HL Deb 09 May 1911 vol 8 cc266-74

LORD ORANMORE AND BROWNE rose to ask His Majesty's Government whether in sales under the Irish Land Act, 1909, a portion of the purchase price is retained by the Land Commissioners for the redemption of Government and other charges; and whether it is the case that the stock so retained is habitually sold by them at a price considerably below the market quotation of such stock; and whether arrangements cannot be made which will not entail this heavy additional loss on landowners.

The noble Lord said: My Lords, the Question which stands in my name is a rather technical and complicated one, and I must therefore trespass for a few minutes on your Lordships' time while I endeavour to make it clear. Those of your Lordships who are interested in Irish land legislation may remember that by the Act of 1903, which is commonly known as Mr. Wyndham's Act, the vendor in disposing of his property received cash, but this was altered by the Act of 1909, which enacted that in future payment should be made in Stock. When the Act of 1909 was in Committee in this House a proposal was made that what was sauce for the goose should be sauce for the gander, and that if the Government thought, it sufficiently good to pay landowners in depreciated Stock all superior interests, such as tithe rent charge, repayment of loans from the Board of Works, and other superior interests, which, of course, have to be redeemed when an estate is sold, should be paid in the same Stock; but this did not commend itself to the Treasury, which demanded its pound of flesh. Consequently when an estate is now sold it is necessary to sell sufficient of the depreciated Stock to enable the superior charges to be repaid in cash.

Perhaps your Lordships will allow me to show how this works. I will take an estate with which I am familiar which was sold for £17,000, and on which the superior charges amounted to £7,700. Under the Act of 1903 the landowner would have received £9,300 in cash, but in order to realise £7,700 in cash to pay off the superior interests it is now necessary, at the price at which Irish 3 per cent. Stock is quoted on the Stock Exchange—namely, 91–92—to sell £8,468 of Stock. Thus only £8,532 of depreciated Stock is handed over to the landlord who sells, as against £9,300 in cash under the 1903 Act. I am not making a hardship of this because it is the law. But what I do complain of is that, instead of obtaining the price at which the 3 per cent. Stock is quoted in the market, the Estates Commissioners when they sell to redeem superior charges obtain a nitwit lower price.

I have a case in point. I need not quote the case in this House, but I shall be happy to give details to my noble friend who will reply on behalf of the Irish Office if he wishes to have them. In this case the Stock was sold at 87 on March 2 for the payment of these charges, whilst the price of Irish 3 per cent. Stock was 91–92. That makes a difference of at least 4 per cent. I dare say my noble friend will tell me that the Stock which is sold is not the same Stock as that which is quoted at 91–92, and he will be perfectly right, because the Stock which is quoted at 91–92 is mature Stock carrying with it interest to the purchaser, whereas the Stock which is sold by the Estates Commissioners is immature Stock and does not carry interest except from the next Gale Day. But the interest on 3 per cent. Stock for six months is 1½ per cent.; therefore this fact ought not to make a difference of more than 1½ per cent. in the price, whereas this particular Stock was sold at 4 points below. And I would point out that this difference of 2½ per cent. makes a further loss to the landlord on the sum I have quoted of £232.

I know that the reply to this is that this immature Stock is only put on the market in very small quantities, and consequently there is no market for it. It has to be sold through a Chancery broker, of whom I believe there are only eleven, and these gentlemen take it in turns to sell, with the result that there is no market and they virtually fix the price of the Stock. Another answer that has been suggested to me is that it will be said that the Estates Commissioners realise this Stock at once in order to pay off charges on the estate which are bearing heavy interest and which would continue to accrue to the next Gale Day if they were not paid off. But even supposing the charge to be 5 per cent. on the sum I have mentioned, there is still shown a considerable loss to the landowner over the difference if the Stock were kept until it became mature Stock.

It is not enough for me to make a complaint as to ibis. I think that a remedy which might meet the case ought to be suggested if possible. Two or three remedies have been thought of. One is that the Estates Commissioners should retain sufficient Stock to be ample security allowing for variations of price till the next Gale Day, and should then sell it as mature stock and hand over the balance, if any, to the vendor. But I think there are difficulties and objections to this course. It has also been suggested that the landlord should find sufficient cash to pay off these charges and then the difficulty would not arise. But we must remember that Irish landlords as a rule are not rich, and that many of their estates are in trust. Consequently the Stock when realised would belong to their trustees and not to them. It would, therefore, be impossible for them to obtain an advance in cash from any bank as they have no security to offer.

But it seems to me there is a solution to this question which would be fair to the landlord and would not damage the tenant or the Treasury. It is this, that instead of issuing immature Stock the Estates Commissioners should issue mature Stock, and in making payments to the landlord should deduct the interest that has accrued from the last Gale Day to the date on which the Stock is issued. It seems to me that this is a mere matter of book-keeping, but it would have this result, that the Stock would be quoted on the market as mature Stock and would consequently rank with the other Stock for which there is a market. I hope this suggestion may recommend itself to His Majesty's Government. As I have pointed out, the loss incurred by landlords under the 1909 Act is already a very heavy one, and I feel sure that His Majesty's Government have no wish in any way to increase that loss unless it is absolutely necessary. I beg to ask the Question standing in my name.

THE PAYMASTER-GENERAL (LORD ASHBY ST. LEDGERS)

My Lords, I have in the first place to thank my noble friend for having kindly postponed this Question from last week. As the noble Lord has told your Lordships the Question raises a very complicated point, though I think not one of very great magnitude. Perhaps I might state to the House the exact position of affairs. When advances for land purchase are made in Stock, the Stock so advanced carries dividends from the dividend day next after the day of issue. The person to whom the Stock is issued receives personally a fractional dividend for the period between the sale and the date of the advance and the first dividend on the Stock. Such Stock until the dividend day next after the date of issue has passed is commonly called immature Stock to distinguish it from Stock which carries the ordinary rate of interest. The true difference in value between mature and immature Stock, no matter when sold, is, therefore, half a year's dividend—that is to say, in the case of 3 per cent. Stock the difference would be £1 10s. per cent. Thus mature Stock sold to-day carries half a year's dividend payable on July 1, whereas on immature Stock sold to-day the first half-year's dividend would be payable next January.

In practice, however, I admit that the difference is somewhat greater. This difference is due to the fact that there is a very restricted market for the sale of this Stock. The purchaser is usually the stockbroker, and seeing that the Stock is of no value until it has matured he has to stand out of the money until that day arrives, and naturally he expects something for that consideration. In cases arising since the Act of 1909 the advances are made in 3 per cent. Stock, and in cases which were already pending at the time of the passing of that Act, amounting to upwards of £50,000,000, the advances are still made in cash unless the vendor elects to take a part or the whole in Stock. But we are only considering cases where the vendor is paid in Stock. The existing Treasury rules on the subject precisely follow the rules that were in existence when all advances were made in Stock—

LORD ORANMORE AND BROWNE

But Stock at that time was at a premium. Now it is at a discount, which is a very different thing.

LORD ASHBY ST. LEDGERS

My point is that the method in question has been in operation for a long time. Now let me describe the method of procedure. When an advance is made in Stock the Stock is inscribed to the credit of the estate, and as soon as legal requirements are complied with the advance is distributed by the Judicial Commissioner. Upon such distribution the necessary amount in Stock is sold to realise whatever charges there may be on the estate, and if the Stock has not become mature it has to be sold as immature Stock. But this is the real point. The date of the distribution depends chiefly on the vendor himself. It is within his option to decide whether it shall be sold at once or whether it shall be kept till the next Gale Day, when it would rank as mature Stock. The Land Commissioners do not press forward the distribution if the vendor, in order to avoid the loss of which the noble Lord complains, desires it to be retained until it has become mature. In general vendors are anxious to pay off their obligations because in many cases they bear very heavy rates of interest, and they are anxious to realise the residue, including the bonus, and very often it is to their advantage to sustain the loss which they may have to encounter on the sale of immature Stock in order to get a prompt settlement of their existing charges. But it is always very largely, if not entirely, within the discretion of the vendor himself as to which course he will adopt.

The losses sustained by vendors owing to this transaction are nothing like so large as the noble Lord's speech might lead your Lordships to suppose. Up to the present the sales of immature 3 per cent. Stock have amounted to only £18,900, or 4 per cent. of the total advances. With regard to 2¾ per cent. Stock, the sales have amounted to only £151,000, or less than 6 per cent. of the total. That shows that the grievance is not a very extensive one. The noble Lord has alluded to the difference between the theoretical and the practical price of this Stock being as much as 4 per cent. I think he has given your Lordships a rather exaggerated impression on that point. I may say that the last simultaneous sale of 3 per cent. mature and immature Stock took place on March 29 last, when the former fetched 91¾ and the latter 89⅜—a difference of 2⅜; but the true difference being 1½, the excess of difference is only ⅞, which is not a very large sum. In fact, on the £18,900 the difference in money only amounts to £180. The greatest difference in the price of these Stocks occurred in a small transaction of immature Stock on March 6, when the difference in price was 3¾, or 2¼ in excess of the true difference.

Now I come to the 2¾ per cent. Stock. The last simultaneous quotation of mature and immature Stock occurred on May 2 last, when the difference was 23/16ths; the true difference was 1⅜, and the excess of difference, therefore, was 13/16ths. If you apply that to the total sums of immature Stock which has been sold, you will see that the loss to the vendor owing to this disability amounts to only £1,400; so that, taking the two Stocks, in one case you get a loss of £180, and in the other a loss of £1,400, and that is the extent of the loss to which vendors have been subjected. I think the question is a very small one having regard to the small extent of these sales of immature Stock. Again, as I have said, it rests entirely with the vendor to decide whether the sale shall be pushed forward or whether he will wait until the Stock has matured and can be put on the market as mature Stock. The fact of the matter is, there is practically no method of remedying the grievance of which my noble friend complains. This immaturity from which the Stock suffers is inherent in it, and nothing you can do will remove the disability. It is for the vendor to decide, having regard to his own special circumstances, whether he will anticipate the maturity to which the Stock will grow in course of time, or whether it suits him better to incur the loss which he must suffer if he sells immature Stock. It is a case in which the vendor is able to make such a decision as will be most advantageous to him in the circumstances.

VISCOUNT MIDLETON

My Lords, the noble Lord has made a clear statement, but I confess that I cannot feel that he has at all met the case which my noble friend brought forward. I think he labours under some extraordinary delusion with regard to the main point that has been put before the House. The noble Lord the Paymaster-General told your Lordships that the whole of this question rests as a matter of fact with the vendor. That is not only not the case, but I should have said it was exactly the reverse of the fact. If any of your Lordships who own Irish land and had gone into Court months ago and years ago were now to go to the Commissioners and say, "When will my case be settled?" the answer would be, "It may be some time in the next three months, six months, or a year." Then many of these landlords who have to be paid in Stock are men who have mortgages on their land, and unless they are to have this money lying at the bank in the names of their trustees and bearing a low rate of interest, they have to give notice to the mortgagees. They have to give notice when they have had their land inspected on the chance that they will be paid on a certain date, and therefore the matter does not rest in their hands at all. Indeed the Commissioners are most careful not to attempt to give any real guidance as to when they will be able to conclude any particular operation, and many men who have given notice to their mortgagees have had to wait for months and for an even longer period. Therefore, they are entirely in the hands of the Commissioners.

This matter is not dealt with under an Act of Parliament but under Treasury rules, and those Treasury rules, I venture to say, are not only unjust but shortsighted. I am not going to dispute the figures which the noble Lord has given, but he himself admits that between the class of Stock which is sold by the Treasury in order to pay these charges and the ordinary Stock of which it forms a part there had been a difference on one occasion of, I think he said, 3¼ per cent. That is a very large difference in Stock which is already depreciated, and which is already doing duty for £100 when it is not £100. I confess that I thought that an extremely weak argument. I also submit that financially and economically there cannot be a more deleterious doctrine for the Treasury than to create two classes of the same Stock, one which is to carry dividends under certain conditions and the other which carries its ordinary and proper dividend, and then to take the least desirable of those and fling it on the market in small quantities and get a lower price.

LORD ASHBY ST. LEDGERS

I do not think that is what happens. The Treasury under the Act of Parliament have to realise sufficient money to pay off the charges. The moment at which that realisation is made depends mainly on the vendor himself. If the vendor prefers to have the Stock sold when it is immature he will suffer loss, but he can wait until the Stock is mature, if he is prepared to wait for a period of not more than six months. The immaturity, as I have said, is inherent in this Stock, but if the vendor waits he then gets the full benefit of his money.

VISCOUNT MIDLETON

It would be very useful to the vendor to have this option if the option were given to him in sufficient time, but the noble Lord has not seen the working of the matter and does not realise the difficulty. If the unfortunate vendor were told at the beginning of January that he would be paid on the 1st of July, he could exercise his option and implore the Treasury not to sell his Stock at a moment when it is likely to produce a difference of 2 or 3 per cent. But he has not that option. He is told of the matter at the last moment, and he has then to decide whether he will keep the mortgagees waiting or accept a depreciated price for the Stock.

I should like to put it on much broader grounds. The state of these Stocks has given rise to a growing feeling of perturbation in the City. All Government securities have suffered considerably within the last few months, and I do think that the Treasury should take care that the rules they make do not involve depreciating that security which they themselves will have to issue in large amounts in the next few years. Every sale at a lower figure—at 87½ when the proper price ought to be 91—tends to depreciate the Stock. It figures in every book as being the lowest price fetched during 1911, and it has the effect of driving down instead of driving up that Stock, of which the Treasury may have to issue £50,000,000, £60,000,000, or £70,000,000 more. There- fore it is not only a question of injustice to the landlord, but it is a question of very serious loss to the State if we continue on this unfortunate system.

I have seen these figures only in connection with the question put by the noble Lord. I have no personal interest of any sort or kind in the matter. But I would urge upon the noble Lord that he should communicate to the Treasury the fact that these proceedings are not only resented by the class who have already been given depreciated Stock in place of their £100, but that they are disadvantageous to the Treasury itself in dealing with this very large class of security. I hope that when other cases come forward an effort will be made as far as possible by the Commissioners to give such notice as will enable landlords, to many of whom this is a matter of great importance, to make such dispositions as will prevent a sale being carried out under circumstances likely to lead to further loss of their securities.

House adjourned at ten minutes past Six o'clock, till To-morrow, a quarter past Four o'clock.