§ 2.51 p.m.
§ Order of the Day for the Second Reading read.
§ THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR THE COLONIES (THE EARL OF MUNSTER)
My Lords, I beg to move that this Bill be now read a second time. The object of this measure is two-fold—first, to permit the increase of the aggregate amount of guaranteed loans which may be lent to Colonial Governments by the International Bank for Reconstruction and Development under the Act of 1949 from £50 million sterling to £100 million sterling, and, secondly, to extend that Act to cover loans made to bodies such as the East Africa High Commission and the Governments of territories with advanced constitutions. As noble Lords will be aware, the Act of 1949 which was introduced into another place by the noble Lord, Lord Ogmore, enabled the Treasury to guarantee loans raised by the Colonial Governments from the International Bank up to a figure of £50 million. The 755 Act was necessary because Colonial Governments in their own right are not members of the International Bank. Under this Bill, it is proposed to increase that figure to £100 million.
It is true to say that up to the present time little use has been made of the powers which are found in the 1949 Act, except that Southern Rhodesia has raised a loan of £10 million from the International Bank during the course of the present year. I think possibly the main reason is to be found in the fact that Colonial Governments in the last few years have been enabled to obtain all the finance they require from the London market. Indeed, since 1948 to the end of last year no less than £56 million had been borrowed from this source, and the present year will have produced a further considerable sum. There may be some noble Lords who would question the need for Parliamentary authority at this present time, but we feel that it is better to seek sufficient authority too early rather than too late, for we must be able to look some years ahead. It is very important to seek authority before negotiations have begun rather than after.
I am not, of course, in a position to give the House any indication of the projects which, either now or in the future, might be financed by the International Bank, but it may well be necessary to seek its assistance during the course of the next few years, for there are now a large number of expensive schemes which will be suitable for loans from the International Bank. I might mention a few of them in passing. There is the Volta River project in the Gold Coast, details of which have recently been announced in a White Paper, and which contemplates an expenditure to the figure of £144 million. There is also the Owen Falls Scheme with a capital cost of £25 million, of which roughly £9 million has so far been raised. In addition, there are two hydro-electric schemes in Northern and Southern Rhodesia the expenditure on which will probably be something in excess of £70 million. It is not, of course, necessary for all capital for these projects to be raised from the International Bank because a certain amount would automatically be raised by other means. I might also remind the House that earlier this year the International Bank had a 756 commission in Central Africa and negotiations for a railway loan are now in an advanced state. Moreover, the International Bank now have a commission in East Africa on the question of transport.
May I turn now to deal very briefly with this two-clause Bill? Clause 1 (1) makes it clear that guarantees can be given in respect of loans to one or more Colonial territories. That, clearly, would apply to the Central African Federation or to the West Indian Federation, if either of those Federations should come into being. It also applies to a Government authority such as the East Africa High Commission, which could be classified, and indeed would be classified, as a Government for the purpose of raising loans. Clause 1 (2) raises the amount to be guaranteed by the Treasury from £50 million to £100 million. Clause 1 (3) removes the necessity for requiring a sinking fund. I have been informed that the International Bank does not operate through sinking funds, but usually by half-yearly repayments: therefore the provision of a sinking fund is not now required. The final subsection of that clause removes any existing doubts about the competence of Her Majesty's Government to guarantee loans in Colonial territories with advanced constitutions. My Lords, I do not think it is necessary for me to say more at this stage on this small but nevertheless important Bill; I therefore commend it to your Lordships with confidence and beg to move that it be now read a second time.
§ Moved, That the Bill be now read 2a.—(The Earl of Munster.)
§ 2.57 p.m.
§ LORD OGMORE
My Lords, the noble Earl, Lord Munster, has explained very clearly to the House the object of this Bill and in the main I think he has made his case. I think it is a Bill which the country needs. But there are one or two points which, in my view, should be brought out and several questions which arise to which we in this House ought to have an answer. As the noble Earl has said, I introduced the original Bill in another place in 1948, and the debate at that time ranged very much more widely than it is likely to do to-day. I then put before the House the four objectives in economic policy in relation to the Colonies against the background of which the original Bill was intended to operate. If your Lordships will bear 757 with me, I should like to repeat what I said then, because it is against that background still that this Bill is intended to operate. I stated then that the objectives in economic policy in relation to the Colonies were four-fold. The first, I said, was to restore and improve the capital equipment of the territories so as to provide a firm basis for future development. The second was to promote those types of economic activity, whether of primary or industrial production, in which the territories were best fitted to engage, having regard to the balance of their economies and the advantages of their external trade. The third was to raise the living standards of Colonial peoples as rapidly as the level of their productivity permitted. The fourth was to secure the mutual advantage of the United Kingdom and the Colonial territories, having regard to the finance, equipment and skill which the former might be able to provide.
I have never since had any criticism of what was intended to be merely a somewhat tentative attempt to define the economic policy of this country towards the Colonies. Indeed, I believe that lately in another place this attempt has to some extent been approved by some Members, but I think it valuable to repeat it because so often we hear advocated in ill-informed quarters the sort of economic policy which would benefit neither the Colonies nor this country, a policy, moreover, which often it would be impossible for this country to develop and which would be harmful to the Colonies if it were developed.
In addition to the economic policy, there is the financial policy of the Government towards the Colonies. In the old days, there were three methods by which the Colonies and other underdeveloped countries could obtain their finance. The first was to obtain from the primary producers a large part of their produce, with little return to the primary producers, selling it and thus obtaining foreign exchange. I am glad to say that this practice has never been adopted in our Colonies, although it has been followed in metropolitan countries. Russia, for example, has financed much of her external trade by this method. Another method of financing underdeveloped territories was by selling the customs rights. This was the method adopted in China and Egypt. It in- 758 variably leads to trouble, to the spread of nationalism and disagreement and to hostility towards the lender countries. Again we have never done it in our Colonies. The third way was by opening the London market, the method to which the noble Earl, Lord Munster, has referred.
Since the war, this country has tried to make available to the Colonial territories new methods of finance, and I think we should take some credit for this. We have made available two new methods: first by means of the Colonial Development Welfare Fund, which provides finance for those projects which give no direct return, although they give a high indirect return, in the way of roads, bridges, water supplies, education and so on; and, secondly, by means of the Colonial Development Corporation, which was intended to provide for those projects which have a direct return. A third way, which has been open to us since the war, is by recourse to the International Bank. As the noble Earl has said, since the war the Colonies have obtained a great deal of finance from this country, and therefore they have not gone to the International Bank for loans. I am not at all sure, however, that they obtain all they need from this country.
In reply to a Question which I asked him on October 27, the noble Earl, Lord Munster, gave me some illuminating figures. One of them was that the total of sterling assets of the Colonial territories at June 30 this year was £1,155 million. It is true, as I have no doubt the noble Earl will say when he comes to reply, that much of this consists of reserve funds. I agree with him, but surely there is some of this money which the Colonies would like to spend if they could obtain the goods from this country. All the time we are piling up this large amount of assets in this country on behalf of the Colonies. We are considerable debtors to them. Yet, in spite of that fact, since the war they have made immense strides as regards the rest of the world. I recommend that your Lordships read the Written Answer which the noble Earl gave me on October 27, which was very detailed. From it you will see that both in value and in volume exports in the Colonial territories have gone up tremendously since pre-war times, in many cases by four and five times as much in value.
759 What I have been saying points to the fact that in all probability the Colonies will need to go to the International Bank, because they will not be able to get all the funds they require from the London market. I hope they will. I hope that the market will be available to them to a greater extent than it has been, but, after all, the Colonies are becoming big and powerful countries. Nigeria, with 27,000,000 people, is a big country, bigger than many metropolitan countries, and we cannot and do not wish to keep her away from the International Bank. My experience of the International Bank was that the Bank lent at first only on those projects which were likely to be remunerative—in other words, on the sort of project for which the Colonial Development Corporation was intended. They did not deal with the sort of project for which we set up the Colonial Development and Welfare Fund, although unless one can get the unremunerative projects—the roads, bridges, ports and schools—going, one will never get the remunerative ones going. I see that the noble Viscount, Lord Portman, agrees with me—he has had experience in East Africa and knows that what I say is correct.
When I was a member of the United Nations, No. 2 Committee, and when the Report of the Bank came up, I had a considerable argument with some of the Bank officials on this very question. They assured me at that time that the Bank's policy was changing, and that in future they would lend on what they called a "mixed bag." They would lump a Colony's assets together, and if there were a sufficient number of remunerative assets they would allow certain non-remunerative assets to go in and lend money on the whole lot. The weakness of that system is that a country still has to repay every year the capital and interest on the non-remunerative assets, as well as on the remunerative ones. The United Nations has not as yet put itself into the position that we in this country have adopted towards Colonies—namely, that on the non-remunerative projects we neither want the capital returned nor charge any interest. All the world has still to catch up with British policy, and I think it is about time, in view of the many absurd and utterly fallacious criticisms uttered in the United Nations, particularly in the Trusteeship Committee, that that point 760 was rammed home. When they do realise that fact, perhaps we shall listen a little more kindly to some of the stern and harsh criticism of our Colonial methods in which they indulge, day in and day out.
The main purposes of this Bill have been clearly set out, both in the Explanatory Memorandum and by the noble Earl in his speech to-day. I thought his speech differed a little from the Explanatory Memorandum. Whereas he said that this Bill was not immediately necessary, as it was not likely that any great amount of loans would be needed from the Bank, the Explanatory Memorandum says:This is necessary in the light of the expected volume of lending to Governments of colonial territories by the International Bank.I think the noble Earl should clear up that point. I understand him to say that the only loan there has been is one to Southern Rhodesia, of £10 million. In this Bill he asks us to increase the ceiling from £50 million to £100 million. But if, as he says, there is not likely to be any more loans in the near future, there does not seem to be a pressing state of affairs calling for Parliamentary intervention and a doubling of the ceiling. I think the noble Earl should clear up that point.
I should like to ask the noble Earl what are the bodies which are affected by this Bill, the bodies concerned with more than one territory. At the moment I can think of only one, the East Africa High Commission. The word used in the Explanatory Memorandum is "bodies," and perhaps the noble Earl will tell us what bodies there are, other than the East Africa High Commission. Can he tell us also what are the "territories with advanced constitutions," referred to in the Explanatory Memorandum, and why it should be thought that those countries with advanced constitutions do not already come within the purview of the 1949 Act? I should have thought—and certainly it was never suggested otherwise in 1948 and 1949—that under the existing Colonial pattern all Colonial territories came within the purview and scope of the Act. If there is such a territory which is completely self-governing and which comes under this Bill—and there is not one, so far as I know—can the noble Earl tell us what security there will be that the loans will be repaid? In other words, if the Colonial Secretary has not 761 the last word, as he has in all Colonial territories, what security will there be that the loans will be repaid and that they will be serviced year by year? Can he also inform me what are the present rates of interest? I believe that originally the interest was something like 2, ½ per cent., with a 1 per cent. servicing charge. What are the present rates, and is there a servicing charge in addition to the interest? I think those are the only questions I have. As I say I entirely support, as do my Party, the general principle of the Bill, but we should like to be satisfied on these details arising on it.
§ 3.12 p.m.
§ THE EARL OF MUNSTER
My Lords, I could not in any way quarrel with the observations which have fallen from the noble Lord who speaks from the Benches opposite. Nor, indeed, can I quarrel with his explanation and definition of economic policy in the Colonies, or even, to a certain extent, with the financial policy which he outlined. Let me see whether I can reply to some of the questions which the noble Lord addressed to me. With regard to the reserve funds, it is true that the reserve funds for the Colonial territories held in this country are something in the neighbourhood of £1,150 million. These funds are kept in this country for specific purposes. There are the currency backing, the pension funds, the sinking funds, and funds kept for other necessary reasons which may instantly come to the mind of the noble Lord. As I understand it, they have never been drawn for a general development such as is contemplated in the Bill which is before us to-day.
The noble Lord appeared to have certain doubts about the bodies which are dealt with in this Bill. There is, of course, the East Africa High Commission, which comes to one's mind at once. As I think I mentioned in the course of my few observations, there is also the possibility of a Central African Federa- 762 tion, and also a West Indian Federation. At the moment I cannot recall to my mind any other body which I think would be in the same category.
§ LORD OGMORE
It does not very much matter, because the noble Earl has really given me the answer, but I take it that a possible West Indian Federation would be more on the lines of a Dominion, would it not? It would not necessarily fall under this Bill at all. If that comment is embarrassing to the noble Earl he need not answer it.
§ THE EARL OF MUNSTER
It is not in the least embarrassing. I think in point of fact the West Indian Federation, if it were formed, would undoubtedly come within the terms of this Bill. I think that is quite clear. Now I come to the other question which the noble Lord asked me about the rates of interest. I think I am correct in saying that the rate of interest charged by the International Bank is 4¾ per cent., and that includes a statutory 1 per cent. commission.
I have answered all the noble Lord's questions except the last one concerning those territories with advanced constitutions—namely, if their constitution was too advanced, what would be the security that they would ultimately pay back this loan. I think the answer there is quite clear. They would not get the loan unless there was a certainty that they had the necessary power and were prepared to pay back. The noble Lord knows the Treasury as well as I do: they are very hard task masters, and I think it very unlikely that they would agree to guarantee a loan to a Colonial Territory with an advanced constitution unless they were reasonably certain beyond all possible doubt that that territory would ultimately repay the capital. I do not think I need say anything further at this stage on this Bill.
§ On Question, Bill read 2a; Committee negatived.