HL Deb 12 July 1962 vol 242 cc374-88

3.25 p.m.

Order of the Day for the Second Reading read.


My Lords, I beg to move that this Bill be now read a second time. I should like to explain the purposes of this short Bill, Which will, I trust, be approved by your Lordships. As your Lordships know, the International Bank for Reconstruction and Development was established after the war to finance reconstruction in countries which had suffered from the war, and for post-war development. Only independent Governments can be members of the Bank, but the Bank may make loans not only to members but also to their dependent territories, provided that the loan is guaranteed by the member Government responsible for the borrowing territory.

The Colonial Loans Act was passed in 1949 in order to give the Treasury authority to guarantee borrowing by British dependent territories from the International Bank, and the principal purpose of the present Bill is simply to increase the amount for which guarantees can be given. Clause 1 (1) proposes to increase from £100 million to £150 million the aggregate amount of borrowing by British dependent territories from the International Bank which can be guaranteed by the Treasury. The International Bank loans guaranteed so far total nearly £88 million. There are applications for further loans, totalling over £6 million at present lodged with the Bank and under consideration. In addition there are a number of projects for loan assistance from the Bank under consideration in the territories but not yet lodged. The limit of £100 million laid down in the Colonial Loans Act. 1952, is likely to be reached fairly soon, and we therefore propose that this limit should be increased to £150 million.

Clause 1 (2) is designed to deal with the position in East Africa. The existing provision in section 1 (1) of the 1952 Act was enacted to enable the Treasury to guarantee loans from the International Bank to the East Africa High Commission. The East Africa High Commission, noble Lords will remember, was constituted by the Governors of Kenya. Tanganyika and Uganda to run certain common services partly of a Governmental nature, such as the administration of customs, and income tax, and partly of a commercial nature, such as the operation of railways, posts and telecommunications. Following the grant of independence to Tanganyika, the East Africa High Commission has been replaced by the East African Common Services Organisation which performs similar functions. Subsection (2) of Clause 1 of this Bill is intended to apply to the situation which will obtain upon the grant of independence to Uganda in October of this year, when the membership of the Common Services Organisation will consist of two independent territories and one colonial territory. This subsection will empower the Treasury to guarantee International Bank loans to the Organisation until all three territories are independent.

Clause 1 (3) extends the scope of the Colonial Loans Act to the New Hebrides, where we have a condominium with the French Government, which is not covered by the definition "colonial territory" in the 1952 Act. Although there is no immediate prospect of a loan application to the International Bank from the New Hebrides, it is considered desirable to take this opportunity to include the New Hebrides within the ambit of the Colonial Loans Act.

If ever a proposal for a loan for the New Hebrides were considered, we should of course act in consultation and co-operation with the French Government.

The loans which have been made by the International Bank have been, as noble Lords are well aware, of tremendous assistance to colonial development over the last ten years in complementing both the loans available from the London market, and the aid which we ourselves give. The loans which have been made to the African territories, and to British Guiana and Trinidad, have been for the development of railway and road transport, harbour facilities, electric power development and agricultural and land settlement schemes. These loans have been of great advantage to the United Kingdom and the dependent territories, and we very much appreciate the help which has been given in this way.

My right honourable friend paid particular tribute, in introducing this Bill in another place, to the work of Mr. Eugene Black, the President of the World Bank. I am sure your Lordships endorse that tribute. The International Bank is valuable to the colonial territories, not merely as a source of funds, but also for its advice on development problems. Before making a loan, the International Bank expects to conduct a general survey of the economic and financial policy of the potential borrower, and to be satisfied, in broad terms, that the territory is devoting its resources to the most suitable kinds of development, and that it is likely to be able to meet any known further commitments.

If the Bank is satisfied on these general aspects, it proceeds to a detailed examination of the particular project for which the loan finance is sought, and technical experts study the proposals in question. We have been particularly glad to note that the Bank's activities in the field of technical assistance are increasing. They have decided to form a group of highly qualified development advisers who will be able to go to member countries, on request, for extended periods, and actually work there. Assistance from the Bank, of course, only complements the aid which we ourselves give. I am not quite sure that the extent of our aid is always clearly appreciated. The total of our aid to the Colonies has grown from about £35 million in 1957–58 to about £94 million in 1961–62—and this, my Lords, over a period when a number of territories have moved to independence. I feel sure that your Lordships will approve this Bill, and I ask you to give it a Second Reading. I beg to move.

Moved, That the Bill be now read 2a—(The Marquess of Lansdowne.)

3.35 p.m.


My Lords, we welcome this Bill, and I am sure it will be generally welcomed in the House. I am grateful to the noble Marquess for giving us such a clear exposition of its contents, and for recommending it in the terms he used. I do not intend to follow the noble Marquess in his remarks about aid to our Colonies, because I am going to deal with that next week. If he will allow me, I will therefore not inflict the same speech on the House twice, but I should like to say something about the World Bank. I think we all agree that the World Bank has already proved an invaluable agency for providing these long-term credits for developing countries inside the Commonwealth, and outside the Commonwealth as well. Their loans are more acceptable to these countries, as I know from my personal experience, than loans from other Governments, because they are never suspect of political motives. The unfortunate thing about bilateral arrangements is that, even when these suspicions are far from justified, the recipients are apt to think that the donors have ulterior motives. For this reason of obvious innocence I am sure the Bank will be called on more and more, both for loans and for the economic surveys and technical aid, to which the noble Marquess referred, to assist these countries in the work of developing their economies.

I should like to join with the noble Marquess in his tribute to Mr. Eugene Black, the President of the Bank. Mr. Black has inspired confidence all over the world by his really remarkable com- bination of financial acumen of Wall Street, and a degree of human sympathy and understanding rare in business and, indeed, in every walk of life. J speak in this matter from some degree of personal experience because I was able to observe his impact on Ghana during the time that he, with his wife, stayed with me in Accra, while he was studying the Volta Hydro-Electric Scheme, for which now the World Bank has advanced a considerable loan. By increasing our guarantee to cover a further £50 million in loans to the Colonies from the World Bank we shall, of course, extend the scope of its work, and I am particularly glad to see that under this scheme, under what is intended both by the Government and by the World Bank, independent Commonwealth countries in Africa, as well as the Colonies, will benefit. I think this is the first time that some of the poorer and less credit-worthy independent countries in the Commonwealth will benefit from a United Kingdom guarantee. Some of this money will be lent, as the noble Marquess said, to the East African Common Services Organisation, and the position there is that Tanganyika is already independent, and Uganda will be in October. So the two indigent ex-British Colonies in Africa will be benefiting from a British guarantee.

I suppose the cheapest way to stimulate economic development in the Colonies, or anywhere else, is to give a guarantee which you are dead certain you will not be asked to pay for later on. These loans are, of course, hard-headed commercial loans, usually at a rate of 6 per cent. interest, serviced by Governments which in the past have never defaulted; and, indeed, the World Bank is so shrewd in business dealings that I do not think there is any likelihood of any default in time to come. Of course, this limits the application of these loans to countries that are considerably more advanced in their economic development than are most of the underdeveloped areas in the Commonwealth or, indeed, in the outside world. These countries to which the World Bank make loans have already an infrastructure of communications and social services that many others lack.

Hence the very great importance—and I should like to refer very briefly to this because it is part of the World Bank, and I warned the noble Marquess that; I was going to ask him some questions on this subject—of the establishment in 1960 of the International Development Association as a subsidiary of the Bank. The I.D.A. is of course able to give these "soft", ultra-long-term loans at a nominal rate of interest in the early years, and this type of loan is undoubtedly the most useful credit instrument for underdeveloped countries in the Commonwealth; and one hopes it will be used much more frequently in time to come. It gives them the time they need to build up their economic and social infrastructure, which they must do before they can start to pay their own way. Hence the great value of I.D.A. for the example it has set to wealthy countries as well as for its usefulness to the poor countries to which it has already lent money.

My Lords, I believe that last year, the first full year of operation of the I.D.A., they approved loans of almost 180 million dollars. That, of course, is chicken feed in terms of money loaned from the wealthier countries, but this money has been very well spent and it is setting a very good precedent for the future. The I.D.A. also has the advantage that it can accept contributions from non-members as well as from its member countries; and Sweden, I believe, has very substantially increased its aid expenditure and has given 6 million dollars this year.

I come to the questions that I propose to address to the noble Marquess. They were started in my mind by a talk I had a short time ago with a senior official of the World Bank. He was expressing some anxiety about the future of the I.D.A. I do not for one moment suggest that I am repeating exactly what he said, but I think this is the gist of what he told me. Roughly, the total capital of the I.D.A. has either been committed or is about to be committed; 250 million dollars have already been lent and another 3 million dollars are under active consideration for loans which will probably be made. This means that within a year from now the capital of this fund is likely to be pretty well exhausted, and I have no doubt that the Government will be asked what they intend to do in the very near future. I want to ask the noble Marquess three questions. Can he tell me whether he and the Government are already aware of the serious financial position of the I.D.A.? Can he say when the Government will be in a position to decide about making a further contribution to these funds? and my third question is this: are the Government already doing their best to persuade other members of this organisation, particularly the richest members—United States, France and Western Germany—to give more money? My Lords. I cannot help feeling that the sincerity of the Government's support of the World Bank will be judged more by what they give in cash than by what they give in promises.

3.45 p.m.


My Lords, there is not much that I want to say in addition to what has already been said. I should like to welcome this Bill, which I think is one which should command the support of your Lordships in whichever part of the House you may sit; but there are one or two observations that I should like to make. It is perfectly true that the World Bank and the I.D.A., about which the noble Earl, Lord Listowel, has been speaking, have done great service and, in fact, day to day they do a great service in what used to be called the underdeveloped territories but, as they did not like that very much, are now called the developing territories. However, it is no good disguising from ourselves the fact that these institutions, particularly the World Bank, have certain weaknesses. The strength is the obvious one that the noble Earl, Lord Listowel, mentioned—namely that there are no obvious national strings; in fact, no national strings at all. And they do make these very valuable surveys to which the noble Marquess has referred. The Uganda survey was recently made and I believe, although I have not actually seen it, that it is a masterpiece. But there are certain weaknesses.

First of all, the World Bank demands a guarantee from some member Government; and that is why this Bill comes before us to-day, so that we—that is to say, the British Government or the British taxpayer—may guarantee loans which, after most careful examination, the Bank proposes to make. In other words, we have to put up the collateral, which is perfectly well known in domestic banking and has been carried into the sphere of world banking. Then, the repayment has to be made in the currency lent. In the past that has usually been dollars, but, as dollars are not quite so hard as they used to be, presumably that might now be in Swiss francs or deutschmarks, or whatever particular currency is desired by the borrower. This is, or may be, a considerable hardship to the borrower. In order to service and repay the loan, he has to buy the necessary currency from the particular country in whose currency the loan was made to him through the Bank.

Then, also, they are, of course, loans. The loan has to be repaid and mainly it has to be serviced; interest has to be repaid. Just recently one of the leading figures of the World Bank —Mr. Hoffman, so far as I can recall—issued a warning note. Speaking in Geneva, he said that there was a grave danger that many territories might borrow large sums from the World Bank and be unable to go on with the projects, and that there would be a considerable number of derelict projects round the world which the various countries had not the money or the resources either to complete or to maintain. That is a very real problem in finance of this kind.

So far as the United States is concerned, there is the Agency for International Development. That also does extraordinarily good work, but there is a weakness here also. It is that the Agency for International Development, which was inaugurated about a year ago and comprises all the former agencies dealing in this field of aid, owing to the dollar stringency and to the pressure of Congress has had to make a rule just lately that all purchases by borrower countries or borrower projects have to be made in the United States or have to be spent on United States goods or services. That is a very grave restriction, of course, to the borrower. Although there may be cheaper goods or services elsewhere he cannot spend the loan on them. He has to go to the United States.

I have always told my friends in foreign countries, in Europe, America and elsewhere, that the only country which is really tackling this problem in a realistic and comprehensive way is Britain, and although we may not have, indeed do not have, as much in development as some of us would like, still we have all the agencies for loans and grants and for the provision of equity or share capital that other lending countries ought to have. These territories need not only finance, not only finance in the shape of loans which have to be serviced and repaid; they need shareholders capital, equity capital, capital that is going to take a risk. The trouble with borrowing money is that sometime or other you must repay it, and often when it is very difficult to do so. With regard to equity capital, shareholding capital, it shares in the risk, and if the project does not go quite so well then it is just too bad; the person who has part of the equity takes part of the loss.

Then, I think most important of all, there is the question of management. It is an extraordinary thing that in an industrial and commercial nation like Britain it is practically impossible, in my experience, to explain to people who have no experience overseas that one of the vital needs is management. You can have all the finance that you can obtain, you can have the finest scheme in the world, and if you have not good management you just lose your money. It seems to me a very simple proposition; it is the very A.B.C. of business; but in my experience it is practically impossible to drive that into the heads of people who are often dealing with questions of this kind. The great weakness of funds such as the World Bank is that they have no management techniques, and I was glad to hear the noble Marquess say that the World Bank are setting up a corps of advisers or specialists. Provided these people have experience themselves of management, that is all very well; but if they are to come along and blow in and blow out again, and give a lot of advice which may or may not be useful, it will not be much help. What is needed is people who know how to manage a mill, factory, farm, plantation or whatever it may be; and, believe me, such people are very difficult to get. Further you need pilot schemes, and nucleus plantations with adjacent smallholdings.

There are just one or two questions I should like to ask the noble Marquess. I was going to ask him myself about the International Development Association to which the noble Earl, Lord Listowel, referred, because there is nothing in the Bill about it and I am not sure what its status is under this Bill. When the Bill came before us, we were told, or at any rate it transpired later, that the Association had authorised capital of one billion dollars. This capital was to be subscribed by member Governments in two groups, the United States to subscribe 320.3 million dollars and the United Kingdom 131.14 million dollars. Perhaps the noble Marquess would enlighten us to-day as to how much of the United Kingdom subscription under that Bill has been made and what is the situation with regard to it.

The difference between the I.D.A. and the World Bank is a very important one. Your Lordships will remember that I said that one of the difficulties of the World Bank was that repayments had to be made in the currency of the lender. But the I.D.A. repayments can be made in the currency of the borrower. That is a very important distinction indeed. Also the actual interest rates are not so high. I should like to know from the noble Marquess, if he would be good enough to tell us, whether the International Development Association comes within the scope of this Bill. The noble Marquess says it does not. That is rather a pity. However, perhaps another Bill will come forward at some time. If what the noble Earl, Lord Listowel, says is true, the Association have completely spent their allocation, and it may be necessary for us to give them more money.

The other point is this. We are going into the East African Commission with one independent country and at the moment two Protectorates, or one Protectorate and one Colony. After October 9, we shall be guaranteeing two independent countries and one Crown Colony. Is Tanganyika already a member of the World Bank? Would the noble Marquess answer that? And is there any guarantee from Tanganyika also with reference to any loans that may be made to the East African Common Services Organisation? The second question I should like to ask is in regard to the New Hebrides; this is a condominium, as your Lordships know, the only one left, I think, in which we share responsibility of administration with France. France is a member of the World Bank. Will France also be giving a guarantee to the World Bank for any loans that may be made to the New Hebrides?

There is one final observation I would make on the Bill, because it must be remembered that we, the British Government, the British taxpayer, will be responsible, during the whole term of the loans—it may be for 20 years; it may be for any period—for the repayment of these loans, and therefore it is essential for us to ensure that the economic situation in these borrower countries is sound and that the political situation is stable; if it is not, they cannot service the loans. Unhappily, one of the aspects of independence is the fact that so often the European civil servants who have had great experience in the territories leave just before, just about or just after independence; in other words, when the country needs them most there is an exodus of skilled administrators, technicians and professional men from the particular territory concerned.

This, to my mind, is largely caused by the extreme folly of the arrangements which are made with regard to these men. What happens is that the British Government at this particular moment offer them tremendous inducements, bribes, bonuses and what you will to leave the country; so naturally—who can blame them?—those men take the inducements and go. So we have a large number of men and some women in the prime of life coming back to this country and elsewhere, leaving the countries in which their services are so valuable, going elsewhere, seeking jobs elsewhere, and, if they wish, living on the money they have received. To my mind this is almost incredible. Who on earth in his senses would at the very moment of independence pay large sums to the people who are so necessary to the country, to leave it? One would think that large sums would be paid to them to stay in it. But no; the sums are paid to leave it. This has caused, is causing and will cause tremendous difficulties in all these countries which are becoming independent and in which we shall retain very great interests, both economic and otherwise.

Of course the reason is, strange and incredible as it may seem (this is the real reason), that the Home Civil Service will not have them because in many cases they have not second-class Honours degrees. We imperil the future of these countries (because wall-tried and able civil servants in many oases have no second-class Honours degree. It seems farcical, but that is the position. They should be incorporated in the Home Civil Service. They could then stay on in those countries, and they would know their future was assured and their pension rights sustained. There would be no difficulty about their future at all. If any of them wanted to come here, well, we have plenty of places in this country where their experience would be most valuable, particularly in the Highlands of Scotland and the rural parts of Wales—not only in the Highlands of Scotland but in industrial pants as well. Their colonial experience would be most valuable in those areas, because at the present moment they are rapidly becoming derelict. The experience that these men have had in sustaining and developing the resources of Africa, of the Far East, and of the Caribbean would be most valuable in developing the resources of our derelict areas in this country.

Therefore, I say, and I ask the Government—I would beg them—in considering the whole question of guarantees, even at this late stage to look into the problem of the Oversea Civil Service, to see whether the absurd regulations which now apply to them could not be amended so that the services of these men and women which are so badly needed in these territories overseas may be retained in the future.

4.1 p.m.


My Lords, I am glad that this Bill has received such a wholehearted welcome from the two noble Lords who have been good enough to speak. I will try to answer the questions that have been put to me. First, I think I should point out to the noble Earl, Lord Listowel, that the Bill deals only with guaranteeing loans from the International Bank, and has, in fact, nothing whatsoever to do with the I.D.A. But as the noble Earl was good enough to tell me that he wished to speak about the I.D.A. I will try to help him, although I am not certain that I can answer all his questions. The noble Lord, Lord Ogmore, also referred to the I.D.A.

So far as the three countries Tanganyika, Uganda and Kenya are concerned, I hope that there is no confusion here. As I said in my opening remarks, this Bill takes care of the situation until all three countries become independent. The noble Lord, Lord Ogmore, asked me whether Tanganyika is a member of the International Bank. Tanganyika is not yet a member but has applied to become a member of the International Monetary Fund, the International Bank and the I.D.A., and we hope that shortly she will be admitted.

So far as the overall financial position of the I.D.A. is concerned, it is in fact outside the scope of what we are discussing this afternoon, but, as the noble Earl raised the question, the answer, as I understand it, is that on June 30 of this year the I.D.A. had in fact committed 235 million dollars—these are the figures that I have been given: I will check them but I think they are correct—out of the 1.000 million dollars. I think that is the position at the moment. The noble Earl will remember what our contribution was: it was £47 million. I understand that the full amount of this has not yet in fact been drawn down. The question of our making greater use of the I.D.A. was referred to. So far Swaziland has received help, as I think the noble Earl is aware. There are a number of other projects which may be suitable for help from the I.D.A. which are now under consideration.

If the noble Earl wants an overall review of the state of the finances of the I.D.A. I think he must allow me to write to him about it. He will remember that my right honourable friend the Chancellor of the Exchequer at the last annual meeting of the International Bank gave an assurance or, rather, said that he hoped that the United Kingdom when the time came would be able to play its part in making further contributions. It is, of course, also our hope that the Governments of France and Germany would play their full part. I think the noble Earl alluded to that himself. I hope I have dealt with the principal points that the noble Earl raised, although in fact they are outside the scope of what we are discussing this afternoon.

I feel I must say just one thing on the question of bilateral aid. I do not want to make a mountain out of this, but I had for three years the privilege of leading the British delegation to the Colombo Plan. I cannot quite agree with the noble Earl that bilateral aid is always suspect and considered to have some sort of political implications. I did not find that from personal experience in the Colombo Plan.

We do not guarantee the loans made to independent countries. I think that is perfectly clear. The only reason why the amendment in Clause 1 (2) has been made is because we are dealing with three countries in different stages of constitutional development who share a common services organisation. That is the reason why this small adjustment has, been made. The noble Lord, Lord Ogmore asked a question about the New Hebrides. If there were any question of a loan being given to the New Hebrides, as I think I said in my opening remarks we should act in cooperation and in consultation with the French; so that would be something which would be done together, between us.

I was glad that the noble Lord, Lord Ogmore, referred to the expansion of the services of the World Bank when dealing with the question of management. I have every reason to believe that the experts I referred to are men of the highest standing who will not just go in and come out. They will be able to stay in the country concerned for long periods and to give really helpful advice. I believe this to be a most important development.

I will certainly take note of what the noble Lord, Lord Ogmore, said, about our Oversea Civil Service, the guaranteeing of pensions and so on, but I am afraid I cannot extend the scope of this debate this afternoon to go into that matter in detail. I assure him that I will take note of the point. I do not think there were any other points of substance that were raised. Therefore, it only remains for me to commend this Bill for Second Reading.

On Question, Bill read 2a; Committee negatived.