HC Deb 07 July 1937 vol 326 cc351-4
62. Mr. Garro Jones

asked the Chancellor of the Exchequer whether His Majesty's Government advised Imperial Airways, Limited, to make its recent issue of shares at 30s. on the ground that an issue on bonus terms was undesirable; whether he is aware that this precaution was ineffective, and that the whole of this concern could have been bought outright at a price less than the aggregate amount which has been paid in subsidies; and why it is necessary to continue to pay such heavy subsidies to this company instead of acquiring it outright as a State concern at less annual cost?

The Financial Secretary to the Treasury (Lieut.-Colonel Colville)

My right hon. Friend explained the Government's position in relation to the recent issue in the answer which he gave on 1st July to the hon. Member for the Tamworth Division (Sir J. Mellor). The hon. Member for Aberdeen, North (Mr. Garro Jones) appears to think that, if the State itself were operating these services, they could do so without any charge on public funds, and that the payment of subsidy to the company is, therefore, waste of money. That, of course, is a complete misapprehension; the subsidy would continue to be payable, though in a different form. The hon. Member will find the financial basis of the new agreement with the company explained in Command Paper No. 5414.

Mr. Garro Jones

May I inform the Financial Secretary that I am not under any misapprehension on that point; and would he answer the more specific point of my question, as to whether the Chancellor of the Exchequer sought to prevent the issue of shares at more than 30s. because it meant that the shareholders would receive a bonus? If tha[...] be so, is the Financial Secretary aware that that precaution failed?

Lieut.-Colonel Colville

Perhaps the hon. Gentleman will await the next question.

63. Mr. Garro Jones

asked the Chancellor of the Exchequer whether he is aware that, in the recent issue of shares by Imperial Airways, Limited, the attempt of the Government to rule out a capital bonus to existing shareholders was frustrated, in that the Stock Exchange Committee held that the shareholders' rights were negotiable and in that they were, in fact, negotiated at 8s. per share; that some shareholders, in addition to their 8 per cent. dividend and their realisation of 8s. per share on renunciation of rights, have enjoyed capital appreciation in the last few years up to 200 per cent. or more; and whether he is satisfied to allow these profits to continue to be made out of State subsidies?

Lieut.-Colonel Colville

No, Sir. The Government desired the issue to be made at the highest practicable price, but it was for the Board, in the exercise of their responsibilities, to decide what was the highest price at which they could properly invite the public to subscribe. The valuation of a share of this kind is largely a matter of opinion, and the fact that the shares command a premium over the issue price merely shows that the market is willing to take an optimistic view of the future of the company. In the financial negotiations with the company leading up to the new agreement, the Government's object has been to keep down the subsidy to the lowest figure at which the company could be reasonably expected to undertake the heavy and speculative obligations imposed on them by the agreement. In this my right hon. Friend believes they have been successful; and, while he takes no responsibility for the market's valuation of the shares in recent months, he sees nothing inconsistent with this policy in the fact that the company were able last year, while they were still operating under the old agreement, to declare a dividend at the rate of 8 per cent. per annum for the first time. I must remind the hon. Member that the average dividend paid by the company since its formation has only been 4⅛ per cent., and that provision is made in the new agreement for apportioning the expectations of profit equitably between the company and the Government, partly through the latter's holding of the deferred shares with participating rights after a dividend at the rate of 10 per cent. per annum has been earned on the ordinary shares, and partly by the provision under which savings effected in prime cost are to be shared between the two parties.

Mr. Garro Jones

Is the Financial Secretary aware that what he calls the inflated price has been brought about, not only by market sentiment but by the rapidly rising rates of dividend declared by the company on the basis of the Government subsidy; and does he intend to impose any limit on the rise in rates of dividend?

Lieut.-Colonel Colville

I cannot add to the very full answer which I have given.

64. Sir John Mellor

asked the Chancellor of the Exchequer the number of new ordinary shares of Imperial Airways, Limited, applied for by His Majesty's Government and the number allotted?

Lieut.-Colonel Colville

It is not the policy of His Majesty's Government to extend their interest in Imperial Airways beyond their present holding of deferred shares. No application was, therefore, made by them for new ordinary shares under the terms of the recent issue. I may remind my hon. Friend that the authority of Parliament would have been required for subscription for new shares in cash.

Mr. Thurtle

Did the Government sell their right to these new shares when they sold the rights that they had?

Mr. Thorne

If the company's profits are over £2,000 a year will they be taxed in accordance with the Chancellor's statement?

Lieut.-Colonel Colville

They will, of course.

Sir Percy Harris

Do not the Government consider that they are sacrificing the interests of the taxpayer in not taking advantage of this premium, as they are entitled to do?

Lieut.-Colonel Colville

It is not the duty of the Government to look for investments, but to further a policy of Imperial air communications, and that is the basis of my answer.

Mr. Attlee

Are we to understand that the Government are willing that any private individual should make profits, but that they will never make a profit themselves?

Lieut.-Colonel Colville

No doubt the right hon. Gentleman's view is that this service would be more economically and properly run under the State. We do not agree.