§ 3.13 p.m.
§ LORD OGMORE rose to call attention to the Annual Report of the Colonial Development Corporation; and to move for Papers. The noble Lord said: My Lords, I think all of your Lordships will agree that the need for Colonial development is so obvious and so well-known to your Lordships that there is no reason at all for me to enter into that phase of this subject. Traditionally in this country, Colonial development has been carried on by Government officials—I say "in this country" because it is, to some extent, from this country that a good deal of the impetus in Colonial government has taken place. It is to the officials, the advisers and the research services in Whitehall that some part of the credit must be given I am not a wholehearted admirer of the Colonial Office—I know their failings—but I think we must give a good deal of the credit to the officials of the Colonial Office for much of the Colonial development that has taken place in the past. Also, there has been in this country, in the City and elsewhere, a great contribution in this field.
§ But it was found, I think, before the war, and certainly it was imagined during the war, that the contribution which could be made either in Whitehall, by the civil servants, or in the City, by the great companies, and the small companies too, was not in itself sufficient: that there was a field in which neither Government enterprise, such as had previously been known, nor private enterprise could adequately fulfil a definite need. There were areas, in other words, which private enterprise could not touch. Therefore, during the 1546 war the Colonial Development and Welfare Fund was set up, which was intended to supply finance for those enterprises in Colonial territories which were of a non-commercial nature but which had to be brought into being before enterprises of a commercial nature could take place. Secondly, just after the war ended, it was decided to supplement this noncommercial activity of finance by the inauguration or setting up of a Corporation which would embark upon commercial enterprises, and would embark upon them either on its own or in conjunction with Colonial Governments or in conjunction with private enterprise.
§ We knew very well, when we were considering this subject at that time, that most of the cream had been skimmed off, and that the milk left, was in most cases very much of a skimmed nature. None the less, we thought it essential, if we were to make any progress in Colonial development, that we should set up a Corporation to undertake those projects which hitherto had made little demand upon, or created little interest in, the minds of those concerned with private enterprise. Therefore, the Colonial Development Corporation was set up to establish or to assist any enterprise in the Colonies which was designed to increase the general productivity capacity of the Colonies. Financially, they were expected, taking one year with another, to "break even." In that regard, we were, I think, unduly optimistic, but there had been no previous experience in this field and it was expected that the successes would carry the losses.
§ I come, without any more ado, to the Report of the Colonial Development Corporation for 1951. To my mind, it shows three things. In the first place, it shows that 1951 has been a year of continued organisation, retrenchment and consolidation. There has been, so the Report says, some planning, but not much. Some new ventures have been considered, but apparetly—although the Report is rather confusing on this point—no new ventures have actually come into being. Secondly, the Report shows that fifty-three undertakings have been in operation, three more than in 1950 (that is why there seems to be a little confusion, for the Report it one place says that no new ventures have been considered) while two were abandoned and five liquidated. Again, I do not quite 1547 know what is the difference between "liquidation" and "abandonment" in this field. Of these fifty-three undertakings, twenty-seven were agricultural or projects allied to agriculture, such as forestry or fishery. Perhaps, indeed, there may be more than twenty-seven, because there is a class of project referred to as "others" which may or may not consist of projects allied to agriculture.
§ These fifty-three projects are in twenty-three separate countries, not counting those projects which have been abandoned. When the Report for 1950 came before your Lordships there was some criticism on the score that the spread-over of the projects is too great; that the existence of projects of many types in as many as twenty-seven countries, inevitably means a very great complexity in the management and in the staff at headquarters. That is true, of course. On the other hand, one has to realise that the Colonies themselves are very diverse. There are over fifty Colonies and Colonial Territories, and they themselves need schemes of differing types because they themselves are of such differing types. What would be of help in Nigeria would not be of the slightest good in Singapore—and so one can go through the various Colonies in that way.
§ The third thing that the Report says is that the trading losses were £643,404; and, with the office expenses added, were £1,070,043. I shall have a little to say about those office expenses later on, because I think they are rather high. There were also losses on the realisation of the assets of abandoned undertakings, and heavy expenditure was incurred in the investigation of projects not followed up. So that the cumulative losses to be borne by the Corporation, like a millstone round its collective neck, at the end of 1951, are described by the Report as being £4,500,000. But I am led to believe that the figure is more in the region of £6,000,000. There can be no writing off of that £6,000,000. The Corporation cannot write off the money. The loss will have to be carried, of course, by such of the projects as are successful.
§ As to the schemes themselves the Report implies, as indeed did the previous Report, that there were three types of project. The first was the project that 1548 never could have succeeded and should never have been started; the second was the project that could have been a success if the management and the organisation had been right; the third was the project that was already a success, or was likely to be a success, in spite of the faults in management and organisation. I am not going to enter into the rights or wrongs of that matter, because, naturally, persons in their private capacity have no recourse to the books and papers, and cannot call for evidence or anything like that. Therefore, they find themselves unable to decide whether such a charge, if it is a charge, or criticism, if it is a criticism, or reason, if it is a reason, is a true one or not. But what I have said is, I think, a fair assumption to be made from the terms of the Report. We in this House cannot interfere in the detailed management, and we can only hope that the regional organisation introduced or developed will ensure that schemes of the right type are chosen; that after they have been chosen initially they will be carefully watched; and, finally, that when they have been put into being they will be managed in a husbandlike manner. I am assured that nine out of ten schemes nowadays need not come at all to headquarters in London. All I can say on this aspect of the projects and the organisation is that I personally wish the Corporation and all the schemes well. As I have said, there are so many schemes of so widely different a character in so many separate countries, that we could not possibly attempt to-day to go through them or to make any assessment or judgment of them.
§ There is one point to which I referred earlier and upon which I should like to make a comment. I notice that the cost of office expenditure, not only here but in the Colonies, seems to be very high. It is almost double the trading loss. I hope that the lavishness in office accommodation, secretarial and typing assistance and the provision of motor cars, and so on, which seems to afflict so many of these large public and private corporations, is a thing of the past. I can never understand why corporations of this kind need to be in Bond Street or in Mayfair. I should have thought that that was quite the wrong atmosphere for them. It would be much better if they were down near the docks, or at any rate in the commercial districts, where the atmosphere of 1549 luxury and privilege, and perhaps the lightheartedness which one so often feels in Mayfair, would not be quite so prevalent. But that is only a personal view.
§ The part of this question to which I wish to refer in more detail relates to finance. Obviously, the financial side is increasingly a keystone of the Corporation's activities. I have already mentioned that no writing off of capital is allowed. The Corporation have to carry it, as I have said, like a millstone. What is even more disturbing is that even if a pilot scheme is started—and pilot schemes have invariably to be started before you can go on to major schemes—it has to be financed out of capital, like any other scheme. If it is not successful—and I dare say six out of ten will not be successful—that capital expenditure has to be carried by the schemes which are successful. These pilot schemes are such that, in the normal way, no private enterprise company would ever dream of embarking upon them.
§ The finance of the Corporation is obtained from long-term Exchequer advances. These are made for forty years. Repayment is by thirty-three annuities comprising interest and capital, beginning in the eighth year. Interest is in accordance with the rate current for Government credit in redeemable securities at the lime of advance, and is calculated to cover the fact that no interest is paid during the first seven years. At present, the interest carried is 4½ per cent. In addition, there are short-term advances at current rates from the Government and also at current rates from private commercial sources. Well, that is the financial obligation of the Corporation, and during its short life much experience has been gained—an experience touched upon by Mr. Justice Upjohn in his Report on the Gambia Egg Scheme which was received in the office yesterday and which I think sets out very fairly the difficulties which the Corporation had to face in its early days. I hope I am being fair to the Corporation in saying this; I think I am. As a result, the Corporation is inevitably tending to play safe. It is attempting to go for certain winners—if there are any certain winners. This is Derby Day, and I should say that certain winners are as difficult to spot in Colonial development as they are at Epsom. Therefore, the Colonial Development Corpora- 1550 tion is tending more and more to become a lending house—lending money either to private enterprise or to Colonial utilities, such as the electricity scheme in Malaya and the housing scheme in Singapore. But it was not set up for this purpose, and it will fail in its purpose if it plays safe all the time, because, as your Lordships know, Colonial development entails calculated risks. It means turning new soil in new ways. Yet the Corporation is stifled by the financial straitjacket in which it is confined.
§ What we have to do to-day is to find or to suggest to Her Majesty's Government answers to the problem. What are those answers? In the first place, the answers entail a new financial policy. We must wipe off the accumulated losses and start afresh—by that I mean the losses on abandoned projects and pilot schemes, not, of course, on schemes which are going forward and which can and ought to carry the capital employed in them. This will enable the Corporation to stride vigorously forward, and not stagger along like a modern Sinbad with a dreadful old financial man of the sea on its shoulders. It may be said that it is an odd suggestion, that a public corporation should be allowed to disgorge its losses in this way. But we must remember that this Corporation was a novelty and that there was no precedent upon which we could proceed. I personally think that the Corporation was, to some extent, given an impossible task when it had to meet all its losses out of its dubious profits.
§ The second course which, in my view, we should take—and this is possibly the more important one; the last was a course of a negative sort; this is positive—is this. I believe that the Colonial Office, Colonial Governments, Colonial municipalities and authorities under the American Point Four programme, the directors of reserve funds which now amount to many millions of pounds—the cocoa reserve, the cotton reserve and others—should use the Colonial Development Corporation as agent for schemes likely to be of great benefit, or thought so to be, but which must be tried out first in the form of pilot schemes. In other words, whenever there is a need for a pilot scheme, I consider that the Corporation should not be expected to embark upon it themselves, borrowing money at 4½ per cent. for that purpose 1551 So far as the finance is concerned, it should be a charge upon a Governmental fund or one of these big reserve funds.
§ One cannot say too often that pilot schemes are essential, but we have found in recent years that a pilot scheme often involves more than one Colony—even more than one region. For instance, it was decided to have a pilot scheme for rice in West Africa. To get experience of rice in West Africa investigations had to cover Malaya, China and even the Southern States of the United States. Those investigations were necessary in order to get experience on which to decide whether rice was likely to be a successful crop in West Africa. The same thing occurred in regard to cocoa. It was decided two or three years ago to grow cocoa in Malaya. It was no good having a pilot scheme in Malaya unless experience gained in West Africa was available. It is no good having a pilot scheme confined to one Colony or necessarily to one region of the Colonial Empire. One has to look at the Colonial Empire as a whole. Therefore, that is why I say that very often the only sort of organisation that can be used for that purpose is an organisation like the Colonial Development Corporation which can obtain its finance as agents from one or another of these bodies.
§ Looking at the problem as a whole, as one which is Empire-wide, we shall find that practically every new scheme must be tried out on a small scale first. I had the privilege of being for nearly two years chairman of the Colonial Research Council. More and more when I went round the various research schemes I found on our research stations that preliminary ideas based on the best expert advice turned out never to be 100 per cent. right and sometimes 100 per cent. wrong. Time after time, one found that something which had appeared perfectly sensible—some idea, perhaps, for growing either a new crop or an old crop in a new way—after being tried out proved not to give the answer desired. One was driven back to the realisation that those who had grown the crop there for hundreds of years were probably right in the end. It is a good thing whenever one develops any of these crops in any Colonial territory to find out either why the crop has not been grown already—there may be a reason which the local 1552 people would know—or why, possibly, it has been grown in a certain way—again, there may be a reason for that.
§ As one who comes from generations of hill farmers, I have always been very dubious about people putting ploughs too enthusiastically on marginal land and trying to till it. And most of the territory in the Colonies which has not already been developed is marginal land. Very often a farmer will say—particularly in Africa—if you go to him as an individual: "This idea of yours sounds very good. You try it, and if you try it and I see that the crop can be grown and I can make money out of the crop, then I will try it. But you try it first." That is an added reason why you want to have a pilot scheme—not only to satisfy yourself that the crop can be grown but also to satisfy the farmers locally that it can be grown.
§ I think that in Colonial development we are moving forward very much into the group or team undertaking. I have felt for many years that we could do much more on what I call the "hub and the wheel" principle—the hub being the central farm, with its administrative unit, servicing and equipment, its supplies, seeds and stud animals, its implements, its credit, foodstuffs, advice, veterinary assistance and so forth; the perimeter, or rim of the wheel, consisting of the individual or co-operative holdings serviced by the central farm. More and more Colonial development is moving towards this group or team undertaking and is going away from the individual undertaking that we have known almost entirely in the past. If we can have this team or group undertaking in the future, the Colonial Development Corporation can help enormously, again as agents, by setting up the central farm or central servicing unit.
§ I shall not detain your Lordships further. There are, as I have said, two courses open to this Parliament and to this Government: first, we can carry on as at present; secondly, we can undertake a financial reorganisation. A war is being waged against poverty, ignorance and hunger. The Colonial Development Corporation can become a powerful factor in Colonial territories in that war. Are we to enable it to make its contribution by a financial adjustment, or is the Corporation to dwindle into impotence and become, instead of a front-line warrior, a 1553 casualty carried to the rear? That is the question for this Parliament and this Government to decide. My Lords, I beg to move for Papers.
§ 3.38 p.m.
§ LORD BALFOUR OF INCHRYE
My Lords, I am sure your Lordships in all quarters of the House are grateful to the noble Lord, Lord Ogmore, for giving us an opportunity of discussing the Colonial Development Corporation Report. I am sure we are grateful to the noble Lord, also, for his interesting survey. The noble Lord made a frank admission that many of the calculations and assumptions of the last Government have, in the event, proved wrong. He started his speech by saying that some part of the credit of Colonial development must go to Colonial Office officials. I am sure that that is a statement with which all your Lordships will be in agreement. But a greater part of the responsibility for policy and administration in Colonial development must rest upon the shoulders of successive Colonial Ministers. This responsibility includes, if I may say so, the sanction by the last Administration of some of these luxurious premises in Bond Street, the haunt of privilege and the centre of gaiety, to which the noble Lord objected. These premises must have been sanctioned by the administration of which the noble Lord was such a distinguished member.
I was greatly puzzled by one statement in Lord Ogmore's speech. He said that in 1945 the Government of which he was a supporter found little cream left in Colonial development. But that is scarcely consistent with the oft-heard words of condemnation from the Socialist Party to the effect that nothing in the way of Colonial development was ever done by previous Governments. I am not quite sure which way the noble Lord wants finally to decide in his mind, but he cannot have it both ways. He cannot say that there was too much development in the past, so that there was nothing left, and at the same time be a willing supporter to a condemnation of the fact of no Colonial development in past years. The noble Lord's speech was, as I have said, a courageous speech, because it was an admission that much was done with Treasury sanction, Government sanction, in the last Administration which in the event has turned out to be in error. I 1554 welcome very much his conversion to the principle of pilot schemes. He said he thought every big scheme should be tried on a small scale first. Would he mind repeating that conversion to past Ministers of his Party who have been responsible for initiating great schemes of nationalisation which have caused such confusion and such muddle? I agree with him entirely; and let us start on a small scale as regards big schemes of nationalisation in this country, just as regards Colonial schemes.
§ LORD OGMORE
I do not know whether the word "conversion" in relation to pilot schemes is quite accurate. I do not know for how many years I have been a believer in it. Certainly I have always recommended it in this House and when I was a Member of another place.
§ LORD BALFOUR OF INCHRYE
Unfortunately, the noble Lord's voice was apparently a voice "crying in the wilderness," because we saw great schemes of nationalisation introduced which, in the event, are not proving entirely successful.
The Minister who is to reply to-day, my noble friend Lord Munster, will be replying, let us not forget, for ten months' administration of the last Government. I do not want unnecessarily to rake over the past, but I must say that the Reports show that, during that period and the period before, money has been lavished without any proper consideration, without advice and ignoring local opinions. If a public company had expended its shareholders' money in the way we see from these Reports it has been expended, I believe that the shareholders would have been entitled to ask for a Board of Trade inquiry—if the Board of Trade itself had not acted without any prompting. It is a pity that there should be two standards for commercially operated concerns, one the standard which is laid down for public companies, and which the Board of Trade watches over, and another for Government-operated concerns.
I come now to the present Report, and I agree with the noble Lord, Lord Ogmore: I think it is a terse, harsh Report, facing up to the realities of the position, admitting the mistakes of the past, giving a clear picture of the present and some indication as to how it sees the future. The results, in terms of money, are nearly twice as bad in the 1555 year 1951 as in the year 1950. The loss, I think, was £524,000 in 1950, and £1,070,000 in 1951. But in spite of that, I much prefer the Report of 1951—as I believe will all your Lordships—to the Report of 1950, because the Report of 1951 shows that the structure is gradually becoming a cleaner and better one, based on ever-sounder foundations.
The noble Lord, Lord Ogmore, put forward two most interesting suggestions as to the future financial set-up. To me the most important part of this Report is contained on page 5 in paragraph 12, where it says:Other things being equal, deliberate policy is to look for experienced private enterprise partners to share in investment and management.That was envisaged in the Report of 1950 in just a few words, when the Report said that some 10 per cent. of the enterprises were shared with commercial interests. That policy has been developed, and I believe that along those lines lies the best prospect of the Colonial Development Corporation fulfilling its task in the most economic manner. As page 5 says, and as the noble Lord, Lord Ogmore, has stressed, the present financial set-up allows no equity capital, which is a necessary corollary of risk and of that partnership between private enterprise and Government finance. I support the noble Lord, Lord Ogmore, in hoping that before we debate the 1952 Report, in twelve months' time, Her Majesty's Government will have agreed to a new financial set-up which will have encouraged this marriage between private enterprise and Government effort to a far greater degree than the present restrictive covenants allow.
I think there is a danger, which has been referred to in previous years by my noble friend Lord Rennell, of rigidity and centralisation in administration and training. When one reads the Report one is amazed to think how many and what variety of enterprises are being controlled from the centre. I do not believe that any business house would have a staff capable of administering and supervising anything like the number and variety of enterprises which the Colonial Development Corporation is endeavouring to supervise. Therefore one hopes this marriage of private enterprise and Government effort will be a marriage 1556 which will be decentralised to the various territories, so that the headquarters staff can be reduced in years to come and far greater responsibility allowed to exist on the perimeter. To give one instance, page 8 deals with the possibility of mining and technical specialists being obtained. I am quite sure that if some of the big mining enterprises were asked for their co-operation in the development of territories and local resources they would be able to put at the disposal of the Colonial Development Corporation facilities, knowledge and experience which the Corporation will not gather in twenty, thirty or forty years hard work.
I hope this marriage between private enterprise and Government effort is going to be developed, and to that end I should like to see the Corporation call in to consultation a few of the great pioneers of Colonial and Overseas enterprise who are still, thank goodness! in our midst. We still have living in this country, in South Africa or in other parts of the British Commonwealth, men who knew Rhodes, men who have worked in great pioneering enterprises. Call some of them in to see how this marriage could be guided along lines profitable for all parties concerned. I believe that a few really good businessmen in this country should be called in order to see what sort of financial structure the Corporation would find most profitable for its purpose, and that representations should then be made to Her Majesty's Government along those line.
Finally, let me say that, like the noble Lord, I do not in the least regret the existence of the Colonial Development Corporation. Although I must condemn the administration as revealed in Reports over past years, for which the last Government must bear their share of responsibility, on the other hand I give the last Government full credit for having initiated in 1945 this particular enterprise. If our Colonial responsibilities mean anything real, they entail the building up of economic independence in the territories to which we aim to give self-government. Responsible self-government cannot be attained unless these countries have economic independence. I believe that if our prospect of Britain's lasting economic freedom and independence from foreign aid is to be fulfilled, it will not be by stretching across the dollar gap to the United States, trying to get United 1557 States customers here and there to buy superfluous goods, most of which they could make as well themselves. Our prospect of a lasting economic independence depends upon the development of our own and the Commonwealth and Colonial natural, mineral and agricultural resources, and upon finding within these territories an ever-increasing demand for goods by the indigenous, inhabitants who are enjoying ever-rising standards of living. The Colonial Development Corporation can make a big contribution towards that aim and object. For that reason, while condemning the past, I am hopeful of the present, and even more hopeful of the future, subject to certain reservations. I support the continuation of this Corporation, and I wish it well.
§ 3.52 p.m.
My Lords, in his opening speech the noble Lord, Lord Ogmore, referred to one or two points with which I should like to deal before I go on to my main theme. The noble Lord referred to the difference between concerns which were abandoned and concerns which were liquidated. I understand that these are referred to in the opening paragraph of the Report, and that those which were abandoned were in the nature of investigations while those which were liquidated were those which had been started but were found to be hopeless in outlook. That is neither here nor there in relation to my main theme. I think the noble Lord brought out an extremely useful point when he said that expenditure on investigation, if necessary up to the point of pilot schemes, should not remain a permanent burden on the Corporation as a whole. There is a good deal to be said for these experimental schemes and investigations being carried out by the Colonial Governments concerned rather than by the Corporation. After all, that is logical, in view of the existence of a fund for Colonial development and welfare. One of the main points to which I want to come in the later part of my remarks is the dividing line between the activities of the Colonial Development Corporation and the activities of the Colonial Development and Welfare Fund.
In considering this Report and the whole problem, what we are really facing is the interesting subject of the gap between what Governments do, or are supposed to do, and the point at which 1558 purely commercial undertakings can, of ought to, come in. There was a time, in the latter part of the last century and the beginning of this, when there was no such gap. Development by commercial companies began as soon as Government activities in the way of road building had reached the point at which they could operate. Nearly all the visible Colonial development in the Colonial Empire to-day is due to the commercial initiative which came in at that moment. There was no gap to be filled. Is there a gap to-day, as we have been led to believe? And if there is a gap, why? Why cannot the same process go on now as went on in the latter part of last century? I think the answer to that—which takes us a little outside the scope of this debate—is to be found in a number of speeches on economic issues made by the noble Lord, Lord Brand, and other noble Lords. It is due to the fact that there is a shortage of capital in the world—not necessarily a general shortage of capital, but a shortage of what Lord Brand calls capital willing to take risks. The reasons for that shortage are the present-day costs, the weight of taxation and the limitation of profits which now makes risks not worth while. Given these circumstances, a gap does exist.
I take it that it is to fill that gap that the Colonial Development Corporation was formed and funds were voted in Parliament for the Colonial Development and Welfare Fund. It is conceivable that that gap could be closed by fiscal devices in this country and the Colonial territories which would make risk-bearing capital more available because propositions would be made more attractive. It is because that situation has not been entirely realised that many people have felt that there was a lack of enterprise in commercial circles and a lack of capital available, and that therefore it was necessary to create this Corporation, whose terms of reference are very peculiar and have led to a great deal of confusion of thought. When the Corporation was set up, it had terms of reference which not only were confused but were also practically impossible of achievement. These terms of reference are set out succinctly and clearly on page 7 of the Report, where it is written:The Corporation was not set up to compete with private capital but to supplement it; 1559 it was obvious that there was not enough private capital for the colonial development jobs urgently required;I do not agree with that. I think that there is enough capital, if it can earn its keep on the risks and in face of the risks it is required to take. The Report continues:Development means adventure and risk; means, historically, a long wait and problematical returns; hence the hesitation of investors and the need for the Corporation to fill the gap;We now come to the logical aspect. The Report says:The Act of Parliament motif, primary and compelling (and, otherwise than commercially, exciting) is to do economic good; just that; but to do it without losing money;What is embraced in the financial structure of the Corporation is that out of the profits which it makes it has to carry the losses which it is bound to make and the costs of pilot schemes and investigations. Ex hypothesi, the profits must be large enough to carry these losses. If the profits are large enough to carry the losses, they are probably large enough also to attract commercial capital. But the Corporation is inhibited from competing with commercial capital. So what?
We get into a completely illogical circle. It is in that circle, within that framework, that this Corporation has had to operate, apart from the aspects of mal-administration of which we are all only too acutely aware. It is small blame that the Corporation has not been able to show more successful results. No commercial corporation with those limitations, and, above all, with the uncertain factor of never knowing how much it would have to pay the Treasury for its money, could ever conceivably contemplate operating at a profit. I will not deal with the aspect of the cost of money. It is well brought out in the Report, and I am sure that noble Lords who follow me will have a great deal to say about it. But I am quite satisfied that in its present structure, and with its present (as if it were a commercial company) Memorandum and Articles of Association, the Corporation cannot operate successfully in the manner in which its sponsors and godfathers designed it to operate.
I should like to consider one of the two striking passages in this Report—and there are many of them. In the first 1560 place, so far as I personally am concerned, I am delighted to see that several of the suggestions that I made in the course of the debate in your Lordships' House in June 13 last year find their place in the present policy which governs the conduct of the Corporation. A considerable step has been taken towards decentralisation by the appointment of regional controllers; and an attempt, at least, has been made to get away from that particular aspect of the executive and management difficulties to which the noble Lord, Lord Balfour of Inchrye, referred—the physical impossibility of a company, with direct responsibility for management, running fifty-odd enterprises from London. It was, as I pointed out then, a nightmare set-up which no commercial corporation would ever have contemplated for two minutes. It is particularly well known that no corporation can direct all these miscellaneous activities from London, whether from Dover Street or from the Docks.
Decentralising is being carried on by the appointment of regional controllers. Let us think what that means. It means more than merely the appointment of a local general manager, to whom small matters in each Colony or area will be referred, instead of referring them to London; it means, as a logical development, something which was again envisaged in your Lordships' House last year—namely the ultimate creation of local Colonial Development Corporations. I have no doubt in my own mind that these regional controllers will in due course have their advisory councils and eventually their local boards. That is not only a logical but probably an essential development, if the present—and, to my mind, entirely right—policy is pursued, of seeking the co-operation of local interests and local authorities. It has been well known to all of us who have had experience of Colonial administration that there are many schemes which many Governments would like to see carried out, but for which they do not think they are justified to vote or to supply their own money. Therefore, they are always anxious to get someone else in to do what they themselves are frightened to do—and rightly frightened. But the best safeguard of the value of a scheme is to secure the economic and financial participation of a local Government, local authority or local private enterprise, to 1561 ensure that the ostensible faith which Governments have in schemes that somebody else is going to develop is sufficiently real to justify their risking their own money. It is obvious that the Colonial Development Corporation have sought to do this, as it was suggested last year that they should.
But on pace 5 of the Report it is written:And Government financial participation is almost always sought, but by no means always forthcoming. Here in fact is one of the soundest lines of development; schemes suggested by Governments, themselves meeting the essential but financially unremunerative elements with their own or Colonial Development and Welfare funds; the Corporation and its partners taking care of the rest.But, my Lords, no schemes of this sort have so far materialised. Why is that? Obviously it is because so many of the schemes that Governments and local authorities are anxious for other people to father are too risky to justify their financing them themselves and having to stand up before their local Legislatures and Assemblies to defend this risking of local taxpayers' money. But I believe that if development is to take place soundly, and the Corporation is to be relieved of this impossible burden of administration from London, that is the only sound method, with the association of private interests.
There are several interesting examples of the direction in which this second line of attack on schemes has been followed by the Corporation. Of the few new schemes which have been started, an outstanding example is Trinidad Cement (Scheme No. 37 on page 44 of the Report) which is one of the few new schemes on which the Corporation embarked in the last year. It is a joint enterprise, a joint partnership between the Colonial Development Corporation and one of the principal firms producing cement in this country, with a vast technical experience behind them. There are several other examples. It is particularly interesting to note that most of the examples where private partnership has become associated with the Corporation in the agricultural field are in the Far East, and that most of them are described—and, I am sure, rightly so—as being, it any rate, promising, if not already financially sound.
1562 The other group of schemes and enterprises to which I should like to refer is one about which I am more doubtful, because I find these schemes are on the borderline, where local Government activities and the Colonial Development and Welfare Fund ought perhaps to replace the Corporation. In the first place, there is the loan to the Malayan Electricity Board. It was obvious that the state of Malaya precluded the raising of money for that purpose in the open market. But was it right that the Corporation should find the money to finance a debenture on this hydro-electric undertaking? It seems to me that that ought more properly to have taken the form of a loan from the local Government to the undertaking, until such time as the undertaking could finance itself abroad. There are one or two analogous enterprises in the same category about which I am doubtful. For instance, there is mentioned on pages 64 and 65 a loan by the Corporation to the Lagos Development Board for the purpose of developing a site near Apapa Wharf. That seems to me to be the function of either the Nigerian Government or a Lagos municipal enterprise, and not one for the Corporation. There are one or two other examples of the same sort. Those are, I think, doubtfully within the ambit of what I should like to see the Corporation do and what I think the Corporation was designed for.
There is a third category in which I am quite sure that the Corporation ought not to be involved in any circumstances whatsoever, and that is mining enterprises. Experience has shown that, where mining looks profitable, there are plenty of people in the world ready to invest their money and lose it, without involving the Corporation in picking up odd mining enterprises which were obviously not sufficiently attractive to attract private money. Frankly, I can see no justification for Government money being used. In the same category are investigations like the coal investigation in Tanganyika, to which I referred last year. I am quite satisfied that there are commercial undertakings with infinitely more experience of that sort of work than the Colonial Development Corporation could ever hope to obtain. It seems to me inconceivable that the Corporation, under its former management, let us say, could have agreed to undertake a job such as 1563 that for the Tanganyika Government. It had to hire people who had the technical knowledge—and there are not many of them; it had to get people who in many cases were either employed by firms already engaged on that work, or who were perhaps not good enough to be engaged by those firms. That sort of advisory engineering work, or advisory mining engineering work, is entirely extraneous from the original conception of the Corporation. I should like to see such schemes brought to a close as soon as possible.
I have said that before closing I should like to turn to one particular side, which is perhaps the most important of all; that is, to consider in our own minds what the purpose and the ambit of the Corporation ought to be from now on. I believe that its most useful function to fill that gap is probably to provide certain services or background machinery for the development of what, after all, is the principal interest of all Colonial territories—namely, agriculture and agricultural production, including forestry. I do not believe that it is right or desirable for the Corporation itself to enter into farming enterprises. They are extremely difficult. There is always a tendency—as I have no doubt other speakers this afternoon will show—for public corporations to attempt to enter upon schemes like that on much too big a scale, with insufficient experience and inadequate personnel. I believe that these schemes can be left to private enterprise if—and this is the important point for the future policy of the Corporation—someone will provide the machinery which will enable that production to be either converted or marketed, or dealt with.
To be a little more specific, what I have in mind is something like this. If your Lordships will consider for a moment the background machinery of the Gezira Cotton Scheme, that was one of the most amazingly successful pieces of Colonial development in a territory which is not a Colony, but which is broadly called a Colonial Territory, that has ever been done by anybody. That, of course, was a three-partnership scheme involving the Sudan Government, the Corporation and the cultivator. Roughly speaking, the Government provided the water, the cultivator cultivated the land, and the Corporation did what? It provided ginneries 1564 for the cotton and it provided the grading, the sampling and the marketing. It provided the physical machinery and financial machinery to enable the cotton to be grown and sold. Another example of the same sort, perhaps, is in the Uganda cotton field, where a great many of the difficulties which have arisen—and of which many of your Lordships are aware—over the ginneries would have been avoided if some Corporation like the Colonial Development Corporation had built and owned the ginneries and had run them on the basis of a profit which was legitimate, returning to the cultivator the value of his crop. In other parts of Africa the same line of development, again in agriculture, could be followed by the provision of slaughterhouses, freezing works, machinery for the transport of meat and places for the curing of hides. I believe that that is the direction in which the Corporation should develop and specialise. It should, I repeat, eschew mining of all sorts, and enterprises which Governments put up but in which the Governments themselves are unwilling to participate. That should be a red flag to anybody, and that red flag has been only too often disregarded by the enterprises of this Corporation up to date.
I should like to say this in conclusion. If the loss figures shown are disappointing; if they are greater than perhaps those in charge of the Corporation themselves hoped they would be this year, I think your Lordships will agree that it does no more than show that the mess which was taken over by the present management was even greater than they anticipated. Already they have done an obviously excellent job of work in cleaning up an Augean stable. I think your Lordships will join with me in wishing them success in their effort. Let us not take the view that, because they have spent most of their time cleaning up, they are therefore unwilling to show initiative and enterprise in the future, provided that they can have that guidance which will show them how far they ought to take over what is probably an activity of the Government, and how far they ought to limit their activities to the true gap which exists.
§ 4.19 p.m.
§ THE EARL OF PERTH
My Lords, this is my maiden speech, so I ask your Lordships' indulgence. Before I touch on the 1565 subject under debate, there is one personal matter which I wish to mention—I refer to the very warm tribute which was paid to my father in this House a short while ago. My family and I were deeply touched and honoured by it. I do not think I would wish to add anything to what your Lordships said, except to say that he was a wonderful father as well as everything else.
Turning to the 1951 Report of the Colonial Development Corporation, I think we should all thank the authors for giving us so much information and something which made such enjoyable reading. There are three points in the Report on which I want to touch. Several of these have already been made by other noble Lords who have spoken to-day, but I am sure that your Lordships will forgive my repetition them. First, the Report refers to the capital structure of the Corporation—or perhaps, rather, to the lack of capital structure, for this is a curious set-up. The Corporation, although its work is that of pioneering and adventure, has only borrowed capital; capital, moreover borrowed on fixed term and at a fixed rate. In the commercial world it would be quite impossible to have a set-up of this kind—indeed, we should find exactly the opposite. It may be said that in the case of a Government concern this is not of particular importance, but I wonder what will happen a few years hence, when the time comes for interest payments and for capital repayments to be made. I am afraid that at that time there may be violent attacks on the then controllers of the organisation, and they will be distracted from their work, which is the developing of the Colonies. I hope, therefore, that this question of the capital structure of the Corporation will be very carefully reconsidered.
Secondly, I should like to turn to a point already made by the noble Lord, Lord Balfour of lnchrye—namely that, other things being equal, the deliberate policy should be to look to experienced private enterprise partners to share in investment and in management. I observe without surprise, looking through the Report, that many of the enterprises which are showing good progress have in fact been those with this partnership. Over the last hundred years the people of this country have gone abroad and have sent their capital abroad for the development of the world. Many great enterprises 1566 have been started. Some have been lost; some have been used to pay for wars; while others have been taken over by the countries in which they were started. But many remain; and, perhaps even more important, much of the experience and, to use a fashionable term, the "know-how" that is associated with those developments can still be found among the great commercial enterprises—and also, indeed, among the smaller ones. If the Corporation will make full use of the experience available it will be of great importance for the future.
Lastly there is the question of the speed of Colonial development. The Report shows a net increase of only three in the number of projects undertaken this year. I know that there are good reasons for this fact—namely, that it has been a period of consolidation and review. But what happens after that period of consolidation is over? Call we expect thirty new projects, or even more? I believe that that will be a difficult task for the Corporation to carry out on its own, or even in conjunction with private enterprise. I listened last week to a debate in this House about the Colombo Plan. I was struck at that time by statements from various noble Lords that they felt there was no short cut to Colonial development. If this means that we cannot force the pace of any particular project beyond a certain point without the risk of disaster, I agree. But I wonder whether it is not possible to find a short cut, in the sense of starting many more projects at more or less the same time and of the Corporations' recognising the desirability of partnering with private enterprise. The problem is, of course, how are we to encourage private enterprise to seek new fields? How are we to help them to use their wealth and experience which are our great assets in this case?
We in Great Britain to-day are in a difficult situation economically. We are short of food and of many primary products that we require; and I am afraid that the outlook for the future is for even further shortages. I suggest that the Government should decide of which of these things of which we are short—whether for lack of dollars or because they are not grown sufficiently in the world—they feel they are in most need: whether, for example, it is tobacco, cotton, sugar or fats. Then I suggest, as 1567 the noble Lord, Lord Rennell, has already suggested, that some form of fiscal encouragement should be given in regard to particular categories of goods chosen, so that private enterprise may turn all its efforts to the development and growth of these various types of goods which are in short supply. This policy would, in a sense, be satisfying our selfish needs, giving us those things of which we are short. And if the projects were started and were successful there would be very little loss to the revenue of the country in making such concessions. The Colonies also, it seems to me, would stand greatly to benefit. They would know that something was being started for which there should be a steady demand in the future; and as the project prospered so also would their standard of living improve at the same time.
I believe that the Colonial Development Corporation can play a very important part in the guidance of such new schemes which may be started. They could act in certain cases in an advisory capacity to the Government on what is or is not feasible. Or, again, they are always there to make the partnership with private enterprise if money is needed—although I suspect that under those conditions it would be much less necessary to find capital. I also believe that we should try to encourage overseas capital to join us. Above all, let us try to induce United States capitalists to join in the development of the Colonies—whose rapid development, I believe, is vital. It seems to me that at this moment of a great economic crisis we are wasting one of our great assets—I refer to the "know-how" of our commercial enterprises.
Taxation being what it is to-day, private enterprise is in the position of "Heads I lose, the Revenue may win" or "Tails I lose if the venture fails." Under these conditions, it seems to me that we cannot expect private enterprise to play its part in Colonial development. If, however, we did away with all this taxation and deliberately encouraged private enterprise, in conjunction with the Colonial Development Corporation, to start new schemes, then I think we might hope for something very new and very much better. I suggest that we should take full advantage of the great experience and "know-how" which is still available. Let us put it to work in no 1568 niggardly spirit, but let us be glad if it prospers and makes money. For if it prospers, we all prosper—the Colonies and the United Kingdom.
§ 4.31 p.m.
§ LORD MILVERTON
My Lords, before I proceed to deal with the subject of our debate to-day, it is my privilege, as the first speaker after the noble Earl who has just sat down, to offer to him the congratulations of this House on a very able and eloquent maiden speech. We always listened with respect and with attention to his father, who spoke here authoritatively, particularly on foreign affairs, and it is fitting that his son should make his maiden speech on another aspect of Imperial matters, Colonial affairs. We shall look forward to hearing him frequently on this and other subjects.
In offering a few remarks on the subject of this Motion this afternoon, perhaps I ought to begin by saying that, as a part-time member of the Colonial Development Corporation Board for the period July, 1948, to July, 1951, I had an opportunity of seeing something of the inner working of the Corporation, to supplement the outside view of its activities which is common to us all. In passing, I should like to echo the appreciation which has been generally expressed in the Press of the Report which is the subject of our debate to-day—its fearless fair-mindedness and ruthless determination to tell Parliament and the public the truth about, and to give a true picture of, the task which has been set the Corporation, and all its activities under the Act; of its successes, its failures and the conflicting nature of some of the obligations which have been laid upon it; and also to give us a picture of the re-orientation of policy and the internal reorganisation in order to create an efficient instrument for carrying out that policy.
I listened with appreciation to the speech of the noble Lord who opened this debate and, while agreeing with a great deal of what he said and, as the noble Lord, Lord Balfour, also said, admiring the courage with which he faced certain of the facts about the Corporation, there are one or two points on which I thought he went astray. Perhaps I may mention them at the very beginning. To begin with—though perhaps it is hardly 1569 worth mentioning the matter—there are what he called the "luxurious offices." Apart altogether from the question of what Administration approved them, there is the fact that, when you start an organisation of this kind, you must look for offices in places where you can find buildings which you can rent, wherever they may be. I think one might just as well argue that this House would be better sitting at the docks, in touch with the problems of the country but, of course, completely out of touch with the people whom it wished to see in the course of its daily business. I do not think the noble Lord seriously meant those criticisms.
There is one other comment that I should like to make. He said that he would like to see local organisations using the Colonial Development Corporation as agent. With respect, I suggest that the noble Lord has the thing in precise reverse to what it ought to be, certainly to what I personally should like to see. It seems to me quite a wrong idea of the function of the Colonial Development Corporation to suggest that it should be the agent of the local people. Surely, it should be the other way round—that it should use the local people as its agents? That is how you are going to build up confidence in the Colonial Development Corporation and all its works throughout the Colonies—not by inducing them to use as their agent an outside organisation, but by allowing an outside organisation to work through the local people.
If I may say so—and this comment refers both to something that the noble Lord, Lord Rennell, said and to the opening speaker's remarks—it is quite hopeless, as I hope to show in a moment, under the present terms of reference, to tell the Corporation that it must not do this and must not do that, and that the thing to do is to indulge particularly in agricultural work. The agricultural work does not pay the percentages which are necessary if the Corporation is to fulfil its present terms of reference. Take the work at Mokwa, in Nigeria. That is a promising project, but I think I am right in saying that there is no likelihood whatever of its ever paying to the Corporation at any time, now or in the future, anything like the 10 per cent. which would be necessary in order to allow to "break even" on the present terms of reference.
1570 I noticed in one published article by an eminent authority a suggestion that the Colonial Development Corporation might find the phœnix an appropriate emblem. I hardly think so. The phœnix, I believe, lived in the desert, contemplating with isolated self-satisfaction its gorgeous plumage, and at long intervals incinerated itself and rose, revivified, from that operation. It is true that the Corporation, moving about in worlds not realised, has burnt its fingers. I suggest that that should not be allowed to become a habit; nor should it be regarded as a good thing to do. We all want to see the C.D.C. (if I may call it so for short) made into a successful instrument of Government policy. No doubt, if it were possible to start de novo, a great deal would be different. But we have to take it as it is, and the task, therefore, is to see that the lessons of past experience are carried into present and future practice. In some respects it seems to me that Colonial Development resembles town planning, in that it is doomed to be the science of the second best. You never start with a clean sheet. You always have something there of which you have to make the best. In judging all schemes of Colonial development, and especially in judging the present Corporation in its present work, one must bear in mind that the present board has not had a clean sheet; and it has not, nor has the chairman of the board at the present moment, a free hand. In any case, the task is complex, but one wonders whether it is not, as has been suggested by many speakers this afternoon, impossible of fulfilment unless there is a change in the original conception of its functions.
I have seen elsewhere the point made, and perhaps it will be made this afternoon in this debate, that the Colonial Development Corporation has not so far been associated with the Colombo Plan or the Point Four Programme. But how can it be? They differ fundamentally in their approach to the problem. The Colombo Plan, and the rest of it, is not hampered by any injunction to work on commercial principles, to pay interest on capital employed or, at the very worst, to break even over a period of years. It is not tied down to benefits which can be reflected in a balance sheet, nor is it doomed to carry for ever a load of interest-bearing debt which must make operational solvency appear nothing more than a politician's 1571 dream. Let us admit that the Colonial Development Corporation was born in a climate of rather unbusinesslike optimism and Utopian haste, and that none of those concerned — Government, Opposition, public, or board—had really thought out whether the purpose so vaguely defined was attainable within the principles so nebulously set out.
If we look at it, the field of co-operative international endeavour known as the Colombo Plan has no unreal restriction about operating at a commercial profit; and, if I may say so in passing, much of what the noble Lord, Lord Rennell advocated, and with which I largely agree, would apply to a Corporation freed from this pernicious burden of commercial principles as interpreted in their terms of reference. If they were allowed to work more on the lines upon which the nations associated with the Colombo Plan are working, they would probably be able to show more results in the shape of benefits to the Colonial peoples, but they would not be able to show it in an ordinary terrestrial balance sheet. The assisting nations in the Colombo Plan have no responsibility for success or failure. The profit is the long-term improvement of the conditions and standard of living of the peoples concerned, and the nations participating in the Colombo Plan are predominantly helping the people to help themselves. That is what I meant with my comment on the noble Lord's remark about using the Colonial Development Corporation as an agent. It should be the other way round. There is no idea of the assisting nations necessarily being senior partners. Far from it. They work as junior partners or as external consultants within the framework of development plans, which are plans made out and sponsored by the receiving nations.
May I mention briefly three points? They have already been touched upon; therefore I need not go into them at any length. They appear to be of supreme importance in this Report, although the first twelve pages of the Report represent so complete and comprehensive a picture of achievement, failure and future policy, that no one interested in Colonial development should fail to read them as a whole. Having done so, most people, I think, would feel that a great deal of this debate was redundant. We are told 1572 that the total consolidated deficiency incurred by the Corporation since its inception is £4,594,599. That is a sum which cannot be written off. It must be carried and interest paid on it until the principal sum is repaid. As was pointed out in the Report, this is completely at variance with ordinary commercial practice and purpose. The Corporation has no equity capital. It has to work on capital for approved schemes in the form of long-term, redeemable loans at fixed intervals. In such circumstances the initial seven year moratorium is useless in face of the need to carry such a burden and to repay capital losses in forty years.
As I have said, what with one thing and another, adding Colonial taxation and overheads, it means that each scheme would have to make a gross return of 10 per cent. in order to break even. That is, of course, not a reasonable possibility, nor is it a reasonable thing to ask of any corporation. If you add to this the obligation to avoid projects which private enterprise would otherwise undertake, and to operate all over the world for the benefit of Colonial peoples and for the development of Colonial resources, you see at once how tough an assignment has been handed to this Corporation. Even without mistakes of judgment, without inefficiency and without errors in organisation, management and method, the task now set the Corporation, with its present terms of reference, is incapable of successful fulfilment. I hope, therefore, that Her Majesty's Government will recognise that fact and will relax the terms, allow the losses to be written off and, indeed, give the Corporation a freer hand in other directions as well.
The noble Lord, Lord Rennell, called attention to the paragraph on page 5 of the Report which suggested that one of the soundest lines of development was probably schemes of the local Government in which they themselves met the essential but financially unremunerative elements from their own funds or the Colonial Development and Welfare Fund, while the Corporation and its partners took care of the rest. As I have seen from several angles in these Colonial matters, it is precisely the first stages of development which are often the most difficult and the most costly. Power stations, irrigation works, roads, railways and ports are extremely expensive things; 1573 and very often, after that amount of transport facility has been installed, it is impossible to proceed with the development. It certainly is not the business of this Corporation to use its funds in providing these things, which in the balance sheet sense are not remunerative.
One welcomes also the decentralisation of administration and the emphasis laid on local partnership and good will, as well as the intention to work as partners with private enterprises who possess what is known as the "know-how" and the experience and skill built up over a long period in business. I welcome also the principle which is here expressed—it is the same principle as that which has made such a success of the Tennessee Valley Authority—of pushing executive authority as far as possible down the line of personnel while retaining policy control at the centre. An offshoot is the welcome declaration that the Corporation contemplates handing over full managerial, technical and financial responsibility to local people when the time comes—in other words, selling out to local people and freeing funds for further development elsewhere.
I do not propose to deal with any of the undertakings in detail. As will be seen, the record is partly good and partly had. Amongst them there will probably be—it is easy to spot them—other failures to report in the future, but we can reasonably hope that the 1952 Report marks a peak in the clearing-up period. The Corporation, as has been pointed out, has never run a homogeneous business. It set out to cover the whole field of agriculture and industry—engineering works, minerals, fisheries, factories, forestry, hotels and so on—not merely financing but doing most of the work itself. Whether or not such an immensely diversified business could ever be managed from one highly centralised headquarters need not now be argued. I agree with the noble Lord, Lord Rennell, that it is asking too much of any organisation.
But one thing to which I should like to draw attention is that the climate of Colonial development is changing rapidly. Colonial Governments themselves are starting development corporations and are entering the field where, in other and earlier days, the Colonial Development Corporation, had it existed, would 1574 have been able to operate. In West Africa, for instance, some of the local corporations have relatively more capital at their disposal than the C.D.C., so that, failing partnership with such local corporations, the field left for the C.D.C. may well be not merely where private enterprise hesitates to enter, but where private enterprise and the local Government as well will hesitate to enter, in which case one can draw the obvious inference that it is probably not the business of the Corporation to enter it either. All of this emphasises the wisdom, if I may say so, of the present C.D.C. policy of working in all cases where possible in partnership with the local Government. I am sure that in this policy, combined with that of proceeding in partnership, financial and managerial, with established businesses, wherever it may be possible to do so, lies the way to success.
It is not easy to define precisely the dividing lines between an investment agency and a development corporation. The C.D.C. partakes of both, and, in view of its world-wide scope and the diversity of its interests, the present emphasis upon the first category seems to me to be a sound one. And may I say in passing that while there is doubtless much force in Lord Rennell's comments about the Colonial Development Corporation undertaking mining operations, I really fail to see that the argument is convincing that because there are outside agencies which command far more skill and experience in mining, therefore the C.D.C. must not touch it. If that principle is to obtain the Colonial Development Corporation will touch nothing at all, because some other people have more experience of every other activity which the C.D.C. might possibly take on. There will be others elsewhere in the world in the business with, probably, far longer experience and more immediate command of skill. It seems to me that that principle carried logically to its end would mean closing down the Corporation in despair. During the past few years, we have been passing through what I may call a boom period in Colonial development. It has become a fashionable thing internationally, and I am not sure that that has been very fortunate for the Corporation. It seems to me that if it is wisely organised then, 1575 when a recession comes—as come it probably will—that will be the time when we shall appreciate more fully the value of the Colonial Development Corporation and when it will indeed come into its own
One final point I should like to make and that concerns the board of management of the Corporation. It consists of a chairman and a deputy-chairman, both full-time appointments, and eight part-time members. The chairman is the chief executive as well as being chairman, and the deputy-chairman is deputy chief executive. It is a somewhat unusual position, and I venture to question whether the immense dual responsibility cast upon those two officers at the head of the Corporation, for both the formation of policy and its detailed execution, is really not a weakness in organisation. It seems also to endanger the continuity of experience and knowledge which is required in the management of a big business. It seems to me that the Corporation is in danger of falling between two stools. It may possess neither the flexibility of big business, nor the stability of Government Service. And may I say that the salaries paid to the high officers of the Corporation appear to bear little relationship to the market value of the officers filling those posts? I mention that only because of the emphasis laid on commercial principles and on working in a commercial manner. The first time we try to apply the commercial principle we find that it has no application, and that the remuneration, not only of the two executives, but probably of the high officers of the Corporation, bears little resemblance to the market value which officers capable of filling those responsibilities would command outside.
I wish to say nothing much about the part-time members of the board except in relation to what the noble Lord, Lord Balfour, said. I do not share his view that if we got some of the heads of big businesses to devote a little time to saying exactly how the Corporation ought to be run, it would have any great value. I suggest that already in the part-time members of the board we have men of wide experience and considerable knowledge of the kind of business that the Corporation may have to tackle, and with a considerable appreciation of the principles which should be applied to those 1576 things. It seems to me again that the Corporation is not being run on commercial principles, because although the time spent by the part-time members is far from being nominal and involves a great tax on their time, the fees which are paid to them are indeed nominal. I am not quarrelling with that system at all, but I suggest that one should try to remember that this Corporation does not follow commercial principles, and it cannot follow commercial principles other than in the terms of reference, which I suggest should be altered at the earliest possible moment. I suggest that only in that way will it be likely that the ability of the chairman and his board will be given full rein, to the benefit of the Colonies and to the credit of this country.
§ 5.3 p.m.
§ THE EARL OF LUCAN
My Lords, it is my pleasant duty, first of all, to associate myself with the noble Lord, Lord Milverton, in extending on behalf of the noble Lords on this side our congratulations and welcome to the noble Earl, Lord Perth, on his maiden speech, which was, if I may say so, an admirable, thoughtful and constructive speech. I feel sure that he knows this subject, and probably many others, and we shall look forward to hearing him on many other occasions.
In the speeches in this debate so far, I seem to detect a general undercurrent of agreement on one thing—namely, that the duty laid upon the Corporation by its original terms of reference, that it should be commercially a success, is impossible of fulfilment and should be amended. I believe that that is the conclusion to which most people have come. When the Corporation was set up five years ago it was something new in the field of organisation and development. There was, moreover, a sense of urgency over the need to increase as rapidly as possible the potentialities of the Colonial territories and, above all, to increase the supply of food. We had the Hot Springs Conference; we had the setting up of the United Nations specialist organisations, all of which agreed—as did most of the world authorities—that, in face of the rising population of the world, the shortage of food was one of the biggest problems confronting the nations of the world after the war. So there is little wonder that, in setting on foot these 1577 various enterprises, risks were taken; and, for my part, I think a Government which did not take risks under those conditions would not have been fulfilling its responsibilities.
As has been said, the task of filling the gap between what private enterprise would accept in the way of risk and what Governments could undertake has meant that it has been almost impossible for the Corporation to show a profit on its working. Your Lordships will remember that in the earlier Reports the Corporation explained the criterion by which it judged schemes that were put up to it. Innumerable schemes were put op and innumerable schemes were turned down, but the schemes that were examined thoroughly were roughly those of two sorts. First, there were those schemes which would increase the production of food in the country concerned, thereby contributing to the better health and nutrition of the inhabitants, whose food, in many cases, was too little or deficient in various necessities. Secondly, there were the schemes which would fortify the economy of the Colonial territory, either by relieving it of the need to import all its requirements, by giving it secondary industries and helping with the general economic advancement, or, where commodities could be produced for export, by enabling the territory either to save or to earn dollars.
In territories of that kind, there was a conspicuous absence of private enterprise clamouring to fill this gap—or so one gathers from the Report. In fact, the "marriage" which the noble Lord, Lord Balfour of Inchrye, talked about between private enterprise and Government effort seems to be distinguished by the absence of willing partners to that match. Whether, as he suggested, a monogamous marriage can be decentralised is something about which the noble Lord left us in doubt. But the fact remains that in their latest Report the Corporation have emphasised their ambition to look for experienced private enterprise partners to share in investment and in management. They have sought the financial co-operation of local Governments, often without success. In the majority of the Corporation's schemes the fact which has militated most against any financial success has been the need to spend a great deal of capital in developing the resources of the locality. As I think the noble 1578 Lord, Lord Rennell, mentioned, commercial firms would expect that before they started operations the local Government would have provided the essential services so that they could start fairly. It is obvious that the Colonial Development and Welfare Fund was set up largely for that object—and when I refer to the essential services needed in the territories I mean communications and social services, such as hospitals and schools. The lack of such a development and welfare fund has meant that the Corporation has been saddled with great capital burdens which in many cases have made just the difference between success and failure.
In the Government Estimates for 1952–53 we find that the money allotted for Colonial development and welfare schemes has been reduced from £16,500,000 to just over £13,000,000, a drop of nearly 20 per cent. That seems to me a serious situation, which must mean either that the Colonial Governments have fallen behind in the preparation of schemes which would qualify under the Act, or that Her Majesty's Government have told the Colonial Governments that they must go slow and economise on the Fund. I think we should hear from Her Majesty's Government which is the case, and whether they have decided to economise on Colonial development funds under the Act. I should mention that the annual ceiling under the Act was £17,500,000, which was raised in 1949 to £20,000,000. We now come down to £13,000,000, and on that reduced sum we can hardly expect the development and welfare in the Colonies to go ahead as well as we should like. One other question occurred to me. There is a body called the Colonial Economic Development Council, and I should like to know whether they have been made aware of this decision to cut down on the welfare fund.
There are other factors militating against anything like the commercial success of this Corporation. In any scheme that is considered, the accurate forecasting of its finances must be almost impossible. There are so many unknown factors—the long period required, in most cases, for the schemes to come to fruition: the normal hazards of the tropics, which make almost any enterprise liable to something near disaster from natural causes; and the movement of world 1579 prices. Your Lordships will have noticed that the Atlantic Fisheries, one of the abandoned undertakings, seemed to have been considered a failure and abandoned solely because of the fall in the world price of shark oil. If the world needs animal oils and there is a shortage, it seems to me that the Colonial Development Corporation is the means by which they should be obtained. That reinforces the argument that ordinary commercial standards of success and failure should not be applied to these enterprises.
Obviously, we cannot look for any certain profits in the immediate future. Why should we? We take some pride in being trustee for our Colonial territories. A guardian does not expect to make money out of his ward. The whole conception of Colonial trusteeship in our day is that we have a duty to develop these territories, to help them towards economic independence—as a preliminary to political independence, as one noble Lord put it. We do not look to make a profit out of these territories. And if we make a loss, who is going to stand it? I suggest that it will be the British taxpayer. He has had benefits from the Empire in the past, and since he is responsible for the welfare of the dependent peoples and for paying for that development, if any money is needed, the demand should fall on him. Moreover, I do not believe that the taxpayer will object, if it is put to him in the right way. If the Government have faith in the Colonies, and if they have faith in the British people, they will say straight out that the Colonial Empire cannot be run any longer "on the cheap," and that we must expect to pay in order to carry out what we believe to be our duty towards these territories.
§ 5.18 p.m.
§ VISCOUNT HUDSON
My Lords, when I saw on the Order Paper that the noble Lord, Lord Ogmore, was going to open this debate, like several other noble Lords I could not help wondering what line he was going to take, and I could not refrain from admiring his courage. I do not know whether the noble Lord has read the 1950 Report before the 1951 Report, or whether he remembers the speeches made in another place when the Bill on which the Colonial Development Corporation is based was passing through that 1580 other place. Practically everything which he said in the course of his speech this afternoon was at complete variance with the views put forward there. For example, he said that nothing ought to be done without a pilot scheme. That is precisely the argument we used from the Conservative Benches. He said that he was in favour of smaller experiments. The late Colonel Oliver Stanley, in the course of his speech on Second Reading of the Bill, said:Corporations should be set up in the Colonies and manned by officials of the Colonies or inhabitants of the Colonies, and not a large Corporation in Whitehall.That was the line we took, but no regard at all was paid during the consideration of the Bill to the views expressed by Colonel Stanley. He also warned the country in that same speech against expecting too much too quickly, and said that there could be no relief in these proposals for solving the immediate crisis.
The noble Earl, Lord Lucan, said that, in view of the world situation, the shortage of food and so forth, the Government would have been wrong if they had not taken the risks involved in instructing the Corporation to try, in all parts of the Colonial Empire, to develop food and agricultural production; and also, as he said, reduce the import of goods requiring dollars or, better still, further the production of goods that would earn dollars. The gravamen of my charge against the late Government is that they did not take our warnings, and that, by going ahead much too fast and by encouraging the Corporation to go into all these ventures—for which, I imagine, the noble Lord, Lord Ogmore, would not absolve himself from responsibility—they, in fact, did the opposite. They have not by their action encouraged the production of food; they have not by their action encouraged the production of those goods that would either gain or save dollars. All they have succeeded in doing, in a great number of cases, is to get the whole of this idea thoroughly "blown" upon. Exactly the same thing happened with the Overseas Food Corporation at Kongwa. Instead of encouraging and securing increased food production, all it has tended to do is to throw doubt on the methods that have been adopted.
§ LORD OGMORE
I admit, frankly, that I think we were optimistic—and 1581 not only we in the then Government, but also the Opposition, who supported the plan—in thinking that there were so many schemes in Colonial development likely to be successful that they would carry the unsuccessful ones. It is not part of my case that we were right; we were wrong in that, and I admit it. But when the noble Viscount charges me with being responsible for the actual projects, I would point out that, as he will see from Mr. Justice Upjohn's Report, it was a strong point on the part of the late chairman that no one should interfere with the commercial management and the selection of projects. He made that quite clear, and I think that under the Act he war probably right. The commercial decision as to whether a particular project should be proceeded with or not was a matter for the board, and not a matter for Ministers.
§ VISCOUNT HUDSON
I quite agree. But, presumably, the board had regard to the objects of the Corporation, as described by members of the then Government—both the noble Lord, Lord Ogmore, and his right honourable friend Mr. Strachey, who actually introduced and conducted this Bill through the other place. What did Mr. Strachey say? He said:It is impossible for benefits to be available except on the basis of wholly new methods of production.The noble Lord himself said:We intend to improve the efficiency of existing cultivated areas and secondly to bring new areas of agricultural production of all kinds. There is a vast plan in our minds.Anyone who takes the trouble to read these two Reports consecutively cannot help but see the failure of plan after plan that was entered upon in those circumstances. To my mind, what emerges from reading these two Reports together is that there are a certain number of schemes which have been eminently successful—and those, for the most part, are those in Malaya, Singapore and the Far East, where the administration and management of the schemes was handed over to great private firms like Harrisons and Crosfield to conduct the business on a management basis; and that there are a lot of other schemes which were conducted by the Corporation itself which, for the most part, have proved, and are proving, a costly failure.
1582 Personally, I have great sympathy with the noble Lord, Lord Reith—I am sure that we all must have—because he has to listen to our various remarks and is unable to reply. I should not like him to think that any observations I have to offer are in criticism of him personally. I think the whole of the 1951 Report proves that he was doing his best to tackle realistically the Augean stable which he inherited. The only thing that causes me a certain amount of apprehension is lest the Corporation are still taking too optimistic a view. After all, if noble Lords read the 1950 Report, they will find time after time statements saying that the prospects were good, and that this looked like being a successful operation. But when you look at the corresponding item for 1951, you find such remarks asThis scheme was fundamentally unsound from the beginning, and it is now being abandoned.Reading the two Reports together, it does seem that a great deal too much money was, in fact, spent in the interval on continuing some of these schemes.
I do not want to detain your Lordships too long, but the difference between the assets as stated in the 1950 Report and the assets as stated in the 1951 Report seems to me to be very large indeed, especially in the cases which the 1951 Report states are now to be abandoned. I am sorry in one way for the noble Lord, Lord Ogmore, because in his speech on Second Reading in the other place his right honourable friend Mr. Strachey said that he had been told by his right honourable fiend the Under Secretary for the Colonies—as Lord Ogmore then was—that the two really good, promising schemes that might be put into operation weft the canning of fish in the Indian Ocean and the growing of rice in North Borneo. When you come to look at what happened to those schemes, you will find that in the case of North Borneo the Corporation had spent £18,000; their share of the loss was small, but they decided to close the thing down—incidentally, they rather belatedly admit that this was a pilot scheme, and a pilot scheme which succeeded in avoiding much greater losses. In the case of the canning of fish, in 1950, on page 34 of the Report, the Corporation reported:Progress and prospects are satisfactory.1583 But when we look at the 1951 Report, we see:The original scheme has now proved to be unworkable, and it will be shut down.So much for the two schemes the paternity of which was attributed to the noble Lord, Lord Ogmore.
The noble Lord himself, in a rash moment in the course of one of his many speeches in the other place, committed himself to the view that the Dominican group (I believe he referred to the advantages of groups to-day) was one with great prospects of success. That, I am sorry to say, also turned out to be a failure, and is being closed down by the Corporation. I do not know whether the noble Lord ever has a "flutter" on the horses, but, for his own sake, I hope that he is a better tipster in that respect than he was in the case of the possible runners in the Colonial Development Corporation Stakes.
§ LORD OGMORE
May I point out to the noble Viscount that in every one of these cases pilot schemes were put into operation? We did not embark on them and spend a tremendous amount of money. Although we had the best official advice that these were likely to be winners, we did not in fact put our money on the winners. I do not know what the correct racing analogy would be, but at least we had a trial run in the form of a pilot scheme.
§ VISCOUNT HUDSON
I am sorry to say that that does not quite tally with the Report of the Corporation. It says on page 51 that the object was to catch fish on extensive banks near the Seychelles. Fishing began in June. European officers and the type of vessel used proved far too costly. The production of dry salt fish was about 110 tons, valued at £6,000, compared with an estimated 640 tons, valued at £33,000. I do not think that can be called a pilot scheme.
§ LORD OGMORE
How do you have a pilot scheme except with a vessel? You cannot have half a vessel. If you are going to have a fishing scheme you have to have a motor fishing vessel.
§ VISCOUNT HUDSON
The 1950 Report says:All fishery schemes are by their nature speculative; this less so than most; there were thorough investigations of both fish resources and markets; prospects are good".1584 I am only pointing out the way in which schemes that were originally thought to be genuinely good have, in fact, turned out to be failures. The really serious thing about the whole of this development is, in my view, that progress in these various Colonies has been set back by the examples of these failures, very largely because there were no pilot schemes to discover the difficulties. In most of the tropical Empire—for want of a better word—agriculture is a very hazardous business, and I think that what experience of the last few years has proved is that large-scale mechanised farming does not pay. In these areas you have men with very low education or no education at all. You have natives with a very low physical output, and therefore you require a quite excessive number of supervisors who, in turn, add to your overheads and make the prospects of getting anything economic almost impossible.
The noble Lord referred to the group system in Nigeria. The Report shows that the total amount of food produced by this scheme, which has already cost £26,000, is valued at only £6,000. However deep the public purse, it is impossible to continue with schemes of that kind. The noble Earl, Lord Lucan, said that it was necessary to close the gap between private enterprise and Government money.
§ VISCOUNT HUDSON
I do not think it is a bad phrase, but from the Report I gather that it involves doing what the Corporation is now proposing to do, which is to decentralise and set up local corporations where you can get the local people, who have the "know-how," interested instead of trying, as the Bill originally conceived, to run everything from London.
There is a conspicuous example of this in the case of Bechuanaland. In the 1950 Report it is described as a scheme for leasing 16,000 square miles of pretty barren country. It is described in the 1951 Report as leasing 9,000 square miles. The difference between 16,000 and 9,000 square miles—a mere matter of 7,000 square miles—is not regarded as even worthy of a footnote. However, that is by the way. It is suggested that this area in Bechuanaland can be 1585 developed for ranching, and it is suggested that, instead of the original scheme of developing it all at once, it should now be clone over a period of eighteen years. It is also suggested that in the first five years an area of 300,000 acres should be developed for arable cultivation for setting up fodder banks.
There are many of your Lordships in this House who have a great deal more experience of agriculture than I have, but I do not believe anyone would suggest that even in England any single person or corporation could manage 300,000 acres of arable land. And in this country we have the advantage of trained agricultural workers, of communications and the National Agricultural Advisory Service. The idea that it is possible to cultivate 300,000 acres of land in Bechuanaland—which is subject to all the hazards of excessive rainfall in one year and excessive drought in another—really is impossible. I am seriously worried that the Corporation should be continuing to carry out this scheme. I have not been there, but I have some knowledge of the conditions in Southern Rhodesia and the Union, and from many friends who have been there I gather that, so far as grazing is concerned, the margin of success or failure is so narrow that if you overstep it the slightest bit you risk the certainty of reducing that area to desert for ever. I would say to the Corporation that it is no good having a man who is a first-class agriculturist and who knows all about the growing of crops, or a first-class biologist, by himself. Under modern conditions what is required for an area such as this is a man who is skilled in considering the whole relationship of animals and plants in relation to one another. So far as I can make out from a request which I put forward to the Corporation, they have no one of that kind, and they are relying on individual experts who may be experts in their own particular line of country but who do not necessarily appreciate the dangers or the possibilities of the situation. Therefore, I hope that the Corporation will have another look at this and proceed infinitely more slowly than it appears at the present moment they contemplate doing.
Some attention has been devoted by your Lordships to the future set-up of the Corporation. I would venture very strongly to support the view put forward 1586 by the late Colonel Stanley, that what is required is a constitution providing not merely for the devolution of work to regional controllers but for the setting up in these various areas of smaller corporations, taking advantage of private enterprise and private initiative and, if necessary, Government help. I know that there are some areas where that local help cannot be obtained, areas where there are not adequate numbers of people with the leisure to give to a scheme of this kind. There, I imagine, it will be essential (but only on a pilot scale I hope) to carry out schemes of the kind that we have seen in the past.
Finally, I would make this point. If the Government, or the Corporation for that matter, want private help, and want to get hold of what I may call private risk capital, it is essential that some change should be made in the clauses of the Finance Act which govern the export from this country of private capital. In my opinion, it really is useless to expect persons, or a company for that matter, who have supplies of capital available to risk them in those countries where admittedly the risk is great, if they are not to be allowed to export their capital where it will earn money under less onerous conditions than it does at home to-day. And if, in addition, you are going to insist on the financial results, when they are brought home, being subjected to the present level of taxation, and the other drawbacks, I am sure you will not get the capital from private sources to come in and help you do the job. I believe that the noble Lord, Lord Reith, is doing a very good job in clearing up the Augean stable that was handed down to him by the efforts of the noble Lord and his nominees. But I believe that he will have to look very carefully indeed at this question of mechanised food production. I do not believe it to be suitable on a large scale in tropical Africa. I believe that it is for the Government to help by making matters easier for people in this country who want to play their part by exporting capital, without which these schemes certainly cannot get the results which undoubtedly they deserve.
§ 5.42 p.m.
§ LORD DOUGLAS OF BARLOCH
My Lords, I am not going to follow the noble Viscount who has just spoken into the 1587 history of the Colonial Development Corporation, interesting as that may be. I am going to confine myself to what is contained in the Report which we are now discussing. It is a little difficult at first glance to discover what the real purpose and object of this Report is. I think it has been very widely misconstrued and misunderstood; and some speeches this afternoon have re-echoed the hasty comments which were made by the Press when it first appeared, and give the impression that the Report is in effect a condemnation of the policy which was pursued by the Colonial Development Corporation under its former chairman. I think that that is a complete misunderstanding of the position, and a very unfair and unjust conclusion. I will give in a few moments reasons why I say that. Let us look at the facts of the situation as they are disclosed in this Report. In passing, may I remind the noble Viscount who has just spoken and who has contrasted the 1951 Report with the 1950 Report that they were both written by the same hand? The change of view has taken place very rapidly, apparently, in the last year. But I think there is a reason for all this. The Report states that there are now fifty-three undertakings in operation—an increase of three on 1950. It does not represent very much of an advance, especially when we come to consider it in terms of the capital investment which is involved.
As I read this Report, the amount which has been spent during the last year upon the new undertakings is less than £200,000. The increase of £10,000,000 in the advances to the Corporation from the Treasury is entirely accounted for, except for that item, by the development of enterprises which had already been started in previous years. So that it is not an unfair conclusion that the Corporation have come to very nearly a standstill in the development of new undertakings. Certainly the rate of operation has been slowed down to practically a snail's pace. It is said in this Report that the last year has been spent upon retrenchment and reorganisation. I do not know what the meaning of "retrenchment and reorganisation" may be, but I notice that the administrative expenses have increased from £419,000 to £484,000, an increase of £65,000—a very large percentage increase indeed. I also notice 1588 that the expenditure upon investigation of projects which have not been followed up amounted to no less than £88,000 during the course of last year, whereas the expenditure on similar investigations during the whole of the previous period was less than £100,000. That hardly seems to me to fall within the definition of "retrenchment."
I also observe that the "reorganisation" has resulted in the appointment of four head office controllers and five regional controllers, all of whom except two appear to have been appointed during the course of last year. I am not at all clear from what is in the Report whether this helps to explain the increase in the administrative expenditure or not; and I do not know whether it represents a real decentralisation of authority or whether it does not. On the question of organisation, it is also to be noticed that there has been a very large turnover of executive staff. Many have left; many new appointments have had to be made; and that does not seem to indicate a very happy state in the organisation.
Now let us look at the financial results as they are described in this Report. It is said that the consolidated and operating loss of the Corporation and subsidiary undertakings was £1,070,043, as against £524,000 in 1950. It is also said that the total consolidated loss amounted to over £4,500,000. However, it is somewhat important to observe that that includes a sum of no less than £1,500,000 which is stated to be provision made by the Corporation for capital losses on undertakings and investments in subsidiary companies. No details of any kind are given to explain how this extremely large sum is made up or what the justification for it is. However, let us leave that aside and turn back for a moment to the question of operating loss to which I have just referred. At a later point (page 5) in the 1951 Report, quite separated from the figures of the operating loss, it is stated that1951 should constitute the peak of Corporation loss; next year's story should be different.Why should next year's story be different? Not on account of the very small extension of the operations of the Corporation which has taken place during the year under review and which, as I gather, amounts to an investment of less than 1589 £200,000. Obviously next year's story will be different because of the fruition of the enterprises which have been initiated in previous years. It is on that account that I say that the hasty conclusions which were drawn from this Report by the Press, that it was an attack upon the former chairman, Lord Trefgarne, are quite unjustified and extremely unfair.
What is the real purpose and object of this Report? I think it is this. It is stated in fact thatthe Corporation has restricted the scale and tempo of development …and that itsdeliberate policy is to look for experienced private enterprise partners to share in investment and in management.In other words, it appears that the Corporation is being diverted entirely from the purpose for which it was initiated, and that it is becoming a kind of investment trust for the purpose of helping private enterprise, instead of fulfilling the real object, which was to fill the gap in the Colonies between what private enterprise was doing and what was being done by the local resources of the Governments of the Colonies. That, I believe, was the fundamental object for which the Colonial Development Corporation was set up. It seems that it is failing in its purpose and that it is being diverted to something quite different.
However, I think that the main purpose of all the tale of woe with which this Report is filled is to establish a case for obtaining a reduction in the rate of interest which the Treasury requires upon the advances made to the Corporation, which may or may not be justifiable upon grounds of public policy, and also to try to secure the advance to the Corporation of money for experimental purposes which will be free of interest altogether and which will not be repayable. It may be that there is something to be said for all that, but I think it is unfortunate that the Report should be framed in the way in which it is framed, in order to try to secure that object. It should have been stated quite clearly and not in a way which has led to unjustifiable inferences being drawn. After all, this and the Colonial Development and Welfare Fund were great undertakings initiated for the benefit of the Colonial territories. They were pioneer undertakings. They 1590 ante-dated the Point Four programme, the Colombo Plan and other schemes of that kind, and it was recognised from the beginning that the Colonial Development Corporation would be expected to embark upon undertakings which would be some considerable time in coming to fruition and which in some cases would be unsuccessful.
I think it is too early to come to the conclusion that, when its undertakings have been fully developed, they will not be sufficient to yield a reasonable amount of revenue and that, on the average, the activities will not justify themselves. It may be that that will be so, but I think the phrase which is used in this Report, thatnext year's story should be differentis an indication that, in the long run, a great many of these undertakings will be successful, to the benefit of the Colonies in which they have been established and to the credit of the faith and the good will of the British people who had this undertaking set up for the good of those who live in those territories. Let us try to abandon the note of denigration and pessimism which has teen too frequent in all this. Let us try to adopt a little spirit of optimism and belief in the success of this great and beneficent undertaking.
§ 5.58 p.m.
My Lords, my only excuse for intervening in this debate this evening is that I have spent eighteen months in Swaziland beside the Corporation's irrigation scheme doing the same thing for private enterprise in the same district. Therefore, I have an insight into some of the great difficulties which beset the Corporation in trying to carry out some of these large-scale schemes. The whole subject of this Report has been adequately covered by noble Lords, who have already spoken far more ably than I can. I shall therefore make no remarks on the matters that have already been covered, except the point that either the Corporation can act on a commercial basis, in which case it will have to be radically reorganised, or it can play a very useful part in providing services and capital which no one else will provide and which cannot possibly be done on an economic basis. But the two cannot really be combined, except in a small degree.
1591 It seems to me that one of the great difficulties of farming overseas in those places is the great distances and the difficulty of marketing cattle and products. Roads, bridges and railways are not there. If money is put up for those facilities it will be a very long time, if ever, before there will be any return on it. Therefore, the Corporation may or may not put up money on that score. But, I fail to see how the production of a great quantity of materials, be it cattle or be it food products, can be of assistance if it cannot be economically moved to the market.
A point was raised by, I think, the noble Lord, Lord Rennell, about the Corporation taking part in mining schemes. There is a case in point. The Corporation spent a large amount of money on the investigation of the Tanganyika coalfields. I do not say whether that is right or wrong, nor shall I even comment upon it. But the results of that investigation cannot possibly be of any use to anybody, unless somebody builds a 400-mile railroad. Straight off, at the most conservative estimate, that is a matter of £40,000,000 or £50,000,000, before you can even look at the results of the investigation. In a way, it seems as though the cart is being put before the horse in carrying out these investigations, unless there is some guarantee that, if the investigation is hopeful, a really good means of transport will be forthcoming.
I pass now to the pilot schemes. Of course, pilot schemes are essential to the carrying out of any operation, be it large or small. The only criticism I have to offer there is that it is difficult to tell, from the size of the scheme and the amount of money which is spent, which is the pilot and which is the final scheme. In the case of the Swaziland irrigation scheme there was a pilot canal, a dam and irrigation works—the whole lot was there before the place was touched. The Corporation have been there at any rate all the time I have been there, and they have enlarged that pilot scheme. They have spent a great deal of money. I believe that the cost of the main canal is put at about £1,000,000; but fortunately they are now wondering whether it is going to be worth while. I think that that should have been considered 1592 before they spent the amount of money which has been spent in the intervening eighteen months.
I turn now to the crops grown in this area. Rice is grown all down the coast of Africa; it is grown in Portuguese East Africa. Within limits, the success or failure of the rice crop there is known. I should like to give your Lordships an example of a case where the Corporation have had a little luck, when they discovered that it was possible to grow three crops of rice from one sowing within a year. The example is worth relating, because it gives an insight into the difficulties of controlling these large-scale operations. The first rice crop was planted and reaped. By mistake, the stubbles were then flooded once again. The native in charge of the irrigation put water in the wrong paddy, where it remained. When the rice expert next visited this site he was astonished to see a crop of rice starting to grow. He had the presence of mind or the good sense to leave the water there, and lo and behold! they reaped another crop of rice within three months: and they did it a third time. That is a piece of luck. One does not always get bad luck in these things. The other piece of luck they have had with the scheme is that they have managed to dispose of their entire rice crop, which is fairly substantial, at the fantastic price of between 2s. and 2s. 6d. per lb. As they are published in the Report the figures relating to the sale of rice look very attractive, but they may be misleading, because the controlled price of rice in the Union of South Africa, which is the market, is, I think, about 1s. per lb. So one has to be a little careful in regard to these matters.
The question of risk capital has been discussed a good deal this afternoon. I think greater importance might he attached to risk management. Capital is forthcoming, but in the part of the world about which I speak, people are not prepared to put up capital unless they are going to manage it. They are not prepared to risk leaving the management to the Corporation. Of course, that is policy. Not on a geographical basis, but on a financial basis, the Report says that virtually every scheme that has been run by private enterprise, or largely run by private enterprise, has succeeded, whereas virtually every scheme that has been run by the Corporation has failed. Well, these 1593 are early days, and it may be rather unfair to make a statement like that; but it has a large bearing upon what people think and whether or not they are prepared to put up money to the Corporation, even if that is possible.
Surely a possibility for the Corporation on these irrigation schemes, and particularly that in Swaziland, would be to provide the irrigation water, plant and seed, and to cover the marketing and undertake a certain amount of land clearing, and then to turn it into a settlement scheme split up into small units, possibly of 100 acres under water with 2,000 acres of dry land for ranching. The units could be let at a remunerative rate so as to pay for all the work that the Corporation have done. I think it would be possible for the scheme to be run successfully by that method.
So far as the relationship of the Corporation with the people of the country is concerned, obviously it is important that that should be on a happy basis. In Swaziland that is not the case. The general feeling is anti-Corporation, for the reason that in this district they are competing with private enterprise. They are competing not only with private capital but they are buying cattle in the local market—and if the C.D.C. want cattle they buy irrespective of the price. I know that from my own knowledge, as well as front what I have been told by several friends. But surely it is not developing the Protectorate or Colony to compete for animals in a place where there are not enough to go round. The problem is a difficult one, but surely the policy should be to breed cattle and get rid of this competition. The purchasing activities and competition for labour, and so on, of the Corporation should, if possible, be reduced to an absolute minimum, in order to preserve good relationships.
So far as crops grown are concerned, Swaziland is starved of mealies. To a large extent the people are dependent on the Union of South Africa for their food supplies, and I think I am right in saying that the Corporation is a very big buyer indeed. The growing of mealies under irrigation is not quite so productive or remunerative as growing rice. Nevertheless, the Corporation should try to develop the crops of food for consumption in the district before they start trying to 1594 grow an export crop and importing crops in short supply, with all the political troubles attached thereto. The hour is getting rather late. Apart from wishing the Colonial Development Corporation every success, and conveying my thanks to the noble Lord, Lord Reith, for the courtesy and kindness that has been extended to me by his staff on this actual Scheme, there is nothing further that I wish to say to your Lordships.
§ 6.9 p.m.
My Lords, when I read this interesting Report, it seems to me that a great number of schemes which showed great promise at first have fallen down through one thing, and one thing only—namely, bad equipment. It seems that wherever the Colonial Development Corporation have touched a ship or embarked on a fishing enterprise the ships have always broken down, and consequently no fish have been brought in for canning or whatever was the purpose in mind. It seems to me that there was some slight lack of supervision or inspection of those ships, because in one particular case the breakdown occurred in the main shaft. That should never have happened. However, it did happen, and the schemes have gone by the board. Let us hope that future schemes will, before the operations begin, be provided with first-class equipment to enable them to go ahead right away.
The few remarks which I am going to address to your Lordships this evening will be concerned with a rather forgotten part of the Colonial Empire—the British West Indies. There is, I understand, a scheme for growing vegetables on 8,800 acres in Eleuthera in the Bahamas. I am not altogether happy about that, because the area happens to be rather in the hurricane belt. However, it may be all right. The particular islands about which I want to talk are the islands which the noble Earl who is going to reply on behalf of Her Majesty's Government has just visited and which I visited last year with the British trade mission—the lesser known islands, St. Kilts, St. Vincent, Tobago, and Antigua. They are mainly fruit-growing islands, and their chief problems are problems of transportation. The only method of travelling speedily from island to island is by air, and the service which is provided by the British West Indies Air Service is first-class. The 1595 method of transporting goods from one island to another is that of shipping them by schooner, which takes a long time. Occasionally there are one or two boats which come down from Canada and call at the various islands and there are also the Elder and Fyffe boats which are primarily banana carriers. But there is no refrigerated service available between these islands.
When I was in Trinidad I had the good fortune to talk to the Minister of Health and the Minister of Agriculture. They told me that their main problem was that of the shipping of their fruit. From a small island like Tobago—which is only twenty minutes' flying time away—there are only two very small ships which carry out an over-night service. All cargo has to be ferried off to the ships in a barge which has no motor in it, and the fruit is exposed for many hours to the hot sun before it gets to Trinidad. When it arrives there it has to be unloaded, and so is again exposed to the hot sun before it gets into cold storage. I believe that if the Colonial Development Corporation were to consider establishing some form of refrigerated service for these islands it would be of very great advantage to the local populations.
I should like now to refer for a moment to the island of Barbados where, again, everything, or practically everything, has to be ferried between ship and shore in barges. We had with this trade mission some caravans, but, unfortunately, these caravans were too large to be ferried ashore, so we could not take them on to the island. It might be possible to give some help—apart from a refrigerated service—by providing some form of tank landing craft which could go on to the various beaches, because in a number of these small islands the roads, in many cases, are not worthy of the name; they are mere tracks.
I now move to another island—that of Grenada, which has a natural deep-water harbour with a depth of seventy feet at the dockside. But the use of it is limited because there is a coral bar running across the harbour and only ships of approximately 4,000 tons or less can get in. These islands have great potential dollar-earning capacity. Americans love the cruises which are provided by such ships as the "Mauretania" 1596 and the "Caronia." It would be an excellent thing if the Colonial Development Corporation would consider some scheme of assistance for these islands, because apart from being exquisitely pretty they are extremely fertile, but they suffer from this lack of transportation. I would pause to mention one paragraph in the Report in which reference is made to the use in Colonial offices of coloured people as clerks and so on. We are told that where possible they are being employed. It so happens that at about this time last year I was in Grenada when the rioting occurred. It was not what one might call an extremely pleasant experience. I was staying with the A.D.C. who, in the absence of the Governor, did magnificent work until he got his head knocked in by a rock. He told me that one of the problems arose in this way. People are educated to a certain pitch, and then there are not enough jobs available which are suitable for those who have that degree of education. I think that if the Colonial Development Corporation studied these problems out in these islands, bearing in mind that they are near one of the richest countries in the world—Venezuela with its oil—and close to America, they would find that troubles such as those which have occurred in Jamaica, Trinidad and, recently, in Grenada, might be obviated by giving these people suitable jobs, through creating the right kind of enterprises. If that were done then these troubles might well vanish.
Before I sit down, I should like to say that the Trinidad cement project is, to my mind, the finest thing that has happened in recent times. They have all the necessary equipment, including all the timber that is required, for building, and the Minister of Agriculture said to me: "if only we had the cement we need we could solve our housing problem." On the welfare side, I would add just this. Last year there were many loyal subjects out there who wanted to come to the Festival of Britain, but there was no ship or shipping space available for them. The Government said that they would divert a ship from Australia, but they cancelled that project because only eighty-three applications were made. I suggest that that was not the point. The people concerned would have had to take a one-way ticket. They would have had to find their own way back. I think that the 1597 Colonial Development Corporation might well consider the possibility of fostering the already deep, loyal feelings of these subjects out there by endeavouring to see that there is at any rate shipping space for them to come here for the Coronation next year.
§ THE EARL OF LISTOWEL
My Lords, may I say first of all with how much interest and pleasure I listened to the maiden speech of the noble Earl, Lord Perth. I think there was not a single speaker in the debate who disagreed with his criticism of the capital structure of the Colonial Development Corporation or who disagreed with his approval of the principle of partnership in management between the Corporation and private enterprise. Indeed it was a most outstanding and thoughtful speech. Your Lordships will remember the wise and knowledgeable speeches on foreign affairs that we used to listen to from the noble Earl's father, and it is extremely pleasant to know that this family tradition will be worthily upheld.
To my mind, the striking thing about this debate—the most striking thing, perhaps I should say, because other noble Lords will have received other impressions—is the heartening effect it will have in the Colonies. As your Lordships know, the Colonies pin high hopes on the Colonial Development Corporation, I believe they pin too many hopes on the Corporation, and that is a pity, because some of them will not be realised. But, in any event, the people in the Colonies will be reassured to know that your Lordships, irrespective of Party, support the Corporation and wish it to have all the facilities that it requires to carry out its work successfully. I think it is evident from the Report for 1951—this has been mentioned before, but I think it can bear mention again—that last year was mainly spent in self-critical meditation. To use the vernacular of the noble Lord, Lord Reith, which gives a flavour to this report, a literary quality, so pleasant after the impersonal bleakness of White Papers, the Corporation has been concerned with "redding-up," with tidying up, cleaning up and preparing for the future. Hospital cases were no doubt examined, to distinguish the moribund from those which might recover after treatment, and thought was given to changes in policy and organisation 1598 required for future development. There were only three more schemes in the whole year. I believe that this was a good thing. I am sure this time was not time wasted. There is no doubt that development does need careful planning and preparation, and it is only in that Way that mistakes can be avoided, both in the nature and in the cost of new schemes.
To my mind the most important conclusion that has emerged from this stocktaking is that the Corporation finds itself in a financial straitjacket from which only the Government can release it. This Report will be memorable apart from other reasons (and I think they were good reasons) mentioned by the noble Lords opposite, because it is the first Report to expose the full gravity of the situation. I should like to cite it, because, after all, it is the best witness to the crippling effect of the present financial policy. The Report says that the Corporation will be deflectedfrom its primary purpose of opening up new fields of development … unless the case it has presented to Government on these fundamental financial difficulties leads to some measure of relief.If I may say so, with respect to the noble Lord, Lord Reith (who I am sure would not claim otherwise), this is not a new discovery; the noble Lord Reith, has not been a Columbus. Many people in the past few years have been aware of this great difficulty and this great handicap for the Corporation. I myself, when I returned from a tour of the West Indies in 1949 and male certain recommendations to the Secretary of State, included a recommendation about the Colonial Development Corporation, to the effect that unless the terms of the 1948 Act were modified it would be unable to carry out the work with which it had been entrusted by Parliament.
It is this case for easing the financial conditions under which the Corporation at present operates that we have been trying to impress upon the Government this afternoon. I am sure that the whole success of the new phase of development which will soon open under the auspices of the noble Lord, Lord Reith, will depend on the willingness of the Government to relieve it of some of the financial obligations which will otherwise stifle its work. What the Corporation needs, after all, is the financial tools for the particular 1599 job it has been set up to do. Everyone agrees, I think, that it has a special function in the economic development of the Colonies which cannot be discharged either by private enterprise or by the Colonial Governments. They each have their separate field of activity. The Colonial Governments must continue to do the basic development which makes increased production possible—provide the main roads, the harbours, the railways, the water, the power, the drainage, the irrigation schemes and so on. This is part of the larger welfare field, and, of course, it is right that, as these are all unremunerative undertakings, we should contribute grants out of Colonial Development and Welfare Funds.
When a sufficient background of this basic development has been provided by public authority, then private enterprise steps in to do the highly profitable productive work. It is the function of private enterprise (and a proper function) to operate in this field of high profitability. But unfortunately a situation has now been reached in which most of the crops and minerals which give a high return for small or moderate outlay have already been "spotted" and made the most of by private companies. There is little development now left in the Colonies which will give a quick and substantial profit on capital investment. It is a complete illusion, which I am sure no one here nourishes but which may exist elsewhere, to suppose that there are large untapped supplies of food and raw materials in the Colonies which any enterprising business concern would develop and place upon the market.
The fact is that most of the future economic development of the Colonies lies in the field of marginal profitability. In this field—we must be prepared to face these unpalatable economic facts—development will be extremely costly and there will be long delay before revenue begins to catch up with expenditure. But it is precisely in this field of marginal profitability that Parliament intended the Colonial Development Corporation to operate. This was a field unattractive to private enterprise and unsuitable for Government. How can the Corporation operate within a 5 per cent. profit margin, with its present financial directive?—and, of course, the terms of this directive are contained in the 1948 Act. To give an 1600 illustration of this proposition, the Report points out that to meet interest charges alone, excluding overheads and sinking fund, its average earnings would have to be at the rate of 6¾ per cent. If this financial directive is unchanged, if it continues as it is at present, what will happen inevitably is that the Corporation will trespass more and more upon the high profitability field—such as it is; narrow as it is, I fear—of private enterprise. This would cut down the Corporation's operations to a bare minimum and turn it right away from the riskier projects where the main prospect of development lies.
I believe that there are some people who would like the Corporation to become a source of cheap capital for private enterprise, but this would be a complete misconception of its purpose. That is not the function which I think anyone taking part in this debate would assign to the Corporation. I hope the Government will make the financial concessions which are necessary if the Corporation is to do what it is supposed to do. I cannot see how the Corporation can be expected to undertake schemes involving expensive exploratory work, pilot schemes and so on, such as have been mentioned in the debate by my noble friend Lord Ogmore and others, involving also long delay before revenue catches up with expenditure, and also to take risks, of which some will inevitably be bad risks, unless the Government will regard part, at least, of the money it advances as a free grant. This would acknowledge the obvious fact that you cannot take risks in business without risking some of your capital. It is surely preposterous that the Corporation, with nothing but debenture capital, should be expected to take greater risks than the ordinary business firm, because that is the situation at the moment. I was glad that the noble Lord, Lord Rennell, who is one of our greatest authorities on business matters, said that in his view no commercial firm could operate under these conditions.
If this principle of mixing grants with loans were accepted, the current deficit of £4,500,000 could be written off, and further losses incurred in the initial stages of development schemes would be dealt with in a similar way. In view of the long period which must elapse before 1601 any profit can be made, I hope the Government will consider whether it may not be possible to extend the interest-free period beyond the present period of seven years. Again, the narrow margin of profit would surely justify the spreading of capital repayment over a longer period of years. The loans are to be forty-year loans. I hope the Government will consider operating these loans over a longer period.
It may be said that, in present circumstances, with the great financial difficulties we are experiencing at home, we cannot afford to spend more money on Colonial development. But I believe that money spent in this way, looked at from the narrower point of view of self-interest, is building up a sound long-term investment. The economists tell us that the terms of trade are turning increasingly in favour of the primary producers. If they are right, and there is no reason to doubt this forecast, the higher price which these products will fetch in the world market will guarantee a reasonable return on our capital in the long run. Looked at from the point of view of the Colonies, it will enable the primary producers to improve their standards of life by purchasing our goods and so help to maintain our standards and our level of employment.
I welcome particularly the proposal in the Report for closer association with private enterprise and Colonial Governments in the financing or management of development schemes, provided always, of course, that the Corporation keeps a controlling interest. I was glad to note that the noble Lord, Lord Balfour of Inchrye, agreed with this, because it is extremely satisfactory to find that supporters of private enterprise are at one with supporters of public enterprise about this important advance in the policy of the Colonial Development Corporation. I think this association will be particularly valuable in the sphere of management. The Corporation obviously lacks the technical knowledge and experience required for managing the immense variety of schemes it undertakes. Here the experienced staff of local firms would contribute substantially to the efficiency of the undertakings sponsored by the Corporation.
I should be the last person to presume to offer advice to the noble Lord, Lord Reith, because obviously he knows in 1602 what capacity he can best serve the Corporation; and, equally, I should be the last person to criticise, because in fact I admire the work which he has already done as Chairman. But he and everyone helping him would agree that in this new phase of development it is vital to get the co-operation of Colonial Governments and all the private firms in the Colonies with the Corporation in its work. I am sure that your Lordships will agree that there is no person better qualified than Lord Reith himself to secure the good will of Colonial Governors and business elements in the Colonies towards the Corporation and, also, their practical co-operation in the Corporation's schemes. I am certain that the Chairman of the Corporation commands more respect in the Colonies than anyone else on it.
Moreover, apart from his persuasive powers, of which we are all aware, the noble Lord, Lord Reith, has a certain infectious enthusiasm for any cause which he supports, which can easily be communicated to others. If the noble Lord, Lord Reith, could find time during the coming year to pay a short visit to some, at least, of these territories where his schemes are operating or about to operate, feel certain that he would considerably increase their chances of success. Of course, it is out of the question for him to make a complete tour of the Colonies, but if he could go even to East Africa or Central Africa, I am certain that it would be immensely valuable. As we all agree, the Colonial Development Corporation is a potential instrument of immense power for helping the Colonial peoples to improve their standards and for increasing their supply of foodstuffs and raw materials. But unless the Government are prepared to give some financial concessions at this stage, and that without delay, then this great instrument will be blunted and made useless for the purpose for which it was designed.
§ 6.37 p.m.
§ THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR THE COLONIES (THE EAFL OF MUNSTER)
My Lords, it seems customary that your Lordships should now discuss yearly the Annual Report of the Commonwealth Development Corporation. Although some observations made by noble Lords during the debate this afternoon have been critical of the Corporation, I have 1603 no doubt that the noble Lord, Lord Reith, and his colleagues will carefully consider the views which have been expressed. On the previous occasion when this question was debated, the noble Lord, Lord Ogmore, who moved the Motion to-day in what I thought were courageous terms, was then the exponent of the late Government's policy. Although during the interval there have been some changes in policy, to which I shall refer in the course of my remarks, nevertheless the primary duty and principal purpose of the Corporation remain unchanged.
Before I deal with the individual points which have been made by noble Lords, I should like to remind the House that under Section I of the Overseas Resources Development Act the sole duty of investigating, formulating and carrying out any projects is laid firmly on the Corporation itself. Her Majesty's Government have- not felt it their responsibility to supervise the detailed carrying out of each individual scheme undertaken by the Corporation. At the same time, this does not mean, and cannot possibly mean, that the Government should have no voice whatever in the choice of schemes and in the final decision whether any particular scheme should be pursued or not.
I think it is well worth reminding certain members of your Lordships' House that the funds which are provided for the Corporation are provided entirely by the taxpayer. In fact, the amount which has already been advanced exceeds £21,000,000, as stated in the Report, and another sum of nearly £15,000,000 has been sanctioned. It seems to me to be the duty of the Government, in handling these large sums of money, to safeguard the taxpayer from wild, extravagant schemes, while at the same time facilitating the important work which the Corporation has to carry out. We feel, therefore, that before large sums of money are advanced we should endeavour to satisfy ourselves that the Corporation has thoroughly examined all the pros and cons of any scheme, that it has made due allowance for any risks or contingencies, and, lastly, that it is capable of implementing what it sets out to do. We all know, on whichever side of the House we sit, that in any business transaction risks have to be accepted, but it is more than ever important that in future 1604 we should have no repetition of the disastrous ground-nuts and egg schemes.
Her Majesty's Government have come to the conclusion that there are two major conditions which will have to be fulfilled before they sanction any new scheme: first, the Secretary of State will require enough information to enable him to judge whether a prima facie case has been made out; and secondly, that (except in special circumstances) someone else besides the Corporation should share in the risk, whether it is local or United Kingdom private enterprise or a Colonial Government itself. The Corporation is, and has been, working along those lines for some time, and schemes which are listed in the Annual Report include a number where the Corporation is associated with private enterprise. In the course of the debate more than one noble Lord has raised the question as to whether the Corporation should be associated with private enterprise or Colonial Governments in fulfilling some of these schemes. There is the further point, to which my right honourable friend attaches great importance, that in these operations there should be local representation on the board. At the same time, we naturally fully recognise that there may have to be exceptions, but if the Corporation wish to proceed with schemes entirely on their own, then Her Majesty's Government will want to be assured that there are sufficient and good reasons for their doing so. My right honourable friend has informed the Corporation of these conditions, and they therefore know his requirements. Within these requirements, the duty of carrying out their responsibilities—including financial responsibility—remains with the Corporation.
The Report and Accounts for 1951 has drawn the attention of the Government to the difficulties which the Corporation consider have arisen from the existing financial structure—indeed, that was a point made by the noble Earl, Lord Listowel, and by other noble Lords. I hope, therefore, that it will be of some use to the House if I comment (I fear at some length) on this particular question. On page 5 of the Report (Section 4, paragraph 22) it states:Provided Government brings its financial requirements into line with its basic intention … Parliament, public, and staff can look forward with confidence in the Corporation, its purpose and its work.1605 As I understand it, the main burden of the Corporation's complaint is that, while it is constituted to operate commercially, it is unlike a commercial concern, in that it has no ordinary capital. There is, to use the words in the Report, no "buffer of ordinary capital to bear risks." Under arrangements for advances to the Corporation, interest is payable, and always has been payable, on the whole of the capital which has been advanced, though for long-term advances actual payment does not begin, as I think Lord Ogmore pointed out, until the eighth year. There are other requirements, but this appears to be the principal one.
My right honourable friend does not fully subscribe to the opinion which has been expressed by the corporation that it is at a disadvantage compared with private enterprise, for there is nothing in the Act or in administrative practice which requires the Corporation to make each and every scheme pay. It has to take good schemes with had schemes, and good years with bad years, and to pay interest on all its operations as a whole. He feels that no commercial firm could hope to attract capital up to £100,000,000 if it had not a fair prospect of earning something much higher than a gilt-edged rate of return. It is true that most private enterprise undertakings have equity capital at their disposal, and that certainly works as a buffer; but it is not the Government's view, and so far as I know never has been the view of successive Governments for years in this country, that they should be in a position to speculate with the taxpayers' money.
§ LORD OGMORE
This is an important point, and I am sorry that the noble Earl did not speak earlier. If that is the view of his right honourable friend, what is the point of having a Colonial Development Corporation at all? Why not leave development to private enterprise?
§ THE EARL OF MUNSTER
Perhaps I might develop the argument, and in the end I think the noble Lord will see the whole of the views of my right honourable friend. I was saying that it has been the view of successive Governments over generations that they should not speculate with the taxpayers' money. That is a view which I venture to think will be strongly supported in your Lordships' House, although, from the interruption of the noble Lord, Lord Ogmore, and 1606 from the remarks of the noble Earl, Lord Listowel, it seems to me that they may be refuting what has been the decision over past years. It may be that I am looking at it the wrong way, and that my right honourable friend is also, and that the Corporation is thinking of equity capital privately subscribed. The suggestion I have already referred to about the Corporation going into partnership with private firms, which has been strongly supported in this House to-day, naturally provides a source of private equity capital. There is, therefore, nothing whatever to prevent these joint undertakings from having an element of equity capital to provide a buffer of the kind that the Corporation has in mind, if, in fact, they feel that that is the need. However, as things are at present, it seems to me that so long as the Corporation does not need to earn more than gilt-edged rates of interest over its whole field of operations it is, in fact, favoured compared with private enterprise.
The noble Earl, Lord Listowel, mentioned Section 8 (7) of the Report, in which the Corporation also say that they have not only to earn 6¾ per cent. after tax, plus overheads, but still more "if advances are to be duly repaid." This might appear to suggest some doubt on the question of repayments of advances, and comments which have appeared in the Press have suggested that since the Corporation repays over a period of forty years it must, in effect, earn a net return on capital of something of the order of 10 per cent. before any scheme can be economic. Such a view is also advanced as evidence that the Corporation is unduly handicapped compared with private enterprise. Here again, my right honourable friend takes a rather different view. As he sees it, the Corporation must earn the net current rate of interest on its loan capital, plus administrative overheads. It must also, like any other commercial concern, make provision for repayments on its loan capital. But this, I submit, does not mean that for forty years it must earn an additional 3 per cent., or thereabouts, besides maintaining its capital intact. The object of its operations is, after all, to utilise the capital advanced to create assets which will provide a net return in the shape of interest and overhead charges. It it succeeds in creating those assets, it will have a capital fund 1607 out of which payments and redemption of capital can be made.
It is, in fact, the Corporation's own policy, as I understand it, and one with which the Government wholeheartedly agree, that from time to time it should seek to sell going concerns at reasonable commercial prices. Provided it manages its affairs like a business concern, it should in the course of time be in a position to liquidate its capital obligations, and the fact that it is a permanent organisation operating on a large scale should increase rather than diminish its opportunities to maintain that capital.
It is not, I suggest, the obligation to repay capital and interest which in itself is responsible for the difficulties encountered by the Corporation, nor is this the real crux of the present situation. As its own Reports have shown, the losses and difficulties which it has experienced are primarily due to the very nature of its task which the Government fully recognise, together with the Corporation's past mistakes and failings, which the noble Lord and his colleagues on the Board are striving with some success to overcome. Even if the Corporation had a proportion of capital which did not carry fixed terms of interest and repayment, its immediate problems would not be eased in any way since these are, essentially, to complete the improvement of its organisation and to concentrate in future on worthwhile projects. The Government are glad to know that during the present period of consolidation, and what the noble Lord, Lord Reith, has described as "redding up," the Corporation, in its own interest and that of the Colonies themselves, is keeping to a minimum schemes which are in their nature highly speculative. In other words, the Corporation recognises that its first responsibility is to get itself on a sound footing, and, until then, to proceed cautiously.
The noble Lord, Lord Ogmore, and other noble Lords, raised the question of writing off the past losses made by the Corporation. I agree with the noble Lord that there are some obvious reasons in favour of such a course and, in fact, they have all been mentioned and find their place in the Report. If, as I think the noble Lord also said, the Corporation 1608 has no prospect whatever of repaying the advances, it would seem just as well to face the fact and write them off. Moreover, the liability to repay capital and interest in respect of schemes which have closed down after heavy losses have been incurred may well be a psychological handicap, since, even if the Corporation is ultimately successful in making its existing schemes pay, the liability in respect of failures may be too heavy and would amount in fact to a permanent millstone around the Corporation's neck. We have very sympathetically considered these arguments, but it has been decided that in fact no real purpose would be served by writing off capital losses now. The Corporation's main task at the moment, as I have already indicated, and as was indicated by other noble Lords, is to run its existing schemes well and to take on new ones which it may operate, with great caution. We think that to write off past capital losses would not affect the Corporation's ability to achieve its task, although it would undoubtedly make the balance sheet look distinctly better.
I realise that the Corporation are thinking only of a "once and for all" operation. But could the position in practice be held on that line? We do not know what to-morrow may bring forth under future chairmen and future boards. The Corporation is a permanent institution, but it is, nevertheless, a young institution. We must avoid creating the impression that the Government do not view these capital losses with as much concern as they deserve. However, there is a way in which the Government can help, and we are prepared to relieve the Corporation from liability for interest in respect of capital advanced to date which can properly be deemed "dead." The details will have to be worked out with the Corporation, but in principle the Government accept the view that it is desirable to assist the Corporation in this way. Moreover, we have also agreed to provide advances on medium terms in addition to the long-term advances. This term is for ten years, and the rate at present is 3¾ per cent. It will be for the Corporation to indicate its preferred method of financing when applying in future for capital assistance.
Now I turn to deal with a matter which was raised by many noble Lords 1609 this afternoon. It is known that the Corporation have asked my right honourable friend that they should receive an allocation of £20,000,000 out of the figure of £100,000,000 for investigations and for marginal cases, and that, meanwhile, some part of their existing resources should be allocated for this purpose with guaranteed replenishment. Our view is that the Corporation must seek to do what investigation it can in the same way as any commercial concern and to allocate a proportion of its resources for investigation of projects. Investigation as such should be undertaken by the Corporation only if there is some genuine prospect of its being economically worth while and coming within its field of likely operations. Investigation which is purely experimental and non-commercial in character is more properly the function of Government. There is, of course, no fixed border line between investigation suitable for Government and investigations suitable for commercial concerns. But arrangements can be made between the Corporation and the Colonial Governments for joint financing of suitable schemes. We believe that such arrangements should be made ad hoc as need arises and finances permit, and that it is not necessary to allocate a specific proportion of the Corporation's resources to this purpose.
The noble Lord who moved this Motion to-day raised two financial points of which he was good enough to give me notice. First, he suggested that the Corporation, by reason of their financial obligations, are driven to undertake projects likely to yield a quick financial return. I think a similar point was made by the noble Earl, Lord Listowel. As I think is already known by both noble Lords, payment of any interest by the Corporation is deferred for seven years from the date of each advance. At the same time, the Corporation have only to take good years with bad, and the fact that in the early years a project may appear unremunerative does not disqualify it for the Corporation's interest. There is, in addition, the concession regarding interest on dead capital, to which I have previously referred. I hardly think that there is anything in the noble Lord's suggestion, but I will concede that if two projects were considered together and otherwise were equal, the Corporation, being human beings, might well choose the one with the quicker return.
1610 The noble Lord, Lord Douglas, and the noble Earl fear that the Corporation may become a finance house to provide loans at low rates of interest for private enterprise. I would remind the noble Lord, Lord Ogmore, of his remarks on June 13 last year, when he replied to Lord Rennell on this very point, the noble Lord, Lord Rennell, having initiated a debate on the affairs of the Corporation. The noble Lord, Lord Ogmore, said (OFFICIAL REPORT, Vol. 172, Col. 80):I should like to turn now to the main current of the debate, and comment on something which the noble Lord, Lord Rennell, said at the beginning. He said early in his speech that he was under the impression that when this Corporation was set up it was to be largely a finance Corporation which was going to finance development in the Colonial territories. If the noble Lord received that impression, it was certainly not an Impression which was widely received. I myself wound up the debate on the original Bill in another place, and I thought that in that place we had made it fairly clear that that was by no means the function of the Corporation, and that it was to have a much wider held of activity. In fact, the then Colonial Secretary, Mr. Creech Jones said that the object of the Corporation "—then the noble Lord quoted—'… will be to establish or assist any enterprise in the Colonies which is designed to increase their general productive capacity.' It was our idea that this Corporation was brought into being to improve the standard of living of the Colonial peoples, by increasing their productivity and wealth.The purpose of the Corporation remains unaltered, and I think I could not have done better than quote the remarks of the noble Lord. It is true that in a few isolated cases, as mentioned in the Corporation's Report, they have in fact acted in the capacity of a finance house, but it is obvious that the vast majority of the existing schemes are not of this nature. Nor is it the intention of my right honourable friend that the instructions he has given to the Corporation should have this effect. It will still be, as in the past, the exception rather than the rule.
I apologise for keeping the House so long but this is an important subject. I should like to deal with the relationship between the Corporation and the Colonial Governments. It is, I think, readily agreed that at all times it is absolutely essential for the relationship between the Corporation and the Colonial Governments to be as close as possible, and the appointment of regional controllers throughout the Colonial territories should 1611 help to further this cause. I was surprised that the noble Lord, Lord Douglas of Barloch, who is no longer here, was concerned about the wisdom of the appointment of these regional controllers, for I look upon them as individuals who must associate themselves—as in fact they are doing—with private enterprise, public bodies and, for instance, the Colonial Development and Welfare Organisation in Barbados. In the future, as in the past, the operations of the Corporation must be closely entwined with all the other plans for the development of the Colonial territory; and it is in that context that Her Majesty's Government have to consider their policy towards the Corporation.
Perhaps I may state the principles of that policy under five distinct headings. First, the Colonial Development Corporation must be given more time to prove itself. Secondly, in present circumstances it is in the Corporation's own interest, and that of the Colonies, to keep speculative projects down to a minimum. Thirdly, it must continue its efforts to put its house in order—that, I think, was aptly described by the noble Lord, Lord Rennell, as "cleaning up." Fourthly, the Corporation is only one of the agencies of Colonial development. It was set up to deal with commercial-type projects. Non-commercial-type projects were the function of Government, through Colonial Development and Welfare and through local public funds. Fifthly, and lastly, making capital available to the Corporation on artificially favourable terms could not he justified, especially in present conditions.
It is, I think, abundantly clear from the Corporation's Annual Report that all the doubtful schemes will require careful watching in the future—especially agricultural development schemes, to which reference has been made. These are long-term schemes, most of which involve pioneer development in new areas The main problem is to keep capital expenditure down to a minimum during the experimental period. I think I should make it clear that, while Her Majesty's Government have no intention of intervening in the administration of these schemes, they do consider that they have the right to be kept fully informed of new developments which substantially affect the possibility of the success or failure of a 1612 scheme. I know that the noble Lord, Lord Reith, is himself fully alive to this point. But, equally, where there is any uncertainty about the future of schemes involving large sums of public money the Government cannot be indifferent. The Corporation have, indeed, expressed their full recognition of the Government's position in this matter. As I say, I apologise for delaying the House for so long, but I wished to make that statement abundantly clear on the future activities of the Corporation.
Now I will, if I may, turn briefly to reply to some of the questions that have been put to me. The noble Earl, Lord Perth, in an admirable maiden speech—on which I should like to tender him the congratulations of Her Majesty's Government—spoke about capital structure. I think I have replied to that point. The noble Viscount, Lord Hudson, raised various questions and, in particular, one about the Bechuanaland Protectorate. I should like to point out to the noble Viscount that it is stated in the 1950 Report that 16,000 square miles of the Chobe Crown lands have been leased. In point of fact, the Corporation had the option over 16,000 square miles, of which during this last year 9,000 square miles were taken up. I understand that Colonel Van der Post has visited that ranch recently and has described the potentialities as endless, provided that we can get the right managerial approach and development policy. I hope as earnestly as the noble Viscount does that both these desirable objects will be attainable.
Then I turn to the remarks of the noble Earl, Lord Lucan, who, I think, in the course of his speech slightly confused Colonial development and welfare with the Colonial Development Corporation. He asked why less was being spent on Colonial development and welfare and whether any change of policy was involved. The answer is clear. The fall in expenditure this year, which I think he rightly described as from £16,000,000 to £13,000,000, is entirely attributable to the difficulties of getting supplies of new capital equipment and skilled staff, and so on. In point of fact there has been no change of development expenditure. Then there was the noble Lord, Lord Douglas of Barloch, who mentioned the Trefgarne Report. All I can say is that Her Majesty's Government accept that Report, but we think it would be much better 1613 now to let bygones be bygones and to allow the Corporation to get on with its job.
§ THE EARL OF MUNSTER
The noble Lord spoke mostly about the Trefgarne Report from the beginning of his speech to the end. But I only mention that in passing.
Finally, I turn to what the noble Lord, Lord Selsdon, said about communications in the West Indies. This is a problem which has been causing difficulties for many years, but it is now actively under review. As regards passenger lines, I can say only that in recent months there has been a remarkable improvement.
I think I have now answered most of the principal questions which have been addressed to me. I should like to conclude by saying that Her Majesty's Government have the fullest confidence in the noble Lord, Lord Reith, as Chairman of the Colonial Development Corporation, and also in his colleagues. We can only hope that under his wise guidance and advice the Corporation may prosper, and that the schemes with which he is concerned may, in fact, fructify.
§ 7.9 p.m.
§ LORD OGMORE
My Lords, I am very grateful to the noble Lords who have taken part in this debate this afternoon. In particular I would congratulate the noble Earl, Lord Perth, on his maiden speech. We shall all look forward to the next occasion on which he addresses us, having had a foretaste of the quality of his contributions. The number of noble Lords who have spoken and the character of their speeches were most interesting and showed great concern in the affairs of the Corporation. They have all been constructive speeches and, as I had hoped, the financial aspect of the Corporation's affairs has been very much to the fore. My own view is that this is now the heart of the matter. In a big Corporation such as this, various aspects take priority from time to time—at one moment it may be organisation; at another, it may be planning. Just at the moment, it is finance. I must say that I was not at all reassured by the Government's reply. We always like to listen to the noble Earl, Lord Munster. He is most lucid and patient and puts a case very well, but the case he has been given to put to-day is, on 1614 the whole, bad case. I am sorry that he had not a better one to put to us.
§ THE EARL OF MUNSTER
May I ask the noble Lord: are he and his Party in favour of the Corporation having ordinary shares?
§ LORD OGMORE
No, not ordinary shares. As I said before, if the Corporation cannot take risks, and very often risks of a nature which an ordinary business concern would not take, then, so far as I can see, there is no point in having the Corporation. You may as well leave it to private enterprise, because all the Corporation can do is to go for those very projects which will yield a certain return. That is the gravamen of our case. I am not going to develop that point here and now, for I do not think this is the proper time, when I am winding up a debate, to go into it at length. But I say that this question has to be decided. I made two suggestions, with one of which, to some extent, the noble Earl has agreed—and I am glad that he has. So far as the writing off is concerned, he is relieving the Corporation of interest for the time being on certain of their capital. I presume the noble Earl will agree on the question of the writing off of that capital in due course. He has gone some way to meet us.
But on the question of who is to pay for the investigation and cost of pilot schemes, the Government have not met us at all. In fact, it is obvious from the speech of the noble Earl that his right honourable friend does not understand the position. The whole gravamen of his case is that the Corporation should be considered in every way as if it were a private company. But we did not bring this Corporation into being to be a private company. If we had wanted to do that, we should have allowed a City corporation, who have done these things for hundreds of years to do it. There is no need to bring a fresh Corporation into do what private companies are already doing; and that is where the Government are falling down. The noble Earl's right honourable friend is a great City magnate; he is a great private enterpriser, and he has come into this thing looking at it through blinkers. Just to keep the racing metaphor, I say he is so weighting this Corporation down that it will not complete the course.
§ THE EARL OF MUNSTER
Do I understand the noble Lord to say that the Colonial Development Corporation should, with complete impunity, lose many millions of the taxpayers' money?
§ LORD OGMORE
I am asking the Government to use something which a Government should use—that is, their common sense and imagination. Here is a problem which faces us. I did not put this from a Party point of view, and I do not want to do so.
§ LORD OGMORE
No. I said from the beginning that we have made a mistake over this. Practically every noble Lord speaking from that side has talked about my courage. If courage means anything, it means that we admit to having made a mistake. I admit that we have made a mistake. I am not taking any "holier than thou" attitude over it. The Government are making a great mistake in tackling this special problem on the lines of private enterprise, talking about "risk capital" and saying that the Corporation must act as an ordinary private enterprise corporation would do, instead of treating it as a new element in Colonial development. The Government will have an opportunity of considering, suggestions made by the noble Lord, Lord Rennell, by the noble Lord, Lord Balfour, and by myself, and no doubt suggestions made by officials. Unless they regard it as a new element, this Corporation is dying and will eventually he dead.
I do not want to enter into argument at this stage. I am sorry that the noble Earl did not speak earlier. If he had spoken after I had spoken, other speakers could have developed this theme and we should have had a debate on the problem of the relationship between the Corporation and the Government, which the noble Earl has explained to us, or has referred to, although not in any great detail. Really, the noble Earl must not expect me just to make the usual sort of winding-up speech. He waits until the end of 1616 a long list of speakers and then develops a new theme. I do not think it is playing fair. It is not the noble Earl's fault. The House does not have a chance to discuss it. When I say that, I am not making a personal attack on the noble Earl, for whom I have the greatest respect and affection, but I think the Government should have arranged for him to speak after myself, and we could have had the final reply from another member of the Government. I do not think it is treating the House as the House should be treated. We have just heard of this theme at the very end of the debate when nobody can properly reply to it. However, it only remains for me to thank the chairman of the Corporation for the work that he has done; the members of the board and the staff of the Corporation at home and abroad; and the Colonial Office staff and the Treasury staff, who are concerned in this matter. Finally, I wish the Corporation every success in the coming year. I beg leave to withdraw the Motion.
§ Motion for Papers, by leave, withdrawn.