HC Deb 28 April 1920 vol 128 cc1231-3

(by Private Notice) asked the Chancellor of the Exchequer whether the calculation in his Budget speech, that the estimated surplus of £234,000,000 in the current financial year would provide a sum of about £70,000,000 for reduction of Floating Debt, on the assumption that no part of the liabilities maturing within the year will be renewed or funded, was intended to convey the impression that he does not contemplate any kind of funding operation during the year, and whether he also intended to rule out any early issue of National Savings Bonds as advocated by the National Savings Assembly in January last?

The CHANCELLOR of the EX CHEQUER (Mr. Chamberlain)

I should have been very glad to meet the wishes of the National Savings Assembly by placing some form of National Savings Bonds "on tap," to supplement War Savings Certificates for purposes of the Savings Movement. But in existing monetary conditions I came to the conclusion that the moment was inopportune for such issue, and in any case I do not think it would be desirable, in view of the Housing Bonds campaign which is now in progress.

In answer to the first part of the question, it was certainly not my intention in my Budget speech to rule out the possibility of funding. But I believe that it will be generally agreed that the time has not yet come for any large funding operation and especially for permanent funding as distinguished from conversion of the Floating Debt into longer dated maturities. But now that provision has been made in the Budget for a contribution out of the Revenue of £234,000,000 this year and some £300,000,000 next year for redemption and cancellation of debt, it is possible and proper to take steps to effect a further reduction of the Floating Debt by the offer for public subscription of a new form of Government issue, the entire proceeds of which will be available for reducing Floating Debt.

I have accordingly decided to offer for subscription, on and after Monday next, 3rd May, a new Government Bond. The terms of the issue will be as follows:—

A five-fifteen year Treasury Bond, issue price—par. Interest payable half-yearly on 1st May and 1st November. The Bond will be repayable at par on 1st May, 1935, but there will be an option, both to the Treasury and to the holder, on giving one year's notice in April, 1924, or in any subsequent April up to and including April, 1933, to secure repayment at par on the 1st May, 1925, or any subsequent 1st May up to and including 1st May, 1934.

The Bond will carry interest at the minimum rate of 5 per cent. per annum, and will also carry additional interest payable during the period ending 1st May, 1925, as follows:—

If and when during any half-year ended the 1st May or 1st November, the Treasury Bills issued to the public were sold to them at an average rate of discount exceeding 5½ per cent, and under 6½ per cent. per annum, then additional interest will be payable on the interest date next succeeding such 1st May or 1st November at the rate of 1 per cent. per annum.

If and when such average rate of discount on Treasury Bills was 6½ per cent. per annum or over, then the additional interest will be at the rate of 2 per cent. per annum.

The first interest payment on 1st November, 1920, will represent interest from the date of purchase at the rate of 5 per cent. per annum plus additional interest at the rate of 2 per cent. per annum, i.e., 3½ per cent. for the half-year. The Bonds will remain on issue till further notice. The entire proceeds of the issue will be applied to reduction of the Floating Debt.

The House will see that the arrangement regarding interest is designed to protect the holder of the Bond against capital depreciation when rates for short money are high, while at the same time the taxpayer is protected against the burden of paying a higher rate of interest than 5 per cent. over a long period. This arrangement will also, it is hoped, prevent the new issue from causing further capital depreciation upon existing Government issues.

It is common ground to men of all parties and all schools of thought that every effort should be made to deal with the problem of the Floating Debt. I have done all that I think possible in the way of taxation, and I now appeal to the public, and in particular to holders of Treasury Bills, to second the efforts which are being made in this year's Budget to grapple with our financial problems, by making a liberal response to this call for subscriptions to the new Treasury Bonds.


Can the right hon. Gentleman say whether the Income Tax will be deducted at the time of payment in connection with this new issue?


I think so.