§ 1. Local bonds shall—
- (a) be secured upon all the rates, property and revenues of the local authority:
- (b) bear interest at such rate of interest as the Treasury may from time to time fix:
- (c) be issued in denominations of five, ten, twenty, fifty, and one hundred pounds and multiples of hundred pounds:
- (d) be issued for periods of not less than five years.
§ 2. Local bonds shall be exempt from stamp duty under the Stamp Act, 1891, and no duty shall be chargeable under section eight of the Finance Act, 1899, as amended by section ten of the Finance Act, 1907, in respect of the issue of any such bonds.
§ 3. The provisions of section one hundred and fifteen of the Stamp Act, 1891 (which relates to composition for stamp duty), shall, with the necessary adaptations, apply in the case of any local authority by whom local bonds are issued as if those bonds were stock or funded debt of the authority within the meaning of that section.
§ 4. Local bonds issued by a local authority shall be accepted by that authority at their nominal value in payment of the purchase price of any house erected by or on behalf of any local authority in pursuance of any scheme under the Housing Acts, 1890 to 1919.
§ 5. The Minister may with the approval of the Treasury make regulations with respect to the issue (including terms of issue), transfer and redemption of local bonds, and any such regulations may apply, with or without modifications, any provisions of the Local Loans Act, 1875, and the Acts amending that Act, and of any Act relating to securities issued by the London County Council or by any other local or public body.
LORD MONK BRETTON
I wish to call your Lordships' attention to the Schedule because the terms of it are of great importance. Your Lordships know that the financial proposals of this Bill are founded on a Report of the Treasury Committee of which Mr. Goschen was the chairman. What I complain of is that in this Schedule the Government have not followed out the recommendations of that committee so far as they could have done so. I particularly ask the Government to insert in the Schedule an Amendment (which I am sorry is not down on the Paper) to make the bonds free of Income Tax to small investors. The Committee say they are going to rely 420 on the man who is going to live in the house; they want the small investor because they cannot get the big one. It therefore becomes of great importance that the recommendation of the committee should be put into the Bll to make these bonds free of Income Tax for small amounts. As I understand the matter, the noble Viscount is prepared to accept an Amendment, but the difference between his proposal and mine is that he wants it to be only up to £100 free of Income Tax, whereas I suggest it should be up to £500, as is done in the case of War Savings Certificates. I will not weary your Lordships by reading the Amendment until I have heard what the noble Viscount has to say.
§ VISCOUNT PEEL
This is a privileged Amendment because it suggests that the interest on these Bonds up to £500 should be paid free of Income Tax. I am prepared to accept an Amendment in slightly different form, limiting the nominal amount on which the interest is paid and on which Income Tax will not be collected, to £100, and I have the authority of the Minister to say that he will do his best to urge another place not to insist upon this being regarded as a privileged Amendment. If my noble friend will agree to move it in the following form, I will accept it— "To insert the following new clause in the Schedule:—" (4) A local authority shall in the case of any person who is the registered holder of local bonds issued by that authority of a nominal amount not exceeding in the aggregate £100 pay the interest on the bonds held by that person without deduction of Income Tax and any such interest shall be accounted for and charged to Income Tax under the third case of Schedule D in the First Schedule of the Income Tax Act, 1918, subject however to any provision of that Act with respect to exemption or abatement." If my noble friend would do that I would accept it.
In the Schedule, page 10, line 19, at the end insert the said subsection.—(Lord Monk Bretton.)
§ On Question, Amendment agreed to.
§ VISCOUNT MIDLETON moved to omit subsection (4) as it appeared in the Schedule. The noble Viscount said: I want to ask for an explanation from the noble Viscount. As this subsection reads, it suggests one of the most extraordinary 421 financial operations which has ever been suggested in an Act of Parliament. Apparently, what happens is that the local authority may issue say 5 per cent. stock at 90, which may go down to 85, and when they come to sell the houses, the fortunate person who has the offer of a house at cost price of, say, £800, produces eight bonds of the value of £85, and the local authority has to take them in full discharge. If that be the intention of the subsection, I shall have to put myself in order by moving its omission.
In the Schedule, page 10, lines 20 to 23, leave
out subsection (4).—(Viscount Midleton.)
§ VISCOUNT PEEL
My noble friend has advocated in a strong speech the proposal of the Government because he has dwelt upon the extraordinarily attractive nature of the bonds and that, after all, is the reason why they are issued. I think you might almost call these bonds a sort of "housing currency," except that they bear interest at 5½ per cent. This provision that the bonds shall be taken by the local authorities in payment for houses will ensure, as my noble friend sees, that they will not go to a discount. That makes them extremely attractive to small investors and the object, of course, is to draw money from small local people who would not invest it in a Government loan or more distant securities.
§ VISCOUNT MIDLETON
Is there any check on the local authority issuing their bonds at a heavy discount? Nothing could be more absurd. I can quite imagine that in Ireland local authorities would issue their bonds at extraordinarily favourable terms and that, subsequently, persons who desired to buy houses, and whom they desired should buy houses, will get them at a ridiculous discount. I really think that the matter requires further consideration by the Government.
§ VISCOUNT PEEL
It seems almost incredible that the local authority would issue bonds at a discount which might a few days afterwards be brought back to the local authority to receive at their face value. It would be the same thing as a banker issuing notes at a discount and, the next day, receiving them in payment at full value. The noble Viscount has made a suggestion with regard to Ireland.
422 It may be possible. I am not so familiar as he is with the conditions there. But if that is so, I can reassure him, because it is not possible. The Regulations are to be issued by the Ministry and one of the Regulations, of course, would be that the bonds should not be issued at a discount.
§ Amendment, by leave, withdrawn.
§ Schedule, as amended, agreed to.