The hon. Member for Somerset, North (Mr. Leather) is well known for his vigorous interest in this important subject, and I was glad of two things: one was that the hon. Member recognised that this debate ought not to continue necessarily without controversy and the other was that he took it rather wider than it had so far gone, leaving the more detailed questions of Commonwealth development and looking at the wider political and administrative background. To some extent I want to follow the hon. Member's arguments, but I also want to deal in rather more general terms with the problems that face this country at least in participating in Commonwealth development.
The hon. Member for Harrow, West (Sir A. Braithwaite) is to be congratulated on his success in the Ballot and in the subject which he has chosen, but I could not help feeling when I listened to his speech that he was unhappy himself about the timing of this Motion. I can well understand that. The hon. Member for Somerset, North referred to the mystique of the Commonwealth, but it is an unfortunate fact that never in our history, perhaps, has the Commonwealth been so divided as it is at present; and to that the hon. Member referred also.
It is, I am afraid, a tragic fact that owing to the actions of Her Majesty's Government, most members of the Commonwealth are not at the moment looking to this country for a political or moral lead. One has only to refer to Mr Lester Pearson's very grave speech the other day. Nevertheless, we can all, in the Commonwealth, congratulate ourselves that the Commonwealth is not in any way near to being broken and that the ties that bind it together, in spite of what has taken place, are still extraordinarily strong.
Hon. Members have said that they are ties, first of all of affection, and that is undoubtedly true. They are, secondly, ties of mutual interest and hon. Members have referred to those. In the past, they have been of two natures. The first is the mutual interest of defence, which is no longer the case. No Commonwealth country, I think, looks to this country for its defence, certainly not, for instance, Australia, New Zealand or India, the defence of whose territory has always in the past been the argument for many of our strategic policies. Today, they look more to the United States.
Secondly, there are the ties of commerce and first of all of trade. We must face the fact that as far as the other members of the Commonwealth are concerned, these ties will remain as long as we remain a substantial and fairly secure market for the products they produce. The second commercial tie is that with which this debate is mainly concerned, the ties that arise out of investment and development in the Commonwealth Territories.
I find it an ironical moment for this Motion to be brought forward today. What surplus is this country likely to have available in the next two or three years for investment abroad? According to the United Kingdom Balance of Payments White Paper (Cmd. 9871), during the last three and a half years the annual average net investment of the United Kingdom overseas has been about £175 million, or about half the figure which is usually considered necessary; but as the hon. Member for Essex, South-East (Mr. Braine) hinted, this figure may, in fact, be an exaggeration. It has certainly been falling in the last two years, and the hon. Member quoted Professor Paish's estimate that in the last three years British capital exports have amounted to an average of only £60 million a year.
If this debate is not to be utterly unreal, we have to ask ourselves seriously what the situation is likely to be within the next three or four years. There is no doubt whatsoever that this country—and it is admitted on both sides, I think, that it is from this country that the main capital for investment in the Commonwealth Territories must come—now faces a very serious balance of payments crisis and that we are unlikely to have any substantial sums left over for overseas investment at all, including investment in the Commonwealth. If the figure is to be any lower than it has been for the last three years, it will be negative. My own view is that it will be negative.
It is of course true, as has sometimes been pointed out, that if investment projects in overseas territories are supported from London by the London capital market, those projects themselves will compete for the products of the capital goods industries on which the proceeds of the loans are spent. To the extent that they are successful in competing for the products of the capital goods industries, they will themselves produce a balance of payments surplus.
That begs two questions. The first is whether the finance is available from London and will be taken up on the terms at which it is available; and the second, what is the capacity of the heavy capital goods industries in this country which are required to supply this equipment? Let me deal first with the question of finance. The current rates of interest in London are making borrowing by developing territories very difficult indeed. Lord Reith, to whom so many hon. Members have referred in glowing terms—and I entirely support what they have said—has, at least in his two last Annual Reports, referred to the rate at which he now has to borrow from the Treasury and the cost to the developing territories of the loans or the investments which he is able to make in Colonial Development Corporation undertakings. He has to pay the rate at which the Treasury itself borrows and this is today a very high rate indeed. The result is that Her Majesty's Government, who, after all, are responsible for these rates, are regarded in the overseas territories as usurers.
Reference has been made to the Kariba Dam project. Let us consider the rates of interest paid on the loans from outside the territory itself for this project. Fifteen million pounds has come from the Colonial Development Corporation, which, I understand, is being paid 6¼ per cent. for it; £3 million has come from the Commonwealth Development Finance Company at 6 per cent. or probably more; and £10 million came from the World Bank at 5 per cent., but I understand that as the instalments of this loan are called forward and as the World Bank sells them, they will return to the Federal Power Corporation half the difference between that rate and the rate at which the Bank itself sells the loan. The Federal Power Corporation, therefore, is likely to get back at least a fraction of 1 per cent. of the 5 per cent. which, on the face of it, it is paying, which is already 1 or 1¼ per cent. less than the cost of money raised in London.
The hon. Member for Essex, South-East referred to the fact that Switzerland is now becoming a source of capital for the Commonwealth Territories, but as he pointed out, this is on the whole mainly in those territories which are well established industrially, like Australia and South Africa, where loans are raised at 3¾ or 4½ per cent., and so on. These loans are not available for Colonial Territories, nor, I understand, for independent territories, except on conditions of payment in Swiss francs and other rather onerous conditions.
It seems, therefore, that if advantage is to be taken of capital of this sort, there is need for a Treasury guarantee for loans obtained outside the Commonwealth by Colonial Territories. There is also the important question of the trustee status of the loans raised in this country for the newly-independent territories of the Commonwealth or of other territories when they become independent. In the end, however, if we really mean to assist in the development, particularly in the basic industrial development of these countries, we shall have to give preferential or priority rates of interest for the loans which they wish to raise here. It is not fair, nor does it appear as if we are serious about our desire to assist Commonwealth development, if we charge them the rates of interest which may be necessary to restrain inflation in this country. They must, in other words, have some priority in the investment projects of the Commonwealth as a whole.
That is not by any means the only important factor in Commonwealth development. There are the matters of private investment, to which hon. Members opposite have referred, but perhaps even more important is some stability in the prices and a reasonable level of prices for overseas Commonwealth commodities. This is probably an even more important feature in Commonwealth development than some of the other things that we are discussing.
I suggest to the House that there may be some connection between the ability of the Swiss to invest abroad and the nature of their industrial production. Their industrial production is concentrated on the production of capital goods for transport, of electrical generating equipment, machine tools and instruments, the sort of products which are required in the early stages by developing territories. That brings me to the question of our own ability to supply what developing territories themselves need.
Hon. Members, particularly on the other side of the House, have referred to the importance in the early stages of investment in the basic services and basic industries. If one examines the figures of any of the various organisations which are concerned with development overseas or the plans of those countries, one always sees that money first of all is spent on transport and secondly on power, and very often power plus irrigation, and then on basic industrial plant.
Of the World Bank's loans, more than half have gone on transport and power. Last year, 40 per cent. were accounted for by power development, and 30 per cent. by transport. The Colonial Development Corporation's list of projects is headed by power, which takes 26·3 per cent. of its expenditure. It does not itself undertake investment in transport. Of the whole planned expenditure under the second Indian five-year plan, including agriculture and welfare services, transport and communications account for 29 per cent., and irrigation and power for 19 per cent. Out of the total of £821 million allocated for industrial investment, the producer goods industries, that is to say, industries for the production of chemicals, fertilisers, steel, cement, metallurgical industries, and so on, account for £570 million and the amount for investment in the capital goods industries is £117 million.
If there is to be any reality in our discussion of Commonwealth development, and in our desire for it, and if we mean business when we say we want to help Commonwealth development, we have to ask ourselves not only whether the capital is available in financial terms in this country, but whether we can supply the capital goods which that financing is intended to purchase.
One can go round and round in a vicious circle in this matter, because the point is that if we cannot we shall have inflation, and if we have inflation in this country, we have, at any rate under the present Government, higher rates of interest and a reduction of capital export. In the end, the whole question of Commonwealth development depends on whether we can or cannot supply the type of capital goods which are required by the developing territories overseas.
This is a matter for the Government. It is their responsibility. However, I would suggest that we now face a most serious problem, because we are faced with a need for massive investment in basic industries at home to safeguard our supplies of energy. Discussions are taking place and suggestions are being made to deal with the situation which we now face in regard to energy supplies and to ensure that we are not again placed in such a situation, and the suggestions are that we should build super tankers, double the atomic power plant production, have more rapid railway electrification, and so on.
Every one of those projects requires the use of very scarce resources here at home—for instance, heavy steel, steel plates, constructional steel, and this at a period when steel output is probably going to fall because of the shortage of oil on which so much of it now depends. We shall need, therefore, to build a new steel mill to produce the types of steel that will be required, and that itself will take a considerable time.
All these projects are competitors for qualified engineering designers, technicians and craftsmen, and they, incidentally, are exactly the types of experts whom we need abroad in the Commonwealth Territories to assist in their development. In addition, these needs of investment at home must conflict with the needs of our export industries in general, which are increasingly dependent on capital goods, especially in developing territories.
Finance, therefore, is not enough. It has been said that the advantage of a highly industrialised country is that it has a good, solid, heavy industrial base. In other words, it has got over the hump of its own heavy capital investment. The tragedy of the preent time is that to some extent we ourselves have need to undertake heavy capital investment here at home, and to that extent, we are ourselves an under-developed territory. If we also considered the needs of capital investment and employment of resources for railway modernisation, for shipping, and so on, one can see how difficult a task it will be for us to play our part in the Commonwealth development which all of us in this House so urgently desire.
I entirely agree, therefore, with those who have said that what is needed is the establishment of a system of priorities in the use of investment resources for Commonwealth development and for home development. If we do establish a system of priorities, which is, of course what we have to do, we have to face what it means, and the responsibility which we in this House have for the sacrifices it may mean for our own people. In that system of priorities Commonwealth development must be given as great a share as we can possibly manage at the present time. The question of what that share should be is for this House, but the machinery, the question of how it is to be done, can, perhaps, be decided afterwards. But it must be done. Unless there is a system of priorities in the allocation of the resources required for our Commonwealth development when they are in extremely short supply, the job. in my opinion, will not be done at all.