That, for the purposes of any Act of the present Session to provide, amongst other things, for the establishment of a British Transport Commission, it is expedient to authorise—
§ Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
§ The following Amendments stood upon the Order Paper in the name of Sir JOHN MELLOR:
In line 5, after "Stock," insert:
redeemable on or before 31st December 1962.
In line 10, after "Act," insert:
and whether the said Commission or any such body continues or has ceased to exist.
§ Mr. Speaker
With reference to the two Amendments in the name of the hon. Baronet the Member for Sutton Coldfield (Sir J. Mellor) I am sorry to inform him that both are considered to be out of Order.
§ 10.27 p.m.
§ Sir John Mellor (Sutton Coldfield)
May I, with respect, Mr. Speaker, make a submission with regard to the first Amendment? I recognise that the second Amendment might increase the charge, but I respectfully submit that the first Amendment would not have the effect of increasing the charge because all it does is to restrict the guarantee to stocks redeemable not later than 1962. In my submission, in refusing authority to the Treasury to guarantee stocks redeemable after 1962, the effect of this Amendment is entirely restrictive, and, if anything, would diminish the charge, rather than increase it. If I might give a practical illustration, which might be considered relevant, it is common knowledge that short-dated stocks carry a lower rate of interest than long-dated stocks, 163 and would not tend to increase the charge. I would be grateful, Sir, if I could have your further considered Ruling.
§ Mr. Speaker
The matter is one of continuous argument. I am not really concerned with the probabilities. If there is any slight possibility that the charge might be increased in any way, I am bound to rule it out of Order I cannot tell whether stock of 1962 or 1972 is going to incur the least charge. If there is a chance that the stock of 1962 might increase the charge on the stock of 1972, I am bound by the Rules of Order to say that there is the possibility that it might increase the charge. I am sorry, but I have looked into the matter very carefully, and am advised that I must rule the Amendment out of Order.
§ 10.30 p.m.
§ Sir J. Mellor
I should like to raise two questions on the terms of the Resolution. The words of the Resolution about which I should particularly like to address inquiries to the Minister of Transport, or the Financial Secretary, or whoever is to reply, are those at the beginning of paragraph (aIt is expedient to authorise—(a) the payment out of the Consolidated Fund of such sums as may be required to fulfil any guarantee by the Treasury of the principal of and interest on stock issued by the said Commission or any other body having functions under the Act.The first point about which I should like elucidation is in regard to the word "stock." It is of great importance, both to the Exchequer and to the recipients of the stock, to know what sort of stock they are to get. On 17th December, when the Chancellor of the Exchequer was asked to say whether the stock was to be redeemable or not, he said that it would be a dated stock, and that he would expect it to be redeemable within this century. But he would not come nearer than that. Therefore, all we know at present is that the stock referred to in this Resolution is intended to be stock which the Chancellor expects will be redeemable within this century. We know no more than that. Before we pass this Resolution, I think we ought to have some further information from the Government. It is of considerable importance to the Exchequer, because the rate of interest upon the stock must be conditioned largely by its date of maturity, according to current market conditions. But it is also 164 of great importance to those who receive the stock by way of compensation, because if it is a short-dated stock, they then have a reasonable prospect, if they desire to realise, of being able to sell at or near par value. Many of us on this side of the House think that the stockholders should have been given cash by way of compensation, but that is outside the terms of this Resolution and I cannot pursue it.
I want to point out that if the stock given by way of compensation is a very long dated stock, and if at the time when they receive the stock recipients desire to sell, and so many desire to sell that the bottom drops out of the market, they will not in that case get for their stock anything like par value. There may well be a wave of heavy selling when this stock is issued by way of compensation. That may result in those who do sell getting only a very small proportion of the par value in actual cash. Therefore, I think that in connection with this Resolution, the House should consider whether we should more closely limit the authority granted to the Treasury in regard to the terms of the stock which it is proposed that the Treasury shall guarantee.
I pass to the second point. It is with regard to the guarantee itself. Events have caused me to feel that we should inquire rather closely into exactly what the Government understand by the guarantee by the Treasury of a stock. Take the Transport Commission stock which it is proposed shall be guaranteed by the Treasury. Suppose that stock is issued, redeemable say in 1990, and suppose it happens that the Transport Commission itself comes to an end as a result of an Act of Parliament, say in 1980. Does the Treasury guarantee survive the demise of the Transport Commission, and will that guarantee continue up to 1990 in respect of the principal and interest? This is not a purely academic point. I have very strong reason for raising it, because the London Passenger Transport Board 3 per Cent. Guaranteed Stock had a Treasury guarantee.
I should like to read to the House the Treasury Minute containing the precise terms of that guarantee. The information was given in answer to a written Question which I put on 16th December, 1946. It was as follows:They…"—165 that is the Lords of the Treasury—…accordingly give Their guarantee for the payment of interest at the rate of three per cent, per annum on the said sum of £12,905,641 of London Transport 3 per Cent. Guaranteed Stock 1967–1972 and for the repayment of the said sum of not exceeding £12,905,641 of principal moneys secured by the said Stock on the due dates."—[OFFICIAL REPORT, 16th December, 1946; Vol. 431, c. 328.]Now the Chancellor of the Exchequer, on 16th December, defended himself, or attempted to defend himself, upon the charge that the Government had repudiated that guarantee. He claimed that there had been no repudiation, because, he said the Passenger Transport Board was being brought to an end by this Bill, and therefore, as the Passenger Transport Board was being brought to an end, the Government guarantee fell through. That is the same thing as a man who has guaranteed the overdraft of another, saying that if he murders that other, then he is relieved of all liability under his guarantee. Quite simply, that is the proposition. The Chancellor said the Board was passing out of existence. Its assets were being transferred to this new nationalised body, and the answer he gave went on to say that the guarantee was not applicable once the Board had passed out of existence.
When we are faced with that attitude in a comparable case, I think we ought to know what the Treasury propose with the regard to the guarantee referred to in this Resolution. Do they contemplate that the guarantee referred to in this Resolution shall be co-terminous with the existence of the Transport Commission, or do they intend that it should survive even the demise of the Transport Commission and continue until the ultimate date for redemption? Is it in fact a real guarantee of the principal and interest of the proposed stock, or is it merely a guarantee which will last so long, and only so long, as the Transport Commission survives? I hope that we shall receive some more definite information upon these two points because I feel that British credit is seriously involved in this matter.
§ 10.39 p.m.
§ Mr. Nigel Birch (Flint)
I wish to support what has been said by my hon. Friend the Member for Sutton Coldfield (Sir J. Mellor). First on the question of the definition of the stock, my hon. 166 Friend pointed out that the Chancellor of the Exchequer did say that this stock would be redeemable, but was not clear whether it would be redeemable in this century or in the next. We were, therefore, left with the idea that it was only redeemable in the long run. In the long run, as Lord Keynes once pointed out, we shall all be dead [HON. MEMBERS: "Hear, hear."] That applies as much to hon. Members opposite as to those on this side of the House. In particular, I would point out that almost all the holders of these stocks will be dead, because the stocks are mostly held by elderly people. This date is important for a number of reasons. The first reason is that, having lost on the average 45 per cent. of their income, a great many of the holders of these stocks will, in future, have to live on their capital.
The question of capital value is thus of great importance. I know that very well from my own experience of my constituents. I know a great many cases among my constituents of people who have no chance whatever of keeping alive except by living on their capital. Capital value is, therefore, important, and a really long date is of no interest to them. Secondly, this stock is being handed over at a false price. The present level of gilt-edged stock is admittedly rigged, and this is done against every possible economic argument. The actual prices in the gilt-edged market are purely a function of the Chancellor of the Exchequer's vanity and, therefore, they stand at an inflated price. Sooner or later, this policy will be revolted against, and the reason is that the present monetary policy inevitably causes a rise in the cost of living and, therefore, a fall in the real value of these stocks. There will be a revolt against the policy, and as a result of the revolt you will get a fall in the gilt-edged market.
My hon. Friend made the point that the Minister of Transport or the Chancellor of the Exchequer may hold themselves at liberty at any time to declare that this particular corporation is at an end, in which case, all the stocks will go into the melting pot again, as has happened with the Central Electricity Board and the London Passenger Transport Board. The sins of the Chancellor are finding him out. He is the first Chancellor, certainly the first since the beginning of the 18th century, 167 who has ever defaulted on a Government guarantee, and there has been a great shock to confidence. He gave two defences, the first of which was quoted by my hon. friend. The second defence was that although he had defaulted upon a Government guarantee it was not a bad case because people were really getting quite good compensation. That is the same as committing a crime against somebody and saying "Anyway I have given you plenty of hush money so keep your mouth shut". That is not an argument for an honourable man to put forward.
One can see many reasons why the particular set-up envisaged by the Minister of Transport will break apart. It will certainly have to be split up sooner or later and he knows it. When this organisation is split up, will the right hon. Gentleman hold himself at liberty to say "The thing is split up, therefore that contract is broken. We would rather pay you off in one per cent. stock. We have not defaulted upon our guarantee because the actual corporation is split up and, therefore, we are not bound in any way"? That is exactly what has been done with the London Passenger Transport Board. I would like the right hon. Gentleman to "come clean" on what he really intends to do about it. I want him to swear himself deeply upon this if he does not intend to do it, because it is a point on which confidence has rightly been shaken. A large part of this stock will not be held by the present holders of railway stock, because they cannot afford to live on it, but will be held by institution's. The authorities of those institutions must be quite clear in their minds about the intention of the Chancellor of the Exchequer. I ask for an absolutely clear answer on both these questions that of a reasonably short date for the stock and that of the life of this particular corporation.
§ 10.44 p.m.
§ Mr. Drayson (Skipton)
This Money Resolution chiefly concerns these people who are affected by the compensation terms of the Bill to which it relates. I wish to draw particular attention to the question of the guarantee by the Treasury referred to in line 5 of the Resolution. Other speakers already have asked the Government if they will say quite clearly how far this guarantee goes. When the Chancellor of the Exchequer spoke on this Measure on 17th December he gave some 168 indication that it would be a dated stock, and that the date would be some time this century. Now the Government have had a month in which to consider the matter more closely, and many of us hope that tonight the Financial Secretary will be able to tell us precisely what that guarantee will be. I see it is referred to as a guarantee of principal and interest. To what extent is the principal of the stock guaranteed, and for what period is the guarantee? We should have that information so that those who are to receive it under the compensation terms of this Bill will know how they stand for perhaps the remainder of their lives. I do not suggest for one moment, that if the dates or rates of interest are satisfactory that would be a justification for the general basis of compensation. I do not feel, in regard to a Measure of this sort, that provided the compensation is enough we should therefore say that it is a good Measure. I detest the whole Bill, and this Money Resolution in particular.
I do not intend, however, to pursue the question of compensation, but to deal, as far as I am able, with the Government guarantee in connection with principal and interest that is contained in this Resolution. It occurs to me that when the time comes for a decision by the Government on the exact terms of the new stock to be issued, they might bear in mind the fact that a million or more of the people affected by this Resolution are small holders of the particular securities that are to be taken over. Would it not be much more simple, if they were to be given the opportunity of deciding to accept½per cent. Post Office Defence Bonds, which they can cash at any time on six months' notice; or alternatively, that they should be allowed to accept, in payment for their stocks, the new Savings Certificates which they can acquire at 10s.? I know that would eliminate all those who have stocks to the value of more than £500, so there would be no chance of the larger holders participating in such a system except to the extent of the amount of the certificates that they are allowed to hold. Then these unfortunate people who, as has been said tonight, will have to spend a certain amount of their capital in order to maintain their incomes, which have been reduced by this generous Government, will 169 be able to cash their certificates, as and when they wish, without any loss of capital.
If the Chancellor of the Exchequer cannot consider that proposal, I suggest to him that there might be a range of stocks carrying varying rates of interest and varying dates of repayment which the present holders could opt to exchange into, bearing in mind the estimated life of the holder. We know today, as a result of the Government's latest White Paper, that the stock market may be considered to be suffering either from a surfeit of planning, or what I may term the "White Paper Willies." Two-and-a-half per cent. Consols now stand at 98, and I have no doubt that, when our financial experts charge into the gilt-edged market, with these resources at his disposal, the Chancellor will no doubt put 2½ per cent. Consols back nearer to par, and, if it coincides with his announcement of the terms of compensation stock, it might on that occasion appear as though he were being generous or at least consistent with the ruling market values. Who knows but that, after that, there may be another White Paper painting an even gloomier picture? Many of us fear that it may be so—we wish that it could be the reverse—and those holders, who know that in 1948 their stock is going to be repaid, will realise that the security they are to be given in exchange may stand at a discount when dealings begin.
The point which the Financial Secretary should bear in mind is that these holders, who are having their interest reduced by 40 per cent. or even more, are hanging on to their railway stocks to enjoy the higher rate of interest for the longest possible time. It is suggested that those who are conversant with these things, or have access to the advice of bankers or others, have considered taking these securities. I do not say whether that is good advice or not. At least we know that it is being done, though I feel that it is not, at the moment, being done by the majority So that we can safely say that, when the final vesting date arrives, and the new British Transport Commission stock is issued, its holders will convert so much of their stock, year by year, in order to maintain something of the standard of living which they enjoyed before. With this stock coming on the market, and the 170 Chancellor of the Exchequer having perhaps exhausted the resources, which he now uses to bolster up prices, these holders may find that this stock, given to them at 100, will not then be saleable at the same price. That is why we look forward with interest to hearing what the Financial Secretary will say tonight on the terms of this guarantee as to principal and interest on the stock that will be issued. We hope he will give us some clearer picture of what is intended.
§ 10.54 P.m.
§ The Financial Secretary to the Treasury (Mr. Glenvil Hall)
I have listened very carefully to the three speeches we have had from the other side of the House, and the burden of the queries which we have had from all three hon. Members has been the same. They have asked me to give a categorical reply to the questions put to the Chancellor of the Exchequer, as they very properly said, on 17th December last. They will not be surprised when I have to tell them that I have nothing to add to what my right hon. Friend said on that occasion. He dealt with the matter very clearly, and the reasons he gave in that answer are very well-known on the opposite Benches, as much as they are on these. We have been following the usual practice of succeeding Governments in this matter when money is raised. Parliament gives the authority to raise the money, and it is for the Treasury to borrow that money on the best terms available at the time that the money is actually obtained, either from the public or from the money market. It is true—and I would remind the hon. Member for Sutton Coldfield (Sir J. Mellor) of this—that my right hon. Friend was quite explicit that this was to be a dated stock. It is to be redeemable; it will not be an irredeemable stock. I regret that I am unable to give the date upon which the stock will be redeemed. This is due to several reasons which, perhaps, I might briefly give to the House.
The first is that we do not really know when it is going to be issued. It is quite likely that all the Stock will not be issued at the same time. Stock in respect of the railways may be issued by the Commission on, say, 1st January, 1948—I give that date by way of example—and it may well be that the stock issued in respect of canals and that in respect of harbours 171 will be issued on other dates. Therefore, it is quite impossible for us to know now, and for me to tell the House now—much as, in ordinary circumstances, I would like to—what the state of the money market will be in 1948, and the conditions under which this Government, or another Government, if another is in power, which is unlikely, will borrow money at that time. We want to be fair, not only to the taxpayer, but to the people who are to get the compensation. It is much fairer to do it in this way. It is a practice which we followed in the Coal Bill, which has since become an Act, and in the Cable & Wireless Act. This same provision appears in the Town & Country Planning Bill, and it also appears in the Electricity Bill. I am sorry that I cannot go farther than that tonight.
As to the guarantee, quite frankly that means exactly what it says—that this stock will be issued by the Transport Commission, and that it will have behind it the full backing of the Government.
§ Mr. Glenvil Hall
I do not want to go into that because my right hon. Friend dealt with it, and I do not desire to detain the House tonight on that matter. There is obviously a difference of opinion between this side and the opposite side of the House as to whether faith has been broken with the stockholders of the London Transport Board. It is our emphatic opinion that no faith has been broken with anybody in that matter. We could argue it all night, and we should still find that we on this side held one view and hon. Members opposite held another.
§ Sir J. Mellor
In those circumstances, will the right hon. Gentleman say whether it is the intention of the Government that the guarantee in respect of the stock referred to in the Money Resolution shall survive the end, should it happen, of the Transport Commission, and that it shall continue until the final maturity of the stock, irrespective of what happens to the Commission?
§ Mr. Glenvil Hall
That is a very hypothetical question. So far as we can foresee, the Transport Commission will not 172 go out of existence, certainly not in the lifetime of the hon. Baronet, and I hope that he will live a long time yet, nor in my lifetime. What will happen then will be for the Parliament of the day to decide. All I am saying is that this Government, in this Bill and through this Resolution, bind themselves to guarantee the principal and interest of the stock which is issued by the Commission. Quite naturally, beyond that I cannot go. We have no intention—
§ Mr. Glenvil Hall
I have no desire to be discourteous, but the hon Baronet did halt me in the middle of a sentence. If he desires to say something I am quite willing to give way.
§ Sir J. Mellor
The right Hon Gentleman declined to answer because, he said, it was a hypothetical question. But are not all guarantees really based on a hypothesis? The Hypothesis is that the person who is guaranteed shall fail to discharge his obligations. That brings the guarantee into effect. The whole thing is necessarily hypothetical. Therefore, will not the right hon. Gentleman answer the question?
§ Mr. Glenvil Hall
Well, Mr. Deputy-Speaker, that is the position. I think I have answered the questions put to me.
§ Mr. Glenvil Hall
This guarantee means exactly what it says. So far as we are concerned, we, as a Government, have no intention of defaulting on it. We cannot imagine the Transport Commission going out of existence Obviously if it does its place will be taken by some other national body, which will undoubtedly take on the liabilities of the Commission.
§ Mr. Glenvil Hall
So far as the London Passenger Transport Board is concerned, the guarantee given thereunder is being continued.
§ Mr. Deputy-Speaker (MAJOR MILNER)
On this occasion we cannot debate the question of anything affecting the London Passenger Transport Board. That would be out of Order. That cannot be discussed, and we must pass on.
§ Mr. Deputy-Speaker
I am sorry but the hon. Member has made one speech and he cannot now make another.
§ Sir J. Mellor
I was only rising to a point of Order, Mr. Deputy-Speaker. I introduced the question of the London Passenger Transport Board and what we allege to be the Government's default on their guarantee of the 3 per cent. guaranteed stock by way of illustration. I understand the right hon Gentleman—
§ Mr. Deputy-Speaker
That may be, but we cannot debate that question on a Motion which has no relation to it.
§ Mr. Gallacher (Fife, West)
Is the right hon. Gentleman not aware that all those fellows on the other side want it so that the stockholders are able to have their cake and eat it? That is the guarantee they want.
§ Sir William Darling (Edinburgh, South)
On a point of Order. Is it in Order for an hon. Member to refer to hon. Members sitting on these benches as "those fellows"?
§ Mr. Glenvil Hall
I think I have covered the points that have been raised. Incidentally, they are the points which I believe the hon. Baronet would have desired to make in moving the Amendments on the Order Paper if they had been called. I congratulate him on having got his points home in spite of the fact that his Amendments were out of Order. I hope, now that I have done my best to answer him, and other hon. Members, that the House will let us have this Motion without further debate.
§ Mr. Drayson
Before the right hon. Gentleman concludes could he help me on the point I made, which I consider to be a fair one? He says that when the final terms are fixed for the compensation they will be consistent with current rates. Will 174 he further give consideration to my suggestion that, whatever the current rates are for the Post Office Savings Bank, National Savings Certificates, or Defence Bonds, small holders will be allowed to accept those instead of the compensation stock?
§ Mr. Glenvil Hall
This stock, unlike the Coal Board stock, can be transferred. Therefore, any individual who receives his moiety or portion of the stock as issued, can, immediately, if he is so minded, sell it on the London Stock Exchange.