§ 3.21 p.m.
§ Order of the Day for the Second Reading read.
§ THE EARL OF LISTOWEL
My Lords, I will again limit my remarks rather narrowly to the terms of the Bill, in order to explain the theory of it to your Lordships and to enable your Lordships to offer any comments you may wish to make with full knowledge of the facts. Like the Bill that I have just introduced to the House, this measure is quite an uncontroversial money Bill. It is designed 138 to enable the Treasury to guarantee loans made by the International Bank for Reconstruction and Development to Colonial Governments. It is in the power of the International Bank to make loans to Colonial Governments, but in accordance with the Bank Statute this can be done only on the guarantee of His Majesty's Government in the United Kingdom, which is the member Government responsible for British and Colonial territories.
The effect of the Bill will be to make available to Colonial Governments a new and important source of finance, if and when required, for the economic development of Colonial territories. Although the main obstacle to rapid economic progress in the Colonial field is at present a shortage of technical staff—and to a lesser extent materials and equipment—rather than of finance, we have nevertheless a duty to ensure that sufficient finance is available and can be drawn on when required. It is our responsibility to see that funds can be raised from external sources, as well as from within the Colonial territories.
The present sources from which Colonial loans are drawn, internal and external, are these. In the first place Colonial territories can goat their own internal loans, and they are already contributing as fully as possible out of their own surplus revenues and capital towards development; and that is not going to be a source of sufficient finance in the near future. Secondly, with the authority of Parliament, this country is providing £120,000,000 under the Colonial Development and Welfare Act of 1945. Thirdly, there is a limited programme of investment on the London it market which may be undertaken by Colonial Governments if other resources are not available. Finally, there is the further possibility that loans may be forthcoming from the European Co-operation Administration. Those are the four existing sources or new sources of loans.
It is true that no request has yet been received from Colonial Governments to borrow from the International Bank, and that there is no immediate prospect of any such request. Nevertheless, loans from the International Bank represent important potential sources of hard currency finance, and we must ensure that these 139 Governments are free to act promptly if and when occasion arises.
The chief difficulty that is likely to prevent Colonial Governments taking advantage of the opportunity they will have under this Bill is the relatively high charges made by the Bank on their loans. These amount to about 4½ per cent., made up of about 3 per cent. interest and between 1 per cent. and 1½ per cent. statutory commission. Another difficulty is the small dollar requirements of a Colony in relation to a particular project, which would make it worth their while to go to the Bank only if they could borrow simultaneously for a number of different projects. Nevertheless, we feel that no obstacle should be allowed to stand in the way of the economic development in the Colonies, and this Bill will certainly remove a potential obstacle to the financing of development in the Colonies.
I will gladly run through the clauses if your Lordships wish me to do so, but as this is a financial Bill and there is not likely to be much detailed discussion on the clauses I do not think it is necessary to go' through them now. I beg to move that the Bill be now read a second time.
§ Moved, That the Bill be now read 2*. —(The Earl of Listowel.)
§ 3.27 p.m.
§ LORD TWEEDSMUIR
My Lords, just to clear up any misapprehension in regard to this Bill, I would like to say that we on this side of the House welcome it, as indeed we welcomed the last one. I suppose, being a Scotsman, I am somewhat economic with my praise. I think this Bill, short as it appears, is an instrument that may be of the greatest help to all our Colonial territories if we use it right. If we do not, it will be just one more round of what I have heard called "shove million." This Bill has had a very slow passage. Its Second Reading in another place was on November 19. So do not let us, in this House, do anything further to delay its passage. When it was debated in another place on November 19 the whole dollar horizon was different from that which we see today, and I would like the noble Earl in his reply to inform the House whether any of the recent happenings in the dollar world will have any bearing or effect on the operation of this Bill.
140 The noble Earl ran through the various available sources of finance for the Colonies: finances from Colonial revenues and the Colonial Development and Welfare Act, possible loans from E.C.A. and flotations such as the Trinidad Loan. I do not know how many of your Lordships are aware of what happened when the Trinidad Loan was floated. A sum of £3,000,000 was sought; £80,000,000 was subscribed, and the list closed in just under one minute. I believe, although I speak subject to correction, that it is the policy of His Majesty's Government so far as possible to keep the Colonies off the London market. If that is so, I wonder whether the noble Earl could say a word on it in reply.
I repeat, we welcome this Bill because it opens a very valuable potential channel to Colonial financing. The Bank charge of 4½ per cent. is rather high. To use fashionable Parliamentary parlance, one can hardly call it "cheap money." The noble Earl dwelt on the fact that rather few Colonies had extensive dollar purchases to make in the future; but still we are prepared. I think that we all agree that the Colonial Empire needs as much capital as it can possibly obtain, and although the International Bank for Reconstruction and Development contains something like 95 per cent. of American money it is, in fact, an international body under international control; and in the building up of the Colonial Empire we shall be all the stronger if we can have the sympathy and support of world opinion as a whole. But if, in the course of the next few years, we have a series of successful dollar transactions by the International Bank, I believe that it may well attract the American private investor who will realise for the first time that the British Colonial Empire is a rich field for enterprising capital; and the benefit will be mutual.
Before I sit down, I would like to ask the noble Earl one question. Banks are banks, whether they are great international banks or small private ones, and they have an awkward way of wanting their money back, and seeking to be paid interest that is owed to them. I take it that the International Bank is no exception, so I imagine that the projects which seek loans from the International Bank will probably be those projects which 141 deal with immediately productive enterprise, and that long-range projects which need a great deal of research will probably remain the province of the Colonial Development and Welfare Act. Perhaps the noble Lord will be kind enough to enlighten me on those two points. Again, for the benefit of the noble Lord, Lord Strabolgi, may I say once more that we on this side of the House welcome this Bill?
§ 3.31 p.m.
§ THE EARL OF LISTOWEL
My Lords, I am obliged to the noble Lord opposite for giving his support to this Bill, and I also greatly appreciate the way in which it seems to be possible to carry Colonial legislation through this House with unanimity. The noble Lord was good enough to give me notice of one question which he intended to ask—namely, that relating to the raising of loans by Colonies in the London market. He was anxious that these loans should be facilitated. The difficulty—and I am sure it is one which the noble Lord will appreciate—about allowing Colonies to raise loans in the London market, is that in that way finance is diverted from this country; and we must keep in mind the overall economic position of the country and the situation with regard to the balance of payments. Until the beginning of the present year, the general position which the Government here were forced to take up was that owing to the acute balance of payments crisis the raising of London loans by Colonial Governments could not be contemplated for some time. That was what we told Colonial Governments at that time. Although we have made some concessions since then, I must emphasise that this situation has not fundamentally altered.
I am sure your Lordships will agree that the economic situation is not fundamentally different now from what it was a year or two years ago. The balance of payments problem is still with us, and it is still necessary that the productive capacity of the United Kingdom should be directed towards only the most essential needs, with a view to the earliest possible restoration of the balance of payments position in the sterling area. In these circumstances, calls by Colonial Governments on the London market, inasmuch as they involve additional claims upon the United Kingdom productive 142 capacity must still be kept to an absolute minimum. On the other hand, we recognise that in certain circumstances Colonies should be authorised to borrow in London. Such an authorisation was given in the case of Trinidad. It has also been given in the cases 3f Malaya and Northern Rhodesia. I can assure the noble Lord that any application by a Colonial Government for a loan in London would be considered most sympathetically. We shall do our best within the limits of the overall economic situation to meet their requirements.
The noble Lord asked whether the dollar position would influence the future of the Bill. Of course, no one can tell what the dollar position will be in the future, but I can assure the noble Lord that the present dollar position will not prevent Colonial Governments from using the authority which they will receive from the Bill, when it becomes an Act, to apply to the International Bank. The Bill is only an enabling Bill, and it is up to a Colonial Government to say whether they wish to have a loan on these terms from that source. There will be nothing to prevent a Colonial Government doing this, in spite of the dollar shortage which, of course, we all realise is a continuing problem. I am grateful to the House for its reception of the Bill, and I hope that your Lordships mill now give it a Second Reading.
§ On Question, Bill read 2*; Committee negatived.
§ Then, Standing Order No. XXXIX having been suspended (pursuant to the Resolution of July 13) Bill read 3*, and passed.