§ 8.40 p.m.
§ Lord SEEBOHM rose to ask Her Majesty's Government whether they are fully aware of the great benefits to the United Kingdom' which could accrue from establishing a world commodities centre in London;whether they have taken into account the finance which the City have already pledged to the setting up of such a centre;and whether they will give further consideration to the proposal. The noble Lord said: My Lords, noble Lords are all aware, that the proposal to set up a world commodities centre in London with Government assistance has been turned down. The Question I wish to ask the Government therefore is this: Are the Government fully aware of the great benefits to the United Kingdom which could accrue from establishing a world commodity centre in London? Have they taken into account the finance which the City have already pledged to the setting up of such a centre;and will they give further consideration to the proposal?
§ The World Commodities Centre Committee was convened by the noble Lord, Lord Wade, on behalf of the Parliamentary Group for World Government, as long ago as December 1975. There were then, and still are, five International Commodity Councils. These are the Cocoa, Coffee, Sugar, Tin and Wheat Councils and several study groups, increased recently by Lead and Zinc Groups which have arrived here;and very large funds are and will be based in London if these ICOs and groups can be pursuaded to stay. In recent years, London has become one of the largest dealers in non-American oil. I believe it has now increased to nearly 30 per cent. of the world trade outside America and is mounting to over £250 millions a day. I give these figures to show that it would be a great pity if anything was done to destroy London as a centre of commodity dealing, with the enormous invisible exports now involved.
§ The essential function of these groups is to administer international commodity agreements, which are likely to grow rather than shrink. Several other Governments are also members of these groups and arc aware of the financial and diplomatic advantages of having all or any of them in 513 their own countries. As an example of the international implications, there are 29 member-countries in the Tin Agreement alone;so that, far from Her Majesty's Government not being able to offer financial assistance, it is our contention that they cannot afford not to do so. Vast invisible earnings are at stake.
§ Now what is this financial commitment? In another place, figures were given which I do not understand and which I consider to be completely incorrect. The original estimated cost of a suitable conference/office complex, in 1975 terms, was about £12 million. Now, it is probably in excess of £20 million. The City, at its first financial facilities meeting, which I chaired last year, agreed to a figure of between £2 million and £3 million;but I should like to say that this was only the first meeting and there was not a very large attendance.
§ I think it is also extremely important to point out that the potential finance of future buffer stock, administration of the common fund and the transfer of additional ICOs to this country all depend on appropriate accommodation. Therefore, it is worrying to know that Austria, Belgium, the Netherlands, Switzerland and West Germany are all angling for this prize fish and that most, if not all, are offering very favourable terms from Government sources. This is one reason why the problem cannot simply be passed on to the private sector.
§ My Lords, I would stress again on the financial front that a large amount of money will not be required at once as it will take several years to build and, with the contribution from the City in the form of equity at the top and some loan money at the bottom, the Government outlay is unlikely to exceed 50 per cent. of the cost and could be very much less if the City and business come up with more money. Inflation is likely to let them off the hook altogether before long. But I cannot stress too strongly—and I have said this ever since I became involved over four years ago—that this centre could be a forum for important international discussion of a very high level and a location where important North/South discussions could take place.
§ We made promises of help to the developing countries at the Kingston Conference a year or two ago;and what 514 have we done? Here is a chance to provide many of them, at relatively little cost, with something that they want. It would be a gesture which would bring goodwill into an atmosphere of frustration and disillusion. This is another reason why Government participation seems highly politically desirable. Let us not forget that the viability of these countries depends on orderly and efficient commodity markets. For some, commodity sales are their only source of income. I cannot help wondering, therefore, whether these important points have all been given proper consideration.
§ The letter to me dated 30th January from the Minister concerned referred solely to the immediate cuts in Government expenditure, with no reference whatever to the long-term financial employment and diplomatic gains;and it caused surprise and offence to those to whom the letter, when copied, was distributed. The last Government had agreed to support the project. Your Lordships can imagine our disappointment after four or five years of hard work to receive such a rebuff in such terms so soon from this Government. I read today that the Chancellor is asking for ideas on how to use North Sea oil profits. I hand him this suggestion on a plate. I could speak much longer since I feel so strongly about this matter;but the hour is late and there are other speakers with considerable contributions to make. So I end by most seriously urging Her Majesty's Government to think again.
§ 8.47 p.m.
§ Lord SHACKLETON
My Lords, I am very glad to support the noble Lord, Lord Seebohm, and I should like first to stress that this is not a party issue, except that this Government have taken a wrong decision. It took us quite a long time to educate the previous Government;and at that time I was a member of the British Overseas Trade Board and we had to work very hard to do so. We are glad that the noble and learned Lord the Lord Advocate, with his legal background, is replying to this debate because I hope that he will listen carefully—as I am sure he will—to some of the financial and other arguments. May I say that it is very satisfactory that the noble Lord, Lord Wade, has been involved, and my old friend Lord Davies of Leek, who was 515 a Member of the House of Lords Committee on Commodities, and the noble Lord, Lord Kissin, who has probably got commodities running out of his ears so much does he know about this subject.
To many this is a very esoteric subject and it is an area which is exceedingly difficult. If I may, without being patronising, I would say that I have sympathy for Ministers pursuing a policy on cuts —and I am not querying the policy;not tonight, anyway—being faced with some additional expenditure. I want to support the noble Lord, Lord Seebohm, in arguing that the figures which were put before the Government are not sound. I would first start by expressing my sympathy to the Property Services Agency. As a former Minister for the Civil Service, I know something of their problems. But they burned their fingers over the IMCO building and are, quite properly, being very cautious. But I think that the advice that may be coming to the Government is unsound;because I think the figures, for safety purposes, have been exaggerated, and I should like to show in what they have been so. The new figures are attributed to the sponsors of the scheme;and the judgment of those of us who have looked at this—and the Government have looked at this—is that these figures are far too high for the Government to consider seriously at this difficult time.
May I go into some detail, and then I will have a suggestion, which I think may be of help to the Government, as to how to process this further. The PSA estimate of Scheme 1 to cover the facilities for seven international commodity organisations is put at £20 million. I am sure even at present rates of inflation—but then they all go up together—this is too high. However, accepting this figure, half could be raised from the market in a normal way on the strength of the rents coming in mainly from the office accommodation. As the noble Lord, Lord Seebohm, has said, the City has already promised £2.7 million, mostly in the form of equity, leaving around £8 million to be found by the Government over the four years during construction.
May I at this point say that my own company has been willing to put up £50,000 towards the equity. I am not 516 declaring an interest because I do not believe that we have a financial interest that we do not share with our fellow men. The case for this is that it is in the national interest to do this. The PSA figures—and I should like to put this argument—depend to some extent on the technical understanding of the nature of the site. A site could be offered free since undoubtedly the value of the surrounding land would immediately be raised owing to the presence of the world commodity centre. Indeed, a greater contribution than £250,000 might be forthcoming from the GLC if the building were on the edge of what we now call the new riverside area. This factor alone would bring the total cost down to £16 million, and there are other provisions in the PSA specification which we are inclined to think are excessive, and the total might in fact be no more than £15 million, which would leave only £2 million for the Government to find over the four-year period. There is of course inflation;but leaving that aside, I am reasonably satisfied with the broad figures. I have discussed them with expert economists who are familiar with this.
Now let me come on to running costs. The shortfall calculated is just under £1 million per annum. This is arguably too high a figure for the Government to meet. The calculation is based on an enormous figure for rates which are charged to the project and then partly recovered. I think it is something like £1½million. This item swamps anything else under the running costs, being nearly five times the total for such things as maintenance, lighting, heating and cleaning. There is again the question of amortisation, which I acknowledge. We believe that this can be dealt with by ordinary market ways.
All these costs, apart from the rates, can be met by the revenue of the tenants, so that apart from the rates no contribution for running costs need be required from the Government. This to some extent will depend upon the location of the building. Obviously, following the IMCO example, some revenue for this purpose would come from the new organisation to meet part of the charge. But it is one that could well be met, and my noble friend Lord Seebohm indicated the Austrian attitude. The way that the municipality there have dealt with the matter is that so far from charging 517 anything at all for rates, they do not even charge rent to international organisations. If this was in the new riverside area close to the new Sheraton Hotel, where a theatre and park are planned, then many of these operating costs would be significantly reduced.
The noble Lord, Lord Seebohm, made the next point very strongly. I should like to reiterate—it is the urgency of the matter—that some feel that because certain markets, like the London Metal Exchange, have been established for so long in London, any new international commodity organisation will be drawn here, and that neither the international commodity organisations nor the markets themselves will ever leave London. However, that is simply not the case. That is where the urgency comes in. A number have gone: rubber, cotton and tea. They are leaving or have already gone. With modern communications and cities throughout the world competing, it is perfectly possible for them to do, as with bauxite in Jamaica, copper in Paris, tungsten in Brussels and rubber in Kuala Lumpur. Nothing is more certain if we do not take this initiative that commodity associations and inter-governmental organisations will drift away.
It is difficult for us to understand—this is a measure of some of our failures nationally—some of these international questions. We have relied for so long on the skill of the City and the energy of our manufacturing industry. But we now know that we are under great pressure. Commodities are not a single subject;each one is unique. Zinc is different even from lead, even though they may be found together. Therefore it is very necessary and helpful for the Government and the City to have this information on their doorstep. There is no limit to the number that one could have. I am surprised that we have not a market in frankincense or a spot market in myrrh. Perhaps we have. This is the natural thing to have in this country.
The development of this and of its value to Government, to the City and to this country cannot be overestimated, and it can be developed more effectively if the experts—the producers, the marketmen, the shippers, the consumers, the trade associations and the bankers—can all be consulted in one centre. It is difficult 518 for many of us to understand that commodities are the foundation of the international trading structure. Therefore, whether it is gold or bulk ethylene, this is where we nationally want this.
There is however the international case to which the noble Lord, Lord Seebohm, referred. It is worth noting that UNCTAD and the ILO are in Geneva. The FAO is in Rome;the international court is in The Hague, and this is where a lot of people would like them to be. We should like to put the international commodity organisations in one building. Let me give one or two figures. It has been calculated that one of the many series of UNCTAD meetings in Geneva over a period of four years has brought in about £2 million for Geneva and yet this excludes the cost of the hotel and other expenditure. A Swiss official has estimated that the economic benefit of expenditure by inter-governmental organisations in 1977 was £606 million, of which 60 per cent. or £363 million went to Geneva. It is no wonder that everybody is rushing for this.
I will not develop the wider figures of the value of this trade to the British;but what is so surprising—and I am quite sure that the Department of Trade and their Ministers will now be aware of this —is that the Government do not appreciate this. I very much dislike, on general economic grounds, hypothecating North Sea oil, as I am sure that the noble Lord, Lord Seebohm does, but, since the Government did ask for suggestions, this is one. There is the international point. We have not done enough since Kingston. We are going to have to contribute something like £500 million to the European Development Fund. This is where some of the money could be spent. We are contributing to Lomé. This could be of importance to the developing countries.
I end on this point, my Lords. There are two matters at issue. One is Government policy on public expenditure. We accept that they have a policy and that they are seeking in hard times to carry it through. The facts here have not been appreciated. I wonder whether the noble and learned Lord, the Lord Advocate, would consider either setting up an inquiry or possibly even a Select Committee of your Lordships' House. This is something that could be done very quickly 519 in order to sort out the figures, in order to ascertain whether the figures the noble Lord, Lord Seebohm, has given are right or wrong, and then they will have the facts on which to argue with their colleagues. I seriously ask the noble and learned Lord to consider that recommendation.
§ 9 p.m.
§ Lord WADE
My Lords, I am very glad to have this opportunity of expressing my support for the case put forward by the noble Lord, Lord Seebohm: namely, the setting up of this world commodities centre in London. We are indebted to the noble Lord, Lord Seebohm, for raising this subject in this House, and I think I can safely say that the whole House is also indebted to the noble Lord, Lord Shackelton, for taking part. We always give great weight to his remarks, and I am sure that the Government will take very seriously what he has said.
The noble Lords, Lord Seebohm and Lord Shackleton, have explained the nature of the proposal we are discussing tonight. In my view, it certainly deserves support and, I think, support without delay. Moreover, as I think both noble Lords have pointed out, it relates to the bringing together of inter-governmental organisations. Some evidence, therefore, is necessary of the British Government's willingness to assist. It is because of this inter-governmental aspect that the British Government's attitude is so important even though, as the noble Lord, Lord Shackleton, has shown, the major part of the cost would in all probability be borne by non-governmental sources. But our own Government's desire to welcome it, as the Government of the host country, must in my view be shown if it is to be taken seriously by bodies from overseas. I am not going to enter into the legal niceties of the obligations that already exist on the part of the British Government in relation to existing organisations here in London, because we are looking ahead and this is really a policy decision.
Before proceeding further in commendation of the plea that has been put forward by the noble Lord, Lord Seebohm, and the noble Lord, Lord Shackleton, I should perhaps explain how I personally come to be involved. As your Lordships 520 know, there is an all-party body, with members in both Houses, which is known as the Parliamentary Group for World Government. It has been in existence for over 30 years. As the name implies, it has long-term aims of an idealistic nature—none the worse for that. I have been impressed by the fact that this group has always been ready to initiate and sponsor projects of immediate practical importance. I think that is one of the merits of this group to which I have the honour to belong. It is therefore understandable that the group became concerned in subjects such as basic raw materials, the chaos that might result from widely fluctuating prices and the need for co-operation on a world scale. I think it is fair to say that these intergovernmental commodity organisations, while they cannot solve all the world's problems, have as one of their objects the stabilising of world prices. Therefore the link between the Parliamentary group to which I have referred and the proposal which we are discussing tonight is understandable: it is a natural one.
My name has been mentioned. I would merely say that a few years ago there was a meeting upstairs which was organised by the group to which I have referred, and I happened to be in the chair at that time. It soon became obvious to me that this was a matter of world interest, and also one of very real interest to Britain and the City of London. I do not think there is any need to apologise for the fact that those two interests seem to me to coincide. I am very glad to do anything I can to help the interests of my own country, and I am very well aware of the valuable role played by those who work in the City of London. But it was clear to me at that meeting that Britain would benefit from this proposal and it was equally clear that the matter was urgent. I agree with the observations of the noble Lord, Lord Shackleton, not only that it is urgent but it is really vitally important that the opportunity now presented to us is not missed—and it may well be missed if we let the chances pass by.
The noble Lord, Lord Shackleton, has explained what he means about the very real danger of the extremely valuable business in the City being lost through lack of evidence of support from the Government. The large attendance of experts at the 521 meeting upstairs that I have referred to made clear to me that there were many who realised where the future lay if we did not act speedily. Therefore a campaign committee was set up under the chairmanship of Mr. David Knox, M.P. For my part, I am glad to have played any small part, hut it is the issue that really matters.
The idea did not originate from that meeting. I think that credit for putting forward the idea goes to Mr. Harold Allen of Australia. He was the executive head of the International Tin Council and is now their special adviser. It was he who advocated the idea as far back as the autumn of 1975. Since then, there have been long discussions about the practical details and, as your Lordships are aware, there have been negotiations with the Government and, for the moment—and I hope that it is only for the moment—there has been a disappointing reply from the present Government.
One should appreciate that there is an issue of principle involved here. It is a very important matter of principle, and that really is the main contribution that I wish to make to this short debate. The principle that I see is the distinction between, on the one hand, cutting current expenditure on consumables and services which arguably might be postponed and, on the other hand, capital expenditure of a now-or-never character. I shall not enter into the question of whether or not there should be cuts, or what kind of cuts there should be. We have already had plenty of argument about that, and there will he further argument about it. The point I am making is that we are now considering capital expenditure which will, undoubtedly, bring in future income which may he considerable. This is a question of investment for the future requiring a quick decision. It is no good saying "At the present time, we cannot afford it. We cannot afford this just now, however worthy it may be". Later will, in my view, be too late and we really cannot afford not to afford it.
That leads me to say that the only explanation for not affording it is a lack of faith in the future. I should not like to suggest that that faith is lacking, but alas, I am already aware that some observers overseas are coming to the conclusion that Britain has no faith in the future, as a consequence of the attitude 522 to this proposal. Of course, I hope it is not true that that faith is lacking, but it is relevant to the issue that we are discussing tonight. The attitude of the Government has, most unfortunately, been regarded as due to a lack of faith and the sooner we put that right the better.
As to where the money should come from, I am very interested in this suggestion that there should be money from North Sea oil. That is a useful illustration of the point that I am endeavouring to make, because North Sea oil should be regarded as a capital asset and if it is disposed of we should reinvest the proceeds in other kinds of capital project which will bring in income for the future. It should he used as an investment with potential income in the days to come, particularly, in this case, in the form of invisible earnings. So that the reference to oil is very relevant.
But time is not on our side. I believe that rejection of the proposal which has been advocated this evening would be very damaging psychologically, and would certainly he shortsighted. I am not one who is given to exaggeration, but to reject the appeal that has been put forward might have very unfortunate consequences and would he a grave error. Therefore, I hope that the noble and learned Lord who is to reply will be empowered to give a favourable answer.
§ 9.13 p.m.
§ Lord ARDWICK
My Lords, the Minister's reply in another place was not merely disappointing to those who had worked on this project for some years and thought they were on the verge of success. It was also deeply unsatisfactory. But now, I think that the Government themselves are learning that it is not good enough, whenever an expenditure is to he cut or a proposed expenditure is to be turned down, for a Minister to shelter behind a few well-chosen words about the need for financial stringency. We all know that there is such a need. We all accept that the need for stringency is real.
But as parliamentarians we must be vigilant to see that in matters of saving and spending the Government get their priorities right. One day, for example, they must prove to us that charging pupils for school buses is one of the better ways of spending money on education. This evening they are asked to show us, 523 in rejecting financial support for a World Commodities Centre in its natural habitat, namely, London, that they are resisting an unjustifiable extravagance and are not, as some of us here this evening would suggest, throwing away a golden opportunity. Indeed, as we have heard, it is an opportunity that some other countries—most of them not very big countries—are anxious to seize. In fact, the scale of expenditure is small by any standard. It is a project which would increase our invisible earnings, add another gleam to the brilliant lustre of the City of London and serve an international social purpose, for the management of commodities is of crucial importance to the developing as well as to the developed countries.
This is one of those projects—not rare, yet not too common—in which expediency and self-interest are also right. My right honourable friend Mr. John Silkin, as chairman of the Parliamentary Group for World Government, has already warned Ministers that its decision may have prejudiced those Governments which are members of the international commodity organisations against supporting the location of the Common Fund in London, a rejection which surely this Government would regret, even if by their actions they had invited it. Mr. Silkin pointed out that capital expenditure on the scale which has been outlined today by the noble Lord, Lord Shackleton, and the noble Lord, Lord Seebohm, would he putting to fruitful use a tiny fraction of the revenues from North Sea oil, that precious commodity revealed to us by divine Providence at a moment in our economic history when we stood desperately in need of a miracle.
Of course, within the first month or two of their life this Government, through the voice of the Financial Secretary to the Treasury, refused to use this rich bounty for specific purposes. The battle against hypothecation was won in the days when pioneer motorists naively believed that the proceeds of what the Government called the road fund licence should be used to fund road building. Nevertheless, it seems that the Government are at least coming along with ideas about fruitfully using the wealth that is steadily accruing to us from the North Sea companies which in a few years' time, when the exploration and development allowances are used up, 524 should amount to an annual revenue of, I think, £5 billion—moreover, at 1978 prices, too.
The Minister's reply in another place on 4th February has been criticised for its harsh tone and its narrow view. Can we hope for a reply tonight that is both broader and more gracious, a reply which indicates that the Government have not yet pronounced their final dismissal of the project and that they are aware of the financial and moral importance of maintaining London as the commodities centre of the world?
§ 9.17 p.m.
§ Lord KISSIN
My Lords, I rise with some hesitation because the noble Lord, Lord Seebohm, the noble Lord, Lord Shackleton, and the other speakers have made most of the arguments that refer to the proposal which is before your Lordships. I want in the first place to thank the noble Lord, Lord Seebohm, for once more drawing our attention to what I consider to be this most important project. I have lived my life to a very large extent in the commodity field, as the noble Lord, Lord Shackleton, was kind enough to say. I am proud that the City of London, the commodity community of London and the commodity markets in London have achieved a leading position in the world. Perhaps we are the leading commodity market today.
London started as an entrepot port, but the facilities and services that we have developed over the years are unique and are constantly expanding. Today a number of the producer countries have become independent. This will change the pattern of trade. They are desirous of taking control and of directing and expanding their commodity marketing operation. There is equally a desire on the part of the consumers to find a platform for negotiation and discussion with the producers in order that the relative interests of both parties can be adequately protected.
The World Commodities Centre, as proposed by the noble Lord, Lord Seebohm, is not primarily, or I think at all, intended to give office space to commodity traders and dealers. It is intended as a centre for all the commodity government agencies of producer and consumer countries, and their joint bodies, which they 525 have established for many years, and as a place to locate them in one building, the City of London is unique. To date, London's tradition as a commodity centre has attracted some six or seven international commodity bodies and a great number of Government commodity agencies have chosen to make their headquarters in our city. I see this desire for closer co-operation between producer and trader and consumer growing and I can see the absolute necessity for providing the kind of environment that the noble Lord, Lord Seebohm, has advocated in a world commodities centre in London.
It is bound to happen. The need to create facilities where the various Government agencies and the international commodity bodies and organisations and the trading community can meet at commercial and diplomatic level is becoming increasingly urgent. We have about 20 commodity markets operating in London and more than half a dozen international bodies are located here. To give them the kind of facilities that the noble Lord, Lord Seebohm, has advocated, in one building, would create a permanent —and I repeat, a permanent—seat for these organisations and would promote a trend for new organisations to come to London and centre their functions and create contact with our trade and our commercial organisations here.
What concerns me is that the previous Government had given promises of assistance for the creation of a world commodities centre in London. The rejection of that project by the present Government could be highly prejudicial to the status of London as a commodity centre. The involvement of the Government in this project is essential and it is not only the money that is essential. That is perhaps not the essential part at all. The important element is that the bodies concerned with world commodity trade should see that the Government of this country are desirous of supporting and maintaining the position of London as a principal centre, as it stands today and in the next phase of development.
At the moment it is estimated that the commodity markets alone arc contributing to the invisible earnings of this country to the tune of some £200 million and the buffer stocks bring in another £100 million. These figures will increase materially as 526 more Government agencies concerned with commodity trade are set up in London and the service operations which are part of the commodity trading activities will increasingly benefit. It would make London the obvious location for the new UN common buffer stock which will no doubt need a large bureaucracy to administer 750 million dollars under its control. London-based banks tend to get the lion's share of the deposit and loan business arising from buffer stocks of cocoa and tin and the new UN fund, and possibly others, will add to these earnings.
What are the figures which the noble Lord, Lord Shackleton, quoted as costs against the income that is at stake? Having previously taken a positive attitude to the creation of the centre, its rejection, as I have said, could be misinterpreted by the community concerned with commodity distribution. Instead of creating a kind of UN secretariat for commodities, creating bodies that would regulate the commodity trade, we are turning away the opportunity to other countries and we are offering something that is within our grasp to countries that have never been concerned with the kind of development in the commercial trade that we are involved in. From Kuala Lumpur to Vienna efforts are being made to move the world commodity centres away from here. If this were to happen the influx of foreign officials representing the producer and consumer countries, the influx of new trading organisations and banks which hope to benefit from this trade which comes from buffer stocks and other elements of the commodity trade, would come to an end. We are likely to lose some of the organisations that have been established here over the last few years, and we might create competitive areas which would have serious repercussions on the close co-operation existing between trade and international commodity organisations that are situated at the moment in London.
My Lords, this is a short debate and I hope I have kept myself fairly short on this subject. But the issue is a vital one. When our Government forecast a bleak economic outlook for the next few years, and reduction in our export of manufactured goods, I think it is advisable to state once more the benefits that can accrue to this country from the project which has been advocated tonight. I am not one of 527 its authors, but I should like to go on record that I am one of its keenest supporters. I would beg the Government to consider the representations that have been made tonight and the consequences that might result from the rejection of this project at this very moment.
§ 9.27 p.m.
§ Lord DAVIES of LEEK
My Lords, I shall try not to reiterate the points that have already been made. Noble Lords have had a busy day and there is a busy week ahead. Consequently, there would be no purpose in repeating the cogent arguments that have been put forward. First of all, may I say how grateful I am and we are to the noble Lord, Lord Seebohm, for raising this matter? The length of the speeches is incommensurate with the value of the speeches;in other words, the value of the speeches is much greater than their length. As a matter of fact I want this debate to be an example of brevity but of common sense to the House.
I would say straight away to my noble friend Lord Shackleton that I support 100 per cent. the idea of this Select Committee quickly drawn together to reassess the position, a Select Committee in relation to a commodity centre. The noble Lord, Lord Kissin, took care to clarify the minds of people who may think this is an esoteric subject, to show what the commodity centre actually is. There would be diplomatic privileges, but there would be conference rooms, opportunities for discussion on the commodity basis and on the country basis. Britain is cramping itself with fear. In some cases articles, and economists, are talking us into the ground and over-emphasising in a frightening way the dangers and the rocks that are ahead for us.
I do hope that we shall take the same courageous approach as was taken to one of the greatest crises in London, in 1666. If you read the diary of Pepys you will know more about it than I do. There you will see that when the whole of London was burned down London did not weep about it but courageously went into rebuilding itself, at £12 million in those days. If noble Lords would go down to the World Trade Centre at St. Katharine's Dock there they would see 528 a flourishing development of international trade. Already we are opening up the river with a hydrofoil that is daily making a trip to Ostend, a 3½-hour trip. Here is the possibility, where there is already an active centre, of building up something like a world commodity centre. The jetfoil started its first trip on 29th February. I would say, like the World Trade News, that up to a point Britain is fettered a little by its own successful history.
A brief analysis of the past 300 years is sufficient to show that we are all rather ill-equipped, even for the present, and surely that is where the London Trade Centre holds, at this moment, an important position. I should like to see the idea of a world commodities centre developed, because in this country we have central banking which began in the 17th century, with know-how integrity second to nothing in the world and, despite the politics of any nation whether Marxist or Socialist, invisible incomes and services have to be used even in the Soviet Union. They have to develop these things. We cannot afford to throw away 300 years of development, banking and marine insurance right from the Elizabethan days up to today. Consequently, the world that we knew yesterday is disappearing. Simplicity has gone. The latter years of the 20th century are destined for professionals. Sterling is no longer a reserve currency. We have to understand world currency "sell in terms of other people's money and use forward exchange markets. Half of our overseas trade is no longer with the Commonwealth, but with Europe. The situation has changed. We must not allow London to disappear in the maw of this change without deciding to rebuild it.
I was delighted when, before the Select Committee—and all of the Members here made a contribution to the Select Committee on Commodity Prices which your Lordships suggested—we were given the benefit of the long know-how of the noble Lord, Lord Seebohm, in the area of insurance, marine banking, and industry;you name it and the noble Lord has practised in it. I remember him coming to us and saying:Finally, another thing I just wanted to mention—I did happen to mention it in the House of Lords, I do not know if it comes into your brief at all—"—unfortunately it did not—is the formation of a world commodity centre in the UK. There are a lot of reasons for this; 529 obviously it would be to the benefit to this country if we had a world centre here. I do believe the problem we are talking about is not going to be solved easily or quickly. It is going to take a very long time, but if we did have a world commodity centre here and most of the Commodity Associations were based in London we would have an automatic forum "—this is the point which the noble Lord, Lord Kissin, emphasized—in London where these things could be discussed in a country which is basically very interested for all sorts of reasons, not only its own economic reasons".The chairman of the committee was the distinguished noble Lord, Lord Roberthall, and the report goes on to point out the invisible earnings that our commodities are making. Up to now they are earning somewhere in the region of £200 million a year. I shall not bore the House—I have already spoken for seven minutes—by going through the matter in detail, but, I have taken the trouble to find out what, in the last 200 years, has earned Britain's bread and butter. Strangely enough, on only about five or six occasions in the last 200 years has the export of goods paid for the things we needed.
Let me make the position clear so that it is on the record and everybody will understand what I am talking about. The goods that we have sold have never made Britain solvent. I have the figures for the period of the Battle of Waterloo. For example, in 1816 the visible balance was plus £4.1 million. Invisible earnings were £15.5 million—over three times more for banking, insurance, shipping and even cotton than we were buying and selling. I shall not bore the House by going down the list;noble Lords must take my word for it. Had time been on my side, I should like to have quoted a number of those interesting figures. The man in the street must be aware that the commodity markets: insurance, banking and shipping, are not robbing him, but are helping him to put butter on his bread. We ask: Has the House considered in depth what it would mean to allow London, as a world commodities centre, to lose the grip and the know-how that it has had since Elizabethan times?
What do we ask tonight? The Unstarred Question of the noble Lord, Lord Seebohm, is:To ask Her Majesty's Government whether they arc fully aware of the great benefits to the United Kingdom which could accrue from establishing a world commodities centre in 530 London;whether they have taken into account the finance which the City have already pledged to the setting up of such a centre;and whether they will give further consideration to the proposal".That anchors me to the first-class suggestion of my noble friend Lord Shackleton, which was supported by other speakers, that we might have a Select Committee of informed people to go into the issue of commodities centres.
I want to keep within 12 minutes if possible, so I shall raise just one other matter. Despite the Brandt Report, this commodities centre would have a constructive link with the whole theory of that report. Let me leave the matter with that one sentence, which is not arid, but which well-informed noble Lords, as you all arc here, will be able to follow. I shall point out something that is not so clear. I have knocked around the world. I am interested in Korea, Japan and the Far East. Let us not regard Korea as a Third World country with the rags on its behind beating its brains out, to use a Welsh colloquialism. Its shipbuilding industry, its lorry- and car-manufacturing industries, and its know-how are on a par with those of most of the developed countries of the world. That is also true of some parts of South-East Asia, and certainly of Hong Kong. I am not wearing my Hong Kong Stock Exchange tie today, but they can teach some members of our Stock Exchange lessons now. I am interested in Malaysia, which has been mentioned in the debate, and Singapore, which is offering people comfort, succour and cheap rents to develop world centres down there, and in particular Taiwan. The figures are interesting.
We are apt to forget that over these past 20 years the world has seen a dynamic switch in the money going to the Third World;it is moving away from Government aid and going more and more into private aid. Private aid has increased from 40 per cent. in 1960 to more than 66⅔per cent. last year. In other words, there is now a greater tendency for private enterprise to develop and help developing areas. Strangely enough, that could be increased through the development of a commodities centre.
Although I should like to go further into this, I shall make just one more suggestion in passing. If we get this commodities centre, I hope that more appreciation will 531 be expressed for the work done by insurance, banking and invisible earners. Some years ago I had a little directorship in a firm that won the Queen's Award. I suppose I should declare an interest in commodities because I am linked with a platinum outfit and it was my outfit that helped to introduce the hallmarking of platinum a few years ago.
Ultimately I should like to see recognition by the British Government—which-ever party is in power—of the value to the nation of invisible earnings. I believe that a Queen's Award could well have been devised for the invisible marketeers some years ago. I have been speaking for 13 minutes. Noble Lords have had a hard day. I do not want to reiterate what has been said. However, I beg the noble and learned Lord the Lord Advocate to take note of this important little debate and see whether he cannot accept the suggestion that this matter be looked into in greater depth.
§ 9.40 p.m.
§ The LORD ADVOCATE (Lord Mackay of Clashfern)
My Lords, I should like to begin by thanking the noble Lord, Lord Seebohm, for bringing this matter to our attention, and also all of your Lordships who have participated in all that has been said in the light of a great variety—and I acknowledge this freely—of experience that is relevant to the matter. Perhaps I should also join with my celtic predecessor in commending the brevity with which these points have been made.
I sympathise with a great deal of what has been said today about the desirability of setting up a world commodities centre. On 21st May last year my right honourable friend the Secretary of State for Trade said in another place that the Government were keen on the idea and would like to see such a centre in London. I am sure that he had in mind many of the matters that your Lordships have mentioned tonight, but he added an important qualification. He said:We must try to find a way of making such a centre self-financing, without resort to the Exchequer".The reasons for this were clear. When the Government came to power, we inherited a public sector borrowing requirement which was too large and a public 532 expenditure programme which was out of control. Our major priority since then has been to put matters right. We have had to take some difficult decisions. Last year saw one round of cuts in public expenditure, and the general economic situation is such that we are now having to consider yet further reductions. It is against this difficult background—and this has been acknowledged more than once in the speeches we have heard—that we have had to weigh the costs and benefits of the proposal for a world commodities centre.
I should like first to say something about the costs, to which the noble Lord, Lord Shackleton, referred. After the general election the campaign committee for a world commodities centre put a concrete proposal to the Government. They said that a suitable centre could be built for £15 million. This would be made up of approximately £3 million each from the City and the Government, with a balance of £9 million met through a market loan. Thereafter, by implication, the centre would be self-financing on the basis of rent paid by the seven international commodity organisations which would occupy it.
The Government looked at this proposal very carefully. We carried out a detailed assessment (and some reference has been made to that already) in consultation with the City interests concerned and with the staffs of the ICOs themselves. But I am bound to say that the results were disappointing. Our revised estimates, which I understand were broadly accepted by the City people and the ICOs, showed that the centre would in fact cost £20 million. The equal capital contributions required from the City and the Government would be between £5 million and £6 million. The centre would in addition run an annual deficit on its running costs—mainly rates—of over £1 million.
This was not the full extent of the problems which these more detailed calculations revealed. One assumption involved was that the ICOs would be willing to pay rent at a level a good deal higher than they pay for their present accommodation;and I understand that it is a point on which they expressed some reservations. Moreover, all the estimates, as has been mentioned, were at current prices and made no allowance for inevitable cost increases 533 due to inflation before and during the construction period.
In sum, the project turned out to require Government assistance on a significantly larger and more uncertain scale than had been originally estimated, and on a continuing basis. It is important in this context to be clear that even expenditure of this significant order, as I understand, would have provided a centre for only the seven ICOs already based in London. A project which went further by making provision for the accommodation needs of future ICOs coming to London, and of the Common Fund, would have cost considerably more;on our estimates at least £27 million. So the figures that have been discussed so far are not referring to the sort of project with which many of your Lordships have been dealing.
I am not saying that in ordinary circumstances we would have regarded the outcome of this more considered work as necessarily ruling a scheme out completely. We might very well, for example, have wished to have further discussions with the City to see if some rather more modest scheme could be evolved or one for which the City would put up a larger proportion of the money involved. At a time, however, when we are being compelled to consider a further round of cuts in Government expenditure in what we all recognise are difficult and sensitive areas, my right honourable friend had reluctantly to come to the conclusion that it was not right for public money to be made available at this time for this project. I have sensed from the debate—indeed, your Lordships have made it very clear —that there is much disappointment at this decision, and I personally share that disappointment, but in hard times unfortunately hard decisions cannot be escaped.
§ Lord DAVIES of LEEK
My Lords, I accept what the Minister says about giving out money at this time, but may I ask him whether, when the statistics were worked out, the return on that money, including the invisible return on it, was taken into account? Is he aware that it is not just a question of giving money with no return?
§ Lord MACKAY of CLASHFERN
As I said at the outset, my Lords, in welcoming 534 the idea of a centre, I feel certain that my right honourable friend the Secretary of State for Trade was considering that very matter, along with many others, including the more general international and political matters to which reference has been made. I hope that nothing I have said suggests that we are in any way lacking in our appreciation of the presence of the ICOs in London. They complement and enhance London's major role in world commodity trading. They provide a concentration of expertise in international commodity matters, and they bring us direct benefits through the money which they and their staffs spend here.
Some alarming words have been spoken in the debate about the danger that, if the world commodities centre project does not go ahead, bad results will follow for London as a commodity centre. We do not see a basis for such a fear. The fact is that just as the ICOs bring great advantages to London, London we believe has great advantages for them. With major commodity markets here and an unrivalled concentration of financial institutions, London is a natural centre for ICOs. They also receive an important measure of Exchequer assistance, with a major proportion of their rate bill being paid by the Treasury. I am confident they will see it in their interest to remain here. I hope and believe that new ICOs, and the Common Fund when that is established, will see the advantages of a London centre also.
In summing up, I will follow the example of speakers who preceded me in their brevity, by answering the Question in the name of the noble Lord, Lord Seebohm, in specific terms. The Government have weighed very carefully the costs and benefits of providing finance for a world commodities centre. We have taken full account of the finance pledged to it by the City, but we have decided, with regret, that, worthwhile as the project is and however much we welcome it, we simply cannot in present circumstances afford to support it financially.