That it is expedient to authorise the issue out of the Consolidated Fund of such
sums, not exceeding in the whole nine hundred and fifty thousand pounds, as are required for the payment of calls on share capital in the Anglo-Persian Oil Company, Limited; to authorise the Treasury to borrow money by the creation of securities for the issue of such sums or the repayment thereof, the principal of and interest on any such securities to be charged on the Consolidated Fund; and to amend the Law with respect to the application of dividends or interest on capital held in the said company.
This is the Report Stage of the Ways and Means Resolution which was recently taken, leading up to a Bill which it will be my duty to introduce shortly in order to give authority for paying up the uncalled amounts still due upon the shares in the Anglo-Persian Oil Company which are owned by the Government. The House may remember that, when this matter came up in Committee, I explained at some length the nature of this obligation, and, in particular, dwelt upon the fact that this was the ordinary obligation upon shares with uncalled liability which the Government, with the authority of the House under the original Act dealing with the Anglo-Persian Oil Company, undertook several years ago, and that it is now following out the scheme of the Act to give the House authority in due course to fulfil our obligation on the shares. It is not, however, for the purpose of giving once more an account of this matter, which I have already given at some length, that I now rise, but simply in order to correct an error which I made in the course of the discussion on the last occasion.
In reply to questions, I stated in the course of the Debate that the actual resolution making the call, and thus crystallising the legal liability, had been passed by the company. At the time, I was under the impression that that was so, but I have since found that I was in error. The actual resolution making the call has not yet been passed by the company. The impression arose in this way. The company passed a resolution resolving that the call should be made, and the Treasury assented to that being done.
Yes, I will give all particulars. That was on 31st October. Thereafter the company wrote to the Government director stating that the resolution actually making the call would be passed at the next meeting of the company. That letter was dated 31st January, and the next meeting of the company was to take place on 27th February. It was assumed that at that next meeting of the company the resolution had been passed. Since our previous Debate, however, I have been informed that that was not so; the resolution was not actually passed at that meeting. I thought it right, since under this impression, I made a statement to the contrary in the course of the previous Debate, to correct it at the first opportunity that presented itself. I believe, however, if I have made the matter clear to the House, that the House will see that this is something in the nature of a formal step. The company has decided that the time has come for calling up this uncalled liability, and, on the advice of our advisers on the company and in other matters, we have come to the conclusion that the right time has come to meet this contingent liability, which will have to be met sooner or later in any case.
I do not propose to divide the House on this matter, but I should like to say a few words in continuation of the discussion that took place last Friday. I should like to tender my thanks to the Financial Secretary to the Treasury for the candid confession of an error he made on Friday. It was a very important error, because the House understood from the hon. Gentleman that a legal obligation had been entered into which the House was obliged to conform to, and now we find the company has not parsed a resolution, and therefore there is no legal obligation of any kind. The Committee was under the impression that this company was founded in order to preserve to Great Britain the right to produce oil in certain localities and that it was necessary for purposes of the Navy that this oil should be preserved for Great Britain. On Friday I was only able to find the Stock Exchange Year Book of 1920 in the Library. Since then I have found the Stock Exchange Year Book for 1921 and I find that, so far from the operations of this company being limited in the inter- ests of England, to a very considerable extent they are in the interest of foreign countries. I am not in the least blaming the company for that. The company are no doubt doing what in their opinion is the best for the commercial interests of the shareholders. But I am prepared to prove that the idea that this company is actuated solely by the idea of preserving oil for the Navy is incorrect. The Anglo Persian Oil Company entered into an agreement with a certain French company to provide a company with a capital of 100,000,000 francs, of which the Anglo-Persian Oil Company was to find a half, and that company was to create and maintain oil refineries in France and to develop oil in French colonies. The Financial Secretary to the Treasury said this money was required to build tank steamers.
No. partly required. That is rather important. One of the purposes to which the money will be put is the building of tank steamers, but there is another reason. I am informed that the development of the oilfields of the company actually on the site of the oil will require more capital than would otherwise be obtainable.
We were told it was for tank steamers, and I pointed out that, as far as I could ascertain, the company had 22 tank steamers. I now find they have 27. The company has entered into this agreement with the French company to provide 50,000,000 francs each in order to develop oil wells in the colonies and start refineries in France. That may be extremely good business from the point of view of the company. I do not blame the company. It is a prosperous company, and it is quite right in carrying on business on commercial lines to develop its business in the way the directors think is most advantageous to the company; but the fact that they are spending £2,000,000 in developing oil in French colonies and starting refineries in France does away with the idea that this is a company whose sole object is to maintain oil for the British Navy. If it is right, and I am not saying that it is not right, for our Government to see that certain oilfields are preserved so that oil can be obtained for the Navy, they ought to take over these particular oilfields and manage them solely in the interests of the Navy. They ought not to put money into and give the protection of their name to a company, however good—and I am in no way casting any reflection of any sort on the Anglo-Persian Oil Company—which carries on business in all parts of the world for commercial profit. That is an extremely dangerous position. I have had certain particulars handed to me by responsible people, and I understand that the Anglo-Persian Oil Company has made very large losses. I do not pay much attention to that, because if you enter into a highly speculative business such as oil business you must make losses as well as profits. Therefore if they have made losses it does not show-that the company is not properly managed. It is a company which, besides being formed to develop oil in the Persian Gulf, holds shares in other oil companies. It is a holding company in other companies, and anybody who has had any experience in the City knows what that moans. I do not say it is not a proper thing to do; but it is not a proper thing for the Government to take an interest in, and as there is now an opportunity for the Government to realise their securities, the better thing for the Government to do would be to realise the securities, which they could do at a profitable price.
I should like to draw attention to a statement made by the Financial Secretary to the Treasury which so covered me with confusion that I could not answer it at the time. He said that if this liability was called up the company would be able to borrow money cheaply. During 30 or 40 years' experience I have always understood that if you wanted to borrow money the debenture or preference stock were a security on the assets of the company, and if there was ordinary capital on which there was an uncalled liability that uncalled liability was a further security for the debenture and preference holders. Now I understand from the Financial Secretary that if you do away with that uncalled liability and take away from the debenture and preference holders that security which they had possessed you will be in a position to enable the company to borrow cheaply. That has not been my experience; I always thought it was the reverse. There is no legal obligation on the House. A Bill will have to be introduced if this Resolu- tion is passed authorising the expenditure. The expenditure is unnecessary. The Resolution demanding it has not been passed. The Committee last Friday did not realise the difference between a call made by an impecunious company and a call made by a prosperous company. The former must be met or the company may have to go into bankruptcy. The latter is a different thing, because if a call is made a shareholder always can say, "I do not want to pay the call, but I will sell my shares," and as the company is prosperous there is always a number of buyers who are willing to buy the shares and pay the call. Therefore, if you do not pass this you will be doing the company no harm. I hope before the Bill is passed that the House will consider whether or not this is not a good opportunity to enable the Government to come with flying colours out of a speculative enterprise. I think that it is the only enterprise of the sort from which the Government could emerge with flying colours. That being so, I strongly advise them to take that course.
The House is deeply indebted to the right hon. Baronet for the further information which he has supplied. That information, to which I hope to add a little, changes the position in which we were on Friday when the House took the Vote. [HON. MEMBERS: "No!"] Hon. Members who say "No" must be unaware of the position of the company at this moment. As the right hon. Baronet has argued, the consent of the Committee to the Government taking this course was based entirely upon the strategic policy—that the British Navy in conformity with the latest decision of scientific opinion was changing more and more from being a coal burning to being an oil burning Navy, and in view of the vast distances separating the fleets of the world there must be a certainty that the British Admiralty could always rely on having an adequate supply of oil for the Navy. The House consented to that. It so happens—it must be by the jest of fate: certainly it is not by their calculated wisdom—that the Government have made a good investment, the only investment which they have made in a commercial enterprise which to-day shows a profit. It cannot be due to their wisdom, because they have gone into business after business, and in every business into which they have gone they have lost their money.
Here are we the only guardians of the taxpayers called upon to exercise that protection which this House only can give to prevent another £950,000 of public money going into a concern under private control and conducted for personal profit. I now want to change the position which I took on Friday. [Interruption.] I do not object to an intelligible interruption, but I am rather embarrassed by a gutteral interruption. On Friday I did not see my way to go as far as the right hon. Baronet when he urged on the Committee that the best thing that the Government could do would be to sell these shares. The position, I understand, is this: These ordinary shares are now standing somewhere round £4. The particular matter with which we are concerned is that a million shares upon which a shilling, or £50,000, has been paid, should now be fully paid by a further payment by the Exchequer of £950,000. That would mean that when the shares are fully paid there is a profit of something like £3,000,000. But as the right hon. Member for the City of London (Sir F. Banbury) said on Friday last, if you want to go successfully you must go when the going is good. At present this company stands very high in public regard, but when certain facts are known, I think the present high regard will be somewhat lowered.
Perhaps it would be easier for the Government to authorise the Bank of England to issue a million shares, on the ground that the Government have found that it was inadvisable for them to continue associated with private enterprise. There could be an issue of a million shares with a shilling paid and a liability. In the present state of affairs they would probably have to take 5s. less for the shares.
The right hon. Baronet's experience in the City is much greater than mine, and I will allow his answer to stand as a reply to the question of the hon. and gallant Member for Central Wandsworth (Sir J. Norton-Griffiths). In some way it would be possible for the Government to dispose of this vast block of shares. The Anglo-Persian Oil Company, in which the Government has made this large investment, is acting as a holding company and subscribing for vast quantities of shares in various other companies, each of which seems to me to be having most unfortunate results. There is the company described as for the control of the Scottish-American oil companies. They also subscribe to Tankers, Limited. As a matter of fact, when the public knew, the shares in the Tankers, Limited, went up as high as 27s. 6d. They are to-day 3s. 6d. It is reported that in this investment the Anglo-Persian Oil Company has lost £3,000,000. Also the Anglo-Persian Oil Company has bought a large block of shares in a Rumanian oil company. They bought at £1 shares which are now worth 12s. 6d. This will press very hardly on the Government in proportion as their holding is so large. There is another very important point, and that is that the Anglo-Persian Oil Company has invested £2,000,000 sterling in French and Belgian oil distributing companies.
I know of no Members of the House who are in it. This is not an occasion for personal imputation. I am dealing with the principle of the Government using the taxpayers' money to subscribe for shares in proprietary companies—shares which are of a highly speculative character, which show a premium now but very shortly may show a loss. This company has invested £2,000,000 in French and Belgian distributing companies, and orders have been placed in France for the building of tank steamers which are going to run under the French flag and over which the British Government will have no control. Obviously the Government is a large shareholder in a highly speculative commercial undertaking. It is, of course, true that the first decision of the Government to go into the Anglo-Persian Oil Company arose out of strategic policy. Because of the War, the Government has again and again invested large sums in various commercial concerns. The country is, however, dissatisfied that the Government should go on investing the taxpayers' money in any commercial concerns whatever, and before the House agrees to passing this Report stage, and consents to the Treasury paying this further sum of £950,000, we ought to have definite assurance that the policy which the Government has hitherto pursued in this matter is at an end.
The whole commercial community is opposed to the Government subscribing for shares in any commercial undertaking, chiefly because there is no public end to be served, and also because small investors are encouraged to take shares in undertakings which result in the loss of their money. Because the Government have taken large blocks of shares, people think it must prove a sound investment. There are thousands of shareholders in various concerns to-day whose losses by investment are entirely due to the fact that the Government was applying for large blocks of shares, and therefore they thought the thing was settled. It was not settled. Company after company to which the Government subscribed is in the last dregs of distress. This company, for the moment, is prosperous, but it is engaged in such speculative undertakings that it is losing money by handfuls, and before long it may not be in its present highly prosperous state. I ask the Financial Secretary to the Treasury to give the House an assurance that the Government has ceased to approve of Treasury commitments in commercial undertakings. If that assurance is given we shall not press for a Division; if it is not given, we shall press for a Division. In taking up that attitude we are serving the best interests not merely of the taxpayer, by protecting him against the loss of public money by investment, but also those of the general investor, who is being lured into ridiculously speculative undertakings because of the Government making these large subscriptions.
In the few words which I shall address to the House I do not intend to repeat any of the arguments already used in the Debate. I wish to point out in reference to the £2,000,000 which the Anglo-Persian Oil Company has invested in French and Belgian distributing companies, that the only result must be a diminished supply of oil for the British Empire and the British Navy and the sending of the oil in other directions. It is perfectly true, as the hon. Member for Eye (Mr. Lyle-Samuel) points out, that tankers which will fly the French flag are being built out of the £2,000,000 invested by the Anglo-Persian Oil Company in the French and Belgian distributing companies. We had the most positive assurances from the Government in 1914 that the investments of the British taxpayer would be devoted entirely to developing the Persian oilfields. The then First Lord of the Admiralty—now Secretary of State for the Colonies—said on 7th July, 1914:
The hon. Member for Melton asked for, and I can give him, an assurance that money voted by Parliament shall be devoted to development exclusively in the Persian areas. … We shall instruct our delegates that this money is to be expended in developing the oil in the Persian sphere alone.
He also said at the conclusion of his speech, in reference to contracts being arranged, we would get them
on terms which will be the result of fair and independent bargaining on each side and not on terms which are those usually imposed upon a forced purchaser in a close and cornered market."—[OFFICIAL REPORT, 7th July, 1914; cols. 1047–8, Vol. 64.]
The actual result was that the Anglo-Persian Company sold their products to the Shell Company, so that we did not get any benefit from it as taxpayers whatsoever. It is now said that we shall get the future prices, for 1923, about one-third less for the Admiralty, but the French and the Belgians will get similar advantages, and if the Government were to sell their shares in the Anglo-Persian Oil Company they could drive any bargain they liked in doing so. It is said the Anglo-Persian Oil and the Burma Companies would become the prey of the Shell Company. I am not sure that a very good bargain might not be driven by the Government in that direction, by which the majority in that company would be English instead of Dutch, and that is therefore another point to be
considered. The Anglo-Persian oil product is, I understand, one which has valuable by-products. The Shell Company possesses the resources for getting out those valuable by-products and selling them, but the Anglo-Persian Oil Company does not possess those resources, and therefore there would be an advantage in that direction as well. What I recommend to the Government is that they should sell their shares and drive as hard a bargain as they can with the Shell Company, so that, in the event of their getting possession of the Anglo-Persian Oil and the Burma Companies, the British Government's position will be quite clear in regard to future contracts, and the British side of the company will hold the majority of the shares over the Dutch side, so that this great company really becomes a British company.
Sir J. D. REES:
I do not follow the hon. Member for the Eye Division (Mr. Lyle Samuel), because, as I understand him, if I do understand him at all, he has taken a totally different line to-night from that which he took two or three nights ago, and I am rather puzzled.
Sir J. D. REES:
It is a matter of very little importance. It is the right hon. Baronet the Member for the City of London (Sir F. Banbury) with whom I am concerned. How does he hold that a call is only an obligation when it is made? Surely it is an obligation irrespective of the date on which it is made. It makes no difference in law, as I understand it, whether the call is made before the House discusses this matter or after. Anybody who has shares is liable for the call.
The call has not yet been made. The Government, I understand, through their directors, have the power of veto, and therefore, the call not having been made, the Government can tell their directors to veto any further attempt to make the call.
Perhaps I ought to deal at once with the statement made by the right hon. Baronet who has just sat down. Legal opinion is that the Government directors have no power to veto the call on the ground that the call is purely a financial matter and not a question of general policy. I do not think it is absolutely certain, but there is legal opinion to that effect.
Of course I would maintain it. Over and over again it has been held that when a call has been made, and the shareholders have objected to it, the call has been withdrawn.
Sir J. D. REES:
I must confess I cannot follow the right hon. Gentleman. It seems to me that it would be absolutely impossible for the Government to hold up their heads for the rest of their lives if they directed their directors to repudiate the call, which is a legal liability upon the Government. The right hon. Gentleman—and I have always admired him for it—has been one of the greatest opponents of anything like Government management or nationalisation, but tonight, having commenced with this heterodox, and, I think, untenable position with regard to this call, he actually winds up by saying that if the Government want to get oil for their ships they had better have a company of their own, and man-ago it, thereby falling into the depths of Socialism.
Sir J. D. REES:
With reference to what the hon. Gentleman opposite said, I was in the House when this investment was originally sanctioned, and it was then stated, and, as I understand, is still believed to be the case, that it was not solely for the supply of oil from Persia to our warships that this investment should be made, but in order that the British nation should have under British control one of the three great suppliers of oil in the world. That is the point, and if this company passed into the control of the other two companies, which are under foreign management, we should not be in a position to feed our ships with oil. My hon. and gallant Friend said that the whole of the products of this company were sold to the Shell Company. That, as I understand the matter, is not exactly correct. What, I think, is the case is that after the end of the present year they are free as to the price of their oil. As to the number of ships, I know nothing about tankers, but I have seen a vast refinery at Swansea, and I should think it would require a great number of tankers to bring the crude oil from foreign ports, because there is not much being got from Derbyshire or any other districts in England, to feed the refinery in South Wales! My hon. and gallant Friend, whom I am rather surprised try find opposing any scheme to provide oil for the Navy, referred to the Belgium and French investments of this company. I know nothing about them, and I did not know, until the hon. and gallant Gentleman spoke, that any existed; but it certainly does occur to me that the distribution companies are not exactly like oil companies, and that the more distributing companies any great producing company has under its control, the better means it has of selling oil—which is not all wanted for the Navy in time of peace—all over the world, and, therefore, the better means of producing those excellent returns about which everybody is agreed, in this particular investment the Government have succeeded in getting for the taxpayers.
I was really only dragged to my feet by what I considered to be the heterodox and astonishing attitude taken up by the right hon. Baronet, to the effect that the payment of calls is almost optional, and that it really differs in proportion to the more or less prosperous condition of the company making the calls, which two propositions—although I say it with great hesitation to so great a financial authority—I believe to be totally untenable.
I only rise to ask the Financial Secretary for information to clear up a point. I understand that this company to-day is controlled as to policy by the Government, so that, although it may be advantageous to go into this foreign business, such as selling oil to France and Belgium, should occasion arise we could, by our control, force all the oil owned by this company to come to this country. Having paid up our call do we if we sell these shares lose control of the company? That seems to me to be a very important point.
Undoubtedly the Government at the present time by its voting power have control of the company. There is no question whatever in this measure of any re-affirmation, far less of any expansion, of any policy such as has been indicated. We are simply here carrying out the necessary consequences of the original decision to make this investment, come to before the War. I can certainly say that this measure is not to be looked upon in any way as giving any hint or showing any indication on the part of the Government to invest any further thousands in such enterprise as is looked upon as private enterprise.