§ The Finance Bill will include Clauses designed to facilitate the conversion of the 5 per cent. War Loan to a lower rate of interest. Since 1929 the Treasury have had the power to pay off this loan at any time by giving three months' notice. Disappointment was expressed in some quarters that we did not carry out the operation earlier in the year. Money rates were for the time being favourable, but we were faced even then with the threat of disturbed money conditions in Austria and Germany, forebodings which unfortunately proved only too true. Our present position is difficult, but it would have been clearly impossible if we had undertaken last June or July the risk of having to find £2,000,000,000 to pay off this debt. The Clauses in the Finance Bill do not fix a particular date for the operation, but they prescribe what is to happen when notice to repay is given by the Treasury. Such a notice will be coupled, of course, with a suitable offer to holders to convert their holdings into another form instead of taking repayment.
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§ The Clauses are necessarily very technical in character, but I will set out briefly their purpose and effect. In the first place, it is impossible to conduct the operation on the basis that three months' notice, neither more nor less, is given, and that then the Treasury is left in doubt up to the last moment as to what amount of cash they will have to find for those who have not converted into the new stock. A longer period of notice than three months will be given, and while holders will be allowed three months in which to dissent—that is secured to them by the 311 prospectus—we want the authority of Parliament for providing that if they do not dissent in three months from any offer made to them they shall be taken as assenting. There is nothing novel in this, as it is a power which on several occasions has been given by Parliament in connection with conversion operations.
§ In the second place, we need certain powers to enable us to frame the terms of the offer. The most convenient form of offer may be that holders shall be allowed to continue their present holdings, subject to a changed rate of interest and a new date for final repayment. What I may call in legal language, I believe, the other "incidents" of the loan will remain as at present. For instance, dividends would be paid without deduction of tax at the source. The House will understand that I am not pledging myself to the details of any particular operation, but the powers mentioned are sought in order that we may proceed in that manner if on the whole it should appear most suitable. In the third place, it is necessary for the Treasury to take power to deal with the large number of points of procedure that arise in connection with any great conversion operation, and, what is very important, we shall have to get express Parliamentary authority to protect trustees who accept any scheme for conversion or continuance of the holdings for which they are responsible.
§ I am seeking these powers in the Finance Bill in order that I may be ready to seize the first suitable opportunity to launch the operation. As I have explained, a conversion such as this is, in its magnitude, by far the greatest thing that has ever been undertaken in the history of the world. It will take some months to carry through, and therefore I am not allowing anything for any saving in this year's Budget.