I beg to move, in page 1, line 7, to leave out from the first "the," to "any," and to insert:
It may be for the convenience of the Committee if we consider this Amendment with the following Amendment, in page 2, line 18, after "of," insert:"repayment of the principal of and the payment of the interest on and other charges in respect of."
One is consequential on the other. The reason for this Amendment is that Clause 1 (1) of the Bill as drafted, while enabling His Majesty's Government to guarantee repayment of principal and payment of interest on a loan from the Bank, does not enable His Majesty's Government to guarantee the other charges of the Bank. These charges are two. There is the statutory commission, which is a commission of not less than 1 per cent. and not more than 1½ per cent. charged by the Bank when it makes or participates in direct loans out of funds borrowed by the Bank during the first 10 years of its operations. That is imposed by Article IV, Section 4 (a) of the Bank's charter. The Bank is obliged to charge commission on loans from funds it has borrowed, but not from funds it has obtained out of members' subscriptions. The commission is not a banker's profit, but is set aside for the Bank's creditors and, of course, eventually of members. The commitment charge is in effect a reduced rate of interest. This reduced rate of interest is charged by the Bank on the undisbursed part of a loan, full rate of interest and commission being charged only from the date of disbursement. It may be held to be implicit in the original Clause 1, but we feel that the matter should be put beyond doubt. This is not a statutory obligation on the Bank as is the other. It is a matter of practice and, of course, it is to the advantage of the borrower. There have been some delays between Second Reading and Committee stage, but we had to have discussion with the Bank on these charges and on various other matters relating to the guarantee. All these matters have now been satisfactorily cleared up and I ask the Committee to approve the Amendments."and other charges in respect of."
We of the Opposition have no quarrel with these Amendments, the purpose of which has been explained quite clearly by the Under-Secretary. We are glad to see this Bill again. We last saw it in November, and we thought that this Government of planners had actually lost it. Now it has turned up and we shall do our best to facilitate its quick passage.
I quite agree with my hon. Friend. In his explanation of the Amendments the Under-Secretary referred to the advantage to the borrowers. That is a good thing from the borrowers' point of view, but we are building up considerable loans from banks, etc., which we assume will be of great help in the development of the Empire. There should be close scrutiny of how these loans are used, because ultimately if there is a big loss it must in some way——
I think that the remarks which the hon. Member is making would be more appropriately made on the Motion "That the Clause stand part of the Bill."
Will the Under-Secretary amplify his explanation by saying what will be the total of the Bank's charges by way of interest and other charges?
I have already said what will be the total amount of the Bank's charges, and I cannot say anything more.
Is it 4½ per cent. or thereabouts?
Amendment agreed to.
Further Amendment made: In page 2, line 18, after "of," insert:
"and other charges in respect of."—[Mr. Rees-Williams.]
Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."
Perhaps I might finish the remarks which I was making. I do not in any way oppose this Clause, but I realise that, as the hon. Gentleman said just now, the borrower is getting a great advantage which should ultimately be of enormous advantage to the development of the various Colonies. We all agree on that. We want to see the Colonies developed fully. But if by any misfortune there should be a loss, and these loans should fail, I imagine that loss would fall on the Bank, and as we have guaranteed the loans it is quite conceivable that that loss might fall on the taxpayers of this country. That should be pointed out because it might be a very heavy charge.It is necessary that it should be pointed out because it should be clearly made known that this country is at present doing an enormous amount by way of finance in helping to develop our Colonies. That should be appreciated, as I am sure it is, both here and in the Colonies. It should also be appreciated in a wide circle outside the Empire. It shows that we in this country are again, as so often in the past, making terrific efforts to help to advance the people in our Colonies. It is a work that has gone on for many years in many ways. An occasion of this sort should not pass without its being clearly pointed out that this work is being done by the Government with the support of the Opposition, and, I believe, of every party in this House. I cannot speak for the Communist Party or the minor Liberal Party, neither of which are represented at the moment, but the great Tory Party and the Socialist Party are supporting this principle.
It might be for the convenience of the Committee if I mention one or two points arising out of some misunderstanding in our minds on the occasion of the Second Reading of this Bill. First may I say, in regard to the query raised by the hon. Member for Torquay (Mr. C. Williams) that the statutory ceiling in the Bill is, as he will see from Clause 1 (1), £50 million. What our actual commitments will be within that total it is impossible for me to say because we do not know to what extent Colonial Governments will take up these loans. No one can say that at the moment. In reply to the hon. Member for Keighley (Mr. Ivor Thomas) the Bank's interest and charges will be about 4½ per cent.On Second Reading the right hon. Gentleman the senior Burgess for Oxford University (Sir A. Salter) quite rightly raised a point on the question of tied loans and the financing of local currency requirements. I heard from Washington that the Bank was very pleased with that discussion and Debate, and congratulated hon. Members on the standard of the Debate. We often get comments of a reverse kind and it is just as well that when we get some bouquets, we should record the fact. The Bank have discussed with us at considerable length the actual requirements of the Bank under these tied loans. On Second Reading, the senior Burgess for Oxford University drew attention to Article III, Section 5, which provides that the Bank:
I am assured by the Bank that their policy and operations are and always have been in complete conformity with that provision. By 30th June, 1948, a total of 470.1 million dollars had been disbursed as follows: United States 356.4 million dollars, Canada 12.5 million, Latin America 50 million, Europe 47.7 million, Near East 2.2 million, Africa 1.2 million and the Far East 1 million. Thus 20 per cent. of the total of the Bank's disbursements have been outside the United States, and goods bought from this 20 per cent. have been financed by purchases of the required currency or by making U.S. dollars available to borrowers. Article IV, Section 3 (a) provides that the Bank:"shall impose no conditions that the proceeds of a loan shall be spent in territories of any particular member or members."
"Furnishing" here covers providing the borrower with a certain currency in exchange for the currency originally borrowed. In the eyes of the Bank, Colonial Governments derive status through His Majesty's Government's membership of the Bank; therefore "currency of a member" is held to include both sterling and Colonial currencies. The Bank would only provide Colonial Governments with sterling in exceptional circumstances as provided by Article IV, Section 3 (b). Except in one or two cases, the Bank has, up to now, only lent in U.S. dollars, but it may provide other currencies in exchange if the borrower desires, but not, of course, the currency of the borower save in exceptional circumstances, as I have mentioned. Hitherto other members have not, as a general rule, permitted their paid up subscriptions to be used. It is important to make quite clear both to the Colonial Governments and the Members of this House exactly what their position is under the regulations of the charter of the Bank."shall furnish the borrower with such currencies of members, other than the members in whose territories the project is located, as are needed by the borrower for expenditures to be made in the territories of such of the members to carry out the purposes of the loan."
I am glad that the Minister has been able to make this supplementary statement, because there was a good deal of anxiety and misconception both in this House and outside on the occasion of the Second Reading of this Bill. During that Debate I pointed out that I thought it was a very great advantage that money lent through the Bank which is almost entirely American in origin was lent without being tied, being different in this respect from, for example, loans made by the Export-Import Bank. When I made that remark the Minister said:
On this "The Economist" commented, and I thought quite reasonably, that the statutes of the Bank—as the Minister has just read them out—are clear and definite that no conditions shall be imposed requiring the loan to be spent in the territories of any particular member or members. "The Economist" went on to say that if that statute was being circumvented by administrative action, the matter should be made the subject of a clear statement of policy. It added that I intervened in the Debate and that though I was—as indeed I still am—chairman of the Banks' Advisory Council and had just come back from Washington, I was apparently quite ignorant of the statute being circumvented. That was true and I was the more surprised because I had been discussing the question of Colonial loans and no suggestion of tying these loans had been made. I, therefore, wrote to the President of the Bank and was informed by him that the statement made by the Minister was apparently due to a mistaken inference from certain informal and preliminary discussions, which were neither completed nor meant to be published, and that, as the Minister has said today, the Bank was not in any way attempting to circumvent the statute in question. I am, therefore, very glad indeed that he has been able to make this statement now."Unfortunately, it is the policy of the Bank at the moment that dollar loans shall only be used for dollar purposes."—[OFFICIAL REPORT, 19th November, 1948; Vol. 458, c. 785.]
I should be obliged if the Under-Secretary could enlighten me on one small point regarding the precise significance of subsection (3, b). So far as I understand it, loans may be made under subsection (3, a), and the money is to be:
That is easily intelligible. At the same time there may be money loans for some project which in fact cost less than it was expected it would cost. That does not very often happen in these days, and I should have thought that in those circumstances, when a particular transaction cost less than anybody thought it would, and when a transaction under subsection (3, b) come to be considered, it would be considered de novo whether a new grant should be approved or not. As I read the Bill, what happens is that if we make a loan of so much money we have to find a way of spending that money whether it is necessary or not. If it is not spent on the original project, some other project must be found on which to spend it."for appropriating and duly applying the loan for the purpose approved as aforesaid."
Those of us who sit in this part of the Committee cordially welcome the arrangements proposed, which appear to be wholly admirable and well designed to achieve the object in view.
Like my right hon. Friend the Member for Oxford University (Sir A. Salter), I am very grateful for the explanation given by the Under-Secretary. I should be grateful further if he could indicate the part to be played by the Colonial Development Corporation in regard to these loans. There has been a long interval since this Bill received a Second Reading. Talks between Lord Trefgarne, the Chairman of the Corporation, and the President of the Bank, Mr. McCloy, have taken place and I should be glad if we could know what was the outcome of those talks. Mr. McCloy took a great personal interest in this question of Colonial development and I hope that since he has ceased to be President of the Bank there will be no change of policy in regard to this matter. Is it intended that all loans to Colonies and similar territories shall be channelled through the Colonial Development Corporation or are these loans through the Colonial Development Corporation only one part of the total sum which may be available to the Colonies?
In answer to the last question put by the hon. Member for Keighley (Mr. Ivor Thomas), the Colonial Development Corporation does not come within the purview and scope of this Bill. It may be necessary, in order to deal with certain matters that we have to deal with here, to have an Amendment to the Overseas Resources Act, but this Bill does not affect the activities of the Colonial Development Corporation at all.With regard to the question put by the hon. Member for Devizes (Mr. Hollis), this is really a safeguarding provision to ensure that a Government which receives a loan and does not, for some reason or other—possibly for the reason he suggested, or there may be other physical reasons—apply it to the original purpose, shall not use the balance of the money so available on schemes which have not the consent of my right hon. Friend. It is, in fact, a provision safeguarding the Treasury, and consequently the taxpayers of this country. For that reason, I ask the Committee to agree that this is a very reasonable and proper safeguard to have in the Bill. I am grateful for the way in which the Committee have received this Clause, and I ask that it now stand part of the Bill.
Question put, and agreed to.
Clause, as amended, ordered to stand part of the Bill.
Clause 2 ordered to stand part of the Bill.
Bill reported, with Amendments; as amended to be considered upon Monday next, and to be printed. [Bill 146.]