§ Mr. FELLasked if the right hon. Gentleman's attention has been called to the fall in values of what are known as gilt-edged securities; and if, between 1st January, 1906, and 14th June, 1911, Consols have fallen 9¾ points and Irish Land Stock 10 points; and if he is aware that the necessity of writing down the values of the holdings of these stocks is diminishing the profits and taxing the resources of many sound financial concerns; and if he proposes to confer on the subject with the high financial authorities to obtain their opinion on the causes of the depreciation and the remedies to be taken to counteract them?
§ Mr. LLOYD GEORGEThe answer to the first three questions is in the affirmative. As regards the fourth, I may say that I have kept in constant touch with the best-informed opinion on the subject, and I find that there is general agreement amongst those most competent to judge that the decline which has taken place in these and other gilt-edged securities during the period in question arises in the main from the continued operation of the same causes which brought about the still heavier and more rapid fall that took place in the prices of similar securities in the preceding period—e.g., between 1898 and 1906, when Consols fell 23 points, or an average of nearly three points a year, against an average of about 1½ points a year since 1906, and the old type of 2¾ per cent. Guaranteed Land Stock 22 points, or an average of 2¾ points a year against an average of about 1½ points for the new type (which only came into existence in 1904) since 1906. These causes were: (1) The general rise in the value of money, due to the enormous absorption of capital in warlike operations—more particularly the South African and Russo-Japanese wars; (2) Competition of Colonial Securities for Trustee Funds, resulting from the admission of these securities to the category of Trustee Investments by the Colonial Stock Act, 1900; (3) Heavy Government borrowing for Irish Land Purchase and (prior to 1906) for warlike operations, and also for other so-called "capital expenditure." The first cause 28 affected gilt-edged securities throughout the world. The second and third affected our own stocks more particularly. The second is very important, since (prior to 1900) home securities had the monopoly of trustee funds, under all trusts not specifically providing for investment otherwise. As regards remedial measures, I am advised that, so far as State action is concerned, the most important are the maintenance of adequate provision for the redemption of debt and the avoidance, as far as possible, of new borrowing. That steps have already been taken in these directions will be seen by comparison of the figures relating to debt reduction since the present Government came into power, and up to 31st March last, with those of the previous five years. From 1st April, 1906, to 31st March, 1911, there was a net redemption of debt amounting to £55,918,000, as compared with a net increase in the previous five years of £85,056,000. Even excluding that portion of the South African war debt created in the former period (namely, £92,000,000), the net decrease in that period was only £6,944,000. As regards new borrowing for services for which the Exchequer is directly responsible, the comparison is even more striking, namely, a reduction from £128,293,000 (or leaving War Debt out of account, from £36,293,000) in the first five-year period, to £13,500,000 in the second five-year period.
§ Mr. AUSTEN CHAMBERLAINI will not attempt to cover the ground which the right hon. Gentleman has traversed in his answer, because it would be impossible for me to do so. I do not complain of the statement, but clearly it would not be becoming of me to argue it now. I wish to ask whether the right hon. Gentleman thinks it quite right to omit from his reasons for the fall in the price of Consols in the earlier period he has chosen for comparison with the later period, the final reduction of interest under Lord Goschen's conversion scheme, about which he did not say one word?
§ Mr. LLOYD GEORGEI have heard that statement made before, but surely everybody purchasing securities at that time would know perfectly well that he was purchasing with the knowledge that in a year or so his interest would be reduced to 2½ per cent. Consequently all that would be discounted, and the mere fact that for a year or two, or for two or three years at the outside, he would be receiving 2¾ per cent. interest as against 29 2½ per cent. would not make any appreciable difference in the price of the security.
§ Mr. AUSTEN CHAMBERLAINIs that not precisely the reason why the price was falling in the earlier years?
§ Mr. LLOYD GEORGENo; the right hon. Gentleman is perfectly wrong. That would not affect the price during the years to which I have referred. Those are years when it was very well known that the interest was to be reduced to 2½ per cent.
§ Mr. AUSTEN CHAMBERLAINDid not the right hon. Gentleman take as the beginning of his period the year 1898, and does he mean to say that the price of Consols at that time was not being affected and did not continue to be affected by the knowledge that there was to be a reduction of interest?
§ Mr. FELLMay I ask whether the right hon. Gentleman can see no way of preventing this continuous drop in Consols and other gilt-edged securities which he says has taken place, considering all the steps he has taken have been in operation for some time and have had no effect?
§ Mr. LLOYD GEORGEThe hon. Gentleman knows perfectly well the Colonial Trustee Investment Act is still in operation, and that is the really one substantial difference between our gilt-edged security and gilt-edged securities abroad. Prior to that Act British Trust Funds had to be invested in British securities, tout since then it has been possible to invest them in other securities. That is a continuing operation, and it must have an effect at the present time.
§ Mr. SPEAKERI think this is a subject more suitable for Debate.