I move:—
In page 2, before Section 3 (c), to insert a new paragraph as follows:—
No loan shall be so guaranteed or made of an amount exceeding the actual net value, at the time such loan is guaranteed or made, of the borrower's investment in the business financed.
The object of course is to produce a safeguard to help in securing that in future this scheme shall work less expensively for the State than it has done in the past, and to prevent the money or the credit of the State being used in financing men of straw, who themselves have not got an adequate interest in the business affected. When we were in Committee on this Bill I put the question to the Minister for Finance (column 1256, volume 47, No. 4 of the Official Debates): "When a loan or guarantee is made, is it normally from the point of view that the State expects not to lose money even if the business proves unprofitable?" The Minister for Industry and Commerce replied "yes." I submit that if the object is to see that even if the business is not a success the State should be reasonably free from loss, it is a very moderate requirement indeed that the amount of the loan shall not exceed the value of the borrower's investment in the business. If a man or a concern has only £10,000 in the business, whether in the form of working capital or in the form of fixed assets, plant and so forth, or divided between the two, it is not reasonable that the State should provide more than another £10,000.
There seems to have been a certain amount of confusion in the mind of the Minister for Industry and Commerce with regard to this matter when we were discussing a somewhat similar amendment on the Committee Stage. He kept referring to the relation of working capital to fixed capital, and he objected to any provision of the kind I am now seeking to introduce on the ground that cases would occur where working capital might be very small in relation to fixed capital, and that one could safely guarantee a larger amount than might appear on the surface. That observation is really irrelevant, because when we speak of the borrower's investment in the business of course fixed capital is included just as much as working capital. I maintain that if the State is to put more money into a concern than the borrower is putting into it, it should do so definitely in the form of an investment and not as a loan at all. You go beyond the bounds of a reasonable loan if you go beyond that limit. The Minister for Industry and Commerce told us that legislation might be introduced making it possible for the State to make such investments. In column 1276 of the same volume he says: "Not merely may we require this Act enabling us to provide long-term loan facilities, but we may also have to provide machinery by which industrialists of another kind may get capital invested in their undertakings—I mean put into the business, left in the business and remunerated in proportion to the profits. We are examining the possibility of meeting that particular deficiency in our financial organisation. It may involve legislation, or it may not." Whether that legislation is introduced or is not introduced I submit that it is clear that if a larger amount of money is to be provided for any individual or concern than that individual or concern is investing in the business, between fixed capital and working capital, it is not proper that it should be by means of a loan. If the State is to do that at all—and personally I should very much look askance at the idea of the State's doing it at all, though it might help out with legislation in such a way as would encourage private individuals to do it—it should certainly do it in a way which holds out a hope of some return to the State commensurate with the risk that is being undertaken. In other words, the State should not merely get the interest on its money that it would expect to get anyhow from a perfectly safe loan, but, if it is going to take a risk like that, it should get a share of profits in the case of the business succeeding, because in the case of the business failing it is perfectly obvious that, under those conditions making a loan of that size, the State will lose a large part of its money in the future as it has done in the past. I wish to appeal earnestly to the Minister to accept this amendment.