§ Mr. Mikardo
asked the Secretary of State for the Colonies whether he will make a statement regarding the conclusions reached by His Majesty's Government on the financial issues arising in connection with the restoration of responsible government in the island of Malta.
§ Mr. George Hall
His Majesty's Government have had under consideration the question of the financial arrangements that must be made with the Government of Malta in connection with the restoration to the Colony of responsible Government in accordance with the promise made by the Secretary of State for the Colonies in a statement in the House of Commons on 7th July, 1943. They have had the advantage of studying the able and comprehensive survey prepared by Sir Wilfrid Woods, who visited Malta last year to undertake a preliminary investi-64W gation into the finances of the local Government.
2. His Majesty's Government have also had in mind the statement made in the House of Commons on 10th November, 1942, announcing that it had been decided to seek the approval of Parliament for a free gift of £10,000,000 to the Government of Malta to be used for the purposes of restoration of war damage and the rebuilding of Malta after the war. That statement contained the assurance that "if the total liability of the Malta Government for compensation and rebuilding, after allowing for contributions from private owners, exceeds the sum of £10,000,000, His Majesty's Government will be prepared to make available such further sums as may be required to meet liabilities which are found in the circumstances as existing after the war to be beyond the capacity of the Government of Malta to meet from its own resources, having regard to all other calls upon those resources at that time."
3. The gift of £10,000,000 which Parliament approved in 1942 was based on the best estimate that could be made in the circumstances then existing, and was reasonably assumed to be adequate to meet the cost of the repair of the damage sustained by the Island at the hands of the enemy. While it is impossible to frame exact and precise estimates of the full expenditure involved, it seems clear that the original estimate is likely to be substantially exceeded. It is also clear from Sir Wilfrid Woods' Report that this expenditure would be beyond the capacity of the Malta Government to meet unaided from its own resources. In these circumstances, Malta can reasonably look to the United Kingdom for the further measure of assistance foreshadowed in the statement already quoted.
4. His Majesty's Government, despite the immense difficulties confronting them in financing their overseas expenditure, will, in accordance with their pledge, make available such further assistance, and they have been considering carefully the form it should take. It could be given either in the form of a series of additional payments agreed from time to time as expenditure is proved in the future to be necessary in order to carry out the objects of restoration of war damage and necessary reconstruction; or in the form of agreement now on a definite sum of money to be 65W drawn upon as necessary in accordance with the progress of expenditure. The first method of procedure would, in the view of His Majesty's Government, lead to many difficulties of administration and possibilities of friction between themselves and the Government of Malta, since differences of opinion would be bound to arise as regards the eligibility of particular expenditure, the ability of the Government of Malta to make some contribution towards such expenditure from its own resources in the terms of the statement referred to in paragraph 2 above, and the efficiency and economy of the arrangements for carrying out the works involved. His Majesty's Government would, under such a procedure, need to have powers of control over administration in Malta, which would be hard to reconcile with the new status. They have therefore reached the conclusion that it would be much more satisfactory to all concerned to fix now a total sum to be made available for expenditure on restoration of war damage and reconstruction in fulfilment of the promise of further assistance given in 1942.
5. His Majesty's Government desire that the sum to be fixed in this way should leave some margin for reconstruction work not strictly covered by the present definition of making good war damage and, after considering the estimates in Sir Wilfrid Woods' Report, they propose to seek the approval of Parliament for the provision from United Kingdom funds of a further sum of £20,000,000, making, with the earlier grant, a total of £30,000,000 in all. This sum will not be paid into a trust fund, as was done in the case of the earlier grant, but will be constituted by law a charge upon the Consolidated Fund. Payments to the Malta Government will be made annually against reasonable anticipations of expenditure as soon as the earlier grant is exhausted. This procedure avoids the need for annual Votes by Parliament to authorise payments from time to time, Parliamentary authority being given once and for all by ad hoc legislation which will be introduced as soon as possible. The new grant, together with the £10,000,000 already granted and the interest received or expected to be received in the future on the earlier grant, would result in there being available for expenditure a total of over £31,000,000. This sum is, of course, intended to be available not only for the payment of war damage compensation 66W but also for the repair of Government and other public buildings and for general reconstruction. It will be necessary for the Malta Government, i.e. Ministers under responsible government to submit annually audited accounts showing that the funds issued under this legislation have been expended on the purposes for which the grant was voted. The Act referred to will provide for such a requirement.
6. It will be the responsibility of the Malta Government so to frame their policy as to ensure that the funds available are used economically and to the maximum benefit of the Colony. His Majesty's Government will, of course, be ready to meet any requests that may be made by the Malta Government for technical advice in connection with the formidable task of reconstruction. During the intervening period until the new Constitution can be brought into operation, it will be the special concern of the present Administration in Malta to press on with the work of repair and reconstruction.
7. His Majesty's Government do not, however, feel that the financial assistance to be granted to Malta can be altogether limited to the purposes falling within the scope of the above grant. They realise that the local Government is faced with need for carrying out a substantial programme of public works in connection with the social services of the Colony: there is an urgent demand for more schools, better hospital facilities, an extended water supply and the like. Under its present constitution Malta could look for assistance under the Colonial Development and Welfare Act for these purposes: once responsible Government is restored, it would normally be debarred under the Act itself from benefiting from its provisions. As an exceptional measure, it is intended to introduce legislation to enable Malta, after the establishment of the new Constitution, to continue to benefit under the Colonial Development and Welfare Act. Subject to that provision being passed by Parliament, the Secretary of State would propose to allocate to Malta a sum of £1,000,000 which would be available for grants to Malta provided that suitable schemes were submitted and approved. Malta would also, of course, receive its share of the benefit from centrally controlled schemes financed under the Act, e.g., schemes of research 67W and surveys; would be eligible for consideration with other Colonies for supplementary allocations from the remaining unallocated reserve; and would similarly be entitled to share in any further provision which may be made by Parliament on the expiry of the present Development and Welfare Act in 1956.
8. His Majesty's Government trust that these decisions will find general acceptance here and in Malta as affording an assurance that the new Constitution shall not be unduly handicapped by the financial burdens thrown on this small community by its gallant part in the war. They for their part can reasonably expect that the Malta Government will spare no exertions to maintain a balanced budget, though they will be prepared, if necessary, to make some provision by way of grant-in-aid to meet the costs of administration during the financial year 1947–48 in accordance with Sir Wilfrid Woods's recommendation. They also recognise that the complete cessation of commodity subsidies at the end of the current financial year, as recommended by Sir Wilfrid Woods, might in the circumstances impose an undue burden on the Government and people of Malta. They are, therefore, prepared to meet one-half of whatever provision for such subsidies in the Malta estimates for 1947–48 is agreed to be necessary, subject to a maximum contribution of £450,000. This further assistance must be limited to the year 1947–48; thereafter, if such subsidies continue to be required, the cost involved, like that of other social services, will have to be paid for out of Malta revenue. In future years it will be for Malta by her own exertions to ensure that her revenue matches expenditure so that her independence is not subject to control by His Majesty's Government. It is clear, moreover, that if progress is to be made in the provision of desirable social services a comprehensive review of the system of taxation must be undertaken with a view not only to the raising of the additional revenue required but also to remedying the present inequitable balance between direct and indirect taxation. Immediate steps will therefore be taken to initiate such a review with the object of the introduction as early as practicable of an adequate system of direct taxation.