HC Deb 01 July 1937 vol 325 cc2145-7
47. Sir John Mellor

asked the Chancellor of the Exchequer whether the Government, as holder of the whole of the issued deferred shares of Imperial Airways, Limited, consented to the recent offer to the public of new ordinary shares at a price substantially below the market price of the existing ordinary shares; whether the Government were consulted with regard to the payment of underwriting commission by the company; and whether, in view of the subsidy payable by the Government to the company, he is satisfied that the terms of the offer were in accordance with the best interests of the company and with the policy of the Government?

The Chancellor of the Exchequer (Sir John Simon)

The answers to the first and last parts of the question are in the affirmative. The condition which the Government laid down in negotiating the new contract with the company was that in making any issue the company should raise capital on the most advantageous terms practicable at the time the issue was made. This principle would exclude any issue to existing shareholders on bonus terms, but would not preclude applications from such shareholders from receiving preferential consideration in allotment. In settling the terms of the recent issue the Board complied with these conditions. It is true that the price of issue was considerably below the market price at the time, but that price was regarded as unduly inflated, and the Board felt that they could not, consistently with their responsibilities, accept it as a guide to the price at which they could properly invite the public to subscribe for an enterpise of such novelty and magnitude as the new Agreement with the Government involves. As regards underwriting commission, the Government were informed that the Board proposed to underwrite the issue in the ordinary way and offered no objection. They were informed by reference to the draft prospectus of the terms on which this was arranged.

Sir J. Mellor

Does my right hon. Friend really think that 30s. 1s the best price that could be obtained, and could lie explain how it can possibly be satisfactory to the Government or to any other shareholder that shares should be offered at a lower price than could be obtained by way of offering them for public subscription, when a much better price could be obtained from the shareholders themselves?

Sir Frank Sanderson

Is it not a fact that these shares have been issued, or are to be issued, at a premium of no less than 50 per cent. above par value?

Sir J. Simon

The answer I have given really deals with those points. As far as Government responsibility is concerned, we have ourselves been very careful to make all possible inquiries, and, as I have said, the Board felt that they could not, consistently with their responsibilities, accept the quotation that has been made of the shares from day to day as though it were the proper price at which the issue should be made.

Mr. Herbert Morrison

Can the right hon. Gentleman inform the House how it is that the Government are paying a subsidy to this concern which is issuing shares at an inflated price?

Sir J. Simon

I understand that the right hon. Gentleman's suggestion is that the shares are being issued at an inflated price. The suggestion of the other hon. Member is exactly the opposite.

Mr. Morrison

May I have an answer to the question? How is it that in the case of a concern which is issuing shares at a very high price above par value—50 per cent.—the Chancellor of the Exchequer is consenting to a continuance of the subsidy paid out of public funds?

Sir J. Simon

The subsidy is part of the general policy connected with the development of air communications. The question of the circumstances in which the shares are being issued at particular price is a separate matter.

Mr. Garro Jones

Does the Chancellor of the Exchequer realise—[Interruption.]