HC Deb 20 March 1888 vol 323 cc1810-31

Clause 8 (Exchange of Consols and Reduced for new Stock) agreed to.

Clause 9 (Power of Court, trustees, & c, in relation to exchange of Stock).

On the Motion of Mr. CHANCELLOR of the EXCHEQUER, Amendment made, in line 2, after "name" insert "or in the books."

Amendment proposed, In page 6, line 9, to leave out "the Treasury with the approval" and insert "the Lord Chancellor."—(Mr. Chancellor of the Exchequer.)

Question proposed, "That the words, 'the Treasury with the approval' stand part of the clause."

MR. CHILDERS (Edinburgh, S.)

asked, If it was intended to give the Lord Chancellor power of making the regulations without the concurrence of the Treasury?


said, the only object of the Amendment was to transpose the order, and to provide that the Lord Chancellor should make the regulations with the approval of the Treasury, instead of the Treasury making them with the approval of the Lord Chancellor.

Question put, and negatived.

Question, "That the words 'the Lord Chancellor' be there inserted," put, and agreed to.

On the Motion of Mr. CHANCELLOR of the EXCHEQUER, the following Amendment made:— In Page 6, line 9, to leave out from "England" to "Scotland of" in line 10, both inclusive, and insert "Stock standing in the name of Her Majesty's Paymaster General.

On the Motion of Mr. CHANCELLOR of the EXCHEQUER, the following Amendments made:—In page 6, line 11, to leave out—" and in the case of Ireland of," and insert— In the case of Stock standing in the name of the Accountant to the Court of Session"; in line 11, after "Lord Chancellor of Ireland," leave out "May," and insert— In the case of Stock standing in the name of the Accountant General of the Supreme Court of Judicature in Ireland, may, with the approval in each case of the Treasury ";

and in line 12, after "stock," insert "or any part thereof."

MR. HENRY H. FOWLER (Wolverhampton, E.)

said, the Amendment next, which stood in his name, was purely a matter of drafting. He proposed to leave out the words from "payable" to "or," in line 15; and afterwards to insert the exact wording from the Clause which Lord Herschell had settled. He did not wish to press the Amendment if the Government wore unwilling to accept it.

Amendment proposed, In page 6, line 14, to leave out the words "Which consent any trustee or other person acting in a fiduciary character, is hereby authorized to give."—(Mr. Henry H. Fowler.)

Question proposed, "That the word proposed to be left out stand part of the Clause."


said, he entirely appreciated the intention of the right hon. Gentleman in moving the Amendment. The Government had, however, considered it, and were of opinion that the present wording which carried out their intention should be retained.

Amendment, by leave, withdrawn.

On the Motion of Mr. CHANCELLOR of the EXCHEQUER, the following Amendment made:— In page 6, line 22, at end, insert—"Provision may be made by such regulations that either generally or in specified classes of eases, the Lord Chancellor, the Secretary for Scotland, or the Lord Chancellor of Ireland, as the case may be, may on behalf of the persons interested in any such stock as aforesaid, consent to the exchange thereof, "unless dissent from such exchange is signified within the time and in the manner fixed by the regulations.

On the Motion of Mr. SYDNEY GEDGE, the following Amendments made:—In page 6, line 26, leave out "may" and insert "shall"; and in same line leave out "or with the consent."

Amendment proposed, In page 6, to leave out Sub-section (3) and insert—"An Exchange of Consolidated Three per Cent Stock, or of Reduced Three per Cent Stock for New Stock, made in pursuance of this Act, shall not be considered to be a change or variation of investment by the holder."—(Mr. Sydney Gedge.)

Question proposed, "That Sub-section (3) stand part of the Clause."

MR. MARK STEWART (Kirkcudbright)

said, he should like to point out that some provision was necessary in the case of trustees who held Consols, the interest of which was shared by many persons, say, in Australia, Canada, India, and other parts of the world. It was necessary that there should be some protection for trustees so placed, and as they could not be too clear in a matter of this kind, unless some distinct reason were given for the withdrawal of this Sub-section, he should himself move an Amendment.


said, the hon. Gentleman's point had been answered by his right hon. Friend the Chancellor of the Exchequer. A clause would be introduced to the effect that trustees who accepted conversion should not be held to have made a new investment.

Question put, and negatived.

Question, "That the words proposed be there inserted," put, and agreed to.

Clause, as amended, agreed to.

Clause 10 (Provision of funds for facilitating conversion).

Amendment proposed, in page 7, line 14, after the word "make" to insert "in the prescribed manner and at the prescribed time."—(Mr. Chancellor of the Exchequer.)

Question, "That those words be there inserted," put, and agreed to.

MR. HENRY H. FOWLER (Wolverhampton, E.)

said, that having addressed the House fully on the subject of his Amendment last Friday, he should not trouble the Committee at length now. He had no desire to assume a tone of which the Chancellor of the Exchequer might complain, but desired to deal with the question purely as one of principle. He said that the optional conversion of Stock should rest entirely on its own merits, and that nothing ought to be paid to bankers or agents to induce any person to agree to the terms offered by the Government. The principle of the Chancellor of the Exchequer was that it was the interest of the holder of Consols to accept the Reduced Stock, and of course it was to the interest of the State that the conversion should take place; and that principle had always been advocated and carried out in previous conversions. If, then, it was to the interest of the stockholder to accept the Chancellor of the Exchequer's terms, why was it necessary to pay a brokerage for obtaining his concurrence in this conversion. The hon. Baronet the Member for the London University (Sir John Lubbock) on Friday had taken exception to what he (Mr. Fowler) had then said with reference to the London bankers, and the view of the hon. Baronet was endorsed by the Chancellor of the Exchequer. With all respect to them he did not think there was anything offensive to bankers or agents in saying that no person should be placed in a position in which his interest might conflict with his duty. If the banker was in the position of an agent giving advice, then he thought he was put in a false position and that he had no right to complain if his position were severely scrutinized. They knew that if an agent of a vendor received a commission from the purchaser, he had to account for that commission, because the law did not consider he should be an agent of both the parties to the bargain. This commission was only given in the event of the advice given by the banker or other agent being favourable to conversion. He would like to call attention to the Money Article which appeared in The Standard newspaper of the 18th of January, which, referring to the Chancellor of the Exchequer's New Local Loan Stock, said— That the market did not understand the terms of the conversion, that the Treasury with its shortsighted stinginess offered the brokers no remuneration for any work they might do in getting their clients to convert their Stock; and that no conversion of Stocks would ever pass which did not in this way enlist the self interest of the market. That was the whole of his argument on this part of the case; he rested upon that, and he said they ought not to sanction anything which would enlist the self interest of the Money Market. Their object and duty as Members of the House of Commons was simply to protect the public interests. He was aware that the Chancellor of the Exchequer on Friday repudiated this notion of commission, and he (Mr. Fowler) was not surprised that he did so. He alleged that it was not payment for advice to induce people to assent to terms, but as payment for services rendered by bankers and brokers. Now, he very much doubted the extent of the labour to which the Chancellor of the Exchequer referred; he did not see what work there was to be done, and besides, the service, if any, was purely voluntary. The Bank of England had provided a very simple form which anyone of ordinary education could easily fill up. No one had asked the bankers to render their services, and he had no doubt that the hon. Baronet the Member for the London University was familiar with the circular which had been issued by a large number of London bankers, which stated that it was the intention of the Government to pay off those holders of Stock who did not send in their assents at par as Parliament had directed, which by the way was incorrect, for Parliament had not yet made any such direction. The circular was to the effect that it was generally thought desirable to accept the terms of conversion, the interest at work in favour of the scheme being considered so great as to insure its success. He found no fault with the banks for sending that circular; he found no fault with the phraseology of the circular; but he said it was a voluntary service, and that they had, therefore, no right to come on the public funds, and ask to be remunerated for what they had done. But if it were for services rendered in aid of conversion, why should not everybody who converts Stock have this 1s. 6d. per cent paid to them? Why should bankers and brokers alone receive it? If the large holders were to have it, why were not the small men who conducted the whole matter for themselves? If that were so then he thought that the Chancellor of the Exchequer's contention would be logically sound. If the right hon. Gentleman said that some expense was necessarily incurred in filling up these forms, and if he would say that every stockholder should be entitled to this commission, then he thought it would very much weaken the strength of the objection which many hon. Members felt to this provision. It would then be a fair and arguable contention that the allowance was being made to the holders for the expense to which they were to be put. What he did ask the Committee not to assent to, was this payment to bankers and agents now proposed for the first time for obtaining assent from holders for the conversion of Stock, which, however it might be expressed, was nothing else than a payment to the banker or broker for getting people to accept these terms.

Amendment proposed, in page 7, line 18, to leave out from the word "exchange," to the end of the Clause.—(Mr. Henry H. Fowler.)

Question proposed, "That the words, 'and may also, if they think fit, authorize the Bank to pay in respect of Stock so surrendered an allowance,' stand part of the Clause."

MR. SYDNEY GEDGE (Stockport)

said, he had given Notice of a similar Amendment, in order that at the end of the Bill a clause might be inserted which would fix a commission for the conversion of the New Threes also. It seemed to him that they were giving a commission of 1s. 6d. merely to induce people to waive the year's notice. Those who supported the clause might be open to the comments of the right hon. Gentleman the Member for East Wolverhampton; but the real reason for this provision had been given by the Chancellor of the Exchequer on Friday last, when he pointed out that this 1s. 6d. was not paid practically to the broker or recognized agent, but really to the stockholders to cover the expense they were put to. He had since that time received letters from ladies as to whether they should be paid off, or whether they should accept the conversion. For his own part, if he received 1s. 6d. per £100 Stock, he should not charge his client with the expense he was put to, and he was interested in very large Trusts, and had considerable correspondence with regard to them. But the trouble was very much the same with regard to the New Threes as to the other Stocks. He entirely agreed with the right hon. Gentleman opposite (Mr. Henry H. Fowler) with regard to secret commission to bribe agents to act unfairly between clients; such things were abominable. The right hon. Gentleman, being himself a practising solicitor, knew that under the Solicitors' Act, a solicitor receives a brokerage fee oven from the borrower for whom he did not act, and he also gets a fee for investigating the title. But that was openly done, and there was no corruption about it; and it was well known that every solicitor made a part of his income by commissions of that kind. He should hope no one would believe that a solicitor was bribed by receiving that commission to advise a loan contrary to the interests of his clients. With regard to the present payment of 1s. 6d., he thought that it should be universal; and, therefore, that the matter should be so put that they might decide the question as to whether its application should be universal or limited.

SIR JOHN LUBBOCK (London University)

said, he understood the hon. Member for Stockport (Mr. Sydney Gedge) proposed to support the omission of these words in order that, by a subsequent Amendment, the 1s. 6d. should be given in the case of the New Threes as well as Consols. He (Sir John Lubbock) thought, however, that the hon. Gentleman had himself given the reason why the Chancellor of the Exchequer excluded the New Threes. In the case of the Three per Cent Consols and Reduced Threes, assent was necessary, which involved a good deal of trouble, and which was not so in the case of the Now Threes; and that seemed to him (Sir John Lubbock) to place the latter in an entirely different position from the two former classes. He agreed with the right hon. Gentleman the Member for East Wolvorhampton (Mr. Henry H. Fowler) that the optional conversion should act upon its own merits; but then he went on to observe that the bankers were placed in a false position unless the result was favourable. He would, however, point out, on the other hand, that this resembled all Stock Exchange business, for there also, if nothing was done, there was no commission. The right hon. Gentleman had said that the London bankers were themselves very large holders of Stock, and surely if they were going to convert their own Stock, there could be no objection to their recommending their friends to adopt the same course as they were themselves taking. It remained to be seen what that course would be, because until the Bill became law, he took it that the matter would remain open. But the right hon. Gentleman asked why the bankers were taking a different course now from that which they took in the case of the conversion scheme of the right hon. Gentleman the Member for South Edinburgh (Mr. Childers). The answer was that the circumstances were different, and they now thought it wise to convert, and therefore they suggested to their friends to look into the matter; whereas, in the former case, they did not think it wise themselves to convert, and consequently did not think it proper to recommend their friends to do so. What bankers did themselves they naturally recommended to their customers. The right hon. Gentleman the Member for South Edinburgh was so enamoured of his plan that he seemed to think that bankers were mistaken in the advice they gave. He could only account for it by replying to inquiries made to him that "bankers were not infallible;" but he (Sir John Lubbock) would point out that the result on the market had justified the advice they gave on a former occasion. The right hon. Gentleman had evidently forgotten the facts. He offered the Two-and-a-Half per Cent Stock at 92, and he complained that bankers told their customers they would get better terms by waiting. But he forgot that in 1885 the Two-and-a- Halfs which he offered at 92 fell to 81, so that those who wanted to do so had the opportunity of purchasing at 8 per cent less than at the time. He (Sir John Lubbock) admitted that was a temporary fall, and that it occurred during the war scare; but everyone know that they stood for some time at 88 and 89, or 4 per cent below the price the Rt. Hon. Gentleman offered, and thus, although there was no corresponding fall in Consols, the result justified the advice given. It was true they had risen subsequently, in common with other Securities. But now the case was very different, and bankers were no doubt under the impression that holders of Stock would be wise to accept the terms offered. He thought it was a little unfair to expect that any banker would be influenced by this very small commission of 1s. 6d., seeing that they were only advising their customers to take the course they were themselves adopting in reference to their own affairs. Unless the House agreed to the course proposed by the Government, it would be very difficult for trustees to convert, because there was no fund under their control from which they could pay the expense of doing so.


said, this was really a proposal made for the first time by the British Government to pay a commission for getting something done on the Stock Exchange which would not be done otherwise. His right hon. Friend (Mr. Henry H. Fowler) had asked the Chancellor of the Exchequer the other night what precedent there was for this course, and the right hon. Gentleman, being pressed very much by that challenge, suggested the case of the Suez Canal. He (Sir William Harcourt) was surprised that the Chancellor of the Exchequer accepted that precedent; because if ever there was a precedent that ought to be avoided it should be that. It was now objected that the Chancellor of the Exchequer was going to the Stock Exchange, and saying—" We make it worth your while to give us your support." But in the case of the Suez Canal there was the payment of so much for the accommodation of advancing the money required. He had heard it stated, notwithstanding, that the Government might have had that money for one-quarter of what they paid for it; and if that was so, a worse precedent was never set than that of the Government going into the market and paying a premium for money at a higher rate than they would have had to pay to the Bank of England. For the first time the Chancellor of the Exchequer offered a premium to the Stock Exchange for getting his proposal accepted. He would not ask whether it was large or small; how much or how little it was, mattered not; but the fact remained that they wove asked to set up this fatal example, which might in future be extended under very objectionable circumstances. Hitherto the British Government had been entirely free from anything of this description. He made no insinuation at all; but they knew perfectly well that certain language had been used during the last month, and it was that language that made it necessary that they should be extremely cautious on a subject of this kind. No one could have listened to the preliminary conversation before the proposal of the Chancellor of the Exchequer was made, without hearing that it was of no use to make this proposal unless the right hon. Gentleman "greased the hands of the stockbrokers." He did not suggest that that was the object of the Chancellor of the Exchequer; but it showed the danger of proposals of the kind with a view to what might happen in the future. His hon. Friend the Member for the London University (Sir John Lubbock) had not answered the question put by his right hon. Friend the Member for East Wolver-hampton—namely, what was going to be done with reference to the large Stocks held by the bankers themselves? Was that money to be paid to the bankers and insurance companies for converting their own Stock? Those were things which made the House properly jealous of the introduction of new precedents. The amount in question was small; but the precedent was not so; and he should like to hoar from the Chancellor of the Exchequer whether this payment was to be made to the bankers and those who themselves held large amounts of Stock. He would also like his hon. Friend the Member for the London University to understand exactly the point of the objection taken, which was not as to the magnitude of the sum of money to be paid, but to the precedent set up by the Treasury, paying to bankers for the first time what was a commission on a transaction in which they were engaged as agents.


said, he was not surprised at the course taken by the right hon. Gentleman the Member for Wolverhampton (Mr. Henry H. Fowler), but his complaint was against the tone of the remarks which he made the other day. He agreed that there was some force in the objections which had been taken. He had not quoted the precedent of the Suez Canal as a justification of their proceeding, but had referred to it in contradiction of the statement of the right hon. Gentleman that there was no precedent of a commission being paid by the British Government. He did not think it fair to say that this was the first time that a commission had been paid by the British Government. The right hon. Gentleman the Member for Derby (Sir William Harcourt) had said that the case of the Suez Canal was totally different, not only in point of commission but in respect of circumstances. He did not know whether the right hon. Gentleman was aware that the Indian Government last year conducted a very successful operation for the conversion of £60,000,000 from 4 per cent to 3½ per cent, and that it paid a commission of 4 per cent. It might be said that that was not the British Government, but it formed an extremely close parallel to that which was taking place at the present moment. He was glad that the right hon. Gentleman did not complain of the amount of the commission; but he had one word to say on that point—namely, that the ordinary brokerage on Consols was 2s. 6d. per cent, whereas this commission was only 1s. 6d. per cent. He called the attention of the Committee to this fact, that by this payment they secured to the holders, who had to employ bankers, solicitors and brokers, that they should have their work done for them much more cheaply than would have been otherwise the case in the ordinary course of business. This commission was to be paid, because it was presumed that there were few bankers who would charge more to their clients than that which was devoted to this purpose by the House of Commons. The right hon. Gentleman called attention to the fact that he was not aware that there would be much trouble connected with the business, but he (Mr. Goschen) was informed that there was a very considerable trouble. Bankers were obliged to consider the interests of their clients, and he was told that persons residing abroad had immediately to be informed by their bankers of what was going on with reference to the Funds, and that was an operation which they had under all circumstances to perform for the interests of their clients. There could be no doubt therefore that the trouble connected with the conversion scheme was very considerable. The right hon. Gentleman had asked him whether those persons who took their Stock to the Bank of England would receive any commission. He presumed that no commission would be paid to them, because they were not agents, and the same remark applied to the case of Insurance Companies. The commission was a brokerage to pay expenses to free holders from the charges which they would otherwise in our. The right hon. Gentleman the Member for Derby had spoken of "greasing the hands of the Stock Exchange." Considering that solicitors and bankers in the country and others would participate in this payment, he did not think it worth while to say that the Stock Exchange would be gained over by an amount charged really lower than the amount of commission generally paid on Consols.

MR. W. E. GLADSTONE (Edinburgh, Mid Lothian)

said, he was reluctant to offer any opposition to any enactment of this Bill; but he must confess that he did not think that the Chancellor of the Exchequer had made out any case for the proposal now before the Committee. In the first place, with regard to precedent, the question of precedent was altogether out of the way. There was no precedent in the case at all. The Indian precedent was no more a precedent than if it were a proceeding of the French or Spanish Government, because it was not a Parliamentary precedent. It was quite obvious also that the case of the Suez Canal was absolutely no precedent at all, because the payment in that case, however unwarrantable it was—and he thought it most unwarrantable—was a payment for services rendered to us, and not for services rendered by bankers and agents to other people. Secondly, it stood upon a totally different ground, and taken upon its merits, he did not think anyone would insist that it was necessary to pay any commission at all. Therefore, pre- cedent disappeared altogether. He did not think that it was unfair to say that the fact of this being an entirely new proposal was that which constituted an objection to it. He did not say it was a fatal objection, but the absence of precedent undoubtedly afforded an unfavourable presumption. Then, as to the form of the proposal, was it an awkward and unmanageable form? The Chancellor of the Exchequer said that if a banker, being a large holder of Stock himself, transacted the exchange at the Bank, he would receive no commission. But what would be the consequence? It would be that the banker would employ a broker, and the commission would be divided. That was not a desirable arrangement to make by Act of Parliament. Again, take the case of the small holder who transacted his own business. He would have all the trouble and probably rather more trouble than would fall on the banker or broker. Why was that small holder, who was the person really interested and who transacted his own business, not to have that allowance for his trouble which would be paid to an agent? No answer had been given to the question, and he doubted whether any answer could be given to it. But, taking a broader view of the question, he thought that if payment was to be made at all this was not an extravagant payment. He took objection to the ground of payment, and it was that which, in his opinion, was a mistake. He could not agree with the Chancellor of the Exchequer's argument advanced in illustration of the smallness of the payment—namely, that it was less than an individual would pay in order to have a transfer effected, because, in the case of a transfer, he had alienated his property. In this case he was doing nothing of the kind; he was not a moving party in the case, and the operation performed for him was not alienation, but a simple change of form. Therefore, he considered there was no analogy between the two oases. But it seemed to him to be a mistake altogether to introduce the recognized agent into this transaction, because the question arose whose agent was he? Let them pay their own agent, but do not let them pay the agents of other people. If the money was to be paid at all, he ventured to say that it ought to be paid to the principal and not to the agent. He was not saying that the 1s. 6d. was too much for the service to be performed; but it was to be performed for the customer, who was the principal. If the agent advised the exchange, it was for the customer and not for the public interest that the advice was given. He was not like Members of that House-who sat there to make the best arrangement they could for the public interest; he worked in the interest of his principal, and the service done was a matter between his principal and himself. He thought, then, having regard to the basis on which this arrangement ought to be founded, that they were paying the wrong man. They agreed that those in the position which the Chancellor of the Exchequer had described should be paid the value of his services in money, but, without saying that the amount was too much or too little, he said that it was not for the State to pay the agent.


said, he confessed that when the matter first came before him he did not at all like the idea of this commission. He was certain, with the right hon. Gentleman the Member for East Wolverhampton (Mr. Henry H. Fowler), that the course was without precedent, and he was equally certain that Parliamentary sanction of such a course might form an evil precedent for the future. But he did not quite follow the right hon. Gentleman the Member for Mid Lothian (Mr. W. E. Gladstone), though he felt it was almost presumptuous on his part even to hint a difference of opinion with him; and if he differed from the right hon. Gentleman it was because of his intellectual incapacity to rise to the same height to which he habitually soared. Why did the right hon. Gentleman argue that a person assisting in the conversion of the National Debt from 3 per cent to 2| per cent Stock was not rendering a service to the State? That he could not follow. The right hon. Gentleman would surely agree that the conversion of the Debt, if it could be legitimately effected, was a great public object from which the State, as a whole, derived considerable benefit; and, therefore, if in effecting that conversion a great financial organization and great financial machinery was set in motion, it was difficult to argue that no service was thereby rendered to the State. If he had any ob- jection, to this proposal at all, his objection would be founded upon grounds of public economy. The conversion was a great public object. Could it be obtained without paying money in this way? That seemed to him to be the point. There was no doubt of this, that if the commission were a very much larger one than that in the Bill, it would not be assented to by Parliament. If the commission had been at all open to the charge of being excessive, Parliament would not have assented to it. If that was admitted it threw a considerable amount of suspicion upon the merits of the commission altogether. They were told that the commission was a small one. He could not altogether agree that a financial charge of £250,000 was a small charge. That £250,000 must come, he supposed, out of the revenues of this year or the next, and he objected most strongly to paying one sixpence for the conversion of the National Debt, in the shape of commission, unless it could be proved by the Chancellor of the Exchequer to the House of Commons that he could not effect the conversion without it. That was a point which the right hon. Gentleman had not got rid of. Could he get up and prove to the House that, without this payment, his conversion scheme would not have any chance of success? He could not see that the right hon. Gentleman could alter what had passed, because they w ere told by bankers and by the Chancellor of the Exchequer, that the Consol holder was placing himself in an advantageous position by converting. If that was so, and if what was widely asserted in the Press, that all Consol holders were in a frame of mind eager, at any rate willing, to convert, was true, why should they sanction a payment which might amount to £250,000, and might amount to a good deal more, when they might perfectly well attain their object without paying a sixpence? That was a point of view which nobody had yet touched upon. The commission, he thought, might be objected to on other grounds. He sympathized very much indeed with what had fallen from the right hon. Gentleman the Member for East Wolverhampton (Mr. Henry H. Fowler), and, to a great extent, with what had been said by the right hon. Gentleman the Member for Mid Lothian (Mr. W. E. Gladstone) as regarded what he would call rather the bitter and unsavoury taste of these commissions to the Stock Exchange. He did not like it at all; but if the Government stated and proved that the great object of the conversion could not be attained without a payment of this kind, then the House must consider was the amount excessive? If it was agreed that if the amount was not excessive, and that the payment was absolutely necessary for the success of the scheme, he owned, though he did not like it, he should not be able to vote against the proposal of the Government.

MR. HALDANE (Haddington)

said, the noble Lord the Member for South Paddington (Lord Randolph Churchill) had just laid down one of the most extraordinary doctrines he (Mr. Haldane)had ever heard. The noble Lord had said, in effect, that it was legitimate to bribe, because the party in whose interest they proposed to bribe was the State. [Cries of "No, no !"] What the noble Lord said came to that. It was an assertion that the end justified the means. But he was not going to discuss that point, because he thought the right hon. Gentleman the Member for Mid Lothian (Mr. W. E. Gladstone) said enough to lay the foundation for another objection to this clause which he wished to point out. He did not think the right hon. Gentleman the Chancellor of the Exchequer had considered the question whether this clause would really protect him in the transaction which he proposed. The Chancellor of the Exchequer must remember that it had often been said, rightly or wrongly, that the morality of the Courts was higher than the morality of commerce. There were many things done in commerce every day which would not stand when they came to be tested, and when they were entering upon transactions of enormous magnitude like this, it was necessary they should take care they did not get themselves into an invidious or awkward position which would not bear the light of day. In the light in which the Courts regarded these transactions, if they made a payment, however innocently, to an agent, one of two things might happen. The agent's principal might say, "I affirm this transaction; I take the benefit of it;" or he might say, "I set aside this transaction because there was a bribe given," and the transaction would not stand. What was there in this Bill which would protect the Treasury from the consequences of having its transactions set aside in this fashion? It was said the Treasury might, if it thought fit, authorize the Bank to pay a slight commission to the agent. If the Treasury did this, it did not make the transaction better. It was not enough to say the Treasury might do so and that everybody knew it. They ought to put words in the clause to say that it should be lawful for the agent to retain the commission of 1s. 6d., and that the transaction should not be liable to be impeached on that account.

MR. W. BECKETT (Nottinghamshire, Bassetlaw)

desired to say a word in defence of the bankers. The other night the hon. Baronet the Member for North Antrim (Sir Charles Lewis) said that the country bankers had complained that this commission was not large enough. The country bankers never did anything of the sort. The country bankers had decided that they would give no advice whatever to their clients in a general form as to what they should do, but that all they would undertake to do would be to send out a short statement to say that if their clients wished to convert and to make use of their services, they would be happy to place their services at their disposal. Some hon. Gentlemen had taken exception to the word "commission;" the word seemed to stink in the nostrils of some hon. Members, including the noble Lord the Member for South Paddington (Lord Randolph Churchill). This conversion must be done on behalf of the small stockholders in the country by someone or other. They were entirely ignorant as to how they were to set about the conversion, and they went to their bankers and said—" Will you put this forward for me in the proper way?" Were the bankers not to be remunerated by someone for doing that service? The Chancellor of the Exchequer had very properly explained that, as this was a compulsory conversion of Stock, the holders ought not to be put to any expense by the process of conversion. The right hon. Gentleman said, in effect, in this clause—" We offer you this 1s. 6d. per cent, in order that the business of the conversion of Stock may be done free of expense to the different holders of Stock." The right hon. Gentlemen the Members for Mid Lothian (Mr. W. E. Gladstone) and Wolverhampton (Mr. Henry H Fowler) objected to the introduction of the words "recognized agents." He (Mr. W. Beckett) also objected to those words. He thought the 1s. 6d. ought to be granted to everybody. If that were so, the banker would say to his customer—" You are allowed 1s. 6d. per cent in order to remunerate someone for the trouble of doing this; therefore, if I take the; trouble to do it, I shall expect you to pay me this small charge." He had asked the Chancellor of the Exchequer privately to do away with the term "recognized agent," and the right hon. Gentleman the Member for Mid Lothian had pointed out how easily that could be done. He (Mr. W. Beckett) thought it would be much better to do away with the term altogether, and let it be a fairly understood thing that 1s. 6d. per cent would be paid to anyone in order to cover the expense incurred by the compulsory conversion of their Stock.


desired in a few sentences to enter his protest against the doctrine laid down by the hon. and learned Gentleman the Member for Haddington (Mr. Haldane). He did not think any lawyer would give the opinion that where a Statute had said that an agent should receive 1s. 6d., or any other fee, for doing certain work, the transaction could be set aside by the principal, on the ground that the agent had received the commission. The very worst that could possibly be made of it was that the principal might claim a share of the 1s. 6d., on the ground that the relation between principal and agent did not entitle the agent to receive it.


said, the Attorney General had misunderstood him. His complaint was that the Bill did not say that the agent might receive the 1s. 6d.; it only gave power to the Treasury to pay public money.

MR. CHILDERS (Edinburgh, S.)

confessed he had found great difficulty in arriving at a conclusion on this subject. When his right hon. Friend (Mr. Goschen) first brought forward this plan, he did not altogether object to the 1s. 6d. as a mere commission to meet expenses; but he was startled by the reasons which the Chancellor of the Exchequer gave for that commission. Those reasons led him to consider further; to consider whether it would be proper that this payment should be made. The right hon. Gentleman at first said that a large amount of trouble would be taken by bankers and others in connection with the conversion of the Three per Cents and the Reduced Three per Cents, and that it was in respect of that trouble that he proposed that this money should be paid, but now he could not deny that this commission was intended as an inducement to bankers and others to persuade their customers to convert their Stock. But oven if the charge were only to meet money out of pocket, he (Mr. Childers) could not help looking back on what was done in the case of previous conversions. Nothing of this kind was done in the case of the great conversion of Mr. Goulburn; and in 1884, when it was thought advisable to propose to Parliament a great conversion of Stock, not only did they not think it right to offer this inducement, but they made full provision for the expenses actually incurred in applying or dissenting or assenting. Instead of waiting for persons to send in their applications, they sent to all holders of every kind of 3 per cent. Stock forms of acceptance or non-acceptance of 2½ and 2¾ per cent Stocks, properly filled up, and all the holders had to do was to sign their names on one or other of these forms. All expense in connection with the conversion was met in the arrangement of 1884, and, if he was not mistaken, the whole of the expense so incurred and met by the Treasury was something like £5,000. This proposal, as it stood, might result in the payment of £150,000 or £200,000. Therefore, he thought the question of the noble Lord the Member for South Paddington (Lord Randolph Churchill) was a very pertinent one, and that was—" Why did the Chancellor of the Exchequer find it necessary to spend this large amount? "The Chancellor of the Exchequer had argued that the payment was solely to meet the expense of conversion. It was quite impossible that £150,000 or £200,000 could be the real amount of the expense incurred by the holders of Stock through their agents, whoever they might be, in carrying out this conversion; and, therefore, unless the Chancellor of the Exchequer was able to refute what he (Mr. Childers) had stated, and to show that for the business trouble in the matter more need be spent than was spent in 1884, he should vote against the present proposal.


said, he did not know whether he would be able to give any assurances which would be satisfactory to his right hon. Friend; but certainly he had every wish to do so. The right hon. Gentleman said that in 1884 circulars were sent out to all holders of Stock. From whom did those circulars come? They came from the Bank of England, an establishment which stood in no relation whatever to those selling or holding the Stock. The consequence was that the circulars were very probably put in the waste paper basket, and the scheme of the right hon. Gentleman failed because of the insufficient means taken to make the holders acquainted with the terms of conversion. It was a very different thing for holders to receive a circular from the Bank of England and to receive a letter from their bankers, or other persons who were competent to advise them, and with whom holders were in communication. He did not know what happened to his right hon. Friend, when he was at the Treasury; but, speaking for himself, he had received countless letters asking for information on every possible point from trustees and other persons. The right hon. Gentleman put it as if it was simply a question of "Yes" or "No;" but there were many questions to be answered—whether they must consult with their fellow-trustees, whether a majority of the trustees could decide, or whether other persona besides the trustees had to be consulted. He had previously no idea of the variety of questions which would arise in connection with the scheme. The sending out of a circular, therefore, was insufficient to acquaint everyone with what was going on. The noble Lord the Member for South Paddington (Lord Randolph Churchill) put the matter very fairly from an economical point of view. He wished him to say whether or not the conversion could be effected without the payment of the commission. It was extremely difficult to prove a negative. He thought this conversion was a very large scheme, and depended for its success, so far as the voluntary conversion was concerned, on the circumstances of the day, and upon a variety of other circum- stances. It was impossible to say for certain whether or not it would have been possible without this payment to have secured this conversion, which he hoped was now within sight; but he would frankly tell the noble Lord that unless he had considered it was right to offer this commission, and that the machinery employed would be the means of bringing home to all Consol-holders what was proceeding, he would have been the last person to propose anything of the kind. He knew beforehand the kind of speeches which would be made by the right hon. Member for Wolverhampton (Mr. Henry H. Fowler) and other right hon. Gentlemen. He was fully aware of the gravity of the precedent and the difficulty of carrying out this conversion scheme to a successful issue; and therefore he did not feel inclined to refrain from offering to the holders, through these means, those facilities and that freedom from expense which he trusted they would secure by the measure as now proposed. He regretted that there should be a division of opinion on the subject. He admitted it was a perfectly natural division of opinion, but he trusted the majority of the Committee would sustain the Government in the proposal they had made.

Question put.

The Committee divided:—Ayes 244; Noes 127: Majority 117.—(Div. List, No. 47.)

Amendment proposed, In page 7, at end of Clause, insert the following sub-section:—"(2.) The sums of five shillings per cent authorized by this section to be paid, may be treated by trustees and others as income, but if so treated shall not be subject to Income Tax."—(Mr. Chancellor of the Exchequer.)

Question proposed, "That those words be there inserted."

MR. CHILDERS (Edinburgh, S.)

asked the Chancellor of the Exchequer if he would be good enough to tell the Committee why, if this was income, it should not be subject to Income Tax. He thought the right hon. Gentleman had arrived at a right decision; but perhaps it would be well that he should give the Committee some explanation.


said, he thought he had explained to the Committee that it was very doubtful whether this was really capital and not income. On the whole, one might say it was equivalent to an increase of the capital value of the Stocks; but on account of its being so small a sum it would be very inconvenient in many cases for trustees to re-invest it, and so they were authorized to treat it as income. If Income Tax had been imposed upon the additional percentage which his right hon. Friend gave, it might be fairly looked upon as capital. Of course he should be glad to have Income Tax upon it; but it struck him it might be considered they were taking away with one hand what they gave with the other.

MR. SYDNEY GEDGE (Stockport)

suggested that "shall" should be substituted for "may." This would only affect trustees and tenants for life. If they said "may" who was to be the judge, the trustee or the tenant for life? Surely, Parliament ought to decide the matter.


hoped the Chancellor of the Exchequer would not agree to the suggested Amendment, because most unquestionably in point of law, this was capital and not income. The decisions upon the subject had been more rigid every year. Very recently the House of Lords had overruled the Courts below in declaring that this was capital. Why should they compel trustees to treat as income that which in point of law was clearly capital?


said, that in some cases it would be very difficult to re-invest small sums, and he entirely agreed with the right hon. Gentleman that authority ought to be left to trustees to treat this as capital and not as income. It would only amount to 10s. on £200 of Stock, to re-invest which would be expensive and troublesome.


said, that supposing a trustee chose to treat this as capital, and a widow lady interested said it was income, who was to decide?


said, that the trustee would be enabled to deal with the money as though it were income. The trustee would be the judge on the point.

Question put, and agreed to.

Clause 10, as amended, agreed to.

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