§ Mr. Pethick-Lawrence(by Private Notice) asked the Chancellor of the Exchequer whether he has any statement to make on the Government's borrowing programme.
§ Sir J. SimonYes, Sir. The House will remember that in my last Budget Statement I said that, when the time came for borrowing for the expense of the war, it would be found that various kinds of loan would be offered, appropriate for different types of investor. The date has not yet arrived to issue a loan on the open market, but I have now to announce that two securities will be on sale as from to-morrow morning, which have been designed to enable all citizens, even of small or very moderate means, to make their contribution.
The first of these securities will be a new issue of National Savings Certificates, for assisting to finance the war, which will replace the current issue henceforward. The new issue will be on exactly the same lines as the present, and will carry with it the same benefits in such things as exemption from Income Tax. A certificate can be encashed at any time. The purchase price of the new Certificates will be unchanged at 15s., but the interest will be slightly increased, so that the Certificate will accumulate to 17s. 6d. after five years and to 20s. 6d. after the full period of 10 years. Subject to a few exceptions, into which I need not enter, no individual may hold more than 500 Savings Certificates of whatever issue. The House will appreciate that that restriction must be continued. Anyone of any income can buy Savings Certificates, and if they could be bought in unlimited amounts, their freedom from Income Tax would make them much too expensive a method of borrowing.
I now come to a second security, which is of a novel kind. There are a great number of people, many of them by no means wealthy, who already hold the 1031 maximum of 500 Certificates; and I hope that there will be a great many more persona who reach that limit before long. I must provide some method, suitable to their circumstances, to enable them to lend fresh money to the State. The new security will be known as a Defence Bond, and will be purchaseable in units of £5. It will be on sale to-morrow and until further notice. It will be issued at par, and will bear interest at 3 per cent. per annum, and it will be repayable seven years from the date of purchase at a premium of £1 per cent., if not cashed before. It will be repayable at par plus any accrued interest at any time after six months' notice; and special arrangements have been made to enable the bondholder, in case of private emergency, to obtain repayment at once, subject to an adjustment of the interest then payable. The interest on this Bond will be subject to Income Tax, but tax will not be deducted at the source, so that bondholders who are not subject to Income Tax at the standard rate will escape the formalities necessary to secure repayment of tax.
In view of the special privileges attached to these bonds, no individual will be allowed to hold more than £1,000 of the Defence Bonds, but he may purchase up to £1,000 worth of the bonds in addition to holding the maximum of 500 Savings Certificates. If he does not hold 500 Savings Certificates, or even if he holds no Savings Certificates at all, there is nothing to prevent him purchasing up to £1,000 worth of the new bonds, but in such a case, the course which will usually pay the investor best is first to make up his holding of Savings Certificates to the maximum of 500, and then to put additional savings into the new bond.
The new certificate and the Defence Bond will be on sale to-morrow at post offices, savings banks and joint stock banks throughout the country. I have arranged for the terms of the certificate and copies of the prospectus of the bond to be available for Members at the Vote Office.
In addition to these new securities which the Government are issuing, the Post Office Savings Bank and the trustee savings banks will continue to offer their facilities to the public, and any increase in the money deposited in those banks will 1032 serve the same national purpose as money invested in the new securities.
As in the last war, the campaign throughout the country in support of these issues has been entrusted to the National Savings Movement. The movement, with its many thousands of voluntary workers, has already responded enthusiastically to my request. To the National Savings Committee in England and Wales, the Scottish Savings Committee, the Post Office Savings Bank and all who assist it, and to the trustee savings banks, I should like to express my thanks for the preparatory work they have already done, and my conviction that their efforts will be crowned with success. In Northern Ireland there has come into existence a new body, the Ulster Savings Committee, which has made it its duty, under the Government of Northern Ireland, to carry out a War Savings campaign in Ulster. Moreover, the Government of Northern Ireland have undertaken to issue a new Ulster Savings Certificate, on terms identical with those of our new National Savings Certificate, and to relend 75 per cent. of the gross proceeds of sale to the Imperial Exchequer. I should like to express warm appreciation of this action by the Government of Northern Ireland, which will ensure a valuable addition to our financial resources.
Such are the arrangements which I am now able to announce for securing from citizens, even of very moderate income, loans from their savings towards the severe expenses of war. The House and the country will, I hope, give their full support to the present appeal, the success of which will be a vital contribution in helping to bring us victory in the struggle in which we are engaged.
§ Mr. LeachHas the right hon. Gentleman considered the proposals made by Mr. J. M. Keynes; and, if so, what does he think of them?
§ Sir J. SimonI have no communication to make to the hon. Member on that subject.
§ Mr. Garro JonesIn view of the fact that the yield on Defence Bonds is 3 per cent., will the right hon. Gentleman state what the yield on the Savings Certificates will be; and also, whether the yield on these two classes of securities will be any indication of the yield on loans issued in larger units?
§ Sir J. SimonThe hon. Gentleman, no doubt, is aware that really no inference can be drawn from these special and short-term transactions. That has always been the experience. It is not possible, in answer to a question, to state precisely the calculation of the yield on Savings Certificates, because, as the hon. Gentleman knows, they are so constructed that the interest is very small at the beginning, and it then tends to rise, the idea being to encourage people to keep them, as indeed they usually do; but if he likes I will have a calculation made, and see if I can communicate it to him.
§ Mr. J. MorganCan the right hon. Gentleman say whether individual members of families can hold units of £500 of these certificates?
§ Sir J. SimonThat has been the rule which is normally followed. Every individual in the country, rich or poor, is entitled to hold £500 worth.
§ Mr. GallacherIs the Chancellor of the Exchequer aware that there are many individuals in the country who cannot afford to hold either £500, or 500s. or good.?