HC Deb 18 March 1940 vol 358 cc1648-51
Mr. Pethick-Lawrence (by Private Notice)

asked the Chancellor of the Exchequer whether he has any statement to make with regard to the recent issue of the 3 per cent. War Loan?

The Chancellor of the Exchequer (Sir John Simon)

Yes, Sir. The House will be glad to know that the amount of the loan has been over-subscribed, and this is a very satisfactory beginning to the series of loan operations which we must contemplate in the course of carrying on the war. I should like to pay my tribute to the support which this loan has received from all classes and interests in the country and in particular from the smaller investors, who, as a class, have already responded so readily in other directions.

In this connection, I have a further observation to make. The completion of the first major borrowing operation of the war makes it desirable for me to make a statement on the intentions of the Government as affecting the issue of Government securities in thefuture. The policy of the Government is to aim at stability of interest rates and to secure that the yields offered on future loans, whatever their type, shall, after making due allowance for such factors as the periods of the loans, be in agreement with the level of interest rates established by the terms of the recent 2 per cent. Conversion Loan and of the 3 per cent. loan just issued. In these circumstances I welcome the action taken to-day by the committee of the London Stock Exchange in announcing a revised list of minimum prices for Government securities. The new minima bear a closer relationship to existing prices than those fixed on the outbreak of the war and may be taken as evidence of the desire on the part of the authorities concerned to co-operate in the policy of maintaining interest rates at the present level. I feel confident that this decision will receive widespread support from the House and from all quarters in the country.

Mr. Pethick-Lawrence

May I first express what I am sure is widespread satisfaction at the result announced by the Chancellor of the Exchequer as to the applications for this loan? I take it that allotment will be confined to the £300,000,000 originally asked for, and in that case I take it that the usual practice will be followed, by which small applications will be allotted in full and applications for larger amounts will be allotted on a pro rata basis. If that is so, may I ask the Chancellor of the Exchequer whether he is able to tell us, approximately at any rate, what percentage the allotment will bear to applications in the latter cases? With regard to the second part of the Chancellor of the Exchequer's answer, may I take it that his statement declares his intention that, if there are any persons who have withheld their applications to this issue in the hope of getting better terms later on, they are likely to be disappointed?

Sir J. Simon

I have no difficulty in answering the questions of the right hon. Gentleman. As he has said, the issue was limited to £300,000,000 except for this addition, that we made, as the House will remember, special arrangements for small subscribers through the Posit Office and trustee savings banks, and the amounts which have come from these sources will be additional to the £300,000,000. As for allotment, since the loan has been over-subscribed, the ordinary course will be taken. Smaller applications will be met in full, but the letters of allotment which have already gone out will show that the larger applicants have been allotted about 80 per cent. of their applications. As regards the final question of the right hon. Gentleman, the purport of my answer was to establish as far as I can the principle that 3 per cent. is a proper rate which we ought to hold, and to discourage any idea that the Government will be willing to contemplate more favourable terms hereafter. If it turns out that I can get money cheaper, so much the better.

Mr. G. Strauss

May I ask why there was considerable delay in making the announcement about the result of the loan, and whether the Chancellor of the Exchequer is aware that this delay gave rise to considerable rumours in the City of London and also to a good deal of propaganda from Germany?

Sir J. Simon

I do not know anything about the last part of the hon. Member's question, but I do not think there has been any delay. The only reason, as far as I know, is that the allotments would only be received this morning.

Mr. White

May I join with the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) in expressing our satisfaction at the result of the loan? At the same time may I ask the Chancellor of the Exchequer whether it is quite clear that the success of this issue makes it none the less necessary to continue the campaign for the issue of Defence Bonds and War Savings Certificates?

Sir J. Simon

Yes, Sir, and that campaign is going on with increasing effect. I would like to add this, that even while this loan was open there was no drop at all, either in the energy or in the results of the National Savings campaign.

Mr. Thorne

As the loan has been oversubscribed, would there be any difficulty in keeping the money and investing it for the subscribers?

Sir J. Simon

I think the hon. Member will realise that if we announce that we want to borrow £300,000,000 and a number of people put in applications for more than that sum, some of them, at any rate, might ask whether we were going to keep to our programme and not alter it because it was over-subscribed.

Miss Wilkinson

Is it not the fact that the figures were all known to the Chancellor of the Exchequer before the actual time of sending out the letters of allotment? Does the right hon. Gentleman realise the psychological effect which might have resulted from a much quicker announcement?

Sir J. Simon

I entirely appreciate the point put by the hon. Member, but she will appreciate that the position is not quite as simple as it appears. There were subscription lists at various centres all over the country, and our desire to bring in smaller people involved the use of Post Offices and trustee savings banks. I did not know the figures until this morning, although I had a general impression about the matter last week.

Miss Wilkinson

Surely it does not matter that the last 2½d. should be known before the right hon. Gentleman makes a statement to the effect that the loan had been over-subscribed?