HC Deb 03 December 1925 vol 188 cc2515-6
96. Mr. W. BAKER

asked the Financial Secretary to the Treasury whether he will state the exact total return which will be secured by a holder of 100 original war savings certificates who agrees to hold them for the extended period; how this compares with the return which would be secured by the same person selling and reinvesting in the new issue; and whether he will explain the reason for the difference?

Major HENNESSY

As the reply is a long one, and contains a number of detailed figures, I propose, with the hon. Member's permission, to circulate it in the OFFICIAL REPORT.

Following is the reply:

1. Each certificate increases uniformly in value by 1d. a month, which equals on 100 certificates £5 in the first year, £10 in the first two years, £15 in the first three years, and so on.

The length of the extended period depends on the date of the certificate: for a certificate originally bought on 31st March, 1921, the maximum is one year; for a certificate originally bought on 31st March, 1920, it is two years, and so on. In the extreme case, rare in practice, of a certificate bought on or before 31st March, 1916, the maximum is six years, but a holder may desire and is entitled to cash his certificate at any time within that period.

2. The current (third) issue of certificates increases in value by 3d. in the first year, and thereafter by 3d. every four months. If 100 certificates of the first series, which have been held for 10 years, are sold and the proceeds reinvested in the current issue, the investment increases in value in the first year by £2 0s. 6d. only; in the first two years, by £8 2s.; three, £14 3s. 6d.; four, £20 5s.; five, £26 6s. 6d.; six, £32 8s. It is evident that this would be an unsuitable scale for the extension proposals, the small increase in the first year acting as a serious deterrent. Moreover, conversion would not meet the case of holders of more than 307 certificates, since that number of ten-year certificates at 26s. gives the purchase price (£400) of 500 certificates of the current series. Under the plan actually adopted the holder can keep the full value of his certificates (£650) invested free of Income Tax.