§ Mr. Pethick-Lawrence
(by Private Notice) asked the Chancellor of the Exchequer whether he has any statement to make about the 4 per cent. Conversion Loan, 1940–1944?
§ The Chancellor of the Exchequer (Sir John Simon)
Yes, Sir. The Li?, per cent. Conversion Loan, 1940–44, which was originally issued in 1924 and of which about £350,000,000 is outstanding, has consistently stood above par since 1932. It is repayable on 1st July, 1944, but carries an option to the Government to repay it on 1st July, 1940, or on any subsequent interest date, subject to three months' notice. The rate of interest carried by the loan is high and I propose to take the earliest opportunity to repay it. Formal notice of the repayment of the loan on the 1st July next is accordingly being given in the "London Gazette" to-night. Holders are being offered, as an alternative to being repaid in cash, the conversion of their holdings on the 1st July into a new loan—a short-term Conversion Loan at a substantially lower rate. This new loan, carrying interest at 2 per cent. per annum, will be repaid at par on the 1st July, 1945, but the Treasury reserve the right to redeem it at par, in whole or in part, on or after the 1st July, 1943. Holders of the 4½ per cent. loan who accept this offer of conversion will receive £100 of the new loan for every £100 of the 4½ per cent. loan converted. Particulars of the offer are being posted to registered and inscribed holders of the 4½ per cent. loan to-night and will appear in the Press to-morrow.
Holders of the 4½ per cent. loan who desire repayment in cash on 117 1st July, 1940, will be required to make application to that effect by the 8th February, 194o; but I trust that all holders, realising the appreciable saving in interest charges that would result from the conversion of the loan, and the pressing need at the present time not only for such savings but for reducing the amount to be reborrowed in order to provide for repayment, will give the conversion offer their favourable consideration. A large proportion of the 4½ per cent. loan is held by banks and other financial institutions; to them and, I hope, to many other holders, the currency of the new loan should make a special appeal and I am confident that they will convert their holdings to the fullest possible extent. As regards the small investor who holds 4½ per cent. Conversion Loan and who has not yet taken up his full quota of National Savings Certificates and Defence Bonds, there can be no objection if he prefers to take out his money for that purpose. But I trust that no holder will opt for repayment except for the purpose of relending the money to the Government.
I have one further point to mention in connection with this operation. Following the course adopted on the occasion of earlier conversions, it is proposed to regard any holder who has not applied either for repayment or for conversion by the 8th February, 1940, as having accepted the offer to convert his holding. Parliament accorded us these powers in connection with the conversion of the War Loan of 1932 and they are more necessary in the conditions of to-day. The provision I have just mentioned will be embodied in rules which the Treasury are making to-day under the National Loans Act, 1939. Some doubts, however, have been expressed whether such a provision is effectively covered by those powers, and I propose to-morrow to ask leave of the House to introduce a short Bill to remove such doubts and, as a matter of urgency, to pass it through al its stages to-morrow also. A White Paper explaining the necessity for the Bill and also its purport will be available in the Vote Office this evening.
§ Mr. Thorne
What are the Chancellor's intentions with regard to the people who do not accept this conversion? Will it be made compulsory?
§ Sir J. Simon
The existing holders of the loan, as the hon. Gentleman appreciates, at present have the right to receive, when the loan is repaid, £100 for each £100 of the stock which they hold. This is an arrangement by which they have the opportunity—and I think very large numbers of them will take advantage of it—to take instead the new issue, which is at 2 per cent.
§ Sir J. Simon
Something between £8,000,000 and £9,000,000 a year in interest would be saved if everyone converted.