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Orders Of The Day

Volume 312: debated on Monday 11 May 1936

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Special Areas Reconstruction (Agreement) Bill

Considered in Committee.

[Sir DENNIS HERBERT in the Chair.]

Clause 1—(Power Of Treasury To Enter Into And Make Payments Under An Agreement)

The following Amendments stood upon the Order Paper: In page 2, line 11, leave out "written "; in line 11, leave out "the Treasury," and insert "Parliament."—[ Mr. Mabane.]

3.44 p.m.

On a point of Order. May I ask whether it would not be more convenient if I dealt with both of my Amendments together?

Quite clearly the two Amendments are dependent upon one another, and may both be discussed as one when the hon. Member moves the first of them.

:I beg to move, in page 2, line 11, to leave out "written."

I agree with the general purpose of the Bill to lend small amounts of capital to start businesses, but I am by no means sure that the Bill is the best way of achieving that purpose. The effect of my Amendments would be to substitute the consent of Parliament for the written consent of the Treasury in the event of the capital of the company being increased. It may surprise hon. Members to know that the capital of the proposed company can be increased. Those who have followed the Debates on the Bill will appreciate that there is a great difference between the popular estimate of what the Bill does, and what is in the Bill. The popular idea is that the Bill empowers the Government, through the agency of the Treasury, to establish a company with a capital of £1,000,000 and that the company shall, for an experimental period of 10 years, lend money to those who desire to set up businesses in the depressed areas but otherwise would be unable to obtain the capital. Hon. Members who have read the Bill know that the Bill does something a great deal more than that, and that it is a very obscure Bill.

The hon. Member will appreciate that that is exactly the point I am making. I am pointing out that the Chancellor of the Exchequer has been conveying to the House that the Bill is for an experimental period of 10 years and that the capital is £1,000,000. Apparently the hon. Member has not yet read the Bill, or he would appreciate that there is nothing about that in the Bill.

It is a very difficult Bill to understand. In his explanation, the Chancellor himself concurred that the Bill was extremely difficult.

Not the whole Bill, but the right hon. Gentleman particularly referred to paragraph 4 of the Schedule. Hon. Members who have read it will find it is extremely difficult to understand. I presented it, together with pencil and paper, to at least half a dozen Members of this House and asked them to explain what it meant, but not one of them has been able to do so. The Chancellor has explained what it means, and we must take his explanation as being perfectly good. In the first Debate on the Financial Resolution, the hon. Member for Seaham (Mr. Shinwell) interpreted what is now paragraph 4 of the Schedule in the way in which I myself did, but the Chancellor said he was wrong and that it meant something quite different from what I must have imagined up to that time.

If we take the explanation which the Chancellor has given, there is no doubt that the Bill commits the Treasury to an ultimate total liability of £1,000,000. That was a point that occasioned some discussion in the Debate on the Financial Resolution, and that was the point on which the hon. Member for Seaham fell. He interpreted the Bill as committing the Treasury to a liability of only £250,000, and he interrupted the Chancellor to ask if that were not so. The Chancellor said that the hon. Member for Seaham was wrong, and that the total liability was £1,000,000. It is important that the Committee should appreciate that at no point in the Bill is £1,000,000 or 10 years mentioned. The Bill commits the Treasury not merely to the liability which, we have been told by the Chancellor, is £1,000,000, although that is not stated in the Bill, but it may commit the Treasury and the State to an unlimited liability of £100,000,000, or any other figure that we may care to mention. In the Debate on the Report stage of the Financial Resolution, the Chancellor of the Exchequer said:
"But if the company started with £1,000,000 capital proves to be a success there is no reason why its operations should not be extended in the future."—[OFFICIAL REPORT, 28th April, 1936; col. 874, Vol. 331.]
On the Second Reading he went further, and said:
"I might mention, in further comment on one observation which I made on a previous occasion, namely, that the losses of the State through the guarantee which it gives could not exceed £1,000,000—that that, of course, remains true as long as the capital of the company is limited to £1,000,000, but if the capital were to be increased then of course that would also increase the possible losses on the part of the State."—[OFFICIAL, REPORT, 7th May, 1936; cols. 1904–5, Vol. 311.]
Therefore, I think we may take it, from the Chancellor's statement on the Second Reading, that, if the capital of the company is increased, the liability of the State will increase with that increase of capital; and that increase of capital beyond £1,000,000 may be sanctioned by the Treasury at any time without the intervention of this House. That is to say, if the company started with a capital of £1,000,000, as indicated by the Chancellor of the Exchequer, and if, having succeeded reasonably well, it desired that its capital should be increased to £50,000,000, the Treasury, by a Ministerial edict, could do that without asking this House, and the liability of the State could be increased to £50,000,000 without any sort of consent being asked. The first words of Sub-section (2) of Clause 1 are:
"In the event of the capital of the company being increased with the written consent of the Treasury."
That implies that the Treasury may at any time increase the capital of the company. No doubt many Members of the House would not have the slightest objection to placing such powers in the hands of the Chancellor of the Exchequer or the Financial Secretary to the Treasury, but I think the House must recollect that it is not legislating for one Parliament, but for all time. There may come a time when, unfortunately, hon. Members opposite may be on the Treasury Bench, and, if this Bill were on the Statute Book, there would be little need for the hon. and learned Member for East Bristol (Sir S. Cripps) to demand his Emergency Powers Bill, because he would have them virtually in this Measure. It is clear that, if the Labour party were on this side of the House, they could by a Ministerial edict increase the capital of the company, and at the same time increase the liability of the State, to an unlimited amount, and the House ought to be very chary of putting such powers into the hands of the Treasury. Indeed, I think it would be dangerous even for Parliament to assume to itself such powers, but I certainly do not think they ought to be placed in the hands of the Treasury. The Labour party, if they were on this side, could, by increasing the capital of the company, engage in what would be virtually State banking, and I think that the Committee ought to press the Chancellor to accept this Amendment, so that, in the event of its being desired to increase the capital of the company beyond the figure which the Chancellor of the Exchequer first proposed, he would have to come to the House and ask permission for that increase of capital, rather than that the House should find that the capital had been increased by a Ministerial edict, and that the House had committed itself to an expenditure far in excess of that which it had originally in mind.

3.55 p.m.

I approach these Amendments with the same friendly feeling as that with which I approached the Financial Resolution, but at the same time I find it very difficult to understand the Bill. It is a highly technical Measure, and I have not been able to find in it any statement of a term of years, though a term of 10 years has been mentioned. I agree with the spirit of the Bill, but I think that, as the hon. Member for Huddersfield (Mr. Mabane) has said, we want some further elucidation of the way in which the Bill will operate. The hon. Member has indicated what is in his mind and is largely in my own mind. Unless we have some assurance that the Bill contains some precautionary provision which we do not at the moment understand or detect, it seems to me that this company might take deposits of £1,000,000, £10,000,000 or £50,000,000, and convert itself into a banking undertaking, without any apparent transgression of the terms of the Bill, and we might find that, as the hon. Member for Huddersfield has said, we had sponsored a Bill which would provide that, while the company would have a capital of £1,000,000, which might be used as a reserve against losses, as in the case of a bank, it might seek, like any bank, to get deposits from private persons, and sooner or later might develop into a national banking institution. That is a point which ought to be dealt with, and, if the Chancellor would show us where we are in the dark and where the necessary precautions are taken, it would make us feel much more satisfied.

3.57 p.m.

If the hon. Member for Huddersfield (Mr. Mabane) had not been so obsessed by the prospect, however remote, that we on these benches might occupy the benches opposite, he could have found much more ingenious and practical reasons in favour of his Amendments than those which he has brought forward. It is strange that, when a Bill of this kind is brought forward with the avowed object of assisting the people in the depressed areas, both the hon. Member for Huddersfield and the hon. Member for Farnham (Sir A. M. Samuel) should forget all about the objects of the Bill, and express their fear and alarm lest it might damage some vested interest in the form of banking or other powerful interests.

I must protest against that statement. I do not know whether the hon. Member was here when the Financial Resolution was being debated, but on that occasion I was brave enough to run the risk of boring the House for half an hour in order to try to help with such views as I have as to the way in which the Bill could be made to work. I was completely in favour of it, and made some suggestions which I thought might be helpful. Therefore, I must protest against the hon. Member's observation.

I completely absolve the hon. Member from any erroneous motive; I was referring to his whole outlook on questions of this kind. He is alarmed at the possibility of this company taking deposits, but it is much more likely to take doubtful overdrafts which the banks have had on their books for a considerable time, and which they will take the opportunity offered by the Bill to transfer to the company. I notice that the hon. Member for Huddersfield is looking surprised, but this company is going to be entitled to consider applications for money, and, if a bank has on its books a £10,000 overdraft which has been causing the manager considerable anxiety for a number of years, he can refuse to renew it, and there is nothing in the Bill to prevent the banks from unloading their dubious securities upon this company, whose losses the Treasury will guarantee. The Chancellor of the Exchequer has been singularly secretive about the operation of the company. We have had no information at all about how the board of directors is going to operate the Bill. I am extremely interested in this matter, as are other Members on this side of the House. We are not enamoured of the Bill, but we do not oppose it, because we hope it will be a useful experiment; but cannot the Chancellor of the Exchequer give us some information as to what a person who is going to get an overdraft—

It is perfectly true that these Amendments together cover a wide scope, but I cannot allow the hon. Member to go into details which are certainly outside the Amendments before the Committee.

With great respect, is it not generally the practice on the first Amendment to a Clause to allow a more general discussion on the Clause than would normally be given?

That may be, but it is certainly the rule and one which I try to enforce, that in no circumstances are we to have a Second Reading Debate on a Bill that is in Committee.

I, of course, bow to your Ruling, and will content myself with having stated the reason why I consider that the House of Commons should have an opportunity of watching how this company is operated, and that the consent of the House should be given before the capital of the company is increased. I hope that in order to allay the anxiety that is felt on that score the Chancellor of the Exchequer will be so good as to give us some information as to the kind of applicant who is to get overdrafts under the Bill.

I have not consulted my party on the point at all, and I have no authority to speak for anyone, any more than the hon. Gentleman. I am giving my opinion, and I hope that the Chancellor will be so good as to tell us the kind of applicant who is to get overdrafts under this Bill, in particular we do not want to find big businesses conducting their experiments through some nominee and merely shifting part of their losses on to the State. It is absolutely vital that we should have some information as to how this board of directors is to operate in the consideration of applications for overdrafts.

4.4 p.m.

I am not certain whether to express satisfaction or sorrow at finding myself in such excellent company this afternoon, particularly the company of the hon. Member for Farnham (Sir A. M. Samuel) who, as everyone knows, is a prominent financial expert.

The hon. Member is an ex-Financial Secretary to the Treasury, and if he did not gain any financial information when he occupied that honourable post, it is a very poor outlook for the present holder of that office. At all events I am extremely encouraged to find myself in such company during the Committee stage of this Bill, and I was more particularly encouraged when I listened to the speech of the hon. Member for Huddersfield (Mr. Mabane). I ventured to suggest, during the Debate on the Financial Resolution, that the Bill was one of some complexity and certainly obscure. Now I find that that obscurity was not peculiar to myself but is common to all Members. When the hon. Member for Huddersfield suggested that the Bill might allow an increase of the capital to £100,000,000, I was more than ever encouraged, because that is precisely the kind of Bill that we on these benches desire. Our complaint against the Bill throughout has been that it is of a very limited character. On the Financial Resolution I expressed doubts as to whether the £1,000,000 was actually to be raised, and I am not quite clear now as to whether that amount will be reached. The hon. Member for Huddersfield, on the other hand, takes the view that the amount that may be raised will be much in excess of £1,000,000, and may reach £100,000,000. If there is any likelihood of the company that is to be set up increasing the capital from £1,000,000 to a larger sum, then we on these benches will be more encouraged to support the Bill.

Moreover, if it is to be understood that the capital may be increased without any unnecessary delay, without unnecessary obstacles being placed in the path, then clearly it is a Bill that is well worth supporting. We shall not oppose the provision that the Treasury may agree with the company to increase the capital. If the matter is to be left to Parliament, with consequent Parliamentary discussions and many obstacles being placed in the way, then clearly that will be of little advantage to the company in raising capital and will be of less advantage to those in the depressed areas who have made demands on the Chancellor for submission of a scheme of this kind. What I cannot understand in the speech of the hon. Member for Huddersfield is that he should impute sinister motives to the Chancellor. He seemed to suggest that the obscurity in the Bill would provide the Chancellor with an opportunity for permitting the company to raise large sums, and he accused hon. Members on the Labour benches of seeking to use their opportunities, if and when they found themselves on the Government side of the House, to proceed along those lines. Surely the hon. Member does not seriously suggest that the Chancellor would assist hon. Members on this side to commit misdemeanours, as he described them, of that sort?

I gathered from the earlier part of the hon Member's speech that I was entirely supported by him in my view. I gathered that it was part of the policy of the Labour party to provide as large sums as possible for this particular purpose, and that it might be quite proper for the Labour party, when in office, to raise such large sums.

Exactly. That is my reason for asking the hon. Member why he imputed sinister motives to the Chancellor of the Exchequer. If the hon. Member suggests that through the medium of this limited Bill we could raise these huge sums of money for the purpose of meeting the difficulties that present themselves in the distressed areas, then I say I am more encouraged to support the Bill and to withdraw much of the opposition that I expressed in a previous Debate. But I have my doubts.

I can only suggest that the Chancellor may perhaps incorrectly have supposed that the National Government will always be in office. If that were not so—

That is an assumption which is ill-founded, in my opinion. One of these days we shall occupy the Government benches, and when that time comes we shall not come forward with what I ventured to describe previously as a very piffling and trifling Measure; we shall come forward with something very much more substantial, if the problem of the distressed areas is as acute then as it is now. On the Financial Resolution I expressed the opinion that no limit was prescribed in the Bill for the operations of the company. I never could understand why the Chancellor spoke of "10 years" as the period of the company's operations, without making any reference to that period being contained in the Bill or in the Schedule. Surely there ought to be some reference in the Bill or the Schedule to the period of the operations of the company. Reference is made in the Bill to the company being wound up at some future date. If it is to be wound up when is it to be wound up? Is it to be wound up when huge losses have been sustained and the company can no longer meet the difficulty that presents itself, or is the time of winding-up to be left in the hands of the Treasury or the Chancellor? On these points we are entitled to some enlightenment.

As regards the amount to be raised, as the hon. Member for Huddersfield said, there is considerable obscurity regarding the power of the company to raise capital. It may be recalled that during the Debate on the Second Reading the Chancellor said, in reply to questions, that the sums to be raised by the company could be relent from time to time. He seemed to suggest that if in the first 12 months those who had obtained loans from the company were able to repay those loans, the money could be re-lent to other business undertakings. In the Bill I can see nothing that lends any colour to that view. Perhaps on that point, which is one of substance, the Chancellor may enlighten us.

4.13 p.m.

I hope that the Chancellor of the Exchequer may be induced to give us some explanation on a question of principle. I do not go quite as far as my hon. Friend who moved the Amendment. A good deal of misconception seems to have arisen on the Bill in the last quarter of an hour. I was very much amused at the way in which the hon. Member who has just spoken said, in effect, "Here we are; we are going to have lots of money for nothing."

Can the hon. Member produce any evidence in support of that statement? Is it not true that hon. Members on the Labour benches have all along declared that it was very doubtful whether the money would in fact be raised?

The point to my mind is whether the guarantee of the Treasury is to be given without coming back to Parliament. If the money were raised a further guarantee might be asked for a capital increase. All that we say in the Amendment is that if guarantees are to be given by the Executive in future the amount of those guarantees should not be indefinite. That is the first thing. Secondly, it is not unreasonable to ask the Chancellor to give some indication of the kind of amount that is in his mind, of the guarantee that may be required under the Bill. We do not ask any more than that. We have a very definite fear that the principle expressed in the Bill seems to allow an indefinite guarantee by the Treasury to the company that is to be formed, and to permit that without Parliament being consulted.

4.15 p.m.

I must apologise to the hon. Member for Huddersfield (Mr. Mabane) for addressing the Committee on this Amendment without having heard his speech. I do not personally share the alarm that is being expressed. My fears are entirely the other way. I am not afraid that this is going to grow into something which the House will have to check. I am afraid it is not going to do enough. This is strictly limited in one way. It is limited to certain areas. I am rather sorry that it is so strictly limited. The areas are—

I do not think we can discuss the areas defined by the Act on this Amendment.

I was only addressing myself to the argument that the demands on the company might grow to a very great extent and, if the area in which they can operate is limited, I was giving that as a reason why these fears are not likely to be justified.

It has been suggested that the Treasury control is going to be insufficient. I do not see why that should be so. I am, with reluctance, bound to admit that the Treasury control must be either in the hands which at present hold it or in those of the party above the Gangway. They seem at the moment the most likely two alternatives. I hope soon that it will be possible to provide another. I do not think that, as regards spending money on the depressed areas, anyone will accuse the present administration of having been reckless and extravagant. The hon. Member for Huddersfield was rather envisaging that the party above the Gangway might have control, but, whatever I may have thought about the possible extravagance of the Labour party, it has never taken that form. I have never supposed that they would pour out large sums of money recklessly in guarantees to private enterprise. I do not think that is part of their political philosophy at all. I think they will be more inclined to take an entirely different method. Whether the administration remains as at present or whether the two Front Benches change, I cannot see that there is any reason for the fears that have been expressed. What leaps to the eye is that by passing this Amendment we should be placing, I think, unnecessary obstacles in the way of an expansion which I should be very glad to see. Therefore, as I want the Measure to operate smoothly and rapidly, I prefer the form in which the Bill stands at present.

4.18 p.m.

I was rather astonished at the speech of the hon. Member for Huddersfield (Mr. Mabane), and also at the support he got from the hon. Baronet the Member for Farnham (Sir A. M. Samuel). I do not know whether they realise it, but they have, in effect paid a tremendous compliment to the financial stability of any future Labour Government. The hon. Member suggested that there is a possibility that Parliament's responsibility under this Bill might in the case of a later Labour Government grow to at least £100,000,000. That means that there would have to be a capital of £400,000,000.

In Clause 4 the guarantee is definitely limited to 25 per cent. [Interruption.] I am not concerned with the hon. Member's opinion. I am arguing about the Bill.

If the hon. Member had followed the Debate, he would realise that the hon. Member for Seaham (Mr. Shinwell) put the very question to the Chancellor of the Exchequer at an earlier stage of the proceedings, and the Chancellor definitely assured the hon. Gentleman that he was wrong in placing the interpretation he put upon it that the the hon. Member is now putting upon it.

I am under the impression that my hon. Friend raised the question of the maximum liability of the Government. Speaking from memory, the Money Resolution gives a figure of £1,000,000, which allows a maximum capital of £4,000,000. It is clear that the limit of the liability of the Government is 25 per cent, of the amount of the loan. However, we will leave that point to be dealt with by the Chancellor. The hon. Member suggested that we shall be able to raise £100,000,000 from private subscribers at a very cut rate of interest with only 25 per cent. guaranteed. I doubt whether any Government could raise money on the terms offered in this Bill to the extent of £100,000,000. We have far less confidence in the financial stability of the Government, because we are convinced that they will have very grave difficulties, on the terms they have offered, in raising any adequate sum of money. Our main objection to the Bill is that the Government are relying on private generosity. They are not going to solve the problem of the distressed areas by raising money on the basis of private generosity. They are going back 30 or 40 years in their methods. If they want to deal with the distressed areas, let them tackle the business on a sound basis and not drag in private generosity, which is bound to fail in any scheme of adequate size.

4.22 p.m.

I think the hon. Member for Huddersfield (Mr. Mabane) was justified in the misgivings that he expressed. Hon. Members opposite on the Second Reading complained that it was a very small Bill which did not go nearly far enough, and urged that the guarantee should be larger. To-day they say they hope they will be able to stretch it a bit further than it appears to go, but they do not think they can. The only Member who has come out hot and strong and thinks he can stretch it further is the hon. Member for West Middlesbrough (Mr. K. Griffith). He said that, while the Treasury is in its present hands, there is no fear of improper uses and, if hon. Members above the Gangway are returned, he thinks they will go on a different basis. Therefore, the only danger that appears likely to come is from the bench below the Gangway.

It seems to me that there is a case to be answered here on the part of the Government. As I understand it, the liability under the Bill as it stands would be £1,000,000, to which of course are to be added various other items for reserves, winding-up expenses and so on. It is already a pretty large sum, but by the agreement between the Treasury and the company the amount guaranteed may grow to a large extent. I will not follow hon. Members opposite in the astro- nomical suggestions of £100,000,000 which they have put forward, but it seems to me that there is a little doubt, reading the Bill in conjunction with what the right hon. Gentleman said on the Second Reading, that the amount to be guaranteed can be stretched to a very considerable figure if the Treasury takes advantage of the powers that are being granted to it. I do not believe anyone on this side of the House would like to grant money to the Government, even in the form of a guarantee, without the very strict control of Parliament. Sometimes we sit up all night haggling about a few pounds being granted for Supply, and Members get extremely agitated on this question. It seems to me equally important that the House of Commons should be exercised in its mind when it is a question of granting money, not right out, but in the form of a guarantee which the Government may be called upon to fulfil. I hope that the Chancellor will make it clear that our fears are groundless or, alternatively, that he will take such steps as to make those fears impossible of realisation.

4.26 p.m.

I am sorry that the Bill, which admittedly contains some technical provisions, should have caused so much doubt and anxiety, but if hon. Members find it obscure in its terms, I do not think there can be any obscurity about the purpose of the Bill. I think the Committee realises what is the object of bringing forward this proposal, namely, to try to get started in the Special Areas small industries which it is alleged could be started to-day if only they could obtain finance, but which cannot obtain finance because the risks incident to their starting are greater than the ordinary financial sources are willing to undertake. That being so, I listened with some surprise to the suggestion of the hon. Member for Huddersfield (Mr. Mabane) that there is a serious danger of some extension of an indefinite amount in the operations of the company which we are proposing to set up. I have been criticised several times by hon. Members opposite for taking too moderate or pessimistic a view of the operations of the company, but, I am bound to say I think anyone who has any idea of it raising £50,000,000, and finding opportunities of utilising it, is living in a world of illusion.

The operations of the company, as I conceive them, are not likely ever to be on a gigantic scale. The thing is an experiment for small businesses and I am not expecting that the Bill, even if it is as successful as the most sanguine anticipate it will be, is going to set the Thames on fire or provide any great revolution in the affairs of the depressed areas. We have been told by the Special Commissioners that the problem of the Special Areas cannot be solved by any single remedy. You have to employ a great number of different remedies, all perhaps individually of comparatively small extent, but the cumulative effect of which will, it is hoped, make an impression on the problem as time goes on. This is one of those steps.

The hon. Member is alarmed because it is provided in the Bill that the capital of the company may be further increased, provided it has the consent of the Treasury, without coming back to the House of Commons. Of course, the reason why the Bill is drafted in this form is that, if the operations of the company proved that there was a real demand for finance which could be met by a company with these powers, it was not desirable to be hampering or delaying its operations by having to come to Parliament for fresh legislation, but that the Treasury might be relied upon, with the safeguards in the Bill, and. with the well-known characteristics of the Treasury, to see that no dangerous or revolutionary experiments were tried.

Let the Committee understand what the effect of this Amendment would be if it were carried. It would not be possible to increase the capital of the company without further legislation. My hon. Friend says that he has confidence in my hon. and learned Friend the Financial Secretary and myself; but he fears what might happen if another Government had control of the Treasury. It appears to me that I should be under a security which I should have thought would be foreign to his nature. What is the proposal? How is this capital to be raised, if it is to be increased? Is it to be a grant by Parliament for really the arguments which have been adduced have almost been upon that basis. But that is not so. The new capital will have to be raised from the public. The hon. Mem- ber for Chesterfield (Mr. Benson) has criticised my statement about the terms upon which the original capital is to be raised, and says that it will be so unattractive that he does not believe that we shall get the money at all. Does the hon. Member for Huddersfield think that because the Treasury are to guarantee losses, the public will rush in in order to take over their share of the losses? Is not my hon. Friend's fear of any dangerous increase in the liability of the Treasury really met by the fact that, before the guarantee of the Treasury comes into operation at all, you have to persuade the public that it is worth their while to run the risk of loss as well?

Will the right hon. Gentleman clear up the point which was raised by the hon. Member for Chesterfield (Mr. Benson) and myself, and which is disturbing many of us, namely, whether the Treasury guarantee is for £1,000,000 in the case of the £1,000,000 company, or £250,000. The Chancellor of the Exchequer said that as the company continued to function the losses would accumulate, but that they could not exceed the total amount of the capital. Does the limitation of the amount of loss exceed that sustained on the whole process? The hon. Member for Seaham (Mr. Shinwell) said very definitely that the liability was one of £1,000,000, and not £250,000. I ask for information on the point, because many of us are rather disturbed about the matter.

I was about to give some information on the subject, as there seems to be some differences of opinion and doubts, which I wish, before I say anything about that, to point out to the hon. Member, that it is really not relevant to the argument I was just then putting. Whether the Treasury's ultimate liability amounts to the total amount of the capital or to four times the capital, the fact still remains that losses may have to be found not only by the Treasury, but also by the public. The public are not going to supply the money if they think that they are going to lose it. I agree that, if the public thought that the party opposite were likely to be in power, it would still further increase the risk.

My anxiety on this Bill would have been considerably lessened from one point of view if it really had been the public who were to put up the money, but we know that the Chancellor of the Exchequer has had conversations with certain banking circles, probably with the Governor of the Bank of England, and that the money would not be scrutinised by the public but by the banking interests, and the same considerations would not apply.

The hon. Member evidently knows a lot more than I do. I was not aware of that, and, in my opinion, the bulk of the money will be put up by the public.

To return once more to the point as to what the ultimate liability of the Treasury can be, of course, the liability of the Treasury cannot be more than the capital of the company for the time being. If the capital of the company is £1,000,000, then the Treasury cannot lose more than £1,000,000. I am speaking of the effects of the guarantee, and not of the £20,000 a year for administrative expenses or the £100,000 contribution to reserve. But, according to the guarantee of the losses of a concern, the liability cannot be more than the original amount of the capital. The hon. Member opposite does not quite appreciate that the capital can be lent over again as it is repaid. That which has been lost cannot be loaned over again, and the total amount cannot be more than the total amount of the original capital. Therefore, if the capital is increased, the amount that can be loaned is increased, and the amount of liability will be increased pari passu. The possible liability of the Treasury in that case would be the amount of the increased capital.

This is the point which troubles the hon. Gentleman the Member for Huddersfield (Mr. Mabane) and myself. If the total capital to be raised by the company, irrespective of any question of re-lending, is £1,000,000, and the guarantee provided by the Government is 25 per cent. of the total capital to be raised, surely, the liability' of the Government is then £250,000. Is that not so? Why does the right hon. Gentleman say that if the total capital to be raised is £1,000,000, the liability of the Treasury is £1,000,000?

If the business undertakings who borrow money from the company and set up their various establishments repay the loans, then the company can use those repayments for the purpose of assisting other business undertakings to establish other industries. That is true? Even if that is so, the total capital at any given moment, in spite of the repayments, can only be £1,000,000. Surely that is so?

The nominal capital can only be £1,000,000. It is a revolving credit over and over again. Losses may be made the second time it is loaned or the third time it is loaned.

But if the amount of capital, even in spite of the re-loaning and repaying processes, remains £1,000,000, the guarantee of the Government, which is 25 per cent. must be a fixed figure of £250,000. I cannot understand it.

I am sorry, but perhaps the hon. Member will have another go. If I draw his attention to the last words of paragraph 4 in the Schedule he will see that it reads:

"in respect of the company's first loans and the sum so payable in respect of the company's additional loans shall neither of them exceed one quarter of the amount of the loans."
If you loan £1,000,000 four times, you have loaned altogether £4,000,000, and a quarter of £4,000,000 is £1,000,000. Does that make it clear?

If you loan £1,000,000 four times, you clearly would have loaned £4,000,000, but if the capital of the company is, as the Chancellor of the Exchequer says, £1,000,000, how do you loan £1,000,000, which is the capital of the company, four times?

The Chancellor of the Exchequer can loan £1,000,000 four times, but paragraph 4 of the Schedule provides the first £1,000,000 loan and the second, and there is a 25 per cent. guarantee in respect of the loss on each. If you have your £1,000,000 paid back, there are no losses on that sum, but you cannot re-loan the £1,000,000 until the first loans have been paid back. Surely that automatically wipes out any guarantee in respect of that particular £1,000,000, and the guarantee on the second loan is a second guarantee.

The hon. Member for Chesterfield takes a technical interest in these questions, but the first £1,000,000 is expressly provided as a transaction in itself. But there is not the same distinction made between the second, third, fourth or any other subsequent £1,000,000.

Surely the £1,000,000 used is borrowed from the public and the guarantee is to the public. What happens to the £1,000,000, or how it revolves is no concern of the public until they want to get back their share of it which they have loaned. That is how I understand it. If at the end of all these transactions the whole of the £1,000,000 has been lost, are we to understand that the £1,000,000 is guaranteed to the public or even at the end of the transactions, when it has revolved a great many times and the loans may have totalled more than £4,000,000, will the public be entitled to more than £250,000, the 25 per cent. on the first £1,000,000?

May I make an effort to see whether I can understand this conundrum. Suppose that £250,000 were lost as the result of the first £1,000,000 which had been loaned. There would then remain £750,000 to be re-loaned. Suppose that sum of £750,000 were loaned and that 25 per cent. of it was lost. I think that the hon. Member for Seaham (Mr. Shinwell) will see that we should have already lost over £250,000, although never more than £1,000,000 had been loaned.

Perhaps I may be allowed to finish my observations after this conversation. I am obliged to my hon. Friend, and perhaps it is clear from the examples which he has given how this is going to work. The only other observation I want to make is that it has been commented upon that there is no mention in the Bill of the 10 years' life of the company, which I mentioned when moving the Second Reading. Some hon. Members thought that either I ought not to mention it, or if I did mention it, it ought to be in the Bill. It was not put into the Bill, but I thought that it was advisable to mention it because it was necessary in the Memorandum of Association that there should be a provision limiting the life of the company, and that the company should be wound up not later than a certain date. Although, as I explained, there would be a limit to the life of the company, if the company were very successful it would be possible to come again, not to the Treasury this time, but to this House to obtain further legislation to prolong the life of the company. It is put in t there in order that there should be some guarantee to shareholders and that the Treasury should not be under liability.

It is difficult for many of us to understand this matter, but I wish to put a point which is troubling so many of us, and which may quite alter our attitude to the Amendment. Is it possible for those who subscribe the capital to this company to lose 75 per cent. of their money, or are they quite certain that they will not lose any of it? That, in a nutshell, is the position which is troubling us.

4.44 p.m.

I am really amazed at the inartistic approach of the Treasury to this matter. This seems to me to be the position. If the Treasury want to guarantee a further loan they may do so whether this House wants them to do it or not. It would then be administered by the Treasury, and the only way to deal with it would be to move to reduce the salary of the Chancellor of the Exchequer of that day. If, on the other hand, the Treasury do not want to give a fresh guarantee, but Parliament wants to do it, then, under the point raised by the hon. Member for Huddersfield (Mr. Mabane), if the Treasury say, "We are not going to do it," the only way to deal with the matter would be to promote a fresh Bill and go through all the various stages that we are going through with this Bill. It is really giving statutory recognition to the position which the Treasury occupied when Lord Snowden was Chancellor of the Exchequer, and which some of us had to put up with in supporting him when we sat on the benches opposite. I imagine that we had quite enough of it in those days, and I for one do not welcome this way of re-stating it.

I am not convinced by the answer which the right hon. Gentleman has given to the hon. Member for Huddersfield. May I put to him again the question that I addressed to him before? I understand that this money is to be raised from the general public. The right hon. Gentleman assured us that he believed that it could be raised from the public, and he has repeated that assurance this afternoon. Say the public are willing to lend the company up to £1,000,000. Then the company, I suppose, will go away and trade with it, like the servants in the parable. When the public return to demand their talents back, they will find that their talents have been wrapped in a Parliamentary napkin and that they will be handed back to them whole—or will they only be guaranteed one in four of them?

We appear to have had from the Chancellor of the Exchequer, who is usually so devastatingly clear, two contradictory answers. Sometimes he appears to say that they will get the whole £1,000,000 back, and at other times he says that they will lose £750,000. The example given by the hon. Member for Gravesend (Mr. Albery) did not really help us very much, because it is no great concern of the public how many times their £1,000,000 is loaned out by the company. They will have lent their £1,000,000, and what they will be interested in, and what we are interested to know, is whether the lenders of the original £1,000,000 are to be guaranteed £250,000 or are they to be guaranteed the full £1,000,000? On the money they lend they are to get interest and they are to have a guarantee of repayment. Are they guaranteed full repayment, or are they only guaranteed -one-fourth? If they are guaranteed the whole, where does their prospective loss of £750,000 come in?

4.48 p.m.

Is it possible that under this Bill the lenders will lose nothing and get the whole of their capital back, while the Treasury will have to find a guarantee of 1,000,000? I think that is the point that has been raised. The question is whether the lenders will get their whole £1,000,000 back and the Treasury in certain circumstances will find themselves having to provide £1,000,000.

4.49 p.m.

The House seems to have been left rather more confused than it was before. It may be that the Chancellor of the Exchequer could say, in the words of Dr. Johnson, that he can give his interlocutor arguments but not the intelligence to understand them. Whether it be lack of intelligence on the part of the Committee or lack of lucidity in the Chancellor of the Exchequer's explanation, or in the proposals, it is a fact that we are more confused than when we began. Some of us are beginning to wonder in what circumstances the Government can lose any money at all, except in proportion as the whole scheme completely fails. Apparently, what is to happen is that the company is to raise £1,000,000 of capital from the public, and it will use that money in order to finance in the special areas small industries, which, ex hypothesi, have not been able to get advances in the ordinary way because of the additional risk involved. If it should turn out that those small businesses succeed and there is no loss, in those circumstances the Government will not be called upon for its guarantee, and its expenditure is limited to the administration expenses from year to year and the winding-up expenses in due course. But suppose those small businesses should fail, then the Government will provide 25 per cent. of the money that is lost.

Therefore, what the Government are really saying, in the final analysis, is that some attempt ought to be made to finance small businesses in areas which, ex hypothesi, are not likely to succeed in getting the money on their own resources, and provided the general public will contribute 75 per cent. of any losses that may be made the Treasury will contribute 25 per cent. If that is really the proposal that the Government are making, then, although I have no right to speak for my colleagues, and I speak only for myself, it seems that we shall have to consider even the amount of support that we have given to the Measure so far.

4.52 p.m.

I listened with care to the explanation given by the Chancellor of the Exchequer as to the maximum liability of the Treasury and, with the greatest diffidence, I feel bound to say that it appears to me that the right hon. Gentleman does not really understand the working of the Bill. Take the £1,000,000 lent in the first instance. Suppose nothing is lost and the £1,000,000 which is loaned out comes back. That process can be repeated indefinitely and there will be no loss to the Treasury. Take the other eventuality. You lend the £1,000,000, and you lose, say, £100,000. The loss to the Treasury in that instance will be £25,000. The company will now have £900,000 left, and they lend that again. Suppose they lose another £100,000. Again, the Treasury will lose £25,000, and so on until ultimately the whole sum is lost. Ten times £25,000 is £250,000. I cannot see how any other possible explanation can be given of the effect of the arrangement as stated in the Bill. In paragraph 4 of the Schedule, there is a limit of the liability of the Treasury to a total amount of £250,000; it may be less, but it cannot be more. It does not matter whether the capital is lent once or 20 times over.

4.54 p.m.

The hon. Member opposite has been trying to elucidate the matter, but it seems to me that each hon. Member who contributes to the Debate contributes something to the confusion. I am not certain whether I shall avoid doing that myself. As I understand paragraph 4, it lays a responsibility upon the Treasury to meet losses of capital which exceed the amount of reserves, with a limit as to the responsibilities of the Treasury not exceeding one-fourth of the amount of the loan. One-fourth, therefore, is the maximum to which the Treasury is committed. If on the first turnover of the £1,000,000 one-fourth of the capital is lost, there will be no reserves available to meet that. The company will have received nothing, and they will have lost one-fourth of the capital. Who is to meet that loss? Presumably, the Treasury. If the Treasury make good the loss, then the £1,000,000 is once more intact and ready for its second turnover for lending purposes. How long could this procedure go on? The Chancellor of the Exchequer suggested that the final obligation of the Treasury is £1,000,000. Therefore, I presume it could only turn over four times, but it seems to me that it could go on so long as the wheel was there.

4.56 p.m.

My hon. Friend has brought forward a very relevant point. The question at issue is the Treasury safeguard as regards capital raised and the Treasury liability as to the amount of money lent or lost. It, therefore, becomes necessary to ascertain how much money this company can actually lend, and I should like to know from the Chancellor of the Exchequer whether the company is to have powers to borrow. If they are to have powers to borrow, then they can lend the amount of their capital not once nor twice but seven or eight times, and in proportion to the amount of capital lost by these loans, perhaps, £10,000,000, the Treasury would be liable to repay 25 per cent. of those losses. Much of the confusion which is arising is not due to the stupidity or obtuseness of hon. Members, but to the fact that the Bill is drafted in an extremely vague way and that we have not before us the memorandum or articles of association of the company which is to operate the Bill. It would have been a splendid thing if we could have had the memorandum and articles of association laid before us. Unless we know whether the company is to be able to borrow or not we do not know how much they will be able to turn over their capital in the way of losses.

The Chancellor of the Exchequer in reply to me said that it was not the banks who would put up the money, but the public. There, again, there was some confusion of thought in the right hon. Gentleman's reply, because everybody knows that what will happen will be that the banks will underwrite the capital and the public will then be asked to subscribe it. The underwriters' responsibility is only to satisfy themselves that the, money is going to be subscribed. Once the money is subscribed the underwriters are discharged from all their liabilities and in many cases also from their interests in the company. It will be then for the people who have subscribed the money to supervise the operations of the company. The scrutiny of the underwriters in guaranteeing the subscription of the money will be no safeguard against malpractices in the administration of the company. We have no safeguards whatever on that score.

That brings me back to the remarks that I previously made, which were intended to register the fact that the Chancellor of the Exchequer has given us no information as to how this company wilt operate. We do not know what type of applicant there will be, nor how much public money the company can loan, and we do not know to what liability the Treasury is committed. We ought to have some fuller explanation before we proceed to any further discussion.

5.0 p.m.

There seems to be only one thing on which everybody is agreed, and that is that the Chancellor of the Exchequer does not understand the Bill and could not explain it if he did. It is rather discouraging. One difficulty, I think, which has arisen is that hon. Members do not altogether realise that the 25 per cent. which is the limit on the liability of the Treasury is not 25 per cent. on losses but 25 per cent. on loans. It is not quite the same thing and it makes a difference in understanding what are the prospects. The hon. Member for South Shields (Mr. Ede) said, I think, that I had given contradictory replies. The replies I gave were different, it is true, but they were in reply to different questions. The answer to any question as to what is the ultimate liability of the Treasury depends upon the assumption made in the question. If you alter the premises you must also alter the answers, and it does not mean that the answers are contradictory.

My hon. Friend the Member for Colchester (Mr. Lewis), who seemed to have some doubt as to my understanding of the Bill, said it was quite clear to him that the Treasury could not possibly lose more than £250,000, because if they lost £25,000 a year for ten years that would make £250,000. That is quite true on the assumption that they are going to lose £25,000 a year. If they did lose £25,000, and lost the same amount ten times, it is quite true by mathematical calculations that you arrive at a loss of £250,000. But how does he know they would only lose £25,000 in one year? Suppose they lost £100,000. If you make these assumptions you can work out all kinds of different results. The ultimate respective liabilities or losses of the Treasury and the shareholders will depend upon the number of times that the capital is lent and the losses upon that capital. The hon. Member for Chesterfield (Mr. Benson) put a question which I think I can answer so that anybody can understand. He asked whether it would be possible that the Treasury in the end might have lost the whole £1,000,000 and the shareholders might have got the whole £1,000,000. My answer is that that is possible. It is conceivable.

Suppose, for example, the first £1,000,000 is lent and no loss is made upon it. That is a single transaction and not a transaction to be aggregated with any other. That £1,000,000 may be lent again twice or thrice or four times. Let us suppose that the £1,000,000 had all been repaid without loss. It is lent again a second time and again repaid without loss. It is lent a third time and again repaid without loss. Then it is lent a fourth time and the whole of it is lost. The total amount of the loans, not the losses, leaving out the first transaction, will be £4,000,000, and 25 per cent. of the loans is £1,000,000. That constitutes the amount which the Treasury can lose. In that case the Treasury would have lost the whole £1,000,000 and the shareholders would have their £1,000,000 still in hand. I do not think that is very likely to take place. That is not how it is going to work out in practice. Hon. Members will see that there may be every kind of variation between that and other kinds of losses. All I can say is that this is the maximum amount the Treasury can lose—£1,000,000£unless the capital is increased. Short of that the losses may be divided between the Treasury and the shareholders in almost any conceivable number of proportions.

5.8 p.m.

I am sorry to trouble the House again but a very ingenious red herring is drawn by the hon. Member for Seaham (Mr. Shinwell). The point is not whether more than £1,000,000 can be lent or whether the Treasury is going to lose 25 per cent. The point of the Amendment is this: Suppose the Treasury wish to increase the capital still further; then we think the Treasury should come to the House of Commons and ask for further guarantees. I do not wish to labour the point but it is a question of principle. We should not allow the Treasury to grant further guarantees without knowing how far they will go. The guarantees might be subject to political control in the future by a Chancellor of the Exchequer who might have large ideas and try to stretch the provisions of the Bill to the maximum possible. May I ask the Chancellor of the Exchequer one question? We know that guarantees can be granted by the Treasury on behalf of the company in respect of loans to Dominions and Colonies and in respect of local loans and loans of that nature. Is there in fact any precedent for giving the Treasury full power to grant guarantees to a private company or a public utility company which is to lend out the money again to various small people? Is there a precedent for anything of that nature?

As far as I know there is no precedent for it; it is a new thing altogether.

5.9 p.m.

In view of the very lucid explanation furnished by the right hon. Gentleman it appears to me that it might be desirable for the hon. Member for Huddersfield (Mr. Mabane) to withdraw the Amendment. Before it is withdrawn, however, as the hon. Gentleman who has just spoken has attributed to me a responsibility for raising a red herring, may I say that if he refers to the Debate on the Financial Resolution he will find that I postulated the precise point that has now been cleared up by the right hon. Gentleman I pointed out that it was likely, if the Treasury provided a guarantee of 25 per cent., that the total amount of capital raised throughout the operations of this proposed company would be £4,000,000. If the right hon. Gentleman on that statement had given a clear and unequivocal reply we might have been saved all this confusion.

I would like to apologise to the Chancellor of the Exchequer for having cast doubt on his apprehension of the Clause. He has shown the Committee quite clearly that, as we thought, the maximum liability might in fact go up to £1,000,000. What I do not understand is why it stops at £1,000,000. He said the money could be lent four times over. If it was lent eight times over the liability would be £1,750,000.

Amendment negatived.

5.10 p.m.

I beg to move, in page 2, line 18, at the end, to insert:

"but in any case no consent to an increase of capital shall be given or any modifications of an agreement made that would have the effect of increasing the total liability of the Treasury beyond the sum of two million pounds."
I want to ask the Chancellor of the Exchequer to give Parliament a right to determine whether or not there shall be an increase in the capital of the company. May I ask whether he regards any more favourably than before the suggestion to limit the increase in capital, so that in no case shall the total liability of the Treasury go beyond the sum of £22,000,000? If he is not prepared to accept the sum of £2,000,000 would he be prepared to accept any limit whatsoever? Capital might be increased carrying with it a potential liability for the Treasury, and I think we should be careful, before parting with the Bill, to see that it does not give the possibility of the liability of the Treasury being increased to an unlimited amount.

5.11 p.m.

I hope the Chancellor of the Exchequer will consider whether he can accept this Amendment. It would go far to remove some of our misgivings. Indeed I think the insertion of a specific amount in the Bill would remove our remaining fears altogether. What we are afraid of is that at some future date a Chancellor of the Exchequer may decide on a certain line of policy and may decide to extend the amount of this guarantee. If the amount of £2,000,000 is specified we shall know that the Bill when it becomes an Act will be carried out as Parliament at present intends it to be carried out and that it could not be stretched.

The Chancellor of the Exchequer has just stated that there is no precedent for the manner in which this Bill is drawn and we have always understood that the whole thing is an experiment. It seems to me that it is only reasonable that Parliament itself should have the right to decide, after a certain amount of experience, whether the experiment has been successful or not.

I hope the Amendment will not be accepted. I really think there is no reason for hon. Members' fears. After all if, as this experiment goes on, it is found that the money gets lost and that there is no success, it would try up by itself. The public would not find the money. If it is a success and the money can be placed out to good advantage, why should we restrict it? If it is going to be a success—and I should very much like to see that—then the more we can encourage these industries the better. If there is any loss it will correct itself. There is no reason for trying to put constraint on the scheme before it has even had a chance to start.

5.13 p.m.

It seems to me that no limit should be placed on possible expansion. As has been said, expansion depends almost wholly on the success of the undertaking. If success is achieved no hon. Member in this House would seek to place any limitation on the company's operation. My own view, for what it is worth, is that it is extremely unlikely that the liability which will fall upon the Treasury will reach anything like the amount suggested in the Amendment. In view of that I think the Amendment should be accepted.

5.14 p.m.

I do not know whether some of this money is going into buildings or if money is to be issued in financing month to month production, and purchases and sales. If a large proportion of the £1,000,000 goes into buildings or into machinery or stock you would come to the limit of the amount and you would require expansion. I do not take exception to the Bill in any shape or form, but when hon. Members talk about limit and expansion we come to question what the limit is and what that expansion is for. In the Preamble to the Bill it says:

"To obtain financial facilities from banks or financial institutions."
Those who have to deal with commercial questions know the difference between providing fixed capital and short-credit; that is to say whether capital or the credit is required as fixed capital or for current trading facilities. A new business starting in a depressed area may say that it wants money for buildings and machinery, or that it only wants money to keep production and sales financially liquid, so that it is able to find money to produce and while its goods are being turned again into money by the retailer; or it may need both types of help. We ought to know what the Chancellor of the Exchequer has in mind; whether the money is to go into buildings and machinery or is to be used to provide financial facilities for these businesses; whether it is going to be used as fixed capital or for revolving credits of a few months. Then we should know how to interpret the expressions used by the hon. Member for Seaham (Mr. Shinwell).

In any case payment to the Treasury must be on the winding-up of a company. The fund may last for 10 years, that is the extreme limit, and unless the company has used its resources we may be without any information as to what liabilities the Government have incurred up to that time. We may not be able to find out the liabilities of the Government until we come to the winding-up of the company.

5.18 p.m.

I hope the Chancellor of the Exchequer will elucidate the reference to the 10 years. The liability of the Treasury seems to depend on the number of times the capital is lent and repaid.

Yes. The limit is set by the number of times the capital is repaid. If the company is to be wound up in 10 years it means that the money will only be lent once or that it will be lent over short periods. If we desire to start new businesses in distressed areas the idea that the capital must be repaid rapidly over a short period is going to militate very strongly against firms asking for help. The knowledge that they will have to repay the capital rapidly will prevent businesss being started where, if capital was found over a considerable period, they might be started. I hope the Chancellor will not accept the limit of £2,000,000. It would mean that there could be no increase of capital by the company of more than another £1,000,000 over and above the first £1,000,000, and if the Bill it to be a success—of that I am sceptical—it will be a grave mistake to limit its operations to £2,000,000.

5.21 p.m.

The hon. Member for Huddersfield (Mr. Mabane) is not wedded to the figure of £2,000,000. Like many of us, he thinks that there is something to be said for a limit. This House in the past has objected to giving an unlimited authority to the Government to spend money on any particular object, and as a matter of principle, a limit should be put in the Bill. I hope the Chancellor of the Exchequer will reconsider this matter and at a later stage put some limit in the Bill. If the right hon. Gentleman visualises circumstances in which £2,000,000 can be used he can put his limit as high as £5,000,000, but I think he should put some limit in, as Parliament does not like to give a blank cheque to the Government for any particular purpose. The suggestion has been made that if the experiment is a failure and money is lost it will automatically prevent other money coming forward. That does not quite cover all the possibilities. The thing may at first run on a small scale and money may go out and come back, but if it were suddenly to expand on a large scale the money might be lost. Many small companies have been carried on successfully for years, and then when they have been greatly extended great losses have been incurred. Such circumstances might arise in this occasion, and I hope the Chancellor of the Exchequer will put in some limit in order to satisfy the principle.

5.23 p.m.

There is a practical difficulty which makes it impossible for me to accept the Amendment, but even if it did not exist I should not feel disposed to recommend the Committee to accept the Amendment. It is not necessary, for the reasons I have already given to the Committee at some length. In the speech of the hon. Member for Colchester (Mr. Lewis) I detected a feeling that the Committee is being asked to guarantee that the Treasury will find money for an indefinite amount in the future without having the specific authority of the House for so doing. This is not a parallel case to one in which commitments are being undertaken on behalf of the Government. When you place contracts for armaments over a period of years you have a guarantee behind you. Here the public have to supply the money, the public will run considerable risks for practically no reward, and you may be quite certain that they are not going to run these risks indefinitely unless the prospects of the work to be done by this company become much more rosy than I reckon them to be at this stage. I think it would be objectionable to put in a high limit because it would encourage people to think that £5,000,000 is all that we are aiming at.

I do not want to prophesy about the future. Let us try the experiment on the limited scale we are suggesting to the Committee and see sow it works. It will then be time enough to extend it. The hon. Member for Ecclesall (Sir G. Ellis) said that there will be no opportunity for the House for 10 years to find out what is going on. He has forgotten the point, and the hon. Member for Huddersfield (Mr. Mabane) has forgotten it, that the liability of the Treasury is not confined to the 25 per cent. losses on loans. There are other contributions by the Treasury. There is a contribution to reserve and also an annual contribution to the expenses, and as this annual contribution will have to be voted there will be an opportunity every year for the House to revise what is being done and ascertain the position of affairs. What this annual contribution will ultimately be we cannot say. It is impossible to say that the capital of the company shall be such as will limit the liability of the Treasury to a given amount. The £20,000 annually has to be taken into account and the ultimate obligation of the Treasury is impossible to foresee.

I thank the Chancellor of the Exchequer for his explanation and I quite recognise that I had forgotten the £20,000 to be paid yearly, which might come to a very substantial sum over a number of years. If we can alter the Amendment to avoid that difficulty and provide that the increase of liability should refer only to an increase of capital, would it be more acceptable to the Chancellor of the Exchequer?

I thought I had made it clear that although there was a difficulty in this matter that even if the difficulty did not exist I should not be able to accept the Amendment for the other reasons I have given.

Amendment negatived.

5.27 p.m.

I beg to move, in page 2, line 21, at the end, to insert:

"and such agreement or agreements shall have effect if no resolution to the contrary is passed by Parliament within a period of twenty-eight days."
I continue my endeavours to secure for Parliament a little more control over the operations and procedure of this company. Sub-section (3) of the Clause reads:
"The Treasury shall, as soon as may be, lay before Parliament a copy of the said agreement and of any further agreement by which it is modified."
If this House does not approve of the agreement or any particular term in the agreement, it would have to proceed by way of Prayer, and that is a difficult procedure for which time has to be found. I am suggesting in the Amendment to add the words:
"that any such agreement shall have effect if no resolution to the contrary is passed by Parliament within a period of 28 days."
That is a negative way of giving effect to the agreement. There will be some matters in the agreement, when it is finally made, that Parliament should be able to discuss. It is a very modest proposal, and I hope that the Chancellor of the Exchequer, having resisted my previous efforts to secure a greater degree of control to this House, will make this small concession, so that Parliament may have an opportunity of discussing the terms of the agreement entered into between the Treasury and the proposed company. As the hon. Member for Ecclesall (Sir G. Ellis) has said, it is important that the House should know the annual position as between the company and the Treasury. Many hon. Members, I am sure, will like to make it a condition of the agreement that the company should reveal at the end of each year the liability of the Treasury at the moment of the compilation of the account. Would it not be a good thing if Parliament had the chance to suggest, or indeed, to exercise pressure to see that a condition such as that is included in the agreement? I hope that the Chancellor will be a little more yielding on this Amendment.

5.30 p.m.

We on these benches have expressed criticism of this Bill, although at the same time we have intimated our decision to accept it; but if it is to be passed by this House eventually, we desire that no restrictions be placed in the way of the company's operations. The company must be given a fair chance to show what it can do. Therefore, in our submission, if Parliament is from time to time to have the opportunity of raising issues relating to the operations of the company, it may have the effect of restricting the company's activities and may also have an injurious effect so far as the raising of capital is concerned. For that reason we do not intend to support the Amendment.

On this head I would like to ask the right hon. Gentleman whether he could furnish the Committee with some information. May we take it from him that, as regards the original memorandum of association which relates to the agreement entered into between the Treasury and the company to be formed, the House will have an opportunity of voicing its opinion on the matter? From the speech of the hon. Member for Huddersfield (Mr. Mabane), I gathered that he desires that any subsequent modifications of the original agreement should, if necessary, be discussed by this House. That may be desirable, but it seems to me that the right hon. Gentleman's reply on the previous Amendment covered that point, because if there is to be an annual opportunity of discussing the operations of the company and the question of administrative expenses, that may be sufficient for the purpose which the hon. Member for Huddersfield has in mind. Every year we shall have the opportunity, I take it, of asking questions with regard to the company's liabilities and its future operations and all other matters relating thereto. I venture to ask the right hon. Gentleman whether, as regards the original agreement about to be entered into, the House will at any time have an opportunity of expressing its opinion on the matter?

5.33 p.m.

The hon. Member for Seaham Harbour (Mr. Shinwell) has made a plea that the company when constituted shall be free to carry on its work without being hampered at all. I think there is a great deal to be said for that. At the same time, Parliament is voting that a guarantee shall be given in respect of the debts of the company, and it is also voting that a guarantee shall be given for unspecified debts which the company may incur later on. Consequently, I think Parliament is also entitled to have some check on the further commitments which the Treasury may enter into on behalf of the country in this respect. On the previous Amendment the Chancellor of the Exchequer took up the general defence of the Bill on two lines. He said, on the one hand—no doubt in order to try to allay the fears of hon. Members, such as the hon. Member for Huddersfield (Mr. Mabane) and myself—that it is only a little Bill, and he said, on the other hand, that the Treasury are such Shylocks that they will not disgorge more money than they can help. If that be the case, it is simply a guarantee of the fact that the administration of the scheme will be carefully gone into. Nevertheless, I think that Parliament as well as the Treasury ought to know exactly what happens. Therefore, if further agreements are entered into with the company, I think it is only reasonable that they should come before Parliament.

5.35 p.m.

I opposed the other Amendments moved by the hon. Member for Huddersfield (Mr. Mabane), but I think there is a good deal to be said for the present Amendment. It is not a very big Amendment, for the reason that the agreement is one which this Committee will have had its part in shaping. It deals with the Schedule, and in the Schedule there are laid down the matters to be provided for in the original agreement, and other matters which may arise in subsequent agreements. To-day we are laying down the main structure. All the Amendment seeks to do is to ensure that the House will have an opportunity of saying whether it thinks that the actual agreement has fully carried out the intentions laid down in the Schedule. The Schedule refers to the main matters, but there is nothing to prevent there being other matters in the agreement beyond those referred to in the Schedule. Subject to what the Chancellor of the Exchequer may say, I should have thought this is an Amendment which ought to be accepted.

5.37 p.m.

Like the previous Amendment, this Amend- ment combines a technical reason, with general reasons, which renders its acceptance inadvisable. The technical difficulty is that the intention of the hon. Member is to prevent this agreement having the effect of law until it has been before Parliament for 28 days, but the Amendment does not in so many words negative the ordinary consequence of an agreement being signed between the Treasury and the company. Therefore, it would not carry out the object which the hon. Member has in view, because even if the Treasury went so far as to state that the agreement would not be valid until laid before Parliament, the ordinary operation of the law would make the agreement valid.

I gather that what the hon. Member really wants is that Parliament should be able to scrutinise the agreement and make certain that it carries out its desires to promote a measure of special assistance to the Special Areas. I would draw the attention of the hon. Member and that of the Committee to the fact that the two previous Amendments, which dealt with the important matters of the money involved, were negatived, and I would therefore ask the Committee to allow this agreement in its technical details to be negotiated by the Treasury. I would point out that the Treasury is bound by the Bill to give effect to what is in the Schedules, and in the Schedules the House lays down the main features of the original agreement. Now is the time for the House to say whether the agreement in all its important characteristics is what it desires. The Committee will observe that in the case of any modification of the agreement that may subsequently be made, under Clause 1, Sub-section (3), the Treasury are under the obligation to:
"lay before Parliament a copy of the said agreement and of any further agreement by which it is modified."
It should always be borne in mind that in this particular Bill, as regards the annual sum which is is to be paid under paragraph 2 of the Schedule, namely the contribution towards administrative expenses, it is specifically provided in Clause 1, Sub-section (4) of the Bill that:
"Any sums required by the Treasury for making the annual payments specified in paragraph 2 of the said Schedule shall be defrayed out of moneys provided by Parliament."
The intention and the effect of those words is to make that particular sum connected with the administrative expenses of the company matter to be discussed by Parliament in the ordinary way. The Committee must bear in mind three things: first, there is to be an annual opportunity for discussing the administration of the company under that provision; secondly, the Bill makes provision for the original agreement and any subsequent agreement, before it is modified—

If I may interrupt, I would point out that I am disturbed by the fact that future modifications in the original agreement may be modifications outside the terms of the Schedule as it exists at present.

Only with regard to paragraphs 5 and 6. With regard to those paragraphs, the Treasury is not bound by the Schedule, because they are paragraphs of very limited scope dealing with only one contingency, namely, the provision of fresh capital. Their object is to enable certain priorities to be given to shareholders. That is a very minor matter and one of no importance at all. I repeat that in this Bill there is provision for an annual opportunity for discussing the administration of the company. There is also a provision to the effect that the original agreement and agreements modifying it shall be laid before Parliament. There is no withholding of any information on the point to which this Amendment is directed. That being the case, and the Committee having negatived previous Amendments on more important matters of money, I think the Treasury should be left to regulate the details of the scheme, which are bound to be in accordance with the Schedule which is actually in the Bill.

The hon. and learned Gentleman said that every year there will be an opportunity for discussing this grant. Supposing, however, the company in any given year, before the Estimates come to be discussed, enters into an arrangement with the Treasury increasing the guarantee which the taxpayer may eventually be called upon to make good, it seems to me that we in this House would only have the opportunity of debating the arrangement, but would not be able to stop it in any way.

I understand that the substance of the two Amendments which have just been negatived concerned the liability of the Treasury; but I would put it to the hon. Member that, in view of the fact that he and all other hon. Members will be given full information on any agreement made by the Treasury or any modification of that agreement, it will not be difficult for him to find an opportunity of calling into question anything of which he disapproves. I would further point out that the Amendment of the hon. Member for Huddersfield (Mr. Mabane) would not prevent such an agreement having effect. Therefore, I ask the Committee not to accept the Amendment.

In regard to Subsection (3), relating to laying before Parliament copies of agreements, I presume that that means copies of the original agreements. I take it that an opportunity is open to the House at any time if it cares to raise these matters and question these agreements.

As to that, I should not like the hon. Member to be under any misapprehension. My reading of the matter is that it is merely an informative proposal; it merely gives the House the opportunity of seeing what is in the agreement. As to the opportunity which might be taken for questioning the agreement, while there are the ordinary opportunities which are open to any Member of this House to ask questions, to raise the matter on the Adjournment, and so on, I frankly tell the hon. Member that I think the effect of Sub-section (3) of this Clause is merely to lay a document before Parliament and for hon Members to take such action as may be open to them under the ordinary procedure of the House.

Amendment negatived.

Clause ordered to stand part of the Bill.

Clause 2—(Exclusion Of 63 And 64 Vict C 51 And 17 And 18 Geo 5 C 21)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Why is this Clause necessary, in view of Section 6 (c) of the Moneylenders Act, 1900? I have no doubt there is some good reason, but I should like a short explanation as to why the Clause is put in the Bill.

5.47 p.m.

This is a very simple matter. Under the Moneylenders Acts of 1900 and 1927 the business of a moneylender was placed under certain statutory restrictions. There are restrictions on a great number of matters. For example, a moneylender may not advertise, except in a, certain way, his willingness to lend money, and the form of his contracts with a borrower is strictly prescribed, and prescribed having regard to what the House normally understands as moneylenders' contracts. He is prohibited also from making any charge for the costs incidental or relating to the negotiations which lead up to the making of a, loan. There are in these Acts certain statutory exemptions, but the proposed company, being a new arrival on the field, does not fall strictly within any of the exemptions in the Acts.

No, and if what my hon. Friend has in view is a statutory company empowered by Parliament to lend money—

"Any body corporate, incorporated or empowered by a special Act of Parliament to lend money." That seems completely to cover this company.

It is a technical point, but this Bill does not empower the company to lend money; it empowers the Treasury to make an agreement with the company. The company is empowered to lend, not by Parliament, but by its memorandum and articles of association. We therefore consider it possible that this point may give rise to misapprehension, and therefore that we might have in future someone pleading unjustly the provisions of the Money-lenders Acts against this company, to which obviously they were never intended to apply. It is for that reason that we thought it best to place the matter beyond all doubt.

5.50 p.m.

There is still one point on which I think the Committee would like to have some information, and that is with regard to the rather strangely worded phrase in this Clause which reads:

"If the company is so incorporated as aforesaid in accordance with arrangements approved by the Treasury."
What arrangements have the Treasury in mind? They have first, to ensure that the objects of the Bill will be fulfilled. We have had the hon. Member for Farnham (Sir A. M. Samuel) expressing the horror which we expect from a banker at the prospect of lending money on long terms. He said, "Will you get people asking you for advances to put up a factory and machinery?" Of course, you will get people coming to ask for these facilities. If they were facilities which they could get through the ordinary financial machinery, they would not come to this company. I therefore want to ask whether the Treasury will make certain that the board of this company will not be constituted of what are known as bankers of the old school, because, if so, that will hamper the operations of the company and the objectives of the Bill. My second point is the one which will presumably be dealt with in the memorandum and articles of association. I should have preferred that we have seen the memorandum and articles of association ourselves, but if that is not to be the case, will the Treasury see them, and, if so, will the Financial Secretary be so good as to tell me whether they propose to approve a Clause entitling the company to borrow? The Chancellor of the Exchequer was busily engaged when I made this point previously, but I should be glad to have it cleared up, because upon that point depends how much money the company can lend.

Will the Financial Secretary or the Chancellor explain the reference to 10 years? I do not think the Committee is clear to what the limit of 10 years applies.

On a point of Order. I inquired about certain specific points, and the hon. Member for Huddersfield (Mr. Mabane) has asked leave to withdraw his objection to the Clause but I object to that until I have had an answer. I shall be glad, Captain Bourne, if you will allow the Minister to give me an answer to the extremely important points which I put. They have been put before, but I have not yet had an answer.

It is doubtful if those points arise on this Clause at all.

Perhaps you would allow me to convince you that they do, Captain Bourne. I said that in this Clause appear the words:

"If the company is so incorporated as aforesaid in accordance with arrangements approved by the Treasury. …"
I wish to ascertain what arrangements are going to be approved by the Treasury. Does it mean that the Treasury must see the memorandum and articles of association?

The hon. Member has overlooked the fact that these words also occur at the beginning of Clause 1. On the question that that Clause should stand part of the Bill, he might have been in order in raising his points. He might again be in order in raising them on the Schedule, but obviously he cannot do so on this Clause.

Question, "That the Clause stand part of the Bill," put, and agreed to.

Clause 3 ( Short title) ordered to stand part of the Bill.

Schedule—(Matters To Be Provided For In An Agreement Between The Treasury And The Special Areas Reconstruction Association Limited)

5.55 p.m.

I beg to move, in page 3, line 8, to leave out paragraph 2.

The paragraph reads:
"2. The payment by the Treasury to the company in respect of every year of the amount expended by the company in administration expenses in respect of that year, or of a contribution of twenty thousand pounds towards those expenses, whichever is the less."
I think there might be given an opportunity to the Government to indicate the nature and extent of the services which have to be rendered in return for this substantial sum of money, because the company which is to be incorporated is not a great operative company, but purely a lending concern, and I do not know to what extent its activities will be carried on. I have no idea what premises it is likely to require, what staff it will engage, or what general expenses one can reasonably expect to be incurred by the company. We are informed that the maximum unit of loans to be granted in each case will be £10,000, and if the whole amount were used up that would mean 100 clients. Is it reasonable to expect them, therefore, to go to an expenditure of £20,000 a year? It is true that the words "or … less" appear in this paragraph, but the very fact that the Treasury commits itself to providing £20,000 if necessary is a very large inducement for it to do so, and I think there ought to be proper safeguards laid down.

I should like to know what the Chancellor of the Exchequer has in mind. Unless there is a reasonable amount of services rendered to justify this expenditure, they are laying themselves open to a sum of public money being spent for which there will be no return. One has to realise that the nominal capital is £1,000,000. I have heard no one suggest that it will be turned over in one year or even in three, four, or five years, but the £20,000 may be expended each year in the circulation of this £1,000,000, and it will be an extraordinary situation if we set up a Corporation in the hope that it may circulate £1,000,000, and it fails to do so at least for five years, and we find that it is expending at the same time a sum of money greater than it has been able to lend.

5.58 p.m.

The hon. Member will appreciate that the £20,000 is a maximum limit and that the amount which the Treasury will contribute is the actual amount of the expenses, provided that that amount does not exceed £20,000. If you are to have a limit at all, you must obviously have a limit which will not hamper the operations of the company, and the limit, therefore, has to be put at that level which contemplates the maximum activity on the part of the company. The hon. Member is quite right in supposing that the company is not likely to begin with an administration bill of anything like £20,000, and as the Treasury is going to make this contribution, naturally the Treasury will have an opportunity of seeing, through its agents, how this money is being expended and of making sure that it is being expended properly.

The hon. Member must also bear in mind that although this company is not an operative company in the sense that it is carrying on the business of manufacture or distribution, the business of lending, in the peculiar circumstances which we are contemplating here, is not by any means a simple matter. We are contemplating, not the ordinary risk scheme of financial houses, but something going beyond that, something which requires, therefore, a particularly careful and detailed investigation of the circumstances in each case. If £10,000 is the limit, in the ordinary case, of the amount which may be advanced to any particular firm, the hon. Member may be sure that the average amount of loan will be considerably less than £10,000, and if, therefore, the operations of the company turn out to be successful, and their help is found to be in great demand, then they will be investigating possibly the affairs of a large number of concerns in a number of different areas. The hon. Member must remember that South Wales is not the only Special Area, and that we have to consider other Special Areas as well. When all these things are put together and it is considered that each area has to have a staff engaged in the work of investigation, it will be realised that this is a case where administration expenses may be expected to be higher than would be the case in an ordinary commercial venture. Seeing that the object of the company is not to make profits, but, rather to fulfill a matter of public interest, I think the hon. Member will agree that it is proper that the Treasury should be authorised to pay these expenses.

6.1 p.m.

I desire to suggest to the Chancellor that it will be necessary, if he is to apply this scheme to Scotland, to consider that companies may be floated in different directions from that in which they will be floated in England. There is a valuable belt of minerals—

Amendment, by leave, withdrawn.

The following Amendments stood upon the Order Paper: In page 3, line 17, at the end, insert:

"It shall be permissible for the company to invest all or any part of its reserves in further loans."—[Mr. Ede.]
"4. Loans by the company shall be made at a rate of interest not exceeding 3½ per cent. per annum."—[Mr. E. J. Williams.]
"4. If in the opinion of the company it is desirable for the purpose of attracting loans, a rebate in the rate of interest of 1 per cent. per annum on the amount of any loan or loans shall be made for a period not exceeding two years from the date of the granting of such loan or loans and such rebate shall be regarded as an expense of administration."—[Mr. Benson.]

The Amendment in the name of the hon. Member for South Shields (Mr. Ede) is out of order as it imposes a charge. With regard to the next two Amendments in the name of the hon. Member for Ogmore (Mr. E. J. Williams) and the hon. Member for Chesterfield (Mr. Benson), it will be rather difficult to disentangle them as they both raise in a different form what is substantially the same point. I, therefore, propose to call the Amendment in the name of the hon. Member for Ogmore, and to allow both Amendments to be argued upon it.

6.4 p.m.

I beg to move, in page 3, line 17, at the end, to insert:

"4. Loans by the company shall be made at a rate of interest not exceeding three and a half per cent. per annum."
There seems to be a flaw in the Bill which I am endeavouring to put right by this Amendment. When the company is being formed the £1,000,000 capital is to be made up of £900,000 cumulative shares and £100,000 ordinary shares bearing 3½ per cent. and 3 per cent. interest, respectively. Nothing is said in the Bill as to the rate of interest to be paid by the people who borrow from the company. After listening a few moments ago to the Parliamentary Secretary, it seemed to me that the Treasury had entirely forgotten the persons who are expected to borrow from the company. This is not an operating company. Its function is to lend money to people who desire to promote industries in the distressed areas. The purpose of my Amendment is to provide that when money is borrowed the maximum rate of interest charged is equivalent to that paid on the cumulative shares. The Government have been talking a great deal about cheap money, and if they really want to help the Special Areas, surely they ought to make provision to see that the persons who desire to set up industries should have money at the cheapest possible rate. Either they must have that or the Government will have to be prepared to subsidise them. I gather that the company will not desire to advance money as a subsidy.

6.7 p.m.

The object of my Amendment is merely an extension of the object of that in the name of the hon. Member for Ogmore (Mr. E. J. Williams). We on this side have more than once expressed our scepticism as to whether this Bill is likely to have any effect. Assuming that the money is raised—and I understand from the Chancellor that the Government have a definite promise that it will be—the next question is whether it will be used. The establishment of a business in a depressed area is not necessarily an easy matter. One might describe such an area, from the point of view of a business man, as a non-economic area. There is a tendency for new businesses to drift south, for the high incidence of rates in the Special Areas as compared with the incidence in the south of England or the more prosperous parts is a serious matter. Another point is that the distressed areas are separated from their markets. It is considered, therefore, that he would be a bold man who started a commercial venture in a depressed area. The object of these two Amendments is to offer some inducement, for the offer of cheap capital may make all the difference between a business being started and not being started, and between the Bill being somewhat of a success and being a failure.

With regard to the suggestion in my Amendment that a rebate of 1 per cent. shall be charged as an expense of administration, we realise that with the maximum rates of interest to be paid on the preference shares and the ordinary shares very little margin is left if the loan interest is limited to 3½ per cent., as is suggested by my hon. Friend's Amendment, and the company will probably find it very difficult, if not impossible, to earn an adequate interest on its loans to pay the rates of interest which are set forth in the latter part of the Schedule. It is for that reason that we wish this rebate to be charged as a cost of administration. Assuming that the expenses of administration are not too high, and having in mind all that the Chancellor said about the difficulties which this company is likely to experience in administration, I think it is possible that these limits in the interest charged can be accepted and the possibility of having a rebate can be accepted by the Treasury, and the company would still be able to remain solvent.

6.13 p.m.

I wonder whether the hon. Gentleman who moved the Amendment realised the effect of placing the interest at a maximum of 3½ per cent. Has he left out of calculation that if the company is to pay 3½ per cent. on the preference shares there will be nothing left for working expenses, which will then fall on the taxpayer, or for reserves? In other words, the hon. Gentleman wishes for a further subsidy in addition to the amount provided for working expenses in the Bill. If only 3½ per cent. or less is earned upon the loans, there will be nothing left as a margin for working expenses. I would like to analyse the principle which the two hon. Members have in mind. Do they really think that in the distressed areas it matters very much to a person who is seeking to open a business in a risky enterprise whether he pays 3½ per cent. or 5 per cent.? Do they not realise that the important question is whether he can get capital or credit with which he can deal? Suppose a man borrows the full £10,000, let us see where it is bringing us. Let us see the effect of limiting the annual rate of interest to 3½ per cent. Suppose he is able to borrow £10,000 for an undertaking which is not likely to be very prosperous; he would not have been able to get the money at all in the ordinary way from a bank, which has to lend depositors' money. In this case it is a national eleemosynary proposal to help distressed areas with the money required for industry, which otherwise could not be provided. In the ordinary way in trade the time that you need to turn the goods that your men have made into money is about 30 days or 60 days or 90 days. I do not believe giving credit for six months is a wholesome way of doing business. People in home markets who want six months credit are only carrying on their business on the capital of manufacturers. Ninety days is long enough.

Surely the object of this Bill is not to offer short term credits to traders, but for the establishment of businesses. May I ask the hon. Gentleman whether he suggests that the common assumption that cheap money is a stimulus to trade does not apply to the Special Areas.

There is a great deal of reservation to be made in statements about very cheap money. The cry for very cheap money on behalf of manufacturers is a spurious cry and the manufacturers are not behind it. It does not very much matter to a manufacturer who borrows £10,000 for financing a contract for goods to be made, or who wants to discount a bill for £10,000 at 90 days for goods he has just sold whether he pays 3½ or 5 per cent. per annum interest. The difference for 90 days amounts to no more than £37 10s. It sounds very impressive to talk about cheap money and to say that to increase the rate of interest from 3½ per cent. to 5 per cent. is a 40 per cent. rise, but there is really nothing in it. It is only an arithmetical calculation, a theoretical statement, smashed up by the working facts of the case. It is like talking about a principality reducing its army by 50 per cent., when its army originally numbered only two men has been reduced to one man.

Whether the manufacturer is asked to pay 3½ per cent. or 5 per cent. on £10,000 makes, as I have said, a difference of exactly £37 10s. for 90 days, and that is only a difference which would concern an accountant or a statistician. What really matters to the manufacturer is the possibility of getting an order worth £10,000, not the £37 10s. more or less interest. If he can turn over the £10,000 four times by getting orders for £40,000 in a year the only difference in the cost for interest would be £150. In a factory dealing with orders of that size probably 150 to 200 men would be engaged and the £150 would not amount to the wages of a doorkeeper. The 1½ per cent. difference in the annual interest is nothing to make any great fuss about. The point is that a man in the Special Areas who wants to set a factory going should have the money with which to do so. This Bill provides it. It is easy enough to make goods when he has got the money or credit. All that has been said about very cheap money really does not affect the case of manufacturing before us. It is based on theory. The practical need is to get the money and make the goods and not the difference of 1½ per cent. interest; but what is more important than all is to be able to sell the goods after they have been made. That is the problem.

6.18 p.m.

The hon. Member for Farnham (Sir A. M. Samuel) has been dealing with this problem entirely from the point of view of commercial credit, whereas the purpose of the Bill is the provision of capital credit. It is the capital with which to start industries that is needed, but he was talking about the commercial credit required when the factory is in existence and the machinery installed and the produce ready to go to market. He is starting at the wrong end.

If the hon. Member is talking about starting commercial enterprises much of the £1,000,000 would go in five minutes—if used for erecting buildings or machinery—and little would he left for financing production.

6.20 p.m.

I rise to a point of Order. I am sorry that I have been absent from the Committee for a few minutes, but I wish to suggest to you, Captain Bourne, that the two Amendments which we are now considering are both out of order, on the ground that both may have the effect of increasing the charge on public funds. I am particularly interested in the second of the two Amendments, which provides that a certain rebate in the rate of interest may be given, and that such rebate shall be regarded as an expense of administration. That might increase the amount which the Treasury have to pay, because in the second paragraph of the Schedule it is provided that:

"The payment by the Treasury to the company in respect of every year of the amount expended by the company in administration expenses in respect of that year, or of a contribution of twenty thousand pounds towards those expenses, whichever is the less."
With regard to the first Amendment, if the rate of interest is limited to 3½ per cent. per annum whereas the association might have been able to secure 7 per cent. per annum, the contingent loss incurred by the Treasury might thereby be increased. I urge that both Amendments may have the effect of increasing the charge.

6.21 p.m.

I submit that we have not yet reached paragraph 6 of the Schedule which refers to the rates of interest to be paid to the preference shareholders and to the ordinary shareholders and that therefore the hon. Member's objection cannot arise. When we come to paragraph 6 will be time enough to deal with it. Further, I submit that there is no reference either in the Bill or in the Schedule to the rates of interest to be paid on the loans to be furnished by the company and therefore it is not out of order to present an Amendment dealing with that precise point.

6.22 p.m.

Surely the hon. Member for Huddersfield (Mr. Mabane) is wrong about the first point, because even if the Amendment in the name of the hon. Member for Chesterfield (Mr. Benson) did increase the administration expenses beyond £20,000 it would not increase the charge to the State, as the company would have to bear the rest of the expenses. [HON. MEMBERS: "No!"] In paragraph 2 we fix the £20,000 as a maximum, and nothing that we do in. reckoning other charges as administrative expenses will make the slightest difference.

6.23 p.m.

I think the hon. Member for West Middlesbrough (Mr. K. Griffith) may be wrong. My right hon. Friend the Chancellor of the Exchequer said it was an amount up to £20,000. If, therefore, charging only 3½ per cent. does not pay for expenditure in respect of running the association, expenses would be rather larger than they would be otherwise, and, consequently, the amount to be paid in by the Treasury up to a total of £20,000 would be larger than otherwise. I thought at first that this Amendment was out of Order; if the 3½ per cent. is not sufficient to provide the expenses of running the association I submit that the point of Order made by the hon. Member for Huddersfield (Mr. Mabane) is sound.

With regard to the question of 3½ per cent., I would refer you, Captain Bourne, to paragraph 6 of the Schedule, in which it is shown that the repayment to the Treasury takes precedence over the payment of interest either to the preference or to the ordinary shareholders, so that any loss involved through inability to pay 3½ per cent. or 3 per cent. interest does not fall upon the Treasury.

6.25 p.m.

I think the hon. Member for Huddersfield (Mr. Mabane) has slightly misapprehended the effect of the Financial Resolution on which the Bill is founded. The question whether a particular Amendment would or would not increase the charge upon the Treasury is immaterial at this stage, so long as it comes within the scope of the Financial Resolution. With regard to the point he raised on the Amendment which is being discussed along with the Amendment now before the Committee, it is true that if that Amendment were accepted it might make the annual contribution of the Treasury an amount up to £20,000 in respect of the administrative expenses, but a sum up to that figure has already been authorised by the Financial Resolution, and therefore an Amendment which would bring the amount up to that amount is in order. As to the Amendment now under discussion, under paragraph (d) of Section 1 of the Financial Resolution various provisions are made for the payment of losses, and there is no limit placed by that Resolution on the amount which may fall on the Treasury, except that it is not to exceed more than 25 per cent. of the losses incurred either in respect of the original or of additional loans. Therefore, if the effect of the Amendment of the hon. Member for Ogmore (Mr. E. Williams) were somewhat to limit the profit, or even to convert into a loss the operations of the company, the liability of the Treasury up to one-fourth of that is covered by the Financial Resolution, and the Amendment is in order.

6.27 p.m.

To continue the reasons for supporting the Amendment of my hon. Friend the Member for Ogmore (Mr. E. J. Williams), we have to bear in mind that we are endeavouring to deal with the situation as it exists in depressed areas. So badly depressed are they that the House has come to the conclusion that only the most unorthodox finance will succeed in lifting these areas out of their depression. The Bill is unorthodox finance, and, had orthodox finance been capable of meeting the situation, would never have been introduced. It is an amazing thing that the hon. Gentleman opposite should suggest that it will be possible for this association to get a return of 7 per cent. upon its capital.

Then it was the hon. Member for Huddersfield (Mr. Mabane). Everybody knows that it has been utterly impossible to induce business men to go to the depressed areas and venture their money. That is the reason why Parliament is now considering ways and means of inducing them to go there. My complaint is that the inducement is being offered to the wrong parties, is being offered to those who will form this association.

This is not the occasion to discuss the merits or the demerits of the Bill, but only whether the operations of the association should be limited in the way proposed.

I must beg pardon for referring to that. My intention was to point out the necessity of an inducement being given to the operating companies which will be formed, to the people who will be the clients of the association, those whom we expect not merely to risk the £10,000 which they will have obtained on loan from the association but a good deal of their own money as well. If they secure a loan of £10,000 they may also risk £10,000 of their own and are expected to fructify the £1,000,000 of this association. I confess to being a most profound sceptic with regard to this association, but at the same time no one can be more desirous of making it a success, because I realise the necessity of encouraging people who will come forward with their own capital to get additional capital. I see the force of giving them the least possible in the way of interest charges upon the capital that they borrow. It will be very difficult for the Financial Secretary to justify anything of this kind. If we are serious in our intention to bring light into the darkness of the depressed and Special Areas, we cannot leave the company to charge any rate of interest that it chooses, and this is, therefore, a most reasonable Amendment to limit the rate of interest.

6.31 p.m.

To put such a provision in the Bill would be to destroy its whole object. The corporation would not get any capital. I ask hon. Members who are supporting the Amendment to think for a moment what they are asking of the people who, because they hope to assist the depressed areas, are to be persuaded to enter into this company. Hon. Members propose to begin by saying to the prospective shareholders: "You are not to charge sufficient interest to pay more than what the shareholders get." It follows from that, that it will be impossible to build up any reserve. You are saying to every prospective shareholder in the company: "It is absolutely certain that one day you will have to meet 75 per cent. of the losses of this company." In those circumstances who will put his foot into the concern?

6.33 p.m.

The hon. Member for Farnham (Sir A. M. Samuel) professes to be interested in the Special Areas problem. If he is, he must be prepared to accord special treatment to those areas, and that is all that we are asking for in the Amendment. I understood his argument to be that there is hardly any difference worth considering between 3½ per cent. and 5 per cent. I wonder if he would use that argument in relation to financial transactions throughout the country?

That is quite a different matter. A difference of one-half of one per cent., in dealing with financial transactions, the buying and selling-of raw materials, or speculating in stocks and shares, is of immense importance, but when you deal with manufacturing operations and the buying and selling of goods, it does not matter very much upon a £40,000 order, or rather upon £40,000 as the turnover of a year, using £10,000 four times turned over, whether the rate of interest is one-half of one per cent. more or less. Even if you get your money for nothing it will make very little difference whether you pay any interest at all. It is not a matter of interest, but of getting money at all to make the goods and then being able to sell them.

The hon. Member has repeated what he said, and has not strengthened his case. What we are asked to believe is that this slight difference in the rate of interest in a commercial undertaking is of very little consequence.

That is what the hon. Member believes. I ask him whether he would apply that reasoning to financial transactions throughout the country as a whole.

His answer is that he seeks to apply it to this particular case, and not to every commercial transaction.

Our submission is that the peculiarity of the undertakings about to be established demands, in the special circumstances, special treatment, and that is a, case for the limitation of the rate of interest and the provision of cheap money. The hon. Member for Farnham seems to think that in small business undertakings, such as we are specially concerned with in this Measure, where the total volume of trade amounts to, say, £40,000 a year, and the rate of interest varies between 3½ per cent. and 5 per cent., that variation may mean no more than a difference of about £150. He forgets that we are not dealing here with one commercial undertaking involving a capital outlay of £40,000, or with transactions of that amount covering a period. of 12 months, but with a great number of undertakings and, as we have heard this afternoon, an amount of capital which may reach many millions of pounds. Therefore, a variation from 3½ per cent. to 5 per cent. in the rate of interest may considerably influence the decisions and the general operations of those who wish to come into the Special Areas. I would beg the hon. Member not to regard this question of the variation of the rate of interest as a trifling matter. It is one of very great substance, and, in my submission, is the point of real substance in the Bill.

The hon. Member for Ecclesall (Sir G. Ellis), who usually speaks with great knowledge upon industrial and financial matters, was, I fear, a little out of his depth when he ventured to address his argument to my hon. Friend the Member for East Rhondda (Mr. Mainwaring). He seems to think that the profit to be returned to the cumulative preference shareholders and the ordinary shareholders varies between 3 per cent. and 3½ per cent. and that it is essential to provide a high rate of interest on the lines of the contemplated business undertaking.

I did not say so and I do not think so. What I said was that when you have to gay out as much as you are getting in there is no margin, and that when there is no margin there can be no reserve. If you wish people to lend you money when they know there is a certain loss, you destroy the very object you have in view.

I am much obliged to the hon. Member. What I said about his argument was on all fours with what he has just said. His argument amounts to this: If the profits to be paid out to the preference shareholders are no higher than the rate of interest, and vice versa, obviously those shareholders will not come in with their money. The hon. Member followed that with the contention and, as he thought, a reminder to us, that there would be no reserve. He is quite mistaken. I put it to the Financial Secretary, and I hope he will be good enough to furnish a reply, whether it is not the fact that the Measure includes a reserve fund to be provided by the Treasury.

Up to £100,000 per annum. It is true that the reserves are to be returned to the Treasury if there are no losses during the period in which the operations are carried on, but the reserves are provided for, and from those reserves it is within the power of the company to meet such variations in the rate of interest as would make all the difference between running a commercial transaction in a depressed area on financially sound lines with cheap money, and running it in an almost impossible way.

Let me try to put my point again. When you are running an undertaking in such a way that losses are certain, if you have no provision for reserves the shareholders will be bound to meet their proportion of losses, just as a trader is bound to do so. All I say again is that you are asking the prospective shareholders to provide money in the knowledge of certain loss in the future.

It seems to me that that is the essence of the scheme. That was provided for from the beginning of these discussions. Upon the Financial Resolution, in the Second Reading Debate and to-day, in the discussion of various Amendments, we have heard of nothing but the possibility of losses being sustained.

The hon. Member for Huddersfield (Mr. Mabane) faced the possibility of sustaining a loss not of £1,000,000 but of 100,000,000, when his Amendment sought to restrict appeals to the Treasury in that regard. That loss will be sustained is the essence of the scheme. Why should not losses be sustained? Hon. Members talk about protecting the interest of the people who have to provide money, and at the same time talk about the active, public-spirited persons who are to venture their capital. I would remind the hon. Member for Farnham (Sir A. M. Samuel) that the Government have provided subsidies without any question of limitation of rates of interest. Now we are being told of the dreadful possibility of public-spirited individuals, to whom the Chancellor referred, not being attracted because the rates of interest are too low.

We have been very moderate with regard to the Amendment. It is time that hon. Members on this side of the Com- mittee expressed themselves without the restraint that has characterised their discussions so far. It is about time that hon. Members understood that this is, as we said at the outset, a miserable Measure, yet they are trying to make it very much worse while wrapping it all up with talk about public-spirited individuals who are simply dying to do something for the people in the depressed areas, straining at the leash, and who yet need to be very careful not to put down their capital because they are going to have, not a mere 3½ per cent. return, not a Consols return, but a gilt-edged return. They are to see to it that they get the highest rate of interest that they can secure for the investment of their capital. We hear about the losses to be sustained, but let it not be forgotten that there is a Treasury guarantee of 25 per cent.

Too little has been said about one point, to which I invite the attention of hon. Members. When applicants come to the company, as they are expected to do, and ask for loans, they will be asked, presumably, for security; or are we to understand that those who apply for loans for the purpose of setting up business undertakings in the special areas will not be called upon to provide security? That would be an unheard of thing in this country. If they are called upon to provide security, and if that security is combined with a 25 per cent. guarantee, it seems to me that we ought not to bear so much as we have heard this afternoon about gestures to public-spirited individuals. If this scheme fails to achieve its intended purpose, namely, to establish small and profitable undertakings, providing employment for people who cannot be absorbed in their old occupations, it will be largely because the rates of interest are too high. Cheap money is the essence of the case, and cheap money ought to be provided for. I would remind the Committee that we have not yet come to paragraph 6 of the Schedule, which provides for the dividends to be paid to the shareholders. When we come to that paragraph, we may have something to say, and, therefore, our submission with regard to; limitation of the rate of interest holds good at this stage.

6.47 p.m.

The hon. Member for Seaham (Mr. Shinwell), who has discussed this matter so reasonably so far, has rather misunderstood the Bill as it stands at this point. He has spoken with scorn of the public-spirited individuals who want more than 3½ per cent. I hope they do not want more than 3½ per cent., because they cannot get it under the Bill as it is drafted. I agree that we have not come to paragraph 6 of the Schedule, but for the present we are bound to imagine that it will be passed in the form in which it stands, and it is really there that the security against profiteering is provided. The hon. Member may think that even 3½ per cent. is profiteering; I do not know what he thinks about that figure, but at any rate it is the limit of what they can get, and any suggestion that people are not going to be satisfied with that figure, but are going to demand more, is departing altogether from the text of the Bill. It is the company that will be able to get more on its loans, apart from the Amendments that we are now discussing, and I suggest that, since profiteering is guarded against, as I suggest it is, it would not be reasonable to make the return less than 3½ per cent., in view of the limited security in what is admittedly a hazardous series of operations in different parts of the country. I think that the company must be left to make reasonable commercial arrangements having regard to what they consider to be the prudent amount that they must get in order to cover the risks that they are undertaking. I think the hon. Member for Ecclesall (Sir G. Ellis) was quite right in suggesting that to insist on these Amendments would not really advance the cause that we have at heart. Hon. Members above the Gangway are pessimistic about this scheme. I am fairly pessimistic, but I must deplore the turn that the Debate is now taking. A few more speeches such as those we have heard on these Amendments would make prospective investors certain that it would be a suicidal policy for them to invest a single penny.

6.50 p.m.

The hon. Member for Seaham (Mr. Shinwell), in his lyrical outburst, departed entirely from the text of the Schedule. With a view to getting people to lend the capital at 3½ per cent., paragraph 3 of the Schedule provides for:

"The setting aside by the company of reserves against losses."
To charge borrowers no more than 3½ per cent. would be to depart immediately from one of the fundamental reasons why the company should be set up, and why people should lend their money at 3½ per cent. As my hon. Friend the Member for Ecclesall (Sir G. Ellis) has said, if you do not get from borrowers at least 3½ per cent. there is not the slightest hope that the company will be able to set up the reserves which are required not only to cover the business risks of an undertaking which is highly speculative, but to ensure the healthy life of every good business scheme in commerce. It is laid down in the Schedule that reserves shall be provided, and for that reason I feel sure that the hon. Gentleman must have overlooked paragraph 3.

6.51 p.m.

In spite of what has been said by the hon. Member for West Middlesbrough (Mr. K. Griffith) and others, I still think it would be an excellent thing to have a definite restriction on the amount of interest to be charged to borrowers. The primary object of the Bill is, not to provide a satisfactory financial proposition for the company, but to make money available on such terms as will enable new industries to be commenced in the Special Areas, and, if that is not possible, when the rate of interest is higher than 3½ per cent., we must make that the limit, and make any consequential alteration in the Treasury guarantee and so on. I was astonished to hear the hon. Member for Farnham (Sir A. M. Samuel) making his speeches about the small consequence of the difference between interest rates of 3½ and 5 per cent. on borrowed money. That is the sentiment of a banker, not of a manufacturer. To-day the manufacturer, more particularly in a depressed area, has to watch every penny of every charge that goes through his books. On a turnover of £40,000 a year, the difference between 3 per cent. and 5 per cent. amounts to £800, or more than the manufacturer pays for his rent or his power. It may make all the difference between a profit and a loss, and therefore I regard the difference between interest at 3½ and interest at 5 per cent. as a vital point in the Bill.

On a 90 days' credit of £10,000, which is turned over four times in the year, making a total turnover of £40,000, the difference between 3½ and 5 per cent. represents £150.

The hon. Baronet is making the facts fit his argument. I stated that the difference between 3 per cent. and 5 per cent. per annum represents £800. I was not speaking about 90-day bills. These people are not going to borrow this money for 90 days. That is another of the hon. Gentleman's misconceptions. He believes that this is a Bill to provide short-term credit, but it is nothing of the kind. Moreover, the suspicions of the Financial Secretary also must be aroused, because Members have said that these are not loans which are going to be granted in ordinary commercial circumstances. They are going to be granted in districts where trade is bad, where rates are high, where money cannot be borrowed in the ordinary money market or from the banks. What guarantee have we that the directors of this company are not going to cite all these facts to prospective borrowers, and say to them, "We cannot lend you money at the same rate that the Midland or some other bank will charge; you will have to pay us 1½ or 2 per cent, extra, to meet the greater risk we are running?" What chance will the poor borrower have to cite the Treasury guarantee and all the other safeguards for the people who are going to put up the money for this lending company?

After what we have heard, it is all the more vital that there should be some restriction of the rate of interest. I believe that 3½ per cent. is the rate that these industries could properly stand. If it is thought to be too low, let it be 4 per cent., or, at the very most, 4½ per cent., so that we may be certain that these borrowers will not be exploited. I hope the Financial Secretary will indicate that he does not approve of some of the sentiments put forward by some of his supporters, and will agree to some limit being placed on the rate that may be charged.

6.57 p.m.

It seems to me that the error into which the hon. Member for Farnham (Sir A. M. Samuel) has twice fallen is due to the fact that he has not read the Preamble, which state: that the Bill is a Bill for dealing with long or medium-term periods. Surely the hon. Member does not call 90 days either a long or a medium term—

It is true that the financial transactions which I have to conduct are not in a depressed area, but in the Surrey County Council and the London and Home Counties Joint Electricity Authority, of both of which I am chairman, we call six months a short term. Certainly the instance, which the hon. Member has twice quoted, of the man who wants £10,000 to finance his transactions while he is realising on his manufacturing operations, and does that four times a year, does not represent the kind of credit that is primarily contemplated by the Bill; and from my knowledge of my constituency, which is in a distressed area, I do not consider that that is the kind of assistance which people there contemplate receiving, at any rate at this stage. What they desire is a long-term credit that will enable them to establish factories in these areas.

The special areas are not like the Great West Road, the Kingston By-pass, and other places where modern factories have been erected. The primary difficulty in the distressed areas is to get factories in which industries can be carried on under modern conditions, and, when a man is embarking on an enterprise of that nature, he needs something more than the credit that will be necessary to tide him over 90 days, even if he can get it renewed at the end of that period. I hope the Minister will agree to some limitation of the rate of interest. If 3½ per cent. is too low, will he suggest some figure, so that, before the House parts with the Measure, we may be assured that the company really is going to lend money to the kind of people who will be concerned in these areas?

6.59 p.m.

The hon. Member for Ogmore (Mr. E. J. Williams) and the hon. Member for Chesterfield (Mr. Benson) have made perfectly clear their points on these Amendments. They desire to see incorporated in the Measure some limit to the rate of interest that may be charged by the company to its borrowers. There has been obvious, throughout some of the discussions that we have had, a tendency to confuse two things, namely, the interest which the shareholder can receive from the company—which is fixed at a maximum of 3½ per cent.—and the interest which the company can receive from its borrowers, which is not fixed. The hon. Member for Chesterfield said with some truth that he would be a bold man who would contemplate setting up a new industry in a Special Area, and he detailed with great force the factors which might be likely to deter a man from starting an industry in such an area.

I would ask him, however, to apply his own argument to the proposal which is now before the Committee. Equally he would be a bold man who would proceed to lend money for the commencement of an industry in a Special Area, particularly when the industry to which his attention is directed is one which cannot otherwise obtain financial facilities. If the hon. Member bears in mind that the company which we are contemplating is bold enough to undertake that enterprise, with a limit to its share-holders' profits of 3½ per cent., he can dismiss from his mind all elements of undue profit-making by this company in the transactions it is undertaking.

I did not suggest there was any danger of profiteering by the shareholders. Their interest is limited. What we had in mind in putting down these Amendments was to try to fix some limit to the timidity of the Treasury and the desire of the Treasury to build up a reserve which would limit the Treasury losses.

I am glad we have reached the essential point that we can eliminate from our minds all suggestion that there is a motive of undue profit in the Bill. The hon. Gentleman need not be afraid of the timidity of the Treasury. This company will be able to grant what terms it pleases without the Treasury having anything to do with it. If the company is prosperous, its profits to its shareholders will always be limited, and it will be in a position to make more and more generous terms to those with whom it deals. I regret that I must counsel the Committee to reject the Amendment, for the reasons put forward by my hon. Friend the Member for Ecclesall (Sir G. Ellis) and the hon. Member for West Middlesbrough (Mr. Griffith). Both hon. Members advanced against this Amendment reasons of the utmost cogency, and I do not think I can say anything that would add to the force of their observations. Supposing we were to accept this Amendment we should be in this peculiar position: This Bill is to deal with a particular type of borrower for whom we have found that ordinary financial provision is not obtainable. He is in the eyes of the normal and orthodox organisation not creditworthy, and we are proposing to erect this organisation to deal with him. If you put this Amendment in the Bill you would be conferring a lower rate of interest on the non-credit-worthy than the credit-worthy can obtain, and that is surely a thing which we do not desire to do.

I would ask the Committee to look at the Preamble. The whole idea is to try to assist certain industries which are not, for the time being, in a position to obtain financial facilities from banks or other institutions. With regard to the Amendment moved by the hon. Member for Chesterfield (Mr. Benson) the suggestion he makes is that you should charge a 1 per cent. rebate to administrative expenses. Unless the administrative expenses were well below £20,000 a year that would be of little or no value to the borrowers. It is only when those expenses fall below £20,000 that the amount payable by the Treasury varies, and this 1 per cent. would be paid by the Treasury. The real effect of what hon. Members are doing is to reduce the possibility of any reserve. The hon. Member for Ecclesall said it would destroy the possibility of there ever being any return. In so far as by any of these devices you limit the power of the company to lend you hamper the purpose for which the Bill is before the Committee. There is every intention that the interest charged to these borrowers will be the lowest that is possible to enable the company to function, and the Committee would be making a mistake if they were to seek rigidly to fetter the discretion of the company in this matter. It is a question which must depend on the circumstances of each borrower.

Amendment negatived.

7.9 p.m.

I beg to move, in page 4, line 42, at the end, to add:

"10. The appointment by the Treasury of one or more directors to the board of the company."
I gather from a reply the Chancellor made to a question I put to him that the Treasury were not averse to doing this, or something like this. I was a little disturbed by one sentence used by the Financial Secretary a moment ago, when he said that the company will be able to lend on whatever terms it likes without the Treasury having anything to do with it. If that is so, there is a very good reason for the acceptance of my Amendment. I do not think the Committee would like to see the company engaging in lending on such terms as it pleased without the Treasury having anything to do with it. It has been the practice in the past to appoint one or more directors by the Treasury when it has been engaged in lending money. The Chancellor said in the Second Reading Debate that the appointment of directors would be done in consultation with the Treasury, but that is not the same as having a director there to follow the day-to-day policy of the company. It may be objected that this will create another form of Government patronage, but there can be no substance in such an argument. I have every reason to hope that the Treasury will accept this Amendment.

7.10 p.m.

I am glad to be able to support the hon. Member. This is the most substantial Amendment that he has put before us. It recognises the importance of Government intervention in a matter of this sort. It is a moderate and limited intervention, but it is the thin end of the wedge and to that extent it is acceptable to hon. Members on these benches. We have a precedent in the Anglo-Iranian Oil Company, where the Government appointed two of the directors, and therefore we can with all the more confidence accept this proposal. The importance of having a Treasury-appointed director lies in the supervision that he can exercise over the operations of the company on behalf of the Treasury. There has been something said about the negative attitude of the Treasury when demands are made on them for finance. I am conscious of that, and I had experience of it in the last Labour Government. Nevertheless the advantages of a Government director on this board of management far outweigh the disadvantages, and I hope that the Financial Secretary, who has given us nothing this afternoon, will now at the last stage grant this very moderate concession.

I should like to join in the request. This is obviously a Bill in the operations of which there might be involved a loss of public money. Many hon. Members seem to think that it will involve such a loss. In any event it will be desirable to have a Government representative there, I hope to prevent such loss, but at any rate to see that it is as small as possible and that the company is conducted on the lines of public service.

7.13 p.m.

I am sorry to have to resist this Amendment. I would gladly have accepted it if I thought there was anything to be gained to the public by it. Hon. Gentlemen have supported it imagining that it would improve the company from the point of view of Government control. The appointment by the Government of directors is limited to two eases. One is when the company is engaged in carrying on some enterprise which is of profound importance to the problems of national defence, such as the Suez Canal or the oil company to which the hon. Member referred. The other case is that of companies under the Trade Facilities Acts, where the company requires assistance to strengthen it. Neither of these two considerations is relevant here. The hon. Member wishes to be assured that full information of the transactions of the company will be before the Treasury. That, I think, was also the object for which the hon. Member for Middlesbrough, West (Mr. Griffith) supported him. The hon. Member for Seaham (Mr. Shinwell) gave more dubious reasons in talking about the thin end of the wedge. I can assure the Committee that the Treasury will be consulted. I would like to make it clear to the Committee what these directors are to be. They are not to be directors in the ordinary sense of gentlemen who give their services for specified remuneration.

When will the hon. and learned Gentleman be in a. position to state who the directors are?

When will you form the company? I understand that a company consists of a directorate, or can you divorce a company from the persons who comprise its membership?

Certainly, a company can consist of shareholders, but the company is not yet in being, and I cannot be expected to say who the directors are. I can, however, tell the Committee that the ordinary directors are to receive no remuneration at all. The chairman and the managing director may get some remuneration, but the ordinary directors are to have none. They will give their time from a sense of public spirit.

We shall get gentlemen who will agree to it. That being so, and there being ample arrangements made between the Treasury and the proposed company to ensure that the most accurate information is given, I put it to the Committee that there is no necessity to have on the board of directors an actual representative of the Treasury in a case like this. I think the hon. Member who moved the Amendment was mostly concerned with the provision of information. That is there already. We shall get all the information we want. If he carries his apprehension a stage further and suggests that the directors might do something unorthodox, or something that goes beyond the provisions of the Bill, Article 8 of the Schedule specifically provides against it. If there is

"any alteration in the memorandum and articles of association of the company which, in the opinion of the Treasury, affects the matters specified in the foregoing provisions of this Schedule,"
the liability of the Treasury to make further payment ceases. That is a very strong check which the Treasury has against the entirely improbable contingency of any attempt by the directorate to exceed its powers.

Is that quite the same thing? That does not cover the possibility of the company taking some action which is inconsistent with the memorandum and articles of association.

If the company were to take any action which affected what is set out in the Schedule, it would be a matter which would relieve the Treasury of liability. To take a case which is not likely to arise, if the company were of its own volition to increase its capital without the written consent of the Treasury, that is a matter that would affect the whole of the financial arrangements in the preceding paragraphs of the Schedule.

That is not the kind of point that I had in mind. The company might decide to close down in one area, or to lend more freely than the Treasury wanted. What manner of consultation between the Treasury and the company, would take place?

The hon. and learned Gentleman has not really met my point. He is still confusing alteration of the memorandum and articles of association with infringement of them. What if they broke through the arrangement in the Schedule and paid 4 per cent.?

The powers and duties of the company are stated in the memorandum and articles of association and they cannot be altered without the consent of the Treasury. I cannot give the hon. Member for Huddersfield information as to the precise form which the communication of information will take, because the company is not yet formed. This Bill is the preliminary to its formation. But those who are engaged in the matter and are willing to co-operate in it are quite willing to give full information.

7.22 p.m.

I hope the Committee will, for once, assert itself on this Amendment. We are all in sympathy with the hon. and learned Gentleman. The outlines of this agreement have, no doubt, been discussed with the financiers who are the promoters of the company. They have probably said to him, "We do not want a Government director on the board at any price. Leave it to us and we will carry out the arrangements satisfactorily and give you all the reports you want." But a Government director on the board will not only give supervision as against any alteration of the memorandum and articles of association. There are certain other vital points about which the Government ought to be informed. The first is the payment by the Treasury of the preliminary expenses of the company and the expenses incidental to its winding-up. I know the directors need not be appointed until after the company is formed, but in practice they give a considerable amount of supervision to the actual formation of the company. The preliminary expenses are an amount which can be varied enormously, even in the formation of a company of this kind, and the very first act of a Government director might be to save the Treasury about £20,000.

The second point is in connection with the administration of the company's expenses. Those, too, might vary tremendously, and a Government director might be able to save an enormous amount of money. But there is a reason far more important than these savings why we should have a Government director on the board. It is of vital importance to the Government to know to what extent this experiment is being successful. The Chancellor of the Exchequer has told us time and again that the Government are going to watch this experiment with interest and, if it should prove

Division No. 174.]


[7.29 p.m.

Acland, Rt. Hon. Sir F. DykeFrankel, D.Leonard, W.
Adams, D. M. (Poplar, S.)Gardner, B. W.Leslie, J. R.
Adamson, W. M.Garro-Jones, G. M.Logan, D. G.
Alexander, Rt. Hon. A. V. (H'lsbr.)George, Major G. Lloyd (Pembroke)Lunn, w.
Attlee, Rt. Hon. C. R.George, Megan Lloyd (Anglesey)Macdonald, G. (Ince)
Banfield, J. W.Green, W. H. (Deptford)McGhee, H. G.
Barnes, A. J.Greenwood, Rt. Hon. A.MacLaren, A.
Burr, J.Griffith, K. Kingsley (M'ddl'sbro, W.)Maclean, N.
Bellenger, F.Griffiths, G. A. (Hemsworth)Mainwaring, W. H.
Benson, G.Groves, T. E.Mander, G. le M.
Broad, F. A.Hall, G. H. (Aberdare)Marklew, E.
Brooke, W.Hall, J. H. (Whitechapel)Marshall, F.
Brown, Rt. Hon. J. (S. Ayrshire)Hardie, G. D.Morrison, Rt. Hon. H. (Ha'kn'y, S.)
Burke, W. A.Karris, Sir p. A.Muff, G.
Charteton, H. C.Henderson, A. (Kingswinford)Oliver, G. H.
Chater, D.Henderson, J. (Ardwick)Owen, Major G.
Cluse, W. S.Henderson, T. (Tradeston)Paling, W.
Clynes, Rt. Hon. J. R.Holland, A.Parker, H. J. H.
Cocks, F. S.Hopkin, D.Pethick-Lawrence, F. W.
Compton, J.Jagger, J.Potts, J.
Cove, W. G.Jenkins, A. (Pontypool)Pritt, D. N.
Dagger, G.Jenkins, Sir W. (Neath)Ritson, J.
Dalton, H.John, W.Roberts, W. (Cumberland, N.)
Davies, S. O. (Merthyr)Johnston, Rt. Hon. T.Rowson, G.
Day, H.Jones, A. C. (Shipley)Seely, Sir H. M.
Dunn, E. (Rother Valley)Jones, Morgan (Caerphilly)Shinwell, E.
Ede, J. C.Kelly, W. T.Short, A.
Edwards, Sir C. (Bedwellty)Kennedy, Rt. Hon. T.Silkin, L.
Evans, D. O. (Cardigan)Lathan, G.Sliverman, S. S.
Fletcher, Lt.-Comdr. R. T. H.Leach, W.Simpson, F. B.
Foot, D. M.Lee, F.Sinclair, Rt. Hon. Sir A. (C'thn's)

successful, they will take measures to expand it in other directions. I am not prepared entirely to trust the directors to give full information. Is there any objection in principle to a Government director being on the board? If that is so, let the Financial Secretary be frank about it and say, "In principle the City dislikes Government directors on a board and, therefore, I am not in a position to accede to your request." If that is not the position, there is no reason in logic or common sense why you should not have a Government director on the board. I am not at all impressed by the statement that the directors are to have no remuneration. I could find a hundred gentlemen in this House or elsewhere who would be delighted to have the standing and prestige of being put on a board of this kind. Having secretarial and office facilities, it would not take more than two hours a month to carry out their duties and the position is one of considerable prestige, influence and importance. The Financial Secretary is generally extremely frank, but in this case I think he is concealing a prejudice on the part of the City to having Government directors. I hope the Committee will not accept his refusal.

Question put, "That those words be there added."

The Committee divided: Ayes, 109; Noes, 221.

Smith, Ben (Rotherhithe)Thurtle, E.Williams, D. (Swansea, E.)
Smith, E. (Stoke)Tinker, J. J.Williams, E. J. (Ogmore)
Sorensen, R. W.Viant, S. P.Wilson, C. H. (Attercliffe)
Strauss, G. R. (Lambeth, N.)Watkins, F. C.Woods, G. S. (Finsbury)
Taylor, R. J. (Morpeth)Watson, W. McL.
Thorne, W.Wilkinson, EllenTELLERS FOR THE AYES.—
Mr. Whiteley and Mr. Mathers.


Acland-Troyte, Lt.-Col. G. J.Ellis, Sir G.Munro, P.
Adams, S. V. T. (Leeds, W.)Emmott, C. E. G. C.Neven-Spence, Maj. B. H. H.
Agnew, Lieut.-Comdr. P. G.Emrys-Evans, P. V.Nicolson, Hon. H. G.
Albery, I. J.Entwistle, C. F.O'Connor, Sir Terence J.
Allen, Lt.-Col. J. Sandeman (B'kn'hd)Erskine Hill, A. G.O'Neill, Major Rt. Hon. Sir Hugh
Amery, Rt. Hon. L. C. M. S.Evans, Capt. A. (Cardiff, S.)Ormsby-Gore, Rt. Hon. W. G.
Anderson, Sir A. Garrett (C. of Ldn.)Everard, W. L.Orr-Ewing, I. L.
Anstruther-Gray, W. J.Fremantle, Sir f E.Palmer, G. E. H.
Aske, Sir R. W.Furness, S. N.Penny, Sir G.
Atholl, Duchess ofFyfe, D. P. M.Perkins, W. R. D.
Baldwin, Rt. Hon. StanleyGanzoni, Sir J.Pickthorn, K. W. M.
Balfour, Capt. H. H.(Isle of Thanet)Gluckstein, L. H.Pilkington, R.
Balniel, LordGoodman, Col. A. W.Ponsonby, Col. C. E.
Baxter, A. BeverleyGower, Sir R. V.Pownall, Sir Assheton
Beaumont, Hon. R. E. B. (Portsm'h)Graham Captain A. C. (Wirral)Raikes, H. V. A. M.
Bernays, R. H.Grattan-Doyle, Sir N.Ramsay, Captain A. H. M.
Birchall, Sir J. D.Gretton, Col. Rt. Hon. J.Rathbone, J. R. (Bodmin)
Blair, Sir R.Gridley, Sir A. B.Rayner, Major R. H.
Blindell, Sir J.Grigg, Sir E. W. M.Reed, A. C. (Exeter)
Bossom, A. C.Grimston, R. V.Reid, W. Allen (Derby)
Boulton, W. W.Guinness, T. L. E. B.Remer, J. R.
Bowyer, Capt. Sir G. E. W.Gunston, Capt. D. W.Rickards, G. W. (Skipton)
Brass, Sir W.Guy, J. C. M.Ropner, Colonel L.
Briscoe, Capt. R. G.Hannah, I. C.Ross Taylor, W. (Woodbridge)
Brocklebank, C. E. R.Hannon, Sir P. J. H.Rowlands, G.
Brown, Rt. Hon. E. (Leith)Haslam, Sir J. (Bolton)Ruggles-Brise, Colonel Sir E. A.
Brown, Brig.-Gen. H. C. (Newbury)Hellgers, Captain F. F. A.Russell, A. West (Tynemouth)
Bull, B. B.Heneage, Lieut.-Colonel A. P.Russell, R. J. (Eddisbury)
Burghley, LordHepburn, P. G. T. Buchan-Russell, S. H. M. (Darwen)
Burgin, Dr. E. L.Holmes, J. S.Salmon, Sir I.
Butler, R. A.Hope, Captain Hon. A. O. J.Salt, E. W.
Campbell, Sir E. T.Hudson, Capt. A. U. M. (Hack., N.)Samuel, Sir A. M. (Farnham)
Cartland, J. R. H.Hudson, R. S. (Southport)Samuel, M. R A. (Putney)
Carver, Major W. H.Hume, Sir G. H.Sanderson, Sir F. B.
Gary, R. A.James, Wing-Commander A. W.Sandys, E. D.
Cayzer, Sir C. W. (City of Chester)Joel, D. J. B.Scott, Lord William
Cayzer, Sir H. R. (Portsmouth, S.)Jones, Sir G. W. H. (S'k N'w'gt'n)Selley, H. R.
Cazalet, Thelma (Islington, E.)Keeling, E. H.Shepperson, Sir E. W.
Cazalet, Capt. V. A. (Chippenham)Kerr, J. Graham (Scottish Univs.)Smiles, Lieut.-Colonel Sir W. D.
Chamberlain, Rt. Hn. Sir A. (Br.W.)Kimball, L.Smith, Sir R. W. (Aberdeen)
Chamberlain, Rt. Hn. N. (Edgb't'n)Kirkpatrick, W. M.Smithers, Sir W.
Channon, H.Lamb, Sir J. Q.Somervell, Sir D. B. (Crewe)
Chapman, A. (Rutherglen)Leech, Dr. J. W.Somerville, A. A. (Windsor)
Chorlton, A. E. L.Lees-Jones, J.Somerville, D. G. (Willesden, E.)
Churchill, Rt. Hon. Winston S.Leighton, Major B. E. P.Southby, Comdr. A. R. J.
Clarry, Sir ReginaldLevy, T.Stanley, Rt. Hon. Oliver (W'm'l'd)
Cobb, Sir C. S.Lewis, O.Stourton, Hon. J. J.
Colville, Lt.-Col. D. J.Liddall, W. S.Strauss, E. A. (Southwark, N.)
Cook, T. R. A. M. (Norfolk, N.)Lindsay, K. M.Strauss, H. G. (Norwich)
Cooke, J. D. (Hammersmith, S.)Lloyd, G. W.Strickland, Captain W. F.
Cooper, Rt. Hn. T. M. (E'nburgh,W.)Locker-Lampson, Comdr. O. S.Stuart, Hon. J. (Moray and Nairn)
Crookshank, Capt. H. F. C.Loftus, P. C.Sueter, Rear-Admiral Sir M. F.
Croom-Johnson, R. P.Lovat-Fraser, J. A.Tasker, Sir R. I.
Cross, R. H.Lyons, A. M.Tate, Mavis C.
Crossley, A. C.MacAndrew, Colonel Sir C. G.Thomas, J. P. L. (Hereford)
Crowder, J. F. E.McCorquodale, M. S.Titchfield, Marquess of
Culverwell, C. T.MacDonald, Rt. Hn. J. R. (Scot. U.)Train, Sir J.
Davidson, Rt. Hon. Sir J. C. C.MacDonald, Rt. Hon. M. (Ross)Tree, A. R. L. F.
Davies, C. (Montgomery)Macdonald, Capt. P. (Isle of Wight)Tryon, Major Rt. Hon. G. C.
Davies, Major G. F. (Yeovil)McEwen, Capt. J. H. F.Turned, Lieut.-Com. R. L.
Dawson, Sir P.McKie, J. H.Turton, R. H.
Denman, Hon. R. D.Macmillan, H. (Stockton-on-Tees)Wakefield, W. W.
Donner, P. W.Manningham-Buller, Sir M.Ward, Lieut.-Col. Sir A. L. (Hull)
Dorman-Smith, Major R. H.Margesson, Capt. Rt. Hon. H. D. R.Ward, Irene (Wadsend)
Dower, Capt. A. V. G.Mayhew, Lt.-Col. J.Warrender, Sir V.
Drewe, C.Meller, Sir R. J. (Mitcham)Waterhouse, Captain C.
Dugdale, Major T. L.Mellor, Sir J. S. P. (Tamworth)Wedderburn, H. J. S.
Duggan, H. J.Mitchell, H. (Brentford and Chiswick)Wells, S. R.
Duncan, J. A. L.Mitcheson, Sir G. G.Wickham, Lt.-Col. E. T. R.
Dunglass, LordMoore, Lieut.-Col. T. C. R.Windsor-Clive, Lieut.-Colonel G.
Eales, J. F.Moreing, A. C.Withers, Sir J. J.
Eastwood, J. F.Morgan, R. H.Womersley, Sir W. J.
Eckersley, P. T.Morrison, G. A. (Scottish Univ's.)
Edmondson, Major Sir J.Morrison, W. S. (Cirencester)TELLERS FOR THE NOES.—
Elliot, Rt. Hon. W. E.Muirhead, Lt.-Col. A. J.Dr. Morris Jones and Lieut.
Colonel Llewellin.

Motion made, and Question proposed, "That this Schedule be the Schedule to the Bill."

7.36 p.m.

There are one or two questions on the Schedule which I should like answered as to the reasons for the very extraordinary financial arrangements. On reading the Bill one realises it must have been drafted by a mathematician, and, moreover, by a mathematician who envied Lewis Carroll his authorship of "Through a Looking Glass," for everything seems to run contrary to all the normal practices. May I know whether the repayment of the £100,000, which is advanced by the Treasury to reserve, takes preference on winding up before arrears of interest on preference or ordinary shares I should also like to know why the interest on the preference shares is to be 3½ per cent., whereas the interest on the ordinary shares, which rank with them for repayment, is only to be 3 per cent.? I find in paragraph 6 (d) that the interest on the ordinary shares is to be equal to simple interest at 3 per cent., whereas there is no reference to simple interest with respect of the 3½ per cent. preference shares. Is there any reason why these words should appear in subparagraph (d) and not in sub-paragraph (c)? Assuming that the company is prosperous, that all our pessimistic expectations as to losses are not realised, and that the company builds up substantial reserves, what is to happen to those reserves if and when the company is wound up? Do the reserves go to the shareholders who have found the capital or do they go to the Treasury? I can find no reference whatever to any allocation of reserves.

I am glad that the Chancellor of the Exchequer is here, because I want to refer once again to the form of the guarantee given by the Treasury. If I understood the Chancellor of the Exchequer aright, on the first £1,000,000 the guarantee is 25 per cent. On the lending of the £1,000,000, assuming that it has all been repaid the second time, the guarantee again is 25 per cent., but thereafter every time the money is repaid and lent out again the guarantee aggregates until, having been lent out five times—the first time, and four times re-lent—the guarantee becomes 100 per cent. What is the reason for increasing the guarantee? One would asume that, in view of the fact that this increasing guarantee cannot become operative for many years to attract capital and to obtain the necessary money—not the first money but possibly a considerable increase in capital—one would have required a larger guarantee at first rather than later on. Here again we find everything topsy-turvy. The greater guarantee comes later on when we see how the company is working, just as the lower rate of interest is on the ordinary shares and not the preference share. The whole thing is upside down and directly contrary to what on the Second Reading Debate the Financial Secretary called "good commercial practice." I should be glad of some explanation of why these extraordinary anomalies are to be found in the Bill.

7.41 p.m.

I am sorry I had to be absent for about an hour during the course of these Debates, but on the Schedule I must again make a protest in regard to the Bill, which I do not like either from the point of view of its principle or from the point of view of the way it is drafted. What we appear to be doing in the Schedule is to think of a number, multiply it by a sum unknown, divide it by four, take away the excess over 1,000,000, and the result is what the taxpayer loses. We might well pause before we pass this Schedule.

7.42 p.m.

The questions which have been addressed to me by the hon. Member are numerous, and I will answer them as far as I can, but if my memory fails me no doubt he will come to my assistance. The first question he asked was what was the priority upon the winding-up of the company, and whether it was actually the case that the Treasury would be repaid the £100,000 before arrears of dividend were made up to the share-holders. The answer to that is, "Yes." I do not know whether the hon. Member objects to that.

It is very good of the right hon. Gentleman to give way, but it is not for me to object. The Chancellor of the Exchequer says that he has promised the money, and the only point that strike's me is that there is not much use in the Treasury paying the £100,000 into reserve if there is not considerable priority in winding-up.

That is on the assumption that there is going to be something left on the winding-up over arid above the losses, and there may be nothing of the kind. There may be nothing left at all, and therefore, in that case the Treasury contribution is very material. The hon. Member wanted to know why we paid only 3 per cent. for ordinary shares and 3½ per cent. for preference shares. My hon. Friend has already explained that we can get the money on those terms, and that really is a sufficient answer to the hon. Member, who cannot understand how he can get money on such favourable terms for an ordinary commercial concern or commercial venture. As I have tried to explain on several occasions, it is not an ordinary commercial concern, but we have found that there are people willing to accept the terms offered and find the money on those terms. That being so, I do not think that we should look that gift horse in the mouth.

The hon. Member also asked me a question about the difference of the position of the ordinary shareholders and the preference shareholders in regard to the winding up of the company. In the case of the preference shareholders their dividend is a fixed and cumulative dividend—3½ per cent. There can be no question of the preference shareholders getting any more than the 3½ per cent. In the case of the ordinary shareholders, the dividend is not fixed, but there is a provision to say that if there is money over sufficient to pay up arrears of dividend to the ordinary shareholders, they are not to be able to claim more than 3 per cent. in respect of each year. If they had compound interest they would be getting 3 per cent. in the first year, plus compound interest for any subsequent period. Under this provision they will be limited to 3 per cent. for each year in respect of any arrears they may hope to get when the company is wound up.

Finally, the hon. Member wanted to know to whom the surplus was to go, assuming there was a surplus sufficient after the various priorities had been met, namely, (1) the debt on the share capital of £1,000,000, (2) the £100,000 to the Treasury, (3) the arrears of preference dividends, (4) the arrears of ordinary dividend and (5) the repayments to the Treasury of any sum claimed in respect of preliminary and winding-up expenses. If there is anything left after that, it will, of course, go to the shareholders. I think I have answered all the questions put to me by the hon. Member. I do not think that things are so topsy-turvy as he suggests. They are complicated and need a certain amount of explanation.

Question, "That this Schedule be the Schedule to the Bill," put, and agreed to.

Preamble agreed to.

Bill reported, without Amendment; to be read the Third time To-morrow.

Civil List Bill

Considered in Committee.

[Captain BOURNE in the Chair.]

Clauses 1 to 8 ordered to stand part of the Bill.

Clause 9—(Provision As To Certain Officers Of The Household)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

7.50 p.m.

A short discussion took place on the subject raised in this Clause when the Bill was before the House the other night, and I should like to have a little more information with regard to the situation created by the proposed alteration. I gathered from the answer given to the hon. Member for Aylesbury (Mr. M. Beaumont) that this Clause made no difference in the position of the three officers concerned, except a change of the Vote on which their salaries were charged; but I think it goes a little further. These three officers, the Treasurer of the Household, the Comptroller of the Household and the Vice-Chamberlain of the Household have hitherto been officers of His Majesty's Household, and if the step proposed in Clause 9 had not been taken, their salaries would have been fixed by the Civil List Bill and questions relating to them could not have been raised again until a new Civil List was discussed, whereas the effect of transferring the salaries of these officers from the Civil List to the ordinary Estimates will be that their salaries will come annually before the House, and anything relating to them can be discussed. If we dissent from anything they do or the way they discharge their duties, a motion to reduce their salaries can be moved on one of the days devoted to the Supply Estimates.

These three officers discharge certain duties. On occasion they come to us, gaily apparelled, in order to bring a Message from the Throne. Hitherto, I understand that their conduct or demeanour on such an occasion would be a subject for the Sovereign. to deal with and not for this House, but in future if we do not approve of the way they behave on these occasions, or if they are improperly dressed, it will be for us to raise the matter. I understand also that one of these officers performs an even more important duty. The Vice-Chamberlain of the Household performs the duty of sending daily a report of the proceedings of the House to the reigning Sovereign. When a friend of mine held that office, I got into serious trouble for trying to take him away from the Whips' Office one evening at a certain hour when he had not completed his letter to the Sovereign. He had to complete that duty before he could attend to anything else, pleasurable as the occasion was to which I had invited him.

Do the proposed changes mean that it will be possible for us to call for the production of that Message? This officer is now to be our officer, and not the officer of the Crown. Would it be possible for us if the Message were not produced when we wanted it, to move a reduction of that officer's salary when the appropriate occasion arose? I should have thought that when we were transferring these officers there would have been one other officer who would have been transferred, and that is the Lord Chamberlain. I cannot help thinking that it is regrettable that this opportunity of transferring the Lord Chamberlain from being an officer borne on the Civil List to an officer borne on the Estimates of the House, has not been taken. He discharges now, apparently as a sort of Court function, the duty of the censorship of plays, and he has certain duties in regard to the control of theatres, important matters with regard to the expression of opinion in this country, for which he is not responsible to this House or to Parliament.

I do not think I can allow the hon. Member to discuss at any length a subject which if he had moved an Amendment to that effect I should have ruled it out of order.

May I ask the Chancellor of the Exchequer or the Financial Secretary whether the question of transferring the Lord Chamberlain with the other three officers was considered, and, if so, for what reason was it decided not to include that officer in this Clause? I should have thought that it would have been a good thing while we were making the change to have made a clean sweep. I understand that one of the reasons for transferring these three officers to the Estimates is that their salaries may be dealt with and that they may be given the salary that is regarded as appropriate to a Government Whip. At the moment they are in the anomalous position that while they are supposed to be the principal assistants of the Patronage Secretary to the Treasury they are less well paid than those Whips who are Junior Lords of the Treasury, with salary. Anything that removes anomalies in the payment of Members on the Front Bench opposite is a matter worthy of consideration. The principal anomaly is that they sit there at all, but we have to endure that. While they do sit there, anomalies ought to be dealt with.

7.58 p.m.

The position of the Lord Chamberlain is quite different from that of the three officers mentioned in the Clause. His is not an office which changes with the Government, but the officers mentioned in the Clause are Whips of the party in office. It, therefore, seems appropriate that their salaries should be borne upon the Estimates and not on the Civil List, thereby swelling the Civil List, seeing that their principal duties are in connection with this House. There is nothing changed by this Clause except that the salaries of these officers are being borne upon the Votes instead of the Civil List.

Question, "That the Clause stand part of the Bill," put, and agreed to.

Clauses 10 to 12 ordered to stand part of the Bill.

Clause 13—(Continuance Of Enactments, Commencement, Repeal And Short Title)

7.59 p.m.

I beg to move, in page 8, line 23, to leave out Subsection (1), and to insert:

"(1) There shall be charged on the Consolidated Fund in each year of the present reign such sums as may be required for the payment of pensions already granted or hereafter to be granted to persons who by the performance of duties to the public, or by their useful discoveries in science and attainments in literature, the arts, or learning, have merited the gracious consideration of the Sovereign and the gratitude of their country; but the sums so charged for the grant Of new pensions shall not in any year exceed four thousand pounds. Subject to the provisions of this Sub-section Sections five and six of the Civil List Act, 1837, shall continue to apply."
It will be seen from the names of hon. Members who have been kind enough to put their names to the Amendment that this is a non-party affair. It is one of those small matters in which all sections of the House will be glad and proud to take a part. I hope that we may even move that immovable organ the bowels of the Treasury. When I mentioned this matter first I received a reply from the Chancellor of the Exchequer for which I thank him. It is not necessary, I hope, to justify what I may call the spiritual foundation of this proposal, in the British Parliament, the heart of the British race, which has spread its language, literature and learning throughout the civilised world and beyond. I should like to make one or two practical points in connection with the Amendment. The first point is that we should increase the annual sum available for Civil List pensions for persons who, in the words of the Amendment (which, with a few slight alterations, I have taken from the Act of 1837):
"by the performance of duties to the public, or by their useful discoveries in science, and attainments in literature, the arts, op learning, have merited the gracious consideration of the Sovereign and the gratitude of their country."
At the moment the sum fixed by the Act of 1837 is £1,200 and this Amendment proposes that that sum shall be increased to £4,000. May I say at this stage that it is such a rare thing for a private Member to be able to propose the increase of a grant of public money recommended by the Ministers of the Crown, and to be in order, that I hope the Committee will take advantage of it and press their rights to the fullest possible limit, especially as we find ourselves at the dinner-hour, when, as we know, anything may happen.

My practical points are these: The Chancellor of the Exchequer in his interesting speech in proposing the Financial Resolutions which are the foundation of the Bill mentioned that owing to the generosity of His Majesty and the sagacity of His Majesty's Government a saving of £36,000 or £37,000 was being made on the Civil List this year. I suggest that out of that saving some small sum at least might be devoted to the purposes mentioned in this Amendment. Secondly, when this sum of £1,200 was fixed in 1837 conditions were very different from those of to-day. To take an example, the Civil List of Her Majesty Queen Victoria was £385,000. To-day, very rightly and properly, the Civil List is £410,000 and in the last reign it was £470,000. But the figure of £1,200 for artists and others remains the same. Other figures have altered. In 1837 the population was, I think, about 15,000,000; to-day it is about 40,000,000. The revenue then was not £80,000,000; to-day it is something like £800,000,000. In those days these, I suppose, were the only Government pensions granted. At the present time we rightly grant something like £40,000,000 in pensions, and the sum I suggest—£4,000—is only one in 10,000 of that figure. Apart from that the struggle for existence in the artistic world was not, I think, so severe in 1837 as it is going to be next year, 100 years later, in 1937.

Having regard also to mechanical inventions which come about every year and which can in the twinkling of an eye sweep aside a livelihood, especially in the domain of music and painting, it will be seen that everything has changed since 1837, when this figure was fixed, except this figure. In fairness I should like to say, because I do not like to discredit my country unnecessarily, that things are not quite as bad as they appear. The figure of £1,200 is not, as some people think, the total figure distributed in pensions every year. The Chancellor of the Exchequer, I think, will tell you that the total figure distributed every year is more in the neighbourhood of £20,000. This £1,200 represents what is given in new pensions every year. Well, £20,000 is not a figure which staggers me when it is devoted to this purpose, and especially when it is compared with the total figure of £40,000,000 paid in pensions otherwise.

I suggest that no civilised country having once accepted, as we have accepted, the principle of distributing pensions of this kind, would be satisfied that it was doing its duty and serving that principle sufficiently by distributing only £1,200 in new pensions every year—a sum which comes down to £60, £80, never I think more than £100, in individual cases. For the satisfaction and the reassurance of hon. Members who rightly fear reckless distribution of public money, who perhaps are not satisfied with all modern manifestations of the arts, and who may think of casual benefactions for crooners and composers of foxtrots and so on, I would say that there are after all statutory qualifications for these pensions. There must be merit, there must be service and duty.

I am not suggesting that everyone who dabbles in the arts and fails through laziness or any other cause should be benefited by the State in this way. I think it is the Prime Minister who decides who shall receive these pensions, and that is a guarantee that they will be properly allocated. Nobody, I think, need fear that the money will be improperly disposed of. It may be said, of course, that in some years there will not be a sufficient number of applicants who are worthy to receive these pensions. I think it is very possible that may be true in some years, although I am bound to say I could almost make a bet that this year and in most years of my life I should be able to find sufficient people to lead to the Prime Minister and say, "Here are worthy people to receive these benefactions from the State."

If there is any difficulty of that sort the answer is that it is not necessary to spend this money every year. I think it very likely that the contemptible smallness of this figure has in many cases prevented people coming to the Crown and applying for pensions. Somebody may say that, after all, there are benevolent funds and charities in various branches of the arts. So there are, but I do not think the State should evade obligations by referring to the existence of private charities. We must remember, too, that we are at the beginning of what we all hope will be a long reign, and whatever sum is fixed this evening will be fixed for the whole reign. I do not know what will happen before the end of the reign. The Chancellor of the Exchequer and his successors, pursuing the course of taxation so familiar to us all, may find the springs of charity, which are already running low, running dry. Then perhaps these pensions will be the only resource to which the recipients of them may turn.

I hope that no Member of the Committee will think that, because of my connection with what I hope I may call an art, I am thinking only of literature or writing and journalism. Indeed I am thinking more of music and painting, as I think the people engaged in those arts are people who at present need consideration even more than those in other forms of art. And apart from art there is science and research. Imagine a man like Professor J. B. S. Haldane—not that I suggest he is in any need of a pension or ever likely to be—but imagine a man like that, surrounded by his devoted assistants, continuously exposing himself to all sorts of perilous experiments, shutting himself up in, glass cases, consuming poisons, exposing himself to extraordinary dangers to discover cures of diseases, imagine a man like that who goes too far in that kind of experiment and finally finds himself unable to pursue that kind of work. What a terrible thing it would be that that man should not be able to go to the head of the State and say, "Sir I have done this for my country, give me a few pounds with which to end my days."

I do not think I can add anything more, except to say that it is an old-established habit in this country to neglect if not to despise the artist until he is rich and successful, until he is fashionable. Then we cannot say or do too much for him. That was never a good habit. I am not pleading for those who are successful. I am pleading for those who have laboured faithfully and well in the field of thought, in the field of research, in, the field of creative art, who find at the end of it all that they have gathered nothing for themselves except perhaps the memory of a short-lived fame. It is on behalf of those people that I ask the compassion of this House and of the Chancellor of the Exchequer.

3.12 p.m.

I would like very briefly to support this Amendment, which is one that must appeal to Members of all parties. I should like first of all to congratulate our official humorist in this House on being the only private Member who has ever been able to get round the most rigid rule of the Treasury—so rigid that no one ever believed it possible to move anything that would in any way impose a charge on public funds and free us from the iron grip of the Treasury. I feel sure that the Chancellor of the Exchequer will by sympathetic to this Amendment. Britain does so little officially for artists, scientists, men of letters and those who labour in the realm of the mind. After all, artists and scientists are not often good business people. It often happens that authors of books that have been successful, or of songs that have been sung round the world, or composers of music which has enriched the heritage of the nation, have found that the profits made were made by the publishers. I have in mind a very great novel for which the authoress received exactly £50.

It is a fact, I think, that in history we largely remember countries because of great names in science and literature. I do not think this country, particularly in this age when we are spending so much on arms, should be remembered by its poor treatment of artists. I am sure the Chancellor of the Exchequer would like to have the opportunity of paying something more than the petty sums that have been mentioned. Almost every general in the last War received in one year more than has been paid to some of the greatest of our scientists who gave their life and strength to preserving life, and who at the end were left with so little. I need only mention Sir Ronald Ross, who did such great work in the investigation of malaria and tropical diseases and ended his life in pain and suffering because of the work he had done. Yet very little was done for him until the very end.

It seems strange that pensions given to those who destroy life should be more than pensions given to those who help to save life. I do not want to make these cheap distinctions, but I think the scales are weighted perhaps a little too much on the side of convention. No doubt hon. Members know of people who have given great service in literature and art to this nation who may not be really in need of this pension to keep a roof over their heads, which is practically all that a Civil List pension does, but to whom it would be of assistance. It may be said, and said truly, that the miner who risks his life gets no civil pension and only 10s. a week. I represent a mining constituency and I know that the worker in the mine, whose life and labour has been portrayed by novelists and poets, would be the last person in the world to think that their small pensions should not be augmented in this way. I appeal to hon. Members behind me to support this modest Amendment, which is designed to help some small deserving cases.

8.17 p.m.

May I add one word on behalf of my colleagues on the Select Committee? It would be desirable if the Chancellor of the Exchequer could see his way to meet the suggestion. The original amount of £1,200 was fixed when the finances of the country were in a totally different position from that of the present time. Those who have given their lives to literature and art of various kinds demand some recognition from the State. What is being done at the present time is exceedingly small for a country as rich as ours. We have supported the Chancellor of the Exchequer in the proposals which form the subject of the Civil List, and we hope that he will recognise the feeling there is in the House and throughout the country and will find it possible to accept the Amendment.

8.18 p.m.

The proposal has been put before the Committee in very persuasive terms by the hon. Member for Oxford University (Mr. Herbert) and the hon. Lady, and the subject of it appeals to anybody who reflects on the sort of considerations which have been adduced by the two hon. Members, but I am afraid that I must ask the Committee to reject it, and I will explain why. The hon. Member for Edinburgh, East (Mr. Pethick-Lawrence) knows that although they are called Civil List pensions they are not on the Civil List, and when he says that there is a great deal of feeling in the House and in the country I must say that there has been no evidence of it. It was reserved to the hon. Member for Oxford University to discover this point. He was the only one who raised it on the Financial Resolution, and he got not one single hon. Member to support him. Apparently, he was then under the impression that £1,200 was the total amount of pensions paid out in any single year, but he has learned since then that £1,200 is the annual amount which is available for new pensions in any particular year. In fact, the total amount which is now being paid out in these pensions is somewhere about £23,000 a year.

It is alleged that there is a demand for these pensions which ought to be satisfied, and which presumably would be satisfied if the Amendment was carried. I am not prepared to say that you could not find a number of deserving cases of persons to whom pensions of this kind might be awarded if the amount available was increased, but I do say that there have been increasing difficulties in recent years in discovering a sufficient number of persons who can meet the conditions of need and merit, and, therefore, if the amount was increased and was utilised you would have to relax the tests which have been applied for selecting recipients for these pensions.

Has not the difficulty rather been that the tests have been made very stringent and extremely conventional because the actual amount is so small?

I will not enter into an argument on the point because I have not made any search into the particular conditions which are attached to each case, but I can give the Committee the information I have, and which still remains unaffected by what the hon. Lady has said. I said that you would have to expand your field, you would have to relax the conditions. It may be said that it is time they were relaxed, but that does not affect my argument. If you are to find suitable recipients for this in- creased amount you would have to relax the conditions which have hitherto been imposed. That may be a good thing. But in that case how do you know that £4,000 is the right amount to fix? On what is the figure based? It is purely arbitrary. On the Financial Resolution the hon. Member for Oxford University took the simpler course of doubling the existing amount, and said that we ought to pay £2,400 instead of £1,200. Now, he has put it up to £4,000. Why? Why not £5,000? Why not £40,000? The hon. Member says that he is not staggered by £20,000. Why does he stop at £4,000? The figure of £1,200 a year given in new pensions has already meant a figure of £23,000; and if you put it at £4,000 it is quite probable that the total would run into £50,000 more than it is now.

I will tell the right hon. Gentleman why I put the figure at £4,000, which I am prepared to justify at any time. I thought the right hon. Gentleman would have the decency to meet me half way, and if he halves the £4,000 he will find that is just about the figure I mentioned.

I shall not argue with the hon. Member about the term which he applied in this case, for he is still comparatively new to the House, and does not seem to realise the control which on these occasions is exercised regarding the things which are said on one side or on the other. My argument is quite a serious one. The figure which the hon. Member mentioned is purely arbitrary, and I feel certain that all the arguments which have been used by the hon. Member and by the hon. Lady opposite could be applied with equal force if the total amount were raised to £4,000. It would still be possible to find many more people deserving of assistance. Although it is perfectly true that the figure was fixed a long time ago, when the finances of the country, as the hon. Member opposite said, were in a very different position from what they are now, I would remind the Committee that at that period taxation was infinitely lower than it is now.

Although I am not prepared to say that it is not possible to make out a good case for increasing this sum, I put it to the Committee that at is extremely hard to state in a convincing way that any particular sum is the right one to apply, and that, moreover, this would be an extremely difficult time at which to increase the sum, in view of the fact that at the moment we are putting fresh taxation on an already highly-taxed people. There would have to be a much better documentary demand for these particular pensions than it has been possible to produce at the present time, if an additional sum was to be justified. I am certain that the acceptance of the hon. Member's Amendment would merely mean that there would be a fresh demand for further pensions, and that there would be fresh grievances cropping up from people who would not be as well treated as these people would be. So far as I know there has been no agitation during, say, the last ten years, to the effect that the sum devoted to this purpose is not sufficient. I very much doubt whether there is a better reason in this case for this particular increase in the sums that are disposed of by the Treasury than there is in dozens of other cases in support of which I am sure the hon. Lady would be very eloquent if she could think of them at the moment. I must ask the Committee to reject the Amendment.

8.28 p.m.

I am sure the Committee has listened carefully to the Chancellor's very weighty arguments and that it appreciates how difficult it is for him to find money in view of the additional taxation which is now being placed on people. I would, however, appeal to the Chancellor to consider whether he cannot, between now and the Report stage, go into this matter again with a view to discovering whether it might not be possible to make some small increase in this amount. It does not seem to me that it would be necessary to have any relaxation of the conditions in which the pensions are granted. If the amount available were increased it does not in the least follow that it would all be used in the year. I urge upon the Chancellor that, although there may have been no popular agitation, there is considerable feeling in the Committee that it would be a generous gesture if some small concession were made. I am sure the Committee would be pleased if the Chancellor could give some assurance that between now and the Report stage further consideration will be given to this very small matter.

8.29 p.m.

I may be only a new Member, but I am quite sure that if I were convinced that I had trespassed against any Rules of Order or even the etiquette of this place, I should be the first to apologise. I am, however, bound to say that I have not heard anything which persuades me that the expression I used just now was not justified. The word "decent" means "becoming," and I am surprised that the Chancellor of the Exchequer of this great country, the heart of the British Empire, should think it decent—that is, becoming and seemly—to stand up and speak in the cold and callous way he has about this very small help for which I have asked for a very large and important body of the community. The right hon. Gentleman asked me why I first asked him to double the sum. In my first speech I spoke extempore and suddenly, and that thought came to my mind. When I looked into the matter I saw that it was not nearly sufficient, and I mentioned the sum of £4,000 because I thought he would look into the matter in the manner in which most Chancellors of the Exchequer do, and say, "I cannot go as far as this gentleman suggests, but I will meet him half way and make some small concession." I am surprised that he is not ashamed not even to go as far as that. If he is offended by that I am very sorry, but I am quite prepared to say it again.

The right hon. Gentleman used the most extraordinary argument that I have ever heard, when he said that even if the sum were £4,000, £5,000 or £50,000 it would still be an arbitrary and imperfect figure. Good Heavens, what are the other figures in this Bill? Is not every limit fixed in a Bill arbitrary, and could not the same argument be made against it? I am surprised that the right hon. Gentleman the Chancellor of the Exchequer, with his great intellectual powers, should venture to offer such an argument as that. As for this matter of there being no evidence whatever to show that there is a real demand for these pensions, and the statement that if the sum were increased it would be impossible to use it, I would like to ask the right hon. Gentleman on what evidence he bases that argument As I said in my remarks just now, I would guarantee myself, if the sum were increased to the amount I suggest, to lead by the hand worthy people who come within the limits of the present conditions and present them to the Prime Minister, and to say, "These are men and women who have done good service to this country in these departments of national life and they deserve to have this assistance now in the declining years of their lives." I may be ruled out of Order and forfeit the respect of right hon. Gentlemen on the Front Bench, but it is disgusting the way in which this modest little suggestion has been received—disgusting, I will say it again.

I have not come here from a manufacturer's office or from the rich parts of this world. I have grown up in the departments of life for which I am now pleading. It is all very well to say "Say it in Punch," but this is not a joke. The life of the artist may be glorious while it lasts, but it is short-lived, precarious and insecure, as are the lives of those for whom hon. Members opposite speak. The artist is not like a man with a factory, a man who builds up an office or a business, or owns land, who can go away and leave it to fructify. The artist is his own factory, his own office, his own raw material, his own foreman, his own manual labourer, and there is no allowance for wear and tear of machinery and plant. It is all in his head. If something happens, if there is a change of fashion, a new mechanical invention, illness in the family or something else, all is finished. The last hope of many who have carried across this country and across the world the name and fame of England in the arts, in literature, in science and so on, is this small pension which, as I say, is insufficient now, and ought to be increased.

I am bound to say that I am very disappointed and entirely unconvinced by the right hon. Gentleman's remarks, and I propose to press this to a Division. I hope I shall be supported by many sections of the House. Let us private Members get together, for this is one of the rare occasions upon which we are able to put down an Amendment increasing a grant of public money proposed by Ministers of the Crown. They have produced very few reasons why that increase should not be made. I hope we shall all stick together and press the Amendment to a Division.