PROTECTION OF DEPOSITORS BILL

HC Deb 04 December 1962 vol 668 cc1149-229

Order for Second Reading read.

3.48 p.m.

The President of the Board of Trade (Mr. F. J. Erroll)

I beg to move, That the Bill be now read a Second time.

Recently, I introduced a Bill for the protection of the consumer in the field of weights and measures. Today, I want to speak about another Bill which also has as its objective the protection of the public—in this case, the person who, in response to an advertisement, has deposited same of his savings with a company about which he may know little.

Perhaps this advertisement has been part of an intensive campaign attracting many members of the public with the offer of a particularly high rate of interest. The company may run into difficulties and in the end the depositors may lose their money. All this can happen without the depositor realising that anything is amiss. That is a state of affairs which the Government intend to remedy within the limits of legislation.

I am not, of course, referring to the well-established and trustworthy channels for public saving. I am not referring, for example, to the banks—that is, banks recognised under the Companies Act—to trustee savings banks, to local authorities, nor to building societies and industrial and provident societies. All these bodies are excluded from the Bill.

I am referring to other organisations which invite deposits from the public and use the money to finance hire-purchase and similar credit trading operations or to finance property management and development. Many companies do this which are well organised and which subject themselves to strict controls as to their liquidity and reserves. The Bill will bring no serious inconveniences to such companies, but there is always the chance of a company beginning its career with glowing promises and ending in disaster.

Under the Companies Act, 1948, certain necessary information is given in a prospectus before the public may be invited to subscribe to shares or debentures; but this does not apply to invitations to deposit of the kind to which I have already referred. Under the Companies Act, also, all public companies are already under an obligation to file their accounts, which are available for inspection by the public for a very small fee at the office of the Registrar of Companies. But these accounts do not have to show all the information which is necessary if one is to form a view of the reliability of a company engaged, for example, in financing hire purchase or property development. Moreover, those accounts can at present, without any breach of the law, be out of date.

Finally, there are some companies which are exempt private companies. This means that they do not have to file any accounts at all. It is obviously wrong that the public should be induced to part with their money with no accounting as to what is being done with it. This Bill, therefore, sets out to remedy these deficiencies.

No legislation can stop companies running into difficulties, nor is it for the Board of Trade to prescribe that a particular form of commercial operation is risky and unsound, or, on the other hand, bold and enterprising and likely to be successful. What the Government must do is to ensure that the information which a depositor ought to have is available, and available early enough to be of use in assessing the prospects or progress of a company. That is what the Bill sets out to do.

I recognise that financial accounts may not mean very much to some of the less experienced members of the public who may be attracted by high-sounding advertisements. But here the financial editors, both of the more serious and of the more popular Press, can render a great service, as, indeed, they already do on the often inadequate information which at present is all that is required by law from deposit-seeking companies. When the Bill is passed they will be able to examine and comment on the more detailed information which will be available, and their readers will be better able to form a view for themselves as to whether they should entrust their money to a particular company or, having entrusted it to a company, to leave it there.

I have mentioned building societies. Here, there has been a long-standing tradition of close control by the Government in the person of the Registrar of Friendly Societies. This control has been possible because building societies operate within a circumscribed and traditional field. But the companies to which the Bill is directed cover a multifarious field of activity, and the sort of control operated for building societies would be quite inappropriate and extremely difficult to establish in this much wider field. A restriction which might be appropriate for one company operating in a particular field would be quite irrelevant in the case of a company doing something entirely different.

I have given considerable thought to the shape which the Bill ought to take. I am sure that the sensible answer lies in greater and more frequent publicity on lines prescribed by regulations submitted by the Government to the House; provisions to stop misleading advertising; and power, as I shall show later, for the Board of Trade, not to control the operations of these companies but to intervene, if necessary, in certain prescribed circumstances.

I should perhaps mention something else to which the Bill is not intended to apply. Under the wide power of exemption provided in the Bill, it is proposed to exclude advertisements for deposits put out in connection with employee thrift and savings schemes—I am sure that hon. Members would agree with this—or in connection with purchases from departmental stores, or for deposits with clubs or societies, or in connection with church funds, for purposes other than business.

Sir James Duncan (South Angus)

My right hon. Friend has been talking about hire purchase and property development. Does that include apple trees and sows, and things like that?

Mr. Erroll

The Bill will cover schemes of the sort that my hon. Friend has described. I will refer to that matter later.

With the agreement of the House, I propose to explain briefly the contents of the Bill. Starting with Clause 1, the Prevention of Fraud (Investments) Act makes it an offence to induce persons to acquire securities, such as shares and debentures, if the inducement is fraudulent or reckless. Clause 1 extends this provision to the soliciting of deposits by all kinds of persons, and, as the House will know, companies, partnerships, societies and individuals are all persons within the meaning of the Act.

Clauses 2 and 3 regulate advertisements. The procedure adopted is to establish a general prohibition on advertising and then to except advertisements put out by banks and the other bodies to which I have referred. They will be able to continue to advertise as hitherto. The Bill permits other companies to advertise provided they have complied with the new requirements about filing accounts. The general objective of the Clauses about advertisements is to ensure that advertisements are not misleading—for example, if only partial information is given, such as the company's assets without a statement of liabilities, or if the authorised capital is stated without the paid-up capital being indicated. These are matters which we would not permit in advertising.

It will be unlawful for advertisements to be put out by individuals or unincorporated societies unless the Board of Trade give permission. This is because it is not possible to prescribe the sort of accounts which such persons would have to keep. It therefore follows that it would not be right to permit advertisements by such persons, except, as I have said, with Board of Trade permission.

Turning to Clause 4—

Mr. G. R. Mitchison (Kettering)

Before the right hon. Gentleman deals with Clause 4, could he say in what circumstances the Board of Trade would expect to give permission?

Mr. Erroll

Only when the Board of Trade is wholly satisfied as to the objectives of the persons or the partnership. In general, this provision will be tightly administered.

Clause 4 provides that a private cornpany may invite deposits but only provided it abandons some of the privileges of the private company, and particularly provided it files its accounts. This is an important feature of the Bill because it means that private companies can remain private but that when they seek deposits in this way they have to shed some of the privileges which appertain to a private company.

Clauses 5 to 12 are somewhat complicated. They contain what I might describe as the accounting provisions of the Bill. No company may advertise for deposits unless it has filed the prescribed accounts and, so long as it does advertise, it must continue to file accounts. The accounts must consist of an audited profit and loss account and an audited balance sheet. In general, they must be delivered within three months of the balance sheet date, so they must be up-to-date. In addition to these audited accounts, there must be six-monthly interim accounts, but those will not have to be audited. These interim accounts will have the advantage of providing more frequent information for depositors without imposing on companies the obligation to call in their auditors twice a year.

If the Bill is accepted by the House, in due course I shall be submitting to the House draft regulations which will prescribe the information which must be given in these accounts additional to that which is already required under the Companies Act. The Economic Secretary to the Treasury, who is to wind up the debate, will be giving more details about the form of account which will be required.

I wish to direct the attention of the House particularly to Clause 11. This Clause makes provision for the furnishing of copies of the accounts to the depositors themselves. A depositor must be given a copy of the latest accounts on making his initial deposit and he can obtain all further accounts on request.

Clauses 15 to 19 deal with the powers of the Board of Trade to ask for papers and documents and to petition for the winding up of a company. This is a development of what the Board of Trade has been able to do in the past. Winding up may prove to be the right recourse when a company is unable to pay its depositors, or can do so only by obtaining additional deposits, or by defaulting on its other obligations, or if its assets are less than its liabilities, or if it fails to deliver or file the prescribed accounts.

This is a wider power than the Board of Trade possesses under the Companies Act and the provisions in Clause 17 enable the Board to require the production of documents. That, also, is an improvement on what we are able to do at present. It makes it possible—this is an important point—for the Board of Trade to make inquiries without the inhibiting effects of the publicity attendant upon the appointment of an inspector. Such publicity can do harm to a company if, in the event, it is shown to have been in no difficulty.

The Bill deals with one other matter, the point which was made by the intervention of my hon. Friend the Member for South Angus (Sir J. Duncan). During the last two or three years a number of schemes have been put forward, and some have come into operation, which invite persons to become owners of livestock which is managed for them by others. Some of these schemes have failed and have caused distress to those who have put money into them. They are the kind of scheme which the Prevention of Fraud (Investments) Act, 1939, was intended to stop. The Bill extends the operation of that Act to cover these schemes.

The Bill, however, does not cover what I might describe as "casino" enterprises, a matter in which the right hon. Member for Battersea, North (Mr. Jay) has been quite rightly taking an interest. The reason why the Bill does not cover those schemes is that there is no suggestion that casino schemes represent serious investment. On the face of it, they are quite clearly farms of gambling. Indeed, the very name "casino" ought to be sufficient warning to people who participate in them. The criminal law already provides remedies if there is fraud in such cases, but this Bill does not apply to them.

Mr. Douglas Jay (Battersea, North)

If the fraud is sufficiently outrageous, will not this mean that it will go scot-free under the Bill?

Mr. Erroll

If the fraud is sufficiently outrageous I would expect other action to be taken by way of prosecution. It is not a proper subject for the Bill.

I wish to commend the Bill—

Mr. Mitchison

May I intervene before the right hon. Gentleman leaves the point about casino companies? These companies have been commented on a good deal in the Press. In one article I read of a company which offered a chance to participate in the enormous profits made daily by developers of London property. It offered only 39 per cent. per annum and did not quite rise to the full flights of fancy attained by the casino enterprises, but the same arguments apply here.

Mr. Erroll

If that case is the same as one I have seen—and from the figures of interest rate which the hon. and learned Member has quoted I think that it must be the same scheme—it would be caught by the Bill under the general prohibition of persons and partnerships, because that scheme, if it is the one I have in mind, was a partnership.

I commend the Bill to the House. I am sure that the House will wish to give it a speedy passage and so help towards the further strengthening of the safeguards for the public.

4.6 p.m.

Mr. G. R. Mitchison (Kettering)

This Bill is very belated. Over two and a half years ago one of the right hon. Gentleman's hon. Friends—the hon. Member for Torrington (Mr. P. Browne)—moved the Second Reading of a Bill for much the same purpose as the present one. It was in many ways less complicated, but otherwise it was rather like it.

In HANSARD for 18th March, 1960, the Economic Secretary is reported to have said: My hon. Friend the Member for Torrington, when he moved the Second Reading of the Bill, said that the need for overhaul is urgent, and I quite agree with him. I hope that the Government will be in a position within a very few months to announce their intentions to Parliament, and I think it is almost certain that the Government will conclude that legislation to deal with this matter should be introduced next Session. In another part of his speech the Economic Secretary said: Certainly, we shall press on with all possible speed. As reported in the following column, he said: this is not a matter which could be dealt with adequately by a Private Member's Bill."—[OFFICIAL REPORT, 18th March, 1960; Vol. 619, c. 1686–7.] I have always agreed with that view and no doubt the hon. Member concerned also expected the Government not to wait for two-and-a-half years before doing something which they themselves said was urgent and which they had undertaken to press on with at all possible speed. One does not know what happens when the Government are in no particular hurry—presumably, absolutely nothing. This is a bad case of delay. Most of these fraudulent offers, invitations to deposit, have occurred during the interval between what was then said and now.

The Economic Secretary to the Treasury (Mr. Edward du Cann)

indicated dissent.

Mr, Mitchison

I see the Economic Secretary shaking his head. He knows a great deal about this matter. May I correct myself by saying some, at any rate, of these fraudulent offers have occurred in that interval? That is where the Government delay has had its effect.

This is also an insufficient Bill. The particular insufficiency is that it relies all through on accounts and control of a financial kind. Those accounts will by no means always be intelligible or of any real use to the people whose deposits are solicited. Many of these cases will come from comparatively small concerns and they will be addressed to quite small people. They do not understand accounts. For that reason, in other similar matters—the right hon. Gentleman mentioned building societies—we have had to introduce other arrangements in order to secure the public. This Bill may be intended to secure the public, and I certainly accept the right hon. Gentleman's good intentions, but it will not do the job.

As so often happens under this Government, the Bill is half a loaf. They have been careful about adding the rest because they were afraid that that might disturb too many of their friends. This is a matter where the public is entitled to more protection. We shall not vote against the Bill because "half a loaf is better than no bread", but we shall do our best to add a bit more to the loaf when we deal with the Bill in Committee.

I can give the right hon. Gentleman no undertaking whatever about the speedy passage of the Bill through Committee, because we think that at present it is so inadequate that we must try to get a few more teeth put into it at that stage.

Those are fairly strong words, but we should look at the background. There is a real background to the Bill. The Bill does not touch banks. We are told that banks are defined in the Companies Act. So they are, but when we look at that definition we find that a bank is what the Board of Trade thinks ought to be treated for the purpose of a bank or a discount company, as the case may be. That is not much of a definition; it just leaves it to the Board of Trade. The Board of Trade is reputed to have a secret list—it has never been disclosed—of 100, 120 or 130 banking concerns. I do not know how many there are. I do not know what the Board of Trade calls a bank and what it treats as a bank. What does it think should be treated as a bank?

The other alternative is a discount company. A number of worthy, perfectly honest, people carry on business and call themselves industrial bankers. Are they banks or are they not?

Mr. Erroll

indicated dissent.

Mr. Mitchison

I see the right hon. Gentleman shaking his head, and I am not surprised, but these people took up the name and, when asked by the Ratcliffe Committee to explain it, their explanation, to say the least, was rather confused.

Some of the industrial bankers are called discount companies. One which advertised a short time ago and which, so far as I know, is perfectly reputable, is called the Campbell Discount Company. It was getting money from depositors and using it ultimately in hire-purchase transactions. I need not go through the detail of the matter. What is included? We must be told a little more than that all that is to be excluded is whatever the Board of Trade thinks ought to be excluded.

Mr. Erroll

I know that it is easy to appear flippant about the definition of a bank, but, in practice, the position of the Board of Trade's powers, as described by the hon. and learned Member, has worked very well, as the Jenkins Committee recognised. I should remind him that the Companies Act was passed in 1948, when the Labour Government were in power. Presumably, they thought it a good definition for a bank.

Mr. Mitchison

No doubt a whole lot of powers have been given to Tory Governments and Labour Governments, but it is not usual to refer to a definition and then to find that it is only what the Board of Trade says it is. As they are to be excluded, I hope that at some stage—preferably in the Bill itself —we shall have a definition of what a bank is. That would be useful. I know it is not easy to do that, but it can be done.

I turn to the history of the matter. One has to go into it. The banks used to get a very high proportion indeed of deposits. If we look at it in relation to the national income in the years immediately before the war, we find that they got about half the national income in the form of deposits. The President of the Board of Trade looks a trifle thoughtful about this. He will find most of the figures in the December issue of the Banker which, although somewhat delayed by the fog, has at last reached me. There was a note about it in The Times this morning. That proportion has gone down to about one-third.

The position is that the ordinary joint stock banks are losing deposits to other institutions and among the most important of those other institutions are the concerns engaged in financing hire purchase. They are one of the groups mentioned by the right hon. Gentleman. The other group mentioned by him was companies concerned with property development. I understand both these groups, but the right hon. Gentleman spoke vaguely of a number of other groups of which he gave no instance except the semi-fraudulent invitations to take a share in a cow or, for that matter, an orange orchard: that was an earlier version of it. We ought to be told during this debate what other institutions the right hon. Gentleman has in mind. I am not talking about definitions, or anything of that sort. I want to know, what is the real mischief supposed to be and by whom and in what circumstances it is being committed?

There have, of course, been fraudulent cases. What strikes me about them is the extraordinary things that people accept for the purpose of handing in deposits. In some of these casino enterprises, there are, apparently, turnovers of £¼ million or substantial figures of that nature. It surprises me that that should go on. I accept, however, what the right hon. Gentleman said, that most of the people who put in deposits want a gamble and that is their way of doing it. It is a curious way of doing it, looked at in that light, but I let that pass. There will certainly be other people who put up their money with the feeling that in this way, at least, they will get a high return.

Some of the propositions have been remarkable. One concern was to play casino games in accordance with a sound mathematical principle and it believed its system to be absolutely infallible. I seem to have heard those wards before quite often about people who gamble on an absolutely infallible system. I am surprised that a concern like that, offering 260 per cent. tax-free by way of interest, should get anybody to come in, whether anybody was a gambler or an investor. I simply cannot understand it. I can understand people having a bit of money on a horse at the races, or whatever it may be, an their own and one accepts it, but the idea of depositing money with somebody who will then gamble it for him an an absolutely infallible system out of which he will pay about two and a half times the original deposit every year is, to me, unbelievable. There it is, however, and it has worked.

Then there are the people who were offered a chance to participate in the enormous profits made daily by developers of London property. We have heard a lot about These properties in one way and another. No doubt, some large profits are being made. This may not be the moment to defend or to debate them, but they do not usually result in giving 39 per cent. interest in a year on money which is withdrawable at 28 days' notice. I will not go into details. Some of these things are too silly for words when one looks at them afterwards, but the astonishing thing is that they work.

The fact that they did so seems to me to show that the precautions in the Bill are not enough.

There are two Clauses in the Bill concerning fraud, Clauses 1 and 20. Clause 1 extends the provisions of the 1958 Act, which itself was a codifying Measure, from investments to deposits. It does not do much more. It is substantially the same thing. How it came about that all this was applied only to investments and not to deposits is probably a matter of history, because when the legislation originally went through deposits would be joint stock bank deposits and would not call for this type of attention and legislation. If anybody was putting up a fraudulent scheme, he would hitch it on to an investment offer rather than to a deposit offer.

Things have changed, however, and they have changed in the direction of reducing the rôle of the banks and increasing the rôle of the concerns engaged in hire purchase and property development finance. The amendment of the law which is contained in Clause 1 is the only instance in which the 1958 Act happened to get in a little bit about deposits. Generally speaking, it was an investment action. There it is, and I say no more about the fraudulent side of it.

The more serious matter is the insufficiency of provisions about accounts. These are the safeguards on which the Bill relies. I look at other similar legislation, similar in the sense that it is equally designed to protect the small depositor from concerns which have in their operations a distinct element of risk and which may "go bust", as the right hon. Gentleman said, without much warning.

In the great majority of cases, building societies are wholly reputable concerns, but there have been one or two exceptions. In addition, there has been another type of trouble in the building society movement: that is, where a concern—there was a case a few years ago—over-committed itself and did not have sufficient fluidity or liquidity to meet the calls that might reasonably be expected upon it.

What happened in that instance is, perhaps, significant. Financial editors no doubt have their uses, but in this case I am not so sure. One of the daily papers raised a considerable amount of criticism, some of it, perhaps, well founded, but otherwise not so well founded, and the building society had to be helped out of its difficulties. It emerged from them, everybody was paid and there was no element of fraud or anything of the sort.

The building societies now have to do one or two things to preserve their standing as building societies. Their standing, often referred to as trustee status, comes from Section 1 of the House Purchase and Housing Act, under which the Treasury has power to make regulations about what will entitle a building society to have its shares and deposits treated as investments under the 1961 Act and, further, to have advances from the Minister of Housing and Local Government to help the purchasers of certain types of house.

Those requirements are tolerably simple. They relate to the proportion of liquid assets to deposits and they are intended to preserve a thoroughly liquid state of affairs, sufficient for what is likely in that type of case. I see no reason why there should not be a similar provision in the present Bill, the more so because as regards the hire-purchase companies at least, their evidence before the Radcliffe Committee showed that some of them—the smaller ones—already had something of the sort in their rules.

I shall not go into the matter in detail, but it is obvious that something could be done. If there ought to be exceptions, they can be stated in the Bill. Offhand, however, I see no. reason why people who take deposits from the public should not keep their affairs sufficiently liquid to repay those deposits when called for. In the great majority of cases, those concerned recognise it themselves.

The trouble about the account process is that there are bound to be intervals between the account and the critical moment and that one of these concerns may get into difficulty very quickly. It is not unprecedented that they have been in difficulty. The House will remember that at the time of the Radcliffe Report, only one bank had any interest in these hire-purchase concerns. The evidence given by the hire-purchase concerns was that they did not expect any further developments. Now, how- ever, the position has changed very much. Eleven of the larger finance houses—concerns engaged in financing hire purchase—gave evidence and the great majority have been taken over, either wholly or a considerable interest in them, by the big banks.

At some period, I suppose, the bankers put their heads together and said, "We will not be able to stop these people getting quite a lot of deposits from the public and using them for hire purchase. They are invading our business to a certain extent and the best way to meet that invasion is to take an active financial interest in what they are doing." Those, I suppose, were their motives, but others may know more about it than I do. What I do know is that as this business has developed, so the banks have taken a considerable interest in it and from their point of view it is now very important.

A few years ago, the extent of the trouble in the finances of hire-purchase concerns was revealed in the losses to which the banks themselves alluded. The ultimate trouble was not so much a matter of investment or money in that form, but the real difficulty which some of them had had in competing with others without making rash transactions with some of the hire purchasers. That is the history, and in those circumstances there is everything to be said for a certain amount of enforced liquidity to ensure that they have a solvent status.

There is one other considerable omission in the Bill, and I refer again to the building society legislation. This was noticed by the Economist in its last number and it seems to me to be perfectly right. In certain circumstances, the Chief Registrar of Friendly Societies is entitled to stop a society from taking more deposits. There is no such provision in the Bill. I consider that there should be. No doubt, the power would have to be exercised by the Board of Trade, but something of the kind ought to be included.

I end with a rather short question that puzzles me a little. What is a deposit? It is clearly not simply money handed over the counter in one form or another. It must be, I assume, money which is placed with an institution and withdrawable at a certain amount of notice.

Mr. Erroll

If the hon. and learned Gentleman looks at Clause 25, he will see what "deposit" means.

Mr. Mitchison

I have seen the definitions. I am not sure they take me very much further. However, I see many hon. Members who are anxious to speak. I feel that I have said enough at this stage of the Bill. This is perhaps a Committee point. I will leave it at that for the moment.

The Bill is late. We did not get a word of apology from the right hon. Gentleman. I do not expect apologies from a Government Department which is only 2½ years late in doing something which it said at the time was urgent. The Bill is insufficient for the very short and simple reason that a good many of the people who ought to be protected by it have not enough understanding of accounts to make a critical examination. It is the final abnegation of the functions of Government when all the Board of Trade can say is, "We cannot do any more, but we hope that the financial editors will do it for us by explaining the accounts to their readers". The Government should do a little better than that.

There are certain obvious things which I believe could be done with principal application to the main groups of deposit-receiving concerns affected—that is to say, the hire purchase and the property developing people. It may very well be that there are other cases which the right hon. Gentleman might take power to except and might wish to except. He has not given us any indication of them except the one—I repeat —semi-fraudulent case of shares in a cow or in an orange grove or whatever it was, about which there has been quite a history. Therefore, I regard the whole Bill as half a loaf. As such I accept it. I hope that we on this side of the House will be able to improve it later. For the moment we shall not divide against it.

4.32 p.m.

Sir Henry d'Avigdor-Goldsmid (Walsall, South)

The hon. and learned Member for Kettering (Mr. Mitchison) has given what I may describe as a tepid reception to this Measure, but I am very glad to see sitting not too far from him the hon. Member for Gloucester (Mr. Diamond), who, I hope, from his new-found eminence, will join my hon. Friend the Economic Secretary in putting some guts into the Bill. The trouble about the Bill is that it is an academic one. It needs hon. Members with some experience of the dust of the market place as well as the caution of Government Departments to make it effective. In this connection, I welcome my hon. Friend the Economic Secretary, because I am certain that he has a most valuable contribution to make to the Measure.

What we have to deal with demands financial sophistication. My right hon. Friend the President of the Board of Trade has accepted that it is useless to hope to protect by legislation people who are willing to invest money on the promise of a return of 40 per cent. per annum or more. Such people are incurable by legislation. They can learn only from their mistakes. We should be out of our place in the House if we tried to frame legislation which would protect people from that form of extravagant optimism. If people are extravagantly optimistic, let them have their gambles, but do not let us as a legislature interfere with them.

My particular interest in the Bill arises from the fact that a large number of my constituents lost substantial sums of money some years ago in a fraud of this sort. If the House will bear with me for a short time, I should like to give them the details, because I think that there is a lesson to be learned. This was the case of a local solicitor's clerk, who set up in busines on his own, borrowed £40,000 from a number of friends, did a little hire-purchase business, and lost all his capital in a year. However, he had some optimistic accountants who accepted his own figures on the value of the outstanding debts, and, as a result, he was able to declare a dividend.

This process was continued the next year with a new set of accountants. He changed his accountants every year and by a bit of judicious usury he was able to pay to his friends who had invested money a large return on their investment. He did not regain the capital that his company had lost. He had a very respectable name. He was working not in any big centre of population, but on a provincial basis. All his shareholders were very pleased with him. Every year he changed his accountants, so the grisly facts never really came to light.

They did not come to light under his management. What happened? An enterprising gentleman from London saw this delightful house with a good name. He bought the shares in it for nothing because they were worth nothing. He bought the controlling shares which this man had for very little. He bought them for a sum of money which he borrowed from the company, so no cash changed hands. He took control of the company. He advertised it very widely all over the country and received a large amount of deposits on which he was advertising that he would pay an interest rate of about 9 per cent. He did not go to the excesses of 40 per cent. He advertised a rate of interest higher than that obtainable at conventional sources, but not so high as to be extreme.

Within the course of the year he got together about £200,000 of deposits, all of which he pocketed. Then, having got the original owner of the company in his employ, he sold him back his shares in the company, which he had never paid for, at a price which added up to £200,000. He pocketed £200,000. The depositors had to whistle for their money.

Would this Bill have caught him? I do not think that it would, because the obligation in the Bill is to produce accounts at certain intervals. The fact about these accounts is that my right hon. Friend the President of the Board of Trade is treating the accountancy profession with almost too much respect. These people are most honourable practitioners in a difficult art, but they have not the gift of divination. They do not have second sight. For a large number of the figures which they produce they rely on directors' valuations or on such internal evidence as they have been able to obtain, but they cannot conceivably verify that a very large number of debts are in fact good debts. If the directors describe them as good debts, they accept them as good debts. In a number of cases this is a very real point.

I do not want my right hon. Friend to think that I am just making a joke about this. With the best will in the world, auditors cannot if they are new to a business produce more than an indication of what is going on. It is only when they are, as it were, tied to the business and have seen it working for a number of years that they can form a conclusion and insist on notes on the balance sheet to that effect, thus drawing the attention of a very alert reader, but not necessarily the attention of the ordinary man in the street.

In this connection the statement that the financial editors will risk libel actions by making comments on the financial standing of a company which go beyond anything which is said in the accounts is not only illusory, but is a very dangerous illusion. Quite apart from any question of being influenced by advertising—the financial Press now is not at all influenced by the advertising it receives—the invitation to a financial editor to stick his neck out in this way is one which his proprietor will suggest he refuses. I do not think that there is any real safeguard to the public in the actions or otherwise of the financial Press.

What is the basis of this problem? I do not think that it is quite as difficult as the hon. and learned Gentleman made out. First, there is no real difficulty about banks. Banks are the only institutions which are recognised as such by the Commissioners of Inland Revenue. They are a much harder group of people to convince than any other I know of. This is a very reasonable basis. As my right hon. Friend said, it has worked very well. There are a limited number of banks. They know who each other are and any bank will tell one what is a bank and what is not a bank. The industrial bankers as such are also well known. They are in an association which is governed by certain rules. These people can also be verified.

The people the Bill seeks to catch are those who seek deposits for which they offer more attractive rates than either the banks or the established hire-purchase houses. How can they afford to offer these higher rates? It can be only on the basis of their own need, or, secondly, the fact that they are doing business of a more speculative nature than that taken on by the other hire-purchase houses. There is nothing wrong in itself in their doing that, but if people do that they should let their depositors know what they are doing. This is one of the first things that should go into the Bill. If people seek deposits, they should say what they are for.

Arising from what I have previously said, the Bill should also contain a provision that, if a house changes hands, this should be also made known. There is nothing improper about that, but in soliciting deposits it is not wrong to say, "Under entirely new management". People may either be attracted by that or repelled. I am usually repelled if people say, "Under entirely new management".

I apologise for making what seem to be Committee points, but it is always difficult to approach a Measure of this sort except on that basis. I see present in the House a number of hon. Members with experience of this matter, and I hope that we shall between us persuade those chiefly concerned that if the Bill is to be effeotive it must deal with some of these points which have been made.

In effect, the people who make deposits are not the most sophisticated form of investors. They are largely financially ignorant. They have got loyalty. They feel—I noticed this particularly amongst my friends in my constituency—that having made a deposit in an institution they want to go on supporting that institution. They have a certain pride in it. The case I am thinking of, which hit so many of my constituents, was a case where they felt certain local pride in the organisation. It was advertising all over the place. They were impressed by it. This is not improper, nor is it a bad thing.

We should bear in mind that people who make the deposits are not very sophisticated. They are the most attractive form of depositors or investors to the promoter, because their deposits probably represent their savings and, as long as they are safe, they do not wish to disturb them. Therefore, the people who cater for these deposits must be subject to a real discipline.

I wish that I could think of any discipline stronger than the accounting discipline, but the fact remains that I do not think that balance-sheets should be published until the accountants can give an absolutely unreserved certificate for them. That is a problem, but we must face it. We must also face the fact that this money is sought for businesses of a semi-speculative nature, and if we are seeking to protect the public we must bring this out. We must not just pretend to do it, and so produce a form of legislation which may simply invite the sort of fraud I have already discussed, and which this Bill, in its present form, does not catch.

4.45 p.m.

Mr. Harold Lever (Manchester, Cheetham)

I heartily endorse the closing words, and much else, spoken by the hon. Baronet the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), because if we pass a Bill which, while purporting to protect depositors does not, in fact, do so, there is clearly a real danger of the future situation being worse than the present one. At the moment, depositors have the satisfaction of knowing that our law on the soliciting of deposits is probably the most lax of any developed industrial country. After the encomiums from the Government Front Bench, the depositor will have the added disadvantage that he will be liable to believe that he is being protected when, assuredly, this Bill does very little to achieve that end.

The heart of the matter was exposed by the hon. Baronet when he said that all the Bill does is to attempt to impose a discipline by accounts. The discipline of accounts as provided in this Measure is inevitably inadequate, but the hon. Member was unable to think of any other method that would help to achieve the object of adequately disciplining those seeking the public's money. That is the heart of the matter, and I respectfully submit—

Mr. F. M. Bennett (Torquay)

The hon. Gentleman would probably agree, on reflection, that there is another discipline in the Bill—control of the form of advertisement, which is one of the most misleading aspects of the whole business; people mis-describing both their business and their capacity. The Bill provides protection from that.

Mr. Lever

I see that the President of the Board of Trade nods his agreement with that statement, but all the Bill does there is to apply the discipline of accounts of advertisements. It does not really apply any kind of discipline to the way in which a business is carried on by the people who are soliciting the public's money. It merely ensures that those advertising shall keep proper accounts, and make them available to the public—

Mr. F. M. Bennett

I do not agree, and I do not want the hon. Member to accept my silence as consent. I think that if he studies the Bill he will find it much more capacious than that.

Mr. Lever

I have studied the Bill to the maximum of my capacity, and I agree that all it does is to provide an accounting discipline.

The difficulty is to find an alternative discipline, and I submit that the only one available is that provided by the not un-analogous discipline in the Building Societies Act or the Friendly Societies Act, where a registrar is in charge of groups of companies soliciting deposits. That would need a public official to service or discipline all the persons seeking deposits from the public, and nothing else will materially add to the safety of the depositing public.

Even though we will all do our best to improve the Bill in some manner, I think that it is quite impossible, either by Statute or by regulations—even coming from so experienced a body as the companies department of the Board of Trade—adequately to discipline and watch over the activities of companies seeking to borrow money from the public unless we appoint a registrar who will undertake duties similar to those of the registrar who is recognised to be necessary to supervise the activities, and more particularly the borrowing activities, of building societies and friendly societies.

If it is objected that we are proliferating controls, my answer must be that if it is thought necessary and desirable to impose a discipline on friendly societies and on building societies in that way—in my submission, the only effective way—surely we must recognise that the activities of the deposit-soliciting organisations are at least as important as the activities of the friendly societies and the building societies.

As my hon. and learned Friend the Member for Kettering (Mr. Mitchison) pointed out, that was not always so, but, as the article in the Banker pointed out, the activities of these bodies have now become, as it were, parallel to the bank- ing system, and are quite worthy of a substantial department to supervise them.

If the House thinks that it will noticeably protect the depositing public by the Bill, I must, with respect, submit that it is mistaken; and if hon. Members will look at the tail end of the Bill they will see why they are mistaken. Unfortunately, it is not in the nature of the things to get such protection as this on the cheap, but this Measure states that the estimated cost will not be more than £50,000 a year. We cannot adequately supervise the activities of hundreds, perhaps thousands, of companies, soliciting deposits running into hundreds of millions of pounds a year, at a cost of £50,000 a year. It is not fair to the Board of Trade, or to its companies department, to saddle it with such a job with inadequate legislative power.

It is suggested that we might put in things like liquidity ratios, but it is quite beyond the power of the House, Or of the Board of Trade or its companies department, to specify, either by Statute or regulation, what the liquidity ratios of borrowing companies should be. It would be an intolerable burden to throw on them, and I would rather see nothing in the Bill than throw that burden on the Board of Trade. It would be necessary to decide in each class of company the proper liquidity ratio. If I borrow money on deposit and am due to repay it at seven days' notice, one liquidity ratio is proper.

If I borrow money the greater part of which is not repayable for eighteen months or two years, another liquidity ratio is proper. It is quite unfair to ask the Board of Trade to lay down, or the soliciting companies to obey, a complex system of rules on liquidity that we in this House think appropriate to businesses of which we know little or nothing.

I feel that the hon. Baronet, with all his great experience of City matters, is mistaken in thinking that much would be achieved by attempting to specify the purpose for which the soliciting companies wanted the deposits. The arts and poetry of modern public relations and advertisement are quite adequate to cover almost every activity in a glow of almost religious and poetic colour when deposits are being sought. We are all familiar with the advertisements now being put our regularly—most of them in the Left-wing publications, strangely enough—on behalf of multi-millionaire organisations to persuade us that the great mainspring of their activities throughout the centuries has been to better the lot of their fellow men, with but a slight accretion of profit to themselves. We could not legislate in regard to such information, nor would it be of much use if we got it.

The fundamental failure of this legislation is also shown by the very words used by the President of the Board of Trade. He says that the people who solicit deposits will now have to provide plenty of material for the financial Press to comment on. He says that the financial Press will have the balance sheets and profit and loss accounts. Here I heartily endorse what the hon. Member for Walsall, South has just said about the value of those balance sheets and profit and loss accounts—incidentally, usually the most significant in many cases. The right hon. Gentleman argues that until this energetic Government came along, with power to protect the depositor, the financial Press, though courageous and alert, was not able to comment on the dubious companies because there were no balance sheet figures or because the companies were exempt as private companies.

All that is changed. The financial Press will have the figures to comment on, but I would point out that the financial Press has freely commented in the past on the absence of any balance sheet at all in those soliciting companies. If comment on that fact has not been effective in protecting the public, how does the right hon. Gentleman think that comment on figures that are provided will help to deter the "sucker" wending his weary way to the insolvent, or about-to-be-insolvent, solicitor of deposits? Time and time again in the past, leading financial newspapers have written feature articles naming companies that were soliciting deposits but had never provided a balance sheet. In future, those newspapers will be able to say that the companies have provided balance sheets, and will comment on the detailed figures in the hope that the comment will deter the public from investing.

It seems to me that the additional protection is illusory, and that the most the right hon. Gentleman can claim to be doing is putting the would-be fraud to a little trouble. In the past, the would-be fraud did not have to bother much, but he will now have to be a little more energetic. What the President of the Board of Trade is doing—perhaps my hon. Friend the Member for Gloucester (Mr. Diamond) will be grateful to him for it—is to put a certain amount of business inevitably in the way of the accountancy profession. But he is not doing anything much for the protection of the public.

I therefore urge the Government to try to widen the cover provided, not to seek to legislate for the impossible, but rather to set up an organisation similar to the well-tried organisations that have adequately disciplined other sections of the financial community which seeks deposits from the uninformed members of the public.

In my submission, it is quite beside the point to lecture people about gambling. Let me say at once that I am neither a Liberal, wishing to leave the speculator to his own devices and the sheep to the shearers, nor am I the bossy, governessy type of person who would go to the other extreme, but I do not think that the Government are entitled to ignore the naivety of many of our fellow citizens. The Government should not deny such protection as can be afforded without seriously inconveniencing in any unreasonable way the lawful activities of other people. It is not enough for the Government to say that they do not care if London is flooded with patently fraudulent invitations to deposit, or that they are not bothered if our citizens are being robbed of large amounts of money by these advertisements.

We expect the Government to provide some kind of restriction on the way these frauds operate. It is not good for a society that we should turn a blind eye to those of our weaker or more naive citizens who are victims on a large scale of such advertisements. I beg the President of the Board of Trade to think again about this. If he is bringing in a Bill to protect the public, he ought to see that the public is protected from frauds which, as we all know, are going on on a wide scale and about which the Bill does not even purport to do anything on the fallacious ground that the gentlemen whose money is being rolled from them are people who are engaged in some sort of gambling activity, or think that they are.

If the Government curb the fraudulent casino syndicate, they might start thinking intelligently and comprehensively about curbing other types of fraud which have nothing to do with gambling. Although the pig schemes or orange grove schemes are affected, if not curbed, by the Bill, the Bill does not in the least affect soliciting deposits for shares or debentures, and when the Bill is passed it will not be difficult to re-enact nearly all the frauds perpetrated on the public in the past by this sort of scheme simply by a slight mutation of the way in which the public's money is drawn from it. That is not good enough and something better should be provided. If the Government are not prepared to make a comprehensive scheme, at least they Should provide something more thorough than this.

Not unnaturally, the Bill is dependent on delegated legislation. I agree that if this is to be the approach, to some extent the Government must rely on delegated legislation. But it is incredible that if they are to rely on it, we should not have had some regulations before us to show what the Government intend. It is obvious what has happened. My hon. and learned Friend the Member for Kettering (Mr. Mitchison) said that it was two and a half years ago that the protection of investors was promised by the Government, but I believe that he is wrong. My recollection is that it was six years ago that in a speech from the Throne the Government promised protection for investors. To echo words used in a different context, one could hardly call this comparatively little Bill adequate fulfilment of that promise.

The Government have been unfair to the President of the Board of Trade, from whom they obviously demanded the Bill at very short notice. That is made clear by the fact that the right hon. Gentleman made no sort of attempt to outline any regulations. No doubt the hard-worked officials, who will have had this unfair task thrown on them, will have something for late this evening —when it is too late for us to criticise—which the Economic Secretary will be able to tell us in his winding-up speech, but the right time for these regulations to have been indicated to the House would have been in the opening speech. Presumably, the new security regulations do not, on security grounds, keep from the President of the Board of Trade the regulations which are to be unfolded this evening, presumably in confidence, in the winding-up speech of the junior Minister.

In those circumstances, I cannot vote against the Bill, for it does not do any harm, except that it might mislead the public to believe that it is being protected; but it does not do much good. I do not think that it makes much contribution to the fulfilment of the Government's long overdue promise and the long overdue need for a Bill to provide protection to the investing public against fraud and irresponsible borrowing and soliciting for investment.

5.4 p.m.

Mr. F. M. Bennett (Torquay)

So far, the only valid charge which I have heard levelled against my right hon. Friend' the President of the Board of Trade and his colleagues has been that of unnecessary delay in bringing forward the Bill. The hon. Member for Manchester, Cheetham (Mr. H. Lever) has been both unfair and inaccurate. He was unfair to my right hon. Friend, because my right hon. Friend did not seek to make any excuses for those who were advertising for people to gamble away their money on obviously futile and fraudulent schemes. What he said—and I trust that he will agree with my interpretation—was that the Bill was not the method to deal with this problem, but dealt only with depositors for investments.

The hon. Member himself said that in the Gracious Speech the Government had said that they would aim to protect the solicitation of deposits for investments, so he cannot have it both ways. If we are talking about investments, then we are not talking about gambling, unless the hon. Member believes that casinos, and so on, are investments and not gambling. The Government's proposals do not and could not have been made to cover fraudulent advertisements for gambling. I hope the hon. Member will now re-read the Bill—I interrupted him twice and he told me that he had read it carefully—and will look again at Clause 3 (1, a), which says: The Board of Trade may by statutory instrument make regulations— (a) for prescribing the matters which must or must not be included in any advertisement which is to qualify for exemption under subsection (3) of section 2 and generally for regulating the form of such advertisements.

Mr. H. Lever

I do not know why I should have to plead guilty to inaccuracy or unfairness or to paying inadequate attention to the Bill. I said that the only discipline to be applied to these proposed borrowers was the discipline of accounts, and that is so even under Clause 3, so far as we now know.

Mr. Bennett

If the hon. Member believes that those words deal with accountancy, he and I must continue to differ. They say exactly what the President of the Board of Trade said—that he was taking powers to regulate the form of such advertisements.

The hon. and learned Member for Kettering (Mr. Mitchison) began by criticising the unnecessary delay. I must admit that he may have heard a few muted cheers from this side of the House, because that criticism is fully justified. There is no excuse at all for having waited this long to produce the Bill. A number of my hon. Friends and I have been attempting by Private Members' Bills, by letters, by Questions and by other means within the purview of a Member of Parliament to try to get the matter dealt with much more urgently.

As the hon. and learned Member has criticised the Government for delay, I should add that my hon. Friends and I have not had much support from hon. Members opposite in getting this Bill brought forward. If the hon. and learned Member is to criticise my right hon. Friend for not paying a tribute to those of us who have been trying to get the Bill introduced, I must say that he himself was markedly lagging in not paying us a tribute for being the hon. Members responsible all along for prodding the Government in this direction.

It is only at this late stage that the hon. and learned Gentleman has jumped up and started criticising the Government for delay. I wish that we could have had his help some time ago.

Mr. J. T. Price (Westhoughton)

As that claim might go on the record unchallenged, may I challenge it by saying that hon. Members opposite are not the only Members who have been pressing the Government? I have been doing so myself—I can speak only for myself—and I will have something to say later about that aspect of the matter.

Mr. Bennett

The hon. Member may be an exception, but I think that the record will show that what I have said is largely correct. I am perfectly willing to take the hon. Member through all the steps taken by my hon. Friend the Member for Torrington (Mr. P. Browne) and others to introduce a Bill of this kind.

Mr. Mitchison

We were very kindly furnished by the Library with a statement of what had been done about this Bill, and the only Question about it was one by the hon. Member for Torrington (Mr. P. Browne), which appeared one day before the Bill was introduced. No doubt there have been other Questions, but I have found them a little difficult to trace. However, I expect that quite a lot was done, and I should be sorry to interfere too much with the hon. Member for Torquay (Mr. F. M. Bennett) patting himself on the back.

Mr. Bennett

The hon. and learned Member was patting his colleagues on the back rather more than himself in this respect, but, apart from what the Library may have provided for him, if he takes the trouble to look back he will find several Questions, apart from a Private Member's Bill introduced by my hon. Friend the Member for Torrington some time ago and which would have come forward again if the Government had not decided to produce their own Bill. I am prepared to supply the hon. and learned Member with a fuller list than the Library has given him to show him the steps which led to the introduction of the Bill. My purpose in bringing this out is to show that my right hon. Friend has received some unfair criticism—apart from that of the delay which my hon. Friends and I are only too willing to admit having been unnecessary delay.

This is not a comprehensive Measure to deal with every method by which fraudulent people try to take money away from honest ones for their own uses. As I see it, what we have tried to do here is to produce a Measure to cover a particular form of evil which has arisen in comparatively recent years owing to the credit squeeze and other factors, when companies have produced advertisements offering much higher returns on deposits than were usually obtainable.

There have been two aspects of this evil, and this Bill is intended to deal with them both. First, there is the passively misleading part of the arrangement which is that the company doing this does not publish, or provide potential depositors of investments with any information at all about its background, its assets, or about the use to which it will put the money. If one writes to a company such as this—as I have on many occasions when these advertisements have reached me through the post —and asks for information about the company, not only does one not hear anything, but one does not receive copies of the advertisement. A great silence descends on the company when someone tries to get this information. This is the first aspect of the evil with which the Government, however tardily, are trying to deal.

The other aspect is that of more actively misleading the public by using terms and descriptions about the functions of the company which are not only misleading, but are clearly intended to mislead. When a company uses the word "10 per cent. guaranteed", the word "guaranteed" implies to the ordinary person that it is guaranteed by someone or something to do with something or someone. In fact, it means absolutely nothing at all, because it is not guaranteed by anyone, nor can one know what is guaranteed by whom. I hope that in the regulations which my right hon. Friend is to bring in in due course he will take steps to deal with such advertisements.

Another habit which has crept in is that practised by companies debarred by the Registrar of Names at the Board of Trade from incorporating the word "bank" into their titles before the word "limited". In fact, a company would not get consent so to include the word "bank" unless it had the best of all pos- sible grounds and the best of all possible backing. Gentlemen who have no experience or repute at all in the banking profession put after the word "limited", "merchant bankers", "agricultural bankers", "advisory bankers"—in fact, there is a whole list of such supposed bankers. To ordinary people the word "bank" is normally associated with the great clearing concerns which handle their money in the ordinary way. The companies to which I have referred put in that misleading statement, and it is intended to be misleading.

In this country the word "bank" has a wholly different connotation from that of almost any other kind of business. It implies something of the older conservatism which is all too often missing. This is a point which we shall take up in Committee, but I hope that the regulations will deal with the people who include such titles in their letter headings and thus clearly mislead the public as to the functions which they intend to carry out. I have given one or two examples, and no doubt my hon. Friends can give many others of this actively misleading feature to which we have become accustomed in recent years, and I hope that my right hon. Friend will make it clear that this is one of the evils which will be dealt with by the Bill.

One point with which I have some sympathy, and on which I intend to press the President of the Board of Trade, is that concerning a company which is required to furnish information under the Bill. I cannot see that there is any power, short of requiring it to wind up, to prevent a company continuing to solicit deposits until and unless the information provided is put forward and proved satisfactory, and I hope that this has not escaped the notice of the Parliamentary draftsmen, because even in a couple of weeks it is possible to make a lot of money out of "suckers". If such a company were allowed to continue to advertise for deposits, it could go into liquidation after about six months, having made a comfortable sum out of the unsuspecting public.

At this point I ought perhaps to declare an interest, although I am not sure of the exact rules about this. I have an intimate family and personal connection with one of the real merchant bankers who have been established in the City for longer than most. I do not think that it is an interest in the accepted sense of the word, because the institution with which I have the honour to be connected has, as the hon. and learned Gentleman knows, been one of the most active in urging the Government to bring in legislation of this kind because it does not like to see the honoured name of merchant bankers becoming linked with fraudulent concerns.

There are 17 accepting houses in the City of London. They are members of the Accepting Houses Committee, and to put them in the same category as fly-by-night attractors of deposits would be unjust. Certain exceptions have been made for the great clearing banks, and others and I suggest that the Accepting Houses ought to be treated in the same way because any restrictions on them would be wholly unwarranted.

I do not know whether the hon. and learned Gentleman is aware of the fact that the accounts of the Accepting Houses Committee receive much stricter surveillance and control by the Bank of England than practically any other institution, because, as the Bank of England has to discount its bills at prime rates, it is not surprising that the Bank of England wants to make sure that the prime bills it discounts spring from sources which are thoroughly conservative secure and respectable in every way. I therefore ask my right hon. Friend to look into this to see whether there can be this one other exception which I consider to be as valid, if not more so, than some of the other exceptions in the Bill.

I have already referred to the unnecessary delay in bringing forward this Measure, which is not an especially complicated one. I regret this particularly because a number of people who have been parted from their money during the last two years could have been saved their losses. I do not want to exaggerate this, but it is a pity that it happened. However, better late than never, and I am now prepared to work hard towards a constructive future for this Measure.

There is one reservation which we ought to have in our minds. We cannot prevent a fool being parted from his money, and, however hard parliamentary draftsmen try, it will never be possible to stop people investing in things which they consider will pay better returns than ordinary investments. Nelson's column, I am told, is still sold to investors about five times a year. No matter how hard we try, I do not think that we can bring that kind of transaction into this Bill.

But we have to make sure of two considerations which I regard as of overwhelming importance in the financial life of this country. First, if people advertise for money, in the same way as someone who sells shares must do, they must provide opportunities for the person investing to obtain all the information that he wants, and not have him put off because the information is not available, or because the company can refuse to provide it. I am aware that many people do not need all this information, but we should make sure that every adult in this country has an opportunity of obtaining such information as he reasonably requires from whatever firm, or individual, or partnership, that is trying to get his money from him. This should be one of the overriding considerations of this Measure.

The second consideration is that just as people should have a right to get such information to enable them to make an investment, so they should be able to think it over carefully and not be actively misled into thinking that they are investing in one kind of concern when, in fact, they are investing in another.

I have already mentioned the use of the word "bankers", and other words which are deliberately designed to convey the fact that people who invest in these concerns are putting their money into something which is as safe as a bank when, in fact, they are not. Therefore, not only in respect of the use of misleading terms, but generally, we should make sure not only that all relevant information is available, but also that those who advertise for deposits make it quite clear for what purpose they are advertising. If the advertisement concerns a crazy, crack-pot scheme, this should be made apparent, or, at any rate, the advertisement should not indicate that the venture is to the contrary a solid. conservative one, thus being obviously misleading.

5.20 p.m.

Mr. J. T. Price (Westhoughton)

The President of the Board of Trade introduced the Bill with a remarkable economy of language, judged even by his own standards, which are conservative in the use of words. Normally, I would have felt inclined to compliment any Minister of the Crown who was economical] in the use of words, because on occasions Ministers have made speeches of great prolixity and loquacity without telling us very much. I am not complaining that the right hon. Gentleman did not tell us very much, or even refer to the merits of the Bill. I make this comment because there was probably a very good reason why he did not spend much time either on the context of the Bill or its antecedent 'history.

I want to refer to the real genesis of the Bill. The President of the Board of Trade is a northern Member, like myself, and he will no doubt know very quickly what I am getting at. The hon. Member for Torquay (Mr. F. M. Bennett) should not cast even mild aspersions across the Floor of the House about the lack of vigilance of hon. Members on this side in these matters, because as long ago as 1956 I took the opportunity of having a long conversation with the then Chancellor of the Exchequer on just such a point.

The House will recollect that in 1956 the Chancellor of the Exchequer was the right hon. Gentleman who is now the Prime Minister. While he was Chancellor I took the opportunity of having an amicable discussion with him about one of the most audacious frauds and scandalous rackets—directed from the City of Manchester—that I have heard in the whole financial racketeering history of this country. It would have been of great interest to the House if the right hon. Gentleman, in introducing the Bill, had had the frankness to tell us that it really flowed from the tremendous scandal that arose in connection with the MIAS Group, in Manchester.

The term "MIAS" stood for "Manchester Investments, Albert Square". The significance of that, from an investment point of view, is that Manchester Town Hall stands in Albert Square—foursquare with the statue of Price Albert, standing there for so long under his canopy and very often in great need of cleaning, because pigeons are very fond of that spot.

When I took the opportunity of drawing the then Chancellor's attention to what was going on in Manchester he was very interested. In that year we had the Suez crisis, out of which the Chancelor was translated to higher regions, and became Prime Minister a year after.

Mr. Deputy-Speaker (Sir William Anstruther-Gray)

I do not want to interrupt the hon. Member, but he is getting rather a long way from the Bill.

Mr. Price

I am sorry if I have transgressed the rules of order, Mr. Deputy Speaker. I will get right back on the line now. I hope that I did not go far from it.

As I was saying, I drew the personal attention of the then Chancellor to an audacious financial racket which was being managed and directed from Manchester. A few days after I handed the Chancellor a large collection of advertisements which I had taken the trouble to cut out from provincial newspapers in remote towns all over Great Britain, many of which had been sent to me by people interested in the matter. He thanked me courteously, and said that he would have inquiries made.

A few days later, while I was sitting in the Chamber, he was good enough to cross the Floor of the House and thank me for what I had done in the public interest. He said that the security people at the Treasury had been given the job of making inquiries and had already discovered that the people running this concern were men of straw, who were not able to carry out their obligations.

It is very significant that although I drew the matter to the right hon. Gentleman's attention in 1956, the MIAS racket in Manchester continued unchecked until 1960, when the principals, Mr. Louis Granville Gordon and his associates in Manchester, were arrested and put on trial. At the trial it was revealed that the total of money collected from small investors by spurious advertisements of all kinds was about £750,000—although I do not believe that the accountants ever discovered the final figures. Of that sum, no less than £339,000 had been filched from the public in the period of eleven months immediately prior to the prosecution being undertaken.

Hon. Members have complained about the delay that has gone on for two years. I am complaining of delay—and supporting it with the history of the case —not for two years but for at least six years, during which hundreds and thousands of small investors were mulcted of money they could ill afford to lose. I am prepared to agree with the hon. Member for Torquay that we cannot entirely protect the public. An old English proverb states that a fool and his money are soon parted. Fortunately, some wise men are not exposed to this risk; they have no money, and are not exposed to the risk of parturition to which he refers.

Some Members of the House, including Ministers when replying to Questions on the MIAS Group, at the time when the matter was boiling up for the bubble to burst—if that is a correct metaphor —thought that the idea of introducing legislation to protect people against the results of their own folly was a kind of paternalism which the House ought not to undertake. But many of our commercial and criminal statutes are concerned with protecting our people against their own folly. I realise that there may be a limit to the lengths to which we can go to try to prevent people from suffering from the conesquences of their own folly, but in financial transactions, with the tremendous growth of advertising and mass suggestion, by television, radio, the Press and everything else, by which the public is constantly being brainwashed, they are exposed to an even greater risk than was the previous generation, which did not have these forces of publicity directed upon it.

Therefore, in a limited sense and with due reservation, I naturally welcome the Bill with all its imperfections to which attention has been drawn. The MIAS scandal was the real genesis of the Bill which has been in gestation from those days. I do not know why it has been pigeon-holed for four or five years. On 4th April, 1960, now about two and a half years ago, the principal criminals, as I think it right to call them, were taken to the Central Criminal Court and the case was heard by Mr. Justice Aarvold. The principal operator was sent down for eight years and his associates for lesser sentences. The judge said in sentencing them that these were the most brazen, most pitiless and most callous frauds ever brought to his notice.

These frauds went on for years. The Government knew about them and did nothing about them, apparently believing that there was no legislative machinery available and that the law of libel protected the criminals against exposure. Even my hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever), who is often punctiliously accurate in his facts, was not accurate about one thing. He said that the financial Press was powerless to do anything about these cases of fraud. The papers would not "chance their arm" because of the law of libel. It is quite true that the law of libel was changed considerably a few years ago, and I am not sure that it was not changed after the cases to which I have been referring.

Nevertheless it is true, and it is only fair to the financial Press to say so, that when the MIAS scandal was coming to light the Investors' Chronicle, which I do not normally read and in which I have no interest whatever, was publishing the most courageous articles from July, 1957, on this kind of thing. One was called, "Curious Expansion of Manchester Group", another was called "Asking for Money" and was published in February, 1958. An article entitled "More Unsecured Depositors" was published in May, 1958. One, which was perhaps the most outspoken of all and really did trail its coat and invite prosecution for libel, was called "Pious MIAS", published in September, 1958. The President of the Board of Trade knows this. He is nodding like an Indian mystic.

Mr. H. Lever

I did not say that the Press was powerless to protect the public because of the laws of libel which, as my hon. Friend has pointed out, were greatly liberalised a few years ago by a Private Member's Bill. What I said was not that they were powerless to protect because of the laws of libel, but than if their comments—and I had this article very much in mind—that there are no accounts available of people seeking to borrow money do not deter people from lending money, what comments upon accounts will achieve protection of the public?

Mr. Price

I am obliged to my hon. Friend. I do not go as far as my hon. Friend in saying that the Bill is completely useless and does not do the things which it sets out to do. I do not take a cynical view of the case. I admit and I concede to the Minister, and those who support him with their names on the Bill, that if this sort of legislation, with all its imperfections had been on the Statute Book the MIAS frauds could not have occurred, because the advertisements could not have been worded in the way they were.

These MIAS frauds were not only conducted by large-scale advertising in remote country districts, where old ladies and possibly young ladies and gentlemen who had money to invest read them. That was one net that was spread. But the most audacious net spread was on every bus owned by the Manchester Corporation.

Mr. H. Lever

And in the Guardian.

Mr. Price

Yes, the Guardian was also carrying the advertisements. I do not know whether it was ever paid for them. I think that when the crash came the unsecured creditors included those with whom the advertisements were published, as well as the depositors. A very careful place was chosen for these advertisements on the buses. These people did not put long streamers on the sides of the buses, like the football pool firms do. The advertisement was on the back of the last seat of the upper deck of the bus as one went upstairs and similarly there was an advertisement downstairs. It struck the viewer right in the eye.

The MIAS people used a very original gimmick. When I see crime stories on television I often think that television puts a lot of ideas into the minds of criminals who operate for profit in London and elsewhere. In this case, these people had a very ingenious gimmick. They did not believe in any round figure for the rate of interest in advertising these companies. They advertised a very odd rate of interest. They would pay 12⅝ per cent. to all depositors with full security. We know that 12½ per cent. is half-a-crown in the £, but 12⅝ per cent. is 30.3d. in the £. The Bill, to a limited extent, will put a curb on the advertising for public money and is, therefore, to be welcomed, but I hope that the Committee will improve the Bill as it gets a proper examination.

I should like to say a few words about the implications of the Bill and about things which are matters of public policy. This company which collapsed, and which I have spent some time describing, has had many imitators since. The country has seen an enormous expansion in industrial or merchant banks. I would be the first to admit that many old-established merchant banks with famous names are as reputable and honourable as the joint stock banks with which we are all familiar. But there are a great many others in between and many institutions which call themselves banks which would find it very difficult to justify that label.

I draw the attention of the President of the Board of Trade to the fact that if he were out of office and not thinking of going into the City like other retired Ministers of the Crown and he was looking for a suitable avenue in which he could employ his great talents, he could come to me or some other hon. Member he happened to know and say, "Now Tom, or Joe, what about you and I going into partnership and starting an industrial bank?" There is nothing to stop his going to a brass founders and getting a brass plate with his name and those of his partners on it and sticking up the plate on a suitable block of offices with a very high sounding title for the bank and setting up in business. [Interruption.] I am surprised that my hon. Friend the Member for Cheetham is so touchy.

Mr. H. Lever

Why should there be any obstacle to the Minister doing this?

Mr. Price

I will give way to my Friend in a moment, if he wants me to. The answer is quite simple. If the right hon. Gentleman were, instead of setting up an industrial bank, seeking to set himself up as an insurance company, a parallel financial institution often performing similar functions, he would need to deposit with the President of the Board of Trade about £20,000—that is what it used to be, I think—for every item of business whether industrial, fire, accident, and so on, and he could not carry on without doing so, according to the law.

Mr. H. Lever

I asked why the right hon. Gentleman should be put under a restriction if, after we have duly removed him from his present office, he wants to be an industrial banker. It is no answer to say that, if he wanted to be an insurance company, he would have to do something else, or, if he wanted to be a doctor or a pork butcher, he would have to be registered or take out some sort of licence. Why should we restrict a perfectly reputable person like the right hon. Gentleman, who wished to earn an honourable living, as I am sure he would. from describing himself as an industrial banker, if he were so minded?

Mr. Price

I have given my answer. If my hon. Friend does not accept it, that is a matter for him. It is good enough for me and seems perfectly logical. He must not try to trap me with debating points like that. This is the House of Commons, not the Oxford Union.

I distinguish the banks and insurance companies, and I say quite seriously, not wishing to be flippant or evasive, that it is time the House took action to stop the misuse of the word "bank", because it connects in the public mind with a quite different institution. Many of these banks are sound and I do not wish to be unfair to them, but today we are faced with a situation in which, with the great building developments which are taking place, we rely very much on the building societies to provide financial backing for owner-occupiers.

The building societies say that they cannot produce enough money to meet all the requests they receive for mortgage advances. Why not? The reason is that many of these so-called marginal banks, the industrial banks, offer fancy and inflated rates of interest to the public. There are still more famous well known companies advertising in the Press a return of 8 per cent. or 9 per cent. with full security, as the Economic Secretary knows very well. How can a building society raise money at 31 per cent. to satisfy the basic housing needs of a community in such circumstances?

People who borrow money at 8 per cent, could go to the banks to borrow at 6 per cent. But they borrow money at these high rates for a specific purpose. The money which is borrowed at these high rates is being farmed out immediately at much higher rates than those paid to the lenders. I have taken the trouble to look into the hire-purchase market in all sorts of ways. I have not done so from a professional or commercial point of view—I have no such interest in the matter—but I have done it as a Member of Parliament who wants to know what is going on in society.

The hire-purchase terms advertised in the windows of many shops look very attractive. The rates of interest look reasonable enough for being allowed two years in which to pay, but, as the Economic Secretary knows—he can check this for himself, if he has got the actuarial knowledge, or he can get the tables and work it out—many hire-purchase transactions entail interest at 25 per cent. or even as much as 40 per cent. per annum on the outstanding diminishing balance of the loan. The fantastic rates which are being charged in hire-purchase transactions are a national scandal, but the Government do nothing about it because the advertisements are couched in such fine language that the real terms do not appear to be anything like that.

This is the driving force which has produced all these rather spurious industrial banks which are prepared to borrow the public's money at high rates of interest and feed it back into the hire-purchase market at fantastic rates of interest. Under the Moneylenders Act, the ordinary moneylender making money available on loan without security is not able to charge more than 22½ per cent., which is high enough in all conscience. Is not that right?

Mr. H. Lever

Wrong.

Mr. Price

I stand corrected. However, irrespective of the Moneylenders Act—[An HON. MEMBER: "49 per Cent."]—if anybody is allowed to charge as much as 49 per cent. per annum, as I hear someone saying, then this practice ought to be condemned by the House of Commons and stopped by legislation.

I say seriously, having waited for the opportunity of this debate to say it, that, so long as we have a hire-purchase system so free of control over the rates of interest which are charged to people who wish to buy consumer goods, we shall always have institutions to provide the funds by raising deposits from the general public at high rates of interest and conflicting with the activities and functions of the building societies at many points.

I hope that the Bill will not be accepted by hon. Members on either side as necessarily a useless one. I do not consider that it is a useless Bill. I believe there ought to be brakes on the kind of advertising which has been going on. It does no credit to those who have been running the advertising professionally or to the House of Commons which has allowed matters to proceed unchecked for all these years during which hundreds of thousands of people have lost millions of pounds by pouring their savings into bucket shops because they did not have the sense to realise that a rate of interest far higher than the market rate meant that the risk of insecurity was that much greater and it was something about which they ought to be properly advised.

I hope that the President of the Board of Trade and his colleagues will ensure that the Bill will be improved in Committee to tighten up on advertising and to tighten up on maximum rates of interest which can be paid. Also, as a final point, to give satisfaction to my hon. Friend the Member for Cheetham, who has been rather tedious, as he can be on the odd occasions when he comes here—I see that he is sitting on the Liberal bench, too—I suggest that we might accept his suggestion that the mere putting in of accounts to be checked may not go as far as it should. I suggest that, if these operators who want to borrow the money from private depositors had to publish an audited balance sheet just as they would if they were raising equity for a new company, that would be some safeguard for people who can still read what is published in the Press.

I should not have opposed the Bill. I welcome it with some reservations, but I hope that it can be made a much better Bill than it is now.

5.49 p.m.

Mr. Donald Box (Cardiff, North)

My hon. Friend the Member for Torquay (Mr. F. M. Bennett) told us of the number of times Nelson's column is sold each year. At one point, I thought that the hon. Member for Westhoughton (Mr. J. T. Price) would try to sell us the Suez Canal. I was particularly interested in what the hon. Gentleman had to say about the activities of the MIAS Group because, although I was not in the House at the time, I saw a good deal of the deplorable material which it was allowed to circulate.

Like other hon. Members who have spoken, I give a qualified welcome to the Bill. Equally, like other hon. Members, I deplore what seems to be the unnecessary delay in bringing this legislation before the House. We have heard a good deal about the part played by back benchers on both sides in bringing legislation forward, but the extraordinary feature is that it was not even foreshadowed in Her Majesty's Gracious Speech three or four weeks ago, yet we now have it suddenly presented with an air of urgency.

I welcome the Bill, but, reflecting on the hundreds and thousands of pounds which have been lost by investors in the MIAS Group, in the livestock business and, more recently, in the casino enterprise companies, I am forced to the conclusion that this legislation is both too little and too late. One is tempted to use the metaphor about closing the stable door after the horse has bolted, but that would be inappropriate in this case because the stable door is not bolted but is still very much ajar.

I never had quite so much sympathy with hon. Members opposite who sit on what I may call the independent Socialist bench and invariably engage in a long debate about the length of the Summer Recess as I had at the beginning of the last Summer Recess. Immediately I returned to my constituency, I found there an absolute rash of casino enterprise advertisements in and around Cardiff, and I subsequently learned that a similar sort of thing was going on all over the country. I at once wrote to the Home Office about it, and I informed the police and the Press of the situation. It appeared that the police already had the matter under examination. Unfortunately, presumably on that account, the Home Office could not be of very much help.

I found in almost every case that the national daily newspapers had large files on the activities of these people but they were afraid to mention the facts because they feared actions for libel. It almost seemed as though the promoters of casino enterprises had deliberately chosen this opportunity when Parliament was in recess to accelerate their activities. Subsequently, their activities became even more prominent and they engaged in something of a poster war, one company over-pasting the advertisements of another. Yet, apparently, no action by the police was possible.

We are now considering legislation to provide protection for depositors. The Bill includes a Clause transferred from the Prevention of Frauds (Investments) Act, 1958, which deals with people who make fraudulent or reckless appeals for deposits. If ever there were a law which one would expect to trap the promoters of casino enterprises, one would suppose it to be the Prevention of Frauds (Investments) Act, 1958, but, apparently, it did not prove effective, mainly, I understand, because of a decision of the Lord Chief Justice on an appeal heard in the High Court.

From a reference to the Bill and to the explanation given by my right hon. Friend, it seems that no action is to be possible against the promoters of casino enterprises in the future.

One is forced to the conclusion that this is rather flabby legislation without sufficient teeth to fasten on those unscrupulous and dishonest people who trap the unwary into parting with their money. Although the Bill requires that audited balance sheets and audited six-monthly reports should be submitted to the Board of Trade before advertising is possible, no yardstick is to be applied to what has to appear in those balance sheets before an advertisement can be published. Another weakness is that depositors are entitled to a balance sheet only after they have made their first deposit. I suggest that it is more important that they see a balance sheet before they make their deposit, although I admit that there are difficulties in making sure that a depositor sees a balance sheet before he parts with his money.

Mr. Alan Hopkins (Bristol, North-East)

Would not he then, upon getting the balance sheet, be at liberty to withdraw has deposit and thereby protect himself?

Mr. Box

Yes, but I think that my hon. Friend is being a little naïve, because, as anyone who has had any dealings with these people knows, once a person has deposited his money it is difficult to get it back again.

I do not underestimate the difficulties of controlling these people, but surely it is not beyond the ingenuity of Government draftsmen to frame minimum standards which should be conformed with before these people are able to advertise in this way. We are reminded that the Committee of the Stock Exchange, the Registrar of Friendly Societies and the Chairman of the Industrial Bankers Association demand the minimum standards from their members before they are allowed to ask for deposits. One thing which is certain is that the reputable people in business would welcome a tightening up of the regulations because it would improve their chances of doing legitimate business. Unless we lay down some standards, it will be the old story of rigid regulations for people most likely to behave in a responsible manner and complete freedom for those of a dubious character.

May I take the most recent example, that of the casino enterprise company about which we have heard a good deal this afternoon. It appears from a reply given to me by my hon. Friend the Minister of State, Board of Trade, that no prosecutions are possible against these people. One company alone is reputed to have got away with £¼ million of investor's money. In addition, it will be outside this Bill. That seems to me tantamount to an invitation to these people to open up again in a different form. If they do that, my right hon. Friend will have to be careful, otherwise they might put "Approved by the Board of Trade" on the bottom of their advertisements.

If this is not the appropriate law to catch people like the casino enterprise promoters, what law will catch them? People who gamble money must be prepared to lose it, but the law has a very real duty to protect gullible people and certainly to protect people against the activities of dishonest characters. Obviously, we cannot and do not want to control all forms of gambling, but we must try to ensure that even the gambler has a chance to win if he gambles his money. It is bad enough when it happens in the case of one or two people, but when it happens on a wholesale scale, as it has in recent months, we look to the Government for protection.

In the absence of legislation, we have heard that the financial Press and the general Press have a big part to play in exposing the activities of these people. I agree that this has been done on a wide scale in the past and there is no doubt that the Press has carried out a very useful function. But even Press publicity can have a peculiar effect. It can sometimes boomerang. About two years ago a Sunday newspaper exposed a gentleman who was offering lucky charms which were intended to improve one's health, wealth and strength, and to ensure high majorities for politicians. About three or four weeks ago he wrote to the same newspaper urgently asking whether it would mind exposing him again as business had fallen off; it had never been as good as it had been at the time when he was exposed two years before.

This shows how brazen these people are. It is confirmed by the cheeky circulars sent by these people even to hon. Members on both sides from time to time. This illustrates how necessary it is to protect investors, particularly small investors, against the activities of these people. I am not particularly concerned about the large investor, who is able to look after himself. He has his banker, broker, accountant and solicitor to help him. If he is foolish enough to invest in one of these schemes he is well able to look after himself. It is the small investor, whether man or woman, the pensioner and the person living on a small fixed income, who deserve help. They are easily dazzled by high rates of interest; and who can blame them, especially if they want to supplement a meagre income? They can write to a newspaper and ask about the merits of the investment, but they do this all too infrequently and after they have parted with their money. The small investor has a right to expect protection from the Government in this regard. I regret to say that I do not think that the Bill gives it, and I therefore hope that it will he improved and strengthened in Committee.

6.1 p.m.

Mr. Alan Hopkins (Bristol, North-East)

Listening to my hon. Friend the Member for Cardiff, North (Mr. Box), I could not help feeling that possibly he would support legislation to ensure that advertisements to prevent the loss of hair were carefully considered and that such advertisements might be of interest to the hon. Member for Gloucester (Mr. Diamond) and one or two hon. Members who have spoken.

I am virtually the only hon. Member of those Members who have so far spoken who is entirely in favour of the Bill as it stands. Since my hon. Friend the Member for Torrington (Mr. P. Browne) produced a Private Member's Bill just over two years ago, there has been a great deal of public interest in this matter. Since then, I have received many letters from investors—depositors, as they should be called—who have lost in some cases all, but in most cases at least a fraction, of the money that they have deposited. There is, however, no doubt that public attention has achieved a most worth-while objective, and that is that my right hon. Friend the President of the Board of Trade has brought forward this Bill. I assume, although I am not clairvoyant, that it was not entirely the MIAS scandal which persuaded him to bring it forward.

It seems to me that there are two ways, of offering protection to depositors. The first is that chosen by my right hon. Friend in this Bill, namely, to ensure that members of the public are afforded information on which to form their own judgment about whether a deposit is. reasonable or not and, at the same time, to issue regulations about the method of advertising for such deposits. Like the hon. Member far Manchester, Cheetham (Mr. H. Lever), I wish that the regulations were before us now. It would be of great value to know what they will contain, for in them surely lie the teeth of the Bill. If they are sensible, reasonable and strong, the Bill will be sensible, reasonable and strong, but not otherwise.

The alternative method of dealing with this matter would be to establish a Government agency, whether it be under or connected with the Board of Trade, which would have a supervisory power to exercise its discretion in determining whether an advertisement could be made, this supervisory judgment to be made on the basis of the facts submitted by the company. This system is in existence in America, and it works there. A great deal of evidence on it was given to the Jenkins Committee, which I appreciate is not within the purview of this Bill and therefore I would be out of order in referring to it.

My right hon. Friend's choice seems to me to be the more sensible one in that, if a substantial Government agency were set up to deal with these matters, that would be time consuming. It would be at least, I should have thought, three years before the Bill could be operative, and I believe that the sooner the Bill becomes law and is in operation—the question of whether it is amended in Committee to make it stronger is irrelevant—the better.

I should like to make three points. The first is that the information afforded to potential investors by prospectuses is fairly clear and precise. I am suspicious that the information required in the accounts to be submitted to the Board of Trade under the Bill will not contain the detail which is afforded in a prospectus. In particular, I should like to know whether the company soliciting deposits has been in existence for some time, the withdrawal of deposits within the preceding accounting period, how much was raised and how much was withdrawn. I should like some description given as to the intention of the company to dispose of the funds which it receives from the depositors whom it is soliciting. It would also be extremely useful to know the nature of the income received in the past, with a breakdown of it, if possible.

I should like my hon. Friend the Economic Secretary to the Treasury, when he replies to the debate, to say whether the advertising to which the Bill refers will include circulars sub- mitted to individuals through the mails. In the past, I have frequently found it to be the practice of some of the companies which we have in mind simply to take a page of the telephone book and to write to twenty or thirty of the people named on it. Does the Bill cover that form of solicitation?

The list of exemptions from the Bill includes banks. I agree with the remarks of hon. Members on banks and will not make the point again, but my hon. Friend will be aware that building societies advertise stating their assets to be of a certain figure. I would not describe this as misleading in any way, but would it not be more revealing for the public and potential depositors if the figure of net assets were given, or if the liabilities were set side by side with the assets so that potential depositors could judge for themselves?

It seems to me that the Bill offers a means of protecting potential depositors. Obviously, it is not possible to protect people from their own folly, but if the Bill succeeds and the regulations are strong it will be possible for everyone to know exactly in what he is putting money. If it then turns out to be bad, it will not be due to lack of protection that his interest has entirely evaporated.

6.10 p.m.

Mr. Peter Walker (Worcester)

Like my hon. Friend the Member for Bristol, North-East (Mr. Hopkins), I welcome the introduction of this Bill, believing as I do in the principle of affording the maximum protection to the public.

The sadness about people who deposit moneys with companies which then defraud them of those moneys is that those concerned are very often the smallest investors, who can ill afford the losses which take place. This applies particularly to companies offering extravagant rates of interest. The people concerned are in urgent need of an increase in their income, perhaps to meet a perpetual commitment, so they indulge in these investments. Although I welcome the Bill and accept the criticism of my hon. Friend that it has been too long delayed, I think that it ill becomes hon. Members opposite to complain in those terms. I recall that the Bill was not mentioned in the Queen's Speech. I cannot remember anyone on the Front Bench opposite deploring that it was not in the Queen's Speech, when we were considering the Government's programme of legislation for this Session.

The Regulations attached to the Bill will be the all-important operative part of it. I regret that we did not hear anything about the regulations which the Board of Trade has in mind. This is of vital importance. I hope the regulations will be so worded that the Board will be allowed a certain amount of discretion. For example, if persons running such a company have a rather dubious past, I hope that there will be something to prevent them continuing to operate companies. This at present applies to powers in respect of unit trusts. I hope also that there will be a very strong provision about the liquidity of these companies.

It is not good enough for them to be basically financially sound if they are unable to return depositors' money whenever they demand it. I hope that the form of accounts will be such that there will be a careful check on bad debts. It is easy to give the appearance of a company being solvent when the assets of the company include moneys owing to people upon which it has actually defaulted. I hope that there will be a way to audit the accounts to show that the assets do not include sums of money which are long overdue debts.

Mr. H. Lever

The hon. Member is mistaken if he thinks that the Bill gives the Board of Trade power to prescribe the liquidity arrangements. The only thing it can prescribe is matters which are to be included in advertisements. It does not stipulate the class of persons who are to run this kind of business, nor the way in which they must run it.

Mr. Walker

There is similar legislation by which the Board of Trade gives approval to other forms of corporation which have taken money from the public, such as unit trusts. There the Board of Trade has discretionary powers which I hope it will take in respect of this Bill, I agree that at present those discretionary powers are not available, but I hope that they will be taken by the Board of Trade.

I very much agreed with my hon. Friend the Member for Cardiff, North (Mr. Box) when he said that it would be far better if the accounts were delivered to the person who is to deposit money prior to his depositing the money. I hope that careful consideration will be given to that suggestion. I should like to see an obligation on the companies involved to send to the depositors a copy of the accounts each year. I cannot see why that is insisted upon in the case of shareholders in ordinary companies but not in the case of people who deposit money in these companies.

I ask the Economic Secretary if the exclusions referring to industrial and provident societies will have regard to the recent case of a so-called co-operative society. I gather that it is completely unconnected with the co-operative movement, but it nevertheless has been operating under that name and the same principle as ordinary co-operative societies. That has resulted in a considerable loss of money deposited by persons who live in the north-west of England. I hope that the Bill will prevent any recurrence of that kind of thing.

I was very disappointed when my right hon. Friend said that within the Bill he considered it was impossible to take action against casino enterprises. I should have thought that it would be easy to include a Clause stating that if a company is advertising for the purpose of using the public's money for gambling, such advertisement should clearly state that that is the position. It is not good enough to say that some of these companies use the word "casino"; some do not use that word. A very considerable amount of money has been invested in these enterprises. It may be stated that this matter is covered by the Prevention of Fraud (Investments) Act, but they have not been caught by that Act. They have escaped abroad with large sums of money which have been invested by depositors.

I do not think it should be beyond the ingenuity of my right hon. Friend to introduce a Clause to prevent that kind of thing. If he finds that impossible, I ask him to take urgent action which would have the same effect. What would be the position of a hire-purchase company which decided to pay its interest on a similar principle as that of Premium Bonds, or if the interest was put into a large pool, a lucky number drawn, and one had a certain interest? Would that be covered by the Bill?

The casino enterprises have caused a great deal of hardship among groups of people. I know of a factory where the foreman decided to invest some of his money in one of these enterprises. For ten to twelve weeks he received regular payment of £5 a week. By that time his confidence had grown and he told all his friends in the factory what a splendid opportunity there was for them to make money. The whole group of people, who could ill afford to invest money in this way, did so, and lost a substantial amount of their savings in that enterprise.

I ask my right hon. Friend to reconsider the situation to see if in Committee he can agree to some Clause being inserted making it vital that such companies shall clearly state in all their advertising that anyone investing his money in such an enterprise is investing in a highly speculative and gambling concern.

6.17 p.m.

Mr. Percy Browne (Torrington)

I join with my hon. Friend the Member for Worcester (Mr. Walker) on the question of casinos and gambling. Although we do not want to legislate against gambling as such, we are trying to legislate for the small investor who is led up the garden by these advertisements, irrespective of whether or not the word "casino" is used.

I should point out that the Conservative Party specifically mentioned in its General Election manifesto in 1959 that it would do something to overhaul the Companies Act, 1948. Perhaps I should mention something about what the hon. Member for Manchester, Cheetham (Mr. H. Lever) asked. Why should not some people put up a plate at their door saying that they are merchant bankers? I could not agree more, so long as they do not issue misleading advertisements to the public.

Along with my hon. Friend the Member for Bristol, North-East (Mr. Hopkins), I welcome the Bill, because it is a replica of the Bill I introduced with the help of 10 hon. Friends in March, 1960. The hon. and learned Member for Kettering (Mr. Mitchison) has been quite consistent. At that time he said that it was a mouse of a Bill, although he spent an hour discussing it and finally talked it out. I do not blame him for doing that, because other hon. Members were pressed on this side into talking it out, but today he described this Bill as a mouse of a Bill. I, however, think that the Bill will do a great deal of good. I find that five of the backers of my Bill have now become Ministers, although one has departed again. I see one of my backers on the Government Front Bench now.

I think that the delay resulting between the time when my Private Member's Bill was introduced and now has caused a considerable amount of unnecessary hardship to a large number of people. The hon. and learned Member for Kettering quoted from HANSARD of 18th March, 1960, one part of the speech of the then Economic Secretary, who is now the Financial Secretary. My hon. Friend the Financial Secretary said in another passage of that speech that we all wondered if there was some possibility that action by the Government in this field which we have been discussing today might have to await the report of Lord Jenkins and his colleagues generally on company law. I would like to assure the House, without any qualification, that there is certainly no need, in respect of some of the things we have been talking about, for action to await the outcome of the Jenkins Committee's deliberations."—[OFFICIAL REPORT, 18th March, 1960; Vol. 619, c. 1685.] That was clear enough, but what damage has been done in the meanwhile? Certain hon. Members on both sides of the House have mentioned some of it.

To those who live in the country perhaps the greatest fraud which has been perpetrated during the last few years has been in connection with the armchair pig business. Being a small trade creditor myself, I went along to one of these groups and heard that the liabilities were £999,000 and so far as I could discover it bad no assets at all, so I had to write off mine as a bad debt. Many people, as a result of this kind of thing, have had to write off their life's savings.

It sounds very attractive to such people to be told that they can buy a little livestock. In this country, particularly in towns, people are attracted to owning a little livestock in Devon or Northamptonshire. They like the idea of being able to go and look at that livestock in the summer when they are on holiday, but now they have lost their money.

I was written to by a constituent about a certain concern, which, I think, has now changed hands. He said that he had deposited money with that company in June, 1960, at what he called the low interest rate of 7 per cent. He had then been told by a member of a joint stock bank whom he had met that it would be wise if he withdrew his money. He wrote to the company, but got no answer for two years. This year he was sent £40, but he had deposited £1,600. I must attack the Government for the fact that this legislation has not come forward before. I do not think that they can say they have been waiting for Jenkins. So far as I know, there is only one reference in the Bill to the Jenkins Committee.

Irrespective of who is responsible for the Bill coming forward at the present time, I suspect that the very fact that my hon. Friend the Member for Torquay (Mr. F. M. Bennett), by coincidence, drew a place in the Ballot for Private Members' Bills, and said that he would reintroduce my Bill with certain trimmings, was the reason why the Bill has come before the House at this time. I think it a reflection on the Government that this Bill was not introduced two-and-a-half or two years ago. [HON. MEMBERS: "Hear, hear."] I expected to get a few cheers from the Opposition benches. The hon. and learned Member for Kettering might well have pressed for this legislation two-and-a-half years ago, yet we had not a squeak from him since he talked out my Bill in March, 1960. He could at least have pressed for it to be the legislation to be brought in.

I wish to ask the Economic Secretary one or two questions. The President of the Board of Trade quoted verbatim paragraph 234 (c) of the Jenkins Committee Report. I should like to know why the Bill has not included the other recommendations of that paragraph. Perhaps my hon. Friend will look at that before he replies to the debate. It would be an extremely good thing if in the Bill there were included provisions to carry out the recommendations in paragraph 34, about no par value shares. This is something I have always felt strongly about. I accept that it is a great plank of Labour Party and T.U.C. policy that one can pretend that an interest rate is 25 per cent., when, in fact, it is 25 per cent. of a par value and not of a real value of a, share, but it is extremely misleading. It would be an extremely good thing if we had no par value shares, as the Americans have.

There has been talk about financial editors and their difficulty in being able to decide which advertisements should be published. As I see it, this is covered by Clause 2 (5) of the Bill. I am delighted that it should be so, because the onus should be not upon financial editors, but upon the Board of Trade, the Treasury or some such Government body. These people are specifically protected by the Bill.

Whilst one may dislike people using the term "merchant banker" if one is a merchant banker of repute oneself—although I do not happen to be—surely the point is that it does not matter what anybody calls himself or his company. We are trying to ensure that if that person then solicits money from the public, not only does he present the accounts to the Board of Trade on the lines stated, but his advertisement is vetted before it is allowed to appear before the public.

My hon. Friend the Member for Worcester, as well as other hon. Members, referred to a matter of importance when he said that not only should the paid-up capital be shown as opposed to the issued capital, but that certain details should be given in the accounts. I suggest, however, that the type of person in whom I was interested in my Bill would not be able to read accounts. The important feature, therefore, is that the accounts should be put before the Board of Trade and that the advertisement should not be misleading. Even with the best will in the world, if some of the small investors in the area which I represent were to be sent a balance sheet, I guarantee that they would not know which way up to hold it, let alone read it properly. That is the job of an expert.

Having said some strong words about the delay, I repeat how glad I am at last to see the Bill. Whilst I accept that in Committee there will need to make alterations in the Bill, I agree with it in principle and I hope that the hon. and learned Member for Kettering, although he enjoys talking a great deal, will give it a fair wind in Committee.

6.27 p.m.

Mr. John Diamond (Gloucester)

It seemed extremely appropriate that the hon. Member for Torrington (Mr. P. Browne) should be the last speaker from the back benches on the Government side, because, as the hon. Member has reminded us, he played a great part in a similar Bill which was introduced as a Private Member's Bill in March, 1960, the contents of which, as well as the hon. Member's speech, I have read with great care.

The hon. Member was today the only Member, on either side of the House, who was not satisfied that the Bill needed a great deal of strengthening. He was, however, in agreement with every other hon. Member who has spoken in saying that it was abominably late. I am, therefore, delighted to follow the hon. Member on that point and to underline how right he is in criticising his own Front Bench for the lateness with which the Bill has been introduced.

Is it not the case that the Bill was foreshadowed in the Queen's Speech as long ago as 1956, that it was announced in the Tory election manifesto of 1959, that all the leading authoritative newspapers—for example, The Times, the Daily Telegraph and the Financial Times—published leaders and City pages directing attention to the need for legislation of this kind in the autumn of 1961 and that several promises have been made by the Government from time to time? The hon. Member for Torrington introduced his Bill in 1960 and was given a clear indication of Government action. We are now at the end of 1962, with no chance of the Bill becoming effective before the middle of next year at the earliest, seven years after it was promised in a Queen's Speech, which is the most authoritative place in which it could be promised. I wish that we could calculate the amount of money that has been lost and the hardship suffered in the meantime, which could have been avoided had the Government got on with their job of governing.

I am sorry that the President of the Board of Trade is not in his place, although, no doubt, he will be returning shortly. I wanted to congratulate the right hon. Gentleman on his speech. I have never heard a shorter or clearer speech in introducing a Bill of this nature. For brevity and clarity the right hon. Gentleman could not be bettered. His manner of speaking is, however, so attractive that I could willingly have listened to him explaining why he was introducing the Bill. He said shortly what some of the Clauses were about, but he did not attempt to justify the purpose of the Bill or to explain why he was tackling it in a certain way. He did not illuminate the Bill with any kind of philosophical background. One cannot possibly deal with a matter like this without a basic philosophical approach which one explains, and, as we are not duly pressed for time, I should like to explain to the House how such a philosophy might be approached.

First, I know that this is a matter of contention. One view by the Government which I share is that this is not the right place to deal with the problems of gambling. I also share the view, which was strongly expressed by the hon. Member for Worcester (Mr. Walker), that if this is not the right place to deal with it another Bill which deals with it should be brought in, and quickly. This, however, is not the place to deal with gambling. We get our attitude confused by trying to deal with investment and gambling, two totally different things, in one and the same Bill.

There is considerable confusion in the public mind about this. I could not do better than quote the Parliamentary Secretary to the Board of Trade, who, in his previous incarnation, took part in the debate on the 1960 Bill, when he said: National savings do not appeal sufficiently to the potential or new savers who want to make money quickly and who think that investing is a casino. Those were prophetic words. At that point in time, the present schemes had not arisen in large measure. I do not know whether the fault is that of the Parliamentary Secretary for putting the idea into other people's heads. It shows, however, that there is considerable confusion and that we should keep the two issues separate as far as we can.

Where do we go to try to find the sort of philosophical background against which the Bill is introduced? The President of the Board of Trade did not enlighten us. I therefore turn to the Parliamentary Secretary, who at least gave considerable thought to the problem when he made his speech in 1960. I recognise that he made that speech as a back bencher. Nevertheless, his philosophical approach is, no doubt, the same. The hon. Gentleman's attitude then was that In a free society people have as much right to lose their money legitimately as they have to make it legitimately.… It is because I wish every man to be a capitalist and not a sucker that I recommend the Bill to the House."—[OFFICAL REPORT, 18th March, 1960; Vol. 619, c. 1645–7.] The hon. Gentleman was recommending the Bill of the hon. Member for Torrington because he would like every man to be a capitalist and not a "sucker". That is a phrase which also is highly to be recommended for its clarity, if not its elegance of expression. It makes the Parliamentary Secretary's attitude clear and, no doubt, that is his attitude now concerning the introduction of the Bill.

That is not my attitude, nor, I feel reasonably sure, is it the attitude of those for whom I speak. Simply to try to make everyone a capitalist and to have no regard whatever to the purposes of collecting capital together, to have no regard to whether that is a waste of resources and no regard to whether it is done for a social or anti-social purpose, does not justify itself and we need to look far more deeply for a philsophy to inform us as to the correct approach to a Bill of this kind.

I accept what has been said many times about the need to encourage growth at home and abroad by savings wisely invested. That is where we start. To do that, we have to eliminate the fraudulent, as Clause 1 does in the Bill. It is right that we then go on to warn the public of risks ahead. Where the situation becomes too dangerous, however, that part has to be fenced off.

That is the way in which we normally deal with all problems as a Parliament and that is the way in which people expect to be protected. They expect to be told of dangers ahead, but where the dangers are too great they expect to be immunised in some way so that they cannot do themselves enormous damage. People expect electric wiring points, by law, not to be left bare lest they burn their fingers on touching them. The same can be said to apply to investment.

Three other points only have to be taken into account before we are ready to form a philosophy on which we can judge as to the method in which protection can be afforded. We must have full regard to the fact that where borrowing is done on deposit or otherwise by a certain class of persons who undertake that borrowing with reasonably high and acceptable standards, it is right in their interests that legislation should be introduced to support those standards, so that there should not be impossibly unfair competition between those who carry on with high standards and those who carry on with no standards.

Furthermore, it is right that the borrowing should be susceptible of control in the event of national emergency, which, no doubt, is in the mind of the Government as this is a recurrent problem for them: that is to say, borrowing not in the form of deposits with hire-purchase companies, merchant bankers and industrial bankers, because this is absolutely unsusceptible of control. That is the one element that the Chancellor of the Exchequer cannot control and he must go about it by all sorts of devious methods, which are unsatisfactory for trade—of altering ratios of deposit on hire-purchase agreements and so on—and which may cause enormous damage, whereas all that he would be trying to do is to prevent inflation getting worse by controlling the general volume of credit available.

Mr. F. M. Bennett

I am sure that the hon. Member does not mean to be unfair, but as far as the true merchant bankers, discount houses and acceptance houses are concerned, the Chancellor's restrictions to clearing banks applied equally to them and were issued by directives applied in the same way.

Mr. Diamond

I carefully excluded them and referred to industrial bankers and hire-purchase companies.

Mr. Bennett

The hon. Gentleman included merchant bankers.

Mr. Diamond

If I said merchant bankers, I withdraw it immediately, because they are susceptible of control. I was specifically referring to that area, which largely is the subject matter of the Bill, where credit is not susceptible of control at the time when it is needed to be controlled. That is why fantastic, high rates of interest are offered, because credit is so scarce and it cannot be obtained elsewhere.

Having established the sort of criteria on which one could form a philosophy for judging the Bill, I come to look at the Bill itself. It is called the Protection of Depositors Bill. If the Board of Trade wanted to set an example in probity in the financial world in the description of anything which it is offering to the public, the last Title that it should have chosen for the Bill should be the Protection of Depositors Bill. The Title goes miles beyond the content of the Bill. It is a gross exaggeration which no reputable auditor, if called upon to certify a phrase like this in a prospectus, would dream of certifying.

We can accept Clause 1, which is the penal Clause and on which there is not much to argue. Let us see, however, what protection is afforded in the remaining Clauses. I agree that the right approach is in these advertising provisions. I agree that one should not stop borrowing, as the Bill does not do, from friends and relations in the privacy of small private companies. There is no reason for doing that. I am satisfied that the Bill does not, nor should it, hamper bona fide banking businesses.

For the rest, it is idle to call it a Protection of Depositors Bill. The most it can be called is a "Sources of Information for Certain Depositors Bill". That is as far as it goes. My hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever), who made an excellent speech, made the telling remark that the additional protection alleged to be given by the Bill is totally illusory.

This is mainly an enabling Bill and, therefore, ought not to be called even a "Sources of Information … Bill". This is a Bill under which regulations may be issued specifying actions which in due course will provide sources of information. That is as far as one can go. I agree with those hon. Members who have said that it is difficult to consider the Bill effectively without having been given the slightest idea of what is in the mind of the Board of Trade as to the regulations which will give the meat, teeth and guts of the Bill. I thought that the President of the Board of Trade was briefed to the point of being unnecessarily brief today.

One must make certain assumptions. Making those assumptions, all that these conditions about advertising will do is to produce information of a detailed kind which will be available too late, as many hon. Members have said, because it is not available before the first deposit is made, unless I misread the Bill. Clause 11 (1 says: every company … shall, on receiving a deposit from any person, furnish him without charge with— (a) a copy of the last audited accounts … It is impossible for a person to have considered it, which is the whole justification for the Bill, in time to decide whether to make the deposit or invest, as it can loosely be called.

What the Bill will do is to produce information which is detailed, technical and distant, because the information is given to him too late. The other information, which is given for future cases, is given by and large in the form of a a return at Bush House. However overcrowded London is, and however much the drift to the South has now taken place, it is still correct to say that not everyone lives within five miles of Bush House or within reasonable bus or underground fare of Bush House. The only way to carry out the purpose of the Bill would be for the proposing investor to take a trip to Bush House and see what is on the file there.

The whole trouble about all this is that, although an investor can be taken to the fount of information, he cannot be made to think. One knows this only too well. Therefore, what are we to do about it if there is a class of investors whom we want to protect, who are susceptible—I will not say gullible, but susceptible—to advertisements of this kind which most of us in the House would tear up as soon as we received them? The very fact that a company issued an advertisement of this kind would lead us to believe that there could not possibly be any sound investment available.

How are we to make a person of that inclination consider carefully before making an investment of this kind? It is him that the Bill sets out to protect. I will tell the House the obvious answer that comes to my mind. I apologise for having a slight personal interest in this matter, being a professional man of a kind. I am merely carrying on a precedent which the Government have set, and set very recently, on the Trustee Investments Bill. The obvious answer to this is to require investors, before making investment, to seek professional advice.

I can justify this very fully by quoting what the Financial Secretary to the Treasury said when he was Economic Secretary to the Treasury. He said this: My hon. Friend the Member for Torrington pointed out that many lenders have no recourse to expert advice, and I think it is at least questionable whether, without some further g3idance, many people would be much wiser about the safety of their money merely from having read a document required to be deposited with the Registrar of Companies under the Companies Act."—[OFFICIAL REPORT, 18th March. 1960; Vol. 619, c. 1683.] I accept immediately that there is to be perhaps a more detailed document. I accept that it has to be registered in two places instead of one, but it will be available for inspection only in one. I still say that what the Financial Secretary then said represents the whole truth, namely, that it is very doubtful whether we are any better off in our attempt to protect the public by notifying someone of a source of information of a kind which he probably cannot understand himself and which he would be most loath to look at, he being the sort of person who would invest on deposit in this kind of undertaking.

We are not out to protect the man from investing in a bona fide undertaking. We are not out to protect him from investing in the sort of company in which, if he took advice, he would be advised to invest. We are out to protect the man from losing his money by investing in a ramshackle show which does not know how to carry on its affairs, which cannot get its finance by the ordinary methods, and which tries these underhand methods—I deliberately say "underhand methods"—of appealing to the gullibility of the public and getting large numbers of small savers to part with a very substantial proportion of the money they can afford to invest. Those are the people we are seeking to look after and protect by the Bill. It is because giving information of this kind without advice is no protection at all that I say that the Bill does not justify its Title in the slightest.

I therefore think that we should look at the possibility of requiring advice to be given. Going on this principle, there is excellent precedent in the Schedules to the Trustee Investments Act, 1961, a very recent Measure. What sort of advice is required? According to the First Schedule, full advice is required before trustees invest in what are called "narrower range investments"—giltedged. Before a trustee invests in gilt-edged, he has to seek advice. Before he invests In fixed-interest securities issued in the United Kingdom by any public authority or nationalised industry or undertaking in the United Kingdom", he must seek advice. One would have thought that anybody would be safe in investing there, but the Government require any trustee investing under Part II to take advice first.

Under Part HI, the wide-range investments, he can invest In any securities issued in the United Kingdom by a company incorporated in the United Kingdom on taking advice. What are these securities? They are shares, debentures, Treasury bills and tax reserve certificates. In short, the precedents set up by the Government is that no trustee can invest, not in deposits under any circumstances at all, but not even in shares or debentures of companies which are of a very high standing, which have to have a very substantial capital, and which have to have a very good history of dividend declaration. Not even in companies of this kind can a trustee invest in shares or debentures without taking advice.

I am on fairly secure ground here. If a trustee is not allowed to invest in such obviously acceptable investments without taking advice, why do the Government think that the ordinary man who is appealed to by advertising of this kind is capable of protecting himself by merely having access to information of a detailed and, to him, not very comprehensible kind?

I want to follow out the question of seeking advice a little further. If he were to seek advice, where would he get to? I am anxious that this should be given the fullest consideration, because we should not be left with a position where it could be said of our Welfare State that we look thoroughly after our investors provided they are dead, but only in those circumstances. If he sought advice, what would happen?

I have my own views on this, but I checked up with accountants and solicitors in the House as to what advice they would give to a client who said, "Look at this. I have received an advertisement from a trading or commercial or manufacturing company". I deliberately exclude a finance house of any kind. "I have received this advertisement. They want me to put up DC on loan at interest, without security, without a voice in the management of the company". What advice would such a professional man give to such a client? The answer is very easy. He would tell him not to invest in any circumstances. I cannot imagine that any solicitor, chartered accountant, bank manager or anybody responsible for giving advice about investment would say otherwise.

I am gradually being forced to the conclusion that the flabby provisions of the Bill, as the hon. Member for Cardiff. North (Mr. Box) said, are nothing like adequate to deal with the needs of the situation. The Government recognised this when dealing with trustee investments. They now allege that they are trying to protect the ordinary investor, who has nothing like the advice available to the trustee. We realise that these flabby provisions in the Bill will by no means do.

What should one do? This is the question to which the logic of any argument of opposition to a particular series of proposals inevitably leads. This one has to answer. I agree with the provisions of the Bill in the sense that it is not right to interfere with a private company or a private man borrowing from friends and relations, because they know the background of the person. They know who they are dealing with.

I should have explained that this is one of the three essential elements in investing. I am sorry that I omitted to explain this. The reason why no professional man would advise investment of the kind to which I recently referred is that the three necessary elements are absent—the element of security, the element of a voice, and the element of knowledge of the background of the business and the person. A person who invests in debentures has security. A person who invests in shares has a voice and some element of security. A person investing by way of a deposit has none of these things. It is the least satisfactory possible kind of investment and should not be dignified with the title of "investment".

It is a pity the Bill does not say just "to deposit" instead of "to invest on deposit". That in itself is a misleading phrase. It is because the private individual has knowledge of his friends and relations, and so on, that we can leave him to lend money to his cousin or whatever the case may be, be it a private individual or a private company.

I agree that we should exclude from the control of the Bill deposits from bankers. Bankers know their business. They can look after themselves. All the three elements I have mentioned are present when a banker deposits, in the true sense of the term, as anyone with an overdraft knows only too well. The banker knows the background, and he has a voice in what is going on. He sees each day how much is being paid in and how much is being paid out, and he has only to lift the telephone to have the managing director or the financial director round to him to explain something or other. The banker has the right to inspect the balance sheet, and gets private returns in addition. He has every possible control of what is going on. His position is totally different from that of the depositor described in the Bill. We can, therefore, exclude, as the Bill does, deposits from bankers.

Then we have to cope with the awkward area left untouched, and I was sorry that when the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid)—who continued the debate from the back benches with an excellent speech, in which he attacked the flabbiness of this Measure and said how much it needed to be strengthened—came to this fence, he not only stopped, but got off his horse completely, and went home. We should have enjoyed hearing a possible solution from him.

I offer a solution which might at least tighten the Bill. Finance houses should certainly be allowed to solicit deposits. They use money, and must borrow it. They cannot finance themselves adequately on share capital and loan capital, or the ordinary kind of debentures. Theirs is a kind of business that requires money coming in at a varying level, so they must have the right to borrow money of that kind. One does not want to limit them to borrowing from the larger sources. They might borrow from smaller sources to the extent which it might be useful, so let them borrow by soliciting in the ordinary way, but let it be controlled—and I mean controlled. Let it be licensed.

Why should we not take powers in this Bill to license every finance house as the Government have taken powers in Section 1 of the Prevention of Fraud (Investments) Act, 1958, to license dealers in securities? I do not know the comparative numbers, but I should not imagine that there was such a difference as would make a difference in the quality of the Board of Trade's administrative arrangements.

This, at all events, would give some real sense of security, and I do not doubt, although I have no right to say it, that, having regard to the evidence the Finance Houses Association gave before the Jenkins Committee, its members would themselves welcome something of this kind. They regard it as essential to discipline themselves in regard to liquidity ratios, size of capital, years of business before becoming members of the Association, and so on, and I am quite sure that they would welcome the approval of such a stamp saying that they were authorised in the same way as dealers in investments are authorised in the Act to which I have referred. I do not think that anything less would he a satisfactory control.

That deals with bankers, private companies, private individuals borrowing without circularising, and finance houses, which would be allowed to solicit for deposits under that kind of supervision and real control. We now come to the private individual. Should he be allowed to solicit? The President of the Board of Trade says "No", and I do not disagree with that. When he was asked for his reason by my hon. and learned Friend the Member for Kettering (Mr. Mitchison), the right hon. Gentleman gave a very illuminating answer. He said that the private individual would be authorised by the Board of Trade to solicit for deposits in special circumstances only, and that those circumstances would have regard to the objects, I think he said, for which the deposits were to be solicited. I think that those were the right hon. Gentleman's words.

It is always nice to build bridges where one can in matters that are not really matters of intense party difficulties, and I accept immediately that it is right that the Government should prohibit the soliciting of deposits by individuals except by individual permission which would have regard to the objects for which the money was being sought.

Having eliminated that class, we are left only with the rest. The rest would be public companies—and here, let me get one point out of the way at once. The Bill refers to private companies issuing notices to the public and soliciting from the public, and, as I understand it, it says that for as long as they do solicit, and for a little bit longer, they shall be regarded as public companies. After a suitable period, they return to their previous state of being private companies. That is what the Bill now provides.

Let me say at once that I consider that to be an absolutely untenable proposition—I was about to use much stronger language. It is utter nonsense. It is not found in the Companies Act, where the rule is that once a public company, always a public company. In that Act, if a company starts by being a private company and then becomes a public company, there is no means of its again becoming a private company—nor should there be. Why complicate the Bill by introducing provisions by which a private company that has carried the public activity of soliciting deposits from people and then, for some reason, stops, has the right to return to the position of a private company, with the privileges flowing from that? There is no justification for it, and I hope that during the Committee stage this series of provisions will be eliminated.

We are now left with the public companies that are not finance houses; not bona fide banks under the definition of the Companies Act, but those companies carrying on a business, a trade, a manufacture or commercial enterprise in one form or another, which think it right to finance their business by seeking deposits from the public. For myself, I cannot see why those companies should not be prohibited in exactly the same way as the President of the Board of Trade says that private individuals should be prohibited.

We want to protect the public and the investor. I have tried to show, and I think that I am right, that anyone from whom a deposit was sought under this method by a trading or a commercial company of this kind, and who sought advice, would undoubtedly be advised, "Do not touch that investment with a barge pole." That would be the advice—and the bill for it would follow immediately In those circumstances, why should we attempt to distinguish, as the right hon. Gentleman has done, between a private individual and a company? I am quite unable to follow that distinction. Why is it right for the Government to prohibit a private individual advertising for deposits, and not right to prohibit a company, other than the one that needs money to carry on business, from advertising for deposits? What is the difference?

Even if there is a theoretical difference—and one knows that behind a company there is a director, a human being, or more than one human being—what is to prevent any individual who would be deterred by the right hon. Gentleman's refusal from turning himself into a public company? He can do that in five minutes—off the hook—as everyone knows. He signs the papers and sends them in, and only has to wait a little while to make sure that the name of the company is accepted. It is as easy as pie to do that. It costs a modest 20 or 25 guineas, and the whole job is done.

In that simple way, he has avoided the whole of the barrier that the right hon. Gentleman was proposing to put between a private individual and his right to solicit money on deposit—

Mr. H. Lever

Is it not quite obvious why the private individual is forbidden to borrow? It is simply that to enable the Bill to control a private individual in the same way as it proposes to control companies would mean compelling private individuals to keep accounts in a detailed manner, as provided for in the Companies Act. That would have involved skill in drafting and, as the Bill has been hurriedly drafted, the Government have excluded private individuals from it. The reason is not as my hon. Friend imagines, but because the Bill is a hasty hotch-potch. The Government had not time to draft it properly, and this provision would have required more time.

Mr. Diamond

As I do not have my hon. Friend's capacity to discern with such clarity the methods used on the other side, I had not realised that, at the pace the Government go, the seven years during which the Government have been considering the Bill were inadequate for proper consideration.

Be that as it may, I am arguing what I think to be the very valid point that the President of the Board of Trade could have said, "This will cause administrative difficulties. We cannot allow a private individual to solicit deposits, because we have no machinery for controlling him, whereas a company is much more readily controlled." This, the right hon. Gentleman might have said, and he would at least have had the administrative argument to support him. With the honesty that we always recognise in him when he is replying, he at once said that the justification was that the Board of Trade would have regard to the objects for which the money was being solicited.

That is an excellent reason. I am sure that the objects that the Board of Trade would have in mind would be the kind of which we on this side would also approve, but if those objects are a sufficient guide for permitting soliciting of deposits by private individuals, they should be a sufficient guide for soliciting of deposits by public companies. If one could tighten the Bill in this way, it would begin to make some sense, and justify its Title.

I recognise that all this goes a good deal further than the Bill itself provides for, and that there may be difficulties with Financial Resolutions, and so on, but I am illustrating that we can deal with the problem if we want to; that there is likely to be little objection from the interests affected—that, in fact, there could be a great deal of support from the interests affected—and that what we want to do is to bring the standard of the worst up to the standard of the best—and that is a very high standard—and protect those who really need protection, and whom it is the responsibility of the Welfare State to protect.

I therefore very much hope that when, in Committee, we try to put strength into this flabby Bill, try to give it muscle, try to give it the power to look after the depositor, as the hon. Member for Walsall, South indicated, we will have the co-operation of both sides of the Committee in our attempt to improve the Bill. It is in that hope, and for no other reason, that I share with my hon. and learned Friend, and with others of my hon. Friends who have spoken, the view that in those circumstances, we should not stop the Bill having its Second Reading.

7.10 p.m.

The Economic Secretary to the Treasury (Mr. Edward du Cann)

My right hon. Friend the President of the Board of Trade has asked me immediately to make the point that the constructive ideas and suggestions which have been made during the course of this valuable debate will be most carefully considered by him between now and the Committee stage. There is no draft legislation which is so good that it cannot be improved, of course, and we shall look forward to accepting any helpful suggestions which may be made in Committee and which will have the effect of improving the Bill; but I cannot accept that this is a flabby Bill in any sense whatsoever.

I should like to make certain general observations and thereafter I will endeavour to answer as many of the detailed questions which I have been asked as time allows. May I say how grateful we are for the support which the Bill has already received from the vast majority of hon. Members who have spoken in the debate? We particularly appreciate the support of the hon. Member for Westhoughton (Mr. J. T. Price).

The need for legislation arises because a company raising money by taking deposits is not issuing shares or debentures and is therefore not subject to the prospectus provisions of the Com- panics Acts; nor, since receipts for deposits are not securities, is it subject to the safeguarding provisions of the Prevention of Fraud (Investments) Act, 1939, which, as the hon. and learned Member for Kettering (Mr. Mitchison) said, was re-consolidated in 1958. The point, therefore, is that something has to be done on this subject of deposits.

I was glad that the hon. Member for Gloucester (Mr. Diamond) made the point that most companies advertising for money deposits are well managed and highly reputable. A minority have been recklessly managed, some fraudulently managed, and have got into difficulties and investors have lost money, while others have been in peril of doing so, and prominent among them have been those whom, as my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) reminded us, Parliament has the heaviest duty to protect, namely, the small investor and especially the unsophisticated investor. I was particularly struck by what my hon. Friend said on the subject of the loyalty of these people, for he was perfectly right and it is one of the tragic elements in this whole situation.

Of course, the companies themselves have some responsibility in the matter and it is satisfactory to note that in the Finance Houses Association and the Industrial Bankers Association a good deal of work has been done already to establish common standards and high practices, and I think that one should acknowledge that. None the less, more requires to be done, and it is perfectly plain that the Government have a responsibility in this matter.

There has been a good deal of talk on the subject of delay. That was perfectly fair, but, on the other hand, perhaps a post mortem does not now matter so much as a sensible Measure to deal with the position. Indeed, one can say with absolute certainty that if Parliament approves the Bill, the chance of other people losing money in future must be diminished. The point is that we should get on with the Bill.

The hon. and learned Member for Kettering spent a little time discussing the form that the legislation ought to take, and he referred particularly to the kind of legislation which we have in respect of building societies. He suggested that this legislation, or, at any rate, some of it, could take that form. That would be perfectly possible and practicable if we were dealing with a homogenous group of companies, but we are not. We are dealing with a large number of companies which are all quite diverse in their methods of operation, and it would not be physically possible to find one method, similar to that with building societies, to control the whole situation.

The hon. and learned Gentleman quoted the Economist, looking fixedly at me the meanwhile. Perhaps I may be allowed to quote it back at him, for the Economist debated this whole problem in the article to which he referred. It came to this conclusion: Statutory regulations of business practice would hardly afford protection against the determined rogue, and would certainly hinder the honest majority in the legitimate pursuit of business. That is the Government conclusion and I am satisfied that it is accurate.

Mr. Mitchison

This is clearly something which we shall have to discuss later. However, I believe that there are about 1,200 companies doing hire-purchase finance of some kind. I do not know the Board of Trade's estimate of the number of companies financing property development. Perhaps we could have it and perhaps we could be told who these mysterious "other companies" are. I see that friendly societies are especially excepted. My hon. Friend talked about the man who converted himself into a company, but I know of a man who, being about to marry, turned himself into a friendly society and complicated the marriage settlement. He has been allowed to take deposits.

Mr. du Cann

Having recently been happily married myself, it seemed to me that my duty was to turn myself into an unfriendly society, and that I have done. I have made a note of the hon. and learned Gentleman's question and I will answer it in the course of my remarks.

We were very much taken to task by the hon. Member for Gloucester for not having a sufficiently philosophical approach—I think that I have fairly quoted which he said. My hon. Friend the Member for Torquay (Mr. F. M. Bennett) said some wise words in this context and perhaps I may add to them. I should like to define what I believe to be the responsibility of the Government in these matters.

We are all very well aware of the social revolution which is now taking place in Britain and which has made such dramatic strides forward in the years since the war. Average earnings have substantially increased and people have more money to spend and more money to save than they have ever had before. On the other hand, most people are comparatively unsophisticated about money matters and there is, therefore, a great need to ensure that they are always put in possession of the fullest possible information wherever possible.

The point has also been made that there is little use in giving people the fullest information if they are unable to comprehend it. I have always thought that there is, therefore, a great need for education in this respect, and although a certain amount has been said about newspapers somewhat cynically—except by the hon. Member for Westhoughton who rightly paid great tribute for the public spirited work which the Investor's Chronicle did at the time of the MIAS affair—newspapers in recent years have done an excellent job in this respect. Not only have many newspapers newly adopted financial columns, but the services given by City editors in questions and answers and in correspondence and through their general readiness to help and advise people who read their columns have merited very strong praise.

The hon. Member for Gloucester suggested that perhaps we should consider writing into the Bill the compulsory requirement that any potential investor should seek advice. That would be very hard to do from a practical point of view and I do not believe that the analogy with the Trustee Investments Act, 1961, is apt, for the types of investment in the First Schedule of that Act are all, or almost all, investments which require approaches to be made on the Stock Exchange, that is to say, through an agent, while in the cases with which the Bill is concerned people are in direct touch with the companies concerned.

Sir H. d'Avigdor-Goldsmid

There is a point which may be overlooked. A stockbroker has a commission which is on a basic rate, whereas one of the many scandals which has occurred with deposits through the actual agents soliciting deposits has been that they have been receiving commissions of up to 25 per cent. or more. That is an especial evil and is relevant to what my hon. Friend is saying

Mr. du Cann

I am grateful to my hon. Friend the Member for Walsall, South for making the point. It is certainly a matter which requires study, but I do not believe that it is practically possible to oblige the man and woman in the street to obtain advice. I do not think that it is on.

The first duty of the Government is to ensure that so far as possible investors are protected against the cheat. The hon. Member for Gloucester was good enough to say that he thought that on the whole the Bill did that. But then we go on to the foolish and the reckless investor and, indeed, the greedy investor, for many of the people who put their money into dubious enterprises are people who are very greedy indeed, and that is their only reason for investing.

I do not believe that the Government are responsible for protecting all these investors and I believe that that is the view of the majority of people. It must be right to endeavour to encourage people to use their individual judgment. If they are careless, that is a matter for them and not for the Government. But they have a second duty, and that is, in framing legislation of any sort not to impose unduly onerous conditions on those who are carrying out, or intend to carry out, legitimate business of any sort, and I am glad that during the debate no one has suggested that this Bill does that.

There are two technical matters about which I should like to give the House further information, and about which I have been asked particularly by my hon. Friends the Members for Torquay, for Cardiff, North (Mr. Box), for Bristol, North-East (Mr. Hopkins), for Worcester (Mr. Walker), and for Torrington (Mr. P. Browne). Both relate to this power of the Board of Trade to make regulations; the first in respect of advertisements, and the second in respect of accounts.

With regard first to advertisements, as my right hon. Friend explained, the principle behind the Clause dealing with this subject is that all advertisements for deposits are prohibited other than those excepted under Clauses 2 and 3. The aim will be to ensure that the advertisement is not misleading, and in general that the persons towards whom it is directed, or their advisers, can obtain, though not necessarily from the advertisement itself, a reasonable amount of information regarding the enterprise with which the deposit would be made. Advertisement for deposits with companies incorporated in, or having established places of business in Great Britain are exempted conditionally. The conditions are that the advertisement complies with any regulations made under the Bill with respect to its form and content, and in particular that the company delivers accounts to the Registrar and to the Board of Trade before advertising.

I turn now in particular to the regulations which will be made to control the form and content of these advertisements. It is not the intention that they should prevent the sort of two-line advertisement which invites the public to apply for further information about a company. This type of advertisement, as we know, is standard practice, and is used by hire-purchase companies of high repute. It is rather the intention to prevent advertisements which are misleading because they give partial information, and my right hon. Friend gave examples of this earlier. I will repeat them in this context: for example, assets without liabilities, and authorised capital without paid-up capital. My hon. Friend the Member for Torquay asked about the use of a word "guaranteed". I would say that this would fall within this context.

The regulations will require that advertisements shall give the name of the company, and its registered business name if it carries on business under a name other than its company name. Advertisements other than the short two-line advertisements, for example circulars, about which I was asked by my hon. Friend the Member for Bristol, North-East, or the further particulars offered in short advertisements, may be required to give particulars about such matters as dates of incorporation, names of directors, names of auditors and bankers, and matters of that sort.

My hon. Friend the Member for Walsall, South referred in particular to change of ownership, and again I think that this is a valid point. They may also be required to state the date of the latest accounts delivered under the Bill and show where they may be inspected.

Mr. F. M. Bennett

This is important in view of the challenges which have been thrown across the Floor of the House. My hon. Friend has reassured me on the use of the word "guaranteed" and presumably he would agree that "full security" is equally misleading. Would my hon. Friend also make clear that the use of descriptive titles for which there is no basis of fact would also come under this control? In other words, if permission is refused for "bank" to be part of the title, it will not be permissible for a person to add it after he has been refused it as part of the title of the firm unless he gives good reasons why he should be permitted to use that form of title.

Mr. du Cann

There are difficulties about this point, but I shall refer to it in a moment.

I turn to the accounting provisions about which I was asked by my hon. Friends the Members for Cardiff, North and Bristol, North-East. These provisions are the core of the Bill because they are designed to provide information which will enable depositors, their advisers, and financial commentators, to evaluate the financial strength of the companies which advertise for deposits.

May I say a further word in parenthesis on the subject of advisers. I am not altogether unsympathetic, and I do not want the hon. Member for Gloucester to think that I am, in regard to his point about advisers. I mention it in this context particularly because it refers again to the suggestion which has been made that perhaps the layman cannot understand accounts. What I think is interesting in this context is that it is much easier today than it was 10 years ago, and certainly infinitely easier than it was 20 years ago, for a man to consult a bank manager or an accountant, and this will be a continuing process.

Mr. J. T. Price

The Companies Act requires directors of public companies registered under that legislation when seeking new equity capital by public subscription, to publish a whole mass of detail in their advertisements for such revenue. Why should not similar particulars be given by financial institutions inviting depositors to put their money into industrial banks and so on? Why cannot the same rules be applied?

Mr. du Cann

I think that the whole point is that it does not seem to matter very much in what way the information is given, provided it is given: whether it is given in halves or in pieces, provided it is all given. That will be the cumulative effect here. It would be an intolerable burden on companies of this sort if every time they advertised for any small amount of money, which they might do because they might have need to raise only a small amount of money, they were obliged to print a full prospectus. That is unnecessary. Provided the advertisements are not misleading, and provided the man to whom they are appealing not only has the information, but is told where he can get it, I think that honour will be satisfied. Any other obligation would be too onerous.

The provisions of Clauses 5 to 14 are technical, and I propose to deal only with some outstanding features. I want therefore to deal with the form of accounts. The Bill enables the Board of Trade to make regulations as to form and content. These regulations will take account of the facts, first, that a part, and possibly a large part, of a company's liability will be in the form of obligations towards its depositors; second, that part of a company's assets will probably be in the form of debts owed to it. I think that these are the basic points. Part of the assets in the form of debts owed will be the case when a company is engaged in hire-purchase business, and this will be the position of most of the companies to which the regulations will apply.

The regulations will also require information on the following points. First, the amount of deposit borrowing and the amount of total borrowing; secondly, the number of depositors divided into classes according to when the deposits become payable; thirdly, the assets of the company which consist of debts owed to it under instalment credit agreements—that is to say, hire purchase agreements, credit sale agreements, agreements for the hiring of goods and loans repayable by instalment, with some indication of the division of agreements between, for example, vehicles, farm and industrial equipment, household goods, and other goods, and after deducting the provision made for bad or doubtful debts fourthly, assets of the company arising from loans made other than under instalment credit guarantees. Some analysis of these loans will be required to show when they are repayable, and whether, for example, a large sum is due from any one person, or whether they are made to associated companies.

The regulations will additionally require a company to give a description of the general nature of its business and all the business of its subsidiaries, if any.

I realise that this is a technical and probably rather boring explanation, but I thought it right to go into some detail in the matter so that the House and the management of some of the companies which will be affected may be as fully informed as possible. There will, of course, be a further opportunity to debate this matter in Committee, and indeed when the regulations are laid before the House there will then be an opportunity to debate them.

Mr. Mitchison

I take it that these regulations are to be made under Clause 12, and that this information will be supplied to the Board of Trade. What will the Board of Trade do with it to protect the depositor?

Mr. du Cann

I would say that they would do as follows: they would examine it with care and attention, and would attempt to evaluate it and use it as an indication—which would be very easy to the trained mind—of the substance and stability of the company concerned, and then keep the situation constantly under review—to coin a phrase.

Mr. Jay

Surely, if they had been doing that for the last five years just as many depositors would have lost just as much money as they have in fact lost.

Mr. du Cann

That is not an appropriate point.

Mr. Mitchison

As the hon. Member rightly says, this is a matter of import- ance, I want to know what the Board of Trade will do with this information in order to protect the depositors. The President of the Board of Trade suggested that the financial newspapers could do the job on behalf of the Board of Trade. Are the financial editors to be summoned to a conference and handed the records of all these companies? Are they alone to be privileged to see them? What else will happen with them?

Mr. du Cann

What my right hon. Friend had in mind was quite clear. If these documents are put on the file of the Registrar of Companies, access is free to bankers, stockbrokers, accountants, solicitors and financial journalists, and the fact that these documents are on file must inevitably be a deterrent to the dishonest operator and manager of a company. That point should be recognised.

I said that I would do my best shortly to answer some of the other points made in the debate. My hon. Friend the Member for Torquay asked about the position of acceptance houses. These will be treated precisely in the same way as are banks and discount houses, that is to say, they will be exempted from the Bill's provisions. The hon. and learned Member for Kettering asked me particularly about the types of company involved, and how many companies were likely to be affected by the provisions of the Bill. It is not possible to make a precise estimate, but the number must he between 500 and 1,000. The main type of company is either the hire-purchase company or the credit-trading company. There are a certain number of property development companies also, and those two classes together make up the majority.

Other classes about which hon. Members have asked are only peripheral. None the less, it is possible for them in the future to engage in other forms of ordinary, legitimate commercial activity while raising deposits of this sort.

Mr. Mitchison

How does the hon. Member reconcile his figure of between 500 and 600 hire-purchase companies with the Economist's estimate of 1,200?

Mr. du Cann

I do not reconcile the two t they are obviously different. What I said was that, on the best estimate we could make, between 500 and 1,000 companies would be affected. It is anybody's guess as to the number ultimately affected, but it will certainly amount to a fair number.

The hon. Member for Westhoughton and my hon. Friend the Member for Torquay drew attention to the need to prevent the misuse of the term "banker". I understand their feelings in this regard, but although it must be absolutely appropriate to endeavour to avoid misleading descriptions of any sort, there are peculiar difficulties in regard to this term. It is now in general usage by some highly reputable firms, and I am not satisfied that it will necessarily be advisable to go outside the recommendations of the Jenkins Committee. That Committee appreciated the difficulty and said: We agree that this practice is undesirable but we think that a general control over the use of even a limited number of descriptions would be going too far". None the less, we shall consider what has been said on this point.

My hon. Friend the Member for Bristol, North-East asked whether circulars are advertisements. They most certainly are. The hon. Member for Gloucester and my hon. Friend the Member for Worcester asked why accounts could not be sent to people before deposits are made. From my own experience in the City of London I can tell them that this is not a practical possibility. It would not be possible to guarantee to get the accounts or the information that it was sought to produce into the hands of everybody, as a matter of obligation, before they made deposits. Managers of these companies receive money out of the blue, without knowing where on earth it has come from, or they may receive it through agents. The question of a yearly distribution will be considered.

As for casinos, we had a division of opinion between the hon. Member for Gloucester, on the one hand, who thought that the casino type of advertisement was not appropriate for the Bill, and other hon. Members—including my hon. Friend the Member for Cardiff, North and my hon. Friend the Member for Torrington—who said that the casino type of advertisement should be covered by the Bill. Again, we shall consider what has been said. Nevertheless, there are great difficulties in drafting appropriately to include casinos within the scope of the Bill. We shall consider the matter carefully, but I am not saying that it can be covered.

A number of other points have been raised. Time does not allow me to answer them all, but I repeat that they will be considered between now and the Committee stage. I also appreciate that many hon. Members have spoken with special knowledge of these subjects, which has made their contributions to the debate very valuable. I repeat especially to my hon. Friend the Member for Walsall, South that if the Bill can be improved in Committee we shall do our best to improve it.

I end on a personal note. As hon. Members on both sides of the House will know, this is a subject in which I have taken an interest for some years. Like others who have spoken in the debate, I have asked a series of Questions in the past. I have pressed for this type of legislation, and it is therefore a great personal pleasure to have some responsibility for introducing the Bill, under the leadership of my right hon. Friend the President of the Board of Trade. I pay tribute to him today for introducing the Bill at all.

In my judgment this is a good Bill, but I do not say that it is so good that it cannot be improved. This would be too much to claim, and I have the authority of my right hon. Friend to say that we shall do our best to improve it in Committee. But I claim that the Bill is necessary and appropriate. I believe it to be very much what is needed, and I warmly commend it to the House.

Mr. Mitchison

Will the hon. Member consider one possibility? I listened carefully to what he said about other companies receiving deposits, and I came to the conclusion that, substantially, this was a Bill to deal only with two classes of depositor—the hire-purchase finance depositor and the property development depositor. I am not asking for an answer now, but I suggest that it might be wise to consider introducing a Bill to deal only with those two classes and to deal later with other matters which seem to me to be of minor importance. I except only the fraud classes, which are of general application, and ought to be.

Mr. du Cann

I am sure that my right hon. Friend will note what the hon. and learned Member has said. There is always difficulty in legislating in a changing situation. The Bill has some flexibility, through the regulations; indeed, that is one reason why it has been designed in this way. At the moment it takes in all depositors, and that is probably right. However, we shall certainly consider what the hon. and learned Member has said.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 38 (Committal of Bills).