HC Deb 07 July 1961 vol 643 cc1935-48
Mr. Mitchison

I beg to move, in page 6, line 27, at the end to insert: (b) any persons (whether trustees or not) whose power to make investments is conferred by or under any enactment other than an enactment contained in a local or private Act or one relating to trustees generally.

Mr. Deputy-Speaker

I think that it would be convenient to discuss with that Amendment, the Amendment in page 6, line 32 at end insert: Provided that this section shall not apply to a Post Office savings bank, a trustee savings bank or a seamen's savings bank under the Merchant Shipping Act, 1894.

Mr. Mitchison

Perhaps I might also refer to the Government Amendment, in page 6, line 31, leave out from "enactment" to end of line 32 and insert contained in a local or private Act".

Mr. Barber

I had hoped that we might discuss these three Amendments together, because I think that they raise similar points.

Mr. Deputy-Speaker

I am sure that that will be convenient.

Mr. Mitchison

Behind the general language of this Amendment, as from a cloud there come the figures of the National Debt Commissioners whose activities we considered in Committee upstairs.

The intention of the Amendment is that under the Clause where there are what I might call limited powers, or perhaps savings bank powers, they can by order be extended to the powers under this Bill.

In other words, the trustee who has a limited power of making investments—perhaps he can invest only in those securities in which savings banks can invest—can, by order, be given power to make other investments, under Clause 7 (2, b). Originally, that provision—as the Economic Secretary perceived in Committee, perhaps for the first time—would have enabled the Treasury to authorise such public bodies as the National Debt Commissioners, who at present have only savings bank powers, to make other investments provided for in the Bill. The Government Amendment would confine extensions of that character to persons whose powers are conferred by a local or private Act. They are a much more limited class of people. They would include cases where a local authority or some other public body had powers under an Act to make savings bank investments. Those powers could be extended under the Order.

The Order deals with another and very limited class of person—the person for the time being authorised to invest funds in the Duchy of Lancaster. These people require no Order from the Treasury. By virtue of this Clause they are to have their powers extended, so having the powers of investment conferred upon private trustees.

The first of my Amendments adds to that very limited category of persons, any persons (whether trustees or not) whose power to make investments is conferred by or under any enactment other than an enactment contained in a local or private Act or one relating to trustees generally, that is to say, it brings back the people who would be excluded by the Government Amendment, and it brings them back in the form that they no longer require a Treasury Order. They would obtain, by the Clause itself, power to make trustee investments.

The second of my Amendments excludes savings banks. It is put forward for the reason that we regard savings banks as being in a very peculiar position. They are quite unlike ordinary banks. They receive money from the public and it goes straight through to the Government in some form or another. On that account they have received special treatment for tax purposes. They are the safest of all investments; at any rate, they are as safe as any Government stock. But I do not think it is right that, given their peculiar position, they should be given powers of investment on the footing of ordinary trustees. On the other hand, when we consider other classes of people—by far the most obvious instance is the National Debt Commissioners—the boot is on the other leg. It is up to the Government to show why these trustees for the public should not have as powerful powers of investment as we are giving to trustees for private persons. Surely they need them.

On 3rd May I inquired from the Treasury what had happened to certain funds held and invested by the National Debt Commissioners, and I was answered by the Financial Secretary. The funds in question are two relating to National Insurance—first, the National Insurance Fund, and, secondly, the National Insurance (Reserve) Fund. The latter is much the larger of the two. On 31st March, 1961, it contained a total amount of stock of £1,257 million. That was its nominal amount. The cost price of this stock was £1,168 million. That is a very large sum, and it represents the reserve of the National Insurance Fund and the moneys provided out of contributions from somebody or other—mainly from employers and employees—to the National Insurance Fund itself. It consists literally of the pounds of the employers and the pennies of the workers.

The appalling fact is that the market value of those investments at the end of March, 1961, was only £845 million. That means that the £1,168 million had shed over £300 million of its value, and had become £845 million.

2.15 p.m.

I had the curiosity to inquire what had happened in the case of the part of that fund which had been bought on or before 31st March, 1952—that is, the end of the financial year when the Tories came into power—and the part that had been bought after the end of that year. They both suffered very considerable falls, making together the fall that I have already mentioned. The stock bought on or before 31st March, 1952, had originally cost £742 million and had apparently fallen to £480 million. It is a little difficult to follow the figures, but I think it is sufficient to say that as regards the stock bought both before and after that date there had been a very heavy fall, and a roughly proportionate contribution to the total very large amount.

When the Tory Government came into power they started the policy to which I have already referred, and in regard to which I now make no comment other than that it involved a considerable fall in long-dated or irredeemable securities. Sure enough, when we look at the National Insurance (Reserve) Fund we find that it is largely invested in just those long-dated or irredeemable Government securities. Its fellow, the National Insurance Fund, is a much smaller one. The cost of its stock was £257 million when bought, and its value in March, 1961, was almost the same, being £250 million. The explanation is simple. Short-dated securities are in the National Insurance Fund and long-dated or irredeemable ones are in the much larger Reserve Fund.

When life insurance societies, pensions funds and similar bodies whose financial requirements broadly correspond with those of the National Insurance Fund have to put their money away for a long or short time they put a growing proportion of it into forms of investment other than Government securities. I am sure that the Government themselves would be the first to acknowledge that bodies of that character—life insurance societies, pensions funds and so on—have a great deal of experience and a great deal of what is commonly called "know-how" in matters of this kind.

They do it; they find good reason for doing it, and are doing it to an increasing extent. They are, of course, broadly, rather in the position of private trustees, the type of people we are considering in this Bill, but the trustees for the public— I do not refer specifically to the Public Trustee but to the people who are the trustees for the public—are unable to follow that practice. The practice which they have followed has resulted in the somewhat disastrous consequence which I have just been indicating.

One says to oneself, "The National Debt Commissioners—who are they"? I said this in Committee, but I repeat it in the House because there are some hon. Members present who were not in the Committee. Mr. Speaker is one, the Chancellor of the Exchequer is another, the Master of the Rolls is another, the Lord Chief Justice is another, the Accountant-General of the Supreme Court is another and the Governor and the Deputy-Governor of the Bank of England are others, who all make up the whole of them.

There is this consolation about it. They have never met I believe, during this century, and they are one of those bodies in the British constitution which we seek to preserve, as it were, as somewhat picturesque anachronisms.

The Solicitor-General

The Trustees of the British Museum.

Mr. Mitchison

The Trustees of the British Museum are not by any means anachronisms. The right hon. and learned Gentleman must take care not to say that to my right hon. Friend the Member for South Shields (Mr. Ede), who is one of them. I should not for a moment describe the right hon. and learned Gentleman as an anachronism. He is much too accurate.

Mr. Barber

One of my hon. Friends who was a Lord Commissioner of the Treasury is looking rather pale at what the bon. and learned Gentleman is say- ing concerning the meeting of these members. I hope that the hon. and learned Gentleman will bear that in mind.

Mr. Mitchison

I once had a Lord Commissioner staying with me. He was followed by quantities of boxes containing documents which he was to sign. The Treasury took steps to see that he was aware of what he was signing. Therefore, I should not for a moment describe the Commissioners of the Treasury as anachronisms. They are certainly alive to other things outside their functions, but the National Debt Commissioners are rather a different story. They have not met during this century, and, in fact, all their functions appear to be carried out by—I forget the gentleman's official description but he is a distinguished civil servant—a Treasury official. In fact, of course, these are Treasury investments.

I am bound to say that the state of affairs of the National Insurance Reserve Fund led me in Committee to say—may I be allowed to repeat it now?—that the Treasury, as a thundering big investor of money, would do much better to consult the Church Commissioners who are very good indeed and make a lot of money out of investments every year. Of course, they cannot at present. They are only allowed to invest in Government securities and the division of the funds, if carried on under the present practice, is going to ensure under existing circumstances losses of the order which I have already indicated.

Surely, if we are to give these powers to private trustees, there is no reason, no sensible reason, whatsoever why we should deny them to people who are trustees, I repeat, of the pounds of the employers and the pennies of the workers in connection with National Insurance. I am afraid that the Government's reason for refusing to deal with the matter here is sheer political prejudice.

We suggested at the last election that it might be a good plan if funds of this kind were invested to some extent in ordinary shares, whereupon the Tory Party said that we were socialising by the back door, that we were really as wicked as the Church Commissioners and that something or other very drastic ought to be done about us. The Tories won the election on that sort of cry. But, now that we are in the calmer atmosphere between elections, perhaps they would recognise that in common justice and fairness to the people who pay contributions to National Insurance their reserve funds ought not to continue to be invested in such a way that they succeed in dropping nearly one-third of the total value of the Reserve Fund.

This is the object of the Amendment, though I do not suppose for one moment that the Government will accept it. It is much too sensible and much too obviously right for them to do anything of the sort. All that interests me for the moment is what they are going to say. Are they going to put forward the real reason, that they have found a Socialist under the bed or under the bench, or somewhere, and that it would be bad politics for the Conservative Party to accept the Amendment? Are they going to defend it on the grounds that it is all very well to give powers to private trustees, because they can be regarded as comparatively sensible, but that the National Debt Commissioners and the Treasury, in particular, are so hopelessly idiotic that one cannot trust them with the powers, or, again, are they going to say that it is just morally wrong that the National Debt Commissioners should hold anything but Government stock? I wonder what the answer will be. Let us see.

Mr. Barber

Subsection (1) of Clause 7 gives the benefit of the wider powers granted by Clause 1 of the Bill to the person specified in subsection (2) of Clause 7. Subsection (2) as it now stands, specifies directly only the Duchy of Lancaster, and, in addition, the Treasury may make an Order specifying any person whose powers of investment are conferred by or under a public and general Act or a local or private Act.

The two Amendments in the name of the hon. and learned Member for Kettering (Mr. Mitchison) would widen the effect of subsection (2) of the Clause to refer directly to any persons—other than a Post Office Savings Bank, a Trustee Savings bank or a seamen's savings bank—whose powers are conferred by or under a public and general Act other than this Bill. In other words, if, by a general Act, Parliament has previously decided to restrict a person's power to a range of investments narrower than those conferred on trustees generally, subsection (1) of Clause 7 would automatically nullify that decision and confer on the persons powers of investment granted by Clause 1 of the Bill, which includes the power to invest in equities.

The intention of the Amendments in the name of the hon. and learned Gentleman is, of course, the opposite of the Government's Amendment to page 6, line 31. The Amendment which stands in my name is intended to narrow Clause 7 even further so as to limit the powers of the Treasury to make an Order under subsection (2) to those persons whose powers are conferred only by a local or private Act. The Clause will then not apply to any persons whose powers are conferred by a public and general Act.

We spent some time on this Clause in Committee, and, of course, its purpose is quite simple. The investment powers of the Duchy of Lancaster are restricted by a public and general Act to a range of investments somewhat, but not greatly, narrower than those authorised by Section 1 of the Trustees Act, 1925. I do not think that I need, once again, explain why it was that we thought it reasonable to give these additional powers to the administrators of the Duchy. But, having done that, we thought it was possible that there might be other persons whose powers of investment were granted by specific enactment and were restricted in a manner similar to the restrictions imposed in respect of the Duchy of Lancaster.

2.30 p.m.

At the time when we discussed this in Committee we had heard of no such person, and we have since heard of no such person. Nevertheless, it was thought, and we still think, that the facility would be useful for such persons if at any time they should come forward. If the Treasury was satisfied that a widening of the powers was unobjectionable, it would then make an Order applying the provisions of the Bill. The expense to the person of promoting amending legislation would be avoided, and this would be particularly apt in the case of private legislation.

It was not the intention, however, that the Bill should automatically and indiscriminately over-ride powers of investment where Parliament had consciously conferred powers narrower than had hitherto been authorised for trustees generally. Perhaps I might give an example of where Parliament has decided in a public and general Act that the investment powers of persons should be narrower than at present authorised for trustees generally.

The example is the Building Societies Act, 1960—with which the hon. and learned Gentleman and I were concerned for many hours last year—in respect of both incorporated and unincorporated building societies. The House decided last year to grant only restricted powers of investment. Other examples, as the hon. and learned Gentleman has pointed out, are the National Debt Commissioners in the exercise of their functions under the National Insurance Act, 1946, in respect of the investment of the National Insurance Fund and of the National Insurance (Reserve) Fund—

Mr. Mitchison

Before the hon. Gentle-many leaves the example of the building societies, I wonder whether he would help me. My impression was that their powers of investment were to be limited by a Treasury Order—I think it was a Treasury Order—just as, in this case, it is proposed that the powers of investment of the bodies indicated here should be granted by Treasury Orders.

Mr. Barber

This is, of course, a matter of drafting and construction, but I must say that I have the impression, though I may be wrong, that if we were to accept the hon. and learned Gentleman's Amendment it would automatically increase the powers of investment of the building societies. I think that he will find that this is so, but, even if I am wrong, it is still true, as he fairly pointed out, that to accept these two Amendments would grant additional power of investments to the National Debt Commissioners in the exercise of their functions concerning the National Insurance Funds.

The two Amendments in the hon. and learned Gentleman's name really raise the same issue that was debated in Committee on an Amendment to apply Clause 7 of the Bill specifically to the National Debt Commissioners. That matter was then fully thrashed out, as my hon. Friends will remember, and the Amendment was defeated.

The issue on these two present Amendments, Mr. Speaker, is really a very simple one. It is whether Parliament ought to make direct and general provision in the Bill to over-ride its own intentions as respects powers of investments which it has deliberately restricted in specific Acts. The Government contend that if Parliament is to be asked to revise the investment powers of a major body to which it has given a very narrow range of investments, fresh legislation should be introduced for that purpose so that Parliament may again consider the individual merits of the case or, at least, that the individual case should be specified in the Bill, as reference is made specifically to the Duchy of Lancaster.

The issue on the Amendment standing in my name is also quite simple. It is whether there should be left in Clause 7 a power that would enable any Government to make an Order permitting say, the National Insurance Funds to be used to acquire the ownership or control of industry and commerce. It was agreed on both sides in the Committee on the Bill that this could be done as the Clause is now drafted. Here, again, the Government take the view that a major change of this kind should be the subject of a separate Bill.

What is in the mind of the Opposition is, I think, crystal clear. They want the whole of the National Insurance Funds—valued at over £1,000 million—to be available for investment in accordance with the extended powers of investment provided in this Bill; that is to say, more than £500 million could be invested in equities. The Opposition Amendments would, of course, give a Labour Government dedicated to the principles of nationalisation immense powers of State control over industry without having to obtain the slightest semblance of parliamentary approval, or having to incur a single moment of parliamentary displeasure.

The hon. and learned Gentleman will not be surprised to learn that this is a facility which the present Government are not minded to give the Labour Party, and I therefore ask the House to reject the two Amendments standing in his name, and to accept the Government Amendment.

Mr. Diamond

I just want to say once more that we are regrettably bound to reach the conclusion that the Government are so frightened of their own shadow, and hon. Members opposite are so terrified of their own shadows—or, as my hon. and learned Friend said, of seeing Socialists "under the bed"—what worse nightmare could any man have than about a Socialist?—that they are unwilling to do the one thing they are sent here to do by their constituents, which is to protect the taxpayers' money and to see that it is wisely invested.

Mr. Stratton Mills

The matter we are debating is why the National Insurance Funds should be under a disadvantage as compared with the funds of private insurance companies. In many ways there are many arguments that attract me to this point of view, and probably the strongest is that it would provide a very great opportunity for, perhaps, mellowing the wilder men of the Socialist Left, who would have an interest in the affairs of many companies.

There are, however, many disadvantages, and the main one, as my hon. Friend has said, is the question of control. Let us make no mistake about it; the National Insurance Funds could easily acquire in the market a 51 per cent. holding of, mainly, medium-sized companies and, perhaps with more difficulty, of the larger companies. With a Tory Government that would not necessarily be a very serious matter, but a 51 per cent. holding in I.C.I. would obviously give a Socialist Government very great control over the whole of the great chemical industry. This is backdoor nationalisation, so I oppose the Opposition Amendments.

Mr. Percy Holman (Bethnal Green)

I must protest at the Economic Secretary's last remark. He said that to invest £500 million of public money in private industry was more dangerous, and worse for the country, than a depreciation of £300 million or £400 million in the National Insurance Funds, largely the proceeds of the workers' contributions. What is £500 million invested in private industry today? We have heard talk of a 51 per cent. interest in I.C.I. Though I have not the figures before me, I rather suspect that to acquire such an interest would cost about one-fifth of that £500 million. Further, what is £500 million compared with the total value of private industry shares today? I should say that it represents about 2 per cent. or 2½ per cent. Yet that produces a feeling of horror on the Government benches.

What utter, complete, absurd rot—just because of the prejudice of the Tory Party against giving wider power of investment to State authorities in dealing with public money, which should be invested in a reasonable way, and not in such a way as to destroy one-third of the value of the National Insurance Funds since they were contributed.

Mr. Mitchison

I got the answer I expected—sheer prejudice and nothing else whatever. The first point was that is was not in the Bill and a new Bill would be required. At the same time the hon. Gentleman admitted that in the Bill as originally put forward it would have been possible to do what we are asking should be done now, or at any rate half of it, by Treasury Order instead of by Statute.

Next, we were told it is impossible to do this with public bodies, but the hon. Gentleman conveniently forgot the Duchy of Lancaster, which is provided with statutory powers already and whose statutory powers are being altered by this very Bill. He also forgot, although he had not been able to find an instance, that he put in a paragraph to insert another category of people exactly corresponding to those he said ought not to be in the Bill. Then we came to the real meat of the matter. This would mean Government control. Dreadful Socialists might do something as bad as could be done with the Anglo-Iranian Oil Company, in which the Government hold more than 50 per cent. of the shares and appoint directors.

I was glad to have the support of the hon. Member for Belfast, North (Mr. Stratton Mills) in saying that we should not deny to people in the position of public trustees what was given for a very similar purpose to pensions funds and the investing of money for a very similar purpose. That is all we are asking for. Of course, in the eyes of hon. Members opposite it is perfectly all right for life insurance companies to get 51 per cent. of the shareholding of some company or another. They are responsible to no one, but what is dead wrong is that people answerable to Parliament and the voters—in short all the community—should have these same powers.

It is apparently right for those responsible to no one, the life insurance company or directors of a private pension fund, to have these powers, but what is reprehensible and too wicked to imagine is that the representatives of the public should have any power to do anything of this sort. If we want to look for ideological prejudice, in this very short debate today we have it stark and so clear.

Hon. and right hon. Members opposite, as my hon. Friend the Member for Bethnal Green (Mr. Holman) pointed out, prefer that more than £300 million of the pounds of the employers and the pennies of the workers should be

Amendment made: In page 6, line 31, leave out from "enactment" to end of line 32 and insert: contained in a local or private Act."—[Mr. Barber.]

lost out of the National Insurance Funds than that there should be any possibility of investing in the way in which a private life insurance company or pension fund does. Can one carry prejudice any further than that?

Mr. Barber

I shall reply very briefly to the hon. and learned Member. The sole question is whether a major body such as the National Debt Commissioners should be dealt with, as it were, in passing in a Bill of this kind, or dealt with specifically. I can sum up our approach by saying that it is not one of prejudice, but one of constitutional propriety.

Question put, That those words be there inserted in the Bill: —

The House divided: Ayes 25, Noes 73.

Division No. 246.] AYES [2.44 p.m.
Bowden, Herbert w. (Lelcs, S.W.) Irvine, A. J. (Edge Hill) Mitchison, G. R.
Brockway, A. Fanner Janner, Sir Barnett Noel-Baker, Rt. Hn. Philip (Derby, S.)
Butler, Herbert (Hackney, C.) Johnson, Carol (Lewieham, S.) Pannell, Charles (Leeds, W.)
Diamond, John Jones, Rt. Hn. A. Creech (Wakefield) Prentice, R. E.
Fletcher, Eric Key, Rt. Hon. C. W. Reld, William
Hale, Leslie (Oldham, W.) King, Dr. Horace Stross, Dr. Barnett (Stoke-on-Trent, C.)
Hall, Rt. Hn. Glenvil (Colne Valley) Lipton, Marcus Weitzman, David
Holman, Percy MacColl, James
Hunter, A. E. Marquand, Rt. Hon. H. A. TELLERS FOR THE AYES:
Mr. Redhead and Mr. Sydney Irving.
Aitken, w. T. Harvey, John (Walthamstow, E.) Pym, Francis
Allason, James Hastings, Stephen Redmayne, Rt. Hon. Martin
Atkins, Humphrey Hay, John Renton, David
Balnlel, Lord Heald, Rt. Hon. Sir Lionel Ridley, Hon. Nicholas
Barber, Anthony Hill, J. E. B. (S. Norfolk) Rldsdale, Julian
Bennett, F. M. (Torquay) Holland, Philip Roberts, Sir Peter (Heeley)
Biggs, Davison, John Hopkins, Alan Roots, William
Bishop, F. P. Homsby-Smith, Rt. Hon. Patricia Russell Ronald
Black, Sir Cyril James, David Simon, Rt. Hon. Sir Jocelyn
Boyle, Sir Edward Johnson, Eric (Blackley) Smith, Dudley (Br' ntf' rd & Chiswick)
Braine, Bernard Johnson Smith, Geoffrey Studholme, Sir Henry
Buck, Antony Langford-Holt, J. Sumner, Donald (Orpington)
Cary, Sir Robert Lewis, Kenneth (Rutland) Tapsell, Peter
Cordeaux, Lt.-Col. J. K. Litchfield, Capt. John Thomas, Leslie (Canterbury)
Corfleld, F. V. Longden, Gilbert Thompson, Richard (Croydon, S.)
Costain, A. P. Loveys, Walter H. Turner, Colin
Cunningham, Knox Lucas-Tooth, Sir Hugh Wakefield, Edward (Derbyshire, w.)
d' Avigdor-Goldsmid, Sir Henry McMaster, Stanley R- Ward, Dame Irene
Doughty, Charles Macpherson, Niall (Dumfries) Wise, A. R.
Drayson, G. B. Maddan, Martin Wolrige-Gordon, Patrick
Fisher, Nigel, Mawby, Ray Worsley, Marcus
Gammans, Lady Mills, Stratton
Gardner, Edward Page, Graham (Crosby) TELLERS FOR THE NOES:
Grant, Rt. Hon. William Pitt, Miss Edith Mr. Chichester-Clark and
Gresham Cooke, R. Pott, Percivall Mr. F. Pearson.
Grimston, Sir Robert Prior-Palmer, Brig. Sir Otho