PALESTINE LOAN BILL. (Hansard, 21 June 1934)

§ THE PARLIAMENTARY UNDERSECRETARY OF STATE FOR THE COLONIES (THE EARL OF PLYMOUTH)

My Lords, I do not think that it will be necessary for me to trouble your Lordships with a long explanation of this Bill. In fact, it authorises the Treasury 113 to guarantee a loan not exceeding £2,000,000, to be raised by the Government of Palestine, but I think I should remind the House of the events which led up to the present position. It was in 1930 that His Majesty's Government announced their intention of guaranteeing a loan for the purposes of land development in Palestine, and in addition to provide, as a, grant-in-aid, the interest on that loan for a period of years. A little later Mr. Lewis French was appointed Director of Development in Palestine, and was entrusted among other things with the task of examining the question of Arab families displaced in consequence of land falling into Jewish hands. Later the High Commissioner made certain recommendations, and in July, 1933, these recommendations were accepted and approved by the Government. In the light of financial conditions both in the United Kingdom and in Palestine, His Majesty's Government decided that it was impossible for the British Government to make a contribution by way of a payment of loan interest for land development in Palestine as was contemplated originally in 1930; but they decided that the financial position in Palestine was now sufficiently satisfactory to enable the country to finance its own requirements.

It was proposed that Palestine should raise a loan of £2,000,000 to defray the cost of resettlement of Arab families who had been registered as "landless" by the Director of Development, and the cost also of an extensive programme of urgent public works and other measures which had the full approval of His Majesty's Government. It was at the same time stated that these works were of substantial value, would produce considerable revenue, and were necessary in the general interests of the country. It was announced that, as in the case of the £4,500,000 loan raised by Palestine in 1927, the new loan would receive the formal guarantee of His Majesty's Government, and the necessary legislation would be introduced in due course. The Bill now before your Lordships follows the precedent of the Palestine and East Africa Loans Act, 1926, but I should like to emphasise the point that the security for this loan is far better than in 1926 owing to the great improvement in the financial position in Palestine, an improvement which, as I have already 114 stated, makes it unnecessary for His Majesty's Government to offer the free grant of interest during the first few years, as was contemplated in 1930. The Government guarantee itself will be of considerable value since it will enable the Palestine Government to raise the loan at a much lower rate of interest than it could otherwise do.

It should be remembered that the £4,500,000 of Palestine Government guaranteed stock which was issued in 1927 ranks as first charge, and noble Lords will appreciate that this first charge would make it difficult for the Palestine Government to raise a new loan on reasonably favourable terms without the Government guarantee. I should like to say a few words about the security for the proposed loan. I can best illustrate the great improvement that has taken place in the financial position by explaining that in 1930, when the issue of a new loan was first contemplated, Palestine had a deficit of £146,000. In 1932–33 that deficit had been converted into a surplus on the year of £500,000. On 31st March last the gross surplus was estimated at £2,200,000. Of this £600,000 was ear-marked for various liabilities, including a working balance. That left a free surplus of £1,600,000. It is intended to build up a Reserve Fund of one year's revenue—approximately £3,000,000—which would be drawn upon only in a serious emergency such as a heavy and unforeseen decrease of revenue. For this purpose £1,500,000 will be placed immediately to reserve, and during the current year a further sum of £150,000 will be added to the Reserve Fund. The annual revenue of Palestine has increased from £2,389,000 in 1930 to £3,700,000 in 1933–34, which was the last complete financial year. The estimate of revenue for 1934–35 is £3,500,000. In the circumstances I do not think any one can have reasonable doubts regarding the soundness of the security for this loan.

I should like now briefly to refer to the objects to which this loan is to be devoted as they are set out in the Schedule of the Bill. First of all £250,000 is provided for the resettlement of "displaced" Arabs. I must explain that all claims for inclusion in the register of "displaced" Arabs were carefully examined by a tribunal consisting of the Director of Development and a legal 115 assessor. The tribunal decided to admit as entitled to resettlement Arabs who had been displaced from the land which they had occupied owing to those lands having passed into Jewish hands and who had failed to obtain equally satisfactory occupation; this was with certain exceptions which I do not think it is necessary to enumerate. But I ought to point out that the owners of land who deliberately sold their land are not entitled to benefit under this scheme. I think your Lordships will agree they are clearly in an entirely different category to tenants. This sum of £250,000 which is provided for this purpose represents the estimated cost of the resettlement of 821 Arab families and the provision of a camping site for 68 families of an Arab tribe who, though not strictly registrable, are considered by the High Commissioner to deserve special consideration.

Then there is the provision for water supplies and drainage schemes. I think this requires a little explanation from me. The chief items under this head are water supply and drainage schemes for Jerusalem and Haifa. The deficiency of water in Jerusalem is historical, and during the past few years the rapid increase of the population has greatly increased the gravity of the situation. It is hoped that the present scheme, which provides for the pumping of water from distant springs at a cost of £370,000, will for the first time provide Jerusalem with an adequate and reliable water supply. At Haifa the position is only a little less serious owing to the rapid development and increase of the population that is taking place, and the provision of a fresh water supply for ships using the splendid new harbour is absolutely essential.

In both Cities the provision of modern drainage systems has for long been an urgent need and has been impracticable pending the provision of ample water supplies. £200,000 is provided for the water supply at Haifa, and £150,000 and £130,000 for the drainage schemes at Jerusalem and Haifa respectively. £10,000 is provided for a new supply at Hebron, £22,000 is provided for the investigation of additional underground sources of water, and £45,000 for improvements in the water supplies of a number of villages. A complete survey and compilation of the water resources of the country, which is of special importance in 116 connection with the operation of proposed new legislation relating to irrigation, will be carried out at a cost of £6,000. It is expected that, after the construction period, the annual charges in respect of the water supply and drainage schemes at Jerusalem and Haifa will be covered by receipts from water and drainage rates, and that annual charges will be partly covered in the case of Hebron and the villages. In the case of certain of the works assistance will be rendered from the Colonial Development Fund by way of free grants of interest during the construction period.

The item of £200,000 for agricultural credits includes a sum of £150,000 which will enable the Government of Palestine to assist in the formation of an agricultural mortgage company for the provision of long-term credit for Arab and Jewish agriculturists, and a sum of £50,000 which will be devoted to the provision of long-term loans for Arab cultivators in the hill districts. I do not think that any one will question the desirability of assisting the development of agriculture in Palestine, and, in the case of the Arab cultivator, of diminishing the power of the moneylender, by the provision of these facilities. While dealing with this particular question I should like to take the opportunity of paying a tribute to the unremitting care which has been devoted by the present High Commissioner, Sir Arthur Wauchope, since he assumed office in 1931 to improving the position and raising the standard of agriculture of the fellah by a variety of methods.

Then I take No. 4, which is the next item. It is an item of £210,000, and includes the sum of £150,000 which will be spent on the construction of an oil berth in Haifa harbour, and £60,000 on the reclamation of land in connection with the construction of the berth. These works are being carried out on behalf of the Iraq Petroleum Company, under a contract by which the company will pay a minimum annual charge of £30,000 on oil exported and will also pay rent for the reclaimed area which will be leased to them. Under the last item, one of £407,000, is included a sum of £156,000 for a new post office and telephone exchange at Jerusalem. I ought to say in this connection that the accounts of the Posts and Telegraphs Departments of Palestine show a large and increasing 117 excess of revenue over expenditure, which should suffice to cover the annual charges of the new building. This item also includes £27,000 for the construction of a new building for the Government Arab College, and £106,000 for new Government schools in the chief towns. The expenditure on new school buildings, though it is not directly remunerative, will result in a saving since the Government will be relieved of the heavy rent charges payable in respect of the present hired buildings, and larger classes will be possible. This will enable more children to be educated without any considerable increase of teaching staff. This same item includes £40,000 for a Government technical school at Haifa, which will be available to both Jews and Arabs, and £20,000 for the purpose of making grants for capital expenditure on buildings and equipment to various Jewish institutions concerned with technical education.

The actual clauses of the Bill itself require little explanation. They follow generally the form of the Palestine and East Africa Loans Act of 1926. Subsection (2) (a) of Clause 2 provides that fair conditions of labour shall be observed in the execution of the works, and paragraph (b) of the same subsection, which has not, as a matter of fact, a parallel in the earlier Act, provides for the manufacture in the United Kingdom of imported plant, machinery and materials, except in special cases. This provision is reasonable considering the advantage which Palestine will derive from the guarantee, and it is estimated that orders amounting approximately to £600,000 will be placed in this country. I beg to move.