HC Deb 03 July 1947 vol 439 cc1639-63

10.10 p.m.

Colonel Crosthwaite-Eyre (New Forest and Christchurch)

I beg to move, That the Capital Issues exemptions Order, May, 1947, a copy of which was presented on Defence (Finance) Regulations, 1939 (S.R. & O., 1947, No. 944), a copy of which Order in Council was presented on 22nd May, be annulled. My I ask your guidance, Mr. Speaker, whether it would be for the convenience of the House if this and the two following Motions were taken together?

Mr. Speaker

Yes, if it would be for the general convenience of the House. It seems to me that this is rather a technical matter and I do not pretend to understand it fully. I think it would be more convenient, if the House agrees, to take the three together.

Colonel Crosthwaite-Eyre

The other Motions are: That the Capital Issues Exemptions Order, 1947, (S.R. & O., 1947, No. 945), dated 21st May, 1947, a copy of which was presented on 22nd May, be annulled. and: That the Capital Issues Exemptions Order, 1947 (S.R. & O., 1947, No. 946), dated 21st May, 1947, a copy of which was presented on 22nd May, be annulled. Only two issues are involved in these three Prayers. Under Order No. 944, Defence Regulation No. 6 in regard to finance is repealed except in so far as it refers to the Isle of Man. Order No. 94b modifies the requirements in respect of offers for sale in so far as no offer may be made of stocks and shares issued with-the consent of the Treasury within a period of two years from the date of such consent. Order 945, with certain very minor modifications, more or less reintroduces the provisions of Defence Regulation No. 6. It is fair to state that in broad terms we are now asked to re-impose on the community exactly the same restrictions on investment as existed during the war.

The first question we would ask the Financial Secretary to the Treasury is in regard to Orders 944 and 946. We understood that under the Borrowing (Control and Guarantees) Act the Treasury had every intention of relaxing completely their control over offers for sale. Very recently the Chancellor of the Exchequer stated in this House that he was not satisfied with the ways in which persons were making these offers for sale. He advanced no reasons why he was dissatisfied and no concrete reasons have been given for re-imposing this. The first question we would ask is: Why has he made under Order 946 this provision that no offers for sale may be made of stocks and shares that were issued without Treasury consent within a period of two years?

It is probably due to my ignorance and nothing else, but I can find no regulation which permits of an issue of stocks or shares other than debentures without Treasury consent. In other words, the only method of raising capital permitted was unsecured loans or debentures. If that is so, the same control over those unsecured loans or debentures is retained by Order No. 946. Therefore, it would seem on the face of it that this concession, so far as the present Government are concerned, is a hollow mockery. I ask the Financial Secretary to tell us in what circumstances stocks and shares could before these Orders be issued to the value of £50,000 without the consent of the Treasury. I have found no provision whatsoever for such an issue.

I would like him to tell the House how such an issue could be made without the consent of the Treasury, and if it was made, why the Treasury should consider it necessary to introduce this restriction. It seems to me on the broad issue that if the Treasury in its wisdom permits an issue—and it must permit an issue surely that issue is justified in itself and whatever may happen subsequently is no matter for the Treasury. It would appear from what the Chancellor of the Exchequer has said that he thinks there are some dark and dubious streams of finance running underneath the surface. If there are, the least the Treasury can do is to tell us what they are so that we can appreciate the issue and decide whether control is necessary or not.

Of all the many trite statements the Chancellor makes in this House, those I regret most are his innuendos against lawful commercial practice, which he never tries to substantiate, but passes on as a sort of bonne boucheto his supporters behind him. We on this side of the House try to guess at what he is aiming. and he leaves his hon. Friends behind him with a sort of chocolate liqueur feeling for the satisfaction of having driven another nail into the capitalist coffin. But, if he is going to make these innuendos against private enterprise—and the Financial Secretary to the Treasury would be the first to admit that private enterprise is the only thing which is going to save this country—let him substantiate them, and not merely make dark hints without any substantiation whatever.

In regard to Order 945, I admit I am puzzled to see how the Government substantiate their claim to introduce this matter. I will quote a passage from the Chancellor's speech on the Second Reading of the Bill which was introduced with the draft order, which in turn is more or less the same as the order we are now discussing. The Chancellor said: The purpose of this control is simple. It is to ensure that the order of priority of schemes for the raising of new capital shall be determined by one criterion only, namely, by their relative importance in the general national interest."—[OFFICIAL REPORT, 5th Feb., 1946; Vol. 418, c. 1547.] In other words, the Chancellor maintained that by the introduction of the Bill a permanent weapon was provided to ensure that investment was related to capital under, or to be at the disposal of, the Government. If that is so, we should have expected that a list of priorities for capital investment would have been given to the Stock Exchange to show what was the policy of the Government. Yet hon. Members opposite know that as far as the Stock Exchange are concerned, we are still working on a list of 1945, and the list has only been slightly modified since that date. If the Chancellor of the Exchequer meant anything when he made that statement, he could only have meant that it was the intention of the Government to keep investment policy absolutely in line with the economic situation of this country. No one, whether on the benches opposite or on this side of the House, would doubt that the economic situation of the country has undergone vast changes since 1945, but there has been no change in the investment policy of His Majesty's Government. They have given no indication to those people responsible for guiding the investments of the public what the policy of the Government is.

We ask the Financial Secretary if this Measure, and the order consequent on it, are really the weapons the Chancellor of the Exchequer claimed them to be. Why is it that there is no direction of policy by hon. Members opposite? Why have they not made the slightest effort to reduce this to practical terms? It is rather like people who have asked for plenary powers and have got them, simply going to sleep like the Sleeping Beauty. I see that the Financial Secretary has taken the compliment of the Sleeping Beauty to himself. I hope he will wake up and tell us something about it tonight. We are the people who are trying to judge whether these matters are justified, but we are left without any clue as to their meaning or as to the power the Government intend to attribute to them. We were told when this Measure was introduced that the demand for capital was greatly in excess of supply. Would the Financial Secretary support that argument today? Would he still say that the demand for capital is still greatly in excess of the supply? Would he not rather say that bank deposits have gone up by over £1,000 million, that capital supply far exceeds demand today, and that if inflationary pressure is to be eased, it is necessary to bring these deposits into industry, to put them into developing industry?

I know what the Financial Secretary will say if he deigns to answer at all— that it is no use attracting money into industry unless there is the material in industry to satisfy that demand. If he uses that argument, he will surely be producing the very answer as to why all these controls are futile, because they form a vicious circle. On the one hand, he says that we cannot attract materials into industry because there is no capital. His colleague, possibly the Minister of Supply, or whoever it may be, says there are no materials. Does he not realise that throughout this country, particularly in relation to small firms, there is a complete lack of co-ordination between materials and capital? I know for myself, through being a Member of Parliament for one Division, that continuously to point out to the Government that in one place there are materials and in another place there is capital, but never in any circumstances are capital and the materials co-ordinated.

That seems to me to be proof of the fallacy of the policy being pursued by the Government. They have taken to themselves, in their arrogance, this idea that they can control capital and materials. Never in any circumstances do they manage to get capital and materials at the same place, so that both can work to the advantage of the community as a whole. I would quote my right hon. Friend the Member for the City of London (Mr. Assheton) who, again in the Debate which led to this Motion, said: Perhaps the Chancellor knows in his heart that the Socialist system can never produce freedom and plenty, and that all it can produce is a dull equality and a gradually declining standard of life for us all."—[OFFICIAL REPORT, 5th February, 1946; Vol. 418, c. 1565-] That is all that this system of control is doing at the moment. The Financial Secretary and the Chancellor have never produced any reason to justify the powers they have taken to themselves. They have never produced any reason whatever to show that their policy has benefited the community. They started with these large statements that it was necessary, and that they were always right. The Solicitor-General said that this system of financial control was certain, safe and sure, that it was certain to be true in 499 cases out of 500. I can only imagine that the 500th case was that which attracted attention from the benches opposite when capital was allotted to Greyhound Racing. They have never done anything to prove that their contention is true.

I would challenge the Financial Secretary to quote occasions on which he can say that the powers given to him either under Defence Regulations or under these regulations which he now proposes, have been used in the public interest. I would challenge him further to say whether he is satisfied that these powers will have any effect upon future capita] investment in the national interest, or on the rate of investment of new capital for the increase and enlargement of industry which has, in fact, taken place can be seen when I point out that in the first six months of this year only £70 million had been introduced into industry. That sum includes all Treasury Bills and all Government commitments. Members on the opposite side can get some idea from that as to what money is flowing, under these Regulations, into the enlargements of our productive industry.

I suggest that these powers, far from producing any improvement, far from solving our troubles, are merely acting as a complete drag against any development; are, instead of giving us a better chance to live in the new world, preventing us from taking any advantage of that which we gained in the war. Far from progressing, at the moment we are stultified and hampered by the political tenets of the Treasury who, by insisting on complete control, are preventing us from getting forward into the morrow of peace.

10.25 P.m.

Sir John Mellor (Sutton Coldfield)

I beg to second the Motion.

Although it revokes the provisions of Regulation 6 of the Defence (Finance) Regulations, 1939, Order No. 944 nonetheless preserves control over public offers for sale of securities. I regard that preservation of control as a direct breach of the Chancellor's undertaking which he gave on Second Reading of what was then the Investment (Control and Guarantees) Bill, 1946. On that occasion, on 5th February, 1946, the Chancellor said: When this Bill is passed into law, and when the draft Order mentioned in the Command Paper has been brought into force, Regulation 6 of the Defence (Finance) Regulations will be revoked. One of the consequences will be that the present requirement of Treasury consent to public offers for sale of existing domestic securities will lapse. Then he proceeded: There has been some misunderstanding in the past about that; so, to make it quite clear, I will repeat that when the draft order is made and the existing Regulation is revoked, the present requirement for Treasury consent to the sale of existing domestic securities will lapse."—-[OFFICIAL REPORT, 5th February, 1946; Vol. 418, c. 1549.] The order to which he there referred, the main order under the Act to preserve the control, has been made. It is one of the orders against which we are praying tonight—Order No. 945. Though the order to which the Chancellor referred has been made and Regulation 6 of the Defence (Finance) Regulations has been revoked, nonetheless the control over public offers for sale of existing domestic securities is being retained. I do not think that the Financial Secretary to the Treasury will dispute that on that occasion the Chancellor of the Exchequer said quite clearly that that control would lapse concurrently with the coming into effect of the main order to be made under the Borrowing (Control and Guarantees) Act. We must have an explanation of that. It seems to me the most simple clear cut breach of an undertaking which we could have in this House. On the merits of the case, I see no justification at all for preserving control of public offers for sale of domestic securities. No new money whatever is involved. Therefore, I cannot see on what ground the Treasury desire to retain these powers. It has nothing whatever to do with the direction of capital into certain industries. It can have no harmful effect at all. It is merely that certain securities change hands. I cannot see at all the logic of the Financial Secretary's explanation of how it is in the public interest that this particular control should be retained. Therefore, will the right hon. Gentleman tell the House what has occurred since February, 1946, to change the view of the Treasury upon this matter?

The other point to which I would like to refer is the extreme antagonism which is exhibited in the main Order, No. 945, against the capitalisation of profits or reserves. Article 4, paragraph (3) provides: Subject to the exemptions contained in Part II of this 'Order, a body corporate …shall not without the consent of the Treasury, issue any securities if the purposes or effects of the transaction consist of or include (a)the capitalisation of profits or reserves. If we look at the exemptions provided in article 8, we find it specially provided in paragraph (3): The exemption conferred by this Article shall not apply to any issue of securities if the purposes or effects of the transaction consist of or include the capitalisation of profits or reserves. Why is this set made by the Chancellor against the capitalisation of profits or reserves when he has repeatedly urged companies to retain profits in the business instead of distributing them as dividends? Indeed, he has given some practical encouragement to that course of action, practical encouragement of a rather sadistic order, because in the current Finance Bill he has imposed a special tax of 7½ per cent. on distributed profits. He has gone out of his way, indeed, to emphasise by that special Profits Tax the importance, in his view, of companies retaining profits in the business and putting them to reserve, rather than distributing them to the shareholders as dividends. It is curious, therefore, to find that not content with imposing in the same Finance Bill, which is at present before this House, a 10 per cent. stamp duty upon bonus isues, in this Order 945 he goes out of his way most drastically to control capitalisation of profits or reserves.

I cannot understand his line of action in this case either, because it is perfectly intelligible that the Chancellor in these days should desire to promote the ploughing back of profits into businesses rather than their distribution as dividends. That is a clear anti-inflationary measure. While there may be protests against it, at least if he stuck to that line and followed it consistently he would have a logical case to argue. But when we see that he first takes one course and then an opposite course, first he encourages capitalisation of reserves by the ploughing back of profits into businesses, and then he takes a course in the opposite direction, it is difficult for people to know where they stand.

One thing which is desirable is that some sort of certainty should be created. It may be that the Chancellor cannot create confidence, but at least he might create some certainty as to his policy. If he had consistently followed the policy of encouraging the ploughing back of profits into business instead of their distribution at least people in business would know where they stood, and they would at least respect his policy. But at present they are not in that position at all and it is a very great misfortune because in the past many of the finest businesses have been built up from very small beginnings through capitalisation of profits and reserves. Many businesses have started in quite a small way. They have never gone to the market for capital at all. They have never borrowed on any large scale by debentures. They have just gone on building up their businesses, gradually increasing their capital resources by ploughing back their profits, increasing their reserves, and capitalising those reserves from time to time by issues of bonus shares to the existing shareholders. That has been the way in which some of the best and oldest family businesses in this country have been built up. Why is it that the Chancellor in this Order, as indeed in other measures which I have mentioned, has gone directly opposite to the course which he has ostensibly encouraged. I think that we must have some explanation of what the Chancellor really means in this respect.

There is one other point about which I wish to ask a question. That is in article 12 of Order 945 we find in paragraph (1): Any consent granted by the Treasury under this Order…(b)…may be revoked by the Treasury. That seems rather bald—any consent granted may be revoked. No conditions are provided at all—no qualifications. I think that we ought to ask at what stage revocation can take place because, after all, if consent is given those concerned are entitled to go ahead and arrange their business. They are entitled to take every possible measure on the assumption that the consent will stand. But how are they to know that under article 12 the consent on which they rely may not suddenly be withdrawn. For what sort of reasons does the Financial Secretary contemplate that consent will be revoked? It may be revoked for reasons possibly having no connection whatsoever with the particular business in question. It may be revoked for some reason of general policy. With the article as it stands the risk of revocation of consent is always present until the business has been entirely completed. It would be impossible for people who are concerned in this matter to go ahead with their arrangements. I feel that these Orders together, and especially Order 945, are singularly unfortunate, and I hope that the House will agree to annul them.

10.39 P.m.

The Financial Secretary to the Treasury (Mr. Glenvil Hall)

I do not think the House will expect me tonight, at this late hour, to follow the two hon. Gentlemen into the by-paths that they have thought fit to enter. For example, we have had quite recently, on the Finance Bill, more than one long discussion on the question of bonus issues, and I hope I may not be expected tonight to answer the hon. Baronet on all the pertinent points, from his point of view, which he has made. [Interruption.]I am here to deal with these three Prayers and if I may, I will deal with them in my own way.

Sir J. Mellor

If the right hon. Gentleman will allow me, certainly I am quite anxious that the Financial Secretary to the Treasury should deal with this in his own way, but he started off by saying that he was not going to deal with the principal point that I made in my speech at all relevant to Order 945, for this question of capitalisation of reserves is very prominently dealt with in that. That is why I think I am entitled to have an answer tonight.

Mr. Glenvil Hall

All I said was that I did not intend to follow the two hon. Gentlemen into the by-ways into which they went. That does not necessarily mean that I will not deal in what I have to say with the main points they have raised, including bonus shares, a point which has been made more than once by the hon. Baronet the Member for Sutton Coldfield (Sir J. Mellor). These Orders hang together. Order 944 wipes out entirely, so far as Northern Ireland is concerned, the whole of Regulation 6 of the Defence (Finance) Regulation 1939, and it wipes out the same regulation so far as England, Wales and Scotland are concerned, except for one particular power to which the main attention of the two speakers has been directed tonight and to which, if I may, I will devote the main part of what I have to say in reply.

It is true that, in spite of what was said by my right hon. Friend the Chancellor of the Exchequer in his Second Reading speech in February of last year, he has not found it possible to cancel the power contained in Regulation 6 which controls what are known as public offers for sale. This Order continues this power. It should be within the recollection of the two hon. Members that when I on the Chancellor's behalf at Question time recently announced that these Orders were about to be laid, I also said that we regretted that he had to continue this particular power. Reasons were given for this in the explanatory memorandum inserted in HANSARD for that date. Never- theless, I will once again give the reasons why my right hon. Friend has had to continue for a time yet, in spite of his promise, in spite of his desire to get rid of it, this particular control.

Order No. 944 ties up directly with Order No. 946. As I have already indicated, Order 944 wipes out Regulation 6 except for this particular control and then Order 946 comes along and modifies that control. One Order revokes Regulation 6 for England, Wales and Scotland, except for the power I have just mentioned, which controls public offers for sale. Whilst the other, the one I am now dealing with, exempts from control public offers for sale where the security offered is shares or stocks, which have been issued within the last two years before the offer is made and which have been issued during that period with express Treasury sanction. The public offers for sale, which come within the ambit of the powers still retained within this particular regulation, thus cover a very narrow field.

I have been asked why my right hon. Friend has decided to keep these powers for a further period. As I indicated in a reply I gave on his behalf, it was with much regret that he decided to continue this control for a while longer. The reason is that during the autumn of last year when it was anticipated that it would be revoked and as a result the power was left in abeyance and many public offers for sale were allowed, it was found that the wrong kind of offers for sale were being promoted. To members of this House, for people saw these offers advertised in the public Press, came indignant letters, and my right hon. Friend received some of them, too. It was pointed out that our resources should be devoted to the rehabilitation and re-equipment of industry after the seven stressful years of war, and not, as in these instances, put into highly speculative enterprises such as dog racing, amusement parks and so on.

My right hon. Friend at that time indicated to the House that if that kind of thing went on, quite obviously, as it was anti-social in character, no Government worth its salt—I am not quoting exactly what my right hon. Friend said —could stand by and allow that kind of thing to continue. Perhaps to underline that I might be permitted to quote the new instructions which quite recently were issued to the Capital Issues Committee, the body which deals for the Treasury and for Parliament with requests to make public offers for sale— The Committee should be prepared to recommend consent to applications in respect of such offers. It will be seen from these opening words that it is not a total prohibition; only that Treasury consent has to be obtained, and ordinarily consent would normally be given for such a public offer of sale so long as it is not anti-social in character.

Mr. Assheton (City of London)

Have these instructions been laid before the House or placed in the Library? If not, will the right hon. Gentleman be good enough to arrange for them to be made available?

Mr. Glenvil Hall

Certainly that shall be done. I should like to give to the House the instructions which have been sent to the Capital Issues Committee, and which I think very concisely and clearly indicate why it is that my right hon. Friend has had to continue this power for some time yet. Here are the instructions: The Committee should be prepared to recommend consent to applications in respect of such offers unless it appears that the proposal is objectionable in the general public interest. For example, they should not normally recommend public offers for sale of securities of companies whose activities are concerned with greyhound racing, amusement parks, and other purposes, for which issues for new money would clearly be ineligible for consent under present circumstances. They should also recommend refusal in the case of offers which are obviously highly speculative in character. A special category of public offer is the offer of securities of companies concerned with the textile industries. It is of great importance that in such cases the Board of Trade should be consulted, and consent should not be recommended except where that Department has expressed itself satisfied that the proposal is not open to objection. The gist of this instruction has already been given to the House either in the course of replies to Questions by my right hon. Friend or in the actual memorandum circulated on 22nd May last. The underlying principle—and I think it is a good principle and I think I will carry hon. Members in all quarters of the House with me in this—the underlying principle is that at this time it would be unwise, when we are asking every type of legitimate business to plough back its profits, to do all it can to bring its equipment and machinery up to date and to renew its tools and all the rest of it, and have these powers given us by the House for this purpose, for us to allow money to be frittered away in connection with greyhound racing tracks or amusement parks or even, as happened after the last war, on highly speculative enterprises dealing with the textile industry to the detriment of the community as a whole.

Mr. Drayson (Skipton) rose—

Mr. Glenvil Hall

I am very willing to give way, but there is a limit to the number of interruptions which I think I should be subjected to, particularly at this late hour when most Members, I am sure, would like to get home.

Mr. Drayson

I would like an assurance from the Financial Secretary. The instruction he has just read suggests that he is not anxious that the maximum amount of new capital should flow into the textile industry so that we can carry out the schemes of modernisation which the President of the Board of Trade is so anxious to see carried out. Could we have an assurance about that?

Mr. Glenvil Hall

Not a bit. The hon. Member has obviously not been listening to what I have read out. The instruction to the Capital Issues Committee is that where the application was in connection with the textile industry, the Board of Trade, which surely should know something about these matters, should be consulted before the committee decided whether to reject the application or to allow it. I do not see anything wrong in that. It is for the Board of Trade as the Department responsible for the industry to see that the money goes to the right type of textile promoter. We all want to see the industry nourish and textiles produced.

The hon. Baronet the Member for Sutton Coldfield asked me one or two questions. In particular he asked me to explain why the Treasury take power to revoke any order which has been made. Obviously life is one continual change. We do not contemplate that this order will last for ever. At some time it will have to be changed. If the hon. Baronet will turn, as no doubt he has, to the Act under which this Statutory Rule and Order has been made, namely the Borrowing Act of 1946, he will see that Section 3 (4) lays down that an order made under this Act may be varied or revoked by a subsequent Order. Therefore if his fear is that this Order may be revoked and that he will not have the chance of knowing it, I can assure him that that is quite impossible. If any change is to be made it can only be done by either varying or revoking this order by leave of Parliament, and normally the easiest way is to revoke. The great expectation is that when these Orders are changed they are changed for the better, and not for the worse. When controls are changed nowadays they are not increased; they are lightened. As a matter of fact, the reason why this Order is being produced tonight is because we are making control easier rather than heavier. It seems very unfair of Members opposite to attack my right hon. Friend because he is making things easier for their friends in the city and is carrying out the promise he made when this particular Bill was brought before the House. They are attacking us as if we were here doing something quite out of Order and fastening the powers which undoubtedly do exist more firmly round the necks of the financial interests in the city. That is not so.

Sir J. Mellor

I am sorry to interrupt, but the right hon. Gentleman has completely misunderstood what I said. I referred to article 12, para. 1 (b)That says: any consent granted by the Treasury…may be revoked. I certainly was not objecting to the possibility of it being revoked. I hope it will be and very soon. I was asking the right hon. Gentleman about the question of a revocation of a consent that had been given. That is my question.

Mr. Glenvil Hall

The same principle applies both to Orders and consents. In a matter of this kind the Treasury are acting on behalf of the Government and the House. We had arguments over and over again when the Bill was passing through the House, on the words to which I have referred. The hon. Baronet and others made the same complaint then to my hon. Friend. These powers are usual. They must reside in some Government Department. The Government Department to exercise them is undoubtedly the Treasury. The Treasury must be given power to vary or revoke if necessary consents which have been issued for one form of transaction or another. There is nothing sinister in it or out of the ordinary.

Sir J. Mellor

I wish the right hon. Gentleman would answer some of the questions I have asked him. I pointed to the uncertainty that would arise, and we ought to have some indication in regard to the circumstances in which the Treasury would revoke a consent.

Mr. Glenvil Hall

The answer I have given is the best one I can give. I have lively recollections of the Debates that took place on the Bill, and, if I may say so, the hon. Baronet interrupted other speakers just as much as he is interrupting me tonight. I can assure him that I have no desire to run away from his questions. I do not find them all that difficult. What I find difficult is to get over to him what I am trying to say. What I am trying to say is this: A consent like an Order can be revoked under the Act and we are transferring the power contained in the Act to this Order 945 so that there may be elasticity. The proper place for it to reside—I make no apology—is the Treasury, so that if necessary consents can either be enlarged, revoked or altered in exceptional circumstances. No one would dream of using the power unwisely. If it were used unwisely there is fortunately always this House and the hon. Baronet can come here on behalf of the person aggrieved and raise it as I am positive he would do.

I have only answered the main questions that have been put. Some of the questions which the hon. and gallant Gentleman put to me to begin with really do not arise under this Order. He was, if I may say so, going back to his Second Reading speech on the Borrowing Act which sets up one of these Orders. I would like to assure him and the hon. Baronet that that Order No. 945 has nothing whatever to do with offers for sale. Offers for sale do not come under the Borrowing Act or the particular Order to which hon. Members have directed attention tonight.

On the other main question they have asked, namely, Why my right hon. Friend has kept on this power to prevent—except by consent—offers for sale being made, I can only add this: We have no desire to prevent genuine offers for sale. What we do not want—nor, I am positive, do Members on the other side—is at this juncture in our history to see national wealth frittered away or used for antisocial purposes. There is nothing more in it than that. In answer to one more question by the hon. Member for Sutton Coldfield on bonus issues, I would say that he knows as well as I do that the power taken to control the issue of bonus shares is not new. If people desire to issue bonus shares they can go to the Capital Issues Committee, and, if the request is reasonable, I have no doubt the Capital Issues Committee will in the future favourably consider it. When the Clause in the Finance Bill now before the House becomes law, the issues will pay a 10 per cent. stamp duty; there is nothing in that which can be said to be going back on what my right hon. Friend promised.

Sir J. Mellor rose—

Mr. Speaker

The hon. Baronet has in-interrupted three times in this connection to make short speeches. In this House one does not make speeches on interruptions.

Sir J. Mellor

I was only endeavouring to correct the right hon. Gentleman to say that he entirely misunderstood what I said. I have never suggested that the Chancellor of the Exchequer had broken his promise in regard to bonus issues in this respect. I merely described it as being inconsistent. I only wish to correct that point.

Mr. Glenvil Hall

My right hon. Friend has not been inconsistent. All he does in this particular Order is to continue what has been in existence for some years—to continue the power of the Treasury to control the issue of bonus shares. There is no inconsistency there. There is consistency, because he is saying that where these are issued with consent the Exchequer should have a rake off. I think I have answered the main points about these Orders. They are very complicated, but I have given an answer to the main points that have been made. I must leave it at that and ask the House to give us these Orders.

Colonel Crosthwaite-Eyre

I would like to know about the list of priorities.

Mr. Glenvil Hall

The last Memorandum of Guidance issued to the capital issues committee was in 1945. No Memorandum of Guidance has been issued since. I am glad the hon. Member has raised the matter, because it gives me an opportunity to say that while that is true, having looked at the Memorandum of Guidance, we find that though the framework there set out and the priorities are still valid, it is more than two years since it was issued, and I can assure him and the House that an early opportunity will be taken to bring that Memorandum of Guidance up to date.

11.5 p.m.

Mr. Nigel Birch (Flint)

I feel that the speech of the Financial Secretary deserves some sort of answer. Some of my hon. Friends have spoken of his inconsistency. I do not agree with them. He has been entirely consistent in his inconsistency. The Financial Secretary was quite right in not attempting to answer on the principle, because I think the reply the Chancellor of the Exchequer gave on the Committee stage of the Finance Bill was the answer to end all answers. The Financial Secretary could not very well deny it, and if he had repeated it he would have lowered himself to the same level.

One word on the question of the broken pledge with regard to offers for sale. The Financial Secretary gave two answers to that. The first was that it only covered a very narrow field. That is the old answer—a sin, but only a little one. The second was that the Chancellor had done this because he had received a lot of indignant letters. But might it not be that some of these letter-writers were misinformed? The right hon. Gentleman must get a lot of indignant letters every day, and he may well be able to stand a few more. The broad issue about which these letters were received would not be covered by this Order at all. In regard to what has been said about new capital, that it would be too terrible if money was put into greyhound racing shares, that does not affect this particular Order because it is not occurring. Companies cannot raise capital at all without the consent of the Treasury. Therefore, I would submit that the right hon. Gentleman's answer had no meaning.

On this question of rescinding orders, the hon. Baronet raised a pertinent point. The Financial Secretary in his reply said that we lived in a world of continual change. Nothing changes with such frequency and rapidity as Government plans. One day we put gilt-edged up to 102, and the next we have it down to 90. One day the balance of payments is £300,000,000, and the next it is £700,000,000. We are continually changing. But if someone acts under an order, and it is revoked afterwards, it may be that he will suffer undeserved loss. I cannot see how the national interest can be seriously affected by the Government keeping their word in all cases where they have given consents. These are not consents that last for years and years. It seems to me that on the two points the answers given by the right hon. Gentleman were not very good ones

11.8 p.m.

Mr. Charles Williams (Torquay)

I think the answer we have been given was a little peevish. A good many people had been left by the Chancellor of the Exchequer with the understanding that there would be a gradual reduction in the severity of the use of these controls. None of us wants to see a lot of British capital—which is very scarce today because of the actions of the right hon. Gentleman—being issued for dog racing shares and that kind of thing. We all want it to go into productive industry which will give goods for export. There is no difference between us on that. But I believe the Financial Secretary has been let down by his right hon. Friend, who seems to have left him with a rather sticky job. He has got into a terrible fix owing to the fact that the Chancellor of the Exchequer has said very clearly that he is going to make the issuing of these shares a great deal easier.

Let me deal with Article 12 on page 6. Just look how wide he is making these rules. In the first place, in (a)it reads: Any consent— This is not an order but a consent by the Treasury. "…granted by the Treasury… may be either genera) or special. One can single out an item specially 01 it can be very wide. There one has an immense width and the Chancellor of the Exchequer is not carrying out what we thought would happen. As far as the right hon. Gentleman was concerned, he apparently thought for the purpose of his explanation that before anything was revoked one had to have an Order, but I do not think that is the plain matter. What one is revoking under (b)is consent of the Treasury at the Beginning of this paragraph. Really, it does not come be-fore the House and I do not think it can be inferred from the speech of the right hon. Gentleman that it would come before the House

Mr. Glenvil Hall rose—

Mr. Williams

Does the right hon Gentleman wish to intervene?

Mr. Glenvil Hall

No, I thought the hon. Gentleman was on a good point. I was looking at my copy of the Act to try to turn up an answer.

Mr. Williams

I am trying to be short. Apparently the right hon. Gentleman wants time to turn up an answer, but, may I give the answer to his point? That really is that under this Order one is enabled at any time after the issue has been granted to withdraw consent simply by reason of the Treasury's action. That is the point. That is bound to lead to terrific uncertainty in the whole of the issues of capital. If one is wanting to get people to put money into secure concerns producing the goods that are needed one needs to give them a great deal more assurance than is given under the Order. It goes on to say that the Order

It goes on to say that the Order may be absolute or conditional. There again one is hedged about with limits or conditions.

And again under (d)it may be limited so as to expire at the end of a specified period. There again one has every conceivable kind of width or narrowness for the purpose of limiting and making it difficult for firms to start a new issue.

What worried me more than anything else the Financial Secretary said was his statement that before issuing these Orders he would refer them to the Board of Trade. I have no particular objection to that except from this point of view. When one refers a capital issue to the Board of Trade one has then two Government Departments rather than one. The Board of Trade under its present administration—and I am only referring to what the right hon. Gentleman says—have very fixed and not very good commercial ideas which may drive industry to a point which we deem to be unsuitable, and one has here a severe restriction which may make a bad use of the capital issues at the present time.

I commiserate with the right hon. Gentleman over the position he is in tonight. But I do say that Orders such as this, taken late at night, which affect the whole rebuilding of the capital issues of this country, might limit and circumscribe capital in such a way that I do not think that these are orders which should be issued. Because I am sure that the main effect of these Orders will be to make it more difficult to regain our export trade in any way whatever.

11.15 p.m.

Mr. Assheton (City of London)

I do not propose to detain the House for more than a few minutes. But I must say that the Financial Secretary has not answered satisfactorily the pertinent points put to him by the hon. and gallant Member for Christchurch (Colonel Crosthwaite-Eyre) and the hon. Member for Sutton Coldfield (Sir J. Mellor). I think that the right hon. Gentleman did not deal at all satisfactorily with the "offer to sell" business. I think the answer he should have made, and perhaps he will concur with me if I am right, is that in the case of an issue of under £50,000 there has been a certain amount of laxity perhaps which he wishes to check, and that this will give him an opportunity of checking it. But none the less it is perfectly clear that the Chancellor of the Exchequer has broken a promise which he made to this House. I am sorry he had to do that, because it is always an unfortunate thing if any Chancellor of the Exchequer has to break any promise. If he breaks one promise there is always a suspicion that he may break another.

Mr. Glenvil Hall

There was complete laxity in all types of investment, not only in those of under £50,000. It was rightly assumed that this thing was coming to an end However, my right hon. Friend the Chancellor of the Exchequer then found that he could not bring it to an end. We have had to tighten it up and to impose these Orders, Nos. 944 and 946.

Mr. Assheton

It is unfortunate that the Chancellor of the Exchequer ever made that promise. He must regret having made it. I do wish the House to agree with me that promises made by the Chancellor of the Exchequer are in a very exceptional category. All promises ought to be kept; but promises made by the Chancellor of the Exchequer regarding financial matters have to be considered very carefully indeed. I hope that nothing of this sort will happen again.

The second point raised has not been answered at all. That was the question of revocation. The Financial Secretary made a very bad point in stating that revocation of a general Order had any relation to revocation of a special consent. The point about a special consent is that the authorities consent to a particular issue of capital in certain circumstances. Those concerned with that issue, in the City or elsewhere, make their own arrangements for the issue, and there is no complaint about what they are doing. When they are in the middle of making these arrangements and have entered into certain commitments in connection with them, it is wrong that the consent should be revoked. I suggest to the Financial Secretary that although he will get his Order tonight because we have not enough hon. Members to vote it down, he should look at the matter again before the Order is re-imposed and see if the provisions of 12 (1) (b,)which says: may be revoked by the Treasury ought not to be related to general, and not to special, consents. I hope the Financial Secretary will convey this to the Chancellor of the Exchequer, and that the Chancellor will discuss the matter with the Treasury before this Order comes before us again.

The third point I want to make is that this Order shows once again the ridiculous antagonism of the Chancellor of the Exchequer towards capitalisation of reserves. I do not want to go over that ground again, but when the Chancellor says day after day that he wants businesses to be careful in distributing profits, and that he wants them to build up reserves, and then comes along with an Order like this, it suggests to anyone reading it that capitalisation of profits or reserves is in itself a bad thing. It is something which the Chancellor wants done, and yet he resists it. I do not know whether the Chancellor understands what he is talking about or not in this matter. I think the Financial Secretary does, and I hope that he will use all the influence he can with the Chancellor of the Exchequer to bring him round to a more reasonable frame of mind. So far as I am concerned, I think it is absolutely necessary that we should vote against Order No. 945 and although the right hon. Gentleman has not given a satisfactory explanation with regard to Nos. 944 and 946 I, for my part, do not intend that we should press these particular objections to a Division.

11.20 p.m.

Colonel Crosthwaite-Eyre

On the many occasions I have heard the Financial Secretary, I have never heard him make such an inadequate speech to a number of arguments from this side. He has made no attempt to answer the points we raised. So far as I gathered his main argument at the end simply followed the earlier answer of the Chancellor of the Exchequer that it was to prevent investments flowing into undesirable types of business. But what he did not make was any reply to what the third order says that it is only applied to offers for sale which are controlled where the shares in question have been issued without the consent of the Treasury for a period of two years. He failed, despite the direct question I put to him, to state in what type of cases could such shares have been issued. I spent some time in trying to elicit how such cases could arise. He never made any answer to that. He never made any distinction, so far as I could see, between the flow from offers for sale and the types of shares not controlled by the Treasury and the types that are controlled. If, for example, a greyhound racing track made an offer for sale of shares issued three years ago the Treasury has no power to stop it, but if the offer was made in the last two years, it has. But, so far as the answer was concerned, he tried to make the House believe that they could control all such offers. I am certain that the right hon. Gentleman would be the first to admit that that is not so. In fact, so far as the offers to sell are concerned the only control they have is one in time and he made no attempt to justify that and show how that time factor is arrived at, or why it is done.

I took great trouble to ask the Financial Secretary certain concrete questions, and if I may say with respect, he ignored the lot. I challenge him that, if this Order is to be perpetrated at this time, ten months after we passed the Borrowing (Control and Guarantees) Bill, there is one thing only he must prove, that the powers we have had up to now in Defence Regulation 6, which he now wishes to carry on in this Order, have been of benefit to the country. But in the answer he has given tonight he has not made the slightest effort to prove it. He has not given the slightest evidence that the control of the Treasury in the capital market has been of any benefit to any industry in any part of the national well-being. We have asked, and we are entitled to ask, that where power of this sort is taken, that where the Chancellor says it is essential to our national life that such power should be taken—at least we are entitled to have some evidence from the Financial Secretary that the power has been used well. He has not made the slightest effort to prove it.

I asked him at the end of his fairly long speech to tell us why he had not even altered the list of priorities since 1945 and all he said was that he thought the 1945 list of priorities was still relevant today. Is there any hon. Member opposite or on this side of the House who believes that the list of priorities of 1945 is still relevant today—[An HON. MEMBER: "Yes."] In that case, I am glad to find that the

Financial Secretary has one supporter in this House. No one else believes, with the crisis upon us and the sudden change in circumstances, that the Government are able to say that the same priorities apply. Yet in 18 months of holding these powers they have not found it necessary to give a memorandum of guidance to the Capital Issues Committee. For these reasons I must ask hon. Members on this side of the House to vote against S.R. & O. No. 945 as a protest against the powers taken by the Government which they claim are essential and which they are completely unable to defend in this House—powers which they have never used in the national interest.

Question, That the Order in Council, dated 21st May, 1947, amending Regulation 6 of the Defence (Finance) Regulations, 1939 (S.R. & O., 1947, No. 944), a copy of which Order in Council was presented on 22nd May, be annulled": put and negatived.

Motion made, and Question put, That the Control of Borrowing Order, 1947 (S.R. & O., 1947, No. 945), dated 21st May, 1947, a copy of which was presented on 22nd May, be annulled."—[Colonel Crosthwaite-Eyre.]]

The House divided: Ayes, 32; Noes, 129.

Division No. 295] AYES. [11.26 p.m.
Assheton, Rt. Hon. R. Hare, Hon. J H. (Woodbridge) Ropner, Col. L.
Bennett, Sir P. Harvey, Air-Cmdre. A. V. Ross Sir R. D (Londonderry)
Birch, Nigel Langford-Holt, J. Stoddart-Scott, Col M
Bossom, A. C. Lennox-Boyd, A. T. Strauss, H. G. (English Universities)
Buchan-Hepburn, P. G. T. Lloyd, Selwyn (Wirral) Studholme, H. G.
Challen, C. Maude, J. C. Teeling, William
Crowder, Capt. John E. Morrison, Maj. J. G. (Salisbury) Wheatley, Colonel M. J
Darling, Sir W. Y. Neven-Spence, Sir B. Williams, C. (Torquay)
Digby, S. W. Noble, Comdr. A. H P
Dodds-Parker, A. D Orr-Ewing, I. L. TELLERS FOR THE AYES:
Drayson, G. B Raikes, H. V. Colonel Crosthwalte-Eyre and
Drewe, C Ramsay, Maj. S. Sir John Mellor.
NOES.
Adams, Richard (Balham) Brooks, T. J. (Rothwell) Ede, Rt. Hon. J. C
Adams, W. T. (Hammersmith, South) Bruce, Maj. D. W T. Edwards, W. J (Whitechapel)
Allen, A. C. (Bosworth) Burks, W. A. Evans, S. N. (Wednesbury)
Allen, Scholefield (Crewe) Castle, Mrs. B. A Field, Capt W. J.
Alpass, J. H. Champion, A. J. Fletcher, E. G. M. (Islington, E.)
Altewell, H. C. Cocks, F. S. Ganley, Mrs C S
Awbery, S. S. Collindridge, F. Gordon-Walker, P. C.
Ayrton Gould, Mrs. B. Collins, V. J. Granville, E. (Eye)
Baird, J. Colman, Miss G. M Griffiths, W. D. (Moss Side)
Barstow, P. G Cooper, Wing-Comdr. G. Gunter, R. J
Barton, C. Corbet, Mrs. F. K. (Camb'well, N.W.) Guy, W. H.
Battley, J. R. Corlett, Dr. J. Haire, John E. (Wycombe)
Bechervaise, A. E. Crawley, A. Hall, W. G.
Beswick, F. Daines, P Hardy, E. A.
Bing, G. H. C. Davies, Edward (Burslem) Hastings, Dr. Somerville
Blenkinsop, A. Davies, Haydn (St. Pancras, S.W.) Hobson, C. R.
Bowden, Flg.-Offr. H. W Diamond, J. Holman, P.
Braddock, Mrs. E. M. (L'pl, Exch'ge) Dobbie, W Hudson, J. H. (Ealing, W.)
Braddock, T (Mitcham) Dodds, N N. Hughes, H. D. (Wolverhampton, W)
Bramall, E. A. Driberg, T. E. N. Hutchinson, H, L. (Rusholme)
Brook, D (Halifax) Dugdale, J. (W. Bromwich) Hynd, H. (Hackney, C.)
Hynd, J. B. (Attercliffe) Pearson, A. Taylor, R. J. (Morpeth)
Janner, B. Peart, Thomas F. Taylor, Dr. S. (Barnet)
Jeger, G. (Winchester) Platts-Mills, J F F Thomas, D. E. (Aberdare)
Jeger, Dr. S. W. (St. Pancras, S.E.) Popplewell, F Thomas, I. p. (Wrekin)
Jones, D T. (Hartlepools) Pritt, D. N. Ungoed-Thomas, L.
Jones, Elwyn (Plaistow) Randall, H. E Usborne, Henry
Kenyon, C. Ranger, J Vernon, Maj W. F
Lee, Miss J (Cannock) Ridealgh, Mrs. M. Walkden, E.
Lewis, A. W. J. (Upton) Roberts, Goronwy (Caernarvonshire) Wallace, G. D. (Chislehurst)
Lindgren, G. S. Ross, William (Kilmarnock) Wallace, H W. (Walthamstow, E.)
Lipton. Lt -Col. M Scollan, T. Wells, W. T. (Walsall)
Longden, F Segal, Dr. S White, H. (Derbyshire, N.E.)
Lyne, A. W. Sharp, Granville Whitcley, Rt. Hon. W
Mack, J. D. Shawcross, C. N. (Widnes) Wilkins, W. A.
McKay, J (Wallsend) Silverman, J (Erdington) Willey, 0. G. (Cleveland)
Mathers, G. Simmons, C J. Williams, W R. (Heston)
Mellish, Ft. J. Skeffington, A. M. Wills, Mrs. E. A.
Middleton, Mrs. L. Smith, C. (Colchester) Woodburn, A.
Mitchison, G. R Smith, S. H. (Hull S.W) Woods, G. S
Nicholls, H. R. (Stratford) Snow, Capt. J. W ziiliacus, K
O'Brien, T. Solley, L. J.
Orbach, M. Symonds, A. L. TELLERS FOR THE NOES:
Paget, R. T. Teylor, H. B. (Mansfield? Mr. Joseph Henderson and
Mr. Michael Stewart.

Question put, and agreed to.