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Lords Amendment: In page 17, line 36, at end insert:
() (a) If it proved by the stockholders' representative or by the Minister that the values of a company's securities as agreed or determined under the provisions of subsections (2) to (7) inclusive and subsection (9) of this section (in this section referred to as 'the Stock Exchange values') in the aggregate fall short of or exceed the value of the company's undertaking and assets on the first day of October nineteen hundred and forty-eight the amount of such short fall shall be added to the Stock Exchange values or the amount of such excess shall be deducted there from as hereinafter provided and the Stock Exchange values as adjusted by such additions or deductions shall become the values of those securities for the purposes of this section;
(b) for the purposes of this section the value of a company's undertaking and assets on the first day of October nineteen hundred and forty-eight shall be such amount as they might have been expected to realise if;
(c) if with respect to any company the stockholders' representative or the Minister desires to prove any matter which may be
2418
proved by him under this subsection, he shall so inform the Minister or the stockholders' representative (as the case may be) by notice in writing given within three months after the date of transfer.
§ 11.30 p.m.
§ The Financial Secretary to the Treasury (Mr. Glenvil Hall)I beg to move, "That this House doth disagree with the Lords in the said Amendment."
The object of this Amendment is that undertakings and assets of companies taken over shall be valued as on a sale between a willing buyer and a willing seller—
§ Mr. Oliver Lyttelton (Aldershot)Not quite.
§ Mr. Glenvil Hall—and that if such value, when ascertained, is greater than the Stock Exchange price, also when ascertained under the present formula—
§ Mr. LytteltonI am anxious that the right hon. Gentleman, in opening this matter, should make it clear that the Stock Exchange basis of valuation is not abandoned. It is only where the Stock Exchange valuation is held to be inequitable that additions or subtractions are made.
§ Mr. Glenvil HallThe right hon. Gentleman interrupted me almost before I had begun to indicate what the Amendment intends to do. I was saying that the undertakings and the assets of the companies taken over should be valued as for a sale between a willing buyer and a willing seller. I am sure the right hon. Gentleman will agree.
§ Mr. LytteltonNo.
§ Mr. Glenvil HallIf it is found that that valuation, when ascertained, is greater than the Stock Exchange valuation as laid down under the Bill, the difference shall be added to the amount of compensation given to the holders of securities and, if it is less, that difference shall be deducted. That is the suggestion in brief, and I do not think the right hon. Gentleman now will quarrel with the way I have put it.
§ Mr. LytteltonI am only interested in getting this strictly accurate. The Amendment begins by saying:
If it proved by the stockholders' representative … that the values of a company's securities … in the aggregate fall short of or exceed …2419 I am only anxious to bring out this point, that the basis of Stock Exchange value is not abandoned, and that the onus is upon the stockholders' representative to prove that that Stock Exchange basis is wrong. Once that premise is admitted, the right hon. Gentleman is, of course, quite correct in pointing out the consequences which follow.
§ Mr. Glenvil HallI have not said that the Stock Exchange basis was abandoned. It has to be taken so that when this other valuation is ascertained it can be either added to or subtracted from to arrive at the amount of compensation which is to be given to any person for the securities he holds.
The main arguments for this change are that the Stock Exchange valuation as laid down by the Government in the Bill when it left this House is unfair because iron and steel companies, since the war, have conserved their resources, have restricted their dividends, have ploughed back their profits into development schemes, and in many cases, as the right hon. Gentleman the Member for North Leeds (Mr. Peake) said on an Amendment a little while ago, have gone in for development schemes and re-equipment on a large scale. The inference is—at an earlier stage of our proceedings it was repeatedly stated by right hon. and hon. Gentlemen opposite—that the Stock Exchange price does not reflect these things; and, therefore, it was essential in the view of hon. Gentlemen opposite that some other computation should be made in order to test whether the Stock Exchange price was or was not a fair one.
It is quite true that the Government, in these nationalisation Measures, have never been wedded to any particular form or method of payment of compensation. The Statute Book, during the last four years, is good evidence of this. When we took over the Bank of England we chose one form of compensation; when we nationalised coal another form was used; and for gas, electricity, transport and, now, for iron and steel, we have chosen—
§ Mr. Nigel Birch (Flint)Not for road transport.
§ Mr. Glenvil Hall—and, I think, properly chosen, that of the mean Stock Exchange price on given dates. The test 2420 we have employed every time, for one or other of these methods, to ascertain what just and fair compensation should be to the holders of securities, has been whether the method chosen in that particular instance was just to the shareholder, fair to the taxpayer, and was also, and this factor does enter into it, speedy of operation. It is our view, and it has been said repeatedly during our proceedings on the Bill, that the method chosen by the Government, and accepted by this House by a very large majority, is the right one.
How are Stock Exchange prices arrived at? This answers the right hon. Gentleman the Member for North Leeds who had some very hard things to say about my right hon. Friend the then Minister of Supply and the undertaking he gave in May, 1946, and my right hon. and learned Friend the Chancellor of the Exchequer, who underlined what he had said on that occasion. Surely, when the Stock Exchange price of any given class of security is arrived at, quite a number of things are taken into account. One takes into account the past history of the concern, its recent balance sheets, the reserves which it has, the condition of its plant and machinery, and whether its machinery and buildings have been brought up to date or whether they are obsolete and worn out. If those who compile the values of Stock Exchange securities do not take these things into account, they must be extremely inefficient, not to say foolish.
Therefore, when we take, as we have taken, the Stock Exchange price of these securities on certain dates, which, in our view, would be more advantageous to the stockholder than some other date, we are being quite fair, because the price on those dates must inevitably reflect the position of the company or the undertaking concerned. It was said by the right hon. Member for North Leeds that my right hon. Friend the then Minister of Supply said in May, 1946, that those companies which spent money on re-equipment would have it reimbursed, and that the Government have failed to live up to the undertaking then given.
A moment's reflection should show the House that a charge of that kind is completely unfounded. If Company "B", reading what my right hon. Friend said, began, as a patriotic set of directors, to 2421 re-equip and bring its machinery up-to-date, and put in new plant, that re-equipment and development undoubtedly would cost money and that money must come from one of two sources. It can either come from the reserves of that company or be borrowed. If it comes from the reserves it would be reflected in the Stock Exchange prices of that concern. If it had been borrowed, then, under the terms of this Bill, that liability would be taken over by the Corporation.
§ Mr. LytteltonTo anyone with some experience of company finance, the remarks of the right hon. Gentleman are entirely incomprehensible. He begins by what is not an uncommon error for the layman, confusing reserves and cash, which have no relation whatever to the subject we are discussing and no relation to each other.
§ Mr. Glenvil HallI do not know what the right hon. Gentleman means when he says I am confusing reserves with cash. I did not use the word "cash" at all. I indicated, and very properly so, that when a firm buys new equipment and plant it has to find the money from somewhere. It can either borrow it, or take it from the reserves—[An HON. MEMBER: "Liquid reserves"]—Yes, liquid reserves, cash reserves.
During the past two or three years Profits Tax has been levied at two different rates. Where the profits have been distributed to the shareholders a rate of 25 per cent. was levied on the distributed profits. Where the profits were put to reserve, and either left there in a liquid form, or in some form of investment, or invested in fixed assets, new equipment, plant and machinery, the rate was 10 per cent. What I am saying is quite correct. Firms which used their reserves to reequip themselves have had that re-equipment mirrored in the Stock Exchange prices quoted in the daily or weekly lists in London. If that is not so, I would like to know how the Stock Exchange daily price lists are made up.
A further argument in support of the Amendment is that the security holders are not being compensated for the full value of the assets of the undertaking by this method. We never have contended that that was so. When we employed a different method when the Bank of England was taken over, so far as I know nothing, was said on the other side of the 2422 House because the compensation we gave to the holders of bank stock did not reflect the full value of the assets then being taken over.
§ 11.45 p.m.
§ Mr. Joynson-Hicks (Chichester)The right hon. Gentleman was very seriously challenged on that point at that time, and completely failed to answer it.
§ Mr. Glenvil HallI have a very vivid recollection of what happened then. What certain hon. Gentlemen did try to ascertain was what were the value of the assets, but there was a general feeling then that the method we were adopting was fair and reasonable to those receiving the compensation. They would continue to get gilt-edged security which would bring them the same income they were previously enjoying.
§ Sir John Mellor (Sutton Coldfield)Surely the right hon. Gentleman will recollect that our attack on the compensation was that it in no sense reflected the great reserves of the Bank of England? We naturally sought to ascertain the amount of the reserves, and we never got the answer.
§ Mr. Glenvil HallAt any rate, it is quite plain that the holders of Bank of England stock did not get the full value of the assets that were being taken over, and the point I am making, and want to repeat, is that we have never contended that the stockholder did get, in the compensation paid to him, the full value of all his assets. What we promised to do, and what we are doing, is to compensate the investor for the loss of his investment. We are giving him here, as an investor in an iron and steel concern, a gilt-edged security, if he cares to keep it, at a fixed rate of interest for an investment which, in years not so long ago, paid no dividend at all.
In fact, in 1929, as most hon. Gentlemen know, 48 per cent. of those cornpanies which are mentioned in Part II of the Bill paid no dividend, and in 1934 84 per cent. of them paid no dividend. Therefore, the majority of the stockholders in iron and steel concerns are getting under the terms of this Bill fair and just compensation for the holding which they now possess. The proof of that—if proof is needed, although they were equally aware that the iron and steel industry was about to be nationalised, 2423 and they were, I should imagine, also aware that following what had been done with gas, electricity and transport, the Stock Exchange price on given days would be taken—is that the shares in most of the undertakings listed in Part II continued to rise.
Finally, if this Amendment were acceptable it would be difficult, although not impossible, to implement it. In any case, to ascertain the values of the full assets of these companies—and they would have to be valued concern by concern—would be a long-drawn out proceeding, and one which we would hate to contemplate. In assessing the values it would be necessary not only to value the physical assets, which might not be so difficult, but also the expectations of these companies, company by company. We should have to assess the competition a company would be likely to meet at home and overseas. We should have to compute also, in order to arrive at the true value, the likely profits of each concern. Those of us who recollect the ups and downs of this industry would find that a very difficult computation to make. I therefore invite the House to reject this Amendment as being unfair to those who are to receive compensation under the terms laid down by the Government.
§ Mr. LytteltonI have listened with something little short of amazement to the Financial Secretary's excursion into the realms of company finance. He has dealt with the subject on what I think I would call a pastoral basis. I talked with my hon. Friend the Member for Chippenham (Mr. Eccles) who, unfortunately, is unable to be with us because of illness, about what would happen if the right hon. Gentleman had to value a herd of milking cows. He would say that the owner is getting the value of the cow which is in milk this year, but last year he might have had it taken over when it was not in milk. How lucky he is. Perhaps a little later, he will realise the force of these remarks. It is quite erroneous to suppose that the Stock Exchange value is discarded.
To listen to the Financial Secretary one would think that no business has ever been bought or sold on the going concern basis. This is what takes place 2424 every day between a willing buyer and a willing seller. The immense practical difficulties which the right hon. Gentleman tries to raise in this matter are entirely without foundation. There is no difficulty in valuing compensation as between a willing buyer and a willing seller. The objection to our original amendment was it gave the companies more if the Stock Exchange values were exceeded, but did not reduce their compensation if a valuation was below Stock Exchange prices. The matter was raised, and quite properly I thought, during the Committee stage. I did not observe it at that time, but I thought the objection was correct. The hon. Member for Reading (Mr. Mikardo), I think, raised the point about different dates on which these valuations could be made; this Amendment lays down a uniform date, and so we start off with agreement.
I do not want to go—and, indeed it would be impossible to disguise the fact that I would wish to fold my wings in sleep earlier than I did last night—into the inaccuracies of the Financial Secretary's speech. I am sure that hon. Members opposite do not wish me to go at length into them, and then nail them down. These are quite sincere objections passed on for consideration and based on a lifetime's experience in these matters. Let me assure the House that I am not in the least concerned as to who does well or badly out of this nationalisation from a financial point of view. I have no interests myself, and what we are considering are not national, but sectional interests. It is a purely technical matter, and I take it that the Government wishes to compensate those who are having their interests nationalised, on a fair and equitable basis.
I am only saying that for technical reasons the basis the Government have chosen does not happen to be fair or equitable; indeed, the Financial Secretary has given some proof of this himself. He said that from one nationalised industry to another the Government adopt a different basis, but the different basis is unlikely to be equitable in every care. There is a case which I do not want to make because I do not want to provoke a speech from the hon. and gallant Member for North Portsmouth (Major Bruce) who happens to be present because that, again, would keep us out of bed.
2425 There is a case for supposing that the Government chooses the instrument for compensation which suits themselves in each case, and not the stockholders. There are one or two things which I think are significant: first, in valuing an estate for Death Duties, the value of a controlling interest in a company is not taken at Stock Exchange value by the Inland Revenue because, in that way, it was thought that the person concerned would receive a value for his controlling interest for this purpose at a lower figure than that at which it would be computed if the fact that his interest was a controlling one were taken into account.
This is exactly parallel to the case with which we are dealing here, and the State cannot have it both ways. If it says to the dead capitalist, "You are really not entitled to value the controlling interest in a company at Stock Exchange value because there is a hidden value in it," then, equally, the State, when compensating him when he is alive, must say, "We take into account the controlling element interest in your share." I dare say it is in the memory of the House that the Government rejected any idea of selling the Argentine Railways—which we have since eaten—to the Argentine Government on the basis of Stock Exchange value. They found that one out anyhow. If they had sold the railways on the basis of Stock Exchange value, we on this side would have belaboured them good and hard for doing so. They avoided this trap and said to the Argentine Government, Certainly not. To sell our railways at Stock Exchange value would be ridiculous because though these valuations are fixed they are only in regard to a very small amount of stock. That is the reason why the Government rejected Stock Exchange values in that case.
But why do they reject them in this case? The reason is that they are going to buy something for much less money than it is worth. I am very sorry to have to give actual cases and figures to the House, but I must drive home the theoretical soundness of my argument by giving practical illustrations. The first one that will occur to hon. Members is the case of Thomas Tilling. In July, 1945, the ordinary shares of that company were valued on the Stock Exchange at 51s. 6d. After the introduction of the Transport Bill they had a little fall, but they varied between 57s. and 60s. a share 2426 at the time of the introduction of that Bill. They were acquired by a system of valuation between a willing buyer and a willing seller, on the basis of a going concern, and the compensation was fixed at 120s. Therefore, the value received was about double the Stock Exchange value.
I have here two other specimen cases. They are the cases of Richard Hill Ltd. and The Briton Ferry Steel Co. Ltd., to which I must draw the attention of the House. In both cases the Government acquired assets worth £750,000 for £105,000. The Financial Secretary's argument about the fact that we are not giving the full value of a fixed asset really falls to the ground on the face of a disparity of this kind. Nothing is more difficult to ascertain than the value of a fixed asset for the purposes of compensation. It is mixed up with the cost of replacement of the asset, its original cost and its earning capacity. But with disparities of this kind Stock Exchange values can be seen to be manifestly absurd. I assure hon. Members opposite that I am not trying to defend a pal of mine who has a few shares in a company, but that I am trying to see that, in this vast revolution, something like justice, and something which can be defended by ordinary fair-minded people, is done. I also acquit the Government of any desire to "do" people, but they are very ignorant and very clumsy in these matters and unwittingly will do a great deal of injustice. It will be seen that the Government are to acquire £750,000 worth of fixed assets for £105,000.
12 m.
In the second and larger case, the total compensation receivable by the Company is £1,154,000 and the parent company's proportion of the net current assets—that is, realisable—is £1,025,000. Consequently, the whole of the fixed assets of the company will be acquired for £129,000, whereas they stand in the books, after depreciation, at £748,000. Here are two instances where, I suggest, a gross injustice is done to the common stockholder. If the Government persist in their attitude in rejecting the Amendments they will have to think again about doing justice.
I will not deal with the question of a pledge, because I have said sad things about that in the past. I still say that the 2427 pledge has been violated, and deliberately violated, but perhaps my right hon. Friend will have something to say about that. I shall end with two other short observations. First, Stock Exchange values are affected by the conservative dividend policies of the company. It is very sad in this vale of tears that the unrighteous sometimes prosper and the righteous sometimes get lower values for their securities. Companies which plough back profits into their business generally command a lower price on the Stock Exchange than those which are free with their distributions.
Second, it is an undoubted fact that Stock Exchange values have been depressed by the voluntary limitation of dividends. Industry has been put on its good behaviour and, having behaved well, its good behaviour is being exploited by the Government so that they may buy its securities at lower prices. Perhaps I will not say in order to do so, but will merely point out that the effect is that their securities vest in the Government at lower prices. I will not go as far as to say "in order" because, as far as possible, I want to keep away from a controversial note.
Lastly, it is demonstrable—and hon. Members will be glad to know that I do not propose to demonstrate it—that unfructified capital expenditure is not reflected in Stock Exchange values. This is not only my opinion, but happens to be also the point of view which is held by the Council of the Stock Exchange. One may imagine that a professional body of this kind which, whatever hon. Members opposite may think, is not a political body, would be very eager to say that the most equitable means of valuing any form of security would be to take the Stock Exchange value, but, as a matter of fact, they take the opposite view and the correct view. They say that for the purpose of parting with a whole company, of an amalgamation of an entire concern, of parting in the most exaggerated sense with a controlling interest, Stock Exchange values are not a fair guide.
I do not want to detain the House any further, and my last point is that when we come to look at how these theoretical vices work out in practice, we find that we are correct in regarding these as vices. If we take the Income Tax basis, with 2428 16 out of the 26 companies—about two-thirds—this is what we find, and perhaps I should explain what I mean by the Income Tax basis: I mean the cost of the assets diminished by the ordinary Income Tax allowance for wear and tear and reduced in value by the process of depreciation allowed for Income Tax purposes. Nobody could possibly say that the value at which the assets stood in the books was inflated. The 16 companies, applying the allowances permitted by the Inland Revenue, get a value of £224 million. The compensation payable by the Government to those concerns amounts to £155 million.
There is really no argument that we are not paying for the fixed assets in full that will allow the Government to get away with something so manifestly unfair. I make a plea that at long last they should allow a little more flexibility—a quality, it would seem, that transcends all others in the mind of the Minister of Supply, because it is invariably his defence, when he is apparently without any other adequate defence, to say, "I must not be pressed on this or that, because I wish to keep everything flexible." Here is a case where he ought to keep things flexible. Where it is demonstrable that to have a Stock Exchange value of a man's security today will inflict hardship, the Government should not exclude from their mind the possibility of arbitration and of the basis of the security's passing from a willing seller to a willing buyer.
§ Mr. Spearman (Scarborough and Whitby)I do not always find it very easy to follow the Financial Secretary, but I have had the pleasure of listening to him through a great many financial Debates, and I have a certain experience of him now, and I feel sure that what he was trying to tell us was that the Stock Exchange valuation is a fair way of valuing shares. All of us who know the right hon. Gentleman know what a very honest man he is, and so I feel sure he really means that; but I have been puzzling myself to try to find out what is the explanation of this clear contradiction. I think, perhaps, it is that the right hon. Gentleman is not very clear about this particular matter, and that he is thinking, perhaps, of Government stocks.
When we take a Government stock, that Stock Exchange valuation is, indeed, 2429 a very fair way of arriving at a value, because there is a free market in that stock. If people want to acquire a certain rate of interest they go on buying the stock and pushing up the price. If, on the other hand, they want to sell, they sell their stock and force down the prices, and, in a free market, they are sure of getting a price. At present, as the right hon. Gentleman is very well aware, they are not very confident about Government stocks, and the price is falling rather sharply. But that, of course, has no value whatsoever as a method of valuing ordinary shares, where there are hidden reserves which entirely alter the whole situation.
The ordinary share is valued very largely on the dividends it is paying, and, consequently, of those companies that are paying a big dividend—perhaps they have been rather rash—the shareholders get an advantage. On the other hand, those that are very cautious and put their money to one side have been penalised. It is for that reason that I cannot understand how the right hon. Gentleman can reconcile himself to this, because though he may want to be very harsh in the price he wishes the State to give, he, like others of his hon. Friends, I am sure, wants to be just, and however harsh they may want the compensation to be, they would wish it to be just between one shareholder and another—between one man and another. Under this arrangement it cannot possibly be fair between one man and another. Shares, as I have said, are largely valued on the amount of dividend they are paying, and on the prospect of what they will pay. But that is only a part of it; there is no scientific way of getting at just what that amounts to.
Perhaps I may give one small personal illustration. I remember a very long time ago, when I was a very young stockbroker, being told by the chairman of what now is one of our greatest industrial companies, to sell a very large number of shares. He was an old man preparing his way for Death Duties. He told me to sell this very large number at just under 50s. He said, "These shares are much too high and I cannot think why they are selling at this price. They are yielding only 4½ per cent." In six months those shares—one of our blue chips—were standing at 90s.
§ Mr. Glenvil HallI suggest that the hon. Member should tell that story to his right hon. Friend, who was arguing just now that a low rate of dividend meant a low Stock Exchange price.
§ Mr. SpearmanThat is exactly what I am saying, that three-quarters of the influence which settles what the price of a share is, is the dividend paid. People are not prepared to buy the shares at a very low rate of interest whatever their future may be; but every now and then it becomes apparent that they will pay much more. Therefore, in that particular instance the shares move up in price. But for those reasons, whereas the Stock Exchange is a clear and fair way of valuing Government stocks, it is a completely unfair way of valuing stocks with variable dividends. Moreover, it changes with the amount of the market. If you get a share with a free market it is more likely to be more sound than another share where the amount is largely held by one family and there is no market for the shares. In such a case you are bound to get quite a wrong price for the share.
Time and time again, I have known cases of shares quoted at 50s. each for a small number, while for a large number they may be quoted at about 10s. each. I have in front of me a list of the prices at which various very important banks, financial houses and companies have taken over other companies. I will quote three examples. The Shell Company, two years ago, took over a block of B.O.C. shares. At that time those shares were standing on the Stock Exchange at 20s. The price which the Shell Company paid was 139s., or 12.5 per cent. of the market price. Hambro's Bank took over a concern, the shares of which stood on the Stock Exchange at 25s., for 28s. 6d., or 23 per cent. on the market price. Baring Bros. took over shares at 6s. which were standing on the Stock Exchange at 3s. 10½d., or a 54 per cent. increase. Does the Minister suggest that Baring Bros., Hambro's Bank, Lazarus Bros., Shell, and other concerns are so grossly incompetent that they are offering 30 to 50 per cent. more than they need pay without any reason? They do it because in these shares the Stock Exchange price is no indication at all.
I come back to my original point, that however stiff the terms which hon. Gentlemen opposite may wish to make, and I 2431 can understand their wishing to make very stiff terms, I cannot understand their not wishing to be just as between one man and another.
§ Mr. Nigel BirchThis is a point which we have many times discussed in the House, and we have always had the same sort of answer from the Financial Secretary; and that answer really is not any answer at all. The hon. Gentleman started by saying that hon. Members opposite had employed many different types of compensation for nationalised undertakings. That is very true. He instanced the Bank of England; coal, which was on a quite different basis; and also the Transport Act, where a number of quite different types of compensation were fixed. Stocks were valued for the railways, but not for railway wagons or for road transport. Therefore, there were three different types of compensation in that Measure alone. Then we had the Town and Country Planning Act, where compensation was on the basis of bluster, without anything behind it.
12.15 a.m.
But surely what we have always argued is this: there must be some principle behind what one does. Surely, the fact that hon. Gentlemen opposite have simply suited their own convenience in various cases does not indicate that they were simply suiting their own convenience and not pursuing the ends of justice. The principle behind all these things is perfectly simple, and it is that a business must be independently valued between a willing buyer and a willing seller.
I say advisedly "a business" and not "shares in the business," because it is something wholly different, as the hon. Gentleman knows. I say "as the hon. Gentleman knows" because he knows what happened in the case quoted by my right hon Friend the Member for Aldershot (Mr. Lyttelton), that is to say, the case of Thomas Tilling, with which hon. Gentlemen opposite are very familiar, where the whole basis was entirely different from the basis employed under the scheme of the Bill. That was a very good instance indeed of the difference between buying shares in a business and buying a business.
2432 So the main point we have always had to draw is, what is an independent valuation? There is no difficulty in taking on such a valuation. It is done every day, and the argument of convenience is one which should not be raised at all. There is no difficulty about doing it, and it should be done if it is in the interests of justice to do so. That argument of inconvenience seems to be an unworthy one.
I should like to say a word on a matter raised by my right hon. Friend, and that is about the pledge that the people would get back the money they put into the creation of capital assets after the Government announced that they were going to nationalise the industry. No answer to charges of breach of faith in that undertaking has ever been given. The only answer given was, in fact, that the assets are reflected in the Stock Exchange values. That is wholly untrue. The only thing reflected in the Stock Exchange values in October, 1948, was the anticipation of what was going to happen under nationalisation. That has nothing to do with the intrinsic worth of the business at all, and this specific pledge was given that money in full for new capital development should be given back. That has not been done.
Of course, it was the previous Chancellor of the Exchequer and the previous Minister of Supply who gave those pledges, but right hon. and hon. Gentlemen opposite must be careful about those pledges that were given. After all, it was not so very long ago that the Chancellor of the Exchequer, standing at that Box, made a solemn pledge that no insurance company was going to be nationalised. That has gone west now. The Government will have to reckon that nobody at that Box is going to be held in much esteem after the experience we have had and the pledges given. That is a serious state of affairs and one they will find extremely inconvenient.
The last point I want to make is that what the Government are doing is to take away from people real assets. They are taking real mills and every kind of plant and factory which is producing iron and steel in many varying forms. And what are they giving in exchange? The right hon. Gentleman said it is absolutely wonderful for people because they were getting gilt-edged securities. What is a gilt-edged security nowadays? It is a security which has depreciated in terms 2433 of goods all the time; that is to say, as the price level steadily rises, the actual purchasing power of the dividends on capital received from a gilt-edged security has depreciated with some rapidity, and I would say with increasing rapidity.
On top of that, it is not only depreciating in terms of goods but also in terms of money. We have seen, in the case of Gas Stock, recently issued and not all taken up, that it has already depreciated to under 93; that is, it is standing at a discount of over 7 per cent., so that people are suffering not only because they have had real assets taken away and have received confetti instead, with a buying power steadily decreasing, but they do not get even the nominal value which, under the Government pledge, they should be entitled to.
How that can be defended, I do not know; in fact it has never been defended. Right hon. Gentlemen opposite say, "Well, it is convenient", and if one's old widowed aunt dies, the Stock Exchange value of her shares is good enough for the Treasury to rob her. That is wholly irrelevant. What hon. Gentlemen are doing is to take real assets, give inadequate compensation in return, even in terms of money, and the money they are giving is money which is rapidly depreciating. Therefore, it is no true compensation for those assets and I hold that this has been wrong and unfair throughout, and in cases where Stock Exchange value has been applied it has always been unjust and always will be so.
§ Colonel J. R. H. Hutchison (Glasgow, Central)I want to make two short comments to show the fallibility of the arguments advanced by the right hon. Gentleman. The first is on the question of reserves. My hon. Friends have shown that a great many considerations come in when a prospective purchaser is considering Stock Exchange securities.
First and foremost comes the dividend rate, its probability of maintenance, the general strength of management, and so on. The right hon. Gentleman, both in the Committee stage and this evening, made great play with the assertion that the reserves were reflected in price and that consequently a prospective buyer really had his eye on the reserves and was buying for them and taking them into his calculations. There was a certain 2434 amount of truth in that in the old days before limitation of dividend restrictions came in, because what a prospective buyer looked at in reserves was the likelihood of the distribution of the reserves in the form of a bonus issue.
When that bonus issue took place he proceeded to calculate whether the dividend rate was likely to be maintained on the increased capital. If that was likely to come about, it had an effect on the price of the shares, but not the main effect. Today, however, when dividends are limited and the only effect of a bonus issue is merely to increase the amount of the capital without increasing the return on that capital, the effect of reserves in calculating Stock Exchange prices is virtually negligible; at any rate it is a very low factor indeed, and has nothing like the importance which the right hon. Gentleman has tried to attach to it.
My other comment to show where the Stock Exchange prices can go so egregiously wrong is to instance the case of well-known trust companies. If the right hon. Gentleman looks at the current Stock Exchange prices, he will find that the prices quoted for the equity stock of those trust companies are from 20–40 per cent. lower than the break-up value of the companies themselves; that is to say, if the trust company were broken up, and all its holdings were sold at current Stock Exchange prices, they would produce from 20–40 per cent. more than the prices of the trust companies' own shares at the present time. I throw that into the arena, in addition to the other instances given, to show how variable Stock Exchange prices can be, and therefore this Amendment, which seeks to protect the ordinary taxpayer of the country as well as the ordinary investor, is not a one-way traffic—it compensates in both directions and is a most fair suggestion.
§ Mr. Hugh Fraser (Stone)Not only throughout this Debate, but throughout Second Reading, and throughout the Committee stages both in this House and in another place, we have been up against a blank wall of abysmal ignorance on the part of right hon. and hon. Gentlemen opposite on matters of compensation. The Clause is entitled "Compensation to holders of securities," but in point of fact, as has been clearly demonstrated on innumerable occasions, it is semi-expropriation and nothing more; and it 2435 is really almost useless to continue an argument with right hon. and hon. Gentlemen opposite, who are either ignorant or foolish or refuse in any way to be convinced by reason.
§ Question put, "That this House doth disagree with the Lords in the said Amendment."
§ The House divided: Ayes, 262; Noes, 116.
2437| Division No. 243.] | AYES | [12.25 a.m. |
| Acland, Sir R. | Forman, J. C. | Marquand, Rt. Hon. H. A. |
| Adams, Richard (Balham) | Fraser, T. (Hamilton) | Mathers, Rt. Hon. G. |
| Albu, A. H. | Freeman, John (Watford) | Mayhew, C. P. |
| Alexander, Rt. Hon. A. V. | Gaitskell, Rt. Hon. H. T. N. | Messer, F. |
| Allen, A. C. (Bosworth) | Ganley, Mrs. C. S. | Middleton, Mrs. L. |
| Anderson, A. (Motherwell) | Gibson, C. W. | Mikardo, Ian |
| Attewell, H. C. | Gilzean, A. | Millington, Wing-Comdr. E. R. |
| Baird, J. | Granville, J. E. (Consett) | Mitchison, G. R. |
| Balfour, A. | Gooch, E. G. | Monslow, W. |
| Barnes, Rt. Hon. A. J. | Greenwood, A W. J. (Heywood) | Morris, Lt.-Col. H. (Sheffield, C.) |
| Barstow, P. G. | Grey, C. F. | Morris, P. (Swansea, W.) |
| Barton, C. | Griffiths, D. (Rother Valley) | Mort, D. L. |
| Bechervaise, A. E. | Griffiths, W. D. (Moss Side) | Moyle, A. |
| Benson, G. | Guest, Dr. L. Haden | Nally, W. |
| Berry, H. | Gunter, R. J. | Neal, H. (Claycross) |
| Beswick, F. | Guy, W. H. | Nichol, Mrs. M. E. (Bradford, N) |
| Bing, G. H. C. | Haire, John E. (Wycombe) | Nicholls, H. R. (Stratford) |
| Binns, J. | Hale, Leslie | Noel-Baker, Capt. F. E. (Brent'ord) |
| Blackburn, A. R. | Hall, Rt. Hon. Glenvil | O'Brien, T. |
| Blyton, W. R. | Hamilton, Lt.-Col. R. | Orbach, M. |
| Boardman, H. | Hardman, D. R. | Paget, R. T. |
| Bowden, H. W. | Harrison, J. | Paling, Will T. (Dewsbury) |
| Braddock, Mrs. E. M. (L'pl, Exch'ge) | Hastings, Dr. Somerville | Pannell, T. C. |
| Braddock, T. (Mitcham) | Haworth, J. | Palmer, A. M. F. |
| Brook, D. (Halifax) | Henderson, Rt. Hn. A. (Kingswinford) | Pargiter, G. A. |
| Brooks, T. J. (Rothwell) | Herbison, Miss M. | Parker, J. |
| Broughton, Dr. A. D. D. | Hobson, C. R. | Parkin, B. T. |
| Brown, George (Belper) | Holman, P. | Pearson, A. |
| Burden, T. W. | Holmes, H. E. (Hemsworth) | Poole, Cecil (Lichfield) |
| Burke, W. A. | Horabin, T. L. | Popplewell, E. |
| Callaghan, James | Houghton, Douglas | Porter, E. (Warrington) |
| Carmichael, James | Hoy, J. | Porter, G. (Leeds) |
| Castle, Mrs. B. A. | Hubbard, T. | Price, M. Philips |
| Chamberlain, R. A. | Hughes, Hector (Aberdeen, N.) | Pritt, D. N. |
| Champion, A. J. | Hughes, H. D. (Wolverhampton, W.) | Proctor, W. T. |
| Chetwynd, G. R. | Hynd, H. (Hackney, C.) | Pryde, D. J. |
| Collindridge, F. | Hynd, J. B. (Attercliffe) | Pursey, Cmdr. H. |
| Collins, V. J. | Irving, W. J. (Tottenham, N.) | Randall, H. E. |
| Colman, Miss G. M. | Isaacs, Rt. Hon. G. A. | Ranger, J. |
| Comyns, Dr. L. | Janner, B. | Rankin, J. |
| Cook, T. F. | Jeger, G. (Winchester) | Reid, T. (Swindon) |
| Cooper, G. | Johnston, D. H. | Rhodes, H. |
| Corbet, Mrs. F. K. (Camb'well, N. W.) | Jones, D. T. (Hartlepools) | Roberts, Goronwy (Caernarvonshire) |
| Corlett, Dr. J. | Jones, Jack (Bolton) | Robertson, J. J. (Berwick) |
| Crossman, R. H. S. | Jones, P. Asterley (Hitchin) | Robinson, Kenneth (St. Pancras, N.) |
| Cullen, Mrs. A. | Keenan, W. | Rogers, G. H. R. |
| Daines, P. | Kenyon, C. | Ross, William (Kilmarnock) |
| Dalton, Rt. Hon. H. | Key, Rt. Hon. C. W. | Royle, C. |
| Davies, Edward (Burslem) | King, E. M. | Sargood, R. |
| Davies, Ernest (Enfield) | Kinghorn, Sqn.-Ldr. E. | Segal, Dr. S. |
| Davies, Harold (Leek) | Kinley, J. | Shackleton, E. A. A. |
| Davies, Haydn (St. Pancras, S. W.) | Kirby, B. V. | Sharp, Granville |
| Deer, G. | Lavers, S. | Shawcross, C. N. (Widnes) |
| de Freitas, Geoffrey | Lee, F. (Hulme) | Shurmer, P. |
| Delargy, H. J. | Lee, Miss J. (Cannock) | Silverman, J. (Erdington) |
| Diamond, J. | Levy, B. W. | Silverman, S. S. (Nelson) |
| Dobbie, W. | Lewis, A. W. J. (Upton) | Simmons, C. J. |
| Dodds, N. N. | Lewis, J. (Bolton) | Skeffington, A. M. |
| Donovan, T. | Lindgren, G. S. | Skeffington-Lodge, T. C. |
| Driberg, T. E. N. | Longden, F. | Smith, C. (Colchester) |
| Dugdale, J. (W. Bromwich) | Lyne, A. W. | Smith, H. N. (Nottingham, S.) |
| Dumpleton, C. W. | McAllister, G. | Smith, S. H. (Hull, S. W.) |
| Dye, S. | Mack, J. D. | Snow, J. W. |
| Ede, Rt. Hon. J. C. | McKay, J. (Wallsend) | Sorensen, R. W. |
| Edwards, W. J. (Whitechapel) | Mackay, R. W. G. (Hull, N. W.) | Soskice, Rt. Hon. Sir Frank |
| Evans, A. (Islington, W.) | McKinlay, A. S. | Sparks, J. A. |
| Evans, S. N. (Wednesbury) | McLeavy, F. | Steele, T. |
| Ewart, R. | McNeil, Rt. Hon. H. | Stoddart-Scott, Col. M. |
| Farthing, W. J. | MacPherson, M. (Stirling) | Stokes, R. R. |
| Fernyhough, E. | Mallalieu, E. L. (Brigg) | Strachey, Rt. Hon. J. |
| Field, Capt. W. J. | Mallalieu, J. P. W. (Huddersfield) | Strauss, Henry (English Universities) |
| Fletcher, E. G. M. (Islington. E.) | Mann, Mrs. J. | Strauss, Rt. Hon. G. (Lambeth, N.) |
| Follick, M. | Manning, C. (Camberwell, N.) | Stross, Dr. B. |
| Foot, M. M. | Manning, Mrs. L. (Epping) | Stubbs, A. E. |
| Summerskill, Rt. Hon. Edith | Warbey, W. N. | Williams, Ronald (Wigan) |
| Swingler, S. | Watkins, T. E. | Williams, W. T. (Hammersmith, S.) |
| Sylvester, G. O. | Watson, W. M. | Williams, W. R. (Heston) |
| Symonds, A. L. | Webb, M. (Bradford, C.) | Willis, E. |
| Taylor, R. J. (Morpeth) | Weitzman, D. | Wills, Mrs. E. A. |
| Taylor, Dr. S. (Barnet) | Wells, P. L. (Faversham) | Wilmot, Rt. Hon. J. |
| Thomas, D. E. (Aberdare) | West, D. G. | Wise, Major F. J. |
| Thomas, George (Cardiff) | Wheatley, Rt. Hn. J. T. (Edinb'gh) | Woodburn, Rt. Hon. A. |
| Thomas, I. O. (Wrekin) | White, H. (Derbyshire, N. E.) | Woods, G. S. |
| Timmons, J. | Whiteley, Rt. Hon. W. | Wyatt, W. |
| Tomlinson, Rt. Hon. G. | Wigg, George | Yates, V. F. |
| Ungoed-Thomas, L. | Wilcock, Group-Capt. C. A. B. | Younger, Hon. Kenneth |
| Usborne, Henry | Wilkins, W. A. | |
| Vernon, Major W. F. | Willey, F. T. (Sunderland) | TELLERS FOR THE AYES: |
| Wallace, G. D. (Chislehurst) | Willey, O. G. (Cleveland) | Mr. Joseph Henderson and |
| Wallace, H. W. (Walthamstow, E.) | Williams, J. L. (Kelvingrove) | Mr. Hannan. |
| NOES | ||
| Agnew, Cmdr. P. G. | Hare, Hon. J. H. (Woodbridge) | Nutting, Anthony |
| Amory, D. Heathcoat | Harvey, Air-Comdre, A. V. | Odey, G. W. |
| Assheton, Rt. Hon. R. | Haughton, S. G. (Antrim) | O'Neill, Rt. Hon. Sir H. |
| Baldwin, A. E. | Head, Brig. A. H. | Peake, Rt. Hon. O. |
| Beamish, Maj. T. V. H. | Headlam, Lieut.-Col. Rt. Hon. Sir C. | Peto, Brig. C. H. M. |
| Bennett, Sir P. | Hinchingbrooke, Viscount | Pickthorn, K. |
| Birch, Nigel | Hogg, Hon. Q. | Pitman, I. J. |
| Boles, Lt.-Col D. C. (Wells) | Hope, Lord J. | Ramsay, Maj. S. |
| Braithwaite, Lt.-Comdr. J. G. | Howard, Hon. A. | Rayner, Brig. R. |
| Bromley-Davenport, Lt.-Col. W. | Hudson, Rt. Hon. R. S.(Southport) | Roberts, Emrys (Merioneth) |
| Buchan-Hepburn, P. G. T. | Hurd, A. | Roberts, H. (Handsworth) |
| Bullock, Capt M. | Hutchison, Col. J. R. (Glasgow, C.) | Roberts, P. G. (Ecclesall) |
| Butcher, H. W. | Joynson-Hicks, Hon. L. W. | Roberts, W. (Cumberland, N.) |
| Carson, E. | Lambert, Hon. G. | Robinson, Roland (Blackpool, S.) |
| Clarke, Col. R. S. | Lancaster, Col. C. G. | Ropner, Col. L. |
| Clifton-Brown, Lt.-Col. G. | Legge-Bourke, Maj. E. A. H. | Scott, Lord W. |
| Conant, Maj. R. J. E. | Linstead, H. N. | Shepherd, W. S. (Bucklow) |
| Corbett, Lieut.-Col. U. (Ludlow) | Lloyd, Selwyn (Wirral) | Smith, E. P. (Ashford) |
| Crookshank, Capt. Rt. Hon. H. F. G. | Low, A. R. W. | Spearman, A. C. M. |
| Crowder, Capt. John E. | Lucas, Major Sir J. | Stanley, Rt. Hon. O. |
| Cuthbert, W. N. | Lucas-Tooth, Sir H. | Stuart, Rt. Hon. J. (Moray) |
| Davidson, Viscountess | Lyttelton, Rt. Hon. O. | Taylor, C. S. (Eastbourne) |
| Davies, Rt. Hon. Clement (Montgomery) | MacAndrew, Col. Sir C. | Teeling, William |
| Digby, Simon Wingfield | McCorquodale, Rt. Hon. M. S. | Thomas, Ivor (Keighley) |
| Dodds-Parker, A. D. | Macdonald, Sir P. (Isle of Wight) | Thomas, J. P. L. (Hereford) |
| Dower, Col. A. V. G. (Penrith) | McFarlane, C. S. | Thorneycroft, G. E. P. (Monmouth) |
| Drayson, G. B. | Mackeson, Brig. H. R. | Turton, R. H. |
| Dugdale, Maj. Sir T. (Richmond) | Maclay, Hon. J. S. | Wakefield, Sir W. W. |
| Duthie, W. S. | Macmillan, Rt. Hon. Harold (Bromley) | Walker-Smith, D. |
| Elliot, Lieut.-Col. Rt. Hon. Walter | Manningham-Buller, R. E. | Ward, Hon. G. R. |
| Erroll, F. J. | Marlowe, A. A. H. | White, Sir D. (Fareham) |
| Foster, J. G. (Northwich) | Marples, A. E. | Williams, C. (Torquay) |
| Fox, Sir G. | Marshall, D. (Bodmin) | Williams, Gerald (Tonbridge) |
| Fraser, H. C. P. (Stone) | Mellor, Sir J. | Willoughby de Eresby, Lord |
| Fraser, Sir I. (Lonsdale) | Molson, A. H. E. | York, C. |
| Galbraith, Cmdr. T. D. (Pollok) | Morrison, Maj. J. G. (Salisbury) | Young, Sir A. S. L. (Partick) |
| George, Lady M. Lloyd (Anglesey) | Morrison, Rt. Hon. W. S. (C'nc'ster) | |
| Grimston, R. V. | Neven-Spence, Sir B. | TELLERS FOR THE NOES: |
| Hannon, Sir P. (Moseley) | Nicholson, G. | Mr. Studholme and |
| Harden, J. R. E. | Noble, Comdr. A. H. P. | Colonel Wheatley. |
Question "That this House doth disagree with the Lords in the said Amendment," put, and agreed to.