§ The Chancellor of the Exchequer (Sir Kingsley Wood)
I should like, with permission, to make a statement regarding negotiations for a loan in the United States. I am glad to be able to inform the House that, with the approval of the President of the United States, the Reconstruction Finance Corporation has authorised a loan to His Majesty's Government of 425,000,000 dollars and an Agreement was signed yesterday. The purpose of the loan is to provide this country with exchange to be used towards paying for war supplies contracted for prior to the enactment of the Lend-Lease Act. As collateral security for the loan, there will be pledged shares representing direct investments and certain marketable securities. There will be no change in the control or management of these direct investments, including British-owned insurance companies in the United States. The loan will bear interest at the rate of 3 per cent. per annum and mature in 15 years, provided that an extension for five years may at our option be made if two-thirds of the capital has been repaid at the end of 15 years. The full text of the announcement which is being made to-day in the United States will be circulated in the OFFICIAL REPORT. The terms of the Agreement are contained in a White Paper which will be available at once in the Vote Office.
I believe the House, with the terms of the Agreement before them, will agree with me that this represents a satisfactory arrangement and once again reflects the readiness of the United States Administration to extend their assistance to us. The execution of this Agreement will require legislation, since the Treasury will need to 800 retain special powers until the loan has been fully repaid, whereas the present Emergency Powers Act will in the ordinary course lapse before that date. The Government intend to ask the House to pass the necessary legislation as a matter of urgency. The text of the Bill will be available to-morrow, and my right hon. Friend the Prime Minister authorises me to say that it is proposed to ask the House to consider it and to pass it through all its stages on the fourth Sitting Day.
§ Mr. Thorne
May I ask the Chancellor whether this will interfere in any way with the Exchange Equalisation Fund?
While expressing the satisfaction we all feel about the nature of this transaction, which is certainly generous, did I understand the right hon. Gentleman to say that the income from the pledged securities will not be devoted to the service of the loan but will remain for the benefit of the holders?
§ Sir K. Wood
I think my hon. Friend had better wait until he sees the terms of the Agreement and the full explanation I shall give when the matter comes before the House.
§ Following is the text of the announcement made in the United States:
§ With the approval of the President, and at the request of the Federal Loan Administrator, the Reconstruction Finance Corporation has to-day authorised a loan to the United Kingdom of Great Britain and Northern Ireland of 425,000,000 dollars. The loan is made under specific authority granted to the Reconstruction Finance Corporation by Congress in an Act approved by the President on10th June, 1941, for the purpose of providing the British with dollar exchange without having to sell their securities and investments at forced sale. They will be used by Great Britain to pay for war supplies in this country contracted for prior to enactment of the Lend-Lease Bill. The collateral includes securities of United States Corporations listed on the New York Stock Exchange having an aggregate value at present quoted prices of approximately 205,000,000 dollars, unlisted securities of United States Corporations estimated to be worth approximately 115,000,000 dollars and capital stock of 41 British-owned United States insurance companies estimated to have an aggregate 801 nett worth something over 180 million dollars. There will be no change in control or management of these direct investments including insurance companies. Their strong financial position and stability will continue unaffected.
§ In addition to the foregoing, there will be assigned to the Reconstruction Finance Corporation earnings of United States branches of the 41 British insurance companies not incorporated in this country. Nett assets of these branches in this country represented by investments in the United States over and above reserves necessary to meet their policy obligations in this country is approximately 200,000,000 dollars, consisting largely of cash and United States Government securities. Collateral will be pledged to the Reconstruction Finance Corporation and deposited with the Federal Reserve Bank as in case of other loans made by the Reconstruction Finance Corporation. Interest and dividends on this collateral, together with earnings of United States branches of the 41 British insurance companies have averaged about 36,000,000 dollars a year for the past five years, all of which will be applied to payment of interest and principal of the loan.
§ The loan will bear interest at rate of 3 per cent. per annum and mature in 15 years, providing that an extension for five years may be made if two-thirds of principal has been repaid by the end of 15 years. On basis of the past five years, the available income would amortise the loan in 15 years. Funds will be available to the British as needed to meet their commitments at approximate rates of 100,000,000 dollars a month.