§ 47. Mr. HARMSWORTHasked the Chancellor of the Exchequer whether he will give the estimated total of direct savings to the taxpayers effected by the series of conversion loans offered since His Majesty's Government came into office, and the amount that these operations have added to the National Debt?
§ Mr. CHURCHILLThe conversion offers made by the present Government have increased the nominal total of the debt by some £55 millions, but notwithstanding this, it is estimated that they have reduced the annual charge to the taxpayer by £1,546,000 per annum. This may seem a paradoxical result, but as I have frequently pointed out, these two figures cannot properly be related. The important figure to the taxpayer is the annual interest charge, which has to be met out of taxation; and the annual interest charge has been reduced by the recent conversions, despite the adverse circumstances in which they had to be effected. The increase in the nominal debt, due to the issue of stock at a discount, does not involve any increased burden to the taxpayer as the Government cannot be required to pay off the 826 stock so created, and would only do so if and when repayment could be effected at a profit. I should of course prefer to avoid the issue of stock at a discount, as the Colwyn Committee recommended, but it is quite impossible to deal with the large and numerous maturities which the present Government have had to face without offering terms acceptable to holders.
§ 51. Mr. ALBERYasked the Chancellor of the Exchequer the amount of 3½ per cent. War Loan, 1925–28, of 5 per cent. National War Bonds, Series 2, and of 4 per cent. War Bonds, Series 2, which have been converted into 3½ per cent. Conversion Loan?
§ 52. Mr. PETHICK-LAWRENCEasked the Chancellor of the Exchequer if he will furnish the House with full particulars with regard to the recent conversion operations?
§ Mr. CHURCHILLThe amounts of maturing liabilities converted into 3½ per cent. Conversion Loan, under the prospectus of the 15th September last, were as follow:—
The conversion of the 3½ per cent. War Loan which was issued at the beginning of the War, when interest rates were little above the pre-War level, has necessarily involved an additional charge amounting to £242,000 per annum; but the conversion of the 5 per cent, and 4 per cent. War Bonds, after taking account of the premiums due on the 5 per cent. Bonds and the Income Tax privileges of the 4 per cent. Bonds, has resulted in a saving estimated at £162,000 per annum.
£ 3½ per cent. War Loan 1925–28 21,166,000 5 per cent. National War Bonds, 1928 49,147,000 With premiums thereon of 2,457,000 4 per cent. National War Bonds, 1928 (Income Tax compounded) 10,274,000 Making a grand total of 83,044,000
§ Mr. SNOWDENCan the right hon. Gentleman say what is the percentage of the conversion of the various loans to the total which might have been converted?
§ Mr. CHURCHILLI can, of course, answer a question of that sort, but it is not within my mental recollection.
§ Mr. DALTONDo I understand the Chancellor to say that the net effect of the conversion dealt with in the answer has been not only to increase capital liability, but also annual interest?
§ Mr. CHURCHILLI think that would be an unfair way of putting it, having regard to the fact that one of the stocks that has been converted was a stock borrowed on far more favourable terms at the beginning of the war than any we had been able to get in the market since.
§ Mr. PETHICK-LAWRENCEIs it within the recollection of the Chancellor that not only the Colwyn Committee, but his Noble Friend who was then Financial Secretary, announced that the Treasury were fully aware of the disadvantages of issuing stock below par, and in view of the fact that it would have been perfectly possible to issue new stock much nearer par than this 3½ per cent, conversion loan, why was that principle departed from?
§ Mr. CHURCHILLThese matters are the subject of prolonged consideration by the expert authorities at the Treasury and also at the Bank of England, and it would be quite impossible to argue the pros and cons of any particular method of conversion at Question Time. I shall be quite ready at any time to explain and defend the measures that have been taken to convert our maturities as they arise. It is not possible, however, to deal with it by question and answer; and the hon. Gentleman makes an assertion which is not at all accepted or admitted and which rests solely on his own personal information.
§ Mr. PETHICK-LAWRENCEBut does the Chancellor realise that when we have a general Debate on this, either he or the Financial Secretary agree to the general principle, but when it comes to particular instances that general principle is not put into effect?
§ Mr. CHURCHILLA borrower is not a chooser in these matters. These conversions have to be provided for as they arise, and we are bound to produce the plan which commends itself and which is acceptable to existing owners of the stock.
§ Mr. SNOWDENDid not the right hon. Gentleman state, in reply to a pre- 828 vious question, that the reason the conversion offer had been made at a very large discount was to make it more attractive? Does he consider that the response to this recent conversion, however, justifies that expectation, and that the response shows that the offer was regarded as attractive?
§ Mr. CHURCHILLYes. The information of my advisers has been that the response was eminently satisfactory in all the circumstances and affords ground for viewing with some confidence the still more serious conversion obligations which are impending.