AGRICULTURAL CREDITS (SCOTLAND) BILL. (Hansard, 12 March 1929)

THE EARL OF AIRLIE

My Lords, a similar Amendment was proposed during the Committee stage of this Bill in the House of Commons, and the point was pressed by the noble Viscount in this 451 House on the Second Reading. It was argued on both occasions that the only bank at all adjacent in many parts of Scotland might not be one of the constituent banks, and that surrounding farmers, particularly the smaller men who would be most likely to need assistance and at the same time least likely to be able easily to change the bank with which they had hitherto dealt, might consequently be unable to take advantage of this measure. The noble Viscount, on the Second Reading, went so far as to say that this might happen to about 50 per cent of the Scottish farmers. It was also argued in favour of the Amendment that the constituent banks ought not to be allowed to bar an applicant because he did not happen to be one of their customers, seeing that public money is being advanced to support the company. It is perfectly true that there will, no doubt, be cases in which the only bank in a district will not be one of the constituent banks, but I am inclined to think and venture humbly to suggest that the noble Viscount's statement that 50 per cent. Of Scottish farmers might be affected is over-estimated.

There is undoubtedly some confusion of thought about the position generally. In the first place, it is the company which it is proposed to set up who will make the loans, and the Bill, as it stands, does not preclude the company from making these loans to applicants who are not customers of the constituent banks. In the second place, the proposed Amendment would not, according to its supporters in the House of Commons, compel the company to make a loan to a customer of a non-constituent bank. On that footing it would not materially alter the position, and would, as pointed out in another place, be merely a "pious expression of opinion." If that were all that the proposed Amendment would achieve, there would be little purpose in it and no use in bringing it into the Bill. If, however, this Amendment is read as imposing, actually or by implication, a measure of compulsion on the company, there are serious objections to it. It would be depriving the company who will make the loans of one of the ordinary elements of security in transactions of this kind. It is not merely a question of "vetting" the original application, although that is important. It has to be 452 remembered that the loans are repayable over the considerable period of 60 years. Obviously banks cart keep in closer touch with the position of borrowers who happen to be their own customers than would be practicable or possible if loans were made to customers of other banks.

The noble Viscount also urged that the non-constituent banks would be in as good a position to advise the corporation as any constituent bank, and that it should not be inferred that only those who saw eye to eye with the Government would be honourable men. It does not seem that this is a question of honour. It is a question of plain hard facts and of business methods. However readily the dissenting banks might supply the information required there could not, in the nature of things, be the close touch between lender and borrower, especially over so long a period as these loans may be outstanding, as there would be if the borrower were a customer dealing from day to day with a bank that was responsible as a constituent bank for the operations of the company. Everyone knows that the possibility of borrowing through one's own bank is definitely greater than through another bank at which one has not an account. The reason is obvious. The would-be borrower, his character, reputation and resources, are generally known in the one case and not in the other, and no report upon him by the bank at which he has hitherto dealt can put another bank in as good a position to judge of his reliability as can be secured from day to day dealings with him.

Lord Novar also urged that it was never suggested during negotiations that any bank that stood out would have its customers debarred from facilities, and argued that the Lord Advocate's statement during the Committee stage of the Bill—namely, that if anything were done that obliged the company to lend through other than constituent banks, it would be open to the latter to say that the arrangements had been altered—did not fairly represent the position. This, however, is not quite how the matter stands. The banks were approached with a view to getting up a company. The basis was, as it still is, that the company would make the loans, and the company would be composed of the constituent banks. The negotiations were with the banks as a 453 whole. Had they all supported the proposals—I am not suggesting that there is any reason why they should—they would all have been constituents and all would have been concerned as to the manner in which, and the persons to whom, the loans should be made; but it would undoubtedly be altering arrangements if, after setting up a company composed of only a number of these banks, a condition were imposed that loans must be granted to customers of other banks who had not elected to join. I venture most humbly to suggest that to do so would be to commit unwarrantable interference with the operations of the company who, subject to its articles and memorandum of association, which are in turn subject to Government approval, ought not to be fettered as suggested. It seems to me, therefore, that, from whatever point of view one looks at this Amendment, it does not appear to be entirely suitable to the Bill, and accordingly, with much regret, I fear that the Government cannot accept it.

§ VISCOUNT NOVAR

My Lords, I thank the noble Earl for the very clear explanation that he has given. It only confirms me in the view which I expressed on the Second Reading, that the best thing to do would be to recast the Bill, because the unfortunate provisions of this Bill, which could not be accepted by half the Scottish banks, and which I understand were very reluctantly accepted by the other half—very much the same situation as in England when the Midland Bank stood out—the provisions of the Bill which make a, farmer go to a bank which is not his own to raise a loan, and which compel him to become a co-operator, which is not the case in England, constitute an abuse of the use of the tax- 454 payer's money. I very much regret the decision to which the Government have come, that they cannot accept the Amendment, but as I see Lord Saltoun, alone with myself, as representing the Scottish Peers, I feel that it is of no use dividing the House, which otherwise I would have done.