HC Deb 05 March 1940 vol 358 cc206-10
49. Lieut.-Commander Tufnell

asked the Chancellor of the Exchequer whether he can now make any statement as to the approximate date on which he proposes to issue the promised War Loan?

Sir J. Simon

I would ask my hon. and gallant Friend to await the statement on this subject which I propose, with the permission of the House, to make at the end of Questions to-day.

Lieut.-Commander Tufnell

Is the Minister aware that there are many people; who, having exhausted what they are allowed to possess under Defence Loan and National Savings Certificates, are anxiously awaiting to invest in something else which will help the Government?

Sir J. Simon

I hope they will wait until the end of Questions.


Sir J. Simon

I ask leave to make a short statement on the subject of the issue of a War Loan. I think the time is now at hand for the issue of a loan on the market. Our very large national expenditure has so far been financed by the additional taxation imposed in September last, by an appreciable increase in the volume of Treasury Bills and by the ever-mounting proceeds of the very successful Savings Campaign which has been in operation since November last. The Government's appeal for subscriptions to a large loan had necessarily to be delayed until it was felt that the market was ripe for its issue. As I have said, I think that the time for this has now arrived, and I am taking the somewhat unusual course of announcing the terms of the loan in Parliament a week in advance of the opening of the lists in order that investors may have ample time to make any arrangements which may be necessary to enable them to subscribe the fullest possible amounts.

Our borrowing since the outbreak of war has all been for short periods. The new loan, however, will be for 15 to 19 years. It will carry interest at 3 per cent. and will be issued at par. That rate accords with the Government's avowed policy of borrowing as cheaply as possible and at the same time is a reasonable one from the investor's point of view. The loan will be repayable at par on 15th October, 1959, but the Treasury reserve the right to redeem the loan, in whole or in part, at any time on or after 15th October, 1955, on giving three months' notice. It will therefore be known as the 3 per cent. War Loan, 1955–1959.

The amount of the issue will be limited to £300,000,000. The amounts which the Government will need to borrow during the next 12 months will, of course, be considerably greater than that figure, but a first issue for a limited amount is convenient to the Treasury from several points of view and I think it will also be in the general interests of the investor. Ten per cent. of all subscriptions will be payable on application and the balance on 15th April, 1940, but prepayment of that balance may be made under discount at the rate of 1 per cent. per annum.

I propose, subject to certain safeguards, to offer to non-residents who subscribe exemptions from taxation somewhat similar to those attached to some of our loans in the last war. For the Bank of England issue of this loan the minimum subscription will be £100. Issues will also be made under prospectuses to be issued by the Postmaster-General and by the National Debt Commissioners on behalf of the Trustee Savings Banks and in these cases the minimum subscription will be as low as £10, although no application of that sort may exceed £1,000. I hope that as many small investors as possible will take advantage of this opportunity of lending their savings to the State for a longer period than that of National Savings Certificates or of Defence Bonds.

Fuller details of the loan will appear in the prospectus which will be published in the Press to-morrow and will also then be available at banks, stock exchanges and post offices. The lists will be opened on Tuesday next, 12th March, and will be closed on the following day. I commend this issue to the earnest attention of every citizen, and to all companies, firms, institutions, societies or other bodies who have resources to invest. It should be, I am sure it is, the determination of all classes and interests in the community to ensure that their power to lend to the nation shall contribute its full part towards our ultimate victory.

Mr. Pethick-Lawrence

May I take it that, in issuing this long-term 3 per cent. loan, which Members in all parts of the House will hope will be subscribed to by individuals out of their genuine savings, the Chancellor of the Exchequer will not preclude from his mind the issuing of a short-term loan at a lower rate of interest particularly suitable for large financial houses?

Mr. Graham White

While associating myself with the hope expressed by the Chancellor and by the right hon. Member above the Gangway, and, indeed, expressing my own belief that this loan will be a complete success because it appears as regards terms of maturity to fit well in the existing structure of our present securities, and also because it will afford a very large opportunity for persons to express their will to victory in a practical way, may I ask whether in any future schemes of finance the Chancellor may contemplate for the further financing of the war that it is his present intention and hope that future loans will be issued on such terms as not to be less favourable to the Exchequer than those he has just announced?

Mr. Leach

Is there anything to prevent would-be lenders on this side entering into collusion with some friends abroad in order to get better terms?

Mr. Mander

Can the Chancellor give an assurance that any income accruing from these investments will be disregarded for the purposes of the means test?

Sir J. Simon

I do not think I can deal with the last Question. As regards the Question put to me by the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence), of course, he realises, and everybody in the House realises, that a very great deal of consideration had to be given before deciding on the time and conditions of a very important issue such as this, and my advisers and I, as I have told the House, came to the conclusion that this was the right time for it. The right hon. Gentleman suggested that it might be accompanied by another loan on different terms, but I should be a little afraid that if one were to attempt to drive, as it were, the two horses side by side, it might always be possible that it might somewhat detract from the appeal of the loan I have announced. I shall, of course, bear in mind what he has said in respect of possible future occasions. The hon. Gentleman the Member for East Birkenhead (Mr. White) also referred to future issues. There certainly will have to be such, but I do not think I should be wise or prudent if I was to make any statement now. As regards the question put to me by the hon. Member for Central Bradford (Mr. Leach), based on my statement about relieving non-residents from tax, I appreciate the point he makes, and we shall take good care to see that it is the genuine non-residents' money which is lent to us on the terms I have suggested. People in this country must pay their taxes.

Mr. Leach

I said "investors on this side" and that has been taken to mean "on this side of the House." I meant "on this side of the water."

Sir J. Simon

I perfectly understand. The hon. Gentleman meant "on this side of the Channel."

Mr. Woodburn

Regarding the suggestion that future loans may come along, may I ask whether the inference that these might be at a higher rate will not injure the success of the present issue? Would it not be wiser to make clear that loans during this war are not to be conducted on the auction-sale principle such as was done in the last war?

Sir J. Simon

I hope the appeal that this loan will make will stand on its own merits without being made the subject of any such inference. I am sure the hon. Member will see that it would be the height of imprudence for me, without careful consideration, to give pledges for years ahead in circumstances that no one at present can foresee.

Mr. De la Bère

Will Income Tax be deducted at source?

Sir J. Simon

Perhaps the hon. Member will look at the Prospectus.