COLONIAL STOCK BILL [Lords]. (Hansard, 7 August 1900)

§ MR. CALDWELL (Lanarkshire, Mid)
said be pointed out when the Bill was in Committee that it would not apply to Scotland. The Lord Advocate had now introduced a new clause to the effect that it should apply to Scotland. There were some obvious advantages in that. It was quite true that the Court of Session had power to approve of Colonial investments, and in all probability that court would include those sanctioned by the Treasury. But it was necessary at present that application should be made to the Court of Session in every individual case. The effect of making this measure applicable to Scotland would be that a special application to the Court of Session would not be necessary in every case in respect of these Colonial investments. The Chancellor of the Exchequer made a statement the other day from which it appeared that he intended that there should be some procedure whereby stockholders should have the advantage of the jurisdiction of the English courts in certain eventualities. 949 Scotch law was different from English law, and he suggested that the Chancellor of the Exchequer should make the conditions of the procedure cover the jurisdiction of the Scotch courts in matters where Scotch stockholders were concerned. At the same time, he had no objection whatever to the new clause.

§ MR. CALDWELL
said he wished to say a few words on the Bill, because it marked a new departure in the legislation of this country. Hitherto Parliament had passed Acts of Parliament authorising trustees to invest certain moneys in Colonial stocks in so far as the trustees were not limited by the trust deed, but in all cases the Acts had defined the conditions. Those conditions were such as that authorising investments in debenture stock where for ten years immediately preceding a dividend of not less than 3 per cent, had been paid on the ordinary stock; but in every case the conditions, whatever they might be, were set forth in the Act of Parliament. This Bill, however, authorised the investment of trust money in certain Colonial stocks which had observed certain conditions. Those conditions were not laid down in the Bill, but they were conditions which the Treasury, in some way not defined, might prescribe. They might be prescribed without any Parliamentary supervision or control, it not even being necessary to lay the conditions before Parliament. The Treasury was also empowered to alter the conditions from time to time. There were several inconvenient practical results of this new legislation. The Imperial Treasury and the self-governing colonies would be brought into direct contact with respect to the most delicate of all questions—financial questions. Their interests would be somewhat divergent. On the one side the Imperial Treasury would be anxious to protect the safety of the investor, and on the other hand the colonists would be anxious to borrow money as cheaply as 950 they could to keep up the value of their existing stock, and in order to put new stocks in the market on as favourable terms as they possibly could. Thus there might be a danger of friction arising between the mother country and the colonies owing to this new relationship that was established between them. But the Bill went much further. By the Bill the Treasury assumed a new responsibility. At present the Treasury had nothing whatever to do with what trustees might invest in, but under the Bill the Treasury assumed an undoubted responsibility in selecting particular Colonial stocks which trustees might invest in. Then the Treasury fixed the conditions which a colony was to observe as regards new stock, and the Treasury might alter these conditions from time to time in the interest either of the investor or of the colony. As regarded investments so sanctioned by the Treasury, it would be difficult for the Treasury or the nation as a whole to avoid a certain responsibility if any complication should arise between the holders of such stock and the colony, as the Bill conferred on the Treasury power to make conditions, and these conditions were not set forth in the Bill. They were, of course, on the Third Reading quite entitled to ask the Chancellor of the Exchequer what conditions he proposed to make. The right hon. Gentleman certainly mentioned some on the-Second Reading, and possibly he had reconsidered these conditions and would be able to give to the House more authoritatively what the final decision was as to these investments outside the United Kingdom. Two conditions would be required. One was that a certain fund should be settled in this country, and certain parties should be responsible in this country, so that the jurisdiction of the courts would be available in the event of any question arising between the holder of the stock and the colony. The other condition which would have to be made was that the colony should not tax that particular stock in such a way as to alter its value. It was obvious that in this instance the colonies had taken advantage of having sent troops to South Africa with the view of securing favourable terms for themselves in regard to these financial questions. The colonies had everything to gain by this Bill. They naturally would have a larger supply of 951 capital, and eventually there must be cheaper money in the colonies. But what might be the result in this country of such powers for investment in the colonies? Money in this country obviously was likely to become somewhat dearer. That would be an advantage no doubt to the investing public at home, but certainly not an advantage to the borrowing public who required money for the purposes of industries at home. It might, indeed, be doubted how far a too ready flow of money was an advantage even to a colony. In passing this Bill the House was undoubtedly conferring very considerable advantages on the colonies. They were getting practically all the advantages belonging to the mother country, while, on the other hand, they did not bear any of the burdens or responsibilities which attended even their own colony as part of the Empire. Take, for instance, the case of Canada, which this Bill was calculated specially to benefit. Canada contributed nothing whatever for the Navy, although if Canada were an independent nation she would require a Navy of her own. Canada contributed nothing for the British Army, although if an independent nation she would require to protect her frontier against the United States. Canada was receiving the benefit of our naval and military expenditure while practically contributing nothing to the Imperial revenue. This, of course, increased the risk of friction between this country and the United States. He thought the time had come when we were quite entitled to raise the question whether the colonies were to reap all the advantages, while we were not to receive anything in return. It was very much to be regretted that a Bill of this importance should be passed through the House at this late period of the session. The House ought to have had an opportunity of discussing it at an earlier period.

§ *SIR ALBERT ROLLIT (Islington, S.)
thanked the Chancellor of the Exchequer for having enlarged the discretion of trustees as to the investments in which money under their control might be safely and securely deposited. He could not agree with the hon. Member for Mid Lanark that the benefits were all in favour of the colonies. Let them admit that there was a concession to colonial 952 opinion, he thought most wisely on Imperial grounds, but on the other hand our country was benefited by the larger-range of investments, and by the very safe security given owing to the industrial development in many of our colonies. The right hon. Gentleman had given powers to trustees which would be exercised with discretion under rules and regulations which would be framed. He had thus added a new outlet for British capital. He admitted that this was a new departure, but it was a wise one. Such changes were not only desirable in respect of the colonies, but also in a very largo degree at home. The principle on which this Bill was based was one he should like the right hon. Gentleman to consider in reference to investments in our own country with the view of enlarging the sphere in one or two ways. He passed to another point which interested himself officially, as Chancellor of the Exchequer—namely, investments authorised to be made in respect of savings-bank money so far as surplus deposits were concerned. The right hon. Gentleman had attempted very properly to enlarge his own means of investment this session, and although his Bill had met with opposition in some quarters, he thought that, keeping in view the changes that must take place in 1903, it was a, matter that demanded careful consideration before any step was taken affecting such large and wide interests as those of the depositors in savings banks and the great economic principles on which these institutions were founded. Not only should the right hon. Gentleman seek a larger discretion for himself in dealing with these moneys, but he should extend the powers of trustees of savings banks in respect of investments they might make, especially in the large field of municipal, school board, and other similar local securities. In fact, the whole subject of trustee investments was ripe for review and re-consideration, and he hoped that at no distant date it would be taken up by the Chancellor of the Exchequer, and that the House would have an opportunity of expressing an opinion upon it. The Chancellor of the Exchequer had shown himself ready to listen to the representations which were made to him with respect to the Savings Banks Bill, by referring it and his (Sir Albert's) own Bill to a Select Committee with power to take evidence. He expressed the hope that if the right hon. 953 Gentleman proposed to deal with the subject by Bill in future he would again feel at liberty to send it for examination by a Select Committee. But he hoped the Chancellor of the Exchequer, before any measure was brought in in future, if any measure must be introduced, would either appoint a Royal Commission, which he thought would be the best mode of dealing with so large and important a subject, or introduce the Bill simply with the object of referring it to a Select Committee for consideration.

MR. GIBSON BOWLES (Lynn Regis)
I should not like the suggestion of the hon. Baronet to go forth without an expression of doubt from one who, like himself, is interested in finance. I think it would be a most dangerous thing for the Chancellor of the Exchequer to ask for, or the House to grant, enlarged powers of investment in regard to funds of savings banks. Those funds are very large, and they are payable at call. It is very doubtful whether there is anything like an adequate reserve; there certainly is no cash reserve; and if the Chancellor of the Exchequer were enabled to put his savings bank money into second-class securities—I will not say bad securities—it would be a very dangerous increase of the risk which already too much surrounds savings banks. I was very desirous to make this remark, so that the statement of the hon. Baronet should not go forth as though unquestioned by the House. I think there is a certain danger in this Bill also. It practically gives an artificial character to colonial investments, endowing them with a sacredness and a "gilt-edged" character which they did not before possess: it enables trustees to invest in them. The result will be, I am afraid, to encourage the colonies to go on borrowing even more than they have done. I have very grave doubts as to the propriety of the course pursued by a great many of our colonies in the exercise of their borrowing powers. This Bill will undoubtedly encourage them to borrow more, and that, I think, is a very great danger to the colonies, and it is a danger which we undertake to share with them by this Bill. We have entered into partnership with the colonies, become guarantors of their solvency, and to that extent have encouraged them in a course which in many cases is very likely to lead to serious embarrassment in future.