said rightly, that when you replace 2 per cent. credit by 5 per cent. credit that is better than 7 per cent. credit and 5 per cent. credit is better than no credit at all, which is very largely the case to-day.
I believe that Part II of the measure will turn out to be of far greater importance than Part I. I understand that the primary object of Part II is to provide the greatest credit possible for this great industry, and I think your Lordships will agree that there is probably no industry in such need of credit as is agriculture. I will give three reasons for that. The first is the large amount of capital the farmer requires. I think I should not be far wrong if I said that £15 per acre is the capital required. There is no such difficult 1095 and no such unpleasant task as farming a farm with insufficient capital, as I have very good reason to know myself. The second reason is the long time a farmer has to wait in order to realise his crops. If you take wheat, a farmer may begin operations in September one year and probably does not reap his price much before Christmas in the following year. That is fifteen months. The period may be even longer in the case of breeding stock and breeding horses. The third reason is that the farmer is confronted with certain difficulties over which he has no control and which may extend over a long period of time. Take a man who buys a certain number of store cattle. He feeds them in the most economical way possible. His grass is in that state of cultivation which delights, and rightly delights, the noble Lord, Lord Bledisloe. He may do everything that science can make possible. Yet when he sells those store cattle he may lose perhaps £2 per head on each one.
There are three good reasons why he wants credit, and how has he got credit in the past? He has, of course, had credit from his landlord, but I think it will not be denied that whereas the total value of the crop and assets on the farm land of England is about £400,000,000, £25,000,000 is all he has had. He has had credit from other sources, from dealers, merchants, auctioneers. It is said that these men in giving him credit have been moved by patriotic motives. I do not recall any case of that kind. I do not know, and I do not think anybody else knows, what rate of interest the farmer has had to pay for that credit. He gets credit from the merchant. One of the absolute essentials of that is that he must go on employing the merchant to whom he is in debt, selling his stock to him at not too remunerative a price, buying from him the things he wants at not too low a price. There is another way a farmer has of raising money. He may be forced to sell some of his stock at a time when quite clearly it is uneconomical to sell. He may be forced to sell in the autumn a stock of hay at a low price and then purchase either hay or some other form of cattle fodder at a much clearer price later on. I venture 1096 to think that if it could be known—it never will be known—what is the average price the farmer has had to pay for his credit it would be found to be in excess of 10 per cent.
If I had been in doubt as to the utility of this measure I think I should have been convinced by the paucity of the arguments that I have read and heard against it. I find those arguments remarkably few. There is one I have seen—I am glad to say I have not heard it here—that this is a landlords' Bill. Certainly that is a cheap form of propaganda, of which I should have been surprised to hear an echo in this House. Then there is the much more legitimate argument that the registering of one of these charges will affect the credit of the farmer in other directions. I do not think it will affect his legitimate credit. It has been pointed out that this register is available for inspection, but in the past one knows that if a farmer has had a loan it has been secured and it has been known. The dealers in a neighbourhood usually know a farmer's stability and usually know his character, and it is to be noted that whatever faults a farmer may have dishonesty or failure to pay his debts has not been among them. The farmer is habitually a good payer. So much is this the case that it has frequently been brought up against him that he so rarely goes bankrupt but rather pays his debts and fades away into poverty and obscurity.
There is one thing I would paint out in conclusion and that is that the value of this measure must depend largely on the use that is made of it. The use made of it will depend on the publicity it gets, the publicity given to it by the Ministry of Agriculture and the publicity that is given to it by the great banks. I would call to your notice that this measure bristles with safeguards for the banks. It talks about their rights and it talks about the obligations of the farmers. It is quite true that there are obligations on the banks, but when you examine them you will find that while there is an obligation to pay into the banks more money than they are actually owed, they are obligated to pay the balance back. That is not a very onerous obligation upon an honourable party. Great responsibility is placed upon the banks, and, indeed, the banks already have a very 1097 grave responsibility. They have great powers and they have assumed those powers to a great extent as the result of the mergers that have taken place. It might conceivably be that these powers are almost dangerous to the country, and it might still more conceivably be that they are dangerous to the banks, but I think we may rest assured that, in this matter as in other matters, the great banks will realise their responsibilities and will exercise them for the benefit not only of themselves but of the farmers and of the nation. If this is so, and I think we may safely assume that it is, then I think there is no measure, within the narrow limits that at present the nation has to set itself, that is more likely to help the whole agricultural community in the crisis with which they are at present beset.
§ LORD OLIVIER
My Lords, I hope that the House will agree to the Second Reading of this Bill and will not accept the Amendment of the noble Lord, Lord Strachie. I think the very worst that can be said of this Bill is that it is harmless. In some respects it is harmless to the point of imbecility. So far as concerns the designs against property which so frightened the noble Earl who wishes to reinforce private landlordism by this Bill, I can assure him that we do not regard the measure as in any degree a dangerous attack upon the possibilities of nationalisation. I will not go into reasons, but I can assure him that we are not afraid of the Bill from that point of view. As regards the question of land mortgages, I agree with my noble friend who spoke before me that it is not necessary or desirable for the State to go into the mortgage market for the purpose of helping persons to get mortgages from the State rather than from private individuals.
I entirely agree with the noble Lord in thinking that Part I of the Bill is not going to have very much effect. During the early years of the War, the Board of Agriculture, as it then was, made very strenuous efforts to get the banks to assist farmers and agriculturists in carrying on during that difficult period by providing the floating capital that was so necessary for conducting their business. I had some experience of negotiations with bankers and my conclusion was that the banks of this 1098 country are so conducted that, provided that the Government will adequately, increase their security, they will always be willing to increase their risk, but that you never get out of the banks any kind of special or liberal facilities in regard to credit. So far as mortgages are concerned, I have been surprised to find how many people are willing to lend money on mortgages to people who want to buy or partially to buy their holdings, and to lend on terms much less remunerative than those obtained from good industrial securities, and better both as regards interest and certainly as regards the amount of capital to be advanced, than those which mortgagors would be able to obtain under this Bill. Consequently I will only say of Part I that I do not think it is going to do either any harm or any good, and I leave it at that.
As regards Part II, I strongly support the Bill because, thanks to the prudence with which I am sure the affairs of the banks will be managed, though the amount of credit that farmers will be able to get will not be very great and the terms will not be liberal, they will be better, safer and easier for them than the terms which they could get at the present time, and I am very glad that the State should give its assistance in any way it can, even indirectly, as in this Bill, and not directly, as I should prefer, to the very great national need of capitalising agriculture, for which many reasons have been so clearly given by the noble Lord who has just spoken. So far as Part II of the Bill is concerned, I think that it is valuable and a sound proposition, and I hope that the House will not hesitate to give the Bill a Second Reading.
§ LORD BLEDISLOE
My Lords, I desire most warmly to support the Second Reading of this Bill. In doing so I should like to express an appreciation, which I am sure that all your Lordships will share, of the quite admirable speech that we have heard from the noble Lord, Lord Cranworth, a speech which, if I may say so, showed a very accurate diagnosis of the present unfortunate position of agriculture in this country and a considerable knowledge, as was to be expected from the noble Lord, of matters connected with the agricultural industry and the ownership of agricultural 1099 land. The noble Lord based his support of this Bill on grounds which are known to be sound in every country in the world where agriculture is a thriving, or comparatively thriving, industry.
What surprises me is to find the noble Lord who is the chief protagonist of the agricultural industry on the Liberal Benches moving the rejection of this Bill. It is rather noteworthy that from the moment when he finished his interesting speech the whole of his colleagues deserted the Liberal Benches and have not returned to them. I lay emphasis on this fact because, at the time when I and certain other noble Lords present to-day were in the House of Commons some years ago, the great advocacy of credit as applied to agriculture came almost exclusively from the Liberal Benches. I hope that that part of the old-time Liberal faith has not entirely vanished, because in this matter, as in other matters agricultural, we want to see solid support from agriculturists belonging to all Parties in the present unfortunate and almost hopeless position of the industry in order, if we can, to agree upon some fundamental principles which all Parties are prepared to support and to provide if possible some stable foundation for our unfortunate but most important industry.
As your Lordships may be aware, there has long been a maxim upon the Continent of Europe that credit is the life-blood of the agricultural industry. Unfortunately in this country we have been very far behind continental countries in recognising the truth of that maxim, and notably so in comparison with all our chief agricultural competitors—Germany, Holland, Belgium, France to some extent and particularly Czecho-Slovakia, as we now call it, and Denmark. In all these countries it is recognised that, of all the industries that require credit and that require some assistance, or at any rate some encouragement, from the State, agriculture stands first. I venture to suggest that there is no industry in this country that subsists so little upon borrowed capital, there is no industry, as Lord Cranworth has pointed out, that requires capital more and there is no country where so little provision is made, either by co-operative effort amongst the farmers or by State intervention, 1100 to provide the credit on which the farming community depends so much and which it is unable to obtain on easy terms by itself. I believe that the soundest method of obtaining credit for agricultural purposes is by co-operative effort, but unfortunately, as we all know, co-operation is not a live movement in this country, and, in my judgment, as has been found in the usually prosperous little State of Denmark, it is never likely to be a live movement unless and until the largest proportion of the land of the country comes to be farmed by occupying owners.
It is admitted by all statesmen in Denmark that occupying ownership is the basis of the vitality of agricultural co-operation, and when the noble and learned Lord opposite attributed to me just now a suggestion that in days gone by I had advocated small tenants, as against small owners, in this country, I wish he were still in his place, because that is exactly what I did not do. I advocated, so far as the small farmer was concerned, private ownership—what is nowadays rather usefully called family farming, dependent to a large extent on co-operative activity and such credit as we are seeking to provide by this Bill. In the case of the larger farmer, the position is very different, because, as the noble and learned Lord sought to say in respect of all farmers, the danger is that you are going to invest in the ownership of land capital which ought to be employed preponderatingly in the business of farming. That is, I suppose, the unfortunate position of many farmers who, on the breaking up of estates, have found themselves reluctantly compelled to purchase their farms. It is the position, unfortunately, in this country of many farmers that they are seriously under-capitalised and under-stocked, because they have had to raise money from their bankers in order to purchase their holdings.
It is all very well to say, as no one will more confidently say than myself, that the banks are doing their utmost to assist the farming community, but the bankers, by the very nature of their business, cannot provide advances of indefinite length, covering for an indefinite period the farmers in this country, particularly at a time when, owing to the state of industry in the country, their 1101 reserves of capital must be fluid. There is, however, another reason why the bankers cannot altogether meet the requirements of farmers. In the very nature of the banking business the value of money changes, and there is nothing more unsettling to a man who has to pay interest on borrowed capital than not being able to assess the amount which he has to pay as interest from time to time. I notice that Lord Strachie, speaking from the Liberal Benches, and Lord Parmoor, speaking from the Labour Benches, criticised the apparently large sum of money to which the Government would be committed if the Bill passed. I think one mentioned the sum of £12,000,000, and the other £14,000,000. If I may venture to say so, with some knowledge of what is going on in this respect upon the Continent of Europe, such a sum as even £14,000,000 is a pitiably small sum for a Government to provide by way of help to the agricultural community. I do not believe there is any country in the world where so miserable a pittance has so far been provided by any Government seeking to encourage the fundamental industry of the country.
As regards Part II of this Bill, to which Lord Cranworth extended his strong advocacy, whatever benefit we may imagine is derived, and I dare say it is forthcoming, from the traders, merchants and others who make advances to farmers on the security of their produce, there are a large number of cultivators in this country, and particularly small men, who have been drifting steadily into the pockets of these middlemen traders, which is a particularly unfortunate position for any cultivator to be in. He feels compelled to buy his requirements from that source, possibly on onerous terms, and to sell his produce in the same direction, at sometimes less than its true value. That does not produce any great vigour in the agricultural industry, and tends to depress rather than to stimulate the cultivator to greater enterprise or to develop the sense of security on which in the last resort the agricultural industry must depend. The noble Earl, who so ably moved the Second Reading of the Bill, said that the banks under this Bill were to have an effective first charge on the farmer's movable assets. In days gone by the greatest asset in the eyes of the banker 1102 was the farmer's capacity to farm, and his personal integrity, and I believe that whatever is done by this Bill, those will continue to be the most valuable asset to any lender of money for the farmer's requirements.
Lord Strachie, in moving the rejection of the Bill, said he based himself mainly upon the suggestion that it was an experiment. In what respect is this Bill an experiment which it is dangerous for Parliament to support? The only experiment that I can see in this Bill is the experiment of establishing a company which will be owned and managed by the joint stock banks. There is nothing experimental about the means of making long-term loans to farmers, nor indeed, so far as the registration of chattel mortgages is concerned, is there anything experimental in the process which will come to be adopted in making short-term loans for the temporary requirements of farmers. You have admirable precedents in the Landschaften on the Continent, and the Federal Banks in the United States, and in the Raffeisen. which proved to be the life blood of all the small agricultural countries on the Continent. This is only the application of the Raffeisen system to suit the needs of this country, where, unfortunately, individualism is very strong and co-operation is not a very promising growth. For my part, I venture to think there is no measure that has been introduced into either House of Parliament in the lifetime of any of your Lordships, which gives more promise that times can be better in the world of agriculture, in producing a continuance of agricultural prosperity and agricultural security, than the measure which has been submitted to this House this afternoon.
My Lords, I feel that I must raise my voice in support of this measure, which has the merit of doing something—I will not say that it is something very big, and my noble friend on my left thinks it compares very poorly with similar advances made in European countries—to assist the agricultural industry. As an experiment I welcome it. It is a new step forward. And we should be very grateful for Government assistance to the banks to advance money to farmers. I am not sure that the long-term credits will be of very great use unless the money is lent on better terms 1103 than those who lend money on mortgage are prepared to accept, and unless it can be advanced for agricultural purposes on rather better terms than the Land Improvement Societies offer. What I should be rather afraid of both in respect to Part I and Part II, is that there will be a tendency in the direction of too close a system of red-tape, that the processes through which the borrower will have to go will be somewhat lengthy, and that he may prefer his older method of borrowing and the source from which he has borrowed. I sought recently to borrow some money from a local authority for the purpose of making improvements in cottages under the Rural Cottages Act, but the process was so long and intricate that I had to give up the idea. On making further inquiries I found that I was able to borrow on better terms from the Land Improvement Society than from the local authority. If that kind of process is imported by cautious officials into the carrying out of this measure, I am rather afraid that the agriculturist may find in his path obstructions which I do not think the Government intend.
With regard to short-term credit, I cannot believe but that everybody is very grateful to the Government for making an effort to help the farmer on terms which I hope will be rather better than those on which he can now borrow from the bank. He can borrow quite easily from the bank at present and certainly to the utmost of the amount of credit he is entitled to; that, at any rate, is my experience in the part of the country that I come from. I do not think there is a stone to be thrown at the banks which exist and have existed so long and have advanced large sums of money on agricultural produce. They have done as well, I think, as any system of agricultural banks could have done. The local manager knows his men. He knows pretty well what is happening on the farms and he is able to secure himself.
It seems to me that the person who will have to secure himself under the short-term credit part of the Bill is the landlord—the person who gives the first amount of credit. He lets the land, the buildings and all the adjuncts that go to make the land cultivable, and he advances those to the farmer without getting anything back for some months.
1104 Therefore, as I say, he is the first person to give credit to the occupant. If, then, the bank, in consideration of a loan on movable stock, is to have the first charge before the landlord, obviously the landlord must take very good care of himself. I have no doubt whatever that the family lawyer and the family agent will take very good care to secure him, and that it will not be possible for the rent due to him to be taken away from him by some one who has advanced money to the tenant. Those are difficulties which may eventuate but I do not see why it should not be possible to get over them.
I am perfectly certain that the unfortunate farmers, of whom I regret to say I am one, who now have large overdrafts at the bank, will have no objection whatever to borrowing from the Government if they can get more favourable terms than they can get from the bank, and that they will be quite ready to shift the burden from the private bank to the public bank—the Government. Having regard to the possibility of borrowing money on rather better terms than they have been able to get up to now, I cannot imagine any one of them not being prepared to welcome this measure.
§ Amendment, by leave, withdrawn.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.