§ Motion made, and Question proposed, "That the Clause stand part of the Bill."
§ Mr. EcclesClause 9 continues the bad work of Clause 8, and further restricts the transfer of securities to foreigners. The White Paper says in paragraph 8:
There is no discrimination against foreigners as such.I am not sure that that is true after reading Clause 9. The Committee will know that at present an American citizen, 450 or a citizen of any country outside the scheduled territories, can have free sterling here, or can remit dollars to this country and have the proceeds credited to his registered account in sterling. If he has the money in his account here, he can buy, at the present time, any security in sterling he wishes or any piece of property. If he desires, at a later date, to resell that security and to take home, let us say, in dollars, the proceeds of the sale, he gets an M form, which is usually given without trouble, and it goes through in that way.451 9.15 p.m.
I want to ask the Chancellor of the Exchequer whether it is not a fact that, under Clause 9 as now drafted, an American cannot buy any security, whether he wishes at some future date to sell it and remit the proceeds out of the country or not, without a permit from the Treasury. In other words, this is a new restriction upon the investment by foreigners of money in this country. If I was right in arguing on the previous Clause that the Treasury are afraid that American money coming into this country might be "hot" money at some future date, it is surely more likely to be so if it is in the form of cash rather than in the form of property here. If that is a good reason, I think we should not put this new restriction upon foreigners, but should allow them, if they remit money to this country, to buy what they like here. If they wished at some subsequent time to take the money out, I can understand they would have to get the permit, but it appears to me that an extra restriction is imposed here. The second point I wish to make very much affects our business dealings with the Empire. Under Clause 9 (2) it is provided that
Except with the permission of the Treasury, a security not registered in the United Kingdom shall not be transferred outside the United Kingdom if either the transferor or the transferee, or the person, if any, for whom the transferor or transferee is or is to be a nominee, is resident in the United Kingdom.Take the case of a South African company which has its head office in Johannesburg and the principal register of shares in Johannesburg, but also has a subsidiary register in London, with a London transfer committee which operates upon that London register, records the transfers and issues the new certificates. This Subsection means that no person in this country may become a shareholder in such a South African company, the head office of which is in Johannesburg, unless he gets permission from the Treasury. If there is, no general exemption in regard to that under Clause 31, it will kill the business between this country and South Africa, and other parts of the Empire, where the head offices, the main registers of the companies' shareholders, are in fact in some town in the scheduled territories.452 I go further. The Committee will know that there are some South African companies which do not keep a London register. What will happen when some United Kingdom resident desires to become a shareholder in one of these South African companies? Must he go to the Treasury to get a permit? If so, it will have a serious consequence. In the case of many of the gold mines in South Africa, which bring so much to the currency stability of the sterling area, since we need the gold to defend the pound, many of them begin with a South African company, and it is not until the company is well established—in other words, until the mine is a proved venture —that application for leave to deal is made in London. If the Chancellor desires, as I am sure he does, the further development of South African mines and other businesses in other parts of the Empire, he must give a general exception under Subsection (2), so that a United Kingdom resident can become a shareholder in a company, the head office of which is in the Dominions, without his having to go hat in hand and produce to the registrar prescribed evidence from the Treasury. I should be very grateful if the Chancellor would give us this assurance, as I know that many of the mining companies in this country are particularly anxious about the matter.
§ The Solicitor-GeneralIn order to understand the object and the effect of Clause 9 one has to contrast the scheme of control of transfer of securities in this Bill with the system which operated under the Defence Regulations. The system was that securities had to be registered and placed at the disposal of the Treasury in order that they could be realised, but that has been completely abandoned, so that the object now is not to make them available for the purposes of conversion into foreign currency. This is completely different. The object now sought to be achieved is conservation of the security position, and, therefore, what we are endeavouring to do will be done in such a way as to cause the least hindrance possible
First, Clause 8 imposes a limitation upon the issue. It requires permission for the issue of new securities to residents outside. Then Clause 9 imposes a control on the transfer, unless both transferor and transferee are resident within the United Kingdom or scheduled territories. 453 How is the registrar who keeps the register of securities to know how to register the securities unless it is made clear by the appropriate evidence, which shall be prescribed, that the necessary conditions are fulfilled and that the transferor and the transferee are resident within and not without? That system can be operated easily without causing any inconvenience to persons who desire to purchase and sell shares by the means of declarations on the transfers. A declaration of residence made on the transfer by the transferor or the transferee and within their authority will be franked by the authorised agents, who will be the banks and the Share and Loan Department of the Stock Exchange, and will combine the system so as to make transfers easy in these particular circumstances. In other words, the transfer as between residents will take place as a matter of course.
What we design to ensure is that the transfers do not fall into the category which are not transfers as between residents. They can be supervised and the agency which will supervise the transfer and pass it in cases where there is doubt about it is the banks or the Share and Loan Department of the Stock Exchange, but in cases of doubt they will have to go to the authority reposing power in them, namely, to the Bank of England. So in point of fact, actual transfers will take place as if there were no control as far as the transferor and the transferee are concerned. That is the object of Clauses 8, 9 and 13, and that, of course, includes Subsection (2) of Clause 9.
The question then arises how it will be operated, and here one is thrown back upon the question of general policy, which does not immediately arise under the terms of this Clause. What the Bill provides is the machinery of control. How that control will be exercised is a matter which is different. It is a question other than the question with which the Committee is immediately concerned, namely, what does the Bill provide for and how does the control operate? Will the control operate in such a way as either to be unworkable or impose unnecessary hindrance, or hindrance which can be done away with in the case of a transfer of shares?
I hope that the Committee will accept from what I have said that, in the case of permitted transfers, there will be nothing beyond the mere appending of a signature 454 to a declaration form by the transferor and the transferee. In cases of doubt— that is to say, where one of the persona is resident outside—then the authorised agent, the bank or other agency, can frank it as being either a permissible transfer or not and, if there is any doubt, a refer back to the Bank of England. It will be seen that the thing will thus work quickly. The question beyond that is simply one as to general financial policy. One can raise an infinity of questions as to whether this or that market transaction will be interfered with, but I submit to the Committee that that does not arise on this Bill. The question the Committee is discussing is whether this control—which is the control we proposed to the House on Second Reading and which, in principle, the House then approved—will work. In order to see how it will work one has to examine the actual Clauses of the Bill itself. When one goes beyond that and asks whether public policy requires that permission should be given under Subsection (2) of Clause 9 in the case of purchases of shares in South Africa—the question raised by the hon. Member for Chippenham (Mr. Eccles)—then I respectfully suggest that we are traversing ground which does not come within the scope of the present discussion.
§ Mr. Eccles indicated dissent.
§ The Solicitor-GeneralThe hon. Gentleman shakes his head but, with great respect, I submit that he is, in point of fact, asking a question which is not germane to this discussion.
§ Mr. EcclesSurely the Solicitor-General would agree that there are not just two or three special cases but hundreds of thousands of shares which are affected by a very simple decision. I will boil the whole thing down into one question. Do the Government intend to consider shares on a London register of a South African company as in all respects as if the company were registered in the United Kingdom? If he would say "Yes" to that, he would relieve a great deal of apprehension
§ The Solicitor-GeneralThe argument that enormous numbers of share transactions are concerned demonstrates the Tightness of my point, that we are now being asked a question which is not germane to this discussion. The hon. Gentleman mentions one kind of share transaction, but after all there are count- 455 less different kinds, and there are share markets all over the world and different types of business. These come within the domain of general financial policy and do not arise on this Bill, which is intended purely to impose a control. It does impose a control, and the question which the Committee is discussing is the nature of this control and whether it is an efficient one.
§ Mr. StanleyIt is with considerable disappointment that I rise to my feet because when I saw the Chancellor of the Exchequer flashing a message to the Solicitor-General a moment ago I thought he was giving him the answer, whereas in fact he just told him to sit down.
§ Mr. Kirkwood (Dumbarton Burghs)The Chancellor would not be so rude.
§ Mr. StanleyPerhaps he asked him to resume his seat. We on this side of the Committee really cannot accept the contention of the Solicitor-General that it is not germane in a discussion of a Bill imposing a control to raise the question of how that control is to be exercised. It seems to me a most important point. Obviously, our whole attitude towards the Bill must be governed by the way in which we are told it is to be used, and indeed—if I might have the Chancellor's attention on this point—the argument seems to cut entirely across the line he himself has been taking in this Committee. He told us that he proposed at some stage, sooner or later—we hope that if possible it will be sooner rather than later—to give us some idea how the controls are to be operated.
The Chancellor is going to give us a survey of the exemption Order, and let us know what is going to be left outside. That is exactly what we are asking for and what the Solicitor-General said we are not entitled to ask for in discussing a Bill of this character. My hon. Friend the Member for Chippenham (Mr. Eccles) wants to know if there is to be under Clause 31, not, of course, an exemption for one particular transaction, but an exemption exempting from the operation of Clause 9 (2) the whole range of the South African registered shares to which he has referred. That is a question we are entitled to ask, and the sort of question which the Chancellor has already promised to answer. We should feel more 456 secure than we do now after the speech of the Solicitor-General if the Chancellor could just confirm that we are not only within our rights in discussing the way these controls are going to be worked, but that he is going to take an early opportunity to give this Committee a general idea of the method he proposes by means of telling us what is going to be in the exemption Order.
§ 9.30 p.m.
§ Mr. DaltonMy hon. and learned Friend was resisting the temptation placed in his power by the hon. Member for Chippenham (Mr. Eccles) to particularise in high degree what would be the attitude taken by the control towards particular South African undertakings. In that my hon. and learned Friend was wise, because I have undertaken, as the right hon. Gentleman said, to give to the best of my ability and in broad terms—and it can only be in broad terms—the intentions we have for the content of this Order for the consideration of the Committee. That broad undertaking stands and we will seek to find suitable time sufficient for Debate upon it.
We are here considering a narrower question than the wider commitment I have made to the Committee on Clause 9 (2). This particular Clause is drafted in terms of the requirements of the United Kingdom as a safety measure in case the control that we have in a particular scheduled territory may fall short of the minimum that is required for our own protection. That is the approach we must make to it. This is a Bill for the national financial defence of this country in cooperation, as we hope, with the various Governments within the scheduled territories, but if would be very rash and might create quite a false impression of certainty in a situation that cannot be completely certain if I were to answer the hon. Member for Chippenham more specifically with regard to a particular class in any particular territory. However, I hope it will be of some assurance to the Committee if I say that normally —in the great majority of cases, and unless there is some reason to the contrary —the exemption Order, which I will seek to expound to the Committee at a suitable moment, will extend to the scheduled territories at large. That is to say, if there is some undertaking within any of the scheduled territories—the hon. Member 457 instanced South Africa but I am making a statement of a more general form— normally it would be our intention that the exemption should extend to the scheduled territories as a whole, subject, of course, to exceptions that might be approved in particular cases in the light of particular considerations. I hope that the right hon. Gentleman will regard that as reasonably reassuring.
§ Earl Winterton (Horsham)Will the right hon. Gentleman particularise on one point? It is clear from what the Solicitor-General said that where a bank of one of the scheduled territories is either the existing agent or about to be the agent of the investor in this country and where a transaction takes place such as the Solicitor-General referred to, the onus of responsibility rests on that bank as agent and not on the person here, and, therefore, it is necessary for the bank to obtain the permit Otherwise, if the bank failed to do so, the person resident in this country might be held to be guilty of an offence.
§ Mr. DaltonI have been present during most of the Debate, but I was absent during the earlier part of the discussion on this Clause. I have endeavoured to give the Committee the general intention of the Government on the matter at issue, but it would be more appropriate that my hon. and learned Friend would answer this particular question, because he has heard the whole discussion.
§ The Solicitor-GeneralThe answer appears to be that declarations will be authenticated by the authorised agents, the banks, and the authentication is made, therefore, on the responsibility of the bank.
§ Earl WintertonThat counts as the permission of the Treasury?
§ The Solicitor-GeneralYes. The authorised agent has certain limited authority from the Treasury, communicated to it by the Bank of England. It is limited authority in the sense that it may frank certain transactions as to which there is doubt. In the ordinary case, where the tranferor is resident in the territories, and signs the declaration, and the transferee is resident in the territories and signs the declaration, of course no question arises. But where you have a case which is out of the ordinary, where ensure that no one shall be guilty under 458 one or the other is resident outside, then it is the authorised agent, the bank, which takes the responsibility of franking it as being a transaction which can be allowed or which requires permission, or referring it to the Bank of England in case of doubt.
§ Mr. BirchThe learned Solicitor-General rightly pointed out that Clause 9 ties in with Clause 13. It seems to me that the effect of these two Clauses goes further than that of the existing Defence Regulations because, under Regulation 3A (3), residents in foreign countries are permitted to exchange British securities between themselves, provided the person to whom they make the exchange is in the same country. I could read out the whole Regulation, but I will refrain from doing so. As I understand it, under these two Clauses, that will no longer be the case. Without Treasury permission, residents outside the scheduled countries cannot exchange securities between themselves, though they are in the same currency area. I wondered why, in fact, the Regulations have been tightened by this Bill, whereas we have been told there was a general relaxation.
§ The Solicitor-GeneralIn terms, i quite agree that the Clause, as drafted, tightens the provisions of the Regulations. The question of switching, as between nonresidents will have to be dealt with by exemption under the Regulation. I quite agree that the regulation in its terms, requires consent for such an operation.
§ Clause ordered to stand part of the Bill.
§ Clause 10 ordered to stand part of the Bill.