I understand that it is the desire of the Committee that we should take this opportunity to discuss the relationship between the new Financial Corporations announced by the Chancellor of the Exchequer about five weeks ago and the national financial system, and I propose to follow that course and, during my speech, to put certain questions to the Chancellor of the Exchequer, to which I hope he will be able to give an answer when he comes to reply. I am convinced that they are of importance from the point of view of the trade and industry of this country and also of the prosperity of the nation and a high level of employment.
We are all aware that during this war the capital market has been controlled by the Government with a very tight rein. There is, of course, the Capital Issues Committee, but in addition to that, and in some ways more important than that, are the various understandings and requests which are dear to British practice; in a word "the velvet glove which conceals the iron hand within." The object of all this control during the war has been the war effort. It is to prevent the capital resources of this country from being wasted, from the war point of view, upon unnecessary activity when they are so urgently required for the direct prosecution of the war, for its ancillary services and for the provision of the necessary forms of civil life. When the war ends, I think, we are all aware also, it is anticipated that there will be two more or less distinct periods. The first will be the transitional period when labour and materials will be in short supply, when there will be a great scramble for the economic means of activity, or in financial terms credit, and in which the principal danger confronting the country will be that of inflation. The last war gives the signpost to that danger. When' the transitional period is over, however long it may last—after the last war it was a matter of some two years and it may last longer or shorter on this occasion; it is not possible to predict—there will eventually arise the later period when the apparatus of production will have caught up with the shortage, when large numbers of men will have been released from the Forces and from war industries of all kinds, when there will be a risk that there will be more men available than jobs for them and when the financial danger threatening the country will be that of deflation rather than inflation.
I take it that these two Corporations, the facts regarding which were enunciated by the Chancellor of the Exchequer on 23rd January, are intended to function in both these periods. The first comment that I would make upon that is that though to the ordinary man it may be that sums of £125,000,000 or £150,000,000 or whatever they may be, appear very large figures, yet in the general ocean of national effort they are in fact exceedingly small. But we must never forget that the beginning is often the most important part. There are many things which are born small and are apparently insignificant but in the course of time they grow and become of extreme importance. I need not remind the Committee that the Exchange Equalisation Account itself when it first started was, comparatively speaking, of very moderate dimensions, just about the same size as the amount proposed for these Corporations, but it became the keystone of the financial arch as far as international exchange is concerned, and no one would deny its importance in that field. Equally, these organisations, with the limited amount of capital which they are to have now, may grow—and I shall have a question to put to the Chancellor of the Exchequer about that later—far beyond the limits which are at present imposed upon them.
In the first period of which I have been speaking they will have, as I understand it, a selective function. It may even amount almost to a restrictive function because large numbers of industrial concerns will come to them and ask for their helping hand, and they will have plenty to pick and choose from those to whom their assistance might be given. When it comes to the second period, if there are funds available at that time, it may well be that they will have a stimulative and expansionist function to perform, one of encouragement rather than of discouragement and restriction.
It must be quite clear from what I have said, and from what anyone who has thought about the matter must realise, that these organisations are bound to have some influence on the national economy, and insofar as they grow and the amount of funds at their disposal becomes larger, that influence may become highly important, and even have a decisive influence upon the trade,' industry and employment of the country. That being so, it must be quite evident that the Chancellor of the Exchequer, apart from any technical considerations, must have an interest, an enduring and it may be a paramount interest, in the basic principles on which these organisations will conduct their affairs, and in their success or failure in achieving the ends and objects for which they are constituted. That interest which the Chancellor of the Exchequer will have, will quite clearly be shared by the House of Commons, which will want to know, from time to time, the answers to a number of questions; with regard to these organisations, and the results which they have achieved.
But over and above this general concern, I cannot see how the Chancellor of the Exchequer can really deny a more exact and direct relationship. As I understand it, these funds are largely to be subscribed by the Bank of England itself, by the joint stock banks, and other financial institutions. As I understand it, the Bank of England is to appoint the chairman, I think, of both these organisations; the other banks are to appoint several of the directors. Now, of course, theoretically and strictly it may be said that the Bank of England, having appointed the chairman, will not interfere with the direct practice of the organisation, and that may well be true. It will not decide whether Mr. Brown or Mr. Smith, engaged in somewhat similar activities, is to get loans, but I am not going to be told that the Bank of England appoints the chairman of an organisation of this kind and does not give him any general instructions. They may not take the form of instructions, but what happens is that the leading authorities at the Bank of England invite the gentleman they are proposing to make chairman to come and have a talk, and certain understandings are reached as to the main principles which he will adopt in the chair of that organisation. Theoretically, after this agreement has been reached, the chairman may go quite contrary to the wishes and views of the Bank of England, but, broadly speaking, that kind of thing does not happen, and, if it were to happen, I am satisfied that there are ways and means in the City of London by which such recalcitrance would be brought to book. No, the real fact is that when an organisation of this kind is set up, and the Bank of England has the power to select and appoint a chairman, we may take it that though this organisation may not be under the direct control of the Bank, in fact it is there to carry out its policy, and that general understanding will be fulfilled.
If I have established a direct relationship between the Bank of England and the main underlying policy of these organisations, I have proved the first part of my argument. I now come to the Chancellor of the Exchequer. I am aware, also, that in our Constitution the Bank of England is not a direct subordinate of the Treasury, but no one really supposes to-day that the Bank of England and the Treasury are able to go separate ways. I remember Mr. Reginald McKenna discussing with me the position of the Bank of England in reference to the Treasury and the Chancellor of the Exchequer. He told me that whatever might be the nominal position, in fact, the Bank of England and the Governor of the Bank of England recognised that it must carry out any national policy on which the Chancellor of the Exchequer was determined, and on which he made his position and his will clear. There is no doubt of that. But what really happened in the old days was that the field of finance was divided, roughly, into two parts: there were those parts which the Treasury knew all about, there were those parts which the Bank of England knew all about. When it came to the second class of points, the Treasury left it to the Bank of England, and they did not have anybody who made it his special province to go into those matters. That prevailed until the time when the Exchange Equalisation Account was set up. From that day onwards, it became necessary for the Treasury to understand and to have their own opinions on matters relating to exchange and currency which, up to that point, they had left to the discretion of the Bank of England. From that day onwards, there is, as far as I am aware, no province in which the Bank of England, in fact, acts on its own without consultation with the Treasury and the Chancellor of the Exchequer, and in which the will and the purpose of the Chancellor of the Exchequer do not prevail.
Therefore, the Chancellor of the Exchequer, whether he likes it or not, is directly concerned in the actions of the Bank of England and, certainly, necessarily in these two organisations, which, however small their beginnings, may and probably will play a very important part in the economy of the country in the days to come. I have only to remind the Committee, further, of the Government's White Paper on Full Employment, in which the concern of the Treasury and the Chancellor of the Exchequer was made clear, in that it related not merely to that part of national finance which we reach in our Budget—the receipts and payments of the State—but is also concerned with the finance and economy of the nation as a whole, set out so lucidly in those White Papers originated by the late Sir Kingsley Wood, which have been brought up to date under the Chancellorship of the present Chancellor of the Exchequer, and which, as the Committee knows, are contributed to on a generous scale by Lord Keynes. Further, on this matter I would remind the Committee that there is in existence a Capital Issues Committee. It has a dominating function to perform during the war, although as the war has gone forward I understand that it has not had to throw its weight about as much as it did in the earlier stages. Some people perhaps imagine that the Capital Issues Committee will cease to function when the war is over, but that, of course, is not the case. I think the Government have specifically denied that it will cease and, further than that, in the matter of raising loans for local authorities—it arises out of one Section in the Act—the Capital Issues Committee must go on for, I think, it is four years at any rate after the war.
I want to ask the Chancellor certain questions about these bodies. I propose to put to him four questions which, I think, must be of interest to all sides of the Committee, because I want him to help us to understand the conditions under which these Corporations will operate. I notice that in the description which the Chancellor used on 23rd January with regard to these funds the words relating to the larger Corporation are not identical with those used with regard to the smaller one. Of the larger one my right hon. Friend said that the object
will be the provision of a temporary or longer period of finance for industrial businesses.
With regard to the smaller one my right hon. Friend said:
The object will be to supply medium and long-term capital."—[OFFICIAL REPORT, 23rd January, 1945; Vol. 407, c. 644.]
Will the Chancellor of the Exchequer expound exactly what he, or the promoters of these Corporations, intends to convey by that slight difference in words?
I want to ask further whether the sums which these Corporations will control are to be regarded as in the nature of revolving funds. Is it expected that they will keep on returning to the fund, and will be in the hands of the industrialists for only a short period? If that is not to be the case how fast may they be used up, and if and when they are used up bow will they be replenished?
Next, I want to ask the Chancellor his: Certain definite amounts of capital ave been put forward, to be subscribed, and further amounts that are to be obtained by borrowing. Supposing these organisations want to increase their capital or borrowings, do they have to get any sanction for that, and, if so, from whom does the sanction have to come? Will it be sufficient for the Bank of England, the banks and the insurance companies to put their heads together and say, "We have decided that although under the original announcement our capital was so much, we are going now to double it or treble it"? Do they have to go to some body, the Bank of England, the Treasury, the Chancellor of the Exchequer, or this House, in order to enlarge their credit facilities?
Finally, I want to put this to my right hon. Friend: To what extent do these activities, which he has adumbrated overlap the ordinary credit activities of the ordinary commercial banks? I am aware, of course—and I expect the Committee will remember, also—that the Macmillan Committee pointed out a hiatus in our financial machinery for providing the necessary funds for the industrial system of this country. They pointed out that it was neither completely supplied by the ordinary commercial banks, which nominally, at any rate, lend only on short term, nor by the City of London, which had most full apparatus for providing long-term credit but did not use it, and maybe could not use it, for industry at home, while it could use it most generously for industry abroad. The Macmillan Committee pointed out that by this curious inversion of what would have seemed the natural order industry at home might be starved of capital, while industry abroad could be fructified by the very funds which were denied to our home industry. As I understand it, that is the main object of these two Corporations. But I want to be very clear as to what extent these Corporations will fill the gap, and to what extent they are going to replace the function of the banks. It may be that if so the individual banks, in so far as they do overlap, will pick out all the plums and will leave the dough to the Corporations. I am sure that is not the intention, but I should like to know precisely what the Chancellor has in mind with regard to that matter.
I come from these structural questions to what many of us think are matters of larger moment. It is quite clear, as I think I have already said, that in the period immediately following the war there will be a great shortage of raw materials and labour and, further, that there will be a shortage of capital in the real sense of the term, because to my thinking finance has no real meaning apart from its economic counterpart. The power of finance is the power to use the economic resources which are available in priority to another person who might want to employ them instead. Therefore, the promotion of these Corporations and funds which they have at their disposal will enable persons to whom they lend money to have priority over other persons to whom they do not lend money. Therefore my hon. Friends and I, and I should imagine the whole Committee, are anxious to see that the effect of the formation of these Corporations shall be to promote the interests of the community and to secure that such funds as are available shall be used to further production of the right kind, and in the right place, and to give it priority over other production which, even if not anti-social, is at any rate not so essential to the well being of the community.
Perhaps the Committee will forgive me if I make a diversion of a rather light kind. It arose during the last war. It appears that there are four kinds of raspberry jam. There is the jam which I make myself from my own raspberries; there is a raspberry jam which is a standard jam, and consists of a certain proportion of raspberries with a percentage of miscellaneous pulp, and there is a very inferior, so-called raspberry jam, which consists of raspberry pips and miscellaneous pulp only. It might have been supposed that that would cover the whole field but it does not, because there was at one time a fourth kind of raspberry jam which had no raspberries or even real pips in it but contained pips fabricated of wood to resemble real raspberry pips. A gentleman appeared before one of the tribunals at calling-up time to plead that his manager, or principal worker, should not be called up for war service on the ground that he was essential in the operation of making artificial raspberry pips and that without him the business would come to an untimely end.
I do not suggest that that is a typical industry. It is a fantastic, extreme case but it enables me to bring home my meaning. Clearly, as between this manu- facturer of artificial raspberry pips and a man who wants to build up a canning business for utilising wholesome fruit and making it available for use in the winter months, there can be no question which is in the real national interest. The point that I want to put to the Chancellor of the Exchequer is whether these organisations will take into account other than purely financial considerations when they come to grant these loans. It may appear to some people that, if a manufacturer of artificial raspberry pips can show a financial profit, to make him a loan does no harm, because he brings back into the public funds as much money as he takes out, but that would not be true because, in the course of doing so, he has used up economic resources which may have been badly needed for other purposes.
Next I want to ask this question. At what point, if at all, will the Capital Issues Committee be consulted in the matter of these loans? Do they come in and, if so, what kind of criteria will they impose? Will any priority be given to concerns which want capital in order to undertake production of value to the community as a whole, and will a very low priority be given to concerns which are aiming at production not necessarily antisocial but of a kind that we can easily dispense with, certainly during the intermediate period when labour and materials will be short? It seems to me and to Members of my Party, and I should imagine to a large part of the Committee, that these are very important questions and, if they were to be answered in the negative, in the sense that only financial considerations will come within the purview of these Corporations, I think that would give a very disastrous impression, and would be a very disastrous decision, because when the war is over there are vital needs of the community to be served and, if they are to be given a lower priority than non-vital, possibly antisocial, needs which may have a higher claim on purely financial grounds, I think the country will be grievously perturbed.
Why is the right hon. Gentleman so concerned that other considerations than finance will be taken into account by the Corporations when the people borrowing from them require to get the consent of the Capital Issues Committee? Is not that need sufficient to ensure that the considerations that he has in mind will be taken into account?
I do not care what means the Chancellor uses provided that that consideration enters at some point. It may enter into the charter of these organisations that they are to use this discretion. It may enter, not through them but through the Capital Issues Committee, because there will be two sieves in considering applications, the sieve of the Corporations and the sieve of the Capital Issues Committee. So long as one or the other has a discretionary power, not merely financial but in the interests of the community, I shall be quite satisfied, and one object of my question is to discover whether either or both sieves shall have a discretionary power in that sense.
There is still one point of importance on which we want further elucidation. When capital is forthcoming for any organisation it can take its reward in one of two more or less distinct ways. It can either have equity participation or it can be at a fixed rate. In which form are the loans that these Corporations make to be rewarded? I have seen it stated—and it is probably the answer to my own question—that they are not to have equity participation but that they are to have interest at a fixed rate. With regard to that, I would just like to say that if these Corporations are not to have equity participation who is? Because it is essential if industry is to flourish that somebody must take the risk. We, on this side of the Committee, the Labour Party, favour, where workable, the participation of the State in industry, but the Members of the Conservative Party take the view that private individuals or private corporations should bear the risk. They think they are better adapted for that purpose. Whatever is true, someone must bear the risk, and so I want to ask, if these Corporations are not to bear the risk, who is? There is a danger, I think, in the financing of industrial enterprises at the present time, that the method of finance will become—I do not know whether I am using the right word—"top-heavy"; that is, that too much of the money is provided at a fixed rate and too little in the nature of risk-taking and equity.
It will be interesting to hear from the Chancellor of the Exchequer what is to be the method. If the method is going to be equity participation I do not see how the Corporations can avoid some share of the control and management. I have heard it said that they will have no share of the control and management and in those circumstances I have to assume that they will not have equity participation. If the contrary is the view, then we will get an entirely different set-up from the one we have been allowed to believe. If on the other hand they are going to have fixed rates of interest, I want to know on what principle that fixed rate is to be determined. Are there to be different rates for different organisations, and, again, will the value to the community of the industry which is to be helped by these loans, have any effect in fixing the rate of interest which they are to be charged?
I am afraid I have talked rather longer that I intended, but I think that if the Chancellor of the Exchequer, with his knowledge and experience, can give the Committee the answers to the various points and questions they will be of interest and importance not only to myself and my hon. Friends on this side of the Committee, but to the Committee as a whole. With regard to the attitude of myself and my Party I will only say this. If the Chancellor of the Exchequer does go some way to meet our claim that there should be some discrimination between industries which are in the national interest and those which are merely for private reasons or are anti-social in their effect, then, as far as I know the views of my Party, the mere fact that we are Socialists will not interfere with our support of these proposals.
I need hardly draw the opposite picture. If these Corporations are to be guided solely by financial considerations and not by social considerations at all, then, for my part, I should view them with considerable misgiving. I should feel that the economic and human resources of this country were likely to be frittered away, and that at a time when the needs of the country for rehabilitation are so urgent there would be grave danger of waste which would create a sense of frustration in the minds of our people in the days that are to come.
The interesting and, I believe, accurate right hon. Gentleman has given us a very description of the relations between the Bank of England and the Treasury, and I gather that he is fully satisfied with the measure of control which the Treasury exercises over the Bank of England. Am I right in that conclusion?
Mr. Pet hick-Lawrence:
I am not quite sure whether this is a question merely for information, or whether it is tendentious. If the question is for information, I would say that, undoubtedly, a very great deal of this is what I have always regarded as essential—the Chancellor should be master in his own house, and that his own house covers the whole financial activities of the nation. Given this, then we have gone a very long way towards the end we seek. If, however, the question is tendentious, and suggests that some of the views I have put forward in the past no longer hold, I would answer in this way—that it is the habit in this country to make changes underground before they obtain overt recognition. The best illustration is that of the position between the Mother Country and the Dominions, because people often say that the Statute of Westminster made all those changes—
I agree that this is going rather too far, but I feel that I have explained the point, to the effect that things appear to me to have gone a long way in the direction we desire.
We have enjoyed the very interesting and informative review which the right hon. Gentleman has given us, and I think that most of us find ourselves in agreement with what he has said. But I must say that I became a little anxious towards the end. I do not want to see British banking taking an undue participation in industry and trying to control industry. I would remind the Committee that, to a large extent, the economic blizzard of 1929 was, mostly, the result of an unwise participation by American banks in American industry. I do not think that bank managers are the right people to control industry, to decide how you should run your business, and I do not think, either, that the Treasury is the right body to run our business. The Chancellor of the Exchequer already takes much too great a share of the country's business—to the extent of 10s. in the £ Income Tax—and much too little risk. The Treasury are too much in control, and I hope to hear the Chancellor of the Exchequer tell us, in the not too distant future, that he will be taking less control by decreasing that 10s. in the £. However, to return to the point it is evident the right hon. Gentleman opposite wanted these new Corporations—
I should like to point out that I did not say that I wanted these Corporations to have equity participation, and I should not like the Committee to think so. I asked which was going to be the case, and in doing so, I was not expressing an opinion but seeking one.
I am very glad to hear that; it eases my mind a little. Then the right hon. Gentleman rather indicated that these Corporations would exercise a certain amount of priority. I think that the sooner we get away from the idea of somebody else making up our minds in our own businesses, and get back to the idea of making up our own minds, the better. In war-time we must have these priorities, and we may need them for a short time after the war, but I do not think that all wisdom is located in the Treasury. In fact, I very much doubt it. Yet we all bow the knee to the Treasury, as if it were a kind of Grand Mufti. I think you get wisdom when a lot of people express their views. That is why I am a democrat, and I do not want dictatorship either in the Treasury or anywhere else. I do not like the idea that one function of the Corporation is to decide that Mr. A shall make money because he makes one kind of raspberry jam, and that Mr. B shall not because he makes another kind. I agree that some things should not be made at all.
My hon. Friend has fallen right into the trap. He declares that some things should not be made at all. Somebody has to determine whether they shall be made or not. Who is it to be?
I think that very few decisions of that kind ought to be made. In other words, I am all for freedom. I am glad that we had from my right hon. Friend a new side of his character. I hope the cartoonists will represent him producing raspberry jam. One good thing about his speech was that, in the presence of the Chairman of the Labour Party, he has cast the cloak of respectability over the capitalist system. That was really very satisfactory, but when he said that the bankers took all the plums, and left the dough to others, I do not know in what sense he was using the word "dough," whether in the sense of the four-ate bar or otherwise. At any rate, we have made some progress in the direction he indicated. He drew attention to a very important matter when he pointed out what new capital really is. Our currency and banking system effectively avoids the need for barter, because barter is the most inefficient way of transferring goods from one person to another.
My right hon. Friend drew attention to the fact that new capital is not something created by the banker, and that all the banker can create is credit, which diminishes the value of the existing capital. It is, rather, a measure of certain resources. What resources? That stock of food, clothing and shelter which has to be used to maintain those people who are producing, not consumable goods, but capital goods. That is what new saving means, and the amount of saving depends on the extent to which the community are willing to cut their standard of living so far as consumable goods are concerned in order that a number of people may be engaged in producing capital goods. There is a limit to that. Therefore, there is a limit at any given moment to the amount of new capital. It depends in part upon the decision of every member of the community as to the extent to which he will abstain from the consumption of consumable goods. I agree that unemployment affects it. If we are not skilful in our organisation, and a lot of people are idle, we reduce our production of goods. At any rate, whatever the factors, there is a limit at any given moment.
Therefore, these banking institutions which the Chancellor has brought into being, or which, at any rate, have been brought into being, because of something he has done—[Interruption.] It is no good the Chancellor looking like that. The control of the Treasury over the Bank of is far too great. What is the use of having institutions with experience and then having further institutions to tell them what they have got to do? Is all wisdom centred in the Treasury or in the Bank of England? Of course it is not, but the traffic is running all too much one way as if it were. What happened? The Chancellor or some of his minions sent for the Governor of the Bank of England. The Governor sent for the Big Five and for the insurance companies. They were told of this new plan, and they all with great timidity agreed. The insurance companies were told what they had to put into these new Corporations. I happen to be a director of a little insurance company, and I was told that our contribution would be so much. The rest of us round the board expressed a little surprise, but the managing director said it had all been fixed up by the insurance companies' association. Our trade union, in fact, had arranged it all. That is how this thing has been worked. It is a. case of complete dictatorship by the Treasury, and the banks and insurance companies never dared say a word. The biggest lot of political rabbits in this country are the chairmen of the big banks. They dare not stand up to the Treasury, and it is no good the Chancellor of the Exchequer, with his innocent face, pretending otherwise.
I am only judging by actions. I am talking about the heads of businesses generally. They are always politically timid, and whenever they go on deputations to a Minister they fawn on him. We make Ministers far too important. That is why I am always trying to "debunk" them.
What we want to know from the Chancellor is what is the need for this new Corporation. Is it to lend money to any credit-worthy people? In my belief non-credit-worthy people who want short-term accommodation can always get it without difficulty. Normally, a man who wants to start up in business does not go to a bank. He looks round among his friends or consults a solicitor who has clients willing to invest money. Or he may consult an accountant. There are lots of people like that who are in touch with small resources which can be borrowed to enable the small man who has a bit of his own to start in business. Therefore, I do not believe that the need for these Corporations exists. If money is wanted for large-scale enterprise there exist the issuing houses. They do not loan their own money, but they make use of the savings of great masses of people. In that way all kinds of enterprises can get money. What this scheme proposes to do is to canalise a certain amount of new savings into new channels, and if people want money they will have to go there.
The same thing was attempted many years ago. The Noble Lord who, until recently, was Father of the House held a Cabinet meeting at Gairloch in Scotland. That, at any rate, was in the United Kingdom and holding the meeting there was a better practice than that of the present Government, who look as if they will hold their next meeting somewhere near Hollywood. It is time we had some meetings in this country. This meeting in Scotland invented the Trade Facilities Act—one of the devices to overcome the slump from which this country suffered in 1920. After the Trade Facilities Act had been used for years, there were Debates in which the Act was denounced, on the ground that it was not helping, but prejudicing trade. People who wanted to start some enterprise and felt a little doubtful about it, instead of, seeking help in the normal channels went to the trade facilities people. If these turned down the project, then, because of that, nobody else would look at it. It would then be blacklisted. The same thing may happen with these Corporations; you get a bad name because, for some reason, they have not lent money to you.
I really wonder whether these Corporations are going to serve any good purpose at all. There may be a case for them, and I hope that the Debate will give the Chancellor a chance to state that case. I hope he will not bully the Governor of the Bank of England too much, and will not let him bully the chairmen of the "Big Five" and also that he will not let the chairmen of the "Big Five" pass it down the line until everybody is under the harrow of the Treasury. These pleasant-looking fellows are sometimes the worst bullies. If a man looks really fierce, you take precautions. The Chancellor is always so genial that he undermines us, because we do not realise how brutal he may be. I hope that he will justify these two Corporations which, by his action, have been brought into being. It is no good his denying that it was done by his action, because if it had not been done by his action, we should not be permitted to discuss the matter on this Vote. That indicates his responsibility. I hope that he will tell us why he started them, with whom he had consultations before he started them, and whether all his advisers agreed with his recommendations.
Perhaps I ought to explain to the Committee that I have certain special reasons for speaking in this Debate. I happen to be a director of one of the "Big Five" banks, and a director of one of the insurance companies, so I can speak as one of the toads under the harrow, and give the toad's-eye view. Then the hon. Member for South Croydon (Sir H. Williams) referred to the Trade Facilities Act, and I happen to have been one of the original three members of the committee set up after the last war, under that Act. My right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) has even given me a fourth reason for speaking, because he has referred to raspberry jam, and I happen to be chairman of some companies who make very large quantities of jam.
I can assure my hon. Friend that the manufacture of artificial pips is not included in our activities. We must all try to be brief in this Debate. I listened with great interest to the speech of the right hon. Member for East Edinburgh. He appeared in a new role to-day, as the man who knows all the questions. I think I know some of the answers to his questions, but I will leave that task to the Chancellor. As I see it, we have to consider this matter from two points of view. First, there is what I would call the technical aspect, that is to say the scope of the Parliamentary and Ministerial responsibility, which is one of the issues already raised in Question and answer in the House. Secondly, there is the real merit of the case. As regards Ministerial and Parliamentary responsibility, I hope that the Chancellor will not meet this technical point with technicali- ties. I feel that we must be realistic and face the facts of life as we have to live it to-day. In all quarters of the Committee, as has been evidenced in the Debate, I am sure there is general agreement that in handling the problems that we shall have to handle in the next few years—and far beyond those years, too, if I may express a personal view—there will be a need for a new synthesis between the functions of Government and the activities of private enterprise, and the Government will have to play a much larger part in that synthesis than they have done hitherto. I want in passing to express the hope, and the belief that it is possible, that the Government's share can be exercised in the way of helpful guidance, and not of restrictive control.
Now, there is no part in the whole range of economic activities in which that synthesis has been worked out in this country better than in the field of finance. My right hon. Friend the Member for East Edinburgh has touched on the relationship between the Government and the Bank of England, and, through the Bank of England, with the big banks and the leading financial institutions. It is my firm conviction that in this matter we are making a really constructive contribution in this country to the technique of intervention by the Government in the life of the country. It is constructive contribution from which other countries might well learn a most valuable lesson. I think we have been handling the matter far better than it has been handled in the United States, and far better than it looks like being handled in some of our Dominions. In fact, this is one of the very rare cases in which our practice is succeeding in doing something like making the best of both worlds.
How does this method work? Let us be perfectly frank in this matter. I hope that the Chancellor will not resent it, if I say that it is really not correct to say that the initiative, in this matter, came from the side of private institutions. I do not see why he should not take the credit for it. I believe that the initiative came from my right hon. Friend. He realised that there would be a need for some new kind of machinery and he spoke to his very wise adviser the Governor of the Bank of England, who in the course of this war before he was made Governor had rendered such valu- able services as adviser to the Treasury. They put their heads together, and they worked out this plan. Then came the stage when the leading banks and financial institutions were brought into it. Here I want to give a straight challenge to what was said by the hon. Member for South Croydon. It is entirely untrue to say that the chairmen of those institutions, or their boards, are nothing but "Yes" men.
Perhaps I might develop my point in my own way. I have seen this thing work. I think we have this situation. The Chancellor, working through the Governor of the Bank of England, decides that a certain line of action is necessary in the public interest. They get to the stage of working out how that action is to be put into practice. Then they consult with those who are responsible for those financial institutions, who have their own responsibilities and their own functions. Apart from the shareholders the chairmen of the banks are responsible to their depositors and the insurance companies are responsible to the people who take out policies with them. There is nothing derogatory to them in saying that their first function is to defend the interest of those people. That is their job. At the same time it is not an exaggeration to say—and I assert that this applies now—that the leading people in business throughout the country want to take account of the public interest also. We are all anxious—and I say "we" because I am chairman of some of these companies—that our private activities should accord with the public interest, but if we are asked by the Government to do something which in our view is commercially unsound, then we do not surrender our independent power of judgment, and it is open to us to say "No, we will not participate." That is how the matter works with the banks. I know of instances within my own experience in which certain proposals have been put up to the "Big Five" banks and in certain cases some of them have refused to join in while others have joined in, showing that judgment has been exercised.
I put it to the Committee that it is a most valuable feature of our present setup that we have the two sides, on the one side the Government who are responsible for looking after the public interest and have it within their power to survey the general picture, and on the other side people who are responsible for conducting financial and other enterprises on sound commercial lines. They are able to take over the full responsibility when the Government ask them to take on a particular course. In the present case the Chancellor must regard it as most valuable to him that, having launched this idea, the responsibility for carrying it out does not rest on his shoulders. Surely we must all recognise the value of this—all of us, at least, who are frightened not so much of State Socialism but of embarking on something which will, in effect, lead to a totalitarian organisation in this country, and to a time when, in the Prime Minister's words, there will be nobody except Government officials and politicians.
I venture to express the belief that we all, on all sides of this Committee, know something of that fear, and all of us who take count of it must, I think, see the value of this sort of set-up in which there is close co-operation, and great willingness on the part of business leaders to co-operate in the public interest, but yet a division of functions and a division of responsibility. I put it to the Committee that the case of the formation of these Corporations is one example of the way this kind of machinery works, and that it is of the greatest possible value.
I want to say a word, in this connection, to my right hon. Friend the Member for East Edinburgh. He has raised a lot of very interesting questions, while not expressing any view, but I am sure he would be the first to agree that in great part the answers to those questions depend upon the division of functions between different elements in the general economic life of the country. If one sits, as I have to sit, at the head of a large group of concerns one of the most difficult questions is: What ought I to do in the public interest and at what point ought I to say that the interests of my shareholders must take second place to the public interest? There are of course a number of cases when the answer is clear; but there are also a large number of border-line cases, and we who are the heads of private businesses are not always in a position to exercise judgment.
Personally, I welcome it very much when the Government come along and say: "We have considered this matter and we think this is the part you ought to play." But when they have done this there remains the question whether they have put up a scheme which is financially and commercially sound. We who are in business are entitled to exercise our judgment on commercial grounds and it is valuable that we should do so; but if the Government have put up a scheme which is commercially sound then we can all be happy, and I can act with a clear conscience and say to my shareholders: "Although the initiative came from the Government and their motive was the public interest, I feel that it is also in your own interests that you should help towards the general prosperity," and therefore I can recommend it. Then my conscience is clear. I know I am doing the right thing and I can stand up to any criticism from my shareholders.
Suppose we reverse that position. Suppose the hon. Gentleman felt in his own conscience that it was in the public interest to take a certain line in regard, say, to raspberry pips but the shareholders were only interested in making raspberry pips—
Then how long does he think that he would last? How long would he and' the remainder of the board of directors last if they dissented and produced nothing that the shareholders wanted them to produce?
In any case it does not affect the point I am putting. If those shareholders did get rid of their directors for reasons of that kind, we should all know about it, and I venture to think that that company would not prosper for very long. It does not pay any private concern to undertake activities which are inconsistent with the public interest, and I do not believe that any company with a decent and reputable board of directors will be found to stand up and say: "We are going to do this for the sake of making profits, although we have been told, and know definitely that it is contrary to the public interest." I do not believe that men of any capacity could be found in business who would take that view. However, I must not be led by my hon. Friend's interruption to lengthen my remarks unduly. I have only a few points to add. What I have been saying is that we have here an example of an excellent practice which is developing in this country—the Government gradually and of necessity extending its function of guidance and developing that in ways which, I believe, will be extremely valuable to the country in the handling of the problems which lie ahead.
I wish in conclusion to say a word on the merits of this case, that is to say on the question whether these new concerns will perform a valuable function. There is certain truth—and again I am speaking from my own experience—in the point made by my hon. Friend the Member for South Croydon with reference to the Trade Facilities Act, about the difficulties that are created when what I can describe as a synthetic organisation is set up. It is quite possible that he is right that in certain cases the Trade Facilities Committee, after investigating propositions, may have rejected projects which perhaps ought to have been assisted. They may have been quite right to reject them judging by the criteria which they had to apply and yet they may have done harm to the concerns by their refusal. I do not think that happened in many cases, but there is no doubt that when an organisation of this kind is set up it tends to attract propositions which cannot be financed by the ordinary methods. In a way therefore it is a case of the survival of the un-fittest.
Indeed we have to face the fact that these Finance Corporations will, in effect, get the rejects of the ordinary financial-machinery. For that reason I want to urge that the value of the Corporations ought not to be judged merely by what their results may be. It is obvious that the banks, who are at present taking a very wide view of what they ought to do in the way of helping industry will keep the best propositions for themselves and that only the cases of special difficulty will be passed on to the Finance Corporations. We could not expect anything else. These Finance Corporations therefore will tend to get the more difficult cases to handle, and we ought not to condemn them if they find they are in a certain amount of difficulty as a consequence. In spite of that, I feel strongly that it will be of the greatest value to have these two Corporations. It is reasonable to expect that there will be a great number of business propositions put up which cannot properly be handled by the banks and which are not ripe for a public issue but which can be handled for the time being by these Corporations. Further than that, I think the Corporations will be most valuable focal points for collecting information. They will provide a survey of the applications, and that will be a most constructive way of getting a view of certain aspects of the economic and financial position. If they are well directed they can be a beneficial reinforcement and source of information to the banks, the Bank of England and to my right hon. Friend the Chancellor of the Exchequer, and, therefore, I wholeheartedly support this proposal, and quite openly give credit to my right hon. Friend for the part which he has played in initiating it.
I intervene with some diffidence after the hon. Member for Walsall (Sir G. Schuster). He has told us of his wide business interests and I cannot pretend to have such an intimate knowledge of these matters as he has. It has always been a matter of wonderment to me, how one man can know all about the making of raspberry jam and the running of railways, joint stock banks and insurance companies simultaneously.
No, but the hon. Member is a member of many boards of directors, and I say that I have always been astonished at the omniscience with which some directors are able to discharge their many duties and at the same time to undertake the functions of Members of Parliament, and be members of Select Committees—those precursors of the managerial society, who rise in the House of Commons and justify an extension of powers to themselves, always on public grounds. Although I have no experience of the administration of a bank from the side of the board of directors, I have had a lot of painful experience of how communities are handled by the banks.
The only institution which provides us with a precedent for what we are now discussing was the Bankers Industrial Development Corporation. I am not saying that it was on all fours with these Corporations, but the purpose for which they are designed is the same. They are to provide money for industries unable to find it in the normal way in the open market. The Bankers Industrial Development Corporation was set up by the late Lord Snowden, in 1930 I believe, to find money for the basic industries, steel and cotton in particular. I represent a constituency which is very largely interested in coal and steel, and I remember going to the late Mr. Neville Chamberlain, when he was Chancellor of the Exchequer, and trying to prevail upon him to agree that the Ebbw Vale Steel Works should be assisted, and a strip mill established there because it would be in the public interest. We are to understand that the banks, because they will be the shareholders, with the insuranec companies, in these new Corporations, are not only the repositories of financial wisdom, but are to be entrusted with decisions in the public interest, that they are to decide that the investment is commercially sound and that it is in the public interest. These were the same people who were formerly entrusted with this job in the Bankers Industrial Development Corporation. What did they do? What was the result between the wars? What was the result after 1930? Derelict Jarrow, murdered Dowlais, destroyed Ebbw Vale, a shift of a basic industry of this country merely in order to gain the very evanescent advantages of being on the new iron ore beds. You can almost spit across this country, but to get 17 miles nearer to the coast they rendered whole communities derelict, in order to shift the exporting trades nearer the ports.
I do want to get this clear. I am not defending what was done between the two wars. If we cannot produce something better than that the system will have failed. The point I wish to make is that the Government will have to exercise a much greater degree of guidance than hitherto as to what is in the public interest, and that the banks are merely there to judge commercially.
May I point out in reply to the first part of the hon. Member's intervention that we are asked to entrust these functions to the same persons? [HON. MEMBERS: "NO."] That is the proposal. It is no good the Chancellor of the Exchequer shaking his head. The constituents of these Corporations will be the joint stock banks and insurance companies. They will nominate the boards of directors, they will guide the decisions. It is no use to say that because a corporation is a different legal entity it is a separate thing from the people who compose it. These Corporations being set up under the proposal initiated by the Chancellor will, in fact, be dominated by the nominees of their constituents, and they will be the banks, They will be exactly the same people who made such disastrous decisions before, and what evidence is there that they are wiser or have more prescience than they had in those days, or that they are more public spirited? They are the same institutions.
I am saying that between the two wars the banks tried to salvage their unwise commitments to certain undertakings by so rationalising great industries in Great Britain as to keep up the price of products in order to get their money back. The banks are the last persons to be entrusted with this task. The hon. Member who interrupted me just now said he hopes that lie Treasury will exercise more guidance on this occasion.
Well, then, that the Government will exercise more guidance than before. The only guidance they can exercise is quantitative guidance. If the Government are to pass judgment on a particular application, on the particular industries to be financed, then the obligation to this House must be immediately fixed. If the Government decide that this or that person is to have new finance, the responsibility of the Government is immediate, and these Corporations will merely be advisory to the Government. Is that how my hon. Friend represents their functions?
The Government will have many direct methods for intervention—their control of the allocation of investment. These Finance Corporations only represent a small sector of activity. For example, does my hon. Friend appreciate that under the Distribution of Industry Bill the Treasury itself is to have a substantial direct function of investment?
I shall refer to the Distribution of Industry Bill in a moment. No doubt it has a direct bearing on this matter. If the hon. Gentleman's inter pretation of the functions of these Corporations—
I intended to use it purely as a matter of illustration, and not to discuss the merits of the proposals in the Bill at all. If the hon. Member's interpretation of the functions of these Corporations is correct, they are bound to be only advisory. If the Government is to be expected to form a judgment about the merits of particular applications, the responsibility of the Government to this House for those decisions is immediate. The hon. Member shakes his head. Therefore, these Corporations will not be advisory; they will be executive, and the Government will be advisory. That is how the whole matter is conceived.
The answer is that that limited scale consists of this fact, that these Corporations will be able to decide on the merits of particular applications within the framework established by the Government, so that within that framework they are executive, and the Government are advisory. We know now exactly where we are. We know what functions are being entrusted to these Corporations.
What happened before? I went along at that time, on the advice of the Chancellor of the Exchequer, to see Mr. Bruce-Gardner as he then was, who was director of the Bankers' Industrial Development Corporation, a gentleman who, in the words of a former hon. Member who represented the Liberal Party, was distinguished for making one blade of grass grow where two grew before. He was the man who carried out all the rationalisation schemes in the great industries before the war. What did he tell me? My function was to represent a great constituency, which was dying industrially. I was a suppliant. I had to secure the suffrage of my constituents in order to be a Member of this House. I, the public representative, had to go cap in hand to this great captain of industry, appointed by private banks, to ask whether it was possible for the credit of the country to be used to revive Ebbw Vale Steel Works. He replied that having financed the Northamptonshire new works, having helped to finance Guest, Keen's development near Cardiff, having smashed Dowlais, it was not necessary for any new steel works to be established in Great Britain, because we had reached what the banks considered to be this country's steel-making capacity. What was our steel-making capacity at that time? It was 3,500,000 tons less than at the end of the last war. In other words the banks deliberately sabotaged British steel production in order to maintain the profits of the steel masters. My hon. Friend nods his head. Are we to believe that these individuals have suffered a change of heart and are now public philanthropists?
To my astonishment, the other day I learned that the President of the Board of Trade had appointed Sir Charles Bruce-Gardner as the person in charge of the reconversion of British industry after the war. The hon. Member referred to the President of the Board of Trade as advising these Corporations. Who will advise the President of the Board of Trade? Sir Charles Bruce-Gardner. Who is he? The nominee of all the big interests in Britain, a monopolist in heart and practice and, of course, in profit. Are we to accept these propositions tamely? What happened further about Ebbw Vale? I pay this public tribute here now, although at that time he was a bitter political opponent of mine, to the fact that we managed to get the strip mill established there through the foresight and genius of Sir William Firth. If we had not had that mill the British tinplate industry would have been slaughtered by American competition. I was interested in frying to get industries established in South Wales, and I remember my hon. Friend the Member for Aberavon (Mr. Cove) trying hard to persuade the bankers at that time to assist in the establishment of a carbide works at Port Talbot.
I emphatically deny that, and so do most industrialists. These people are never the ones, to decide the location of industry. They will always make a false balance sheet. If you charge the cost of production at your new works with the cost of moving a whole township from one part of the country to another, building an entirely new township, in other words charge the new product with the social capital displaced, the cost of production at the new works is heavier than at the old.
I am sorry, but these interruptions will cause me to lengthen my speech. For anybody planning the industries in Great Britain to say that whole communities should be moved, in a small island like this, in order to be nearer the coast when we are competing with Pennsylvanian products 1,500 miles from the coast, is nonsense. Any conception of industrial planning in Great Britain would take the coast into consideration with a view to port facilities, but not from the point of view of transport, because, as I say, most of our industries are less than 100 miles from the coast at any point. If, as has been pointed out over and over again, the additional transport charges are an important consideration for an industrial concern, as they often are, that is an argument for equalising freightage all over the country, not an argument for tearing up communities. The railway companies have given special rebates, with the consent of this House, in order to assist industries to remain in certain places. There is no reason why by any intelligent industrial planning we should not prevent this horror of our people being uprooted in the way we have seen in the past. What will happen when the iron-ore beds in Lincolnshire are exhausted?
We could not get that carbide works in Port Talbot, not because the scheme designed was not desirable—I think it has now been established—but because the big capital invested in Scandinavia prevented any concern from raising money in the open market. Although the Central Electricity Board had agreed to take the electrical power from the works into the grid, additional finance could not be obtained in the market, because every time individuals were approached, the banks came down on them, and word was passed round that it should not be granted. This was done by people who wanted to keep up the price of carbide, producing it in Scandinavia. Directly before the war we had to rush into the production of carbide, because we were in such a parlous condition. Those were the "far-sighted" people.
Some of us were very frightened when we saw this proposal. My right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) asked whether these concerns were to consider their private interests only, or were they also to take the public interest into account. My right hon. Friend the Chancellor of the Exchequer may say, in reply, that they will take into account the public interest. But since when has this House decided that consideration of the public interest shall be farmed out by the House of Commons to some other body? It is we who exist to consider the public interest. It is the job of banks to consider the commercial interest, not to make decisions on public grounds; because once the banks are allowed to do that we have abrogated the functions of Parliament. The elected representatives of the people should determine what is and what is not in the public interest. This is a typical conception of a totalitarian State—that you empty out of the elected assembly the functions it normally possesses, and hand those functions over to finance corporations.
That is a matter of private sentiment. Who is the arbitrator? The arbitrator of what you should do with your £50 is yourself; the arbitrator of what you should do with somebody else's £50 must be the House of Commons. What the Corporations are deciding is not what to do with their £50, but how to use the public credit. That is what they are going to exist for. My hon. Friends the Members of the Welsh Parliamentary Labour Party are very concerned about this matter, and they have asked me to express their concern here. We want to know whether we are going to have any say at all in how these powers of finance are to be used. The Board of Trade will establish certain buildings, clearing sites and constructing certain shell factories, in Wales. But, of course, the Board of Trade will not in most cases enter into actual operations; they will rent part of the space to private concerns. Those private concerns will have to raise money. Will they have to go to these Corporations?
It is no good my right hon. Friend trying to do a sleight-of-hand trick. If you want money after the war you can get that money only in two ways: either by getting the consent of the Capital Issues Committee to raise the money in the open market, or by getting the consent of these Corporations.
My hon. Friend is under a misapprehension. I thought I had removed it in an answer I gave some time ago. All the safeguards that may exist from time to time will apply to operations conducted with the assistance of one of these new Corporations, as they apply to operations conducted in other ways. There is no abrogation contemplated of any authority, either of the Government or of any organ of the Government, like the Capital Issues Committee.
I thought my hon. Friend said that they would have to go either to the Capital Issues Committee or to one of these new Corporations. My short answer is that if it is a case for going to the Capital Issues Committee, they will have to go there anyhow.
That does not deny what I am saying. There are either those two sources separately, or people can go to the Capital Issues Committee through the new Finance Corporations. There is no third way.
If either an existing concern or a new concern wants to raise capital, it has, under present arrangements, to get the consent of the Capital Issues Committee. To the extent to which the Capital Issues Committee continues, such a concern will have to go to the Capital Issues Committee in future. Only when it has the consent of the Committee, will it be able to go either to the public, or to an existing Finance Corporation, or to one of these new bodies for the necessary finance.
There is not, so far as I can see, any conflict between my right hon. Friend and myself. It is true that, even if these Corporations agree to lend the money, the Capital Issues Committee's consent must be maintained. I think my right hon. Friend has said that it is almost automatic—I have not got the exact words.
My hon. Friend is confusing two entirely different things. These Corporations will have to raise money for their own purposes. I did say that if the Government had approved the general plan, the consent of the Capital Issues Committee to the raising of money by those Corporations would be almost automatic.
That does not affect at all the necessity for a particular concern that wants finance from one of these institutions having to go to the Committee. There is nothing automatic about it, so far as they are concerned.
We will leave it to the test of experience. If you have two institutions of this sort, one in conflict with the other, you will get no planning at all. It is almost inevitable that if these Corporations have "vetted" a scheme and agreed that it is in the public interest, within the frame of the decision taken by the Treasury, the Capital Issues Committee could not conceivably come down and say, "No, we will not allow it." If such a situation did arise it would not be lubricating the machinery of finance, but putting obstacles in the way of raising money for industry.
There is one other consideration that the Committee ought to bear in mind. The Corporations, to which the joint stock banks are to be the sole subscribers, are to be charged with the duty of providing capital for small businesses. Is that the kind of function that the banks ought to decide? Are they the people to decide whether small concerns are to raise money or not? These great banks are dominated by the monopoly interests. My hon. Friend the Member for Walsall (Sir G. Schuster) shakes his head, but on this side we cannot accept that denial. Most of these monopolies have their directorships on the banks. We know that what the great monopolies want, the banks will agree to.
I will do so with pleasure. [An HON. MEMBER: "Walk into the parlour."] I have walked into those parlours before, and have walked out again. Is it seriously suggested that these banks are the right sort of people to decide whether a small business man is to have money or not?
My right hon. Friend started off the other day by talking about a significant and valuable departure; and now, by successive interruptions, he is trying to divest his observations of any importance. One of the functions of the Corporations is the provision of capital below a certain amount. We ask whether the banks are the proper people to make decisions of that sort.
I do not understand what my hon. Friend means. These individuals will be coming along. If they could find money in the open market or if they could get the consent of the Capital Issues Committee to raise that money, they would not need to go to the Corporations. They will assess the commercial schemes. The banks will be the people determining that. Are they the right people to determine it? I admit that the Corporations will be different from the banks, but the banks will dominate the Corporations. One of the difficulties about raising money in the modern capitalist system is this. It was always thought that if a sharp decline in the price of hiring money persisted, it would drive liquid money into industry, and make it easier to raise capital for investment. Experience has shown that a persistent low money rate has no such effect. We had experience in the years between the two wars of low interest rates persisting for a long time, and yet of difficulty in raising capital, because the persistently low money rate has the effect of frightening people off about their prospects, and does not serve as a pump, as it formerly did. It often happens, therefore, that a large number of industries—small concerns—are crowding the capital market for permission to raise money.
You will, therefore, have a number of concerns in the future trying to raise money, not merely because they are speculative, not merely because they are marginal, but because of the fact that, nowadays, people in Great Britain are very timorous indeed in investing money which is not absolutely secure. So a very large number of concerns will be coming to these Finance Corporations, and we want to be satisfied that, when they make their applications, their cases will be decided, not merely upon commercial grounds—because the commercial grounds will be uppermost where a marginal concern is involved—and we are anxious that the operations of these concerns should be conducted in the light of day. I know that we are up against a real difficulty here. It is very hard for the Government to decide between the claims of two different sets of business people wanting capital. The extent to which the Government are now prepared to interfere in economic affairs, and, particularly, the extent to which they are called upon to interfere in the financing of business, is an extremely difficult question. Unless it is carefully guarded and surrounded by all sorts of proscriptions and directives, the door is wide open for nepotism, corruption, favours and all sorts of things like that. Indeed, Members of Parliament are driven by their own constituencies, and by the chambers of trade in their own areas, to try to get special provision made for their areas, so that we are, now, really in a great difficulty.
We have always exercised the quantitative direction of capital, and, through the Treasury and the Bank of England, the total amount of money available, but the qualitative direction of capital has been determined by the market, by the ordinary organisation of capital in industry. Now we are being asked whether, if we entrust these functions to private Corporations of this sort, we are really ruling out the possibilities of corruption and the dangers of favouritism, but all that we are doing is hiding them. These Corporations themselves are no more immune from bad habits, from corruptive influences and considerations which are not worthy ones than the Government itself, and, unfortunately, there is no objective criterion that can be used in these matters. Therefore, if the decisions are to be on public grounds, the tests are more subjective than objective, and our difficulty in determining the merits of a decision will be very much greater. So I say that we are in a dilemma.
I did not say that it was an insoluble dilemma; I said it was a dilemma, and I was coming to my hon. Friend's point. My next sentence was going to be this: I would infinitely prefer that the possibilities of undue influences should be revealed in the most public way than be made furtive, concealed and subterranean by putting these functions outside the representative Government. Therefore, we, on this side of the Committee, having considered this matter, have said that qualitative direction of capital should be entrusted to an investment board, whose decisions should be public, whose directions should be known, and the general policy of which should be laid down by this House so that it might be reviewed from time to time. So open, so public, and so objective and factual would be the directions given to the investment board, that any possibility of undue influence would be ruled out. In fact, as my hon. Friend says, things would be perfect. No one suggests that secular institutions of this sort are ever perfect, but what I do suggest is that, if they are imperfect, if they develop faults, then the faults should be discernible and traceable so that correctives can immediately be put into operation. But, if we shift this away from a public institution, where it can be scrutinised, and put it behind the closed doors of banks, making it the function of an irresponsible organisation, then we foster corruption in the State long before the State is able to recognise where the corruption starts and to what extent it spreads. We therefore suggest that the State should create a financial institution; not a bastard institution which has neither the merits of State planning nor the counter-checks of private competition, but an investment board over which this House could have continuing control.
When the hon. Member for Ebbw Vale (Mr. Bevan) rose to speak, I felt sure we were going to hear some resounding complaints on past events and, as the hon. Member comes from South Wales, particular references to the Bankers Industrial Development Corporation. We have heard a great deal about the latter's alleged restrictionist policy, and an interruption was made which, by the rules of Order, I am not allowed to follow up, but the whole position will be altered by the Distribution of Industry Bill, about which the hon. Member was not allowed to speak. A far more important factor, however, is that the hon. Member seems to have overlooked the policy laid down in the White Paper on Full Employment. This White Paper can be very directly linked with the proposals before the Committee to-day, and this White Paper was unanimously endorsed by the House some time ago. Since the hon. Member laid such stress on the question of social capital, may I say that the White Paper laid down that an essential pre-requisite for prosperity after the war was that there should be a high degree of mobility of labour?
I do not want to interrupt the hon. Gentleman, but he ought not to identify us with the White Paper. All we did was to agree to the first sentence of the White Paper, and we, on this side of the Committee, specifically stated that we could not possibly be regarded as supporters of the whole.
I quite appreciate that, but I think that it still remains that that is the policy which has now been accepted and upon which all present legislation is being based. I think it will be agreed that the pedigree of these Corporations is impeccable. They arise from recommendations of the Macmillan Committee on Banking, of which the present Minister of Labour was a member. That Committee advocated the formation of companies very similarly constituted to those before the Committee to-day. It is true that the Bankers Industrial Development Corporation already existed at that time, but the Macmillan Report had advocated its complete separation from the Bank of England, a separation which, of course, is proposed in the case of the Corporations before us to-day.
I want to be honest with the Committee and say that, at first sight, I was inclined to share the scepticism which I have heard expressed by friends of mine in the City on these proposals. They asked, while making due allowance for the function of the second Corporation to fill the famous Macmillian gap to deal with cases where lesser amounts of money were not so easily forthcoming for short or medium terms, what would this Corporation do that they could not do? They asked if London was a failure as a leading capital market, but the Macmillan Report had most specifically stated that it was not, and I support that view. They asked if the banks were obstructive in their financial policy, and I think a fair answer to that was that they were not, so long as the security was reasonable. They further asked if expenses were high or whether there were certain undesirable or nefarious practices. The answer to that is that the Companies Act can always be amended and that there is competition from other capital markets.
These critics, therefore, concluded that these Corporations had been put before the country with two objectives: either, that they were to be used for financing doubtful concerns with insufficient security and prospects, or that they represented the first step in the direction of investment. These are powerful arguments, but they seem to me to ignore two important factors. They first of all ignore the implications of the full employment policy, and they also ignore the effect of the war on the post-war industrial need for capital. I should like to take the second of these points first. In war, finance is more or less at a discount. There is a disposition to assume that wartime technique can be adapted to peacetime needs, and this in some respects, is a dangerous assumption, for, when all production, or very nearly all production, is on Government account, finance is readily available. The Government pay more quickly, as can be seen from the steep decline in bank advances. But funds are not so readily provided to sustain private production for civilian needs, with the risks attendant on the normal mechanism of free markets.
Again, there are heavy reconversion expenses ahead of us. There is the problem of overhauling laid-up plant, of renewing overworked plant, of complete retooling, and such costs as these have no counterpart in the form of additional tangible assets. There are some people who think that the Government should meet these costs, and it is true that assistance is provided in the form of relief from Excess Profits Tax, but the effect of the Excess Profits Tax is unequal. There are some people paying little or none and the effect of this relief is consequently haphazard. Many on the other hand who have played a very big part in the war effort will be called upon to bear a high proportion of the cost of their reconversion, and I might quote in that respect as a particular instance the case of concentrated firms. The assistance that will be required in all these cases is hardly a job for the normal capital market.
More important than this is that the real justification for the establishment of these concerns arises from a consideration of the full employment policy. The principal factors in the White Paper which impinge upon the proposals before us are that in order to maintain the stability of prices we must do four things. The first is that we must continue some rationing; the second, that we must keep down the internal level of costs; the third, that we must continue the savings campaign in order to prevent undue expenditure on consumption goods; and the fourth—and these are the most important words in connection with the Debate to-day—that we must control the use of capital to the extent necessary to regulate the flow and direction of investment. In this connection the Government are committed in the same White Paper, as now endorsed in the Distribution of Industry Bill, to obtain capital for new concerns which establish themselves in the areas where development is particularly desirable.
The White Paper on Full Employment emphasises the need for keeping capital expenditure stable and the devices which it proposes to this end are all supplementary to the flow of private capital, the latter, it is true, being influenced to a lesser or a greater extent by interest rates. But monetary policy alone is not enough. It is, therefore, by the proper use of public investment that we can maintain this stability. Proposals are made that programmes of future development should be worked out and that they should be put into operation when they are required to maintain investment at a suitable level. We need not concern ourselves to-day with a very important part of this expenditure, namely, that of local authorities, since they are dealt with by different machinery which was discussed by the House not so long ago. But the important programmes of public utility concerns and of the larger private enterprises, where timing, above all, is the essential factor, doubtless will need to be financed by the larger of these two new corporations, especially if that financing is in the nature of a regional or an industrial reorganisation which involves a number of concerns. Whatever may be said about the history of the Bankers' Industrial Development Corporation—and it is admitted that it showed a restrictionist rather than an expansionist tendency—they were the first organisation in this country to start that kind of financing. In one Or two cases, notably that of the Lancashire Cotton Corporation, they succeeded in bringing about the type of reorganisation which will be needed on an increased scale after the conclusion of the war.
The thing that worries us on this side of the Committee, and I am sure worries hon. Members opposite, is: How are you to prevail upon industries of this sort which are deeply involved in maintaining price levels, and how can you expect them to pursue an expansionist policy, as they are naturally restrictionist by their very nature?
I am coming to that point at a later stage of my speech when I discuss the amount of capital available for investment, which is the limiting factor, as the hon. Member will realise. I am assuming—and this is where I part company with him—that what is laid down as the policy, as outlined in the White Paper on Full Employment, is going to be translated into fact. The hon. Member is sceptical about that and thinks that the Corporations will not do anything of the sort but will carry on their operations on restrictionist lines. I confess that I can see no absolute guarantee whereby they can be forced, but they are subject to a number of restrictions and methods from which it would appear that the wishes of the Government will be a very important factor in their actions. Therefore, I naturally quoted the Bankers' Industrial Development Corporation to show that it was the first attempt that had been made—and in some respects not a successful attempt—to deal with the problem on regional lines.
The very great problem that faces us in the coal industry, for example, is one which will probably have to be dealt with on the lines of regional development and one which will, therefore, involve in any single operation a number of independent companies, some of which are in a prosperous condition and could easily be financed through the ordinary channels, but where it would be considered better in the national interests that they should be treated as a unit and dealt with through these Corporations. The suggestion of the hon. Member and some of his friends does not apply to these proposals, for they favour a national or public investment board. I really must say that I thought that we were going to hear the whole speech of the hon. Member opposite without any reference being made to this subject but, fortunately, he was prompted by the hon. Member for Sea-ham (Mr. Shinwell) and subsequently produced an eloquent defence of this policy.
Is it not obvious that, if there is a dilemma between Government financing of industry and private financing of industry, that dilemma would have to be solved, and my hon. Friend the Member for Seaham (Mr. Shinwell) was rather over-anxious perhaps to reach the point so early?
The hon. Member was showing a strong tendency to sit on the one horn. I was waiting anxiously to hear the proposed defence which in due course was adumbrated. We heard a great deal about nepotism and corruption and things of that sort: I find that nepotism and corruption can, in certain circumstances, take place in any quarter of society and I do not say that this proposal is going to provide any especial protection, but I certainly do not fancy the prospect of endless inquiries regarding investment being brought on to the Floor of the House. The idea of a National Investment Board is entirely totalitarian in conception and certainly in execution. If it were adopted, the Chancellor's guarantee that the activities of these Corporations will be entirely additional to, and will not supersede, existing activities would fall to the ground with, in my opinion, very great disadvantage to this country. I, personally, take the very opposite view on this particular matter and I say that any person who can make out a good case to the capital market, with the proviso that the technical advice that the City enjoys should be improved and that it should have a better appreciation of the prospects of inventions, has a right to get his money if he can convince the capital market and the public. It would be intolerable for example if a necktie manufacturer were to be prevented from raising money for his operations on the ground that there were enough similar factories.
It is a similar case to that brought forward by the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) in regard to the manufacture of jam. In neither illustration do I consider that there is any reason or justification for supposing that such an advance to the capital market should be made through any but the normal, private channels. These Corporations are not devised for finances of that nature. If any private manufacturer can make out a case he has every right to go to the capital market and it is an intolerable proposition that any bureaucrat or Government Department should be able to prohibit development or choose between one man and another. Under a system of freedom and competition such as we have to-day and such as I hope will perpetuate itself this can only be decided by the free play of economic forces, by the laws of supply and demand, and by the infinitely varying, the sometimes conflicting and the sometimes unifying factors of taste, choice and habit.
Is not the hon. Member following the textbook attitude? Are these not merely reminiscent of the later years of of the 19th century? Is there any such free play of the laws of supply and demand? Is the hon. Member not describing historical reminiscence rather than actual fact?
We had this example given this morning in the Debate. We have had the examples of small enterprises. I can recall very clearly the operations of the capital market between the two wars and it is entirely untrue to say that there was no freeplay in operations. Some were disastrous, admittedly. As the Macmillan Report pointed out, of the amount of money raised on the capital market in 1928, 45 per cent., or thereabouts, had been lost by 1931, but the risk has to be taken in a society such as ours, and it is a risk that most people are prepared to take, and, incidentally, there was subsequently almost full recovery. We have enjoyed a free capital market not only in regard to home industries, but foreign industries as well, and I hope it will continue to be so within its own framework.
I showed in the earlier part of my speech how I queried the desirability of these Corporations and I have tried to justify them by tying them up with the policy of full employment and by showing that there will be certain operations after the war for which the normal capital market is not suitable. I then proceeded to say that within the free capital market there should be freedom of choice and that is something which I put before the Committee in reply to the demand for a national investment board. For the latter would mean that every single issue of capital would have to be decided upon in a bureaucratic manner and would be susceptible of being brought on to the Floor of this House with, in my opinion, an undesirable result. I am perfectly prepared during the transition period to see the continuation of control, such as the Capital Issues Committee, but I am not prepared to see it perpetuated for all time.
I now come to what I consider to be the dominating question which really dwarfs all the considerations and arguments I have been attempting to put forward. It is the question of the availability of sufficient capital after the war for the needs before us. Various estimates have been made on this subject by experts and financial journals alike which, after allowing for consumption expenditure and Government expenditure, show that the balance of the national income available for investment will be something between 500,000,000 and £900,000,000 per annum according to the calculator. Yet it is a fact that a figure of nearer £1,200,000,000 is likely to be needed after the war for reconversion, rehabilitation, modernising of plant, and the general progress of investment. However, so long as the provision of capital remains the third consideration in this trinity, so long, as it is only something which can be found after the demands of consumption and Government expenditure have been met, it will, of course, remain the residuary legatee, and the calculations which I have studied seem to me to show that there is a very strong probability that insufficient money will be available for ordinary capital development after the war. When we take into account the enormous arrears of maintenance to be made up, for which it is doubtful, in my mind, whether there is enough liquid money available in the balance sheets of most companies, when we take into account the vast new developments and the modernising of industry which is absolutely essential if we are to survive in a competitive world—
I am rather projecting myself into a further stage. Of course, in the immediate post-war world, the men and materials will be the dominating question, but I am rather assuming at the moment that they can be made available. I am taking that as my thesis, and I am trying to show that, on the position as we see it now, it would hardly appear that there will be enough money left after the other desires have been met—whether they are the desires of the individual or the Government—to maintain and to reequip industry. There are, therefore, only three ways of making this money available. The first, and the one which I think a number of my hon. Friends wholeheartedly favour, is that the national income should be made larger, but that means harder work and no restrictive practices either by employer or by employee, and certainly no idea for a long time to come of a 40-hour week and things of that sort—at least not until there is an infinitely greater production per man-hour. The second way by which more capital can be made available is that consumption expenditure should be made smaller. We know already from the White Paper that it is proposed that this should be done by the continuation of rationing, and also by encouraging a savings campaign which will keep money out of consumption expenditure and make it available for investment. The only other way—and there is no bucking this issue—whereby more money could be made available is, of course, by inflation, but I think that is universally looked upon as not the wise solution of the problem.
There is plenty of money in the City now, so I am informed; indeed, the great rise in equities during the last two years is very largely due to the fact that the same capital has been chasing round after its own tail in recurring circular movements, but this amount of money will, I imagine, soon be absorbed in straightforward commercial ventures, the type of ventures which I said earlier I do not wish to see circumscribed. On the other hand, much money must quite clearly be made available for large-scale reorganisation, which, as I tried to show a minute ago, is one of the two principal justifications for these Corporations. There will be, in addition to regional reconstructions, and to the type of investment for which the normal market is not suitable, need to support new enterprises and firms which have not large sums of money available in their balance sheets and cannot, therefore, finance themselves in the normal way. So there must be a fund outside the private normal capital market, a fund which must, of course, exercise that degree of control which is implicit in the White Paper policy of the even flow, and which will support those ventures for which the capital market is not the right agency. But, I repeat, in conclusion, that the ordinary capital market, employing funds other than those required for the activities of these Corporations, must be as free and as unfettered as the elections in Poland.
I think the hon. Baronet who has just spoken has done very well in calling attention to the fundamental necessity of tying up the proposals now before the Committee with the Government's policy of full employment and the allocation of industry and priorities. It is perfectly clear that the Government have to exercise a certain amount of control over the way that money is employed after the war. In building, for instance, we could not allow a number of factories and mansions to be set up when there were houses to be built, and it would be absolutely essential for the Government to intervene. The point which I think concerns us all to-day, however, is how far, under the Government proposals, there is really to be effective control. Something has been said about an investment board. I think that is an interesting proposal, and I am rather surprised that the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) made no reference whatever to it in his remarks, although it is the policy of the Labour Party. Of course, one can have investment boards of different kinds. They need not be of the kind to which my hon. Friend was referring, where every single transaction has to be settled by a bureaucracy, but they could be of the kind where the Government exercised a good deal of guidance and influence and left a good deal to financial corporations under their indirect control. That is the kind of body which I think we shall come to some day. Then we had the case for chaos, put by the hon. Member for South Croydon (Sir H. Williams) in his usual attractive way, for really that is the policy for which he and his friends stand.
The main point in which I am interested is to see how far, and in what way, the Government will control these Corporations. It is said that they will appoint a chairman. If that is so, does that mean that if the chairman fails to carry out the wishes of the Government, he will be sacked? I have no doubt the Government hope they will appoint a chairman who will be sympathetic to their views and who will carry them out, but he may not, and, if he does not, certainly the Government cannot avoid their responsibility and they will have to intervene. I want to ask the Chancellor, when he replies later, to give the most definite assurances that the Government intend to keep a directing hand on the way these organisations are carried on.
It seems to me that the Government are carrying on two contradictory policies at the present time. There is, first of all, the Capital Issues Committee, acting as an agent for the Treasury, which is trying to turn all money into Government securities—quite rightly from its point of view—and discourage its use for new financing. On the other hand, they feel now that they must do something to give industries the necessary money for re-equipment and reconstruction. That is perfectly obvious. We want to have more clearly stated the relationship between these two different bodies. There is the Industrial and Commercial Finance Co., Ltd., which has a £45,000,000 capital and will make up the gap so far as small businesses are concerned. However, I notice that the directors of this Corporation will be people associated with big business, be- cause the directors of the joint stock banks are mainly that—that is nothing against them, but they do happen to be people connected with big business or people such as proconsuls who have done great service in different parts of the world. Those people may take a most patriotic and disinterested view of their functions and duties but, at the same time, it is the case that their own natural interests and inclinations will be much more sympathetic to large than to small businesses, and certainly that will have to be watched by the Government. I am sure they will do their best to be impartial, but they may not succeed. We had an example this morning of one eminent director of this kind, the hon. Gentleman the Member for Walsall (Sir G. Schuster). He happens to be a very enlightened man, and if all the directors of these concerns took his point of view, I do not think there would be much difficulty, but they probably do not; probably a great many do not come up to his standard, and that is why there is need for caution.
Then we have the Finance Corporation for Industry, Limited. I find it rather difficult to see in what way that body will function. Apparently it is not to touch cotton, or coal or steel, and it is not to compete with normal financial institutions. Then what precisely is it to do? I think it would be very interesting to have information about that.
I am glad to hear that, because that was certainly the information given to me. As alternatives to the Government proposals, and apart from the National Investment Board, it has been suggested that the present Capital Issues Committee should be amplified, its task made much wider than at present, and that financial institutions both large and small should be allowed to operate and treat all those who want money alike. Then I have seen a proposal made—I suppose this is more in the nature of an investment board—that these concerns should be definitely under Government control, under the jurisdiction of the Treasury or the Board of Trade, as the Export Credits Guarantee Department was made the direct instrument of Government policy. I am not advocating that, although it is an interesting suggestion; I prefer the looser system, certainly at the present time, provided that at the back of it there is effective public control in the public interest and in direct relation to our vital full employment policy. I ask the Chancellor of the Exchequer to be very clear on that point because, unless public interest is very securely guaranteed and linked up with the Government policy in other fields, I do not feel that the arrangement now before the Committee will be satisfactory. I hope, therefore, that the Chancellor will succeed in satisfying us on these points.
I told the hon. Gentleman the Member for Ebbw Vale (Mr. Bevan) that I intended to make some references to what he said and I hope I may be forgiven for doing so in his absence, in the hope that he may perhaps find time to read to-morrow what I have to say. I have great admiration for the hon. Gentleman's always brilliant and forceful speeches and I was, therefore, rather taken back today when he started off with such expressions of diffidence. As his speech went on however I fully understood why he should be diffident in expressing himself on these subjects, but, unfortunately, as he carried on with his speech, he seemed to forget his own diffidence. The hon. Member also showed himself in another new role to-day—that of a restrictionist—as he advocated the practice of giving advantage to certain sections of the community, or parts of the country, to the detriment of the national economy as a whole.
I think there is general agreement in the Committee that the Chancellor has been rather modest in the amount of credit which he has claimed for these new proposals. I am sure they will be loyally supported by the institutions in the City which are connected with them, but I do not think that they were spontaneously proposed by them. I suggest that these twins were conceived in Whitehall, and were born of "The Old Lady of Threadneedle Street," whose union with the Treasury is now so intimate as to be almost legitimate. I think it is very important that we should know the degree of responsibility which the Government have for these proposals. If they are responsible, it is for us to see that the interests involved are adequately safeguarded. The hon. Member for Ebbw Vale attacked the financial institutions which are going to put up the money for these propositions. I would like to point out to him that the insurance companies, for example, who are the largest participators, taking 40 per cent. of the larger Corporation, are not concerns owned by a few plutocrats, but on the contrary—the life offices, who have the bulk of the funds—hold their money as trustees for the policy holders. At least 90 per cent. and in some cases all the profit goes not to the shareholders, but to the policy holders. So, I think it is important to see that these policy holders, who come from every walk of life, are adequately protected.
The right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) urged that considerations other than financial should be taken into account in settling these advances. I would remind him that the Macmillan Report says:
No institution, acting as an intermediary between industry and investors, can possibly succeed unless the security which it induces the latter to buy is proved to be sound and remunerative.
I should like to have some clarification from my right hon. Friend the Chancellor as to the objects of these two concerns, and the machinery by which they will be run. I stress very much indeed the necessity for the greatest possible care being taken in regard to the choice of management. In any industry management is always of great importance, but never is it of more importance than in concerns of this sort, on which the whole future will depend. Our experience of concerns of this sort is not altogether a happy one. After the last war the Farringdon Committee advocated the setting-up of a new type of institution able to afford the financial facilities which were not available under existing conditions, and which were described as advances for the extension of manufacturing
plant and the co-ordination of works to reduce production costs. That proposal was, in fact, on a similar plane to those we are now considering. As a result of that the British Trade Corporation was set up, under Royal Charter. Within a few years it had made immense losses. Half the directors resigned, the capital was written dawn, all the reserves were lost and, finally, it changed its name to the Anglo-International Bank, and then became moribund. I am not making any gloomy prophecies whatever about the proposals we are now considering; I am only saying that with that experience behind us let us be very sure that we pay attention to the lessons to be learnt from that, and benefit from them. I think we may be encouraged, having had that experience of the past, by which we can benefit in the future, providing we are prepared to do so. I particularly want, however, to stress the immense care which must be taken in the choice of management.
The second point on which I would like amplification relates to the objects of these two concerns. I have heard several objects ascribed to them, and I am a little apprehensive lest in trying for too many we should fall between two stools. I know from bitter experience that if one tries to shoot several birds with one shot one is apt to miss the lot. Therefore, I would like some clarification as to what these proposals are setting out to do. It may be that their prime object is to finance those first-class borrowers who would make have no difficulty in raising money in the open market, but who would not want to do so because they would not be allowed to spend it owing to the shortage of men and materials. They might well prefer to borrow £100,000 one year and £100,000 the next until their programme was complete and then make a public issue to repay these loans. If that is their object, then I am wondering whether the banks would not have done it, and whether they will not do it any way. The second object may be to prevent a scramble for new issues, which may lead to congestion in the money markets and cause money rates to be dearer. I can see that if there were a great many more issues coming out than could be easily digested there would be a tendency for each issue to be offered on higher terms than the previous issue. If that is so it might have an adverse effect on the rate at which the Government borrow. But I suggest that that is not really the case. My hon. Friend the Member for South-East St. Pancras (Sir A. Beit), in his very interesting speech, showing what a faithful reader he was of that excellent paper, "The Economist," expressed some doubts as to whether there was enough money available for all the purposes for which in would be required after the war.
If we look at the White Paper which was issued at the time of the Budget we can see that private savings, after tax, for each year of the war up to then, averaged over £1,500,000,000, and I suppose now must be in the neighbourhood of £7,000,000,000. The insurance companies, who hold as trustees for their policy holders, have hundreds of millions of pounds in Government stock, now hold about half of this money in this form of security, whereas it is their normal practice to hold less than one quarter. Therefore, they are likely to be only too willing to increase their yield as soon as they were encouraged to do so by the Treasury, by going into other types of security. In order to make the picture more complete perhaps I might remind the Committee that the Macmillan Report showed that in 1928, which was rather a boom year for new issues, the total amount of issues of industrial ordinary and debentures amounted to £284,000,000. So I suggest that in actual fact, for many years to come, the amount of money available is out of all proportion to the goods and services on which it can be spent, and that there is no need to fear any scramble of that sort.
The third object for which these concerns might be used is to finance promising undertakings which are not yet ripe for public issue. Well, if that is to be so I should like to hear more about how the shareholders—I am talking about the larger company—are to be rewarded. I understood that they were to get a fixed rate of about 4 per cent. I think it is absolutely certain that if promising concerns, which are not yet ripe for public issue, are to be financed by these Corporations they will make some failures. Therefore, I think it is only right that they should have equity interests in these concerns, so that they can recoup themselves by those which succeed. I am doubtful, indeed, whether there is any gap of this sort. I know a financial institution in the city which has immense unused resources at its disposal, and they have told me that of every 1,000 proposals which come before them they have been able to accept only three, and that when they have checked up on the ones they have refused they have found that they have never succeeded. I suggest that there are funds available for any enterprise which is really promising. The right hon. Gentleman the Member for East Edinburgh urged that we should encourage production of the right kind, and gave his amusing example of raspberry jam. I would like to ask him: Just how are we to know what is the right kind of production? We are not in a position of choosing between one luxury and another at the present time, but between one necessity and another, and it is, therefore, absolutely clear that the Government must control production to the extent of allocating men and materials where production is most needed.
But when the time comes when we again have an abundance and it is a question of a choice of luxuries it is for the consumer to settle. I do not believe it would be at all an effective way of allocating available men and materials to do it by means of an investment board or the direction of investment. There are many concerns which have enormous liquid funds at present and they would have a most unfair advantage. The only way by which we can effectively see that those things that are most required are produced is by strict allocation during the temporary period. I think a National Investment Board would be ineffective for that purpose.
I very much disagreed with the hon. Member for Ebbw Vale when he said that the low money rates caused a reluctance to invest in equities. I think the contrary is the case. I believe the Treasury's real function in the immediate future will be to keep down the money rates to such a low level that there is an inducement to people to invest in promising concerns. When we were on the gold standard money was in a different category. It was not possible to increase the supply of money without the risk of its leaving the country, and depreciation of the exchange. Now that the export of capital is controlled and sterling is not convertible to another currency any such considerations no longer apply. The Treasury can now, as it has done during the war, in- crease the cash basis of the banking system and so enable banks to create money. As they do this in proportion to their cash deposits the central bank, by increasing or decreasing, can regulate the supply of money and so control interest rates. In fact money is not a measure of what we can afford, as it used to be in the past, but something that we can control and use for the benefit of the economy of the country.
I think a great deal too much fuss is being made about these two Finance Corporations. I find them rather difficult to discuss, because we are trying to discuss figures which are unrelated to any background and without any context. It is proposed to increase financial resources by £170,000,000. But what does that mean in relation to the existing financial resources in the country? I do not know, and I do not think anyone knows, because I do not think anyone knows what the existing financial resources are. We have an immense amount of liquid financial capital. Even before the war there were bank deposits amounting to £2,000,000,000 and gilt-edged securities to the tune of another £7,000,000,000, and during the last five years these figures have increased to £4,500,000,000 bank deposits and £22,000,000,000 Government securities all of which is, theoretically at any rate, just as liquid as the £170,000,000 of these Corporations. No one knows how these vast sums are held. All we know is that something like three-quarters of the bank deposits are held institutionally. We do not know how much of the £26,000,000,000 already in existence is held in industrial reserves, in depreciation reserves or free reserves, but it must be a fairly colossal sum. It must be somewhere between thirty and a hundred times as much as the proposed capital of these new Corporations, and this vast but unknown sum is just as available for investment in industry, because it is owned by industry, as any sums borrowed from these Corporations by industrial concerns.
The Chancellor in his original statement referred to these Corporations as calculated to help to an important degree in the policy of full employment. I have no doubt that they will have some influ- ence, but we must realise, in discussing them, that the £170,000,000 which they propose to make available is only a drop in the bucket of the capital already available to industry because it is owned by industry. I am not suggesting that these organisations are not likely to prove useful. Their function is to provide financial capital to such concerns as are unable to raise it in other directions but, viewing the financial condition of industry as a whole, one must realise that the proposal is a very tiny one and the increase of available capital is very small. How many thousands of millions of liquid capital are available no one knows, because it has never occurred to the Treasury or the Government that it was important to find out, and the result is that we are very largely discussing the effect of these two Corporations in a vacuum. I think, however, that it is as well to emphasise that these vast financial sums have no objective reality. They are nothing more or less than pen-and-ink entries in bank ledgers and, as far as the country is concerned, whatever might be the effect on individuals, if these figures were either doubled or halved it would not have the slightest effect on the real wealth of the country.
The real problem that we have to face is, What steps are we going to take to see that this financial capital is turned into real industrial plant? That is the major problem, and that depends very largely on the allocation of our industrial resources between current consumption and capital formation. That is what we ought to be asking the Government. Have they a policy on this matter? Do they know the relative needs of consumption and capital creation? Is there any information as to what new equipment we require in industry? That it is very large is a reasonable assumption, but anyone would hesitate to put even an approximate figure to it. All we know is that in the five years of the war, apart from engineering, the whole of our industrial plant has been running down. We know that in the decade prior to the war there was little or no new capital imported into industry, so that we have to face after the war the making good of something like 15 years of capital equipment. In the 20s, something like £70,000,000 a year of new capital was on an average put into industry. If we take that as a reasonable, normal amount, there seems to be a deficiency, quite apart from the war period, which arose in the 30s of something like £700,000,000. At post-war prices that would amount to £1,000,000,000. I doubt whether the amount of capital re-equipment required after the war will be less than £1,000,000,000. It will probably be a great deal more.
I notice that the Chancellor states that the Finance Corporations will be in contact with Government Departments, so that Government policy may influence their decisions and activities. But have the Government any policy, not merely for the utilisation of this potential £170,000,000, but for the utilisation and direction of the expenditure of the thousands of millions of pounds of industrial reserves, which are just as fluid as the £170,000,000? The Capital Issues Committee and the capital market are in no way in control of these industrial reserves. A company which has industrial reserves does not need to apply to the Capital Issues Committee to spend them, as far as I understand the function of the Committee. It certainly does not have to go to the capital market. For very many years the chief supply of funds into industry has not been through the capital market but from the undistributed profits of industry, so that the Capital Issues Committee is not an adequate form of control. It does not touch it and, if we are going to have a Government policy related to the Finance Corporation and its little brother, with their £170,000,000, and no Government policy related to the enormous spending power of industry from its own resources, we really have a policy which controls the dog's tail, but makes no attempt to control the dog itself.
The major problem that we have to face is the direction the Government is going to give to British industry as a whole. Has it decided the priorities? Has it decided how much of our industrial capacity can be directed to current consumption and how much must be directed to capital formation? Has it decided in its own mind the priorities between the export market and the home market? As the hon. Member for Scarborough (Mr. Spearman) said, in the immediate postwar period the ordinary market demand is no adequate guide. It may possibly be in normal circumstances that the con- sumer had the ultimate right to say how demand shall run, but, for a very long time to come, the consumers' demand is going to be almost insatiable, one will be able to sell almost anything.
The direction of industry and the allocation of our resources must be a matter of high Government policy and so far as I know, we have had no indication from the Government that they have even started thinking about priorities of allocations. We are talking about the provision of finance, but have started at the wrong end, It is simple to provide the finance. We have done it to the tune of £170,000,000. It means a few entries in bank ledgers. It is, however, a much more difficult and much more important thing to provide plant, to provide an industrial policy, to provide priorities, and if we discuss finance without having any clear idea of what we want industry to do with that finance we are merely putting the cart before the horse. It has been said many times in this Debate that the only source of re-equipment of capital industry is out of current consumption, and we must not forget that. We have to decide sooner or later, if we are to have an orderly progress in industrial development, what proportion of our current production can be directed to capital ends rather than current construction.
Every year the Chancellor introduces a Budget, a very important Budget, but during war time it has not been the most important Budget. It has merely been the reflection of a secret budget which has been compiled by the Ministry of Labour—the man-power budget. Have the Government considered a man-power budget for after the War? It seems a matter of vital importance. Our aim must be two things; the maximisation of the national income and the maximisation of the social utility of that income, and that cannot be done without a man-power budget. Let me give one example of what I mean. I do not want to raise the question of housing, but it illustrates my point. So far as I know the only indication that has been given to the country of how we are to allocate our man-power after the war is that we shall be employing 1,250,000 men in the building industry. Whether that means bricklayers, joiners and the like, or whether it involves the whole production of building material as well, I am not sure, but I think it refers merely to the craftsmen on the job. Has that figure been co-ordinated with the needs of other industries? Parliament and the country have not yet been told. We have had this figure flung at us without any background or relationship, just as this figure of £170,000,000 was flung at us. Housing is of vital importance, I am told a million houses are needed at once to provide every family with a home and the building of those houses is obviously a priority of immensely high importance, but once we have provided those million houses there will be another problem on our hands, that of slum clearance, which is not so important a priority as that of providing houses for people who have not got them.
I suppose the Chancellor has not forgotten the report of the medical officer of Stockton, in which he stated that when in Stockton they had transferred people from the slums into corporation houses, to his and everybody else's astonishment the standard of health fell. It had fallen because the occupants of the slums, by being transferred to the corporation houses, had merely got as an improvement better sanitation and more air space at the expense of food. In other words, as regards health, they had changed from a high priority to a lower one, and had suffered for it. That is a typical example of what might happen if we get our man-power budget out of balance by not considering total industrial and social needs.
If we have this man-power budget will it work without direction of labour? What is to happen if we do not have the power to direct people to go where the budget needs them?
It is not a problem of the direction of labour. It is primarily the problem of planning the capital equipment of industry and deciding into what industry capital will be allowed to go. Thereafter the problem should be to decide on what lines industry is to be developed. If our man-power budget is incorrectly drawn after the war, we shall get our industrial system off balance. It may he that we shall be building too many houses at the expense of greater social needs. It may be that we shall allow current consumption to impinge too greatly upon capital formation. On the other hand it may well be that we shall allow too great an expenditure on capital to the detriment of current consumption, and thereby enforce upon the community too great a period of austerity. That could easily happen if control of these vast financial resources in the hands of industry is not adequately exercised, and if by their attempting to invest too much they raise prices by inflation.
If we are going to solve the very pressing problems, not merely of the changeover to peace time but the very rapid increase of our national standard of living, it is quite obvious that we must have some well thought out plan for industrial development. I am not suggesting that there should be rigid control of industry. There must be some broad general conception of how industry should develop, and facilities and priorities should be established by the Government to achieve that end. It is no use thinking that because we are providing the finances—which merely represent pen-and-ink entries in ledgers—that we have solved the major problem. This is a question of the control of all industrial operations. We are now, as the old farmer said, "on the verge of the outbreak of peace." It is essential that Parliament should be informed by the Government whether it has framed its industrial policy for the future.
I have not come here to-day with any prepared speech and for this reason I hope the Committee will bear with me if my remarks are somewhat disjointed. I would like in the first place to refer to the suggestion made by the hon. Member for South Croydon (Sir H. Williams) that the banks, insurance companies and investment trusts were told to subscribe to these two companies. That is entirely incorrect. The banks, investment trusts and insurance companies were approached through what I suppose would be called, in Parliamentary language, "the usual channels." That means the chain through the Treasury and the Bank of England to the main representative city associations, and it is entirely wrong to say that they were told to subscribe. It was represented to them that there existed a certain gap in the machinery for financing industry and they were asked to help to bring into being machinery for dealing with that gap. Whether or not there does exist such a gap I would like to discuss at a later stage; but it is the case that negotiations with regard to the smaller organisation were rather difficult These went on for over six months, and in the course of these negotiations the machinery was whipped into shape and those who were asked to subscribe money, for which they stood responsible to their own shareholders had, through their associations, an important part in framing that machinery. The short answer, anyhow, to the hon. Member for South Croydon is that not all of those institutions who were asked to subscribe are doing so. Some have refused to do so, because their directors do not feel they have the necessary mandate from their own shareholders to appropriate the money for which they are responsible to such purposes; and it is rather interesting to observe that a large proportion of those who have refused to subscribe have their habitat North of the Tweed, which is the same place where the Governor of the Bank of England himself comes from, I believe.
This leads to the question of whether there really is a gap in the financial machinery. I am myself inclined to support the view of the hon. Member for Scarborough (Mr. Spearman), who rather doubted that there was such a gap; I would not like to be too positive about it, because I might be proved to be wrong next day. However, there may be a gap and there can be no harm in setting up machinery to deal with it. We can only find out whether there is a gap by going to market to see. My own feeling is that there may be a limited gap for a limited period, and that period is while the Treasury restriction on the normal functions of the capital market endures. I am talking now not of the Capital Issues Committee but the Treasury restrictions on the machinery of issue. I am inclined to think that once full freedom is restored to the capital market, once it is possible in the public interest to restore full freedom, it will be found that there is no gap. If this is a correct view, and if it is true that there is only a temporary gap, then I think we may expect to see these two Companies will not do very much business, at any rate after the first few years of their existence.
I would like to refer particularly to the speech of my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence), who puts his points in a most debatable form, so that it is a pleasure to consider them and try to deal with them on their merits. In the first place, he said, as did the hon. Member for Chesterfield (Mr. Benson), that the capital of these two companies was rather small, in relation to the problems with which we have to deal. As my right hon. Friend intimated it is true that most of us are apt to be born rather small, though we can grow as time goes on. But I am bound to say that when we consider that these companies are formed only for the purpose of filling a gap, and that the total amount at issue is hardly likely, for a considerable period of time to be in excess of the figure of the £1,000,000,000 mentioned by my hon. Friend who spoke last, then surely £175,000,000 must be a considerable contribution to the gap.
It is small in relation to the total amount of capital requirements to be dealt with, but not small in relation to the gap it is proposed to fill. The questions of my right hon. Friend the Member for East Edinburgh were addressed to the Chancellor, and I feel rather like the hon. Member for Walsall (Sir G. Schuster) that, though I know the answers to some of them, it is not my province to reply to them, and so I will merely make some comments on them. There is, first, the question of competition of the new companies with the existing machinery. I should expect that competition to be full and free, and it is very much in the interests of prospective borrowers that it should be full and free. If these companies were to have anything in the way of a monopoly of the business, it would enable them, if they wished, to exact their own terms from prospective borrowers. It would be much better for those borrowers that there should be alternative channels through which they can raise the money if the terms asked by the new Corporations should prove to be too stiff. Therefore, I have reason for hoping that the Treasury restrictions which limit the free functioning of the ordinary capital market, and particularly those which limit the way in which issues should be made, will be lifted as soon as possible so that we shall not have a repetition of what occurred recently, when one of the leading com- panies of the country, requiring some £2,000,000, had, largely as a result of those restrictions, to pay considerably more for accommodation than they would have done were it not for the restrictions. As soon as these restrictions can be modified or lifted, a much freer range of competition between the various channels of issue of capital will be open. Another point which we have to realise is that these two Corporations are entirely different in their purpose, structure and ownership, and that it is not possible to deal with both of them in the same general terms.
The main purpose of this Debate, which was particularly sought by the Party opposite, was to raise the question whether and, if so, to what extent, these Corporations ought to come under the control of this House. In considering that point it is important to consider whose money is at risk and to what it is to be devoted. If these companies are being formed for the purpose of serving the public interest, it ought to be done with the taxpayers' money, and undoubtedly it ought to be under the control of this House. But these companies are being formed for the purpose of finding capital for people, large and small, who intend to use it in their own businesses, and hope to make a profit by doing so. It is not the public interest that is being served, except that, indirectly, the public interest, is served if business as a whole is helped to find necessary capital. As the borrowers are going to use the money for their own interests and will make the best terms that they can, it seems right and proper that the lenders should also be regarded as seeking their own best interests, and it is far better that private money should be put out at private risk. Therefore, it has been decided in the formation of these companies that private capital should be sought for this purpose, and we have to consider whose money is at risk. The money which is at risk in the case of the smaller Corporation is that of the joint stock banks, which will own all the stock of the new company. They will also advance all the additional loans which are required for its business. In the case of the larger Corporation, the capital will be subscribed by the investment trusts and insurance companies, and additional loan money as required will be found by the banks. None of those who have been asked to subscribe this money have any authority from their own shareholders or their depositors in the case of banks, or their policy holders in the case of insurance companies, to provide the funds of their companies for public purposes.
Therefore, two main stipulations governed the formation of these companies. One is that they shall be regarded as commercial undertakings and shall not willingly or knowingly advance money to uncreditworthy people or on improper risks. The second is that those who supply the money, that is to say, the shareholders of these two Corporations, shall be the ultimate authority which appoints the directors. There could be no other basis for asking the directors of banks, investment trusts and insurance companies to subscribe the money of their companies, for they have no mandate from their own shareholders, nor is there anything in their memoranda and articles of association which entitle them to subscribe money for public purposes.
In conclusion I would like to emphasise the governing consideration on the point which is really at issue in this Debate, namely, how far this House should control the operations of these companies. Put in a nutshell, it is that this money is not being advanced in the public interest directly. It is, therefore, being found by private capital. If it is thought desirable by the House that there should be an organisation which should advance money on public grounds, then it should be the taxpayers' money and it should properly be controlled by this House.
I want to refer particularly to the speech of the hon. Member for Ebbw Vale (Mr. A. Bevan). I usually listen to his speeches with considerable pleasure. They are frequently excellent Parliamentary performances, and his arguments are lucid, and frequently persuasive. I must confess, however, that I have never heard a more muddle-headed speech than the one he delivered on this subject to-day. He enlarged the scope of these two institutions, which, as the hon. Member for Chesterfield (Mr. Benson) said, must not be exaggerated in scope or size, until they covered the whole investment policy to be followed after the war. He then laid down a series of propositions, mixed with some incredibly bad history, and anybody who is acquainted with the facts must have found it one of the most ludicrous performances we could have listened to. His attack on the Bank of England and the policy it followed during the crisis between the two wars was utterly unhistorical and uninformed. It is only right to say here, because it should be said from time to time, that the attacks which were made on one individual, the present Lord Norman, were utterly unworthy of the service which the Governor of the Bank of England rendered to the country during one of the most difficult economic periods through which we have ever passed. Lord Norman was always the first to say that he made mistakes, but to anyone who worked with him, for however short a time, it was obvious that he was inspired by the purest principles of public service.
I will not follow that, but may I say that the policy of deflation in this country was settled by the Government of the day and the House of Commons, which decided that we should go back to the Gold Standard in order to pay the American debt. It could not have been a decision of any one individual. It is important to say that the policy that was followed during that difficult period was not the policy of the Bank of England nor of the financial institutions of this country. To take what had to be done to meet a terrible crisis, the most terrible that this country has had to face in economic affairs, as the regimen of normal healthy business is ridiculous. It is the more ridiculous because the very case referred to by the hon. Member for Ebbw Vale was saved by the action of the Bank of England, because it enabled the Ebbw Vale company to be re-established and to be put on a basis which helped it to give employment to thousands of men.
The mention of Ebbw Vale is an example of the danger of trying to influence these economic matters by political considerations. Anyone who has any knowledge of the matter, or who has investigated it, cannot doubt that the proper place for that works was not Ebbw Vale but Scunthorpe, where works and all the necessary ore existed. It is not right to talk about the danger of tearing up people from their homes when new industries are being established or extended. What happened to the biggest extension of our coal field in the new Sherwood Forest? Where did the miners come from? They came from Scotland, Wales and Yorkshire. Should we extend old and bad pits in order to keep people there, instead of developing new and finer coalfields in England when we could bring the people to new, modern villages? Of course not. It is a great advantage, very often, for people to travel from one geographical district where industry is dying, to new districts where housing conditions are bound to be infinitely better.
I come to these two institutions. I do not think they should be exaggerated at all. Anybody who knows about these matters will be aware that they are much more modest than was suggested by the hon. Member for Ebbw Vale. They represent an attempt to fill two gaps. I can imagine the type of thing that would be done. There is, possibly, some opening for them. Take the case of an industry which wants to renew its plant, in conditions where the character of the industry is changing and it cannot immediately show a profit. It is barred, thereby, from the new issue market. It is no use going to that market with an issue in which you say that you think there will be dividends in ten years' time. You cannot go to a bank, because a bank cannot lock up its assets in long-term loans which are not capable of being liquidated. There are occasions when we get what are called "bank babies," and with those sick babies the question has to be asked: "Is it better to put these industries into the hands of a receiver, or should an effort be made? Is there any hope that, if they get long-term finance not normally available to them, they can be saved, and put into a position where they can go to the capital issues market, pay off their longterm loans and resume their functions?"
Let us make no mistake; we are not going to place the whole of fresh issues of capital into the hands of an institution which will not be in a position to decide questions which have to be decided. Here I disagree with the hon. Member for Chesterfield (Mr. Benson). The question of deciding where to put new capital is one of the most difficult problems that anyone could have to decide. There are very few men capable of deciding it in this country, and they always command enormous fees for their services. What one tends to do, is to travel on conventional lines, but these are not conventional days and the industries of the future may not be on conventional lines. I well remember that you could no more raise money for the radio industry at one time than, at about the same time, you could have done for flying. The people who advocated those things were regarded as cranks. Few people would have believed that in a very few years both would have been very healthy industries of great value to the export trade of this country. The same was true of artificial silk. When that first came in, you could have financed cotton, but not artificial silk. So I could go on. That is the whole argument against the solution that has been suggested on the other side, of a permanent investment board. It could never have the experience, the knowledge or judgment to enable it to decide which are going to be the new industries, and which industry had the best right to go to the capital issue market.
During the next few years, we might have a sort of control by the Capital Issues Committee, which has to decide certain things. That Committee should go on for some time. How long, I do not know. To suppose that you can find four, five or a dozen, people with sufficient knowledge and with that curious judgment which is so hard to find, but which can pick out the winner in the new inventions—it does not bear thinking about. We have had in this country, in the past, the finest financial machinery in the world. No country has had the same financial facilities for industry as this country has had, and no country has ever had such low rates of interest. I know of no country where so much money can be borrowed, "on the nod" almost, if you are credit worthy, or for so little. About these institutions, I say let us hope that they will be reasonably successful, and will be valuable additions to that financial machinery which has performed such services in the past and has still greater services to perform in the future. I believe that, with our characteristic common sense and genius in these matters, these institutions, if established, will be made successful, and will perform valuable service to the industries of this country.
It is with no desire to see the Debate unduly curtailed that I intervene at this stage. I notice that other Members sought to catch your eye, Major Milner, and they may yet be fortunate before the day is out. We have had an interesting Debate, in the course of which, as is usual on such occasions, a certain number of criticisms which have been put forward by various speakers have been more or less answered by other speakers. I thought I might perhaps be able to serve a useful purpose by attempting to gather the threads of the Debate together at this point.
I propose, first, to deal with the question which was put early in the Debate by my hon. Friend the Member for South Croydon (Sir H. Williams), when he asked: "What is the case for these institutions?" I think the case can be stated fairly simply. I would refer the Committee to the recommendations of the Macmillan Committee, made in the Report published in 1931. That Committee, which was a very representative and authoritative body, addressed itself to the question of the facilities available for obtaining credit for industry under various conditions. In regard to short-dated credits, the Committee expressed the view that that was the function of the banks and the facilities provided were adequate and satisfactory. They proceeded then to deal with the question of what they called intermediate credit of one or two to five years, and they thought that there, too, that the facilities were adequate where the credit was for internal use. They were more doubtful where it was required to cover sales or contracts abroad.
Then they came to the question of longterm capital where, as my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) pointed out in his speech, they expressed the view that the arrangements available seemed to be organised rather with a view to providing capital abroad than to help industry at home. They put that down partly, I think, to industry's natural desire not to come too much under the direct influence of the banks, an attitude which has found some mild expression in one or two speeches to which we have listened today. They went on to say that, in their opinion, some independent concern with an expert staff of its own was necessary, a concern with a staff which could act as a financial adviser to industry and give assistance in finance or in obtaining finance. That, they said, was hardly a proper function for the banks. They thought that the case might be met—I am giving a summary of recommendations that are spread over many pages of the Report—by an organisation already in existence, the Bankers' Industrial Development Company, provided that that organisation were definitely separated from the Bank of England. That is, as far as it goes, part of the case for the larger of the two bodies that we are discussing to-day, the body which is to be called, I think, the Finance Corporation for Industry, Limited.
Now I come to the other one, the smaller body, and there too the case is to be found very largely in the recommendations of the Macmillan Committee. Perhaps I may quote textually from the Report of the Committee, where they said that it had been reported to them
that great difficulty is experienced by the smaller and medium sized businesses in raising capital which they may from time to time require, even when the security offered is perfectly sound. To provide adequate machinery for raising long-dated capital in amounts not sufficiently large for a public issue, that is to say, amounts ranging from small sums up to £200,000,
which was the limit I put in the first statement I made on the subject in this House; they said that that process,
always presents difficulties. The expense of a public issue is always too great in proportion to the capital raised. Therefore, it is difficult to interest the ordinary investor by the usual method. The investment trust companies do not look with any great favour on small issues which would have no free market and would require close watching, nor can any issuing house tie up its funds in long-dated capital issues of which it cannot dispose.
I do not think I need go on with the quotation. The Committee quite seriously considered that there was a gap, which became known as the "Macmillan gap," in the facilities available. That, in a
word, is the case for the smaller of the two Institutions.
But is is not the whole case. I would call the attention of the Committee to a further point. The very high rates of direct taxation which have been in operation now for a considerable period of years and the high rates which, so far as I can foresee, must continue for some considerable time to come, must inevitably have the effect of reducing very materially the volume of resources available for provision through the ordinary traditional channels through which capital has, in the past, been provided for enterprises of various kinds.
It cannot be seriously disputed that there is scope for further facilities of the kind which these two institutions are designed to provide. These institutions are not to be looked at as though they were organisations discharging public responsibilities, and doing so even to the exclusion of other agencies. They are to provide facilities additional to all those that already exist, through the banks, trust companies, organisations like the Charterhouse Trust, and so forth, within the framework of private enterprise. It seemed to me that the speech of my hon. Friend the Member for Ebbw Vale (Mr. A. Bevan) was largely vitiated by the fact that from beginning to end he talked as if these were to be public bodies, answerable through some Minister to this House, dealing with funds for which the Government and this House had responsibility, and in which the general public, as distinct from the particular shareholders or organisations which are providing the funds, had a direct concern. Of course nothing of the kind is the case. If we were going to set up a public organisation to provide funds for industrial enterprise of one kind and another, we should require a very different set-up from that contemplated here. That is not the position at all.
I said that the hon. Member argued as if the functions which those concerns were to discharge were those appropriate to a public organisation. What are the public functions which these bodies are to discharge? [An HON. MEMBER: "In the national interest."] We are also concerned in that, every one of us. Every organisation in the country is very much concerned. I, as Chancellor, am very deeply concerned.
I agreed absolutely with my hon. Friend the Member for Walsall (Sir G. Schuster) when he said we are developing a new technique in these matters. We are in the presence of what he called a new synthesis. We are endeavouring, in one way or another, to establish such a connection between the Government and the organs of government, and individuals and organisations outside, as will promote the public interest in the presence of a positive Government policy in the economic field, a policy which, for example found expression in the recent White Paper on full employment. The conception embodied in that White Paper implied, as I have said before, a sort of partnership between the Government and private enterprise. It is quite inevitable. That does not mean that private enterprise is going to assume public responsibility, in the sense of a responsibility that can be brought home through the responsibility of Ministers to Parliament, but I think it does imply, as my hon. Friend said, that private enterprise should recognise, as I believe it does in a very large measure, that it has, in common with other elements in the community, a public responsibility. It must concern itself with the public interest.
Supposing one of these two Corporations were to authorise the use of capital for purposes which the Government considered contrary to their full employment policy, what attitude would the Government take?
May I pursue my argument? I shall not disregard that point. I do not in any way disclaim such responsibility as properly belongs to me, for the creation of these organisations. My hon. Friend the Member for Walsall was perfectly right when he said that I had been concerned from the beginning in the steps that were taken, in the consultations that took place, which have led to the creation of these two organisations. I am in no way ashamed of the part I have played in this matter. We are going to have a close integration of the activities of these organisations—which are essentially a product of private enterprise—with the activities of the Government. From my point of view, it will, I am perfectly sure, be a great advantage to have in existence bodies operating on the considerable scale which is here contemplated, with which not only I, but my right hon. Friend the President of the Board of Trade, will be in more or less continuous touch. These bodies will be assisted, not only by regional organisations, but there will be, in the case of the larger body, an advisory committee of a representative character available for consultation.
My right hon. Friend must realise that throughout this Debate we are discussing to what extent we can make the functions and activities of these organisations responsible to the House of Commons. This Debate would never have occurred at all had it not raised that issue. My right hon. Friend says there will be an advisory committee, who will be dismissable, at the disposal of the persons who appoint them. He now suggests that I was wrong in regarding them as their creatures. What are they, if they can be dismissed by the Corporation whenever it wishes to do so?
It is rather a strange charge, I agree. With great respect, we are not discussing how these bodies may be made answerable to the House of Commons. I think we are probably discussing haw the existence of these bodies will hear upon the responsibility of Ministers to the House of Commons, and I am engaged in endeavouring to explain to the Committee how I think the new organisation will work.
As I say, the Government will be in touch with those who are directing these new bodies. I have no doubt whatever that the boards of these institutions will have sufficient good will to be desirous at all times of paying heed to any advice or suggestions that may come from the Government, whether from my right hon. Friend the President of the Board of Trade or myself. My right hon. Friend the Member for East Edinburgh referred, in terms certainly not of condemnation, to the traditional association which had grown up between the Chancellor of the Exchequer and the Governor of the Bank of England. He was speaking with knowledge. That association does exist. It does not in practice mean the subordination of one to the other at any time. It does mean close and frequent exchange of views, which, in my opinion, is of very great advantage in the public interest. That at least has been my experience and the experience, I know, of my predecessors. The association goes back to the very earliest times. There have, indeed, been occasions on which the Chancellor of the Exchequer and the Governor of the Bank of England have disagreed; but at all times it seems to me that in the sort of community that exists in this country such an association—and this is only one out of many that could be quoted—has very great advantages.
Before this Debate was decided upon questions were raised as to the limits of the responsibility which Ministers could fairly be expected to assume for the working of these Corporations. I would like to give the Committee, in general terms, my own idea of how the thing should work. It seems to me that Ministers may fairly be held accountable, and be called upon to furnish information and answer questions and, if need be, criticisms, in the House, so far as the operations of these institutions affect the general economic policy of the country, so far as they may bear upon specific items of policy, such as the cheap money policy, the general investment policy, and the problem of inflation, which may in future be a very serious preoccupation, not only of the Government but of organisations such as these. There is the very important question of the Capital Issues Committee, about which I will say a word in a moment. I will also say a word about the general policy in regard to capital issues, at any rate during the transition period, which I think may very well extend beyond the two years that my right hon. Friend indicated. These are all matters in regard to which Ministers can be held responsible. On the other hand, when it comes to the detailed working of these institutions, and how they set about examining particular applications, what terms they charge, and matters of that kind, concerning the internal economy of the organisations, while Ministers may be asked to provide such information as they possess—and I have no doubt they will be willing to give it—they should not be held answerable, because these matters will be beyond their scope.
This is very important. Mr. Speaker stated that he would advise the Clerk at the Table on what Questions were admissible to the Chancellor of the Exchequer on the functioning of these Corporations, on the basis of this Debate. Therefore, what the Chancellor is now saying is of the greatest importance to our future procedure. What he is saying means that all the Questions that may be put concerning the operations of these Finance Corporations could quite easily have been put before they were formed, because the bearing of capital issues upon inflation and all those other considerations were matters that could always be put to the Chancellor of the Exchequer. If he denies that he is responsible for any of the internal workings of these Corporations and for how they use their powers, we can put no Questions on any specific matters of that kind. Information is a matter for the Board of Trade, not for the Treasury, because the Board of Trade is the Ministry that deals with statistics.
I was speaking of Ministers, not the Treasury in particular. As I said, I was only putting my own views as to how the thing will work. I am not disclaiming responsibility. I think there is a considerable field in which Ministers may be held accountable to the House for the general working of our economic and financial arrangements. It seems to me that they could be held responsible in some degree, as the hon. Member says, before these bodies came into existence, but I think that the existence of these bodies and the fact that the Government will be in touch with them justifies a closer degree of responsibility.
It is important that we should not press too far inferences based on consultations which are known to be taking place. My right hon. Friend the Member for East Edinburgh began by saying that the Bank of England will appoint the chairman. The Bank of England will appoint the first chairman of the smaller body, but subsequent chairmen, I presume, will be appointed in the ordinary way by the directors. There is nothing at all in the plan about the appointment of the chairmen of the larger body. I have no reason to suppose that it will be made by the Bank of England. No doubt there will be consultation with all the organisations concerned, of which the Bank of England will be one. He went on to say that the Chancellor of the Exchequer of the day and the Governor of the Bank of England had to be in very close consultation, and, he proceeded, "the will and purpose of the Chancellor of the Exchequer must prevail." No doubt, in regard to issues of the very highest importance, in the last resort, the will of the Government of the day must, with the sanction of Parliament, be made to prevail. But in the sort of day-to-day consultations that take place, I do not think that the question of making the will of one Minister prevail, in a matter for which he is not directly responsible, is at all likely to arise. I do not think that that is how it will happen. I think that, by the process of consultation, the mind of each will be informed, and progress will be made towards a full measure of agreement. But if there should be disagreement and the issue is not one of the absolutely highest importance, each will in the end act within his own sphere, in the discharge of his own responsibility.
This is of supreme importance. I have never suggested, or imagined, that the Chancellor of the Exchequer would be responsible for any of what we might call the day-to-day, or even the week-to-week, policy of the Corporations, but the question to which I was devoting my attention was that of the fundamental matters of policy to which his attention will be given. One question was, whether these organisations would make their decisions on financial considerations alone? That is the kind of thing for which, I say, the Chancellor must be held responsible, because it belongs to his category of things which are vital to the economic wellbeing and stability of the country.
I do not think we are far apart. I was only a little concerned about the phrase, which my right hon. Friend used, that the will and purpose of the Chancellor of the Exchequer must prevail. I will certainly deal subsequently with the questions that my right hon. Friend put to me.
I think it was in the course of the speech of the hon. Member for Ebbw Vale that some remarks were made about the unfitness of bankers to control these matters, and to exercise a dominating influence over industrial development. It is really of the essence of these plans—the point is one to which I myself attach considerable importance—that these Corporations should have an identity of their own, that the directors should be chosen not primarily for their financial knowledge or experience, but that they should be men of wide industrial and general business experience, and that the banks, as such, should not exercise a dominating influence in the formulation and application of the policies of the Corporation. The Bankers' Industrial Development Corporation was very much more closely associated with banking than these companies will be, because the Bank of England had a 50 per cent. share, and the Governor was chairman and had the casting vote, so that it might have been said, though I do not think it would have been entirely true, that that Corporation was a creature—to use, with apologies, the language of my hon. Friend—of the Bank of England. But actually, in what happened between the two wars, unless I am very much mistaken, the policy that was followed, right or wrong, was framed by the industrialists concerned, and the financial institution provided the finance. That, at any rate, is my reading of the position in that respect.
There is another respect in which these organisations are vastly different from the Bankers' Industrial Development Corporation. That body was brought into existence for the purpose of facilitating what was described as the reconstruction or rationalisation of industry under the shadow of a great depression. It was concerned very largely with what might almost be called rescue-party work. But here we are, I hope, at the beginning, or very near the beginning, of a period of expansion, seeking as part of a constructive policy and of a determination shared by all, to promote, by every means in our power, a policy of full employment. We do not picture these organisations as being brought into existence to serve a purely temporary purpose. We think, at any rate, that they will be found useful, as the hon. Member for Hastings (Mr. Hely-Hutchinson) said, as a permanent part of our organisation. I hope so, and, as I have said, from my point of view, two things are vital: first, that the organisations should maintain continuous and close touch with the responsible Departments of Government operating in the same general economic field, and, second, that they should not be dominated by banking or any other particular interest.
If I might come now to the specific questions which were put to me by my right hon. Friend the Member for East Edinburgh, I think I shall, in that way, be able to fill in the gaps in what I have been saying, and present, in a convenient form, a general picture of the working of the two organisations. My right hon. Friend was kind enough to give me his questions on paper, and I am very much obliged to him. He first asked to what extent are the funds of the Corporations to be regarded as revolving funds; otherwise, how fast may they be used up? First, let me deal with the distinction which must be drawn between the large Corporation and the smaller. In the case of the larger Corporation, part of the intention is that the organisation will be available to provide temporary finance pending some permanent arrangement, and one would hope that, to a considerable extent, the money made available by the Corporation to the industries which are assisted would come back within a comparatively short period of time. In the case of the smaller Corporation, designed to assist small industries which have difficulty in raising finance in the market, most of the loans will probably be of a much longer and more permanent character.
Before my right. hon. Friend leaves that point may I ask whether in the case of the smaller Corporation, if the matter is ripe to go through the issue market, it will do so and release funds accordingly?
Certainly, so much the better, but I was calling attention to the distinction between the two. My right hon. Friend's next question was: If the Corporations want to increase their capital by borrowing powers, have they to get sanction, and, if so, from whom? The answer is, that the Corporations will be free, by an amendment of their articles of association in the ordinary way, under the Companies Acts, to extend the permitted scope of their operation, if experience seems to justify that course. I have very little doubt that, inasmuch as there was consultation with the Government before the initial scope of their operations was determined, there will be consultations in future, if any change is thought to be desirable. Of course, if one of these Corporations decided that it would enlarge the permissible scope of its operations by raising more capital, it would have to conform to any requirement that might, for the time being, be in force in regard to the control of capital. That is the position to-day. They cannot go forward at all, without getting permission of the Government, after application to the Capital Issues Committee.
Next, my right hon. Friend asked what is the precise significance, apart from the amount, of the difference in wording of the objects of the two bodies. I think I have already indicated it. It is a rather different approach in the two cases to the problem of finance. The next question of my right hon. Friend was: To what extent will their activities overlap the functions of the banking system? The answer to that is that they are not designed to displace anything, but to be entirely supplementary to existing facilities and resources. My right hon. Friend then asked me if considerations other than finance, would be taken into account in reaching a decision to grant or withhold loans. The answer is this: The Corporations will be managed on ordinary commercial principles in, this sense—that they will not take risks which are not, in the judgment of the directors, reasonable risks to be taken. On the other hand, it is definitely the view of those who have been responsible for organising these institutions, that their primary concern should be to make available facilities that are required in the public interest. They will not be out to make safe profits on as large a scale as they can. They will aim at a reasonable return on the capital that has been sub- scribed, and they will be ready at all times—so I have been assured by those responsible—to consider the best advice that may be made available to them, either through the Advisory Committee, on which all industrial interests will be represented, or through the Government, as to those developments which are most in the public interest. Of course, so long as control of capital issues continues, there will be available, through the machinery of the Capital Issues Control, direct advice which can be made effective, in practice, for the purpose of directing capital into the most useful channels.
That brings me to the next point, which I have already partly answered. At what point, if at all, will the Capital Issues Committee be consulted? The hon. Member for Ebbw Vale did succeed in putting the cart well before the horse, because he seemed to assume that a concern requiring facilities would go to one of these organisations, make its proposals, justify its application, and having got consent, after possibly consultation with the Government on the part of the organisation, would then go to the Capital Issues Committee. It will surely be the other way. The Capital Issues Committee will have to say whether it is a case where a capital issue will be permitted and then, when they have given their consent, perhaps a conditional consent, the concern will go to one of these Corporations, if it should decide to take that course, rather than an alternative course, for the provision of the necessary capital.
The next question links up with the question I have already answered—Will any priority be given to concerns requiring capital for purposes which it is in the national interest to further? In the exercise of this Capital Issues control, surely that purpose will be effectively secured, at any rate, for a long time to come. When and how the present capital issues control will be removed I cannot say, but it is certainly bound to continue as we pass through the transitional period for quite a considerable time.
The last question was: Will the assistance given cover subscriptions to equity capital with varying returns, or will they all be loans at fixed rates of interest, and if so what will determine the rate of interest? These are matters which will be in the discretion of the directors of the Corporations. Their articles of association are wide enough to enable them to participate in or take equity shares or to lend capital, and in regard to the rates of interest they will have to act according to the best of their judgment. I think I have dealt fully with the field already covered by the Debate. I have answered the questions put so helpfully by my right hon. Friend and I only want to say, in conclusion, that I most cordially welcome the collaboration of my friend the Governor of the Bank of England, and those with whom he has been associated in the City in bringing these Corporations into being, and, as I said in the first statement I made to this House, I regard them as being directly in accord with, and calculated to help in an important degree, the Government policy of full employment.
I am sure that the Committee very much appreciates the full and detailed account which the Chancellor of the Exchequer has given of the purpose and functioning of these new organisations which are to be set up. I do not think that anybody in any part of the Committee disagrees with the contention that such new organisations are necessary. It is evident, not only for the reasons given in the Macmillan Report, but in the light of the situation that will exist directly the war is over, that it will be desirable that concerns, particularly those which have been doing war work, should have adequate facilities for raising capital to tide them over a temporary period of rehabilitation. Large numbers of firms who have formed part of concentration schemes will have difficulty in coming to the public and asking for capital because they will not be able to prove their stability from their records. There is no doubt at all—I certainly have no doubt—that finance organisations such as those suggested will form a necessary part of our economic set-up.
The point on which there is strong disagreement is: who is to control these important organisations and are private or public interests to be dominant? We have had three points of views put during the course of the Debate. We have had the point of view of the hon. Member for Hastings (Mr. Hely-Hutchinson). I was sorry there was not a fuller attendance in the Committee when he spoke, because I look upon him as a great asset to the House, as the man who speaks frankly and freely what is in the mind of bankers. He does not hedge his remarks, but says things that are rarely said in public, because usually City people are careful to cloak their views in high-principled language. But not the hon. Member for Hastings; and I admire him for it. He said that the loaning of money from the insurance companies or banks to industry is solely a private affair; it is private money being lent to a private company or a private individual concerned only with one private object, and that is, the making of profits. Therefore, the public interest only comes in indirectly and the whole thing should be in the hands and under the control of private interests, namely, the nominees of the insurance company and the bankers.
That is the case which the hon. Gentleman put up very honestly, and it is the case from which we on this side of the Committee dissent strongly. We maintain that the allocation of the resources of this country—the financial resources representing the real resources in the shape of raw material—is a matter which affects the public of this country primarily, the lives, it may be, of thousands of individual workers in a large number of factories as well as the prospects of large managerial staffs and even the welfare of whole communities and townships. Therefore, it is ridiculous to say that, because the money comes from insurance companies or from banks, the matter is a private one and private interest alone must determine the direction in which the loans are to flow and the conditions on which they are to be given. We reject that outlook wholly. The prospect of those companies functioning under the management of men nominated by the hon. Member for Hastings and his friends without substantial public control is alarming indeed. From the whole outlook and general social philosophy of the bankers it is highly dangerous to put them in control of this essentially public business.
But the Chancellor of the Exchequer and the Government do not go as far as that. The Chancellor accepts the situation that there should be a measure of Government responsibility in these matters. The difficulty lies in deciding how big that measure should be. It is one of the diffi- culties at which we have arrived in our present stage of economic development when we are mixing a huge area of private enterprise with a great measure of public responsibility. It is an exceedingly vexatious business, as not only the Chancellor of the Exchequer but, I am sure, the President of the Board of Trade fully appreciates. Consequently, we are witnessing the establishment, as in this case, of new techniques and new organisations in an attempt to combine the two elements successfully.
The scheme which the Chancellor of the Exchequer has put before the Committee to-day is, as I understand it, this: These organisations will be responsible through their own board, and their own advisers, for the detailed administration of their work. They alone will decide to whom they will lend money, and on what terms; and the Chancellor will not interfere. He, however, will be responsible for the general economic policy involved, and he will be prepared to answer to the House in respect of that and other major considerations. That is a compromise which is understandable, and it is one which one would expect, in point of fact, from a Coalition Government. But I, and I think many of my colleagues with me, believe that the functions of these organisations will be so important that the details, the decision as to which industries—maybe big industries—which townships, which communities will benefit from the loans which these organisations will grant, should be the responsibility of public representatives and not of any private individuals.
There are all sorts of questions of public importance which must come before this Committee of bankers' nominees which bankers' nominees are not able to decide and should not be asked to decide. There might well be two concerns, manufacturing similar articles, coming to the Committee and demanding loans so that they may rehabilitate themselves. The Committee may wonder whether they should both receive loans when it may be wholly undesirable that they should both expand or whether it would be in the public interest if the two concerns came together and amalgamated, or whether that might be contrary to public interest. All sorts of difficult questions of public policy may arise, and almost certainly will arise, in respect of many individual applications made by firms in this country for help, and only someone who is responsible to the public and accepts full Parliamentary responsibility should decide. There may be a clash between applications made by firms whose products are highly desirable, are urgently needed in the public interest, and firms which are making luxury or semi-luxury goods. For example, there may be a clash—I think this contrast has been made before—between firms making perambulators and those making luxury cars. The decision between the two will affect the public welfare. The Government should therefore take a far greater interest, and accept far greater responsibility, for the functioning of these two organisations, than he proposes to do.
I want to say one word about the Capital Issues Committee. The Chancellor, if I understood him aright, suggested that the public interest would in many respects be safeguarded by those who decide which capital issues should be permitted. I would point this out, however, that as far as I see it the function of the Capital Issues Committee will change completely when the war is over. At the moment their duty is a very easy one. If any application comes before them, all they have to decide is, should this firm be allowed to issue new capital in the interests of war production? That is the sole criterion, or at least the criterion in 95 per cent. of the cases.
Perhaps I might interrupt to say that the Capital Issues Committee exercises its judgment on the individual cases, subject to any instructions of a general character that it may have from time to time from the Treasury. That is how it operates.
I am not talking about instructions to the Corporations at all. We were talking about the Capital Issues Committee, which is an organisation set up by the Treasury, to which all applications for fresh capital must go. I was only venturing to supplement what my hon. Friend opposite has been saying by making it clear that the Capital Issues Committee do not operate with an absolute discretion; they have directions, which may be varied from time to time, to which they have to conform in the exercise of their individual judgment.
Yes, I am very grateful to the Chancellor, but the present situation is this: that they receive general directions which probably say, "You may grant permission wherever the case is made out that, in the war interest, additional capital should be raised." It would be that sort of general direction.
The sole point I was making was that their task is comparatively easy now, but, when the war is over, their task will be very different and very much more difficult because then, presumably, they may have to make a decision between competitors. Every firm in the country at that time will be trying to expand, to get back to peace time production, and to produce the maximum amount of goods it can for internal or export purposes. I imagine that if the Capital Issues Committee functions at all, unless it gives a blank cheque to everybody, it will have policy decisions to make which will be different from those it is making to-day. I raise this point to ask whether, when these applications come to the Capital Issues Committee stage—before coming to the finance organisations, or maybe, afterwards—the Government are likely to exercise a direct influence on individual applications where any matter of public policy is concerned.
My quarrel with the Government in this matter is that I think that the responsibility which they are prepared to take is only a general one and therefore insufficient. I am frightened that some of the mistakes—perhaps on a minor scale—which my hon. Friend the Member for Ebbw Vale (Mr. A. Bevan) talked about, will take place. I believe decisions will be made entirely in the interests, and according to the principles, of bankers and bankers' nominees. I believe that those who may run these organisations will reflect and share the opinions of the hon. Member for Hastings, that is that they will have no public consideration in view whatsoever, that their only consideration will be financial, namely, whether the firm which is applying for this help is honest, whether it is likely to make profits, irrespective of what its products are, or any other public consideration.
That will be harmful to the national interest. The Government, as custodians of the public welfare, should take far larger responsibility in this matter, and be answerable to us in this House. I know that there is little chance of getting our way in this matter at the moment, but I am glad that we are further forward than we were. The Government are at least accepting a greater measure of responsibility in this sphere of private enterprise than they have ever done before. I welcome that advance, and regret that they are not prepared to go further. I, for one, am looking forward to the day when they will go very much further indeed.
Having listened to the speeches in this Debate, I must confess that some of them have seemed to me to approach the subject-matter under discussion with an air of unreality. I speak not as a banker but as one who, from time to time, is called upon for advice by people who want to increase their capital and extend their businesses. The first thing I would like to emphasise is that I have been very much concerned about certain adverse comments which have been made about the great financial institutions of our country. If Members would reflect upon the magnificent way in which our banking institutions have stood the stresses and strains of war, I think they would hesitate before levelling such criticisms. I certainly thought that the speech of my hon. Friend the Member for Ebbw Vale (Mr. A. Bevan) was a complete distortion and exaggeration of the outlook of those responsible for our financial institutions upon their responsibilities to the country as a whole. From the general tenor of his remarks I rather gathered that he assumed that those responsible for our financial and commercial undertakings were not at all interested in anything other than the limited and restricted interests of their own companies. That is quite untrue, and I believe that on reflection he will admit that the observations he has made cannot be justified by the facts.
What is the position in which we are likely to find ourselves in the immediate post-war days? I was glad to hear the Chancellor say that these Corporations were to be supplementary to the agencies and opportunities available to-day for those who require financial assistance. I am certain that in the immediate postwar period there will be need for every financial agency we can find if we are, in a measurable degree, to obtain full employment for our people. The Chancellor, I thought, struck a solemn, but true, note when he spoke about the drain which was caused upon the financial resources of concerns by the heavy taxation which is now operating and which, I am sorry to say, he thought was likely to operate for some years to come. Many concerns are beginning to be exercised in their minds as to how they can pay off their obligations, not in respect of new plant, but their present indebtedness to His Majesty's Government for Excess Profits Tax and Income Tax, which are not represented in those concerns by liquid assets. One of the major things that these Corporations, and financial institutions generally, will have to consider is the extent to which they can finance undertakings to pay off their indebtedness to His Majesty's Government. The Chancellor said that this heavy burden of taxation, which is likely to operate for some time, is something which is causing the greatest possible stringency on the part of many companies to whom the Government will be looking in the post-war years to provide employment for those coming back from the Forces. That is true.
I differ completely from the hon. Member for North Lambeth (Mr. G. Strauss). I very much deprecate the suggestion that His Majesty's Government should be responsible for the direction and control of operations which need a skill and technique which I, personally, do not look for from Ministerial or Departmental circles. I differ from those who suggest that Parliament, through its Ministerial representatives, is the proper authority to investigate these technical and complicated matters. To say that if we delegate duties to outside bodies we must, therefore, take care to see that we are able to dot all the i's and cross all the t's is a mistake. That is not the function of Parliament. I differ from those who have said there must be greater control from the Government; I, personally, look to the Government to see that to the best of their capacity they will ensure that these Corporations are launched efficiently, and that so far as they can exercise any influence in appointing people the right people will be appointed. I would not be afraid of Government appointments or of nominees of bankers or insurance companies. The test to apply is: "What are the qualifications of this person, his integrity and character?" Having been satisfied on those points I would say: "There is the job; go ahead." It is a mistake for Parliament to attempt to undertake examination in detail of these matters.
I believe that these Corporations will be another avenue by which people who badly need financial assistance will be able to obtain it. What is more important, I believe they will be necessary if we are to continue the employment of our people, and find ways and means of diverting them from war to peace-time occupations. I regret that there has been this vast difference of opinion instead of wholehearted support for concerns which will be able, through their financial assistance, to help us to assure that full employment which it is so necessary for us to obtain after the war
I have listened to most of the speeches to-day and I should like to say how grateful we all feel to the Chancellor of the Exchequer, who has been here throughout the Debate and in his intervention has endeavoured to make clear a number of points which were agitating some of those who have spoken. I am not sure that he has made clear how far Ministers will be responsible for answering Questions on the activities of these two Finance Corporations. When the matter was raised a fortnight ago, Mr. Speaker said:
To meet the difficulty, I have instructed the Clerks to consult the Treasury in order to ascertain whether they have any responsibility in all cases of doubt."—[OFFICIAL REPORT, 9th February, 1945; Vol. 407, C. 2377.]
I imagine that that Ruling, which the right hon. Gentleman has supplemented to-day, places the responsibility firmly upon the Treasury for saying which are questions of detail and which are questions of policy, and not upon the Clerk at the Table when we go there to submit our Questions. I am afraid this policy has not been a great success in regard to the B.B.C. and other matters. I think perhaps, on the whole, we shall have to try it out and see how it works in practice, but I am certain that the Committee understands the right hon. Gentleman's
intention, and that he will be prepared to modify it from time to time.
I was sorry to hear the hon. Member for The Wrekin (Mr. Colegate) make some sort of attack on the hon. Member for Ebbw Vale (Mr. Bevan), but for whose Parliamentary vigilance this Debate would not have taken place. In fact these two Finance Corporations might have been announced in the Press and nothing more might have been heard about them from the point of view of our responsibilities here. The hon. Member's vigilance, in drawing Mr. Speaker's attention to the constitutional question, has enabled us to have this discussion, which was suggested also by Mr. Speaker, in order to clear up this very question to which the Chancellor of the Exchequer has addressed himself to-day. I cannot help thinking that, when the puffing and blowing, and the routine motions of this war Parliament have finished, and when we come to look at what is left of the rights of Parliamentary criticism and debate, the House will find itself under a considerable debt to the hon. Member for his courage and consistency.
I listened with great interest to the speech of the hon. Member for Walsall (Sir G. Schuster), who takes a great interest in the subject, not only in the capacity to which he referred but in a much wider political and economic capacity. As far as I can observe, these two Corporations are certainly not going to disturb what Mr. Lloyd George once called the "frozen penguins of the City of London." I think the mild reception that has been given in this House and in public opinion to these companies is due, to a certain extent, to the mild manner in which they were introduced or announced by the Chancellor himself. It is only to-day that the right hon. Gentleman has been able to clear up their parentage. It seems to me that he is like Sir James Barrie, who in a rectorial address at St. Andrew's referred to the wishful side of himself as a wistful imaginative figure called "Maconochie." I cannot help thinking that these Finance Corporations are from the "Maconochie" side of the Chancellor of the Exchequer, who is a good Scot, and that they are nothing more or less than a piece of harmless window dressing. I was hoping the right hon. Gentleman would have told us a little more about the advisory panel. He started to tell us something more about
it but was interrupted and then found himself involved in a discussion on "creatures." I should like to take him back to the answer he gave on 23rd January to a Question by the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence). He said:
I understand that it is the intention that the management and the labour sides of industry should be represented on the panel."—[OFFICIAL REPORT, 23rd January, 1945; Vol. 407, C. 646.]
I expected that he was going to tell us that this representation of management and labour would not only be at the invitation of the directors or the chairman of these panels but that the chairman would perhaps consult the T.U.C. or the various employers' and management organisations in order to give effect to the direct representation of labour and the management side as well as economic and industrial advisors. I hope he has not said the last thing about that. I appeal to him to take advantage of the considerable opinion in the country which is very greatly interested in this problem, and to see that, in its broadest sense, there will be the fullest representation on these panels.
I had the interesting experience recently of meeting a very large industrial discussion group, representative of shop stewards, trade unionists, and including members of the Labour Party, Liberals and Conservatives. These very problems that we have been discussing have been extensively discussed by them, over a fairly long period. It is interesting to notice how, over and over again, when we come to consider the solution of almost any post-war problem, all sections of this group pose the same questions over and over again which have been put to-day to the right hon. Gentleman. What are to be the relations between industry, the Government and finance at the end of the war, on questions of policy and political principle? I have heard the suggestion that, instead of "Wings for Victory" weeks, and Warship weeks, we should, after the war, have industrial investment weeks and that, when the National Savings movement has finished, we should have a national investment campaign and that the savings of the people should be invested in some of the national stable industries of the country through central direction.
I think these two Corporations are being formed for a very limited purpose. I think they have been formed on the initiative of the right hon. Gentleman merely to "spread the risk" in undertaking these loans and legitimate advances and for no other reason at all.
It is my view that the banks, insurance companies and investment corporations, particularly those investment trusts or companies which are already financed by the insurance companies or the banks, provide all the facilities of this kind that are required to carry out necessary refinancing. This new set-up will not add a single penny piece to the effective credit available to smaller business concerns who want to obtain loans at the end of the war. What is the experience of people who have seen this sort of thing working between the wars? Of course everybody wants fresh capital. Everybody has at some time or other bright ideas for putting in new machinery, of entering new fields, or making fresh products or getting fresh export markets. Any concern which is credit-worthy, which has a reasonable balance sheet which will enable them to borrow, can, at the present time, through existing machinery, and if over £10,000 through the Capital Issues Committee, get all the credit it wants up to the sums which have been referred to. This has been done before. There exist several excellent public institutions which were set up many years ago, with the same object of enabling the banks and insurance companies to get liquid funds and investments through to the whole field of smaller concerns. These organisations still exist, and they could carry out all the requirements which the right hon. Gentleman claims are to be carried out by these two newly created Corporations. Therefore, I repeat the only reason they have been set up is to spread the risk. The rest is merely political show.
We do not very often have the Chancellor of the Exchequer and the President of the Board of Trade together on the Front Bench planning the new world on a Friday. Now that we have got them there, I would like to ask them how these new Corporations, will fit in with the various schemes that have been put forward by that energetic industrialist Mr. Devereux, such as the Cumberland plan. That is a scheme to give Cumberland the opportunity of setting up new industries.
It has been based on a full economic and geological survey. It is called planning by co-operation, and it will enable local interests to know what national resources are in the locality and available before they begin to plan their post-war development. How will the new Corporations fit into plans of that kind? There have been several references to the South Wales plans where we hope there will also be new projects. I do not mean making dolls' eyes and that sort of thing, but fresh orientation of national industries. How do the two Finance Corporations fit into plans of that kind? No reference has been made in the Debate to the vast field of re-financing at the end of the war in regard to the re-equipment of the agricultural industry. Is that to be left to the Agricultural Credits Corporation, or will co-operative organisations of farmers, or large individual farmers, or even small farmers be able to go to the Corporations and obtain the necessary borrowings to enable them to take advantage of the opportunities which the Government have promised to place in their way and get finance for re-equipment and rebuilding which has been lagging during the war years, or are they to take advantage of existing credit and mortgage corporations?
This scheme is a piece of window-dressing. It will give no considerable extension of credit to the smaller industries. The Chancellor of the Exchequer will have tremendous responsilibities on his shoulders at the end of the war in the re-financing of industry. I have no doubt that he is aware of it by now, and I hoped that taking advantage of this Debate, he would tell us something of what he has in mind with regard to a national investment board at the end of the war. Planners, traders, industrialists, agriculturists, trade union workers and everybody are waiting to know what is to be the function of the Government in relation to industry and their planning for the post-war reversion. I ask the right hon. Gentleman to take the first opportunity to tell us what he has in mind in order to facilitate the fairest and most prosperous conditions for all concerned.
I want to try to clear up a little confusion that has been created in my mind by speeches made from the opposite benches. To go back to the example of raspberry jam given by the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence), he was concerned as to which kind of raspberry jam is to be made, and it is an important thing whether we are to make raspberry jam of Grade I, II, III or IV. But who is to make the jam when it has been decided what grade of jam we want? The industrial policy of this country has to be much more under guidance from the Government that it was before the war. I am glad to see the President of the Board of Trade here. Surely he will have various means of influencing whether we are to make raspberry jam or not. I have on my notes such things as the Capital Issues Committee, under Treasury control, the location of industry, building permits, foreign exchange control and bulk purchase. All these are admirable weapons with which to influence the shape and nature of production over part of the field. Nobody, at any rate on this side of the Committee, imagines that the Government will determine the whole of the productive capacity of this country, but a great deal more should be done than was done before the war.
Having decided that certain things should be produced rather than others, that raspberry jam of the type which the right hon. Gentleman the Member for East Edinburgh makes in his kitchen is a good thing to produce and not the jam with fabricated pips, we then have to ask, "Who is a good jam maker?" This is the point at which these two Finance Corporations come into the picture. If the jam maker requires money, it is somebody's money. It is either the depositor's money, in which case the bank must take care that the money is not lent to a man who has no real experience and gives no prospect of being good at his job; or it is the taxpayers' money, or the money of somebody who has lent it to the Government, in which case it is the Government's business to see that the money is properly spent. There must be machinery far vetting the credit-worthiness of the person who is to carry out the industrial policy, whether he is carrying it out with private money or Government money.
The hon. Member is talking nonsense. Neither my party nor I advocate the abolition of all controls. Perhaps that is the only counter-scare with which the hon. Member may make progress in his part of the world, but in my part of the world we do not advocate the abolition of all controls. These two Corporations are valuable because they bring into the scope of Government policy the experience of bankers who are able to say who is worthy to have money to carry out the bits and pieces of our industrial policy. They will no doubt lend money to a great many people who are not doing things which my right hon. Friend the President of the Board of Trade may have decided should be done. That is natural enough. There will be plenty of activities which are good, but which are not to be planned, but there will be other cases where my right hon. Friend will have to know that he has some financial institution in the background to which he can go and say: "The project for making this kind of raspberry jam appeals to me. See that the people who come along get their money, but tell me who is creditworthy and who is not." I can see a very valuable partnership in planning employment after the war and not wasting people's money. Therefore, I am for these institutions.
I hope that they will also be there to supply money to firms who have not been able to pile up cash reserves during the war. It seems to me that some firms who will end the war with enormous cash reserves, might, if they were allowed to do so, be able to get such supplies of material and labour as to give them an unfair advantage over others. Because of E.P.T. or some other reason, the other firms might not have been able to accummulate cash reserves. The two Corporations might very well fill a gap there. For that reason, and for the reason which the Chancellor of the Exchequer gave regarding the shrinkage in private persons' savings, I support these institutions. I would, however, like to repeat the question put by the hon. Member for Eye (Mr. E. Granville) concerning agriculture. I hope that the Chancellor of the Exchequer will not be godfather only to industry but will remember there are other people who very badly need help, especially in small units. I am not competent to say whether or not the help which is going to be given to industry under these two Corporations exceeds the help which agriculture can get from the Agricultural Mortgage Corporation, but I ask that agriculture should have the same credit facilities as industry.
Finally, I agree with what my hon. Friend the Member for Walsall (Sir G. Schuster) has said, that this is one of the steps forward in bringing private persons and interests into harmony with the public interest. It will not work unless a great many of us display rather different principles and rather different breadth of vision in our business dealings. I am not very old, but I believe that my generation are definitely different in this respect from business people in the 19th century. We have learned something. If we are given a chance we will show that reconciliation between the profit motive and the public interest can be brought about, with great advantage to this country.
In some respects the importance of these two Finance Corporations has been a little exaggerated. The larger one is to consist of a consortium of investment companies and insurance companies which will subscribe the share capital. Its loan capital of £100,000,000 is to be subscribed by the banks The smaller Corporation is to have the whole of its share and loan capital subscribed by the banks. So, out of the possible total of £170,000,000, not more than £25,000,000 is to be subscribed by the insurance companies and the investment companies. The remainder will be subscribed by the banks. The whole of this fund will obviously be subtracted from the resources that the participating bodies could have had available for lending directly and there will, in the end, be no greater funds available for lending than there were before the Corporations were formed.
It may be true, as the Chancellor of the Exchequer has said, that these Corporations will help to fill a gap which was described by the Macmillan Committee. They will be the means of providing finance for people who have had difficulty in obtaining it in the past, but to the extent that they do that and their funds are taken away from other purposes, it does not appear that, in toto, those who are concerned in industry will have any more finance available to them than they would have had if the Corporations had never been formed. It does remain possible, however, that some people who should have got finance will get it and some people will not get finance who otherwise would have got it and should not have had it. That seems to be the sum total of the matter.
There is another aspect, to which the Committee should devote a little attention. These companies, according to an answer which the Chancellor of the Exchequer gave to a question by me a little while ago, are to have the power to subscribe for shares or debentures of the companies whom they assist. It seems quite likely that they will, whether they do that or whether they simply advance money without doing it, insist on having nominees of their own on the boards of directors of the companies which they finance. In the case of the larger company, which will have available a share or loan capital of £125,000,000, it is clear from the description which the right hon. Gentleman gave that it is intended to make temporary advances and that it is contemplated that, after a time, the companies which have been assisted in that way will make share or debenture issues in order to raise the money to repay what they have borrowed from the Finance Corporation.
Therefore its capital will be a revolving capital which will, in the end, so to speak, be used many times over, but it does not follow that when the capital which has been borrowed from a Finance Corporation has been repaid, its nominee upon the board of directors will cease to sit there. It may be that he will continue to be there. There is, therefore, a possibility that, in the course of time, these Corporations may acquire a very large amount of power over the whole direction of industry in this country, and that the process which has been so deplorably evident for many years of concentration of control of industry, and the growth of monopoly, will actually be assisted by the formation of these two Corporations. That is a prospect which the Committee ought to look at with some apprehension. If it is a possibility, it indicates very clearly that the Chancellor of the Exchequer will be unable to dissociate himself too far from the administration of these two Corporations, and that he will be obliged, if he wishes to protect the public interest, and if he wants to prevent the growth of monopoly in this country, to see how the business of these Corporations is managed. This is a matter of very serious concern. The growth of monopolies has been one of the causes of the restriction of industry and of production, and of the growth of unemployment to the terrible dimensions which it reached between the two wars, and we must do everything within our power to prevent such a state of affairs from being repeated.
I said that these two Corporations would not have any new savings at their disposal, that they would merely have savings which were diverted from the parent institution. Nor will these two Corporations in themselves provide any capital. By that I mean new capital in the shape of factories, machinery, tools and other instruments of production, newly brought into existence. These Corporations will not provide any of that, and cannot do so unless the people of this country who provide the funds which come into the hands of insurance companies, investment companies and banks, are willing to deny themselves a certain amount of present income and a certain amount of current consumption, in order that the necesesary labour and natural resources should be diverted from the production of consumption goods to the production of capital goods. Therefore, in the end, it turns upon the willingness of the consumer to forego present consumption in order to provide the capital which will be necessary in order to rehabilitate industry. Everything depends upon that in the end, and these two Corporations, even if they have a useful particular purpose, are not the instruments by which that problem is solved. They are merely new channels through which such savings as the people are willing to make may possibly be directed into some industrial channels which they would not have reached in the past, and diverted from other industrial channels to which they might have gone.
The only justification which remains for all this is if it can be demonstrated, upon the lines which were indicated in the Macmillan Report, that the existing state of affairs results in a wasteful em- ployment of the capital resources of this country, and that a better distribution of these resources could be obtained by a device of this kind. On that aspect of affairs singularly little information has been placed before the Committee to-day by the Chancellor, to whose general explanation of the mechanism I listened with attention and admiration, but the fundamental economic aspects of it have yet to be unravelled, and also the steps that can be taken to ensure that these new Corporations do not become a means of a concentration of financial power and the growth of monopolies.
The hon. Member for North Battersea (Mr. Douglas) began his speech by pointing out that the importance of these Corporations must not be exaggerated, but he ended on a note of warning, which seemed to suggest that they might grow to such an extent as to be gigantic Corporations, almost monopolies, which might be a public danger.
The hon. Member also said in his speech that they would only have £170,000,000 capital, which in these days is an extremely small amount. Even if one adds to that the total amount of capital which becomes available as "revolving capital," it can still remain only a very small amount, comparatively speaking. This question of the growth of monopolies to which the hon. Gentleman referred is one which affects and interests us all. I do not want to go into that aspect of the matter to-day. Indeed, I would not have raised it at all but for the hon. Member's speech. I think we must divide monopolies into those which are beneficial and those which may not be beneficial, and must see that in the future monopolies are in some way controlled, but not stopped in respect of the beneficial parts of their operations. I understand there will be a Debate on that subject when the usual channels grant a day for a discussion. I shall be very interested to hear what the Government have to say on that aspect of the matter. It is one in which all sides of the House are interested, and which must be dealt with in some way.
As far as I could gather from the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) these Corporations were looked upon by him with, at any rate, no disfavour, after the explanations given by the Chancellor of the Exchequer. He seemed satisfied. But the hon. Gentleman the Member for North Lambeth (Mr. G. Strauss), from the Back Benches, did not seem anything like so satisfied. I am sorry to see this quarrel on these matters of finance between the Front Bench and the Back Bench of the Labour Party. Perhaps this will be one of the wounds which will be healed before the General Election comes, but it is interesting to see that there is still a dividing line between the Front Bench and the Back Benches opposite. The hon. Member for North Lambeth tried to make out that there should be public control of private money and attacked the hon. Member for Hastings (Mr. Hely-Hutchinson), although he applauded his honesty as a banker in speaking as he did. These Corporations are raising money privately, and it seems monstrous to demand that in the day-to-day, and week-to-week, use of that money there should be some form of public control. If I were a shareholder in one of the interested companies or trusts I should be very annoyed with the directors if they participated in a scheme which might be used for political purposes.
Surely the logic of the hon. Member for North Lambeth's argument is that if he wants control he should raise the money from the taxpayers. If it is to be publicly controlled then it should be public money and not private money. But he said nothing like that. He wants the best of both worlds—the control of private money, and not the issue of public money from the taxpayers' pockets. I suggest he cannot have it both ways. The control, as far as there is control, comes from the Capital Issues Committee. The Capital Issues Committee control this form of issue in exactly the same way as they control any other form of issue. There can be no public or private issue to-day without their permission. This is decided on the general question of public policy, after consultation with the Treasury. In some ways that is no doubt advisable, but it is not fair to private enterprise to try to control it too much, and this idea that there must be public control of private enterprise is not in all cases fair to private enterprise.
It seems to me that as soon as the capital market is free enough to operate in its normal commercial way, the control of the Capital Issues Committee should come to an end. I hope that the Chancellor of the Exchequer is not contemplating in the far distant future—because it is bound to be some years ahead—a permanent control over the issues of capital. It is not fair for private enterprise to be controlled for ever in that way. But for the time being, when there are such tremendous demands on capital, there must be some priorities in its use. I doubt whether it is realised what a tremendous demand on capital there will be. The local authorities' demands will be colossal. There will be demands for roads, schools, town planning, and all sorts of things like that. Over the whole range of local authorities work has been held up for five years, and their activities will be extended as a result of Acts passed during the war. That will demand enormous quantities of capital, which can be raised only in some form of ordered priorities.
Apart from Government and local authority demands, there will be tremendous private demands for capital, not only from the bigger industries, which have been working all the years of the war without being able to repair losses, waste, wear and tear of material, and so on, but for other industries with arrears of maintenance. Machinery will be worn out, because it has been over worked. Buildings have been over worked, too. The demands of public and private capital must be co-ordinated in some way, so that they shall be met as fairly as possible. That is a very big problem for the Capital Issues Committee. I am glad that they will have the guidance of the Government in dealing with the question. If we are to revive and extend our export trade, as we must to live, we must see that there is a fair share of the available capital for private, as opposed to public, needs. It is no good building the most wonderful schools if there are no children or if the parents of the children are out of work. We have to get our people to work, earning good wages, so that they can feed and look after their children. Then will come the time for us to educate them, to put up modern schools, and eventually, when we have got the teachers, to raise the school-leaving age. We must base our policy on a fair share of capital being available for industry, and particularly for the export industries.
These two Corporations will provide for only a small part of industry. They will not provide for the bigger companies or for the very small man. The big companies will have to go either to the public, in accordance with permission granted by the Capital issues Committee, or to the banks themselves. The very small man will have to be dealt with in a different way. I think that the arrangements so far adumbrated—the £150 grant and further loans—are satisfactory, but I hope that the Chancellor will not "spoil the ship for a ha'p'orth of tar" by making the limit for loans so low that the really small man cannot set up his business again. These Corporations are designed only for the medium man, between the very small man and the very big one. Here, I think, as the Macmillian Committee has said, there may well be a demand for a special way of helping them to raise capital. As the scheme before us has the backing of the Macmillan Committee and the backing of the Chancellor of the Exchequer to-day, I support it wholeheartedly, but I hope that it is a limited thing, designed for as limited a time as possible, and that it will not become, as the hon. Member for North Battersea suggested, a huge private monopoly, which may be detrimental to the public interest.
I find myself in agreement with two points made by the hon. and gallant Member for North Kensington (Captain Duncan). First, he says that he wants to see a fair share of the available capital allotted for non-productive things, like schools and hospitals, and for manufacture. So do I. In a time of scarcity the only way to do that is by planning; and the only authority to supervise that planning, and to decide whether schools are to have priority over motor cars, is a Government responsible to Parliament. The second point on which I agree with him is that we cannot have public control over private money. Yet we agree that there must be public control over the major economic resources of this country. It is because I want to see that public control, and because I know that we cannot have public control over private money, that I want to see public ownership of important financial and industrial institutions, so that they can be controlled by the community. The logic of the hon. and gallant Member's argument is that one ought to be a Socialist. But I will not develop that any further at the moment.
The thing that interested me most in the Chancellor's speech was the statement that we are departing from the traditional way of raising capital. The only reason why I have intervened in this Debate is that I believe that this setting up of Finance Corporations by the Government is a very big step away from the traditional economy of this country. The way in which capital has been raised is what has given its colour to our economic theories, and, on that account, has reacted on social ideas as well. The traditional method of raising capital, to which the Chancellor of the Exchequer referred and from which he said we were now departing, was that individuals would risk their money in the hope of receiving a reward, and if they were unsuccessful they stood the loss; and, maybe, when the people who were risking the capital were a large number of small units, it was an efficient self-regulating mechanism. Those who risked their capital successfully were prosperous, and new ideas developed, and those who risked it in a silly way went out of business.
I believe the time has come when that self-regulating mechanism will no longer work, and the reason for this is that it is no longer true to say that those risking their capital are for the most part a large number of small units. One hon. Member has said that it is not the private investor who has to provide large amounts of capital. It comes from the undistributed profits of companies in industry, and from large financial institutions such as insurance companies, which, even though they have gathered up their capital from little people, are not risking it as such. It is impossible to conceive that any Government would allow an important financial institution like an insurance company to fail, because the effect would be such as would destroy the whole financial structure of the country. So I ask hon. Members opposite to realise that the economic theories on which most of their political conceptions have been based are no longer valid because the facts have changed very much indeed.
I wish to develop this scheme for planning in the realm of capital expenditure not only for the reason given by the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence)—that there should be priorities—but for the much more important reason that there must be full employment. If the experience of the last 20 years is anything to go by, the big condemnation of the present economic order is that it does not use the available capital which is in existence. There has always been a certain amount of it unused.
I come now to the point made by the hon. Member for Walsall (Sir G. Schuster), who said he believed that, in the future, no industrialist would ever do anything which was, in his view, definitely against the public interest. Let us assume that the industrialist is a man entirely public spirited and only wishing to do that which is for the good of the community, as I believe is so in most cases. Even such a man, public-spirited and philanthropic, if he sees an undertaking in which he can invest his capital and produce goods that are required by the community, at the same time providing the employment which is needed by the community, will only do so if he is going to be able to pay a dividend on the capital he has invested; in other words, if he can do the work at a profit. It is all right for a Government to try and control an industrialist if he has already decided to do something, but, if he decides that something cannot be done because he cannot make a profit there is absolutely no power on this earth by which the Government can make him do it.
I believe that it is the necessity of having to pay dividends, and therefore of having to make profits, that is the regulating mechanism of our industrial system to-day, and one has to consider these Finance Corporations against that particular economic system. I believe that the hon. Member for North Battersea (Mr. Douglas) is right when he says that, if they are brought into such a system, they will only increase the present tendency in that system to develop monopolies. I do not think that we shall see anything from these Corporations except a tendency which has been going on for the past 40 years, I suppose, and has increased during this war, for financial and industrial units to coalesce into monopolies, and I do not believe that we can cut them up, either by legislation or any other means. It is an inevitable growth. That is another argument why monopolies should be put under public ownership and directed to the public good.
I want to deal with another aspect of this matter. In setting up these Finance Corporations, the Government are taking a hand in seeing that capital is provided for industrial development and they are going to do it by a system of borrowing. In what circumstances is it sensible to borrow? If one is going to spend a large sum to-day, and a little each day for the next 10 days, then it is sensible to borrow and repay over the days ahead, but if there is to be a uniform expenditure, there is not the slightest need for borrowing. I know that, if one is considering the building of a new steelworks, you may say, "Here is a large capital sum to be expended, and, once this steelworks is erected, there is no more to be spent on this particular works," but, if you take industry over the whole field, then I am quite sure everyone will agree there must be a certain uniform rate of capital expenditure. I, therefore, believe that, if one had a planned economy, one could, anyway, provide this amount of capital at a uniform rate, not from borrowing at all, but from taxation. I think an hon. Member opposite said that if the Government were going to control this capital, they ought to raise it from taxation, and I believe that is what would happen in a Socialist State. I do not suggest that that should be done under the present political conditions. If it was found possible to finance any undertaking without payment of interest, it would destroy the whole basis of the present system. If we are to have a rational and planned economy, that can only be done on a basis of the public ownership of the important financial and industrial resources.